Print Edition - 2014-07-02 | MONEY
Energy and manufacturing should be the mantra
- Budget talk
Jul 1, 2014-
With the country waiting with anticipation for the next fiscal year’s budget, the coalition government has an historic opportunity to produce a financial plan that can stimulate economic growth and bolster private sector confidence.
The upcoming budget should largely focus on the energy and manufacturing sectors. As important stakeholders in the country’s economy, the FNCCI has come up with a slogan “Urja ra Utpadan, Hami Sabaiko Ahawan”.
The budget should focus on energy development. Along with developing reservoir-type projects, the government should extend facilities to the projects being developed by the private sector. It has targeted ending load-shedding within three years. This might be difficult to fulfil especially during the dry season, but if we can sign a Power Trade Agreement (PTA) with India and erect cross-border transmission lines, the goal can be achieved. The PTA along with the cross-border transmission lines will help Nepal to export and import electricity to and from India as per our requirement.
With our ballooning trade deficit, export promotion is the only way we can arrest the ever widening gap. But for this, there should be a special initiative in the new budget directed at the manufacturing sector.
Import substitution is another means to narrow the trade deficit. The government has declared that it will buy Nepali goods even if they are costlier than imports, but it has not happened. We have become self-sufficient in leather footwear, and if the Nepal Army and Nepal Police were to buy Nepali products, footwear imports can be cut.
Similarly, the government should increase cash incentives to export-oriented products. While neighbouring countries like India and China are providing cash incentives in the range of 10-16 percent, we are getting just 3-4 percent.
Nepal needs to identify its key products to promote exports. Some talk about agricultural products, others talk about natural herbs and still others talk about handicrafts and pashmina. Hence, a specific focus is required.
The second generation reform which Finance Minster Ram Sharan Mahat has been talking about should focus on issues that have been hindering industrial growth in the country.
The government has not been able to get Parliament to pass new acts related to business and the economy. And this has had a big impact on the economy. The acts that have a direct relation with business should be endorsed by Parliament at the earliest. The private sector has lobbied strongly for an Industrial Enterprises Act and it has finally reached Parliament.
The construction of the infrastructure at the Bhairahawa Special Economic Zone (SEZ) has already been completed, however, it has not been operationalized due to lack of a SEZ Act. Likewise, the Income Tax Act, 2002 has become outdated and needs to be amended while labour laws should be revised as per the current scenario.
There is also a need to give fresh impetus to economic diplomacy. The cost of doing business in Nepal should be reduced. A legal framework is compulsory for this.
The government should focus on promoting domestic industry. Foreign investors look for stability and opportunity and the performance of local industry before deciding to invest in Nepal.
Likewise, the budget should not be considered as a political subject, and the government should ensure that the annual financial plan is issued on schedule.
The government has been struggling to expedite capital expenditure, and it should work on increasing the efficiency of government agencies with regard to budget implementation. Nepal should not be made to miss opportunities due to politics. The political parties should remember the promises published in their election manifestos.
(Pandey is President of the Federation of Nepalese Chambers of Commerce and Industry)
Published: 02-07-2014 09:10