REDCL’s legality in question

Opposition’s motion to transfer BOiC portfolio to BDBL shot down

NA: Not only did the opposition fail to convince the government, it also fell short of votes to carry through their motion to close down the newly established Rural Enterprise Development Corporation (REDCL) and transfer its portfolio to Bhutan Development Bank Ltd (BDBL).

The three-hour long discussion in the National Assembly yesterday, saw 11 members raise their concerns and 18 more list their names to speak on the issue.

Cutting short the discussion, the Speaker upon seeking consensus among the members decided to let North Thimphu representative Kinga Tshering, who moved the motion, to offer the final recommendation and  the finance minister to also provide his opinion before voting.

Three recommendations of the opposition swayed the discussion along the party lines to the extent that the Speaker had to warn the members to be wary of what they say.

The house then decided to vote on each recommendation wherein the opposition’s motion garnered only 16 votes at the most.

Kinga Tshering said the BDBL is most suited to continue the services offered by  the erstwhile BOiC given its reach and manpower.

When the Revolving Fund I (RF-I) of Nu 1.5B is already handed over to BDBL, the opposition questioned the need to establish REDCL as a state enterprise simply to implement the Nu 400M RF-II. The recommendation was to close it down and hand over the portfolio to BDBL.

Another recommendation was to involve the economic development and private committee to review the performance of BOiC. The third recommendation was to seek help of the legislative committee to contemplate the legality of establishing  institutions like BOiC and the Agency for Promotion of Indigenous Crafts (APIC) through a government executive order.

All three recommendations were shot down.

Kinga Tshering also said that a policy intervention from the government would allow commercial banks to lend to the priority sectors at lower interest rates.

The Drametse-Ngatshang representative, Ugyen Wangdi said the establishment of REDCL also deserved scrutiny on legal aspects.

He cited the public finance Act that stipulates the conditions for instituting an SOE. The Act states that the government may establish an SOE to either carry out social security or in areas of natural monopoly. “Carrying out the functions of a financial intermediary (lending and borrowing) is neither a social security nor a natural monopoly,” he said.

The Act also states that for a budgetary government body, unless there is a compelling reason to deliver goods and services in a commercial environment, such activities should be handed over to an existing enterprise, which the opposition thinks is BDBL.

Declining to support the recommendations, the finance minister said the intent of establishing REDCL is different from that of commercial banks, including the BDBL. “The basis of REDCL is to model a SME bank in the country,” he said.

Currently the Central Bank does not have regulations for SME banking because of which, he said the RF-I was handed over to BDBL to continue the services. Once regulations are put in place, he said the fund will be transferred back to REDCL. “While BDBL gives agriculture loans, interests are high and there is a requirement of collateral. It is profit oriented and REDCL is not,” he added.

The education minister, Norbu Wangchuk argued that injecting BOiC funds into BDBL would distort the financial market management. “As BDBL has to compete with other banks, doing so would not enable a level playing field,” he said.

He explained that all stakeholders including BDBL was consulted. He informed the house that BDBL’s average lending rate was 12 percent and providing loans at four percent would affect their operation. “This concern was raised by BDBL themselves.”

On the legal aspects, the minister said  the public finance Act empowers the government to establish an SOE for social causes. The REDCL moreover is incorporated under the companies Act and licensed by the central bank in accordance with the financial services Act. “There is no point to discuss the legality or go to court,” he said.

The opposition leader said that the purpose of the Economic Stimulus Plan, from where BOiC originated, is to stimulate the economy at the earliest. While the government boasts of approving projects worth Nu 605M of the Nu 1.9B, (Dr) Pema Gyamtsho said ESP is lagging behind. “Forget about jumpstarting the economy, it is not even getting up,” he said.

This derailed the discussion with health minister, Tandin Wangchuk defending that the ESP not only jumpstarted the economy, it is in fact “flying”.

Lyonpo Norbu Wangchuk said the GDP growth from 2.05 percent to 5.6 percent, easing of rupee shortage, lifting of restriction and bans are all indicative of the economy heading in the right direction.

“It is because of restrictions the former government imposed that the economy is now stable,” the South Thimphu representative Yeshey Zimba said.

The rupee situation, he said is no different. “The only mistake the former government did was by saving the foreign currency reserve,” he said. Had the then government sold foreign currencies in slices frequently like the current government does, he said the rupee problem might not have surfaced.

He said that ESP must have a special package, something that could steer huge industrial growth and job creation. “But the services BOiC offered are no different from what BDBL offers,” he said.

Members from the opposition raised the concern that applicants have already complained of BOiC approving projects submitted by supporters of the ruling party.

“This will tarnished the image of the employees if it is not true,“ said another opposition member.

However, the ruling party members argued that most of the beneficiaries of loans were from Thimphu, Paro and Mongar, where the opposition had won most seats.

The discussion also touched on Karma Tshering’s appointment as the CEO of BOiC, who happened to be a PDP candidate in 2013.

Kengkhar-Weringla MP, Rinzin Jamtsho pointed out that the salary of the CEO and two directors amounted to Nu 7.8M in two years, which otherwise could fund 22 projects.

The health minister said opposition members are not happy when the government is making progress.

“They (opposition) must be concerned about 2018 elections, when we achieve good results” he said.

Tshering Dorji

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