NRB provides Rs 570m refinancing

Out of dozen banks and financial institutions that had applied for the much-sought after refinancing from the central bank, only two -- Citizens Bank International and Clean Energy Development Bank -- have taken the facility after Nepal Rastra Bank (NRB) eased the provisions.
"The two institutions -- Citizens Bank International and Clean Energy Development -- took Rs 570 million under the refinancing facility," said Gopal Kafle, spokesperson of the central bank. "Citizen Bank took Rs 430 million whereas Clean Energy Development Bank took Rs 140 million under refinancing facility," he said adding that apart from Himchuli Bikas Bank and Annapurna Finance, the remaining applicants are commercial banks that had asked the central bank to provide refinancing facility due to liquidity crunch.
Meanwhile, finance companies were not much attracted to the facility as only one finance company has applied for the facility.
The mid-term evaluation of the Monetary Policy has introduced refinancing tool to pump in liquidity in the banking system for productive sectors like tourism, hydropower, exports, agriculture, small and medium scale industry and other productive sectors.
The central bank has decided to extend refinance loans up to Rs 25 billion to the banks and financial institutions against collateral of good loans at an annual rate of 7.5 per cent. The financial institutions can charge only up to 10.5 per cent and can get such refinancing facility up to 40 per cent of their primary capital, according to the central bank.
The facility will be provided for six months and could be reviewed if new collaterals of good loans are provided.
Since last October, the market has been witnessing liquidity crunch. Bankers think that the psychological fear of depositors is behind the tight liquidity at present. "It started since last October, when the central bank could not provide cash in the market during the Dashain festival," he said adding that the source of income provision coupled with the political uncertainty has shaken depositors’ confidence from the banking system.
According to the NRB's nine months report, the liquid assets of the commercial banks stood at Rs 170.7 billion as at mid-April 2010. "Of the components of liquid assets, liquid fund declined by 7.8 per cent," said the central bank. "A decline in commercial banks' balance with the NRB as well as balance held abroad accounted for a contraction of liquid funds in commercial banks."

Lumbini Bank takes a turn around, churns profits

Lumbini Bank has set an example on how Nepalis themselves can turn a 'sick' financial institution into a sound and healthy one.
"When I took over the management of the bank four years back, it was in a state of collapse," said Shovan Deve Pant, CEO of the bank that was taken over by central bank in 2001 due to poor management. The central bank has clamped sanctions of March 7, 2006 restricting all major activities of the bank due to its high NPA, negative capital, serious noncompliances in various areas of accouting and income recognition and loan loss provisioning then.
After almost four years, Lumbini Bank has achieved capital adeqacy ratio of 24.23 per cent that is much above the regulatory requirement of 10 per cent and one of the best in the industry, he said adding that the NPA -- another barometer of the bank's financial health -- has come down to 4.66 per cent from 40.54 per cent in 2006.
The central bank has been restructuring the Nepal bank Ltd and Rastriya Banijya Bank with the grants. But still the restructuring of these banks are going on.
The zero deviation between unaudited and audited report of the bank for the fiscal year 2008-09 also reveals that the bank has improved its internal auditing. The bank has posted Rs 332.20 million profit in the fiscal year 2008-09.
"We now complied to all the central bank directives in regard to capital, NPA and increased income by more than five times in very difficult situations of emabargoes from NRB," Pant added.
After its financial health improved significantly, the Nepal Rastra Bank board has lifted all the sanctions from March 28, 2010. "We are proud to be one of the safest bank in Nepal's financial market," he added.

Nepal gets $42 million IMF loan

The International Monetary Fund (IMF) approved an immediate loan of $42.05 million to help address Nepal's economic troubles.
The loan was approved under the Washington-based fund's rapid credit facility, which provides swift and flexible financial assistance for low-income countries that face an urgent balance of payments need, according to the washington-based lending agency.
The move came as the main political parties yesterday agreed to extend Constituent Assembly's (CA) term, in a dramatic eleventh-hour deal to avert political crisis. The Maoist party said the leaders had agreed to form a new national consensus government as part of the deal.
Under the deal reached late hours yesterday, Prime Minister Madhav Kumar Nepal had agreed to resign within a week.
The IMF said in a statement that the zero interest rate loan did not require any explicit programme-based conditionality or review.
However, it said, economic policies were expected to address underlying balance of payments (BoP) difficulties and support macroeconomic stability and poverty reduction.
The country is experiencing a significant decline in exports widening the trade deficit, and a worsening of economic confidence, which has contributed to a large deterioration in the current account balance and a decline in international reserves as well as a liquidity crunch in the banking sector.
According to the central bank's first nine month's report, the country has recorded a BoP deficit of Rs 22.1 billion and total trade deficit has expanded by 58.9 per cent to Rs 238.47 billion. Similarly, the gross foreign exchange reserves have dropped by 15.8 per cent to Rs 235.75 billion.
"The government's policy programme, supported by the IMF, is aimed at addressing these risks and stabilising international reserves," said IMF deputy managing director Naoyuki Shinohara. "At the core of the programme are a tight monetary and fiscal policy stance to support the exchange rate peg, which remains Nepal’s anchor for macroeconomic stability, and efforts to improve financial sector soundness."

Budget surplus rises despite hike in govt spending

Despite registering the increment of 30.9 per cent in the government expenditure, in the first nine months of the current fiscal year, government has observed the budget surplus of Rs 10.3 billion.
According to the Nepal Rastra Bank (NRB)’s macroeconomic report of nine months of the current fiscal year, the government budget surplus on cash basis stood at Rs 10.30 billion compared with a budget surplus of Rs 12.72 billion in the same period last fiscal year. "The budget surplus stood at Rs 4.94 billion in the eighth month of the current fiscal year," according to the central bank.
Meanwhile, the total government spending has increased by almost a double at 30.9 per cent amounting to Rs 140.09 billion, due to higher recurrent and capital expenditure, in the mid-April, which had increased by 18.5 per cent only in the same period last fiscal year.
The recurrent expenditure alone has increased by 28.5 per cent to Rs 90.94 billion due to increased salary and allowances of civil servants, rising expenditure on special security plan, larger subsidies to public schools, increased economic assistance," the report said.
Similarly, capital expenditure has also increased by 47.5 per cent to Rs 28.35 billion which had declined by 2.5 per cent in the same period last year.
"Only 26.7 per cent of the budget estimate on capital expenditure has been spent so far," the NRB said. The low expenditure has been due to delay in the approval of budget, lingering in the contract process, absence of representatives in local bodies as well as weak law and order situation in the country. In the eighth months, only Rs 79.37 billion of recurrent budget and Rs 22.45 billion of capital budget had been spent.
A positive impact of 'Tax Compliance Year', increase in PAN number holders, mobilisation of tax volunteers, control in revenue leakages and tax administration reforms has contributed to 28.2 per cent growth of revenue mobilisation to Rs 126.53 billion, whereas in the eight months the revenue mobilisation was at Rs 105.58 billion.
The revenue collection has slowed down as in the last fiscal year’s same period, government had been able to register a growth of 39.3 per cent.
"Value Added Tax (VAT) contributed most to the total revenue as it grew by 40.6 per cent to Rs 38.50 billion. It had increased by only 23.2 per cent in the same period last year," said the report. "In the eighth month also, VAT had grown by 43 per cent registering Rs 33.36 billion in the government’s kitty."
Increased consumptions and reforms in VAT administration has been attributed to such a growth in VAT.
Similarly, Increase in imports of high tax yielding vehicles and spare parts pushed the customs revenue up by 35.9 per cent to Rs 25.07 billion compared with 25.7 per cent rise in the same period of last year. Customs collection had grown by 43 per cent in the eighth months of the current fiscal year.
Excise revenue increased by 60.3 per cent to Rs 16.94 billion against an increase of 45.1 per cent in the same period of last year. Likewise, a positive impact of tax compliance year and increase in PAN number holders has attributed to 22.2 per cent increase in income tax amounting to Rs 23.47 billion. In the first eight months, it had grown by 20.7 per cent to Rs 17.52 billion.
However, non-tax revenue has declined by 8.6 per cent to Rs 16.07 billion compared with an increase of 68.7 per cent in the same period last year.

