Public Enterprises
Revival A Sine Qua Non

By Uttam Maharjan

THE basic thrust of public enterprises (PEs) is to render services to the general public by meeting their needs of various types. The origin of PEs may be traced back to the Great Depression of the 1930s, when the world economy suffered a mammoth tumbling down. At that time, the private sectors had not developed and there were socio-economic inconsistencies in the world economy.

Crucial Role

The establishment of PEs by governments played a crucial role in consolidating their economies. But during the 1980s, the world economy underwent a sea change, giving way to liberalisation and laissez-faire principles. By that time, the private sectors had appeared in form to run state-owned enterprises on their own by taking them over from the governments.

This development also gripped the Nepalese economy in the 1980s and the waves of liberalisation have swept the country more intensively since 1990, when multi-party democracy was ushered in the country. The post-1990 governments have adopted liberalisation and privatisation as if they were a panacea for all financial ills.

It may be noted that the role of a government has changed a lot-vis-à-vis what it was in the pre-1980 years. At that time, a government could look after public enterprises well but now its responsibility and functions have grown in scope to such an extent that it needs adequate time to think over development plans and strategies to uplift the socio-economic conditions of its people. This is what the change in global perspective towards management of PEs suggests.

In Nepal, PEs were established during the early 1940s. Nepal Bank limited and Biratnagar Jute Mills were set up at that time. The number of PEs had reached 69 by 2048 BS. Although such PEs made significant contributions to the national economy during the incipient years, they gradually under-performed and became 'white elephants' for the government. So, there arose talk of privatising the ailing PEs. The Privatisation Act, 2050 came into force in order to streamline the privatisation of PEs within a legal framework. But it may be mentioned that some PEs like Bansbari Leather Shoe Factory and Harisiddhi Tile Factory had been privatised before the enactment of the Privatisation Act.
In the beginning, the pace of privatisation was so brisk that within three years over 16 PEs were privatised. But the privatised companies could not function well and some of them had to be liquidated. Now, the pace of privatisation is almost at a snail's pace.

Why are PEs ailing in Nepal? There are several reasons. PEs are the ames damnees of politicians and the bureaucratic top brass. They are virtually like recruitment grounds. The appointment of eight balls to the top positions of PEs has eroded their professionalism and corporate culture. So, the employees of PEs do not care a hang about their organisations, they are self-absorbed in their own interest.

Besides, corruption, fiscal indiscipline and irregularities overstaffing, lack of a proper monitoring and follow-up mechanism, failure of auditing to get completed in time and other shortcomings are also responsible for enfeebling PEs.

Although the government has invested over 70 billion rupees in PEs, the returns generated are less than one per cent. Thisshows that the PEs have become almost pauperised and have turned out to be burden to the government. The government has adopted privatisation as a tool for saving such ailing PEs from the morass of collapse but it has not been able to produce any tangible results. Now, PEs can flourish neither under government management nor under the private sector That is why, the government has liquidated some PEs like Sajha Yatayat.

Privatisation is not bad per se if carried out properly. It seems the government went impetuously after privatisation without properly assessing the consequences it might bring about. And, the government did not think about options like reform packages.

In fact, it will be prudent on the part of the government to return 'essential' PEs and hand over other PEs that may flourish well under private sector management. The privatisation programme, however, seems to be highly ambitious. The Ninth Plan (1997-2002) set a target of privatising 30 PEs. The current budget has also made provision for giving continuity to reform and privatisation programmes for PEs.

Imperative

PEs are really in a Catch-22 situation now. It seems as if their close-down would not affect the economy to an appreciable degree due to their inability to contribute to the national economy. But their failure will certainly have an adverse impact on the general public. They will be deprived of essential services unless some stop-gap options are chosen. So, it is imperative that momentum be given to the reform or privatisation of PEs in a transport and accountable manner.

Promoting South Asia's Trade

By Khilendra Basnyat

CONOMIC development is a prerequisite for raising the living standard of South Asia's people. International trade is one of the major components that can contribute to this region's economic development.

