Kathmandu. As the government prepares the budget for the upcoming fiscal year 2082/83, President of the Federation of Nepalese Chambers of Commerce and Industry, a leading private sector organization, Chandra Prasad Dhakal, has said that a budget should be brought that encourages investment.
The Federation of Nepalese Chambers of Commerce and Industry, in the pre-budget discussion held on Sunday regarding the upcoming budget, said that the government’s policies and programs have been made public and that it has taken the promotion of the private sector positively and that the private sector expects the budget for the upcoming year to come in a way that encourages investment.
According to him, this time’s budget should include aspects such as the expansion of an open economy with social justice, structural changes for a new phase of economic reform, promotion of the private sector, enhancement of good governance and revenue mobilization, and effectiveness of public spending in its objectives and priorities. The main attractions this time should be programs to reduce general spending and increase development spending and increase the purchasing power of the general public and the production and productivity of entrepreneurs.
Dhakal said that according to a study conducted by the Federation of Nepalese Chambers of Commerce and Industry across the country, policy instability has been seen as an obstacle to the expansion of industry and business.
He said, “Many countries have achieved economic progress by stabilizing policies and institutions despite the lack of political stability. Therefore, policy stability is the main need of the hour. The second issue is that all parties publicly acknowledge the importance of the private sector and ensure an environment where entrepreneurs and businessmen can do business with respect. According to a study conducted by the Federation and the World Bank, the private sector contributes to 81 percent of the economy. Similarly, the private sector has provided 86 percent of employment. The morale of the private sector has decreased due to the inability to invest due to various reasons despite the potential. Foreign investment has only reached zero.2 percent of the gross domestic product. In such a situation, special attention should be paid to stability by declaring 2082-92 as an investment decade in the upcoming budget, covering all sectors.
Chairman Dhakal has also said that policy transparency and business security should be ensured by enacting integrated investment-related laws, including reforms in laws such as land, forest, environment, public procurement, minerals and hydropower, which are obstacles to investment.
According to him, a budget that guarantees good governance is necessary to reduce public frustration and attract youth to business. For that, he said that arrangements should be made to do everything from business registration through the Citizen App by making the best use of technology. According to him, the compulsion to renew businesses should be ended. Arrangements should be made for renewal based on revenue payment.
Until technology is accessible and all services are online, arrangements should be made for micro, household and small enterprises to register at the relevant ward office and pay their taxes at one place. Arrangements should be made to issue tax payment certificates immediately after paying taxes.
Chairman Dhakal said that for facilitating large and foreign investments, the Investment Board and the Department of Industry should be merged into a powerful body and legal arrangements should be made so that the entire work can be done by the same body after the investors submit their details to that body.
He said that it would be appropriate to make a simple arrangement for the common citizen to change their previous citizenship to a national identity card, adding that the digital service is to provide convenience to the general public.
According to Dhakal, the biggest problem in Nepal’s budget process for about two decades has been the lack of capital expenditure. The trend of only about 17 percent of the budget being allocated for capital expenditure and that too only about 60 percent being spent has not led to the expected development in the country on the one hand, while on the other hand, it has led to low demand in the market and has also affected private sector businesses. When determining the size of the budget for at least the next two years, the size of the budget should be increased at the same rate as the growth rate of revenue.
The federation has concluded that more than 600 billion rupees of investable money has been accumulated in Nepal’s banking system for more than 6 months and even though the interest rate has decreased by three percentage points to single digits in three months, further business and industry have not been able to expand due to lack of demand in the market.
Suggesting in the upcoming budget, Dhakal said that the system of cutting off the facilities provided to the industry by the Industrial Business Act and other laws should be ended, that production-based concession programs should be continuously operated for ten years, including high value-added production sectors, and that in India, since they were implemented covering 14 production sectors, five times more investment was made in such programs in one year.
According to him, import substitution industries should be given priority in the upcoming budget and concessions should be provided. The guidelines regarding the use of domestic goods should be fully followed. Under the Industrial Corridor Special Program, the concept of open special economic zones should be introduced by introducing special programs targeting industries on the roadsides from the Indian border to Churephedi and other potential corridors.
Stating that manufacturing industries, tourism, and service industries that provide more than 100 jobs should be given a minimum 40 percent exemption on income tax along with the honor of employment champions, he said that the expansion of small and medium enterprises under the concessional program for small businesses would be another priority.
In order to stabilize the economy, in the upcoming budget, arrangements should be made to provide loans of up to Rs 10 million as collateral for projects, with entrepreneurs, the Credit Guarantee Corporation, the government, and development partners also bearing the risk, arrangements should be made to provide special entrepreneurial loans to their dependent families at concessional rates if those who go for foreign employment regularly send remittances through legitimate means, and companies should be established with the investment of local government and businessmen affiliated with the Chamber of Commerce and Industry for the storage and transportation of agricultural and non-agricultural products produced at the local level, and assistance should be provided to small entrepreneurs to find markets for their products online, Dhakal suggested. Stating that it is necessary to study and approve EIA within 6 months and to expand the scope of projects falling under IEE and approve them within 3 months, Dhakal emphasized the need to introduce a policy in the budget to make EI and IE mandatory based on environmental impact, rather than linking them to the investment amount.
Since domestic timber has the potential to meet domestic demand and even export it, the prevailing forest-related laws and procedures should be simplified to ease the use of domestic timber by ending the situation of importing billions of rupees worth of timber and timber products annually. He said that despite the provisions in the act on forest-based industries, there are practical difficulties, facilitation should be provided for the establishment of such industries. Necessary procedures should be made regarding the excavation, sale, distribution and export of gravel and stone and arrangements should be made to export more than 20 million cubic meters of domestic consumption annually.
Making suggestions in the upcoming budget on behalf of the leading private sector organization, FNCCI, he said that the exemption facility currently given to startup industries should be continued for another five years, and that startup growth centers should be established in all provinces in collaboration with the private sector.
Dhakal also urged the government to collaborate with the Federation of Nepalese Chambers of Commerce and Industry by launching the ‘Hundred Startups, Hundred Investors’ program to attract private sector investment in at least one hundred startups in a fiscal year in the next few years.
According to him, it is necessary to encourage the use of software produced in Nepal in public and private institutions, and it is necessary to encourage the private sector to establish ICT malls. This is like an ICT park. Where companies can go and set up their offices. The private sector will establish such malls in urban areas and provide infrastructure and other facilities to information technology enterprises.
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