Budget Watch: Series 17

Budget is the normal process of executing plans and policies of the government. It is a medium that decides the priority of the plans to be executed. It will address everything and move to that which has more priority. However, in the present context, more than the budget it is the political state of the country that is more important. Economic agenda must be taken forward in a long term prospective. And we need think beyond the budget also.
The essential thing is to boost the morale and confidence of the business community. If there is no confidence, no attempt will be successful. The economic sector should focus on how to make a long-term strategy to improve the present economic condition. We should be concerned about all the plans that have to be made.
In Nepal, be it hydropower sector, tourism, or floriculture (agriculture) — every sector is doing well. Even the small and the medium enterprises (SMEs), which work locally, should have a local market. Nepal has a population of about 25 million and I think it is a sizeable one. We can promote local markets easily in our country.
Today's generation is mainly interested in information technology (IT) education, which we can compare to the future growth of the young generation in the IT sector. Therefore this sector too needs to be developed. But the main problem our state has is politics. So, first the political condition of the state should be de-politicised because politics has its impact on each and every sector of the state. The government has to play the role of facilitator rather than trying to do things on its own.
The manpower that we are sending abroad right now is unskilled. Thus, private sector should be encouraged to impart vocational training and generate required skilled manpower which will send home more remittance. With the right policy, the private sector can be encouraged in this regard.Education sector holds great importance cause educated society is good for long-term social development. There must be consistency in policy for this sector.

Vijaya Dugar,
Entrepreneur

WTO trade talks fails

It was the haggling over nuances of the Doha deal that stuck in the gullet, and the most troubled round of negotiations at the World Trade Organisation here to liberalise global commerce collapsed last night over differences between the US and India just as it seemed that patient diplomacy had paid off. Part of the problem was WTO itself. It has 153 members and no deal is possible unless all of them agree. Tension between the developing and developed world was evident ever since the talks started, but it became clear over the past nine days that there were splits among developing countries too. In the end, negotiations broke down under their own complexity.
The last two of the three main components of talks — liberalisation of trade in services, agriculture and industrial goods — were crucial. Washington and Brussels knew they would have to accept deep cuts in the support they provide for farmers: in the case of the European Union, some subsidies deemed most trade-distorting would have been cut by 80 per cent. In return, the West wanted better access for its manufacturers to the fast-growing emerging economies. After much haggling, leading developing nations led by Brazil agreed to a formula that would have meant average cuts of more than 50 per cent in industrial tariffs

Long wait of FIIs, NRNs end, can invest in secondary market

Arrangements will be made to allow Non Resident Nepalis (NRNs) and Foreign Institutional Investors (FIIs) to invest in the secondary securities market, as promised in last year's budget.
However, the finance ministry has not yet forwarded any regulation or modality on how to allow NRNs and organised foreign investors to invest in the sole secondary market.
"The draft Act for FIIs is ready but it has reached nowhere due to political instability," said a senior official at the finance ministry, adding that the ministry had also done homework on modalities of how to allow NRNs to invest in the secondary market, Nepal Stock Exchange Ltd (Nepse). "It is not only an economic but a political issue also. Political instability has pushed it back as it has to be passed by the parliament," he added.
Experts opine that investment by FIIs and NRNs will fuel the capital market as they will bring more capital to the market that has more than Rs 3 trillion market capitalisation. "It will also create institutional investors, something that our capital market lacks," they said.
Chairman of Securities Board of Nepal (Sebon) Dr Chiranjivi Nepal said Sebon had prepared a preliminary draft and submitted it to the finance ministry. "Nepal Rastra Bank (NRB) needs to change some of its regulations," he said adding that the basic infrastructure for NRNs and FIIs to allow invest in the secondary market is paperless trading, i.e. installation of central depository system (CDS). "The private sector is interested in helping Nepse instal CDS. Most probably, the installation of CDS will be mentioned as a priority item in the present budget," Dr Nepal said.
"We have suggested to the government to allow NRNs and FIIs to allow invest in the secondary market," Nepse general manager Rewat Bahadur Karki said adding that physical infrastructure like automation and wide area network (WAN) have been developed for the purpose.
"We need to develop Internet trading for them to invest," he said adding that Nepse was working on client support software and modalities of central depositary system (CDS). "Then, we can invite FIIs and NRNs to invest in the secondary market," he said.
Nepse has also prepared some preliminary modalities of how NRNs and FIIs can invest. These modalities are still under discussion. "According to that, NRNs have to open accounts in commercial banks before investing in the secondary market," he said.
Also, how NRNs and FIIs can take back their earnings with them is another burning issue that needs proper tackling.
Meanwhile, there is yet another Act waiting in the wings because it also needs parliament's approval. The Draft Regulation of Mutual Funds is in the pipeline. According to the draft, Mutual Funds can also invest 50 per cent of their capital in foreign countries. "It is delayed due to the lack of a Trustee Act that in its own turn needs parliament's approval," said the ministry source.

Can Monetary Policy crack whip?

Nepal Rastra Bank (NRB) is soon going to announce the Monetary Policy for fiscal year 2008-09. But the million dollar question is, can it crack whip on inflation that is at 11 per cent in mid-june 2008, according to the macro-economic report by NRB based on 11 months.
The inflationary pressure as been regularly rising from the food and energy price hike in recent months.
"It will take all possible measures to contain inflation and stabilise economy. It will change cash reserve ratio (CRR), that is at five per cent of deposit and has not been changed for last four years," said a high official at the central bank. The CRR is the portion of deposits banks have to keep with the central bank that is at five per cent at present.
The policy that is brought after the budget annually is being announced this year before the budget. Due to delay in the government formation this year, the government could not bring its annual budget, instead it brought an Accounts Bill to temporarily manage the expenditures and revenue collection.
"But, the central bank has prepared the monetary policy for the fiscal year 2008-09," the official said, adding that attempt would be at keeping the inflation at manageable level that is around six per cent and to achieve six per cent economic growth rate. Last year the policy had set the target of 5-5.5 GDP growth.
"However, the real GDP could be calculated after the government brings the budget. According to the budget and with an estimation of surplus in Balance of Payment (BoP), size of budget and income sources the policy projects the gross domestic product (GDP), every year," the source said. "The central bank might have to bring another policy, if needed, after the full estimation of BoP, budget deficit, foreign aid flow and size of the budget."
The policy will be discussed in next week's NRB board meeting and finalised.
Last fiscal year's policy had also increased the single borrower limit for the bank loans for infrastructure development such as hydropower — as it requires big loan for a longer term — to facilitate the banks to increase investment in infrastructure for a longer term.
"To strengthen supervisory capacity of the central bank, it has also implemented a system of prompt corrective measures that will enable the central bank to supervise financial institutions on a regular basis for their capital adequacy ratio (CAR)," the official said.

SAARc mulls multimodal transport

Apart from focusing on the energy and food crises, the 15th SAARC summit on August 2-3 in Sri Lankan capital Colombo will discuss a SAARC Regional Multimodal Transport Study (SRMTS) and try to work out a way to implement it to integrate South Asia and foster more trade among member countries at a faster pace.
Transport integration in South Asia will end the landlocked status of Nepal, Bhutan and North East India and strengthen their connectivity to island nations in the region. "Transport network in the region is fragmented though basic infrastructure exists in some countries," said Dr Pushkar Bajracharya, consultant for Asian Development Bank's (ADB) first study of SRMTS.
"There are various bottlenecks," he said, but added that the problems could be solved unitedly. He said better connectivity would boost Nepal's exports and open up markets in more countries. The SRMTS has suggested Nepal build four regional-level roads and two railway lines to link it to its other South Asian neighbours.
"Major corridors for surface, air and multimodal transport have been identified. Key points identified are Birgunj, Biratnagar and Bhairahawa. India has also promised to develop some border points. However, progress is slow as there are problems at the operational level," said Dr Bajracharya.
Connectivity will help boost cooperation in trade, energy and tourism sectors in the region leading to all-round poverty reduction. ADB funded the study in 2006 under Regional Technical Assistance (RETA) and has shown willingness to fund the projects implementations that are identified. It has suggested air, rail, road and sea route connectivity.
"Nepal should upgrade Tribhuwan International Airport (TIA) and Bhairahawa Airport," states the report. Road network could be Nepal's key to access to sea ports in South Asia. The study has identified 18 road networks, including 14 currently operational roads.
The 1323-km Kathmandu-Birgunj-Kolkata-Haldia road that can help Nepal develop Birgunj as a dry port has been proposed. A 1394-km Kathmandu-Kakarvitta-Phulbari-Mangola-Chittagong road to access Mangola and Chittagong ports in Bangladesh is also recommended.
An Inter-Government Group on Iransport (IGGoT) at the level of relevant secretaries of SAARC member countries is involved in implementation of prioritised recommendations of SRMTS.
The second meeting of IGGoT held in August 2007 identified a number of pilot, regional and sub-pilot regional projects that were endorsed in the first meeting of SAARC Transport Ministers then. Nepal is pushing for their early implementation according top priority.
A number of initiatives were taken since the first meeting but Nepal has not benefitted till date. Consultants hired by ADB also provided technical inputs, with a number of models and choices for drafting regional transport and transit agreements. These were tabled during the ministerial meetings last year.
The second study of ADB proposed two railway lines for multimodal transport projects:
1. Pilot project — Birgunj-Katihar-Singhabad-Rohanpur-Chittagong, with links to Jogbani, Biratnagar and Agartala.
2. Sub-regional / regional project — Kathmandu- Birgunj-Kolkata/Haldia.
Other routes, according to ADB report, are the Kathmandu-Nepalgunj-New Delhi-Wagha-Lahore-Karachi road for better connectivity between Nepal and Pakistan, and another road connecting Kathmandu to Lucknow. It has also proposed a fast track road between Kathmandu and Birgunj.
Exporters feel a major reason for Nepal's falling exports is poor surface connectivity and that the sooner Nepali goods get to sea ports in any of the South Asian countries the better will it be for Nepal's trade. According to Dr Bajracharya, "The barriers are not so daunting. What is required is strong political will."
India has recently drafted a Regional Motor Vehicle Agreement and a Railways Agreement and circulated these for comments from member countries also. The 15th SAARC meeting will discuss these drafts too.

