BUDGET BUZZ: Taxes should be rationalised

The budget in its addendum brings amendments to fiscal Acts. In India, one-time finance minister and now prime minister Dr Manmohan Singh initiated economic changes using this very tool, ie by bringing changes in tax legislations. It is time people entrusted with governance took a cue from Dr Singh and brought economic revolution in Nepal

Four issues this budget should address are:

Firstly, tax rates should be rationalised and brought down to give Nepali businesses an edge over the economies of scale of our two giant neighbours. Simultaneously, programmes should be initiated to increase the tax base to supplement revenue loss. Rationalising tax rates not only encourages investments and prevents capital flights but also increases foreign investments. There is a national debate in Singapore where there is 18 per cent corporate income tax which is considered very high as compared to 15 per cent in Hong Kong.

Secondly, tax laws should be reviewed to curb discretionary powers of the tax authorities and clarify prevalent ambiguities. That means subjectivity in laws should be minimised as far as possible. This will decrease corruption and encourage people to pay tax. Also, tax procedures should be simplified for hassle-free tax payment.

Thirdly, this budget should incorporate the concept of a multipurpose unique National Identity Card (preferably electronic) to replace citizenship cards. This will help the government track tax evasions, facilitate tax collection and discourage money laundering and also help in welfare delivery, national security and voter registration.

Finally, the budget should focus on infrastructure development both in word and deed. It is a rule of the thumb that for a developing country economic growth follows only after infrastructure development. The budget should boldly provide for capital expenditure.

Unless the state assures the taxpayers that their money has been utilised in building infrastructure, health care and education along with the state's commitment to provide basic securities the taxpayer will not be inclined to pay taxes and any tendency to evade tax cannot be morally challenged. This budget should reflect the accountability of taxpayer's money.

Jagadish Bhattarai

Tax consultant

BUDGET BUZZ: Address the pertinent issues

Federation of Handicrafts Association of Nepal suggests the following for the coming budget.

1. Conducive environment creation

a) Addressing labour problem -- Handicraft enterprises are tortured by labour unions who put forward unjust demands. Unless this problem can be solved, it is useless to talk about business growth.

b) Energy crisis -- Unless the budget shows the government's commitment to resolve the current power crisis, increasing production of handicrafts is impossible.

c) Maintaining Law and Order -- There is no industrial climate. Bandhs, strikes and disruptions have to checked. Otherwise, we cannot think of sustaining industries/business while working only half the total working days in a year.

2. Industrial Infrastructure Development

a) Establishment of laboratories -- Handicraft industry is handicapped by inadequate facilities for quality testing as per the requirements of importing countries. Without a Fumigation/Heat Treatment lab and cadmium testing lab, we have not been able to assure our buyers of the quality of exports. The market may crash anyday. The budget should arrange for adequate funds for the operation of such facilities either in the government or private sector.

b) Handicraft Village -- This issue has entered the seventh year since the government announced to give land and facility to FHAN to manage all investments to operate the village for adding at least one tourist attraction for Nepal Tourism Year 2011. We look forward to a positive response in the forthcoming budget.

c) Handicraft Design and Development Centre -- The commercial policy 2065 has stated that the Handicraft Design and Development Centre would be converted into handicraft design institute. The centre was established by us with token initial support from the government. Despite resource crunch, we continued its operation for the fifth year in the hope of cost sharing with the government as announced in the budget. The budget should make adequate funding provision to operate the institute with its own funding.

3. Expansion of Vocational education

In view of the current state of unemployment and its social costs, the budget could allocate funds for expanding vocational education (VE). As the present scope of Council for Technical Education and Vocational Training (CTEVT) is too narrow, VE should be included in the curriculum of universities and schools to improve access to technical education and ensure self-employment.

4. Export facilitation

There are a lot of issues in export and the budget cannot address all these. If just two things are addressed by the forthcoming budget, handicraft export will be facilitated. The forthcoming budget should address the issue of Tribhuvan International Airport Authority's decision to increase its service charges from 900 per cent to 2500 per cent from the coming fiscal year. As most of the handicrafts are exported by air, this exorbitant rate will halt handicraft export and substantially increase unemployment. The budget should reflect the government's commitment to revise the Archaeology law promulgated in 1956 that still requires handicraft products to undergo museum pass certification for export. The law assumed that this is the only way to check outbound goods of archaeological value. And, we know the fate of many articles having high archaeological value.

5. Foreign Market Promotion

If we look at the budgets, they never allocate adequately for promoting Nepali products abroad. Handicraft, a symbol of Nepal's identity, has to be promoted abroad as to withstand competition. The focus should be on:

a) Special promotion in trade deficit countries -- Nepal has trade deficit with many countries. If we focus on promoting our products, including handicrafts, in those countries, our deficit will be reduced.

b) Mobilisation of embassies -- Our embassies are still old style bureaucratic set-ups without economic orientation. They can be mobilised in many ways to promote our country and products abroad. For this, our embassies have to be allocated adequate funds and a strong performance measurement system for reward and punishment. Otherwise, they will still be the waste of our scarce resources. Showcasing Nepali products in embassies is a brilliant idea. But, lack of adequate fund to purchase such products has resulted in empty shelves in our embassies. Embassies can also organise single country exhibitions in principal markets. But, the way our embassies organize such events expose Nepal as a resource-constrained country.

Pushkar Man Shakya

President

Federation of Handicrafts Association of Nepal

BUDGET BUZZ: Bring a consensus budget

Nepal is passing through a critical period of the peace process and political consensus is the first and foremost need of the country today. This factor needs to be seriously considered while preparing the budget so that it is owned by all parties and get success in implementation.
The Three Year Interim Plan is a consensus document of major political parties of the country. Likewise the Common Minimum Programme of coalition partners of the government. Hence, the budget should be based on mainly these two documents and as set in the TYIP, priority should be accorded to agriculture, tourism. Hydropower and infrastructure. TYIP has adopted a development model of three pillars viz public sector, private sector and cooperative sector. The budget should therefore be able to mobilize all these three sectors.
A safe and investment friendly environment should be created to enhance private sector activities and provisions made to promote and expand cooperatives all over the country in different economic activities. The government should, on one hand, facilitate these sectors and on the other, build public private partnership to develop infrastructure. The government should take the lead in developing the social sector.
The incumbent government is led by CPN-UML. Like the historic and popular budget of 2052-53 presented by the then CPN-UML government, the upcoming budget should be guided by the principle of a welfare state and provide relief measures to downtrodden people and marginalised sections of society. While providing such relief, it would be better if it is linked with economic empowerment and social transformation wherever possible.
Build Own Village Yourself was the most popular programme introduced in the budget of 2052-53 by the UML government. Subsequent governments also continued this programme under different names. However, it is natural to expect that the programme be continued with the original name.
The present government is an interim government. Its main responsibilities are to promulgate a new constitution and complete the peace process. Thus, the budget should focus on projects which are near completion rather than introducing new big projects. Completion of SEZ in Bhairahawa is a case in point.
The Task Force formed by the government has already drafted a new Industrial policy and Foreign Investment policy. The government need to approve them and make necessary budgetary provisions. Similarly, good projects like Investment Board, which was provisioned in the previous budget, should also be continued and implemented. This will help in bringing mega projects.

Dr Pushpa Raj
former member, National Planning Commission (NPC)

NDB small depositors ask their money back as soon as possible

Nepal Development Bank (NDB) Victims' Group has asked the Nepal Rastra Bank (NRB) to return deposits of small depositors and amount of the rights shares of some shareholders as soon as possible as the court procedure will take a long time.
"If the liquidation is the last resort, we urge NRB to immediately get permission from the court and return small depositors money and the amount of rights shares," said Kirti Madan Joshi, president of ad-hoc committee of NDB-Victims Group during a press meet here today.
They also urged to give a last chance to revive the ill-fated bank. "It should be given a last chance to revive," he said suggesting three options - indirect intervention, and strict supervision, taking control of its management or appointment of new management team to revive the first development bank of the country. "NRB could form a new board of directors including promoters like Nepal Army, Employees' Provident Fund and investors," he added.
The victims demanded to punish the existing management team, directors and senior officers of the bank for mismanaging the people's deposit. "A bank cannot misuse public deposit," the victims said warning that if their demands are not met they will go on strike."
The liquidation of NDB is not the solution," said Joshi adding that it would affect the entire financial sector.
The victims slammed NRB for delay in taking action against the troubled-NDB. "NRB officials and NDB both should take responsibility for the present state of NDB," the depositors accused.
The NRB has decided the NDB to sent to liquidation after its repeated attempt to revive it as a healthy financial institution failed due to non-cooperation of the bank's chairman Uttam Pun and his team.

