NEPAL BUSINESS FORUM NEWSLETTER – SEPTEMBER 2012
Expanding the Nepal Business Forum Initiative through Regional Public-Private Dialogue The NBF initiative has demonstrated that positive results can be achieved through a well-managed mechanism for public-private dialogue. Over time, it has become clear that the initiative needs to be expanded to other regions within Nepal to foster a larger dialogue on region-specific issues. With the objective of supporting inclusive development and the growth of districts outside Kathmandu Valley, NBF is supporting regional forums. The regional forums are made up of officials/leaders who work at all levels of government, business and community groups to support the development of their regions. Regional forums are an essential component of public-private dialogues as they address local issues that constrain the business environment. The forums foster partnerships to develop local solutions and strategies to address business environment constraints. Through the public-private dialogue process, the members work towards delivering sustainable and pragmatic solutions and services to their regions. This second newsletter for NBF focuses on the emerging regional public-private dialogue forums as a critical support to enabling more inclusive economic growth in Nepal.
“The Eastern Regional Business Forum is an effective dialogue platform between the government and the private sector to discuss issues relating to private sector development, and to increase investment in the region. Frequent dialogue through this forum focusing on sectors with high investment potential in this region- such as agro, industrial growth, herbal products, and Eco-tourism- is needed to produce meaningful results which support economic growth by creating a sound investment climate.” Dr. Krishna Chandra Poudel, Former Co-Chair and Regional Administrator, Eastern Development Region
The Eastern Regional Business Forum Created as a platform for public–private dialogue at the sub-national level in April 2010 through a Memorandum of Understanding with the Regional Government and the regional chamber, the Eastern Regional Business Forum operates through regional business associations and forums. It covers 16 districts of Eastern Nepal and raises issues faced by businesses in the eastern region. As per the decision taken by the Steering Committee of Nepal Business Forum, the ERBF has been recognized as a regional chapter of NBF. This dynamic PPD forum in the eastern region has been active since 2010 and NBF is initiating another forum in the far and mid-western region. Depending on their success and the support from stakeholders, other regional forums may be established. The ERBF is an open forum which is jointly chaired by the Regional Administrator for the Eastern Development Region and the President of the Eastern Regional Chamber of Commerce and Industry. Till date, the ERBF has met five times, raising a total of 27 issues that affect businesses in the region.
Mr. Kishore Pradhan addressing the Eastern Regional Business Forum in Biratnagar
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“The ERBF is playing a catalytic role in facilitating the development of the eastern region of Nepal. Seven recommendations from the ERBF have already been implemented, including the reduction of illegal electricity connections and the allocation of government funding to undertake a Special Economic Zones’ feasibility study in Biratnagar. The Forum is committed to maintaining a strong dialogue and close cooperation with the government and private sector representatives to achieve progressive reforms. We will continue our efforts to strengthen the ongoing process of reforms, and further develop this dialogue through active participation to achieve more benefits in all aspects.” Mr. Kishore Pradhan, Co –Chair, ERBF and President, Eastern Regional Chamber of Commerce and Industry
NEPAL BUSINESS FORUM NEWSLETTER – SEPTEMBER 2012
Key Concerns of the Eastern Regional Business Forum Most of the issues that were presented through the regional forum highlight the need for national level changes. Key concerns discussed by ERBF members include issues related to the Special Economic Zones, industrial security and labor unrest, trade, power and electricity generation, and promotion of SMEs, especially agribusinesses. This year the ERBF has met twice. Their first meeting this year was held on January 3, 2012, where the opening session was inaugurated by the Rt. Honorable Prime Minister Dr. Baburam Bhattarai. Addressing the program attended by businessmen, government officials, IFC’s Regional Advisory Services Head, Mr. Anil Sinha, and the Head of DFID Nepal Office, Mr. Dominic O’Neill, Prime Minister Bhattarai underscored the government’s priorities for private sector development and encouraged industry and business leaders to formulate concrete and feasible plans for resolving the energy crisis. The President of the Eastern Regional Chamber of Commerce and Industry Mr. Kishore Pradhan highlighted the issues facing industrialists and businessmen in the eastern region and promised to come forward with solutions. The second session involved extensive discussions on the long-term development agenda of the eastern region. A variety of issues and concerns were raised on the floor for discussion and deliberation, on the basis of which the recommendations were made. The Forum met for the second time on May 2, 2012 to evaluate the progress of recommendation implementation and to prioritize other recommended issues. Dr. K.C.Poudel, the Regional Administrator and public sector Co-Chair, commended the PPD initiative for contributing to the development of the eastern region, and emphasized the need to prioritize to achieve reforms. Mr. Anil Kumar Thakur, Joint Secretary of the Ministry of Industry and a member secretary of the Private Sector Development Committee of Nepal Business Forum, applauded the efforts of NBF to include regional stakeholders for achieving region-specific reforms. Mr. Kishore Pradhan highlighted the success of the ERBF in being able to implement recommendations, particularly those relating to security in the industrial corridor and the controlling of electricity leakage with the help of Nepal Electricity Authority. Also present in the workshop was Mr. Shyam Dahal, Director from the
Department of Customs, who assured attendees that the construction of the Integrated Customs Point will be complete within two years, thus reducing the costs to trade by as much as 40 percent.
