Saturday, April 30, 2016

PM dirests to increase development spending

Prime Minister Khadga Prasad Sharma Oli has directed government secretaries to spend 80 per cent of the budget in next two-and-a-half months.
Addressing an interaction with the secretaries at his Office in Singh Durbar, on 'Progress and challenges on the current budget' today, Oli directed them to anyhow spend 80 per cent of the development budget within next two months. The fiscal year is only two-and-a-half month remaining but the government has been able to spend only 19.69 per cent or Rs 40.50 billion till April 28. The eroding spending capacity of the government has taken toll on development projects, though the ministries have been asking for more budget for the next fiscal year.
The premier also asked the secretaries reason why the spending has been only 18 per cent by the mid-April, by the end of nine months of the current fiscal year.
Though the secretaries said that last year's earthquake, economic blockade and obstruction in project implementation process delayed the developmental projects and expenditure, they have not been in position to accelerate the development works in the last months of the fiscal year.
Going by the trend of the spending in the last fiscal years too, the successive governments have been spending most of the budget at the last trimester, also due to procedural dilemma and bureaucratic hassles.
The fiscal year is ending in next 75 days but the government still has Rs 168 billion development budget remaining, which means the government has to spend around an average of Rs 2.24 billion per day. However, haphazard spending at the end of fiscal year is dangerous as the quality of the development works could be compromised and no one will be accountable to the money that is people's tax.
The Office of the Auditor General has reported that some 328.52 billion arrears till the last fiscal year 2014-15, which means the misuse of public money is increasing and the government is not being accountable to the people and public spending. A tendency to allocate budget to politically motivated projects in the last quarter of the fiscal year to accelerate spending is also a serious concern for the auditor general.
On one hand the government is tightening the screw to mobilise revenue and on the other, it has been unable to spend, which means the government treasury is bulging, stashing the money unproductively in the central bank's vault. Due to failure to spend, the government treasury is stashed with Rs 170 billion – which is the highest over last four-five years – according to central bank.
During the meeting, most of the secretaries said that their ministries could spend capital budget in the range of 60 per cent to 70 per cent, according to a secretary present at the meeting. “The Finance Ministry has projected the capital expenditure of 75 per cent in the current fiscal year,” he said, adding that most of the secretaries were of the view that most of the spending takes places in the last four months and payment of expenditure made in first and second four months also take place at the same time, hence expenditure figure will grow.
Mid-Term budgetary review of the current fiscal year had mentioned that over the last seven years, the trend has it that over 70 per cent of actual capital expenditure takes place in the last four months. “This trend is likely to continue this year too.”
"The prime minister took stock of the progress made so far on capital expenditure and directed all the concerned ministries to speed up works and utilise the capital budget in an effective manner within the remaining two-and-half months of this fiscal year,” said spokesperson of the Office of Prime Minister and Council of Ministers Binod Bahadur Kunwar.
Many secretaries assured the prime minister that use of 80 per cent to 85 per cent of capital expenditure was still possible, if the works move ahead as planned.
However, former chief secretary Leela Mani Paudyal said that it’s almost impossible to achieve 80 per cent capital expenditure within the next two-and-half months. He argued that the expenditure ratio could however dramatically increase, if the government disbursed the private housing subsidy to those whose residences collapsed or were damaged by last year’s quake.
The government has plans to provide Rs 200,000 as private housing subsidy to each family. But it has not given even the first of four installments of this support to the victims.
"Expressing concern about low capital expenditure so far, the prime minister instructed the secretaries to speed up road, bridge and electricity project works,” said energy secretary Suman Prasad Sharma, who claimed that his ministry will spend up to 80 per cent of the capital budget. But Energy Ministry has so far spent only 28 per cent of the capital budget
Likewise, Ministry of Agriculture has so far spent just 30 per cent capital budget. But agriculture secretary Uttam Kumar Bhattarai claimed that the ministry has targeted to spend 80 per cent capital budget by the end of fiscal year.

