Unleash exports cash incentive

It is disturbing to note that genuine exporters have not been able to get the much-touted cash incentive that the government announced last year to boost exports. In its cash incentive policy, which was greeted with smiles by the business community, the government had promised 2 percent cash incentive on exports of goods having 30-50 percent value addition, 3 percent incentive on goods generating 50-80 percent value addition and 4 percent on goods with more than 80 percent value addition.



However, despite the existence of a fund of Rs 600 million for the purpose, this scheme for rewarding exporters has remained nonfunctional-- thank to lackadaisical response from the bureaucracy, particularly the Department of Industry, in formulating an agreeable standard for incentive distribution to smoothen implementation of the scheme.



There is no need to explain the importance of exports for Nepal, where the scale of the trade deficit is already in the red zone and unemployment is worrisomely high. The export-import ratio of the country is simply alarming, with total export volume covering only 16.2 percent of the total import. More than that, the total volume of exports is barely enough to finance the import of one particular item -- petroleum products. The growing mismatch between imports and exports tore a large hole in the country’s balance of payments for almost two years. Though the BOP hole has lately been patched up, the sustainability of the patch-up has been questioned because it is not healthy growth in exports but a drive by the government to take in reimbursement from donors that produced this surplus.



We have reiterated many times that boosting exports, not curbing imports, is the best treatment for the runaway trade deficit. We have seen in the past that curing imports bring more bad with it than good. For example, it weakens domestic demand and squeezes economic activity, thus generating less revenue for the state. Even worse, it breeds underground economic activities like cross-border smuggling and black-marketeering.



We believe expediting implementation of the cash intensive scheme for genuine exporters is the best way to breathe new life into our dying export sector. Hence, we urge the Department of Industry and other agencies concerned to speed up the formulation of transparent procedures for examining the ratio of value addition and set the standards for fixing intensive amounts. However, we also urge the Ministry of Industry and Supplies to take all possible precautions to check any possible misuse of the intensive scheme through manipulation of paper work. We also urge the government to revisit its earlier refusal to include in the scheme exports made in Indian currency because after all we need Indian currency to finance our huge import from India.

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