Krishna Hari Baskota is revenue secretary at Finance of Ministry. In his talks with Nirjal Dhungana of Nepalnews.com, Bastoka divulged his views on a myriad of aspects pertaining to the country’s economic realm. According to him, the country’s economy is in good stead and the government is highly serious towards propelling the country towards the path of prosperity. He also tried to dispel the apprehensions among the business tycoons that the government is exhibiting flippancy towards cooperating with the private sector. Excerpts:

1) How do you assess the prevailing economic scenario of the country?

Krishna Hari Baskota

In a nutshell, the country’s economy is in good stead. Micro economic indicators are looking up. Even though the country is in transition phase, the prevailing economic statistics give ample space to be optimistic about the future days. I can emphatically say that the government’s assessment regarding the country’s economy does not lack substance.

For the current fiscal year we have set the target of achieving 7 percent GDP growth. And, it goes without saying that agricultural and non-agricultural outputs are the prime propellers of the rate of GDP growth. Enthusiastically, good weather has resulted in a considerable growth of agricultural outputs.

The government is also planning to introduce irrigation facility to support many farmers across the country. In some 26 districts, we have given subsidy in transportation of fertilizers in order to enable the farmers to produce more. Moreover, extension workers related to agriculture have been mobilized in the 4,000 VDCs of 75 districts.

With an aim to help the low-income consumers, the government has also devised the concept to setting up consumer cooperatives every VDC across the country this year.

All in all, the government is fully focused towards enhancing both social and economic lives of Nepali people.

2) The private sector is lamenting that the industrial growth of the country has been hit hard by various problems like prolonged power outage, labour unrest and so on. As such, what exactly is the government doing to boost the non-agriculture sector of the country?

I also agree that the industrial outputs have witnessed a decline to some extent. Of course, the load-shedding and labour dispute have inhibited the industrial growth. The abrupt fluctuations in prices of raw materials in international market have also affected the manufacturing sector of the country. Our industries are not been able to produce as per their capacity.

In order to inject new vigour to the country’s trade, the government is planning to establish commerce desks in Nepali missions abroad, invest more on trade related infrastructure and grant special duty concessions and incentives to export-oriented industries, among other things.

The new Commerce Policy has laid high priority on trade facilitation, infrastructure development, linking small industries to the markets and economic diplomacy. The prime tenets of the policy are raising investments and manufacturing capacity and mainstreaming trade in the country’s development.

It has also made provisions about institutional mechanisms to rev up economic diplomacy, and provide software and hardware support to the manufacturers and service providers to link up their products and services with the markets.

Establishment of garment processing zone, carpet villages and handicraft villages with special incentives are other priorities of the policy.

It has also envisaged about joining various bilateral and regional free trade agreements to open up new markets for Nepali exports apart from seeking aggressive use of economic diplomacy to create trade-enabling environment on the external front.

On the other side, as per the duty draw back system, the government has already returned the required amounts to industrialists. The government is also serious towards ensuring industrial security apart from resolving labour dispute through inter-ministerial coordination. I strongly hope that this will help in realizing the target of achieving GDP at around 7 percent in this year.

3) What do you say about excessively high inflation rate and subsequent price increment of essential commodities?

We are also attentive towards bringing down the level of inflation to some 7.5 percent from the current 14 percent. Major factors that have contributed to swell inflation include syndicate, cartels, hording and black marketing. The government is of the view that the apex organizations of Nepali business community should also make efforts towards discouraging unhealthy business practices.

The Department of Industry and Commerce is mulling to form three tier monitoring committees-central, regional and district-level-to check the unbridled price inflation. The three-tier committee will be formed in conjunction with the private sector.

Notably, we have also been monitoring the market to ensure that the mismatch between demand and supply will not take place. Inflation will also go down if there is more public construction works.

As this year’s budget has earmarked a large amount for the purpose of public procurement, it can also help to reduce the level of inflation.