Global economic crisis hits remittance inflow

Though, the number of Nepali migrant Nepali workers going for blue-collar jobs abraod has not decreased, the remittance inflow has slowed down.
According to Nepal Rastra Bank (NRB)'s macroeconomic report, in the first nine months of the current fiscal year remittance has shown slow growth of 9.6 per cent amounting to Rs 164.929 billion. In the corresponding period of the last fiscal year, it had increased by 60.3 per cent.
However, the number of migrant workers has touched 202,794 in the first nine months of this fiscal year. The number of Nepali migrant workers going abroad was 175,958 in the same period last fiscal year.
Within the first nine months of the fiscal year 2009-10, remittance escalation rate has gone down from the growth rate of 35.3 per cent in the first month – mid-august -- to 9.6 per cent in mid-April. While in the last fiscal year, remittance increment had gone up from 31.2 per cent to 42.5 per cent at the end of the fiscal year 2008-09.
Meanwhile, in the first month of the current fiscal year, the remittance had registered a growth of 35.3 per cent against the growth of 31.2 per cent in the corresponding period of last fiscal year.
In mid-September 2009, increment in remittance went down to 19.7 per cent since then it has been fluctuating – reaching 6.6 per cent in mid-November and it again increased to 10.4 per cent in mid-December from there it rose to 13.6 per cent in mid-February 2010. However, in mid-March remittance has gone down to 9.9 per cent.
International Monetary Fund (IMF) has also estimated the slowdown of remittance growth rate to an average of 11 per cent. "Since most of the destinations for foreign employment is still bearing the burnt of international economic crisis, our remittance is not growing as much as it has to,” said NRB’s spokesperson Gopal Kafle. "Besides, there is a speculation doing rounds that workers have been holding the cash for investment purpose instead of sending it back home," he said adding that the central bank is also suspicious that remittance money is being invested somewhere outside Nepal so that the incomes earned from abroad is not visible in the formal accounts. Kafle also blamed informal channels for the remittances’ slow growth in comparison to that of last year.
This retarded growth rate of remittance has affected the Nepal’s Balance of Payments (BoP) which is at the deficit of Rs 22.1 billion in the first nine months of the current fiscal year.
Similarly, at the time when there is liquidity crunch in the country, snail pace of remittance growth is also posing a great problem.

Multimodal transport regulation to be developed

The freight forwarders today said that the Multimodal Transportation Act and Regulation is not practical.
Speaking during an intercation organised here today by the Nepal Intermodal Transport Development Board (NITDB) -- in association with Department of Commerce (DoC) and Nepal Freight Forwarders Association (NEFFA) -- to discuss on Multimodal Transportation Act and Regulation, they said that the forwarded liability is a key and the Act doesnot speak on that.
Multimodal Transportation is a transport-system operated using more than one mode of transport under control of one operator in two or more countries. Benefits of the model are faster transit, low paperwork, cast effective and one agency deal. The model also reduces formalities in port and customs when importing goods from third countries via India or vice versa.
According to NITBD, cargo containers are delivered at ICD and empty containers are received at the same place. Banks should play vital role in promotion of trade through investing in business against documents.
The government is initiating the act and regulation to increase export as the model promote safer way for export goods. Moreover, exporter or importer will have easy contact to agents as local agents are appointed under the model.

NRB prepares to issue Foreign Employment Savings Bond

Nepal Rastra Bank (NRB) is planning to issue the Foreign Employment Savings Bond targetting the Nepali citizens working abroad.
This bond will be sold only to the Nepali citizens working in North Korea, Malaysia, United Arab Emirates, Saudi Arabia and Qatar, at present, said the central bank. Each bond will yield 9.75 per cent of interest and the issuing agency will get the commission of 0.25 per cent of the total amount while floating the primary issue.
The NRB has asked for the applications from licensed remittance service providers to work as an agent in the foreign countries to undertake the trading of this particular foreign employment bond. Only those remittance service providers that have a valid licence to operate its business in those any one or all of the five countries are allowed to apply.
The central bank spokesperson Gopal Kafle said that the Foreign Employment Bond will be able to bring the money earned by foreign employees in the formal channels. According to Kafle, "the workers can be able to earn higher interest from the purchase of this bond."
"This bond will help achieve multiple targets like it will help in increasing capital inflow to the nation and the cash will come through proper channels instead of going through hundis and other informal channels,” he said adding that due to some procedural technicalities the central bank has been little late. "But we are hopeful that the bonds will be sold in the primary market before the end of the fiscal year,” he added.
The Foreign Employment Bond (FEB) visualised in the budget for the fiscal year 2009-10 had targetted to collect Rs 7 billion. However, it seems the target has to be revised and the bond worth Rs 1 billion will be sold till the end of the fiscal year. The budget has promised to utilise remittance in productive sector. However, the fiscal year coming to an end in two months.
"The bond will be utilised to develop big projects,” said Purna Chandra Bhattrai, joint secretary of Ministry of Labour and Transport Management (MoLTM), who is also the member of FEB committee. "The committee has suggested the government to offer 9.75 per cent interest rate."
"As the banks and financial institutions are offering higher interest than offered by the FEB, we have to revise it," he said adding that conditions of tax rebate will also come in action plan.
"It will come soon after implementing process will be selected,” Bhattarai added. Bank and financial institutions will get 0.25 per cent commission when selling the bond.
Foreign Employment Promotion Board (FEPB) has conducted series of consultation meetings with banks, financial companies and remittance companies to implement the bond. However, its already the 11th month of the current fiscal year and the bond issuance might take another couple of months making it an ambitious and yet another paper-plan of the government. Around 1.2 million Nepalis are working in South Korea, Malaysia, United Arab Emirates and Qatar. The government is targeting around 10 to12 per cent of migrant workers to sell the bond.

Gold hits another record high

The precious yellow metal today hit another record high costing Rs 35700 per tola (11.664 gram). The price of gold per 10 gram was at Rs 30,625 in the local market whereas the silver was traded for Rs 471.50 per 10 gram.
"The Greece crisis coupled with euro and dispute between North Korea and South Korea pushed the international price up," said Tej Ratna Shakya, president of Nepal Gold and silver Traders Asociation (NEGOSIDA). "On top of that the devaluation of Indian Currency (IC) against the dollar also pushed the gold price higher in the local market."
Nepali currency is pegged with the Indian Currency (IC) and its devaluation against the greenback will hit the Nepali rupee too.
"The price in the local market might touch Rs 40,000 per tola," said traders fearing low trade before the marriage season.
Earlier, last Monday the precious yellow metal had touched a record high -- in the domestic market – reaching Rs 35,254 per tola (11.664 gram).
Last recorded high price was because of strong dollar that had contributed to the price hike in the domestic market. However, the silver was traded at Rs 481 per 10 gram that is Rs 561 per tola(11.664 gram) on last Monday.
Gold price began approaching record levels from couple of weeks earlier, when the escalating Greek crisis prompted investors to flee to the precious metal. Heightened concerns about the risk of contagion from Greece’s debt woes have attracted fresh inflows of cash into gold, which is widely regarded as a safe bet in times of economic uncertainty.

