Wednesday, June 6, 2018

Trading resumes after government rolls back decision to hike CGT threshold

Nepal Stock Exchange (Nepse) resumed trading – in the second half of the trading session today – after the government rolled back its earlier decision to revise the method of calculating capital gains tax (CGT) on trading of bonus and rights shares for two weeks.
The investors withdrew their protest against the new CGT calculation method enforced by the Inland Revenue Department (IRD), according to the investors. "The protest was called off following the government's decision to put the new calculation method on hold for the time being," they said. "According to the new calculation method, CGT on selling bonus and right shares has to be calculated with face value as the base rate."
"The new decision – announced in the budget for the next fiscal year 2018-19 – is irrational decision, which can never be implemented because investors will not pay capital gains tax when there is no capital gain," according to Nepal Investors Forum.
Earlier, the government used to charge 5 per cent CGT on trading bonus and rights shares in the secondary market. With the increase in the CGT to 7.5 per cent through the federal budget 2018-19 on May 29, the tax administration had also changed the CGT calculation method. Prior to the enforcement of the new rule, CGT used to be levied on the income made from the difference in actual price of shares traded and adjusted base price of stocks. Adjusted base price of the stock means the price of stock immediately before book closure plus the value of shares received from rights and bonus divided by the number of shares.
The investors had been protesting against the IRD circular that imposed CGT on difference between the actual price of shares traded and base price of bonus and rights shares that is Rs 100 per unit share.
The share market has witnessed a large sell off on Sunday as soon as the IRD issued the circular levying 7.5 per cent CGT on the difference of actual price of share traded and its base price. On Monday, the investors hold discussion with the government asking the government o take back the circular.
But their discussion ended inconclusively forcing the investors to not to do any transaction yesterday, though the market was open for trading. Yesterday, the ministry has also formed a committee led by joint secretary at the Economic Policy Analysis Division Uttar Kumar Khatri to examine the revision in CGT calculation and suggest a solution.
Yesterday witnessed not a single transaction in the share market – for the second time in two years – in a year after VAT on brokers' commission row, which has been eliminated by the budget.
The protest continued today as well and the investors did not do any transaction during the first half of the trading hours.
The benchmark Nepse index ended 13.91 points higher to close at 1,282.75 points even in the second half – one-and-a-half hour transaction – recording turnover of Rs 238 million.
However, the investors are still under pressure as they do not know what will happen after 15 days. The seven-member task force led by Khatri – including representatives from the IRD, Department of Revenue Investigation, Securities Board of Nepal, Nepse and CDS and Clearing, and a capital market expert as members – will submit a report in 15 days. "Based on the study report, the ministry will plan the next move from the next fiscal year,” Khatri added. "After mid-July, the government will decide a formula based on the recommendations of a task force."

IFC may extend $15m financing to Nepal’s Global IME Bank

The International Finance Corporation (IFC) – a member of the World Bank Group – has proposed to extend a $15 million financing facility to Global IME Bank to support the lender’s programme for small and medium sized enterprises, it said.
The bank is ranked as fifth among commercial banks in Nepal based on its total asset base of Rs 124 billion ($1,151 million) and loan portfolio of Rs 89.7 billion ($833 million) as of April 13, 2018. The bank will prioritise lending to enterprises in tourism, agriculture, micro finance and small and cottage industry sectors. SME financing will cover both daily business operations and capital expenditure. "This project is part of a concerted effort by IFC in the Nepali financial sector to enable local banks to access long term US dollar resources,” as per the disclosure.
Global IME Bank has a network of 129 branches across the country. The Nepal Stock Exchange (Nepse)-listed bank is 51.2 per cent owned by the promoter group while the remaining is held by the public. IME Group, chaired by Chandra Prasad Dhakal, is engaged in a number of sectors including banking and insurance, automobiles, energy, logistics, IT, infrastructure and tourism.
IFC has also proposed a $15 million investment in NMB Bank to support its lending activities in the SME space. IFC has been present in Nepal started since 1956 and is among a handful of organisations financing sectors like agribusiness, transportation and trade finance. In 2015, IFC financed $7 million equity in Business Oxygen (BO2) – a private equity fund in Nepal – followed by a $7.3 million add on investment in the fund.

