Call for labor reforms

I’ve always believed that the Nepali economy is a very resilient one because it’s not too overly dependent on exports. So, even when the global recession happened, we weren’t very seriously affected. We have a small inherent economy, mainly based on local demands.[break]

The year 2010 poses many challenges for the corporate world and the overall business economy of Nepal. Firstly, political disturbance is the major challenge. Due to the unsettled political situation, the labor is still much undisciplined. You can’t base large investments when you have such an ungoverned workforce. So this is one factor that’ll continue in the coming year as well.

Another thing is that the power outage problem doesn’t seem likely to be solved in the near future. The government has been very slow in responding to this crisis. Load shedding will deter big investments coming to Nepal.

The fiscal situation of Nepal also isn’t looking too well as cash flow has been very low in the banking sectors. People here are rather investing in the Indian stock market, Indian insurance and mutual funds so the economic activity that should happen internally is crossing the borders. The decline in cash flow means downslide in demand as well, and that’s a major challenge for any industry.

Besides that, the interest rate is going up because of the decline in cash flow. So, highly capital-intensive industries will definitely be very reluctant to invest. With high interest rates, the scope of hydro industry, that’s traditionally thought be very good, will also be lessened. Similarly, many projects will also be held off.

The confidence of the international community in Nepal is also declining. So, increase in international investment or any such involvements in Nepal in the near future is quite unlikely. I don’t see that situation likely to be reversed for the better.

Remittances have also been slowing down, and with that, demands will go down, too. So even with our resilient economy, what overall growth we’ve had will also stall with the diminution in remittances.

About opportunities, it’ll be based on political settlements. If there’s necessary political settlement, growth will bounce back and there are chances of international investment as well. We have a sizeable population, and there’ll be opportunities as well. The tourism sector and cement industry still have great potential to be explored.

Looking back, there’re some key areas that we need to focus on. The most important is labor reforms. We and the political parties should really look at it and come to a much needed solution.

Next year, we don’t want to be getting into labor problems. It’s gone too far now with their undue demands. If we are to address them, when we’re already marked as uncompetitive with our undisciplined labor and with that cost of production, none of our industries will be able to survive in the international scenario.

As for my visualization of the corporate world in year 2010, I’d like to put it this way. I find 2010 as a very challenging year. But if we can bring about labor reforms and political settlement, I do see opportunities opening up for everyone. I mean, all these many political exercises going on won’t be substantial unless there’s economic growth.

All of us are first concerned with the fulfillment of basic needs. For that, the economy has to be strong, new trade and industries have to come up; and for that to happen, again, we desperately need good labor conditions and political stability. So it all runs in a circle.

The Federation of Nepalese Chambers of Commerce and Industry (FNCCI) has been talking with the trade unions and constantly raising the relevant issues. It’s extremely important that political parties realize the importance of labor reform if any industry has to survive in Nepal. We hope the government comes up with a comprehensive labor policy which is reasonable to both the labor and the industry.

Shekhar Golchha is the Director of Golchha Organization.