Nepali Times spoke with Arun Kumar Chaudhary, president of the Nepal-India Chamber of Commerce and Industry, and importer of the Maruti cars, on the outlook for business, tax collection, the trade treaty and WTO.
How is it to do business in an economic downturn?
The overall business scenario in all sectors is very depressing-trade is low, tourism is not doing well, exports are bad, and we can't hope to be out of it in a year, given the global downturn.
What can business do to ensure the impact of the recession is minimised?
It is difficult to see how one can avoid being affected by what is happening in the country. The impact of external factors can be minimised by consolidating, identifying niche markets, and focused and vigorous marketing and sales.
How have you been affected?
Automobiles are one of my main areas of business. My business was first hit after the tragic incident at the palace (1 June). The recent VDIS (Voluntary Tax Declaration Scheme) has added to the problem, as people are shying from buying any capital goods. Our sales are at an all-time low. Business has to go on, but how? We are encouraging people saying, \'you don't want to spend your money, we will offer you collateral-free financing at 10 percent interest on diminishing balance.' But the overall mood is depressed, and business is low. Vehicle prices have also gone up-by Rs 30-50,000 depending on the model-after the new tax.
What could government do to help business?
The VDIS was wrongly timed. It has sapped the confidence of business at a time when people should have been taking more risks, making more investments. I don't want to get into whether the scheme is good or bad, it was wrongly timed and should be stopped for now.
We also need a rescue package. One way would be to get commercial banks to reduce interest rates. How can all businesses lose money and the banks make profits? They can afford to forego profits and help industries survive right now.
Third, we need good PR. Our emergency is not like those elsewhere, but we have been unable to disseminate that message effectively, so people abroad think we are in a crisis.
And political stability?
That is understood, it is the first thing I would like to see.
What about the trade treaty, due for renewal by 5 March?
I would say there is no need to worry. It will be renewed, but we cannot say in what terms. Under the treaty, anything with a Certificate of Origin can be exported to India without customs duties. The economic situation in India might be different now from when the treaty was signed. India is proposing a value addition clause in the treaty, saying that exports of a few products have surged and injured its industry. Value addition is not bad for the country-the more value added, the better it is. I understand India's logic, it needs to consider the WTO. We too must be sensitive about where we will be when the WTO comes into effect.
Is Nepali officialdom thinking seriously about these issues?
Right now we aren't talking about anything but renewal. We're not talking about the implications of the WTO, we aren't doing our homework.
Leave the treaty aside for a moment. Can we isolate ourselves from the changes in the world? No, so instead of being bogged down by the treaty, why can't we try and define where we will be, what our core competence will be, once the WTO comes into effect?
How could we ideally adapt to the coming changes?
We should have begun accession exercises a long time ago, and by now completed much of the preparatory work. It will be difficult to face the effects of globalisation overnight. We need to identify our core competence. We should talk to India openly. Maybe we can request them to stagger value addition and work towards meeting the requirements. This way we would only export things that help the national economy.
Do you think the renewal is being dealt with correctly?
I feel we are still bargaining over the percentage of value addition. I don't think we are seeing the big picture, putting everything on the table and saying these are our plans, that over the next five years, when the treaty has to be renewed again, value-addition won't be an issue.
Do you think the Indians are right in saying some products are doing a little too well?
Let's not get into specifics. There are questions about data, its reliability and the contributions some of the industries in question are making to our economy, the investment that has been made.
How can we move on?
We first have to know what we want to achieve. The government should ask what contributions industries are making to revenue, employment generation, and whether they are contributing towards building our industrial base. We get too emotional about issues when business-like negotiations are needed.