Obstacles for Business in Nepal: Instability and Maoists

Political instablity and power outage are the two major contributors to Nepal’s poor investment climate, a World Bank report says. It forget to mention the number one reason: the Maoists.

Nepal 2009 Enterprise Survey points out lack of access to finance and labour regulations as other major obstacles. Obstacles, however, differ from industry to industry. Transport and electricity are especially problematic for the tourism industry, whereas labour regulation is the key impediment for the manufacturing sector. The survey conducted last year has covered 13 cities across the country. Nepal’s decline in export has rightly been potrayed in the survey. Only four percent of the firms are exporters against the South Asian average of 20 percent. Nepal, however, has fared better in some areas: Tax rates, tax administration, business licensing and permits and court functioning. (detail)

Maoists threat to GMR

Nepalis have been bearing the brunt of treacherous power cuts for some years and it is only projects such as these that can provide relief to them a few years down the line. The Maoists have no right to deny the people the future benefits that such projects will bring to them.

GMR Energy Limited, the Indian company selected for the commissioning of the 300-MW Upper Karnali Hydro Electricity Project, has written to the government of Nepal on Thursday (28 January), seeking security for continuation of work on the project. “The company has asked for adequate security on the project site,” said Energy Minister Prakash Sharan Mahat. GMR had bagged the project in January 2008 through international bidding and was conducting the Detailed Project Report. The project is expected to see the light of the day in seven years. With the project’s completion, Nepal will get 12 percent free energy along with 33 percent free equity shares.

The Upper Karnali agreement, according to Maoist politburo member Khadga Bahadur Bishwakarma, is unequal and so are other agreements signed with India. He said scrapping of the agreement is squarely related to the Maoists’ agitation for national sovereignty. “The Upper Karnali pact is against the country and the people. It has robbed people of their ownership over natural resources,” he said.

It is nothing short of baffling that the Unified Communist Party of Nepal (Maoist), which was in parliament when the bidding for the Upper Karnali Hydropower Project was on and a part of the government when the project was awarded to Indian company GMR Energy Limited, is threatening the firm to pack up their bags and leave the country. In addition, when the Maoists led the government for nine months until May last year, they completely forgot about the company but now that they are in the opposition, it has suddenly dawned on them that there is an Indian company operating in our backyard. How hypocritical can the party get?

According to the Maoists, the threat against GMR is part of their ‘national independence campaign’ (read ‘national independence campaign against India’). Why India? Because, in the eyes of the party, they are responsible for keeping them out of the current power equation for so long! It’s unfortunate that out of desperation, the Maoists are speaking and doing things, which in the long run will be detrimental not only to them but to the country as a whole.

GMR was awarded the contract to build, own, operate and transfer the 300 MW Upper Karnali Hydropower Project through Open Competitive Bidding in January 2008. If a company that has secured a project through a fair and a transparent process is threatened and intimidated, will it not discourage international companies from entering the Nepali market in the future? Isn’t this a big blow on a country that is incapable of financing mega projects on its own? Take for example Nepal’s failure so far to develop the highly-attractive and low-cost Upper Tamakoshi Hydropower Project. (source)