BoP deficit at Rs 22.1 billion, exports six times over than the imports, inflation at double digit

If one goes by the central bank-published current macroeconomic situation based on nine months' of the current fiscal year, nothing seems right with the country's economy.
The inflation still stands at double digit, Balance of Payment (BoP) has recorded a deficit of Rs 22.10 billion, exports have plunged and imports have gone up pushing the trade deficit up to double compared with the same period last year, and the gross foreign exchange reserves continue to declined.
Though, the government expenses has gone up, revenue mobilisation has shown poor growth in comparison to the same period last fiscal year.
The year on year (y-o-y) inflation -- as measured by the consumer price index -- moderated to 10.8 per cent in mid-April 2010 compared to 11.9 per cent increase in the same period last year, the NRB said attributing the rise in the prices of spices, pulses, grains and cereal products.
The total government spending has also increased by 30.9 per cent to Rs 140.09 billion compared with an increase of 18.5 per cent in the same period last year. "The high growth in recurrent as well as capital expenditure accounted for such an increase in the government expenditure," the NRB attributed the rise to rise in recurrent expenditure that has increased by 28.5 per cent to Rs 90.94 billion.
Nepal's merchandise exports declined by 10.4 per cent to Rs 45.67 billion in contrast to a growth of 20.3 per cent in the same period last year. Exports to India dropped by 6.6 per cent against a growth of 10.5 per cent and exports to other countries plummeted by 16.5 per cent against a growth of 40.7 per cent in the same period last year. "However, merchandise imports soared by 22.6 per cent compared to a growth of 18.2 per cent in the same month last year," said the NRB report. Imports from India grew by 37.1 per cent compared with a growth of 11.5 per cent and imports from other countries grew by 46.9 per cent compared with a growth of 49.6 per cent in the same period last year.
Total trade deficit expanded by 58.9 per cent to Rs 238.47 billion against the rise by 27 per cent in the same period last year. Trade deficit with India rose by 53.8 per cent compared with a growth of 12 per cent in the same period of last year, whereas trade deficit with other countries expanded by 65.1 per cent compared to a growth of 52.3 per cent in the same period last year.
The gross foreign exchange reserves also dropped by 15.8 per cent to Rs 235.75 billion from a level of Rs 279.99 billion at mid-July 2009 as against a growth of 29.8 per cent in the same period last year.
Similarly, the liquid assets of the commercial banks stood at Rs 170.7 billion as at mid-April 2010, revealed the report. "Of the components of liquid assets, liquid fund declined by 7.8 per cent. Another component of liquid assets, commercial bank' investments in government securities has also declined by 11.6 per cent (Rs 8.3 billion)."
Due to the higher credit disbursement relative to the deposit mobilisation, the credit-deposit (CD) ratio increased to 89.1 per cent in mid-April from 81.2 per cent in mid-July 2009. Similarly, the liquidity-deposit ratio declined to 29.6 per cent in mid-April from 34.2 per cent in mid-July 2009.
The NRB has, however, injected net liquidity amounting to Rs 90.1 billion. Similarly, the central bank injected net liquidity amounting to Rs 68.9 billion through net purchase of $923.4 million from commercial banks. A net liquidity of Rs 108 billion was injected through the net purchase of $1.4 billion in the same period last year.

Hydropower companies must float shares for locals

Hydropower companies have to float shares for the locals also, according to the amended the Securities Registration and Issuance Regulation – 2065.
According to the amendment, a company has to float a minimum of 30 per cent shares of its issued capital, unless otherwise directed by the company’s regulatory body.
Of the 30 per cent, five per cent has to be separated to the company’s staff; 10 per cent to the locals and remaining 15 per cent to the general public.
However, the locals cannot sell their share till three years. The new amendment has directed that an individual can not apply for the share as both the local inhabitant and public. "If a person applies for the share that is separated to the locals, he/she cannot apply for the shares separated to the general public."
"To encourage the real sector in the secondary market, Securities Board of Nepal (Sebon) has amended the regulation," said Shurbir Paudel, chairman of the Sebon. "If we can attract real sector in the secondary market, it can reflect the real economy," he said adding that the present market is dominated by the BFIs.
The companies like hydropower that requires a longer construction periods, can offer the shares to the public even in its construction phase provided it has obtained licence for operation. But it has to complete its one year’s audit and hold annual general meeting to float the shares. However, the company must have started its construction and attained basic infrastructures like land, buildings, warehouses etc already bought or in the process of buying capital equipments.
"It also needs to have already received loans from banks and financial institutions," according to the amendment. The debt of the company has to be limited as per the regulations and the shares have to be underwritten according to the directive.
The amendment has made it more stricter for the public. "If an applicant is found to be fake or have provided wrong information, the issue manager can confiscate the deposit amount and deposit it in the Sebon’s account," it said.
Likewise, to make the trading more transparent, Sebon will allow the right share transfer through stock exchange with the help of brokers. The regulatory authority has segregated the banks and financial institutions (BFIs) and insurance companies in one basket and the companies belonging to real sectors in the other. "These regulations are targeted to facilitate the participation of real sector in the secondary market,” said Niraj Giri, director at the Sebon.

Government approves Nepal Business Forum

The government has set up Nepal Business Forum (NBF) to promote private sector through regular interaction. The cabinet meeting held on May 16 had approved the NBF.
"It will simultaneously build a platform for the public and private sector to interact, to build capacity and provide important analysis for decision makers," said the NBF. In providing these services the NBF will enhance the advocacy function for business membership organisation.
The government had received technical support from South Asia Enterprise Development Facility managed by the International Finance Cooperation (IFC) in partnership with DFID and NORAD. The IFC -- a member of World Bank Group -- has been working in establishment of Public-Private Dialogue mechanisms throughout Asia, Africa, Eastern Europe and Latin America. The Forum is a joint effort of the government and private sector of Nepal. Its structure includes working groups –– investment promotion, export promotion, infrastructure development, finance, insurance and banking, women entrepreneur, industrial environment, labour relation, and industrial safety –– and a semi-annual high level plenary forum headed by the Prime Minister.
Federation of Nepalese Chambers of Commerce and Industry (FNCCI), Nepal Chamber of Commerce (NCC), Confederation of Nepalese Industry (CNI), Nepal Bankers Association (NBA), National Business Initiative (NBI), Federation of Women Entrepreneurs Association of Nepal (FWEAN) and Federation of Nepalese Cottage and Small Scale Industry (FNCSI) are representing in the NBF from private sector while 14 ministries and National Planning Commission (NPC) are representing from the government side.

Ministry directs not to involve i nnetwork marketing

Ministry of Commerce and Supply (MoCS) has directed not to be involved in any kind of network business as it has formed a committee to study the network business.

Though, the ministry had enforced the directives on January 31 to regulate goods related networking business in Nepal, consumer rights groups have been protesting against the directives as the section 55 of Consumer Right Protection Regulation was silent on the issue.

"That was a malpractice of MoCS which has to be revoked," said Ram Chandra Simkhada, secretary of Consumer Rights Protection Forum (CRPF) that was against the directive since the ministry enforced it.

Government’s negligence in regulating the business has fueled the rapid growth of the business. More than two dozen network marketing companies operating in Nepal are doing business over Rs 28 billion. Money collected by networking companies from poor and low income people was always in risk as the business was unprotected by laws. Over half-dozen network marketing companies had fled in last two decade with Rs 4.6 billions due to weak law. Consumer right activist, Jyoti Baniya, blamed the authorities – the ministry, Nepal Rastra Bank (NRB), Insurance Board (IB) and others related agencies for the rapid growth of business.

