The World Bank implemented Global Partnership on Output-Based Aid (GPOBA) project in Nepal has made the first payment of $592,200 to the Alternative Energy Promotion Centre (AEPC) for successful 2008 delivery of verified new biogas plant installations in Nepal. This project provides increased access to clean and affordable energy for rural Nepali households, and has successfully installed 4,772 new biogas plants eligible for payment under the GPOBA grant.
The World Bank-administered GPOBA programme signed a grant agreement with the Government of Nepal in October 2007 providing a total of $5 million in support, which will provide payment for the verified installation of up to 37,000 new biogas plants in 48 remote districts of Nepal. The programme is being managed by the Alternative Energy Promotion Center (AEPC) with implementation support provided by the Biogas Sector Partnership Program-Nepal (BSP-N). It uses an innovative 'output-based aid' approach in which subsidy payments are made based on verified results.
"The project builds on Nepal's impressive track record with mainstreaming biogas plants as a practical and affordable solution to energy problems in rural Nepal," said Susan Goldmark, World Bank Country Director for Nepal. "It converts animal and human waste into a clean source of cooking fuel -- thereby removing the need to use wood, dried dung and other fossil fuel sources of energy. The biogas byproduct can also be used as a natural fertilizer to increase agricultural yields. This is a small but important step to improving the lives of rural Nepalis."
The GPOBA project aims to support replacement of traditional energy sources used by the rural population, such as firewood and kerosene, with modern biogas plants. Biogas plants use anaerobic decomposition of organic material (mostly animal manure) to produce a flammable gas called biogas, which can be used to meet rural cooking and lighting needs. GPOBA's grant payment is made to AEPC for successful commissioning of new biogas plants ranging in capacity from 4m3 to 8m3. Even the smallest plants with a 4m3 capacity produce enough gas to run a cooking stove for nearly 2.5 hours daily.
Switching to biogas reduces carbon emissions and decreases the frequency of respiratory infections that result from burning solid fuels in poorly ventilated households. Families will also save approximately three hours of labour per day due to the conveniences of gas in addition to financial savings by not purchasing other fuels and fertilizers. Women and girls, who are traditionally responsible for collecting firewood and cooking and cleaning, will be the project's primary beneficiaries. Furthermore, access to biogas will enable families to use gas lanterns after sunset providing light for children's studies or other household activities.
"The GPOBA fund received will help AEPC to install additional biogas plants in the future in more remote and needy areas in Nepal," said Dr Narayan Prasad Chaulagain, Executive Director of AEPC.
Saroj Rai, Executive Director of BSP-Nepal added, "The GPOBA funding for BSP is an achievement that has further motivated us to promote biogas with increasing focus on market development in remote areas."
The GPOBA funds will complement the Fourth Phase of Nepal's Biogas Support Program (BSP-IV), which aims to support biogas plant installation for over 135,000 new rural households through 2011. Biogas Support Programme was started in 1992 by the Netherlands Development Organisation (SNV) together with the Government of Nepal to promote environmentally friendly and affordable energy to remote rural areas. It has helped install over 200,000 biogas plants till date in rural Nepal.
The full Nepal Biogas Programme is co-funded by the government, SNV, and the German Development Bank (KfW). It is also receiving carbon finance revenue from the World Bank Community Development Carbon Fund (CDCF).
Thursday, July 30, 2009
Price hike control plan a Barmecide's feast
The recently announced Monetary Policy for the fiscal year 2009-10 has projected the price hike at 7.5 per cent -- almost half the present rate.
However, the government has been since last year failing to control price rise. Nepal Rastra Bank (NRB) and the Finance Minister -- in the budget -- project growth and price hike ritually every year. They failed last year to contain the price hike and this year too, people are feeling the heat of the price hike.
The people have not got any relief from the price spiral as neither the budget nor Monetary Policy has tried to tackle the key factors that have led to the current surge in inflation.
"It requires better management of financial, monetary and political causes as the price hike is co-related to all of them," said National Planning Commission (NPC) vice-chairman Dr Yubaraj Khatiwada. The key reason behind the price hike is insufficient supply, he opined adding that the bandhs/road blockades/syndicates have contributed 10 per cent to the total price rise.
The other major reason for price hike is more money chasing less goods. There is a shortage of goods due to hoarding, curtailing and supply constraints. The Commerce Department last week raided some of the godowns in the valley on the charge of hoarding. However, the traders protested and the government seems to have backed down as not a single trader has been booked.
Rise in salary and remittance inflow has also contributed to the price hike. The remittance inflow has increased by 55.5 per cent and crossed the Rs 169 billion mark. But remittance has been spent on unproductive areas like land and houses, fuelling consumerism.
World Bank Economic Advisor for the South Asia Region, Ejaz Ghani said Nepal is benefitting from higher inflows of remittances and healthy availability of foreign aid. "With the decline in global commodity prices, the balance of payments (BoP) and fiscal situation are comfortable and there is no evidence of a liquidity constraint on domestic demand," he said adding that on the contrary large foreign exchange inflows are creating some demand pressure.
The private sector could not become an engine of growth as the manufacturing industries have not seen any growth while consumption is increasing. Labour disputes and frequent power outage has hit production, leading to more unemployment.
The government also could not spend on development activities that would have generated employment, It instead spent more on unproductive areas. In the first 10 months of 2008-09, recurrent expenditure increased by 26.5 per cent to Rs 81.9 billion. In the corresponding period of the year before that, this expenditure had increased by 21.9 per cent, according to NRB.
It was that upward revision of salaries of government employees as well as an increase in non-budgetary expenditure that led to such acceleration in recurrent expenditure in the review period.
All this led to a price spiral, despite the government's tall claims of containing the price rise. The year-on-year (y-o-y) consumer price index rose by 12.9 per cent in mid-May compared to that of 9.2 per cent in the same period the last fiscal year, according to NRB.
The food and beverages group pushed the price hike up as the inflation, in the review period, was driven mainly by the 16.5 per cent price rise in food and beverages group. The price index of non-food and service group increased by 8.8 per cent.
The price increase in food and beverages group was 13 per cent and that in non-food and services group was 5.3 per cent in the same period the last fiscal year. The price of items in food and beverages group like sugar and sugar-related products increased by a whopping 66.9 per cent in sharp contrast to last year's decline of 0.5 per cent, said the central bank.
Similarly, the price indices of vegetables and fruits as well as meat, fish and eggs sub-groups increased by 33.5 per cent and 27.5 per cent respectively in the review period compared to an increase of 1.8 per cent and 10.2 per cent respectively in the same period last year.
The indices of pulses also rose by more than double to 26.3 per cent compared to an increase of 12.1 per cent in the same period last year. The subgroup of grains and cereal products also witnessed a price rise of 6.3 per cent compared to an increase of 21.0 per cent in the corresponding period of the previous year.
In the review period, the y-o-y core inflation rose to 12.7 per cent from 7.5 per cent a year ago.
Recognising the high inflationary pressure, NRB has announced a cautious and tight Monetary Policy envisioning to containing inflation at 7.5 per cent. However, there has been no change in the political situation and the prevailing political instability will lead to hoarding further fueling price rise, with little or no hope for the public.
Policy measure taken by Monetary Policy
KATHMANDU: The policy has reintroduced Statutory Liquidity Ratio (SLR) to contain inflation and fuel growth as it is commonly used to contain inflation and fuel growth by increasing or decreasing it, respectively. This counteracts by decreasing or increasing the money supply in the system.
Policy measure taken by the Budget
KATHMANDU: The government is trying to get consensus on banning strikes and bandhs. Declaring the highways a strike-free zone and implementing third-party insurance, the budget has tried to protect highways from unwanted bandhs, accidents and disputes leading to bandhs for compensation. It has promised to keep the supply route -- the highways -- free of disturbances.
Factors leading to the price hike
Contributing -- Price Weightage
Indian Market -- 40 per cent
Bandhs/road blockades/syndicates -- 10 per cent
Stockists/wholesellers -- 20 per cent
Hoarders/blackmarketeers -- 30 per cent
Wednesday, July 29, 2009
Nepal-China trade forum for enhancing ties
Chandi Raj Dhakal, immediate past president of Federation of Nepalese Chambers of Commerce and Industry (FNCCI) and All China Federation of Industry and Commerce (ACFIC) vice-chairman Xie Jingrong signed a memorandum yesterday in Chengdu City of Sichuan Province of the People's Republic of China.
Both sides agreed that the annual forum meeting held alternatively in China and Nepal is to be held as per determined by the two sides to respond to increasing mutual business activities. "The Forum's activities needs to move in a new direction as per the trade and investment opportunities created due to the changing global and regional economic dynamics and development," they agreed in the memorandum.
Both sides also agreed that under the framework of the Forum, multi-fold commercial activities between the two countries would take place such as exchange of trade delegations, training for Nepalese entrepreneurs and exchange of assistance for entrepreneurs.
Dhakal, who is leading a 23-member FNCCI team, expressed his satisfaction over the outcome of the meeting. The Chinese side also expressed its commitment to enhancing the Forum's role for mutually beneficial trade, investment and economic relations.
The Forum was established in 1996 by agreement between the governments of Nepal and China to promote trade, investment, cultural and other relations between the non-governmental and private sectors of the two countries. This is the 10th meeting of the Forum and was held in Chengdu City of Sichuan Province of the People's Republic of China.
The meeting also reviewed past activities and explored new investment opportunities for the future. The theme of the meeting was investment in Hydropower and Agriculture sectors of Nepal.Li Chongxi, vice-secretary of Sichuan Provincial Committee of the communist Party of China and Huang Xiaoxing, vice-governor of People's Government of Sichuan Province and Jinrong also graced the meeting.
On the occasion, FNCCI vice-president Bhaskar Raj Rajkarnikar gave a presentation on investment opportunities in Nepal and Nepal's initiatives in attracting Foreign Direct Investment (FDI), while coordinator of Hydro Forum in FNCCI Gyandra Lal Pradhan presented papers on the potentialy of Chinese investment in hydropower sector in Nepal.
An FNCCI team also held discussions with Chinese private sector representatives and authorities on construction of Trishuli-Syaprubesi-Rasuwagarhi road, direct air link between Nepal and Chengdu, foreign exchange facilities to Chinese tourist, listing of Nepal in major tourist destinations for Chinese tourists and quarantine facilities on the Nepal-China border.
Nepal needs more Chinese investment to bridge the gap of widening trade deficit that is around Rs 22 billion with China. Nepali entrepreneurs have been requesting the Chinese authorities to recognise Nepal Standard (NS) mark to facilitate trade between the two countries.
China has also shown interest in investing in cement, tourism, agriculture and hydropower sectors in Nepal.
Both sides agreed that the annual forum meeting held alternatively in China and Nepal is to be held as per determined by the two sides to respond to increasing mutual business activities. "The Forum's activities needs to move in a new direction as per the trade and investment opportunities created due to the changing global and regional economic dynamics and development," they agreed in the memorandum.
Both sides also agreed that under the framework of the Forum, multi-fold commercial activities between the two countries would take place such as exchange of trade delegations, training for Nepalese entrepreneurs and exchange of assistance for entrepreneurs.
Dhakal, who is leading a 23-member FNCCI team, expressed his satisfaction over the outcome of the meeting. The Chinese side also expressed its commitment to enhancing the Forum's role for mutually beneficial trade, investment and economic relations.
The Forum was established in 1996 by agreement between the governments of Nepal and China to promote trade, investment, cultural and other relations between the non-governmental and private sectors of the two countries. This is the 10th meeting of the Forum and was held in Chengdu City of Sichuan Province of the People's Republic of China.
The meeting also reviewed past activities and explored new investment opportunities for the future. The theme of the meeting was investment in Hydropower and Agriculture sectors of Nepal.Li Chongxi, vice-secretary of Sichuan Provincial Committee of the communist Party of China and Huang Xiaoxing, vice-governor of People's Government of Sichuan Province and Jinrong also graced the meeting.
On the occasion, FNCCI vice-president Bhaskar Raj Rajkarnikar gave a presentation on investment opportunities in Nepal and Nepal's initiatives in attracting Foreign Direct Investment (FDI), while coordinator of Hydro Forum in FNCCI Gyandra Lal Pradhan presented papers on the potentialy of Chinese investment in hydropower sector in Nepal.
An FNCCI team also held discussions with Chinese private sector representatives and authorities on construction of Trishuli-Syaprubesi-Rasuwagarhi road, direct air link between Nepal and Chengdu, foreign exchange facilities to Chinese tourist, listing of Nepal in major tourist destinations for Chinese tourists and quarantine facilities on the Nepal-China border.
Nepal needs more Chinese investment to bridge the gap of widening trade deficit that is around Rs 22 billion with China. Nepali entrepreneurs have been requesting the Chinese authorities to recognise Nepal Standard (NS) mark to facilitate trade between the two countries.
China has also shown interest in investing in cement, tourism, agriculture and hydropower sectors in Nepal.
Commercial banks reduce Non-Performing Assets (NPA)
The Non-Perfoming Assets (NPA) of commercial banks have come down. NPA is one of the key indicators that gaue the financial strength of any bank or financial institution.
"By the end of the fiscal year 2006-07, the NPA of A-class commercial banks was 10.3 per cent, which came down to 6.3 per cent by the end of the fiscal year 2007-08," said the Monetary Policy 2009-10.
The NPA decreased to 4.9 per cent by April 13, 2009, according to the unaudited report of the commercial banks.
Of the total 25 commercial banks then, except three government and semi-government commercial banks -- Nepal Bank Ltd (NBL), Rastriya Banijya Bank (RBB) and Agriculture Development Bank Ltd (ADBL) -- 22 commercial banks' NPA is at 2.4 per cent, the eighth Monetary Policy said. NBL and RBB -- by the end of the fiscal year 2007-08 -- had 12.4 per cent and 21.7 per cent NPA respectively. They further reduced their NPA to 8.6 per cent and 18 per cent respectively by April 13, 2009. They have succeeded in reducing the NPA under the Financial Sector Reform Programme which had categorically said them to reduce the NPA.
However, the number of commercial banks, development banks and finance companies has also increased. Currently, there are 26 commercial banks, 63 development banks, 78 finance companies, 12 micro-finance companies -- making it a total of 173 banks and financial companies.
By April 13, 2009 -- the end of fiscal year 2008-09 -- the total number of branches of commercial banks also increased to 681 from 555. Within six months, 126 new branches of commercial banks were added, according to the policy that has stated that regionwise the branches of commercial banks stood at 127 in Eastern Development Region, 337 in Central Development Region, 135 in Western Development Region, 51 in Mid-Western Development Region and 31 in Far-Western Development Region.
Though commercial banks claim that they are moving towards rural areas, their reach through branches is less in the hilly region. According to the report, the populace in Western Development Region has little access to commercial banks. "The urban-centric banks should go to rural areas," NRB governor Bijaya Nath Bhattarai said during his reinstating ceremony the other day.
What is NPA
KATHMANDU: Non-Performing Assets (NPA) is a classification used by financial institutions that refer to loans in jeopardy of default. Once the borrower has failed to make the interest or principal payments for 90 days the loan is considered NPA and also known as Non-Performing Loan (NPL). Non-performing assets are problematic for financial institutions since these institutions depend on interest payments for income. Troublesome pressure from the economy can lead to a sharp increase in NPA and often results in massive write-downs.
The NPA level
2007 July 16 -- 10.3 per cent
2008 July 16 -- 6.3 per cent
2009 April 13 -- 4.9 per cent (unaudited report)
"By the end of the fiscal year 2006-07, the NPA of A-class commercial banks was 10.3 per cent, which came down to 6.3 per cent by the end of the fiscal year 2007-08," said the Monetary Policy 2009-10.
The NPA decreased to 4.9 per cent by April 13, 2009, according to the unaudited report of the commercial banks.
Of the total 25 commercial banks then, except three government and semi-government commercial banks -- Nepal Bank Ltd (NBL), Rastriya Banijya Bank (RBB) and Agriculture Development Bank Ltd (ADBL) -- 22 commercial banks' NPA is at 2.4 per cent, the eighth Monetary Policy said. NBL and RBB -- by the end of the fiscal year 2007-08 -- had 12.4 per cent and 21.7 per cent NPA respectively. They further reduced their NPA to 8.6 per cent and 18 per cent respectively by April 13, 2009. They have succeeded in reducing the NPA under the Financial Sector Reform Programme which had categorically said them to reduce the NPA.
However, the number of commercial banks, development banks and finance companies has also increased. Currently, there are 26 commercial banks, 63 development banks, 78 finance companies, 12 micro-finance companies -- making it a total of 173 banks and financial companies.
By April 13, 2009 -- the end of fiscal year 2008-09 -- the total number of branches of commercial banks also increased to 681 from 555. Within six months, 126 new branches of commercial banks were added, according to the policy that has stated that regionwise the branches of commercial banks stood at 127 in Eastern Development Region, 337 in Central Development Region, 135 in Western Development Region, 51 in Mid-Western Development Region and 31 in Far-Western Development Region.
Though commercial banks claim that they are moving towards rural areas, their reach through branches is less in the hilly region. According to the report, the populace in Western Development Region has little access to commercial banks. "The urban-centric banks should go to rural areas," NRB governor Bijaya Nath Bhattarai said during his reinstating ceremony the other day.
What is NPA
KATHMANDU: Non-Performing Assets (NPA) is a classification used by financial institutions that refer to loans in jeopardy of default. Once the borrower has failed to make the interest or principal payments for 90 days the loan is considered NPA and also known as Non-Performing Loan (NPL). Non-performing assets are problematic for financial institutions since these institutions depend on interest payments for income. Troublesome pressure from the economy can lead to a sharp increase in NPA and often results in massive write-downs.
The NPA level
2007 July 16 -- 10.3 per cent
2008 July 16 -- 6.3 per cent
2009 April 13 -- 4.9 per cent (unaudited report)
Tuesday, July 28, 2009
ADB Fund for carbon capturing
Asian Development Bank (ADB) and Australia — through its Global Carbon Capture and Storage Institute — have signed a trust fund agreement to support the capture and storage of rising levels of carbon emissions in Asia.
Under the agreement, Australia is supplying an Aus$21.5 million grant for the Carbon Capture and Storage Fund. The fund will support geological investigations and environmental studies into potential carbon dioxide storage sites, capacity building, and community awareness programs which can help accelerate the deployment of carbon capture and storage demonstration projects around Asia. “Asia’s share of worldwide energy-related carbon dioxide emissions is now three times bigger than it was 30 years ago, and under current trends it will soon be the globe’s biggest emitter,” said Bob Pegler, deputy chief executive officer (CEO) of the Global Carbon Capture and Storage Institute. “This growing rise in greenhouse gas emissions, combined with other pollutants, threatens the sustainability of Asia’s future growth, as well as its efforts to reduce poverty and to meet other Millennium Development Goals.”
The new fund aims to support ADB’s developing member countries (DMCs), with initial priority given to the People’s Republic of China, India, Indonesia, and Vietnam. Central and local governments, the private sector, and other entities eligible for ADB assistance will be able to tap it, with projects to be selected on criteria drawn up by Australia and ADB.
The fund will form part of the Clean Energy Financing Partnership Facility (CEFPF), which is an important tool to facilitate more investments in clean energy projects in ADB’s DMCs. Its goal is to help DMCs improve energy security and transition to lower carbon economies. CEFPF’s five donor countries — Australia, Japan, Norway, Spain and Sweden — have committed a total of $60.2 million to the facility since it was established in April 2007.
“ADB is committed to, and currently promoting, greater use of clean energy in our DMCs,” said Werner Liepach, Principal Director of ADB’s Office of Cofinancing Operations. “The CEFPF and funds like the Carbon Capture and Storage Fund provide quick access to much needed support for ADB’s clean energy agenda and high priority clean energy investments in the region,” Liepach added.
Starting in 2013, ADB will increase its target of clean energy investments to $2 billion a year from a previous target of $1 billion, in a bid to accelerate low-carbon growth and reduce greenhouse gas emissions in the region.
Under the agreement, Australia is supplying an Aus$21.5 million grant for the Carbon Capture and Storage Fund. The fund will support geological investigations and environmental studies into potential carbon dioxide storage sites, capacity building, and community awareness programs which can help accelerate the deployment of carbon capture and storage demonstration projects around Asia. “Asia’s share of worldwide energy-related carbon dioxide emissions is now three times bigger than it was 30 years ago, and under current trends it will soon be the globe’s biggest emitter,” said Bob Pegler, deputy chief executive officer (CEO) of the Global Carbon Capture and Storage Institute. “This growing rise in greenhouse gas emissions, combined with other pollutants, threatens the sustainability of Asia’s future growth, as well as its efforts to reduce poverty and to meet other Millennium Development Goals.”
The new fund aims to support ADB’s developing member countries (DMCs), with initial priority given to the People’s Republic of China, India, Indonesia, and Vietnam. Central and local governments, the private sector, and other entities eligible for ADB assistance will be able to tap it, with projects to be selected on criteria drawn up by Australia and ADB.
The fund will form part of the Clean Energy Financing Partnership Facility (CEFPF), which is an important tool to facilitate more investments in clean energy projects in ADB’s DMCs. Its goal is to help DMCs improve energy security and transition to lower carbon economies. CEFPF’s five donor countries — Australia, Japan, Norway, Spain and Sweden — have committed a total of $60.2 million to the facility since it was established in April 2007.
“ADB is committed to, and currently promoting, greater use of clean energy in our DMCs,” said Werner Liepach, Principal Director of ADB’s Office of Cofinancing Operations. “The CEFPF and funds like the Carbon Capture and Storage Fund provide quick access to much needed support for ADB’s clean energy agenda and high priority clean energy investments in the region,” Liepach added.
Starting in 2013, ADB will increase its target of clean energy investments to $2 billion a year from a previous target of $1 billion, in a bid to accelerate low-carbon growth and reduce greenhouse gas emissions in the region.
Sunday, July 26, 2009
Governor Bhattarai starts second innings
"I am back home," said reinstated governor Bijaya Nath Bhattarai today, promising to continue the fight against the financial mafia. "The support of my collegues was my moral strength," he said addressing Nepal Rastra Bank (NRB) employees -- who had been waiting for him the whole day.Immediately after taking charge, Bhattarai said the monitoring and supervision capacity of the central bank have to be enhanced. "Mushrooming banks and financial institutions have not contributed to the real sector's growth," he said adding that the increase in number has rather encouraged unhealthy competition. He was also against urban-centric banks and financial institutions. "There are more opportunities in semi-rural areas," he said advising them to serve the rural populace.
Bhattarai opined that the country needs a few but strong banks and financial institutions rather than many weak ones. "Merger and Acquisition (M&A) should be encouraged to make stronger banks," he added.
Asked if the Monetary Policy announced by his predessesor could be changed, he said that Monetary Policy is the central bank's policy, and so it would not make any difference who brings it. "It iss a team of NRB that works on it and mere change of governor will not have any impact on it," said Bhattarai. However he was of the view that SLR -- the policy brought after 17 years -- was not necessary.
"Whatever good work that my predessesor Kshetry did, I will continue," he assured. "Others like the liquidation case of Nepal Development Bank (NDB) I need to look into. NDB should have improved when NRB declared it a problematic bank and had also issued a slew of directives but it did not improve and today it has been sent to the court for liquidation," Bhattarai added.
The continution of financial sector reform programme, good governance, accountability, transparency, lowering the NPA of Rastriya Banijya Bank and Nepal Bank Ltd, shareholder access to information are some of challenges for NRB, according to him.
On the occasion, the then NRB executive director Surendra Bahadur Pradhan said that it took them two years and 15 days to get justice. "The financial mafiosi and conpiracy against the central bank and its honest employee has been defeated," he said advising NRB employees to keep their morale high.
An emotional Pradhan also thanked the media and NRB employees for supporting him and Bhattarai throughtout the cooked up case against them.
The CIAA had filed a case at the Special Court against Bhattarai and Pradhan on June 29, 2007. The Special Court sent the case to the Supreme Court after it could not decide unanimously. The Supreme Court on July 15 acquitted them.
Kshetry discharged
KATHMANDU: The government discharged governor Deependra Bahadur Kshetry before reinstating Bijaya Nath Bhattarai. Kshetry -- after receiving the discharge letter from the finance ministry -- coolly walked out of the central bank and took a cab home. He was appointed by the erstwhile government on January 16 for a one-year term till January 31, 2010. NRB employees offered him a ride home but a composed Kshetri declined and took a taxi from the gate of the NRB . The Ba 1 Jha 7068 taxi rode him to home. However, he hinted at moving the court, as according to him, the discharge letter was not according to the NRB Act. Governor Bhattarai also praised his predecessor for his honesty and moral strength. "Kshetry is my friend," Bhattarai said adding that if he moves court, it will not hamper the day-to-day affairs of the central bank.
