Nepal's economy has been under constant pressure for the past few years. Due to the long-term effects of the pandemic, geopolitical tensions and internal structural weaknesses, the challenges seen in the economy are becoming deeper and more complex. However, some indicators have improved recently.

As there has been a general improvement in economic growth. But the pace of improvement in the real sector is still weak . Investment flows are declining . Industrial production is slow . The unemployment rate remains high. Millions of youth are still forced to migrate abroad in search of employment. The trade deficit is out of control. As the confidence of the private sector weakens, investment stagnates and there is more liquidity in the financial system.

The upcoming budget coming in such a complex situation is not only a table of revenue and expenditure, but an opportunity to become a historical document of economic reform and economic transformation . The next budget needs to come with a clear plan for long-term improvement along with the solution to the current challenges. The current need is to build the foundation of a sustainable, inclusive, production-oriented and competitive economy without getting caught up in immediate relief .

Our structural problems are obvious . Production costs are high . Export capacity is lacking and dependence on imports is increasing . Monetary and revenue policies are unstable . Which has weakened policy forecasting ability . Frequently changing policies and regulations have reduced the confidence of the private sector . In such a situation, the budget should include practical and result-oriented programs aimed at solving these problems.

Our economy is mainly based on consumption. Where there is no expected improvement in productivity growth . Therefore, the upcoming budget should present a clear course of action to restructure the overall economic framework by bringing programs focused on production and job creation. Employment should be created in labor-intensive sectors such as agriculture, tourism, information technology, construction, small and domestic industries. Policy commitment is needed to ensure entrepreneurship promotion, start-up support, skill development, cheap and easy credit, access to capital, use of technology and market access to give opportunities to the youth in the country. A meaningful partnership with the private sector will be essential to make all such programs successful.

Addressing the commission's recommendations

Capital budget spending has been poor for years. Not only has the capital flow been stopped, but the capital expenditure is not on time and the market is running, the development speed has also been blocked. Therefore, while allocating the capital budget, it is necessary to prepare it based on the implementation capacity from the planning stage. Not limited to the budget announcement, a clear action plan, institutional structure, technical capacity and coordination mechanism should be prepared for its implementation. The role of the private sector, civil society, local government and technical aspects should be ensured in the implementation.

Efforts to lead the liberal economic policy adopted by Nepal after the 1990s to the next stage of reform have not been done sufficiently. The high-level Economic Reforms Commission formed under the special initiative of the Federation of Nepal Chamber of Commerce and Industry has already presented suggestions for the new phase of reforms. Now we should prepare a clear action plan for time-bound reforms by radically improving labor, capital, tax, finance, production and export policies. The financial system needs to be innovative, accessible, secure and digital friendly. Job-friendly labor policies, competitive capital policies and policies that directly link technical education and vocational training with production are necessary. The recommendations of the Economic Reform Commission should be prepared to be practically implemented through the budget. In terms of reform, not only policy, but also regulation, implementation, evaluation and public-private partnership mechanisms need to be clear .

Public Private Partnership

Federation of Nepal Chamber of Commerce and Industry has always prioritized cooperation with the government. We have already presented our suggestions for the upcoming budget and we have high expectations to address them through the budget. Joint efforts of the government, private sector and common citizens are indispensable for solving economic problems. The future of Nepal with long-term stability, prosperity and innovation is possible only through the triangle of cooperation, facilitation and combination. The next budget has a historic opportunity to be presented as a clear, far-sighted and implementable document in that direction .

It is mandatory for the government to come up with an action plan to provide stability in the overall financial and monetary sector while implementing the new phase of reforms, including the recommendations of the Economic Reforms Commission. It will restore confidence in the market by bringing stability to the currently announced laws and policies. Recently, the government has amended more than two dozen laws that are considered obstacles to investment promotion. Now the implementation of those amendments in practice should not be delayed . Likewise, it is imperative to implement the recommendations of the high-level commission formed for the reform of the overall tax and revenue system. It will make the tax system simple, transparent, sustainable and investment friendly. Which is a prerequisite for long-term economic stability .

Declaring investment decade

Addressing the slowdown in investment flow, it has become imperative to declare the next decade (year 2082-2092) as 'Investment Decade' to promote domestic and foreign investment . The main reason why Nepal is unable to move forward in development is the government, domestic private sector and foreign investment is very low . Therefore, the next decade needs to be decisive from the point of view of establishing integrated investment laws, facilitation agencies and service systems. For this, the private sector has already taken the initiative. Under the leadership of the federation, Nepal Development Limited, an investment company with a capital of 10 billion rupees, has been established with the investment of entrepreneurs and businessmen from 77 districts and non-resident Nepalis. Through this, the Federation has made arrangements to mobilize even the small capital of Nepalis in the country and abroad. Addressing this awareness of the private sector and the readiness to promote investment, the government needs to declare the next decade as 'Investment Decade' through the budget. The private sector is expected to lay the foundation for the 'Investment Decade' by including an investment-friendly environment, productivity enhancement and professional self-sufficiency in the upcoming budget. If such strategies are included, the chances of revival of the economy and long-term prosperity will be high .

In addition, in order to maintain trade balance, increase investment and create jobs, import substitution and export promotion, it should be arranged to allow the export of mining and mineral products without adverse impact on the environment. Companies that build and operate hydroelectric projects by the end of June 2082 will be given a 50 percent income tax discount and VAT refund for 10 years and 10 to 15 years. To do this, this time limit should be extended by 10 years till 2092 . To replace imports, it is necessary to bring programs such as providing special concessions to products manufactured using domestic raw materials.

Commitment to policy stability

A long-term policy commitment for production growth is now inevitable . A competitive production system can only be built through the modernization of agriculture, the use of technology in the industrial sector, the expansion of energy and transportation networks, and the reform of the labor and financial systems. It is necessary to implement the concept of Himalayan Economic Corridor by connecting it with Madhyapahari Highway. It will contribute to the regional balanced development of the country and help in the development and promotion of new economic centers while minimizing the problem of rapid migration. Similarly, with the joint efforts of the federal, state and local levels, information technology-enabled production and service industry hubs should be developed at the state level, which will pave the way for inclusive economic transformation.