KATHMANDU: Demise of the Constituent Assembly (CA) has crumbled the hopes of private and public sectors alike who were anticipating Nepal’s journey towards economic prosperity. Nepal Investment Year could be a fiasco if politics continues to shadow country’s

economic agendas. Manifest-ations of dirty politics: strikes, demonstrations and bandhs may prove costly

for the nation’s economy.

Bad omen

CA dissolution without promulgating the constitution points to a bad omen in a country long marked by political instability. Stakeholders fear that lack of consensus among political parties even after May 27, the day stipulated for the birth of a new constitution, means

protracted state of flux. That only deteriorates investment climate. Government announced investment year without preparation thinks Meghnath Neupane, director general at Confederation of Nepalese Industries (CNI). “Investment is neither a charity work nor a festival. It requires security and guarantee of a venture,” says Neupane. He thinks that political quagmire has ruined the investment climate. “Many acts related to industry need to be amended. Formulating laws through ordinance is not easy. For example, there is a huge problem with labour law,” he expounds.

Stakeholders complain that investment environment in the country is not yet matured and that the government programme of celeb-rating 2012-13 as ‘Nepal Investment Year’ lacks required vigour. Such critics point to lack of enthusiasm among concerned government ministries, private sector and public. They argue that Nepal Investment Board (NIB) alone cannot make the year successful, insist-ing that the May 27 incident has sent negative signal to the world.

“Given the current situation of political instability and the country being run by a caretaker government, I don’t think either domestic or foreign investors will venture to invest,” opines Prof Dr Hari Sarmah, chief executive officer (CEO) at Nepal Association of Tour and Travel Agents (NATTA). Tourism sector is witnessing a decline in its business owing to political instability. As divulged by Sarmah, tourism registered a decline by nine per cent in the month of April this year as against the same month last year. “I personally believe that the

investment year, irrespective of how effectively we campaign it, is not going to bring in anything because diplomatic missions in

Nepal are sending negative advisories to their countries asking their citizens to think twice before coming to Nepal,” asserts Sarmah.

Contrary to the long awaited hope that clouds of uncertainty and confusions surrounding investment and business climate will clear away following a political settlement, untoward political development seems to be pushing the country to an abyss. Entrepreneurs are

apprehensive of a vulnerable situation in business and industrial sectors that political instability could invite. The current unstable political scenario could mark the downfall of the country’s economy. “If the politics again involves trade unions imposing bandhs and strikes forcing the closure of industries, it would be a great misfortune for the country. Such incidents would not only impact the concerned venture but also ruin Nepal’s image in the export market,” notes Suraj Vaidya, president at Federation of Nepalese Chambers of Commerce and Industry (FNCCI).

Not all is lostHowever, Vaidya believes that things are not yet out of track and that Nepal can achieve prosperity provided good governance and policies. “Fundamentally Nepal’s policies are good. They just require some reforms,” he says. An optimistic Vaidya narrates how the country witnessed a surge in re-investment in the past four years even as the country continues to function with an interim constitution. He

elucidates the example of foreign investments — Ncell, Surya Nepal and Dabur Nepal. “There has been an increase in the number of

local industries as well,” he points out. Stating that FNCCI is involved in promo-ting Nepal as an investment destination in cooperating

with the NIB, Vaidya says, “Despite political instability, response from countries like the US, Thailand, China and even India is tremendous. This is due to geological location of the country as it shares its borders with two economic giants.”

With a high level mech-anism like NIB in place, the recurring fate of politics completely subduing its economic agenda will no more hurt the country, opines Eco-nomist Dr Surbir Paudyal. Despite political changes and cabinet reshuffles, the board will function as a permanent body for the economic development, signing agreements and bringing in investments. Though political instability has direct adverse effects on existing manufacturing sector, its impact on big projects remain insignificant, according to Paudyal. NIB is currently working on 14 priority projects in sectors such as hydro electricity, tourism, and infrastructure development. “Signing of treaties like Bilateral Investment Promotion and Protection Agreement (BIPPA) by Nepal and the presence of NIB leaves enough room to be hopeful on the country’s economic future,” says Paudyal.

“NIB has approved Project Development Agreement (PDA) of big hydro projects totalling over 3,000 megawatt and we are also working on

14 priority projects,” says Radhesh Pant, CEO of NIB, adding that investors are still interested and positive on Nepal. He also affirms NIB’s crucial role in ensuring policy stability and assuring investors that change in politics or governments would not affect policies. “The year 2012 is largely a preparatory part working on policies to create investment friendly environment. The actual investment programmes will start from next year,” he says.

Consensus wayTo a country that hugely relies on foreign aids for its annual budget, foreign investment is indispensable. While the performance of NIB is yet to be tested, credibility forms the foremost part in building an investment-friendly environment. However, the level of trust on political leadership to back up economic agenda is thin. “For Nepal Tourism Year-2011, political leaders had expressed commit-

ment in writing that they would refrain from calling for bandhs, but the prom-ise was broken,” laments Neupane, questioning the level of trust that can be placed on such people in power. Panta asserts that the private sector cannot simply shy away from its responsibility of build-

ing an investment-friendly environment. “Private sector needs to unite and play an important role in terms of influencing the politics and government for the noble cause,” he says.

Vaidya warns that if parties ignore the national agenda of economic prosper-ity and do not form a consensus, it could prove disastrous. “People elected leaders so that they would utilise the powers given to them to serve the country. They must understand that people can reject them through ballots,” he says. Call of the hour is of a consensus among parties, government, private sector and the

people to make the investment year successful.