2. Major Issues and Constraints Faced by
Consulting Industry in Nepal
2.2 Examples of Some Specific Issues
Steps Taken by SCAEF
3. Future Needs
3.1 Efforts Underway and Recommendations
Maximize the Input of Domestic Consultant Firms with Domestic
Firms in Lead Roles:
Establishment of Base Line Data on Domestic Consulting
Industry:
Institutional Importance and Preferential Treatment:
Promote Domestic Professionals at International Level:
Financial & Legislative Policies:
Partnership:
-Er. Keshav Kunwar
President, SCAEF (2004 – 2007)
1. General
Many efforts and achievements have been made for the
development of consulting services and the professional
practices because of the hard and collective teamwork carried
out by SCAEF since it’s establishment in 1990. Because of the
vision and the team-effort made by SCAEF in the last 16
years, many of the day to day hindrances in the form of legal
provisions and practices, perception of Client/Employer/Donor
Agencies towards consulting industry of Nepal, services
procurement process etc., which earlier negatively affected
the consulting business, has been removed, changed or
significantly minimized.
During recent years, GON has also taken some important
measures for the institutional development of engineering
profession including the construction industry in Nepal. They
are:
Recognition of SCAEF as national body,
Designation of Government Line Ministry to look after the interest of SCAEF and its Member Firms
Amendment of Construction Industry Development Act (now in draft)
Enactment of Nepal Engineering Council Act
Formulation of Nepal Building Codes Act
Formulation of Nepal Construction Act
Establishment of Construction Industry Development Board
Publication of Public Works Directives
Preparation of National Procurement Act – (now in draft)
The open and broader view taken by, the Government of Nepal
(GON) towards involvement of private sector in national
economy is another vital step towards grooming up of the
private industries.
Definitely, the efforts made by SCAEF and steps taken by the
Government as outlined above are just beginning, which still
requires a lot of further efforts from the government and all
relevant institutions.
2. Major Issues and
Constraints Faced by Consulting Industry in Nepal
2.1 Present Context
The world as a whole is marching towards liberalization and globalization. This millennium will be an era of whirlpool of globalization. The worldwide waves of democratization, globalization, privatization, liberalization, marketization and individualization have exercised a powerful influence on the life of the Third World countries. Thus, this century will be of more challenge and hard endeavor for developing countries of the world like Nepal in their striving. The invasion of technology, digitization of information, liberalization of economy and global competition for excellence in qualitative performance will push the low income countries like Nepal to a still remote corner, unless we become more qualified, innovative, creative, dedicated, sincere and honest towards our behaviour, practices and profession.
No nation can operate this 21st century economy without a 21st century knowledge infrastructure. Knowledge infrastructure has now to be developed first for tangible economic performance. Skill acquisition, development and retention, creativity and entrepreneurship are the ‘engine’ to drive knowledge infrastructure.
The overall service industry in Nepal has been suffering from the lack of right understanding in its totality and thus has not been recognised by the government separately. Service Sector as a whole is contributing more than 40% in the National GDP of Nepal. The construction industry alone is contributing about 15% in GDP.
There still remains large number of issues, which needs to be addressed in order to institutionalize the consulting service industry in Nepal as a true professional entity and strive for various modalities to enhance technical capability of consulting firms/professionals and uphold professional ethics in the consulting industry of the country. Other than the challenges at domestic level, time has also come to pay attention in much boarder area taking into consideration of the present domestic and international developments, market opportunities, domestic capability as well as constraints etc.
We have seen from the history of developed countries that the consulting and construction service industries have always played one of the most vital roles, and has been the country’s backbone in their process of development. The development of this sector, in fact, indicates the level of development of a country. Positive and supportive policies and attitude of their respective governments were the main reason behind their success.
Thus, the issue of the enhancement of skill in domestic consultancy service industry should be one of the major thrust for the overall development endeavor of the nation, as this industry should be one of the spinal element for bringing the dream of the national construction for prosperity into reality. To strengthen the capability and competence is of more importance due to the fact that our country has already entered as a member country into the World Trade Organization (WTO).
