– This article was originally published by Akash Shrestha on July 3, 2016 in The Himalayan Times.
With the start of July, we are now into the month of the new fiscal year 2016/17. The budget that was presented before parliament five weeks ago will go into implementation from mid-July. The objective of the budget once again is to “… increase income and employment …,” and “to attain high economic growth through increasing productivity and production,” among many.
On one hand, we have these; on the other, there are people migrating out of Nepal by over a thousand a day in search of economic opportunities — including some of the most hostile territories in the world. They do so because they have no other choice. When there are no jobs in the country, one makes the obvious choice of becoming an economic migrant.
One common thing that binds the budget, the Constitution and migrants is jobs. And what creates ‘new’ jobs? Private enterprises! And creating private enterprises that will create new jobs is not easy for Nepali citizens to do. Thus, the immediate focus should be to work towards facilitating enterprises. To begin with, the two most important aspects of facilitating ‘enterprise’ will be ‘facilitating entry’ and ‘facilitating exit.’
Starting a business — facilitating entry
Facilitating entry should eventually translate to a situation where a Nepali can easily dream of starting his/her own business. Then, the next thing to look into will be how long does it take for an aspiring entrepreneur to get from thinking about starting a business to registering one and moving to the operation phase. As things happen in Nepal, the latter tends to hinder the former.
Say, one wants to start a small manufacturing industry. If one studies the official processes, it will look like the company can be registered in a matter of weeks, if one is lucky. But for an entrepreneur, registering a business at the Office of the Company Registrar is merely creating a legal person. This legal person does not have any right to engage in economic activities unless it gets necessary permission from other agencies, depending on the nature of its business. This is where things get more inhospitable for aspiring entrepreneurs. If one needs to do an Environmental Impact Assessment, it can only be passed through the Department of Industries and can take him anything between four to six months, to years.
Then there are a number other agencies to get the permission from before one can operate, vis. the Office of Cottage and Small Industries, the Inland Revenue Office, other concerned departments, et cetera. Some of the common grievances of all existing industrialists are that there are too many and unclear legal processes, and all of these cost a lot of time and under-the-table fees. Now that Nepal is going to implement federalism, people should feel that this is a positive change for them. From starting a business perspective, this can be achieved through devolution of the regulatory agencies that are centred in Kathmandu to all new provinces, further guaranteeing that people get all kinds of services from One Stop Service Centres (OSSCs), and reviewing and reforming existing procedures to get rid of redundancies and make them less time-consuming.
Closing a business — facilitating exit
Another equally important factor that affects people’s decision to start a business is how easy it is to close the business should s/he choose to. Sometimes businesses go in loss, other times, people feel that there are greater prospects of profit in another business and want to close their existing business. In order to make sure that the switch is prompt, people are still economically active, and the utilisation of resources is optimised, it should be easy for business to wipe their slate clean and start anew.
To put it simply, there is no clear policy regarding exit. One of the hurdles is that it is a challenge to find your own file at the regulatory agencies, then, tax files are practically never closed, you have to hire a liquidator irrespective of the size of your business, the regulatory agencies are not at all friendly, and there is no coordination and harmonisation across functions of different government agencies. When people see that it is difficult to get their hands off a business once they get into it, that their resources are likely to be stuck in a not-so-profitable or even loss-making business, and that they are always being monitored, that already acts as a big demotivating factor.
To start with, facilitating exit would require a clear exit policy on the regulator’s part. Then, the processes will need to be simplified and made entrepreneur friendly, redundancies be done away with, and entrepreneurs be made to believe that the regulators are there to facilitate rather than to stifle their entrepreneurial spirits. Just as in case of entry, the exit processes should be handled from the provincial level, too.
It is when people feel that they can earn their own livelihoods by starting their own businesses in Nepal that we will be able to meet the goals as stated in the Constitution and the budget. We cannot be promising to create jobs for people without analysing why people are not doing it on their own. At the end of the day, it is private entrepreneurs that create new jobs, and not the government.