Nepal to privatize ailing public enterprises

State-owned public enterprises ( PEs), now considered white elephants, have sapped the resources of this Himalayan country, forcing the government to privatize some of them. Among those to be privatized are Nepal Drugs Limited, Janakpur Cigarette Factory, Birgunj Sugar Mills, Nepal Metal Industry, Butwal Yarn Company and Nepal Orient Magnetite Limited. "Enough is enough. The government cannot put in more money from the state coffers to pay for the salaries of their employees and the liabilities that they have incurred," Industry Secretary Krishna Gyanwali told Xinhua in a recent interview. Low productivity, excessive manpower, non-transparent management and lack of responsiveness to the demands of the market have been blamed for the failure of these public enterprises to make money. The Industry Ministry, which is responsible in overseeing the PEs, said a study committee has been formed to look into the current financial status of Nepal Drugs Limited. "Once the committee comes up with its report and conclusion, we will decide on how the company can be privatized," Gyanwali said. Following its failure to comply with the World Health Organization's good manufacturing practices (GMPs), the drugs factory was closed three years ago. But it has yet to settle its liabilities worth 500 million Nepalese rupees (5.26 million U.S. dollars) to the Nepal government. The government has also earmarked 1.5 billion rupees (15 million U.S. dollars) to pay for the employees of the Janakpur Cigarette Factory a month ago as part of the preparations for privatizing the company. A committee formed under Rishi Raj Koirala, the ministry's joint secretary, is currently studying the modalities to be adopted in handing over the cigarette factory to the private sector. This is also the case with the Butwal Yarn and Birgunj Sugar Mills. "In the privatization scheme, we are thinking of selling government shares in the company or just leasing them to the private sector through a management handover," Koirala said. In the case of Nepal Metal, two Chinese companies, Chenhui Minerals Limited and South China Mining Energy Company, have already been committed to injecting fresh investments worth 2 billion Nepalese rupees (20 million U.S. dollars) each to run the factory by buying all government shares. Industry Ministry sources said that the factory will be handed over to one of the two Chinese companies after going through their detailed proposals. Nepal's major corporate house, Khetan Group, has shown interest in taking over the management of Orient Magnetite and run the factory. Nepal's oldest factory, Nepal Jute Mills located in Biratnagar, has resumed full operation since last week after the government sold it to an Indian private company. Other state-owned firms like the Gorakhali Rubber Industry, Janak Siksha Samagri Limited, Nepal Electricity Authority, Nepal Oil Corporation, Nepal Telecom and Nepal Airlines Corporation, have been reported to be in the red because of mismanagement. "This is the result of earlier government's reluctance to privatize these PEs on time," Krishna Hari Baskota, secretary at the Prime Minister's Office, said. Most of the PEs were set up to provide goods and services to the people at a time when the private sector was still reluctant to invest because of an unstable government. "However, over the years, PEs have been a story of failure due to the lack of accountability, nepotism, favoritism, large-scale corruption and over-staffing, among others," Baskota said. Unlike the PEs, the relatively young industries owned and operated by the private sector in Nepal have already been profitable because of good corporate management, transparency, and their ability to respond to the demands of the market. According to a status report released by the Ministry of Finance in July this year, the PEs in Nepal suffered a net loss of 3.49 billion Nepalese rupees (36.7 U.S. million dollars) in the fiscal year 2011-12 with most of these state-owned corporations operating in the red. "This is a clear indication that the government should no longer be engaged in business and money-making activities, hence, the PEs should be handed over to the private sector immediately," Baskota said.