Economists urge budget to focus on increasing security, investment

The economists during a pre-budget interaction organised by Nepal Economic Association (NEA) here today suggested the government to focus on increasing security and investment in the budget. However, finance minister Surendra Pandey assured them that the budget will concentrate on helping check price hike, generate more employment, increase competitiveness and spending on infrastructure. He also accepted that the culture of bandh has bleed the economy white.
Prof Dr Madan Kumar Dahal, president of NEA suggested to bring the budget based on Three Year Interim Plan and Common Minimum Programme. "The budget should guarantee employment for a member of the poorest of the poor family for atleast 100 minimum days in a year," he said adding that the people should feel the change.
"Without infrastructure development growth is not possible and private sector should be encouraged to invest on infrastructure," he suggested, "however, Nepal's development is hit by non-financial causes."
"If the government brings budget focusing on increasing investment, growth rate can be fuelled," said Prof Dr Bishwambher Pyakuryal. He was of the opinion that Nepal could achieve five per cent growth next fiscal year, provided the situation does not deteriorate. "Though the growth rate at present is at 3.8 per cent," he said adding that cartelling has pushed the prices up to double digit.
However,the effective monitoring and supervision could bring the price down, suggested Prof Dahal. "Quality of products imported should be taken seriously as our import has been increasing but the quality has not been maintained," he added.
Pyakuryal also suggested to utilise the surplus budget from this year and invest on storage-based hydel projects as the country is reeling under a power shortage. Apart from hydropower, they also stressed on giving priority to agriculture sector by providing subsidy on seeds and fertilizers to fuel growth.

BUDGET BUZZ: Focus on boosting agriculture output

If we really believe that agriculture is one of the mainstays of Nepal's GDP growth and poised to take it double digit levels, it is time that the coming budget for 2009-10 should be totally focused on boosting agricultural output and promoting related activities. The strategy for growth cannot be frittered away in too many areas, rather the efforts should be used for a few chosen viable sectors which may have wider impact socially as well as economically. There is no denying the fact that agriculture is one such sector which has the potential to contribute significantly to GDP growth, percolate earnings to the majority of the population and have a cascade effect on a wider scale and range.

The budget can flag off an investment plan for the agriculture sector with the objective of

-- a ) Boosting agricultural output.

b) Establishing linkages between agriculture and industrial sector.

c) Making agricultural sector efficient in terms of cost.

d) Transforming agriculture into a contemporary rural sector commercial activity for self employment of young people.

To start with, the budget should focus on strengthening and enlarging the agricultural base by providing adequate allocation for

1. Irrigation

2. Subsidy on fertilizer

3. Development of whole sale mandis.

4. Building a delivery mechanism in terms of agricultural development authority with full powers to take decision on a day-to-day basis for the development and promotion of the agro sector. The emphasis should be on doubling the output of the following sectors in the next five years.

a. Extensive cultivation of paddy, wheat, maize, oilseeds and soyabean with the latest technological inputs.

b. Integrated farming of dairy, poultry and fishery.

c. Plantation of tea, jute, herbs and flowers.

d. Vegetable growing.

e. Agro-food processing industries such as rice, flour, animal feed, edible oils, seed processing and fertilizer.

These agricultural sectors should be declared "Industries of National Importance" and given an 'incentive package' which would consist of

1. Loans at concessional rates of interest.

2. Tax holiday for 10 years

3. Tax free investment allowance of 40 per cent of the profit if any of the profit making industries wants to reinvest in these sectors.

Appropriate geographical areas can be declared Special Agro Economic Zones. For example, Palung can be the SAEZ for potatoes and Ilaam for tea plantation. These special zones could become hubs for the cultivation of designated crops with infrastructure such as access roads, marketing centres and warehouses built under PPP model. Private investment in these special agricultural economic zones should be given tax incentives and exports should be given the same facilities as those in the special economic zone. The policy should be that instead of importing processed food material in bulk, raw agricultural input such as paddy, oil seeds, wheat should be imported, processed and value-added in Nepal.

Agriculture tax on the import of raw agricultural product such as paddy, wheat, maize, oil seed etc is detrimental not only to agro-food industries but also kills cost efficiency of our own agricultural produce. This fee encourages unorganized imports.

It is essential that the poor farmer become an entrepreneur and engage in commercial farming on an economically viable scale so that the latest technology can be used. The corporate sector, if induced to take to farming, can engage the farmer more productively as a partner. In this context, contract farming act should immediately be introduced with provisions that companies can be formed on the basis of land-holding.

Corporate private sector can not only bring technology but also market and scale. Only self-employment can address the problem of poverty. The corporate sector and farmers working jointly can provide self-employment to farmers on a large scale.

The budget can unfold a plan to build on an extensive scale farmer training and information centre, agricultural warehousing complexes, cold storages and wholesale mandis for sale and purchase of agricultural produce on PPP and/or Boot Model.

This package will consist of

1. Agricultural warehousing act to be announced.

2. Land to be provided by government on lease.

3. Private sector will invest 60 per cent of total investment while 40 per cent will be provided by the government on an interest-free loan basis.

4. Services provided by these enterprises should be exempt from any taxes, direct or indirect.

5. Bank loan made available at concessional rate.

6. No duty, VAT or LDT on the import of plant and machinery, spares and equipment for the above projects. This budget can make a provision for leasing out fallow lands in government possession. The agricultural farms and the R&D centre run by the government can also be leased out to the private sector so that these outfits can be converted into model pilot farms and training-cum information dissemination centres for farmers in the vicinity.

The export of agricultural produce is discouraged by the fact that the duties paid on the inputs of agricultural produce are not refundable as the final products are not under VAT. Likewise, the facilities of Bonded Warehouse also cannot be availed of because the agro-industries are more focused on domestic market and, therefore, cannot meet the criteria of 60 per cent exports. There anomalies should be removed by this budget. Also, discourage all kinds of existing monopoly markets and syndicate systems in the agricultural sector to provide equal opportunity to all entrepreneurs.

The budget can start fixing minimum purchase price of both cash crops and cereals before plantation starts (around the world most of the countries have adopted this policy). Future trading in agricultural produce and the building of buffer stock of food by the government also goes a long way in boosting agriculturists confidence.

Currently, the agricultural sector in Nepal is riddled with outdated practices and is denied technical inputs in terms of better farming methodology. The new budget should take the initiative to break these shackles and usher in the winds of change.

Ananda Bagaria

Vice-President, Confederation of Nepalese Industries (CNI),

and managing director, Pro-biotech Industries Pvt Ltd

Arun Valley primary issue oversubscribed

Arun Valley Hydropower Company's primary issue has been oversubscribed by over 21 per cent to Rs 2 billion.
"Though, it will take a couple of days to find the actual amount and applicants, by the end of third day -- Thursday -- a total of 43,787 applications worth Rs 1.26 billion have been received," said Niraj Giri, director at the Securities Board of Nepal (Sebon). According to the primary estimation, on the last day -- Friday -- the amount should cross Rs 2 billion.
Arun Valley had floated its 5,15,000-unit primary shares (worth Rs 94.76 million) from June 23 after adding a premium of Rs 84 to the face value of Rs 100, making it Rs 184 per unit share that closed on June 26. According to the regulation, if the primary issue is oversubscribed, the it would be closed on the fourth day.
Similarly, a company can add premium equal to its net worth, if it is in profit and has distributed cash dividend for three consecutive years, according to the new Securities Board of Nepal (Sebon) regulation. Arun Valley has distributed 20 per cent cash dividend from the profits of last fiscal year.
Arun Valley Hydropower -- that constructed Piluwakhola Hydropower in Chainpur of Sankhuwasabha district -- has been providing 20 per cent cash dividend from the profit over three successive fiscal years.
NMB Bank is the sales and issue manager for Arun Valley's primary issue while the issue and sales managers of Chilime's primary issue are NIDC Capital Market and Citizen Investment Trust (CIT).
Arun Valley -- established in 1997 aims to develop, build, own and operate hydropower projects and has formed joint ventures with companies to build medium and large hydropower projects and develop entrepreneurship for the promotion of the hydropower sector's currently-owned Piluwakhola Hydropower Project (3MW).
Currently, there are only three listed hydropower companies -- National Hydropower, Butwal Hydropower and Chilime Hydropower -- at Nepal Stock Exchange. After Arun Valley's listing, there will be four hydropower companies.

Investors' confidence at low
KATHMANDU: Investors are not yet confidence as this week too the transaction amount decreased by 1.76 per cent to Rs 226.91 million. Except the shareholders of hydropower companies, all others including the key market player -- financial institutions like commercial banks, development banks and finance companies sub-groups -- lost this week pulling the Nepse down by 13.10 points to 670.61 points from last week's closing of 683.71 points. The hydropower sub-group gained 14.18 points to close at 897.71 points. Three sub-groups -- manufacturing, others and trading -- didnot see any changes in their indices. NIC Bank (with Rs 27.32 million), Standard Chartered Bank Nepal (with Rs 23.79 million), Nabil Bank (with Rs 12.26 million), Bank of Kathmandu (with Rs 11.00 million) and Nepal SBI Bank (with Rs 10.17 million) are the top performers this week. The contribution of Group A companies went up to 50.86 per cent from last week's 14.38 per cent but the sensitive index --the barometer of Group A companies -- went down by 4.74 points to 178.90 points from last week's closing of 183.64 points.