Friday, April 22, 2016

Economic revival still a far cry

Even one year after the devastating earthquake, the government has not been able to provide shelters to quake-hit populace, let alone reviving their livelihood. The economy that was shaken by the earthquakes of April 25 and May 12, and hundreds of aftershocks throughout the year, further crumbled due to the India-imposed economic blockade.
The government apathy toward its citizens, political bickering, chronic red tape, lack of absorptive capacity, and eroding government capacity to spend budget coupled with bureaucratic and procedural delay forced quake-hit people to live under open for almost a year.
The government – post-earthquakes that floored above 800,000 private buildings, except thousands of public buildings including hospital, schools and police posts and heritage sites – had shown the urgency for mobilising resources for reconstruction by organising the International Conference on Nepal’s Reconstruction (ICNR) within three months, on June 25, 2015. The National Planning Commission (NPC) and the then government led by Sushil Koirala did a commendable job by bringing all the development partners to one platform for rebuilding and rehabilitation of quake-hit populace.
The international development partners, who were initially surprised by the government’s efficiency and urgency for rebuilding people’s lives and reviving their livelihood, pledged some $4.1 billion for reconstruction. Of the total pledge, the development partners have already signed agreements worth $1.28 billion, realising the urgency of the situation.
But lack of political consensus for economic priority has stalled not only the reconstruction of physical infrastructure damaged by the earthquakes, but also failed, miserably, to address people’s economic revival, according to senior economist Prof Dr Bishwhambher Pyakuryal.
The devastating earthquake made Nepal lose properties worth $7 billion. And the Indian economic blockade immediately after the promulgation of new constitution by the people – a six and half decades old Nepali dream – has also bled the economy $7 billion, making a total of $15 billion – around 70 per cent of country’s total GDP of $21 billion.
According to the central bank, the blockade hit the income of the people and sent 2.5 per cent to 3 per cent of Nepalis below national poverty line though the earthquake had only damaged properties. It means the 13th periodic plan's target of reducing the poverty to 18 per cent from current 23.8 per cent is unachievable as some 1 million people is going to fall below the national poverty line. "The government has, even after a year, failed to address the people in reviving their livelihood that could have helped them come out of poverty trap,” Pyakuryal said, adding that the loss of agriculture land like rice fields – due to earthquake – is going to hit the agriculture output, pulling economic growth down. “The non-agriculture sector’s growth has also been hit hard due to the blockade.”
Macroeconomic indicators have been alarming due to the government’s lack of seriousness, he added.
Foreign investment commitment has come down to Rs 8 billion in a year post-earthquake – from April 13 2015 to April 12, 2016 – compared to Rs 67 billion a year ago. The country has also witnessed a drop of around 45 per cent in migration compared to last year, which is going to hit the remittance inflow, in the next fiscal year.
Thus, the devastating earthquakes and India-imposed blockade that cost the country one-third of the economy is definitely going to pull economic growth to the lowest in last three decades. According to the Nepal Rastra Bank (NRB), World Bank (WB), Asian Development Bank (ADB), International Monetary Fund (IMF), the GDP growth could be somewhere between -0.9 per cent and 1.7 per cent in the current fiscal year due to insensitiveness of the government toward the urgency.
The situation could have been better had the incumbent Khadga Prasad Sharma Oli-led government been serious toward its citizen’s plight. On one hand the government has not been able to spend resources it has and on the other the spending of taxpayer’s money has not been transparent. According to the 53rd annual report of the Auditor General, total unaccounted expenditures increased to Rs 328.52 billion by the end of the last fiscal year 2014-15. The amount is some 40 per cent of the total annual budget of the current fiscal year. But the increment in development budget spending is too low to compare with the irregularities revealed in the report.
According to the central bank, capital expenditure increased by only 1.1 per cent to Rs 22.97 billion in the eight months of the current fiscal year 2015-16, compared to the same period of the last fiscal year. "Such expenditures had increased by 39.4 per cent in the same period of the last fiscal year 2014-15," it reads.
The eroding government capacity has also been revealed by the central bank report as the government has a surplus of Rs 31.75 billion budget on cash basis. The country could construct a mega hydropower plant – that could increase industrial capacity – from the surplus budget, had the government and bureaucratic capacity been enhanced.
Economy is actually not only about money. It is also about value produced by the money. “If the government spends Re 1, it will add value worth around Rs 4,” according to Pyakuryal. Thus, the failure of the government in spending Rs 90 billion reconstruction budget – set aside by the budget for the current fiscal year – will also have a huge impact on the economy.
“The government has been overlooking the alarming situation,” according to a former member of the National Planning Commission (NPC) Chandramani Adhikari. "The bureaucracy has to be regularly pinched to remind the urgency of the situation."
The governance and administrative structure is also a huge constraint that has blocked not only the economic reconstruction but also the overall reconstruction, a highly placed bureaucrat, who does not want to be named, seconded Adhikari. “Bureaucracy is the major roadblock for reconstruction and development. Instead of removing these problems, the political leadership is busy postponing them,” he said, adding that the bureaucratic dilemma, despite the formation of National Reconstruction Authority (NRA), and also delayed appointment of the NRA chief executive, who was supposed to be one of the development experts, also made the lives of people more miserable.
The authority was formed to fast track the reconstruction and rehabilitation along with reviving lost livelihood of quake-hit people. But its leadership has become redundant. Though, the chief executive, appointed by Prime Minister Oli himself, has legitimacy, he lacks competence and acceptance, two of the three important factors for a good leadership.
It is a fact that the political leadership failed to minimise the impact created by the earthquake and the blockade. The social impact, during the blockade, was more alarming than the economic one. Hospitals ran out of medicines, and most of the schools were closed. Similarly, reconstruction works were stalled and fuel shortage hit the economy more coupled with power outage of around 12 hours daily, industrial and business activities chocked, agriculture sector suffered due to shortage of fertilizers and tourism nosedived.
But instead of carefully reconstructing the economy and promoting transparency, the Oli government enticed the situation to become more destructive. The government overlooked black economy, claiming to rescue the people out of supply shortages, promoted crony capitalism and discouraged the private sector by pushing them on the verge of closure.
During crisis, a government could claim that it will print more money and distribute it to the people, also to create egalitarian society, to pull its populace out of poverty trap and make them rich. But printing money to pay for unproductive work just inflates prices, stealing from those who are still productive. And the Oli government did exactly that to discourage the productive people and sector and promoted his cronies in the name of liberal economy which sent the inflation overboard.
“This year will be remembered as the year of stagflation led by high inflation, low employment and low economic growth, and the rise of parallel economy that has left us with a herculean task of rebuilding lives, economy and infrastructure,” another senior economist Prof Dr Madan Dahal said.
The situation could have been different, if the government had common sense on economy, and zeal to rescue and save the people from severe poverty cycle. According to the central bank, rebound in economic activities is expected following the gradual normalisation in the supply of fuel along with other essential commodities in the country. “The reconstruction of physical structures ravaged by the earthquakes is to underpin the rebound,” it said, adding that consequently, the production of construction materials such as cement, rod, and concrete and zinc sheet is likely to rise. “It is likely to generate a salutary impact on job creation."
The capacity utilisation of manufacturing sector is also expected to grow with the ease in supply of fuel and other essential raw materials. Similarly, with the onset of adventurous tourist season, tourism growth is expected, if the government instills some confidence on travel entrepreneurs. “There is immense scope for rebounding tourism in faster pace,” said the general manager of Soaltee Crown Plaza, the oldest deluxe five-star hotel in the country, Upal Majumdar. "But there needs to be massive media campaigns in the tourist source markets telling the world that Nepal is ready to welcome tourists,” he added.
But even after one year of the devastating earthquake, with international and domestic resources in hand, the government has miserably failed to utilise them to put people back to their homes and they are still living under the open sky.