"Why did not the authorities take action against networking companies earlier," he questioned. According to Baniya, there are hidden causes including monitory benefit in issuing network marketing directive. "NMD was also the product of mal-intention,” he said.

Meanwhile, the MoCS has formed a five member investigation team under the coordination of joint secretary of the Ministry including representatives from Ministry of Industry, Finance Ministry, Home Ministry and Ministry of Law and Justice. The ministry has banned networking business throughout the country until further notice.

The ministry has strongly warned networking companies to stop their activities.

Three Year Interim Plan aims to upgrade Nepal's status

The Three Year Interim Plan (2010-11 to 2012-13) aims Nepal to upgrade the country from its current status of Least Developed Country (LDC) to Developing country (DC).

"Apart from status upgradation of the country, the TYIP also aims at creating employment and ensuring high economic growth by reducing the number of people living under the poverty line," said Dr Jagdish Chandra Pokhrel, vice-chairman of National Planning Commisson (NPC) during the inauguration ceremony of Nepal Development Council (NDC) meeting that is intended to finalise the approach paper for the TYIP (2010-2013).

The draft of approach paper also envisions a society where there will be no legal, social, cultural, lingual, religious, economic, gender, racial and any other kind of discrimination. "The target of the plan is to have a sustainable economic growth for the overall improvement on the living standard of people, which will also aid Millennium Development Goals (MDGs)," he said adding that the target will be possible only through the creation of employment opportunities, reduction of economic inequalities, achieving the regional balance, and elimination of social exclusion.

Addressing the meeting, the Prime Minister Madhav Kumar Nepal outlined six areas -- that need focus -- commercialisation of Agriculture, development of tourism, hydropower, industries, infrastructure and skill for better job opportunities. "The plan will focus on creating more employment opportunities," he said adding that during the last TYIP (2007-2010) the poverty level has come down to 25.4 per cent, which is encouraging.

"Though poverty level has come down, rich poor gap has widened," said finance minister Surendra Pandey. "Non-economic issues have hurt the economy," he said addig that the country has a potential of achieving six t oseven per cent growth, hyad there been no non-economic issues that have hurt the economy.

The TYIF (2010-2013) -- the second in a row -- has two major objectives that include poverty alleviation and establishment of sustainable peace through the employment centric inclusive and justifiable economic growth.

To achieve the objectives, the plan has also focused on generation of employment opportunities, development of infrastructures, inclusive and justifiable development, and good governance. "The government will emphasise on the internal and foreign employment creation," the plan reads.

Similarly, in order to achieve decentralised development and keeping the probable federal governance in mind, government will strategise to construct economic infrastructures in the way that the probable federal regions’ can benefit. The strategy of inclusive and justifiable development will be for the achievement of improved living standard of marginalised, geographically and economically backward population which will also aid the establishment of sustainable peace.

The plan also aims at developing physical and social infrastructure, agriculture, tourism, industry, essential services such as drinking water, energy, electricity, roads, foods, medicines and education, environment conservation, investment for elimination of discrimination which will aid the economic development.

The government has estimated Rs 1,023.7 billion for the three year interim plan (2010-2013) -- the continuation of the present three year interim plan (2007-2010). The last three year interim plan (2007-2010) was allocated Rs 511 billion.

The national think-tank is holding Nepal Development Council meeting today and tomorrow to finalise the Approach Paper for the next Three-Year Interim Plan that has targetted 5.5 per cent growth. The current Three Year Interim Plan had estimated 5.5 per cent growth but the average growth stands at 4.4 per cent.

Last three year interim plan was the second such periodic plan. The first such three-year interim plan was implemented in 1962 after the demise of democracy and introduction of the party-less Panchayat system, Nepal has seen a periodic plan since 2013 BS

Buddha flies to Bhutan

Buddha Air has begun its international flight by successfully operating a first test flight to Paro International Airport, Bhutan.
One of the Beech crafts of the airline took off from Tribhuvan International Airport (TIA) at 9 am in the morning and landed at Paro Paro International Airport.
Buddha Air -- first Nepali private airliner to fly to Bhutan -- is scheduled to begin commercial flights from Kathmandu to Paro -- some 55-km away from the Bhutanese capital of Thimpu -- from July 17. In the first phase, the airline will operate four flights a week on Mondays, Tuesdays, Thursdays and Fridays, according to the company. The airline will launch daily commercial flights to Bhutan from September.
"The airline will also operate a chartered and a commercial flight from October, which is the peak season for tourism in the Druk kingdom," Buddha Airlines said adding that would operate extra charter flights as per the demand.
Buddha Air -- a private airline company founded in 1996 -- is the largest domestic air travel operator in the country employing nearly 500 experienced professionals. The company has the largest fleet of most expensive and brand new aircraft amongst all domestic airliners in operation. The airlines safety record and reliability has earned it a host of awards including the Highest Safety Award given by the Ministry of Tourism and Civil Aviation as well as a list of the most esteemed clientele in the country including most United Nations organisations, all major diplomatic missions, international non government organisations as well as national level organisations.

World Bank predicts 3.5 per cent growth

The World Bank has estimated Nepal's GDP growth rate for fiscal year 2009-10 at 3.5 per cent.

This is less than a high growth rate of 5.3 per cent in 2007-08. "Political uncertainties, a cooling down of new construction and energy shortages have constrained growth rates," said the World Bank's report.

The country ended a decade-long conflict in 2006 and has since been working to establish a 'new' Nepal with inclusive and accountable governance structures. However, the transition remains complex and political uncertainty can lead to a deterioration of security hurting the economic performance.

"Fiscal management has remained prudent: there has been progress in revenue administration," it said adding that service provision, especially in education and health, is improving as community and user groups are increasingly involved in taking decisions that affect their lives.

The government expects agriculture to grow by 1.1 per cent, against the earlier projection of 3.3 per cent. Non-agricultural growth is expected to nearly halve to 3.6 per cent from the 6.6 per cent projected earlier.

Prolonged drought and unseasonal rains adversely affected Nepal's agriculture, which contributes 33 per cent to gross domestic product (GDP). A grain deficit of 400,000 tonnes is expected in the fiscal year and there has been little or no new investment to mitigate the effects of weather. Investment in agriculture and irrigation remained at low average of 0.55 per cent of GDP in fiscal year 2009, said the report.

Industrial production growth has been negatively impacted by power shortages, strikes, transport disruptions, and other disputes. The appreciating real exchange rate has also hurt manufacturing exporters. The government, nonetheless, projects a recovery of manufacturing growth to 2.7 per cent for this fiscal year, again, on the back of the construction boom.

The service sector has become an important engine of growth, it's contribution to GDP is now up to 52 per cent over 46 per cent 10 years ago buoyed by increased in tourism receipts, telecommunications, and increase in investments in social services including health and education.

Strong revenue efforts and generous foreign aid have helped to finance rising spending. Foreign aid rose from 3.6 per cent of GDP in fiscal year 2006-07 to 4.7 per cent of GDP in fiscal year 2008-09.

Imports have risen fast from $1.6 billion (26 per cent of GDP) in the fiscal year 2000-01 to $3.6 billion (30 per cent of GDP) in fiscal year 2008-09 -- largely due to thriving consumption made possible by remittances. Exports have remained under $1 billion, and as a share of GDP, have continuously declined from 13 per cent to seven per cent. Exports of readymade garments, carpets and Pashmina - the main exports have declined.

Official remittances rose from about 13.8 per cent of GDP in fiscal year 2007-07 to 22 per cent of GDP in fiscal year 2008-09. This is less than the total amount as it does not account for inflows from India and informal channels. Fueled by high remittances, monetary growth has been high in the last two years.

