A Deviated Path: The Private Life of Nepali Private Sector

Siromani Dhungana/UWB

Nepal’s private sector, as evidences show, is shying away from its major responsibilities and becoming much like NGOs. The current situation is such that the private sector is acting like nonprofits or as a project implementing body. Popular perception is that our private sector lacks innovative approaches and entrepreneurial mindset.

Recently, me and my friend Hom Nath Gaire did a story on the recent trend of private sector engaging in appeasing donors for projects instead of being involved in businesses. I want the news to speak and help you readers make a judgment about our private sector:

A Donor-Dependent Private Sector

By Siromani Dhungana and Hom Nath Gaire

Aid orientation has been evident among Nepal’s private sector organizations as they are hell bent on bagging projects from donor agencies to carry out activities for their own welfare and day to day activities. Sometimes, their race for getting projects appears to be ‘unhealthy’.

Here are some examples:

• USAID Nepal Economic, Agriculture and Trade (NEAT) activity provided grant to the Confederation of Nepalese Industries (CNI) to conduct Public Private Dialogue (PPD) on draft of Foreign Investment and Technology Transfer Act (FITTA) last year.

The draft was prepared by the Institute of Policy Research and Development (IPRAD). CNI’s rival, the Federation of Nepalese Chambers of Commerce and Industry (FNCCI), started to criticize the activities under that project. The dispute became visible when the FNCCI formally organized a programme to challenge some provisions of the draft such as allowing Nepali investors to invest abroad, and accused that the draft was totally in favour of some businessmen affiliated to CNI. Due to the controversy, the Ministry of Industry could not table the draft at the Cabinet meeting. Government officials say that the reason behind the conflict between FNCCI and CNI was nothing more than the grant from USAID NEAT, which phased out last year.

• European Union had tentatively agreed, according to a FNCCI source, to provide a grant of five-million euro to FNCCI for the promotion of products listed in the Nepal Trade Integration Strategy in the European market. Later, the project was bagged by CNI in the name of “Go International”. In informal discussions, FNCCI officials still blame CNI for using all kinds of tricks to get the project. In this case, even employees at EU were dragged into controversy. Now, the project is being handled by CNI instead of FNCCI.

• Similar is the case of the SAARC Trade Promotion Network (SAARC TPN), a regional trade facilitation project supported by German International Cooperation (GIZ). There was a big hue and cry on which organization should represent Nepal’s private sector in this project as the project seeks participation from all SAARC countries. Both FNCCI and CNI were at loggerheads over the participation. Later, the GIZ decided to include all umbrella organization creating different sub committees to settle the dispute. The third organization, Federation of Nepal Cottage and Small Industries (FNCSI), also became a part of the project due to dispute between two big organizations, FNCCI and CNI.

• Businessmen affiliated with Nepal Chamber of Commerce (NCC) started a new initiative, National Business Initiatives (NBI) with grants from International Alert and GIZ. Many consider it as NCC’s attempt to get projects from donor agencies.

Foreign Aid: A Meeting Agenda
According to some members of CNI and FNCCI, members of both umbrella organizations get engaged in heated debates over foreign aid during their board meetings.

Some members directly accuse the leadership of inefficiency if the rival organization gets a donor-funded project, a member of FNCCI told The Corporate on the condition of anonymity.

“It’s a shame that our businessmen openly ask for projects during talks with representatives of the donor agencies,” a CNI member said, “They should be rather talking about bilateral trade or expanding Nepali business abroad or even inviting foreign investors.”

Making Umbrella Organizations a Begging Bowl
Why is our private sector making the umbrella organizations a begging bowl? It is tough question. It is no surprise as our private sector has ‘feudal mindset’ and they are hell bent on amassing profit, ethically or unethically, says Deependra Bahadur Kshetry, former vice-chairman at National Planning Commission.

It is shameful that they are also dependent on the government to carry out their activities. But they scold the government whenever they get the chance just to cover their own weaknesses, he claimed.

Nepal’s private sector lacks innovative approach, he opined. “They utilize their creativity just to make profit from the policy lapses. For instance, they amassed billions from the multi-billion VAT scam. Problems such as under and over-invoicing, income splitting and transfer pricing are rampant,” said Kshetry.

Instead of making the umbrella organizations a begging bowl, the private sector should utilize their income source to become self-reliant, he said.

Major umbrella organizations – FNCCI, CNI and NCC – are member-based organizations and they should run from their members’ contributions, a businessman suggested. Besides, FNCCI, CNI and NCC earned millions by issuing Certificate of Origin. But the problem is they are never transparent, according to him.

Dependency to what Extent?
It may sound ridiculous but it is a fact that Nepal’s private sector seeks help from the government not only for promotional activities but also to get opportunities for foreign trips and organizing events such as seminars, summits and conferences. For example, some umbrella organizations wrote to the government demanding that the government bear their travel costs to participate in the Ministerial Meet of WTO held in Bali, Indonesia. But the government refused the proposal.

Representatives of the umbrella organisations promote their businesses abroad but ask the government to provide air-fare and other essential cost, an official said. This suggests that Nepal’s private sector is completely dependent and inefficient, Kshetry claimed. “Many evidences show that, apart from some genuine firms, we can categorize our private sector just as household businesses.”

They Get Aid From:
FNCCI: FNCCI has been actively cooperating with various foreign / international organizations such as UNDP, USAID, DFID, UNIDO, UNCTAD/GATT/ITC, THE WORLD BANK, ILO, PPPUE, SEQUA-GTZ Private Sector Promotion Project, UNFPA, Asia-Invest, JICA, IOE, NIKKEIREN, APO, JETRO, SAARC Secretariat, ICIMOD, AOTS etc in carrying out various activities for the promotion of business and industry. (Source: FNCCI)

CNI: USAID, European Union, GIZ, DFID, IFC, Association for Overseas Technical Scholarship etc.

Nepal Chamber of Commerce: Nepal Chamber of Commerce is representing Nepal as a national focal point for Regional Investment Information and Promotion Services (RIIPS) of UN\ESCAP. The Chamber has been conducting seminar and training, related to business and economy, with the help of International organizations, such as International Trade Centre – ITC (UNCTAD – WTO) and the Asian Pacific Centre for Transfer of Technology (APCTT). (Source: NCC)
(The news was originally published in The Corporate Weekly)

(Siromani Dhungana is a Kathmandu-based journalist and Media Educator. He is also editor of United We Blog, Nepal’s first blog site. Email: siromanidhungana@gmail.com | Twitter: @siromanid.)

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