It is encouraging news that, after 24 years, one of the country’s key industries, Hetauda Textile Industry, has resumed operations. The state-owned industry, established with China’s assistance as a gift to Nepal, gradually declined after political parties turned it into a platform for recruiting their party workers. Ultimately, rampant politicization of state-owned enterprises led to the industry’s collapse.
Several years ago, the Nepal Army proposed operating the industry to produce uniforms and other clothing required by the armed forces. However, corrupt political leaders rejected the proposal, arguing that the army should not be involved in commercial activities. Nevertheless, Nepal Army personnel have now successfully taken the initiative to restart the factory.
However, there are concerns about whether the revived industry can compete in the market. One of the major challenges is Nepal’s open border with India, through which smuggled goods continue to enter the country and dominate the market. Nepali industries are therefore under constant pressure to keep their products competitively priced.
This can be achieved, among other measures, if the government provides electricity to domestic industries at subsidized rates. At present, the Nepal Electricity Authority (NEA) has asked private power producers to reduce generation because electricity production exceeds domestic consumption. Instead of allowing electricity to go to waste, the NEA could provide surplus power to domestic industries at subsidized rates. The government should also introduce additional incentives and facilities for local industries.
Another important question is whether government-run industries can remain sustainable in the long run. There are certainly legitimate doubts. Therefore, the government should introduce a practical public-private partnership model under which such industries can operate professionally without unnecessary political interference.
If Nepal wants to create employment opportunities, it must establish more industries and expand its industrial base. However, the government must also provide an enabling environment and reasonable protection to ensure that private-sector investors can operate profitably and sustainably.
First and foremost, Nepal should focus on establishing industries that can substitute imported goods. Given the country’s relatively small population and limited domestic market, however, industrial development cannot depend solely on domestic consumption.
Nepali industrialists also face various obstacles when attempting to export their products, particularly to the Indian market. Nepal should learn from these practical challenges and formulate a long-term industrial strategy accordingly.
To develop a stronger and more sustainable economy, Nepal should expand economic partnerships with China without hesitation or fear of pressure from the south. Nepal should not become overly dependent on the Indian market. Similarly, it should not make the export of electricity to India or any other single country the central pillar of its economic strategy.
Nepal needs a diversified industrial and export strategy, stronger domestic production, reliable and affordable energy, and balanced economic partnerships with its neighbors and other countries. Only through such a comprehensive approach can Nepal build a resilient industrial economy and create sustainable employment opportunities for its people.
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