Rumour, little guys drag Nepse down
Nepal Stock Exchange (Nepse) today plummeted by 29.73 points to 708.11 points from last week's closing.
The first day of trading was suspended for half an hour after the index dropped by four per cent during an hour-and-a-half of the start of trading at the sole secondary market.
The market closed 4.03 per cent lower or 29.73 points less, though it resumed operation after half an hour. The investors lost confidence after a rumour spread that banks and financial institutions do not need to increase paid-up capital. "The rumour is not true," said Rabindra Bhattarai, a share analyst. The Monetary Policy announced on Friday has not changed the minimum level of paid-up capital required.
The minimum level of paid up capital -- kept unchanged according to the policy -- is Rs 2 billion for commercial banks, Rs 640 million for development banks and Rs 200 million for finance companies. And the banks and financial institutions will issue bonus shares and rights shares to increase their paid up capital as most of them have to increase
There is an unofficial rule in the stock business called the 'Odd Lot Theory'. It states that when small investors buy into a stock it's a sell signal and visa-a-versa. A 'small investor' is defined as someone who buys small lots or odd lots (less than one hundred shares). The reasoning is that the small investor is consistently wrong about when and what to buy or sell. So if the little guy is buying, it's time to sell and if the little guy is selling its time to buy."This unofficial rule is painfully accurate in the Nepali stock market," said one investor. The small investor consistently takes too little risk or too much risk or buys in after the market or an individual stock runs up. These are the only consistent qualities of this class of investor and they always result in losses. "Take a look at what the small investor has been doing lately in Nepse," Bhattarai said adding that they are nervous and trying to exit from the market by selling their shares whereas 'the players' are comfortable and buying.A week before the budget and a week after the budget Nepse gained, but the market on Sunday, the first day of this week, plummeted. Small investors -- fearing a further fall in the secondary market -- rushed to sell and the big investors gained from them.
Dr Poudel quits
KATHMANDU: Nepse chairman Dr Narayan Poudel resigned citing non-cooperation from the Nepse management. The first PhD-holder in the capital market in Nepal said that the employees, management and board should work together for the benefit of a company. "I want Nepse to set an example of good corporate governance," he said. Poudel also said that the Central Depository System (CDS) would be set up by the end of this fiscal year. However, finance minister Surendra Pandey in his budget has promised to bring CDS into effect from this October.
The first day of trading was suspended for half an hour after the index dropped by four per cent during an hour-and-a-half of the start of trading at the sole secondary market.
The market closed 4.03 per cent lower or 29.73 points less, though it resumed operation after half an hour. The investors lost confidence after a rumour spread that banks and financial institutions do not need to increase paid-up capital. "The rumour is not true," said Rabindra Bhattarai, a share analyst. The Monetary Policy announced on Friday has not changed the minimum level of paid-up capital required.
The minimum level of paid up capital -- kept unchanged according to the policy -- is Rs 2 billion for commercial banks, Rs 640 million for development banks and Rs 200 million for finance companies. And the banks and financial institutions will issue bonus shares and rights shares to increase their paid up capital as most of them have to increase
There is an unofficial rule in the stock business called the 'Odd Lot Theory'. It states that when small investors buy into a stock it's a sell signal and visa-a-versa. A 'small investor' is defined as someone who buys small lots or odd lots (less than one hundred shares). The reasoning is that the small investor is consistently wrong about when and what to buy or sell. So if the little guy is buying, it's time to sell and if the little guy is selling its time to buy."This unofficial rule is painfully accurate in the Nepali stock market," said one investor. The small investor consistently takes too little risk or too much risk or buys in after the market or an individual stock runs up. These are the only consistent qualities of this class of investor and they always result in losses. "Take a look at what the small investor has been doing lately in Nepse," Bhattarai said adding that they are nervous and trying to exit from the market by selling their shares whereas 'the players' are comfortable and buying.A week before the budget and a week after the budget Nepse gained, but the market on Sunday, the first day of this week, plummeted. Small investors -- fearing a further fall in the secondary market -- rushed to sell and the big investors gained from them.
Dr Poudel quits
KATHMANDU: Nepse chairman Dr Narayan Poudel resigned citing non-cooperation from the Nepse management. The first PhD-holder in the capital market in Nepal said that the employees, management and board should work together for the benefit of a company. "I want Nepse to set an example of good corporate governance," he said. Poudel also said that the Central Depository System (CDS) would be set up by the end of this fiscal year. However, finance minister Surendra Pandey in his budget has promised to bring CDS into effect from this October.
Saturday, July 25, 2009
Nepse defies popular market belief
Contrary to the popular belief that decrease in capital gain tax will push the Nepse high up, the Nepse this week posted a marginal growth of 1.97 points to 737.84 points from last week's closure of 735.87 points. Though the capital gain tax is one of the reasons that hit the growth of capital market, it is not the major one.
The transaction amount has also increased by a minimal 3.52 per cent to Rs 407.91 million against last week's Rs 394 million. Last week -- after the budget -- the Nepse gained 32.99 points against 35.45 points a week earlier.
However, the shareholders of commercial banks and finance companies sub-groups gained as these two sub-groups gained 18.19 points to 782.67 points and 7.17 points to 699.36 points respectively. The remaining -- development banks, insurance companies, trading, hydropower companies, others and hotels -- sub-groups lost except the manufacturing sub-group that did not witness any trading this week.
The hydropower companies and others sub-groups plunged by 37.36 points to 980.07 points from last week's closing of 1028.43 points and 37.58 points to 687.31 points from 724.89 points putting a break to Nepse's last two weeks impressive growth.
The sensitive index -- the barometer of Group-A companies -- gained 2.59 points to 197.77 points from last week's closing of 195.18 points. Last week, the 78-scrip sensitive index had flared by 7.09 points to close at 195.18 points.
Similarly, the float index -- calculated on the basis of real transactions -- also gained 1.07 points to 71.15 points from last week's closing of 70.08 points.
This week Nepal Bangladesh Bank (with Rs 44.04 million) topped the chart in terms trading amount followed by Bank of Kathmandu (with Rs 35.27 million), Nabil Bank (with Rs 28.71 million), Standard Chartered Bank Nepal (with Rs 28.01 million) and Nepal Investment Bank (with Rs 26.63 million).
In terms of number of share units traded National Hydropower Company topped the chart with 1,68,000-unit shares changing hands and in terms of number of transactions Citizens Bank International topped the chart with 561 transactions.
Monetary Policy offers nothing
KATHMANDU: Monetary Policy has neither good nor bad news for the investors. The closely watched policy document announced yesterday by Nepal Rastra Bank (NRB) could have a huge impact in the Nepse as the domestic capital market has over 85 per cent contribution of banks and financial institutions. But the Monetary Policy didnot increase the paid-up capital -- as expected by some investors -- of the banks and financial institutions. "The limit of minimum level of paid up capital has been kept unchanged," the Monetary Policy said adding that nowonwards, the base for increasing capital of licenced banks and financial institutions by the NRB will be their capital fund. The capital fund includes core capital and supplementary capital. The minimum level of paid up capital -- that is kept unchanged according to the policy -- is Rs 2 billion for commercial banks, Rs 640 million for development banks and Rs 200 million for finance companies. Only a couple ofbanks like Nepal Investment Bank and Kist Bank has already increased their minimum level of paid up capital but remaining commercial banks yet have to increase their paid up capital by the end of 2010.
Warren Buffett to star in cartoon
NEW YORK: The so-called Sage of Omaha, Warren Buffett, is a billionaire, a philanthropist, a stockpicker and an author. In a new turn, the wily 78-year-old investor will shortly add cartoon star to that list. An animated version of Buffett will teach children about finance in a series called The Secret Millionaires Club, to be created by internet empire AOL and media firm A Squared Media. Episodes lasting three to five minutes will appear on AOL before being distributed across the web via social networking sites. The world's second richest man is in august company. Others featuring in cartoons as part of the same project include the supermodel Gisele Bundchen, who plays a superhero protecting the environment, and Martha Stewart, who will educate viewers in cooking, craft, gardening and creating 'unforgettable' events. Nebraska-based Buffett has built a vast army of US followers who admire his flair for picking successful investments and acquisitions. Hisfortune is estimated at $37 billion, second only to Bill Gates's $40 billion, in Forbes magazine's annual ranking of the world's richest people. Buffett said the credit crunch was a reminder of the need to teach children about money, "What better time to help educate our kids about financial responsibility." It has been a tough year for Buffett. His Berkshire Hathaway investment company suffered a rare drop in its asset value during 2008, partly due to what Buffett admitted were 'dumb' choices. It recently lost its triple-A credit rating and its shares have slipped by 18 per cent over the last 12 months. -- The Guardian
The transaction amount has also increased by a minimal 3.52 per cent to Rs 407.91 million against last week's Rs 394 million. Last week -- after the budget -- the Nepse gained 32.99 points against 35.45 points a week earlier.
However, the shareholders of commercial banks and finance companies sub-groups gained as these two sub-groups gained 18.19 points to 782.67 points and 7.17 points to 699.36 points respectively. The remaining -- development banks, insurance companies, trading, hydropower companies, others and hotels -- sub-groups lost except the manufacturing sub-group that did not witness any trading this week.
The hydropower companies and others sub-groups plunged by 37.36 points to 980.07 points from last week's closing of 1028.43 points and 37.58 points to 687.31 points from 724.89 points putting a break to Nepse's last two weeks impressive growth.
The sensitive index -- the barometer of Group-A companies -- gained 2.59 points to 197.77 points from last week's closing of 195.18 points. Last week, the 78-scrip sensitive index had flared by 7.09 points to close at 195.18 points.
Similarly, the float index -- calculated on the basis of real transactions -- also gained 1.07 points to 71.15 points from last week's closing of 70.08 points.
This week Nepal Bangladesh Bank (with Rs 44.04 million) topped the chart in terms trading amount followed by Bank of Kathmandu (with Rs 35.27 million), Nabil Bank (with Rs 28.71 million), Standard Chartered Bank Nepal (with Rs 28.01 million) and Nepal Investment Bank (with Rs 26.63 million).
In terms of number of share units traded National Hydropower Company topped the chart with 1,68,000-unit shares changing hands and in terms of number of transactions Citizens Bank International topped the chart with 561 transactions.
Monetary Policy offers nothing
KATHMANDU: Monetary Policy has neither good nor bad news for the investors. The closely watched policy document announced yesterday by Nepal Rastra Bank (NRB) could have a huge impact in the Nepse as the domestic capital market has over 85 per cent contribution of banks and financial institutions. But the Monetary Policy didnot increase the paid-up capital -- as expected by some investors -- of the banks and financial institutions. "The limit of minimum level of paid up capital has been kept unchanged," the Monetary Policy said adding that nowonwards, the base for increasing capital of licenced banks and financial institutions by the NRB will be their capital fund. The capital fund includes core capital and supplementary capital. The minimum level of paid up capital -- that is kept unchanged according to the policy -- is Rs 2 billion for commercial banks, Rs 640 million for development banks and Rs 200 million for finance companies. Only a couple ofbanks like Nepal Investment Bank and Kist Bank has already increased their minimum level of paid up capital but remaining commercial banks yet have to increase their paid up capital by the end of 2010.
Warren Buffett to star in cartoon
NEW YORK: The so-called Sage of Omaha, Warren Buffett, is a billionaire, a philanthropist, a stockpicker and an author. In a new turn, the wily 78-year-old investor will shortly add cartoon star to that list. An animated version of Buffett will teach children about finance in a series called The Secret Millionaires Club, to be created by internet empire AOL and media firm A Squared Media. Episodes lasting three to five minutes will appear on AOL before being distributed across the web via social networking sites. The world's second richest man is in august company. Others featuring in cartoons as part of the same project include the supermodel Gisele Bundchen, who plays a superhero protecting the environment, and Martha Stewart, who will educate viewers in cooking, craft, gardening and creating 'unforgettable' events. Nebraska-based Buffett has built a vast army of US followers who admire his flair for picking successful investments and acquisitions. Hisfortune is estimated at $37 billion, second only to Bill Gates's $40 billion, in Forbes magazine's annual ranking of the world's richest people. Buffett said the credit crunch was a reminder of the need to teach children about money, "What better time to help educate our kids about financial responsibility." It has been a tough year for Buffett. His Berkshire Hathaway investment company suffered a rare drop in its asset value during 2008, partly due to what Buffett admitted were 'dumb' choices. It recently lost its triple-A credit rating and its shares have slipped by 18 per cent over the last 12 months. -- The Guardian
Nepal Telecom Authority gets serious over call-bypass
Nepal Telecom Authority (NTA) has yesterday formed a committee to investigate on illegal call-bypass that has become a serious problem recently.
The six-member committee formed under Santosh Poudel, deputy director of the NTA will prepare a report within two months. "The NTA will take action on the basis of the report produced by the committee," said Ananda Raj Khanal, director at the Nepal Telecom Authority -- the regulatory authority of the telecom service providers.
The committee has the representatives of four telecom service providers -- Nepal Telecom (NT), Spice Nepal (Mero Mobile), United Telecom Ltd (UTL) and STM and an Internet Service Provider (ISP) Association.
Telecom providers are losing billions in fraudulent international calls. "NT alone is losing around Rs 1 billion because of international calls made to bypass the official gateway," said the NT. Other telecom service providers -- Spice Nepal, UTL and STM -- are also losing out.
Call bypassers use V-SAT to divert international calls from the official gateway to Voice Over Internet Protocol (VoIP). VoIP is a general term for a family of transmission technologies for delivery of voice communications over IP networks such as the Internet or other packet-switched networks. The call is then transferred to the telecom client through a landline or mobile. Such international calls show local numbers on the receiver's set.
If a local number appears on one's caller ID while receiving an international call, it is a by-passed call. International call-bypass has become a serious problem to the NTA as it is not only creating misunderstanding between the telecom service providers but also bleeding the national coffer white.
"Callers are also being cheated because the reception is unclear and it is hard to connect," Khanal said. "Getting an internet connection and a phone line is not difficult now. If one has an internet connection, one can easily bypass a call from anywhere with a VoIP device that is small enough to fit in a back-pack and is easily available."
"Because there is no need to pay the service charge or the tax, these calls are cheaper for the end-user," he said adding that sim cards of all the telecom operators are used for bypass purposes.
The telecom operators have been blocking sim cards, when they suspect or get complaints of their sim cards being used for call bypass but NTA needs a teeth to take strong action against those involved in the fraudulent act.
"We will prepare Act or do whatever needed -- after the report comes -- to control this," Khanal assured.
The six-member committee formed under Santosh Poudel, deputy director of the NTA will prepare a report within two months. "The NTA will take action on the basis of the report produced by the committee," said Ananda Raj Khanal, director at the Nepal Telecom Authority -- the regulatory authority of the telecom service providers.
The committee has the representatives of four telecom service providers -- Nepal Telecom (NT), Spice Nepal (Mero Mobile), United Telecom Ltd (UTL) and STM and an Internet Service Provider (ISP) Association.
Telecom providers are losing billions in fraudulent international calls. "NT alone is losing around Rs 1 billion because of international calls made to bypass the official gateway," said the NT. Other telecom service providers -- Spice Nepal, UTL and STM -- are also losing out.
Call bypassers use V-SAT to divert international calls from the official gateway to Voice Over Internet Protocol (VoIP). VoIP is a general term for a family of transmission technologies for delivery of voice communications over IP networks such as the Internet or other packet-switched networks. The call is then transferred to the telecom client through a landline or mobile. Such international calls show local numbers on the receiver's set.
If a local number appears on one's caller ID while receiving an international call, it is a by-passed call. International call-bypass has become a serious problem to the NTA as it is not only creating misunderstanding between the telecom service providers but also bleeding the national coffer white.
"Callers are also being cheated because the reception is unclear and it is hard to connect," Khanal said. "Getting an internet connection and a phone line is not difficult now. If one has an internet connection, one can easily bypass a call from anywhere with a VoIP device that is small enough to fit in a back-pack and is easily available."
"Because there is no need to pay the service charge or the tax, these calls are cheaper for the end-user," he said adding that sim cards of all the telecom operators are used for bypass purposes.
The telecom operators have been blocking sim cards, when they suspect or get complaints of their sim cards being used for call bypass but NTA needs a teeth to take strong action against those involved in the fraudulent act.
"We will prepare Act or do whatever needed -- after the report comes -- to control this," Khanal assured.
Friday, July 24, 2009
Eighth Monetary Policy walks tightrope
Policy reintroduces SLR after 17 years, hopes to contain price hike at seven per cent
Recognising the high inflationary pressure, Nepal Rastra Bank (NRB) today announced a cautious and tight Monetary Policy for the fiscal year 2009-10.
"It is believed the policy will contribute to the prudent macroeconomic management, consolidation of the financial and external sectors and secured internal payments system to create a conducive economic environment for higher growth," said NRB governor Deependra Bahadur Kshetry, unveiling the eighth Monetary Policy.
"The existing liquidity overhang in the economy is sufficient to facilitate economic growth of 5.5 per cent," Kshetry said adding that the policy also envisions containing inflation at seven per cent. However, the Monetary Policy -- in the last fiscal year also -- failed to contain the price hike and it is still doubted whether it will fuel growth and contain the price hike.
The policy has reintroduced Statutory Liquidity Ratio (SLR) after one-and-a-half decades to contain inflation and fuel growth.SLR is commonly used to contain inflation and fuel growth by increasing or decreasing it, respectively. This counteracts by decreasing or increasing the money supply in the system. The commercial banks, development banks and finance companies are now required to invest in government securities six per cent, two per cent and one per cent of their total deposit mobilisation by second quarter, respectively and which will be increased to eight, three and two per cent respectively by the end of the fourth quarter.
"The old banks already have invested in government bonds and securities over the limit fixed by the policy," said Anil Shah, vice-president of Nepal Bankers' Association (NBA) and CEO of Nabil Bank. "However, the new banks will feel the heat and it might put pressure on lending rates," he added.
Kishore Maharjan, CEO of Sunrise Bank agreed with Shah. "Lending rates may go up," he said.
Though the limit of paid-up capital is unchanged, the policy has made capital fund the main barometer of any financial institution. Apart from that, it has also opened the borders for domestic banks. They can now open branches outside the country.
"The policy is flexible and can be adjusted according to the situation anytime," governor Kshetry said. It has not changed any major rate like Cash Reserve Ratio (CRR), refinancing rates or the bank rate.
SLR versus CRR
KATHMANDU: What Statutory Liquidity Ratio (SLR) does is it restricts the bank's leverage in pumping more money into the economy. On the other hand, Cash Reserve Ratio (CRR) is the portion of deposits that the banks have to maintain with the central bank.The higher the ratio, the lower the amount that banks can use for lending and investment. The other difference is that to meet SLR, banks can use cash, gold or approved securities whereas with CRR it has to be only cash. CRR is maintained in cash form with NRB whereas SLR is maintained in liquid form with the banks themselves. SLR refers to the amount that all banks require to maintain in cash or in the form of gold or approved securities. However, the Monetary Policy has directed the banks to buy government bonds and securities. The objectives of SLR are to restrict the expansion of bank credit, augment the investment of banks in government securities and ensure solvency of banks. CRR is in the form offiat currency stored with the central bank. The reserve ratio is used as a tool in the Monetary Policy, influencing the country's economy, borrowing, and interest rates. It would cause immediate liquidity problems for banks with low excess reserves. It was increased from 5 per cent to 5.5 per cent in last fiscal year's Monetary Policy.
Recognising the high inflationary pressure, Nepal Rastra Bank (NRB) today announced a cautious and tight Monetary Policy for the fiscal year 2009-10.
"It is believed the policy will contribute to the prudent macroeconomic management, consolidation of the financial and external sectors and secured internal payments system to create a conducive economic environment for higher growth," said NRB governor Deependra Bahadur Kshetry, unveiling the eighth Monetary Policy.
"The existing liquidity overhang in the economy is sufficient to facilitate economic growth of 5.5 per cent," Kshetry said adding that the policy also envisions containing inflation at seven per cent. However, the Monetary Policy -- in the last fiscal year also -- failed to contain the price hike and it is still doubted whether it will fuel growth and contain the price hike.
The policy has reintroduced Statutory Liquidity Ratio (SLR) after one-and-a-half decades to contain inflation and fuel growth.SLR is commonly used to contain inflation and fuel growth by increasing or decreasing it, respectively. This counteracts by decreasing or increasing the money supply in the system. The commercial banks, development banks and finance companies are now required to invest in government securities six per cent, two per cent and one per cent of their total deposit mobilisation by second quarter, respectively and which will be increased to eight, three and two per cent respectively by the end of the fourth quarter.
"The old banks already have invested in government bonds and securities over the limit fixed by the policy," said Anil Shah, vice-president of Nepal Bankers' Association (NBA) and CEO of Nabil Bank. "However, the new banks will feel the heat and it might put pressure on lending rates," he added.
Kishore Maharjan, CEO of Sunrise Bank agreed with Shah. "Lending rates may go up," he said.
Though the limit of paid-up capital is unchanged, the policy has made capital fund the main barometer of any financial institution. Apart from that, it has also opened the borders for domestic banks. They can now open branches outside the country.
"The policy is flexible and can be adjusted according to the situation anytime," governor Kshetry said. It has not changed any major rate like Cash Reserve Ratio (CRR), refinancing rates or the bank rate.
SLR versus CRR
KATHMANDU: What Statutory Liquidity Ratio (SLR) does is it restricts the bank's leverage in pumping more money into the economy. On the other hand, Cash Reserve Ratio (CRR) is the portion of deposits that the banks have to maintain with the central bank.The higher the ratio, the lower the amount that banks can use for lending and investment. The other difference is that to meet SLR, banks can use cash, gold or approved securities whereas with CRR it has to be only cash. CRR is maintained in cash form with NRB whereas SLR is maintained in liquid form with the banks themselves. SLR refers to the amount that all banks require to maintain in cash or in the form of gold or approved securities. However, the Monetary Policy has directed the banks to buy government bonds and securities. The objectives of SLR are to restrict the expansion of bank credit, augment the investment of banks in government securities and ensure solvency of banks. CRR is in the form offiat currency stored with the central bank. The reserve ratio is used as a tool in the Monetary Policy, influencing the country's economy, borrowing, and interest rates. It would cause immediate liquidity problems for banks with low excess reserves. It was increased from 5 per cent to 5.5 per cent in last fiscal year's Monetary Policy.
Thursday, July 23, 2009
New Bank of Kathmandu board takes charge, NRB-team returns
After a little over two months, Nepal Rastra Bank (NRB) today handed over the management of Bank of Kathmandu (BoK) to the bank's new Board of Directors (BoD) led by its chairman Narendra Basnyat.
Earlier today the board has chosen Narendra Basnyat as the chairman of the board.
The management committee appointed by NRB -- led by coordinator Laxmi Prapanna Niroula and members Ramesh Kumar Pokharel, Prem Prasad Pandey and Murari Basnet -- was mandated to hand over the management to the new BoK board after the bank's special AGM yesterday. BoK had yesterday elected four board directors from public shareholders -- Govinda Prasad Sharma Regmi, Bishnu Kumar Banjade, Narendra Basnyat and Dr Hem Raj Subedi -- and unnanimously selected three board directors Ramesh Nath Dhungel, Bijaya Krishna Shrestha and Satya Narayan Manandhar from among the promoters.
Aapart from the four public shareholders, a fifth -- former director Balaram Neupane -- had also filed his candidacy for board director as a majority of BoK's shares is with the public. The promoters are only 42 per cent stakeholders.
Earlier on May 19, NRB had taken over the bank's management after suspending its board and sent a four-member team led by NRB executive director Niroula to oversee BoK's running. This was after the BoK board's controversial decision to 'call back' Radhesh Pant from the post of managing director.
Meanwhile, Pant -- former managing director of Bank of Kathmandu (BoK) -- has joined Kumari Bank as chief executive officer (CEO) and the hunt for CEO for BoK begins.
Earlier today the board has chosen Narendra Basnyat as the chairman of the board.
The management committee appointed by NRB -- led by coordinator Laxmi Prapanna Niroula and members Ramesh Kumar Pokharel, Prem Prasad Pandey and Murari Basnet -- was mandated to hand over the management to the new BoK board after the bank's special AGM yesterday. BoK had yesterday elected four board directors from public shareholders -- Govinda Prasad Sharma Regmi, Bishnu Kumar Banjade, Narendra Basnyat and Dr Hem Raj Subedi -- and unnanimously selected three board directors Ramesh Nath Dhungel, Bijaya Krishna Shrestha and Satya Narayan Manandhar from among the promoters.
