National Business Initiative for Peace and Development in Nepal
Prof Hari Bansh Jha

1.0 Background

The success of a society largely depends on successful business.1 Business is not possible in unsuccessful society and in a situation when there is absence of security. Business groups like to make investment only when there is peace and stability. Importance is accorded to private business groups because they have potentiality to transform conflict into peace. One of the advantages with the business groups is that they have financial resources of their own to launch business activities. In order to keep their business activities running, they often maintain connections with different stakeholders in the society, including the rebel groups, civil society, security personnel and government departments.2 As far as possible, they try to maintain neutral position between the warring factions like the security agencies and the rebel groups.

In certain conflict-ridden countries, the business groups are known to have made commendable efforts for the reconstruction of damaged infrastructural projects such as hydropower, telecommunications, educational and health. They addressed the root causes of conflict such as unemployment, social exclusion, gender discrimination and regional disparity. They also supported displaced people and settled land conflicts. In addition, they provided jobs to the former fighters, minors and other needy people. Their role was well acknowledged in economic empowerment of single women and also in restoring economic peace. Hence in a welfare state an effort is made by the government to keep the business activities expanding with a view to ensure long-term peace and development.

2.0 Corporate Social Responsibility

As per the Corporate Social Responsibility, the business groups are obliged to take into account the interests of the customers, employees, shareholders and the communities, aside from giving due consideration to ecological and environmental factors. They create new knowledge and build rapport with the workers in the industries.

The role of corporate social responsibility is not yet well realized in Nepal. Yet a modest beginning has been made by certain business houses to improve the life of the common people. Khetan Group has introduced scholarship schemes for the students; while Golchha Group runs eye hospital in Biratnagar to provide eye-care service to the people free of cost. Similarly, Chaudhary Group supports certain educational institutions. Kedia Group's commitment to the promotion of education of girls is well acknowledged. The Marwari communities operate a number of religious activities. The Vaidya Group has launched activities for the protection of the environment.3 Business groups like HansrajHulaschand Bajaj and Buddha Air have supported an NGO for improving the quality of education under Teach for Nepal programme.4 Nepal SBI Bank Limited provides scholarships to students to pursue higher education. Besides, it distributed scholarships to 15 meritorious and financially downtrodden students on the basis of marks obtained by them in SLC examination. 5

3.0 Setback to Business Initiatives

In Nepal, the CPN (Maoists) started People's War in 1996 that lasted for a decade until 2006 when a Comprehensive Peace agreement was signed between the government and the rebel forces. Such factors as social exclusion, wider disparities in income and resources among different sections of the society, rampant poverty and governance-deficit were largely responsible for the conflict. Once the peace was disturbed, life of the common people became difficult. Crimes, extortions, abductions and threats became the order of the day, which directly affect investment and business climate in the country.

During the war against the state, the rebel groups first targeted the business environment. Conflict got momentum when the business environment was disturbed. In the deteriorating business environment, most of the business groups were compelled to pay huge donations. Failing to do so often proved a costly affair. This resulted into torture, abductions and killings of entrepreneurs. At times, the factories were blasted and burnt. Buses, trucks and other transportation services of the business houses were destructed. Entrepreneurial activities like production of goods were disturbed through the growing militancy of trade unions in different industrial units.

Cases of bank robbery affected the business units and investment especially in the rural areas. The call for bands disrupted the supply of goods and other market forces. Movement of goods and services were stuck when the buses and trucks in the transporters were targeted. The distribution system was affected when the government buildings, hydropower stations, roads, bridges, drinking water system, telecommunication networks, educational and health institutions were partially or fully damaged.

It was not the rebel groups alone but also the security agencies that spoiled the business environment. Business activities were affected when the security forces occupied the schools and other such institutions. Business activities were also affected when the movement of the people and goods were obstructed during the security check up in highways and district roads. Some of those activities resulted into shortage and smuggling of goods. This not only created hyper inflation but also unemployment. Displacement of population within the country took place on a large scale. Most of the youth migrated outside the country for the protection of their life and also in search for livelihood. Amidst such moments of chaos and insecurity, there was hardly any zeal left for the domestic or foreign business groups for the establishment of any new enterprise.

Nepal suffered a lot during the conflict period between 1996 and 2006. Available statistics show that 17,828 people were killed both by the rebel and security forces. Nearly 450,000 family members of the victims were directly affected. About 5,800 people were disabled and 25,000 children orphaned. Moreover, 9,000 women were widowed and 14,852 people were disappeared.6 Besides, about 270,000 people were displaced. Tourism sector was affected most when there were strikes in the hotels and related industries.