Tuesday, April 12, 2016

Nepal to grow by 0.5 percent: IMF

A couple days after the World Bank cut Nepal's economic growth forecast for the current fiscal year 2015-16 to 1.7 per cent, International Monetary Fund (IMF) has even lowered the growth forecast to 0.5 per cent.
Like the World Bank, the IMF has also attributed trade disruptions along Nepal-India border points, delay in execution of post-earthquake reconstruction works, and unfavorable monsoon that will hit output of goods and services for the lower economic growth.
The growth projection of the IMF – published in World Economic Outlook Report – is the lowest in the last 14 years.
Though the government has projected economic growth to be around 2 per cent, another multilateral development partner Asian Development Bank (ADB) recently forecast 1.5 per cent economic growth in the current fiscal year.
Though all of them have pointed out the devastating earthquakes a year ago – on April 25 and May 12 – and subsequent aftershocks, delay in reconstruction works due to political bickering and border obstructions for almost four months after the promulgation of constitution as the major factors that have pulled the economic growth down, their forecast has been different.
The massive devastation – that floored around 800,000 houses, apart from cultural heritage sites, and public buildings including schools, hospitals and police posts – had pulled down economic growth to 3.04 per cent in the last fiscal year 2014-15, from projected 5.5 per cent. The natural disaster had damaged the assets, but the India-imposed economic blockade for almost 4 months hit the income of the people resulting to heavy loss that is pulling economic growth down between around 2 per cent and 0.5 per cent.
The four-month blockade not only created supply disruption but also dealt a severe blow to industries and lowered consumption. On top of the natural disaster and blockade, the government also failed to spend capital budget that could have created employment and lay the foundation of economic activities and capital formation.
According to the Financial Comptroller General's Office, the government has been able to spend only 16.61 per cent of the capital budget in the first nine months of the fiscal year. Of the Rs 208.87 billion capital budget, the government has been able to spend only Rs 34.69 billion. The inefficient bureaucracy and low political willingness failed the country, hitting not only the economic growth but also pushing the country backwards to around a decade.
According to the IMF report, all these problems are expected to push Nepal to the third lowest rung of the economic growth ladder in Emerging and Developing Asia in the current fiscal year.
In the group of 29 developing countries, Nepal is only above Mongolia, which is likely to post a growth of 0.4 per cent, and Brunei Darussalam, whose economy is expected to contract by two per cent this year, the report read, adding that the inflation, however, is likely to hit double digit at 10.2 per cent. "Such a jump in prices of goods and services will make Nepalis feel poorer because their income is not expected to go up in line with the expenses," the report stated.

Monday, April 11, 2016

Quakes, trade disruptions hit economic growth hard: World Bank

Nepal's economic growth has been stalled due to devastating earthquakes as well as significant cross-border trade disruptions in the second half of the calendar year, according to the World Bank.
The incidents imposed a severe toll on economic activity, the World Bank said in its report 'South Asia Economic Focus' which has projected economic growth to slow down to 1.7 per cent in the current fiscal year 2015-16.
However, the multilateral development partner has also expected the economy to recover on the back of strong reconstruction activity in the next fiscal year. The World Bank has expected normalisation by the end of 2016, leading to strong rebound in 2017 with GDP expected to grow by 5.8 per cent. "Though challenge is the potential slowing down of remittance inflows, which represent around 30 percent equal of GDP," it added.
Likewise, in the near term, Nepal will also have to face higher inflation as a result of the trade disruptions and related supply bottlenecks," it read. "Disruptions increased inflation to double digits, affecting the welfare of the poor and vulnerable, while reducing revenue collection and slowing reconstruction efforts."
According to the biennial report, South Asian economic performance prospects remain strong due limited exposure to global turbulence, coupled with increasing investment activity. "Led by robust growth in India, South Asia shows resilience in the face of turbulent international markets and remains the fastest-growing region in the world, with economic growth forecast to gradually accelerate from 7.1 per cent in 2016 to 7.3 per cent in 2017," the report said.
However, there are also signs of fading tailwinds, it said, adding that capital flows to the region have declined and remittances from oil exporting countries have started to weaken. "Fuel and food prices remain low but are unlikely to keep falling," World Bank South Asia vice president Annette Dixon said, adding, "As a result overall output growth is slower than previously anticipated and inflation has recently been creeping up."
South Asia has been resilient to global turbulence due to its limited exposure to slowdowns in other major economies coupled with the tailwinds of favorable oil prices, capital flows, and remittances, she added. "However, fiscal and financial vulnerabilities remain and countries should strive to address them through generating revenue and creating more fiscal space."
The report's analysis of fiscal policy across the region suggests that governments need to find a balanced path towards fiscal consolidation.
"Fiscal policy has a wide range of impacts for development," said World Bank South Asia chief economist Martin Rama. "The fiscal deficit affects macroeconomic stability, capital expenditures are needed for growth, and taxes and social spending matter for equity," he said, adding, "With the currently low oil prices, this is also an opportune time for South Asian policy makers to introduce or expand explicit carbon taxes. This would improve environmental and fiscal sustainability at the same time."
Many South Asian countries show potential for accelerated growth in the short to medium term. However, they should expect a more difficult global environment demanding well-managed domestic economies.
Given its weight in the region, India sets the pace for South Asia as a whole. Economic activity is expected to accelerate from 7.5 per cent in fiscal year 2015-16 to 7.7 per cent in the next fiscal year 2016-17 based on the expectation of strong private investment, a push in infrastructure spending, an improved investment climate, and deleveraged corporate and financial balance sheets, according to the report.