Drastic drop in Pashmina exports

Over recent years, export of Nepali pashmina has declined drastically. In 2056-57 BS, Nepal had exported pashmina products worth Rs 7.5 billion but export has now dropped to a meagre Rs 1.5 billion. To revive the lost glory of Nepali pashmina products, pashmina entrepreneurs have developed a Code of Conduct (CoC).
"We have to maintain the quality of Nepali pashmina to reclaim our market," said entrepreneurs here today during a consultation on the Code of Conduct of Pashmina Trademark organised by Nepal Pashmina Industries' Association (NPIA), ENTReC/UNDP and Federation of Nepalese Chambers of Commerce and Industry (FNCCI).
The association is also in the process to register a collective trade mark of Nepali pashmina for its identity and quality maintenance to compete in the global market. There will be a seven-member CoC regulatory authority to monitor and regulate it. Members failing to abide by the rules will be suspended from membership for upto a year and fined also.
"Effective monitoring of the CoC is a must to maintain quality," Purushottam Ojha, commerce secretary, said, adding that it would also help reduce poverty as commercial farming of sheep in the mountains could fetch them good income.
The CoC is not a compulsory regulation but developed by the concensus of pashmina entrepreneurs. It is a moral responsibility and depends on the self-discipline of members. "But it has to incorporate environmental issues and labour issues also in order to get international recognition," he said.
The reasons for shrinking Nepali pashmina's market is identity crisis in the international market and failure to maintain the quality that Nepal was earlier famous for. Thus, the CoC will ensure that norms of transparency are followed to maintain quality.
Apart from that, Nepal has to compete with Chinese pashmina that has claimed 60 per cent of the total pashmina trade globally, entrepreneurs said. "To compete in the global market, we need collective effort," association president Shanker Prasad Pandeya said adding that product diversification is also important.
The CoC — a joint initiative between the government and pashmina industries — will come into immediate effect as it has been made mandatory to get the trademark.
Pashmina is completely a Nepali product manufactured from wool of sheep that are reared in Nepal's mountains above 3000 metres. The regulation will be updated time to time and it has to be followed by the members accordingly.
Naresh Chandra Lamichhane, consultant to the NPIA gave a presentation during the programme.

Budget Watch: Series 16

Aviation is perhaps the hardest hit industry all around the globe due to the unprecedented fuel price rise. Fuel cost is as high as around 50 per cent of the flight operation cost these days. The rise in fuel cost has forced many airlines to ground aircraft, reduce frequency and cut manpower. In Nepal also, fuel price has now become the biggest concern for the airline industry, passengers' society and government.
As air travel helps all economic sectors grow, it is imperative that there be a conducive environment for the airline industry to survive and grow. In our context, airline industry is more important due to geographical conditions as they are restrictive of other modes of trasportation.
However, due to ever increasing fares air travel is becoming more and more inaccessible for a large segment of our population.
Air travel is very expensive in Nepal due to some key reasons:
1. Tax components constitute a large part of the total cost of air travel.
2. Nepal Oil Corporation makes a good margin on aviation turbine fuel.
3. Belief of policy makers and general public that the airline industry is a high profit business.

For enabling the airline industry to offer cheaper air travel and more frequency of flights, it is necessary to waive through the coming budget 2008-09 various taxes incumbent on airline sector. These include 10 per cent lease tax on aircraft rental cost, 13 per cent VAT on aviation turbine fuel (ATF), 13 per cent VAT on aviation insurance premium, 13 per cent VAT on import of spare parts and 15 per cent TDS on payment to foreign experts. Exempting the airline sector from these taxes and enabling it to reduce fares will result in expanded air travel to/from remote regions of the country. The net result will be reflected in other economic sectors.
In international aviation, Nepali airlines are at a great disadvantage as ATF in Nepal is the most expensive. Despite having their base here they have to lift more expensive fuel than competing foreign carriers. Likewise, lease tax is uniapplicableque to Nepal compared to our neighbours and hence the cost of flight operation is more expensive for local airlines leaving them at a competitive disadvantage.
Over the past few years, these tax cost elements have increased radically. The three per cent lease tax was raised to 15 per cent and then reduced to 10 per cent a year back. VAT on aviation insurance premium was not applicable a few years earlier. Aviation fuel price has increased from $1100 per kiloliter (KL) to $1500 per KL, a 36 per cent increase within a span of a few months.
Total benefits accruing to the economy will surpass the total tax collections from the above tax components if exemptions are made.
On the other hand, the travelling population, including those from the hinterlands and those moving to foreign lands for employment, will benefit much from reduced fares and more flights. As cheaper fares will help increase more economic yields per flight, local airlines will tend to increase frequency of flights. Reduced fares and more flights will also have a great positive impact on the overall tourism industry in the country.

Vijay Shrestha,
Presedent,
Airline Operators' Association of Nepal (AOAN)

Exports to India on a downslide

Nepal's trade with its major trade partner India is falling continuously over the recent past months. One of the reasons for declining exports is the dismal performance of the manufacturing sector.
Although the external sector displayed mixed performance in the first 11 months of 2007-08 and total exports rose by 0.4 per cent in comparison to a decline by 1.6 per cent in the corresponding period of the last fiscal year, exports to India fell by 8.1 per cent in contrast to its growth of 1.8 per cent in the same period of 2006-07.
The decline was mainly in the export of items like vegetable ghee, textiles, chemicals, resin and readymade garments to India. However, imports from India accelerated by 25.6 per cent in the review period compared to a growth of nine per cent in the corresponding period of 2006-07, states data from Nepal Rastra Bank.
The contributing factors for the upsurge in total imports in the first 11 months were a rise in the import of petroleum products, MS billet, vehicles and spare parts, hot rolled sheet coils and cold rolled sheet coils, wire and bread among others, from India.
Similarly, in 10 months of the fiscal year 2007-08, export to India declined by 7.5 per cent compared to a decline of one per cent in the same period of 2006-07. "Exports to other countries, on the other hand, grew by 13 per cent compared to a decline of 3.1 per cent in the comparable period of the previous fiscal year," according to the report.
The scenario, in the past nine months was no different. On the external front, export to India plummeted by 8.3 per cent and increased by 10.3 per cent to other countries. In the same period of the previous fiscal year, export to India had declined by 2.3 per cent. During the past eight months of 2007-08 also, export to India plummeted by 6.9 per cent compared to a decline by 6.4 per cent in the same period of 2006-07.
Exports to other countries, however, registered a growth of 7.2 per cent in the review period compared to a decline of seven per cent in the same period of previous fiscal year.

