Sunday, January 31, 2016

IT sector’s contribution to state coffer growing

Contribution of the Information Technology (IT) industry to the state coffer has jumped by eight times over the past six years, according to the Inland Revenue Department (IRD).
According to the department, IT industry contributed Rs 15.1 billion to the state coffer in the fiscal year 2013-14, compared to Rs 2.3 billion six years ago in fiscal year 2009-10.
The IT industry contributed Rs 14.4 billion – including both VAT and non-VAT – in the first 10 months of Fiscal Year 2014-15. Contribution from IT sector is estimated to exceed Rs 16 billion in the fiscal year 2014-15,  a growth of eight times in just six years.
Despite low registration of IT-based companies, according to the department, the contribution of the IT industry is very encouraging.
However, president of Computer Association of Nepal (CAN) Federation Binod Dhakal said that the government should encourage IT industries not only to increase revenue but also to create more jobs. "We can control exodus of IT professionals, if the government promotes IT sector, as there is enough space for youth in this sector," he added.
Similarly, president of F1Soft Biswas Dhakal said that the government should help IT industry grow so that it can contribute more to the state coffer. "Despite government's apathy, the IT industry is contributing large amount of money to the state coffer," he said, urging the government to allocate a special area for IT industries with uninterrupted power supply. "It will help make IT sector one of the largest sources of income generation, apart from employment generation," he said, adding that it will also help retain IT professionals in the country.
IT-related businesses have started being formal lately with due registration that has also expanded tax base though the volume of transactions is still very small. Four universities, more than 62 colleges, over 318 software and hardware companies, ISPs, cyber net, web-design, hosting and registration, IT enabled services, and networking services providers have joined the tax net, data shows.
But there are no customs records documenting the import and export of software statistics. As import and export of software is carried out electronically, these activities may be missed from the national accounts.
The World Bank Study on IT and IT-Enabled Services Industry in Nepal conducted in 2010 showed Nepal's software export was worth $10-15 million in 2007. The study also estimated that Nepal's export revenue should be about $1.1 billion, with the industry employing up to 40,000 professionals. The estimate is almost 100 times the formal revenue.
According to IRD, more than 83,400 IT-based companies are in the tax net but only around 4,000 have been paying regular taxes.