1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14.
Transmission line from India to Nepal should be upgraded. Market linkage on agribusiness- especially for Cardamom, Ginger, Tea and Amliso- should be developed and promoted. In order to promote the export of agri-products, test lab, cold storage facility and a refinery should be built at Kakarbhitta as soon as possible. Jogbani-Shankhuwashava road should be extended up to Kimathanka. Nirmali-Kunauli Railway route should be built. Transport route to Bangladesh should be opened. Transport route to Bhutan should be opened. Mirchaya-Katari-Ghurmi Okhaldhunga road should be constructed with standard bridges. Kunauli-Rupani highway should be developed. Biratnagar Airport should be upgraded into a regional airport. Operationalization of the Rajbiraj airport. Bangladeshi taka and Nepalese rupees should be made easily convertible like that of Indian rupee and Nepalese rupees. Feasibility study should be conducted to establish fertilizer industry, wherever appropriate, in the country. Budget should be allocated for Eastern Regional Business Forum from the government.
Issues raised on January 3, 2012
The second Eastern Regional Business Forum was attended by Rt. Hon. Prime Minister Dr. Baburam Bhattarai (center), IFC’s Regional Advisory Services Head, Mr. Anil Sinha (left) and Ms. Hisila Yami Bhattarai.
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NEPAL BUSINESS FORUM NEWSLETTER – SEPTEMBER 2012
ERBF- Notable Achievements In the relatively short time since its inception, the ERBF has already been successful in implementing several key recommendations.
Controlling Illegal Pilferage of Electricity On October 6, 2010, the forum tabled the problems concerning lack of electricity due to pilferage. A task force was formed to look into the issue. According to Mr. Kishore Pradhan, President of ERBF, the task force ran a campaign against illegal hooking to electricity transmission wires in the eastern region from 2010 September to 2011 February with the help of local administration, Nepal Electricity Authority and the Nepal Police, and was able to bring to book 400 cases of pilferages. This measure prevented around 15 Megawatt of electricity from being stolen and helped plough back the supply to the power grid for industrial and domestic use of registered clients of the Nepal Electricity Authority. According to the former Director of the Biratnagar Regional Office of Nepal Electricity Authority, there was an increased revenue of Nepalese rupees 374 million ($ 5.3 million) in the Fiscal Year 2010/11 due to this initiative. The slow pace of rural electrification, lack of proper irrigation facilities and a tendency to encroach on public land and establish squatters’ settlements were a few of the reasons why people resorted to illegal hooking. Those involved in the act were penalized with a fine of Nepalese rupees 3000. The fines contributed to further increasing the government coffer by Nepalese rupees 1.2 million. Technically, 14-16 percent loss was calculated as electricity leakage from generation to distribution (1.5 percent in generation, 4.5 percent in transmission and 9-11 percent in distribution). With the average calculated technical loss of 10 percent in distribution, there was a loss of 12 MW in the total power supply requirement of 120 MW. As a result of this, this measure was replicated across the country. NEA disconnected power from unauthorized users from the central region in Bhaktapur and Chitwan districts. At the same time, the then Minister for Energy started to cut off power even from the government offices whose bills were overdue.
Repair of Biratnagar Multi-Fuel Power Plant in progress
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Improvement in the Law and Order Situation in the Industrial Corridor Marred with industrial unrest and strikes, the Forum formed a task force to maintain the law and order situation within the region. The members of the Forum worked jointly with security forces to improve the situation within this industrial corridor. The security forces were mobilized to make regular patrols and also established a process for responding to requests for safeguard. Through this initiative, kidnappings were reduced significantly as compared to the numbers during 2008. In 2008, 247 kidnapping were reported; this was reduced to 47 by 2010 due to the intensive patrols and security measures.
