COVER STORY (Spotlight Weekly)

DASHAIN FESTIVAL
Season Of National Anxiety

Although barely a week remains before the Dashain festival begins, the crowds at stores and stalls are apparently thinner this year. There is a palpable sense of anxiety among consumers. Even in the peak of the country's marketing season, they seem to be tightening their purses, letting it loose only to buy essential items like foodstuffs and clothes. The series of tragic events that hit the country this year has had a dramatic effect on consumer behavior. Just as businessmen were hoping to welcome consumers back to their shops on the eve of the Dashain festival, international events have scared buyers away. Will consumer and business confidence be restored after Dashain?

By SANJAYA DHAKAL

Shambhu Thapa, 42, has decided to shelve his plan to buy a new 14-inch color television this Dashain. His two sons have been pestering him to buy a new TV set for the last few years. A clerk at a private company, Thapa had made up his mind to buy one this year with his savings and Dashain bonus. But events in the country over the last couple of months have forced him to reconsider. "I am not sure that I should spend my savings just yet. After the massacre in the royal palace and escalation in the Maoist insurgency, it does not seem alright to waste money on non-essential items like TV. Who knows what is going to happen tomorrow?" asks Thapa, who lives in a rented apartment in Old Baneshwor.

Thapa has decided to save his money this year. "I hear of price rise and, with the war on Afghanistan, there is a definite possibility of sharp inflation. Besides, I will have to buy new clothes and foodstuffs for the festival, too."

Gauri KC of Sanepa shares Thapa's views. "The situation is all confusing. There is no telling what is going to happen. Obviously, we are saving our money rather than spend it lavishly like previous years," said the middle-class housewife. She said that although her family will not stop from spending on items like foodstuffs and clothes, which is a benchmark of Dashain festival, they are not going to make big buying decisions anytime soon. "Let's see what happens with the Maoist government dialogue and this war in Afghanistan first."

Thapa's and KC's anxiety reflects the real condition of Nepalese consumers. Struck by domestic ó and, lately, international ó turmoil, the people are not in their regular Dashain shopping spree. "There is a marked change in consumer behavior this year. Earlier, people used to buy electronic items like TV sets during Dashain from their bonus salaries. But this year they are limiting their spending to regular essential items," says Bhaskar Rajkarnicar of Everest Exhibition (See box).

Market Transactions

Most of the shops and departments stores are recording stagnant and even decreased sales volume this Dashain. Thanks to the economic downturn and the uncertain atmosphere, consumers are not in their usual Dashain state of mind as far as spending is concerned.

"There are no transactions this year. When the pockets of the customers are empty, how can we expect to make more sales," asks Manoj Rauniyar, a trader who had put up a stall to sell sweaters and other winter attires at the Dashain Mahotsav in Bhrikuti Mandap. "We have slashed prices heavily to lure consumers."

Rauniyar's stall sells sweaters for Rs 550 each (down from the usual Rs 1,050). "We were having a lot of stocks lying unsold in our shop, so we put up our stalls here hoping for brisk sales."

Prakash Kafle, who also has a clothes store in the Dashain Mahotsav, shares Rauniyar's sentiments. "We have come to this kind of fair for the first time this year. But it does not seem like we will be making any profits," he says. Kafle spent Rs 21,500 on putting up the stall for eight days. "It seems we will be only breaking even, going by the transaction of the first three days here."

Both Rauniyar and Kafle say they decided to put up the stall in the fair hoping to make up for the declining sales in their respective shops in New Road and Putalisadak. They say that while the richer customers prefer big department stores, it is the middle and lower middle class people who come to them. "And this year I have found that our customers are in a mood for hard bargaining as well," says Kafle. Another indication of the emptying pockets. The signboards offering heavy discounts ó up to 65 percent — that are rampant in the fair area also point to this fact.

Consumer Spending In Economy

According to the World Development Report 2001 prepared by the World Bank, Nepal's household final consumption expenditure as a percentage of the Gross Domestic Product (GDP) in 2000 stands at whopping 77. It means that 77 percent of the country's GDP is because of household final consumption.

This is higher than the South Asian average of 70 percent. The household final consumption expenditure as a percentage of GDP in 2000 stood at 68 for India, 78 for Pakistan and Bangladesh and 71 for Sri Lanka. If compared globally, too, the figure is higher. The same figure for the high- and mid-income countries stand at 62 percent each, while those in the low-income countries (with per capita incomes under US$755) record 69 percent.

The high household consumption in Nepal may be because the people here earn less and have to spend a significant part of it on essential items. Nevertheless, it shows how important consumer household consumption is to the country's economy.

"Compared to other countries, our household consumption expenditure is rising," says Tula Ram Basyal, spokesperson at the Nepal Rastra Bank (NRB). "The thing is, Nepalis spend most of their resources for regular purposes and have little savings to utilize in business or investment."

According to him, the National Saving in 2000/2001 for Nepal was 20 percent of the GDP and Gross Domestic Saving was 16 percent of the GDP, up one percent from the previous year.