Wednesday, January 27, 2016

Nepal 15th most corrupt country in the world

Nepal is 15th most corrupt country in the world, according to Transparency International (TI).
According to the Corruption Perceptions Index (CPI) 2015 published by TI today, Nepal is the 15th most corrupt country globally on the basis of score, and 38th on the basis of ranking, it said, adding that Nepal is also third most corrupt in South Asia, after Afghanistan and Bangladesh.
Nepal with a score of 27 – out of 100 – ranks in 130th position among the 168 countries.
Nepal’s image as one the most corrupt countries in the world has taken a further beating as the country has slipped by four positions from last year, states the report titled 'Corruption still rife but 2015 saw pockets of hope'. Last year Nepal was placed 126th with a score of 29. Bhutan – the least corrupt country in the region – ranks 27 with a score of 65.
According to the report, overall weak governance and politics has dragged Nepal down.
Bhutan – the least corrupt country in the region – ranks 27 with a score of 65. In South Asia, India (76th position with a score of 38) ranks second – after Bhutan, Sri Lanka third Sri Lanka (83rd position with a score of 37) and Pakistan (117th position with a score of 30) ranks fourth, followed by Nepal, Bangladesh (139th position with a score of 25) and Afghanistan (166th position with a score of 11), states the report that has not listed Maldives in the index.
Nepal’s slip in ranking in the CPI has been attributed largely to public servants’ abuse of authority for personal gains and weak control over public servants.
“The survey shows action taken against public servants involved in abusing authority was weak,” said TI-Nepal’s president Bharat Bahadur Thapa, while releasing the CPI report in Kathmandu. “It indicates strong inclination among civil servants towards abusing authority for personal gains."
The performance of all the 3 state organs – judiciary, bureaucracy and legislature – has been reflected poorly in the TI survey. "It demonstrates government’s total indifference towards fighting corruption," Thapa said, adding that the rare commitments made by the government to adopt zero tolerance on corruption proved nothing but lip service.
Grand corruption is the abuse of high-level power that benefits the few at the expense of the many, and causes serious and widespread harm to individuals and society, the TI report reads, adding that it often goes unpunished. "Nepal continues to perform poorly and has been one of the most corrupt countries."
Conflict and war, poor governance, weak public institutions like the police and the judiciary, and a lack of independence in the media characterise the lowest ranked countries like Nepal.
Similarly, top performers share some key characteristics like high levels of press freedom; access to budget information so the public knows where the money comes from and how it is spent, high levels of integrity among people in power and judiciaries that don't differentiate between rich and poor and are truly independent from other parts of government," the report states.
The annual survey by the Berlin-based watchdog said the Corruption Perceptions Index (CPI)  measures the extent of corruption within a country, on a scale ranging from zero to 100. Countries securing higher scores are rated as the least corrupt and the low scorers are perceived to be the most corrupt. Countries with a score below 50 are perceived as highly corrupt and those that secure 100 are the cleanest, according to TI. Among the lowest 38 countries most of the countries scores are equal making Nepal 15th most corrupt country in the world. Cameroon, Iran, Nicaragua, Paraguay and Ukraine also have scored equal to Nepal, and are 15th most corrupt countries on the basis of score.
Controlling corruption in Nepal remained a herculean task, with the anti-graft body officials themselves have been caught in bribery scandals and commissioners found taking dual state facilities. On top of that, there have been widespread allegations that the anti-graft body has been protecting the corrupt state oil monopoly as the Nepal Oil Corporation is involved in institutional corruption largely supported by the CPN-UML president and Prime Minister K P Oli, UCPN-Maoist supremo Puspa Kamal Dahal 'Prachanda', and the anti-graft agency's chief.
Experts see this grim situation, despite having 16 anti-corruption agencies including Commission for the Investigation of Abuse of Authority (CIAA), as a systematic breakdown of rule of law. Nepal has broken the record of 2011, when it was ranked 154th among 182 surveyed countries, with a score of 2.2 on a scale of 0 to 10. Nepal last year was ranked 126th, out of 175 countries surveyed, with a score of 29.
A country's score can be helped by open government where the public can hold leaders to account, while a poor score is a sign of prevalent bribery, lack of punishment for corruption, and public institutions that don't respond to citizens' needs. The Corruption Perceptions Index (CPI) is based on expert opinions concerning public sector corruption.
Nepal has failed to improve either its country-wise ranking or its score in the index which shows Denmark to be the least corrupt country with a score of 91. Denmark (score 91), Finland (score 90), Sweden (score 89), New Zealand (score 88) and the Netherlands (score 87) are the five best performers, respectively, whereas Somalia, North Korea, Afghanistan, Sudan and South Sudan are the worst performers.
Afghanistan ranks as the third most corrupt country globally after North Korea and Somalia,  and as the most corrupt country in South Asia, the report further shows.
The big decliners in the past four years include Libya, Australia, Brazil, Spain and Turkey. The big improvers include Greece, Senegal and the UK.
Corruption can be beaten, if we work together, the TI report has said, adding, "To stamp out the abuse of power and bribery and shed light on secret deals, citizens must together tell their governments they have had enough."
"The 2015 Corruption Perceptions Index clearly shows that corruption remains a blight around the world," said chair of TI José Ugaz. "But 2015 was also a year when people again took to the streets to protest corruption," he said, adding that people across the globe sent a strong signal to those in power: it is time to tackle grand corruption.

Deurali Janta Pharmaceuticals to manufacture medicines of gastrointestinal and liver diseases

Deurali Janta Pharmaceuticals has added a new division to manufacture medicines of gastrointestinal and liver diseases at an affordable price for patients.
"The company has created a separate division under the name ‘Divyam’ to manufacture medicines of gastrointestinal and liver diseases from next month," executive director of the pharmaceutical company Hari Bhakta Sharma, said speaking at a programme organised to mark the Silver Jubilee Year of the company’s establishment today in the capital.
We are preparing to manufacture and make available new medicines of gastrointestinal and liver diseases at an affordable price, he said, adding that the company’s initiative is expected to bring down import of similar medicines.
The company has allocated a budget of Rs 100 million for the new division. "The company will invest Rs 100 million in Divyam while Rs 500 million will be put in the production of injectable medicines," he informed.
The company will also work on upgrading to newer technologies to ensure quality products also to cater to international markets,” he said, adding that the company also plans to export the new drugs. "The company planned to invest big in these three segments as part of its plan to diversify its products."
The WHO-GMP and ISO 9001 and ISO 14001 certified company, currently manufactures 300 types of drugs from its five production plants. The company's investment has increased to Rs 1.20 billion from Rs 5 million, according to Sharma.
Deurali Janta Pharmaceuticals Pvt Ltd (DJPL) holds a 4.7 per cent share in the domestic market that is estimated at Rs 27 billion and growing at an annual rate of 12 percent, the company claimed.
A total of 355 companies have been selling their products in the local market, in which Nepali products hold 40 percent market share, according to the Department of Drugs.
The domestic market is facing tough competition from foreign drug makers, apart from shortage of fuel – due to Indian blockade – and raw materials that have pulled the production down to just 55 per cent capacities.
"Our production capacity has come down to 33 per cent, while transactions have dropped by 50 per cent,” Sharma added.