Aapart from the four public shareholders, a fifth -- former director Balaram Neupane -- had also filed his candidacy for board director as a majority of BoK's shares is with the public. The promoters are only 42 per cent stakeholders.
Earlier on May 19, NRB had taken over the bank's management after suspending its board and sent a four-member team led by NRB executive director Niroula to oversee BoK's running. This was after the BoK board's controversial decision to 'call back' Radhesh Pant from the post of managing director.
Meanwhile, Pant -- former managing director of Bank of Kathmandu (BoK) -- has joined Kumari Bank as chief executive officer (CEO) and the hunt for CEO for BoK begins.
Borders now open for banks
The Monetary Policy for the fiscal year 2009-10 has opened the borders for domestic banks. They can now open branches outside the country.
Sounding a note of caution on the inflationary budget, the Monetary Policy Nepal Rastra Bank (NRB) to be announced tomorrow has offered a slew of suggestions to the government to control the price hike.
"The policy is flexible and can be adjusted according to the situation," said a source at the central bank. "It will take all possible measures to contain inflation and stabilise economy," the source said adding that inflationary pressure has been rising due to the food prices hike based on non-financial reasons.
The central bank has prepared the Monetary Policy for this fiscal year while aiming at keeping inflation -- hovering at 13 per cent -- at a manageable level of seven per cent and to achieve 5.5 per cent economic growth as envisioned by the budget for the fiscal year 2009-10. But, given the experience of last fiscal year when the country witnessed a historic price hike, the people doubt the present government's capability to bring the price hike under control.
One of the major tools to curb price hike is to squeeze liquidity from the market. However, it is bringing a flexible policy and will not adjust Cash Reserve Ratio (CRR) that was increased last fiscal year to 5.5 percentage points from five per cent in the hope of containing the price hike.
Instead, bankers have urged the central bank to reduce CRR as according to them they are facing liquidity crunch.
"There is no liquidity crunch in the market," scoffed Kishore Maharjan, CEO of Sunrise Bank, citing the example of latest 91-day Treaury Bills that sold like hot cakes.
The CRR is the portion of deposits that banks have to keep with the central bank.The last Monetary Policy failed to contain the price in the last fiscal year. In a mid-term review of the last fiscal year's Monetary Policy, NRB governor Deependra Bahadur Kshetry had accepted the failure of the Monetary Policy to curb the price hike.
Earlier this morning, an NRB board meeting passed the Monetary Policy. As an advisor to the government, the central bank brings the Monetary Policy annually after the budget.
Sounding a note of caution on the inflationary budget, the Monetary Policy Nepal Rastra Bank (NRB) to be announced tomorrow has offered a slew of suggestions to the government to control the price hike.
"The policy is flexible and can be adjusted according to the situation," said a source at the central bank. "It will take all possible measures to contain inflation and stabilise economy," the source said adding that inflationary pressure has been rising due to the food prices hike based on non-financial reasons.
The central bank has prepared the Monetary Policy for this fiscal year while aiming at keeping inflation -- hovering at 13 per cent -- at a manageable level of seven per cent and to achieve 5.5 per cent economic growth as envisioned by the budget for the fiscal year 2009-10. But, given the experience of last fiscal year when the country witnessed a historic price hike, the people doubt the present government's capability to bring the price hike under control.
One of the major tools to curb price hike is to squeeze liquidity from the market. However, it is bringing a flexible policy and will not adjust Cash Reserve Ratio (CRR) that was increased last fiscal year to 5.5 percentage points from five per cent in the hope of containing the price hike.
Instead, bankers have urged the central bank to reduce CRR as according to them they are facing liquidity crunch.
"There is no liquidity crunch in the market," scoffed Kishore Maharjan, CEO of Sunrise Bank, citing the example of latest 91-day Treaury Bills that sold like hot cakes.
The CRR is the portion of deposits that banks have to keep with the central bank.The last Monetary Policy failed to contain the price in the last fiscal year. In a mid-term review of the last fiscal year's Monetary Policy, NRB governor Deependra Bahadur Kshetry had accepted the failure of the Monetary Policy to curb the price hike.
Earlier this morning, an NRB board meeting passed the Monetary Policy. As an advisor to the government, the central bank brings the Monetary Policy annually after the budget.
Government fails to run industries
It could be an eye-opener for the government that it has completely failed in operating industries.
During 2007-08, major loss-making ventures of the government were Udayapur Cement Industry and Janakpur Cigarette Factory (JCF) with losses amounting to Rs 266 million and 154.5 million respectively. "The net loss of seven PEs of the industrial sector doubled to Rs 435.9 million from Rs 272.7 million in 2006-07," said a report of the Finance Ministry.
The demand for cement is growing because of the construction boom but Udayapur Cement Industry posted loss. "Total sales of Udayapur Cement Industry has declined due to reduction in its production. Its loss increased due to its inability to minimize the cost of production proportionate to the decline in production," said the report.
The cumulative loss of Nepal Orind Magnesite Private has reached Rs 3.58 billion including this year's loss of Rs 86.1 million. Nepal Drugs Ltd has posted Rs 66.1 million profit -- basically due to sale of fixed assets to the tune of Rs 116.2 million.
Dairy Development Corporation (DDC) incurred net loss of Rs 89.8 million during the period despite a profit of Rs 14.7 million in 2006-07. "This was due to an increase in administrative expenses and provision of gratuity," the report said.
The total outstanding debt of all PEs in the industrial sector amounted to Rs 3.63 billion during 2007-08. However, net fixed assets also increased to Rs 4.67 billion from Rs 1.82 billion. The overall progress of the industrial sector does not seem to be satisfactory, said the government report. There is no improvement in the condition of Nepal Orind Magnesite and its financial burden has been increasing each year.
Of the total number of PEs established in the 60s, currently 36 are operating under full or majority ownership of the government. Of these 36 enterprises, seven are in the industrial sector, six in the trading sector, seven in the service sector, five in the social sector, three in the public utility sector and eight in the financial sector.
JCF neckdeep in trouble
JANAKPURDHAM: Janakpur Cigarette Factory (JCF) is facing a serious financial crisis and the factory is operating by using overdraft for operational costs. The company is currently at a loss of over Rs 530 million, including Rs 500 million overdrafts and Rs 30 million interests. The crunch in operational capital occurred due to high maintenance costs and high wastage due to the old rotary filter cigarette producing machine, AC plant and other equipment. The factory was set up 45 years ago with Russian support. Most of the machinery dates back to inception time. It will cost Rs 440 million to change the machines. Technicians said the factory is in a dilapidated condition and it would require Rs 1 billion immediately to keep the factory operating smoothly. They added that the factory is suffering a monthly loss of over Rs 12.5 million due to old machinery. The factory management has urged the government to arrange funds for the factory by selling its fixedassets like land. The factory owns land worth Rs 2.75 billion. Meanwhile, the factory is facing problems in arranging over Rs 260 million funds to be paid in gratuity funds to over 240 staffers who retired recently. Production in the factory has also been declining due to lack of modern equipment. Last year, the factory produced 1.15 billion sticks of cigarettes against the target of 2.36 billion sticks.
During 2007-08, major loss-making ventures of the government were Udayapur Cement Industry and Janakpur Cigarette Factory (JCF) with losses amounting to Rs 266 million and 154.5 million respectively. "The net loss of seven PEs of the industrial sector doubled to Rs 435.9 million from Rs 272.7 million in 2006-07," said a report of the Finance Ministry.
The demand for cement is growing because of the construction boom but Udayapur Cement Industry posted loss. "Total sales of Udayapur Cement Industry has declined due to reduction in its production. Its loss increased due to its inability to minimize the cost of production proportionate to the decline in production," said the report.
The cumulative loss of Nepal Orind Magnesite Private has reached Rs 3.58 billion including this year's loss of Rs 86.1 million. Nepal Drugs Ltd has posted Rs 66.1 million profit -- basically due to sale of fixed assets to the tune of Rs 116.2 million.
Dairy Development Corporation (DDC) incurred net loss of Rs 89.8 million during the period despite a profit of Rs 14.7 million in 2006-07. "This was due to an increase in administrative expenses and provision of gratuity," the report said.
The total outstanding debt of all PEs in the industrial sector amounted to Rs 3.63 billion during 2007-08. However, net fixed assets also increased to Rs 4.67 billion from Rs 1.82 billion. The overall progress of the industrial sector does not seem to be satisfactory, said the government report. There is no improvement in the condition of Nepal Orind Magnesite and its financial burden has been increasing each year.
Of the total number of PEs established in the 60s, currently 36 are operating under full or majority ownership of the government. Of these 36 enterprises, seven are in the industrial sector, six in the trading sector, seven in the service sector, five in the social sector, three in the public utility sector and eight in the financial sector.
JCF neckdeep in trouble
JANAKPURDHAM: Janakpur Cigarette Factory (JCF) is facing a serious financial crisis and the factory is operating by using overdraft for operational costs. The company is currently at a loss of over Rs 530 million, including Rs 500 million overdrafts and Rs 30 million interests. The crunch in operational capital occurred due to high maintenance costs and high wastage due to the old rotary filter cigarette producing machine, AC plant and other equipment. The factory was set up 45 years ago with Russian support. Most of the machinery dates back to inception time. It will cost Rs 440 million to change the machines. Technicians said the factory is in a dilapidated condition and it would require Rs 1 billion immediately to keep the factory operating smoothly. They added that the factory is suffering a monthly loss of over Rs 12.5 million due to old machinery. The factory management has urged the government to arrange funds for the factory by selling its fixedassets like land. The factory owns land worth Rs 2.75 billion. Meanwhile, the factory is facing problems in arranging over Rs 260 million funds to be paid in gratuity funds to over 240 staffers who retired recently. Production in the factory has also been declining due to lack of modern equipment. Last year, the factory produced 1.15 billion sticks of cigarettes against the target of 2.36 billion sticks.
Nepal, Myanmar to restart direct air link
Nepal is seeking resumption of direct air link with Myanmar after an over two-decade hiatus to promote tourism between the two countries.
The move will strengthen bilateral friendship and promote Nepal in Myanmar, sources quoted officials at the Nepali embassy in Myanmar as saying.
Myanmar and Nepal had established direct air link in 1970 but due to the internal affairs of Nepal, direct flight between the two countries was halted in 1988. In February 2001, the then foreign minister Chakra Prasad Bastola visited Myanmar and had discussions with his then counterpart U Win Aung on maintaining friendly relations and mutual cooperation. There was nearly no economic and trade activities between the two countries except for cultural exchange.
Resumption of direct air link will help increase the flow of Myanmarese Buddhist tourists to Nepal -- especially Lumbini, the birth-place of Lord Buddha.
Nepal, along with Bhutan, joined the seven-member Bay of Bengal Initiative for Multi-Sectoral Technical and Economic Cooperation (BIMSTEC) in 2004 as the last two members of the grouping -- the five original members being Bangladesh, India, Myanmar, Sri Lanka and Thailand sharing BIMSTEC. BIMSTEC, first founded in 1997, aims at promoting multi-sectoral cooperation for economic and social progress of the region.
The move will strengthen bilateral friendship and promote Nepal in Myanmar, sources quoted officials at the Nepali embassy in Myanmar as saying.
Myanmar and Nepal had established direct air link in 1970 but due to the internal affairs of Nepal, direct flight between the two countries was halted in 1988. In February 2001, the then foreign minister Chakra Prasad Bastola visited Myanmar and had discussions with his then counterpart U Win Aung on maintaining friendly relations and mutual cooperation. There was nearly no economic and trade activities between the two countries except for cultural exchange.
Resumption of direct air link will help increase the flow of Myanmarese Buddhist tourists to Nepal -- especially Lumbini, the birth-place of Lord Buddha.
Nepal, along with Bhutan, joined the seven-member Bay of Bengal Initiative for Multi-Sectoral Technical and Economic Cooperation (BIMSTEC) in 2004 as the last two members of the grouping -- the five original members being Bangladesh, India, Myanmar, Sri Lanka and Thailand sharing BIMSTEC. BIMSTEC, first founded in 1997, aims at promoting multi-sectoral cooperation for economic and social progress of the region.
Wednesday, July 22, 2009
NRB to hand over management of Bank of Kathmandu back
Nepal Rastra Bank (NRB) will handover the management of Bank of Kathmandu (BoK) back to the bank's new Board of Directors (BoD) tomorrow after BoK's special AGM today formed the new board.
"The present management committee appointed by NRB for using the authority of BoD -- led by Laxmi Prapanna Niroula as co-ordinator and Ramesh Kumar Pokharel, Prem Prasad Pandey, Murari Basnet as members -- will hand over the management to the new BoK board tomorrow," said a source at NRB. "The NRB board meeting tomorrow will ask the Niroula-led NRB team to handover the management and come back," the source said adding that the NRB team is mandated to hand over the management to the new board members after BoK's special AGM.
BoK today elected four directors from public shareholders -- Govinda Regmi, Bishnu Banjade, Narendra Basnyat and Dr Hem Subedi -- and unnanimously selected three directors Ramesh Nath Dhungel, Bijaya Krishna Shrestha and Satya Narayan Manandhar from the promoters.
Five contestants from the public -- along with former director Balaram Neupane -- had filed their candidacy for the four positions as a majority of BoK's shares is with the public. The promoters are only 42 per cent stakeholders.
Earlier on May 19, NRB had taken over the bank's management suspending its board and had sent a four-member team led by NRB executive director Niroula. This was after the BoK board's controversial decision to 'call back' Radhesh Pant from the post of managing director.
The crisis precipitated after the 313th board meeting of BoK on March 22, which decided to recall Pant from the post of MD. Though the decision was taken by a majority of the board members, Pant was not given a chance to furnish his explanation. Four directors voted against him while two -- Sitaram Thapaliya and Sudarshan Poudel -- supported him.
NRB took over the bank's management to safeguard the investors' and promoters' interests due to dispute among board members and also to send a strong signal that the regulatory authority of the monetary market was keeping a hawk's eye on financial institutions. It is empowered to take over the management of any financial institution under NRB Act 2063 (Section 54) after giving it a seven-day chance to furnish an explanation.
However, NRB revoked its earlier decision to suspend the directors on June 25 and allowed them to contest in the special AGM after the suspended board realised its mistake and agreed to work together for the betterment of the bank, investors and promoters.The suspended board members, who had moved the Supreme Court against 'NRB intervention' -- in their own words -- also withdrew the case.
NRB published a Due Deligence Audit report on June 27 and called the special AGM of the bank -- established on March 3, 1995, as the 10th commercial bank -- for today.
"The present management committee appointed by NRB for using the authority of BoD -- led by Laxmi Prapanna Niroula as co-ordinator and Ramesh Kumar Pokharel, Prem Prasad Pandey, Murari Basnet as members -- will hand over the management to the new BoK board tomorrow," said a source at NRB. "The NRB board meeting tomorrow will ask the Niroula-led NRB team to handover the management and come back," the source said adding that the NRB team is mandated to hand over the management to the new board members after BoK's special AGM.
BoK today elected four directors from public shareholders -- Govinda Regmi, Bishnu Banjade, Narendra Basnyat and Dr Hem Subedi -- and unnanimously selected three directors Ramesh Nath Dhungel, Bijaya Krishna Shrestha and Satya Narayan Manandhar from the promoters.
Five contestants from the public -- along with former director Balaram Neupane -- had filed their candidacy for the four positions as a majority of BoK's shares is with the public. The promoters are only 42 per cent stakeholders.
Earlier on May 19, NRB had taken over the bank's management suspending its board and had sent a four-member team led by NRB executive director Niroula. This was after the BoK board's controversial decision to 'call back' Radhesh Pant from the post of managing director.
The crisis precipitated after the 313th board meeting of BoK on March 22, which decided to recall Pant from the post of MD. Though the decision was taken by a majority of the board members, Pant was not given a chance to furnish his explanation. Four directors voted against him while two -- Sitaram Thapaliya and Sudarshan Poudel -- supported him.
NRB took over the bank's management to safeguard the investors' and promoters' interests due to dispute among board members and also to send a strong signal that the regulatory authority of the monetary market was keeping a hawk's eye on financial institutions. It is empowered to take over the management of any financial institution under NRB Act 2063 (Section 54) after giving it a seven-day chance to furnish an explanation.
However, NRB revoked its earlier decision to suspend the directors on June 25 and allowed them to contest in the special AGM after the suspended board realised its mistake and agreed to work together for the betterment of the bank, investors and promoters.The suspended board members, who had moved the Supreme Court against 'NRB intervention' -- in their own words -- also withdrew the case.
NRB published a Due Deligence Audit report on June 27 and called the special AGM of the bank -- established on March 3, 1995, as the 10th commercial bank -- for today.
Monday, July 20, 2009
NRB revokes action against financial institutions
Nepal Rastra Bank (NRB) has revoked the action against Nepal CSI Development Bank -- from July 15 -- after it increased its Cash Reserve Ratio (CRR) and injected fresh capital according to the directives of the NRB.
The central bank has imposed ban to collect deposits from August 20, 2006 and issued a slew of directives to improve its financial health. "The central bank has revoked its action against it after the financial health of the CSI Development Bank has improves," said the central bank.
The NRB had directed it to take Prompt Corrective Action on October 17, 2008.Similarly, the NRB has also revoked the action against Arun Finance and Saving after it also increased the minimum capital requirement. The NRB on October 17, 2008 banned it to take deposit and declared a problematic bank under the NRB Act.Similarly, the NRB has also allowed the suspended directors of the Bank of Kathmandu (BoK) to take part in the special annual general meeting (AGM) and file for candidacy for the directors. The special AGM is going to take place on July 22.Earlier, the NRB has suspended the BoK board after the controversial decision of its board to 'call back' Radhesh Pant from the post of managing director.
Central Depository Company of Nepal in offing
A group of banks, Nepal Stock Exchange (Nepse), Citizen Investment Trust (CIT) and Credit Information Bureau (CIB) has establish Central Depository Company of Nepal.
The Central Depository Company of Nepal will have 50 per cent shares of Nepse, 10 per cent share of CIB, 15 per cent of CIT and 25 per cent of a group of six commercial banks -- Standard Chartered Bank, Nabil Bank, Nepal SBI Bank, Bank of Kathmandu, Nepal Investment Bank and NIC Bank -- as promoters. "They have signed Promoters Agreement," said a source at the Securities Board of Nepal (Sebon).According to the draft regulation of the Central Depository System (CDS) -- sent to the finance ministry for its nod -- the company should have over Rs 100 million capital.
The increase in volume and number of share transactions after the automation of Nepse has created demand for the establishment of CDS that offers safety and convenience compared to holding securities in physical form, enhances liquidity by instantaneous transfers and delays, thefts, interceptions and subsequent misuse of certificates eliminated."After the CDS comes into operation, paper certificates would be converted into digital form and the ownership transformation will be completed within a lesser period of time that will provide more opportunities to investors for immediate exploitation of information and it will help control fraud as well," Shanker Man Singh, managing director of nepse said at an interaction on 'Establishing Central Depository System in Nepal'.
During the interaction, Cyrus Khambata and officials from Central Depositary Services (India) presented papers on the various facets of the CDS with particular relevance to Nepal.
However, Rewat Bahadur Karki, former MD of the Nepse said that Clearing and Central Depository System (CCDS) should be set up as the clearing is yet another key aspect and problem.
Finance Secretary Rameshwor Khanal, deputy governor Krishna Bahadur Manandhar, chairman of the Sebon Sur Bir Poudel, Pramod Bhattarai from Nepse, Ram Kumar K, C D Deshpande of CNC and Vinay Apsongikar of CMC took active part in the interaction.
"We still have traditional system of dealing with share certificates with enormous paperwork which is time consuming and involves various problems," Singh saidThe main functions of the CDS are centralised database and accounting for setting up the depository is to accelerate growth of scripless trading, with major thrust of individual participation and creating competitive environment, responsible to the user's interest and demands to enhance liquidity.In the Budget speech, Finance Minister Surendra Pandey claimed that CDS will start operating by October 17
The Central Depository Company of Nepal will have 50 per cent shares of Nepse, 10 per cent share of CIB, 15 per cent of CIT and 25 per cent of a group of six commercial banks -- Standard Chartered Bank, Nabil Bank, Nepal SBI Bank, Bank of Kathmandu, Nepal Investment Bank and NIC Bank -- as promoters. "They have signed Promoters Agreement," said a source at the Securities Board of Nepal (Sebon).According to the draft regulation of the Central Depository System (CDS) -- sent to the finance ministry for its nod -- the company should have over Rs 100 million capital.
The increase in volume and number of share transactions after the automation of Nepse has created demand for the establishment of CDS that offers safety and convenience compared to holding securities in physical form, enhances liquidity by instantaneous transfers and delays, thefts, interceptions and subsequent misuse of certificates eliminated."After the CDS comes into operation, paper certificates would be converted into digital form and the ownership transformation will be completed within a lesser period of time that will provide more opportunities to investors for immediate exploitation of information and it will help control fraud as well," Shanker Man Singh, managing director of nepse said at an interaction on 'Establishing Central Depository System in Nepal'.
During the interaction, Cyrus Khambata and officials from Central Depositary Services (India) presented papers on the various facets of the CDS with particular relevance to Nepal.
However, Rewat Bahadur Karki, former MD of the Nepse said that Clearing and Central Depository System (CCDS) should be set up as the clearing is yet another key aspect and problem.
Finance Secretary Rameshwor Khanal, deputy governor Krishna Bahadur Manandhar, chairman of the Sebon Sur Bir Poudel, Pramod Bhattarai from Nepse, Ram Kumar K, C D Deshpande of CNC and Vinay Apsongikar of CMC took active part in the interaction.
"We still have traditional system of dealing with share certificates with enormous paperwork which is time consuming and involves various problems," Singh saidThe main functions of the CDS are centralised database and accounting for setting up the depository is to accelerate growth of scripless trading, with major thrust of individual participation and creating competitive environment, responsible to the user's interest and demands to enhance liquidity.In the Budget speech, Finance Minister Surendra Pandey claimed that CDS will start operating by October 17
Business community wants committment
The business community today complained that the budget has not given domestic industries a level playing field. They opined that the government has to work with private sector to fuel growth.
"Time bound commitment is needed to boost the confidence of private sector," the entrepreneurs said at an interaction organised by Federation of Nepalese Chambers of commerce and Industry (FNCCI). They also complained the finance minister Surendra Pandey for not giving level playing field to the agro-based industries like sugar, flour, ghee and oil. "Without proper homework the finance minister imposed tax," said Gopal Chhetri, advisor of the FNCCI.
The budget has crushed the Crusher Industry, said Krishna Sharma, president of Crusher Industry that has been paying over Rs 1000 million to the local bodies as various taxes.The budget is not at all encouraging to the export-oriented industries, Prashant Pokharel, president of Garment Association of Nepal (GAN) said adding that the government has to lobby for duty-free quota of Nepali products in the US market as it would benefit domestic products.
Kush Kumar Joshi, president of umbrella organisation of Nepali private sector welcomed the budget but urged for an effective mechanism for the budget implementation. "Government has to clarify the reason of the price hike and cannot always blame private sector," he said. The government has failed to curb price hike that is hovering around 13 per cent.
"Time bound commitment is needed to boost the confidence of private sector," the entrepreneurs said at an interaction organised by Federation of Nepalese Chambers of commerce and Industry (FNCCI). They also complained the finance minister Surendra Pandey for not giving level playing field to the agro-based industries like sugar, flour, ghee and oil. "Without proper homework the finance minister imposed tax," said Gopal Chhetri, advisor of the FNCCI.
The budget has crushed the Crusher Industry, said Krishna Sharma, president of Crusher Industry that has been paying over Rs 1000 million to the local bodies as various taxes.The budget is not at all encouraging to the export-oriented industries, Prashant Pokharel, president of Garment Association of Nepal (GAN) said adding that the government has to lobby for duty-free quota of Nepali products in the US market as it would benefit domestic products.
Kush Kumar Joshi, president of umbrella organisation of Nepali private sector welcomed the budget but urged for an effective mechanism for the budget implementation. "Government has to clarify the reason of the price hike and cannot always blame private sector," he said. The government has failed to curb price hike that is hovering around 13 per cent.
Sunday, July 19, 2009
Women Migrant Workers bring remittance, bridge gender gap
Apart from bringing in remittance, foreign employment has bridged the gender gap (GG) also, according to a survey.