Depressed Mood

After the June 1 royal massacre, the Nepalese people are going through a depressed mood. Earlier the onset of the festive season marked an increase in the volume of market transactions. Dashain is the biggest festival of Nepalese Hindus. The festival is marked as a time to eat good food and wear new clothes.

From towns to villages, the festival is observed with emphatic enthusiasm. Goat meat and sweets are a must. Wearing new clothes is another important tradition. People go to relatives' houses to receive tika (sacred vermilion) from elders. The festival is marked as an event of victory over evil.

"Even the poorest of the poor people take loans to buy new goods for the festival. Such is the strong sense of celebrating festivities among the Nepalese society. Therefore, it would not be appropriate to say that their bad mood will hamper their spending pattern, though it can be safely argued, the pattern has been somewhat affected," says a sociologist. He, however, added that the royal massacre has seriously affected the social psyche of Nepalese people, if not their economic psyche.

Agrees Shambhu Thapa. "Definitely, Nepalis are in no mood for entertainment at present. After the royal massacre and the continued killings in government-Maoist clash, the people are feeling very bad."

Definitely, the mood of the consumers is going to affect their buying decisions. This could be one major reason why there have not been desired transactions this season.

Will Consumer Confidence Be Restored?

There are silver linings in the dark cloud. Many believe that if the ongoing dialogue between the government and the Maoists succeeds or if it paves the way for the peaceful conditions, not only the consumers' confidence, the whole economy stands a chance to revive.

Nepalis are not unfamiliar with recession. They have been going through bad economic times for many years. That is why it will be unfair to judge the present circumstances as being the defining moment.

Presently, the export sector is going through turmoil. More than 80 percent of the country's garment industries have already closed down, leaving around 40,000 people jobless in the aftermath of growing domestic insecurity and deepening global recession. The impact of the economic downturn in the United States, the key market for Nepalese garments, has been particularly harsh. The same is true for the carpet sector.

The tourism industry is witnessing unprecedented turmoil, especially with the threat of global terrorism keeping visitors away. Already plagued by series of events like 1999 Indian Airlines hijack, the Hrithik Roshan riots, the royal palace massacre and the escalating Maoist insurgency, the tourism sector has been dealt a fresh blow in the form of global war on terrorism. In short, the pillars of Nepal's exports are crumbling down. With the US military strikes on Afghanistan, the entire region has become tense, with deepening uncertainty about their fallout. What will all this ultimately lead to? Bhaskar Rajkarnicar believes the Nepalese economy has hit rock bottom. "The only place it can go is up, and I believe it will go up after the current festive season." Soothing words, especially when they are coming from a businessman in these troubled times.

‘People Are Not Spending Much’

— Birendra Rajkarnicar

Birendra Rajkarnicar is the Managing Director of the House of Rajkarnicar (HoR), an organization that has been regularly organizing exhibitions and events. Currently, the HoR is organizing Dashain Mahotsav, a major consumer trade fair, at Bhrikuti Mandap. Rajkarnicar spoke with SANJAYA DHAKAL on the current state of consumer behavior. Excerpts:

How do you find the current trend of consumer behavior?

In general, I have to say it is not good. The average person does not have enough money in his pocket. There is an environment of uncertainty in the domestic front. The outcome of the government-Maoist dialogue is being anxiously awaited. Likewise, in the international arena, the war in Afghanistan is having direct and indirect effects. The exports of carpets and garments have come down drastically. The consumers who do not have enough money are definitely not going to spend much. Even those having it are saving it. This is what the environment is.

You are organizing the Dashain consumer fair. How has public reaction been?

The consumers' reaction to the fair has been interestingly quite encouraging. This year the traders have been recording depressingly low transactions. Thanks to the economic downturn and domestic reasons, the business was at a low ebb. As a result, the traders have had a considerable stock of goods. The fair has given them a unique short-term opportunity to make up for those lost times. On the other hand, the general consumers, who were going through a rough phase over the last couple of months, thanks to insecurity, bandhs and the campaign to ban the sale of alcohol, are now restless to get back to normalcy. The fair has given them that opportunity. The fair is a combination of entertainment and business.

What about spending patterns? Are consumers spending as much as they were in previous years?

Another interesting development has been the drastic cutdown of prices by the traders. They have introduced heavy discounts. These facts have worked together and we can safely say that the number of visitors at the fair is not going to come down compared to previous years.

Isn't there some noticeable change in the consumer mood?

The basic thing is that people spend only when they have money. Moreover, in times like these, people tend not to spend even if they have money. They rather like to save it for future. At present, the situation is beset with uncertainties and instability. Until and unless this situation improves, the condition will remain the same.

Do you think the present trend of stagnant, if not decreasing, consumer spending is a reason for serious concern?

It is, indeed. The government needs to introduce some package. They have to take some policy initiatives to restore consumer confidence. Long-term policies and strategies are needed to boost exports.

What are your expectations on actual buying-selling in the Dashain fair?

