Deepak Malhotra is the Chairman of IMS Group, a business group with diversified interests in various sectors including technology, e-commerce, automobile, real estate, healthcare, and financial services, among others. Malhotra is also the President of the Mobile Phone Importers Association as well as Vice President of the Nepal Chamber of Commerce. ApEx caught up with Malhotra to talk about the current economic slowdown, the impacts of higher interest rates on business operations and problems surrounding the business sector. Excerpts: Many businesspersons say that the current economic slowdown is the deepest in their living memory. How severe is the crisis for the private sector? The policies of the government and the central bank created the current crisis. The exorbitantly high borrowing rates, unnecessary tightening of working capital loans and the credit-to-deposit (CD) ratio of banks, among others, have impacted businesses very much. The current borrowing rates have made doing business unsustainable. We are facing double problems; there is a sharp decline in market demand for goods and services, whereas BFIs have been pressurizing us to pay the loans and interests.

We have repeatedly urged the Ministry of Finance and the Nepal Rastra Bank to bail out the crisis-hit businesses. But, they have turned a deaf ear to our demands.

While many businessmen complain of BFIs charging high-interest rates, the same individuals are also the promoters of many banks. In this situation, is it fair for them to complain against the policies of banks and the central bank?  This is a valid issue. There are businesspersons on the board of many banks. Ideally, there should have been a separation of bankers and businessmen in the banking system. Banks have not reduced the premium on interest rates despite repeated requests from private sector organizations. The influential businessmen who should have been vocal against the interest rates issue have chosen to remain silent during this crisis. I think it is because their personal interests are playing a role in this context. My point is, business community members need to raise a united voice. As the President of the Mobile Phones Importers' Association, how do you see the policies of the government affecting the mobile handset business? As the official importer of Samsung mobile phones, IMS used to import mobile phones worth Rs 10 billion annually. Until four years back, mobile importers used to get a 40 percent VAT rebate on the import of handsets. This has made mobile phones cheaper in the market as well as helped to check illegal imports. The abolishment of the VAT rebate in the federal budget of FY2019/20 has already hit our business. In addition, the government also imposed excise duty on handset imports. Making the matter worse, the government enforced import restrictions on mobiles above $300 from April this year. The sudden imposition of import restrictions has hit mobile businesses very hard. While we were left with no mobile phones to sell, we were not in a position to reduce our expenses. Mobile importers and dealers operate on a relatively thin sales margin; there is only a five percent gross profit in the mobile business. People may not believe it but the mobile phone business has now turned into a loss-making venture. The ineffective implementation of the management device management system (MDMS) as well as a surge in illegal imports also posed serious issues to the domestic mobile phone business. What do you think are the factors hindering the effective implementation of MDMS?  We have been regularly asking the authorities to implement the MDMS effectively. The problem came when there was a discussion about identifying the legality of mobile phones. Neither mobile phone importers nor the government had any issue with the Nepalis working abroad bringing phones for their personal use. But the issue here is, a few traders have been using migrant workers to import mobile phones illegally. It is estimated that around 100,000 such illegal phones have already arrived in the Nepali market. Once the Nepal Telecommunication Authority (NTA) implements the MDMS system effectively, such phones will not be activated. What do you suggest for Nepalis who buy phones abroad to use them in Nepal? People should not buy mobile phones in foreign markets to use such handsets here. It is because genuine mobile phones can be brought from the Nepali market at affordable prices. Customers will also get an official warranty/guarantee and a few high-end handset models available in the market even come with insurance coverages. As the government has recently lifted the ban on mobile phone imports, when Nepali market see new models of Samsung phones? With the lifting of import restrictions, we have started the process of opening a Letter of Credit (LC). IMS will introduce flagship models of Samsung mobile in the Nepali market in months or two. We have not been able to launch the Samsung Galaxy Z Fold 4 in the market due to import restrictions. Along with Fold 4, the Galaxy S22 series phones will also be reintroduced to the market. How much time do you think it will take for the Nepali mobile phone business to rebound? Not only mobile phones, but the market of every product/sector has weakened over the last couple of months. With the lifting of import restrictions, we will now start importing mobile phones. But, we are not sure whether there will be buyers. If the government works to improve the business environment and resolve all our problems, then only the mobile phone market can bounce back.