| January 18, 2018
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Govt damaging industrial environment

Market-distorting practices to hit job creation
KATHMANDU, March 10:
•    The government, which has allowed Birat Petroleum to sell petrol at Rs 130 per liter -- Rs 31 higher than the price fixed by Nepal Oil Corporation, is arresting drugs manufacturers on charge of promoting black-market.
·•    A single-engine aircraft of Air Kasthamandap crashed on February 26. The government, without any further investigation, banned operation of single-engine aircraft across the country.
•    Government agencies
are confiscating Surya cigarette, stating that it was not carrying health warning message on 90 percent of the packet, though the Act to Control and Monitor Tobacco, 2068 BS states the warning pictures should cover 75 percent of the packet.
These are some of the examples that show how the government is destroying investment climate in the country. On one hand, the government claims that private sector is the engine of economic growth, and on the other it is discouraging and harassing the private sector, and promoting 'black economy'.
The decision to allow Birat Petroleum to sell petrol at Rs 130 per liter when NOC is selling it Rs 99 per liter is an act of promoting black-market, according to consumer rights lobbyist Jyoti Baniya. "The government itself is promoting the informal economy," he added.
The government is, in a planned way, harassing industrialists and encouraging black economy which will in turn send negative message to investors. Pashupati Murarka, president of Federation of Nepalese Chambers of Commerce and Industry (FNCCI), said recent incidents aimed at harassing private sector will send negative message to potential investors. "Industrialists are not criminals," he said, adding that the government was treating investors as criminals.
Prime Minister K P Sharma Oli and his cabinet members -- from ultra-right to ultra-left politicians -- repeatedly preach about promoting private sector and liberal economy. But in action, they are completely against the liberal economy and the private sector. Rather they are promoting crony capitalism, an industrialist told Republica, preferring anonymity. “The government is promoting market-distorting practices and crony capitalism in the name of encouraging private sector,” he said, adding that industrialists were only milking cow for them.
According to Advocate Jagdish Dahal, Nepali legal system is not development and economic prosperity-friendly. "Unstable governments and arbitrary decision of ministries are inflicting more damage on our efforts for economic development,” he added.
Any investor -- be it domestic or foreign -- invests in a country where there is policy stability, Dahal said, adding that the investors can be assured of their business age on the basis of policy. "However, instability in Nepal has been a headache for investors as the instable policy, including law, has damaged country's investment environment."
Industrialists also are surprised at the way policy keeps changing in Nepal. Ravi KC, vice president of Surya Nepal, says that the government has every right to update policy according to time. He, however, says it must involve stakeholders concerned in discussions before changing laws, adding that one policy change can impact thousands of employees and billions of revenue to the government. "Likewise, frequent changes in policy will increase risks in business. Neither domestic nor foreign investors will invest in Nepal in such scenario," he added.
The government has been eroding its capacity to spend development expenditure, and failing to create employment in the country, pushing thousands of youth to Gulf and Malaysia every year. It has not been able to amend acts and policies that have hampered development works, but is quick in amending acts and policies that discourage investors.
The government move is pushing industrialists to become traders as they do not want to take any risk by investing in industries, according to industrialists. They say that the government is to be blamed for shrinking contribution of the manufacturing sector to the economy. According to the Central Bureau of Statistics, the manufacturing sector is expected to grow by 2.35 percent in 2015/16 compared to 2014/15.
Dahal attributes the government's moody policy-making for declining growth of manufacturing sector. "The current legal system is not development-friendly," he said, adding that the delay in courts have been a major deterrent to economic growth and private sector.
Likewise, the Doing Business Report of the World Bank has also revealed that Nepal's investment climate is not encouraging for doing business. In the Doing Business Report 2016, Nepal fell five notches to 99 due to weakness in regulatory and reform process.