During the conflict period, the rebel groups forcefully captured the private property of a large number of people in various parts of the country, which are yet to be returned to them. There was also colossal loss of government property, including the government buildings, roads, power stations, telecommunication facilities, etc. In such moments of chaos, the business sector was the one that bleed the most. All such business initiatives as the Uniliver Nepal, Surya Tobacco Company, Coca-Cola Company, Dabur Nepal and distilleries were targeted. In Kathmandu, the Blue Star hotel was closed when huge donation was asked for. Also, some cottage and small scale industries were compelled to spill milk and throw vegetables and other agricultural products on roads due to transport bands.7

The intensity of conflict somewhat reduced in 2007 when the government of Nepal and CPN (Maoist) agreed to keep the rebel forces in seven cantonments and 21 satellite camps. Arms of the fighters were locked. During the verification made by the United Nations Mission to Nepal (UNM), 19,500 out of the total 32,000 fighters qualified the test. It was only by the end of 2012 that most of the forces took voluntary retirement and the remaining forces were integrated into the Nepalese army.

Nepal has not been able to restore normalcy even after several years of conflict. The legacy of conflict is still continuing. The country lost around 25 per cent of its potential GDP due to the general strikes between 2008 and 2013. During that period, most of the strikes were called by the political parties (36 per cent) followed by strikes called by the rebellious groups (17 per cent), transport unions (9 per cent), local communities (8 per cent), ethnic and alliance groups (5 per cent), student unions (4 per cent), business groups (2 per cent) and others (18 per cent). There were altogether 787 strikes in 2008, which peaked to 1,205 in 2010 and declined to 218 in 2013.

A single day strike caused loss to the economy to the extent of Rs. 2,527,000,000.00. 8 In addition to political and economic chaos in the country, poverty and lack of employment opportunities compelled most of the working group population to leave the country. Unemployment rate among the youth in the country has remained as high as 38 per cent. The level of migration was surprisingly high, which in the recent years increased by 37 per cent.

Estimates are that over 1,500 Nepalese leave Nepal for countries other than India in search of jobs each day.9 Unofficial figure of people leaving the country for employment abroad through the Indian territory is much higher. In 2011, about 700,000 Nepalese were engaged in one or the other jobs in the Middle East countries, including in Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and UAE.10

Over 300,000 youth have been forced to leave the country each year. Estimates are that over 3.5 to 4 million people work in overseas countries. The total amount of remittance brought by the Nepalese workers to their homes from the overseas countries amounted to $5 billion in 2013, which was about one-fourth of the country's total GDP. There is hardly any country which is as much dependent on the remittance through its emigrant workers as Nepal. With this context, Gardiner Harris rightly states, "No country in the world with at least 10 million people earns a greater share of its wealth from emigrant workers."11

However, the remittance that Nepal receives is at a great social cost. Data available from Foreign Employment Promotion Board confirm that 726 Nepalese workers died while working in foreign countries in 2012; of which there were 253 cases of deaths in Malaysia followed by Saudi Arabia (205), Qatar (151) and UAE (47). 12 Most of the workers died on account of work place accidents, suicide, cardiac arrest and heart attacks.

No meaningful foreign direct investment came to Nepal during the conflict period. As the development projects were targeted, there was very little progress made in infrastructure sector. Work in hydropower projects was stopped. As such, the country had been exhibiting load shedding hours for 18 hours a day at present. In the absence of power, production in industrial, agricultural and service sector has largely declined resulting into lesser export and greater import and huge deficit in balance of trade with foreign countries. Over 50 per cent of the Small and Cottage Industries (SCIs) employing sizeable number of working force has shut down their operations. Of the total 300,000 SCIs, only 140,000 are in operations now.13 Poor access to power and finance along with growing cost of production are the main factors for the closure of the industries. Most of the industries in the industrial corridors in Biratnagar, Birgunj, Janakpur, and other areas are also closed for some of these reasons.

