Regional rice exchange could help steady global prices

A regional rice index and commodities exchange could help calm world rice price fluctuations and ensure farmers get a fair price for their rice, according to a working paper by the Asian Development Bank (ADB).

"Very little stands in the way of bringing more price transparency and stability to both rice producers and consumers,” said Practice Leader for Agriculture, Food Security and Rural Development in the Regional Sustainable Development Department at ADB Lourdes Adriano. "ASEAN can play a critical role in helping the region ensure rice remains affordable by taking the lead on developing a regional rice price index and standardising rice grades.”

The report, 'Commodities Exchange: Options for Addressing Price Risk and Price Volatility in Rice', which was prepared in the recent ASEAN Rice Trade Forum, suggests futures and options could be traded on existing commodities exchanges in Hong Kong, China or Singapore, based on a regional rice index representative of the most exported and consumed grades of rice.

Top exporters like India, Thailand and Vietnam, could also establish domestic commodities exchanges, allowing farmers to obtain a better price by selling their most popular local rice grades directly in the market, rather than through a middleman.

For rice trading to be successful, essential building blocks need to be put into place, including warehouses, price dissemination systems, and education of market participants. Warehouses will give farmers the option of storing their rice and selling it when they feel prices are right, while knowledge of prices will help them plan their crops.

Price volatility in the rice market has been linked to the kind of opaque bilateral transactions that currently dominate the market. Using a commodities exchange, government agencies could instead act as aggregators for local rice farmers and hedge the price risk using the regional rice index.

An exchange could also provide an alternative platform to bilateral agreements, bringing much needed transparency in price discovery, thereby reducing price volatility.

In the medium-term, ASEAN could also develop an investment plan that will help build needed infrastructure, establish a subregional commodities exchange in the Greater Mekong Subregion, provide market information and intelligence, and offer programmes to develop farming skills.

Assuming normal weather conditions and the same macro conditions as 2011, total ASEAN rice output is projected to increase from 110.5 million metric tonnes in 2010-2011 to 128.3 million metric tonnes by 2021-2022.

Yields will grow slightly, by 1.22 per cent annually, while harvest area will increase by 0.15 per cent to nearly 47 million hectares by 2022. Production constraints include limits on land and higher input prices, particularly energy-based inputs and the crop’s high carbon and water footprints.

Annual trade deficit exceeds total budget

The country recorded a trade deficit that was more than the budget and received remittance almost equal to it in the last fiscal year 2011-12.

Nepal imported merchandise worth Rs 461.67 billion in the last fiscal year, whereas it exported merchandise worth Rs 74.26 billion, thus widening the trade deficit to Rs 387.41 billion, the central bank's annual data revealed. The country's total budget for the last fiscal year stood at Rs 384.9 billion.

The country imports six times more than it exports, primarily due to a large increase in the import of petroleum products and gold, it said, adding that the country imported petroleum products worth Rs 92.25 billion — that is Rs 17.99 billion more than the total export receipt of the country — and gold worth Rs 25.77 billion in the last fiscal year.

However, the overall Balance of Payments (BoP) recorded its highest ever surplus of Rs 127.70 billion — also due to improvement in services account, and current account coupled with the highest inflow of remittance — in comparison to a surplus of Rs 2.18 billion a fiscal year back, the report added.

"The current account posted a surplus of Rs 75.98 billion as compared to a deficit of Rs 12.94 billion a fiscal year ago, whereas net service account witnessed a surplus of Rs 14.06 billion in contrast to a deficit of Rs 8.67 billion a fiscal year back."

Under services, tourism income rose by 24.8 per cent as compared to a decline by 12.5 per cent a fiscal year ago. Net transfers registered a growth of 37.3 per cent to Rs 422.77 billion, and workers' remittance surged by 41.8 per cent to Rs 359.55 billion as compared to a growth of 9.4 per cent a fiscal year back, according to the central bank.

Due to the increase in remittance inflow and weakening rupee, the gross foreign exchange reserves surged by 61.5 per cent to Rs 439.46 billion in mid-July 2012 from a level of Rs 272.15 billion as of mid-July 2011.

"Of the total reserves, Nepal Rastra Bank's reserves increased by 76.2 per cent to Rs 375.52 billion from a level of Rs 213.10 billion as of mid-July 2011," the central bank said. In US dollar terms, the reserves of convertible foreign exchange increased by 24.4 per cent to $3.87 billion in mid-July 2012 from the level witnessed in mid-July 2011.

Likewise, the reserves in terms of inconvertible foreign exchange increased by 88 per cent to IRs 60.39 billion. "On the basis of the current trend of imports, the existing level of reserves is sufficient for financing merchandise imports for 11.6 months, and merchandise and service imports for 10.3 months, the central bank added.

 

FDI drops to Rs 7.14 billion

KATHMANDU: The prolonged political transition in the country pulled down the commitment of foreign direct investment (FDI) in the last fiscal year. "The Department of Industry granted approvals to 227 joint venture projects with a FDI commitment of Rs 7.14 billion in 2011-12 as compared to Rs 10.05 billion a fiscal year back," the central bank data revealed, adding that out of 227 registered projects, some 106 are service related, 64 tourism, 31 manufacturing, 15 agriculture, seven mineral and four energy related projects. The number of joint venture projects increased by 8.6 percent while the investment amount has decreased by 29 per cent, it said, adding that of the total 227 projects approved in the review year, the largest numbers were from China (77), followed by India (24), USA (24) and South Korea (21). "These projects were expected to generate direct employment opportunities for 9,050 people."

