Thursday, May 31, 2012

Maoist hampering economic growth

It cannot be a mere coincidence.
When the current UCPN-Maoist –– then CPN-Maoist –– went underground in  February 1996, the country's economy was looking up — by six per cent — and the decade long 'people's war', in their own words, nearly destroyed the economy and did not allow people to get benefit from the economic growth.
Similarly, the economy has, again, this year started looking up — by 4.56 per cent — after the Constituent Assembly (CA) election, due to expectations that the constitution will ensure a conducive and predictable climate for investors but on May 27, instead of promulgating a new constitution after four years of continuous efforts, the Dr Baburam Bhattarai-led government extended the  political transition – no one knows for how long – keeping investors, both domestic and foreign, who were flocking to the country guessing.
"The economy is not a priority for the UCPN-Maoist," according to former finance minister Dr Ram Sharan Mahat. "They want to capture the state by fooling the common people through cheap slogans," he said, adding that their militant labour union has closed down many industries forcing investors to run away. The regular bandhs organised by their sister organisation has pushed the transaction cost and production cost of the industries up, which has deteriorated the investment climate.
"Apart from policy distortion and fooling the private sector, the UCPN-Maoist has done nothing to support economic growth as the economy is not their cup of tea," he added.
Dr Bhattarai had announced Immediate Relief Package and Immediate Action Plan for Economic Development and Prosperity but the programmes failed miserably in delivering relief to the people despite his tall claims.
However, both Dr Bhattarai and his finance minister Barshaman Pun have still been fooling the people by claiming that economic prosperity is their key agenda. "They have neither been able to create employment at home nor provide relief to the common man
due to rising cost of living," said Prof Dr Bishwambher Pyakuryal. "The situation has forced people to flock to far flung destinations to earn a living," he added.
Every year some 400,000 youth enter the job market but more than 350,000 go to the Gulf countries and Malaysia in search of employment as there is no investment in the country due to regular intimidation, and policy and political instability.
"The tall claims of double digit growth made by the UCPN-Maoist is like selling a dream to the poor people as they have no jobs to feed themselves," he said. "How can the country witness economic growth without investment which is key for generating employment and propelling growth?"
The country's overall investment stands at 0.8 per cent of the gross domestic product (GDP), whereas it is some two per cent in South Asia, according to Pyakuryal, who also claimed that the government has made no contribution to the increasing remittance figures that saw an inflow of Rs 248.18 billion in the nine months of the current fiscal year, and has become a lifeline of the country.
"Remittance has only fuelled imports and not contributed to capital formation, which will eventually hit the economy in the long run as the country will fall into a remittance trap,” he said.

Government to boost investors’ confidence, relax margin type lending

The government today promised to ease margin type lending for shares to boost investor confidence.
In a nine-point agreement between various stakeholders, the Finance Ministry has agreed to relax the margin type loan against shares as it
will take some time to bring margin lending regulation. "Investors can avail loans against the share purchase receipt," said president of Nepal Investors' Forum Sitaram Thapalia.
After a discussion among Finance Ministry officials led by the caretaker finance minister Barshaman Pun including the central bank governor and Securities Board of Nepal (Sebon) chairman, the government also agreed to bring a slew of market supporting regulations soon.
“The central bank and Sebon will take appropriate measures to provide long-term loan facility,” according to spokesperson of the Finance Ministry Rajan Khanal.
Similarly, the government has also agreed to take action against public companies that have not held regular annual meetings on time and are cheating investors and demoralising them. "It will boost the confidence of the investors as there are many listed companies like National Hydropower which have not held their annual meetings since the last three years," said Thapalia, adding that the agreement has further directed Sebon and Office of the Company Registrar to
safeguard the investment of investors whose shares were invested in public companies which have been delisted due to untimely general assemblies or to avoid financial crime.
Sebon and Citizen Investment Trust will also formulate a regulation and working procedure within a month regarding institutional investment in the secondary market. Khanal said that the meeting also decided to start the operation of Credit Deposit System (CDS) from next fiscal year. It has been postponed several times.
The Office of the Company Registrar and Sebon will act to execute the provision of Buy Back Option, said Khanal, adding that the Finance Ministry and Nepal Rastra Bank will start homework to establish Assets Management Company to manage securities assets. "Sebon will take prompt action to execute the provision of mutual fund to develop and reform the secondary market.”
The meeting also agreed for close supervision of companies whose financial health is not good, said Khanal, adding that Nepal Rastra Bank and Sebon will initiate action against such companies if they are found involved in any misconduct.
The meeting also decided to upgrade Nepal Stock Exchange as it has been creating troubles recently.

Wednesday, May 30, 2012

PM lays stress on economic growth

Caretaker prime minister Dr Baburam Bhattarai today said that tourism, agriculture and hydropower are the government's major priority areas.
In a meeting with different government agencies, he urged the Finance Ministry to focus on economic growth, creating employment opportunities and inclusive growth in the new budget.
"The government has realised that the execution of policies has not been satisfactory among project implementing agencies,” he said, adding that all the agencies including the Finance Ministry should assertively execute planned projects to make people realise the change and development.
He also directed the Finance Ministry not to let the morale of the private sector go down. “The ministry should bring a plan of economic prosperity by taking the private sector into confidence,” said the Premier, who had brought a couple of populist programmes to give relief to the people but failed to implement them.
Similarly, caretaker finance minister Barshaman Pun said that the ministry has been putting its effort to expedite capital expenditure.
The ministry has done its best to create an environment of confidence with the private sector, he briefed the prime minister.
“The ministry will give high priority to projects which have national importance,” he said, adding that the next budget will incorporate the  provision of health insurance and lay emphasis on energy.
In the meeting, finance secretary Krishna Hari Baskota said that the economic sector has failed to be as dynamic as expected. “The situation of capital expenditure is unsatisfactory and the country has failed to attract foreign investment,” he said, adding that the mobilisation of foreign aid has also failed to meet its target.
“The overall export scenario has not improved, interest rate has not reduced and investment in the productive sector has not increased which will have an adverse impact in the economy,” Baskota added.
Vice chair of National Planning Commission Deependra Bahadur Kshetry and governor of Nepal Rastra Bank Yubaraj Khatiwada shed light on the situation of the implementation of monetary policy of the current fiscal year. They also suggested strategies regarding the monetary policy which the government should embrace in the coming budget.

