Private sector should lead economy responsibly

High ranking officials at the Finance Ministry, reiterating their commitment to a liberal market policy, have asked the private sector to lead the economy.
"The private sector, with its innovation and creativity, must lead the economy," said senior economic advisor to the ministry Dr Chiranjivi Nepal, during an interaction on 'Privatisation challenges and way forward', here today.
"Though successive governments in the past seemed confused, the incumbent government stands firm on a liberal market economy," he said, adding that the private sector — with responsibility and competency — should lead the economy as the public sector cannot run industries smoothly due to lack of ownership. "The government is only a facilitator."
"However, the private sector seems lost as it repeatedly approaches the government asking for something or the other," he added.
"The government does not need to run public enterprises and will hand them over to the private sector in a phasewise manner, if the private sector is responsible and accountable," said finance secretary Shanta Raj Subedi, on the occasion.
The government has privatised some public enterprises (PEs) but most of them are either not in existence or are performing poorly, he said, adding that the private sector still lacks a corporate culture and is basically family-run.
"The government had privatised the public enterprises with the hope that the private sector would operate them efficiently and contribute to employment generation, apart from contributing to the government coffer," he said, "But the private sector has — instead of diversifying business and becoming more competent — failed to smoothly operate the privatised entities, due to which the government has slowed down the privatisation process."
The government has formed a committee to take stock of privatisation and to chart a future course of action, Subedi said, informing that it is also planning to privatise PEs that are in profit, or to operate them in a Public-Private-Partnership (PPP) model.
Post-1990, the government under a liberal market economic policy, started privatising public enterprises but most of the privatised entities are on the verge of closure. From 1992 to 2008 some 30 enterprises were privatised.
"Among them only 11 enterprises are in operation," according to chief of the Privatisation Cell under the finance ministry Bashudev Sharma. "The rest have either been closed or liquidated or dissolved."
The government received a total of Rs 6.43 billion through privatisation of public enterprises. "Nearly Rs 100 million is still needed to solve employee and supplier related liabilities of the privatised enterprises."
However, the private sector has complained to the government that it did not receive assistance from the government as promised to run the enterprises they bought.

AMC on cards
KATHMANDU: Senior economic advisor to the finance ministry Dr Chiranjivi Nepal hinted that the government, in the budget for next fiscal year 2013-14, will introduce an Assets Management Company (AMC). "It has become a must to manage assets," he added.

'Budget should focus on employment generation'

The next budget should focus on employment generation to check the massive migration, increasing productivity and import substitution by creating business-friendly environment, suggested the experts to the central bank during an interaction here at the Nepal Rastra Bank (NRB) today.
The budget for the next fiscal year 2013-14 should concentrate on business expansion linking market with the farmers, encourage youth towards agriculture, promote organic agriculture, organised land and farming system, incentivise production and exports, and reform tax rates, they suggested.
They also recommended formulation of Assets Management Company, coupled with interest rates reduction for productive sectors, expansion of financial access to rural areas, bridging gap between banks and financial institutions and deprived sector, and easing of liquidity measures for the monetary policy for the next fiscal year.
Nepal Rastra Bank, as an economic advisor to the government, will suggest the recommendations of experts for the next fiscal year's budget, said Nepal Rastra Bank governor Dr Yuba Raj Khatiwada, on the occasion.
Despite political transition, increasing labour shortage and trouble, unfavourable weather, and delayed budget, the economy is sailing smoothly, he said, hoping that the inflation might cool down due to decrease in prices in the bordering districts.
The central bank, apart from fiscal policy, also has sought suggestions for the monetary policy for the next fiscal year.
Since the insurance companies are going for mergers, they should be incentivised, suggested Insurance Board chairman Dr Fatta Bahadur KC.
The board has increased the paid up capital of life and non-life insurance companies forcing them to go for merger. "They should be encouraged with sweetener," he added.
Likewise, Securities Board of Nepal Chairman Baburam Shrestha recommended tax break for Mutual Funds to encourage investors.

Governor asks private sector to form Asset Management Company

Central bank has asked the banks and financial institutions to team up and form Asset Management Company (AMC).
"Since long the government has tried to form Asset Management Company, but has not been successful," said central bank governor Dr Yubraj Khatiwada.
"The banks and financial institutions should come forward and can form Asset Management Company as problems in the real estate sector have yet not been solved," he said, adding that the government could become partner in the private sector initiative.
Asset Management Company is a company that invests its clients' pooled fund into securities that match its declared financial objectives. It provides investors with more diversification and investing options than they would have by themselves. Mutual funds, hedge funds and pension plans are all run by asset management companies. They earn income by charging service fees to their clients.
Asset Management Company offers its clients more diversification because they have a larger pool of resources than the individual investor. Pooling assets together andpaying out proportional returns allows investors to avoid minimum investment requirements often required when purchasing securities on their own, as well as the ability to invest in a larger set of securities with a smaller investment.
Apart from Asset Management Company, the credit rating agency will also help boost the current market, the governor said, adding that one credit rating agency is in pipeline and the formation of Asset Management Company will help both capital market and real estate grow. Both the sector is passing through a difficult period currently.
"But real estate sector is picking up slowly, though it has its own internal problems that needs to be solved to expand," Khatiwada added.
Currently, the developers have started more housing and apartments projects not only in the Valley but also outside the Valley like Hetauda and Pokhara, where there is still demand according to the developers.
The government has also encouraged the developers to go outside the valley as the organised settlement is a must for the development of the districts that have higher economic activities.
The government has also asked the private sector to engage in the government-planned 10 big cities on the Puspalal Lokmarga that is under construction.

Governor asks private sector to form Asset Management Company

Central bank has asked the banks and financial institutions to team up and form Asset Management Company (AMC).
"Since long the government has tried to form Asset Management Company, but has not been successful," said central bank governor Dr Yubraj Khatiwada.
"The banks and financial institutions should come forward and can form Asset Management Company as problems in the real estate sector have yet not been solved," he said, adding that the government could become partner in the private sector initiative.
Asset Management Company is a company that invests its clients' pooled fund into securities that match its declared financial objectives. It provides investors with more diversification and investing options than they would have by themselves. Mutual funds, hedge funds and pension plans are all run by asset management companies. They earn income by charging service fees to their clients.
Asset Management Company offers its clients more diversification because they have a larger pool of resources than the individual investor. Pooling assets together andpaying out proportional returns allows investors to avoid minimum investment requirements often required when purchasing securities on their own, as well as the ability to invest in a larger set of securities with a smaller investment.
Apart from Asset Management Company, the credit rating agency will also help boost the current market, the governor said, adding that one credit rating agency is in pipeline and the formation of Asset Management Company will help both capital market and real estate grow. Both the sector is passing through a difficult period currently.
"But real estate sector is picking up slowly, though it has its own internal problems that needs to be solved to expand," Khatiwada added.
Currently, the developers have started more housing and apartments projects not only in the Valley but also outside the Valley like Hetauda and Pokhara, where there is still demand according to the developers.
The government has also encouraged the developers to go outside the valley as the organised settlement is a must for the development of the districts that have higher economic activities.
The government has also asked the private sector to engage in the government-planned 10 big cities on the Puspalal Lokmarga that is under construction.