Thursday, April 7, 2016

कालोधन ओसारपसार : शंकास्पद कारोबार तीव्र

विभिन्न छाया कम्पनीमार्फत कालोधन ओसारपसार बढेपछि त्यसलाई रोक्न नीतिगत एकरूपता र अन्तर सरकारी समन्वयको खाँचो देखिएको छ। चर्चित 'पनामा पेपर्स लिक' प्रकरण सार्वजनिक भएसँगै उक्त प्रकरणमा संलग्न भनिएको विश्वका केही नेताले पदबाट राजीनामा दिइसकेका र बाँकीलाई पनि राजीनामाको दबाब बढ्दै गर्दा नेपालमा पनि बहस चुलिएको छ।
नेपालमा ठूला विदेशी लगानीका आयोजना लगानी बोर्डले स्वीकृत गर्ने भएकाले स्वीकृति दिनुअघि उसले नै राम्ररी अनुसन्धान गर्नुपर्ने सम्पत्ति शुद्धीकरण अनुसन्धान विभाग स्रोतले जनाएको छ। बैंक तथा वित्तीय संस्थाले पनि ठूलो निक्षेप तथा कारोबार गर्दा विशेष सतर्कता अपनाउनुपर्ने स्रोतको दाबी छ।
सम्पत्ति शुद्धीकरण निवारण ऐन २०६४ को दफा ६ ले 'सेल कम्पनी' सँग कारोबार तथा उक्त कम्पनीको खाता सञ्चालनसमेत गर्न नहुने व्यवस्था गरेको विभागस्रोतले जनाएको छ। 'सेल भन्नाले भौतिक उपस्थितिबिनाको छाया कम्पनी बुझिन्छ, यस्ता कम्पनीको कुनै व्यापार–व्यवसाय हुँदैन तर कानुनी प्रक्रिया पूरा गरी दर्ता भएका हुन्छन्,' स्रोतले भन्यो, 'त्यही कानुनी प्रमाणका आधारमा एकबाट अर्को देशमा अवैध सम्पत्ति ऋण वा लगानीका नाममा ओसारपसार गरिरहेका हुन्छन्।' तर, नेपालको कानुनले यस्ता कम्पनीको कारोबार वा खाता सञ्चालनलाई गैरकानुनी मानेकाले बैंक तथा वित्तीय संस्था पनि कारबाहीमा पर्न सक्ने स्रोतको दाबी छ।
यसै कानुनअन्तर्गत नेपाल राष्ट्र बैंकले सेल कम्पनीसँग कारोबार नगर्न र गरेको भए विवरण उपलब्ध गराउन वाणिज्य बैंकलाई निर्देशनसमेत दिइसकेको छ।
यसअघि पनि बैंक तथा वित्तीय संस्थाले शंकास्पद वा १० लाखभन्दा बढीको कारोबार गर्नुपर्दा राष्ट्र बैंकअन्तर्गतको वित्तीय जानकारी इकाइलाई जानकारी गराउनुपर्ने व्यवस्था छँदै छ।
इकाइको वार्षिक प्रतिवेदनअनुसार पछिल्ला वर्ष बैंक तथा वित्तीय संस्थामार्फत शंकास्पद कारोबार संख्या बढेको देखिएको छ। अघिल्लो आर्थिक वर्ष २०७०–७१ मा ५ सय ७१ वटा यस्ता कारोबार भएको 'रिपोर्टिङ' थियो।
मुलुकमा राजनीतिक संक्रमण लम्बिँदै जाँदा नीतिगत अस्थिरता र कमजोर सरकारका कारण पछिल्ला तीन वर्षमा शंकास्पद कारोबार बढेको प्रतिवेदनले औंल्याएको छ। आर्थिक वर्ष २०६९–७० मा ३ सय ३३ वटा शंकास्पद कारोबार 'रिपोर्टिङ' भएकोमा आव २०७०–७१मा ४ सय २५ र गत आवमा ५ सय ७१ पुगेको हो। प्रतिवेदनअनुसार आर्थिक वर्ष २०६६–६७ मा यस्ता १ सय ७७ वटा कारोबार दर्ता थिए।
वित्तीय जानकारी इकाइप्रमुख हृषीकेश भट्टका अनुसार शंकास्पद मानिएका सबै कारोबार अवैध वा कालोधन नै रहेका ठोकुवा गर्न नसकिए पनि शंका लाग्नासाथ राजस्व अनुसन्धान विभाग वा अन्य सम्बन्धित निकाय पठाउने गरिन्छ।
धेरैजसो कर छली, भ्रष्टाचार, कालोबजारीजस्ता अवैध क्रियाकलापबाट आर्जित धन कुनै 'ट्याक्स हेभन' मुलुकमा कम्पनी दर्ता गरी त्यसमार्फत फेरि देशभित्र लगानी वा ऋणका नाममा भि'याउने गरिन्छ। यस्तो अपारदर्शी कारोबार गर्नेहरूले विभिन्न ठाउँमा लगानी गर्ने बहानामा कालोधन ओसारपसार गर्ने क्रम पछिल्ला दिन तीव्र देखिएको हो। पनामा पेपर्सले नेपालमा पनि त्यस्ता सात कम्पनीबाट कालोधन कारोबार भएको तथ्य सार्वजनिक गरेको छ।
यस्तै, सम्पत्ति शुद्धीकरण अनुसन्धान विभागले विभिन्न सरोकारवाला निकायबीच छलफल गरी यस्ता कारोबारको लगत राख्न सुरु गरेको विभाग महानिर्देशक दामोदर रेग्मीले बताए। राष्ट्र बैंकको वित्तीय जानकारी इकाइ, प्रहरीको केन्द्रीय अनुसन्धान ब्युरो (सिआइबी), राजस्व अनुसन्धान विभाग, अर्थ मन्त्रालयका अधिकारीबीच छलफलपछि 'पनामा पेपर्स लिक' प्रकरणमा नेपालीको सम्बन्ध र कारोबारका आधारमा रणनीति तय गरिने उनको भनाइ छ। 'यसमा वित्तीय संलग्नता, कर छली, आपराधिक गतिविधिमा संलग्न भएको वा अन्य कारोबार जे पनि हुन सक्छ,' रेग्मीले भने।
अघिल्लो वर्ष पनि स्विस बैंकमा खाता रहेका १३ नेपालीबारे खुलासा भएको थियो। विभागले सम्बन्धित व्यक्तिको 'प्रोभाइलिङ' सुरु गरे पनि पछि रोकिएको थियो। अब उक्त प्रक्रिया फेरि सुरु हुने रेग्मीले बताए।
'पनामा पेपर्स' खुलासाले विश्वभरका १ सय ४० भन्दा बढी राजनीतिज्ञ कर नलाग्ने 'ट्याक्स हेभन' मुलुकमार्फत आर्थिक कारोबारमा संलग्न रहेको तथ्य बाहिरिएपछि नेपालमा फेरि एकपटक अवैध सम्पत्ति आर्जन र सम्पत्ति शुद्धीकरणको मुद्दा पेचिलो बनेको छ।