The trend of gender difference between male and female has vanished in the last five years as an equal number of women are attracted to foreign employment unlike five years ago, states the report on Women Migrant Workers (WMWs) in foreign employment and financial aspects conducted by Society of Economic Journalists (Sejon) in assistance of UNIFEM.
Due to financial crisis, women go for foreign employment and Isreal is the most preferred destination for them as it is more lucrative in terms of money and comparatively safer than other destinations, the report stated.
Community and caste has nothing to do with foreign employment as women from different castes and communities and different economic status are opting for foreign employment.
However, the cost of foreign employment is high due to the manpower agencies. "If financial institutions were to lend them money, the cost might come down," suggested the report.However, the financial institutions want a payback assurance. "We have the bitter experience of lending to foreign employment aspirants," said Sashin Joshi, president of Nepal Bankers' Association (NBA) and CEO of NIC Bank. "The rate of loan default is 96 per cent in the previously floated loans to foreign employment aspirants," he said adding that banks will lend if there is a guarantee that their money would be returned.
"A mechanism has to be set up -- like a tripartite agreement -- to float loans to foreign employment seekers," he added. Joshi also blamed the government for not doing enough homework before bringing the Rs 7 billion bond scheme for migrant workers. "Without homework, the government has brought the scheme and it may be just another deficit financing tool," he opined. "Apart from that, it cannot be sold through embassies.
"Financial Companies' Association president Ram Shanta Shrestha supported Joshi. "The tendency of borrowers not repaying the loan is dangerous," he said. Social scientist Ganesh Gurung said the bond would not be sold as migrant workers' primary intention will be to repay their loan followed by spending on their children's education.
"The government should announce some incentives, if it wants to sell the bonds," Gurung said. "There is no compatibility between the government's Act and Regulations and their implementation," he added.
Nepal Foreign Employment Agencies' Association president Tilak Rana Bhat complained of the government's apathy towards the sector. The government has opened 107 countries for Nepalis as foreign work destinations. "The remittance that keeps the economy afloat is not government's achievement," he said adding that before blaming the manpower agencies, the government should stop the women going via India as they would be more vulnerable in that case.
Nepal Remitters' Association (NRA) president Chandra Dhakal said the government should bring those sending migrant workers through illegal channels within the legal frame to minimise vulnerability.
"Remittance has almost 18 per cent contribution to the GDP but it is neglected by the government," Dhakal complained. "However, nearly 30 to 40 per cent of the remittance does not come through banking channels.
"For the past five consecutive years, remittance remains the top contributor to foreign exchange earnings. Remittance has contributed to 26 per cent growth in convertible currency reserves by playing a crucial role in savings, investment, growth, consumption and poverty and income distribution. "Women migrant workers contribute 11 per cent in the total 18 per cent," said UNIFEM Regional Programme manager Sharu Joshi Shrestha. Finance Ministry senior advisor Keshav Acharya said women have 100 per cent contribution in remittance, because the men work in foreign land and it is their wives who look after the home and bear all family responsibility.
The impact of remittance is not only economic, but also social, cultural and political. Remittance's high social returns manifest in the form of increased household investments in education, entrepreneurship and health.
Remittance augments the income of the recipient households. Increased income has impact on consumption and livelihood. Remittance also increases household expenditure on health and education.
Nepal Rastra Bank (NRB) research department executive director Trilochan Pageni assured of further research on the topic. "Remittance could also have negative impacts," he said adding that large and sustained remittance inflow could cause an appreciation of the real exchange rate and Nepal is slowly losing relative export competitiveness due to easy inflow of remittance.
The trend of gender difference between male and female has vanished in the last five years as an equal number of women are attracted to foreign employment unlike five years ago, states the report on Women Migrant Workers (WMWs) in foreign employment and financial aspects conducted by Society of Economic Journalists (Sejon) in assistance of UNIFEM.
Due to financial crisis, women go for foreign employment and Isreal is the most preferred destination for them as it is more lucrative in terms of money and comparatively safer than other destinations, the report stated.
Community and caste has nothing to do with foreign employment as women from different castes and communities and different economic status are opting for foreign employment.
However, the cost of foreign employment is high due to the manpower agencies. "If financial institutions were to lend them money, the cost might come down," suggested the report.However, the financial institutions want a payback assurance. "We have the bitter experience of lending to foreign employment aspirants," said Sashin Joshi, president of Nepal Bankers' Association (NBA) and CEO of NIC Bank. "The rate of loan default is 96 per cent in the previously floated loans to foreign employment aspirants," he said adding that banks will lend if there is a guarantee that their money would be returned.
"A mechanism has to be set up -- like a tripartite agreement -- to float loans to foreign employment seekers," he added. Joshi also blamed the government for not doing enough homework before bringing the Rs 7 billion bond scheme for migrant workers. "Without homework, the government has brought the scheme and it may be just another deficit financing tool," he opined. "Apart from that, it cannot be sold through embassies.
"Financial Companies' Association president Ram Shanta Shrestha supported Joshi. "The tendency of borrowers not repaying the loan is dangerous," he said. Social scientist Ganesh Gurung said the bond would not be sold as migrant workers' primary intention will be to repay their loan followed by spending on their children's education.
"The government should announce some incentives, if it wants to sell the bonds," Gurung said. "There is no compatibility between the government's Act and Regulations and their implementation," he added.
Nepal Foreign Employment Agencies' Association president Tilak Rana Bhat complained of the government's apathy towards the sector. The government has opened 107 countries for Nepalis as foreign work destinations. "The remittance that keeps the economy afloat is not government's achievement," he said adding that before blaming the manpower agencies, the government should stop the women going via India as they would be more vulnerable in that case.
Nepal Remitters' Association (NRA) president Chandra Dhakal said the government should bring those sending migrant workers through illegal channels within the legal frame to minimise vulnerability.
"Remittance has almost 18 per cent contribution to the GDP but it is neglected by the government," Dhakal complained. "However, nearly 30 to 40 per cent of the remittance does not come through banking channels.
"For the past five consecutive years, remittance remains the top contributor to foreign exchange earnings. Remittance has contributed to 26 per cent growth in convertible currency reserves by playing a crucial role in savings, investment, growth, consumption and poverty and income distribution. "Women migrant workers contribute 11 per cent in the total 18 per cent," said UNIFEM Regional Programme manager Sharu Joshi Shrestha. Finance Ministry senior advisor Keshav Acharya said women have 100 per cent contribution in remittance, because the men work in foreign land and it is their wives who look after the home and bear all family responsibility.
The impact of remittance is not only economic, but also social, cultural and political. Remittance's high social returns manifest in the form of increased household investments in education, entrepreneurship and health.
Remittance augments the income of the recipient households. Increased income has impact on consumption and livelihood. Remittance also increases household expenditure on health and education.
Nepal Rastra Bank (NRB) research department executive director Trilochan Pageni assured of further research on the topic. "Remittance could also have negative impacts," he said adding that large and sustained remittance inflow could cause an appreciation of the real exchange rate and Nepal is slowly losing relative export competitiveness due to easy inflow of remittance.
Saturday, July 18, 2009
Nepse cannot impress transaction
The decrease in capital gain tax has pushed the Nepse up by 32.99 points to 735.87 points but the transaction amount could not justify the whopping gain. The transaction amount observed only 3.06 per cent growth to Rs 394 million this week in comparison to last week's Rs 382.3 million.
However, the shareholders of seven sub-groups -- except manufacturing and trading -- commercial banks, development banks, hydropower, finance companies, insurance, others and hotels gained this week.
As expected the budget brought capital gain tax down to 10 per cent from the earlier 15 per cent but the Nepse could not perform better than last week. Last week too, the Nepse had surged more than this week as last week it had gained by 35.45 points to 702.88 points after a long spell of bearish trend. This week Nepse gained only 32.99 points to 735.87 points. The selling pressure has pulled the Nepse down by 13.24 points to 735.87 points on the last day of the weekly trading -- on Thursday. Except for the last day, other days the Nepse ended in the green zone.Similarly, the contribution of Group-A companies -- the blue-chip shares in the domestic market -- also increased to 53.78 per cent against last week's 44.36 per cent. The 78-scrip sensitive index also flared by 7.09 points to 195.18 points from last week's 188.09 points. Last week sensitive index had surged by 10.73 points.
Similarly, the float index -- calculated on the basis of real transactions -- gained 2.61 points to close at 70.08 points from last week's closing of 67.47 points.This week Nepal Bangladesh Bank (with Rs 64.77 million) topped the chart in terms trading amount followed by National Hydropower Company (with Rs 50.55 million), Standard Chartered Bank Nepal (with Rs 49.15 million), Bank of Kathmandu (with Rs 27.55 million) and Nabil Bank (with Rs 19.06 million). Both -- Nepal Bangladesh Bank and National Hydropower Company -- is promoted by NB Group.
In terms of number of share units traded National Hydropower Company topped the chart with 5,44,000-unit shares changing hands, in terms of number of transactions Bank of Asia topped the chart with 296 transactions.
The new provision
KATHMANDU: According to the new provision on Capital Gain Tax announced in the budget for 2009-10, as per the, section 1, subsection 2 of the Aarthik Bidhayak Act 2066 the provision of section 1,2,3,4,5 and 10 will be executed immediately and the rest of the provisions are executed from Shrawan 1, 2066 (July 16). The section 52 of the said act specifies that the capital gain tax on listed securities are as follows:-
Capital Gain Tax for Individuals -- 10 per cent of the gainOther than individuals -- 15 pe rcent of the gain
In Case fo Non-Listed Securities
Capital Gain Tax for Individuals -- 10 per cent of the gain
Other than individuals -- 15 per cent of the gain
However, the shareholders of seven sub-groups -- except manufacturing and trading -- commercial banks, development banks, hydropower, finance companies, insurance, others and hotels gained this week.
As expected the budget brought capital gain tax down to 10 per cent from the earlier 15 per cent but the Nepse could not perform better than last week. Last week too, the Nepse had surged more than this week as last week it had gained by 35.45 points to 702.88 points after a long spell of bearish trend. This week Nepse gained only 32.99 points to 735.87 points. The selling pressure has pulled the Nepse down by 13.24 points to 735.87 points on the last day of the weekly trading -- on Thursday. Except for the last day, other days the Nepse ended in the green zone.Similarly, the contribution of Group-A companies -- the blue-chip shares in the domestic market -- also increased to 53.78 per cent against last week's 44.36 per cent. The 78-scrip sensitive index also flared by 7.09 points to 195.18 points from last week's 188.09 points. Last week sensitive index had surged by 10.73 points.
Similarly, the float index -- calculated on the basis of real transactions -- gained 2.61 points to close at 70.08 points from last week's closing of 67.47 points.This week Nepal Bangladesh Bank (with Rs 64.77 million) topped the chart in terms trading amount followed by National Hydropower Company (with Rs 50.55 million), Standard Chartered Bank Nepal (with Rs 49.15 million), Bank of Kathmandu (with Rs 27.55 million) and Nabil Bank (with Rs 19.06 million). Both -- Nepal Bangladesh Bank and National Hydropower Company -- is promoted by NB Group.
In terms of number of share units traded National Hydropower Company topped the chart with 5,44,000-unit shares changing hands, in terms of number of transactions Bank of Asia topped the chart with 296 transactions.
The new provision
KATHMANDU: According to the new provision on Capital Gain Tax announced in the budget for 2009-10, as per the, section 1, subsection 2 of the Aarthik Bidhayak Act 2066 the provision of section 1,2,3,4,5 and 10 will be executed immediately and the rest of the provisions are executed from Shrawan 1, 2066 (July 16). The section 52 of the said act specifies that the capital gain tax on listed securities are as follows:-
Capital Gain Tax for Individuals -- 10 per cent of the gainOther than individuals -- 15 pe rcent of the gain
In Case fo Non-Listed Securities
Capital Gain Tax for Individuals -- 10 per cent of the gain
Other than individuals -- 15 per cent of the gain
Thursday, July 16, 2009
Government fails to contain price hike
The government cannot contain the price hike as claimed in the budget speech, said Dr Shanker Sharma, former vice-chairman of the National Planning Commission (NPC) -- the national think-tank -- launching the Least Developed Countries Report 2009 here today.
Inspite of spending on popular programmes, it should build its spending capacity, he suggested. "Capital formation is very low and has not increased," he said adding that it was 21 per cent of gross domestic product (GDP) in 1992 and the rate has not increased.
The country might suffer from 'Dutch Desease' as the government has not focused on economic reforms and development. "The money is coming anyway as remmittance and foreign exchange reserve is swelling," he said adding that the government is in comfortable situation and has not increased spending on agriculture and infrastructure to fuel the growth. "The spending on infrastructure is at 12.8 per cent and on agriculture the government spending has gone down to 50 per cent from 1992.
"The donors have also shifted their focus to health and education from infrastructure and agriculture due to the government's inability."
Massive irrigation to ioncrease the productivity and promoting the domestic industries based on local raw materials that has comparitive advantages are the solutions," Sharma prescribed. Agriculture has 32.9 per cent contribution in the total GDP.
Despite being a agricultural country, Nepal is also a food importing countries like other Least Developed Countries (LDCs) as the investment on agriculture has gone down in comparison to the global investment.
"Assembling Industries are the new global phenomenon," the former vice-chairman of the national think-tank said adding that Nepal can take advantage of being in the middle of two growing economic powers and start accessories industries -- that manufactures parts and components -- for their industries instead of focusing on final products.
Currently, there are 49 LDCs, according to this March's revised list of UNCTAD. Every three years the UNCTAD revises the list of the LDCs, which has three criterion; low income criteria, human weakness criteria and economic vulnerability criteria.
Wednesday, July 15, 2009
World bank reaffirms support
The World Bank is exploring -- together with the government and other stakeholders -- how to reallocate funds from the Emergency Peace Support Project can most effectively complement the Emergency Peace Support Project and peace efforts.
It noted the priority given by the government to fund the payment of allowances to the Maoists in cantonments and emphasized the importance of continuing these payments.
A Bank today concluded a periodic review of the Project. The team also held discussions with senior government officials, high ranking leaders of the UCPN-Maoist, development partners supporting the peace process, and representatives of Nepali civil society. At these meetings the World Bank reiterated its commitment to continue supporting Nepal's peace process through the Project. The Bank will also continue to support peace-building through the development programmes it finances in Nepal.
"Implementing peace accords is not always easy but the Bank stands by its commitment to supporting Nepal in the implementation of its Comprehensive Peace Agreement (CPA)," said Susan Goldmark, the World Bank's country director for Nepal. "As part of our new assistance strategy, we will support projects that aim to contribute to the maintenance of peace and minimize the potential for future conflict. This reflects the centrality of peace to development and the Bank's commitment to it.
"The team welcomed progress in a number of areas, including initiation of payments to families of those killed as a result of the conflict, improved payment procedures for allowances to Maoists in cantonments, and the recent clear commitment to the discharge of minors and other ineligible former combatants from cantonments.
They also noted the funding gaps for implementing the peace accords and the need for ongoing support from the international community in addressing the needs of other conflict-affected groups, as well as reconstruction priorities, as reflected in the Nepal Peace Trust Fund needs assessment.
Yesterday finance minister Surendra Pandey has clarified that the WOrld Bank is not willing to provide monetary assistance to the PLA fighters who are in Cantonment.
It noted the priority given by the government to fund the payment of allowances to the Maoists in cantonments and emphasized the importance of continuing these payments.
A Bank today concluded a periodic review of the Project. The team also held discussions with senior government officials, high ranking leaders of the UCPN-Maoist, development partners supporting the peace process, and representatives of Nepali civil society. At these meetings the World Bank reiterated its commitment to continue supporting Nepal's peace process through the Project. The Bank will also continue to support peace-building through the development programmes it finances in Nepal.
"Implementing peace accords is not always easy but the Bank stands by its commitment to supporting Nepal in the implementation of its Comprehensive Peace Agreement (CPA)," said Susan Goldmark, the World Bank's country director for Nepal. "As part of our new assistance strategy, we will support projects that aim to contribute to the maintenance of peace and minimize the potential for future conflict. This reflects the centrality of peace to development and the Bank's commitment to it.
"The team welcomed progress in a number of areas, including initiation of payments to families of those killed as a result of the conflict, improved payment procedures for allowances to Maoists in cantonments, and the recent clear commitment to the discharge of minors and other ineligible former combatants from cantonments.
They also noted the funding gaps for implementing the peace accords and the need for ongoing support from the international community in addressing the needs of other conflict-affected groups, as well as reconstruction priorities, as reflected in the Nepal Peace Trust Fund needs assessment.
Yesterday finance minister Surendra Pandey has clarified that the WOrld Bank is not willing to provide monetary assistance to the PLA fighters who are in Cantonment.
Dr Bhattarai lambasts government, budget
Dr Baburam Bhattarai, the first finance minister of the Republic of Nepal and one of the ideologues of the CPN-Maoist today lambasted the government and the budget presented by his successor Surendra Pandey on Monday.
"We do not recognise this puppet government and its budget," he said bitterly adding that the budget that Pandey claims to be 'socialist' has failed the people. "It could not address the rising price hike and the employees' pay scale."
"The budget has announced cheap and popular programmes that can neither fuel growth nor generate employment," he added. Dr Bhattarai opined that the government has tried to impress by aping some programmes of the Maoists.
To match Dr Bhattarai's claim in the last budget of generating 10,000 MW of electricity in 10 years Maoists, Pandey has in his bag a programme which he claims will generate 25,000 MW of electricity in 20 years.
"The budget is full of ridiculous claims and plans. It has also reduced the allocations to agriculture and social security and increased the deficit," Dr Bhattarai added.
The Maoists opened the House to let the CPN-UML-led government present the programmes and policies after a 40-day disruption. They have been not taking part in the budget discussions also to protest what they call President Dr Ram Baran Yadav's 'unconstitutional' reinstatement of Army chief General Rukmangad Katuwal.
"We do not recognise this puppet government and its budget," he said bitterly adding that the budget that Pandey claims to be 'socialist' has failed the people. "It could not address the rising price hike and the employees' pay scale."
"The budget has announced cheap and popular programmes that can neither fuel growth nor generate employment," he added. Dr Bhattarai opined that the government has tried to impress by aping some programmes of the Maoists.
To match Dr Bhattarai's claim in the last budget of generating 10,000 MW of electricity in 10 years Maoists, Pandey has in his bag a programme which he claims will generate 25,000 MW of electricity in 20 years.
"The budget is full of ridiculous claims and plans. It has also reduced the allocations to agriculture and social security and increased the deficit," Dr Bhattarai added.
The Maoists opened the House to let the CPN-UML-led government present the programmes and policies after a 40-day disruption. They have been not taking part in the budget discussions also to protest what they call President Dr Ram Baran Yadav's 'unconstitutional' reinstatement of Army chief General Rukmangad Katuwal.
Price hike unlikely to roll back
Though the government has projected to keep the price hike at seven per cent, the idea seems unfeasible. For the new fiscal year, the price hike is estimated to remain at 13 per cent as the government has completely failed to curb it.
Food price inflation remains a serious concern across Nepal. According to figures recently released by Nepal Rastra Bank (NRB), the year-on year inflation for food and beverage was 16.5 per cent for May. A poor food availability situation in remote hill and mountain markets, caused largely by the recent winter drought, has resulted in significant price increase during June, said a report Market Watch jointly prepared by World Food Programme (WFP), Food Security Monitoring and Analysis System the Ministry of Agriculture and Cooperatives (MoAC), Department of Agriculture, Agribusiness Promotion and Marketing Development Directorate of the the Federation of Nepalese Chamber of Commerce and Industries (FNCCI) and Consumer Interest Protection Forum (CIPF).
"This is particularly so in Mugu, where reduced local food stocks and insufficient external supply, has resulted in a five per cent increase in the price of cooking oil, a 30 per cent increase in the price of rice and a 50 per cent increase in the price of beans between May and June," the report said adding that due to a poor winter crop harvest, the price of potato continues to increase across much of the country, on average up by 10 per cent compared to last month, and up by over 58 per cent compared to last year.
Even Kathmandu Valley is under serious threat of price rise. There has been a strong increase in vegetable prices in the past one month, and the comparison of prices a month back and the prices today shows a very noticeable difference.
The price of carrot in the last one month has shown a major difference. Then priced at Rs 36.80 per kg it is now at a high at Rs 67.50, a difference of 155 per cent.
The widely consumed cauliflower has shown a difference of 104.74 per cent, priced at Rs 23 per kg a month back it is selling for Rs 47 per kg.
"The vegetable and grain yield this year has been very dissatisfactory due to meagre rainfall and various other factors. The price hike is due to lack of supply," said Binay Shrestha, Planning Officer of the Kalimati Fruit and Vegetable Market Development Department.
Broccoli shows a difference of 141.33 per cent, priced at Rs 38 per kg it a month ago it has now gone up to Rs 92 per kg.
The price of watermelon in the peak season has touched Rs 47.50 per kg. It was at Rs 13.67 exactly a month back, showing a difference of 247.48 per cent.With the implementation of the proposed budget, the government has estimated the Gross Domestic Product at 5.5 per cent by the end of the coming fiscal year. The growth rate in agriculture sector is expected to be at 3.3 per cent and non-agriculture sector at 6.6 per cent. The projection is based on the surmise that the price level will gradually drop and inflation will be around seven per cent. Looking at comparative data for only a month, the estimated rate of inflation does not seem to be a realistic or practical approach to curbing the price hike.
Food price inflation remains a serious concern across Nepal. According to figures recently released by Nepal Rastra Bank (NRB), the year-on year inflation for food and beverage was 16.5 per cent for May. A poor food availability situation in remote hill and mountain markets, caused largely by the recent winter drought, has resulted in significant price increase during June, said a report Market Watch jointly prepared by World Food Programme (WFP), Food Security Monitoring and Analysis System the Ministry of Agriculture and Cooperatives (MoAC), Department of Agriculture, Agribusiness Promotion and Marketing Development Directorate of the the Federation of Nepalese Chamber of Commerce and Industries (FNCCI) and Consumer Interest Protection Forum (CIPF).
"This is particularly so in Mugu, where reduced local food stocks and insufficient external supply, has resulted in a five per cent increase in the price of cooking oil, a 30 per cent increase in the price of rice and a 50 per cent increase in the price of beans between May and June," the report said adding that due to a poor winter crop harvest, the price of potato continues to increase across much of the country, on average up by 10 per cent compared to last month, and up by over 58 per cent compared to last year.
Even Kathmandu Valley is under serious threat of price rise. There has been a strong increase in vegetable prices in the past one month, and the comparison of prices a month back and the prices today shows a very noticeable difference.
The price of carrot in the last one month has shown a major difference. Then priced at Rs 36.80 per kg it is now at a high at Rs 67.50, a difference of 155 per cent.
The widely consumed cauliflower has shown a difference of 104.74 per cent, priced at Rs 23 per kg a month back it is selling for Rs 47 per kg.
"The vegetable and grain yield this year has been very dissatisfactory due to meagre rainfall and various other factors. The price hike is due to lack of supply," said Binay Shrestha, Planning Officer of the Kalimati Fruit and Vegetable Market Development Department.
Broccoli shows a difference of 141.33 per cent, priced at Rs 38 per kg it a month ago it has now gone up to Rs 92 per kg.
The price of watermelon in the peak season has touched Rs 47.50 per kg. It was at Rs 13.67 exactly a month back, showing a difference of 247.48 per cent.With the implementation of the proposed budget, the government has estimated the Gross Domestic Product at 5.5 per cent by the end of the coming fiscal year. The growth rate in agriculture sector is expected to be at 3.3 per cent and non-agriculture sector at 6.6 per cent. The projection is based on the surmise that the price level will gradually drop and inflation will be around seven per cent. Looking at comparative data for only a month, the estimated rate of inflation does not seem to be a realistic or practical approach to curbing the price hike.
Monday, July 13, 2009
Mixed bag of borrowed template
Finance Minister Surendra Pandey today presented an accommodative budget of Rs 285.93 billion for the fiscal 2009-10. Though the budget has increased its revenue target, it still has Rs 46.34 billion deficit.
"The budget is little oversized," said former finance minister Dr Ram Sharan Mahat, who was cautious in his praise. It has the following broad contours -- Rs 160.63 billion has been set aside for recurrent expenditure, Rs 106.285 billion for capital expenditure and Rs 19.12 billion for principal repayment.
However, denizens, suffering from double digit price hike, will not get respite as the oversized budget could fuel the price hike. It seems that the government has completely surrendered to the rising price as it projects 13 per cent price hike in 2008-09 but has no contengency plan to contain the price rise.
Prof Dr Bishwambher Pyakuryal, a senior economist, too endorsed that overriding perception. The all-important fiscal document has, though, aims to contain the price hike at seven per cent and targets growth at 5.5 per cent.
