FEATURES NEWS THE RISING NEPAL (DAILY)

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.

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