NATIONAL 4 - (Spotlight Weekly)

‘Nepalese businessmen have learned to fight their own battles’

-- BINOD CHAUDHARY

BINOD CHAUDHARY, a former president of the Federation of Nepalese Chambers of Commerce and Industries (FNCCI), is known for his forthright views on the economy. At a time when much of the country is worried about economic prospects, the chairman of the Chaudhary Group of Industries believes the situation will improve. Chaudhary spoke to KESHAB POUDEL at his office on issues related to the national economy. Excerpts:

At a time when industrialists are pointing to the dismal performance of the Nepalese economy, how do you visualize the economic prospects of the country?

Opportunities bestowed on Nepal by nature have existed for the hundreds of years. But if you consider whether we have been able to exploit these huge opportunities, we get a very disappointing picture.

As an ardent supporter of the government's economic liberalization policy, what are your impressions of the results?

Liberalization per se is not an end, it is only a means of achieving prosperity. The process of liberalization has to be supported by all the other activities a particular sector needs to grow. I have seen many economic policies implemented in the country. In the 1980s, the name of the economic game used to be import substitution -- not only in Nepal but everywhere. All industries were working with the objective of producing everything at home, whether the value added was one percent or 100 percent. We wanted to be producers. They increased the tariff wall to protect Nepalese industries and to encourage the setting up of more industries. Soon people in many countries realized that this approach was not going to work, particularly in the West, which is generally seen as the driving force for the current global policy. The West thought technology was important in the process of industrialization. Every country in the world is working with a business objective. Unfortunately, we are the only one that does not have any objective. The West wanted to sell its technology, plants, and machinery to the Third World. Thus, it encouraged the Third World to become a producer of every item, irrespective of whether or not they had a comparative advantage.

How did the policy of economic liberalization begin?

After they felt that the phase of dumping their products was over. They realized that these industries would not survive without major policy changes. Then the name of the game changed to economic liberalization, which means you only produce things in which you have comparative advantages. That became the catchword the World Bank and the International Monetary Fund started to preach. Countries introduced structural adjustment programs and started up to open up their economies.

How do you assess the process of liberalization?

When you open up a particular sector through reforms, you also need to reform your legislation. The meaning of liberalization is to cut down bureaucratic red tapism and take away discretionary decision-making authority at all levels. That is a tactical thing.

Are you satisfied with the process?

Had Nepal not followed the policy of liberalization and reform by taking away arbitrary and discretionary decision-making authority, the country and its industries would have been completely finished by now. Economic development has come to a standstill. It is economic liberalization that has sustained economic growth during this period of political instability, when Nepal has had six prime ministers in 10 years. Today's six-to-seven percent economic growth has been possible because of economic liberalization. Nepal is not the only country in this region opening up its economy. Nepal needs to introduce a new policy framework to make Nepalese industries compete with others. A small country like Nepal has to compete with a large one like India. It is very important to see what steps the government is taking now. Can industries alone do everything or do they need greater support? If not, the government of Nepal must carefully provide other policy initiatives to ensure that Nepalese manufacturers are still able to compete with multinational giants. All countries initiate reforms. Developed countries made reforms long ago and they do not have to face unhealthy and unsustainable competition.

What needs to be done to protect our industries?

Be it Japan or the European Union, every country or regional grouping has its own way of doing things. The clamor about joining the World Trade Organization shows the concern of developed countries. Why is France making a noise on the entertainment industry and why is Japan not opening its agro-sector? Because every country wants to ensure that unequal competition is not promoted in the name of liberalization. Liberalization means preventing the bureaucracy from making unnecessary intervention. Today no industrialist in Nepal needs to go to the Department of Industry and Commerce to do business. Almost all the areas of the business sector have been deregulated. Economic growth has continued because of liberalization and deregulation.

Do you find the government's approach positive in tackling the problems faced by industries?

No government has had the time to see the difficulties of the industries, as they are preoccupied with party politics in order to retain power. We do not expect a lot from the government. Nepalese businessmen have learned how to fight their own battles. We wish to be left alone. If politicians do not interfere with us, we will be quite happy. Liberalization has introduced so many things that it separates us from political intervention. As far as taking full advantage of a liberal economic regime is concerned, it requires total creative and innovative steps on the part of the government. We still need certain policies to make our industries stronger and to help them compete with larger players.

As a former president of the FNCCI, how do you see its current role?

It has been a long time since someone has asked me about the role of the FNCCI. Generally, these days, I avoid commenting on the FNCCI. An organization like the FNCCI has three types of functions that must be carried out together. The first are ceremonial activities like organizing conferences, attending social functions, going abroad, receiving delegation, all of which the federation does. It is part of life.

