Japan helps Nepal to introduce fortified flour at small mills to reduce anemia

Nepal will enlist the help of small millers to boost the production of fortified cereal flour, which can help reduce anemia and other illnesses linked to vitamin and mineral deficiencies, particularly in poor, rural areas.
To support the government’s goal, the Japan Fund for Poverty Reduction (JFPR) — financed by the government of Japan and administered by the Asian Development Bank (ADB) — is providing a grant of $1.8 million for producing fortified flour at small, village-based milling centers, known as Chakki mills. The project is targeting the addition of iron, folic acid and vitamin A to milled wheat, maize and millet, benefiting around 200,000 people.
Anemia, caused by a lack of essential nutrients, is a major public health issue in Nepal, resulting in many maternal and perinatal deaths and development problems in children. Fortified flour, used to combat anemia, is now produced in large, commercial milling enterprises but this is only a small proportion of the total consumed, and cost, technology and other barriers have hindered its introduction at smaller mills.
The government, along with the Canadian non-government organisation, Micronutrient Initiative, is now testing low-cost fortification systems at water and electric-powered Chakki mills and the JFPR-funded project will help accelerate and expand this process.
“Fortified flour can reduce national rates of vitamin and mineral deficiencies within one year of implementation," said Snimer Sahni, principal Project Economist in ADB’s South Asia Department. "This project will define the conditions, capacities and resources needed for the sustainable expansion of small-mill flour fortification, benefiting the poor and vulnerable.”
The project will seek to find realistic solutions to the problems that currently prevent flour fortification at small mills, such as recurring costs, supply and support system difficulties, quality assurance issues, and a lack of consumer awareness. Among the innovations it will consider are community-based financing options, including possible channels for converting grain received as payment for use of the milling facilities, into hard cash.
Community participation is a key element of the project, with 65 village development committees (VDCs) to receive resources for the delivery and monitoring of the use of nutrients by millers, for collecting payments, for providing quality assurance monitors, and for raising community awareness. The target is to provide 360 small millers with the equipment and training to produce about 19,000 metric tonnes of fortified flour which will give nutrition protection for more than 200,000 people for two years.
Once the project outcomes have been assessed, they may be expanded to other parts of Nepal through ADB’s country assistance programme.
Along with JFPR, the government will provide $122,000, the private sector $14,725, and beneficiaries about $130,000, for a total project cost of $2.066 million. The Ministry of Health and Population is the executing agency for the project which will run from 2010 to 2012.

World Bank provides additional resources to upgrade rural roads

The World Bank approved $45 million in additional financing to help scale up Nepal’s efforts at improving the rural road network.
The Rural Access Improvement and Decentralisation Project (RAIDP) has been upgrading rural roads in 20 of Nepal’s 75 districts since 2005, when the World Bank provided a $32 million grant. The government and participating District Development Committees (DDCs) have provided about $10 million, according to the bank.
The Swiss Agency for Development and Cooperation (SDC) has also provided $2.1 million for the Trail Bridges component of the project.
With the new financing, the project will expand its operations to 10 more districts. The additional funds will also help meet cost escalations that have occurred on account of the doubling of input prices since 2005. For example, the cost of reinforcement bars and cement increased by an average of 130 per cent between 2005 and 2007. Costs also increased following an upgrade in technical specification like moving from gravel to low cost black-top roads.
“Nepalis have high expectations of sustained peace and economic opportunities,” said Susan Goldmark, World Bank Country Director for Nepal. “Improving rural roads in these districts will support Nepal’s vision of creating employment, jump-starting economic development, and reducing poverty”.
Of the two project components, the Rural Transport Infrastructure component will rehabilitate and upgrade a further 550 km of existing dry-season rural roads to all-season standard and, in the remote hill districts, upgrade another 140 km of existing rural trails and tracks to dry-season standard.
When combined with the original grant, this will result in 1,165 km and 211 km, respectively.
It will also maintain about 4,500 km of rural roads, construct 160 trail bridges and selected river crossings, as well as develop small community infrastructures. The additional financing is expected to create 150 days of off-farm employment a year for over 30,000 people.
The second component – Capacity Building and Advisory Services – will support institutional strengthening at the Department of Local Infrastructure and Agriculture Roads (DOLIDAR) and DDCs in the areas of road asset management and District Transport Master Plans. It will also aid the Rural Transport Service Study and its policy recommendations and provide project implementation support.
“Once complete, beneficiaries in the project areas will enjoy a 20 per cent reduction in travel time and a 30 per cent increase in transport services plying the roads,” said Marianne Kilpatrick, Senior Transport Specialist, World Bank.
Approximately 2.4 million people are expected to benefit from RAIDP when this phase ends in 2013. In addition to including 10 more districts in the project, RAIDP intends to increase the number of kilometers upgraded in the original 20 districts.
“The partnership with DDCs has resulted in more efficient use of resources and an increased focus on maintenance,” said Surendra Joshi, Senior Transport Specialist, World Bank.
In the meantime, 45 districts are covered under the Rural Reconstruction and Rehabilitation Sector Development Project (RRRSDP) which is supported by the Asian Development Bank (ADB), the Department for International Development of the UK (DFID) and the OPEC Fund for International Development (OFID).
The RAIDP additional financing is a blend of credit and grant from the International Development Association, the World Bank’s concessionary lending arm.

Top global central banks aim for tougher financial rules

ZURICH: Leading central bankers and national regulators said on Thursday they were aiming to introduce proposals to strengthen international financial requirements on banks by the end of 2012.
The agreed reforms, which have been in the offing for several months, are part of a "comprehensive response" to the financial crisis, the Basel Committee on Banking Supervision said.
"The capital and liquidity proposals will result in more resilient banks and a sounder banking and financial system," said Dutch central bank chief Nout Wellink, chairman of the Basel Committee.
However, the Committee said it was still reviewing possible additional measures on "systemically important institutions," banks that are big enough to have an impact on whole economies and the rest of the financial system if they run into trouble. It will also assess the potential impact of its package of measures and refine them next year.
"The fully calibrated set of standards will be developed by the end of 2010 to be phased in as financial conditions improve and the economic recovery is assured, with the aim of implementation by end-2012," the statement said. "The Committee is mindful of the need to introduce these measures in a manner that raises the resilience of the banking sector over the longer term, while avoiding negative effects on bank lending activity that could impair the economic recovery."
The group of central bankers and national financial regulators from 27 leading economies had alreday approved stregthened regualtion and supervision and revised "Basel II" capital requirements in July and September. AFP

Mauritius ranks top in ‘Paying Tax’ list in Sub-Saharan Africa

PORT LOUIS: Among the 46-Sub Saharan African countries Mauritius tops the rank in Paying Tax, followed by Botswana and South Africa in the second and third positions.
The report – a joint publication of the World Bank, International Finance Corporation, and PricewaterhouseCoopers – is the fifth edition that the World Bank Group’s Doing Business project has included the "paying taxes" indicator.
The indicator measures the ease of paying taxes in 183 economies around the world. Besides paying taxes, the Doing Business project provides quantitative measures of regulations in nine other areas: starting a business, dealing with construction permits, employing workers, registering property, getting credit, protecting investors, trading across borders, enforcing contracts, and closing a business.
However, Mauritius ranks 12th – slipping one position down from last year’s 11th rank – among the 183 economies around the world. “A medium-size company must make seven payments in a given year in Mauritius, whereas the Sub-Saharan African average is 37.7 and OCED average is 12.8 payments per year,” according to the report.
Similarly, it takes 161 hours per year to pay the tax in Mauritius whereas in Sub-Saharan African country, it takes 306 hours in an average.
The paying taxes indicator measures tax systems from the point of view of a domestic company complying with the different tax laws and regulations in each economy. The case study company is a small to medium-size manufacturer and retailer, deliberately chosen to ensure that its business can be identified with and compared worldwide.
The indicator covers the cost of taxes borne by the case study company and the administrative burden of tax compliance for the firm. Both are important for business. They are measured using three subindicators: the total tax rate (the cost of all taxes borne), the time needed to comply with the major taxes (profit taxes, labour taxes and mandatory contributions, and consumption taxes), and the number of tax payments.
The paying taxes indicator measures all taxes and contributions mandated by government at any level (federal, state, or local) as they apply to the standardised business. The total tax rate subindicator measures the impact of taxes and contributions on the company’s income statements. It includes the corporate income tax, social contributions and labour taxes paid by the employer, property taxes, property transfer taxes, dividend tax, capital gains tax, financial transactions tax, waste collection taxes, and vehicle and road taxes. The other two subindicators, on the time to comply and number of payments, also include taxes and contributions withheld or collected, such as sales tax or value added tax (VAT).
In this year’s report, the top reformer was Timor-Leste, which introduced a new tax law, streamlined the business tax regime, and simplified tax administration. Between June 2008 and May 2009, 45 economies made it easier to pay taxes as measured by Doing Business, almost 25 per cent more than in the previous year, according to the report.
“Eastern Europe and Central Asia had the most reforms for the third year in a row, with 10 economies reforming, whereas around the world on average, the case study company faces a total tax rate (percentage of profit paid out in taxes) of 48.3 per cent and spends 286 hours a year, and makes 31 tax payments, to comply with tax laws,” the global report said.
In the EU the average total tax rate for the case study company fell from 46 per cent to 44.5 per cent reflecting in part cuts in the corporate income tax rate implemented in 2007-08 in Germany and Italy.
The number of taxes levied on the company averages 9.5 globally. The average for the EU is almost 11.
Mauritius has climbed to 17th position from 24th in the global Doing Business 2010 report. It has been ranked first among 46 Sub-Saharan Africa economies. The Indian Ocean Island country has climbed seven position up to rank 17 from last year’s 24 position, according to the Doing Business Report – measuring business regulation. Out of the 10 category in the overall report, it has improved in the four categories but slipped in the five categories, whereas it is in the bottom of one of the category – closing business – compared with last year’s report.