BUDGET BUZZ: Bring policy to reduce import of drugs

The Association of Pharmaceutical Producers of Nepal (APPON) was established by Nepali pharmaceutical entrepreneurs 20 years ago with the clear objective of producing quality, safe and effective drugs and to deliver these at affordable prices within the country.
At present, we are a 42-member industries producing quality medicines. The total contribution of the association to the Nepali pharma market is 35 per cent out of the total 42. Around 14 industries have already received AHO-GMP (WHO Standard Good Manufacturing Certificate) Certificate. Till now, we have utilized only 55 per cent of our total capacity.
APPON members never compromise on quality and try their best to improve the quality of all Nepali medicines. APPONs suggests the inclusion of the following points in the budget to come in order to boost the pharma sector and increase its capacity utilisation as well as market strength.
APPON wants to reduce the import of medicines from different countries to protect the 42 industries and their 45 products in which the country is self sufficient through local production. In the meantime, it wants to have easy, favourable registrations of new molecule (new products) for their sustainability and recommends that only innovative companies from the association should get registration of that molecule.
It also wants to participate in and contribute to the preparation and revision of the National Drug Policy. It wants to revise the Drug Manufacturing Code-2041 as per the need of member industries timely.
Similarly, APPON wants to have cut off in VAT of excipients and other packaging materials which are produced and available in the country. The requirement of different stainless steel equipment and accessories is more in Nepali industries. However, there is 40 per cent tax which we have to pay (25 per cent custom and 13 per cent VAT aside from other taxes). This is not justified.
APPON wants that the tax and VAT on research and development and other laboratory equipment, which are imported, should be abolished to facilitate the member industries.
APPON believes that if the government respond positively, it can bolster 50 per cent of the total Nepali pharma market. APPON is eager to work in cooperation with different ministries as well as DDA and other stakeholders. It wants supports from all consumers of Nepali medicines and assures of the quality, safety and efficacy of Nepali medicines -- factor most vital to the people of the country.

Umesh Lal Shrestha
President
Association of Pharmaceutical Producers of Nepal (APPON)

NRB goes soft with suspended Bank of Kathmandu board

Nepal Rastra Bank (NRB) has revoked the action against the suspended board members of Bank of Kathmandu (BoK) and allowed them to contest in the special annual general meeting (AGM).
According to the NRB's decision on May 19 -- when it took over the bank's management -- the suspended board members would not be able to hold any position in any financial institution for a period of five years from the date of suspension.
"But today's decision allows them contest the AGM," an NRB board member said.
The NRB will publish a Due Deligence Audit report and decide to call the AGM. According to the regulation, a 21-day notice has to be published for the AGM. The NRB team will hand over the management after the AGM slated any time in future.
NRB had suspended the BoK board and sent a four-member team, led by its director Laxmi Prapanna Niraula, to work with acting CEO Sabin Lal Shrestha. It was mandated to hand over the management to the new board members after the AGM.
NRB today revoked the decision late this evening after the suspended board realised its mistake and agreed to work together for the betterment of the bank, investors and promoters. After NRB received a joint application from the two warring factions of the suspended board promising to work jointly, the central bank decided to call back Laxmi Prapanna Niraula, the executive director it had sent to run BoK.
The suspended board members also withdrew the case they had filed at the Supreme Court against Nepal Rastra Bank's (NRB) intervention on Monday. They had filed the writ petition claiming that NRB's move to take over the bank under the NRB Act 2063 (Section 54) could not be justified as the bank's financial health was sound and that the interests of BoK's promoters and depositors were not at stake.
The crisis precipitated after the 313th board meeting of BoK on March 22, which decided to call back Pant from the post of managing director. Though the decision was taken by a majority of the board members, Pant was not given a chance to furnish his explanation.
Four directors took the decision against Pant, while the remaining two -- Sitaram Thapaliya and Sudarshan Poudel -- supported Pant.
NRB took over the bank's management to safeguard the investors and promoters interest due to dispute among the board members after it was not satisfied with the explanation that BoK's board submitted to it.
The central bank is empowered to take over the management of any financial institution under NRB Act 2063 (Section 54), if it is dissatisfied with the explanation it has sought.
A majority of shares of BoK -- established on March 3, 1995 as the 10th commercial bank -- is with the public. The promoters are only 42 per cent stakeholders.

BUDGET BUZZ: Provide relief to people

In the course of forming the budget for the fiscal year 2009-10, the government should be serious in its political efforts to write the new constitution and provide relief to the general public as well. In addition, here are some candid suggestions for making the new budget which will help meet the minimum expectations of people.

* Enforcement of rule of law and security all over the country (end to impunity, lawlessness and bandh culture).

* Clear vision about growth-oriented economic policy (emphasis on pro-poor and inclusive policies).

* Tighter fiscal management by targeting subsidies at a marginal class.

* Comprehensive industrial policy with labour flexibility (address labour problems with the right to invest and investors).

* Financial sector reforms by raising foreign direct investment in major industrial areas.

* Favourable investment climate by introduction of investment allowance and lower corporate tax rate to spur growth.

* Incentives for private sector investments in health care and infrastructures status for making inclusive growth a reality.

* Tax holiday for 100 per cent export oriented units to receive investment in export production capacity.

* Special export incentives for readymade garments, carpets and other value added exports to create jobs for jobless workers.

* Immediate action against power shortage problems through purchase agreement with India and warfooting action plan for constructing transmission lines (on both sides of the border).

* Focus on increasing the overall share of non-agriculture sector in the economy.

* Immediate action to reduce inflation to single digit.

Chiranjibi

Former chairman,

Securities Board of Nepal (Sebon)

Global FDI flow falls to half

Global foreign direct investment (FDI) inflows, cross-border mergers and acquisitions (M&As) -- the main mode of FDI -- drastically declined in the last quarter of 2008, and the fall has continued into 2009, United Nations Conference on Trade and Development (UNCTAD) data reveal.
FDI inflows dropped by 54 per cent and M&As by 77 per cent during the first quarter of 2009 as compared to the same period last year. Prospects for FDI will remain gloomy for the rest of the year, UNCTAD economists say
A renewed commitment by policy makers to an open environment for international investment will play an important role in maintaining favourable conditions for a recovery in FDI flows," UNCTAD Secretary-General Supachai Panitchpakdi said of the first quarter results. UNCTAD has been closely monitoring investment policy developments at both national and international levels.
According to UNCTAD, the data on FDI flows available for the first quarter of 2009 reveal a drastic plummet. The 54 per cent decline was apparent among the 57 countries for which quarterly data on FDI inflows were available as of mid-June 2009 (which account for roughly 60 per cent of global inflows). Forty-three countries, including major host countries such as Brazil, China, and the Russian Federation, recorded declines.FDI outflows for the same period fell by 57 per cent for 47 countries (accounting also for about 60 per cent of global FDI outflows) for which such data are available
Thus, the majority of these countries (37 out of 47), including major investors such as France, Germany, Japan, and the US, experienced declines in FDI outflows in the first quarter of 2009.
Recent data on cross-border M&As confirm this trend: they decreased by 77 per cent for all countries in value in the first quarter of 2009 as compared to the first quarter of 2008, and by 62 per cent over the last quarter of 2008. All three groups of economies -- developed countries, developing countries, and transition economies -- experienced falls in cross-border M&As. If the first quarter trend continues, projections for the whole of 2009 are for global FDI inflows to drop by close to half. While developed countries are mainly responsible for the fall of FDI in 2009 -- they have experienced a nearly 60 per cent decline -- unlike in 2008, developing countries and transition economies are also this time experiencing declines
For developing nations, the reduction is expected to be as much as 25 per cent and for transition economies as much as 40 per cent.

Good response for primary issue of Arun Valley

Arun Valley Hydropower Company received good response to its primary issue. "On the first day yesterday, 7,000 applications worth Rs 160 million were files its Initial Public Offering IPO," said Niraj Giri, director of Securities Board of Nepal (sebon).
It has floated 5,15,000-unit primary shares from yesterday. It has added a premium of Rs 84 to the face value of Rs 100, making it Rs 184 per unit share.
According to the new Securities Board of Nepal (Sebon) regulation, a company can add premium equal to its net worth, if it is in profit and has distributed cash dividend for three consecutive years. Arun Valley has done so. It distributed 20 per cent cash dividend from the profits of last fiscal year.
Arun Valley Hydropower -- that constructed Piluwakhola Hydropower in Chainpur of Sankhuwasabha district -- has been providing 20 per cent cash dividend from the profit over three successive fiscal years.
Interested applicants can apply for a minimum of 50-unit shares of Arun Valley while a minimum 20-unit can be applied for of Chilime Hydropower. The maximum number of units one can apply for of Arun Valley is 50,000 while for Chilime it is 1,000 only. NMB Bank is the sales and issue manager for Arun Valley's primary issue while the issue and sales managers of Chilime's primary issue are NIDC Capital Market and Citizen Investment Trust (CIT).
The company -- established in 1997 and promoted by Guru Prasad Neupane, Jeevan Raj Shakya and Amar Raj Tamrakar -- to develop, build, own and operate hydropower projects, formed joint ventures with companies to build medium and large hydropower projects and develop entrepreneurship for the promotion of the hydropower sector's currently-owned Piluwakhola Hydropower Project (3MW).
The promoters own 12,00,000-unit shares and the remaining 17,15,000-unit shares will be floated for the public. Arun Valley is planning Upper Piluwa Khola Small Hydropower Project (4.5MW), Lower Phemekhola Small Hydropower Project (2.2MW) and Kabeli-B1 Small Hydropower Project (9.8MW). The new investment partner of the hydropower company will be Janata Bank that is promoted by Guru Prasad Neupane and is in the process of getting the licence of a commercial bank.
However, Chilime Hydropower has suspended its much awaited IPO after a court order. It had planned to float its 23,04,000-unit shares from June 15 adding a premium of Rs 223.70 to the face value of Rs 100 per unit, making it a total of Rs 323.70 per unit share.But the locals of Rasuwa, where the hydropower project is located, have locked the project demanding shares and the company has agreed to give them eight per cent shares. Under the new regulation, Sebon permitted Chilime to give five per cent shares only to the locals and they moved court saying it was against the earlier agreement with Chilime.
Today the Court fixed another hearing on Chilime on June 29.