Entry of Nepal in WTO has opened door inviting the developed technology and cutting-age knowledge to enter in the country. This will be an important step forward in long-term to meaningful transfer of technology and development of knowledge-base in local service market.
But, there is still a lacking of formulation of clear-cut supporting policy and legislative provisions by the government at national level for directly addressing the issues related with consulting industry.
The consulting industry has never received any preferential approach by the government compared to other industries [e.g. Federation of Nepalese Chamber of Commerce and Industries (FNCCI), Chamber of Commerce, etc.] and it has never received any meaningful protection from the government.
Hence, with limited technical know-how and modest resources, the consulting industry of the country, after entry in WTO, will reel under the heavy weight intrusion of world giants in this sector.
At one hand, HMGN is lacking the full-scale commitment , and on the other, the bilateral and multilateral donor agencies, which are the true partners in development of this nation have also kept mum , where adopting bold and adequate provisions for healthy growth of the consulting industry is concerned. Sandwiched between these dilemmas, the present consulting industry is really in deep confusion regarding its survival, like an orphan, where as actually it should have been geared up in full pace and enthusiasm towards developing the nation.
2.2 Examples of Some Specific Issues
There has been some cases in the past and more at present
regarding penslising the consulting firms including
blacklisting of firms for the under performance or giving
caution for unsatisfactory performance as desired by the
Client and donors without giving sufficient opportunity to
the consulting firms to clarify. The intent here is not that
there should not be practice of penalising against the bad
performance. The concern is only that it has to be evaluated
based on facts and figures concerned with all the project
related stakeholders and working conditions. Now security for
sure has become a serious concern and we all are aware of the
practical difficulties that we all are facing. Further, the
basic five actors of the development works are the Client,
the Donor, the Consultant, the Contractor and the NGOs/INGOs
or the community group. The performance evaluation of all
these actors have to be done and not only the evaluation of
the Consultants and Contractors. Even in normal situation,
there are areas of lackings with Clients and Donors also
leading to Project delays and sufferings. Some of the
examples of such lapses are :
(1) Project Planning:
» The Project should be planned in such a way
that good working season is best utilized. Commencement of
field survey and investigation should generally be planned
from the month of November and not during onset of monsoon
and festival periods.
(2) Delay in Decision Making in the Procurement Process of
the Consulting Services
» The Consultant’s selection procedure is
generally delayed and sometime it takes more than one year,
which effects in the actual working schedule of the project
leaving less time for actual execution of the Project, which
ultimately leaves questions on Consultant’s
performance.
» The delays made for decision making are compensated
from the time required for actual project
implementation.
» Most of the Project requiring substantial field
based works get commenced at the onset of the monsoon.
» We know well about bureaucratic lingering of GON,
but delay for giving concurrence from donor agencies has also
been observed.
» Because of these delays, projects are being
implemented on the basis of the pre-feasibility or
feasibility studies, no time with the Client and donors to go
for detailed design and one can expect the performance output
by this.
» Ultimately, the Consultants are always made
Scapegoats.
(3) Lack of Standard Billing Rates for Consulting
Services
» It has been a normal practice that GON
(even within the various branches of same department) and
Donor Agencies use different billing rates while estimating
the fee for consulting services.
» Some use rate of NRs 45,000 and some NRs 145,000 for
remuneration per month for similar position of
experts/specialists.
» Such differing estimations suiting the specific need
of particular department and project budget is due to the
lack of a standard billing rates. Thus, to avoid such
differing estimations, a standard billing rate should be
adopted.
» SCAEF has prepared such standard billing rates and
has provided to government agencies, which needs to be
accepted by all or alternate solution should be worked
out
(4) Estimate of Adequate Working Time Period and
Realistic Professional Inputs
» Adequate time, specially for survey,
investigation and design, should be given.
» The delays made for decision making should not be
compensated from the time required for actual project
implementation.
» Similarly, appropriate estimates of inputs needs to
be made depending upon the complexity of the Project in term
of type of works, terrain, social issues etc.
