You have become the FNCCI president after a big hiatus. How does it feel?

Though it took some time, my election to the post was based on merit. I feel this is the start of a new era at apex private sector body, with youths taking over crucial positions. FNCCI has now gone to second and third generation entrepreneurs. All the candidates who are likely to helm the FNCCI in the days to come are relatively younger and represent second or third generation of their families. The best thing about the youths at FNCCI is they are more focused and motivated to do something for the institution and the business sector rather than just eyeing top posts. They feel if FNCCI becomes strong, they can become strong. And this will definitely translate into something better in the days to come.

The budget for 2015-16 is set to be announced. What are the private sector’s expectations?

We have not asked for many concessions and facilities this time. What we are saying is the country needs a proper investment and business environment. We are really concerned about the implementation aspect. Things mentioned in the policy are described otherwise, hence there is a need for clarifying the issues. This will help create a conducive business environment. When an industrialist does business, s/he is driven by things mentioned in the policy. Hence, it is very important that the policies are made clear.

Post-earthquake, people are not willing to spend much. This might lead to an economic recession. Hence, there is a need for increasing spending for which there is a need for attracting investment. Increment in spending and investment is crucial for boosting the Gross Domestic Product (GDP).

Today, it takes almost four years to set up an industry. By the time an industry starts operations, its feasibility might not remain the same. There is a need for clearing such hurdles. There might be infrastructure projects which are ready to go into implementation. Such projects should get immediate clearance from authorities concerned. The lengthy process should be shortened.

The VAT threshold should also be increased. It is difficult for small and petty traders to maintain financial records as per the government regulations. Their compliance cost becomes higher. The government should give some respite to small traders.

Entrepreneurs of 14 highly-affected districts, whose businesses have been completely wiped out, should be supported by the government. Self-employed people who have also generated employment should be rehabilitated. The government has committed giving Rs200,000 to those whose houses have been collapsed in the earthquake. Those who have jobs and those are in farming are safe, but those who were doing businesses have lost their income source. The government should think about how to facilitate them.

Participation of the private sector in the reconstruction initiative is a must. The government should prioritise locally-manufactured products. We should take the earthquake as an opportunity and work to increase investment. This will have a long-term repercussion.

What are the sectors the government needs to focus on?

The manufacturing sector cannot be ignored. It plays an instrumental role in generating employment and reducing dependence on imports. We should prioritise high-value agriculture. In a country where we have such a great bio-diversity, we should focus on high-value agriculture. Hydropower and tourism are some sectors where we have comparative advantage. Hydro, in specific, needs a major boost. We have the potential to develop Nepal as an educational hub. Can’t we lure students from Uttar Pradesh and Bihar of India? Information and Technology is another sector having immense potential. There is no dearth of opportunity. We need to tap it.

What role the private sector wants in the rebuilding process?

From time to time, the government has failed to make capital expenditure. The size of the budget is expected to grow with the massive reconstruction drive. However, there are doubts whether the government is capable of spending the amount alone? If they can’t spend, I think a public-private partnership (PPP) can help. We can also follow Build-Own-Operate-Transfer (BOOT) model in the infrastructure sector. Around 500,000 houses have been completely destroyed. The government and the private sector can work to address the demand, requirement and the need of the people in terms of what kind of new houses they want and what kind of infrastructure is supported by a particular place.

Also, the government can transfer cash to the needy through bank accounts and allow them to rebuild homes by setting up some parameters. This will also help boost consumption of domestic raw materials. FNCCI has its network in all 75 districts and this channel can be mobilised.

There is no representation of the private sector in the National Reconstruction Authority headed by Prime Minister Sushil Koirala. If the private sector is included in the authority, we can give our inputs. The private sector commands 70 percent of the GDP. How can this sector be ignored?

There seems to be a lack of trust between the government and the private sector. How can that be addressed?