Repair of Biratnagar Multi-Fuel Power Plant A 39 MW powerplant in Biratnagar had been idle for several years; this issue was raised in the October 2010 meeting of the ERBF. As a result of this, funding was secured from the World Bank to repair the power plant, but the process was slowed because of issues related to the Letters of Credit and procurement problems. The issue was raised again with the Prime Minister at the January meeting of the ERBF and he committed to speed the process. Repairs started immediately and one generator is now ready, and two more are expected to be completed by end of 2012. Within a few months repair of all generators within the plant are expected to be completed, after which the plant will be handed over to the private sector through the NEA. A committee has just been formed under the leadership of Mr. Kush Kumar Joshi (former President of FNCCI) comprising of members of the Ministry of Industry, Energy, Finance and other key
NEPAL BUSINESS FORUM NEWSLETTER – SEPTEMBER 2012
ministries and private sector representatives to expedite the project. According to the Co-Chair of the Eastern Regional Business Forum Mr. Kishore Pradhan, “The fuel plant is a critical improvement for the industries established in the Eastern Industrial corridor- more than 50,000 people are currently employed here, but with regular electricity supply, we can increase employment by at least 10-20
percent. Without the regional forum of Nepal Business Forum, this could not have been pursued and resolved.” By the end of the year, 30 MW could be added to the maximum 650 MW currently generated by Nepal, and dedicated to the use of the industrial sector of the eastern region.
Current Priorities and Recommendations The group prioritized the following issues and made their recommendations, along with identified steps for implementation: 1.
Opening of a Regional Company Registration Office in Biratnagar to facilitate and streamline business operations: This reform will significantly benefit the private sector in terms of time and cost savings. Currently, the ERBF has proposed to locate the office at the district level, at the Department of Cottage and Small Industry Office, Morang which is the representing body of the Ministry of Industry at the local level. The Ministry of Industry has taken this up as an issue for implementation. The opening of the OCR in Biratnagar will help the private sectors save an estimated $ 202,000.
2.
Integrated Customs Point: The process of land acquisition from the community had stalled due to insufficient funds to compensate the community. Recently, the process received a boost when the Ministry of Finance disbursed the required funds to give continuity to the project. The ERBF has prioritized the completion of land acquisition and its immediate handover to RITES, the Indian Company. The ICP is estimated to save the private sector as much as $ 416,000, or 40 percent of the costs to trade. It will also enhance the scope of trade with Bangladesh and, through the establishment of the immigration desk for passenger clearance, may increase the number of tourist arrivals through this region.
3.
Promotion of Agricultural Products from the Region: The eastern region is diverse in its agricultural economy with cardamom, ginger, tea and amliso being the key products that the region is known for. However, the promotion of these products to date has been very low. The Commercial Agriculture Development Project has been approached to support this initiative and it was decided that a workshop will be organized with the CADP and ERBF to plan next steps. The CADP expressed commitment to submit a report to ERBF for implementation.
4.
Allocation of Budget for ERBF: The Forum had put forward a request to allocate a budget from the government on January 3, 2012. It was decided that grants from the Ministry of Industry will be requested for the ERBF and the MoI will coordinate this with the Ministry of Finance.
5.
Transmission Line to India: The Forum decided that the remaining line of 12-13 km should be expanded to complete the single circuit. This will increase the supply of power within the industrial corridor.
Mr. Anil Kumar Thakur, Joint Secretary of the Ministry of Industry and a member secretary of the Private Sector Development Committee of the NBF, addressing the ERBF’s Prioritization Meeting in Biratnagar on May 2, 2012
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NEPAL BUSINESS FORUM NEWSLETTER – SEPTEMBER 2012
The Future of Regional PPD in Nepal A Western Regional Business Forum in Nepalgunj to be initiated The Steering Committee on February 23, 2012 agreed on the establishment of a far and mid-western region business forum located in Nepalganj, and FNCCI has agreed to house the Secretariat. In the coming months Nepal Business Forum would like to work with the Government of Nepal and FNCCI to hold the first forum. A six-day PPD training program on Improving Stakeholder Relations was organized by the Federation of Nepalese Chamber of Commerce and Industry with the support of GIZ in Dhangadhi. The pilot modules of the training were to be tested. These modules included: Communication, Negotiation, Workplace Cooperation, Conflict Management and Effective Advocacy. It was attended by Ministry of Industry, FNCCI and International Finance Corporation. The participants of the trainings were from the eight districts of the far and mid-west (local Chamber of Commerce, District Development Committee, Department of Cottage and Small Industries, FNCCI, among others).
“Nepal Business Forum has been working towards private sector development and expanding itself at the local level. A Western Regional Business Forum is in the process of being established to focus on result-oriented reform work whose benefits can be experienced by the private sector at the regional level.” - Mr. Anil Kumar Thakur, Joint Secretary, Ministry of Industry & Member Secretary, PSDC, NBF
Nepal Business Forum: Latest Results at a Glance Harmonization of Custom Hours: Due to the difference in the working hours and days between Nepal and India, there were significant delays and slower processing of trade related activities. As a result, the Export Promotion and Trade Facilitation Working Group of NBF raised this issue on January 22, 2012. Following their concerns, the meeting agreed to consider the issue and take it up with the Director General of the Customs Department of both Nepal and India. Further, the Private Sector Development Committee Meeting held on April 30, 2012 assigned the Secretary of Ministry of Finance to work as a Convener to resolve this issue, not only with India but also with neighboring country, China. On May 25, 2012 the MoF issued a notice to implement the harmonization of custom hours/days. E-Tendering Processes Adopted: The private sector advocated for the introduction of an Electronic Tender System to overcome syndicates undertaking anti-competitive practices. In this regard, the Public Procurement Monitoring Office has prepared software that acts as a portal to receiving applications for procurement related to civil works and goods. E–tendering processes have also been operational in more than 12 organizations and projects, the Department of Road being the first to install and and implement it in August 2011.
