Inner-View

His old friends call B.K. Shrestha a genius but Shrestha himself recalls that almost all of his attempts to do business here have proved failures. Educated in institutes like Harvard, Shrestha’s career chart includes stints with Nepal Industrial Development Corporation (NIDC) and India’s TATA group. Later, he settled down in India doing a number of business. A media-shy Shrestha, who is the Chairman of Everest Bank Ltd., reluctantly agreed to talk to Business Age when he was here for the Board of Directors Meeting of his bank, and shared his impressions about business in Nepal. Excerpts:

In the last twenty years, I have submitted more than 12 proposals before the Nepali government. Nepal, being a land-locked country, is dependant on roads for transportation. Fifty percent of the foreign exchange we spend on fuel import goes to the government of India through the purchase of furnace oil. When Surya Bahadur Thapa was the Prime Minister, I proposed to establish a refinery here. But the people then did not understand this. During that very time, Ambani began his business in plastics in India and now he is at par with Tata and Birla. He is the largest producer of polyester is the world whereas he was only a trader some time back. When I forwarded my proposal, Surya Bahadur Thapa viewed that India would not take this very positively, meaning that it would be better if we remained dependent on India.

Another big project was that of magnesite. It is run by an Indian national who has his factory in Orissa. But how is he doing it? He is not doing it correctly. His plant is only equipped to supply raw material. I proposed to HMG that I would come in but on the condition that I would be the major shareholder. Another project was in textile, which is the biggest import item for Nepal. I proposed to put up a polyester factory here. The use of man-made fibre is now over 80 percent. Natural fibres like cotton, wool and silk are not used to large extent these days. And if that is happening around the world it will happen here in Nepal as well. Therefore I proposed to go in the direction of man-made fibre instead of natural fibre. The polyester proposal is very versatile with great potential. The polyester can be used singly as well as by blending it with silk, cotton or wool. My plan was not to bring in polyester and weave it and export it to India but to make the yarn here itself. That 15 year old proposal is still lying with the Department of Industry. My partner in the venture would be Aditya Birla, the son of BK Birla. Of course he is no longer alive now but you will find his signature in the proposal which was not accepted by the Nepali government. In Butwal, there was a setup that had Chinese equipment but was not functioning. Bharat Bahadur Pradhan, who was then the Minister for Industry, told me to take over the unit. But I told him that I would first carry out a study. You see, Indian machinery is better than Chinese because of the open policy which has allowed a Swiss to open up a factory in Koimbatore. Also, Chinese equipment does not facilitate blending. And there is no demand for pure cotton both in India and Nepal, because maintenance is not very easy. As I gave my proposal for the project, Salt Trading Corporation decided to put the money it had earned from trading into industry. And I was not given permission on this project as well. You see now that Salt Trading is not doing well in any of the industry it is involved in, although it is still doing well in trading. The Butwal unit is also doing badly. And then I have another project to talk about. You see, there is gas in plentiful under the earth in the Kathmandu valley. And we are investing huge sums of money in buying gas. The gas can be pumped, impurities removed and then filled into cylinders or bottles. A factory to manufacture the cylinder can also be put up. I submitted a proposal asking for 25 percent shareholding. The rest could be invested from the public sector and the government since the gas is the nation’s property. But that proposal too was not accepted.