Tuesday, January 26, 2016

Gold price hits at three-month high

The precious yellow metal price hit a three-month high of Rs 50,900 per tola (11.663 gram) in the domestic market today.
Gold has rallied in the international market pushing the price in the domestic market, according to the Federation of Nepalese Gold and Silver Association (Fenegosida).
Gold price has increased by Rs 600 per tola in a single day to be traded at Rs 50,900 a tola today. The last time gold was traded at a similar rate in the domestic market was on October 29.
Price of gold has started to increase since last two weeks due to growing demand in Chinese market, according to the reports in the international media that claimed that investors have begun shifting their investment in precious metals as worries over a slowing global economy have hit stocks and crude oil.
The international market price governs the prices of the precious metals in the domestic market. Gold price had dropped to as low as Rs 47,700 per tola on December 18 before re-bouncing to the highest.

Wednesday, January 20, 2016

Global unemployment rate projected to rise in both 2016 and 2017

Despite falling unemployment levels in some developed economies, new ILO analysis – World Employment and Social Outlook (WESO) – shows the global job crisis is not likely to end, especially in emerging economies.
Continuing high rates of unemployment worldwide and chronic vulnerable employment in many emerging and developing economies are still deeply affecting the world of work, warns a new International Labour Organisation (ILO) report.
The final figure for unemployment in 2015 is estimated to stand at 197.1 million and in 2016 is forecast to rise by about 2.3 million to reach 199.4 million. An additional 1.1 million jobless will likely be added to the global tally in 2017, according to the ILO's World Employment and Social Outlook-Trends 2016 (WESO).
“The significant slowdown in emerging economies coupled with a sharp decline in commodity prices is having a dramatic effect on the world of work,” says ILO director-general Guy Ryder.
“Many working women and men are having to accept low paid jobs, both in emerging and developing economies and also, increasingly in developed countries," he said, adding that and despite a drop in the number of unemployed in some EU countries and the US, too many people are still jobless. "We need to take urgent action to boost the number of decent work opportunities or we risk intensified social tensions."
In 2015, total global unemployment stood at 197.1 million – 27 million higher than the pre-crisis level of 2007.
The unemployment rate for developed economies decreased from 7.1 per cent in 2014 to 6.7 per cent in 2015. In most cases, however, these improvements were not sufficient to eliminate the jobs gap that emerged as a result of the global financial crisis.
Moreover, the employment outlook has now weakened in emerging and developing economies, notably in Brazil, China and oil-producing countries.
"The unstable economic environment associated with volatile capital flows, still dysfunctional financial markets and the shortage of global demand continues to affect enterprises and deter investment and job creation,” explains director of the ILO Research Department Raymond Torres.
“In addition, policy-makers need to focus more on strengthening employment policies and tackling excessive inequalities," he said, adding that there is much evidence that well-designed labour market and social policies are essential for boosting economic growth and addressing the jobs crisis and almost eight years after the start of the global crisis, a strengthening of that policy approach is urgently needed."
The authors of the WESO also document the fact that job quality remains a major challenge. While there has been a decrease in poverty rates, the rate of decline in the number of working poor in developing economies has slowed and vulnerable employment still accounts for over 46 per cent of total employment globally, affecting nearly 1.5 billion people.
Vulnerable employment is particularly high in emerging and developing economies, hitting between half and three-quarters of the employed population in those groups of countries, respectively, with peaks in Southern Asia (74 per cent) and sub-Saharan Africa (70 per cent).
Meanwhile, the report also shows that informal employment – as a percentage of non-agricultural employment – exceeds 50 per cent in half of the developing and emerging countries with comparable data. In one-third of these countries, it affects over 65 per cent of workers.
“The lack of decent jobs leads people to turn to informal employment, which is typically characterised by low productivity, low pay and no social protection," Ryder said, "This needs to change."
Responding urgently and vigorously to the scale of the global jobs challenge is key to successful implementation of the United Nations’ newly adopted 2030 Agenda for Sustainable Development,” he concludes.

