Monday 21st September 2020

Nepal Federal Budget FY 2019-20- Expectations and Scope

Experts opine that the budget should also work on improvising existing policies that hinder development including tax administration and procurement policies
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Nepal Federal Budget FY 2019-20- Expectations and Scope

It’s the time of the year when Nepal unveils its annual federal budget.

The most important subject of discussion, Nepal Federal Budget FY 2019-20 has created a set of expectations from various institutions and individuals across the country, which are connected with the challenges they face in contributing to the development of the economy.

Here’s a list of industry leaders’ expectations from Nepal Budget FY 2019-20:

Federation of Nepalese Chamber of Commerce and Industry (FNCCI)

Federation of Nepalese Chamber of Commerce and Industry

FNCCI opines that this year’s budget should focus on developing measures to encourage Nepal’s production sector. This includes identifying related problems and using the budget to solve them, improving the judicial system and reducing corporate income tax among others.

“The budget should focus on improving the judicial system, especially related to tax issues, stabilise interest rate in the banking system, ease land acquisition and facilitate environmental issues while establishing a factory and promote export by giving special treatment to industries that manufacture products with high value addition. Similarly, the budget should also reduce corporate income tax by five percentage. In a nutshell, the budget should adopt measures to bring down the cost of doing business in the country.”Federation of Nepalese Chamber of Commerce and Industry.

Confederation of Nepalese Industries (CNI)

Confederation of Nepalese Industries

Besides increasing Nepal’s production base, #NepalFederalBudget2019 should also address the rising trade deficit, says the Confederation of Nepalese Industries.

Through the budget, the Nepal Government should make sure that imported raw materials taxes are not more than imported finished goods.

“Promotion of the industrial sector is crucial to achieve desired economic growth and developmental goals. For this, it is crucial that export-oriented businesses receive special treatment from the government, like special tax incentive packages for them. The government should also introduce measures to cope with the liquidity situation. The budget should also take concrete decisions to ease and simplify customs procedures.” – Confederation of Nepalese Industries

Independent Power Producers’ Association – Nepal (IPPA- Nepal)

Independent Power Producers Association – Nepal

IPPA opines that the government should amend its Public Procurement Act, which it considers as an obstacle to realizing the goal of generating 15,000 megawatts of electricity by FY 2028.

It also believes that both domestic and foreign investors be given equal opportunity to promote the private sector investment in the power sector.

“Nowadays, the government has given more facilities and is focusing on bringing huge foreign direct investment, but without much success. We have suggested the government to introduce similar provisions for both domestic and foreign investors to boost private sector investment in power sector. We need a one-window system for hydropower sector to ensure hassle-free and timely completion of procedures.” – Independent Power Producers’ Association–Nepal

Nepal Chamber of Commerce (NCC)

Nepal Chamber of Commerce

As per the Nepal Chamber of Commerce, the budget should work towards shifting Nepal’s import-based economy to a production-based one. For this, the association says that the government should encourage and promote small & medium-scale industries in the agriculture & handicraft sectors.

Thirdly, the budget should be able to come up with programs that create more job opportunities for Nepali youth within the country.

“The budget should focus on driving the country’s import-based economy towards production-based. This can be done by promoting domestic industries and entrepreneurs. Likewise, low development expenditure has been a major problem in Nepal. The government should develop a budget expenditure timeline and make it mandatory for ministries to spend a certain chunk of development budget within a specific time period.” – Nepal Chamber of Commerce

Federation of Contractors’ Associations of Nepal (FCAN)

Federation of Contractors Associations of Nepal

Technical manpower seems to be a persistent issue for contractors looking to execute Nepal development projects, according to FCAN.

Additionally, the association has some reservations against a few provisions of the recently-revised Public Procurement Regulations, which penalize contractors who do not complete projects in time.

The association believes that timely project completion depends on coordination from government officials and other stakeholders.

“The contractors are facing scarcity of technical manpower in the country to execute development works. The government needs to develop sector-wise technical manpower in the country. We also need to bring in skilled manpower through contract agreements, and the Ministry of Labour, Employment and Social Security needs to manage such things for us. – Federation of Contractors’ Associations of Nepal.

Nepal Association of Foreign Employment Agencies (NAFEA)

With more than 500,000 migrants traveling abroad for employment, NAFEA thinks that the government should arrange for a large-scale, internationally recognized training center for migrant aspirants.

Besides, it suggests that the government create measures to ensure a hassle-free working environment for workers in foreign destinations through the upcoming budget.

“The government is only focused on supplying labor and inking various bilateral agreements. However, much remains to be desired in terms of cross-checking whether the signatories are abiding by those agreements. Among others, the government should make Nepali embassies in destination countries more responsible towards the issues of migrant workers in those countries.” – Nepal Association of Foreign Employment Agencies

Organic Farming Promotional Taskforce

The Association advices that the government mobilizes this year’s budget to promote promoting sustainable organic farming as Nepal presents a suitable environment for the same.

It further suggests that this be done, with existing resources rather than following other countries’ practices.

Besides, the government should work towards the classification of farmers, which helps it in identifying which farmers really need government support. It also suggests that the government focus on increasing production levels with the upcoming budget.