Meanwhile, the Bank said that Nepal's economic prospects are clouded by political uncertainty that is expected to continue until key stakeholders reach consensus on the type and shape of the new government. Business confidence is expected to remain low with continued law and order problems, extortion, occasional strikes, and uncertainty about private property.

Infrastructure bottlenecks would likely remain. It could be difficult to design and effectively implement key structural reforms that address matters such as labour regulations and financial sector weaknesses. Nepal, as a result, is unlikely to enjoy the full benefits of the growing Indian and Chinese markets, at least in the immediate future.

Banks improve internal auditing

The commercial banks have improved their internal auditing.

In comparison to fiscal year 2007-08's huge difference between non-audited reports as opposed to the audited ones, the fiscal year 2008-09's deviation has come down heavily.

There was a difference of up to 100 per cent between the audited and unaudited reports in the fiscal year 2007-08 but it has come down to 17.32 per cent in the fiscal year 2008-09 thanks to the Public Accounts Committee (PAC) that has taken the issue seriously after The Himalayan Times published the news last year.

The PAC has directed the central bank, finance ministry and the banks to improve the internal auditing.

"The central bank has been keeping hawk's eye since then," said former president of Nepal Bankers Association (NBA) and Kumari Bank's CEO Radhesh Pant.

Financial institutions dominate the domestic secondary market because they are considered more transparent than any other sector. Investors pick their choose in the secondary market by checking the non-audited reports as they are published ahead of the annual general meetings. The audited reports are usually published after almost six months.

"As per the non-audited report of 2008-09, Sunrise Bank has posted a profit of Rs 102 million. But, the audited document reveals that it has raked only Rs 84.77 million -- a drop of 17.32 per cent in profit during the year," stated a report compiled by Securities Research Centre and Services (SRCS). Sunrise Bank had a whopping 100.47 per cent difference between the audited and unaudited reports, a year ago.

"At times, a bank may think that loan is either good or entails a medium risk. But, central bank might think otherwise and make the bank provision more leading to the difference in the profit," Pant added.

Of the 27 commercial banks, the SRCS has compared the non-audited and audited reports of 23 commercial banks that are listed in the secondary market.

According to the central bank's directives, banks and financial institutions -- commercial banks, development banks, finance companies and others -- are obliged to publish their non-audited balance sheet immediately after the end of the fiscal year to ensure the transparency in the financial sector.

Reputed banks like Standard Chartered Bank Nepal, Nepal Investment Bank Ltd, Everest Bank and Nabil Bank have a nominal difference in their non-audited and audited reports. In fact, records reveal that their net profit has 'marginally' increased or decreased in the audited report, which is nominal. They are considered safe and sound banks.

INSET

Variation in audited and un-audited reports of banks (2007-08)

Nabil - (0.00001 per cent)

NIBL - (1.52 per cent)

SCNBL - (0.03 per cent)

HBL - (1.40 per cent)

NSBL - (5.37 per cent)

NBB - (12.70 per cent)

EBL - (2.35 per cent)

BoK - (0.04 per cent)

NIC - (0.24 per cent)

MBL - (32.62 per cent)

Laxmi Bank - (1.52 per cent)

KBL - (1.15 per cent)

Lumbini Bank - (15.39 per cent)

NCC - (1.17 per cent)

SBL - (1.07 per cent)

NMB - (2.63 per cent)

BoAN - (0.02 per cent)

Citizens' ( 0.0009 per cent)

DCBL - (0.00065 per cent)

Global - (13.72 per cent)

Prime - (0.65 per cent)

Sunrise - (17.32 per cent)

THree Year Interim Plan meets most MDGs

The Three Year Interim Plan (2007-2010) has mixed result but most of Millennium Development Goal's (MDGs) are supposed to be met, according to the National Planning Commission (NPC).

As per the MDGs, the poverty level should come down to 21 per cent by the end of 2015 but the target could be exceeded as the poverty level seems to go down to 18 per cent, hoped the national think-tank. The poverty level was targetted to bring down to 21 per cent but it has come down to 25.4 per cent.

"Though, some of the sub indicators could not be met."

The TYIP -- that had targetted a growth of 5.5 per cent -- has been allocated a budget of Rs 511 billion, though the average growth rate has come to 4.4 per cent.

Most of the sectors have underperformed. The growth target of agriculture was 3.9 per cent but it registered only 3.3 per cent, whereas the non-agriculture sector had a growth target of 6.4 per cent, but it also came down to 5.1 per cent.

Dr Puskar Bajracharya, member of NPC said that the think-tank has now thought of making effective monitoring as there have been a lots of complaints over the implementation of the programmes.

Meanwhile, The NPC is holding Development Council meeting on May 23-24 to prepare Approach Paper for the next three-year interim plan.

"The approach paper will concentrate on employment generation," Bajracharya said adding that the next three year interim plan (2010-2013) has focused on employment generation.

The government is allocating Rs 1,018 billion for the next three year interim plan (2010-2013) -- the continuation of the present three year interim plan (2007-2010). The last three year interim plan (2007-2010) was allocated Rs 511 billion.

The new three year interim plan is the continuation of the running three year interim plan with some strategic changes.

Last three year interim plan was the second such periodic plan. The first such three-year interim plan was implemented in 1962 after the demise of democracy and introduction of the party-less Panchayat system.

The three year interim plan (2007-2010) gave special emphasis to relief, reconstruction and reintegration, Creation and Expansion of employment opportunities and to increase pro-poor and broad-based economic growth.

The Rs 511 billion last three year plan had also planned to reduce poverty to 15 per cent by 2015 from 31 per cent. "We can achieve the target of poverty reduction," he said.

Socio-economic change, employment based economic growth, physical structure appropriate to federalism and inclusive economic growth are some of the strategy in the next three-year interim programme apart from emphasis on agriculture, social and infrastructure development, development of tourism and service sectors. This plan has also focused on joint investment from public and private sector

CNI wants Certificate of Origin issuance rights

Confederation of Nepalese Industries (CNI) urged the government to grant them the right to issue Certificate of Origin (CO) back.

The ministry of trade has given the right to issue CO -- a facility offered primarily to export-based industries -- Federation of Nepalese Chamber of Commerce and Industries (FNCCI), though CNI also used to issue the CO till six months ago.

CNI today demanded it to be treated equally with FNCCI and give it back the right to issue CO. "Most of the exporters are with us," claimed Binod Chaudhary, president of CNI and CA member during a programme organised in the capital.

However, the ministry decided to give the right to issue the CO to FNCCI only on November 24, 2009. According to the decision, the FNCCI will charge 0.12 per cent and the accumulated fund will be distributed among the district chamber, FNCCI, concerned commodity association and bilateral association, Trade and Export Promotion Centre, CNI and for institutional development. "However, we have not got our dues," complained Chaudhary. "The government should implement its own decision," he added.

"The fund is meant to be utilised in the export promotion," said Narendra Basnyat vice-president of CNI. "CNI needs its fair share of resource allocation to continue activities and continue its role of being a key catalyst in the nation's growth and development."

"The ministry must ensure the right of the exporter to chose the organisation from which it wants to issue it's CO," Vijaya Shah, founder chairman of Jawalakhel Distillery and Himalayan Distillery, said adding that it is a fundamental right to economic freedom.

Meanwhile, commerce and supply secretary Purushottam Ojha said that the CO issuing authority also has to have competency.

