Saurya Rana is the President of Nepal-India Chamber of Commerce and Industry (NICCI), reelected for the second term. Through his professional journey, he has been associated with Surya Nepal, ITC Ltd. (India), Grasim Ltd (Aditya Birla Group, India and Philippines), Hoare Govett (UK) and Holland, Hannen & Cubitts (UK). He has also served as President of Nepal Automobile Dealers Association.
In this edition of Business 360, we talk to Rana about the Nepal India Chamber of Commerce & Industry’s role in light of the post election status of the country, the federal structure and the new government, focusing on bilateral business and investment between the two countries and trade diplomacy with India. Excerpts:
Re-elected as President of NICCI, what will be your priorities for this term?
In line with the mission statement of NICCI, the focus will be on fostering and facilitating economic activities through the promotion of bilateral trade, investment and industry between India and Nepal. The focus will be to also ensure that NICCI continues to be a facilitator between the business community of Nepal and India for enhancement of bilateral trade and investment.
Nepal is likely to have a stable government for five years, can this be an opportunity to take Nepal-India’s economic relations to a new level?
Nepal and India are ‘natural’ partners in the milieu of trade, economy and socio-cultural exchanges. However, the full potential of trade and investment has not yet been realised. Following our visits on four Prime Ministerial delegations to India within a two year span, what stands out glaringly, after extensive discussions with Indian industrialists, is the need for political stability coupled with an ‘investment conducive’ environment.
Like every well-wisher of Nepal, we are also optimistic that the current political mandate will lead to political and policy level stability which will help in taking our economic relations to a new level.
Trade deficit with India has been on the rise, what can be done to narrow it down and why is the government failing to address it?
In Nepal, one macro issue which is constantly raised is trade imbalance between Nepal and India. This issue was also at the fore during the high level visits in the past between Nepal and India. In recent years, the trade deficit has escalated significantly.
To redress the trade imbalance significantly, I reiterate what I have said in several fora.
Water resources and energy enhancement capacity will be the key driver to reduce trade imbalance. Nepal needs to take urgent steps to ensure operationalisation of the various energy projects which are in the pipeline like the Pancheswar Multi-Purpose Project, Arun 3 and Upper Karnali and expedite Tamakoshi, Budhi Gandaki as well as other major reservoir based projects. This would not only generate substantial revenue for Nepal but would critically be a clean, import substitution to fossil fuels which are the single largest import item of Nepal. The world, including India and China, have ambitious, time bound programs to convert at least Passenger vehicles to electric vehicles within the next decade or so. We must capitalise on our huge globally competitive advantage of water resources before climate change wreaks further havoc.
Nepal has been dominantly an import led economy. Nepali traders continually face problems while exporting products like jute, ginger. Could this be a strategy to discourage from Nepal?
The issue faced by jute exporters and agro products like ginger is different. Jute exports faced an anti-dumping investigation in India in the past but given the limited capacity of the jute industry in Nepal their export is not capable of causing any serious injury to the domestic jute industry of India. Therefore, it has been impressed upon the Indian side in various meetings including the Inter Governmental Committee (IGC) meetings for the withdrawal of the antidumping investigation process on Nepalese jute products.
The issue faced by agro products exporters like ginger etc. is that that of complying with Pest Risk Analysis (PRA) related regulations. On request of the Nepalese side, Indian authorities have been granting market access to Nepalese Agro exports by establishing quarantine requirements for various products like lentils, ginger, coffee beans, broom grass, cabbage, cardamom, medicinal and aromatic plants, tea, and rice bran by incorporation in relevant regulations. However, the critical issue of accreditation of Nepalese labs still needs to be addressed, failing which we will continue to face niggling problems. We are hopeful of some progress in the forthcoming IGC meeting.
Every leader from India and Nepal claims to have special relations with each other, but the ground reality is very different. There is disconnect between what is said and done. What is NICCI doing to strengthen economic and bilateral relations?
First of all let us understand the geo-political context of the two countries. Nepal shares a border of over 1850 kms in the east, south and west with five Indian States. The Nepal-India border is unique in the world; an open border allowing movement of people without passport or visa thereby aiding the inseparable economic relations and development of trade in goods and services between the two countries. Over the centuries, this free movement permitted coexistence between ethnicities, linguistic and social relations, cultural similarities along with vibrant trade and commerce.
