Chairman and Managing Director of Saurabh Group (SG), BISHNU PRASAD NEUPANE hails from a business family that migrated to Nepal from Burma. Also a civil engineer, Neupane now heads the group that churns out a variety of products including cement, steel, tea and spun yarn. With over two decades of experience in industry, trading, cultivation and finance, Neupane talked to Guneshwor Ojha of THT Perspectives on the current scenario of the industrial and manufacturing sector in Nepal. Excerpts:
What major challenges do Nepali industries face today?
At present, Nepal’s industrial sector is in a bad shape. Almost all industries are either losing money or operating at a breakeven position. Nepal’s manufacturing industrial sector today is mainly dogged by three major problems: lack of energy, manpower and funds. When we started the company a decade ago, these problems were non-existent. Now they are burgeoning as serious threats. Industries are unable to run to their full capacity, thanks to the power crisis. Our group annually exports goods worth Rs 400 million, but the government provides no considerable incentive for the same. Another factor is that China and India provide loan to their industries at low interest rates so that the manufacturing cost is lessened, thereby encouraging exports. In Nepal, however, bank interest rates have gone up and cost is a major issue for the establishment of industries, especially bigger ones. How can an export oriented industry survive at 15 per cent bank interest? Security is another concern. All in all, Nepal does not have an industry-friendly environment.
Isn’t it true that Nepali labourers are heading overseas because they are not getting the pay they deserve?
It’s not that Nepali industries pay their labourers insufficiently; the problem lies with the government’s labour law and policy. Due to lack of clear policy, even those willing to render service here are unable to work. Only a hire and fire policy can create conducive work environment. For example, I cannot double the salary of a deserving worker because it draws protests from the labour unions. Thus, the sordid fact is that mostly unprofessional workers stay with the factory turning it to a political stage. They do not work but keep on pressing for impractical demands — like, a worker be made a per-manent staff within a year of entry! Another reason why people go to countries like Malaysia is because they want to see the world. But we have had many cases where our workers have returned from abroad and rejoined.
How do you perceive the future of Nepal’s manufacturing industry?
Given the existing sit-uation, the future of Nepal’s manufacturing industry is really bleak. If this persists, industries will gradually die. Export oriented industries will be the first ones to go, because they cannot compete with cheaper Indian and Chinese exports. Secondly, the companies consuming more electricity will cease to exist due to power shortage. And ultimately, even the
industries based on local resources will slowly dis-appear. Yet sadly, industrial sector of the country seems to be either lost amidst high political talks or stands neglected by the government. I’m not blaming a particular government or political party, but that has been the trend so far. Everybody’s focus is on the constituent assembly, which is without a doubt very important. But nobody talks about industries, which play a crucial role in the country’s economic development. By the time the nation realises the importance of the industrial and manufacturing
sector, it might be too late. But if we address the problem before it gets out of hand, there is hope. Otherwise, it will have a similar fate as that of Nepali carpet and garment industries.
What could be the immediate measures to be taken to revive the industrial sector?
First, the government needs to provide electricity at any cost. Rather than opting for expensive energy from thermal plants, it should
import 200 MW to 300 MW electricity from India. Expanding required transmission line takes only six to eight months, and India is ready to supply. While talking with the state electricity board in Gorakhpur of India two years ago, I learnt that they are willing to export electricity to Nepal. They purchase electricity from numerous private coal-based thermal power plants in Uttar Pradesh at around IRs 3.5 per unit, and are happy to sell to Nepal at IRs 6 per unit. Plus our government can strike a deal with the state government itself.
Why go for diesel fuelled thermal plants at home, which cost NEA Rs 30 per unit, when we can import adequate power from India at a much cheaper price?
Secondly, banks should provide low interest rates for industries. Instead of investing on Indian and bonds of other countries, Nepal Rastra Bank should invest in Nepali industries through commercial banks at subsidised rates. Right now, central bank is giving seven per cent interest on reinvestment to banks. Why not grant the same to
industries on collateral?
Finally, the government should provide subsidy for labourers of struggling industries. For example, if labourers need a minimum wage of Rs 7,000 per month and an ailing industry can only provide Rs 6,000, the government can provide remaining Rs 1,000. And there sho-uld be efficient labour law.
How hopeful are you about the economic future of the country?
I’m cautiously optimistic. With a few good people at decision-making level, a small country like Nepal can prosper in a short time. For example, NTY 2011 shouldn’t be the be-all and end-all of Nepal’s tourism sector.
Instead, the government should come up with long-term plans in the tourism sector. Similarly, hydropower must be emphasised and
developed, either through government support or through the help of multi-lateral agencies. The government should also provide financial guarantee and develop projects like West Seti Hydroelectric Project.