The second function is that of a lobbyist or a pressure group ready to fight for its members. It should evaluate how a program, rule or regulation affects industries, whether it fosters or restricts industries? Strong lobbying to protect and promote industries is needed. Pressure should be built through the media and through public opinion. If required, such pressure must also come from the streets.

The third and most important function is to give an appropriate vision to the country. That is what Japanese and Korean industrialists have been doing. In most countries, industrialists are leading the country by articulating a new vision. We hear policy makers say that the private sector should take a leadership role. We must evaluate for ourselves whether we are taking the lead.

In the first role, we have been very successful. On the other two fronts, evaluation of our performance may differ from person to person. It is up to you to evaluate whether we have been successful.

It is said that Nepalese industrialists are facing a tough time because of frequent bandhs (general strike) and other unrest. What is you opinion?

The entire country, not only industries, is passing through a very painful process. Obviously, such disruptions have their impact on the industrial sector. The economy is the first sector where one can see the implications of political instability and unrest. Law-and-order problems and industrial unrest are the result of the people's total dissatisfaction with the existing state of affairs. There is a yawning gap between their expectations from the restoration of multiparty democracy and the achievements made so far. The industrial sector has to face more problems because it is in the forefront.

Many industrialists complain that it has become unsafe to invest in Nepal. How do you see the law-and-order situation in the country today in terms of foreign investment prospects?

The question of safety is related to the mind of the people. One cannot find perfect safety anywhere in the world. We know what kind of safety situation exists in our neighboring countries and in developed countries. If you ask me, I have not found any reason to feel unsafe because I love my people and the people love me. However, people who have not seen the situation in Nepal perceive security matters through the media. Unfortunately, we have been sending very wrong signals every day through the media. Because of the

reporting by the media, foreigners want to avoid Nepal. The recent street violence, bandhs and law-and-order problems are sending across a very bad message about Nepal. Sometimes a section of the media blows things out of proportion, particularly outside Nepal.

Industrial houses in Nepal are investing in many of the same sectors. How do you look at this trend?

This is because of our mind-set. It is because of lack of entrepreneurship and lack of homework. If you are talking about the mushrooming growth of noodles and the media war, there were at least 10 noodle industries in the market before two more came out recently. More than half of the country's manufacturing plants have either closed down or are in the process of doing so. Some companies are doing well while others are in trouble. Why is this happening? This is an issue that merits research. When a business decision is made on the basis of your emotions or your personal likes and dislikes, it is already doomed.

Some industrialists feel the Company Act and the Labor Act need to be amended. What is your view?

The present Company Act is simple enough, some improvements may be required. I have also received a draft of the amended Company Act. In an environment of deregulation, acts should be made as simple as possible. Experience has shown that industries flourished countries where there are no acts. India has made a mark globally in the information technology (IT) sector, with the emergence of many companies. This is because there was no ministry of IT in the beginning. After the establishment of the ministry, the sector faced trouble. As far as the labor environment is concerned, we need to voice a single policy. When we meet labor unions, we tend to talk about their concerns, and when we meet industrialists, we are more concerned about them. There has been always such duality here.

How do you see the possibility of hydropower development?

From childhood, I have been hearing that Nepal is rich in hydropower. Despite having such potential, we have been able to exploit less than 400 MW. We still have an opportunity but it will not exist for long. When Bangladesh starts to supply its natural gas, no one will buy our expensive hydroelectricity.

Do you plan to invest in the hydropower sector?

We are very interested to join this sector. We want to become a player. Everybody knows the BPC saga. The government took back its decision to hand over BPC to us in an unceremonious and unreasonable manner.

What proposal do you have to clean up the Bagmati river?

Like many other things, this effort has also become a victim of politics. The government chose not to respond to my call. We have our own proposal, which has been made public through the media. My brother is in now in the Pashupati Area Development Trust. So, we hope our proposal will be implemented. As you know, it is impossible for an individual to start such a big project. We need support from the government and other agencies. We cannot go alone with shovels. We will provide support and make other necessary arrangements. But there are some forces that do not want this to happen. People like Bidur Poudel, chairman of the Bagmati Sewerage Development Committee, who is trying to do everything to not allow us to take an initiative to implement our project. Poudel has already spent Rs 500 million on his project, and he would lose his bread and butter if our project starts.

At a time when industrialists are expressing pessimism on economic development prospects, what reason do you have to be so optimistic?

I have no choice but to be optimistic. I cannot survive if I become a pessimist. I am a Nepali and I have given my life to Nepal fighting for private-sector development and creating an industrial empire. I will continue to struggle until my last breath to boost the nation's moral and confidence.