On February 14, Jaankaari sat with Hari Prasad Gautam, senior vice-president of the Birgunj Chamber of Commerce and Industries (BiCCI), at his Birgunj residence.
At BiCCI, Gautam chairs the industry committee, responsible for safeguarding the rights and interests of the business and industrial community in the Birgunj-Pathlaiya Industrial Corridor and the region.
In his view, Birgunj holds the best potential for industries and businesses to flourish for various reasons, but faces significant policy and investment challenges stemming from the state’s ignorance.
How would you describe the current landscape of MSMEs in Birgunj?
This is one of the most fertile lands for MSMEs but lacks industrial development, which also includes big industries, trade and service sector, among others.
A small wave of industrialisation in the form of foreign investment was seen in 1996 after an agreement with India that set up multinational companies like Dabur and Unilever in the region. Surya Nepal was already there. An industrial environment was gradually developing.
But the conflicts induced by Maoists discouraged further investments and overall industry culture. Nor did the state pour its attention, rather was focused on procuring weapons and gears for security agencies.
Yet today, for the development of MSMEs and other industries, there’s no better place than Birgunj. It is the best.
What are the bases for your claim?
First, to be successful, any industry in Nepal should have over 40% of its production consumed in Kathmandu. Additionally, these industries rely on a smooth supply chain to the capital. Birgunj is the shortest gateway to Kathmandu and the under construction Nijgadh fast track promises further improved connectivity.
Second, for international trade, Birgunj is the best border. There are three well-equipped customs offices (the Integrated Check Post, the Sirsiya Dry Port and the oldest office in Inarwa) in Birgunj. Once we enter Raxaul, we can reach any trade destination across the globe via Kolkata sea port, which is conveniently and quickly accessible via Birgunj.
Third, Birgunj has cheaper land properties, a history of industrial base, a greater industrial spirit and there’s availability of workforce without much unrest. You can hardly find any land [for industrial purpose] in Kathmandu. There’s no scarcity of water and flooding problems like Kathmandu. Lower pollution is another plus point for Birgunj.
Birgunj is currently the hub for medicine and foodstuffs industries. Why? Because of its supply [suitability] to Kathmandu. That’s why it’s an industrial city.
What are the biggest challenges MSMEs in Birgunj face today, including regulatory and financial hurdles? How has the COVID-19 pandemic affected small and medium enterprises in the region?
An economic emergency emerged post-COVID with dollar reserves sufficient for imports of six months. Here, the state took a prohibitive policy, denying dollars to industries to purchase raw materials and temporarily suspending letter of credit (LC) services. The state imposed a 110% charge on letter of credits to import machinery parts.
As an industrialist, you move according to secured resources and plans. During COVID, you applied for further loans. Banks, following Nepal Rastra Bank’s directives, issued a circular to businesses with the subject ‘working capital loan’, where industrialists would get further loan corresponding to their current working capital while simultaneously binding them to pay back earlier loans as specified in the circular.
This forced industrialists to focus on reducing loan amounts, rather than stabilising their businesses, using instruments like real estate, shares, and gold and cash.
It’s been five years since the real estate market has slowed down, which is also the longest so far. For shares, the market did see a boom but is not dependable either. Additionally, businesses deposited their money at cooperatives for higher returns, which sank too.
All in all, industries could not operate then, resulting in a downfall of production, while produced goods could not get demands in market, and on top of that banks exercised strict policies.
Two years later, the state realised their mistake but it came too late as businesses had already lost confidence. As a result, the business environment degraded post-COVID.
What key initiatives has BiCCI undertaken to support MSMEs, including funding, training, and market linkages?
There’s a Micro Enterprise Development Fund (MEDF) at BiCCI. Through that body, we provide business related technical knowledge to laymen to become businessperson. We provide training on setting up small scale businesses like motorcycle workshops and plumbing.
However, we haven’t been able to do much due to a lack of resources.
Do MSMEs in Birgunj have adequate access to financing, and what steps can be taken to improve credit availability?
No. Only a limited group of people can access credit facilities available at banks.
Neither do banks come out of their comfort zones to design innovative programs that empower, let’s say, 100 aspiring MSME businesspeople. Of them, 50 businesses might grow by five times, 20 by two times, 10 at break even and 10 might suffer loss. But that’s not the case.
For instance, one of my employees wanted to drive his own EV cab as it promised good earnings. I did the maths and concluded that the car loan financing, available for a period of five years, can be repaid within three years if the cab service goes smoothly.
To borrow the loan, the financier sought his monthly income to be NRs 160,000. I may certify his monthly income to be NRs 20,000 on which he pays 1% tax, but how can he show his earning to be that much? Now he was compelled to take the loan in someone else’s name, who is now at risk if something unfortunate happens.
All in all, bank loans are not accessible to ordinary people.
What can be the solutions to all these problems that you pointed out?
The state must carry out heavy reforms, including governance. They should formulate business-friendly regulations and policies and promote industrial culture. The government must designate industrial estates with all amenities like electricity, water, security, accessible loan facilities etc.
Moreover, agriculture is still the way out to a better economy for Birgunj and the country. For that, it should be modernized and commercialised. A farmer should be able to sustain their family of, let’s say, four by yielding a field spread over a bigha. They should gain confidence that their work is sufficient to get their children a proper education at a nearby school.
But the state has failed to facilitate agriculture.
What are your concluding remarks?
Let hardworking people earn and live.
