14 May, 2020 10:39 am

Export tax imposition impacts on Industries international market and on labor workforce


Published on : 14 May, 2020 10:39 am

Kamal Subedi & Kriti Giri

Kathmandu. Nepal is under lockdown for more than 50 days.General masses have started demonstrating their dissatisfaction through various online portals due to widespread escalated poverty, unemployment, uncertainty, sufferings, wage cut offs, layoff plagued, poor governance etc.

There was a widespread dissatisfaction primarily in the labor class, factory workforce, predominantly with continuous lockdown extension. However, government’s decision to nationwide lockdown extension till May 18 has provided some relaxation to some 42 manufacturing industries and some relief for portion of labor workforce.

But yet some answers are expected regarding what about other industries and its impacts on industrialists? Industries are hugely impacted as it is one of important keystone of any countries booming economy. Continual of supply chain is vital for its sustainable representation. It represents enormous manufacturing jobs, contribution to production, distribution, trade market and Nations economy. Covid-19 and extension of lockdown has decisively dropped out enormous production, due to labor shortages as it fails to fully function. Eventually it is going to have a running impact on sales as well. The trade position is important particularly to import raw materials.

There is a great shock among industrialist and on rising government action due to its imposition of tax increment making their inter-continental trade more difficult. It has not only shaken the industrialists due to global pandemic; manufacturing grinds has been on halt causing incalculable damage to importing materials but also its consequences on larger productions that are going to be badly impacted both at short and long run.

Multitudes Impacts are seen ranging from trade and business to labor class job-oriented livelihood across countries as there is shortage in supply chain. Industries are largely codependent and has place in center in global trade. Increment in tax export clearly helps to shore up government but collapse the supply chain, dealership and visibility in the international market.

Industries are not in a position to benefit from the size of Nepalese domestic market alone. Most of the products have a huge adoption in European export markets, imposition of tax increment lessens chance of competition and makes competitive errant attractive and deters the chances of domestic marginal players of Nepal. It leaves no choice but to exit from international markets as it calls for domestic products to have large replacements in present circumstances.

Manufacturing businesses are always highly multifarious as it is not only limited to manufacturing but sales, marketing, distributions, maintenance, recycling wastages, energy consumption etc. It has a linkage with various properties and stakeholders. With huge labor shortages, companies are struggling to operate in full scale, however operation cost remains constant on industrialists, many falling majorly under huge debts.

It has and will create distress as factory shut down and recent spate of production will likely to drive them over the edge in coming months. Under such circumstances, 4% increment on export will create significant detrimental impact to industrialists but to export less or no export at all.

There is no response from Governments end to provide any reliefs during crisis situation or any incentives to help workforce/ labors to get back into regular work, but rather tend to put additional pressure on industrialists to provide in-house provisions for their workforce for their companies to operate smoothly.

It has severely widened gap for the industrialists to run economic activity in present circumstances with workforce shortages, provision of labor wages, reducing production demands and increasing volume in export taxation. Industrialists predict that it is going to be a major drop in sales in coming two years. This means that manufactures suppliers and dealers will have a huge impact as they will have to survive on huge debts. Three consecutive quarters on an average given the outbreak of pandemic situation worldwide is a major challenge among all industrialists.

With workforce responsibility and imposition of taxation the situation remains tough and difficult to predict industries sustainability. It is expected that situation will improve in the upcoming months only with Governments adequate strategy to live with covid-19. But it is not a sign of overall recovery.

Government is expected to respond to the crisis with national recovery plans. Without any recovery plans it may cause serious threats to banking system. In the current scenario, classic economic policy measures, such as lowering interest rates may not just be applicable.

As everyone speculates financial system, industries, private sectors and companies may collapse, eventually leading major chunk of Nepalese people unemployed. The National authorities need to quickly respond to rescue plans rather than settling their own internal dispute.

Needs of industries underlie on temporary energy efficiency, some reliefs on energy consumption prices, VAT and other Tax reductions. Immediate recovery and bail-out packages are necessary to rescue industries to support workforce and place them back into works in a short run.

In a long run, utilizing local manpower and upgrading them to skilled workforce, skills mapping of return migrants as mainstreaming return migrants is another upcoming challenge post epidemic, investment in infrastructure and education, improved financial system and adequate policies. Eventually industries are to benefit from qualified workforce. But all is possible only if government is willing to foresee, Or else, “New Normal” will still be far away from Normalization.

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