Global FDI flows fall sharply

Global foreign direct investment (FDI) flows fell by 23 per cent in 2017 to $1.43 trillion from $1.87 trillion in 2016, according to UNCTAD’s World Investment Report 2018. The decline is in stark contrast to other macroeconomic variables, which saw substantial improvement in 2017.
"Downward pressure on FDI and the slowdown in global value chains are a major concern for policymakers worldwide, and especially in developing countries,” UNCTAD secretary-general Mukhisa Kituyi said, adding that investment in productive assets will be needed to achieve sustainable development in the poorest countries.
The global fall was caused in part by a 22 per cent decrease in the value of cross-border mergers and acquisitions (M&As). But even discounting the large one-off deals and corporate reconfigurations that inflated FDI in 2016, the 2017 decline remained significant. The value of announced greenfield investment – an indicator of future trends – also fell by 14 per cent to $720 billion. Prospects for 2018 are therefore muted.
Global flows are forecast to increase marginally but remain well below the average over the past 10 years. An escalation and broadening of trade tensions could negatively affect investment in GVCs. Tax reforms in the United States are likely to significantly affect global investment patterns.
UNCTAD observed that the negative FDI trend is caused in large part by a decrease in rates of return. The global average return on foreign investment is now at 6.7 per cent down from 8.1 per cent in 2012. Return on investment is in decline across all regions, with the sharpest drops in Africa and in Latin America and the Caribbean. The lower returns on foreign assets also affect longer-term FDI prospects.
As a result of the investment downturn, the rate of expansion of international production is slowing down. The modalities of international production and of cross-border exchanges of factors of production are shifting from tangible to intangible forms. Sales of foreign affiliates continue to grow – up by 6 per cent in 2017 – but productive assets and employees are increasing at a slower rate. This could negatively affect the prospects for developing countries to attract investment in productive capacity.
Growth of GVCs has also stagnated. GVC trade peaked in 2010–2012 after two decades of continuous increases. UNCTAD’s data shows foreign value added in trade – the key GVC indicator – down by 1 percentage point to 30 per cent of trade in 2017. The GVC slowdown shows a clear correlation with the FDI trend and confirms the impact of the FDI trend on global trade patterns.
FDI remains the largest external source of finance for developing economies. It makes up 39 per cent of total incoming finance in developing economies as a group. It now accounts for less than a quarter in the least developed countries (LDCs), with a declining trend since 2012.

Home Ministry claims to take action against notorious contractors

Home Minister Ram Bahadur Thapa today claimed to take action against those contractors, who fail to complete their task within the deadline.
Addressing a press conference – on the occasion of completion of his 100-day in the cabinet – at the ministry today he warned of stern action against anyone who violates the law regardless of their status.
Though, he has been making claims of taking action against the erring contractors, two of the contractors – namely lawmaker Hari Narayan Prasad Rauniyar (chairman of Pappu Construction) of the ruling Sanghiya Samajbadi Forum-Nepal and Sharada Prasad Adhikari (chairman of Shailung Construction), who is the landlord of Nepal Communist Party (NCP) co-chairman Pushpa Kamal Dahal are in the news for their notorious acts.
The number of projects of these two contractors' have seen delays and time and cost over run and they have been misusing their power to get away with it.
“We have already made it clear that whoever violates the agreement and misuses the state coffers are criminals," he said, adding that the issue is under the jurisdiction of the law.
The government’s crackdown on non-performing and under-performing contractors will be continued, the minister asserted, though the contractors have been claiming that they have been targeted for political motive, and amassing the wealth like the government did with the transporters.
Asked on the on the gold smuggling case, the home minister said that ‘big fish’ of the gold smuggling racket have become restless as the investigation into the case nears its conclusion. "We have arrested some small and medium 'fish'," he said, being hopeful that the government will get hold of the big fish behind the gold smuggling.
Though, he admitted that some elements are trying to influence the ongoing investigation into the case, the case under trial at the Biratnager Court has been scripted to save what the minister said 'big fish'. The main accused including Chudamani Upreti aka Gore and DSP Shyam Khatri have surrendered to the court asking to save their life as they have been under threat. They however have denying their involvement in the gold smuggling and murder of Sanam Shakya claimed that they are innocent.
Minister Thapa said the deadline of the probe committee could be extended, if necessary, but the government is reaching a conclusion soon. The extended deadline of the probe committee is coming to an end on June 14.

Monday, June 4, 2018

Shares close lower amid CGT dispute

Share market today closed lower as talks between investors and government on newly implemented in Capital Gains Tax (CGT) ended inconclusively.
The government-issued circular yesterday changing calculation method on bonus and right shares of capital gain tax, which according to them has increased tax liability for them. In some cases, investors are liable to pay CGT even when a transaction is closed with loss, the investors claim.
The market turned volatile during today's trading as the index swung back and forth around the 1,270-point mark. At the end of the trading hour, the index was down by 5.11 points to close the market at 1,268.84 points as shares worth Rs 424 million changed hands
The Others sub index gained over 3 per cent but all the major sub indices logged losses on the day.