The top 10
Mauritius – First
Botswana – Second
South Africa – Third
Malawi – Fourth
Seychelles – Fifth
Zambia – Sixth
Comoros – Seventh
Ethiopia – Eighth
Swaziland – Ninth
Rwanda – Tenth

Banks need to bring $30 million to open branches

Foreign banks wishing to open a branch in Nepal are required to bring in at least $30 million to get a license to start banking services, according to the central bank’s regulation.
In accordance with Nepal's commitment made to the World Trade Organisation (WTO) during its accession in 2004, the country is obligated to open the door to foreign banks to do wholesale banking in Nepal from January 1, 2010.
According to a new policy of Nepal Rastra Bank (NRB), regarding foreign banks, hopeful banks have to invest at least another $5 million for each branch they want to set up here.
"The capital requirement was fixed as per the WTO's principle of national treatment for foreign companies too," NRB executive director Maha Prasad Adhikari said.
Given Nepal's commitment to allow foreign banks to do only wholesale banking, the central bank is opening the door for them to provide only wholesale banking services.
Foreign banks wishing to enter Nepal must be at least BBB rated as per the evaluation of international rating agencies like Fitch, Standard & Poor’s or Moody’s, as per NRB policy.
They also have to bring a no-objection letter issued by the regulatory authority of their home country to apply to open a branch here.
Foreign banks are also required to follow the rules and regulations of NRB. They can repatriate their profits to their home country after paying taxes, fees and other liabilities as per the laws of Nepal. But they have to obtain the approval of the central bank before taking away the income, according to the NRB regulation.
Branches of foreign banks which are scrapped or liquidated could get their licenses scrapped in Nepal too, the NRB policy states.
However, they will be allowed to open only one branch in the first phase and depending on their performance the licence foer the other branches could be issued, the central bank said.
Similarly, they cannot accept deposits less than Rs 100 million and issue credit of less than Rs 300 million. “They can invest only in large projects like hydro-power, aviation, tourism and railway,” the central bank said.
Contrary to popular speculation that international banks would throng domestic market from 2010, none of the banks have applied so far. According to the NRB officials, they might be waiting for the central bank’s policy.
The opening of branches of international banks in Nepal will particularly not affect the general public but it might help kick start stalled economy by injecting more investment for large infrastructure projects and creating more employment opportunities.

Government fails to boost exports, forex reserve drops

Trade deficit widens,
Balance of Payment deficit
Current account deficit
Remittance soar by only 11.1 per cent

The third month of the current fiscal year saw poor export business as the exports fell by 16.8 per cent against an increase of 25.9 per cent in the same period of last year, according to the caurrent macroeconomic situation, based on the first three month's data of the current fiscal year.
Of the total exports, export to India declined by 11.4 per cent against a rise of 3.2 per cent in the same period last fiscal year. Exports to other countries also plummeted by 23.2 per cent as against a rise of 70.6 per cent in the same period of the previous year.
The report attributes the decline in the exports to India to the decline in the exports of readymade garments, zinc sheet, shoes and sandals, thread and marble slab, among others. “Similarly, exports to other countries went down due to the decline in the export of pulses, woolen carpets, readymade garments, tanned skin and readymade leather goods,” the NRN said.
However, imports increased by 30.4 per cent compared with a growth of 32.8 per cent in the corresponding period of the last year. “While imports from India rose by 25.2 per cent compared with a growth of 20.9 per cent, imports from other countries soared by 37 per cent compared to a sharp growth of 51.8 per cent in the same period oi last fiscal year.
Similarly, the overall balance of Payment (BoP) registered a deficit of Rs 19.45 billion in contrast to a surplus of Rs 7.70 billion in the same period of the previous year. “The current account also posted a deficit of Rs 11.38 billion in the first quarter of this fiscal year against a surplus of Rs 4.31 billion in the same period of the last year,” the central bank said in the report. The current account deficit is attributed to the expansion in trade deficit by about 48 per cent and the decline in net income by 15.6 per cent.
Likewise, under transfers, while grants fell by 21 per cent , workers' remittances increased by just 11.1 per cent in comparison to a whopping rise of 67.3 per cent in the same period of the last year.
The gross foreign exchange reserves stood at Rs 249.10 billion in mid-October 2009, a drop by 11 per cent compared to the level as at mid-July 2009. Such reserves rose by 8.5 per cent in the corresponding period of the last year.
“In US dollar term, gross foreign exchange reserves declined by 5.7 per cent to $ 3.38 billion in mid-October 2009. In the same period last year, such reserves had gone down by 3.9 per cent. The current level of reserves is sufficient for financing merchandise imports of 8.5 months and merchandise and service imports of 7.2 months only,” the report said.
However, the budget deficit stood at Rs 90.5 million compared with a deficit of Rs 2.9 billion in the same period last year due to a high growth of revenue collection.
But the total government spending increased by whopping 35.5 per cent to Rs 39.7 billion against a decrease of 2.4 per cent in the same period last year. “Recurrent expenditure increased by 54 per cent to Rs 28.5 billion against decreased by 13.2 per cent in the same quarter last year. However, capital expenditure increased by 73.3 per cent to Rs 1.93 billion in contrast to a decline of 60.8 per cent in the same period last year.

Nirdhan becomes national level Microfinance Development Bank of Nepal

Nirdhan Utthan Bank Ltd (NUBL) received formal recognition as “National Level Microfinance Development Bank” from the central bank of Nepal, Nepal Rastra Bank (NRB).
The recognition came after the NUBL fulfilled the minimum capital requirement of NPR 100 million as paid-up equity. NUBL is first microfinance bank of Nepal to be recognized as National level microfinance bank.
Being a national level microfinance bank, it can now expand its service all over the country by establishing its branch network in all 75 districts of Nepal.
The journey of NUBL started with the inception of “Nirdhan” as an NGO in 1993 with establishment of project office in Siktohan VDC of Rupandehi, Nepal. Later, NUBL was created as a limited company to operate microfinance activities under Development Bank Act of Nepal. Now, operating under Bank and Financial Institution Act, Nirdhan Utthan Bank limited operates in 24 districts with 75 branch network.

Global FDI flow increases in second quarter of 2009

Global foreign direct investment (FDI) flows experienced a rebound during the second quarter of this year compared with those in the first quarter. However, this flow of FDI is much lower in comparison to the same period last year. The Global FDI Quarterly Index in the second quarter of 2009 was 45 points lower than that a year ago, it said adding that initial indicators for the third quarter show no signs of a further pick-up in FDI flows.
According to the UNCTAD’s Global FDI Trend Monitor, the global FDI quarterly index rose to 115 from 70 in the second quarter.
“The rebound was reflected in G20 economies with a 38 per cent increase in FDI inflows as compared to the first quarter of this year,” said the report. But this rebound was not uniform. For example, the pick-up in the second quarter was particularly marked in some European Union economies such as France, Germany, Spain, Ireland and Sweden, while flows remained relatively low in economies such as the United States or, in a few cases, even declined (e.g. the United Kingdom). In emerging economies, slight increases were observed in Brazil, India and the Russian Federation, while inflows remained practically unchanged in China.
Two factors, however, suggest that the pick-up in the second quarter of 2009 should be treated with some caution. First, the absolute level of FDI flows was considerably lower than that in the same period of 2008 (figure 1), which puts the rebound in perspective. Second, this pick-up seems to be mostly attributable to an increase in intra-company flows and reinvested earning, while equity flows remained unchanged, and at a low level. As equity flows are the FDI component, most directly related to TNCs’ longer-term investments strategies, this suggests that companies remain cautious about their international expansion.
However, this flow of FDI is much lower in comparison to the same period last year. The Global FDI Quarterly Index in the second quarter of 2009 was 45 points lower than that a year ago, it said adding that initial indicators for the third quarter show no signs of a further pick-up in FDI flows.
The report said that overall, global FDI for this year – as a whole is likely to remain sluggish and significantly lower than in last year despite gradual improvement in world business outlook.
In order to provide the international investment community with a timely periodic assessment of global FDI flows, UNCTAD’s Investment and Enterprise Division has launched today the Global Investment Trends Monitor (GITM). The Monitor will be released every quarter of the year (in mid- January, mid-April, mid-July and mid-October). Each issue of the Monitor will provide 1) FDI trends for the latest quarter for which definite data are available, as well as 2) an early indication of trends for the quarter ending just prior to the publication of the Monitor. In order to present the global investment trends clearly, with a view to user requirements, UNCTAD has developed the Global FDI Quarterly Index. This index is based on quarterly data of FDI inflows for 67 countries and economies,2 which together account for roughly 90% of global FDI flows. The index has been calculated from the year 2000 onwards and calibrated such that the average of quarterly flows in 2005 is equivalent to 100.
The current inaugural issue of the Monitor covers global FDI trends in the second quarter of 2009 and also FDI estimates for the third quarters of 2009.