(5) Lack of Government Authority to Establish
Uniformity in the Selection Procedures of the Consulting
Services
» There are lots of ambiguities and
complexities in the preparation of Terms of References,
evaluation criteria, formation of evaluation committees
between various government agencies and departments.
(8) Unstable financial policy and frequent changes in
budgetary provision mainly related to advance tax
deduction have always created chaos & conflict. The
efforts and achievements and decisions made earlier are lost
and conflict is crated between Government and Private Sector.
From the advance tax deduction, more than 20 million (2
carores) rupees is deposited in government account after
clearance of tax, which needs to be refunded to various
consulting firms.
(9) Uncompatible Weightage Between Domestic and Expatriate
Consultants
While large and complex projects are to be formulated and
designed, the involvement of foreign consulting firms are
still inevitable, since they have the practical experience of
applying modern technology and have long history of managing
large consulting services. Though, GON has the practice to
invite foreign consulting firms in association with local
consulting firms, the leading firms of the such associations,
in general, are mostly foreign firms even with the negligible
small inputs as compared to the inputs of domestic firms.
Instead of giving Domestic Consultants lead roles, maximum
weightage for selection of consultants is given to expatriate
specialists even when their man-months allocated are
considerably small compared to that of local professionals.
This requires rethinking as the basic aspiration of involving
expatriate specialists is for technology transfer for those
complex issues, which requires more experienced hands. This
is also important to avoid demoralising affects to domestic
consultants.
(10) Lack of Opportunity for Human Resource Development
SCAEF member firms employ a large number of professional,
technical and managerial staff. But, GON so far has never
provided any opportunities for overseas training and studies
for human resource development within the consulting
industry. Such opportunities are given only to government
employees. Trained and skilled manpower only can replace
expensive expatriate experts, and steer the nation towards
the path of development under self-sufficiency. Furthermore,
skilled and trained menpower are the asset of the country,
wheather they are serving from government agencies or private
sector. Moreover, in the context of WTO, skill development
exposure to international arena, learn lessons from developed
part of the world and explore opportunities is must in order
to complete globally. Thus, this discrimination is not
justified, and is not based on the natural law of
equity.
(11) Inability to Listen and Change
» In several instance, the government asks for
suggestion and advises from SCAEF, but in many cases the
advises are ignored, which is disgraceful and waste of
time.
(12) Capability Evaluation of Nepalese Consulting
Industry
» Facts and figures on the overall standing of
Nepalese Consulting Industry are not established. No any kind
of efforts have been made by GON in this regard.
(13) Reward and Penalty
» There is no appropriate performance evaluation
system of consulting firms to penalize for the bad
performance and also reward for good performance in order to
enhance the overall capability of the industry as a
whole.
Besides, the Consulting Industry needs the following support
from Government and The Donor Agencies:
» There is scarcity of job in the Nepalese market and
consulting firms are struggling for their survival.
» In this context, huge packages should be split into
several smaller packages, so that more consulting firms have
a chance to participate and get the job.
» Blacklisting and cautioning of National Firms and
individual professionals based on one sided past performance
evaluation should be stopped.
» The evaluation should be done in transparent way and
concerned party should get a chance for clarification. Due
regards should be given to the fact that National Consulting
Firms are working at adverse working condition at present and
they are in learning curves.
» Independent third party should carry out performance
evaluation of the Donor supported projects or
programmes.
(14) Establishment of Base Line Data: Evaluation from third
independent agency on the overall scenario of the actors
involved in the development endeavors in the country and
establish facts and figures from where to have a new start is
a need of today.
(15) There are also, at present, various shortcomings on the
part of Consultants. The Consulting industry needs a matured
professionalism and ethical behaviour. Further, there are
some other burning issues such as quoting of low rates,
replacement of project personnel, pulling legs among firms
etc.
Steps Taken by SCAEF
SCAEF has been concerned with the above-mentioned issues,
as part of its continual efforts to make the consulting
industry play a positive and visible role in the task of
national development. SCAEF is now attempting for
» Act of professionalism, which is really
lacking
» Healthy competition and sustained future
» Develope good society and brotherhood
» Enhance in house capability
» Transparency
Open dialogue, professional discussion and communication based on moral an ethical values
Follow the Codes of Ethics Prepared by SCAEF.