Labour unrest, frequent strikes hitting economic growth

The private sector blamed labour unrest, frequent strikes and energy deficiency as major bottlenecks in creating an investment-friendly environment that has hit industrial growth.
The current political turmoil, which has been created due to the  failure to promulgate a new constitution, has further fuelled uncertainty in the industrial sector, said president of Federation of Nepalese Chambers of Commerce and Industry (FNCCI) Suraj Vaidya in an interaction programme organised by the Finance Ministry here today.
The labour unrest and strikes will continue since the political parties have failed to ensure stability through a new constitution, he added. “The private sector which was optimistic about attracting more investment in the productive sector utilising the opportunity of the Investment Year has been discouraged with the latest political developments.”
The garment industry has been compelled to cancel orders due to the irrational demands and threats from workers, said president of Garment Association – Nepal (GAN) Uday Raj Pandey. “The garment industry has failed to deliver products on schedule due to labour unrest and power outage.”
Similarly, entrepreneurs involved in the tourism sector said that tourist arrivals have reduced in a visible form. “The booking ratio at various five-star hotels has reduced by 30 per cent to 40 per cent,” an entrepreneur said. “Similarly, around 12 per cent airlines have already curtailed the number of flights to Kathmandu due to low mobility of tourists. Airline operators have reduced the number of
flights by some 30 per cent to 40 per cent due to the political instability."
The private sector also lamented about the unavailability of fuel to run industries. "Industries face hassles in getting diesel at a time when the country is also reeling under massive power outage,” said Vaidya.
The private sector also demanded the government to compensate them for losses due to unnecessary bandhs organised by various parties.
Addressing the concerns of the private sector, finance secretary Krishna Hari Baskota said that the government will try to incorporate all the concerns of the private sector in the coming budget.
Caretaker finance minister Barshaman Pun asked the private sector not to be discouraged because of the political instability. “Economic growth and prosperity should not be affected due to political instability,” he said, adding that the government is positive about addressing all the problems being faced by the private sector.

Financing in sustainable energy must to reduce cost of operation

Financing in sustainable and renewal energy will help reduce the cost of production and dependency on fossil fuels making domestic products more competitive, according to a study.
"It provides cover for the rising cost of fuel," said 'Sustainable Energy Finance Market Study for Financial Sector in Nepal' carried out by the SouthAsia Enterprise Development Facility, managed by International Finance Corporation (IFC) in partnership with the UK Department for International Development and the Norwegian Agency for Development Cooperation.
The study, that has analysed the current energy use pattern by the industries and identified areas where financial institutions can invest for greater efficiency, reported that the country can save around $9.02 million — from the selected industries — with the adaptation of energy efficient methods.
Currently, domestic industries consume more energy, which could be reduced bringing their operation cost down, said the report that has studied some 265 industries — 72 large, 154 medium and 39 small — including cement, brick, steel, food and beverage, paper and pulp, poultry and feed, tourism, dairy and tea.
The country had imported petroleum products worth Rs 67.38 billion in the first nine months (mid-May) of the current fiscal year against imports of Rs 52.35 billion in the same period of last fiscal year.
The increasing dependency on fossil fuel due to lack of energy required for industries has increased the cost of production of the domestic industries making Nepali products uncompetitive in both the domestic and international markets.
According to the Environment Sector Programme Support, domestic industries can save up to 30 per cent of energy costs by implementing energy efficient measures alone.
There is also a significant investment potential estimated at some $17.92 million for energy efficient and renewable energy projects in the country's 10 selected industrial sectors, the report concluded, adding that the payback period is also comparatively less, a little over two years for equipment and technology change, process modification, installation of modern technologies and fuel switching,  whereas for retrofit options it will be upto two years only.
With the study, IFC — a member of the World Bank Group — has targeted financial institutions to help them develop sustainable energy lending
Together with energy service providers and end-users, the project aims at making sustainable energy projects bankable by carrying out energy audits too. With IFC’s support in building capacity for proposal evaluation, loan product development and due diligence, Clean Energy Development Bank specifically is launching a unique sustainable energy financing product, the first such offering by any financial institution in Nepal.
“Clean Energy Development Bank invites all stakeholders to join the Sustainable Energy Finance initiative to tackle the energy crisis responsibly and effectively,” said chairman of the bank Manoj Goyal.
"Promoting energy efficiency is particularly significant in the country which is completely dependent on petroleum imports," he said, adding that additionally, unreliable grid power supply forces plants to use expensive diesel generators.
"Energy is a major priority for industrial growth," said IFC programme manager Thelma Tajirian, adding that the sustainable energy finance market study will help financial institutions make strategic decisions in the new market and spur the private sector to take the lead in clean and sustainable economic development.
Similarly, head of energy finance of IFC Pavol Vajda said that the developing world could move up towards higher income generating countries by using efficient energy forms and not just traditional energy sources. "As energy is a key economic driver, its efficient use will boost gross domestic production," he said, adding economic prosperity and development depends on secured energy future.