"Otherwise, Nepal will get bad name in the international market." he said adding that the country need to give CO to export its goods to the European countries that has given it Generalised System of Preferences (GSP) that is a formal system of exemption from the more general rules of the World Trade Organisation (WTO). Specifically, it's a system of exemption from the most favoured nation principle (MFN) that obligates WTO member countries to treat the imports of all other WTO member countries no worse than they treat the imports of their 'most favoured' trading partner.

In case of India, he said that only one institution that the government has recommended can issue CO according to the Nepal-India trade Treaty. "But for the third country both CNI and FNCCI can issue the CO," he added.

Minister for Trade and Commerce Rajendra Mahato agreed with the secretary. He advised the entrepreneurs to share the fund according to the ministerial decision. "But if there is a problem," Mahato said, "the ministry can think of constituting a neutral agency as suggested by the entrepreneurs."

CNI to expand

KATHMANDU: CNI has decided to expand its branches in all the districts across the country. The organisation that was established some nine years ago has no district branches till now. According to CNI, more than 125 corporate houses, leading institutions, multinational companies are its members, who represent more than 1,000 companies and above 400 industries. The organisation that provides 50,000 direct employment and 150,000 indirect employment opportunities and has turnover of 35,0000 million -- has middle and large exporters. It is developing itself as a think-tank and contributes to above 50-90 per cent in most major sectors of the economy and has footprint across all major cities, towns, and industrial regions from Mechi to Mahakali, CNI claimed

Gold hits record high

Propelled by the strong greenback, the precious yellow metal has touched another record high in the domestic market today. It was traded for Rs 35,254 per tola (11.664 gram) -- Rs 694 more expensive from yesterday's trading price. Yesterday gold was traded for Rs 34,560 per tola.

"Strong dollar has contrubited to the price hike in the domestic market," Tej Ratna Shakya, president of Nepal Gold and Silver Dealers’ Association (NEGOSIDA) said adding that the rescue package brought by European Union (EU) to help Greece has also become effective propelling the gold price in the international market, though less than last week's record price.

According to NEGOSIDA, gold today was traded for Rs 30,225 per 10 gram while silver was traded at Rs 481 per 10 gram that is Rs 561 per tola (11.664 gram).

Gold began approaching record levels last week, when the escalating Greek crisis prompted investors to flee to the precious metal. Heightened concerns about the risk of contagion from Greece’s debt woes have attracted fresh inflows of cash into gold, which is widely regarded as a safe bet in times of economic uncertainty.

Remittance inflow slows down

The worker's remittance inflow to Nepal has slowed down in recent months.
The remittance increased by only 12.6 per cent to Rs 143.95 billion in the first eight months of the fiscal year, according to the central bank, whereas in the same period last year the remittance inflow had increased by a whopping 65.3 per cent.
President of Nepal Remiters Asociation (NRA) Chandra Dhakal agreed that the remittance inflow has slowed down. "But the remittance inflow has not decreased," he added.
Dhakal attributes the slowdown of remittance due to the post-recession impact. Last year, the major Nepali migrant workers' destination countries were hit by the recession hard. "Though, the migrant workers outflow has improved in recent months, last year, we witnessed a slowdown in the outflow," he said adding that the reduction in working hours in the host country has also hit the remittance business.
"On top of that the migrant workers might be holding the money back in the host country as the dollar is weak now," Dhakal said.
The country has received Rs 209.69 billion as remittance in the last fiscal year. The remittance -- also considered a lifeline of Nepali economy -- contributed 21 per cent to the gross domestic product (GDP) in the last fiscal year.
Nepali economy has been dependent on the earning from remittance in recent years, which is not a healthy sign for the economy. However, until our exports sector improves, remittance is one of the major foreign currency earners after tourism.
Last fiscal year, remittance had helped the Balance of Payment (BoP) to remain in surplus, which has been in deficit in recent months.
International Monetary Fund (IMF) has estimated that remittance inflow to the country will slow down at around 12 per cent in the current fiscal year. The current trend also suggests that the average remittance inflow in the current fiscal year could not exceed 12 per cent. Last fiscal year's average rate of increment in remittance inflow was 47 per cent.
In the first month of current fiscal year remittance had increased by 22.5 per cent while in the same period last fiscal year it had posted only 21 per cent increment. However, it increased to a whopping 59.4 per cent in the second month of last fiscal year. This fiscal year's second month saw an increment of only 19.7 per cent.
Dhalak is hopeful that the remittance inflow will increase in the coming months. "The outflow of migrant workers has started picking up and it will help remittance inflow," he said adding "But it will take three to four months."

Credit to production sector drops

The credit to production sector has dropped, according to the central bank.

Credit to the production sector has increased by 9.5 per cent in the first eight months of the current fiscal year compared with a growth of 12 per cent in the same period last fiscal year. "Sugar, Cement, Iron and Steel industries witnessed significant Credit expansions under the industrial production sector credit," according to the central bank.

Similarly, credit to agriculture sector increased by Rs 2 billion. Credit to wholesale and retail business as well as finance, insurance and fixed assets; and service sectors increased by 23.2 per cent, 41.6 per cent and 20.2 per cent, respectively. "Credit to these sectors during the same period last fiscal year had increased by only 10.1 per cent, 23.6 per cent and 11.9 per cent respectively," said the Nepal Rastra Bank (NRB). Credit to real estate sector has, however, doubled as it has increased by Rs 14.9 billion in the first eight months compared with Rs 7.7 billion in the same period a year ago.

Similarly, deposits mobilisation of commercial banks has increased by 4.2 per cent (Rs 22.9 billion) amounting to Rs 572.7 billion as of mid-March.

According to the central bank, the first eight months of the current fiscal year witnessed a total deposits increment by 14.3 per cent (Rs 60.2 billion) in comparision to the same period last year. "Similarly, private sector credit of commercial banks grew, though nominally, by 16.5 per cent -- Rs 66.7 billion -- compared to a growth of 16.3 per cent -- Rs 50 billion -- in the same period last fiscal year.

Similarly, the liquid assets of the commercial banks stood at Rs 167.9 billion as of mid-March. However, of the components of liquid assets, liquid fund declined by 9.7 per cent. A decline in commercial banks' balance with the NRB as well as balance held abroad accounted for a contraction of liquid funds of commercial banks. In the review period, the balance held abroad declined by Rs 4.3 billion amounting to Rs 49.2 billion while the balance with NRB declined by Rs 10.1 billion, the central bank said.

Similarly, commercial bank' investments in government securities declined by 12.3 per cent (Rs 8.8 billion). "The higher growth of commercial banks' loans and advances relative to their deposit mobilisation has changed their liabilities/assets structure," said the report.

Loans and advances of commercial banks increase by 11.8 per cent (Rs 60.9 billion). As a result, the credit-deposit (CD) ratio increased to 90.2 per cent by mid-March from 81.2 per cent a month ago. Increase in CD ration is not a good sign.

Similarly, the liquidity-deposit ratio declined to 29.3 per cent in mid-March 2010 from 34.2 per cent in mid-July 2009.

The NRB has injected net liquidity amounting to Rs 69.1 billion in the banking channel. During the period, Rs 7.4 billion and Rs 1 billion were mopped up through outright sale auction and a reverse repo auction respectively, while Rs 74.2 billion and Rs 3.4 billion were injected through repo and outright purchase auction respectively.

In the same period last fiscal year, net liquidity amounting to Rs 11.7 billion was mopped up. "Of the total liquidity mopped up, Rs 7.5 billion and Rs 13.2 billion were mopped up through outright sale auction and reverse repo auction respectively, while Rs 9 billion was injected through outright purchase auction," said the central bank.

Meanwhile, NRB injected net liquidity amounting to Rs 55.2 billions through net purchase of $733.2 million from commercial banks. A net liquidity of Rs 97.2 billion was injected through the net purchase of $1.3 billion in the same period last year.

