Nepal’s economy has been reeling under pressure following the September 8-9 Gen Z protests, which appear to have hit business confidence hard. Despite enough loanable funds, lending has slowed and the morale of the private sector has gone to rock bottom. What is more irksome is that nearly Rs 1.1 trillion remains idle in banks. The Gen Z demonstrations seem to have made investors shaky, as many are either unwilling or hesitant to pump in capital into existing or new businesses. The World Bank’s recent reports have not been consoling either- it has projected only 3.1 percent growth this fiscal year, which is a sharp drop from the earlier estimate of 5.2 percent. This too showed that the unrest and instability have left a blow to our economy. Since entrepreneurs make investments through loans, adjustments and savings, if they are attacked and homes, hotels, industries and offices are targeted, then the economy will suffer heavily. In our nation, the private sector has accounted for 81 percent of Nepal’s economy and provided 86 percent of employment. The sector has contributed over 80 percent of income tax. The private sector has lost around Rs 88 billion. It is obvious now that when the national economy’s backbone is hit badly, it will leave revenue and jobs in tatters. Both local and foreign investors in Nepal became doubtful of the nation’s investment environment following severe attacks on businesses, multinational companies and five-star hotels.
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Because of this, our industries could collapse entirely without investment security. Assaults on enterprises have created a perception that nothing could be built in Nepal. Meanwhile, the authorities’ failure to arrest assaulters and penalize vandalism, arson and looting has only emboldened the sense of impunity. If this persists for long, it will drive capital out of the nation. However, there are some signs of hope and opportunities. Finance Minister Rameshwore Khanal has indicated that the government is fully committed to undertaking strong efforts to restore the confidence of businesses and investors. A nationwide consultation with businesses is underway to find ways to rebuild trust and boost morale. In this context, Nepal Rastra Bank Governor Bishwonath Paudel has tried to encourage businesses by advising them to take advantage of the favorable monetary situation and policy. Lower interest rates, abundant liquidity and foreign reserves exceeding Rs 2.2 trillion will give slumped business houses an ample opportunity to rebound. It is therefore imperative for the private sector to start boosting production and employment growth by availing the opportunities.
Above all, authorities should work with a clear, consistent strategy to reassure investors to gain tangible outcomes. A swift crackdown on vandalism and arson, as demanded by the business community, would dispatch a positive message that the government is committed to protecting private property. Making regulatory processes smooth and offering credit support to affected industries will be one of several ways to instill confidence. Moreover, the authorities should promote public-private partnerships, which would encourage investment. Initiatives to guarantee insurance for businesses impacted by unrest might further reduce hesitation among entrepreneurs. Likewise, there is a need for open dialogue with local chambers, startups and foreign investors that can help introduce suitable policies, stressing the fact that the government understands the needs and stakes of the business sector. Confidence among the demoralized business community can be rebuilt with a coordinated effort to protect investment. Strong support from the government for businesses and collaboration among concerned bodies can reverse the current slump.