4.0 Business Initiative in Post-Conflict Situation

There have been some new business initiatives at the national level in the post-conflict period in Nepal. Nearly 200 organizations run microcredit and they reach 1.8 million families. Plan is afoot to create US $1 million social business fund in Nepal.14 This is intended to create social business in energy, healthcare, women empowerment, environmental protection and poverty alleviation.15

However, a great investment is needed in infrastructure sector for creating due business environment. What is required most is to attract foreign direct investment from the bilateral, multilateral and private agencies to supplement the national business initiatives. Significantly, the prospect of foreign direct investment is growing in the post-conflict period, which could prove helpful in averting future conflict in Nepal. Reports are that Nepal received foreign direct investment (FDI) amounting to Rs 113.18 billion from 78 countries in last few years. 16 Most of the foreign investment projects are in hydropower, mineral exploitation, chemicals, tourist hotels and restaurants. Those investment projects have come from India, Japan, USA, China, South Korea, Germany, France, Hongkong, UK, Switzerland, Thailand, Pakistan, Austria, Singapore, Netherlands and Taiwan.

Until recently, India was the largest investor in Nepal. But now China has not only left India behind in investment in Nepal, but its investment is three times more than Indian investment in this country. In 2013-14, 108 Chinese aided projects worth Rs. 29.80 billion were launched in Nepal; but only 10 Indian-aided projects worth Rs. 8.22 billion were invested during that period.

Recently, China completed Zhangmu-Kathmandu optical fiber cable project in Nepal in 2008, which is a superhighway between China and Nepal. In 2014, the Civil Aviation Authority of Nepal (CANN) and China CAMC Engineering Co. Ltd. entered into an agreement for the construction of Pokhara International Airport. The total cost of the project is estimated at Rs. 21.47 billion.17 If the work on this project begins in 2014, it could be made operational in 2019.

However, Nepal and India have signed crucial agreements in 2014, particularly in hydropower sector. They entered into formal agreement on power trade agreement (PTA). This will enable exchange of power between the two energy-starved countries. Also, the Nepalese authorities signed Project Development Agreement with GMR Consortium of India in September 2014 for the construction of $ 1.5 billion worth of 900 MW Upper Karnali Project.18 As per the agreement, Nepal would receive 12 per cent free electricity and 27 per cent free equity investment from the GMR. The project is expected to be completed by 2022 and handed over to Nepal after 25 years of its operation.

In yet another major development, Nepal signed a Project Development Agreement (PDA) with India's Sutlaj Hydropower Company for the production of 900 MW Arun III Hydro Power Project in Sankhuwasabha district in eastern part of Nepal at the cost of Rs. 150 billion. As per the agreement, Nepal would receive 21.09 per cent (197 MW) free electricity.19 In addition, the Company would provide six per cent of the total shares to the local residents. It would undertake projects related to roads and canals in the local areas. Besides, it would also make contributions for the socio-economic development of the local communities. The country will receive profit worth Rs. 3 trillion and 62 billion in cash from the project in 25 years, apart from receiving Rs. 80 billion in terms of income tax and Rs. 1 trillion and 66 billion in royalty before the project is returned to Nepal.

Nepal and India have also signed an agreement for the re-activation of 6000 MW Pancheshwar Project in 2014. The project work would begin from the next year in 2015. Expectation is that there would be tremendous multiplier effect of this project in the economy.

In a major development, the United States has made a decision whereby Nepal is made eligible for its large scale Compact Program for investment in financing priority projects. The Compact Programs are multi-year agreements between Millennium Challenge Corporation and a recipient country which intend to make investment in projects that help reduce poverty and stimulate economic growth. Nepal is expected to receive huge funding ranging between US $ 100 and US $600 million per project for this purpose.20

Also, Prime Minister Sushil Koirala has asked the Non-Resident Nepalese to make investment in Nepal because of the potential returns in tourism and other sectors. A humble beginning has been made due to the effort made by NRN Association Chair Shesh Ghale to establish Shreraton Kathmandu Hotel at Kantipath in Kathmandu at the cost of Rs. 8 billion through the financial support of AMI Group Holding, Australia. To be spread over 14 ropanies of land, the 17 storied hotel is expected to generate employment to 50,000 people.21

Additionally, the tourism industry which was hardest hit during the conflict period has now shown major sign of revival. Tourism is important for generating many other related businesses. In the recent years, there has been spectacular growth in the number of Chinese tourists in Nepal. The Chinese tourists are now next only to the Indian tourists in number. Statistics show that the number of Chinese tourists doubled within three years from 46,360 in 2010 to 89,509 in 2013. In 2014, the number of the Chinese tourists is expected to surge by 30 per cent. 22 Over 60 per cent of Nepal's total foreign tourists other than Indians come from China. One of the reasons for the growth in the number of Chinese tourists in Nepal is due to improved connectivity with Chinese cities. Presently, Chinese carriers, including Air China, China Eastern and China Southern operate 56 flights per week. In fact, Nepal has more of air connectivity with China than with India. In future, the number of Chinese tourists to Nepal might increase spectacularly in view of the fact that the Chinese government has made a decision whereby its nationals are not needed to take prior approval from the government to visit Nepal. 23 The flow of the Chinese tourists in Nepal could grow further with the development of Kyirong Port as a tourist destination centre for the mainland Chinese.