Trade growth to remain subdued in 2016 as uncertainties weigh on global demand

Growth in the volume of world trade is expected to remain sluggish in 2016 at 2.8 per cent, unchanged from the 2.8 per cent increase registered in 2015, according to the World Trade Organisation (WTO).
Imports of developed countries should moderate this year while demand for imported goods in developing Asian economies should pick up, WTO economists reported adding that global trade growth should rise to 3.6 per cent in 2017.
Risks to the forecast are mostly on the downside, including a sharper than expected slowing of the Chinese economy, worsening financial market volatility, and exposure of countries with large foreign debts to sharp exchange rate movements, the report read. "On the other hand, there is some upside potential, if monetary support from the European Central Bank (ECB) succeeds in generating faster growth in the euro area," it said today.
"Trade is still registering positive growth, albeit at a disappointing rate,” WTO director-general Roberto Azevêdo said, adding that it will be the fifth consecutive year of trade growth below 3 per cent. "Moreover, while the volume of global trade is growing, its value has fallen because of shifting exchange rates and falls in commodity prices."
It could undermine fragile economic growth in vulnerable developing countries," he said, adding that there remains as well the threat of creeping protectionism as many governments continue to apply trade restrictions and the stock of these barriers continues to grow. "However, we should keep these figures in perspective."
WTO members can take a number steps to use trade to lift global economic growth from rolling back trade restrictive measures, to implementing the WTO Trade Facilitation Agreement. "The agreement will dramatically cut trade costs around the world, thereby potentially boosting trade by up to $1 trillion a year,” Azevêdo added. “More can also be done to address remaining tariff and non-tariff barriers on exports of agricultural and manufactured goods.”
On the basis of the forecast for 2016, world trade will have grown at roughly the same rate as world GDP for five years – at market exchange rates – rather than twice as fast as was previously the case. Such a long, uninterrupted spell of slow but positive trade growth is unprecedented, but its importance should not be exaggerated. Overall, trade growth was weaker between 1980 and 1985, when five out of six years were below 3 per cent, including two years of outright contraction.
Alternative indicators of economic and trade activity in the opening months of 2016 are mixed, with some pointing to a firming of trade and output growth while others suggest some slowing. On the positive side, container throughput at major ports has recovered much of the ground lost to the trade slowdown last year, while automobile sales – one of the best early signals of trade downturns – have continued to grow at a healthy pace in developed countries. On the other hand, composite leading indicators from the Organisation for Economic Cooperation and Development (OECD) point to an easing of growth in OECD countries, and financial market volatility has continued in 2016.  Therefore trade growth may remain volatile in 2016.

