Editorial

Sickness & Cure

Clamouring for duty concessions and moratorium on bank loans, the Nepali private sector has been missing the point in the ongoing effort to find solution to the industrial and business sickness. In the absence of a clear national policy in this regard, what the government has been doing is some patchwork. Against this background, the attitude of the private sector is not helping to find any lasting solution to the problem. Providing some additional loan to the sick unit through the commercial banks and development banks by providing refinance facilities from the central bank, may help to some extent but it is surely not a sufficient cure of the malady. In fiscal front, the only provision to help a sick unit out is a small concession on the import duty for the machinery.

This policy regimen is based on the assumption that the industrial sickness is caused either by shortage of finance or by obsolescence of the machinery. The possibility of product obsolescence due to changed lifestyle of the consumers, loss of competitiveness due to technological innovation and opening up of the domestic market for foreign goods, and the belligerence of the management and the trade union are not yet officially recognised as the causes of industrial sickness.

Now that the last legal hurdle on ratification of Nepal’s accession to WTO has been removed by amendment in the Treaty Act through an Ordinance, Nepali economy has irrevocably entered the field of open international competition. But what about creating an environment under which the Nepali business can compete effectively in the new international business order?

The entry into the WTO regime warrants massive restructuring in the business environment in the country. Many firms will have to abandon their existing business and start a new one. This may also warrant shifting the location of the business in many cases.  The existing laws and practices of the government pose serious hurdles in such restructuring. Many cases of industrial/business sickness have this reason at the root. Though the investor has clearly understood it and wants to shift his resources to more efficient uses, the existing provisions in the Company Act, Industrial Enterprise Act and the Labour Act make it practically impossible to do so. Above three dozens of laws are listed to be amended to make them compatible with WTO regime. But nothing is reported being done in this front though it has been over six months since the Cancun Ministerial approved Nepal’s accession to WTO. Lack of policy clarity due to the delay in the legislation has been holding some of the urgently needed investments.

The problem of industrial sickness is accentuated also due to the dogged reluctance of the authorities, and of some captains of Nepali business, to accept that it would be better to let some of the sick units to die unless it is convincingly proved from detailed study that the revival would be possible at reasonable costs. Due to this obstinacy in the attitude, there are futile efforts being made to save even those units that are terminally sick.

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