Global FDI Flow Quarterly Index
(2005 = 100)
2008 Q2 – 159.6
2008 Q3 – 132.9
2008 Q4 – 136.2
2009 Q1 – 69.6
2009 Q2 – 114.5

Nepal targets overhaul of power network to reduce shortages, boost growth

Years of underinvestment in electricity infrastructure has left Nepal with one of the most unreliable power supplies in South Asia, putting a brake on the country’s economic growth.
In response, Asian Development Bank’s (ADB) Board of Directors has approved a loan of $65 million equivalent to strengthen and expand electricity transmission and distribution facilities in a bid to cut network losses and reduce frequent supply interruptions and outages, said the manila-based bank in its press release.
Funds will also be used to upgrade two hydropower plants, introduce compact fluorescent lamps, and install solar and solar-wind powered streetlights in a push to boost energy efficiency, increase the use of clean renewable technologies, and take some of the strain off the national grid. Public-Private franchising partnerships will be developed in selected urban areas to improve service quality to consumers, providing a model that could be replicated in future.
The Energy Access and Efficiency Improvement Project will support the Government of Nepal’s long-term vision to provide universal coverage using grid-based and off-grid supplies by 2027. Installed generating capacity at the end of 2008 was 615 MW with just 33 per cent of households connected to the national grid.
“The project will strengthen and increase supply capacity, increase consumer connections, improve the finances of the state-owned Nepal Electricity Authority, and eventually allow for increased cross-border energy trade, giving the economy a boost,” said Priyantha Wijayatunga, Energy Specialist in ADB’s South Asia Department.
An estimated 20,000 additional households are expected to directly benefit from the distribution improvements, while all 1.5 million grid-connected electricity consumers will receive more reliable power supplies. The installation of 1,000 solar and solar-wind streetlights in municipal areas of Bhaktapur, Kathmandu and Lalitpur will improve safety, particularly for women and children, while the project is expected to reduce an estimated 15,000 to 20,000 tons of carbon dioxide emissions annually.
ADB’s loan from its concessional Asian Development Fund covers 69% of the project cost of $93.7 million. The loan has a 32-year term, including a grace period of 8 years. Interest is charged at one per cent per annum during the grace period and 1.5 per cent per year for the rest of the term.
Grants totaling $4.5 million from the Climate Change Fund and Multi-Donor Clean Energy Fund, administered by ADB, will also be provided. The Government and Nepal Electricity Authority will supply the balance of $24.2 million. Nepal Electricity Authority is the executing agency for the project which is due for completion around September 2014.

Airports' upgrade in Nepal to increase safety, boost tourism

The Asian Development Bank (ADB) will help Nepal appeal to even more tourists through a project to improve the country's airports and civil aviation safety standards.
The ADB Board of Directors approved a total of $80 million – including a grant of $10 million and a loan of $70 million equivalent – to finance the Nepal Air Transport Capacity Enhancement Project.
The project will improve safety and capacity at Tribhuvan International Airport (TIA) in Kathmandu, and three domestic airports – Lukla, Rara and Simikot – that serve remote areas inaccessible by road. TIA, Nepal's only international airport, will be reconfigured and upgraded to international safety standards, with the project including provision for the construction of 1.4 km of new taxiways, a new power supply system, the refurbishment of its international terminal and the construction of a new temporary domestic terminal. The three domestic airports will receive improved communication equipment, visual approach aids, and weather equipment.
“Due to the challenging terrain in Nepal, air transport is an essential part of the country’s transport system, providing access to many remote towns and villages in the mountainous areas,” said Dong-Kyu Lee, Transport Specialist in ADB’s South Asia Department. “Providing safe and reliable aviation access to the country will attract more tourists and greatly contribute to Nepal’s economy."
With international and domestic passenger traffic expected to increase significantly in the next four years, the project will also seek to enhance the organisational effectiveness of the Civil Aviation Authority of Nepal, the regulatory body that controls the country's aviation industry. Existing regulations will be updated to meet international standards and viable opportunities for private sector participation in future airport developments will be identified.
ADB's grant and loan, from its concessional Asian Development Fund, covers 87 per cent of the project cost of $92 million. The Government of Nepal will contribute the remaining 13 per cent. The ADB loan has a 32-year term, including a grace period of eight years. Interest is charged at one per cent per annum during the grace period and 1.5 per cent per year for the rest of the term.
The Civil Aviation Authority of Nepal is the executing agency for the project, which is due for completion around the end of 2014.

IFC helps Nepal plan expanding financial services

IFC, a member of the World Bank Group, is helping microfinance institutions and banks in Nepal discuss strategies for expanding financial access by mobilizing deposits and using banking technologies such as payment cards, mobile phones, and retail agents. Microfinance institutions, banks, payment providers, regulators, and development partners from Nepal along with institutions from Bangladesh and India participated in the discussions at a workshop hosted by IFC at the request of the Nepal Rastra Bank (NRB).
Senior executives from Nepal Rastra Bank, Nirdhan Bank, Everest Bank, Bangladesh’s BRAC Bank, and Indian firms BASIX and FINO, were among those participating in the workshop on Expanding Access to Finance in Nepal: The Opportunity of Deposits and Banking Technologies. The conference was organized by SouthAsia Enterprise Development Facility, managed by IFC in partnership with the United Kingdom’s Department for International Development and the Norwegian Agency for Development Cooperation. Participants shared experiences, best practices, and innovations in other developing and emerging economies to explore opportunities for deposit mobilization and use of innovative technology in Nepal.
Bijaya Nath Bhattarai, governor of the Nepal Rastra Bank (NRB), said, “By engaging in a dialogue involving all the stakeholders, the workshop provides an opportunity to exchange ideas and determine how financial services can be extended beyond the current coverage of 30 percent of Nepal’s population. “
Microfinance institutions and banks discussed technologies that can transform and expand financial services. They also outlined the needed business models and regulatory framework required and shared experiences in Nepal and the South Asia region.
Speaking at the workshop, Anil Sinha, IFC General Manager for Advisory Services in South Asia, said: "The workshop provides a platform for microfinance institutions and banks to make financial services accessible to underserved people in Nepal, particularly those in rural areas who lack access to banks.”
By working closely with microfinance institutions, banks, and payment providers across South Asia, IFC assists in strengthening financial institutions and supporting appropriate regulatory frameworks.
IFC is the only international financial institution focused exclusively on the private sector, the engine of sustainable development in emerging markets. Along with IBRD, it is currently seeking a capital increase to strengthen its ability to create opportunity for the poor in developing countries—including by supporting institutions to extend financial services to underserved communities in Nepal.
To learn more about IFC’s activities in South Asia, visit www.ifc.org/southasia.

About IFC
IFC, a member of the World Bank Group, creates opportunity for people to escape poverty and improve their lives. We foster sustainable economic growth in developing countries by supporting private sector development, mobilizing private capital, and providing advisory and risk mitigation services to businesses and governments. Our new investments totaled $14.5 billion in fiscal 2009, helping channel capital into developing countries during the financial crisis.

MAURITIUS BUDGET 2010: FM Sithanen plays Santa

PORT LOUIS: Finance minister Ramakrishna Sithanen today presented his fifth budget keeping the common man in mind. Nearing election year, Sithanen’s presentation is not likely to raise eyebrows.
The budget for the year 2010 – made to coincide with the calendar year for the first time – has its focus on accelerating the private sector investment, mitigating the economic crisis and creating more jobs, ensuring social security including low cost housing, water supply and sewage – and sustainable development while stressing on Greener Mauritius. The budget also promises to promote culture and sports too.
“The Balance of Payments (BoP) has turned around from a deficit of 4.9 billion in 2005 amounting to 2.6 per cent of GDP to a surplus as from 2007,” Brunel University doctorate finance minister said adding that “despite the crisis the surplus is projected to be around Rs 13.5 billion ($452 million) for 2009, representing about 4.8 per cent of gross domestic product (GDP).”
He has, however, projected a fiscal deficit at 4.5 per cent. But the government borrowing requirement will only be four per cent of the GDP, because it is going to raise Rs 1.5 million from the listing of Mauritius Telecom (MT).
Painting a rosy picture of the island nation’s economy – in his over two-hour long budget speech in the parliament house – he hailed the role of Small and Midium Entreprises (SMEs) as according to him, in the past four years, these enterprises have generated 24,000 new jobs, accounting for 60 per cent of the total 40,000 jobs created. “In 2008, the economy has created more jobs for women than men,” he said.
The good news for the business community is that he has kept the tax rates unchanged. However, the budget has targeted to raise Rs 66.8 billion in revenue that is up by 21.9 per cent than the last year.
Due to its traditional mono-crop economy, the budget has a various packages for the sugar industry sector.
He has continued the Additional Stimulus Package (ASP) until December 2010 to mitigate the crisis because of the positive outcome from ASP during the year. The budget vows to provide support of Rs 900 million to local authorities compared to some Rs 45 million they used to receive annually and maintain the additional Rs 100 million for infrastructure
development in Rodrigues.
Though, he is worried about the very high budget deficit. The expansionary macroeconomic policies -- in particular stimulus Measures -- have triggered a rise in household consumption as a percentage of GDP to 75.2 per cent in 2009 from 74.3 per cent in 2008. As a result the saving rate is expected to fall to 12.8 per cent in 2009.But according to the finance minister, the Indian Ocean Island nation has survived the crisis. He attributed the survival of the economy despite the global crisis, to reforms.The Central Statistics Office (CSO) has predicted a growth rate of 2.8 per cent for 2009 and 4.3 per cent for 2010. By 2011, he said, the economy will rebound and be on track for five per cent and above.

