Assessing
Privatization
Nepali business sector
leaders assess the privatization program of HMG
Early December 1999 and a
week before that saw a flurry of activities in Nepal related to the topic of
privatization. Soon after an ILO sponsored seminar on the subject, Adam Smith Institute
(ASI), a British consulting firm that is advising HMG on privatization, held, what it
called, a Privatization Summit bringing in high level participants from Nepal’s
immediate neighborhood – India, Pakistan, Bangladesh and Sri Lanka, as well as from
far away places - Malaysia and Ghana.
On the eve of the summit, Ministry of Finance (MOF) brought out a report claiming
that privatization has been successful in Nepal. MOF claim was based on statistics related
to 10 of the 16 enterprises privatized so far. "When the government rids its itself
of a liability, that is a success for privatization", said a press release issued by
MOF.
The country’s business
sector leaders, taking part in an opinion poll conducted by Business Age, said that they
do agree with the MOF claim, but only partially. While 73% of them showed that they agreed
partially with MOF claim, 13% were found in full disagreement with MOF.
A majority of
the respondents (53%) said that the privatization modalities of the late 1990’s were
better than those of the early 1990’s – apparently a good news for ASI that
started providing consultancy to HMG only from 1998. But, not a single public enterprise
has been privatized since 1998 in Nepal, except of course the partial divesture of Nepal
Bank Ltd. shares. The attempts to privatize Nepal Tea Development Corporation and Butwal
Power Company have not materialized as yet. |
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1.
Do you agree with the claim of the Ministry of Finance (MOF) that privatization has been
successful in Nepal?
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2. Do you agree that the
government is going logically with the process of Butwal power Company privatization?
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In the most current case in hand with the MOF’s privatization cell – Butwal
Power Company (BPC), the business leaders were fairly divided in support as well as in
criticizing the government’s manner of handling the case. A sizeable 40% said, they
could not pass any judgement on the issue - perhaps a reflection of the failure of the
authorities to educate the public. While about 20% respondents said, they fully agreed
with the argument that the government was going logically in BPC’s privatization,
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3. Do you
agree that the privatization modaleties being followed recently are better them those of
early 1990's?
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| some 27% others said, the
government was partly logical in handling BPC case. Only 13% were in full disagreement
with government’s way of handling BPC privatization. It may be recalled that the
government had to cancel the whole process of privatizing BPC when one of the two bidders
withdrew blaming the government of taking side with the other bidder. The government is
also criticized for adopting such a process in BPC privatization that practically excluded
Nepali companies from taking part in the bids. |
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4. In your
estimation, how many of the privatized business are being managed responsibly by their
buyers?
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In terms of transparency, the privatization decisions of the government were judged good
by 40% of the business community leaders, while 20% judged them as ‘worst’.
Still, other 40% said they could not say anything about it, again a bad reflection on the
government’s public education effort about privatization.
The respondents were also critical of the private sector itself while judging the
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5. How do
you rate Nepal's privatization decisions so far in terms of transparency?
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| management of the
privatized enterprises. Some 54% said that only a few of privatized units were being
managed responsibly by their new owners, while 40% respondents had the opinion that most
of the privatized units were not being managed responsibly. It indicates that these badly
or irresponsibly managed public enterprises were handed over without carefully
examining the corporate credentials of the prospective buyer. As one respondent has
commented, |
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6. What do
you suggest about speed of privatization?
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only
those units are being managed responsibly that are in the hands of "well-managed
professional groups".
But, the business community does not seem to be against the principle of privatizing
public enterprises. The overall message from the private sector in this opinion poll is to
speed up, not delay the privatization process. About 72% respondents have suggested to
‘go faster’ with privatization. |
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