Nepali Times Asian Paints
"We are part of the problem and we are ready to make a difference."

Suraj Vaidya is president of the Vaidya's Organisation of Industries and Trading Houses that is largely involved in trading and manufacturing. Nepali Times spoke with Vaidya, who is also a vice president of the FNCCI, about corruption, the investment climate, and the potential for new products from Nepal.

Nepali Times: What is the business environment like right now?
Suraj Vaidya: The situation is not good. There is also lack of political commitment. There have been many changes in government, which has affected continuity. All top political leaders visit the Federation of Nepalese Chambers of Commerce and Industry (FNCCI) and give the impression that everything is under control. But political parties have yet to agree on a common economic agenda. We tend to wait until the last minute, we make on-the-spot decisions in times of crisis and crisis-solutions are never good over the long run.

How can confidence be restored?
Business now has one concern-peace and security. The FNCCI is worried about the eventual outcome of what is happening now. The army is mobilised, nobody knows for how long. We don't know if all political parties have the same agenda. The leaders must sit down and produce results. We hear they are talking, but what are they talking about: politics or the national interest? We'd like to see political leaders come together and say this is our single joint agenda. If that happens, I am sure that 50 percent that the Maoist problem can be solved. The remaining 50 percent can then be taken up. We're unable to say what will happen tomorrow. We've met all political parties, big and small. We said: this is a national crisis, if you don't handle it right, nobody knows what will happen in another six months.

So we lack stability and focus.
Yes. There is also no vision and continuity.

How are businesses coping?
Personally I think 11 September and the crisis we face are opportunities to reassess-look at what we have done, where we need to go, what the problems are. The FNCCI has begun working to that end. We're trying to create an environment where all say: we are business people, we want to make profits, but we also realise that we need to give something back to society. We have formed an ethics committee because the FNCCI thinks business people have to come out and say we are corrupt. But it is the system that has made us so, because without that you cannot get anything done. I'm talking about corruption at all levels. We accept that we are corrupt, but also say that corruption doesn't begin and end with us. There is another party to it. The Confederation of Indian Industry (CII) has a code on, say, donations to political parties. We are trying to agree on something similar and ask government for tax-deductions on such contributions. These are very basic issues, but can have a big impact if we begin enforcing them. We will have a roundtable in June and present our assessment on the causes of corruption to government. We are part of the problem and we are ready to make a difference.

What about labour issues?
When I began working with trade unions I didn't know how complex the situation was and how simple the solutions were. The trade unions want the basic rights of workers guaranteed. Employers say the only reason they can't make employees permanent is because our labour law is very pro-employee. Business has to be flexible, be able to make quick decisions. We need to have a clear understanding on flexibility in hiring. I don't talk of firing because that is where the problems begin. Internationally, the ILO has rules on termination of employees. We agree on the need to protect workers' rights, but industry problems also need to be considered, especially in difficult times such as now. We are working out good management practices based on the Global Compact. We're also working on eliminating the worst forms of child labour from industry in 11 districts.

Would you make new investments now?
Even now I am putting up tea factories in remote areas. But my way of thinking has changed. My first factory was 100 percent family owned. The second project is different-I've given 40 percent shares to local farmers, kept 40 percent and given 20 percent to my buyer. I think we need to change strategy and get people involved.

How is tea doing?
Nepal produces about 10 million kg each year. About 90 percent of that is CTC grown in the tarai. CTC growers have a problem because we haven't been able to fulfil domestic demand locally. Tea coming from India is displacing our producers. Our production cost is high, which drives up the final product cost. India has protection in the form of high tariffs and taxes; we need to at least counter the Indian measures, protect our industry. Tea takes five years to begin giving back in the hills and three years in the plains. Our farmers have no incentives or subsidies to sustain themselves during that period. Still, we can realise our tremendous potential in tea if government were to review the tariffs, taxes and domestic incentives. Last year we produced about 700,000 kg of orthodox (hill) tea, this year we should reach about a million kg. By 2005 we may reach 2.5 million kg.

What is the potential for orthodox tea?
Compared to Darjeeling tea we have a better fragrance. There are two types of bushes that produce good teas, the Assam variety, and the China clone. In the hills we use the China bush which has better aroma and lighter colour. Sixty percent of tea sold as Darjeeling is of the Assam variety. In Nepal we have 99 percent China clone tea, the variety the world is interested in. From that point of view we're is a good shape. We have been building niche markets, Germany, Japan and US and the potential is good.

You talk about tea as one would expect you to about Toyota cars. How did the change come about?
Before the 1989/90 blockade with India, my family was involved in many products. During the blockade we were forced to run our industries on 10 litres of diesel a day, which was when we changed our strategy. We realised that our advantage would be in areas where we didn't depend on the outside for raw materials. We sold our shares in many industries and got involved in tea. I'm also looking at silk, garlic and olives. These are areas we should be investing in. With these products you need investment, care, and time. You need to be part of the product. With tea, I have realised that your heart must be in it, to enjoy it and grow with the venture. This was why it was easy to shift from Toyota to tea. We have invested about Rs 70 million already and another 30 million is in the pipeline.

(11 JAN 2013 - 17 JAN 2013)