Yes there was. I saw prospect in sugar. The people involved in this business have not probably conducted serious studies but east of Birgunj is not good for the business. Sugar is made from fidro chemical, which is produced from reaction with the sun. The sucrose in the cane produced in Morang is only one percent. That goes up to 11 percent in Kailali and Kanchanpur. There is an equipment to find the content of sucrose and I used that to discover the high content of sucrose in the sugarcane in the west. That is why sugar mills in Bihar and eastern UP are doing badly while those in western UP and Punjab are doing well, and also in South India, because of the constant sunshine in that part. They can use the sugar mills for up to 8 months in a year while we are only able to use it for 4 or 5 months here. So realising the prospects of sugar in Kailali and Kanchanpur I submitted a proposal. And I also proposed that no other player be allowed in the area for 10 years. Because there was a problem of roads and I was planing to invest Rs 10 million on the project. If, after all my efforts, someone else came in to reap the benefit, then my investment would go to waste. But I wasn’t given the permission. Another of my proposal was related to leather but that too turned out to be a failure. I also proposed to introduce class system in buses. If a very comfortable way of transport was provided, may be the people flying by air would travel by bus since the cost would come down. Also, it is only quite recently that a bus terminal in Kathmandu was constructed. A terminal has to have restaurants, lavatories and book stalls. If the government is not willing to provide those facilities, someone else should do it. So I proposed to construct a terminal in Bharatpur or Simra to carry passengers to the airports there from where it is only a half hour’s flight to Kathmandu. But again the government did nothing but sit on that proposal. It is not concerned at all about the time and money put in to make the proposal.

You are the chairman of a homeopathy medicine company, SBL. Why did you not set up similar unit here in Nepal?

SBL is not only the biggest homeopathic medicine unit in India but in the whole of Asia. I gave a proposal to the Nepali government to manufacture medicines to export to India rather than import medicines from India. I asked to purchase Royal Drugs or acquire it on lease or agreement, but the government has given no reaction on that.

Simply because we have heavy business transactions with India and it makes sense to go into banking with Indians. After the State Bank of India, the Punjab National Bank (PNB) is the biggest in India. In its 160-year history PNB has not made a loss. The bank has some 4000 branches. We are also doing quite well.

There in a distillery. My partner is Khoday, a big industrialist group based in Bangalore. We manufacture their popular brands like Peter Scotch Whisky and Lisdon. I am also involved in leather processing unit abroad.

All my plans here have been failures. But I am studying as to whether I can enter the insurance sector. But you know that so far the government has not been very encouraging. There are good prospects in insurance. Fund collection will be huge. The next question will be how to utilise that fund. But I have not decided for sure to enter the business. Talks are going on with big companies in India for partnership.

I keep travelling around. I go wherever I have work. I usually do not halt for more than a week in one place.

The business community is doing its part. But they have not all been thoughtful. I will give you an example. The Blue Star hotel is doing well here. And so they opened a big hotel in Pokhara as well. But that is not doing well. The Amatyas engaged themselves in a number of fields without much success, until they finally did well with San Miguel. They also put in large sums of money and opened a hotel in Pokhara. My suggestion to the business community is to involve themselves in allied fields, not in disconnected lines. I feel that many of the Nepalis are scared by size. My background is such that I had been employed with Tata. And there, size does not matter. They are concerned with success. I also think that Nepalis do not trust one another.

If you take the banking line for example, earlier there were only two big banks Nepal Bank Ltd. and Rastriya Banijya Bank. Now a number of foreign banks have come up. And these are run by Nepalis. This is to say that the Nepalis are at par with anyone else in the world. Of course, there is limitation of trained manpower. And we are in the process of training our own staff.

Nepal has become over-loaded with banks. So the situation is such that a new entrant will find things very difficult. Because they will come with a capital of Rs 500 million and will aim to earn at least 5 percent of that investment. The only way to make profit would be to loan out finance. And I fear that they will have to issue loans at low interest rates and on risky businesses. Also, if I had known that so many banks would crop up, I would not have involved myself in the banking business. When the banking sector was first opened to the private sector, I was among the first to submit a proposal. But Nepalis were not given permission to open up banks. Only foreigners were allowed and so Grindlays, Indosuez and NABIL came into being. Later, the policy facilitated entry of Nepali players and I again handed in my proposal. And the then governor assured me that only Himalayan Bank and Everest Bank would be given license to operate. But you see now so many banks functioning. Of course, if business had developed accordingly, there would have been no reason to object operation of the numerous banks. But with business not flourishing and plenty of finance in banks, the banks are only able to offer about 7 percent interest in fixed deposits while it is 11 percent in India. Again, while the minimum rate of interest on loan is 16 or 17 percent in India, it in only 12 or 13 percent here. Even then, there aren’t good projects here. So this is a dangerous signal for the banking sector.

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"All my proposals here have failed"