4) There are apprehensions that the inflow of remittance into the country will be badly affected as prime destinations of Nepali migrant workers are resorting to retrenchment because of the global economic recession. So, how well prepared is the government to shield the foreign employment from contingencies arising from the crisis?

I do not feel that the inflow of remittance will go down steeply due to the recession. Instead, what I believe is that with the gradual appreciation of the US dollar, the arithmetic value of remittance the country is receiving will seen an upward spiral.

The worldwide economic crisis has so far proved inimical to top rung jobs not low ones. As a major chunk of Nepali migrant workers are engaged in low-level jobs, it can be predicted that the economy will not suffer badly in terms of remittance. Moreover, the volume of money being remitted by Nepali migrant workers through banking channel has not shrunk.

5) Entrepreneurs are accusing the government of being flippant towards creating investment-friendly environment as well as supporting the private sector. What do you say about this?

I do not subscribe to this allegation. Arithmetically speaking, the flow of FDI has witnessed a 25 percent increment in the first six months of this year compared to the same period last year.

To spur investment in hydropower sector, we have decided to exempt aspiring investors from the provision of Value Added Tax (VAT). Previously, the state used to charge VAT for any hydro projects with the electricity generation capacity of more than 3 megawatt (MW). But now no VAT will be charged for any hydropower project of any capacity.

Additionally, the cabinet has also decided to offer tax holiday for investors of hydro projects for seven years. As the country is marching towards the path of political stability, it is the best time to make foray into any viable venture.

The fact that the government has forwarded the propositions like public-private partnership (PPP) and BOT (Build-Operate-Transfer) attests to its commitment towards encouraging the private sector.

Nepal must sharpen the competitive edge of its exportable items in order to reap optimum benefits from its affiliation to the WTO
It must be pointed out that a segment of the business community is opposing the recent decision of the government to operate some ailing public enterprises by forming a holding company. In fact, it is the duty of the government to take care of those public enterprises which produce goods for general consumption.

So, it is fallacious to term this decision as something that violates the basic tenets of liberal economy policy.

We have decided to insert a new lease of life into Gorakhali Rubber Industry, Biratnagar Jute Mill, Birgung Sugar Factory and Hetauda Textiles as both the state and the private sector had failed to efficaciously run them in the past.

The government will take the mantle of these public enterprises for sometime and after that we will allow the market components to determine the function of them.

Relevantly, I would also like to assert that rumours that the Nepal Rastra Bank has started to fix savings and lending rate are completely baseless. The government will, in no way, divert from its liberal market policy.

6) Do you think Nepal is prepared to face the juggernaut of the WTO?

Undeniably, the country should exploit its accession to the WTO to the hilt. The process of deeper integration unleashed by WTO seeks to enforce standardization of domestic policies in a wide range of issues including trade, investment, competition, technology, government procurement, labour standards, taxation etc.

What I believe is that Nepal must sharpen the competitive edge of our exportable items in order to reap optimum benefits from its affiliation to the WTO.

The fact that the government has forwarded the propositions like public-private partnership (PPP) and BOOT (Build-Own-Operate-Transfer) attests to its commitment towards encouraging the private sector.
Enhancing our indigenous know-how and skills could prove pivotal to give a whole new dimension to the export trade of the country. The country should be serious towards exporting products like handicraft and herbs in order to boost both the indigenous resources and economy.

The government has already started the process of registering herbs like Yarsagumba under the provision of Trade Related Intellectual Property Right (TRIP) stipulated in the protocol of the WTO. The move is aimed at preventing foreign companies from registering their patent rights in our invaluable herbal plants.

The ministry of agriculture has invested a lot of resources in order to ensure that we will not lose from the provision of the TRIP. The government is well aware of the fact that we should come up with a number of related laws to protect TRIP rights.

In next 20 years Nepal will be able to reap royalty from its patent registration. Remarkably, a special Nepali team is also deputed in Geneva to facilitate the government in registering patent of Nepali products.