Privatization Policy

The topic of privatization is extremely important to both business communication and its stakeholders. By increasing the private sector's involvement in national development, privatization is currently being viewed as a strategy for stabilizing and growing the national economy. A sectoral adjustment program or a public sector reform will frequently include the start of a privatization project. Therefore, the essence of privatization is the government's strategy of selling out its current interests in favor of the private sector.

Around the world, a fresh surge of ideas and a variety of options for public sector transformation emerged in the 1980s. As a substitute approach to public sector changes, the privatization period came into being. Money developing countries in Asia also initiated privatization moves. Many public enterprises are privatized.

The Sixth Plan contained the first mention of Nepal's privatization program. All following Development Plans have had a similar policy. Additionally, the Government occasionally makes decisions about this policy at the Cabinet and Ministry levels. About 12 state businesses were slated for privatization in 1985. However, this grandiose idea was unable to come to fruition. Later, the government made the decision to sell some of the top financial institutions' shares to the general public at a premium price.

To plan and carry out the privatization initiative, the Ministry of Finance established a Privatization Cell in 1989. The objectives, methods, and administrative frameworks for the privatization of state enterprises were outlined in a policy document on privatization that the government released in 1991. The Privatization Act became effective in January 1994.

The privatization process is described in the act as "the participation of the private sector in the administration of enterprises or the sale, giving on lease, or transfer of government ownership to the private sector, employees, or desirous organizations either partially or wholly in such an operation." In order to privatize a public enterprise, the following procedures must be undertaken, according to the Act:

• The Finance Minister will serve as the chairman of the privatization committee. Its member-secretary will be the Joint Secretary in charge of the Corporation Coordination Division.
• The Committee's responsibilities include conducting research, assessing the businesses, removing obstacles to privatization, developing programs for privatization, and recommending the plan to the Government for implementation. The committee has the power to invite any expert or consultant, domestic or foreign, to participate in its meetings as an observer.
• For the purpose of evaluating the enterprise, the Committee may designate a term of domestic experts or, if appropriate, a term that includes both domestic and international experts.
• Any company that has been designated for privatization by any one or more of the following procedures may be privatized by the government:
  • By sale of shares of the enterprise to the general public, employees, workers, and any person or a company, interested in the management of such enterprise;
  • By formation of cooperatives;
  • By selling assets of the enterprise;
  • By leasing out the assets of the enterprise;
  • By involving private sector in the management of the enterprise; and
  • By adopting any other modalities considered appropriate by the Government on the basis of the recommendation of the Committee.
  • By making an announcement in a national newspaper outlining the relevant information about the firm in accordance with international practice, the government may solicit ideas relating to such privatization.
• Priority is given to the Nepali investor or group of Nepali investors during the Committee's evaluation of proposals if the proposals of two or more investors are determined to be identical.
• An agreement between the offeror and offeree is required before transferring ownership of an enterprise in order to explicitly outline the terms and circumstances that must be followed by both parties.
• The Government of Nepal and the parties involved in the privatization have an agreement that states that any disagreements relating to any matter under that agreement should be resolved through mutual dialogue. Such a dispute may be sent to arbitration if it is not resolved.
• The government may guarantee the ongoing employment of the current employees of the firm that is about to be privatized at the moment the service, gratuity, and other benefits accrued to the workers are transferred. When retrenchment is authorized, the government must make arrangements for fair benefits or compensation for current workers and retirees from the privatized firm.
• The proposal for privatization is partially based on the belief that public sector businesses are ineffective and have placed an undue burden on the budget.
• Three state enterprises were privatized in the first stage by the sale of assets through a public tender. Bhrikuti Paper Mills, Harisiddhi Brick and Tile Factory, and Bansbarfi Leather and Shoe Factory were among the businesses that were thus privatized.
• Five additional public businesses—Nepal Film Development Company, Balaju Textile Industry, Raw Hide Collection and Development Corporation, Nepal Lube Oil, and Nepal Bitumen and Barrel Udhyog—were privatized in the second phase. This time, the sale of block shares through a public tender served as the privatization model. Tobacco Development Company and Jute Development and Trading Corporation were also liquidated.
• Six further businesses were privatized in the third stage. These included the sale of government-owned shares by Nepal Bank Ltd., the Agricultural Tools Factory, the Nepal Foundry, Bhaktapur Bricks, Raghupati Jute Mills, and Nepal Coal Ltd.
• In 2000, the privatization process reopened. The privatization of the Tea Development Corporation. Recently, Butwal Power Company underwent privatization by selling Intercraft Nepal the government-owned shares. The Government recently made the decision to liquidate four state enterprises that had been operating at a loss. Agriculture Tools Factory, Cottage and Handicraft Sale Emporium, Hetauda Textile Industry, Birgunj Sugar Factory, and Agri Lime Industry are some of these public businesses. Nepal Telecom Company and Nepal Drilling Company

The new government policies have reduced the public sector's influence in Nepalese business. Currently, the public sector's involvement is restricted to a few core businesses. In the past, the public sector had assumed a dominant role in shaping the foundation of Nepal's industrial strategy.

Reference:

• ap.org/company/News-Values
• lawcom.gov.uk/wp-content/uploads/2015/10/cp226_residential_leases.pdf
• nepalca.com/wp-content/uploads/2016/05/capiii_corporatelaw_june12.pdf
• Pant, P. R. (2009). Business Environment in Nepal (SIXTH ed.). Kathmandu, Nepal: Buddha Academic Publishers and Distributers.
• sundaytimes.lk/980823/plus8.html
• quizlet.com/28563963/chapter-10-business-law-flash-cards/