Tourism Working Group Formed: To look into the needs and problems of the tourism sector, NBF formed a separate Working Group for the tourism sector on February 23, 2012. Nepal relies, to some extent, on the revenues generated through tourism for boosting its economic growth; however, it has not been able to unleash its true potential. Therefore, NBF aims to support the growth of this sector by bringing about reforms that will have a major impact on the country. Barriers to Women Entrepreneurs Identified: The dearth of data and statistics has been a major problem in Nepal which has hindered factbased advocacy efforts for policy changes affecting various groups, including women entrepreneurs. Women entrepreneurs play a vital role in the growth of the private sector; however, lack of baseline data, evaluation and analysis has prohibited the formulation of project strategies and mechanisms to address their problems. Therefore, on the request of the Women Entrepreneurship Development Working Group of NBF, IFC supported a scoping study which identified and developed solutions to address the barriers related to doing business for women which was endorsed by the WG for implementation on May 9, 2012.
Nepal Business Forum: An Update Number of Recommendations Made
Number of Recommendations Implemented
Number of Meetings Held
Export Promotion and Trade Facilitation
11
5
5
Infrastructure
12
1
5
Financial, Monetary and Insurance Affairs
14
4
4
Business Environment, Labor Relations and Industrial Security
13
5
9
Industrial Investment Promotion
16
7
7
Women Entrepreneurship Development
13
3
4
High Level Business Forum
4
3
2
Steering Committee
3
0
3
Private Sector Development Committee
6
3
7
Number of Recommendations Implemented
Number of Meetings Held
No. of Task Forces Formed
7
5
3
Working Groups
Eastern Regional Business Forum Number of Issues Raised 28
As of September 2012
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NEPAL BUSINESS FORUM NEWSLETTER – SEPTEMBER 2012
About SEDF SouthAsia Enterprise Development Facility aims to create opportunities and improve lives. SEDF is managed by IFC, in partnership with the UK Government and the Norwegian Agency for Development Cooperation. SEDF facilitates the growth of small and medium enterprises by helping to improve their access to finance through a supportive financial infrastructure, financial products development and strengthening of financial institutions; and providing business services to strengthen value chains. SEDF also helps businesses adapt to the impact of climate change. SEDF operates in Bangladesh, Bhutan, northeast India and Nepal.
About IFC IFC, a member of the World Bank Group, is the largest global development institution focused exclusively on the private sector. We help developing countries achieve sustainable growth by financing investment, mobilizing capital in international financial markets, and providing advisory services to businesses and governments. In FY12, our investments reached an all-time high of more than $20 billion, leveraging the power of the private sector to create jobs, spark innovation, and tackle the world’s most pressing development challenges. For more information, visit www.ifc.org.
About Nepal Business Forum Nepal Business Forum provides a platform for public-private dialogue which is aimed at accelerating and facilitating the reform process by providing the government and the private sector with a structured, transparent and resultoriented mechanism through which they can deliberate on investment climate issues, and jointly agree on reforms. NBF was created by an Executive Order of the Government of Nepal in May 2010. The SouthAsia Enterprise Development Facility supported the Government to design NBF based on recommendations and lessons learned from earlier IFC involved public-private dialogue initiatives in a number of other countries. The institutional framework of NBF consists of three committees and eight sectoral Working Groups, supported by a Secretariat. At the apex is the High Level Business Forum chaired by the Prime Minister, the Steering Committee is chaired by the Industry Minister, the Private Sector Development Committee is chaired by the Chief Secretary, and the eight Working Groups are co-chaired by Secretaries of various ministries and Presidents of business membership organizations. For more details, contact Mr. Gopal Tiwari, NBF Secretariat Coordinator at GTiwari@ifc.org
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The NBF Secretariat Gopal Prasad Tiwari NBF Secretariat Coordinator Advisory Services in South Asia, World Bank Office Hotel Yak & Yeti Complex, Durbar Marg, Kathmandu, Nepal Telephone: +977 1 4226792 Ext. 6341 Durbar Marg, Kathmandu, Nepal Mobile: +977 9841333226 Facsimile: +977 1 4225112 Email: Gtiwari@ifc.org www.ifc.org