Though it would not be a normal growth, I hope there will be average business. In general, transactions worth at least 20 million rupees to 30 million rupees do take place in such fairs.

‘The Only Way For The Business Sector Now Is To Go Up’

— Bhaskar Rajkarnicar

Bhaskar Rajkarnicar is the Managing Director of the Everest Exhibitions and a prominent entrepreneur in the advertising field. Rajkarnicar recently organized a major trade fair in the capital called Kathmandu Utsav. He spoke with SANJAYA DHAKAL on issues related to consumer economics. Excerpts:

Recently you organized Kathmandu Utsav amid reports of economic depression and low consumer confidence. How was your assessment of this phenomenon?

It is very much true that there is depression in economic activities. However, in terms of consumers, Nepal has an interesting market. When we planned Kathmandu Utsav six months ago, we had thought that in the given circumstances of political instability, it could not be successful. Fortunately, there was a record booking of stalls for the Kathmandu Utsav and consumer turnout, too, was massive. Even the transaction was not bad. So, I have to say that from the point of view of consumers, the market is not that bad. But again, the point to remember is that this enthusiasm, too, is the result of this depression. For the past five months, Nepalese traders/businessmen were facing extreme difficulty in recovering their costs. They were struggling to keep afloat. Obviously, they took this fair as sort of last resort. On the other hand, this is the hottest buying season for Nepalese consumers. So we cannot say that because there was normal sales in the fair, the depression has gone away. That is incorrect. Still there is slack in sales. If you compare the transactions/sales to previous years, then, I have to say we have a problem. Already less than a week remains for the festival to begin and we are yet to witness the normal surge in marketplaces. However, I think that the business in the country will improve after Dashain and Tihar.

What about visitor turnout this year?

In terms of visitor turnout, there is no significant change as such. It is true, there is no growth but it has not declined, either. The same is true as regards consumer spending. Normally, we should be witnessing 20-25 percent growth in sales/transactions. But that is absent.

Due to the incidents of last few months, the collective mood of Nepalis is at very low ebb. Has it made any difference to the way they buy/spend?

Definitely, it has. In the past we used to see that consumer behavior during Dashain was very positive. It is also a bonus month. And even those people who do not get bonus always plan to buy something new in the season. Dashain ushers in added market in the field. More specifically, people tend to buy electronic items or go out somewhere to enjoy like restaurants once they lay their hands on their bonus salary. This we have not seen this year, unfortunately. The present consumer behavior is such that they are buying only regular items like clothes and foods. This is indeed a sign of depression.

How dangerous, do you think, is this kind of consumer behavior to the country's economy?

I think that Nepal's economy cannot and will not collapse as international economies do. We do not depend wholly on the business resources. We have other sources, too. Our economy cannot collapse the way the Thai or American or Malaysian economies do. If we look at the past 10-20 years of the history of our consumer market, we are at the lowest point now. I think it cannot move below this point. Most probably, the economy will get a boost in November after the festival season. We were expecting it to boost before Dashain, but it did not because of international events. Presently, our economy is getting closely inter-linked with international mainstream. Even a slight change in American consumer behavior will hit our garments and carpets, two of the major export items. I think that our economy will witness an upturn now. We have come to the lowest point. The only way we can go now is, up. Carpet, garment, pashmina, tourism ó every sector is already affected. There is nothing worse that can happen now.

How do you assess business and investment confidence?

If we take the reports by banks and financial sectors as the actual picture, then I must say the situation is not very bad. Though there are doubts whether this is the actual picture. As far as other business sectors like electronic, information technology, exports, tourism, restaurants are concerned, they are in really bad shape. If there was massive foreign investment and if the investment was withdrawn en masse, our economy could have collapsed. But that is not the case here. The business sector has realized that they, themselves, have to revive the economy. This is evident by the fact that even in these uncertain times, we see a lot of new economic activities going on.

What should be the government's role?

The government has its duties. The first thing it has to do is reform the banking sector, which is the pre-requisite for any economic reforms. Just two months ago the central bank introduced new rules and regulations saying they were of international standards. I disagree. I believe we have to introduce modern approaches rather than sticking to traditional ones. Everybody is talking about the relief package. The government should relax its taxes. At present the business sector is reeling under double pressure ó one from recession and the other from strict taxation. The authorities need to ensure a peaceful environment as well as introduce some sort of short-term tax holidays to bail this sector out from the turmoil. We are not expecting billion-dollar bailouts from the Nepalese government like in the United States. We are only demanding that the government become flexible enough to soothe the sector and enthuse confidence. That apart, we want even those forces outside the government to refrain from hitting at the economy, which is the lifeblood of the nation. In fact, recently the Federation of Nepalese Chamber of Commerce and Industry ran a media campaign urging all to show restraint and stop hurting the economy. In Sri Lanka, too, there is a serious internal problem, but it has not been allowed to hurt the economy. We demand the same here. Otherwise, I have to say that the country will collapse even before the economy does here.