FDI
FDI averaged around Rs 1 billion annually for the two decades ending 2005. We have taken this yearly average to around Rs 8.4 billion since 2005. Following the reforms in 2006, we have attracted more than Rs 30 billion of FDI. This year, in the midst of the crisis, we are expecting around Rs 9 billion of FDI. The FDI is also more diversified than in the past, coming from various countries and flowing into almost all sectors of the economy. Two months ago the Jin Fei project was inaugurated. It is the single largest FDI in our history, for an investment of Rs 25 billion over eight years, creating some 40,000 jobs, both direct and indirect.

National Savings
National saving rate in Mauritius has been historically high, staying above 20 per cent for most of the years since independence. However, as from 2001 it has been on a decline. The situation could have tightened the capacity to finance investments. But it has not. During the period 2006 to 2009, average monthly rupee deposits at banks have grown by around 40 per cent, outpacing GDP growth and generating enough liquidity to meet investment needs. In fact, all types of deposits, including savings, time and foreign currency have been rising at rates exceeding GDP growth. The savings-investment gap is also reflected in the current account of the Balance of Payments (BoP). The Net International Reserves have gone up from Rs 56.3 billion in 2005 to around Rs 100 billion – an 80 per cent increase. Our country has enough foreign currency reserves to pay for 42.8 weeks of imports compared to 31.4 weeks in July 2005.

Current Account
The current account deficit is expected to be lower at around nine per cent of GDP. The BoP has turned around from a deficit of Rs 4.9 billion in 2005, amounting to 2.6 per cent of GDP to a surplus as from 2007. Despite the crisis, the surplus is projected to be around Rs 13.5 billion for 2009, representing 4.8 per cent of GDP.

Agro-Industry
One of the traditional pillars of the country’s economy – the sugarcane Industry – has bounced back and expanded by around 22 per cent, including an 18.2 per cent growth in 2009. “The government’s vision of food security has been fruitful as the stage has been set for the production of 10 million litres of milk per year as from 2010 and 12 million litres by 2011. The Food Security Fund is also financing the purchase of fibre glass boats for off lagoon fishers. The Fishermen Investment Trust is funding activities that were previously inaccessible for artisanal fishermen, including fish farming in cages, integrated fish culture projects in barachois and purchase of boats for off lagoon fishing in Mauritius and in Rodrigues. The Marine and Agricultural Resource Support (MARS) programme is implementing pro-poor reforms and institutional development, marine resource management, and diversification of rural incomes and employment in Mauritius and Rodrigues.

Textile
The textiles and clothing sector was recovering from its deep recession, expanding its output by up to 8.5 per cent in 2007. But it was caught in the
global crisis, stagnating in 2008 and its output shrinking by four per cent in 2009.

Tourism
The tourism sector has been booming before the global crisis hit the island nation. It expanded by an annual average rate of 7.8 per cent from 2006 to 2008 with a peak of 15.2 per cent in 2007. But this year, it has been hit by the crisis, showing a negative 7.6 per cent growth.

Financial sector
The financial industry has come out relatively unscathed from the global financial turmoil. It will grow by some six per cent this year. The sector is showing an annual average growth rate of around 7.6 per cent for the period 2006 to 2009.

ICT/BPO
The ICT/BPO sector has grown by 40.8 per cent in the past three years and is expanding by 16.2 per cent this year. It is now contributing 5.8 per cent to GDP from less than one percent in 2005 and is employing 12,000 persons.

Construction
The construction industry has been experiencing its best period in many years. Its growth averaged 10.5 per cent annually for the period 2006 to 2008. This year the slowdown in real estate and IRS and RES activities have affected its output, while public investment in infrastructure has enabled it to maintain a positive growth of 2.5 per cent. The real estate sector is maintaining a healthy growth pace, averaging seven per cent for the period 2006 to 2009 and expanding by about six per cent in 2009.

Health care
The health centre of excellence has become a reality - providing world class services to Mauritians as well as to foreign clients. The number of beds in private clinics has increased by 56 per cent since 2005 to more than 800. There are now 19 private clinics in Mauritius in contrast to 12 in 2005.

Infrastructure development
The budget continuing its focuses on infrastructure development – including eco friendly infrastructure – has promised to modernise and expand import.
“Over Rs 15 billion have been allocated to extend, improve and create new road networks. Out of which Rs 1.3 billion to maintain and rehabilitate round 600-km of roads. The construction of the additional carriages and road ways will add 360 km of roads to the network,” he said.
He has also allocated budget for the Port. The Mauritius Container Terminal berth is being strengthened and expanded and the seabed is being deepened to 16.5-m at a cost of Rs 3.5 billion to allow the Port to meet growing traffic and attract larger vessels,

Agriculture
To enable planters and breeders to optimise their revenue, AREU is setting up an agricultural production and marketing information system. It will provide planters with real time market intelligence on crop production and prices by using mobile phone technology and posting information on a central website. Relevant information for breeders will also be supplied. To encourage the development of high-tech sheltered farming the government is introducing a scheme to provide technical assistance for the design and implementation of projects. It will also advance 90 per cent of the investment costs on soft terms, with a moratorium on payments for three years. It is setting up a scheme to assist sugar co-operatives to obtain the Fair Trade accreditation from the EU. This will enable them to obtain a premium of $60 per tonne of sugar. Government will advance the funds on soft terms for 75 per cent of the costs of consultancy and the application fee of Rs 150,000. Government has instead decided to set up a Cane Democratisation Fund to hold the 35 per cent stake in the various companies. The shares currently held by the Sugar Investment Trust in milling companies will be transferred to the Cane Democratisation Fund. In return, the shareholders of SIT will own shares of corresponding value in the Cane Democratisation Fund. Shares in the Cane Democratisation Fund will be offered to planters, labourers and artisans.

Bounty for the employees
Upto Rs 12,000 monthly salary holders – 3.5 per cent increment
Above the Rs 12,000 – Rs 450

MAURITIUS BUDGET 2010: People on Finanace Minister’s mind

PORT LOUIS: When the Finance minister reads out his budget speech on Wednesday he will keep ‘people’ in mind. His focus might also be on accelerating growth across various sectors.
Since this is the last budget of this government, there is a high probability that it will "put people first" and therefore attempt an early harvest even though the financial space created was used to sustain the economy. Do not also expect any new reforms to be initiated, though existing reform programmes are doing fine.
Priority will thus have to be the safeguard of employment through various supports to businesses like continuation of stimulus packages and the maintenance of heavy public investment in infrastructure and other projects. This, unfortunately, could be at the cost of not bringing down the budget deficit to a manageable level.
The GDP growth should be propped back to its average level of five per cent so that jobs could be created and the debt-servicing eased through tax buoyancy.
That the economy is back on normal growth pattern and some more measures have been taken on the social front such as wage compensation, a betterment of the purchasing power and eradication of absolute poverty are pluses for the minister.
One can expect that the government to focus on utilities, particularly water supply and wastewater disposal programmes.
At the same time, investments in infrastructure and the stimulus package are keys to ensure job preservation and creation. The stimulus package that the government has offered has been fruitful. So it should be maintained as a shock observer for a traditional economy like ours that is still suffering from the global economic downturn. However, the government might review some of the programmes without disturbing the social dimension.
The MID (Maurice Ile Durable) fund could be reactivated in the context of the Copenhagen conference on climate changes and so would food security through regional initiatives.
The last budget has predicted budget deficit to GDP to rise to 4.8 per cent in December 2009 and it seems to be close to reality as the government spending continues to oil the wheel of the economy.
To eradicate poverty, the government has put in a lot of effort. The implementation of the two per cent Corporate Social Responsibility (CSR) Levy will soon be a reality and will go a long way towards poverty alleviation.
The major MID programme needs more regulatory framework for alternative forms of energy. This is more the priority as the price of oil looks to rocket further and electric cars seem to be of lesser priority.
Developing large infrastructure projects is a must to propel the economy. Infrastructure needs of this island country are high compared to available resources. This gap remains and therefore the focus will remain.
As Mauritius is a welfare state, the government has given a lot of emphasis on social security programme. The reinforcement of Mauritius as a Welfare State will and should continue as it will help those below the poverty line.
Among the sectors that might benefit could be the Small and Medium Enterprises (SMEs) segment that needs a re-look as it faces many challenges. Another sector expected to benefit would be the crisis-hit tourism industry.
Finally the common man will benefit as more jobs would be created and preserved, and social security benefits could be enhanced.
The budget could also have some surprises as there could be revised legislation to ensure a level playing field and any loophole is plugged for the new regulations in IRS/RES projects.
Though the government has been talking a lot about Knowledge Hub, Ile Durable, 24/7 working environment, it should also add a new working culture with a new mindset to be able to take the economy to the next level.
The reforms initiated since minister Sithanen’s first budget, if completed, will ensure that the country moves to the next level.
(In conversation with BDO De Chazal Du Mée's CEO Yacoob Ramtoola, corporate finance partner Afsar Ebrahim, and consultant Dr Babu Rajpatti.)