Thursday, January 7, 2016

Nepal's economy to grow by 1.7 per cent: WB

The World Bank has projected Nepal's economy to grow by only 1.7 per cent – the lowest in South Asia – in the current Fiscal Year 2015-16. The government has also projected the economy to grow less than 2 per cent, whereas the government's economic adviser, Nepal Rastra Bank (NRB), has projected negative growth in the worst case scenario.
Earlier, The World Bank (WB) had projected Nepal's economy to grow by 3.7 per cent prior to the trade disruption. The World Bank's January 2016 Global Economic Prospects published today has identified ‘an escalation of existing tensions in Nepal’ as the key risk to the country. Stating that budget execution, particularly capital spending, has been a longstanding challenge in Nepal, the report says ‘slow progress in post-earthquake reconstruction, coupled with political tensions, could dampen any post-earthquake rebound’.
In Nepal, the cost of earthquakes in the spring of 2015 is estimated at about one-third of the nation's Gross Domestic Product (GDP), the World Bank said, adding that reconstruction efforts have been held back by political uncertainty and the closure of land routes through India in the second half of 2015.
This has led to acute fuel and food shortages, and put a halt to reconstruction efforts. Moreover, investment and other economic activities have been hit hard.
“Plans to build major hydropower projects in partnership with China and India are likely to see considerable delays in the current environment,” as per the report.
But the economy could grow by 5.8 per cent in the next fiscal year, it said, adding that activity should gradually recover as government reconstruction spending is ramped up in the later years of the forecast period. "Nepal's planning to substantially increase spending for reconstruction and is in turn expected to push the fiscal balance into a modest deficit."
Likewise, the bank has hailed South Asia's economic growth. "South Asia was the fastest growing economy in 2015 among developing regions and is expected to expand even faster in 2016, thanks to strengthening investment as well as government and central bank policies that support economic growth," the World Bank said.
Seeing mainly domestic risks to its forecasts, the report also forecast economic growth in South Asia accelerating to 7.3 per cent in 2016 from 7 per cent in 2015. The region's economic prospects are bolstered by its relative lack of trade exposure to slowing demand in China, and by standing to benefit from lower global energy prices due to being a net importer of oil.
"South Asia is a relative bright spot compared to the general outlook for emerging and developing economies," said World Bank chief economist Kaushik Basu. "This good news is made possible by a confluence of factors, from low oil prices to a positive policy environment. But it is also a great responsibility given the growing importance of this region in driving global development and ending poverty."
India, as South Asia's biggest economy, is projected to grow at a faster 7.8 per cent in 2016-17, which begins on April 1, after 7.3 per cent the year before and would be helped in part by progress on infrastructure building and government measures aimed at boosting investment, it added.
"South Asia's economic growth should be seen as an opportunity to take the region to the next level in ending extreme poverty and increasing shared prosperity," said regional vice president for South Asia at the World Bank Annette Dixon. "For South Asia to move to the next level it would need to sustain economic growth levels of more than 7 per cent a year while making sure that growth is sufficiently inclusive to address the unresolved issues of inequality and prosperity that is not widely enough shared."
The report saw external risks to the outlook as less pressing than domestic risks. Economic activity in the region could be hurt if there is a disorderly slowdown in major emerging market economies or if tighter global financial conditions produce financial market stress. Any further downturn of oil prices or growth slowdown that shrinks remittances from workers in the Gulf Cooperation Council countries could dent consumption in the region.

Monday, January 4, 2016

The Banker recognises Ram Sharan Mahat as global ‘Best Finance Minister'

