Print Edition - 2015-07-18 | MONEY
Many measures recommended by PDNA not included in budget
Jul 17, 2015-
The budget for the fiscal year 2015-16 has not included many measures recommended by the Post Disaster Needs Assessment (PDNA) to revive earthquake-affected Micro Small and Medium Enterprises (MSME).
The government’s annual financial plan contains a wholesale package for all earthquake-affected businesses which will be implemented through the proposed Economic Rehabilitation Fund under Nepal Rastra Bank (NRB). The fund will provide refinancing facilities and interest subsidies to earthquake affected residential homes, agriculture, business and tourism.
The government has allocated a whopping Rs91 billion, which is more than 11 percent of the total budget of Rs819.47 billion, for the reconstruction effort. It has also set an ambitious target of finishing the rebuilding within five years. However, the budget has not specifically mentioned MSMEs although the PDNA had suggested implementing particular measures for this sector.
Of the total amount proposed to be spent on reconstruction by the National Reconstruction Authority headed by Prime Minister Sushil Koirala, Rs50 billion has been allotted for the housing sector. A sum of Rs3 billion will go to public buildings, Rs2 billion to heritage infrastructure, Rs7 billion to other infrastructure, Rs6 billion to the manufacturing sector and Rs6 billion to the social sector.
However, there is no specific mention of the MSMEs which are among the worst hit sectors. According to the PDNA report, the estimated losses of all kinds suffered by commercial establishments amount to Rs7.93 billion while industrial losses total Rs10.87 billion. “To mitigate these negative impacts and allow the sector to recover and contribute to the overall reconstruction effort, a strategy comprising both policy measures and practical assistance to the most affected micro, small and medium enterprises (MSME) is proposed,” the PDNA said.
According to the PDNA, while medium and large-scale enterprises provide access to employment opportunities in the formal sector, a substantial number of jobs are provided by micro enterprises which constitute the largest share of this sector, the majority of them being informal. Prior to the earthquake, it was estimated that there were 174,823 micro enterprises in the 14 affected districts as assessed through the Household Survey. The PDNA has recommended that for severely-affected micro and small enterprises, a two-pronged support strategy should be adopted, starting with immediate assistance for rubble removal and restoration of the working capital of the affected enterprises and, secondly, assessing their need for and securing their access to supplementary financial and non-financial services to ensure that the businesses—especially those headed by women and youth—are built back better in terms of management capacity, sustainability and resilience.
The report has also recommended setting up business recovery centres (BRCs) to channel immediate direct support to earthquake-affected MSMEs, support the strengthening of the capacity of existing providers of non-financial and financial business services and link the affected MSMEs with these service providers.
“We had asked the government to immediately start a business recovery centre to support small enterprises in particular,” said Hari Bhakta Sharma, senior vice-president of the Confederation of Nepalese Industries. “The budget has mentioned establishing a business recovery fund somewhere, but no details are available.”
The CNI had asked the government to allocate Rs500 million as seed money to establish a business recovery centre to support business enterprises. “After the government sets up the fund, we had pledged to boost it to Rs5 billion,” said Sharma, adding that the centre should be established under a public private partnership (PPP) model.
FNCCI President Pashupati Murarka said although the budget has announced tax waivers to revive business, it isn’t enough.
“The government should bring a package for their reinstatement. MSMEs have a huge role in the economy. They have a substantial role in the supply chain,” Murarka said, adding MSMEs generated thousands of employment opportunities, so the budget failed to give adequate focus towards the sector.
Published: 18-07-2015 08:46