SCAEF has suspended few of its members from its memberships, who have violated the code of Ethics of SCAEF.
3. Future Needs
There are lots of pros
and cons in post WTO entry, which if not timely weighed and
appropriate decision made, will surely destruct the national
capital developed till date, be it in commercial, trade or
service sector. The construction and consulting industries
including science and technology related professional
services are the pillars and backbone of development of any
nation. Today, even recognised as domestic issues are
increasingly affected by international actors and events. In
the context that Nepal has formally become the Member of WTO
since April 23, 2004, and with the limited technical know-how
and resource, survival of the industry will be an upheaval
task against the free and open competition from the developed
part of the world. For this, a more determined and bold
support from the government is most important to promote and
ensure strengthening and proliferation of this national
industry, which can stand against global competition and
challenges, and can exploit the opportunities.
In the above context, SCAEF has been seriously working for
the overall institutional development of consulting industry
in Nepal. Some of the activities carried out and efforts and
achievements made are described above and elsewhere in this
document.
3.1 Efforts Underway and
Recommendations
Formulation of Clear - Cut Supportive Policy and
Legislative Provisions: To protect the national
property developed with lots of effort and resources spent,
Government must take bold, responsible and far-sighted
decisions and must formulate a clear - cut supportive policy
and legal provisions (Act and Regulations) to protect
national interest, promote national firms and develop their
competency through preferential provisions made towards them.
Without such support from the government, the national
consulting sector will be overthrown by flood of expatriate
firms with manifold resources and experience.
Establishment of “Consultancy Development Center”: The
Government should establish a “Consultancy Development
Centre” (CDC) like in other countries (e.g. India, Srilanka,
Malaysia, Indonesia etc.) as a national nodal point, which
should be an authorized body to particularly deal with
enhancing, strengthening the consultancy capabilities and
promoting of the Consulting Industry at national and
international levels including enhancing consultant – client
interaction and act as a policy facilitator. This body should
be responsible to formulate & suggest appropriate
policies and regulations required for a healthy growth of the
industry, and training in management of consulting Industry
including preparation of standard documents and procedures
for the selection of consultants to be used by all government
organizations in order to maintain uniformity.
The task of performance evaluation of Consultants for reward
and punishment can also be given to CDC as an independent
agency.
Similarly, establishment of a ‘National Procurement Cell’ for
review and for maintaining uniformity, and monitor the entire
process of procurement including adoption of standard billing
rates for maintaining uniformity is vital. Further, It should
be ensured that subject matter specialists get selected and
nominated in evaluation committees. A formal TOR of the
‘Evaluation Committee’ should be prepared along with the
statement on qualification of the evaluators, the detailed
criteria of the evaluation before calling proposals and bids.
Such criterion should be made transparent to the consulting
firms and bidders.
The Consulting Services Act should be formulated which should
define the professional liability and need for qualified
professionals for undertaking consulting business. The
consulting services are amalgamation of business and
professional. The professional characteristics required to be
engraved in the corporate structure of the consulting firms
including provision of professional working
directors/managers. This will also help in developing
corporate culture in consulting firms, and enhance
professional liability.
SCAEF has been able to convience the government on the need
of the above said and the amendment of Construction Industry
Development ACT and REGULATION for the overall development of
construction and consulting service sector is already
underway and on February 22, 2005, Ministry of Physical
Planning and Works has been designed as Government Line
Agency to look after the interest of consulting service
industry.
Maximize the Input of Domestic Consultant Firms with
Domestic Firms in Lead Roles: A policy should be
made for Domestic Consultant to play lead role in all
infrastructure development works except those complicated and
needing high technology that is not available in the country.
In many cases, the input of domestic consultants can be
maximized with expatriates to be involved in advisory roles.
The type of projects requiring expatriate specialists can be
specified after detail discussion with SCAEF, and other
concerned agencies. This is a general practice being followed
in almost all countries in south-east Asia, with the
committed support from their governments. It is also
necessary to assign proportionate weightage to all experts
(foreign and local) and also for work experience during the
Consultant’s selection on the basis of their inputs. This
practice will not only boost the morale of local experts but
will also assign them responsibility to perform. Some
achievement has been made in this regards.