Wednesday, April 6, 2016

Policy harmonisation needed to curb flow of dirty money

Greater policy harmonisation among government agencies has been urged to curb the flow of dirty money.
As some world leaders have resigned and others are under pressure to resign over the Panama Papers leak concerning international illicit money flows, government agencies in Nepal have also started debating policy harmonisation. "Nepal Investment Board approves mega foreign investments but it now has to be extra careful to investigate backgrounds before approving foreign investments," according to a high source at the Department of Money Laundering Investigation (DMLI).
Likewise, apart from cross checking foreign investments, banks and financial institutions also have to check the backgrounds before handling any transactions or opening accounts for foreign or domestic investors, the source said, adding that Article 6 of the Anti-Money Laundering Act has restricted the opening of accounts for shell companies – offshore bogus companies – and carrying out any transactions with them. "If found out, the banks and financial institutions will be punished under the Act."
Though banks and financial institutions already have to report transactions of over Rs 1 million or suspicious transactions to the Financial Information Unit (FIU) under the central bank, the Panama Papers leak has again raised a serious question over the possibility of such institutions becoming involved 'unknowingly'.
Banks and financial institutions have to be extra careful now, the source said.
Likewise, the government has also to seriously take stock of registered companies to curb the flow of dirty money, the official suggested. "Though Nepal has committed itself to curb the flow of dirty money – earnings through corruption, tax evasion and black marketing – the government itself is promoting black marketing and institutional corruption, and this could damage the economy in the long run."
Meanwhile, the DMLI today called on stakeholders including the revenue administration, the central bank's Financial Information Unit (FIU) and the police, to discuss the possibility of dirty money flowing into the country from offshore shell firms, and also the possible Nepali names in the Panama Papers leak.
Along with the DMLI, the FIU and the Department of Revenue Investigation (DRI) are the key government agencies that deal with issues of money laundering, terrorism financing and foreign exchange misappropriation.
According to DMLI chief Damodar Regmi, the meeting discussed the seven Nepalis fingered by the Panama Papers leak. "We are seriously discussing financial connections, transactions and the possibility of tax evasions," he said, adding that the department has also restarted the profiling of suspicious names that could be in the Panama Papers although the leak has not identified any of the names. "It has, however, claimed that the names will be published in May," Regmi added.
Last year also, the central bank, the DRI and DMLI had tried to investigate names that had figured in rumours following revelations of illegal outflow of money to a Swiss Bank.
Such investigations are very tricky, Regmi said, adding that without any authentic information it's impossible to track the flow of dirty money and the activities of bogus companies. "However, we have restarted the process of profiling names and restarting investigations," he added.
As Nepal has been seeing a steady rise in FDI commitments from the countries identified by the ICIJ as tax havens, the DMLI has said that it will now step up surveillance for FDI coming from these tax havens. There is a need of in-depth investigation, given the huge foreign direct investment (FDI) entering Nepal from tax havens in recent years, Regmi said, adding that statistics from the Department of Industry (DoI) reveals that of the total FDI commitments till last fiscal, about 20 per cent were from tax havens.
The rise in money entering Nepal from tax havens has raised question that it could be illegal money stashed abroad by Nepalis, though the government departments have no proper records of such money.
Apart from enhancing the supervisory capacity to monitor FDI commitments, the government agencies like the DoI and the Office of Company Registrar (OCR) should work together to fight the flow of dirty money.
Regmi said that now onwards the DMLI will adopt 'risk-based supervision system', instead of launching investigating after the incident of money laundering surfaces. But, the DMLI has any success success so far in investigating money laundering cases. The department has not filed any any case against money launderers at the Special Court in the current fiscal year, neither had it filed any case in the last fiscal year too.
Since its establishment some five years ago, the department had filed only 30 money laundering cases at the Special Court. The DMLI was established in 2011 after a huge international pressure on the government. The government had committed the Financial Action Task Force (FATF) – a global anti-money laundering body – that it would approve the anti money laundering act in line with global fight against the fight to dirty money flow.
The department has to be strengthened to get result against the cases of money laundering.
Currently, the department has been probing 700 cases and 200 of them are in 'advanced stage', according to Regmi.

Tuesday, April 5, 2016

Economists urge tough laws against money laundering

Economists have suggested to the government to strengthen the law to curb the illegal outflow of money from the country.
Their suggestion came a day after the Panama Papers leak that has also fingered seven Nepalis having partnership firms in several tax havens. "Though the issue will not have any impact on Nepal at present, it will definately have adverse impact on revenue mobilisation in the future," said former chief secretary Bimal Koirala, speaking at an interaction in the capital today.
Citing the recent example of how the government is unwilling to charge capital gains tax (CGT) on the sale of TeliaSonera's ownership in Ncell to Axiata, Koirala asked the government to start tracking the money. "The Panama Papers should be a lesson for the government to make its law strong enough to prevent such illegal flow of money."
The names of the seven Nepalis mentioned in the Panama Papers have yet to be disclosed.
Koirala suggested to the government to bring all manner of earning under the tax net so as to prevent money laundering. "If the government fails to bring strong legal provision to curb illicit flow of money, drug peddlers and armed smugglers could misuse the country for stashing their illegal earnings," he said, "Such earnings from corruption and tax evasion is sent to offshore firms and back channeled to the country under the pretexts of loans and investments."
The government also needs to find ways to plug the loopholes if there are any to curb the flow of dirty money.
He also cited the example of the central bank's freezing of Rs 3.5 billion that entered Nepal in the name of Mukti Shree Group, suspecting back channeling of black money, and also asked the government to prioritise the foreign investment. "The government should not accept all kinds foreign investments," Koirala said, suggesting the government to accept only those foreign investments that pay taxes and generate employment in the country.
Likewise, senior economist Prof Dr Bishwhambher Pyakuryal, on the occasion, said Nepal's mention in the Panama Papers has raised a question mark over the country's credibility. The deficiency in trust will result in low foreign borrowings and grants, which will in the longer term hit the development and social sectors, he said, adding that it will hit the social sector hard in the long run. "Tax evasion will hit revenue mobilisation resulting in low government spending in the social sectors."
Previous international reports have also mentioned about Nepalis stashing their illegal earnings in various tax havens. The report 'Illicit Financial Flows from Developing Countries' published by Global Financial Integrity (GFI) had last year revealed that $754 million on an average every year was siphoned away from Nepal between 2003-2012.
According to the report, trade misinvoicing – misreporting the value of a commercial transaction on an invoice submitted to customs – accounted for most of the capital flight.
Likewise, the prolonged political transition in Nepal has made it easier for domestic and foreign firms operating in Nepal to launder money out of the country, the economists said.
"If the current situation persists, Nepal could face blacklisting by the international community," Pyakuryal added. Blacklisting of a country means it will not be able to do international trade and will have restricted movement of its citizens across the globe.
"Nepal should thus enter into an agreement with the tax haven countries for information sharing relating to tax and banking transactions," he suggested.
Meanwhile, a day after the Panama Papers exposé, Department of Money Laundering Investigation (DMLI) today said that it would start probe to find whether Nepalis too are holding offshore accounts.
It is calling a meeting of key stakeholders –Financial Intelligence Unit (FIU) under Nepal Rastra Bank, Department of Revenue Investigation (DRI) and Nepal Police – tomorrow to discuss on whether Nepalis have offshore accounts and whether the government agencies are aware of such accounts.
In one of the biggest leaks in the history, International Consortium of Investigative Journalists (ICIJ) on Monday made public a huge cache of documents showing how the world’s rich, powerful and famous exploit the secretive offshore tax regimes and hide their money. The documents also named the top 10 destinations, known as tax havens, where the world’s rich and powerful stash their money. 

