Oct 29, 2013

How are the public enterprises of Nepal doing?

Although huge state-owned enterprises are benchmark of any centrally planned economy, after second World War, numerous public enterprises emerged even in market economies of the West. The stated purpose of establishing these enterprises is to provide goods and services to citizens cheaply and in some cases provide goods and services that are not taken up by the private sector for lack of profit-making opportunities. In centrally planned economies, public enterprises were (and still are) considered essential to spearhead the economic growth and control the commanding heights of the economy. However, more often than not, public enterprises have failed. They have not only failed to achieve their objectives but usually have ended up being a drag on their economy.

Nepal too had created dozens of state-owned enterprises starting 1950s. But Nepalese public enterprises also have failed to meet their objectives and instead have become one of the most lucrative avenues for corruption and labor politics. A handful of these enterprises were privatized during the economic reforms of early 1990s. Today around 36 public enterprises are in operation, out of which, nearly every one of them is incurring losses

Why is the scenario so bleak? Why have our public enterprises failed and what can be done about it? Is privatization the only option or restructuring them can solve the problem? Which of the public enterprises are really essential for us? These are some of the questions, my colleagues at Samriddhi, The Prosperity Foundation have tried to answer in the following study. Please go through it and let us know if you have any comments or feedback.