"It seems that the government wants to give something to the people. But, unfortunately it lacks focus," said Dr Shanker Sharma, ex-vice-chairman, National Planning Commission (NPC). "If there is a good monsoon, the growth target could be achieved since it is primarily powered by agriculture, which is dependant on the vagaries of nature,” he added.
Pandey also has a lot of hard work in store to live up to his promise.
Dr Sharma opined that delivery mechanism needed to be improved at least 10 times to make it a resounding success.
In a bid to be as accommodative as the ground reality allowed him to, the Finance Minister has not only added new programmes but also opted for continuity of his predecessor Dr Baburam Bhattarai.
Pandey said that the budget would focus on job creation, boosting law and order, creating a better investment climate and implementing power projects to end a crippling shortage of electricity that has stunted economic growth but he has totally lost the focus.
Dr Mahat, too, agreed that the budget lacked a sustained focus. The budget is a throwback to Bharat Mohan Adhikari of his own party -- CPN-UML -- and Maoist Dr Bhattarai's budgets.
Entrepreneurs, however, felt that it neglected private sector. But, in theory Pandey worked towards an inclusive budget, where the public-private partnership (PPP) has been bandied as a guiding force.
Binod Chaudhary, CA member and a leading industrialist, agreed that the private sector was overshadowed. "Though, it's also true that the budget is infrastructure-driven,” he added.
"But the budgetary allocation for infrastructure is not enough," said Dr Sharma. He cited the example of a showpiece project National Pride -- a Kathmandu-Tarai Fast Track road. Though the estimated cost of the project is pegged at Rs 60 billion, Pandey has allocated only Rs 250 million in his budget.
The Finance Minister has also let the government employees down since he did not hike their salaries and only hiked their allowance. His projection of foreign assistance -- at Rs 56.95 billion - and foreign grant -- at Rs 21.56 billion -- too is ambitious.
The new Finance Minister clearly seems to be inspired by his predecessor. For instance, despite the pressure from the bureaucracy, he increased the revenue target to Rs 161.73 billion.In reality, even if he could meet the revenue target, his ability to spend -- like Dr Bhattarai -- is very much in doubt in absence of local bodies and political instability.
“Pandey has lost sight of the fact that our economy cannot absorb expansionary fiscal policy at this moment," added Dr Pyakuryal.
Highlight
Total budget outlay -- Rs 285.93 billion
Recurrent expenditure -- Rs 160.63 billion
Capital expenditure -- Rs 106.285 billion
Principal Repayment -- Rs 19.12 billion
Sources
Revenue target -- Rs 161.73 billion + Rs 15 billion = Rs 176.73 billion
Foreign assistance -- Rs 78.51 billion
Foreign grant -- Rs 56.95 billion
Foreign loan -- Rs 21.56 billion
Deficit -- Rs 46.34 billion
Major highlights of annual budget 2009-10
* Inflation rate -- seven per cent
* Gross Domestic Product target -- 5.5 per cent
* Agriculture sector growth target -- 3.3 per cent
* Non-agriculture sector growth taget -- 6.6 per cent
The tax exemption limit has been increased to Rs 1,60,000 for unmarried and Rs 2,00,000 for married.
* The prevailing highest rate of customs duty of 40 per cent has been reduced to 30 per cent.
* Foreign currency declaration limit by foreigners at the arrival point has been fixed at $5000 from earlier limit of $2000.
* Local Development Tax and Kawadi Tax scrapped.
* Tribhuvan International Airport duty free shops can seel goods in Indian Currency.
* Industreis exempted 10 per cent tax on special industries and information technology industry that directly emploes 300 or more Nepalis the year round.
* Industries that directly employes 1,200 or more Nepali nationals round the year round or which provides direct employment to more than 100 Nepali nationals including 33 per cent women, dalits (the downtrodden) or the handicapped will have to pay only 80 per cent tax on their income of that particular year.
* Tax Compliance Year has been declared for developing taxpaying habit.
* All income earners and advance tax payers (TDS payers) will have to get PAN members compulsorily.
* Income earners involved in different employments, occupations or investments without PAN numbers, who have not paid or only partially paid taxes like consultants, doctors, engineers, lawyers, auditors, artists, commission agents will, if they get PAN numbers within the last day of Magh 2066 (mid Feb 2010) and submit the tax returns of the fiscal years 2007-08 and 2008-09 and pay the tax, will be exempt from submitting the tax returns of the previous year and enjoy exemption on payment of tax, charge, interest and penalty on it.
* Projects of National Pride: The government has announced three project -- Kathmandu-Nijgadh fast track road, Upper Seti Hydropower project and the Hulaki Sadak in the eastern Tarai. These are high priority projects that depend on investment from the private sector and donors. However the government wants to use the unspent budget to initiate these projects.
* Rs 1,00,000 grants for intercaste marriage.
* Rs 50,000 grants for widow marriage.
* Generation of 25000 MW of electricity in 20 years.
Top 5 Ministries (in terms of budget allocation)
Ministry of Education Rs 42.24 billion
Ministry of Home Affairs Rs 15.38 billion
Ministry of Defence Rs 14. 62 billion
Ministry of Health and Population Rs 14.13 billion
Ministry of Local Development Rs 13.83 billion
Budget Allocation for Constitutional Bodies
President Rs 160.68 million
Vice President Rs 22.17 million
Constituent Assembly-Legislative Parliament Rs 770.30 million
Court Rs 1.41 billion
CIAA Rs 89.21 million
Office of the Auditor General Rs 142.16 million
Public Service Commission Rs 145.06 million
Election Commission Rs 185.68 million
Office of the Attorney General Rs 217.66 million
Council of Justice Rs 8.97 million
National Human Rights Commission Rs 70.53 million
Prime Minister and Council of Minister's Office Rs 3.49 million
"The budget is little oversized," said former finance minister Dr Ram Sharan Mahat, who was cautious in his praise. It has the following broad contours -- Rs 160.63 billion has been set aside for recurrent expenditure, Rs 106.285 billion for capital expenditure and Rs 19.12 billion for principal repayment.
However, denizens, suffering from double digit price hike, will not get respite as the oversized budget could fuel the price hike. It seems that the government has completely surrendered to the rising price as it projects 13 per cent price hike in 2008-09 but has no contengency plan to contain the price rise.
Prof Dr Bishwambher Pyakuryal, a senior economist, too endorsed that overriding perception. The all-important fiscal document has, though, aims to contain the price hike at seven per cent and targets growth at 5.5 per cent.
"It seems that the government wants to give something to the people. But, unfortunately it lacks focus," said Dr Shanker Sharma, ex-vice-chairman, National Planning Commission (NPC). "If there is a good monsoon, the growth target could be achieved since it is primarily powered by agriculture, which is dependant on the vagaries of nature,” he added.
Pandey also has a lot of hard work in store to live up to his promise.
Dr Sharma opined that delivery mechanism needed to be improved at least 10 times to make it a resounding success.
In a bid to be as accommodative as the ground reality allowed him to, the Finance Minister has not only added new programmes but also opted for continuity of his predecessor Dr Baburam Bhattarai.
Pandey said that the budget would focus on job creation, boosting law and order, creating a better investment climate and implementing power projects to end a crippling shortage of electricity that has stunted economic growth but he has totally lost the focus.
Dr Mahat, too, agreed that the budget lacked a sustained focus. The budget is a throwback to Bharat Mohan Adhikari of his own party -- CPN-UML -- and Maoist Dr Bhattarai's budgets.
Entrepreneurs, however, felt that it neglected private sector. But, in theory Pandey worked towards an inclusive budget, where the public-private partnership (PPP) has been bandied as a guiding force.
Binod Chaudhary, CA member and a leading industrialist, agreed that the private sector was overshadowed. "Though, it's also true that the budget is infrastructure-driven,” he added.
"But the budgetary allocation for infrastructure is not enough," said Dr Sharma. He cited the example of a showpiece project National Pride -- a Kathmandu-Tarai Fast Track road. Though the estimated cost of the project is pegged at Rs 60 billion, Pandey has allocated only Rs 250 million in his budget.
The Finance Minister has also let the government employees down since he did not hike their salaries and only hiked their allowance. His projection of foreign assistance -- at Rs 56.95 billion - and foreign grant -- at Rs 21.56 billion -- too is ambitious.
The new Finance Minister clearly seems to be inspired by his predecessor. For instance, despite the pressure from the bureaucracy, he increased the revenue target to Rs 161.73 billion.In reality, even if he could meet the revenue target, his ability to spend -- like Dr Bhattarai -- is very much in doubt in absence of local bodies and political instability.
“Pandey has lost sight of the fact that our economy cannot absorb expansionary fiscal policy at this moment," added Dr Pyakuryal.
Highlight
Total budget outlay -- Rs 285.93 billion
Recurrent expenditure -- Rs 160.63 billion
Capital expenditure -- Rs 106.285 billion
Principal Repayment -- Rs 19.12 billion
Sources
Revenue target -- Rs 161.73 billion + Rs 15 billion = Rs 176.73 billion
Foreign assistance -- Rs 78.51 billion
Foreign grant -- Rs 56.95 billion
Foreign loan -- Rs 21.56 billion
Deficit -- Rs 46.34 billion
Major highlights of annual budget 2009-10
* Inflation rate -- seven per cent
* Gross Domestic Product target -- 5.5 per cent
* Agriculture sector growth target -- 3.3 per cent
* Non-agriculture sector growth taget -- 6.6 per cent
The tax exemption limit has been increased to Rs 1,60,000 for unmarried and Rs 2,00,000 for married.
* The prevailing highest rate of customs duty of 40 per cent has been reduced to 30 per cent.
* Foreign currency declaration limit by foreigners at the arrival point has been fixed at $5000 from earlier limit of $2000.
* Local Development Tax and Kawadi Tax scrapped.
* Tribhuvan International Airport duty free shops can seel goods in Indian Currency.
* Industreis exempted 10 per cent tax on special industries and information technology industry that directly emploes 300 or more Nepalis the year round.
* Industries that directly employes 1,200 or more Nepali nationals round the year round or which provides direct employment to more than 100 Nepali nationals including 33 per cent women, dalits (the downtrodden) or the handicapped will have to pay only 80 per cent tax on their income of that particular year.
* Tax Compliance Year has been declared for developing taxpaying habit.
* All income earners and advance tax payers (TDS payers) will have to get PAN members compulsorily.
* Income earners involved in different employments, occupations or investments without PAN numbers, who have not paid or only partially paid taxes like consultants, doctors, engineers, lawyers, auditors, artists, commission agents will, if they get PAN numbers within the last day of Magh 2066 (mid Feb 2010) and submit the tax returns of the fiscal years 2007-08 and 2008-09 and pay the tax, will be exempt from submitting the tax returns of the previous year and enjoy exemption on payment of tax, charge, interest and penalty on it.
* Projects of National Pride: The government has announced three project -- Kathmandu-Nijgadh fast track road, Upper Seti Hydropower project and the Hulaki Sadak in the eastern Tarai. These are high priority projects that depend on investment from the private sector and donors. However the government wants to use the unspent budget to initiate these projects.
* Rs 1,00,000 grants for intercaste marriage.
* Rs 50,000 grants for widow marriage.
* Generation of 25000 MW of electricity in 20 years.
Top 5 Ministries (in terms of budget allocation)
Ministry of Education Rs 42.24 billion
Ministry of Home Affairs Rs 15.38 billion
Ministry of Defence Rs 14. 62 billion
Ministry of Health and Population Rs 14.13 billion
Ministry of Local Development Rs 13.83 billion
Budget Allocation for Constitutional Bodies
President Rs 160.68 million
Vice President Rs 22.17 million
Constituent Assembly-Legislative Parliament Rs 770.30 million
Court Rs 1.41 billion
CIAA Rs 89.21 million
Office of the Auditor General Rs 142.16 million
Public Service Commission Rs 145.06 million
Election Commission Rs 185.68 million
Office of the Attorney General Rs 217.66 million
Council of Justice Rs 8.97 million
National Human Rights Commission Rs 70.53 million
Prime Minister and Council of Minister's Office Rs 3.49 million
Sunday, July 12, 2009
Economic Survey paints gloomy picture
Contrary to the projection of seven per cent Gross Domestic Product (GDP) growth, the Economic Survey released by the Finance Ministry a day ahead of the budget for fiscal year 2009-10 puts forth a grim reality.
The GDP at the base price is expected to expanded by only 4.7 per cent -- far below than the encouraging figures during last fiscal that was at 5.3 per cent. Favourable monsoon and judicious policies had soared the growth rates in both agriculture and non- agriculture sectors in the last fiscla year but delayed monsoon coupled with acute power crisis, frequent political disruptions have taken a huge toll on the agriculture that accounted for only 2.1 per cent growth, states the Survey. The agriculture contributes 32.4 per cent to the total GDP.
The survey -- based on eight months' data of the current fiscal year -- portrays a gloomy economic picture. The manufacturing industry posted a negative growth of 0.5 per cent against 0.2 per cent last year. Ditto for electricity, gas and water. This time around, education, health and construction, in non-agro sector, have powered the growth. While, financial intermediary has nosedived to 3.3 per cent from last year's high of 13.8 per cent. The Survey maintained that double digit price hike and slower growth have had an adverse effect on the consumers' purchasing power, posing a serious threat to the financial management.
The government's spending on the corporation has also gone up by 17.5 per cent in 2007-08 in comparison to 2006-07, states the survey, which was tabled in the House late this evening by finance minister Surendra Pandey, who will present the budget for the fiscal year 2009-10 on Monday.
The GDP at the base price is expected to expanded by only 4.7 per cent -- far below than the encouraging figures during last fiscal that was at 5.3 per cent. Favourable monsoon and judicious policies had soared the growth rates in both agriculture and non- agriculture sectors in the last fiscla year but delayed monsoon coupled with acute power crisis, frequent political disruptions have taken a huge toll on the agriculture that accounted for only 2.1 per cent growth, states the Survey. The agriculture contributes 32.4 per cent to the total GDP.
The survey -- based on eight months' data of the current fiscal year -- portrays a gloomy economic picture. The manufacturing industry posted a negative growth of 0.5 per cent against 0.2 per cent last year. Ditto for electricity, gas and water. This time around, education, health and construction, in non-agro sector, have powered the growth. While, financial intermediary has nosedived to 3.3 per cent from last year's high of 13.8 per cent. The Survey maintained that double digit price hike and slower growth have had an adverse effect on the consumers' purchasing power, posing a serious threat to the financial management.
The government's spending on the corporation has also gone up by 17.5 per cent in 2007-08 in comparison to 2006-07, states the survey, which was tabled in the House late this evening by finance minister Surendra Pandey, who will present the budget for the fiscal year 2009-10 on Monday.
Forex reserve up by leaps and bounds
The gross foreign exchange reserves stood at Rs 283.4 billion, a rise by 33.3 per cent in mid-May 2009 in comparison to mid-July 2008. In the same period last year, such reserves had risen by 19.3 per cent, said the report of Nepal Rastra Bank.
On the basis of the US dollar, gross foreign exchange reserves rose by 15.4 per cent to $3.6 billion in mid-May 2009. "Such reserves had gone up by 15.5 per cent in the same period of the previous year," the report based on ten months' data said.
The current level of reserves is adequate for financing merchandise imports over 12.4 months and merchandise and service imports over 10.1 months.
A major contributor to the increase in foreign reserve is remittance. "Under transfers, workers' remittances soared by 55.5 per cent in the review period compared to a growth of 35.5 per cent in the same period of the last fiscal year," the central bank said.
In the first ten months of the current fiscal year, NRB mopped up net liquidity of Rs 11.7 billion through open market operations. Of the total liquidity of Rs 20.7 billion mopped up in the review period, Rs 7.5 billion was mopped up from outright sale auctions and Rs 13.3 billion from reverse repo auctions.
"Despite a substantial injection of liquidity through foreign exchange intervention in the review period, a liquidity of Rs 9.0 billion has been injected through repo auctions in the seventh and eighth months of the review period on account of a shortfall in liquidity -- particularly due to a higher cash balance of the government with NRB and a higher expansion of currency in circulation in the review period," it said.
Net liquidity of Rs 4 billion was mopped up in the corresponding period of the previous year through open market operation including Rs 6.5 billion through outright sale auctions, Rs 6.6 billion through reverse repo auctions and Rs 9.0 billion through repo auctions.
In the review period, NRB injected net liquidity of Rs 121.5 billion by net purchase of $1.6 billion from commercial banks through foreign exchange intervention. "A net liquidity of Rs 76.6 billion had been injected through a net purchase of $1.2 billion from commercial banks in the corresponding period of the previous year," NRB added.
An elevated inflow of remittances necessitated such a substantial amount of intervention in the foreign exchange market in the review period.
NRB purchased Indian currency (IC) worth 59.9 billion through the sale of $1.3 billion in the review period. Indian currency of 48.3 billion had been purchased through the sale of $1.2 billion in the corresponding period a year ago. A depreciation of Nepali currency vis-Ã -vis the US dollar encouraged the import from India against the payment of Indian currency and, therefore, a higher amount of IC purchase was made as against a sale of the US dollar in the review period.
On the basis of the US dollar, gross foreign exchange reserves rose by 15.4 per cent to $3.6 billion in mid-May 2009. "Such reserves had gone up by 15.5 per cent in the same period of the previous year," the report based on ten months' data said.
The current level of reserves is adequate for financing merchandise imports over 12.4 months and merchandise and service imports over 10.1 months.
A major contributor to the increase in foreign reserve is remittance. "Under transfers, workers' remittances soared by 55.5 per cent in the review period compared to a growth of 35.5 per cent in the same period of the last fiscal year," the central bank said.
In the first ten months of the current fiscal year, NRB mopped up net liquidity of Rs 11.7 billion through open market operations. Of the total liquidity of Rs 20.7 billion mopped up in the review period, Rs 7.5 billion was mopped up from outright sale auctions and Rs 13.3 billion from reverse repo auctions.
"Despite a substantial injection of liquidity through foreign exchange intervention in the review period, a liquidity of Rs 9.0 billion has been injected through repo auctions in the seventh and eighth months of the review period on account of a shortfall in liquidity -- particularly due to a higher cash balance of the government with NRB and a higher expansion of currency in circulation in the review period," it said.
Net liquidity of Rs 4 billion was mopped up in the corresponding period of the previous year through open market operation including Rs 6.5 billion through outright sale auctions, Rs 6.6 billion through reverse repo auctions and Rs 9.0 billion through repo auctions.
In the review period, NRB injected net liquidity of Rs 121.5 billion by net purchase of $1.6 billion from commercial banks through foreign exchange intervention. "A net liquidity of Rs 76.6 billion had been injected through a net purchase of $1.2 billion from commercial banks in the corresponding period of the previous year," NRB added.
An elevated inflow of remittances necessitated such a substantial amount of intervention in the foreign exchange market in the review period.
NRB purchased Indian currency (IC) worth 59.9 billion through the sale of $1.3 billion in the review period. Indian currency of 48.3 billion had been purchased through the sale of $1.2 billion in the corresponding period a year ago. A depreciation of Nepali currency vis-Ã -vis the US dollar encouraged the import from India against the payment of Indian currency and, therefore, a higher amount of IC purchase was made as against a sale of the US dollar in the review period.
Saturday, July 11, 2009
GDP growth slashed to half
The government has slashed the growth rate for the fiscal 2008-09 to almost half of the target. According to a source at the Finance Ministry, the gross domestic product (GDP) growth has been slashed to 3.5 per cent.
Dr Baburam Bhattarai, in his budget speech for the fiscal 2008-09, had projected seven per cent growth but his projection failed as a result of regular power cuts, frequent nationwide protest programmes and labour disputes.
Dr Shanker Sharma, former vice-chairman of the National Planning Commission, said peace was the first necessary requirement for growth. Dr Sharma said boosting private sector confidence was a must for the growth. “The private sector must feel that it is safe to invest. There must also be clarity in policies,” he added. If the budget can take the private sector into confidence and encourage investment by providing more incentives, growth could be accelerated. “Otherwise, the growth rate may not pick up in the next fiscal too,” said Dr Sharma.
The Central Bureau of Statistics’ report — based on the first six months’ data — has revised its projection to 3.8 per cent. Similarly, Asian Development Bank (ADB) has also slashed the growth forecast to three per cent for the year 2009 due to poor winter crop, deceleration in remittance inflow and slower growth of the industrial sector.
Finance Minister Surendra Pandey will present the budget for the fiscal year 2009-10 this week. However, it is likely to be a Herculean task for him to fuel growth and keep a tight leash on the runaway price hike horse. The price hike still stands at 12.9 per cent. Both NRB and the government have failed to contain it.
Though accelerated growth would have cushioned the impact of price hike, possibility of growth almost remained a chimera. According to the Forbes’ annual list of Doing Business, Nepal further plunged to the 121st position against 96th position last year as a result of unfavourable investment climate. Nepal has never witnessed double-digit growth in the past. The highest growth rate ever was 9.6 per cent in1984.
Dr Baburam Bhattarai, in his budget speech for the fiscal 2008-09, had projected seven per cent growth but his projection failed as a result of regular power cuts, frequent nationwide protest programmes and labour disputes.
Dr Shanker Sharma, former vice-chairman of the National Planning Commission, said peace was the first necessary requirement for growth. Dr Sharma said boosting private sector confidence was a must for the growth. “The private sector must feel that it is safe to invest. There must also be clarity in policies,” he added. If the budget can take the private sector into confidence and encourage investment by providing more incentives, growth could be accelerated. “Otherwise, the growth rate may not pick up in the next fiscal too,” said Dr Sharma.
The Central Bureau of Statistics’ report — based on the first six months’ data — has revised its projection to 3.8 per cent. Similarly, Asian Development Bank (ADB) has also slashed the growth forecast to three per cent for the year 2009 due to poor winter crop, deceleration in remittance inflow and slower growth of the industrial sector.
Finance Minister Surendra Pandey will present the budget for the fiscal year 2009-10 this week. However, it is likely to be a Herculean task for him to fuel growth and keep a tight leash on the runaway price hike horse. The price hike still stands at 12.9 per cent. Both NRB and the government have failed to contain it.
Though accelerated growth would have cushioned the impact of price hike, possibility of growth almost remained a chimera. According to the Forbes’ annual list of Doing Business, Nepal further plunged to the 121st position against 96th position last year as a result of unfavourable investment climate. Nepal has never witnessed double-digit growth in the past. The highest growth rate ever was 9.6 per cent in1984.
BUDGET BUZZ: Facilitate aviation sector
Aviation sector is one of the growing sectors that has tremendous potentials in Nepal.However inconsistent policy of the government has hit the growth of the aviation sector. The budget for the fiscal year 2009-10 should ensure that the aviation sector -- one of the major revenue contributors to the national coffer -- be facilitated.The budget should exempt Value Added Tax (VAT) on imports of spare parts for the aircraft. The airlines cannot charge VAT on the tickets for passengers but it has to pay VAT while importing spare parts for the aircrafts that is not practical.
The budget should widen the income tax exemption bracket to Rs 2,00,000. The present tax exemption bracket is not practical as the salary scale of low-and-middle level employees has gone up.
The budget should encourage the taxpayers by making them feel that the state and tax authority is responsible to its citizen.
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.
The budget should ensure that tax laws be reviewed to curb discretionary powers of the tax authorities and clarify prevalent ambiguities. This will decrease corruption and encourage people to pay tax. Also, tax procedures should be simplified for hassle-free tax payment.
Birendra Bahadur Basnet
managing director
Buddha Air
Shareholders cheer up as Nepse looks up
The shareholders of all the major sub-groups -- commercial banks, development banks, finance companies, hydropower and others -- gained this week as these sub-groups propelled the Nepse to 702.88 points. The Nepse surged by 35.45 points to 702.88 points from last week's closing of 667.43 points in a week after a long spell of bearish trend. The investors looked hopeful that the budget would bring some relief to them like the capital gain tax would come down to 10 per cent from the present 15 per cent.
The shareholders of commercial banks and development banks sub-groups posted a whopping gain as they gained 51.54 points to 736.57 points and 44.31 points 744.66 points in five day trading this week.
Similarly, the contribution of Group-A companies -- the blue-chip shares in the domestic market -- also increased to 44.36 per cent against week's 24.69 per cent. However, the transaction has decrease by 17.36 per cent to Rs 382.31 million against last week's increase of 103.88 per cent to Rs 462.61 million.
The 78-scrip sensitive index also flared by 10.73 points to 188.09 points from last week's closing of 177.36 points. The float index -- calculated on the basis of real transactions -- also gained 3.38 points to close at 67.47 7points from last week's closing of 64.09 points.