Listed hydropower companies
KATHMANDU: Currently, there are only three listed hydropower companies -- National Hydropower, Butwal Hydropower and Chilime Hydropower -- at Nepal Stock Exchange. After Arun Valley's listing, there will be four hydropower companies. National Hydro Power has listed its 13,851,862-unit shares at a face value of 100 per unit making it a total of Rs 1,385,186,200. Butwal Power Co Ltd has listed its 8,390,577-unit shares at a face value of Rs 100 per unit making it a total of Rs 839,057,700 and Chilime Hydropower Co has listed its 7,296,000-unit shares at a face value of Rs 100 per unit making it a total of Rs 729,600,000. The total number of hydropower companies' shares stands at 29,538,439-units worth Rs 2,953,843,900.

Forum of Nepalese Banks meet Prime Minister

Forum of Nepalese Banks presented a memorandum to Prime Minister Madav Kumar Nepal today.
Forum chairman and Himalayan Bank Ltd chairman Manoj Bahadur Shrestha presented the memorandum highlighting current burning issues related to banking and overall economic scenario. During the meeting with the premier, Shrestha said that the Nepali private commercial banking sector is just 25 years old.
"All stakeholders involved in this sector are in the primary stage and continuously upgrading their capability, knowledge base, service level efficiency and service quality expectations," he said.
He stressed the need for joint effort of all stakeholders for resolving issues evolved during the banking operations and betterment of the overall economic scenario of the country.
Forum general secretary Ashok Agrawal briefed the Prime Minister about the objectives of the forum and elaborated on concerns covered in the memorandum.
The Prime Minister assured the delegation of looking into the concerns of the forum and directing the concerned authority for early resolution of issues raised.
Forum of Nepalese Banks -- a corporate social forum has been established to fairly represent, lobby for the interest of all stakeholders in banks and bring about a broader perspective in the banking system of the country. It was registered at the District Administration Office, Kathmandu, on June 16. The ad hoc executive committee of the forum has been formed with nine members chaired by Manoj Bahadur Shrestha.

Forum of Nepalese Banks meets Prime Minister

Forum of Nepalese Banks presented a memorandum to Prime Minister Madav Kumar Nepal today.
Forum chairman and Himalayan Bank Ltd chairman Manoj Bahadur Shrestha presented the memorandum highlighting current burning issues related to banking and overall economic scenario. During the meeting with the premier, Shrestha said that the Nepali private commercial banking sector is just 25 years old.
"All stakeholders involved in this sector are in the primary stage and continuously upgrading their capability, knowledge base, service level efficiency and service quality expectations," he said.
He stressed the need for joint effort of all stakeholders for resolving issues evolved during the banking operations and betterment of the overall economic scenario of the country.
Forum general secretary Ashok Agrawal briefed the Prime Minister about the objectives of the forum and elaborated on concerns covered in the memorandum.
The Prime Minister assured the delegation of looking into the concerns of the forum and directing the concerned authority for early resolution of issues raised.
Forum of Nepalese Banks -- a corporate social forum has been established to fairly represent, lobby for the interest of all stakeholders in banks and bring about a broader perspective in the banking system of the country. It was registered at the District Administration Office, Kathmandu, on June 16. The ad hoc executive committee of the forum has been formed with nine members chaired by Manoj Bahadur Shrestha.

Drought, crop loss bring wolf to door

Drought has resulted in decreased national crop production in wheat and barley by 14.5 per cent and 17.3 per cent respectively. Crop losses in many hill and mountain districts of the Mid-western and Far-western regions were more than 50 per cent, said a report.
It also revealed that crop losses ranged from about 10 per cent in the Tarai to more than 50 per cent in some of the mountain districts of the Mid-western and Far-western regions. Such heavy crop losses have caused severe food insecurity in many communities in those region, particularly in areas where wheat and barley are food staples.
"More than a year of sustained high food prices has already stretched household resources to breaking point," said the World Food Programme. Limited income opportunities and lack of access to food due to frequent supply constraints have left many drought-affected households with few coping strategies to respond to this shock.
Nepal experienced one of its driest winters in 2008-09 resulting in significantly reduced winter crop yields, mainly wheat and barley, according to the report.In early April 2009, the programme issued an Emergency Alert based upon its field surveillance system, warning that some two million people might be pushed towards food insecurity because of drought. This was followed by a Crop and Food Security Assessment jointly carried out by the Ministry of Agriculture and Cooperatives (MoAC), WFP and FAO which estimated that in addition to current WFP programming an extra 700,000 people are in urgent need of immediate assistance.
Although crop production across the country was affected by drought, the magnitude of crop losses and resulting impact on food security vary greatly between different geographic regions of the country. The most affected areas are where wheat and barley play an important role in household food security -- essentially in the hills and mountains of the Mid-western and Far-western development regions. Severe winter crop losses are exacerbating an already precarious food security situation caused by several years of poor crop harvests, poverty, sustained high food prices and frequent market supply shortages.

BUDGET BUZZ: Bring practical and target-oriented budget

Nepal Chambers of Commerce wants the budget to be more practical and target-oriented. NCC hopes the budget will incorporate more long-term projects and programmes which have a lasting positive effect on the economy. The budget should focus on the development of rural areas and rural economy.

NCC believes that without sustainable peace, no business can flourish and without business/investment economic development is a distant dream. So, the first priority of the government should be establishment of lasting peace and favourable business environment. For favourable business environment and sustainable peace, the government should immediately put an end to bandhs, chakkajams, strikes and road blockades. It should protect investors and their investment and secure their right to do business.

Only then will a favourable environment be created for the private sector's development. The budget should focus on development of key areas like agriculture, hydropower, tourism, manufacturing sector and infrastructure development for economic growth. The budget should promote Public-Private-Partnership (PPP) in infrastructure development and clearly define the role of the private sector in this approach.

NCC further believes that the budget should emphasise on creating more jobs so that we can stop the younger generation migrating abroad. We have been urging the government to abolish the syndicate system and scrap the scrap tax which will give relief to people from spiraling price hike. The proposed property tax should not be implemented before a new Constitution comes into effect. Also, no new tax policies should also be implemented in this period.

NCC demands the implementation of multiple VAT for its effectiveness and generation of more revenue. The single VAT rate has been ineffective and most contentious since its implementation. Also, the VAT system should be reformed so that exchange of bills becomes feasible in transactions.

The existing labour policy is a major bottleneck in Nepal's industrial and economic growth. The rigid labour policy is the main reason for low productivity and disputes between management and employees. So, the budget should amend this policy and make a new liberal and investment-friendly labour policy. The government should ratify the foreign investment policy, industry policy, commerce policy and hydropower act in the House, form the proposed Investment Board and set up Special Economic Zones within a month.

The consumer policy should be rectified and made business friendly as businessmen also are consumers. The budget should allocate funds for upgradation of TIA and construction of a new international airport. Similarly, new regional airports should be constructed in districts like Pokhara and Rupandehi. For development of hydropower sector, the budget should waive taxes on investments made in hydropower and provide tax holiday for 10 years.

Similarly, industries using local raw materials should also be granted this facility.

NCC wants the budget to promote Information and Communication Technology in Nepal and also increase use of ICT among the general public by cutting customs duty and providing VAT free facility. The government should also implement e-governance for better service and good governance. Climate change will be the biggest hurdle in the growth of LDCs like ours. Already, Nepal has started facing the effects of climate change in the agriculture and environmental sectors. So, NCC wants government to allocate fund for tackling this issue before it is too late.