Economy, development to top SAARC summit

Economic and development agenda will figure prominently during the 15th SAARC summit scheduled for August 2-3, in the Sri Lankan capital, Colombo.
South Asia — home to over 1.4 billion people from India, Pakistan, Nepal, Sri Lanka, Bangladesh, Bhutan, the Maldives and latest entrant Afghanistan — has created SAARC for a joint effort to raise the living standards of the people of this region.
The heads of the eight South Asian states will take up issues including Implementation of SAARC Regional Multimodal Transport Study (SRMTS), Operationalisation of SAARC Development Fund, Implementation of SAFTA, Trade facilitation Agreements/Measures, Poverty Alleviation, food crisis and Energy. These issues could have a long term impact on the economic and development integration of the region if they are implemented.
SAFTA, a major issue in the economic integration of South Asia — home to 24 per cent of the world's population and 40 per cent of the world's poor — came into effect from 2006 January 1.
The SAFTA agreement was reached at the 12th SAARC summit in Islamabad, the capital of Pakistan, on 2004 January 6. Seven foreign ministers of the region signed a framework agreement on SAFTA with zero customs duty on the trade of practically all products in the region by end 2016. After some changes in SAARC Preferential Trading Arrangement (SAPTA), the modified and more efficient mechanism of regional trade agreement — SAFTA — came into being on 2006 January 1.
Trade liberalisation programme under SAFTA through reduction of tariff rates by member countries is also taking place as scheduled or even earlier (seven years for non-Least Developed Countries and 10 years for LDCs) to bring down tariff.
"However, Nepal has not seen trade under SAFTA, even after two-and-a-half years," said commerce secretary Purushottam Ojha. It might be weakness on Nepal's part or a sign of SAFTA's failure;
the summit will also be a ground for introspection. Introspection is needed also because the total intra-regional trade among the member countries in SAARC is less than six per cent of the total international trade of the region.
The difference between India and Pakistan in the administration and management of SAFTA needs to be resolved for a full-fledged implementation of provisions under the SAFTA agreement.
Member countries' bid to get sensitive items excluded from their import lists also has not allowed SAFTA to move ahead as desired.
This summit will also discuss a number of trade facilitation agreements and measures like SAARC Mutual Administrative Assistance in Customs Matters, SAARC Multilateral Agreement on Avoidance of Double Taxation and the Agreement on Promotion and Protection of Investment (draft).
The period 2006-2015 has been declared the SAARC Decade of Poverty Alleviation in keeping with the commitments of the Millenium Development Goals (MDGs) and SAARC Development Goals (SDGs). The summit will also discuss operationalising the Social window of the SAARC Development Fund (SDF) that is going to open up important avenues in regional implementation of many poverty alleviation projects.
The 15th summit will also find out ways of tackling the energy crisis. Development of renewal and alternative sources of energy available in the region is the need of the hour. The rising energy crisis has called for a concept of SAARC Energy Ring and regional energy trade that is in the process of being developed by experts in such a way that they encompass all energy resources and allow all SAARC countries equitably share in energy resources as well as easier and efficient access to commercial energy resources such as oil and gas through the trans-South Asian pipeline.
The 11th summit held in Kathmandu (4-6 January 2002) provided some impetus to the shared aspirations for a more prosperous South Asia, especially the creation of an Economic Union for regional integration. At the summit, SAARC leaders agreed to accelerate cooperation in core areas like trade, finance and investment to realise the goal of an integrated South Asian economy in a step-by-step manner. They also agreed to the vision of a phased and planned process eventually leading to a South Asian Economic Union (SAEU).
At the 12th SAARC summit held in Islamabad (4-6 January 2004) the SAARCFINANCE was given the responsibility of studying and making recommendations for early and eventual realisation of a SAEU. It was also tasked with examining the concept of a South Asian Development Bank.
However, the process is moving at snail's pace. Work is still in the stage of setting up of Preferential Trade Agreement and reducing customs. It will be followed by setting up a Free Trade Area, a united Customs Union and a Free Market where labour and capital can freely move and the process finally leads to a SAEU.

Stagflation, but budget deficit swells,

Though, the government seems to have been able to check inflation, it was unable to stop the rising budget deficit. But inflation is also at double digit. Last month it was 9.2 percent.
The year-on-year consumer inflation rose to 11 per cent in mid-June 2008, from 4.5 per cent a year ago. Inflation was driven by a significant rise in the price of food and beverage group (13 per cent) as well as non-food and service group (nine per cent) in the review period. The price rise of food and beverages and non-food and service group was 5.8 per cent and 3.1 per cent, respectively, a year ago.
However, the budget deficit swelled to Rs 9.30 billion in the first 11 months of the fiscal year 2007-08. The deficit was Rs 6.93 billion in the corresponding period the last fiscal year. The higher growth of government expenditure relative to resource mobilisation accounted for such a budget deficit in the review period, states the current macroeconomic situation report, based on the first 11 months' data of the fiscal year 2007-08. The domestic financing of the budget deficit through the issuance of securities (excluding overdraft) amounted to Rs 13.33 billion in the review period.
According to the Nepal Rastra bank (NRB) report, the government cash balance with NRB amounted to Rs 6.65 billion as in mid-June 2008. Including a cash balance of Rs 3.12 billion for the previous year, the cumulative cash balance of the government reached Rs 9.77 billion in mid-June 2008.
However, the net domestic borrowing of the government remained at a negative of Rs 633.6 million on account of the repayment of Rs 7.31 billion domestic debt and cash balances with NRB in the review period. The outstanding domestic debt (including cash balance with NRB) of the government stood at Rs 95.55 billion in mid-June 2008. Such outstanding debt was Rs 96.18 billion in mid-July 2007.
In the first 11months of 2007-08, revenue mobilization also soared by 25.5 per cent — amounting to Rs 90.17 billion compared to an increase of 20.8 per cent in the corresponding period of last fiscal year. Such an impressive growth of revenue was on account of substantial increase in the import of merchandise goods and resulting increase in customs duties, VAT revenue and excise duties, increase in income tax and increase in non-tax revenue.
"Of the total revenue mobilisation, VAT revenue grew by 18.8 per cent to Rs 28.7 billion in mid-June 2008," the central bank's report states. The growth in VAT revenue was on account of growing imports and consumption induced by the rise in remittances and reforms in VAT administration such as establishment of Large Taxpayers' Unit, strengthening of the billing system and non-filers' management.
In the review period, customs revenue rose by 21.2 per cent to Rs 18 billion compared to an increase of 11.4 per cent in the same period the last fiscal year. Similarly, income tax revenue increased by 29.8 per cent to Rs 14.54 billion. The evolution of corporate culture on account of growth in banks and financial institutions contributed to such high income tax collection. Last year, such revenue had risen by 31.4 per cent.
In the review period, non-tax revenue grew by 41.7 per cent to Rs 15.55 billion compared to an increase of 19.7 per cent in the same period of the preceding year. Such increase in non-tax revenue was on account of increase in dividend paid by some public enterprises including NRB as well as the amount received by the government in the form of principal repayment from Nepal Telecom, Nepal Electricity Authority and Civil Aviation Authority.

Cape Verde 153rd WTO member

GENEVA: The northern African island nation of Cape Verde, one of the world's poorest states, became the 153rd member of the World Trade Organisation (WTO) on Wednesday.
With a population of 4,00,000, Cape Verde, an archipelago in the North Atlantic, specialises in the production of salt and bananas and in fishing. Negotiations between Cape Verde and the WTO began in 1999.
The process included the examination of measures undertaken by the African nation to adapt its trading practices to WTO regulations as well as to open its markets to imported goods and services. The country, which became independent from Portugal in 1975, became the 33rd of the world's 50 least developed countries (LDCs) to join the WTO.
However, no ceremony has been planned at the WTO. "We are too busy for a ceremony," said a diplomatic source, refering to an ongoing ministerial meeting in Geneva aimed at brokering a global trade deal. - Agence

Energy village in offing

The scantily-lit and sparsely populated hilly villages across Baglung are expected to illuminate by 2009, if a plan to turn the district into a model energy village succeeds.
According to Rural Energy Development Programme (REDP), several micro-hydro projects are being set up to generate more than 1 MW hydro-power — the largest quantity generated under one programme in a district — in Baglung within this year.
The idea may be a milestone in meeting rising energy crisis and reducing dependency on fossil fuel while the mega projects could be developed for energy exports and the micro projects for rural consumption."Detail feasibility study has been carried out in some of these pocket areas for the Urja Upatyaka (Energy valley) in Baglung to develop mini-grid by inter-connecting all the micro hydro systems to each other and their eventual connection to national grid," says REDP. After the successful completion of this initiative, works for the development of mini-grid in other pockets would be carried out. Baglung is the model district for the promotion of rural energy systems, particularly the micro hydro. As several micro hydro schemes have been developed in some natural geographical areas, the concept of development of Urja Arc, Urja Upatyaka, Urja Strip and Urja Gaon — energy valley, energy belt, energy village — has emerged as a new dimension that proves that if planned deliberately and specifically to meet the rural energy needs, the decentralised rural/renewable energy systems could fulfill the objectives, relieving the necessity of extension of national grid into the area.
The other programmes, mainly the Mini Grid Support Programme (MGSP) of ESAP/AEPC is also going to generate as much electricity in Baglung till 2009, making Baglung district a Mega Power district through micro hydros.
From September, 2007 the REDP is being implemented under its third phase as a project of the government with joint funding of UNDP and the WB till 2010 with the expansion of the programme to 15 more districts making a total of 40 programme districts.
Under its first phase of implementation, the programme succeeded to support for the installation of 107 Micro Hydro Demonstration Schemes (MHDSs) in some 100 remote VDCs of 15 districts that generate some 1800 kW electric power.
"At the same period, through the assistance and facilitation of the REDP, some 53 numbers of Pico hydro/Peltric-sets were installed in those programme VDCs that generated some 170.2 kW of electric power," says Thakur Devkota, deputy programme manager and senior energy advisor at the REDP.
Thus, under its first phase of implementation, altogether 160 micro hydro schemes (107 MHDS and 53 Pico hydro / peltrics) were installed generating a total of 1970.2 kW directly benefiting some 18,918 households in the remote villages.

