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By Shanker Man Singh

Prime Minister KP Sharma Oli has said that privatization is not an achievement in the country. Recently, during the conclusion of the Road Department’s progress review conference, he said that the privatization done after 2046 BS did not give any results.

“It could not give the country success,” he said. At that time, the policy of privatization was brought forward by the Nepali Congress government under the privatization, deregulation and delicensing policy. The same policy is still in place.

Oli became the PM with the support of the Nepali Congress, however, he opposed the policy adopted by the NC.

The Finance Ministry has stated that there are 44 public institutions in Nepal, of which 25 are profitable, 17 are lost and two are closed. Rising government spending on public institutions against rising deficits presents a significant concern in the economic landscape.

The Nepal Oil Corporation has earned the highest profit of 11.72 billion 29 million rupees.

In the second place, respectively, Nepal Electricity Authority earned Rs. 9.445 million rupees, Nepal Telecommunication Company earned Rs. 7.92 million rupees, Citizen Investment Fund earned Rs. 3.857 million rupees, Deposit and Loan Protection Fund earned Rs. 3.8063 million rupees. The net profit of these 5 companies is 75.67 percent. On the other hand, look at the losses. Among the institutions that incur the most losses are Nepal Airlines Corporation, Nepal Television, and other government undertakings.

Nepal Airlines Corpo ration has been continuously operating at a loss from 2076/77 BS to the review period. These initiatives are seen to fulfill two main objectives giving more space to the private sector to act as the main engine of economic growth and reducing the size of inefficient public enterprise operations, saving costs and generating revenue.        Although defunct, public corporations continue to play important roles in both developed and developing countries. Generally, in the past, public institutions were established in Nepal with the main objective of providing essential goods and services to common countrymen and citizens at reasonable prices. Biratnagar Jute Mill was established in 1936 as the first public institution in Nepal.

In the past, globalization, liberalization, de-licensing and continuous structural transformation of the national economy have helped the expansion of the private sector, on the one hand, while, on the other hand, the size of the public sector has been decreasing, including dissolution or disinvestment of public institutions.

These initiatives are seen to fulfill two main objectives giving more space to the private sector to act as the main engine of economic growth and reducing the size of inefficient public enterprise operations, saving costs and generating revenue. Although defunct, public corporations continue to play important roles in both developed and developing countries.

Many public institutions remain in developing countries, particularly in sub-Saharan Africa, as major suppliers of social services, some of which are relevant to the achievement of sustainable development goals. For example, public enterprises have become the main source of employment in many countries due to the slow growth of the private sector.

These different circumstances warrant a careful review of the role that public institutions can play in the socio-economic development of countries. However, what is also important is that new public institutions must perform effectively and appropriately in market conditions.

The public sector reform agenda includes, among other things, exploring options for private/public partnerships including management issues, structure, performance monitoring and feedback arrangements.

Since the 1930s and especially after World War II, many state-owned enterprises, also known as public corporations, were created in both developed and developing countries to address trade deficits and capital shortages and promote economic growth, and depopulation. By providing capital and technology to strategic sectors where the private sector (eg heavy industry, infrastructure, etc.) lacked investment capacity, most governments resorted to public enterprises to increase capital formation, to produce essential goods at low cost.

Employment generally contributes to the economic development of the nation-state. This trend continued into the early eighties. However, increasing corruption, management incompetence, overstaffing (many governments treated public sector enterprises as easy means of job creation and easy means of patronage distribution without regard to economic viability), inflation and the widening current account deficit of the 2020s have been severely exposed.

Public institutions have an important role as key players in the success and failure of the government and economic development. Public sector enterprises generally have three types of organizational structure, departmental undertakings, statutory corporations and joint stock companies.

If we look at the history of public institutions in Nepal, In 1993 BS, Biratnagar Jute Mill was established after the issuance of the Company Law, and after the issuance of the Special Act, Nepal Bank Limited was established in 1994.

Under the industrial sector, there are seven such as Dairy Development Institute, Hetaunda Cement Industry, Udaipur Cement Industry, Nepal Aushadhi Limited, Nepal Orind Magnesite, Herb Production and Processing Company, Janakpur Cigarette Factory (Closed).

Nepal Aushadhi Limited and Nepal Orind Magnesite under the industrial sector are in losses. Under the commercial sector, Agricultural Materials Company Limited, Rashtriya Biu-Bijan Company Limited, Nepal Food Institute, Nepal Oil Corporation and Timber Corporation are operating. Among them, the operating income of Rashtriya Biu-Bijan Company Limited and Agricultural Material Company has decreased.

Under the service sector, there are five institutes namely Nepal Civil Aviation Authority, Nepal Air Service Corporation, National Productivity and Economic Development Center, Nepal Transport and Warehouse Management Company Limited, and Industrial Area Management Limited.

In the social sector, there are the Cultural Institute, Gorkhapatra Sansthan, Janak Education Material Center, Nepal Television and National Housing Company.

Telecommunication Authority, Nepal Electricity Authority, Electricity Production Company Limited, National Broadcasting Grid Company Limited and Nepal Water Supply Institute are under the service sector.

In the financial sector, Agricultural Development Bank, Rashtriya Banijya  Bank, Nepal Bank Limited, National Insurance Institute, Insurance Company Limited, Deposit and Credit Protection Fund, Nepal Stock Exchange Limited, Citizen Investment Fund and Hydropower Investment and Development Company Limited.

Some of the government undertakings have been privatized, yet, they have not been able to achieve significant success. It seems that the goal of the nation will be fulfilled only if the institutes of the same nature can be merged and professional efficiency, efficiency, effectiveness and quality can be increased. Most of the enterprises were established by the government or donor countries. Public enterprises in Nepal are mainly established to serve the following purposes: infrastructure facilities and services; basic consumer and development items; adequate supply of essential commodities; managerial assistance to enterprises in need; and entrepreneurial support to enterprises in need.

The government started a system of removing the chief executive officers and directors of all public enterprises (PE) and appointing new ones selected through open competition in their place, but it could not be continued.

The first public institution with legal validity in Nepal is Nepal Bank Limited, which was established in 1938. After the establishment of the bank as a public institution, a series of additional PEs were established. There are a significant number of total public institutions established in Nepal. Despite this impressive growth in the number, role and scope of public institutions, their performance – financial or otherwise – has always remained below satisfactory levels. Public institutions also play a significant role in realizing the highest aspirations of the people of Nepal, which have been accepted by the government of Nepal in the process of building a welfare state and moving towards socialism by providing essential goods and services easily and easily.

Therefore, since past reform efforts to improve managerial and financial efficiency by solving such problems in the management of the institute have not been effective, it is necessary and mandatory to make a policy and legal arrangement related to the operation of the institute with the structural and systemic reforms of the institutes.

In Nepal, the Corporations Act, 1964, the Communications Corporations Act, 1972, the Companies Act, 2006, the Cooperatives Act, 2017 and other related laws have been enacted as legal frameworks for the operation and management of government-owned industries.

To conclude, the significance of public enterprises cannot be ignored, however, the government should be cautious about efficient management, end political intervention and introduce strong anti-corruption agencies.