Monday, April 4, 2016

अकुत धन विदेशतिर

नेपालमा भ्रष्टाचार तथा कर छलेर कमाएको सम्पत्ति विदेशमा लुकाउने प्रवृत्ति तीव्र देखिएको छ। स्वदेशी–विदेशी कम्पनी सञ्चालक तथा लगानीकर्ताले राजनीतिक संक्रमणको फाइदा उठाउँदै जुटाएको अकुत आम्दानी विदेश पुर्याएका हुन्।
अनुसन्धान पत्रकारको संस्था इन्टरनेसनल कन्सोर्टियम अफ इन्भेस्टिगेटिभ जर्नालिस्ट (आइसिआइजे) ले आइतबार सार्वजनिक गरेको दस्तावेजमा विश्वका विभिन्न 'ट्याक्स हेभन' मा कालो धन थुपार्नेमा सात नेपालीसमेत छन्।
तर, संस्थाले सातमध्ये नेपाल भेन्चर्स लिमिटेडको नाम मात्र खुलाएको छ। पेरुमा काम गर्ने भनिएको उक्त कम्पनीको अन्य पृष्ठभूमि भने केही खुलाइएको छैन।
राजनीतिक संक्रमण लम्बिँदा स्वदेशी, विदेशी कम्पनी तथा लगानीकर्ता पछिल्ला दिन नेपालमा गरेको कमाइ कानुनअनुसार कर नतिरी विदेश पठाउन सक्रिय रहेको एक उद्योगीले नाम नबताउने सर्तमा नागरिकलाई बताए। सरकारी हस्तक्षेपबिना सम्पत्ति शुद्धीकरण अनुसन्धान विभागले गम्भीर छानबिन गर्ने हो भने पछिल्ला दिन अकुत सम्पत्ति सबैभन्दा बढी बिदेसिएको भेटिने उनले दाबी गरे। 'यो लहरोमा राजनीतिज्ञ, व्यवसायी र कर्मचारी सबै तानिन्छन्,' उनले भने। संविधानसभा चुनावपछि कमजोर सरकार, नीतिगत अन्योल र खुला भ्रष्टाचार नै कालो धन बाहिरिनुको मूल कारण रहेको उनको भनाइ छ।
आइसिआइजेले आठ महिनाको अनुसन्धानपछि मध्य अमेरिकाको पानामास्थित कर छलीको पैसाबाट कम्पनी स्थापना गर्ने ल फर्म 'मोसाक फोन्सिका' का दस्तावेज सार्वजनिक गरेको हो। दस्तावेजमा शक्तिशाली राजनीतिज्ञ, कलाकार तथा व्यापारी गरी विश्वका १ सय २८ जनाले गरेका गोप्य आर्थिक कारोबारको विस्तृत विवरण छ।
दस्तावेजअनुसार कालोधन विदेशमा थुपार्नेमा कम्युनिस्ट मुलुकका नेता तथा तानाशाहहरू, बलिउड कलाकार अमिताभ बच्चन, उनकी बुहारी ऐश्वर्या राय पनि छन्। रसियाका राष्ट्रपति भ्लादिमिर पुटिनले सहयोगीमार्फत २ अर्ब अमेरिकी डलर गोप्य कारोबार गरेकोदेखि पाकिस्तानी प्रधानमन्त्री नवाज सरिफ, साउदी अरबका राजा, चिनियाँ नेता सी जिनपिङ, भ्रष्टाचारविरुद्ध सुधार अभियान चलाएको भन्दै आएका युक्रेनी राष्ट्रपति पेट्रो पोरोसेन्कोका कम्पनी पनि दस्तावेजले सार्वजनिक गरेको छ। यस्तै, फोर्ब्स पत्रिकामा सूचीकृत २९ अर्बपतिदेखि चर्चित फुटबलस्टार मेसी र फिफा इथिक्स कमिटी सदस्य पेड्रो दामियानीको पनि गोप्य आर्थिक कारोबार विवरण सार्वजनिक भएको छ।
आइसिआइजेले मोसाक फोन्सिका ल फर्मका १ करोड १० लाख गोप्य दस्तावेज सार्वजनिक गरेको हो। उक्त फर्मका कार्यालय विश्वका ४० देशमा छन्।
ट्याक्स हेभन भन्नाले ब्रिटिस भर्जिन आइल्यान्ड, पानामा, सिंगापुरजस्ता कर छुट हुने देश बुझिन्छ। यस्ता देशमा विश्वका धनी र प्रख्यात नेता तथा कालोबजारीमा संलग्नले छाया कम्पनी दर्ता गर्छन्। आइसिआइजेका अनुसार अफसोर उद्योगमा अधिकांश सेवा कानुनी नै हुन्छन्। तर, अनुसन्धान गरिएका कागजातले बैंक, ल फर्म र अरू अफसोर खेलाडीले कानुनी आवश्यकता पूरा नगरेको देखिने आइसिआइजेले जनाएको छ।
आइसिआइजेले मोसाक फोन्सिका ल फर्मबाट प्राप्त १ करोडभन्दा धेरै कागजात जर्मनीको सुडडएचे चाइटुडजस्ता विश्वका सयभन्दा बढी समाचारसंस्थाको सहकार्यमा अनुसन्धान गरी यस्ता छाया कम्पनी तथा लगानीकर्ताबारे पत्ता लगाएको हो।
नेपालमा पनि पछिल्ला वर्ष ब्रिटिस भर्जिन आइल्यान्डजस्ता 'ट्याक्स हेभन' बाट धेरै लगानी आएको छ। उद्योग विभागको तथ्यांकअनुसार नेपालमा लगानी प्रतिबद्धता जनाउने प्रमुख तीन देशमा भारत र चीनपछि ब्रिटिस भर्जिन आइल्यान्डका कम्पनी छन्।
एनसेलको ८० प्रतिशत सेयर होल्डिङ गर्ने कम्पनी रेनल्ड्स होल्डिङ्सदेखि अजयराज पराजुली (सुमार्गी) को मुक्तिश्री समूहले ऋणका नाममा ल्याएको पैसासमेत ब्रिटिस भर्जिन आइल्यान्डकै कम्पनी हो। शंकास्पद देखिएकैले मुक्तिश्री समूहले ऋणका नाममा ल्याएको साढे ३ अर्ब रुपैयाँ नेपाल राष्ट्र बैँकले अहिलेसम्म फ्रिज गरिराखेको छ।
कालो धन सेतो बनाउने क्रममा नेपालबाट अकुत पैसा बाहिर पठाउने, ट्याक्स हेभनमा छाया कम्पनी दर्ता गरेर त्यही पैसा उक्त विदेशी कम्पनीको ऋणका नाममा भिœयाउने प्रचलन रहेको पनि व्यवसायीले नागरिकलाई बताए।
गत वर्ष पनि यस्तो समाचार प्रकाशित भएपछि नेपाल राष्ट्र बैंक र राजस्व अनुसन्धान विभाग तथा सम्पत्ति शुद्धीकरण अनुसन्धान विभागले छानबिन गर्ने प्रयास गरेकोमा कुनै आधिकारिक सूचना नपाइएको अनुसन्धानमा संलग्न अधिकृतले जानकारी दिएका छन्।
अघिल्लो वर्ष राष्ट्र बैंकले राजस्व अनुसन्धान विभागलाई चिठी लेखेर अनुसन्धान अगाडि बढाउन भनेको थियो। यस्ता सूचनाको आधिकारिकता पुष्टि नहुने तथा अनुसन्धान गर्ने सञ्चारसंस्था अथवा उक्त देशका बैंक पनि सूचना दिन बाध्य नरहेकाले समस्या पर्ने अनुसन्धानमा संलग्न अधिकारीले बताए।
यस्तै, अघिल्लो वर्ष सम्पत्ति शुद्धीकरण अनुसन्धान विभागले शंकास्पद नाम 'प्रोभाइलिङ' गर्ने, सम्बन्धित देशसँग सूचना माग्न सुरु गरेको तर द्विपक्षीय सम्झौता तथा दोहोरो कर उन्मुक्ति सम्झौता नभएका देशसँग आधिकारिक रूपमा सूचना माग्न नसकिएको उनीहरूको भनाइ छ ।

