National 9 (Spotlight Weekly)

Reform And Recovery

An enterprise that has sustained many industries is struggling for its own survival

BY AKSHAY SHARMA

Newspaper headlines have been screaming against the dismal performance of the Nepal Industrial Development Cooperation (NIDC) for quite some time. The government seems to have heard; it is planning to privatize the corporation. An enterprise that has sustained many industries is struggling for its own survival.

"One of the reasons [for NIDC's current plight] is the frequent personnel changes Nepal's political instability brings," says Ramkaji Tamrakar, an economist. "Moreover, the corporation has more employees than it needs."

A industrial unit : Suffering from troubles

That was not the idea behind the creation of NIDC. In 1957, an industrial development center was established to carry out research and development functions. In 1959 (by way of a special charter act), the center was converted to NIDC to provide financial and technical assistance to industries in the private sector.

To enhance the corporation's activities, a new NIDC Act was enacted in 1989, under which the corporation is empowered to carry out several functions such as merchant banking and leasing business, underwriting services and commercial banking facilities. The main objective of the corporation is to facilitate industrial development in the private sector by providing financial, technical and managerial assistance and thus, mobilize capital in the industrial sector.

However, poor loan recovery has taken a toll on the organization. "If we continue with the commercial ego we have been carrying around, the number of defaulters will surely increase," said Dr. Bishwambher Pyakurel, a former chairman of the corporation. "NIDC is under enormous pressure. The Debt Recovery Act has not been implemented."

In consonance with the industrial policy of the government, NIDC provides financial assistance to industries based on the nature and location. Priority is usually given to industries manufacturing primary necessities of general consumption. Besides agro-processing, health-care and pharmaceutical, mineral and the construction sectors, real estate development, housing and tourism sector development such as hotel, lodges, resort hotels are also considered for financing.

Air and surface transport, electrical power plants and other such projects are also the part of NIDC activities when they are undertaken by the private sector and duly incorporated in accordance with industrial policy of the government.
NIDC provides services by way of long-term loan in domestic and foreign currencies; short term or working capital loan in local currency; equity participation and guarantee loan. The authorized capital of the corporation has now been increased to Rs. 1 billion from Rs. 10 million. It is divided in to ten million ordinary shares of Rs. 100 each. The issued capital will be as determined by the board from time to time, say experts.

"We could not be cost effective, that is why we have not been able to compete with other banks," says Dr. Pyakurel. The paid up capital is Rs. 308 million. NIDC supplements its equity capital resources with internal as well as external borrowing to meet the industrial credit requirement.

It is estimated that NIDC-financed industries have generated direct employment opportunities to about 74,000 people and the country has gained self-sufficiency in 30 industrial products. It is also estimated that such products have occupied fair share in the export trade of the country. Besides, it has contributed greatly towards revenue collection for national treasury and positive impact on social structure itself has been realized due to creation of the environment for consumption of indigenous products.

The corporation is committed to reform the procedures of loan approval, disbursement and realization. The loan approval process is to be made more simplified and regular follow-up is to be made in the implementation stage. More effective steps are to be taken for the realization of principal and interest dues. Special emphasis is to be given to rehabilitate sick industries. Prompt action will be initiated to sell the assets of legally seized industries in order to recover the dues.

Efforts also have been made to get low-interest bearing loan from foreign-based loaning agencies. "Information about small and medium scale industries is to be made available through the Internet," says Bharat Joshi, chairman of the corporation. Will NIDC be able to sail out of its sea of troubles? Visibility remains unclear.