Wednesday, 8 December, 2021

Hope Of Business Revival

A large number of businesses and industries, especially small and medium enterprises (SMEs), in the country are reeling under a severe crisis of existence due to prolonged restrictions imposed in the wake of the COVID-19 pandemic since March 2020. About four-month long first lockdown in 2020 and limited operation of businesses for another four months had caused a severe blow not only to them but also the economy of the country that was getting to the path of high growth trajectory after the conclusion of two-decade long political uncertainty inflicted by armed conflict and prolonged transition. While the businesses and industries were gradually reviving with their efforts combined with government relief packages and tax discounts, abrupt resurgence of the COVID-19 cases in April this year demanded another lockdown which lasted for one and a half months and further aggravated the crisis. A snap survey conducted by the Federation of Nepali Chambers of Commerce and Industry (FNCCI) during the second lockdown showed that about 70 per cent businesses and industries were put off the operation during the restriction period.

The private sector has been demanding an economic stimulus that is at least 5 per cent of the country's economy. According to the government estimates, the size of the economy by the end of the last fiscal year 2020/21 has reached about 4.2 trillion which means the stimulus, if designed, would be of about Rs. 201 billion – about 12.2 per cent of the budget of the current fiscal 2021/22. The businesses have also been demanding the continuation of discounts in tax and interest rates. In a meeting with Prime Minister Sher Bahadur Deuba the other day representatives of Nepal Chamber of Commerce demanded to mobililse 10 per cent of the total vaccines available to the private sector. However, given that 3.2 million people are employed in about a million enterprises across the country –according to the Economic Survey 2018, it is an appropriate demand. Since the private sector is the largest job provider and accelerator of the economy, the government should listen to their demand and support in the revival of the businesses through every possible means.

SMEs is the sector hardest hit by the pandemic but received the least support from the government announced relief and other programmes because most of the SMEs are running informally and the offer is for the formal businesses only. Likewise, tourism is another victim with its sector-wise Gross Domestic Product witnessing a negative growth of 16 per cent in the FY 2019/20. Hence, the government must listen to the demands of the private sector and design appropriate support and relief programmes to help them in the revival process.

It is good that a pledge from the Prime Minister has come to support the private sector in their revival. In a meeting with the NCC delegation, he rightly said that the challenges facing the economy could be addressed only through the cooperation between the government and the private sector. However, there is a mismatch in the demand and supply. Although the government designs the business-support programmes in coordination with the private sector representatives, they are poorly subscribed. Procedural difficulties in such programmes should be fixed and it should be expanded down to the cottage and SMEs. Meanwhile, the private sector should also make itself more resilient with special crisis fund, better cooperation among the business community and better labour relations.