Lentil production up, so is price

The retail price of lentils have risen subsequently in the domestic market over the last decade. According to a report, although the production of lentils has increased their prices have not come down.In the Tarai belt of the country, there are some 6,00,000 to 7,00,000 farms involved in lentil production and spending on an average about 70 labour days per hectare cultivating lentil.
"This is an approximate equivalent of 30,200 full-time jobs," states the data from Agro Enterprise Centre under the Federation of Nepalese Chambers of Commerce and Industry (FNCCI).The production is thus spread in a large number of production units which cultivate on an average about 0.2 to 0.3 hectare per family. The total production of lentils in 2005-06 was 1,58,000 metric tonnes (MT), according to the report.Domestic market and farm household consumption from is 1,00,000 to 1,30,000 MT per year.
Apart from domestic consumption, Nepal exports lentils. Total lentil exports amounted to 35,000 MT in 2005-06, with an estimated value of $21 million (Rs 1,305.6 million approximately). Nepal stands nineth among the top 10 lentil exporting countries. Nepal exports lentil to India, Bangladesh, Korea, USA and Bhutan.There are 15 lentil mills (dal mills) that have a total installed processing capacity of 30 to 60 MT per hour (average two to four MT/hour per mill) and over a dozen major millers and exporters exporting from 20,000 to 60,000 MT per year.
There are reportedly some 140 lentil landraces in Nepal, states Agro Enterprise Centre/FNCCI.
"Seeds used by farmers originated from three major sources like improved seeds deriving from the Nepal Agricultural Research Council (NARC) seed multiplication programme that released eight varieties of lentils over 25 years. It is about to release three more varieties of lentils of Nepali pink and small lentils (2.2 to 2.5 gram/100 seed): One for Tarai (ILL 7723) and two for the hills (ILL 7982 & ILL 6829). Local seeds are also kept by farmers at the household level and imported from neighbouring India (either via formal or informal channels) or overseas markets.
Among all the lentil, Nepal's pink, small-sized sweet lentil renowned.

Nabil leader in Best Accounting

What better gift than the 'Best Accounting Award' for Nabil Bank that completed its 24th year of operations? Nabil Bank bagged the award on Friday.
"Since 1984, Nabil has not looked back," chief executive officer Anil Shah says, adding it has introduced many firsts to the financial sector in Nepal.
Apart from most advanced technology, it is also extending its base in rural areas, at a time when most banks are blamed for being urban-centric. "We believe that to be the bank of first choice in Nepal, we must be present where the bulk of the population is," he says.
Shah also sings paeans to his staff. "Nabil's main strength is its team. Most other banks are headed by or have senior management teams who started their career in Nabil," he claims adding that Nabil is not only delivering higher level of customer service but it is also 'manufacturing' the maximum number of Nepali bankers.
He thinks customer service and returns to shareholders are the contributions of Nabil Bank over 24 years. "For those who invested at our inception or throughout, our share was Rs 750 but today it is over Rs 5,000," he justifies adding, "Our regulators see us as a model bank."
Though during the insurgency banking was the only sector that was least affected, Shah thinks otherwise. "Banks do well if customers do well. There are 25 banks now. We take depositors' funds, give them interest, then lend those funds and when those borrowers do good business they repay us the principal with interest," he says adding that banks are catalysts of the economy. "The bank is the economy's heart and pumps blood through the system. If the heart does not work, nothing else will."
"We invest in projects that entrepreneurs bring up. For that, they must feel the confidence to bring in infrastructure projects," he says. "If they feel that in three years time the government will revoke their license, no one will invest."
Encouraged by the investors' confidence, Nabil Bank is going to rural areas for micro-lending, agriculture lending, small business lending and lending on infrastructure. "Infrastructure is our second focus area — be it hydro power, roads, cement, telecommunications. Our motto for hydro power is 'Nepal Ko Pani; Pragati Ko Khani'."
"We are in fact going to structure our services in such a way that we build our skill internally to do project financing. We are able to lead consortiums. People keep saying Nepali banking sector has nothing to do in large projects. I would remind them however big a project, it is in Nepal and that also in rural areas. Foreign investors will need local partners. That is what Nabil is gearing up for."
Shah feels that when infrastructure is developed the financial sector is not excluded. "We have to build our skill and size so that we are also included in the development."
Entering its 25th year, Nabil is better poised than other banks and he believes it will be a financial warehouse five years hence.

ADB founder president passes away

Tadao Chino, former president of the Asian Development Bank (ADB), passed away due to liver failure in Tokyo yesterday at the age of 74.

Serving as president from 1999 to 2005, Chino steered ADB through a challenging period that included providing assistance to several developing member countries still suffering from the effects of the 1997-1998 financial crisis, states a press release.

Soon after Chino's arrival, ADB approved its Poverty Reduction Strategy, declaring poverty reduction its overarching goal. Under that goal, negotiations for the replenishment of the Asian Development Fund (ADF VIII) - ADB's major source of concessional funds for the poor - were started. He also helmed negotiations for ADF IX, securing funding for 2005-2008.

Addressing new challenges, Chino oversaw the adoption of the institution's private sector development strategy in 2000, and the reorganisation of ADB in 2002, together with its Resident Mission Policy. "Under his leadership, ADB adopted its long-term strategic framework to provide strategic direction and to position ADB to help its member countries achieve the Millennium Development Goals (MDGs) by 2015," states the release.

"Chino was a strong voice for eradicating poverty and his influence continues to be felt today," said ADB president Haruhiko Kuroda.Chino's involvement in ADB dates back to the institution's creation.

In 1964, Chino, as an officer of the United Nation's Bangkok-based Economic Commission for Asia and Far East (ECAFE), laid the groundwork for establishing a regional development bank. His efforts led to the founding of ADB in 1966. He is survived by his wife and two daughters.

Primary market facing glut

Primary issues worth more than five times than that of fiscal year 2063-64 hit the market in the fiscal year 2064-65. Similarly, double the number of companies floated shares in comparison to the last fiscal year. Commercial banks topped the chart in the list of companies that issued IPOs then.
Securities Board of Nepal (Sebon) permitted 72 companies to issue Initial Public Offerings (IPOs) worth Rs 11.56 billion in the fiscal year 2064-65. Only 31 companies had received permission to issue IPO worth Rs 2.75 billion in the fiscal year 2063-64.
Of the 72 companies, 18 received permission for IPO worth Rs 1.1 billion, 49 received permission to issue rights share worth Rs 7.6 billion and five received permission to issue debentures worth Rs 2.95 billion.
In the fiscal year 2064-65, Sebon permitted altogether 64 financial institutions to float IPOs. "Around 13 commercial banks, 19 development banks, 32 financial institutions, six insurance companies and two other companies were permitted to issue their IPOs," said Sebon.
Along with the increase in the number of primary issues, the capital market is heating and the need to increase manpower in Sebon is as urgent as market regulation, say experts.
"Despite lack of manpower, the board has started inspection of collection centres when the IPOs are being floated to encourage the common investors and discourage 'fake-investors', over the last couple of months," Dr Chiranjivi Nepal, chairman of Sebon said.
In recent days, the regulatory authority of capital market is also serious towards protecting the investors' interest. "We are minutely watching the market and taking necessary action to protect the common people's hard earned money," he said adding that the board brought new regulations like Merchant Banking Regulation this past year. It is also bringing IPO Registration Regulation and Mutual Fund Regulation that are in the Finance Ministry awaiting the go-ahead.
According to Sebon, the market capitalisation in secondary market till the last day of fiscal year 2064-65 has also crossed Rs 3.5 trillion. Sebon has permitted primary issues worth Rs 23.46 billion from fiscal year 2050-51 to fiscal year 2064-65. The issuance for fiscal year 2064-65 is 49.3 per cent of the total IPOs so far.

Gold gallops across Rs 25,400

Gold price touched a historic high of 21,820 per 10 gram — Rs 25,450 per tola (11.664 gram) — in the domestic market today. If the current bullish trend continues, soon the price will touch Rs 30,000 per tola in the domestic market, according to gold traders.
Due to the weak dollar and plunge in global stock market, gold became a hedge against inflation pushing its price sky high. "The weak currency has also made gold more attractive because the metal is a hedge against inflation," Tej Ratna Shakya, president of Nepal Gold and Silver Dealers' Association (NEGOSIDA) said adding that the international price rise might propel the domestic market, too. "Though, there is no demand in the domestic market, the rallying seems to continue," he added.Earlier - on March 17 - gold had touched a historic high of Rs 25,000 per tola in the domestic market.
Gold Demand Trends (GDT), the World Gold Council's flagship report on supply and demand trends in the global gold market, states that the sharp rise and unusually high volition in gold price, which briefly touched a record above $1,000 per ounce in mid-March, was a key determinant of movements in gold demand in the first quarter (Q1) of 2008. "It resulted in total identifiable demand falling by 16 per cent in tonnage terms from year-earlier levels to 701.3 tonnes (the lowest in five years) but rising 20 per cent in value terms to $20.9 billion, more than double the level of four years earlier," it states.
Demand in India decreased but demand in China grew by 15 per cent to 101.7 tonnes in Q1 of 2008. Gold's extensive appeal and functionality, including its characteristics as an investment vehicle, are underpinned by the supply and demand dynamics of the gold market.
For thousands of years, gold has been valued as a global currency, a commodity, an investment and simply an object of beauty. As financial markets developed rapidly during the 1980s and 1990s, gold receded to the background and many investors lost touch with this asset of last resort. Recent years have seen a striking increase in investor-interest in gold. While a sustained price rally, underpinned by the fact that demand consistently outstrips supply, is clearly a positive factor in this resurgence there are many reasons why people and institutions around the world are once again investing in gold.
In the international market also, gold posted $975 per ounce today.