This week Nepal Bangladesh Bank (with Rs 62.37 million) topped the chart in terms trading amount followed by Bank of Kathmandu (with Rs 36.86 million), NIC Bank (with Rs 36.85 million), IME Finance (with Rs 19.59 million) and National Hydropower company (with Rs 18.92 million).
In terms of number of share units traded and transaction amount Nepal Bangladesh Bank topped the chart with Rs 62.37 million transaction of 2,49,000-unit shares changing hands, while Pashupati Development Bank topped the chart in terms of number of transactions with 895 transactions.
The shareholders of commercial banks and development banks sub-groups posted a whopping gain as they gained 51.54 points to 736.57 points and 44.31 points 744.66 points in five day trading this week.
Similarly, the contribution of Group-A companies -- the blue-chip shares in the domestic market -- also increased to 44.36 per cent against week's 24.69 per cent. However, the transaction has decrease by 17.36 per cent to Rs 382.31 million against last week's increase of 103.88 per cent to Rs 462.61 million.
The 78-scrip sensitive index also flared by 10.73 points to 188.09 points from last week's closing of 177.36 points. The float index -- calculated on the basis of real transactions -- also gained 3.38 points to close at 67.47 7points from last week's closing of 64.09 points.
This week Nepal Bangladesh Bank (with Rs 62.37 million) topped the chart in terms trading amount followed by Bank of Kathmandu (with Rs 36.86 million), NIC Bank (with Rs 36.85 million), IME Finance (with Rs 19.59 million) and National Hydropower company (with Rs 18.92 million).
In terms of number of share units traded and transaction amount Nepal Bangladesh Bank topped the chart with Rs 62.37 million transaction of 2,49,000-unit shares changing hands, while Pashupati Development Bank topped the chart in terms of number of transactions with 895 transactions.
Friday, July 10, 2009
BUDGET BUZZ: Support Nepali handmade paper
Nepali handmade paper is one of the best industries due to its inherent features. The industry, which is entirely based on Nepali resources, simultaneously addresses poverty reduction due to its ability to absorb marginalised farmers in remote hills and mountains and also unskilled labor force in urban areas. Equally importantly, it is a major foreign currency earner as it is one of the top five handicraft export items.The budget should focus on poverty reduction and export promotion of products. Such dual objectives can be fulfilled by boosting the growth of the handmade paper sector. The two contributory aspects of the handmade paper sector, namely poverty reduction and export promotion should be addressed with different budgetary tools.
Expansion of domestic market of labour-intensive industries like handmade paper sector can be achieved by the government with proactive purchase of Nepalese handmade paper for official use as the government is one of the largest buyers. In the case of Nepalese handmade paper, the government has recently decided to re-use it for citizenship certificate and other official documents. Such purchase should be prioritized while scripting the budget for the coming fiscal year.
New items like driving license, academic certificates for different universities and vehicle ownership documents should be added to the list. Categorical budget allocation with emphasis on Nepalese handmade paper products for these important documents will raise demand. Thus, the employment opportunities for marginalised labour force will increase and help reduce poverty. It also should be underlined that eventually most of these documents will be purchased by the user of the documentsand there will be no direct liabilities to the government.
Currently, Lokta paper is exported in different forms like stationery items, gift items, greeting cards, packaging items around the world. The budget should support the sector to expand its market in the world. The sector needs fiscal support to be competitive in the international market. Income tax incentive would be a major tool. Income tax exemption in export of Nepalese handmade paper will make it competitive as entrepreneurs can lower their price. Such income tax support will help cover up for the 'land-locked' cost of transportation from Nepal. Handmade paper sector is mainly manufactured by cottage and small scale entrepreneurs. They have limited human resources and managerial abilities to work with government sectors. It is essential to simplify procedures of VAT refund and duty draw-back facilities so that these small scale entrepreneurs can enjoy the existing facilities of VAT refund against export and duty draw-back facilities. There is strong potential for growth of Lokta paper in the international market. Nepal Handmade Paper Association is promoting Nepalokta brand in the global market. The government should support its marketing efforts by providing support to participate in important trade fairs. Funding for participation in trade fairs is essential as these entrepreneurs are small scale and cannot afford it from their own pockets. Allocation of such fund in the budget for participation in fairs will be a positive step in the promotion of Lokta paper worldwide.
Dr Milan Dev Bhattarai
Former President
Nepal Handmade Paper Association
Japan tops in cost of living
According to the World Cost of Living 2009, Tokyo returns to the top position and Dublin ranks 25th of 143 in the Mercer 2009 Cost of Living city rankings, dropping nine places from 2008.
The decline of rental and food prices in Dublin, coupled with the fall in the value of the euro against the US dollar, has caused Dublin to drop down in the rankings. Noel O'Connor, Senior Consultant at Mercer, commented, "As a direct impact of the economic downturn over the last year many currencies, including the Euro and British pound, have weakened considerably against a strong US dollar causing a number of European cities to plummet in the rankings."
Tokyo has knocked Moscow off the top spot to become the world's most expensive city for expatriates according to the Mercer survey. Osaka is in second position, up nine places since last year, followed by Moscow in third place. Geneva climbs to fourth position and Hong Kong moves up to fifth. Johannesburg in South Africa is the least expensive city in the ranking. The survey covers 143 cities across six continents and measures the comparative cost of over 200 items in each location, including housing, transport, food, clothing, household goods and entertainment. For example, a large fast food hamburger meal can cost up to €7.15 in Dublin compared to €2.68 in Beijing.
The data is used to help multinational companies and governments determine compensation allowance for their expatriate employees. O'Connor also noted, "With significant exposure to multiple economies and currencies, multinational companies continue to be greatly affected by the financial crisis. The cost of expatriate programmes is heavily influenced by currency fluctuations and inflation rates. It is important for multinational companies to continuously review their compensation packages and ensure they are in line with the rest of the market." Tokyo moves up one place in the ranking to become the most expensive city for expatriates both in Asia and globally. The Japanese yen has strengthened considerably against the US dollar which also lifts Osaka into second place from 11th in 2008. Hong Kong follows in fifth place and Singapore has moved up three places to reach 10th. In 140th place, Karachi continues to be the least costly city in this region -- up one place from last year.
Moscow remains the most expensive city in Europe for expatriates in third place. However, a dramatic depreciation of the rouble against the US dollar has led to a sharp fall in the city's index score compared to 2008 (115.4 in 2009 V's 142.4 in 2008). The next European cities in the ranking are Geneva and Zurich in fourth and sixth place, up from eighth and ninth respectively. European cities have experienced some of this year's steepest falls in the ranking, with Warsaw plummeting from 35th to 113th and Glasgow (129th place) and Birmingham (125th place) in the UK falling 60 and 59 places respectively. German and Spanish cities all fell between eight and 11 places, whereas cities in Sweden, Ukraine, Czech Republic, Romania and Hungary all fell between 36 and 48 places. "As most European currencies have weakened against the dollar it has become more costly for companies based in this region to send expatriates and their families to US cities," said O'Connor.
Oslo and London, both previously in the top 10, are now in 14th and 16th place respectively. "The decline of rental prices in both London and Oslo, coupled with the fall in the value of British pound and Norwegian krone against the US dollar, have caused these cities to plummet in the ranking," said O'Connor.
New York remains the highest ranking city in the region and has also joined the global top 10 list this year, jumping from 22nd to 8th place. Los Angeles is up 32 places to 23rd and Washington is up 41 places to 66th. Winston Salem is the cheapest US city surveyed, ranked at 126. All cities in the US have experienced a rise in this year's ranking due to the strengthening of the US dollar.
Canadian cities have slipped down the index with its highest ranking city Toronto down 31 places to 85th. Ottawa drops 36 places to 121st and Montreal is now in 103rd place, down from 72nd in 2008. In 15th place and up 74 places from 2008, Caracas in Venezuela is the top ranking city in South America. Sao Paolo and Rio de Janeiro have experienced a reverse move, plummeting from 25th to 72nd and 31st to 73rd respectively. Buenos Aires has climbed 26 to reach 112th place. "Although the Argentine peso has lost value against the US dollar, the high inflation rate observed on goods and services have caused Buenos Aires to rise in the rankings," said O'Connor.
The decline of rental and food prices in Dublin, coupled with the fall in the value of the euro against the US dollar, has caused Dublin to drop down in the rankings. Noel O'Connor, Senior Consultant at Mercer, commented, "As a direct impact of the economic downturn over the last year many currencies, including the Euro and British pound, have weakened considerably against a strong US dollar causing a number of European cities to plummet in the rankings."
Tokyo has knocked Moscow off the top spot to become the world's most expensive city for expatriates according to the Mercer survey. Osaka is in second position, up nine places since last year, followed by Moscow in third place. Geneva climbs to fourth position and Hong Kong moves up to fifth. Johannesburg in South Africa is the least expensive city in the ranking. The survey covers 143 cities across six continents and measures the comparative cost of over 200 items in each location, including housing, transport, food, clothing, household goods and entertainment. For example, a large fast food hamburger meal can cost up to €7.15 in Dublin compared to €2.68 in Beijing.
The data is used to help multinational companies and governments determine compensation allowance for their expatriate employees. O'Connor also noted, "With significant exposure to multiple economies and currencies, multinational companies continue to be greatly affected by the financial crisis. The cost of expatriate programmes is heavily influenced by currency fluctuations and inflation rates. It is important for multinational companies to continuously review their compensation packages and ensure they are in line with the rest of the market." Tokyo moves up one place in the ranking to become the most expensive city for expatriates both in Asia and globally. The Japanese yen has strengthened considerably against the US dollar which also lifts Osaka into second place from 11th in 2008. Hong Kong follows in fifth place and Singapore has moved up three places to reach 10th. In 140th place, Karachi continues to be the least costly city in this region -- up one place from last year.
Moscow remains the most expensive city in Europe for expatriates in third place. However, a dramatic depreciation of the rouble against the US dollar has led to a sharp fall in the city's index score compared to 2008 (115.4 in 2009 V's 142.4 in 2008). The next European cities in the ranking are Geneva and Zurich in fourth and sixth place, up from eighth and ninth respectively. European cities have experienced some of this year's steepest falls in the ranking, with Warsaw plummeting from 35th to 113th and Glasgow (129th place) and Birmingham (125th place) in the UK falling 60 and 59 places respectively. German and Spanish cities all fell between eight and 11 places, whereas cities in Sweden, Ukraine, Czech Republic, Romania and Hungary all fell between 36 and 48 places. "As most European currencies have weakened against the dollar it has become more costly for companies based in this region to send expatriates and their families to US cities," said O'Connor.
Oslo and London, both previously in the top 10, are now in 14th and 16th place respectively. "The decline of rental prices in both London and Oslo, coupled with the fall in the value of British pound and Norwegian krone against the US dollar, have caused these cities to plummet in the ranking," said O'Connor.
New York remains the highest ranking city in the region and has also joined the global top 10 list this year, jumping from 22nd to 8th place. Los Angeles is up 32 places to 23rd and Washington is up 41 places to 66th. Winston Salem is the cheapest US city surveyed, ranked at 126. All cities in the US have experienced a rise in this year's ranking due to the strengthening of the US dollar.
Canadian cities have slipped down the index with its highest ranking city Toronto down 31 places to 85th. Ottawa drops 36 places to 121st and Montreal is now in 103rd place, down from 72nd in 2008. In 15th place and up 74 places from 2008, Caracas in Venezuela is the top ranking city in South America. Sao Paolo and Rio de Janeiro have experienced a reverse move, plummeting from 25th to 72nd and 31st to 73rd respectively. Buenos Aires has climbed 26 to reach 112th place. "Although the Argentine peso has lost value against the US dollar, the high inflation rate observed on goods and services have caused Buenos Aires to rise in the rankings," said O'Connor.
Thursday, July 9, 2009
NRB urges police, RID, IRD to investigate NDB honchos
Nepal Rastra Bank (NRB) today formally requested the Nepal Police, Revenue Investigation Department (RID) and Inland Revenue Department (IRD) to thoroughly investigate into financial crimes involving the board of directors -- serving at different time till date -- of Nepal Development Bank (NDB), including the patron Uttam Pun and chairman Amar Gurung.
All of them have been accused of fraud, financial embezzlement and misuse amounting to a massive Rs 1.08 billion. The NRB has also sought for the Finance Ministry’s coordination in the investigation process.
“The troubled NDB board of directors, chief executive officers, advisors and managing directors — serving at different times — have not been abiding at all by directives of the central bank, risking the depositors and shareholders’ money, but benefitting themselves,” the central bank’s Supervision Department said in the letter to Police Headquarters written on Thursday. Similarly, the department also wrote to the RID and IRD to probe the source of income and banking transactions of Pun, Gurung and all other directors. The NRB Board had decided to take the help of police, RID and IRD on July 6.
The central bank also sought the Appellate Court’s approval to appoint liquidator to begin the liquidation process as the bank could not be revived and deserved to be sent to liquidation under Section 77 of the Bank and Financial Institution Act 2007. Before moving the Appellate Court, the central bank had also sought NDB’s clarification on why it should not be sent for liquidation. In response, the first development bank in the country could not furnish satisfactory clarification.
According to the NRB’s findings, the NDB has a huge loss of Rs 670.87 million, though it possesses a paid-up capital of Rs 320 million. It has total assets of Rs 730.13 million but its non-performing assets stand at 55.09 per cent and capital adequacy ratio is a whopping 48.31 per cent: that is almost five times more than the permissible limit of 11 per cent.
The NDB had Rs 720 million deposit of 32,000 depositors till mid-March. Of the total deposit, the bank has not been able to return Rs 330 million worth of institutional deposits of Employment Provident Fund and Nepal Army´s Welfare Fund even after expiry of maturity date. The EPF and Army’s deposit constitute around 45 per cent and 27 per cent of the total deposit, respectively.
All of them have been accused of fraud, financial embezzlement and misuse amounting to a massive Rs 1.08 billion. The NRB has also sought for the Finance Ministry’s coordination in the investigation process.
“The troubled NDB board of directors, chief executive officers, advisors and managing directors — serving at different times — have not been abiding at all by directives of the central bank, risking the depositors and shareholders’ money, but benefitting themselves,” the central bank’s Supervision Department said in the letter to Police Headquarters written on Thursday. Similarly, the department also wrote to the RID and IRD to probe the source of income and banking transactions of Pun, Gurung and all other directors. The NRB Board had decided to take the help of police, RID and IRD on July 6.
The central bank also sought the Appellate Court’s approval to appoint liquidator to begin the liquidation process as the bank could not be revived and deserved to be sent to liquidation under Section 77 of the Bank and Financial Institution Act 2007. Before moving the Appellate Court, the central bank had also sought NDB’s clarification on why it should not be sent for liquidation. In response, the first development bank in the country could not furnish satisfactory clarification.
According to the NRB’s findings, the NDB has a huge loss of Rs 670.87 million, though it possesses a paid-up capital of Rs 320 million. It has total assets of Rs 730.13 million but its non-performing assets stand at 55.09 per cent and capital adequacy ratio is a whopping 48.31 per cent: that is almost five times more than the permissible limit of 11 per cent.
The NDB had Rs 720 million deposit of 32,000 depositors till mid-March. Of the total deposit, the bank has not been able to return Rs 330 million worth of institutional deposits of Employment Provident Fund and Nepal Army´s Welfare Fund even after expiry of maturity date. The EPF and Army’s deposit constitute around 45 per cent and 27 per cent of the total deposit, respectively.
Nepal Development Bank stares at liquidation
Nepal Rastra Bank (NRB) — the central bank — has moved Patan Appellate Court to press for liquidation of the troubled Nepal Development Bank (NDB).
If the Court decides in favour of NRB, then NDB will hold the unenviable record of becoming the first banking institution in the nation’s financial history to be liquidated.
Liquidation refers to the process by which a company — or part of a company — is disbanded, liabilities settled and subsequently the assets and property of the company is redistributed among shareholders.
A liquidator — in other words an officer who is specially appointed to wind up the company’s affairs — oversees the due process. The liquidator is legally empowered to act on behalf of the company in various capacities. S/he is primarily responsible to bring and defend lawsuits.
Other duties and responsibilities include collecting outstanding receivables, paying off debts, finishing corporate termination procedures and settling all claims ahead of the dissolution.
Stating that the bank could not be revived and deserves the liquidation as per Section 77 of the Bank and Financial Institution Act, 2007, the central bank sought Patan Appellate Court’s approval to appoint liquidator to begin the liquidation.
However, the court has the prerogative to take a decision that could seek an alternative if any party evinces interest to run the beleaguered institution.
NDB — Nepal’s first development bank that started its operations in 1998 — is ailing for many years. According to NRB’s findings, NDB has run up huge losses. Though it has a paid-up capital of Rs 320 million, the losses are pegged at Rs 670.87 million. While, it has total assets worth Rs 730.13 million. But, its non-performing assets stand at 55.09 per cent and capital adequacy ratio (CAR) is a whopping 48.31 per cent, which is almost five times more than the permissible limit.
In this light, the ill-fated financial institution has little chance of a revival, especially after Dreams Capital Ltd’s failed attempt to pump Rs 280 million to put it back in business. One of the negotiators, who were involved in the revival bid, said that the capital injection could restore CAR to the required level of 11 per cent.
But he has reservations about Uttam Pun — NDB’s patron — who has shares worth Rs 1.6 billion. Pun claimed to have resigned from his post and showed willingness to sell his shares after the Dreams Capital Ltd declined to invest because of his presence. Pun’s actions smack of escapism to evade legal action as he cannot sell his shares that have been frozen for transaction.
Association of Nepali Development Banks and the Association of Nepali Finance Companies had also lobbied hard with NRB not to liquidate NDB. However, the central bank had no option but to opt for liquidation.
Earlier, Sunanda Shrestha and his group had injected Rs 86.2 million. Shrestha also bowed out, thanks to Pun and his associates, who did not want to let go the management.
NRB had declared NDB an ailing institution on October 11, 2007. Over the years, NDB never followed the central bank’s regulatory obligations, instead frittered away depositors’ money. Had the NRB taken bold step at the outset, then less depositors would have been in trouble today.
Uttam Pun — the then executive chairman and promoter of NDB — repeatedly moved the Appellate Court, got a reprieve from the judiciary even as the unsuspecting public continued to deposit in his institution.
NDB got many opportunities from NRB but each time it tried to get away by furnishing abstract clarifications. On June 2, NRB had sought a clarification within 15 days, citing Clause 86 of Nepal Rastra Bank Act. NDB, in turn, submitted a capital plan on June 18, seeking time till
October 17 to improve its financial health. It claimed that given the opportunity, it could sell Rs 10 million worth shares and recover Rs 90 million deposit from Nepal Cooperatives as
instructed by NRB.
Under the circumstances, liquidation is the only corrective measure that a regulator can
restore to prevent further losses, putting paid to the bank’s hopes to operate with doctored balance sheets and misusing public
money.
Legal action also has to be taken against NDB’s management and promoters to send out a strong message that depositors’ sums are safe and central bank is capable of living up to its regulator’s role. However, the central bank has to ensure speedy handover of around 3,200 small depositors’ money.
Time is ripe for NRB to act tough to rein in tainted banks in an otherwise healthy banking
industry. It’s high time as well to ponder over setting up a national deposit insurer, which can insure deposits up to a certain limit.
Banking is one of the few sectors that has not only created jobs but also given a chance to the investors to operate in a transparent manner. However, the bad apples need to be weeded out to restore depositors’ faith that banks and financial institutions are the custodians of public money.
If the Court decides in favour of NRB, then NDB will hold the unenviable record of becoming the first banking institution in the nation’s financial history to be liquidated.
Liquidation refers to the process by which a company — or part of a company — is disbanded, liabilities settled and subsequently the assets and property of the company is redistributed among shareholders.
A liquidator — in other words an officer who is specially appointed to wind up the company’s affairs — oversees the due process. The liquidator is legally empowered to act on behalf of the company in various capacities. S/he is primarily responsible to bring and defend lawsuits.
Other duties and responsibilities include collecting outstanding receivables, paying off debts, finishing corporate termination procedures and settling all claims ahead of the dissolution.
Stating that the bank could not be revived and deserves the liquidation as per Section 77 of the Bank and Financial Institution Act, 2007, the central bank sought Patan Appellate Court’s approval to appoint liquidator to begin the liquidation.
However, the court has the prerogative to take a decision that could seek an alternative if any party evinces interest to run the beleaguered institution.
NDB — Nepal’s first development bank that started its operations in 1998 — is ailing for many years. According to NRB’s findings, NDB has run up huge losses. Though it has a paid-up capital of Rs 320 million, the losses are pegged at Rs 670.87 million. While, it has total assets worth Rs 730.13 million. But, its non-performing assets stand at 55.09 per cent and capital adequacy ratio (CAR) is a whopping 48.31 per cent, which is almost five times more than the permissible limit.
In this light, the ill-fated financial institution has little chance of a revival, especially after Dreams Capital Ltd’s failed attempt to pump Rs 280 million to put it back in business. One of the negotiators, who were involved in the revival bid, said that the capital injection could restore CAR to the required level of 11 per cent.
But he has reservations about Uttam Pun — NDB’s patron — who has shares worth Rs 1.6 billion. Pun claimed to have resigned from his post and showed willingness to sell his shares after the Dreams Capital Ltd declined to invest because of his presence. Pun’s actions smack of escapism to evade legal action as he cannot sell his shares that have been frozen for transaction.
Association of Nepali Development Banks and the Association of Nepali Finance Companies had also lobbied hard with NRB not to liquidate NDB. However, the central bank had no option but to opt for liquidation.
Earlier, Sunanda Shrestha and his group had injected Rs 86.2 million. Shrestha also bowed out, thanks to Pun and his associates, who did not want to let go the management.
NRB had declared NDB an ailing institution on October 11, 2007. Over the years, NDB never followed the central bank’s regulatory obligations, instead frittered away depositors’ money. Had the NRB taken bold step at the outset, then less depositors would have been in trouble today.
Uttam Pun — the then executive chairman and promoter of NDB — repeatedly moved the Appellate Court, got a reprieve from the judiciary even as the unsuspecting public continued to deposit in his institution.
NDB got many opportunities from NRB but each time it tried to get away by furnishing abstract clarifications. On June 2, NRB had sought a clarification within 15 days, citing Clause 86 of Nepal Rastra Bank Act. NDB, in turn, submitted a capital plan on June 18, seeking time till
October 17 to improve its financial health. It claimed that given the opportunity, it could sell Rs 10 million worth shares and recover Rs 90 million deposit from Nepal Cooperatives as
instructed by NRB.
Under the circumstances, liquidation is the only corrective measure that a regulator can
restore to prevent further losses, putting paid to the bank’s hopes to operate with doctored balance sheets and misusing public
money.
Legal action also has to be taken against NDB’s management and promoters to send out a strong message that depositors’ sums are safe and central bank is capable of living up to its regulator’s role. However, the central bank has to ensure speedy handover of around 3,200 small depositors’ money.
Time is ripe for NRB to act tough to rein in tainted banks in an otherwise healthy banking
industry. It’s high time as well to ponder over setting up a national deposit insurer, which can insure deposits up to a certain limit.
Banking is one of the few sectors that has not only created jobs but also given a chance to the investors to operate in a transparent manner. However, the bad apples need to be weeded out to restore depositors’ faith that banks and financial institutions are the custodians of public money.
ADB aid for safe drinking water
The Asian Development Bank (ADB) today said it will help 30 urban centres in India, Nepal and Sri Lanka improve water management to enhance economic opportunities and reduce water-borne diseases.
"Intermittent water supply is the norm in South Asian urban centres. There are no strategies to make water available 24 hours a day. This is one of the most important objectives in urban water management," the bank said.
Intermittent supply has resulted in water contamination and wastage, unreliable metering and burst pipes, the multilateral lending agency said in a press release.
The project is funded through an $850,000 grant from the Investment Climate Facilitation Fund established by Japan last year under the Regional Cooperation and Integration Financing Partnership Facility which supports technical assistance projects.
"Through the technical assistance, up to 30 urban centres in these three South Asian countries will acquire technology and expertise in managing the water sector," the bank said. The technical assistance will determine geographical and population coverage of service areas in the chosen centres, assess if drinking water supply complies with acceptable quality standards and also if waste water management affects the quality of groundwater, aquifers and other water sources.
The project will also determine the levels of non-revenue water, operational efficiencies, and operations management system of the select urban centres, ADB said.
"Proper assessment, planning, and management of water-related issues require reliable data on critical factors related to urban water security," said KyeongAe Choe, principal urban development specialist of ADB's South Asia Department.
