Thursday, December 20, 2012

Worsening investment climate demoralises private sector

Prolonged uncertainty, lack of policy clarity, and government apathy towards export promotion coupled with the worsening investment climate and rising cost of production have demoralised the private sector.
"The economy has never been a priority for the government," said president of Confederation of Nepalese Industries (CNI) Binod Chaudhary here today.
"Political parties have used the private sector only to strengthen their hold," he said, adding that the manufacturing sector's contribution to the gross domestic product (GDP) has come down to 5.9 per cent, the lowest in a decade, from over 10 per cent earlier, reflecting the mood of the private sector. "Due to the declining productivity of labour and increasing cost of capital, cost of production has also spiralled making Nepali products less competitive."
The worsening investment climate has pulled the private sector's morale down, said senior vice president of CNI Narendra Basnyat. "Security of investment and property is key to boost investment climate," he said, adding that the private sector has become a victim of prolonged uncertainty and policy illusion.
"Political parties have mixed economy with politics," according to vice president of CNI and executive director of Deurali-Janta Pharmaceuticals Hari Bhakta Sharma. "Highly politicised labour unions have also spoiled the investment climate," he added.
Nepal had the second lowest minimum wage ($33.54 per month) in South Asia, according to the International Labour Organisation (ILO). In 2006, it increased by 35.21 per cent, the highest increase compared to any other South Asian countries to $45.36 per month. As of 2011, Nepal has the highest minimum wage in South Asia ($83.76 per month), followed by Pakistan ($82.17 per month), India ($64.07 per month), Sri Lanka ($51.22 per month), and Bangladesh ($40.46 per month), according to the ILO data.
The private sector has more than 70 per cent investment but the sector has been taken hostage by the political parties to fulfill their vested interests, forcing the people to suffer and leading to higher imports.
The government itself is not interested in promoting exports, said managing director of Shivam Cement — that employs around 350 and has an investment of around Rs five billion — Satis More.
"There is a huge demand for cement in the country and investors have also been attracted to invest in the sector but frequent disturbances in the cement companies by some groups have always been posing a security threat," he said, adding that unless the government provides security to the industries, the country will never be able to substitute imports leading to huge trade deficit.
A decade of CNI
KATHMANDU: Confederation of Nepalese Industries (CNI) will organise its 10th annual general meeting on Saturday. "We have invited Nobel Laureate Prof Muhammad Yunus as a key note speaker for our 10th anniversary," said CNI president Binod Chaudhary, who has been leading CNI since its establishment. "However, this time, the institution will see a new leadership," he said, indicating that senior vice president Narendra Basnyat might lead CNI.

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