The Bullish Trend
Last Friday - Rs 21,090 per 10 gram
Sunday - Rs 21,350
Monday - Rs 21,350
Tuesday - Rs 21,650
Wednesday - Rs 21,820

Could NOC be bailed out?

A report by the Finance Ministry estimates that more than double accumulated net profits of all the 36 state-owned public enterprises (PEs) will be needed to rescue Nepal Oil Corporation (NOC). The NOC is estimated to post a loss of Rs 7.18 billion due to rise in petroleum prices in the international market. But the net profits of the other PEs is estimated to be at around Rs 3.51 billion.
However, in the fiscal year 2006-07, Nepal Telecomm (NT) and Agriculture Development Bank, Nepal (ADBN) pushed the total net profits of the PEs up to Rs 7.96 billion.
The annual review report of the PEs for the fiscal year 2006-07 states that out of total 36 PEs, 22 have registered net profits and 14 are still in losses. In the fiscal year 2005-06, 19 PEs had incurred losses. However, the overall performance of the PEs has relatively improved in comparison to the last fiscal year.
The net profits of the PEs for the fiscal year 2006-07 is at Rs 7.96 billion. "The NT's Rs 5.98 billion and ADBN's Rs 1.05 billion net profits have pushed the total profits of the PEs," states the report. In 2005-06, the profits stood at Rs 2.54 billion only. The estimated profits on the basis of figures so far, was Rs 5.98 billion, according to the report.
The PEs like Udaypur Cement Industry has posted its increase in sales by 33.20 per cent. Nepal Dairy Corporation and Hetauda Cement Industry have witnessed marginal increase in their sales in this fiscal year. However, the net loss of these seven PEs under industry sector is at Rs 178.1 million.
The seven PEs under service sector have, however, posted a net profit of Rs 568.4 million, a rise by 80 per cent from the fiscal year ahead. The national flag-carrier, Nepal Airlines Corporation (NAC) has posted Rs 342.1 million net profit due to increase in passengers and smooth operation of both of its Boeings. However, this year, it's profit might plunge because of the Boeings repeated technical glitches and irregular flights on the profit making routes.
The government has also earned Rs 1.48 billion cash dividend from seven of the 36 PEs. But its a mere 1.96 per cent of the government's total investment.
According to the report, only 21 PEs have completed their annual auditing and the rest have failed to complete their annual auditing on time. The report concludes that the companies which are in losses will add liabilities to the government as they are creating unfounded liabilities.

Mahat paints rosy picture

The incumbent government is handing over a sound economy to the government-in-waiting despite some challenges, finance minister Dr Ram Sharan Mahat, said in a post-budget interaction here today.
Both the GDP growth and revenue collection exceeded government expectation.
"Though there are daunting challenges for the next government to meet exploding aspirations of people; tame inflation; check the intimidation and threat against business community that are the propeller of growth and largest employment generator and provide security for investment; and push the plummting exports up, the present macro-economica indicators are looking up," he added.
"With no major changes in tax rates and induction of new steps, mobilisation of a total of Rs 103.66 billion revenue seemed to be a challenging task. Despite instability in the country through out this fiscal year, the government managed to collect Rs 107 billion revenue, a 22 per cent more than the target," he said.
Based on the growth trend of revenue generation — in the year ahead — which was in an average of 19.5 per cent, he had predicted 17 per cent growth to meet the target in the fiscal year 2007-08.
He had predicted five per cent GDP growth but it recorded 5.6 per cent. "It was possible because the government has been able to maintain fiscal discipline," he added.
However, the government has failed to maintain inflation rate that it had predicted to be at around five per cent. The inflation has crossed 11.5 per cent.
The Constituent Assembly yesterday passed the Advance and Expenditure Bill worth Rs 73.53 billion — one third of the estimated expenditure of this fiscal year — that will be automatically replaced by a full-fledged budget.
Due to delay in formation of the new government, this government was forced to bring the Bill as a temporary arrangement to allow itself to carry on with routine expenses and revenue collections from tomorrow, start of the new Nepali fiscal year. The economic policies of the last budget also gets continuity until a full-fledged budget is brought by the new government.
Though, Mahat presented a rosy picture of the economy, CA members showed serious concerns over the rising inflation that is at 11.5 per cent at present and supply mismanagement of petroleum products.

CNI to host Economic Summit

The Confederation of Nepalese Industries (CNI) is organising an economic summit on August 14-16 here to start a focused debate on how to start building a prosperous and economically strong Nepal.
"Political stability and writting a new Constitution are not the only challenges that Nepal faces today," Binod Chaudhary, president of CNI said adding that building a prosperous Nepal is yet another challenge.
The three-day CNI Economic Summit-2008 with the theme of 'Rs 12,000 per month income for every Nepali - a national commitment' will see a host of intelligentsia and experts in the field. Six working papers on key and critical issues like rapid economic growth and its associated issues, trends, constraints and impediments in selected sectors; labour relations compatible to global trends; economic vision in the new Constituent will be discussed and practical and workable strategies will be worked out for achieving double digit growth, according to CNI.
"It would be worth recalling that even when the country was passing through a comparatively much worse phase, CNI had in 2004 advocated achieving a double-digit growth as an effective tool for addressing the socio-economic disparity," Chaudhary said. "This initiative is a continuation in a somewhat remodelled form of the initiative that we had undertaken at that time."
Double digit growth cannot be achieved solely through the commitment of the government, said Chaudhary adding that each and every section of community must be equally committed and play their roles effectively. "CNI wants to facilitate the growth by actively involving all stakeholders," he added.
This will be a brainstorming as various members of the Constituent Assembly including sectoral and functional experts and professionals, members of civil society, aid and donor agencies and representatives of the private sector will be actively participate in this summit.
The Prime Minister will inaugurate the summit that will be spread across six participative sessions. CNI thinks that with serious commitment of every stakeholder achieving a double digit growth is not an impossible target. It is also planning a major international investment summit in Kathmandu next year.

CA passes Accounts Bill

The Constituent Assembly today passed the Advance and Expenditure Bill presented by finance minister Dr Ram Sharan Mahat.
Due to delay in formation of the new government according to the new mandate of the people, the government had no option but to bring the Bill as a temporary arrangement to allow the government to carry on with routine expenses and revenue collections starting from the new fiscal year on July 16. The economic policies of the last budget also gets continuity until a full-fledged budget is presented by the new government.
Dr Mahat had presented the Advance and Expenditure Bill of Rs 73.53 billion — one third of the estimated expenditure of this fiscal year — that will be automatically replaced by a full-fledged budget once that is presented by the new finance minister later.
"The budget is not only a statement of income and expenditure but also a policy paper of the government," Mahat said, adding that the new government will bring a full-fledged budget according to its vision and policy.
"The micro-economic indicators are positive and we have maintained fiscal discipline," he added.
Earlier, the finance minister tabled the Bill for discussion in the CA meeting, according to the fifth amendment of the Constitution.
The government can now spend one third of the total expenditure of the last fiscal year that the new government, possibly led by CPN (Maoist), will adjust while making the full-fledged budget.
Though, Mahat presented a rosy picture of the economy, CA members showed concerns over the rising inflation that is at 11.5 per cent at present and supply mismanagement of petroleum products.
"Politics has again pushed the economic agenda on the back burner," CA member Binod Chaudhary said, adding that this is the sad day for business community as it will hit not only them but also to the country hard.
Similarly Rajendra Khetan, another CA member, requested the government not to make the Bill a precedent. "Though, its a temporary arrangement due to delay in government formation," Khetan said.
According to Mahat, current fiscal year recorded 5.6 per cent GDP growth — highest in the last seven years. Agriculture sector also registered 5.65 per cent growth while non-agriculture sector registered 5.57 per cent growth.
The gross domestic saving increased to 11.5 per cent, up from 9.7 per cent last year. According to the initial estimation, he also
predicted 22 per cent growth in revenue generation by the end of this fiscal year.

Budget Watch: Series 15

Agriculture is Nepal's potential and strength. It contributes approximately 40 per cent to our total GDP but since its growth is stifled this contribution is eroding every year. There is consensus that commercialisation of farming is a must to revive agricultural sectors. The 2065-66 budget can take the following steps for commercialisation of agricultural sectors:

* Allocate substantially for irrigation* Provide electricity to farmers at night at half the current rate.* Instal exclusive electrical distribution hubs for agricultural purposes.

* Subsidise for installing 'deep tube-wells' and community ponds for irrigation.

* Set up modern warehousing and marketing facilities for wholesale cash crops.

* Incentives for private investments in setting up modern warehouses and marketing facilities and the lending by banks against the depositary slips issued by recognised warehouses.

* Government should create buffer stocks of grains and fertilizers at different locations.

* Agriculture development surcharge be reduced to five per cent and ultimately phased out over the next two years. It should not be levied if the agricultural product is imported by industry for its own use as raw materials.

