'Int'l investors know little about Nepal; correct this situation'
Ryokichi Hirono, Professor Emeritus of Seiki University, is a well regarded economist of Japan. He has served in different policy making bodies in Japan and also worked in agencies like the World Bank, Asian Development Bank and UN system. As a person who has traveled places teaching economics and giving lectures on pertinent issues, Hirono recently made special presentation on Investment Promotion in Kathmandu.
In an interview with Milan Mani Sharma of Republica, Hirono talked at length on how Nepal can establish itself as a lucrative investment destination for overseas investors. Excerpts
Even though Japan is one of the leading bilateral donors, Nepal has received small portion of Japanese investment. Why is that so?
Nepal has low Japanese private investment because only a small portion of Japanese investors know about Nepal. For investments to make way into a country, investors must know the country well as cultural and language gaps work as huge psychological barriers. Second major factor is incentives. After all, businesses are profit oriented and investors must be told about profit-making opportunities in the country. Third is the work culture compatibility and comfort of doing business. Nepal has not managed to win as much Japanese investment because of the shortfall in these areas.
What should Nepal do to overcome these constraints?
Both the government and the private sector should play an active role. In 1950s when Japan was poor and had little international exposure, it was the government that created the environment that facilitated movement of Japanese private sector to the US. This helped them acquire management skills, bring in investment and technology. The role of the private sector was also important at that time because they showed zeal to learn and were eager to propagate what they learnt abroad in their own country. I think Nepal should make efforts in this line.
What do Japanese investors look at before setting foot in a country?
They are political stability and the economic growth rate. Hence, if Nepal wants to get more FDI it must assure its economy is growing at a sound pace. Likewise, it must assure stability of the government as well as policies. Policies that have been put in place should remain there for fairly longer span. Second important factor is supply of skilled laborers, who are not only technically sound but disciplined as well. This workforce should have the capacity to efficiently apply their skills, ensuring higher efficiency and productivity. The third important factor is the level of support extended by the government to the private sector. Efficient bureaucracy - that ensures fair tax administration and clamps down on red tape - is also another factor that investors look at. The final condition is the working condition in a country such as corruption status, policy predictability and availability of basic services.
You stayed in Nepal for almost a week and have interacted with top government officials and private sector representatives. What is your reading? Will Japanese investors put in money in the country?
My interaction with various personalities gave me a feeling that things are changing for good here. The government is working toward creating an investment friendly environment. The private sector is changing too. In the past, Nepali businesses were run by promoters themselves, and since promoters wanted to maintain control over everything, they resisted change and were rigid. This attitude is changing fast and they are open to change and are more responsive to market shifts. They have also well understood the merits of innovation and are eager for joint ventures. How the Japanese investor will respond, however, will depend on how the Nepali government and private sector build their cases.
Many investors here have expressed concerns over rigid labor law. What is your perception on it?
If the country is open to foreign investment it should also make similar adjustments in the labor law as well. However, having said so, my belief is laborers, like every other individual, behave depending on what they are getting. The government cannot force them to work if they do not want to. And how to keep them motivated is the duty of investors as well. If businesses can assure they can provide decent working condition, monetary return and other benefits, I am sure workers will not refuse to work.
What business areas are Japanese investors interested in?
In Nepal, Japanese investors are interested in agriculture, hospitality, infrastructure and hydropower. There are other areas as well that offer good business prospects. Both Nepali government and private sector should inform them about these prospects and work together to actually lure them.
Nepal has not received any aid from Japan in the last few years. Why is that?
Aid and investment are same these days. Just as the private investor, the government providing aid these days like to see that the assistance provided are being used efficiently and yield desired outcome. In the past, donors used to look at output only, and used to be satisfied if certain number of schools or hospitals were built. These days, they gauge aid effectiveness by ascertaining how many people are actually making use of schools or hospitals. Mere completion of their construction is not enough. Earlier, there were concerns about Nepal not being able to make good use of aid. But given Nepal´s changing situation, the country might start receiving Japanese aid soon.