Panama papers finger seven Nepalis, identity still unknown

There has been no end to illegal outflow of money accumulated through tax evasion and corruption, according to international investigations.
The International Consortium of Investigative Journalists (ICIJ) yesterday disclosed that there are seven Nepalis, who are shareholders in offshore firms in tax havens. The ICIJ investigation has, however, not revealed any names, though the documents do name a company, Nepal Ventures Limited. Details about the company – either it is a real Nepali company or the name only is Nepal Ventures – have not been provided.
The prolonged political transition in Nepal has made it easier for domestic and foreign firms operating in Nepal to swindle money out of the country, according to an investor, who does not wish to be named. "They have been evading tax and sending the illegal funds to offshore firms," he said. He, however, claimed that detailed investigations by the Department of Money Laundering Investigation (DMLI) could expose the outflow of money accumulated through tax evasion and massive corruption, if the government has the political will to investigate. "The probe will expose the nexus between politicians, bureaucrats and business people."
Unstable governments and policies due to political transition and weak governance, coupled with a lack of political will to crack the whip on corruption have encouraged the illegal outflow of money, according to him.
ICIJ, a nonprofit based in Washington DC, has published a report on the offshore financial dealings of 128 of the world's rich and famous. The report has been prepared after long and extensive investigations by an international coalition of media outlets is based on documents provided by an anonymous source.
According to the ICIJ, as many as 72 world leaders from Russian president Vladimir Putin to Pakistani prime minister Nawaz Sharif and Indian actor Amitabh Bachchan have hidden their assets in the offshore companies.
The German newspaper Süddeutsche Zeitung received 11.5 million encrypted internal documents of a Panama-based law firm, Mossack Fonseca, spanning between 1970s and 2016, and shared them with the ICIJ. The leak thus dubbed the 'Panama Papers' contains mostly emails, PDF files, and photo files belonging to Mossack Fonseca, one of the largest providers of offshore financial services.
A global network with 600 people working in 42 countries, the law firm operates in tax havens including Switzerland, Cyprus and the British Virgin Islands, and in the British crown dependencies of Guernsey, Jersey and the Isle of Man.
British Virgin Islands is one of three key investment sources - after India and China - for Nepal, according to latest data.
The central bank had freezed Rs 3.5 billion that entered Nepal in the name of Mukti Shree Group, suspecting back channeling of black money.
Earnings from corruption and tax evasion is sent to offshore firms and back channeled to the country in the name of loans, according to business people.
Most of the services the offshore industry provides can be used for legal purposes and by law-abiding customers. "But the documents show that banks, law firms and other offshore players often fail to follow legal requirements to make sure clients are not involved in criminal enterprises, tax dodging or political corruption," the papers read, adding that the files show how these fixers and middlemen protect themselves and their clients by concealing suspect transactions. "In some instances, they work to head off official investigations by backdating and destroying documents."
Last year also, the central bank, the Revenue Investigation Department (RID) and the Department of Money Laundering Investigation tried to investigate suspects, after yet another revelation of illegal outflow of money in a Swiss Bank.
However, we could not find any authentic information, said one of the investigation officer not wanting to be named.
The central bank wrote to RID to look into the matter, the official said, adding that the countries where such bogus companies have been registered are not compelled to provide information, nor can the banks be forced to share their clients' details.
Likewise, the Department of Money Laundering Investigation had also started to profile names that were under suspicion. "But due to lack of Double Taxation Avoidance Agreements (DTAA) and bilateral agreements to share banking information, our investigation reached nowhere," the investigating official shared.