Surendra Bir

President

Nepal Chambers of Commerce (NCC)

A trip of lifetime, literally

As summer draws near, the call of the open spaces beckons you to seek new adventures. Three Nepali youth icons -- Nima Rumba, Dipak Bista and Suraj Singh Thakuri -- are going to conquer the Himalayas in the campaign 'Road Trip to Everest'. This is the first ever adventure planned in Nepali biking history.
Sacred Summits Pvt Ltd that has been organising motorcycle tours across Nepal and to Tibet, India and Bhutan for more than half a decade has taken the responsibility to take them to Tibet -- always a dream for most motorcycle ethusiasts around the globe -- in association with Yamaha. The Yahama FZ team will be the first ever Nepali team to go to Everest Base Camp (North) in Tibet on motorcycles. This is the first time in the history of Nepal that a bike of 150cc category will be ridden to such high altitudes and on a route which is used for only a limited period in a year. Only heavy bikes and strong riders are advised to travel on such a road where oxygen level falls lower as altitude increases. Till date only 4x4 wheel drive SUV's have traversed that road.
"Tibet is the Roof of the World. Only a priveleged few have had the opportunity of riding motorcycles on the Tibetan plateau," said Rabi Thapa, CEO of the Sacred Summits (Pvt) Ltd.
This touring adventure to Tibet involves riding for long hours on one of the most challenging terrains in the world. "The remoteness, the desert-like landscape and high passes like Thong La Pass at 5050 metres as well as Lalung La Pass and Gyawla Pass at 5200 metres is a journey not definitely for the faint-hearted," he said adding that it is a 'once-in-a-lifetime-adventure'The chance to visit one of the most famous places on earth, Everest Base Camp (the North side or popularly known as the Chinese side) is definitely an opportunity of a lifetime.
Nepal has lots of places that are more adventure-laden but why Everest Base Camp? "The answer is simple," said Thapa, "The mother of all mountains is Mt Everest and for climbers, this is the pinnacle. So it is, for motorcycle riders too. The name of Everest draws people like a magnet and no matter where you ride there is always a pride and sense of achievement at having reached Everest Base Camp.
Nepali music heartthrob Nima Rumba said that he has not been to Everest Base Camp. "I took is as a challenge," he said adding that its a way of testing ownself one's limit. He is convinced that he will prove his mettle.
Morang Auto Works (MAW), the sole authorised dealer of YAMAHA motorcycles for Nepal, is providing an opportunity for enthusiasts of FZ16 to be a part of the 'Road Trip to Everest' -- a tour programme planned by MAW. The three customers of FZ 16 chosen via lucky draw will get a chance to be part of this tour along with the three celebrities.
However, the riders must note that traffic in Tibetan Autonomous Region of China is on the right side of the road. It takes a while getting used to it and of course, China follows Beijing time and so, as soon as riders cross the border they needs to be aware of high altitude, local customsand traditions. Besides, some knowledge of the history of the country does add more charm and feel to the ride.
Riders need to prepare a lot; not only mentally. Apart from that clothing is yet another important factor. "Tibet can be cold, dusty and harsh at times and sometimes it is all sun and fun," added the master rider, who has accompanied lots of teams on the Tibet tour. "We always tell our riders it's always better to be over-prepared than under-prepared when riding in the Himalayas," he said. Before the ride, Thapa and his team brief the riders and team members about the trip and what they should expect ahead. "But it always surprises them with its appealing charm."
"It will of full of surprises," accepts Rumba. "There will be difficulties -- like climate, physical and mental -- that's why its challenging," he said adding that one should be physically and mentally both prepared to face the challenges on such long and exciting tour. And why not he has friends like sportsman Bista and Thakuri, who are willing to take challenges.
Everyone should have good riding gear as well as protection from the wind. A good helmet with visor, wind/waterproof jackets, gloves, riding boots and good sun glasses are essentials. Another important thing to remember is that this trip is not a race and so the riders need to ride in a group as well as enjoy the fabulous scenery along the way.
The camarederia between sportsman Dipak Bista, singer Nima Rumba and VJ and presenter Suraj Singh Thakuri will definitely be stronger after the long and challenging trip.
"Riders should stop to take photographs, drink water to hydrate -- because the altitude dehydrates the body -- relax and enjoy the adventure," suggested Thapa, who is taking the first Nepali team on the Tibet tour.
While travelling over 3000 metres, there is always the risk of Acute Mountain Sickness (AMS). However, the trip leader will be well-versed in first aid and thorough knowledge of AMS and will be carrying a comprehensive first aid kit. To battle AMS, there will be bottled oxygen, Body PAC (an altitude portable chamber) as well as Diamox (acetozolamide), a medication that seems to assist in acclimatization.
Since this is an adventure and the journey is being undertaken in the middle of the monsoon, there are chances of landslides, bad road conditions and maybe even having to ride in the night due to traffic diversions.
Anything and everything is possible but it is guaranteed that it will be the trip of a lifetime or as the Sacred Summits Riders' slogan says, "Life is an Adventure…. Ride it!"

BUDGET BUZZ: End impunity, white corruption

Our economy has long been suffering from impunity, red tape, white collar corruption, bad governance and industrial unrest.

Sloganeering and the CA elections have hyped people's aspirations. The industrial sector was hopeful but nothing was delivered for peace, development or an industry-friendly environment. The tragedy is that even the budgeted development expenditure was not spent.

The global economy is moving ahead and integrated with matching demand and supply based on comparative and competitive advantage. But where are we heading? Can we sustain whatever employment we have or whatever industrial input we have?

After elections, Nepal got a new political regime and we should have taken radical steps so that the economy could take off and become self-driven. However, this is nearly possible without understanding the Common Economic Agenda (CEA).

Still, it's never too late and with this budget it could be one step towards that direction.Some broad areas are outlined below for consideration in the new budget.

- Time-bound one-window mechanism for the industrial sector to attract investments.

- One-window committee to allow fast-track decisions for new hydro projects.

- Opening up new sectors in tourism and developing Nepal as the hub of South Asia.

- Implementation of laws and policies for better investment environment.

- Built confidence of the private sector and fight white collar corruption especially in the revenue administration.

- Link India and China with Nepal as transit facilitator. Explore the potential to complement and supplement Sino-Indian opportunities for generating employment.

- Develop Nepal as service sector economy.

- Develop Nepal as an offshore centre (we already have a law on this).

- Implementation of SEZ.

If we cannot deliver development, equitable opportunity and economic rights the political conflict in Nepal will never rest and peace can never flourish. This is possible thru more and more investment and generation of employment. While drafting the new constitution it is up to us to take socio- economic rights as basic and fundamental rights of the people and budget can be 1st step to make people feel so by creating opportunity.

Rajendra Kumar

President

Young Entrepreneur's Council

Budget should be based on Three Year Interim Plan

The budget should be based on the Three-Year Interim Plan and Common Minimum Programme (CMP), suggested Dr Pushparaj Raj Rajkarnikar, former member of National Planning commission (NPC) at an interaction at Reporters' Club here today.
Agriculture, hydropower, tourism and infrastructure development are the key areas the budget should address for economic growth, he said.
Previous governments also brought some good programmes like literacy programme -- that could bring social transformation needed for economic development -- and fast-track construction, Rajkarnikar said adding that the private sector did not come forward for the much-talked Fast Track Road construction due to frequent bandhs and insecurity. "The private sector is not willing to invest," he added. "It should be taken into confidence and the cooperatives sector groomed, apart from making the budget inclusive and a socially transformative one."
Finance Secretary Rameshwor Khanal also agreed the private sector has to be taken into confidence and that the government should create an investment-friendly environment. "Commercialisation of agriculture thereby creating more jobs in agriculture, industrial security, expansion of road network for access to markets, and focus on spending on health and education for long term socio-economic change are the priorities of the budget," he said adding that post-conflict rehabilitation, relief and reconstruction are also important factors that the budget would not fail to address.
The private sector has suggested consistancy in revenue policy and the finance ministry is positive on that, he assured the business community. "For implementation of long-term projects, the government is thinking of a multi-year budget," Khanal added.However, Federation of Nepalese Chambers of Commerce and Industry (FNCCI) president Kush Kumar Joshi said that the security is key to industrial development. "Industrial Security Force, solution to energy crisis, increasing competitiveness by scrapping the scrap tax and implementing multi VAT and boosting investors' confidence are vital for employment generation," he said adding that the budget must ensure peace in the industrial sector.
"Due to low export and high import, trade deficit of Nepal with other trading partner countries is widening hugely," said Prof Dr Bishwhambher Pyakurel. "The trade deficit is at Rs 208.51 billion currently and is estimated to go up to Rs 330 billion by the end of the next fiscal year. Currently import is double the export," he said adding that the contribution of industrial sector to the gross domestic product (GDP) has been decreasing. He pointed out that the projection of the budget would fail if there was no coordination between Monetary Policy and Fiscal Policy. He also suggested forming a mechanism under the finance secretary to make fiscal and monetary policies compatible.
The Public-Private-Partnership concept has come to Nepal a long time ago but it has not moved forward. FNCCI has prepared a technical paper on the modality of PPP. "Government apathy has made the PPP only a slogan," Prof Dr Pyakurel complained.
Nepal Chambers of Commerce president Surendra Bir Malakar urged the government to bring multi VAt system for effective revenue mobilisation. He also suggested expanding tax net rather than increasing tax rate.
NPC former vice-chairman Dr Narayan Khadka advised the government not to bring a populist budget.

BUDGET BUZZ: Continue pro-industry policy

Confederation of Nepalese Industries (CNI) wants the government to continue with pro-industry policies and programmes. The pressing issues that are hitting the business and industry sectors are energy crisis, labour disputes and frequent bandhs and strikes that the new budget should address immediately.

CNI is concerned over the rising price that is an against the world trend. CNI wants the budget to focus on immediate ratification of Foreign Direct Investment (FDI) Policy, establishment of Investment Board and product-specific Special Economic Zones (SEZs) and formation of industrial security force to make an investment friendly environment for double digit growth. The SEZs that are proposed for Jhapa, Dhanusha, Birgunj, Panchkhal, Jumla and Dhangadhi should be supported by industries like cement factories in Udayapur, Hetauda, Dang and Surkhet.