"Intermittent water supply is the norm in South Asian urban centres. There are no strategies to make water available 24 hours a day. This is one of the most important objectives in urban water management," the bank said.
Intermittent supply has resulted in water contamination and wastage, unreliable metering and burst pipes, the multilateral lending agency said in a press release.
The project is funded through an $850,000 grant from the Investment Climate Facilitation Fund established by Japan last year under the Regional Cooperation and Integration Financing Partnership Facility which supports technical assistance projects.
"Through the technical assistance, up to 30 urban centres in these three South Asian countries will acquire technology and expertise in managing the water sector," the bank said. The technical assistance will determine geographical and population coverage of service areas in the chosen centres, assess if drinking water supply complies with acceptable quality standards and also if waste water management affects the quality of groundwater, aquifers and other water sources.
The project will also determine the levels of non-revenue water, operational efficiencies, and operations management system of the select urban centres, ADB said.
"Proper assessment, planning, and management of water-related issues require reliable data on critical factors related to urban water security," said KyeongAe Choe, principal urban development specialist of ADB's South Asia Department.
BUDGET BUZZ: Hydropower is THE sector
Hydropower is the sector government should seriously think of developing for the overall development of Nepal. Indeed, the development of other sectors like industry, services, agriculture, tourism etc is not possible without power. Sustainable and accelerated hydropower development in Nepal largely depends on the creation of an investment friendly climate. The budget therefore should address the following concerns of the Independent Power Producers' Association Nepal (IPPAN):· Income tax holiday should be for 15 years. The Electricity Act 2049 had made provision for tax holiday for 15 years, which was scrapped later by a budget speech. Hence, commitment is needed from all political parties that policies related to hydropower industry remain unchanged for at least 15 years.
· VAT exemption on hydropower industry should include both construction materials and electro-mechanical equipments.
· There should be VAT exemption in the import of construction materials and electromechanical equipments. Also, there should be one per cent custom duties on the import of construction materials and equipments related to hydropower.
· Hydropower developers have to pay mortgage tax at the rate of 0.2 per cent of the bank loan. The amount to be paid as tax is colossal for small and medium sized hydropower projects. For example, the construction cost of a 25 MW hydropower project at the rate of Rs 15o million per MW is Rs 3,750 million. The loan investment at the rate of 70:30 ration is Rs 2630 million. Now, the mortgage tax to be paid at the rate of 0.2 per cent is Rs 5.3 million, which is a sizeable amount of money. We therefore request the government, to either cancel it or minimize it.
· The government should allow to open Letter of Credit (LC) in US dollars or in other foreign currency while importing equipments or materials related to hydropower industry. In such a case, importers will be exempt from 16 per cent excise duty of the Indian government. It will prove a big relief to hydropower developers.
· Also, the government should allocate budget for the construction of new transmission lines and strengthening of existing transmission lines.
· The government should make access roads for hydropower projects, which are being built in a cluster in a river basin. Also, the government should construct inter-connecting transmission lines for such hydropower projects.
· The government should speed up construction of the east-west mid-hill highway. It will pave the way for generating inexpensive power. Also, it should build high capacity 400 KV east to west transmission line running through the mid-hills and along the east to west mid-hills highway.
· The proposed international Infrastructure Development Bank should be instituted at the earliest possible, since capital available in the local banks is sufficient for small hydropower projects only.
· Loans to hydropower developers should be provided on project financing instead of personal guarantees.
Dr Sandip Shah
President
Independent Power Producers' Association Nepal (IPPAN)
President
Independent Power Producers' Association Nepal (IPPAN)
NMB Bank allots Sunrise Bank share
NMB Bank Ltd allotted the shares of Sunrise Bank Ltd today.
Sunrise Bank had received a total of 3,44,526 applications -- including 295 by staff of the bank -- for 10,03,19,959-unit shares. Of the total applications, 4,657 applications were rejected as the applicants had not filled the forms completely. "Applicants, who have not filled in their grandfather's names, account number -- and anything other factor that is mandatory or missed the signature ares -- are disqualified," said the issue manager.
According to the IPOs Regulation, an applicant must fill the bank account number as the money would be returned through banks by account payee cheque. A total of 89,149 public applicants including 295 Sunrise Bank staff got the shares that were floated from May 3-6.
Though some investors blamed the issue manager for mishandling the primary issue, NMB Bank allotted the primary shares on the 64th day -- six days ahead of stipulated allotment time. According to the Securities Board of Nepal (Sebon) regulation, the issue manager can allot Initial Public Offerings (IPOs) within 70 days of the closure of the issue, if applications cross the 3,00,001 mark. Sunrise Bank received 3,44,821 applications worth a little over Rs 10 billion for its 37,50,000-unit shares with a face value of Rs 100 per unit.Aplicants, who asked for 50-unit shares got 10-unit shares while those who asked for 17,010 to 20,000-unit shares were allotted 700-unit shares of the bank.
Monday, July 6, 2009
Increased assistance vital
Increased assistance for trade-led development is vital for Asia and the world to recover from the latest economic crisis and ensure long-term growth, Asian Development Bank (ADB) president Haruhiko Kuroda said today at the second Global Review of Aid for Trade in Geneva, Switzerland. At the same time, it is 'critically important' that countries refrain from taking protectionist measures to try to insulate themselves from the effects of falling global demand, he said. The gathering brought together Pascal Lamy, Director-General of the World Trade Organisation (WTO), Robert Zoellick, president of the World Bank (WB), and Dominique Strauss-Kahn, managing director of the International Monetary Fund (IMF), with the heads of various multilateral development banks and other top trade and development officials to discuss progress on Aid for Trade since the first review in November 2007.
Aid for Trade, conceived in December 2005, is aimed at helping the least-developed countries around the world put in place the policies, infrastructure and skills necessary to bolster trade which, in turn, boosts economic growth and helps to reduce poverty, said a press release issued from Geneva.
The Asia and Pacific region's trade performance is mixed. While some countries are integrated into global business networks, the region's 22 least-developed and smaller economies still account for just 0.3 per cent of world exports, a level that has barely changed in the last 25 years. The global economic crisis has worsened the situation, with the sharp drop in the region's exports expected to cause aggregate growth to decline to around 3.4 per cent this year. While growth is anticipated to pick up to six per cent in 2010, lower-income countries and small states are likely to lag behind and rising poverty remains a major concern when the global economy recovers.
"Rebalancing growth toward greater domestic and regional demand is an important key to the region's recovery. This will foster increased intra-regional trade, help the region recover faster and strengthen Asia's approach to open regionalism. Aid for Trade is also vital for economic recovery and for long-term development and structural change," Kuroda said.
ADB continues to support increased trade within the Asia and Pacific region. In the Greater Mekong Subregion (GMS), for example, it has financed roads across the six-country region and also standardized border regulations. ADB also earlier this year expanded its Trade Finance Facilitation Programme from $150 million to $1 billion. The programme, which extends loans and guarantees to support trade in frontier markets, could generate $15 billion in trade finance through 2013.
Aid for Trade, conceived in December 2005, is aimed at helping the least-developed countries around the world put in place the policies, infrastructure and skills necessary to bolster trade which, in turn, boosts economic growth and helps to reduce poverty, said a press release issued from Geneva.
The Asia and Pacific region's trade performance is mixed. While some countries are integrated into global business networks, the region's 22 least-developed and smaller economies still account for just 0.3 per cent of world exports, a level that has barely changed in the last 25 years. The global economic crisis has worsened the situation, with the sharp drop in the region's exports expected to cause aggregate growth to decline to around 3.4 per cent this year. While growth is anticipated to pick up to six per cent in 2010, lower-income countries and small states are likely to lag behind and rising poverty remains a major concern when the global economy recovers.
"Rebalancing growth toward greater domestic and regional demand is an important key to the region's recovery. This will foster increased intra-regional trade, help the region recover faster and strengthen Asia's approach to open regionalism. Aid for Trade is also vital for economic recovery and for long-term development and structural change," Kuroda said.
ADB continues to support increased trade within the Asia and Pacific region. In the Greater Mekong Subregion (GMS), for example, it has financed roads across the six-country region and also standardized border regulations. ADB also earlier this year expanded its Trade Finance Facilitation Programme from $150 million to $1 billion. The programme, which extends loans and guarantees to support trade in frontier markets, could generate $15 billion in trade finance through 2013.
Sunday, July 5, 2009
BUDGET BUZZ: Bring continuity budget for completing plans, projects
The coming budget should address some of the critical issues for the economic development of the country.* There should be a three-year rolling budget so that policies and plans are given continuity and projects can be carried through without interruption.
* The budget should end discriminatory corporate tax rate for banks. The tax rate should be 20 per cent for other industries and not 30 per cent as it is now. The banking sector pays the highest amount of corporate tax. Its accounts are not only the most transparent but it also operates under the most effective regulator.
* The government should consider implementing a very low flat income tax rate of five per cent over a three-year time-span in tandem with heavy penalty including imprisonment for tax evasion. This will not only ensure a significant widening of the tax base by bringing people into the tax net by encouraging and incentivising compliance but also increase tax revenue as has been the case in many countries under flat tax regimes in central/eastern Europe and low tax regimes like Singapore and Hongkong. Nepal collects only one-sixth of its revenue from income tax. With a low flat tax regime it would not be inconceivable to increase this ratio by a third within five years.
* Government must spend more on infrastructure. Identify just three large-scale infrastructure projects -- one hydropower (generation & transmission), one fast-track road and one international airport, for example. Create independent implementing authorities, allocate budgets and get on with the task with pre-determined implementable time lines
* Announce -- with the endorsement of all major political parties -- policies which are investment-friendly with an irrevocable/irrefutable commitment to not make any regressive changes for at least 15 years. These policies should ensure unfettered property rights, non-nationalization, flexible but equitable labour legislation, tax-credits for capital investments, easy entry/exit for Foreign Direct Investment, tax-holidays for large industries say with investments of more than Rs 1 billion, long-term leases for government land, liberal non-bureaucratic regime allowing medium/long-term external commercial borrowing, credit enhancement through partial government guarantees for large scale projects of more than Rs 10 billion, government re-finance window for long-term finance.
* Avoid property tax or taxes in the nature of VDIS at all cost until a low flat tax regime (with heavy penalties for non-compliance) is introduced as it will scare away scarce capital.
* Invest heavily in education and health sectors and building roads. Encourage the private sector to invest in these sectors but under an effective regulatory mechanism to ensure that the interest of the public is fully protected and there is no abuse. Reduce expenditure on defence but increase in law enforcement.
* Make tax assessment non-discretionary and tax officers accountable for their actions. If tax officers add back taxes which are proved, on appeal by a court of law, to be unfair, illegal and irrational the tax officers involved in the decision must be held accountable.
* Advance rulings on grey areas must be given by the Tax Department within the time stipulated by law. This has not been complied with and must be strictly enforced.
* Introduce subsidies to farmers for production (not consumption) as much and as long as is required for us to remain competitive vis-a-vis Indian farmers. This will not only help reduce unemployment and absolute poverty but also reduce our dependency on imported food.
Sashin Joshi
president,
Nepal Bankers' Association and the CEO of NIC Bank
Operators at by guess and by gosh on telecom service quality
The telecom service providers today blamed the power outage, poor infrastructure and remote geographical conditions for the low quality of telecom services.
"The long hours of power outage has hit Nepal Telecom's battery backup design that was capable of supplying power for only four to five hours," said Bishwanath Goel, managing director of Nepal Telecom that provides GSM and CDMA services in all 75 districts of the country.
"Most of the complaints are related to Radio Frequency Optimisation (RFO) but 16-hour power oputage has hit its rapid expansion," he said adding that NT received 77 complaints related to RFO from January to June this year. "NT is installing generators in 10 BTS towers, 12-hour back-up capacity will be installed in 10 BTS towers and solar equipment in another 10 BTS towers," he repeated the plans of NT to counter complaints.
However, Goel did not explain why NT had not improved the quality of its services even though the load-shedding hours have come down to 10 hours a week from 16 hours a day.
Chandi Shrestha of Spice Telecom -- the telecom service provider under the brand name Mero Mobile -- also described his company's plans to sell 25,00,000 SIM cards by the end of this year. "Most of the problems arise due to consumers' habits," he said adding that consumer education is also key to better telecom services. He, however accepted that the telecom service providers have failed to educate consumers.
He urged the telecom regulator to play the role of facilitator, whereas chairman of the regulator -- Nepal Telecom Authority (NTA) -- Bhesraj Kandel advised the operators to upgrade service quality alongwith the service expansion. "Regulator should also interfere, the operators do not abide by regulations," he said citing the example of NTA forcing them to reduce interconnection charges.
"NTA as regulator has also fixed parameters for quality of service," Kandel added. NTA has licensed three operators for basic telephony service, two for cellular mobile service, eight for network service, 38 for Internet service, 90 for VSAT and three for GMPCS.
"The Internet Service Providers (ISPs) are lagging behind in comparison to telecom operators," said Pawan Shakya, president of Association of ISPs.
"The long hours of power outage has hit Nepal Telecom's battery backup design that was capable of supplying power for only four to five hours," said Bishwanath Goel, managing director of Nepal Telecom that provides GSM and CDMA services in all 75 districts of the country.
"Most of the complaints are related to Radio Frequency Optimisation (RFO) but 16-hour power oputage has hit its rapid expansion," he said adding that NT received 77 complaints related to RFO from January to June this year. "NT is installing generators in 10 BTS towers, 12-hour back-up capacity will be installed in 10 BTS towers and solar equipment in another 10 BTS towers," he repeated the plans of NT to counter complaints.
However, Goel did not explain why NT had not improved the quality of its services even though the load-shedding hours have come down to 10 hours a week from 16 hours a day.
Chandi Shrestha of Spice Telecom -- the telecom service provider under the brand name Mero Mobile -- also described his company's plans to sell 25,00,000 SIM cards by the end of this year. "Most of the problems arise due to consumers' habits," he said adding that consumer education is also key to better telecom services. He, however accepted that the telecom service providers have failed to educate consumers.
He urged the telecom regulator to play the role of facilitator, whereas chairman of the regulator -- Nepal Telecom Authority (NTA) -- Bhesraj Kandel advised the operators to upgrade service quality alongwith the service expansion. "Regulator should also interfere, the operators do not abide by regulations," he said citing the example of NTA forcing them to reduce interconnection charges.
"NTA as regulator has also fixed parameters for quality of service," Kandel added. NTA has licensed three operators for basic telephony service, two for cellular mobile service, eight for network service, 38 for Internet service, 90 for VSAT and three for GMPCS.
"The Internet Service Providers (ISPs) are lagging behind in comparison to telecom operators," said Pawan Shakya, president of Association of ISPs.
Saturday, July 4, 2009
Transaction amount goes up, Nepse down
The contribution of Group-A companies -- the blue-chip shares in the domestic market -- dropped to 24.69 per cent from last week's 50.86 per cent. However, the transaction has gone up by 103.88 per cent to Rs 462.61 million against last week's decrease of 1.76 per cent.
The Nespe also lost 3.18 points to 667.43 points from last week's closing of 670.61 points. The 78-scrip sensitive index lost 1.54 points to 177.36 points from last week's closing of 178.90 points. The float index -- calculated on the basis of real transactions -- also shed 0.19 points to close at 64.09 points.
The shareholders of the commercial banks, development banks, finance companies and insurance companies lost while the hotels, hydropower and trading sub-groups' share holders gained this week. The manufacturing sub-group did not see any transaction of its shares but others sub-group -- that has Nepal Telecom shares under its belt -- after the plunge it recovered to close at 646.19 points -- the closing of last week.
This week NCC Bank (with Rs 98.30 million) topped the chart in terms trading amount followed by National Hydropower (with Rs 87.89 million), Nepal Bangladesh Bank (with Rs 63.83 million), Bank of Kathmandu (with Rs 17.02 million) and Standard Chartered Bank Nepal (with Rs 15.53 million).
Similarly, in terms of share units traded National Hydropower topped the chart as its 9,82,000-unit of shares changed hands. But in terms of number of transactions, Pashupati Bikas Bank topped the chart with 604 transactions.
The Nespe also lost 3.18 points to 667.43 points from last week's closing of 670.61 points. The 78-scrip sensitive index lost 1.54 points to 177.36 points from last week's closing of 178.90 points. The float index -- calculated on the basis of real transactions -- also shed 0.19 points to close at 64.09 points.
The shareholders of the commercial banks, development banks, finance companies and insurance companies lost while the hotels, hydropower and trading sub-groups' share holders gained this week. The manufacturing sub-group did not see any transaction of its shares but others sub-group -- that has Nepal Telecom shares under its belt -- after the plunge it recovered to close at 646.19 points -- the closing of last week.
This week NCC Bank (with Rs 98.30 million) topped the chart in terms trading amount followed by National Hydropower (with Rs 87.89 million), Nepal Bangladesh Bank (with Rs 63.83 million), Bank of Kathmandu (with Rs 17.02 million) and Standard Chartered Bank Nepal (with Rs 15.53 million).
Similarly, in terms of share units traded National Hydropower topped the chart as its 9,82,000-unit of shares changed hands. But in terms of number of transactions, Pashupati Bikas Bank topped the chart with 604 transactions.
BUDGET BUZZ: Bring separate Act to promote ad business
The advertisement market has developed due to globalisation and industrialisation and also due to development of media, communication and broadcasting technologies. Nepali advertising sector that is worth Rs 3 billion per year also wants its problems to be addressed in the budget.· Production and distribution of Nepali feature films and advertisements are both governed by the same Cinema Act and Regulation 2026. It should be noted that a feature film is a two-hour affair and costs millions to make whereas the production cost of an a minute-long advertisement is relatively very low. The two genres should not be governed by the same Act and regulations. There are difficulties in censorship and other procedures. The charge for ad films should be decreased to encourage ad films as they cost less in comparision to feature films. Thus, the government should decrease the government tax for ad films.
· The government should also amend the ad film censorship regulation according to the global trend. Until such amendment, AAN should be given the responsibility of coordinating, regulating and monitoring as it is the umbrella organisation of advertising agencies.
· Currently, cable operators are broadcasting various foreign channels in Nepal. The government should prepare regulations for them as well as they also have to follow the law of the land. According to norms, channels downlinked from Nepali sky have to either broadcast clean feed. If they have advertisement feed, they should not charge viewers. The government should register foreign channels according to international norms and ban the foreign advertisements in them. Domestic advertising agencies would benefit and local ads depicting Nepali culture, tradition and resources would be encouraged, if the government makes it mandatory for foreign channels to air clean feed.
· The government should provide tax relief to advertising agencies purchasing tools and machinery and equipments like high tech cameras and computers.
· Budget should ensure that every multinational company invest their 10 per cent budget on advertisement in Nepal.
Nirmal Poudel
President
Advertisement Association of Nepal (AAN)
Friday, July 3, 2009
Government fails to control price hike
The government has completely failed to control the price hike in food commodities and the overall price hike that still hovers close to 13 per cent.
"The year-on-year (y-o-y) consumer price index rose to 12.9 per cent in mid-May 2009 compared to 9.2 per cent in the same period last year," according to the current macroeconomic situation based on the first 10 months' data of current fiscal year published by Nepal Rastra bank (NRB).
The inflation, in the review period, was driven mainly by 16.5 per cent price rise in food and beverages group. However, the price index of non-food and service group also increased by 8.8 per cent.
"In food and beverage group, sugar and sugar-related products played a key role in pushing the price hike up so that it increased by a whopping 66.9 per cent, the report said. This is in sharp contrast to last year's decline of 0.5 per cent. Similarly, the price indices of vegetables and fruits as well as meat, fish and eggs sub-groups increased by 33.5 per cent and 27.5 per cent respectively in the review period compared to an increase of 1.8 per cent and 10.2 per cent respectively in the same period last year.
The wholesale price inflation increased to 15.5 per cent compared to 10.1 per cent a year ago. Indian price hike plays a key role in the Nepali market. Though India's wholesale price index has posted a negative growth by the end of May, the Indian month-on-month price hike in May is also at 10.3 per cent.
The central bank's report reveals that the government budget on cash basis remained at a surplus of Rs 6 billion in contrast to a deficit of Rs 6 billion in the same period last year. "The government has significant cash surplus of Rs 21.6 billion -- including Rs 3.9 billion of previous year -- with Nepal Rastra Bank," according to the report, thought the total government expenditure on cash flow basis, increased by 25.7 per cent to Rs 127.6 billion compared to an increase of 28.2 per cent in the corresponding period of the previous year. Low growth rate of capital expenditure accounted for such a deceleration of total government expenditure.
Revenue mobilisation also grew by 39.9 per cent to Rs 110.5 billion compared to an increase of 24 per cent in the corresponding period the previous year. "The government's firm commitment to revenue leakage control, revenue administration reforms, Voluntary Disclosure of Income Scheme and significant growth of non-tax revenue contributed to such an impressive growth of revenue mobilisation in the review period," said NRB.
However, exports shot up by 19.8 per cent in the first ten months of the current fiscal year in contrast to a decline by 2.4 per cent in the same period last year. The rise in exports is contributed to readymade garments, textiles, GI pipe, catechu, toothpaste, pulses followed by pashmina, woollen carpets, readymade garments and handicraft.
But at the same time, total imports also went up by 25.4 per cent compared to an increase of 16.8 per cent in the same period last year. "Imports from India rose by 11.5 per cent and imports from other countries surged by 50.4 per cent compared to last year's nominal imports," the report said.
During the review period, the overall Balance of Payment (BoP) posted a significant surplus of Rs 43.1 billion compared to a lower surplus of Rs 19.9 billion in the same period last year.
"The year-on-year (y-o-y) consumer price index rose to 12.9 per cent in mid-May 2009 compared to 9.2 per cent in the same period last year," according to the current macroeconomic situation based on the first 10 months' data of current fiscal year published by Nepal Rastra bank (NRB).
The inflation, in the review period, was driven mainly by 16.5 per cent price rise in food and beverages group. However, the price index of non-food and service group also increased by 8.8 per cent.
"In food and beverage group, sugar and sugar-related products played a key role in pushing the price hike up so that it increased by a whopping 66.9 per cent, the report said. This is in sharp contrast to last year's decline of 0.5 per cent. Similarly, the price indices of vegetables and fruits as well as meat, fish and eggs sub-groups increased by 33.5 per cent and 27.5 per cent respectively in the review period compared to an increase of 1.8 per cent and 10.2 per cent respectively in the same period last year.
The wholesale price inflation increased to 15.5 per cent compared to 10.1 per cent a year ago. Indian price hike plays a key role in the Nepali market. Though India's wholesale price index has posted a negative growth by the end of May, the Indian month-on-month price hike in May is also at 10.3 per cent.
The central bank's report reveals that the government budget on cash basis remained at a surplus of Rs 6 billion in contrast to a deficit of Rs 6 billion in the same period last year. "The government has significant cash surplus of Rs 21.6 billion -- including Rs 3.9 billion of previous year -- with Nepal Rastra Bank," according to the report, thought the total government expenditure on cash flow basis, increased by 25.7 per cent to Rs 127.6 billion compared to an increase of 28.2 per cent in the corresponding period of the previous year. Low growth rate of capital expenditure accounted for such a deceleration of total government expenditure.
Revenue mobilisation also grew by 39.9 per cent to Rs 110.5 billion compared to an increase of 24 per cent in the corresponding period the previous year. "The government's firm commitment to revenue leakage control, revenue administration reforms, Voluntary Disclosure of Income Scheme and significant growth of non-tax revenue contributed to such an impressive growth of revenue mobilisation in the review period," said NRB.
However, exports shot up by 19.8 per cent in the first ten months of the current fiscal year in contrast to a decline by 2.4 per cent in the same period last year. The rise in exports is contributed to readymade garments, textiles, GI pipe, catechu, toothpaste, pulses followed by pashmina, woollen carpets, readymade garments and handicraft.
But at the same time, total imports also went up by 25.4 per cent compared to an increase of 16.8 per cent in the same period last year. "Imports from India rose by 11.5 per cent and imports from other countries surged by 50.4 per cent compared to last year's nominal imports," the report said.
During the review period, the overall Balance of Payment (BoP) posted a significant surplus of Rs 43.1 billion compared to a lower surplus of Rs 19.9 billion in the same period last year.
Thursday, July 2, 2009
Tourist arrival growth encouraging
The month of June saw a rise in tourist air arrivals by six per cent to 23,222.
According to the Immigration Office, Tribhuvan International Airport (TIA), arrivals from Bangladesh, Pakistan and Sri Lanka grew by 16, four and seven per cent, respectively.