Friday, June 1, 2018

Nepal-Bangladesh to jointly promote trade, tourism

Nepal and Bangladesh could promote trade and tourism jointly, according to a higher Bangladeshi official.
Addressing a Round Table Meeting on 'Nepal-Bangladesh Relations: Exploring Trade and Commerce', in Kathmandu today jointly organised by the Asian Institute of Diplomacy and International Affairs (AIDIA) and Embassy of the People’s Republic of Bangladesh commerce secretary of Bangladesh Shubhashish Bose said that Nepal and Bangladesh could both develop a joint tourism package. "Both the countries can cooperate to formulate such policies that could offer a joint package to the tourists who can visit both the countries easily," he said
Saying that Nepal could be the chief exporter of commodities like tea, garlic, lentils, cardamom to Bangladesh, he also suggested that Export Function Bureau of Bangladesh and Trade and Export Promotion Centre (TEPC) of Nepal could sign a Memorandum of Understanding (MoU) to better facilitate trade and commerce between the two nations.
The visiting Bangladeshi commerce secretary Bose, on the occasion, said that both the nations need to cooperate to be self-reliant and support the South Asian market rather than wholly depend on their Western or European counterparts.
Likewsie, commerce secretary Chandra Kumar Ghimire, on the occasion, emphasised that the population of Nepal has great potential, if guided in the right direction and the utilisation of the demographic dividend will be in its full form if proper actions taken in the form of education and practice. He mentioned that partnership with our immediate neighbour like Bangladesh is necessary to achieve the estimated gross domestic product (GDP) of Nepal to be 8 per cent in the next fiscal year. "Liberal policies are necessary regarding tariffs and connectivity," he said, mentioning the agendas like generation and export of hydropower sector in Nepal, tariff related issues, and preferential market access, Rohan Singbad route, simplification of pharmaceutical products, etc will be put into action.
He also expressed the need of trilateral cooperation between Nepal-India-Bangladesh to better facilitate trade and commerce.
Likewise, president of Confederation of Nepalese Industries (CNI) Hari Bhakta Sharma, on the occasion, wished to see the trade agreement happen between both the nations regarding the hydropower sector. He talked about the acute deficiency of infrastructure regarding tourism which needs to be developed to better enhance revenue from tourism industry. Sharma also suggested that there can be a common visa for Bangladeshi tourists to India and Nepal. He mentioned that a lot of things need to be done in future but the most important thing to be done is the immediate implementation of the decisions made.
Ambassador of Bangladesh to Nepal Mashfee Binte Shams concluded the round table, which aimed at discussing the possible trading arenas between the two countries focusing on connectivity through which trade between the two neighbouring countries can flourish and benefit both the parties, according to the organisers.

Wednesday, May 30, 2018

Countries lose $160tn in wealth due to earnings gaps between women and men

Countries, globally, are losing $160 trillion in wealth because of differences in lifetime earnings between women and men. This amounts to an average of $23,620 for each person in the 141 countries studied by the World Bank Group in a new report released today.
The study, 'Unrealised Potential: The High Cost of Gender Inequality in Earnings,' examines the economic cost of gender inequality in lost human capital. It comes before the meeting of the G7 – currently headed by Canada – which committed to ensuring gender equality and women’s empowerment are integrated across all G7 themes, activities and initiatives during its presidency.
The losses in wealth from inequality in earnings between men and women vary by region. The largest losses – each between $40 trillion and $50 trillion – are observed in East Asia and the Pacific, North America, and Europe and Central Asia. This is because these regions account for most of the world’s human capital wealth. Losses in other regions are also substantial. In South Asia, losses from gender inequality are estimated at $9.1 trillion, while they are estimated at $6.7 trillion in Latin America and the Caribbean and $3.1 trillion in the Middle East and North Africa. In Sub-Saharan Africa, the losses are estimated at $2.5 trillion. While losses in low income countries are smaller in absolute terms than in other regions, as a share of the initial endowment in human capital, the losses are larger than for the world.
"The world is essentially leaving $160 trillion on the table when we neglect inequality in earnings over the lifetime between men and women,” said World Bank CEO Kristalina Georgieva. "This is a stark reminder that world leaders need to act now and act decisively to invest in policies that promote more and better jobs for women and equal pay at work.”
In nearly every country today, women face barriers to fully participate in the work force and earn as much as men. Because of this, women account for only 38 per cent of their country’s human capital wealth, defined as the value of the future earnings of their adult citizens - versus 62 per cent for men. In low income and lower-middle income countries, women account for just a third or less of human capital wealth.
Programmes and policies that make it easier for women to get to work, access basic infrastructure and financial services, and control land could help achieve gender equality in earnings, the report reads.
“Human capital wealth accounts for two thirds of the global changing wealth of nations, well ahead of natural and other forms of capital,” said World Bank Group lead economist and author of the report Quentin Wodon. “Because women earn less than men, human capital wealth worldwide is about 20 percent lower than it could be.”
The study is part of a broader research program at the World Bank that benefits from support from Canada, the Children’s Investment Fund Foundation, and the Global Partnership for Education. The issue of gender equality in earnings is fundamental and it requires interventions across the lifecycle. Future work will consider other economic costs related to gender inequality, including those related to fertility and population growth.
“There are estimates showing the costs and benefits of gender equality to key economic sectors and economic growth,” said World Bank Group senior director for Gender Caren Grown. “By focusing on wealth, this study is a unique addition to that literature since wealth, and especially human capital, is the assets base that enables countries to generate future income.”