Likewise, CNI wants an end to the syndicate in the transport sector and also stopping the practice of calling road blockades. Industrial revolution is necessary to end unemployment. The budget should provide tax rebate for large scale industries that employ above 500 staffers as this would encourage industries to generate more employment. CNI also wants the budget to bring provisions that could provide special facilities to those industries that hire over 25 per cent women workers.

The new budget must reduce custom duty on raw materials. CNI requests the government to make a policy of returning customs duty of export industries and establishment of a high-level revenue board with active participation of the private sector.

With the focus on tourism promotion, CNI proposes an international airport in Neejgarh of Bara district and regional airports in Pokhara and Bhairahawa. The government has declared the year 2011 as Nepal Tourism Year targeting to welcome one million tourists. To attract more tourists, CNI also proposes that the government make heritage hotels in old palaces.

Nepal needs a long-term policy for modernisation and commercialisation of the agriculture sector. Infrastructure development is another key aspect of our economy that the budget needs to give priority to. CNI proposes that an Infrastructure Development Bank with Public-Private-Partnership (PPP) model be developed along with construction of East-West railway in the Tarai as well as roads in the hills.

CNI also wants to see Nepal as a transit point between two fast growing economies -- India and China -- through the construction of North-South highways in Mahakali, Karnali, Kali Gandaki and Koshi river corridors. The budget must spell out policy measures to end energy crisis including simplification of licensing process and also no license for up to three megawatt (MW) hydropower projects. To encourage hydropower generation, the budget should bring a policy that needs no environment impact assessment for up to 50 MW hydropower generation.CNI also urges the government to mobilise all its diplomatic missions abroad for economic diplomacy to encourage Nepali exports.

Binod Kumar

President,

Confederation of Nepalese Industries (CNI)

NRB set to move court seeking liquidation of Nepal Development Bank

Nepal Rastra Bank's (NRB) Board meeting, finally, decided today to move to Patan Appellate Court for the liquidation order of the troubled Nepal Development Bank (NDB).
The NRB board took the decision after it was not satisfied with the clarification NDB submitted on Thursday. "The clarification is abstract," a board member said.
Earlier, the NRB on Friday has again sought NDB's clarification either it was of the Board of Directors' decision or the chairman's only as the clarification letter submitted to NRB on Thursday was signed by the NDB chairman Amar Gurung only. The NRB had asked NDB's board to clarify its stand.
On June 2, the NRB has decided to seek explanation with the ailing development bank on why should not it be liquidated. The NRB has given it a 15-day to submit the clarification.
According to the clause 86 of the Nepal Rastra Bank Act, NRB has given a 15-day deadline for the clarification to NDB. The NRB will now file a case at Patan Appellate Court seeking permission for NDB's liquidation under clause 74 of Banks and Financial Institutions Act (BAFIA).
On June 18, NDB submitted a capital plan seeking time till October 17 to improve its financial health. It had claimed that given the opportunity, it could sell shares of various institutions and get back the deposit from National Cooperatives as instructed by NRB. "It still would need an additional Rs 70 million capital injection after it managed to get its money back," according to the NDB.
"The NDB could not be revived as there isn't any guarantee that it will make amends as it has repeatedly been flouting the central bank's directives," said the NRB that has frozen its all accounts after it sought explanation.
According to the findings of central bank, small depositors will get their money back since the financial institution has Rs 16.5 million in cash and Rs 160.3 million bank deposit. Employee Provident Fund (Rs 331.4 million) and the Nepal Army (Rs 180 million) might not get their money back but small depositors that are around 3,5 00 need not worry, NRB said.
NDB -- the nation's first development bank -- started operations in 1998. Though it has a paid-up capital of Rs 320 million, it ran into huge losses, pegged at Rs Rs 690.2 million till the end of mid-March. Its non-performing assets are at 55.09 per cent and capital adequacy ratio (CAR) stands at a whopping 48.31 per cent. As per rule, a bank must maintain its CAR at 11 per cent.
On October 11, 2007, NRB had declared NDB a problem institution and directed it to take a slew of corrective measures but NDB never toed the central bank's regulatory obligations and played dirty with depositors' money.

Nepal, Europe to be linked via air

TUI/Arke Fly of the Netherlands is planning to re-launch direct flights from Holland to Nepal from October 2009. At first, there will be one flight per week which could be increased as per the market demand in future.
Nepal's ambassador to Holland Pramesh Kumar Hamal said increased air connectivity to Nepal from the market hubs of Europe such as Holland would have a positive effect on the resurgence of tourism in Nepal. Speaking during a programme organised under joint auspices of Nepal Embassy in Brussels and TUI/Arke Fly Group of Holland, envoy Hamal said Nepal has adopted a liberal and open sky policy in view of its own landlocked status.
"Arke Fly would be able to tap the already existing market demand for direct air connection to Nepal," he said, stressing on the priority accorded to the tourism sector. He added that a new tourism policy has recently been brought out and the campaign 'Nepal Tourism Year 2011' has been launched.
Hamal highlighted the unique and unparalled attractions of destination Nepal and underscored the need to harness the rich potential of tourism development for the benefit of Nepalis.TUI/Arke Fly chief executive officer Steven Vander Heijden said Holland's past experience in direct flight operations to Nepal would help restart the air link. "The decision to resume flights to Nepal from October 2009 draws a lot from those experiences," he said adding that Nepal has a magnetic charm as a tourist destination. Transavia and Martin Air used to fly to Nepal in the past.

NRB agains seeks clarification with NDB

Nepal Rastra Bank (NRB) has asked the troubled Nepal Development Bank (NDB) to clarify its Board of Directors' stand on the clarification letter that it submitted to NRB on Thursday.
The NDB submitted its explanation -- signed by its chairman Amar Gurung -- to NRB but NRB said it had sought clarification on why the ailing development bank should not be liquidated from its board, said a high ranking NRB official.
The NRB letter asked NDB's board to clarify its stand. "If the clarification is from the board also, the minutes of the board meeting also have to be submitted along with the clarification," the official said adding that the minutes of the board meeting are a must if it is the board's decision. "It is unclear whether it is the NDB chairman's personal explanation or the reply of the board of directors."
"Yes, we have received a query letter," NDB acting chief executive officer Purna Prasad Sharma said adding that the board is meeting to darft a clarification to NRB after it received the letter.
On June 18, NDB submitted a complete capital plan but also sought time till October 17 to improve its financial health. It claimed that given the opportunity, it could sell shares of various institutions and get back the deposit from National Cooperatives as instructed by NRB. However, it still needs an additional Rs 70 million capital injection even after it manages to get its money back.
However, there isn't any guarantee that NDB will make amends as it has repeatedly been flouting the central bank's directives.Individual depositors will get their money back since the financial institution has Rs 16.5 million in cash and Rs 160.3 million bank deposit. The NRB's findings show the Employee Provident Fund (Rs 331.4 million) and the Nepal Army (Rs 180 million) might not get their money back but small depositors need not worry. NDB has around 20,000 shareholders and 3,500 depositors.
If NRB finds the clarification unsatisfactory, it will file a case at Patan Appellate Court to press for NDB's liquidation. NRB has already seized all its assets and frozen the accounts in various financial institutions.
NDB -- the nation's first development bank -- started operations in 1998. Though it has a paid-up capital of Rs 320 million, it ran into huge losses, pegged at Rs Rs 690.2 million till the end of mid-March. Its non-performing assets (NPA) is at 55.09 per cent and capital adequacy ratio (CAR) stands at a whopping 48.31 per cent. As per rule, a bank must maintain its CAR at 11 per cent.On October 11, 2007, NRB had declared NDB a problem institution and directed it to take a slew of corrective measures but NDB never toed the NRB line.

BUDGET BUZZ: Bring investment-budget

As the umbrella organisation of the Nepali private sector, the Federation of Nepalese Chambers of Commerce and Industry (FNCCI) wants this budget to focus on increasing investment -- in short, it should be an 'investment budget'.

Without an favourable investment-climate and increased investment, economic development would be a distant dream.

To create an investment-friendly climate, anarchy and the culture of bandhs, strikes and road blockades -- that are bleeding the business white -- should be immediately stopped. If bandhs continue, industrialists will be compelled to close their business further fuelling unemployment problems. The government should bring a provision where businesses can get compensation for losses caused by bandhs, strikes and road blockades.

The government should also take strong measures to promote investment in productive sectors. The budget should be guided by the value of production. The security of investors and their investment are the main problems in Nepali private sector. Other obstacles are dilemma in adopting an economic policy and laws, their implementation and the prevailing energy crisis. The budget must encourage generation of wind energy, solar energy and energy from wastage.

The budget should also promote private public partnership (PPP) in infrastructure development, enhance the purchasing power of consumers and promote good governance. It should focus on strengthening joint public-private investment with greater leverage to the private sector.We suggest that the budget set a growth target of eight per cent for the fiscal year 2009-10 because it is a prerequisite for fast development. Nepal can achieve this target if there is peace and a business-friendly environment. For speedy development, the government must immediately ratify foreign investment policy, industry policy and commerce policy in the House, form the proposed Investment Board and set up Special Economic Zones (SEZs) within a month.Stable tax policies encourage businessmen to invest more. Thus, FNCCI opposes any new tax policies that government might introduce before the country gets a new Constitution. The budget must address the private sector's demand of multiple VAT at 1, 4 and 13 per cent instead of the present 13 per cent VAT. There has been a huge leakage in revenue due to single window VAT. If multiple VAT comes into effect, the government will be able to generate more VAT revenue. The budget must waive taxes on investments made in hydropower and reduce corporate tax by five per cent to 20 per cent which now stands at 25 per cent. The Kabadi Tax (scrap tax) must be scrapped and the proposed property tax should not be implemented before a new Constitution comes into effect.

