Make in Nepal: Myth or reality
It has become imperative for Nepal to move forward with rapid economic development by sincerely following modern economic principles, starting industrialization by building advanced capitalintensive manufacturing industries, establishing a modern financial system, or establishing modern institutions to support it. Nepal cannot take more excuses for underdevelopment by blaming internal distortions, policy failures, and land conditions. Economic transformation requires a supportive state mechanism, the right development strategy, and the right industrial policies. It would not be an exaggeration to say that leadership and implementation is the main challenge today rather than the policy, act, rules, regulations, directives, guidelines etc.
Mahatma Gandhi seems to have sown the first seed of the popular concept "Make in India" in 1944, relaunched by Indian Prime Minister Narendra Modi in September 2014. Gandhi was not a professional economist but advocated some of the principles and policies for the development of the Indian economy that he hoped the Indian government would follow after independence in 1947.
Recently, some privatesector manufacturers in Nepal, who import most of their raw materials and produce them in Nepal, and entrepreneurs based on Nepali raw materials, are advancing the "Make in Nepal-Swadeshi" campaign intending to make the nation self-reliant. Such proposals from the government are welcome from the private sector. It has been made public that the campaign has launched the 'Make in Nepal-Swadeshi' campaign to increase domestic production, increasing the competitiveness of businesses and increasing demand for Nepali goods and services. There is a perception that the private sector should cooperate with the Government in this campaign But it is clear to us that some private sector entrepreneurs have failed to maintain good governance in the past. Nonpayment of electricity in the industrial sector, production of sensitive items like medicines at higher prices during the blockade, sale of goods at higher prices during the lockdown, use of diplomatic missions to get higher prices of sanitisers, the arrest of businessmen in gambling, etc. There is no shortage of those who believe that the government should take the lead in running the campaign when there are many. Therefore, there is no doubt that the national economy can only be lifted by the country's industrial expansion, job creation, and productivity growth. It is not a new thing for the private sector to have the idea that the government should not only take ownership of the campaign but also play an effective role in making the industries self-reliant. According to reports, the campaign has set a great target of creating 150,000 industrial jobs annually by operating 1,000 industries every year. If the basis on which the projection was made had been revealed, the basis for public confidence would have been created. The goal is to increase annual exports to US 4.3 billion in five years and contribute 22 percent to GDP by 2025 and 26 percent by 2030.
Accordingly, the government is going to make the use of indigenous goods and services compulsory in government offices. It may be recalled that the previous government had made an arrangement to use domestic goods in government offices even though it was 15 percent more expensive than foreign goods, but such a provision has not been implemented in practice as expected. The present government is going to strictly follow such a provision. But it remains to be seen how this will be implemented
The policy of using indigenous goods and services is expected to have significant results in the long run, except when indigenous goods and services are not available as an alternative to foreigners. Encouragement of indigenous goods and services can also reduce the trade deficit by increasing internal employment, market expansion, and overall economic activity. To achieve these objectives, the government is going to implement a compulsory arrangement through the Public Procurement Act to encourage the use of indigenous goods and services in government offices. If the government introduces a promotional special economic program, the country has ample potential to increase the use of indigenous textiles by encouraging the production of cotton, silk, wool, and vegetable fiber yarn. Besides, Nepali handicraft materials, traditional items, ethnic identity materials, samples of cultural items such as basic items can be used in government offices to encourage.
The use of such items can be increased as the government has introduced incentive programs such as a 50 percent rebate on electricity tariff used by textile industries registered for value-added tax and 5 percent interest subsidy on bank loans to encourage domestic production. But such clothes should be used by the police, Nepal Army, and government employees to create a proper environment of value and quality.
Recently, Prime Minister KP Sharma Oli has urged entrepreneurs to expand investment in domestic production. Nepali products must be competitive as consumers choose goods and services from angles such as quality, price, easy availability, guarantee rather than where they are made. The government can provide tax breaks and an investment-friendly environment, not force people to buy these goods and services. Even if the government gives a 15 to 20 percent price discount as desired, if Nepali products do not look quality and attractive, it will not be possible to secure the market for such goods and services. Since no industry can do business using only government offices, an environment of general production, distribution, and consumption should be created.
For that, the producers should pay special attention to quality and price. Low productivity, labour laws, and weak infrastructure are the barriers to Nepal's nonmanufacturing industry. Difficulties such as lack of related infrastructure still exist. One of the reasons behind us is Nepal's inability to produce large-scale goods for import substitution and export promotion. Our import-export ratio of 90:10 represents unhealthy in the economy, for every export value of 10 we import 90 equals.
The government is making some efforts to revive the economy by supporting the productive sector, although they are making good use of the time, have not been well implemented, and still have a long way to go. The governments seem willing to lay the foundation stone for industrial zones and special economic zones, whether the private sector is willing to set up industries there or not.
Recently, the Prime Minister and ministers laid the foundation stone for many industrial and economic sectors as a continuation of this process. And, for a long time, Nepal has been developing the country's first two large export-oriented special economic zones (SEZs) in Simara for textiles and Bhairahawa, although only a limited number of private industrialists are willing to set up industries. There and the majority are reluctant to invest as they differ from government policy. To transform the economy quickly and meaningfully, the government must completely change its approach and strategy to support the manufacturing sector as a top priority. To support industrial development, the government is in the process of updating industrial and labour laws, foreign exchange regulations, and other related laws.
Nepali industries cannot compete with imported textiles and food items, to compete with cheap and smuggled Indian goods, these industries will have to be given special tax relief and strict security. Only if we can support these two groups of industries for import substitution purposes can there be a great achievement in the manufacturing sector.
For export trade, we should revive our dead textile and carpet manufacturing sector by inviting domestic and international partners to invest in medium and large-scale industries for export. Similarly, investment is required in the processing of primary products, handicrafts, gold, and diamond jewelry industry through organized companies and also in Nepal's export processing sector, which can greatly increase the value of these commodities and increase both the quality and quantity of exportable products. Currently, the manufacturing sector is small and not dynamic, and cannot be expected to play a strong role in mitigating the economy. And without rapid development in this area, rapid transformation in the economy is almost impossible.
The government's decision on indigenous goods will certainly increase the use of indigenous goods and services, but in some cases, it has complicated the monopoly, as some past events have confirmed. If the producers of Nepali goods and services are the same or limited, then it is not possible to make the prices of indigenous goods and services competitive. If there is only one producer, it is like buying goods directly from him. There is no point in tendering.
Even if there are a limited number of producers and distributors, cartelizing between them can lead to a monopoly in pricing. Producers should also show readiness and sincerity to fulfill the national objective by diagnosing the practical problems in the spirit of the government's policy of promoting indigenous goods and services.It has been suggested not to spoil the habit of Nepalis by buying anything from abroad except essential and bringing it to Nepal and selling it.
Saying that the main source of income of Nepalis is remittance, i.e. money earned abroad, and the place to spend it is a supermarket, Prime Minister Oli disagreed with such work and suggested selling only raw materials and essential consumer goods. Most of the goods sold in Nepal's supermarkets are manufactured or manufactured abroad. In those supermarkets, there is an abundance of goods that increase the cost more than the essentials.
Such goods have created a habit of wasting the money of Nepalis. According to the Central Statistics Office, Nepalis spend 91.1 percent of their income on consumption and other activities. Due to the habit of saving only a small amount of income, the economic condition of Nepalis has not improved.