5.0 Business Promotion through Entrepreneurship

Entrepreneurship is fundamental to the development of a nation. Entrepreneurs are the business owners, who create something new and innovative business of small size. Often, they do not follow any prescribed path and grab opportunities wherever they are available. Because of some of these skills, the entrepreneurs are regarded as change agents in a society. They not only create jobs but also reduce poverty. Most of the business companies in today's world are driven by the entrepreneurs who reallocate resources for business promotion in the most productive way.

USA is developed mostly due to its highest level of entrepreneurial activity. Most of the companies in this country are created by entrepreneurs. Entrepreneurial activities alone make a difference in national income by one-third. Almost 2 million business activities begin each year as self-employment ventures. Nearly 8.4 out of every 100 adults in the country start business on their own. Newly growing firms are major source of jobs. Also, 80 per cent of the jobs in the country are created by the entrepreneurs.

USA is also pioneer in the production of entrepreneurs. By founding Microsoft, Bill Gate emerged as most successful entrepreneur in the field of information technology. Other dynamic entrepreneurs created such social media sites as Twitter and Facebook. Norman Borlaug, the agricultural scientist from Texas and Noble Peace Prize winner is known as father of green revolution. He is widely known for his role in increasing agricultural yield, combating world hunger and saving the life of millions of people all over the world. Vinoba Bhave, the founder of Land Gift Movement in India redistributed over 7 million acres of land among the untouchables and landless people. Also, Kamal Kar's low-cost latrine and Dr. Bindeshwar Pathak's Sulabh Sauchalaya have benefited millions of population not only in India and Indian sub-continent but all over the globe. Muhammad Yunus, Nobel Peace Prize Winner of Bangladesh has benefited the poor folk through his micro-financing scheme.

In India, Naturals has emerged as the country's largest salon chain. It specializes in activities related to hair treatment, hair straightening, threading, bleaching and bridal make-up. During last fifteen years, it has been able to empower over 200 women entrepreneurs. By 2017, it aspires to develop 1000 more women entrepreneurs across 3000 salons and provide 500,000 jobs in the country.24

Interestingly, an American who visited Nepal as a tourist set up Cloud factory in this country, which has now emerged as a leader in the outsourcing of data entry and processing and has been able to meet the needs of software customers at the global level.25 The U.S. Embassy in Nepal signed an MOU with the Federations of Nepalese Chambers of Commerce and Industry to open an American Corner library and resource centre at FNCCI building in Kathmandu.26 This centre is expected to play an important role in promoting businesses skills among the Nepalese youth.

Unfortunately though, there is a lack of plan and programme to nurture entrepreneurship activities in Nepal. Most of the businesses are stereotype and lack of innovative approach. There is hardly any thinking outside the box in terms of innovation in business activities. This is one of the reasons why the country is poor. Many poor communities have to survive on less than $ 1 a day. Nepal’s GNI Per Capita income (US $ 730) is almost lowest in South Asia.

6.0 An Overview

Some of the recent deals in hydro-power and other infrastructure sector could go a long way in addressing conflict and ensuring peace and development in Nepal. Any improvement in power supply position and also its availability at a cheaper price could create multiplier effect. This could pave the way for the establishment of businesses in multi-sectoral fields such as in education, health, tourism, industrial, agricultural and services sectors, apart from generating income and employment opportunities on a massive scale. It is likely that the country would avoid another conflict and is able to restore long-term peace if the state adopts proper measures for the development of infrastructure and creation of business environment through entrepreneurship growth.

The government has to come forward to create an environment in which women and young entrepreneurs could make business. Small business activities could be created through micro-financing and credit cooperatives. Resources of the multilateral and bilateral agencies could be mobilized for creating new business activities.

There should be a realization that entrepreneurship is key driver of the economy. The state also needs to come forward with time-bound policies and programmes for the growth of entrepreneurship and business activities. Education system has to be overhauled. Awareness needs to be created in the society and among the teachers, administrators and school staff for the need of entrepreneurship education and change in school curriculum. Schools and colleges need to provide communication skills and entrepreneurial 'spirit' to bring more and more business in the economy. Successful entrepreneurs should also be taken to the classrooms in the educational institutions.