Given the above, Nepal and India are ‘natural’ partners in the milieu of trade, economy and socio-cultural exchanges. However, the full potential of trade and investment has not yet been realized.
NICCI is focusing on the following specific action items to enhance economic and bilateral relations between the two countries:
On a NICCI initiative, FNCCI, CNI, NCC agreed through a Joint Working Group that key proposals on trade and transit issues between India and Nepal be presented to both Governments through a joint working group with a single voice from the business community. The key top 10 issues raised in the joint proposal to the Ministry of Commerce, Nepal were taken up in the last IGC meeting . We hope that most of these issues will be taken up and resolved in the forthcoming IGC meeting.
Similarly, the Joint Working Group had presented further recommendations on the changes to be made in the 2 decade old Nepal-India Trade Treaty to the Ministry of Commerce in June 2016. Though the Trade Treaty was renewed automatically at that time without any changes, we are confident that in the future, if acknowledged and implemented, it would result in a win-win situation for both the countries.
One of the issues in the last IGC minutes was the formation of an India-Nepal Joint Business Forum for enhancing the scope of IGC to discuss all bilateral economic and investment issues. NICCI continues to represent the matter with an earnest hope that this will fructify and the private sector will be inducted into this forum as it rightly deserves.
Keeping in view the significance of tourism for the mutual benefit of Nepal and India, NICCI is committed to strengthening bilateral cooperation in this sector. Against this backdrop, there have been series of interactions, workshops, stakeholders meetings, and delegations in the last 4 years at the initiative of NICCI. The last Nepal-India Joint Working Group meeting for bilateral tourism promotion was held in February 2015 in New Delhi. Nepal will be hosting the second JWG meeting, most probably in February 2018.
Foreign Direct Investment from India is on the decline. How can this be addressed?
Yes, FDI from India has been declining. FDI from India to Nepal is less than 0.01% of India’s total FDI commitments abroad. It is hence up to us to take advantage of this opportunity by ensuring a politically stable and investor friendly environment. As I remarked earlier, if the hydropower projects on the anvil can be completed, it would send a highly positive signal to potential Indian investors.
To attract FDI, we need to ensure ease of doing business and upholding international laws and norms. For the last half a decade, NICCI has been holding meetings with various government stakeholders and disseminating a paper collated by the multi nationals which focuses on critical areas of repeal which would foster greater investment. Some of the key issues which need to be addressed to enable FDI inflows are:
A new Intellectual Property Rights policy, which we have been told is being reformulated for the last 6 years. This is a pressing issue needing redressal if we are to garner large multinational FDI.
Restriction in trading new products for test marketing by multinationals in Nepal has thwarted new product introductions. Multinationals have requested permitting a small percentage, maybe 5 or 10 percent of their turnover to be the base for bringing in new offerings for test marketing, which if successful, they can manufacture in Nepal. Currently, smuggled products are entering through our porous borders thereby depriving the Exchequer of revenue.
The disallowance to set off business losses despite operating through a single PAN card discourages risk taking and innovation, thereby hampering fresh investments.
The inordinate time taken for repatriation of genuine dividends and payment of agency fees. This is causing tremendous concern to most of the multinationals and other bilateral companies.
It has been more than six years since we signed BIPPA with India and still there has been no ratification. There are over 150 operating Indian ventures in Nepal. Surely we want further investments.
Once a new government is in place we will be working with FNCCI on the possibilities of taking road shows to key Indian cities. Further, with the creation of new provinces, we will find a host of opportunities as provinces will compete to attract investments.
Since the trade embargo, there are hints that’s diplomacy with India is not stable. How can economic diplomacy be strengthened?
NICCI being in the forefront of fostering and facilitating economic activities between India and Nepal and based on various interactions and participation in trade fora, I am of the view that economic diplomacy with India continues to be strong and stable.
Will the increasing geopolitical rivalry between India and China affect Nepal's economic terms with both nations? How can we balance relations with both economic giants?
Nepal should clearly prioritise its national interests and adopt a policy in managing its relationships with India and China that best preserves and promotes her national interests. In order to preserve its long term security, it is necessary for Nepal to understand the sensitivity of India and China in terms of their security related issues and adopt policies judiciously, following a middle path, that respects the interests of both neighbours without endangering its own sovereign and independent position.
Another vital national interest for Nepal is its economic development, which ultimately helps to promote stability. Nepal has benefitted from the economic assistance of both India and China, and considering the economic rise of both countries such assistance could provide substantial benefits in the future.