Industry and commerce in disarray due to headless ministryThe Deuba administration has not appointed a new industry minister since the previous incumbent left office last May.
The Sher Bahadur Deuba administration has been functioning without a minister of industry even though nearly six months have passed since it was sworn in.
Keeping the Ministry of Industry, Commerce and Supplies without a head for nearly half a year exhibits the government's lack of concern when the economy requires particular attention amid the coronavirus disaster, insiders said.
The Deuba administration has not appointed a new industry minister since the previous incumbent Lekh Raj Bhatta left office in May 2021.
Not that the government has not tried. Prime Minister Deuba had named Gajendra Hamal as industry minister on October 8 last year; but he didn't last long, dashing out three days later as controversy engulfed his appointment.
With one of the key ministries in the government, the Ministry of Industry, Commerce and Supplies, stumbling along without a helmsman for such a long time, the country is facing stagnation in all three sectors, insiders said.
Economic prosperity through industrial development and revolution and the creation of thousands of jobs has remained in the speeches of the political leaders, they said.
“Nearly six months have passed since the new government came, but it has not been able to appoint a minister for industry, commerce and supplies. This shows how responsible the government is towards the development of industry,” said Shekhar Golchha, president of the Federation of Nepalese Chambers of Commerce and Industry (FNCCI), recently, speaking at a conference entitled Post Covid Economic Revival.
The pandemic has raised inflation and left the economy in tatters; and mismanagement has marred supply and market, leading to a sharp rise in costs, captains of industry said.
“The contribution of domestic industry in the GDP has shrunk from 15 percent to around 5 percent in recent times, which means that the government is not concerned about industrial development,” Dinesh Shrestha, vice-president of the Federation of Nepalese Chambers of Commerce and Industry, told the Post.
The government has not been able to create an environment for the establishment of industry, he said.
“We feel that the Industry Ministry has become less of a priority for the current government. We are amazed that the government has been giving so little importance to industry by not appointing an industry minister till now. This is a serious issue,” Shrestha said.
"Currently, the prime minister is also looking after the industry portfolio; but for lack of a dedicated minister, policy-level decisions are being delayed. Around 50 bills are pending in Parliament," said private sector stakeholders.
“Though the prime minister is looking after the Industry Ministry, he has not been able to look at our problems effectively,” Shrestha said.
"Central bank data shows that 80 percent of the country's industrial enterprises have come back into operation after the second wave of the pandemic; but they have not been able to operate at full capacity, leading to an increase in imports," Shrestha said, adding that this would hit the economy hard.
Shrestha said that industrial entrepreneurs were facing many problems, but there was no one to discuss them with.
"The government had said in the budget statement that import duties on some raw materials would be slashed to promote domestic production," Shrestha said. "But this has not happened."
According to the Department of Customs, imports surged by 59.55 percent to Rs838.40 billion in the first five months of the current fiscal year (mid-July through mid-December), turning the balance of payments situation upside down.
Central bank statistics show that the country saw a balance of payments deficit of Rs150.38 billion in the review period against a surplus of Rs110.65 billion in the same period of the previous fiscal year.
Gross foreign exchange reserves slid by 11.0 percent to Rs1.24 trillion in mid-November 2021 from Rs1.39 trillion in mid-July 2021.
According to former industry secretary Chandra Ghimire, the Ministry of Industry, Commerce and Supplies is the largest government agency giving priority to economic issues, but with the ministry remaining without leadership for a long period, such matters will not get priority at the policy level.
“Secondly, different proposals need to be taken to the Council of Ministers for improvement or for introduction as a bill or regulation; and when there is no separate minister, delays will result,” Ghimire said.
"Currently, imports have soared to new highs, and the trade deficit has also swelled which has increased losses in the current account and balance of payments. At a time when the country's economy is going through a bad patch, the industry minister would have introduced special packages and made policy-level decisions by negotiating with the Ministry of Finance, Nepal Rastra Bank, National Planning Commission and other ministries,” Ghimire said.
"Lack of leadership will make it difficult to tackle a situation like this," he added.
The private sector has forecast that due to rising inflation, Nepal’s trade deficit could reach a record Rs1.6 trillion by the end of this fiscal year in mid-July 2022.
“Inflation is at a high level while rural areas are facing shortages of food grain. The industry minister plays an important role in handling supply management across the country. The minister can improve things by intervening in price hikes and controlling hoarding or malicious market activities. But without a dedicated minister, difficulties are created in managing and controlling the market,” Ghimire said.
“The attraction towards industry among potential investors is declining; and to encourage entrepreneurs to invest in industry, the ministry could have introduced incentive packages. But it has been delaying its response to industrial entrepreneurs,” Ghimire said.
The lack of a minister also means delays in making decisions even at the administrative level.
"For the economy to recover from the destruction caused by the pandemic, industry and industrial entrepreneurs and traders need to be provided with special packages time and again, but there is no one to do that," Ghimire said.
“Our industry minister and the Indian industry minister need to hold talks regularly; but with no minister heading the ministry, it will be difficult to resolve issues related to industry, commerce and supplies,” Ghimire said.
"The country will soon be graduating from a least developed country to a developing country, and we will need to sign many new trade agreements. When we are no longer an LDC, we might not get market entry in other countries at zero tariff. So before we lose this advantage, we should make trade agreements with our trading partners fast or else we will lose our markets. The industry ministry is so important in the current situation,” Ghimire said.
Consumer rights activists said that prices of all goods in the market had jumped due to a hike in shipping costs and fuel prices, but with no industry minister, unscrupulous traders have been raising prices beyond reason.
“Traders have a free hand in setting market prices because the Ministry of Industry, Commerce and Supplies has been headless for more than five months,” said Madhav Timalsina, president of the Consumer Rights Investigation Forum, in a recent interview with the Post.
"Political events and lack of government presence have become an opportunity for traders who are fixing the prices of goods and services on their own," Timalsina said.