“The next fiscal year’s budget must prioritize promoting sustainable organic farming. Although the government’s election manifesto had made tall promises, the recently unveiled government’s policies and programs disappointed the farmers to some extent. Besides, import of agricultural products is increasing by the day, so the next budget must prioritize increasing the production level of the country. Also, farmer-oriented programs must be handed over to the local levels.” – Organic Farming Promotional Taskforce

Pacific Asia Travel Association, Nepal (PATA-Nepal)

Pacific Asia Travel Association, Nepal

With the focus on improving infrastructure, the renowned travel association says that the next budget should focus on building and improving infrastructure, which is important for tourism development.

This includes the construction and management of roads, airports, hotels and more. Therefore, the next budget should focus on completing the big airport projects including Nijgadh International Airport, Gautam Buddha International Airport and Pokhara Regional International Airport on time.

“The next budget should focus on planning as well as timely completion of tourism infrastructure. We have to properly manage, upgrade or build airports, roads, hotels, among others, to handle a large number of tourists. Besides, lack of skilled human resources is a problem in every sector of the country. Moreover, before bringing any new program, the government has to go through research and development modality. Also, we need to explore new destinations where we can promote and market our tourism products.” – Pacific Asia Travel Association – Nepal Chapter

Hotel Association Nepal (HAN)

Hotel Association Nepal

HAN opines that the upcoming budget should create pathways for investment in the hotel industry.

Besides, the government should also utilize the budget to prioritize the construction of tourism infrastructure, which includes developing air and land connectivity, improving roads condition and more.

“Despite having immense potential of attracting a large number of tourists, lack of air and land connectivity, worst condition of roads and pollution are discouraging tourists from visiting Nepal. So, to address these issues, the budget should be infrastructure-oriented. The next budget must remove VAT from agricultural and other products procured by the hotels from the local market.” – Hotel Association Nepal

Forum for Protection of Consumers’ Rights

The consumer rights association opines that the government may have had some setbacks in implementing the previous year’s budget, however, it has scope this year to improve on its setbacks from the past.

It advices that the budget should revise the existing VAT, focus on production and commercialization of local products and promote production-based subsidy for farmers.

“Looking at the consumers’ right, the budget should revise the current VAT system of the country. A standard should be set for VAT implementation. Similarly, currently 80 per cent of our daily consumables are being imported. So, the next budget should prioritize production and commercialization of local products. The country’s economy is currently dependent on remittance, which is not sustainable. So, the next budget must bring programs that generate employment for youth.” – Forum for Protection of Consumers’ Rights

Budget Size Essential to Address Underlying Issues

Besides the kinds of reforms and policies that industry leaders and key stakeholders expect from the upcoming budget, experts also think that the size of the budget will also play an important for the successful implementation of these programs and policies.

Tribhuvan University Central Department of Economics Kusum Shakya states that expansion of the budget size is important to fulfill the needs of the different layers of the government.

“However, the budget should not be allocated for programs and projects that are infeasible and only add to the financial burden of the government,” she said.

Economic analysts also think that the Nepal federal budget FY 2019-20 should not be populistic or only cater to government aspirations. It should focus on paving way for feasible policies and projects, while providing scope for execution.

Former National Planning Commissions Vice Chair-person Swornim Wagle thinks that the budget should address upcoming vulnerabilities in the economy including some of the issues mentioned by the aforementioned associations and institutions such as rising trade deficit and financial sector instability among others.

“Sadly, it seems that the government is ignoring these issues and trying to once again accommodate populist programs in the budget,” Wagle said.

Experts opine that the budget should also work on improvising existing policies that hinder speedy development including tax administration and procurement policies. They believe that fixing these aspects alone will boost development in the country.

Economist Biswo Poudel states that the new budget should come up with solutions to reduce the current expenditure, which is rapidly increasing.

“In the name of federalism and fulfilling lawmakers’ demands, the current expenditure — under different unproductive headings — is increasing. Such expenditures will add financial pressure on the government, which will ultimately affect the country’s development,” Poudel said.

Poudel also advices the government to analyze the lessons learned from previous budget implementations and use them to successfully implement the upcoming budget.

“Focus should also be on measures to expedite timely expenditure of the development budget,” he adds.

Overall, experts ask the government to initiate programs through the budget that can be started and completed within the coming fiscal year.

They also emphasize on maintaining fiscal discipline throughout all government layers with the upcoming budget and laying special emphasis on the manufacturing sector and simplifying tax rules.

Upcoming Budget to Focus on Ongoing Projects’ Completion

Meanwhile, officials involved in the annual budget statement preparation have said that the government will allocate adequate budget to the projects that are currently underway and have made significant progress over the past few months.

“Along with the government priority, we will also look at the progress made by the projects. If it is found that the projects need more budget, the sufficient amount will be given,” said Sudhil Bhatta, National Planning Commission Member.

Similarly, various ministries and their subordinates have sent out proposals to prioritize the completion of old projects, instead of introducing new ones in the annual budget announcement.

According to the Ministry of Urban Development Secretary Ramesh Prasad Singh, 95 percent of the budget sought from the government is for ongoing projects.

Earlier, Finance Minister Yubaraj Khatiwada had expressed that the government would like to celebrate the upcoming fiscal year for completion of projects in progress.

Let’s wait and watch what the Nepal Federal Budget FY 2019-20 has in store for the betterment of its people.

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