* Announce minimum support price for selected food grains.
Government should set up an institutional platform where all stakeholders, farmers, entrepreneurs and government personnel can work together. The symbiotic relationship among stakeholders has to be protected by a suitable Act.
Food crisis is going to aggravate. Prices of fertilizers will skyrocket and supply will get limited. Government has to focus not only on alternative fertilizers but also efficient use of fertilizers and fertilizer production domestically.Areas under tea plantation need to be doubled and extended to other hilly regions in the next five years. Reforms needed are modernisation, consolidation and identity of Nepali tea in the international market.

Government can declare tea plantation areas as SEZs and provide incentive packages as per SEZ for their modernisation and consolidation.Subsidy can be given for developing international packaging and FDI allowed in promoting, selling and distributing Nepali tea in the international market.

Similarly, private sector can provide the following in agricultural development:

* Appropriate technology - pre and post-harvest.

* Market linkage to industrial production.

* Improved seeds.

* Fertilizer at affordable prices.

* Technology for efficient use of water.

* Financial support.

* Market information

Jagdish Agrawal,

Managing Director,

Pro-Biotech Industries

Gold glitters

Taking a cue from the international market, gold in the domestic market today hit Rs 21,350 per 10 gram — Rs 24,900 per tola (11.664 gram).
"The price rise is not due to local demand but due to international price rise," said president of Nepal Gold and Silver Dealers' Association (NEGOSIDA) Tej Ratna Shakya, who was today again selected president unanimously for a second term.
The price of gold once again is on a bullish path. Earlier — on March 17 — gold had touched a historic high of Rs 25,000 per tola in the domestic market. "And the phenomenon may repeat itself," he said adding that the rising international price has pushed the local price skyhigh despite low local demand.
In the international market, gold today hit $964.50 per ounce. The price of gold in the international market is rising even though the price of crude is also touching new highs by the day. Gold is inching towards $1000 per ounce in the international market and the domestic market too is warming up.
The continuous rise in crude price, weakening greenback and the fall in international share markets have led to the hike in the global gold price.In the domestic market, gold closed Rs 255 higher to Rs 21,090 per 10 gram on Friday from last week's closing price of Rs 20,835.



New NEGOSIDA Team
KATHMANDU: The 17th AGM and second national conference of NEGOSIDA on Sunday unnanimously selected a 21-member new team for the next three-year term. Earlier, the team consisted of 19 members. Tej Ratna Shakya has been unanimously selected president again while Mani Ratna Shakya are selected senior vice-president and Gyanuraj Shakya, Mohankaji Shakya, Mohan Kumar B K and Harka Bahadur Sunar are named the vice-presidents from each development region.

Budget Watch: Series 14

The lengthening line of investors clutching share application forms at the collection centres clearly shows an investment 'hunger' among Nepali investors. This is a great opportunity to the entrepreneur to do business collecting funds through capital market and for the government to develop investment friendly policies to channel funds through capital market in productive sectors to boost the economy. To manage, develop and satisfy the hunger of capital market the following points are recommended for the coming budget:
* Government should strengthen Securities Board of Nepal (Sebon), the regulator of Nepali capital market, financially, technically, resourcefully. It should not become an avenue of political appointment but should be developed as an avenue of capital market experts.
* To avoid present problems of paper-based transactions and centralized (limited in the Valley) stock market, Central Depository System (CDS) should be immediately initiated and different trading centers should be developed in major cities. It will help broaden the area of capital market and allow access to non-Valley investors.
* Government should address the problems of shareholders of Agriculture Development Bank Ltd.
* Limited number of brokers and their long time syndicates should be broken by strengthening Nepse's resources and bringing easy entry-exit policy of brokerage firms.
* Investors' identification number should be created to identify real investors and control fraud and fake application in primary issue.
* Being an agricultural country, agro-based companies should be brought into the area of capital market to increase production and fulfill the increasing need for food.
* Tourism, hotel and hydropower companies should be encouraged to provide profitable investments avenues to the hungry investor and boost the country's economy.
* Government should incorporate in the budget options to facilitate micro hydropower to use local resources (capital and water) and improve the economic soundness of villagers.
* Budget should encourage the private sector to establish solid waste management (fertilizer) company to solve the day-to-day problem of waste management in urban areas like Kathmandu Valley. The company will produce organic fertilizer. It can be used in farming and government should subsidise the fertilizer to the farmer.
* Institutional investors should be facilitated for efficient and sustainable development of the capital market.
* Merger and acquisition laws as well as regulations should come into effect to facilitate the increasing number of financial institutions

Rabindra Bhattarai,
Stock Analast

Gold to cross Rs 25,000 per tola

Taking a cue from the international market, gold in the domestic market today hit Rs 21,350 per 10 gram — Rs 24,900 per tola (11.664 gram).
"The price rise is not due to local demand but due to international price rise," said president of Nepal Gold and Silver Dealers' Association (NEGOSIDA) Tej Ratna Shakya, who was today again selected president unanimously for a second term.The price of gold once again is on a bullish path. Earlier — on March 17 — gold had touched a historic high of Rs 25,000 per tola in the domestic market. "And the phenomenon may repeat itself," he said adding that the rising international price has pushed the local price skyhigh despite low local demand.
In the international market, gold today hit $964.50 per ounce. The price of gold in the international market is rising even though the price of crude is also touching new highs by the day. Gold is inching towards $1000 per ounce in the international market and the domestic market too is warming up.
The continuous rise in crude price, weakening greenback and the fall in international share markets have led to the hike in the global gold price.
In the domestic market, gold closed Rs 255 higher to Rs 21,090 per 10 gram on Friday from last week's closing price of Rs 20,835.

New team in NEGOSIDA
KATHMANDU: The 17th AGM and second national conference of NEGOSIDA on Sunday unnanimously selected a 21-member new team for the next three-year term. Earlier, the team consisted of 19 members. Tej Ratna Shakya has been unanimously selected president again while Mani Ratna Shakya was selected senior vice-president and Gyanuraj Shakya, Mohankaji Shakya, Mohan Kumar B K and Harka Bahadur Sunar were named the vice-presidents from each development region.

Budget Watch: Series 13

With the declaration of a Federal Democratic Republic of Nepal, people's expectations of the new government are very high. The new budget should truly reflect people's need for change. Trekking Agencies' Association of Nepal (TAAN) is hopeful that the government will incorporate its demands in the upcoming budget. Since tourism is the mainstay of the national economy, the government's main focus should be on encouraging more international airlines to fly to Nepal.

It should immediately initiate measures to control mayhem and disorder in our only international airport. Realising adventure tourism as an important aspect of our tourism industry, the government should develop effective rescue mechanisms and allot separate adequate fund to carry out rescue operations.

This will help make our mountains and trekking areas safe. Since many years, we have been asking the government to give industry status to the tourism sector and provide due facilities. The government should allow duty-free import of vehicles for tourism industry. It should also allow unhindered movement of tourist vehicles throughout the country even during bandhs and strikes.

This will help portray Nepal as a tourist friendly nation in the international arena. At a time when the need for responsible tourism is being felt throughout the world, the government should come up with programmes to ensure safety and security of porters and trekking staffs.

Similarly, the government should give due emphasis to economic diplomacy to promote trade and tourism sector of the country. It should provide separate fund to our embassies and consulates for tourism promotion. To materialise the concept of 'Nepal for All Seasons', the government should offer special incentives to visitors coming during the off-season.

Priorities:

* TIA improvement

* Industry status for tourism

* Unhindered movement of tourist vehicles

* Focus on economic diplomacy

* Special programmes for porters

* Incentives for off-season visitors

Jyoti Adhikari,

President,

Trekking Agencies' Association of Nepal (TAAN)

Budget Watch: Series 12

Nepal is suffering from economic and industrial unrest resulting in deteriorating tourism industry. After the CA election when the CPN-Maoist emerged as the leading party it made public announcements that tourism would be given the status of industry and developed so as to enhance the country's economy. The Maoists should implement their announcements.
The Hotel Association Nepal (HAN) has been urging the government to give top priority to tourism and adhere to political commitment for its development. In this context, the following suggestions are vital for the enhancement of tourism industry as a backbone of Nepal's economy.
* The World Tourism Organisation estimates that every tourist entering a country employs nine persons in that country. This figure is higher in the case of Nepal where tourist reach has penetrated to the village level in many areas. While agriculture retains its premier position as a tool for poverty alleviation, mining and hydropower has great long term potential but needs huge investment whereas tourism has, can and will bring all-round economic development.Given priority, tourism can fuel sustainable economic development and effectively address issues of poverty and unemployment.
* It has a cascade effect as even a farmer is earning by directly selling vegetables or other food items. In the same manner, tourism provides an opportunity to various economic sectors to flourish, such as tea shops, carpet industries, tour operators, rafting, mountaineering, airlines companies and wildlife tourism. It is the only industry which leaves an impact on the people residing in each and every corner of the country. Hotel industry is quite competitive and a sensitive business, therefore there is a need to reduce VAT from 13 per cent to 10 per cent.
* Strengthen Nepal Airlines and immediately purchase two more new aircraft.Treat hotel industry as an industrial sector to let it avail of concessions, like lower electricity tariff. Provide free visa to visitors from SAARC and China for 15 days. Allow more international airlines to operate in Nepal and make airline operations cost effective in terms of fees/charges payable to Civil Aviation Authority of Nepal (CAAN).
* Provide incentives/concessions for innovative tourism products/services. Set no limit on tax-deductible promotion/marketing expenses for tourism. Expedite the building of the second international airport at Lumbini. Bandhs and strikes have tremendously affected this sector.
* The government must ensure a congenial atmosphere and guarantee free movement of tourists.Although, there are many existing tourism destinations in Nepal, product development remains absolutely essential. Promotion and protection of tourism destinations are the need of the hour.
* Despite the government having declared that the open-sky policy would benefit the tourism industry, it has to have real backing to support tourism related businesses. The private sector has to go and demand to see real benefits of the open-sky policy and its implementation. To open doors and boost tourism, international airlines should not be taxed for at least one year to increase the tourism market.
* Establishment of travel/trade desk in Nepali diplomatic missions abroad in collaboration with the Foreign Ministry and Nepal Tourism Board.