The manufacturing sector should not be charged more than 8-10 per cent interest rate. The industries hit by conflict should get a chance to reschedule loans and get waiver on interest for the duration of the conflict period. The budget should also declare tax holiday for 10 years to industries that use domestic raw materials. To encourage domestic production, the budget must make it mandatory to buy domestic goods for official purposes.

Apart from tackling the deteriorating law and order, power crisis and other infrastructure related problems, the budget must also try to resolve the private sector's pressing problems like labour disputes. The government should ensure a liberal labour policy that guarantees 'No Work, No Pay' and ban politically-affiliated trade unions. Trade unions should be apolitical.

Kush Kumar

President

Federation of Nepalese Chambers of Commerce

Shareholders of Bishal Bazaar Company gain

Except for the shareholders of trading sub-group, all others lost this week.
After a long time Bishal Bazaar Company saw its 324-unit shares being traded on Thursday to push the trading sub-group's index up by 8.57 points to 290.35 points. Bishal Bazaar's shares were traded between Rs 3,213 (maximum) and Rs 3,150 (minimum) making a total of Rs 1,029,060 transaction. The shareholders gained Rs 100 as the shares last time were traded at Rs 3,100.
Of the total nine sub-groups, two sub-groups -- manufacturing and others -- did not see any changes in their indices as manufacturing sub-group did not see its shares being traded throughout the week whereas others group had a rollercoaster ride before closing at 646.19 points equal to the last week's closing.
The shareholders of commercial banks, development banks, finance companies, hydropower, insurance companies and hotels have to wait for a couple of weeks to get better prices for their scrips as investors' have not gained confidence yet.
Though the Nespe dropped by only a minimal 0.68 point -- to close at 683.71 points from last week's closing of 684.39 points -- the transaction amount dropped by a whopping 75.79 per cent to Rs 230.97 million against last week's increase of 176 per cent to Rs 953.93 million.
The sensitive index also lost 0.32 point to 183.64 points from 183.96 points. Similarly, the float index also shed 0.23 point to close at 66.03 points from last week's closing of 66.25 points. Similarly, the contribution of Group-A companies also plunged to 14.38 per cent against last week's 46.99 per cent.
The top performers of this week are NCC Bank (with Rs 30.70 million), Bank of Kathmandu (with Rs 14.62 million), Standard Chartered Bank Nepal (with Rs 13.48 million), Citizens Bank International (with Rs 12.82 million) and Nepal SBI Bank (with Rs 10.71 million).
National Hydropower company topped the chart in terms of share units traded as its 1,11,000-unit of shares changed hands, whereas Nepal Express Finance topped the chart in terms of number of transactions with 563 transactions.
The sole secondary market this week also added 175,71,593-unit rights shares of Nepal Investment Bank, Siddhartha Development Bank, Infrastructure Development Bank and Pokhara Finance.

Trading sub-group
KATHMANDU: Nepal Stock Exchange (Nepse) has listed only four companies -- Salt Trading Corporation, Bishal Bazaar Company, Nepal Trading Ltd and Nepal Welfare Company Ltd -- under trading sub-group. Bishal Bazaar Company has listed its 4,91,400-unit shares at Rs 100 per unit face value making it to a total of Rs 49,140,000. Similarly, Salt Trading Corporation has liated 247,777-unit shares at the face value of Rs 100 per unit making it to a total of Rs 24,777,700. Nepal Trading Ltd has listed its 50,000-unit shares at Rs 50 per unit paid up making it to a Rs 2,500,000 and Nepal Welfare Company has listed its 41,000-unit shares for Rs 50 paid up per unit making it to a total of Rs 2,050,000. The trading sub-group has a total of 830,177-unti shares worth Rs 78,467,700.

World hunger reaches one billion mark

The global financial meltdown has pushed the ranks of the world's hungry to a record 1 billion, a grim milestone that poses a threat to peace and security, UN food officials said today.
Because of war, drought, political instability, high food prices and poverty, hunger now affects one in six people, by the United Nations' estimate.
The financial meltdown has compounded the crisis in what the head of the UN Food and Agricultural Organisation a "devastating combination for the world's most vulnerable."
Compared with last year, there are 100 million more people who are hungry, meaning they consume fewer than 1,800 calories a day, the agency said.
"No part of the world is immune," FAO's Director-General Jacques Diouf said. "All world regions have been affected by the rise of food insecurity."
The crisis is a humanitarian one, but also a political issue. Officials presenting the new estimates in Rome sought to stress the link between hunger and instability, noting that soaring prices for staples, such as rice, triggered riots in the developing world last year.
Josette Sheeran of the World Food Programme (WFP), another UN food agency based in Rome, said hungry people rioted in at least 30 countries last year. Most notably, soaring food prices led to deadly riots in Haiti and the overthrow of the prime minister.
"A hungry world is a dangerous world," Sheeran said. "Without food, people have only three options: They riot, they emigrate or they die. None of these are acceptable options."
Even though prices have retreated from their mid-2008 highs, they are still "stubbornly high" in some domestic markets, according to FAO. On average, food prices were 24 percent higher in real terms at the end of 2008 compared to 2006, it said.
"Malnutrition kills through the fact that it weakens the immune system of a child," said Andrei Engstrand-Neacsu, a Nairobi, Kenya-based spokesman for the International Federation of Red Cross and Red Crescent Societies in East Africa. Some 22 million of the 1 billion hungry people counted by the United Nations are in the drought-stricken Horn of Africa, he said.
Engstrand-Neacsu said he had just returned from a corner of southern Ethiopia on the Kenyan border where the food situation is dire, and had been speaking to a family who lost a child to malaria in February. The parents said they were told he couldn't be saved because he was malnourished.
Engstrand-Neacsu called on donors to act before "skeletal African children are shown on the television screen at dinnertime" in the West.
The number of hungry people is estimated to have reached 1.02 billion — up 11 percent from last year's 915 million, FAO said. The agency said it based its estimate on analysis by the U.S. Department of Agriculture.
FAO said that the hunger rate is rising, too — that is, the number of hungry people is growing more quickly than the world population. Officials did not provide a rate but said the trend began two years ago.
Almost all the world's undernourished live in developing countries. But all regions of the world have registered two-digit increases in hunger from last year.
The world's most populous region, Asia and the Pacific, has the largest number of hungry people — 642 million, up 10.5 percent from last year. Sub-Saharan Africa registers 265 million undernourished, an 11.8 percent increase. Even in the developed world, undernourishment is a growing concern, with 15 million in all and a 15.4 percent increase, the sharpest rise around the world, FAO said.
The dire figures make it highly unlikely that a goal set by the wealthiest nations to cut hunger in the world in half by 2015 will be met, though officials vow to press world leaders at the Group of Eight summit gathering in Italy next month.
FAO said the calorie-limit it employs to declare a person hungry is on average 1,800, though it changes slightly from country to country.
Alice Lichtenstein, a professor of nutrition science and policy at Tufts University, said FAO's hunger definition was reasonable, if a little conservative. She said the 1,800-calorie threshold represented the number of calories most adults need to maintain their body weight, but that the figure would vary depending on a person's size and level of physical activity.
The number of calories for children varies even more. They need fewer calories because they are smaller, but also need increasing amounts as they get older to ensure they are growing.
World cereal production in 2009 was strong, but the global economic downturn resulted in lower incomes and higher unemployment rates — and therefore reduced access to food.
The crisis also affects the quality of nutrition, as families tend to buy cheaper, calorie-rich but nutrient-poor foods such as grains, at the expense of meat, dairy products and other expensive and high-protein foods.