Complementary

South Asia's economy was by and large complementary in the colonial period. With the dawn of independence, however, because of political consideration and shortsighted policies pursued in this region, the complementarily has almost ceased.

This region's economic growth rate has declined. However, the share of imports from industrialised countries has remained high. The terms of trade have worsened.

The agricultural products are predominant in most South Asian countries with the exception of India and Pakistan. In these two countries, manufactured goods constitute a very high proportion of the total export.

South Asia is a resource poor and less developed region where the primary sector dominates the economy. About 60 per cent of the region consist of primary products, which suffer from sagging demand and relative price fall.

This region has heavy dependence on the import of capital goods, industrial, agricultural and essential consumer goods including food and petroleum products. Its export has decreased and the balance of payment went on decreasing. This unfavourable situation tends to perpetuate this region's reliance on external assistance. Since the foreign aid seems to be uncertain, even the low level of development, which is continuing in this region, may be handicapped and stagnated in future.

In reality, there is a possibility for not only a horizontal type of trade among the South Asian Countries but also for the vertical types of trade among these nations. They are capable of meeting each other's needs in capital as well as consumer goods industries.

Although the existing trade in manufactured goods among the South Asian countries is small, there are possibilities for increasing this trade. India, with the background of industrialisation, can furnish adequate quantity of the manufactured goods, including capital goods imported by other countries of this region. However, other countries of this region cannot supply the manufactured goods being imported by India.

India needs high technology items for import, which other South Asian countries cannot produce. Hence, the scope for mutually beneficial trade in manufactured goods among these countries is limited. However, adopting appropriate policies by the concerned countries can expand this scope in future.

No doubt, South Asian countries have a common history and composite culture. To begin with, all these countries should strive at the resumption of normal trade especially among Bangladesh, India and Pakistan. Apart from this, they should adopt a coordinated export strategy in regard to the scale of primary commodities such as jute and tea.

Since there is an expanding scope for a mutually beneficial trade in manufactured goods among the South Asian countries, they will have to adopt suitable policies. In this respect, India should gradually give up the policy of self-sufficiency regarding some manufactured consumer goods. Rather it should plan for dependence on other countries of South Asia including Pakistan for the supply of such consumer goods, which they can produce more advantageously. This would mean a policy decision by India not to expend the productive capacity as regards some consumer goods. Also, it means that India should vacate certain industries over a period of time in preference to other countries of this region.

To bring about improvement in South Asia's trade, at the Seventh SAARC Summit, the proposal for South Asian Preferential Trade Agreement (SAPTA) was approved. Inter-governmental groups on trade liberalisation drafted this. It envisages exchange of trade preferences among the SAARC members at tariff, semi-tariff and non- tariff levels gradually.

SAPTA allows SAARC member countries to import commodities from one another with 10 per cent less tariff than those imposed on merchandise imported from non-SAARC countries. It has also designated Bangladesh, Bhutan, Maldives and Nepal as the least developed countries including exclusive tariff preference for exports. Yet South Asia's trade is far from satisfactory.

Most South Asian countries have limited domestic markets. It is arduous to demonstrate superiority of economics of scale in these domestic markets. Also, if these countries bring up import substitute by duplicating each other's efforts, the optimum distribution of resources in the whole region will be disturbed. Consequently, there cannot be an effective economic growth for this region as a whole. Therefore, it is essential to adjust each nation's economic plan, bring up import substitute industries on the basis of agreed specialisation more effectively. This will pave the way for the ultimate economic integration.

To import producers' goods from advanced countries outside the region as much as possible, South Asia must increase its exports. It also becomes necessary to promote the inflow of long-term capital and techniques from outside the region to offset capital shortage as well as skills in this region.
Most defects could be rectified if there is a proper coordination of development plans among the individual South Asia countries. Ultimately, an environment will be created to stimulate these countries' economic growth rate, thereby making them to react a higher level of intra-regional trade. To overcome the difficulties of restricting trade policies and shortages of foreign exchange reserves, these countries should enter into bilateral and multilateral trade and payment agreements.