Rama Krishna Sithanen
Vice-Prime Minister and Minister of Finance and Economic Empowerment
Education: B Sc Economics (with First Class Honours), an MSc Economics (with a Mark of Distinction) at the London School of Economics and a PhD in Political Science from Brunel University
Tenure: Minister of Finance ( Sep 1991 to Dec 1995, 2005 to present). Elected to the National Assembly for Belle-Rose/Quatre Bornes (2005)
Distinction: Chosen by the Switzerland-based World Economic Forum in 1994 as one of the 100 Global Leaders for Tomorrow

Price hike starts to cool down

The price hike that has zoomed up last year has started to cool down.
According to Nepal Rastra Bank (NRB), the year-on-year (y-o-y) inflation -- as measured by the consumer price index -- moderated to 9.3 per cent in Mid-October 2009 against 14.1 per cent in the same period last year.
The food and beverage group -- especially Vegetables, sugar and sugar related products -- have become more expensive than last year.
Sugar and sugar related products have become more expensive as it increased by a whopping rate of 42 per cent in compared to an increase of 39.5 per cent in the same period last year. Similarly, the price indices of vegetables and fruits increased by 37.5 per cent in sharp contrast to last year's decline of 10.1 per cent.
Similarly, the price indices of pulses as well as meat, fish and eggs sub-groups also increased by 25.1 per cent and 22.7 per cent respectively compared to an increase of 24.7 per cent and 22 per cent in the same period last year, said the NRB.
Though, the prices of food and beverages have not come down, the prices of non-food and services group came down by over six times. “The price index of food and beverages group increased by 15.6 er cent but the index of non-food and services group rose only by two per cent,” said the central bank said adding that the index of food and beverages and non-food and services group had risen by 15.2 per cent and 12.9 per cent respectively in the first three months of last fiscal year.
Within the group of non-food and services, the index of tobacco and related products rose up by 17 per cent against to a rise of 12.7 per cent during the same period last year. However, the price index of transport and communication declined by 8.7 per cent in comparison to an increase of 23.1 per cent during the same period last year.
Surprisingly, the prices in Kathmandu Valley, Tarai and Hills have moderated as the price index of Kathmandu Valley rose by 9.7 per cent and followed by 9.4 per cent in Tarai and 8.5 per cent in Hills against 14.5 per cent, 14 per cent and 13.9 per cent last year.
The y-o-y core inflation also moderated to 10.9 per cent from 13.1 percent a year ago, the central bank’s data revealed.
Similarly, the salary and wage rate index also rose by more than a double to 22.1 per cent in comparison to a rise of nine per cent a year ago. “The increase in basic salary and allowances of civil servants and its simultaneous effect on salary of the private sector contributed to such an increase in salary index,” concluded the NRB report.

Government's failure inspending on development works leaves whopping Budget surplus

In the first two months of the current fiscal year 2009-10, government budget surplus stood at Rs 556.6 million in comparison to a surplus of Rs 3.4 billion in the same period last year, however the government spending has gone up by 69.8 per cent to Rs 26.6 billion in comparison to an increase of 40.4 per cent
“The increase was mainly on account of a rise in the growth of recurrent expenditure,” said the current macroeconomic situation based on the first two month's data of the current fiscal year published by the central bank.“Recurrent expenditure rose by a whopping rate of 108.1 per cent to Rs 17.6 billion, compared to a moderate rise of 11.9 per cent to Rs 8.4 billion in the same period last year,” the report said attributing the rise mainly to an upward revision in the salary and allowances of the civil servants and teachers.
Meanwhile, revenue mobilisation also grew by 54.5 per cent to Rs 22.6 billion compared to an increase of 17.5 per cent in the corresponding period of the previous year. Government's firm commitment to control the leakage in the revenue as well as tax administration reforms in conjunction with increasing import and consumption by virtue of high remittances inflow contributed to such an increase in the revenue mobilisation, said the report.
The government received foreign cash loans amounting to Rs 158.9 million and foreign cash grants amounting to Rs 2.72 billion, where as it had received foreign cash loans of Rs 625.1 million and foreign cash grants of Rs 2.12 billion in the same period of last fiscal year.However, exports fell by 15.2 per cent in contrast to a rise of 35.7 per cent in the same period last year. “Of the total exports, export to India declined by 13.2 per cent in contrast to a rise of 6.7 per cent. Exports to other countries plummeted by 17.4 per cent as against a rise of 94.7 percent in the same period of last fiscal year,” the Nepal Rastra Bank said.
The decline in the exports to India was attributed to the decline in the exports of readymade garments, zinc sheet, thread, copper wire rod and aluminum section, among others. Similarly, exports to other countries went down due to the decline in the export of woolen carpets, readymade garments, pulses, tanned skin and silverware and jewelleries.At the same time, total imports expanded by 20.3 per cent compared to a higher growth of 45.5 per cent in the corresponding period of the previous year. While imports from India rose by 17.3 per cent in the review period compared to a growth of 35.4 per cent, imports from other countries soared by 24.2 per cent in the review period compared to a significant growth of 60.7 per cent during the same period last year.
The Balance of Payment (BoP) deficit has also doubled to Rs 3.76 billion against the deficit of Rs 1.89 billion in the same period of the previous year. “The current account also posted a deficit of Rs 5.07 billion compared to a deficit of Rs 2.57 billion in the same periodlast year,” the report said.

Nepal received Rs 34.99 billion remittance
KATHMANDU: Nepal received Rs 34.99 billion in the first two months of the current fiscal year. “Under transfers, workers' remittances increased by 19.7 per cent in comparison to the growth of 59.4 per cent in the same period last fiscal year,” said the central bank report.

Nepse plunges, investors nervous

Nepse this week plunged by 22.94 points to close at 578.19 points from Sunday morning's opening of 601.13 points.
Psycological pressure of book closures, fresh supply of stocks, financial institutions margin call -- due to continuous decrease in price of shares -- made investors more nervous forcing them to exit from the market.
In comparision to the new listing, the number of investors did not increase giving some smart investors a chance to sell off their shares at the current price and buy at a much lower price afterwards as according to them, the secondary market index is expected to drop further.
This week itself, primary shares of Sunrise Bank (12.5-million-units), Prime Comercial Bank (10-million-units), Vibor Bikas Bank (6.8-million-units) and rights shares of Civil Merchant Bittiya Sanstha (4,99,270-units), People's Finance (666962-units), Pokhara Finance (12,720-units), Narayani Development Bank (99884-units) and Nirdhan Utthan Bank (20,9936-units) were listed at Nepal Stock Exchange, making the total number of listed shares over 928.72-million-units, including promoters' shares, corporate debentures, bonds, preferred shares and mutual funds.
Of the total 26 commercial banks, Nepse has 23 commercial banks (with over 281.56-million-unit shares) under its banks sub-group that is the key player in the domestic market. Of the remaining three commercial banks, Nepal Bank Ltd has been delisted, Agricuture Development Bank is floating its shares worth Rs 960 million soon and Rastriya Banijya Bank is a complete government undertaking.
Thirty 30 development banks are listed at Nepse in the development banks sub-group with a total of over 66.34-million-unit shares. Sixty-two finance companies are listed at Nepse with 81,932,204-unit shares.
Though there are 18 companies in the manufacturing sub-group, the sub-group is the least traded and the weakest player in the domestic secondary market unlike the global secondary market practice.
Market pandits think that the institutional investor is the need of the hour as the existing investors are unable to hold the fresh supply of shares. Apart from the nervousness of current investors, the continuous bearish trend has repelled new investors from the secondary market as the major market player -- commercial banks sub-group -- this week also lost a whopping 34.69 points to close at 552.19 points from Sunday morning's opening of 586.88 points.
Bank of Kathmandu topped the chart in terms of transaction this week with Rs 31.19 million followed by Kist Bank with Rs 27.59 million, Nepal SBI Bank with Rs 26.20 million, Standard Chartered Bank Nepal with Rs 20.57 million and Nabil Bank with Rs 14.70 million.
In terms of number of share units traded this week, Kist Bank dominated the secondary market with its 76,000-unit of shares changing hands. Pashupati Development Bank topped the chart in terms of transaction number with 566 tradings in its kitty.
During the five-day session, 95 companies saw their shares being traded. The contribution of Group-A companies increased to 64.48 per cent against last week's 56.48 per cent while the 78-scrip sensitive index -- a barometer of Group-A companies -- also lost 7.20 points to drop to 144.57 from Sunday morning's opening of 151.77 points.
The float index -- calculated on the basis of real transactions -- also dropped by 1.22 points to slide to 56.26 points from its opening of 57.48 points.

Asian Life's primary issue oversubscribes, closes

Asian Life Insurance's primary issue closed today after it was oversubscribed more than sixteen fold.
"By the end of today we expect the collection to exceed Rs 1.65 billion," said Ramesh Bhattarai, chief executive officer of Asian Life Insurance.
The Initial Public Offer (IPO) worth Rs 108 million of 10,80,000-units at a face value of Rs 100 per unit -- was floated on October 27.
"After this public issue worth Rs 108 million, the paid-up capital of the company will be Rs 360 million," he said adding there is Rs 252 million paid-up capital at present.
At a time when the secondary market has been performing poorly, the encouraging response has shown that there is still an attraction for primary issue. "People may have found the IPO more lucrative as there has been no IPO for some time," Bhattarai said.
Contrary to the banks and financial institutions, insurance companies declare bonus only once in three years.
Of the total issue, 43,200-units are meant for the staff of the company. Contrary to other public issues, the company has allowed people to apply for minimum 10-units also. The maximum limit for application was upto 20,000-units.
After complaints about fake applications, Securities Board of Nepal (Sebon) has made it mandatory to apply with photo and bank account number for the primary issue.
The regulatory authority of the capital market permitted the company on September 16 to go public and the Company Registrar's Office gave the go-ahead on October 8.
NIDC Capital Markets was the issue and sales manager of the insurance company that has -- according to unaudited accounts -- posted Rs 3.32 million profit in the fiscal year 2008-09. The company has projected Rs 15.29 million profit for this fiscal year. According to its prospectus, it is not going to give any dividend for another three years.
Asian will be the 18th listed insurance company in Nepse as there are already 17 listed insurance companies -- under Nepse's insurance companies sub-group -- with a total of 20,703,504-unit shares at Rs 100 face value making a total total paid up worth Rs 2,070,350,400.
Meanwhile, Prime Life Insurance also is in the pipeline for issuing primary shares to the public.