It is true the state does not trust the private sector and the private sector too has some reservation regarding the government’s capacity. There is a need for changing this. I don’t say the private sector is 100 percent perfect. We need to try to bridge the differences by working closely. Every sector has issues. Just because 5 percent is doing something hanky-panky, you cannot ignore the 95 percent. Same applies to the bureaucracy. The government should start taking the private sector positively. If we initiate dialogue, we can definitely adders these differences.

There seems to be a lack of coordination and communication within the private sector. FNCCI has recommended a hike in VAT threshold to Rs 10 million, while Confederation of Nepalese Industries (CNI) has demanded annulment of the threshold provision and introduction of Multi-VAT Rate system. Also, CNI has demanded a reduction in VAT, while FNCCI does not buy this idea. Your take?

I agree there are differences in this issue, and that is not bad at all. This is a healthy initiation from both the sides. May be for the first time, after I took over as FNCCI president, a joint delegation FNCCI, CNI, and Nepal Chambers of Commerce, among others, visited the Ministry of Finance with a common agenda. As far as the VAT threshold is concerned, I had discussions with the CNI office bearers. CNI has some big business enterprises as its members, while the FNCCI has entrepreneurs ranging from small scale traders to big corporates. FNCCI feels increasing the threshold will help small enterprises. Since CNI has a different context, they might not agree to this. And hence it is justifiable to have differences.

CNI has demanded 2-3 percent reduction in VAT for increasing consumption and 5 percent corporate tax. They have also put forward some examples of countries doing so during disasters to boost consumption. However, we feel it isn’t right to ask the country to reduce VAT in such circumstances. We feel, the government should make proper utilisation of the VAT raised. The concern is the money should not freeze inside the locker. In the case of corporate tax, though FNCCI has not officially put forward a demand, I feel the government should reduce it to help businesses sustain and reinvest.

Economic Policy Recommendation Committee has recommended the upcoming budget set an ambitious economic growth target of 6 percent. How pragmatic is this?

This isn’t a non-achievable target. We can do it. The government will have to increase its spending capacity for this. It is a tough, but achievable target.

The budget for this fiscal year stressed on second generation economic reforms. However, the government’s policies and programmes do not focus on it. What do you think is the real problem?

The problem is in implementation. A lot of things are mentioned in the Policies and Programmes and the budget, but sadly they are not implemented. Take an example of the Labour Act. The entrepreneurs and workers agreed to the Act some one year ago. The affected parties have come together. However, the government is not being able to endorse it. We wanted the Act to come even through an ordinance. But even the Parliament isn’t enthusiastic about endorse this Act. A nation can be strong only if its private sector becomes strong. The government should realise there is no alternative to free market economy and set a higher level-playing field.

How do you see the business environment from here on?

Investor confidence cannot change overnight. However, developments on constitution drafting front has raised hope. Investors are positive towards Nepal. The earthquake has prompted foreign as well as domestic investors to look forward to opportunities in this market. We need a positive mindset. The bureaucracy should work to fast-track procedures. Also, the tendency of taking industry as a source of revenue should change. Industry is a source of employment generation. Our Acts and polices do not have anything that discourages foreign investors. The only thing that keeps people from entering Nepal is the fear that the Acts and policies might be misinterpreted. If these things change, I don’t see any hurdles to the creation of a fertile business climate.

The private sector has been de- manding Nepalis be allowed to invest in foreign soil. Your take?

No one can stop the flow of money. There is no boundary. If not allowed legally, there will be illegal flow. If there is illegal flow, the money won’t return back. If I have skills and capability, why cannot I make an investment in the United States? If foreign companies can operate in Nepal and take back dividends, why can’t a Nepali company do the same? The world is economically united and everyone wants to expand investment. Money is going out anyway. So why not legalise it and open the door for it to return to Nepal.

How do you analyse the recent political developments? The parties are close to endorsing the constitution. What significance will it have as far as the private sector is concerned?

The country has to move on with or without constitution. There was an interim constitution to guide the nation. The main thing the promulgation of a full-fledged constitution will do is it will put an end to the tendency of industrialists of shying away from things saying the country lacks a constitution. Leaders now say “there is no constitution, how can we focus on the economy?” This will change and it will have a positive impact.