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Kathmandu Friday November 23, 2001 Marga 08, 2058.
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DFID changes aid policy on privatisation project
By Ram Sharan Sedhai
KATHMANDU, Nov 22 - The Department for International Development (DFID), the
British Government’s international development agency and a principal donor to
Nepal’s privatisation project, has expressed its strong dissatisfaction towards the
slow pace of privatisation process and has decided to change its present assistance
policy.
The agency, which has been supporting the privatisation project of Nepal for
the past four years, has decided to change its assistance policy in an evaluation report
of privatisation process in Nepal, citing slowness as main reason.
A highly-placed official at the Privatisation Cell of the Ministry of Finance
said that the report submitted to the government a few weeks ago chiefly expresses
dissatisfaction over the almost stagnant privatisation process.
"Mainly the report shows its frustration over the slow pace of
privatisation," said the source.
The process of privatisation has come to a near standstill as the National
Tea Development Corporation, a lone Public Enterprise (PE) has been privatised over the
past four years. The government failed to send PEs to private hands due to various
controversies surrounding the privatisation of state-run enterprises.
The government had privatised over one and a half dozen of PEs during the
first and second phases of the process launched a decade ago, however it could not
maintain the pace in the recent years.
The DFID being fed up with the slow pace of privatisation process of PEs had
threatened the government to stop its assistance by December last year. However, upon the
request of the government it extended the support till December 2001.
The agency is of the opinion that the process of privatisation should not be
cumbersome and it should be linked to the level of performance, said the official.
"Future supports will depend upon level of performance. If the process
is in status quo, the assistance will be minimum and if it is in an accelerated stage, the
support will be increased," he added. The upcoming agreements will be based on this
principal, he informed.
Even the Finance Minister and officials of the privatisation cell are not
satisfied with the current pace of privatisation process. Finance Minister Dr Ram Sharan
Mahat in a public programme had repeatedly expressed his dissatisfaction over it.
Member of National Planning Commission (NPC) Dr Shankar Sharma says that the
process of privatisation has been slowed due to some shortcomings seen in the past. He
also said that the lack of enough funds with the government has also hindered to speed up
the privatisation process.
"Now the time has come for the government to make extra efforts to
expedite the privatisation process of PEs", he added.
Officials say that they are also in favour of changes in the current
privatisation process as it has not been able to produce desired results. There should be
revision in the working style of Adam Smith Institute, an agency providing technical
assistance in the privatisation process of Nepal, said an official at the Ministry.
Privatisation of non-performing PEs has been featured as one of the major
agendas of Nepal’s economic reform and has been tied up by number of bilateral and
multilateral donor agencies to their lending. The World Bank in its Country Assistance
Strategy (CAS) prepared for 1999-2001 has categorically tied up the bank’s lending
with privatisation.
Privatisation of at least seven PEs, including tangible progress in the
hand-over of Royal Nepal Airlines Corporation (RNAC) and Nepal Telecommunication
Corporation (NTC) to private operator, are among the major conditionalities for Nepal to
qualify for the Bank’s high-case loan scenario. CAS, which for the first time tied up
the Bank’s loan to performance said Nepal could get anything from zero to US$ 400
million depending upon the pace of economic reform.
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