What is also necessary is to remove all the impending barriers to innovation. State policy, if any, responsible for limiting the competition and checking entry of new business has to go. Corruption that spoils the business environment has to be controlled. Intellectual property rights have to be safeguarded so that the entrepreneurs are able to innovate new product and technology in the society.

Jha is Executive Director of Centre for Economic and Technical Studies in Nepal.

Endnotes

  1. http://www.international-alert.org/news/sri-lanka-and-nepal-exchange-business-leaders-search-inclusive-economy-peace
  2. Bishnu Raj Upreti and Safal Ghimire. 2011. New Actors in New Business : Private Sector Engagement for Peacebuilding in Nepal. SASON Journal of Sociology and Anthropology, Volume 2, p. 277 in http://www.academia.edu/1196999/New_Actors_in_New_Business_Private_Sectors_Engagement_for_Peacebuilding_in_Nepal
  3. Ibid., p. 280
  4. http://www.teachfornepal.org/partner/
  5. Republica, "Nepal SBI Bank distributes scholarship," My Republica, December 3, 2014 in http://www.myrepublica.com/portal/index.php?action=news_details&news_id=87834
  6. Hari Bansh Jha "Conflict and Peacebuilding in Nepal," FPRC Journal 2014, pp. 109-10
  7. Republica, "Economic impact of bandhs in Nepal," 31 October, 2014 in http://www.myrepublica.com/portal/index.php?action=news_details&news_id=85668
  8. Kamal Dev Bhattarai, "The Plight of Nepal's Migrant Workers," The Diplomat, August 11, 2014 in http://thediplomat.com/2014/08/the-plight-of-nepals-migrant-workers/
  9. Sarah Paoletti and et al. 2014. Migrant Workers' Access to Justice at Home: Nepal. Open Society Foundations, New York, pp. 23-25.
  10. Gardiner Harris, "In Nepal, a Better Life with a Steep Price," The New York Times, August 14, 2014.
  11. Sarah Paoletti and et al, no. 12, p. 72.
  12. Nepalnews.com, "Over 50 pc SCIs shut down operation," November 8, 2014 in http://setopati.net/politics/4040/Religious-conflict-if-Hinduism-not-restored:-Khum-Bahadur/
  13. Yunus Centre, "Nobel Laureate Professor Muhammand Yunus Launched Social Business in Nepal" in http://www.muhammadyunus.org/index.php/yunus-centre/yunus-centre-highlights/968-nobel-laureate-professor-muhammad-yunus-launched-social-business-in-nepal
  14. Chaudhary Group, "CG Foundation Pledges $1M For Social Business," December 23, 2012.
  15. Post Report, "Total foreign investment in Nepal reaches Rs. 113 b," The Kathmandu Post, February 17, 2014 in http://www.ekantipur.com/2014/02/17/business/total-foreign-investment-in-nepal-reaches-rs-113b/385461.html
  16. Krit Bhuju, "Pokhara int'l airport project gets cabinet nod," My Republica, October 28, 2014.
  17. PTI, "Nepal, India sign historic Power Trade Agreement," The Economic Times, October 21, 2014 in http://economictimes.indiatimes.com/industry/energy/power/nepal-india-sign-historic-power-trade-agreement/articleshow/44898837.cms
  18. My Republica, "PDA for Arun III to be reached during SAARC Summit," My Republica, November 5, 2014.
  19. Republica, "Nepal picked for US Compact Program investment," My Republica, December 13, 2014 in http://myrepublica.com/portal/index.php?action=news_details&news_id=88467
  20. My Republica, "PM Koirala urges NRNs for more investment in Nepal," My Republica, October 11, 2014 in http://myrepublica.com/portal/index.php?action=news_details&news_id=84620
  21. Republica, "Chinese arrivals rising steadily," My Republica, October 13, 2014 in http://myrepublica.com/portal/index.php?action=news_details&news_id=84715
  22. Bhoj Raj Poudel, "China's Nepal game," My Republica, August 20, 2014.
  23. The Times of India, December 3, 2014
  24. Embassy of the United States, "Entrepreneurship Challenges and Opportunities in the Context of Nepal," March
  25. 2014 in http://nepal.usembassy.gov/sp-03-21-2014.html
  26. Ibid.

Published Date: 9th October 2015, Image Source: http://nbinepal.org.np/
(Disclaimer: The views and opinions expressed in this article are those of the author and do not necessarily reflect the official policy or position of the Vivekananda International Foundation)

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