Revenue collection exceeds target

The finance ministry exceeded its taget of Rs Rs 28.61 billion and collected Rs 34.32 billion revenue by the third month (September 15-October 15) of the current fiscal year.
"The collection is also 53 per cent higher than the collection in the same month last year," said revenue secretary Krishna Hari Baskota. During the same month last fiscal year, the the collection was Rs 22.3 billion.
Finance Minister Surendra Pandey in his budget -- for the fiscal year 2009-10 -- presented on July 13 has set a revenue target of Rs 176.5 billion -- over Rs 33 billion than his predesessor former finance minister Dr Baburam Bhattarai, who has set revenue target for the fiscal year 2008-09 at Rs 141.72 billion.
However, the ministry has exceeded the revenue collection as it had collected Rs 143.5 billion by the end of the fiscal year. "In the recent years, revenue collection has been increasing," he said adding that the appointment of a separate secretary to look after revenue has made a sense. Then finance minister Dr Ram Sharan Mahat created a separate revenue secretary to monitor the collection of revenue as the revenue collection has alsways been a headache then.
Though the contribution of Value Added Tax (VAT) in the total revenue is highest, this month also observed a fair growth of excise and customs. "But the VAT is still the highest among the tax heads," revenue secreatry added.
By the end of second month of the fiscal year, the government had collected Rs 22.55 billion revenue -- 54.5 per cent higher than the collection in the same period of last fiscal year that was Rs 14.58 billion.
For the first month of this fiscal year, the collection was Rs 11.74 billion against the target of Rs 9.78 billion.
In an average the ministry has set target of Rs 9 billion for each of first, second and third months but it collected Rs 11 billion in an average. The encouraging collection is contributed to leakage control, higher valuation in customs and tax complaince.
The finance minister has set revenue target of Rs 176.50 billion -- Rs 150.24 billion from tax revenue and Rs 26.25 billion from non-tax revenue -- for this fiscal year, when he had announced his accommodative budget of Rs 285.93 billion.
However, the encouraging collection of revenue has made little sense as Madhav Kumar Nepal-led government has not been able to spend on development activities.

Budget Blues
KATHMANDU: The government will run out of expenses in less than a month if it cannot pass the budget due to opposition United Communist Party of Nepal (Marxist) protests in parliament. "But it will not affect revenue collection," Baskota said adding that the ministry can, however, collect the revenue till the six month that is till January 15. "We can collect revenue till the six months even if the budget doesnot pass," he informed. The parliament must approve this fiscal year's budget by the middle of November or face a likely shutdown of the administration, with the government unable to pay employees. Due to delay in passing the budget, government has been facing problems in development expenditure and the trend has encouraged spending of development budget at the end of fiscal year on the party cadres.

The target and collection
For first month (July-August) -- Rs 9.78 billion (Target) -- Rs 11.74 billion (Collection)
By second month (August-September) -- Rs 19.03 billion (T) -- Rs 22.55 billion (C)
By third month (September-October) -- Rs 28.61 billion (T) -- Rs 34.32 billion (C)

SAARC Trade portal launched

Minister for Commerce and Supplies Rajendra Mahato today launched official SAARC Trade Information portal in the valley.
The portal will be a single point of access for all current SAARC-related business and trade information as it is will have data from all the eight SAARC countries.
It will also be continuously validated by 26 regional and national partners from both the private and public sectors of the region.Secretary General of SAARC Dr Sheel Kant Sharma and trade ministers from SAARC countries were present in the launching ceremony.
The initiators of the portal, SAARC Information Centre (SIC) and German Technical Cooperation (GTZ), pursue the approach that having access to reliable trade information generates additional business because more and better information facilitates faster, more efficient and more cost-effective ways to realise intra-regional trading and business opportunities. As a result, successful business will create more employment and thus contribute the socio-economic development in the SAARC region, said the SIC.
The data displayed in the portal will be reliable to make business decisions. Business — especially Small and Medium-Sized Enterprises (SMEs) — of SAARC region can get much benefit from the information in developing their business and markets, it is hoped.

NAC wants to lease one aircraft for international flight

The national flag carrier is seeking to lease one aircraft from January for six weeks as one of its Boeing is going for a regular C check to Israel.
"Nepal Airlines Corporation (NAC) is sending its Boeing for a regular C check," executive chairman Sugat Ratna Kansakar said adding that an aircraft will be leased to maintain the scheduled flights and reliability of the carrier.
The aircraft is required to operate flights from its Kathmandu base for the Kathmandu-New Delhi-Kathmandu sector everyday and Kathmandu-Dubai-Doha-Kathmandu four times a week. "Since it will still be the tourist season, we do not want to disturb the schedule," he added.
However, NAC managing director Captain K B Limbu thinks that it is not economically viable to lease an aircraft for a short term. "It's not necessary to lease aircraft for a short term," he said adding that NAC can fly its passengers on another low-cost airlines for six weeks.
Kansakar explained that if it will not be economically viable, NAC may rethink the leasing idea.
NAC has asked for an aircraft that should not be older than 15 years from the date of manufacture on Aircraft, Crew, Maintenance and Insurance (wet lease) -- ACMI -- basis for six weeks begining January 3 with a total number of 375 guaranteed blocks hours during six weeks.
The interested parties should send their offers with detailed specification, manufacturing date, configuration, present registration number, valid insurance, present owner, present operator of the aircraft and ACMI rate per block hour within November 12, said NAC.
The aircraft should have 150 to 200 seat capacity and delivery and re-delivery of aircraft will be in Doha. "The national flag-carrier will decide whether to lease or not on the basis of ACMI rate per block hour," Kansakar said.
NAC is connected to 10 major cities around the globe and flies to 30 destinations domestically. It has two Boeing 757-200 aircraft -- Karnali and Gandaki -- since the 1980s. It has always been in controversy while leasing aircraft.
However, it has recently decided to buy two aircraft -- a wide body A330-200 with a seat capacity of 279 and a narrow body A320-200 with 150 seat capacity -- from the European manufacturer Airbus soon.
Currently, around two dozen international airlines are flying to Kathmandu and the ailing national carrier has been limited to its few destination due to lack of aircraft and over-politicisation of the management. It is facing troubles on the international and domestic fronts too as its domestic fleet has six Twin Otter Aircraft with 19-seat capacity but only four of these are operational.

Complaint filed to halt Asian Life's IPO

A complaint has been registered against the primary issue of Asian Life Insurance here at the Securities Board of Nepal (Sebon).
Bishwambher Ghimire has filed a complaint to stop the issue as the company has asked to deposit Rs 100 -- 100 per cent of the face value of per unit share, which according to the Company Act should be 50 per cent as the Asian Life Insurance has not completed three years of operation.
Asian Life Insurance Company floated its 10,80,000-units -- worth Rs 108 million -- of primary shares at a face value of Rs 100 per unit yesterday. "The company was established only two years ago and according to the Company Act, it cannot ask for the cent per cent call money of the face value," Ghimire said adding that the company cheated investors by asking them to deposit Rs 100 per unit of shares instead of Rs 50 per unit.
"The company's issue is against the Company Act and Sebon Regulation too," he argued.
Sebon -- the regulatory authority of the capital market -- has committed a mistake and it should correct its mistake by immediately halting the issue, Ghimire said.
According to the Sebon Regulation also, the call money of such a company should be 50 per cent of the face value.
But Sebon director Niraj Giri said that the company has -- according to the condition of Insurance Board (IB) -- has asked for the 100 per cent call money. "The promoters have also paid the 100 per cent of their shares," he added.
After this public issue worth Rs 108 million the paid-up capital of the company will be Rs 360 million, according to Asian Life Insurance that has Rs 252 million paid-up capital at present.
Of the total issue, 43,200-units are meant for the staff of the company. Contrary to other public issues, the company has allowed people to apply for minimum 10-units also and one can apply for a maximum of upto 20,000-unit.