However, India, considered as a major market of Nepal, showed a decline of six per cent. Consequently, in aggregate, the SAARC segment showed a four per cent decline compared to last June.
Chinese arrivals increased by 17 per cent along with Thai (37 per cent), Malaysian (three per cent), South Korean (55 per cent) and Singaporean (eight per cent). The other Asian market to decline in June was Japan (four per cent). Other Asian segments registered a positive growth of 18 per cent.
By far the most encouraging results came from European markets, with an overall positive growth of 25 per cent. Arrivals from UK maintained the increasing trend with a growth of 15 per cent. Nepal's major markets in West Europe: Germany, the Netherlands, Italy and Norway all posted significant increases of 27, 30, 34 and 17 per cent, respectively. However, France recorded a two per cent decrease in arrivals, data revealed.
Tourist arrivals from Australia, New Zealand, Canada and the US also registered positive growth of 27, five, 11and 21 per cent, respectively. Nepal observed a remarkable growth of 15.8 per cent in April 2009 but suffered a trough in May with a decline of five per cent in the visitor arrivals. Increase in the arrivals again in June reflects the volatile nature of international tourism and indicates the need for concerted and consistent marketing and promotional efforts.
The increase in arrivals also shows that the global economic downturn has failed to deter the traveling spirit of tourists. Both the European and North American markets had positive growth trend. However, despite the general acceleration, there is still a certain degree of uncertainty prevailing there and growth will depend on evolving economic conditions. A total of 28,210 foreign tourists and 45,451 Nepalis departed via TIA while 40,337 Nepalis arrived via TIA in June.
Tibet to grant visa
KATHMANDU: At a promotional campaign jointly held by the Consulate General of Nepal in Lhasa, the Nepal Tourism Board, and the China Tibet Tourism Bureau, an official from the Consulate General of Nepal promised to 22 travel wholesalers that in the near future travel agencies in Tibet would be able to offer visa services to Chinese tourists who want to visit Nepal. "This is what we have been longing for all along," said Liu Jin, the sales manager of Tibet China International Travel Service. "Tibet and Nepal both have abundant tourism resources that are strongly complementary to each other." According to Shrestha between 2006 and 2008, 5,00,000 tourists visited Nepal each year and seven per cent of these were from China. In 2008, Tibet welcomed more than three million domestic and foreign tourists. Nepal hopes the promotion will attract more people to visit the country by way of Tibet. Wang Songping, the director of the China Tibet Tourism Bureau, statedthat Nepal is an important hub for Tibet's tourist market, while Lhasa is also an important transit point for Chinese visiting Nepal via Tibet. Wang stated that the cooperation between the two regions would certainly be a success.
According to the Immigration Office, Tribhuvan International Airport (TIA), arrivals from Bangladesh, Pakistan and Sri Lanka grew by 16, four and seven per cent, respectively.
However, India, considered as a major market of Nepal, showed a decline of six per cent. Consequently, in aggregate, the SAARC segment showed a four per cent decline compared to last June.
Chinese arrivals increased by 17 per cent along with Thai (37 per cent), Malaysian (three per cent), South Korean (55 per cent) and Singaporean (eight per cent). The other Asian market to decline in June was Japan (four per cent). Other Asian segments registered a positive growth of 18 per cent.
By far the most encouraging results came from European markets, with an overall positive growth of 25 per cent. Arrivals from UK maintained the increasing trend with a growth of 15 per cent. Nepal's major markets in West Europe: Germany, the Netherlands, Italy and Norway all posted significant increases of 27, 30, 34 and 17 per cent, respectively. However, France recorded a two per cent decrease in arrivals, data revealed.
Tourist arrivals from Australia, New Zealand, Canada and the US also registered positive growth of 27, five, 11and 21 per cent, respectively. Nepal observed a remarkable growth of 15.8 per cent in April 2009 but suffered a trough in May with a decline of five per cent in the visitor arrivals. Increase in the arrivals again in June reflects the volatile nature of international tourism and indicates the need for concerted and consistent marketing and promotional efforts.
The increase in arrivals also shows that the global economic downturn has failed to deter the traveling spirit of tourists. Both the European and North American markets had positive growth trend. However, despite the general acceleration, there is still a certain degree of uncertainty prevailing there and growth will depend on evolving economic conditions. A total of 28,210 foreign tourists and 45,451 Nepalis departed via TIA while 40,337 Nepalis arrived via TIA in June.
Tibet to grant visa
KATHMANDU: At a promotional campaign jointly held by the Consulate General of Nepal in Lhasa, the Nepal Tourism Board, and the China Tibet Tourism Bureau, an official from the Consulate General of Nepal promised to 22 travel wholesalers that in the near future travel agencies in Tibet would be able to offer visa services to Chinese tourists who want to visit Nepal. "This is what we have been longing for all along," said Liu Jin, the sales manager of Tibet China International Travel Service. "Tibet and Nepal both have abundant tourism resources that are strongly complementary to each other." According to Shrestha between 2006 and 2008, 5,00,000 tourists visited Nepal each year and seven per cent of these were from China. In 2008, Tibet welcomed more than three million domestic and foreign tourists. Nepal hopes the promotion will attract more people to visit the country by way of Tibet. Wang Songping, the director of the China Tibet Tourism Bureau, statedthat Nepal is an important hub for Tibet's tourist market, while Lhasa is also an important transit point for Chinese visiting Nepal via Tibet. Wang stated that the cooperation between the two regions would certainly be a success.
BUDGET BUZZ: Declare hotel sector a national industry
As a responsible sector of Nepali economy, Hotel Association of Nepal (HAN) has been urging the government to develop it. Development of tourism and hotel sector will provide geometric benefits to the nation.Hotel industry, a primary sector of the tourism industry, should be given due priority and the government should address its grievances in the budget.
Government should implement minimum VAT rate compared to that of multiple Vat rate, so that inflow of foreign currency increases. Items used by hotels like agricultural products are non-VAT items. Therefore, the VAT of three per cent on these should be refunded.
The tourism sector plays a vital role in the development of the country, and this sector should be updated and upgraded. There should be facility for minimum customs charge or discount on the custom charge.
Most hotels are in need of renovation. The government should allow discounts on the maintenance materials used by hotel industries such as furniture, carpet and equipment
The government should allow free visa facility for Nepal Tourism Year 2011.
Hotel industry being a sector of major capital investment should be granted loan facility at cheap rates.
There should be discount on the electricity charge for hotel and restaurants registered under hotel industry and restaurants industry.
There should be income tax discounts on foreign currency earned by tourism industry
The hotel industry for years is facing loss due to huge investment and the present income tax act is not satisfactory. The new budget should increase the lease period from seven to 10 years so that it will be easy to recover the loss.
Targeting Nepal Tourism Year 2011, Nepal Airlines Corporation should buy two new aircraft.
To increase the number of tourist arrivals, the construction of regional international airports should start as soon as possible.
Parking charges at Tribhuwan International Airport (TIA) should be at par with the neighbouring countries.
Old taxis should be phased out. CAAN should appoint trained workers and bring taxis of international standards. The trained taxi drivers should be provided uniforms and the simple loan interest facility granted for buying taxis.
To encourage internal tourism, people related to government and non-government organisations should be given travel leave and concessions.
Diplomatic mission offices should be facilitated with travel desk.
New VAT system should be formed to reduce the effects of global financial crisis on Nepal Tourism Year 2011
Illegal monasteries at Lumbini charging illegal donations from tourists against the Lumbini Development Fund Policy should be booked according to the law.
HAN confirmation should be made compulsory while categorising hotels and certifying them.
The government should renew the contract of the hotel resort that is managing the Chitwan National Park Area since 25 years.
Prashiddha Bahadur Pandey
President
Hotel Association of Nepal (HAN)
Aid for Trade review in Geneva
World Trade Organisation (WTO), its members and key development organisations, including Asian Development Bank (ADB), will conduct the Second Global Review of Aid for Trade -- aimed at expanding the trade capacity of developing countries --- on July 6-7 in Geneva.
The Second Global Review will evaluate progress made since the First Review, held in November 2007, and scrutinise how Aid for Trade is being implemented, said the ADB office in Manila. Progress in securing additional, predictable financing will be discussed and views exchanged on how aid flows can be maintained against the backdrop of the global recession. The four key objectives of this Second Global Review are 'Moving from commitment to implementation', 'Integrating trade in national and regional development strategies', 'Sustaining aid flows during the global economic downturn' and 'Assessing the effectiveness of Aid for Trade'.
The meeting will assess how Aid for Trade is making good on its promise as the agenda moves from commitment of funds (increase of 10 per cent annually since 2005 to funding pledges today standing at more than $25 billion annually (for non-concessional loans add an additional $27 billion) to implementation in concrete projects at the multilateral, regional and national levels.
The meeting will also analyse how trade can be better integrated into core national and regional development strategies, obstacles overcome and the process encouraged.
This Review will study the impact that the global economic downturn is having on Aid for Trade flows, how donors can be persuaded to engage long term through additional and predictable financing and what role emerging South-South donors can play in Aid for Trade.
The Geneva gathering will try to find what conclusions are emerging on the results and effectiveness of Aid for Trade so far. The second joint OECD/WTO monitoring report 'Aid for Trade at a Glance', to be published coinciding with the Second Global Review, highlights that the Aid for Trade initiative has already made remarkable progress.
ADB president Haruhiko Kuroda is due to speak at the conference. ADB has long been a supporter of the WTO Aid for Trade initiative as a way to help low-income countries in the Asia and Pacific region catch up with nations such as the People's Republic of China, Malaysia, Republic of Korea and Singapore which have prospered from export-oriented economy.
Ministers, trade officials and senior government officials from around Asia gathered in Siem Reap, Cambodia, in late May to discuss the status of trade in Asia. At that meeting, Cambodia and Japan were appointed co-chairs of a Regional Technical Group on Aid for Trade tasked with stepping up Aid for Trade in the Asia-Pacific.
Aid for Trade was first conceived in December 2005 to help the world's low-income countries increase their capacity to conduct exports and imports. Among the initiatives are efforts to put in place crucial infrastructure for the transportation of goods, standardising policies and ensuring available trade finance.
The latest gathering will take stock of the progress made in those efforts to boost trade since the first Global Review also held in Geneva, Switzerland, in November 2007.
The Second Global Review will evaluate progress made since the First Review, held in November 2007, and scrutinise how Aid for Trade is being implemented, said the ADB office in Manila. Progress in securing additional, predictable financing will be discussed and views exchanged on how aid flows can be maintained against the backdrop of the global recession. The four key objectives of this Second Global Review are 'Moving from commitment to implementation', 'Integrating trade in national and regional development strategies', 'Sustaining aid flows during the global economic downturn' and 'Assessing the effectiveness of Aid for Trade'.
The meeting will assess how Aid for Trade is making good on its promise as the agenda moves from commitment of funds (increase of 10 per cent annually since 2005 to funding pledges today standing at more than $25 billion annually (for non-concessional loans add an additional $27 billion) to implementation in concrete projects at the multilateral, regional and national levels.
The meeting will also analyse how trade can be better integrated into core national and regional development strategies, obstacles overcome and the process encouraged.
This Review will study the impact that the global economic downturn is having on Aid for Trade flows, how donors can be persuaded to engage long term through additional and predictable financing and what role emerging South-South donors can play in Aid for Trade.
The Geneva gathering will try to find what conclusions are emerging on the results and effectiveness of Aid for Trade so far. The second joint OECD/WTO monitoring report 'Aid for Trade at a Glance', to be published coinciding with the Second Global Review, highlights that the Aid for Trade initiative has already made remarkable progress.
ADB president Haruhiko Kuroda is due to speak at the conference. ADB has long been a supporter of the WTO Aid for Trade initiative as a way to help low-income countries in the Asia and Pacific region catch up with nations such as the People's Republic of China, Malaysia, Republic of Korea and Singapore which have prospered from export-oriented economy.
Ministers, trade officials and senior government officials from around Asia gathered in Siem Reap, Cambodia, in late May to discuss the status of trade in Asia. At that meeting, Cambodia and Japan were appointed co-chairs of a Regional Technical Group on Aid for Trade tasked with stepping up Aid for Trade in the Asia-Pacific.
Aid for Trade was first conceived in December 2005 to help the world's low-income countries increase their capacity to conduct exports and imports. Among the initiatives are efforts to put in place crucial infrastructure for the transportation of goods, standardising policies and ensuring available trade finance.
The latest gathering will take stock of the progress made in those efforts to boost trade since the first Global Review also held in Geneva, Switzerland, in November 2007.
NC protests Finance Ministry's fiscal indiscipline
The Finance Ministry has distributed around Rs 560 million in the last month of the current fiscal year. A group of Nepali Congress (NC) Constituent Assembly (CA) members today remonstrated with Prime Minister Madhav Kumar Nepal over the Finance Ministry's distribution of Rs 560 million in the last month of the current fiscal year, saying they feared embezzlement of funds.
"We have complained to the PM about the possible embezzlement of funds as the money was distributed at the fag-end of the fiscal year," said an NC Constituent Assembly member. He added that the PM mereley came back at them with that he had no inkling of the distribution of the budget at the end of the fiscal year. "The budget has been distributed according to the all-party consensus," the PM said.
However, the Nepali Congress CA members said there was no such consensus and that the decision was arbitrary.
The fund was distributed at the request of some of the CPN-UML's CA members. "However, the ministry of Local Development has not approved any projects at the end of the fiscal year," the NC CA member said adding that the trend of the fund distribution arbitrarily would lead to fiscal indiscipline.
Dr Baburam Bhattarai has also been accused of distributing Rs 1.10 billion while leaving the office. "The present finance minister Surendra Pandey is following in the footsteps of Dr Bhattarai and creating fiscal indiscipline at the end of the fiscal year," the NC CA members alleged.
"We have complained to the PM about the possible embezzlement of funds as the money was distributed at the fag-end of the fiscal year," said an NC Constituent Assembly member. He added that the PM mereley came back at them with that he had no inkling of the distribution of the budget at the end of the fiscal year. "The budget has been distributed according to the all-party consensus," the PM said.
However, the Nepali Congress CA members said there was no such consensus and that the decision was arbitrary.
The fund was distributed at the request of some of the CPN-UML's CA members. "However, the ministry of Local Development has not approved any projects at the end of the fiscal year," the NC CA member said adding that the trend of the fund distribution arbitrarily would lead to fiscal indiscipline.
Dr Baburam Bhattarai has also been accused of distributing Rs 1.10 billion while leaving the office. "The present finance minister Surendra Pandey is following in the footsteps of Dr Bhattarai and creating fiscal indiscipline at the end of the fiscal year," the NC CA members alleged.
Budget should focus onsocial spending
Bharat Mohan Adhikari, a senior leader of ruling CPN-UML, was the finance minister for nine months when CPN-UML was in power in 1995-96. He was the first finance minister of the CPN-UML. Adhikari has some words of advice for Surendra Pandey — his fellow party leader, who is heading the finance ministry and preparing budget for the fiscal year 2009-10. The budget has to be presented before the fiscal year ends, but Pandey is likely to present the budget a little later than usual due to the deadlock in the parliament.Adhikari talks to Kuvera Chalise on what the budget’s priorities, size and focus should be.
What should be the top priority of the budget?
The guiding principle of the budget should be state, private sector and cooperatives. There should be consensus on these three pillars that can drive Nepali economy. Apart from that, the budget should focus on creating conducive environment to speed up the economic development that could bring inclusive growth. Only growth with social justice can bring peace in this country. Social network in the rural areas has to be created and strengthened.
Every government brings its own programmes making the people more confused. Should the budget bring more new programmes or give continuity to the programmes of the past governments?
It’s not necessary to impose new programmes every time. If the programmes of the past governments have given positive results, why not continue them. When I presented the budget almost one-and-a-half decades ago, I brought ‘nau-sa’ programmes to accelerate the economic activities in the rural areas. It cost government little but generated economic activities that increased rural growth. Such programmes should be continued as Nepal has more villages, where we need to generate economic activities that can fuel economic development. The tested and widely beneficial programmes should be continued.
Which programmes of the past governments you think are worth continuing?
The programmes that Dr Baburam Bhattarai brought in his budget like the opening of cooperative shops in every village should be continued. Such programmes will encourage the cooperatives, provide villagers with goods at reasonable price and curb price hike. But Dr Bhattarai’s Literacy Programme needs to be improved upon. It should be launched as a national campaign for at least three to five years, not for a short period. The Youth Self-Employment Programme could also be continued with certain changes. The Afno Gau Afai Banau programme generated lots of activities in the rural areas and has to be continued. The cooperatives have to be strengthened by amending the Acts. They should be actively involved in production and distribution. Budget should ensure social spending. Free health care for women and children will help boost social security. The budget must encourage education in the rural areas by providing free snacks and uniforms for the children from Dalit, backward and marginalised groups. Similarly, primary health care should be guaranteed.
What should be the size of the budget?
It should be around Rs 300 billion. Roughly, the capital expenditure — expenses for development activities — will be around Rs 125 billion, current expenditure will come to around Rs 150 billion, as the salaries of the employees will go up.
Economists say Rs 260-billion budget will be ideal. Revenue generation target cannot be more than last year’s and the Maoist-led government failed to spend on development, though it succeeded in meeting the ambitious-revenue target of Rs 141 billion. Can the finance minister dare to bring Rs 300-billion budget?
The government has to follow Dr Bhattarai on revenue target. Dr Bhattarai did a remarkable job on that front and proved that revenue can be generated, though he failed on development front and the government has a surplus of Rs 22 billion. He met the target of Rs 141 billion. New budget should set a target of at least Rs 183 billion. An ambitious target will encourage the bureaucracy to work more efficiently. Had I been the finance minister, I would have set up a separate mechanism to spend on development activities and sent the budget to the villages for whom it was meant.
Dr Bhattarai blamed other political parties for not being able to spend the development budget due to absence of representatives in the local bodies. What kind of mechanism can take the place of local bodies?
There should be a high level committee headed by the Prime Minister to look into the development activities. The committee should review its task every three months and submit the report to the parliament and to the people. People have every right to know what their representatives are doing for their development.
If all the committees are headed by the Prime Minister how can he do justice to them?
He has to prioritise. For example, there is no need for the PM to head the Investment Board as its focus is to lobby and bring investment in the country for mega projects. Such committees should be headed by a political figure who has a good international reputation, who can convince foreigners to invest in the country.
Talking of investment, Nepal has barely seen any investment in the recent past. How should the private sector be ecouraged to invest more?
The reason for Nepal’s poverty is low production and little investment. Policies should be framed to encourage the private sector to bring more investment and generate employment. It should be encouraged to invest in fast track roads and Tarai and Lhasa-Kathmandu railway. The budget must announce a clear policy on domestic raw material-based industries like cement and hydropower. The special economic zones, like in Panchkhal, have to be speeded up.
Despite Nepal being rich in water resources, the country is reeling under long hours of power outages? How can industries operate?
The budget should spell a clear policy on hydropower generation. It has to form a policy to attract foreign investment in mega hydel projects that need FDI. Other micro, small and medium-scale hydro projects that are under review have to be immediately finalised and Nepal Electricity Authority should enter into Power Purchase Agreement without wasting any time. There have been continuous disruption of the hydro power projects by the locals, as they feel they are being denied the ownership of their natural resources. The problem can be solved by ensuring the locals’ participation as shareholders and sharing the benefits with them by constructing schools, hospitals and roads and providing them with employment. Tehri Dam project of India is the best example how the project can benefit the locals also.
Nepal is an agricultural country and most of the Nepalis are dependent on agriculture for their livelihood but the productivity is decreasing every year and there is food scarcity. How can budget ensure food sovereignty and modernise agriculture?
The budget should give priority to land reforms, land tilling, accessibility of loan to the farmers, subsidy on fertilizers and improved seeds, apart from the irrigation facilities. The modernisation and commercialisation of agriculture is yet another aspect the budget should address in all seriousness.
Wednesday, July 1, 2009
BUDGET BUZZ: Counter negative publicity at international level
NATO is committed to the promotion and development of Nepali tourism and always ready to undertake any task that helps strengthen Nepal's economy as a whole.
As a non-government, non-profit making and non-political organisation dedicated to promoting inbound quality tourism and developing new tourism products, it is an association of renowned tourism entrepreneurs who are the highest taxpayers and among the highest foreign currency earners for the country.
In view of the mega tourism event -- Nepal Tourism year 2011 -- NATO is confident that the following recommendations will be incorporated in the coming budget:
1. Regain lost confidence through effective marketingNepali tourism industry is a victim of negative publicity in the international market. As a result, even after improved circumstances in the country, tourists are still hesitant to come to Nepal.
2. Enhance competitive strength of local tour operatorsDue to global competition from regional markets such as India, South East Asia and South Asian countries, it has become extremely important for tour operators to constantly upgrade their office equipment, vehicles and other infrastructure to meet the demand of their clients.
3. Enhance competition with equal opportunitiesFair competition should be enhanced by making sure that those who are paying taxes are not penalised any further by ensuring that all those who sell travel or deal with tourists must be brought under the VAT umbrella. If VAT is waived, this will raise revenue.
4. Encourage international flights/charters, ensured stronger air access.
5. Market TIA Tribhuvan International Airport (TIA) must be marketed to promote it and lure international airlines. Its services should be improved, as the TIA milieu gives tourists the first impression of Nepal.
6. Encourage movie producers Movies made in Nepal by international producers would be a method to publicize the country in the international arena. Policies related to making movies in Nepal should be simplified and fees slashed so that movie producers are encouraged on a massive scale.
7. Invest for rural developmentPublic investment in rural development should be increased. If infrastructure like road, electricity, communication are put in place, tourism entrepreneurs would promote rural and village tourism.
8. Develop tourism infrastructure, set up four-lane highways to tourist destinations
9. Strengthen the national carrier, Nepal Airlines Corporation. Add more aircraft
10. Tour Operators and Travel Agents must be treated as two separate categories.
11. Take stringent action against wilful defaulters.
12. Strikes, lockouts, chakkajam, bandh, gherao should be completely banned.
13. Easy exit for troubled tourism companies.
14. Declare tourism a national industry to encourage foreign investment.
Basanta Raj Mishra
President
Nepal Association of Tour Operators (NATO)
FNCCI asks NRB to reduce CRR
Federation of Nepalese Chambers of Commerce and Industry (FNCCI) has asked Nepal Rastra Bank (NRB) to reduce the Cash Reserve Ratio (CRR) to 4.5 percentage points from the present 5.5 percentage points.
While submitting its recommendation on monitory policy to NRB governor Dipendra Bahadur Kshetri here today, a delegation led by FNCCI president Kush Kumar Joshi urged for mobilising remittance in productive sectors. Nepal receives Rs 170 billion in remittance, 17 per cent of the GDP. "The government should issue Development Bond and Citizens' Bond and encourage people to buy these," said Joshi told NRB that brings Monetary Policy after the budget every year.
The Monetary Policy should ensure that Small and Cottage industries are charged less interest, importers can import from India by opening Letter of Credit (LC) in dollars, the establishing of Infrascture Development Bank is expedited, the loan repayment period for the hydropower sector is increased to 10-20 years and that banks are allowed to exchange Rs 500 and Rs 1000 Indian currency notes, FNCCI recommended.
It also urged the central bank to revise Negotiable Instrument Act, review the repayment period of bank loans and reduce SLF penalty rate from three per cent to two per cent.
FNCCI also strongly urged the governor to form a high-level committee to deal with wilful defaulters. Responding to the entrepreneurs. governor Kshetry said that he would take the suggestions positively while bringing Monetary Policy.
While submitting its recommendation on monitory policy to NRB governor Dipendra Bahadur Kshetri here today, a delegation led by FNCCI president Kush Kumar Joshi urged for mobilising remittance in productive sectors. Nepal receives Rs 170 billion in remittance, 17 per cent of the GDP. "The government should issue Development Bond and Citizens' Bond and encourage people to buy these," said Joshi told NRB that brings Monetary Policy after the budget every year.
The Monetary Policy should ensure that Small and Cottage industries are charged less interest, importers can import from India by opening Letter of Credit (LC) in dollars, the establishing of Infrascture Development Bank is expedited, the loan repayment period for the hydropower sector is increased to 10-20 years and that banks are allowed to exchange Rs 500 and Rs 1000 Indian currency notes, FNCCI recommended.
It also urged the central bank to revise Negotiable Instrument Act, review the repayment period of bank loans and reduce SLF penalty rate from three per cent to two per cent.
FNCCI also strongly urged the governor to form a high-level committee to deal with wilful defaulters. Responding to the entrepreneurs. governor Kshetry said that he would take the suggestions positively while bringing Monetary Policy.
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