Prakash Shrestha,
President,
Hotel Association of Nepal (HAN)

Investment in hydro lucrative

A development bank is taking all the financial charges and acting as an financial consultant apart from being trustee and also look into other matters related to project finance of a hydropower project.
"Ace Development Bank will take charge of the entire financial management of the project and will play the lead role of financial advisor, fund manager and trustee for the 34 Megawatt (MW) Marshyangdi III hydropower project being developed by Keton Hydropower Ltd, a subsidiary company of BPC," Siddhanat Raj Pandey, managing director and chief executive officer of Ace Development Bank, said adding that Ace will raise approximately $78 million from the domestic and international financial markets with 'suitable financial instruments'.
Ace has designed partially convertible debenture with embodied option to raise the required capital. It believes that the instrument will be lucrative for both domestic as well as international investors to invest in.
Ace's hydro power initiative focuses on the hydro sector and is timely and intelligent investment as the country is passing through severe energy crisis. The rising oil prices and load-shedding have hit Nepal. Nepal Oil Corporation (NOC), the sole supplier of the petroleum products in the country, has been asking more money from the government and government has time and agian refused to provide cash to bail it out. The government gave the cash-stripped NOC Rs 6 billion but still, its in loss.
Nepal's dependency on fossile fuel cannot be lessened without the development of hydropower. And the rising global oil price has no other remedy than to shift the dependence from fossile fuel to hydropower.
Chilime Hydropower Company became the model hydro power project for hydropower development through mass participation and paved the way for more private palyers to enter into the business.
It is the first hydropower company to be listed and trade its shares at the Nepal Stock Exchange Ltd (Nespe).
However, the much-taled and appreciated Chilime model has not been replicated as there are only three listed hydropower companies in the secondary market.
Though, the 309-MW Tamakoshi is to follow the Chilime model, Ace has planned another model of raising the required capital. It has planned 'partially convertible debenture with embodied option' to raise capital. Ace's commitment to provide a one window entire financial management facility for the hydropower projects of any size is an example of how Nepali financial institutions can help hydropwer sector.
Ace will pool a team of qualified professionals including hydro technicians, bankers, capital market specialists and network with domestic as well as international investors including global Venture Capital firms. Ace will fulfill the huge capital requirement for the domestic hydro sector to some extent. "It will also be the first of its kind in Nepal's financial market," Pandey claimed.
The investment in hydroelectric power plant is the best inverstment. But still only three hydro power projects are listed and their shares are being traded. The group-wise distribution of the traded shares and amount show that the trading of commercial banks occupies 47 per cent of the total volume. Finance companies, development banks, hydropowers and insurance companies occupied 24 per cent, 13.47 per cent, 13.40 per cent and 2.04 per cent of the total volume, respectively during mid-March to mid-April 2008, according to the Nepse.
Once the dam is built, it will provide with dividends forever. Revenues from dams are inert as a lead weight. You sell your power to utilities in long-term contracts. These contracts might span 30 or 50 years of period. You build in a provision for inflation, check the utility's credit and then you collect your perpetuity. Revenues from hydroelectric power plants don't care about panics on Nepse or recession.


Listed hydel companies

Company ------------Unit shares------------total money
National Hydro Power Co -- 7,000,000 -- Rs 700,000,000
Butwal Power Co Ltd -- 8,390,577 -- Rs 839,057,700
Chilime Hydro power Co -- 7,296,000 -- Rs 729,600,000
Total ---------------------22,686,577 --Rs 2,268,657,700

Budget Watch: Series 11

Hydropower is not only about energy production for productive sectors but also a powerful means of bringing in socio-economic transformation and development as it brings in a number of development initiatives in the villages. It brings electrification programmes, rural road and bridge construction activities, health support programme, awareness programmes, school support programmes, job related training and capacity building programmes, contracts to the local suppliers or service providers and tax income, greening programme.
However, all these definitely require policies for effective results. Another major benefit of hydropower is employment generation. During construction, a significant proportion of the investment goes to the villagers as labour fee, buying local production and raw materials, significantly contributing to uplift the rural economy. Besides, making the local populace shareholders help empower and uplift their living standard.
Once NEA used to campaign urging people to 'use electricity for cooking' to maximize the domestic use of electricity. But those golden days did not last long. Due to subsidy being given to kerosene and LPG, people preferred petroleum products to electricity as the cheapest sources of energy. The decision of government to subsidise petroleum product was a big mistake, electricity limited to lighting actually murdered many big projects.
The price of fuel is sky rocketing in the global market. Nepal is also facing the brunt of it with energy consumption getting expensive and scarce every day. As energy is one's basic needs, Nepal is spending around Rs 300 billion to buy energy. Nepal has been spending a huge money to buy petroleum products.
Thus, Nepal needs to emphasise and focus on power export besides the domestic market-oriented projects. However, the export projects might contribute to local resource mobilisation and help uplift national economy but they will not help reduce the load shedding problem.
Therefore, while the pace for export projects is being speeded up, there is also a need for commitment and initiatives to advance projects for domestic consumption.
Nepal has not been able to win the confidence and increasingly attract domestic and foreign investments in hydropower sector. The past mistakes and hydropower policies of the previous governments have not been meaningfully absorbed by successive governments to seriously work for its sustainable development.
Various short-term and medium term solutions plus local projects for domestic consumption are essential to solve the power crisis. The state should take a proactive role to create and foster congenial environment and push private sector with the sole responsibility to meet domestic market energy needs.
Similarly, to meet the rural energy needs, small hydropower projects need to be constructed. A congenial environment needs to be fostered to encourage the villagers to use electricity from small hydropower projects (2-4 MW) as the preferred source of energy to kerosene or wood.Likewise, construction of medium sized projects of 100-MW in the small townships and cities and big projects of 150-MW in the commercial and industrialised pockets should be initiated by the government apart from seriously considering the energy export option.Politically, there is a lack of forward movement in hydropower sector due to over politicisation.




Gynendra Lal Pradhan,
Patron,
Hydro Solutions

Budget Watch: Series 10

Some suggestions for the budget to promote the Information, Communication and Technology (ICT) sector that is vital for the equitable development of a country;

* ICT should be a priority sector & treated like an Industry.
* Tax holiday for at least 5 Years.
* Rs 1000 million venture capital as in 2001 budget.
* IT Park should be consider as EPZ and give incentive.
* Start ICT Incubator.
* Use RTDF in OLPC project in rural schools.
* Omit multiple taxation for single service like internet service.

Biplav Man Singh,

President,

Computer Association of Nepal (CAN)

Budget Watch: Series 9

With the establishment of republican federalism, lawmakers and various political parties have put forward myriad agenda for implementation. Aspirations of the people too have gone up very high. As such, I wonder how the caretaker government is going to formulate its budget. Whatsoever, Nepal Association of Tour and Travel Agents (NATTA) hopes that the government will sincerely put up agenda of upgrading the aviation infrastructure of the country, including the only international airport and the number of domestic airports in the upcoming budget.
While allocating budget for the proposed second international airport the government should not ignore the major issue of consolidating the national flag carrier in whatever ways suggested by the task force formed by the former government. Priority-wise speaking, economic diplomacy must be encouraged in Nepali embassies and consulates abroad.
Nepal Tourism Board (NTB) too needs to spread its network in potential as well as eroding markets by setting up proper information outlets. Finally, I think for a proper boost to industry, the present airport taxi services need a total replacement. Last but not the least in importance is that the tourism industry of the country be given the status of industry in the real sense of the term and vehicles imported to serve the tourism industry shouldn't be taxed.

· Improve aviation infrastructures
· Consolidate the national flag carrier
· Adopt economic diplomacy
· Make NTB more proactive
· Duty free import of vehicles

Ram Kaji Koney,
President,
Nepal Association of Tour and Travel Agents (NATTA)

Budget Watch: Series 8

This will be the first budget of 'New Nepal' and it should reflect economic philosophy that will chart the path on which the nation must travel to achieve its aspirations of peace and prosperity. I believe the budget should focus on maximizing the contribution of areas in which we as a nation have core intrinsic strengths.