Banks vie to distribute dividends to shareholders

It seems that the banks are competing to give dividends to their shareholders.
The Board of Directors (BoD) meeting of NIC Bank yesterday decided to recommend 15 per cent bonus shares and 0.79 per cent cash dividend from the profits of the fiscal year 2008-09. However, the decision is subject to approval of Nepal Rastra Bank and NIC's annual general meeting (AGM).
Similarly, the 128th BoD meeting of Siddhartha Bank Ltd (SBL) today also proposed 10 per cent cash dividend.
Bank of Kathmandu's (BoK) 359th board meeting today decided to propose 40 per cent bonus shares and 7.3684 per cent cash dividend to its shareholders from its profit of the last fiscal year. The bank made a net profit of Rs 461.73 million in the fiscal year 2008-09 -- a growth of 27.73 percent compared to the preceding year.
According to BoK, it has been able to increase its deposits by 14.21 per cent and loans and advances by 17.24 per cent respectively compared to a year ago. It has also reduced its Non Performing Loan (NPL) to 1.27 per cent from 1.86 per cent.
The 26th commercial bank -- Kist Bank -- has also proposed 3.5 per cent cash dividends to its share holders that is subject to the approval of the annual general meeting and the central bank's approval.
Nepal Investment Bank Ltd has distributed 20 per cent cash dividends whereas Nabil Bank is distributing 30 per cent cash dividend and 50 per cent bonus shares. Similarly, Standard Chartard Bank Nepal has announced 50 per cent cash dividend and 50 per cent bonus shares. These banks are considered blue chip shares in the domestic market as the secondary market trading is dominated by them.
The commercial banks sub-group today shed 7.6 points to 563.63 points to pull Nepse down -- the fourth consecutive day this week -- today by 5.4 points to close the market at 585.04 points. Standard Chartered Bank Nepal lost Rs 51 per unit share, Himalayan Bank lost Rs 50 per unit, Citizens' Bank International lost Rs 48 per unit, Everest Bank lost Rs 36 per unit and Nabil Bank lost Rs 31 per unit to drag Nepse down.
Out of the total 26 commercial banks in the country, 23 commercial banks are listed under the bank sub-group and play a key role in the secondary market. Out of Nepal bank Ltd has been delisted and Rastriya Banijya Bank is 100 per cent government holding, the third Agriculture Development Bank is planning to float 96,000,00-unit shares to public by the end of this Kartik.

SAARC trade portal to be launched on Thursday

A regional trade portal is set to be launched on Thursday.
"The internet-based information system that contain decision-support trade and business information from all the eight South Asian Association for Regional Cooperation (SAARC) will help integrate the region," said Horts Amman, programme manager, GTZ, German Technical Cooperation agency that has helped develop the portal.
The easy flow of trade information will help increase intra-regional trade among SAARC nations that is at five per cent. The intra-regional trade among EU is 63 per cent and in ASEAN 38 per cent.
"The portal will become a vehicle to increase intra-regional trade. It’ll help bridge the gap between buyer and seller benefiting the both,” he added.
The idea of SAARC trade portal -- a break from the conventional trade channel in the region -- was floated in 2004. However, it started only last July. It took one-and-a-half year's continuous efforts and euro1.75 million, generously aided by the German Federal Ministry for Economic Cooperation and Development (BMZ), to make a SAARC portal a reality.
The SAARC-TIP was officially approved by 38th SAARC Standing Committee, which was held in Sri Lanka. Initially, it was planned to be established in Sri Lanka but due to some technical reason, it is being established in Kathmandu as the SAARC Secretariat is in the Nepali capital.
"The trade portal will be under the SAARC information Centre," said Shree Dhar Gautam, director, SAARC Secretariat. "It has 27 operational network partners. These institutions will appoint information managers, who will be trained by the International Trade Centre (ITC) that will also be linked to the SAARC trade portal,” he added.
The project operation committee comprises of 25 national public and private sector trade related institutions, including SAARC Chambers of Commerce and Industry and the SAARC Information Centre under the direction of advisory committee.
The Federation of Nepalese Chambers of Commerce (FNCCI), Confederation of Nepalese Industreis (CNI), Trade and Export Promotion Centre (TEPC) and Federation of Small and Cottage Industry of Nepal (FNCSI) are the Nepali network partners.
The SAARC Trade Information Project (SAARC-TIP) is jointly implemented by the SAARC Information Centre (SIC) Nepal and GTZ under the advisory committee that is chaired by the representative of the SAARC presidency and represented by the SAARC secretary general.
The trade information service generates revenue and increase transaction volumes to sustain the operations. "The GTZ will support for the next one-and-a-half years. At present, the work is on revenue-generation models like charging subscription, placing advertisements, customised information certain commission, where two parties can trade via the portal that helps regional traders with diverse trade-related information,” added Gautam.

Nepse flooded, lists 29.3-m-unit shares in a day

The secondary market is flooded with shares as today on a single day it listed 29.3-million-unit of primary shares of three financial institutions -- two commercial banks and one development bank.
Sunrise Bank and Prime Commercial Bank listed their 12.5-million-unit and 10-million-unit primary shares whereas Vibor Bikas Bank listed its 6.8-million unit primary shares.
With the three new financial institutions, the number of listed companies has also gone upto 163 in Nepal Stock Exchange (Nepse) with 697.76-million-unit of shares including primary, bonus, rights and promoters. According to Nespe, with the two additions, there are 23 commercial banks in banks subgroup -- the key market propeller. The 23 commercial banks have listed 281.56-million-unit shares.
Similarly, with one new entrance in the development banks sub-group the number of listed development banks has touched 30.
"Vibor Bikas Bank floated 26,52,000-unit shares worth Rs 265.20 million on June 10 for the public including its staff. It listed a total of 6.8 million-unit shares worth Rs 680 million including 41,48,000-unit promoter shares today.
The 30 development banks have listed 66.34-million-unit shares at Nepse that is dominated by banks and financial institutions. They have over 85 per cent of the total trading.
According to the rule, shares of listed companies will be traded after a week of listing. Thus, these three financial institutions will see their trading next week.

Nepse dropping
KATHMANDU: Nepse on Tuesday lost 4.89 points to close the day at 590.44 points. The single loser -- Everest Bank -- lost Rs 116 per unit share pulling the banks sub-group down by 8.03 points to 571.23 points. The secondary market saw 93,511-unit shares getting traded on the third day this week. On the second day, Nepse dropped by 4.1 points to close at 595.33 points. All the key market propellers -- commercial banks, development banks, finance companies, and hydropower companies -- plunged, pulling Nepse down. Standard Chartered Bank Nepal and Nabil bank -- considered blue chip shares in the domestic market -- lost Rs 60 and Rs 37 per unit on Monday pulling the banks index down by 6.58 points to 579.26 points. The only sub-group that gained was trading sub-group. Bishal Bazar Co Ltd pushed the index of the trading sub-group by 4.8 points to 261.21 points as its 10-unit of shares were traded at Rs 2,860 -- Rs 56 per unit more than the last closing.

Tourism entrepreneurs hail NAC decision to add aircraft

Tourism entrepreneurs have hailed Nepal Airlines Corporation's (NAC) decision to purchase new aircraft.
Hotel Association Nepal (HAN) president Prasiddha Bahadur Pandey, Nepal Association of Travel and Tour Agencies (NATTA) president Ram Kaji Koney, Trekking Agency Association of Nepal (TAAN) first vice-president Bacchu Narayan Shrestha, PATA Nepal Chapter president Pawan Tuladhar, Himalayan Rescue Association (HRA) president Bikram Neupane, Nepal Association of Tour Operators (NATO) vice-president Ashok Pokharel and Tourist Guide Association of Nepal president Vishnu Gyawali today in a press statement hailed NAC's decision to purchase new aircraft A320-200 by next year.
"The national flag carrier's decision before the Nepal Tourism Year 2011 will help the tourism sector," they said.
A meeting of NAC´s executive committee recently decided to buy two aircraft -- a wide body A330-200 with a seat capacity of 279 and a narrow body A320-200 with 150 seat capacity -- from the European manufacturer Airbus. The committee -- headed by NAC chairman Sugat Ratna Kansakar -- has finalised one plane in the A320-200 series and another in the A330-200 series. The estimated cost of the aircraft comes to around $41.289 million and $92.845 million.
NAC had called for tenders on April 7 and after going through the proposals it found the proposal of Airbus more profitable, said NAC officials adding that it is operating two Boeing 757s. Apart from Airbus, Boeing also had submitted a proposal.
The operating cost of the Airbus A330-200 comes to 40 per cent less than the wide-body Boeing 767 and Boeing 777 that the American company had proposed to NAC that is buying aircraft from Airbuses after 1987-88 when it had bought two Boeings -- Karnali and Gandaki
"We will purchase a fleet of six aircraft in five years' time," said an official of the ailing national flag carrier that has fallen in controversy every time it has tried to buy or lease aircraft.
Lately, NAC is losing its customers. Not only are more international airlines flying to Nepal but it also has been repeatedly grounding one of its aircraft due to technical glitches.

Revised Nepal-India Trade Treaty comes into effect

Minister for Commerce and Supplies Rajendra Mahato and his Indian counterpart Anand Sharma signed a revised bilateral trade treaty in Kathmandu today evening. The treaty comes into effect immediately offering an upgraded seven-year pact with provision for automatic renewal every seven years.
“The new treaty retains all the positive aspects of the old treaty,” Indian Trade and Commerce Minister Sharma said, referring to the earlier 1996 trade treaty.
He said the new treaty will have a seven-year validity instead of the earlier five years and will be extended automatically every seven years, creating a “stable framework for bilateral trade and investment”.
The cumbersome Duty Refund Procedure (DRP) has been scrapped to provide Nepal a direct control on the customs duty revenues on import of manufactured goods from India. Besides the Kolkata Port, Nepal can now also avail of the Vishakhapatnam port while four additional land customs stations will be established to facilitate bilateral trade. Also, for the first time, bilateral trade will be allowed by air through international airports connected by direct flights between Nepal and India (Kathmandu/Delhi, Mumbai, Kolkata and Chennai).
The two ministers also signed an Agreement of Cooperation to Control Unauthorisd Trade that will allow export of goods imported by Nepal from India to the third countries without the necessity of carrying out any manufacturing activity in Nepal. This will enhance exports from Nepal to third countries where it has a better market access as compared to India.
India has also agreed to allow Nepal access to the Banglabandh port through Indian territory, allow items like rice, wheat and sugar to be sent to Nepal at a time they are not allowed to be exported to other countries and will authorize the export about 50,000 tonne of fertilizer.
The trade treaty in 1996 had benefitted Nepal but India imposed quota on some of the products like vegetable ghee and acralic yarn revising the 1996 treaty in 2001 after which Nepal’s exports to India plummeted and the trade deficit widened. The revised treaty is hoped to give lease of life to Nepal’s exports and help bridge the ballooning trade deficit that is over Rs 180 billion at present.

