Address Issues Facing Public Enterprises

Public enterprises in Nepal have been established with the major objective of providing essential goods and services to the citizens at affordable price. And in the process, they promote social justice and develop independent national economy. The Biratnagar Jute Mill was established as the first public enterprise (PE) in Nepal in 1936. Currently, there are 44 public enterprises in existence. Among the existing public enterprises, 42 are in operation, 23 of which are wholly-owned by the government of Nepal. The government has owned fifty percent or more of the shares or assets in 21 PEs. And, 42 PEs are operated in industrial, trading, service, social, public utility, and financial sectors in Nepal. 

As envisioned by the Constitution of the country, the economic objective of the State is to attain a rapid and sustainable economic development as well as economic growth by way of the maximum mobilisation of the available means and resources through participation and development of public, private and cooperatives. It also aims to develop a socialism-oriented independent and prosperous economy while making the national economy independent, self-reliant and progressive in order to build an exploitation-free society by abolishing economic inequality through equitable distribution of the achievements made. The Corporations Act, 1964, Communication Corporation Act, 1972, Company Act, 2006, Cooperative Act, 2017 and other relevant laws have been enforced as legal frameworks for the operation and management of government-owned enterprises. 

Investment policy

The ratio of operating income of PEs to the GDP was 11.67 percent in FY 2021/22. The contribution of operating income of trading sector to the GDP holds the highest rank and social sector holds the lowest rank. 25 PEs were in profit and 17 PEs incurred losses in that year. The fifteenth plan has the vision for building a self-reliant and socialism-oriented economy through strong and competitive PEs. The budget speech of FY 2023/24 has proposed to formulate and implement an investment policy to ensure systematic and profitable share and loan investments made by the government in PEs and to introduce a policy to divest a certain percentage of shares of public enterprises, including Nepal Telecom and Nepal Airlines Corporation. 

The budget proposals should be implemented effectively to make the policies of the State result-oriented. The government has authorised National Innovation Center (NIC) to reopen Krishi Aujar Karkhana, located in Birgunj, to resume manufacturing agricultural tools. It has signed agreement to operate it for the next ten years. It can be taken as the positive step from the perspective of industrial development. It is imperative to make the reforms in policies, structures, and management. An umbrella policy can be formulated for effective operation and management of public enterprises. There is also the need for an integrated act. The laws are process-oriented rather than result-oriented. Thus, the prevailing laws relating to public enterprises should be amended to make PEs more functional. 

There is also a lack of professionalism in PEs. Their professionalism must be enhanced through human resource development. The officials for public enterprises like chairman, general manager, managing director, CEO etc., should be appointed on the basis of merit and through competition. The monitoring and evaluation of their performances should be carried out regularly. Only the right size of employees needs to be hired by conducting O&M survey. The role of trade unions should be oriented to developing professionalism and maintaining good corporate governance. 

Transparency and accountability

Nepal Financial Reporting Standards (NFRS) should be completely implemented in PEs to maintain financial discipline. Audit is considered as the process to measure financial discipline and accountability of institutions. The audit of public enterprises must be carried out on time. Transparency and accountability could then be enhanced as expected. There is also a need for public assets management. The assets of non-operational enterprises, such as lands, buildings, and equipment etc., should be utilised properly. It is also essential to reduce high operating costs of public enterprises. The concept of public-private partnership can be adopted to operate them effectively.  

According to Annual Status Review of Public Enterprises, 2023, the net profit of PEs has decreased by 94.15 per cent in FY 2021/22 in comparison to the year before. Thus, restructuring of public enterprises on the basis of need and relevancy is a must. There is the need for coordination and collaboration in policy making and implementation at all levels for effective operation and management of PEs. Our efforts must be oriented to the promotion of rule of law and the building of system. 

 (The author is a freelancer.)