Mind your own business- Nepali Times

SUBHAS RAI

A hydropower drought, labour union storms, blizzards of local opposition, and the constant tornados of extortionist politicians�that about sums up the investment climate two months into the government's self-declared Nepal Investment Year 2012.

This is not just the result of outdated policies, it is also because there are deeper ethical problems with a rent-seeking government apparatus. The current Maoist-led coalition has given a whole new meaning to the phrase 'red tape'.

Since January, we have looked at the business environment in this fortnightly space. The disturbing thing is that every other week there are new bad examples to cite.

The latest victim is Unilever Nepal, whose factory has been forcibly locked out this week after workers launched a strike demanding double salaries and allowances, interest free housing loans and house maintenance fees. There is a limit to labour demands, but these are so outrageous that it wouldn't be surprising if Unilever follows in the footsteps of Surya Nepal which closed down its state-of-the-art garment factory in Morang last year after similar suicidal demands by unions. For an illustration of what such militancy can do, just look at over-unionised West Bengal and how far it is lagging behind other states in India.

Genuine labour problems can be solved through dialogue. But when labour wings of political parties use strikes for payoffs, negotiations don't work. A consignment of raw material of Sherpa Adventure Gear, the internationally recognised Nepali brand has now been stuck at customs for over 45 days. The production line has come to a halt, orders promised are in a limbo simply because the Minister of Commerce and Supply is too busy playing ethnic politics and organising a banda in far-western Nepal on Friday.

"I can deal with load shedding, I can deal with strikes, but having to deal with kleptocrats in power is beyond my capacity," an exasperated Tashi Sherpa of Sherpa Adventure Gear told us this week from Europe where he is promoting his spring lineup. "It is impossible for honest investors to prosper or work in such an unhealthy environment."

Nepal has slipped heavily in the global index of transparency, accountability and corruption in recent years, falling eight places to 154th from 2010 to 2011 in Transparency International's annual report.

Nepal also faces the risk of being blacklisted by the Financial Action Task Force (FATF), a global anti-money laundering body, as the Parliament sits on the three acts that were supposed to be approved within 2010. Of the three acts, the Mutual Legal Assistance Bill and the Bill on Extradition Treaty have been registered at the parliamentary secretariat, while the bill on Organised Crime is stuck in the cabinet. At present, illegal outflow of capital from Nepal has outpaced official development assistance Nepal receives, precisely because of the risky investment climate within the country. If blacklisted, Nepal's financial system will lose its credibility as FATF has warned its member countries to take strict measures against blacklisted countries that pose substantial money laundering and terrorism financing.

These should be terrible news for Nepal's rulers. But do they know? Do they even care?

Forget about inviting new investors or encouraging new FDI in 2012, we will be lucky to keep the ones we have.