The NRB purchased Indian currency equal to 63.6 billion through the sale of $1.4 billion in the Indian money market. Indian currency equal to 47.8 billion was purchased through the sale of $1 billion in the same period last fiscal year. "An accelerated trade and payment deficits with India accounted for such a higher volume of Indian currency purchase," said the bank.

Nepse closure hurts government coffer

The sole secondary market has been closed -- for the second time -- in last two months.

Last time, it was by the irate investors but this time its due to the indefinite strike called by the UCPN-Maoists and the government being a mute spectator.

"The closure has hit the secondary market straight for three days," said Shankar Man Singh, managing director of Nepal Stock Exchange (Nepse). "Nepse offered protection to the brokers," he said adding that the brokers have, however, turned down the Nepse's protection offer and have closed the trading.

"Brokers denied the Nepse protection offer citing security reason," he added. "They were afraid because some of them were threatened to close the trading."

The closure of the secondary market will not only hurt the investors but the government coffer too.

"Last fiscal year, Nepse had contributed around Rs 930 million to the government coffer," Singh said adding that "but this year, it could plunge three times lower to Rs 300 million."

However, a week-long bandh by investors once and week-long bandh by UCPN-Maoists will hit the government coffer hard.

The Nepse has been performing poorly due to low confidence of the investors and the indefinite general strike.

"Investors' confidence is more important then the revenue loss," he said. "At a time when the capital market is bearish due to low investors' confidence, its going to have negative impact on the investors' psychology and panic selling might pull the Nepse lower."

"Investors are losing confidence," Nanda Kishor Mundada, president Brokers Association of Nepal, said adding that the indefinite strike could be the last blow to the already-shaky market.

He is of the opinion that the capital market could not function in such an uncertain environment. "Even if we trade, banks are closed and we could not settle transactions," Mundada said.

At the time when the whole industry is suffering due to strike, he thinks the operation of secondary market is impossible. "The bandh this time is different from earlier," he added.

The government is losing one million rupees -- directly and indirectly -- daily from the capital market due to the closure, according to him. "In a week government will lose around Rs 5 million," he added.

Last time when the investors closed the market operations for a week the government could not do anything, though the issue was related to development of the market. "This time its more difficult to trade when compared with last time," he added. "Till the situation normalises the trading cannot take place," he concluded.

Neither the Securities Board of Nepal (Sebon) -- the regulatory authority nor the government is concerned over the closure of the secondary market operations.

Multilateral institutions need reform

The multilateral institutions and development banks need to reform.

Dinesh Bhattarai, Permanent Representative and ambassador of Nepal in Geneva, speaking on behalf of the least developed countries (LDCs), today said the opening session of the weeklong Trade and Development Commission, "the current economic and financial crisis has exposed the limitations and weaknesses of the international financial institutions, and necessitated the deep reform of multilateral institutions and development banks."

He also called for greater emphasis on agricultural development, infrastructure development, poverty reduction, and steps to ensure food and energy security in the globe's poorest countries.

'Business as usual is not an option' as a fragile recovery in the world economy takes hold, UNCTAD's secretary general said addressing on the occasion.

Secretary general Supachai Panitchpakdi said that "moving out of a crisis of such magnitude offers a rare historical chance for change, a momentum for reform. New development paths" are needed based on diversifying developing countries economies, on 'a pragmatic balance' between the roles of the market and government policies, and on "reorienting international trade, financial, and monetary cooperation towards more equitable, sustainable, and coherent global governance systems."

Recovery cannot depend solely on climbing demand in industrialised nations for foreign goods, Supachai told the meeting. Developing countries should look increasingly to 'South-South' trade -- that is, to one another - for market opportunities. "This is not unrealistic, given that many developing countries have performed relatively better and survived the crisis with less damage than in previous recessions," he said.

The secretary general similarly called for "integrating the Southern perspective more explicitly" into reforms to the global financial and other governance systems being considered by the Group of 20 industrialised and developing nations. And he stressed an UNCTAD message of recent years: that improving the "productive capacities" of developing countries -- that is, their abilities to produce goods and services of greater sophistication, and in greater variety -- is vital for making stable economic progress, creating jobs, and raising living standards.

Supachai noted that global trade contracted by about 12 per cent last year, and that global unemployment, according to the International Labour Office (ILO), exceeded 200 million.

Rodolfo Reyes, Ambassador of Cuba to the United Nations Office and Other International Organisations at Geneva, speaking on behalf of the Group of 77 and China, told the meeting that "Globalisation and liberalisation without adequate and effective regulation at the national and international levels, and without attention to development concerns, can lead to detrimental effects on the financial and real economies, as well as on peoples' lives and the environment."

A representative of Egypt, speaking on behalf of the African Group of countries, urged "greater emphasis on the need for boosting the economic diversification of developing countries and the enhancement of their services and industrial sectors."

The Commission, which continues through May 7, went on in its afternoon session to explore the theme of recovery and change in a debate on "successful trade and development strategies for mitigating the impact of the global economic and financial crisis."

Later in the week, the Commission will review the outcomes of UNCTAD expert meetings held on such topics as commodities and development; services and trade; South-South cooperation; transport and trade facilitation; competitive law and policy; 'green' and rural energy technologies; and productive capacity-building.

FT to launch three international exchanges

Billionaire Jignesh Shah-promoted Financial Technologies said it will launch three new international exchanges, including Bahrain Financial Exchange and Singapore Mercantile Exchange, this year.

The Singapore Mercantile Exchange (SMX) will go live in August 2010, the Global Board of Trade (GBOT), Mauritius in September and the Bahrain Financial Exchange (BFX) in October this year, the company said in a statement.

The bourses, as regulated market platforms, will endeavor to be the enablers of financial inclusion through efficient transmission of fiscal and monetary policies of their respective governments and regulators and will democratise 'access' to financial products and services, Financial Technologies said.

They aim to propagate inclusive and equitable growth and an investment cult in regions they operate in to further propel economic growth and job creation in their respective local markets, it said.

"Financial Technologies Group is perhaps the first company in the history of modern civilisation to successfully set up three greenfield regulated exchanges from ground-up which would go live in the same year," Financial Technologies Group Chairman and Group CEO Jignesh Shah said.

SMX, based out of Singapore, will be regulated by Monetary Authority of Singapore (MAS), GBOT by Financial Services Commission (FSC) and BFX by Central Bank of Bahrain (CBB).

SMX -- as an international Pan-Asian Exchange -- will offer a basket of commodities including bullion, base metals, energy, grains and soft agricultural produce, commodity indices, currencies and oil as well as other financial instruments on its trading platform.

BFX will be the first multi-asset exchange offering conventional and Islamic financial products from the Middle-East providing an avenue for global market participants to access alternate investment options in Shariah-compliant financial instruments as well as conventional derivatives and cash products, the company said.

GBOT -- based out of Mauritius -- will be the gateway for the US and the Europe to the African and Asian markets. The exchange will offer trading on both currency and commodity derivatives.

The FT Group operates one of the world's largest networks of ten exchanges connecting Africa, Middle East, India and South East Asia. In India, Financial Technologies is a promoter of several bourses, including the MCX and the MCX-SX.

Trade deficit increasing at an alarming rate

Merchandise exports during the first eight months of current fiscal year declined by eight per cent to Rs 40.41 billion agsinst a growth of 16.2 per cent in the same period of the last fiscal year. On a monthly basis the merchandise exports, however grew by 8.9 per cent in February-March against a decline of 0.8 per cent in the same month last year.