World Bank aid for power development

The World Bank today approved $89.2 million to help Nepal implement its Energy Crisis Management Action Plan.
Nepal is experiencing an energy crisis of unprecedented severity, caused by years of under-investment and sharp growth in electricity demand. This long-term problem exacerbated last year due to drought in parts of the country and loss, through flooding, of a transmission line that was used to import electricity from India. As a result, by January 2009, grid-based consumers were being supplied with electricity for only eight hours per day
This has had a highly negative impact on all aspects of the economy and imposed a heavy burden on Nepalis. While recent rains have brought some relief against the power supply crisis, the shortage of storage capacity in the system means that the power supply deficit will continue to be severe in the coming winters
The government has declared a 'national energy crisis' and its immediate priorities are to identify and implement quick investments to prevent in the coming winters a repeat of crises of similar magnitude while implementing medium-to-long term development plans on a parallel basis. The government also intends to ensure the continued expansion of its successful micro-hydro rural electrification programme.
"Increasing access to electricity is one of the major human and economic development challenges facing Nepal," said Susan Goldmark, World Bank Country Director for Nepal. "While it is clear that chronic power shortages will continue to be a defining feature of life in Nepal for several years to come, the bank is stepping up its assistance to help Nepal minimize economic impacts and hardships in the short term and also to implement medium to long term development plans. Some 36,000 rural households will benefit from the expansion of Nepal's micro-hydro programme."
The additional financing for the Nepal Power Development Project, which was approved on May 22, 2003, will include investments in rehabilitation of the Kali Gandaki 'A' Hydro Electric Plant (HEP), the largest plant in Nepal's power system as well as of two existing thermal plants in Duhabi and Hetauda
It will also finance construction of the Bharatpur-Bardaghat transmission line, strengthen the old and severely overloaded distribution network in Kathmandu Valley and expand the government's off-grid micro-hydro rural electrification programme. These investments are intended to strengthen Nepal's power system by increasing energy production through reduction of down-time at the Kali Gandaki 'A' HEP, making available an estimated 22 MW of capacity at the existing thermal plants
It will also improve the reliability of the Kathmandu Valley distribution network by adding 500 MW transmission capacity to relay power from existing and expected future projects. An additional 4.25 MW is expected to be installed through the micro-hydro programme.
Nepal's total grid-connected generation capacity amounts to a meager 683 MW, and the actual available capacity at any point in time is generally considerably lower. "Load-shedding", or rotating outages, has long been a facet of the hydro-dependent power system in Nepal, where protracted conflict, weak institutions and low finances have hampered the addition of power generation capacity
Electricity supply is worse in the dry season (October to May) when river water levels are lower. "In the absence of a concerted scale-up of grid-supplied power, Nepal will continue to be burdened by a heavy reliance on costly, and often polluting, alternative means for meeting the demand for electricity", said Michael Haney, senior energy specialist at the World Bank. "While some cite the high costs of hydropower development as an argument against developing Nepal's great potential in this area, the cost to the economy of doing without electricity or relying on alternatives is enormous."
The additional financing is a blend of credit ($73.7 million) and grant ($15.5 million) from the International Development Association, the World Bank's concessionary lending arm. The credit has 40 years to maturity with a 10-year grace period.

Discussion on good corporate governance

Corporate governance is an area of great importance for all financial and real sector institutions, opined experts here today during a seminar on 'Good corporate governance means good business' organised jointly by Nepal Stock Exchange (Nepse) and International Finance Corporation (IFC), the private sector arm of the World Bank Group.
"For companies, good governance means securing access to broader based, cheaper capital," said Nepse general manager Shanker Man Singh, adding that for investors it means enhanced shareholder value. "Good governance equals good business. All of us are working towards that goal, whether through legislative measures, training or inculcating new standards of ethics in business," he said.
At a time when domestic companies are deep into boardroom disputes, corporate good governance is in a shambles. Regulatory authorities like Nepal Rastra Bank (NRB), Securities Board of Nepal (Sebon), Beema Samiti, Company Registrar and front line regulator Nepse face great challenges in safeguarding depositors' and shareholders' rights.
Though in April 2005 Corporate Governance Country Assessment -- a corporate financial governance project that provided the impetus for the development of Nepali capital market -- with the help of World Bank, the situation has not yet improved.
For the regulatory authorities supervision and monitoring are becoming more challenging due to lack of trained manpower, infrastructure and increasing number of public companies.
"The Company Act provides basic corporate framework, but when companies go public and their shares get publicly traded at the sole secondary market, their corporate good governance is a matter of concern for the public as well," Singh said.
"Capital market is limited to family, multinationals are not going public and public enterprises are suffering from political influence," said Constituent Assembly member and industrialist Padhma Jyoti. With a five-decade long experience and expertise in Nepali corporate business, he urged entrepreneurs to escape from political turmoil.
Mike Lubrano, MD of Catrca Capital, Washington presented a paper on, "Stock Exchange and Improvement in Corporate Governance: the Case of Novo Mercado, Brazil'. Sanaa Abzouzid of IFC presented a paper on 'Preparing a family business for IPO'. She explored the feasibility of transformation of family business into public business in Nepal.
A firm with good governance can attract higher investment premiums, have cheaper access to debt, outperform its peers in the long run and gain better access to multilateral investors. To establish good corporate governance, a firm should have well-defined shareholders rights including protection of minority shareholders, solid control environment including strong risk management and internal control, high levels of transparency and disclosure and an empowered and capable Board of Directors.
"Business is not just about making sound investment decisions, taking and managing risks and dealing with economic uncertainties. Today, it is about social responsibility, putting all of our actions under public scrutiny and responding to the concerns of those among whom we conduct our business in open and accountable way," Singh said adding that it is important for all to remember that good governance, like personal integrity, is no longer a luxury but a necessity.
Securities Board of Nepal chairman Dr Sur Bir Poudel, Nepal Bankers' Association president Sashin Joshi, Himalayan Distillery chairman Narendra Basnyat and Unilever Nepal managing director Kamran Baqr also shared their experiences of corporate good governance.
NRB deputy governor Krishna Bahadur Manandhar and Washington-based IFC corporate governance unit's Maxin Garvey also shed light on good corporate governance.

Nepal Development Bank seeks time to improve

Troubled Nepal Development Bank (NDB) has submitted its explanation, signed by its chairman Amar Gurung to the Nepal Rastra Bank (NRB) today - ahead of the deadline that expires on Sunday.
"We've submitted a complete capital plan, seeking time till October 17 to improve our financial health. If we get the opportunity, then we can sell the shares of various institutions and get back the deposit from the National Cooperatives as instructed by the NRB. Once we manage to rack in this sum, we will still be in need of additional Rs 70 million capital injection," said Purna Prasad Sharma, acting CEO of NDB.
Incidentally, the DB chairman has only signed the clarification letter. Hence, it is unclear whether it is his personal explanation or conveys the message of the board of directors as well."We'll ask the bank tomorrow to clarify the board of directors' stand. But, there isn't any guarantee that it'll make amends since it has been repeatedly flouting our directives," said a senior NRB official.
"But the individual depositors will get their money back since the financial institution has Rs 16.5 million in cash and Rs 160.3 million as bank deposit," the central bank said adding that its findings show that save the Employee Provident Fund (Rs 331.4 million) and the Nepal Army (Rs 180 million), small depositors need not worry as they will get back their deposits back. The NDB has around 20,000 shareholders and 3,500 depositors.If the NRB finds the clarification unsatisfactory, then it will file a case at the Patan Appellate Court to press for the bank's liquidation.The NRB has already seized all its assets and freezed the accounts in various financial institutions.
NDB - the nation's first development bank - started operations in 1998. Though it has a paid-up capital of Rs 320 million, it ran into huge losses, pegged at Rs Rs 690.2 million till the end of mid-March. Its non-performing assets are at 55.09 per cent and capital adequacy ratio (CAR) stands at a whopping 48.31 per cent. As per the rule a bank maintain its CAR at 11 per cent.
On October 11, 2007, the NRB had declared the goings in the bank as a problem and directed a slew of corrective measures but the NDB never followed the NRB's directions.

Revenue target to go up by 20 per cent

The finance ministry is preparing the Revenue Policy for the fiscal year 2009-10. On the basis of the policy, the revenue target will be set though according to tradition the ministry increases the revenue target every new financial year.
"According to tradition, successive govenrments have been increasing the revenue target by over 15 per cent to 20 per cent every year," said Dr Shanker Sharma, former vice-chairman of the national Planning Commission (NPC), the country's think-tank.
If revenue target is increased by 20 per cent, it will come to around Rs 170.06 billion. The size of the budget might also go beyond Rs 280 billion. "Setting a high revenue target will help stop leakages and corruption," he opined
"If the government wants to increase the revenue target, the infrastructure is in place," said acting revenue secretary Krishna Hari Baskota. Due to the Voluntary Disclosure of Income Sources (VDIS) also, the tax net has widened giving room for increase.
However, the business community has been requesting the government not to be revenue-oriented but to implement earlier policies.
Former Finance Minister Dr Bhattarai had set a revenue target at Rs 141.72 billion -- that was dubbed highly ambitious -- for this fiscal year. Dr Bhattarai's total budget size for this fiscal year was Rs 236.15 billion. The encouraging collection of revenue is attributed to three major reasons: priority of the finance ministry for revenue mobilisation, fear in the business community of the Maoist leadership and the alacrity of the leadership itself.
VDIS and rising inflation -- that pushed customs and VAT up -- helped achieve Dr Bhattarai's revenue target. But this year, the price hike is expected to come down and that will hit the VAT and customs collection.
The finance ministry has, however, met this year's ambitious target that was over 33 per cent than last fiscal year. By the end of Jestha -- the 11th month of the current fiscal year -- the ministry collected a total of Rs 121.24 billion, surpassing its target of Rs 117.80 billion for the month.
The total revenue target is short by only Rs 17.37 billion. "The target for the last month of this fiscal year, Ashad (mid-June to mid-July) is Rs 23.92 billion but only Rs 17.37 billion is needed to meet the total target of Rs 141.72 billion as in the earlier months we have surpassed the target," Baskota added.
The ministry had collected Rs 90.17 billion during the same period last fiscal year. In comparison to the same period last fiscal year, revenue collection has increased by Rs 31.07 billion -- a 34.4 per cent growth.
Despite its failure to spend on development activities, the previous finance ministry under Dr Bhattarai concentrated on revenue mobilisation by forming separate desks for separate types of taxes and the systematisation of tax and regular follow-up.