were reports of hotels and resorts expanding facilities. People who had planned new hotels speeded up construction as the preparation for Tourism Year appeared to be going ahead in full swing and sincerely. The promotional activities in the first few months of the year went generally well. Tourist arrivals showed upward trend. The direction was right. As envisaged, tourists from northern neighbor steadily increased.
However, the commitment of ‘no public strikes’ was forgotten in just the first three months. There was not just one isolated instance. Several groups presumably affiliated to or having the blessing of one or the other political parties emerged to announce and enforce public strikes daily for almost a week. Random incidents of localized strikes were, of course, plentiful in the month of May. Hotels once again started expressing worries as tour operators reported large scale cancellations.
There is still growth in tourist arrivals largely contributed by Chinese and Indians, but the Tourism Year target of reaching a million now definitely becomes unattainable. Tourists come to Nepal to enjoy the natural beauty, to see the rich cultural heritage that we have. People spending hard-earned money in their leisure time certainly want peace and free mobility, and when this is not available, nobody endures strikes just because Nepal is so beautiful.
In addition to these adverse externalities, the internal dynamics of the Tourism Year management also seem to be in disarray. Nepal Tourism Board does not have a CEO; its website directs visitors to another page and then vanishes. Substantial portion of the budget meant for tourism promotion using influential global media remains unused. There is a host of problems.
Now, close on the heels of apparently a failed thematic year, the government seems to be mulling 2012 as an investment year. Unlike the idea of Tourism Year, this one has not been thought through properly. In fact, lots of homework went in preparation for Tourism Year; at least it was announced more than a year before the year actually began.
Change in government itself is not the real problem. Governments in a democracy everywhere change periodically. Our periodicity, of course, has been excessively short. Continuation of a government for at least a reasonable period of time would be ideal, but then it is not a necessary pre-condition. What is necessary is the commitment to rule of law, good governance and policy predictability.
Now, in less than four months’ time, the government wants Investment Year to begin. This was actually the demand of the business community, who saw sagging business confidence as a serious problem not only to the economy but also to the political process and stability. The thought given to investment is good and, therefore, government accepted the idea without question and almost as soon as the word dropped.
Are we, however, ready for it?
There’s little that we don’t know why we have not been able to attract investments in the economy both from within and outside. There have been several studies in the recent years on our growth constraints and in identifying problems to investments. If only we are able to resolve some of the problems that we know, we can certainly build some confidence. But solutions are difficult to implement not because they are complex, not because we do not have the technical wherewithal to deal with them. The real difficulty is that we have failed time and again in honoring our own words we spoke of our volition and not because others wanted us to speak.
Entrepreneurs are a bunch of strange people. They are essentially risk-takers, but with a motive. They turn the risks into opportunities and skim profits from the turmoil. When there is no opportunity of turning risks into profits in industries, they move to speculative activities. Their preference for cash becomes higher and therefore they invest in areas from where exit is quick, easy and less painful. This is what is happening in Nepal at the moment. This is the reason for preference of trade over industries, preference of speculation in property and bullion market.
Political instability tops the list of perceived problems. It is generally misunderstood as a frequent change in government. Change in government itself is not the real problem. Governments in a democracy everywhere change periodically. Our periodicity, of course, has been excessively short. Continuation of a government for at least a reasonable period of time would be ideal, but then it is not a necessary pre-condition. What is necessary is the commitment to rule of law, good governance and policy predictability. These commitments must be translated into behavior. When due to frequent change in government, there is a breakdown of law and order, public institutions become weak and corrupt, and there is a lack of honesty in policy implementation, the business confidence ebbs away.
Therefore, it is necessary before we set out on the Investment Year journey that there is a political consensus on the stability of governance. Political parties need to demonstrate by deeds that in matters of maintaining rule of law, there will not be any compromise. There must also be a consensus on broader economic policies and the security of foreign investments, if we are to also woo foreign investors.
Labor unrest is another serious problem. Workers’ productivity in Nepal is low. The same people who earn accolades from employers outside the country, when employed within the country at almost equal wage-scales become trouble-makers. Why is it so? There is clearly excessive politicization of the labor unions. We must, therefore, find a new equilibrium of industrial relations where workers’ interests are fully safeguarded while at the same time industries and investors are free from any physical threats. And, if we are to really work for the Investment Year, then a tripartite mechanism for peaceful resolution of industrial disputes must be put in place before the year begins. The decisions of the tripartite mechanism of workers, employers and the government must be made binding on all parties.
Without these two necessary prior preparations, the proposed Investment Year would just be hype.
It is said that big investments in Nepal is not possible because of poor physical infrastructures and under-developed financial market. This is true, but then this bottleneck itself can be an area of big investments initially. Without better transportation infrastructure and uninterrupted supply of power, modern industries cannot be set-up. The objective of the Investment Year should, therefore, be to attract investments in power generation from any source—hydro-power or wind-power or thermal. Expressways or railways linking major industrial hubs and markets should also be in the list of priority investments from private-sector investors.
Underdeveloped domestic financial market is not a problem as long as we are willing to accept foreign direct investments. However, while we do so, we should also be encouraging the establishment of investment banks and private equity funds within the country. Aside from the infrastructures investments, the focus should also be in commercial farming and agro-processing.
The point is that we must also have a list of projects where the investments are preferred. If these preparations are done in the remainder of this year, then only the announcement of the Investment Year will make any sense.
rameshorek@gmail.com
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