Ideally, development may have been linked to industrialisation or the expansion of the manufacturing sector, but in the case of Nepal being landlocked between two of the largest manufacturing nations of the world this theory does not hold true. We will never be able to compete with the economies of scale that similar industries will enjoy in India and China and if we follow this path, as in the past, we will end up manufacturing lower quality goods and selling them at a higher price to our own people. This fact has to be realised by the government and reflected in the budget.

We cannot expect to achieve an 'economic revolution' by treading old paths. The underlying common denominator for the development of all core areas has to be maximum distribution of gain and benefit to a large base of the population.

A focused and coordinated effort is required to look into each of the five core areas: Tourism, Agriculture, Infrastructure, Service Sector, and Human Resources Development. This determination needs to be highlighted and clearly extrapolated in the budget so that there is no doubt about the government's clarity in the importance it places on these core areas.If an economic revolution is to occur to change the economic map of Nepal over the next 10 years, just as the political map has changed over the last 10 years, then it is essential that we change the way we formulate and implement economic policy and the start of this process will be the first budget that the first government of New Nepal presents.

The five pillars for our New Nepal's economy should be:

1. Tourism

· Hotels

· Lodges

· Restaurants

· Trekking & Mountaineering

· Adventure sports & Value added activities

· Associated supply chain industries

2. Agriculture

· Enhancing productivity through land reform

· Cooperative farming

· Greater value added production

· Herbs and jungle product development

3. Infrastructure

· Hydro Power

· Road connectivity

· Irrigation· Cement

4. Service Sector

· Financial

· Healthcare

· Education

· BPO/Outsourcing

· Information Technology

5. Human resource Development

· Vocational Education

· Skilled manpower development for domestic productivity and export

· Converting our population from a liability to an asset

Anil Shah,

Chief executive Officer,

nabil bank Ltd

Budget Watch: Series 7

We should focus on our core strengths; Agriculture, tourism, hydro power, services sector and infrastructure. Apart from these the essential issues are:

· Revenue administration should focus on trade facilitation through simplification and standardisation of documentary requirements at customs points.
. Introduce Online Custom Declaration System.
· Form a full-powered 'Revenue Authority'.
· Facilitate exporting firm as much as the export industries.
· Establish and operate Export Trading Houses.
. Export Trading Houses should be accorded the status of deemed export.
· Allow Export Credit at more concessional rates, abolish special fee in income tax and revamp customs tariff rates.
· Abolish VAT in industrial machinery and equipments.
· Protect and search markets for Nepali garment industries. Economic co-operation with neighbouring countries, with Nepal as the transit point in India-China trade.
· Speedy implementation of already signed agreements like WTO, SAFTA, BIMSTEC, and the Bangkok Agreement where Nepal is an observer.
· Programmes for reviving sick industries and restoration of peace and stability.
· Government should make a budget that can be sustained by internal resources. The budget must focus on poverty alleviation and give space to excluded, marginalised and indigenous people and also rehabilitate the conflict-hit.
. Widen the tax base and refrain from hiking rates. Policies and building infrastructure like Garment Processing Zone are needed.
· Export Promotion Agency should work in a way that for every dollar spent, the country can export $300 worth of products.
· Implement labour law reform in line with the speed of liberalisation and in conformity with WTO. Making enabling laws for operating Special Economic Zones also required. Regular railway service between Kolkata and Birgunj ICD can save huge logistic costs.
· Since export industries have also been categorised as other industries and put under the tax net thereby weakening competitive strength, the prevailing tax regime should be reviewed.
· As regards borrowers from banks, there should be a clear division between wilful and unwitting defaulters.
· Effective governance and economic reform depends on the government's policy focus, and it must work hard to recapture that. The actual outcomes of the last budget fell far short of intended. There is little likelihood that this year's budget too will be implemented in full.The new budget should also focus on the impact of India's budget on Nepal's economy.
· Unauthorised trade among neighbouring countries should be controlled by these countries jointly.
· Non-tariff barriers seen while exporting to India in the form of Quarantine, SPS measures and lab testing should be harmonised.
· Government should start debate among stakeholders in the country on implications of the Comprehensive Economic Partnership Agreement (CEPA).





Surendra Bir Malakar,
President,
Nepal Chambers of Commerce (NCC)

Exports continue to dip, Imports rise

In the first 10 months of the financial year 2007-08, the quantum of exports declined whereas that of imports increased significantly. As a result the trade deficit widened.
Total exports fell by 1.2 per cent compared to a decline of 0.3 per cent during the corresponding period the previous year. "Of the total exports, export to India declined by 7.5 per cent in the review period compared to a decline of one per cent in the same period last fiscal year," states a Nepal Rastra Bank (NRB) report.
On the other hand, exports to other countries grew by 13 per cent compared to a decline of 3.1 per cent in the comparable period the previous year.
Decline in exports to India was on account of the fall in exports of vegetable ghee, textiles, chemicals, resin and toothpaste. Exports to other countries went up largely due to the increase in the exports of pulses, Nepali paper and paper products, herbs, wheat, packing materials of paper, cigarettes, electric wire and stationery, states the central bank report.
Total imports surged by 21 per cent in the first 10 months this fiscal year in comparison to a rise of 10.5 per cent in the corresponding period the previous fiscal year. While imports from India soared by 25.4 per cent in the review period compared to a growth of 11.4 per cent in the corresponding period of last fiscal year, imports from other countries rose by 13.8 per cent compared to a rise of nine per cent the previous fiscal year.
Consequently, the total trade deficit expanded by 31.6 per cent in the review period compared to a growth of 16.5 per cent a year earlier, according to the central bank.In the first 10 months, the remittances sent by Nepalis working abroad increased by 35.3 per cent to Rs 108.64 billion compared to an increase of 3.1 per cent in the previous fiscal year.
However, the overall Balance of Payment (BoP) posted a surplus of Rs 19.88 billion in the review period in comparison to a surplus of Rs 6.97 billion in the corresponding period the previous fiscal year mainly because of upsurge in travel receipts, remittances and capital transfer.
The current account posted a surplus of Rs 4.63 billion in the review period compared to a surplus of Rs 5.04 billion in the corresponding period the previous fiscal year.

Guerrero is World Bank South Asia vice-president

World Bank president Robert B Zoellick has appointed Isabel Guerrero vice-president for the South Asia region. Guerrero took over from her predecessor Praful Patel on Wednesday.Guerrero, who moves to her new position from that of County Director for India based in New Delhi, joined the bank in 1982. Early in her career she worked as a country economist for the Philippines, Myanmar, Morocco and the Central Asian republics with a focus on macroeconomics, trade and poverty.

"For the past 11 years she has been a country director for Bolivia, Ecuador, Paraguay and Peru (1997-2002); Colombia and Mexico (2002-2007) and most recently India, where she took up the position in March 2007," states a World bank press release.

"It is a most special privilege to be invited to take on this role in one of the most important regions of the world as measured by the development agenda," said Guerrero in Washington this week. "South Asia is a region of extraordinary hope as demonstrated by its aggressive growth over the past decade. It is also a region in which the range of profound human challenges stand out starkly, from poverty to conflict to tremendous environmental management issues," she said adding that finding solutions in South Asia means finding solutions to some of the most intractable problems facing our world.

Guerrero said her time in India had also demonstrated to her the region's phenomenal capacity to find those solutions with the sort of innovation and intellectual creativity that was already driving the sub-continent into the world's imagination.

Announcing her appointment, Zoellick said she brought to the task a strong track record in development and a commitment to finding cutting-edge solutions that would serve the region and her clients well. During her first months in the position Guerrero will visit all the countries of South Asia.

Gold price goes sky high

The price of gold, once again, is touching the sky. Although in the international market, it hit $944 per ounce today, a rise by $2 from yesterday, it showed a reverse trend in the domestic market and fell by Rs 100 per tola (11.664 gram) from yesterday.
It touched Rs 20,920 per 10 gram — Rs 24,400 per tola — in the domestic market today. Yesterday, it hit Rs 21,005 per per 10 gram — Rs 24,500 per tola. However today, the price of the precious yellow metal decreased by Rs 100 to Rs 20,920 per 10 gram."Due to the off-season and tepid market response, we did not increase the price today," Tej Ratna Shakya, president of the Nepal Gold and Silver Dealers' Association (NEGOSIDA), said adding, "Rather, the stockist decreased the price by Rs 100 per tola in the domestic market."
"The price of gold in the global market is rising as the price of crude is also touching new highs everyday," he said, pointing to the possibility of gold hitting Rs 25,000 per tola. "If the current bullish trend continues, soon the price of gold will cross Rs 25,000 per tola in the domestic market also," he added.Earlier — on March 17 — gold had touched a historic high of Rs 25,000 per tola in the domestic market.
The huge rise in crude price that soared to a record above $145 a barrel today fuelled by concerns over a larger-than-expected drop in US stockpiles and threat of conflict with Iran, slowdown of US economy, the weak global stock markets and further weakening of the dollar have been pushing the price of gold up over the last two months.
The price of gold has jumped nearly by 20 per cent since the start of the year after rising nearly 32 per cent in 2007.The demand that has been continuously rising in the largest gold consuming countries like India and China has also fuelled the price hike.