This month, a couple of news regarding Nepal Airlines Corporation and its demand for Rs. 4 billion to purchase new aircraft popped up, and the enterprise expected the funds would be arranged through the upcoming budget.
Through recent years NAC has been involved in corruption of worth billions, accused of not having a proper business plan, or treating its employees properly and has been categorized as a “too big to fail” state-owned enterprise that is bleeding the taxpayer’s money.
State-owned enterprises are backed up by the government and they do not need to fear the market and its swings unlike private businesses. Private enterprises have to face risks. If an enterprise is not prepared, the loss is bound to come. In the case of a state-owned enterprise like NAC, the body has literally no incentives to make things better, increase profit, or even lead the market. It may be accused of poor performance by the officials in the government, but they would still be funded.
It’s very disturbing to visualize taxpayer’s money going directly to the pockets of the NAC officials to be misused, but that’s not all. In an economy, resources are always limited. Whatever fund that has been collected in their account is the money that will not be used for other developmental projects. As of late 2019, NAC had acquired a loan of Rs. 40 billion and had accumulated a loss of Rs. 5.21 billion. The government investment was approximately Rs. 31.04 billion, which is the exact amount that could not be spent for something much more effective like road and bridge construction or rural development.
The year 2020, an important year for Nepal tourism saw no change in the performance pattern of NAC. In February 2020, NAC planned to divest 25% of its share to other state-owned enterprises only. The widebody planes are accumulating losses due to lack of management potential while the narrowbodies now cost more to maintain.
All of these and many more cases not only highlight the inefficiencies of this enterprise but also how we are becoming increasingly normal about it. Another news about its demands will make us shrug and eventually move on. But its failure cannot be the new normal.
NAC’s inefficiency is often overlooked because of the government support behind it. But since the taxpayers need to be assured that their money is being put to effective use, the state-owned enterprise needs to have proper management, a strategic business model and determination to turn up profit, much like any ordinary private enterprise.