"We are suffering from trade deficit of around Rs 24 billion due to uncertain political scenario," said Prashant Kumar Pokharel, president of Garment Association Nepal (GAN).

In terms of destination, exports to India dropped by 2.9 per cent against a growth of 3.7 per cent in the same period last year.

However, Pokharel opined that compared to other countries export to India is more flexible and easier. "Export with India has flexibility as Indian market has no more trade barriers and there is no time bound problems too," he said adding that the garment export to India is quite encouraging. "The only problem hampering export trade is political uncertainty, load shedding, and labour unrest."

Exports to other countries plummeted by 16 per cent against a growth of 42.9 per cent in the same period last year. The drop in the exports to India was contributed to the decrease in the exports of readymade garments, zinc sheet, plastic utensils, pulses and GI pipe among others. Likewise exports to other countries decreased considerably due mainly to the decline in the exports of pulses, woollen carpet, readymade garments, silverware and jewelleries and herbs among others.

The merchandise imports, on the other hand, grew by 43.9 per cent to Rs 253.74 billion compared with a growth of 26.3 per cent in the corresponding period of last year. On a monthly basis, the growing trend of the merchandise imports continued during the month of February-March. During the month, the merchandise imports soared by 57.6 per cent compared to a growth of 30.5 per cent in the same month of the previous year.

Imports from India grew by 38.5 per cent in the review period compared to a growth of 12.1 per cent in the corresponding period of the previous year. Likewise, imports from other countries grew at the same rate of the previous year that is by 50.9 per cent, the central bank said in its report.

The growth in the import of vehicles and spare parts, MS billet, MS wire and rods, hot rolled sheet in coil and electrical equipment among others from India and gold, telecommunication equipment and parts, other machinery and parts, steel rod and sheet and polythene granules among others from other countries contributed significantly in the rise of the total imports in the review period.

The country has a whopping trade deficit. "Total trade deficit expanded by 61.2 per cent to Rs 213.33 billion," said the Nepal Rastra Bank (NRB). Trade deficit had risen by 30.1 per cent compared with the same peiod last year. Trade deficit with India rose by 53.8 per cent compared with a growth of 15.6 per cent in the same period of last year. "Likewise trade deficit with other countries expended by 70.41 per cent compared with a growth of 53.4 per cent in the same period last year."

As a result of the slowdown in exports and accelerated import growth, the ratio of export to import dropped to 15.9 per cent from 24.9 per cent a year earlier.

Soaring imports widen trade deficit

Due to soaring imports of consumer goods, the trade deficit has more than doubled in the first eight months of current fiscal year.

The total trade deficit has increased by 61.2 per cent amounting to Rs 213.33 billion as compared to the 30.1 per cent increase in the same month of last fiscal year, the Central Bank's macroeconomic report of first eight months of current fiscal year revealed. Trade deficit with India alone has risen by 50.3 per cent against 15.6 per cent rise in last year's corresponding period.

According to the Central Bank, the imports from India compose of consumer goods like vehicles and spare parts, MS billet, MS wire and rods, hot rolled sheet in coils and electrical equipments. "Similarly, Nepal has been importing gold, telecommunication equipment and parts, other machineries and parts, steel rods and sheet and polythene granules from other countries," the Nepal Rastra Bank (NRB) said.

Increasing consumerism has, though, increased the government revenue; which is not good for the national economy.

"It shows that the current trade deficit is increasing by high demand for foreign luxury goods like vehicles and electronics. Likewise, the relatively capital goods that are being imported are also used for the construction of houses and buildings, thus having minimum forward linkages," according to the economists.

Earlier Central Bank's governor Dr Yuva Raj Khatiwada has himself shown serious concern over the growing trend of consumerism. He has also hinted at curbing such imports as the remittances inflow and easy credits have fuelled the consumerism.

On one hand the commercial banks are facing liquidity crunch and on the other consumerism is increasing -- suggesting there is enough money in the market -- creating confusion to the economists.

Due to the dwindling imports and escalating exports, the ratio of export to import has dropped to 15.9 per cent from 24.9 per cent in the same period of last year.

The goods import has gone up by 43.9 per cent to Rs 253.74 billion while on the same period last year the product imports had increased by 26.3 per cent. Imports from India alone have grown by 38.5 per cent.

However, merchandise exports from Nepal have dropped by eight per cent against the growth of 16.2 per cent in the same period of last fiscal year, according to the Central Bank. The goods exports to India alone have decreased by 2.9 per cent compared with the growth of 3.7 per cent in the same period of last fiscal year.

ADB signs first Trade Finance Agreement

The Asian Development Bank (ADB) today signed trade finance agreements with three banks in Uzbekistan. The agreements with Agrobank, Asaka Bank, and Hamkorbank are ADB's first such agreements in the Central Asian country.

Exporters and importers in most developing economies find it difficult to access the finance they need to conduct cross-border trade. The Trade Finance Facilitation Programme (TFFP) aims to fill that need by providing loans and guarantees through, and in conjunction with, international banks and banks in ADB's developing member countries.

Support for trade will also help boost the economy in Uzbekistan, which ADB recently forecast would grow 8.5 this year and 9.0% in 2011. "The agreements under ADB's Trade Finance Facilitation Programme will provide Uzbek companies with the financial support they need to buy and sell key components and final goods. More business means more jobs and higher incomes," said Philip Erquiaga, Director General of ADB's Private Sector Operations Department.

In 2009, the TFFP provided support for $1.9 billion in trade deals, 300% more than in 2008. By attracting private sector financing and because the portfolio can roll over once a year, the program could generate $15 billion in trade finance through 2013.

In addition to providing the finance, the programme links banks and firms in ADB's developing countries with their counterparts in other countries. This builds relationships and spurs knowledge sharing that will help banks and their clients in the longer term.

"The links created through the program will complement the efforts by the Central Asia Regional Economic Cooperation (CAREC) program to help Central Asian economies leverage off each others' strengths through better transport, energy and trade ties," he added.

The CAREC programme is a partnership of eight countries -- Afghanistan, Azerbaijan, the People's Republic of China, Kazakhstan, Kyrgyz Republic, Mongolia, Tajikistan, and Uzbekistan -- and six multilateral institutions; ADB, the European Bank for Reconstruction and Development, the International Monetary Fund, the Islamic Development Bank, the United Nations Development Program, and the World Bank.

Banks in Afghanistan and Azerbaijan are already participating in ADB's TFFP and ADB expects banks in other Central Asian nations to sign on to the program later in 2010.

Meanwhile, Asia has made a quick turnaround from the global economic crisis but the region still faces many challenges and must ensure that future growth is inclusive and environmentally sustainable, ADB president Haruhiko Kuroda said on Friday.

Speaking at a news conference at ADB's 43rd annual meeting in Tashkent, Uzbekistan, Kuroda told reporters that ADB provided substantial support to its developing member countries during the crisis, and ADB's operation increased to $16.1 billion in 2009, 42 per cent higher than the previous year.

"These efforts helped developing member countries sustain critical development expenditures in health, education and infrastructure, among others, and helped accelerate the region's recovery," he said. But despite the region's recent economic turnaround, Asia and the Pacific still face large economic, social, and environmental challenges.

The annual meeting runs from May 1 - 4 and will focus on the region's recovery and postcrisis development agenda. Finance ministers, senior government officials, business leaders, academics, media and members of international organisations and civil society, are among 3,000 participants attending the meeting.

Finance minister Surendra Pandey, along with Finance secretary Rameshwor Khanal, is also participating in the annual meeting of ADB at Tashkent. Pandey will address the annual meeting as governer of ADB Board of Governers. He will also hold meeting with ADB president, vice president, and high level officials.