Insecurity causes erosion in business confidence

Last Tuesday, the name of Pashupati Murarka, a vice president at the Federation of Nepalese Chambers of Commerce and Industry (FNCCI), was added to the list of victims of attacks by unidentified groups.
As had been the case in the previous attacks on people of the Nepali business community, no bodily assault was conducted on the target himself – this time Murarka, who again was left without any physical injury. The full force of the attack was directed only at the vehicle the intended target was occupying.
The shattered glasses of Murarka and the other businessmen’s rides have been replaced by now. But it will take longer to restore the confidence of businesspeople and investors shaken by the attack.
The damage has been done!
“Business confidence plays a vital role in luring new investment. It is even more important than the availability of energy and political stability,” Murarka said. “The government must create a favorable environment so that investors do not have to worry about their security.”
Considering the events of past few months, Murarka’s wishes might not come true any time soon since the government has not been able to nab the people who launched the attacks on businessmen.
“This is continuing to erode confidence of businessmen and investors,” Murarka said.
The government announced Investment Year 2012/13 to lure foreign direct investment (FDI). Following this, the government has received investment commitment from abroad. But the response has not been that overwhelming. One of the major reasons for this is the government’s inability to ensure security of investors.
“Let alone reviewing and amending the necessary laws to attract foreign as well as domestic investment, it has failed even to provide security to the business community,” Murarka said.
Government officials also echo the private sector’s sentiment.
“It is unfortunate that the business community has lost investment confidence due to different reasons such as union unrest and trade unions’ concentration on garnering political clout through an unholy nexus,” Kewal Bhandari, joint secretary at the Ministry of Labor and Employment, and a former director general of the Department of Labor, said.
Some of the issues would have been solved had the political parties shown some seriousness. “But almost no one is serious about the country’s economy,” Bhandari said. “So how can we expect the business community to make new investments?”
The flow of investment depends to some degree on the business confidence level. The higher the business confidence, more the flow of investment will be. When investors are living in fear, nobody wants to start a new project.
But it is not only industrialists like Murarka who have lost confidence. Even small and medium-scale entrepreneurs feel the same.
“Small-scale industrialists have been intimidated by the recent attacks,” Lata Pyakurel, former president of the Federation of Nepalese Cottage and Small Industry (FNCSI), said. “Attack on big investors creates terror among small-scale investors and entrepreneurs.”
Who will come to the rescue of small-scale investors when the ‘big ones’ are under fire, she asked.
“The psychological threat has disturbed promoters of small and medium enterprises,” Murarka said.
FNCCI officials are worried that small and medium enterprises may start shifting their bases to other countries to escape the adversities they face here. “The level of confidence plays an integral role in the decision-making process,” Murarka said.
Business confidence in Nepal was low during the decade-long armed insurgency. “But that was understandable,” FNCCI Vice President Bhawani Rana said. “It’s very unfortunate that investor confidence has not been restored even after the commencement of the peace process.”
Further explaining the importance of investor confidence, Rana said that the falling investment confidence is going to affect the country’s economic growth. “These kinds of attacks create terror in the business community, which paralyzes everything, including the economy,” Rana said.
Many businesspeople now say they are not much bothered about issues like availability of power, documentation process and labor issues. “Forget about being aggressive in crossing hurdles in starting a business, we are not even sure about our security,” Rana said. “Fear itself is a big hurdle to start a business.”
Lately, foreign investors are shying away from even thinking of making an investment in Nepal, Murarka said. “We can’t calculate the loss the country has been bearing due to such decisions, as potential foreign investors are dropping their plans to travel to Nepal.”