Economic Policies and Reforms

The government's economic reform initiatives over the past ten years have drastically altered Nepal's corporate and industrial landscape. Currently, Nepalese business and industry are undergoing a significant shift. They now find themselves in a compositional situation as a result of the markets' opening up. The ever-expanding globalization process, the admission of multinational corporations into the Nepalese market, the liberalization of imports, and the transition to a buyer's market have created whole new demands for the government's commercial firms.

Practically every sector of the economy has been impacted by the new economic policies and reforms. Trade, industrial, and foreign investment policies have all seen significant changes. In addition, considerable structural changes and monetary and fiscal reforms have contributed to macroeconomic adjustments.

Reducing ineffective controls, boosting private investment, and integrating the domestic economy with the global economy are the goals of these reforms. Thus, it would be required to investigate in further detail what these reforms entail and how they are affecting the nation's economic climate.

A variety of programs, including the Industrial Policy of 1992, the Foreign Investment Policy of 1992, the Privatization Policy of 1992, and the Labour Policy of 1999, were developed and put into effect to hasten the reform process.

Industrial Policy

In 1992, the Industrial Policy was announced. The coverage is extensive, and it adheres to the tenets of a free-market economy. The policy has expanded the country's potential for joint venture activities. The private sector's involvement has been encouraged, especially for the nation's industrial growth. A country's economic and social advancement is a fundamental goal, and industrialization is a key component of that progress. Along with providing goods and services, industrialization also opens up job opportunities. It enables the efficient mobilization of financial and skill resources that could otherwise go unused. It serves as a means of promoting technical advancement and innovation. Therefore, industrial growth has a multiplier effect on the economy.

Liberalized and streamlined procedures have made it simpler for commercial and industrial businesses to expand and modernize. Except for those involving foreign investment and those relating to military and public health, licenses are no longer necessary for starting, growing, and upgrading industries.

The 1992 Industrial Policy outlines its goals, plans, and tactics. The following are the Policy's objectives:

• To strengthen the industrial sector's contribution to the national economy by increasing industrial production and productivity;
• To prioritize the growth of export-oriented and locally resource-based sectors;
• To establish appropriate policies that are supportive of industrialization for the overall, balanced development of the nation;
• To lessen the strain of employment and underemployment in the agricultural sector through the growth of employment-generating enterprises.

The Industrial Enterprise Act of 1992 includes the Industrial Policy's principles in its statutory provisions. The following are the principal clauses of the Industrial Enterprise Act:

• According to the Policy, the Government is to act as a catalyst in fostering an environment that would promote the healthy expansion of the industrial sector.
• The Private Sector Has Been Assigned Full Responsibility For The Development And Promotion Of Industrial Activities, And The Policy Fully Encourages Private Sector Participation.
• The strategy draws in foreign capital through equity, loans, technology transfers, and other forms of cooperation.
• A license is not necessary for the establishment, expansion, and modernisation of industrial businesses, with the exception of those involved in the fields of defense, public health, and the environment, according to the policy.
• Through a single-window system, the Policy provides all types of services to the industries.
• Industries founded in the country's rural, underdeveloped, or less developed regions are given additional facilities and incentives.
• Industries founded in the country's rural, underdeveloped, or less developed regions are given additional facilities and incentives.

Major changes have been observed in the nation's industrial environment since the Industrial Policy of 1992 came into effect. This strategy helped the nation's new economic reforms and policies get off the ground. The industrial sector is no longer enslaved by regulation and licensing.

The primary objective of the policy is to draw in foreign direct investment. As a result, the restrictions on foreign investment were lifted. Additional incentives are provided by the policy to cottage and small-scale companies. For instance, the traditional cottage enterprises are exempt from income tax, sales tax, and excise duty, and they can be registered within six months after starting operations.

Additionally, specific plans are established for the institutional and financial back-up of these businesses. The government assumes the role of a facilitator for fostering a hospitable environment for the healthy expansion of the industrial sector. Facilities have been given to enterprises based on their location and the national priority. The private sector has been given entire responsibility for the development and promotion of industrial activity, and the policy strongly supports private sector engagement.

References:

• faculty.insead.edu/fatas/fiscalec.pdf
• jstor.org/stable/1808426
• Pant, P. R. (2009). Business Environment in Nepal (SIXTH ed.). Kathmandu, Nepal: Buddha Academic Publishers and Distributers.