Wanted good managersTrying to revive rotting public enterprises would be throwing good money after bad
The government is planning to revive a number of sick public enterprises that have virtually been in a shambles for years. Industry Minister Nabindra Raj Joshi has announced that he will put at least four of them—Nepal Drugs, Butwal Spinning Mill, Hetauda Textiles and Birgunj Sugar Mill—back into operation in the first phase. He is also reportedly considering resurrecting Gorakhkali Rubber Industry and Biratnagar Jute Mill. It looks like a brilliant idea because equipment, vehicles, machinery and property worth millions have been lying idle or rotting away. In some companies, the employees are still drawing salaries although production might have stopped years ago. But re-injecting cash into these failed ventures without exploring what brought them down originally may prove to be an unproductive, therefore, populist decision in the long run.
These enterprises were among those gifted ready-to-run by the donors. It is indeed a great paradox that successive politically appointed managements were unable to generate a mere operating profit out of such huge investments. Our development discourse often laments the ‘resource curse’ phenomena. Nepal has been unable to grow economically and ensure distributive justice despite an abundance of natural resources, supposedly hardworking people and huge markets next door. Recently, financial resources are also becoming increasingly available. But we are still unable to produce, sell and earn a profit. Our imports are fast ballooning and exports shrinking.
One may blame frequent political interference in management, endemic corruption and lack of market orientation for the proverbial inefficiency and ultimate grounding of public enterprises. That is certainly true, but the private sector in Nepal is faring no better either. Highly ambitious-sounding projects, business houses and companies that earned impressive profits right from the take-off phase have fallen like a house of cards overnight. The unwillingness of big business houses to assign responsibilities to professionals as opposed to clan members, adopt a corporate culture and make businesses transparent have often cost the company its future. The Amatya Group, Khanal Group and Necon Air are some examples.
The root cause of all these sad corporate stories is undeniably management failure. Resource-rich companies that had uncontested markets have also failed due to lack of management, under-management or sheer mismanagement. A management degree, proven management skill or job-related experience has seldom been the main criteria for candidates when appointing the chief executive or management board. Loyalty that is often ‘beyond business’ has invariably ruled the roost. The mindset of the political masters is that ‘anyone they pick is fit’ for the job. In the private sector, the common belief is that money will do ‘all the magic’ of earning profits, therefore, professional managers are not indispensable.
Doomed to fail
Against such a backdrop, the government’s plan to revive dying companies by investing additional billions, create 11,000 to 50,000 jobs and push import substitution is a non-starter without first addressing the chronic issue of management deficit. The rent-seeking design of politicians across ideologies has completely dismantled independent recruitment architectures like the Public Company Management Board, which at one point was functioning as a fairly credible public recruiter. An even larger problem is that the political leadership is averse to qualification due to cronyism.
The management crisis is pervasive across all sectors and disciplines. The political parties, which are at the centre of policy and decision-making in the country, are grossly mismanaged. Historic Bir Hospital is a classic example of health sector mismanagement. Despite huge budget allocations to sectors like education and infrastructure (particularly roads), the outcomes have been terribly disappointing. In fact, there is hardly any system, structure or service entity in the country that could be cited as the best managed example. We are awestruck by the fact that the economic administration is unable to conduct the allocated capital expenditure while there is an undersupply of everything—infrastructure, basic services and daily essentials.
The country’s elites have been asking for some time why Nepal has not developed despite its location and natural resources.The answer is lack of management. There is lack of management everywhere—in politics, diplomacy, finance, economy and general service delivery. Where does the problem lie? Nepal’s political and business classes do not realise that management as a science can better solve many of these problems. The government has failed to attract fresh MBAs and other graduates from reputed international business schools into its regular bureaucracy. Considering the fact that it will take 20 to 25 years for a fresh recruit to reach the executive level, the shortage of efficient mangers will exist for decades to come. This, indeed, is a cause for concern.
Start the hunt
The supply-side outlook for management skills and services is equally bleak, to say the least. This is so primarily because Nepal lacks business schools, both in terms of number and quality.The quality of the teaching faculty is a real problem. Products of reputed international business schools have no or little incentive to come to Nepal, and even less so to take to teaching. The curricula and pedagogy of the management or business departments of all Nepali universities are inferior to any university of moderate quality on the Subcontinent, let alone the world. Making quantitative research, case studies and publication an integral part of the teaching-learning process even at the postgraduate level is limited to rituals. As a result, the graduates of these institutions are better suited to become clerks than managers which the country lacks the most.
Nepal first needs to address this crisis of management that bedevils every sector of growth and development. Only then will public and private enterprises run efficiently, the allocated development budget spent fully and the country put on the development path. The understanding that money and plans are not enough to translate hopes into goals and that efficient managers are equally indispensible is very crucial here.
Wagle, a founding editor of the economic daily Arthik Abhiyan, is an eco-political analyst