Establishment of Base Line Data on Domestic
Consulting Industry: In a regular basis, evaluation
of the overall capability of consulting scenario in the
country is necessary in order to decide on the actual need of
expatriate consultants. SCAEF is working in this
regard.
Human Resource Development: The opportunity for higher study,
training’s, international seminars, conference, etc. must be
made open and available to the private consultants and their
employees to enhance their capability and qualification as an
assets of the country. With the long and continual effort of
SCAEF, the government, now has started to provide some
opportunities for training to the staff of SCAEF member
firms, which previously was meant only for government
employees.
Institutional Importance and Preferential
Treatment: SCAEF, as a professional partner of HMG
must be encouraged to be apart of its entire procedures of
technical affairs, should be included in all relevant task
forces, national committees and policy making committees.
SCAEF should be given same type of preferences and
opportunities by the government as they give to FNCCI,
Chamber of Commerce etc. Efforts are underway to make SCAEF
recognized to such an extent that SCAEF’s representatives
should be a member of delegations during high level
formal/state visits.
Institutional Importance and Preferential
Treatment:
Promote Domestic Professionals at International
Level: The government agencies and political
leaders, ministers, bureaucrats should act as ambassador on
its behalf outside the country to promote and disseminate
information about SCAEF.
Financial & Legislative Policies: The
Financial Administration Regulation (FAR) needs to be
reviewed and clauses related to the Procurement needs to be
deleted from FAR, with a statement that “Procurement shall be
carried out according to the Procurement Guidelines used by
MOF/FCGO or the Donor Agencies”. There should be an
uniformity and continuity in financial policy, which are not
changed frequently, so that the achievements and decisions
once made are given continuity, and no conflict is created
between government and private sector. In internationally
funded projects, there should be a provision of acquiring a
certain portion of fee in foreign currency (viz. US$).
Government should develop policy to relax tax/custom (in
income as well as in equipment purchage) in consulting
service sector as is provisional in other sectors (e.g.
tourism)
Partnership: An environment of partnership
between bureaucratic & political parties and private
professional organizations should be promoted through
awareness programmes to end the prevailing feeling of bossim
and ‘Master & Servant’ feeling.
Creation Of Market Development Fund: A
“Market Development Fund” should be created comprising of a
diverted part of tax paid by the Consultants into this fund
for utilization for institutional and professional
development of consulting industry
4. Long-term Results
SCAEF is confident
that with the appropriate concern and positive considerations
of the GON towards the implementation of policies and
regulations as outlined above, and a positive consideration
for HRD programmes from the Donor Agencies, the avenue for
institutional strengthening of the Consulting Industry will
be widened and this will create, among others.
Employment opportunities to a large numbers of engineers, experts/specialists, technicians, administrative staff including retired government employees etc.
Service delivery and revenue generation (tax is not applicable on the huge amount paid to expatriate consultants)
Increased involvement of Nepalese Consulting Firms to ensure increased accountability and sustainability of infrastructure development works
Significant reduction in project cost due to the involvement of Nepalese Consulting Firms (cost of foreign Consulting Firms is generally 15-20 times expensive than the local Firms)
Expenditure made remains within the country
National capacity enhancement in the area of science, technology and research works
Human resource development to lead towards the development of knowledge-infrastructure & knowledge economy.
Finally, create environment for effective contribution in the efforts for poverty alleviation and sustainable development in Nepal.
5. Conclusion
The Consulting Industry
being in a learning curve has many limitations those needs to
be corrected. The industry under collective leadership of
SCAEF is striving it’s best to identify their weak areas and
rectify them. The industry, despite being in a state of
despair due to the present deteriorating economic,
developmental and security condition is still in a state of
confidence and ready to bear the hardships. Only that is
needed is sympathy and understanding with commitment from the
Government and Donor Agencies to support and assist them to
perform with zeal, efficiency and quality for overall
development of this nation.