Price hike cools down, salary increases

Salary and wages increased by double in comparison to the price hike in the second month of the current fiscal year.
According to Nepal Rastra Bank's (NRB) data of mid-September, the overall year-on-year (y-o-y) salary and wage rate index rose by 20.8 per cent but inflation moderated to 9.7 per cent.
The price hike was 13.5 per cent in the same period last year. In the review period, the price index of food and beverages group increased by 16.3 percent.
Similarly, the index of non-food and services group rose only by 2.1 percent. The index of food and beverages and non-food and services group rose by 14.2 percent and 12.8 percent, respectively, in mid-September 2008.
Rise in prices of vegetables and fruits contributed to the price hike as their indices increased by a whopping 43.5 per cent -- in sharp contrast to a decline of 14.6 per cent in the same month last year. Similarly, the price indices of sugar and sugar related products also increased by 40.5 per cent in comparison to an increase of 38.9 per cent during last year's same month, said the NRB.
The price index of meat, fish and eggs has doubled to 29 per cent against an increase of 14.5 per cent in the same period last year.
However, the grains and cereal products subgroup witnessed an increment of 5.8 per cent against a 23.8 per cent hike in the same month last year. The price index of transport and communication declined by 8.7 per cent against the increase of 23.1 per cent during the same month last year.
Region-wise, the Tarai was the most expensive as the price index there rose by 9.9 per cent followed by 9.6 per cent in Kathmandu Valley and 9.4 per cent in the hills. The respective rates were 13.5 per cent, 14.1 per cent and 12.7 per cent last year.
The y-o-y core inflation rose to 10.9 per cent, a moderation from 12.1 per cent a year ago, said the report.
However, the overall y-o-y salary and wage rate index rose by 20.8 per cent in comparison to a rise of 9.1 per cent a year ago. "The salary index increased by 32.8 per cent due to increase in basic salary and allowances for civil servants," said NRB. The wage rate index increased by 17.1 per cent compared to an increase of 12.3 per cent in the same month last year.
Wages of agricultural, industrial and construction labourers increased by 18.1 per cent, 15.8 per cent and 16.4 per cent respectively against increase by 19.5 per cent, 2.7 per cent and nine per cent, respectively, in the same month last year.

Wholesale price up
KATHMANDU: The y-o-y wholesale price inflation rose to 12.6 per cent against 10.3 per cent a year ago. Agricultural commodities that increased by 29.7 per cent contributed to the increase of wholesale price as it was a 0.7 per cent increase a year ago. Within the agricultural commodities group, the price index of cash crops increased by 84.3 per cent against the decline of 23.2 per cent a year ago. Likewise, price of livestock, fruits and vegetables and spices also increased by more than double to 42.5 per cent, 30.9 per cent and 20.2 per cent against the increase of 13.3 per cent, -22.1 per cent and 10 per cent last year.

Merchant bankers miss disclosure deadline

Securities Board of Nepal (Sebon) has assked merchant bankers to submit their annual financial details as they missed the disclosure deadline.
According to the new Merchant Banker Regulation 2008, a merchant bank has to submit its annual financial details within the three months from the end of the fiscal year.
"We have received only one merchant banker's financial details till date," said Dhrub Timilsina, deputy director at the Sebon -- the regulatory authority of the capital market. By the end of the three months -- that was October 17 -- only Elite Capital has submitted its annual financial details. The rest have failed to meet the deadline of disclosure.
There are one-and-a-half dozen merchant bankers in the capital market. They act as issue and sales managers, share registrar, securities underwriter and portfolio manager.
According to the earlier regulation, they were supposed to submit the annual reports within the five months after the end of the fiscal year. "There might be mixed up with the timings," Timilsina added.
"If the reports could not be submitted within the period, the board may, on application of the merchant banker stating valid reason, thereof grant extention of three months," according to the nerw regulation. The Board may impose fine for the failure to submit annual report even in the extended period.
The board has made the disclosure mandatory as the capital market is expanding. The Merchant bankers also have to submit semi-annual report of its merchant banking business to the board within 60 days of the expiry of the semi-annual period.
The board has also asked a broker -- Arun Securities Services -- for an explanation as it failed to submit the annual financial details of the last fiscal year.
According to the Securities Act 2007, the brokers also have to submit their annual financial details within the three months from the end of the fiscal year. Out of 23 brokers, only six have submitted their accounts within the time.
The 15 brokers have submitted the unaudited report while four brokers didnot submitted the report. "But three brokers have asked for time extention," Timilsina said adding that the board could extend the time if they have valid ground.
The board could extend three more months, upon which if the broker will be unable to submit the financial report, it would be fined Rs 5,000 to Rs 25,000, according to the Act.

Soaltee Hotel proposes dividends

Soaltee Hotel has proposed bonus shares and cash dividends.
The 161st board of directors' (BoD) meeting of Soaltee Hotel Ltd on Wednesday proposed 20 per cent bonus shares and 11.5 per cent cash dividend to its shareholders.
The proposal is subject to approval from its annual general meeting (AGM), said the hotel that has decided to hold its 35th AGM on December 17.
There are only four hotels listed under the hotels sub-group in Nepal Stock Exchange (Nepse). Hotel Yak & Yeti, Soaltee Hotel, Taragoan Regency (Hyatt) Hotel and Oriental Hotel (Radisson) have listed a total of 24,225,898-unit shares in the secondary market.
But Soaltee Hotel has a paid-up value of Rs 10 per unit share whereas the remaining three have Rs 100 paid-up value per unit share. However, the secondary market has witnessed a regular trading of only two hotels -- Soaltee Hotel and Oriental Hotel (Radisson). The shares of Taragoan Regency (Hyatt) Hotel also is being traded though, irregularly. Oriental Hotel (Radisson) has held its 12th annual general meeting on September 16. Both the shares of Oriental Hotel and Soaltee Hotel have been trading for around Rs 200 per unit.
Hotel Yak & Yeti that has listed 2,209,208-unit of shares with a face value of Rs 100 per unit, wants to be delisted from Nepse.
Hotel Yak & Yeti could be delisted soon, according to Nepse. According to the rule, if a company does not pay annual renewal fee for three consecutive years, it can be delisted. The hotel has not paid its renewal fee for three consecutive years.
The Nepse board has also discussed the hotel's request to be delisted but has not taken any decision.
Meanwhile, Kist Bank's board of directors' meeting has also proposed 1:1.5 rights shares and 3.5 per cent cash dividends from the profits of the fiscal yaer 2008-09.
The youngest commercial bank -- that has upgraded from the Class-C finance company to Class A commercial bank -- has planned its annual general meeting on November 14. The AGM will approve the BoD's decision. It will have its books closure for the AGM from October 30 to Novermber 14. The bank has planned to increase its paid-up capital to Rs 5 billion -- the largest amount among commercial banks in the country. According to Nepal Rastra Bank (NRB), a commercial bank needs to have Rs 2 billion paid-up capital.
Meanwhile, Nepse again dropped below the 600-point mark to close trading on the first day of the week at 599.22 points. Nepse lost 1.94 points from the morning's opening of 601.16 points.

Training on commodities market ends

The commodities market is emerging, it has immense growth potential and will continue to expand in multiple horizons within two years, said experts at a two-day workshop on 'Futures and Derivatives Market (Commodities, Forex, Options, Structured Products)' that concluded here today.
Since the market is complicated and ruled by international events, economies, new investors need to be educated fundamentally and technically. A training workshop was the need of the hour, Frank Reudi from Swisscontact said in the programme organised by Jamb Technologies with technical assistance of Swisscontact in close coordination with Morningstar Investment Service (a subsidiary of Jamb) and United Finance.
Currently, there are around 50 registered brokers who are involved in commodities business and the business has already spread Kathmandu Valley. According to estimates, there are around 8,000 traders of whom 5,000 are active in the market, Morningstar Investment Service said.
With the growth of the market, more complaints and greivances are also coming up and to address them a regulation is a must. "Intially, we didn't have a market, but now we have a market spread all over Nepal, and it needs to be regulated," according to Morningstar. "Tax imposed on commodites trading should also be scientifically addressed as there should be the provision of rebate and charges on net profit not on gross profit such as what prevails.
Swisscontact is the organisation of the Swiss private sector for development cooperation which aims to promote private economic and social development in selected countries in South and East Asia through advisory services, training and continuing educationCommodities and Metal Exchange Nepal (COMEN) that started its operations in 2007, Mercantile Exchange Nepal (MEX) and Nepal Derivative Exchange Ltd that have just started are some of the exchanges. There are four to five commodities exchanges also in the pipeline.
Commodities market is a type of financial market like capital market, money market, derivatives market, foreign exchange market and insurance market but it has wider scope on the domestic front.