Low levels of per capita income and rates of economic growth characterise South Asia countries' economics. In the past, the average annual growth rates of these countries' economies were marginally higher and in some cases lower in comparison to the population growth rates.
The increase in oil prices, worsening terms of trade, global recession and increasing protectionism pressure in the industrialised countries have posed serious threats to the balance of payment positions of South Asian countries. These countries have been experiencing high inflation rates. The debt service payment is imposing a heavy burden on national resources. Apart from this, it also burdens the balance of payment of some of these countries.

One of the possible ways to accelerate the economic growth of South Asia is through the economic cooperation from outside the region. The important means are the economic assistance from abroad and expansion of imports of South Asian products by outside countries.

The speeding up of economic growth in South Asian countries results in an increase in the scale of intra-regional trade. However, at the early stage of economic development, these countries will be pressed with the need to procure most of the chemicals and other heavy industrial goods from outside the region.

In reality, the prospects for outside economic assistance are not bright. Therefore, there is a need to forge intra-regional cooperation among the South Asian countries. The expansion of inter-regional trade will increase an exchange of goods among all the countries of this region.

There are a number of areas where regional cooperation becomes fruitful to all the participating countries. However, there should the economic development of South Asia. The main aim of regional cooperation should be not to expand trade for its own sake but to expand trade in the interest of an overall economic development of the region.

Inflation is one of the bottlenecks, which may impede the realisation of high rate of growth in intra- regional trade of the South Asian region. The other bottleneck is the practice of resorting to discriminating tariff policies by various countries of this region. However, an important reason for facilitating intra-regional trade deserves special attention in the improvement in transportation facilities, which include roads, rails, etc.

Ample Scope

Of course, the intra-regional trade in South Asian countries is a very small fraction of the total world trade in these countries. Such trade today hardly constitutes eight percent of the total foreign trade of South Asia. This indicates ample scope for regional cooperation in regard to trade.

A Fashion Statement

By Uday Lama

TRULY speaking, 'a fashion statement' means that everybody is on the lookout for one fad or another whether it be something to adorn the body or wear. And soon enough it becomes the rage of the day-a current vogue which hits the teenagers and young adults alike. Given that this is the case it is seen everywhere as the in-thing to do in the Kathmandu.

Take for instance body piercing. Not content with wearing metal rings on the ear lobes now other body parts have not been spared. Eyelids too are given the same kind of treatment even though it may cause mild discomfort. The lips are readily pierced for the purpose of bearing objects. Likewise the navel too comes in for the same attention and has caught on.

May be all these has to do with some deep inner psyche at play; with the subconscious loose who knows what dare devilry the upcoming generation will think of next. It must be remembered that the typical teenagers is normal, easy-going and likely to be the boy next door-not some savage. And though there is no ritual connected with festooning the self with ornaments, the idea has sprung up suddenly seemingly out of nowhere.

Savages readily pierce their body parts as part of a fetish or worship of objects and has to do with dancing around a fire. They also mutilate and undergo agony of body to purify the spirit. It all involves invoking the spirits, to appease the gods and commune with nature.

The youths have certainly come up with a hare-brained idea just to let other know what is going on in their-mind. And in the process they have honed the art of body piercing to a fine degree. They are ready to go to any length to show what is in fact a throwback to the past ages.

By focussing on specific body parts the youngsters are going in for an exhibition of sorts. Drawing attention to themselves in a rather weird way when there could be other ways of achieving the same result. They are to be pitied since all it adds up to is exhibitions with no holds barred.

This approach to fashion is alarming in that it pre-supposes a problem in the offering. The youngsters are out to declare in a brazen manner with no thought of the consequences. Or the reaction it could provoke; one not always predisposed towards them. So what happens is a stand-off with the outlandish rebels trying to make the best of it without compromising themselves.

The purpose here is to dwell on the finer aspects of a fashion gone haywire. And the fallout from this gesture of defiance may yet take tie to make its presence felt. Pushing towards the dim future when it will be considered normal, proper and fitting. Maybe then and only then will what is bizarre could fall into a pattern and be the norm.