 

Average inflation at 8.3 per cent

KATHMANDU: The annual average consumer price inflation increased by 8.3 per cent in fiscal year 2011-12 as compared to an increase of 9.6 per cent in fiscal year 2010-11. The price index of food and beverages group increased by 7.7 per cent whereas the index of non-food and services group increased by 9 per cent witnessing relatively lower price rise in the review period as compared to the previous year. The indices of food and beverages and non-food and services had increased by 14.7 per cent and 5.4 per cent respectively in fiscal year 2010-11. 

Looking ahead, moving forward

PANCHAKANYA GROUP: CELEBRATING FOUR DECADES OF BUSINESS EXCELLENCE
 

What started as a small rice mill in Jhapa — Panchakanya Rice Mill — in 1972, some four decades back, Panchakanya Group has come all the way to becoming one of the leading business groups in the country today.

"There certainly has been a lot of ups and downs," recalls managing director of the group Pradeep Kumar Shrestha.

From the era of 'Licence Raj', when he had to skip classes to get a licence, to the current open economy, when it is easy to get a licence but difficult to do 'ethical' business, Shrestha — the second generation in the business — has not only expanded Panchakanya's network but made it a household name.

Earlier, it used to be a seller's market but now it is a buyer's market, he says, adding that with the open economy post-1990, competition has increased and for the better. "Competition has helped bring in quality products and made them more affordable," said the managing director of the group that employs around 1,000 people directly and around 3,000 indirectly.

The group owns around 11 industries that offer a complete housing solution — from steel to plastic, furniture, plast, wires, nails and allied, apart from its own construction, and housing and land development company, and also operates Nepal Bitumen and Barrel Udyog — and runs trading firms, school, hospital, banks and hydropower businesses successfully.

However, it was with the group's second venture – Panchakanya Steel – that it entered into the manufacturing sector and started moving from the eastern part of the country — where they initially hailed from — to the centre — Kathmandu — and the steel factory in the western part of the country in Bhairahawa.

"It was difficult to move from one place to another in those days due to transportation hassles," he remembers, "But the identity crisis due to the regular movement has also made our father Prem Bahadur Shrestha — the first generation and current chairman — stronger and more determined."

From the first generation that helped establish the company, to the second that helped diversify it with aggressiveness, now the third generation is ready to carry the baton further, said Shrestha, adding that the third generation is well equipped with international exposure and ready to take on more responsibilities.

As a multi-billion rupee company today, Panchakanya Group, not only caters to the domestic market, but also exports pipes and fittings to India.

The group — like in each year — is planning to bring a new product in the market soon, says Shrestha. Similarly, it is working on limestone ore for its planned cement factory which might take a year to come into operation, and looking for iron ore in the country for its steel factory.

"Nepal has all the required resources to create employment back home," he says, "There is a huge scope for the ancillary industry for Indian and Chinese industries, unmatched biodiversity and tourism, which need to be exploited."

"We can make a difference if we are sincere," Shrestha concludes.

Asia Pacific tourism arrivals grow inMay but slowdown continues

International visitor arrivals into Asia Pacific destinations during May showed a collective gain of three per cent year-on-year, according to preliminary results released today by the Pacific Asia Travel Association (PATA).
This was the second consecutive month with a declining growth rate and heralds the impact of the various economic contagions across the globe. For the first five months of 2012, the average growth in international visitor arrivals into Asia Pacific destinations was six per cent up year-on-year.
Foreign arrivals to South Asia grew by a moderate six per cent during the month. Despite a weak result from the Maldives (down by one per cent) and a relatively slower month for Nepal (up by nine per cent), the overall trend for the sub-region still showed some promise compared to the previous month. India was up by five per cent during May, while Sri Lanka managed a double-digit growth in arrivals (up by 18 per cent).  This upward trend seems to be continuing as early results for June suggest another lift in the arrivals growth rate.
Even under these trying conditions, Southeast Asia still managed solid growth of 8% during the month to become the fastest growing destination in Asia Pacific. Even so the growth trend is still downward, falling from a high of 15 per cent in March to nine per cent in April and eight per cent in May. There are positives however. The Philippines showed a slower but still significant increase of six per cent after four consecutive months of double-digit growth. Similarly Cambodia (up by 23 per cent), Indonesia (up by eight per cent), Singapore (up by 14 per cent) and Thailand (up by eight per cent) performed well above the sub-region’s average, while Myanmar in particular was very strong performer recording a 53 per cent gain in foreign arrivals during May. Vietnam however posted negative growth (down by 13 per cent) for the month, the first time this has happened since September 2011.
“While there is significant variation in the results at the sub-regional and destination levels, the majority of Asia Pacific economies still reported growth during the month of May, according to PATA chief executive Martin J Craigs. “2012. It is evident, however, that the toughening global marketplace is having an impact on the Asia Pacific region,” he said, adding that none of us can be afford to be complacent as we reach the midway point of calendar year 2012.