Former finance minister Dr Ram Sharan Mahat has been announced as the 'Best Finance Minister' globally.
The Banker magazine – releasing a press statement today – said that it has selected Mahat as the best finance minister in Asia Pacific region and globally too.
Liberal economist Mahat is the first to be recognised as the global 'Best Finance Minister' by The Banker magazine in South Asia.
Earlier in 2011, then Indian finance minister current Indian president Pranab Mukherjee was awarded best finance minister in Asia Pacific region.
Mahat is credited for making significant contributions in garnering foreign aid to Nepal in aftermath of the devastating earthquakes on April 25 and May 12.
The award has been given for Mahat and his team's 'significant work carried out following the catastrophic earthquakes this year, his pro-activity in making Nepal's challenges known after the natural disasters, and the resilience of Nepal's economy following these calamities', the press statement by the UK's reputed The Banker magazine in its January 2016 edition further reads.
His team had prepared Post-Disaster Needs Assessment (PDNA) report and organised International Conference on Nepal's Reconstruction (ICNR) within the two months of the devastating earthquakes. After the earthquake, the-then finance minister Mahat had played an important role in making positive amendments in the existing banking laws and in providing loans to youth at concessional rates.
"This decision was the outcome of our discussions here at the magazine, and a survey of views among bankers and economists. Many congratulations to you and your colleagues,” read letter sent by the London-based magazine to Mahat. "Survey respondents pointed to the significant work you and your team carried out following the catastrophic earthquakes this year, your pro-activity in making Nepal’s challenges known after the natural disasters, and the resilience of Nepal’s economy following these calamities."
“The Banker‘s Finance Minister of the Year 2016 awards celebrate the officials that have best managed to stimulate growth and stabilise their economy,” the London-based magazine has posted on its website. The magazine is planning to present the award to Mahat, in person, in Nepal sometime this year.
Mahat, a Nepali Congress stalwart, was the Finance Minister for Nepal since February 2014 to October 2015 in the Sushil Koirala-led government. It was his sixth inning at the Finance Ministry since 1994. The pro-reformist Mahat is also credited for his economic reforms during the 1990s that opened the country for foreign investors in various sectors pushing the economic growth to 7.5 per cent before the Maoists started armed revolution.
The Banker has been the premier monthly magazine on global finance since 1926, and is owned by the world-renowned Financial Times group.
Taiwan’s Chang Sheng-ford was named global finance minister of the Year 2015 by The Banker. Chang was picked best finance minister globally and in the Asia-Pacific region too for 2015.

Sunday, January 3, 2016

Third country trade triples in wake of Indian blockade

The economic blockade by India has hurt the southern neighbour also as Nepal's trade direction has changed in favour of third countries. Though India's share in Nepal's total foreign trade is still half, the trade with third countries other than China and India has tripled, whereas the trade with India and China has decreased, according to the Department of Customs.
According to the department, the share of trade with third countries was 11 per cent in the first five months of last fiscal year. The figure has jumped to almost triple to 31 per cent, in the corresponding five months of the current fiscal year of 2015-16.
Director general at the department Shirsir Dhungana says that the squeeze in the volume of trade with India and drop in the total trade volume have changed the trade direction scenario. He also attributed the growth in third country trade to the use of the Birgunj dry port. "We have been able to bring the dry port into operation from November 1," he said, adding that the government sent some 14,000 loaded trucks out of the country, and this has contributed to the third country trade. "Likewise, Tribhuvan International Airport (TIA) – yet another trade point for third countries – has also been operating smoothly."
Nepal's trade with India dropped to 54 per cent in the first five months of the current fiscal year from 65 per cent in the same period last fiscal year. Likewise, the trade with China has decreased to 15 per cent in the first five months from 24 per cent in the same period last fiscal year, the data revealed.
The devastating earthquakes on April 25 and May 12 damaged the only trade route to China through Tatopani customs, which is attributed to the drop in trade with China. The other trade route with China, Kerung, has also not been fully operational due to the earthquakes and also due to lack of physical infrastructure, including roads on the Nepal side. The government's apathy in developing the infrastructure including road leading to Kerung is the key concern in drop in trade with China.
But the Indian economic embargo has directly hit the trade with that India itself. Immediately after the promulgation of the new Constitution on September 20, the Tarai-Madhes-centric parties started agitations in the plains, and the southern neighbour, in order to support them, stopped cargo movement through Birgunj customs, which sees the bulk of Nepal's total trade with India. The drop in trade with India through Birgunj-Raxual customs – that contributes 70 per cent to the international trade – has also hit the revenue. The state coffer has lost Rs 50 billion in revenue in the first five months of the current fiscal year, according to the Finance Ministry.
The embargo has in particular hit the smooth supply of petroleum products – Nepal's major import from India – that constitutes almost one fourth imports from India. The drop of petroleum products import to 32 per cent, according to department data, has not only hit the trade with India but the day-to-day life in the country has also become difficult due to lack of fuel. Nepal imported Rs 110 billion worth of petroleum products from India in the last fiscal year, according to central bank figures.
Though, trade analysts claim that the current trade direction would not be sustainable once India lifts the blockade, the trade diversification and customs diversification is key lesson that Nepali policy makers, politicians and development strategists should understand. Sooner they understand, better will be the future of the countrymen.