Sunday, May 29, 2016

Budget to push more Nepalis into poverty

The expansionary nature of the budget for the next fiscal year is going to push more Nepalis into poverty, although the government has promised to reduce the percentage of people under the poverty line.
Currently, some 21.6 per cent of Nepalis are under the national poverty line, whereas the government aims to bring it down to 18 per cent, according to the budget for fiscal year 2016-17.
However, the government's distributive and expansionary budget is going to push more Nepalis under the poverty line, thanks to increasing inflationary pressure, said economist Prf Dr Bishwhambher Pyakuryal.
Finance Minister Bishnu Poudel yesterday presented a budget of Rs 1,048.9 billion for fiscal year 2016-17 in Parliament, with an aim of reducing poverty, increasing economic growth and preparing the base for a prosperous Nepal, apart from implementation of new Constitution.
But the hike in the salary of government employees by 25 per cent and grade – making it to around 40 per cent salary hike in total including increased grade – and various distributive programmes in the budget will push market prices up, he said, adding that while the salary hike could be justified as the cost of living is increasing, the impact of the hike on the market will hit non-government employees and daily wage workers hard. "People who earn their living from day to day wage are most at risk of falling back into poverty will be dragged below the poverty line."
The 13th periodic plan that had aimed to bring the poverty rate down to 18 per cent failed mainly because of the failure of successive governments to create employment in the country and also rising inflation over the last three years. "Likewise, inflation fuelled by expansionary fiscal policy will again thwart the government's poverty reduction target," he added.
The 'socialist-oriented budget' has doubled the social security blanket and placed an extra burden on state coffers. This may have been necessary, but the distribution of the budget across all the 'dream projects' would not contribute to capital formation and increased productivity, according to former finance secretary Rameshwor Khanal."This could be disastrous for the economy," he added.
Likewise, the budget – that claims to strive for a self-reliant economy but has been overly dependent on foreign grants and loans, and also revenue from imports – has also failed to enhance market monitoring capabilities and crack the whip on price inflation.
The deficit budget, which aims to mobilise Rs 565.9 billion from revenue – mostly from the imports like customs, excise and VAT – has failed to introduce any radical reform in the revenue administration. Citing the examples of economic crisis in Greece and Venezuala, Khanal claimed that the estimation of large revenue without any sustainable base could lead to disaster.
Similarly, the budget has estimated Rs 10 billion to come through principal repayment and Rs 106.9 billion through foreign grants. The resulting deficit will be financed through foreign loans of Rs 195.7 billion, domestic loans of Rs 111 billion and Rs 59.4 billion from savings of the current fiscal year.

Thursday, May 26, 2016

PEs profits up, dividend down

Though Public Enterprises (PEs) recorded impressive profit in the fiscal year 2014-15 compared to a fiscal year ago, their return has decreased.
They posted net profit of Rs 33.92 billion in the last fiscal year compared to Rs 5.5 billion, some Rs 29 billion in 2013-14 more, according to a report published today by the Finance Ministry. But they paid Rs 6.45 billion to the government as dividend, which is less compared to what they had paid a fiscal year ago.
Of the 37 PEs, some 20 posted net profit, whereas other 14 are still in net loss compared to 15 in 2013-14. NOC, which was in net loss in 2013/14, logged impressive profit in the last fiscal year.
"The net profit of these PEs was Rs 5.5 billion in 2013/14. In 2012/13, they had reported net profit of Rs 11.4 billion," the report added.
Despite regular political bickering, increasing red tape and weak governance, PEs were in green due to huge profit churned by Nepal Oil Corporation (NOC), Nepal Telecom, Rastriya Banijya Bank Ltd (RBBL) and Agriculture Development Bank Ltd (ADBL).
NOC, which used to be in loss in the past years, recorded profit of Rs 15 billion in the last fiscal year, whereas Nepal Telecom, RBBL and ADBL have been contributing huge revenue to the state coffer after they successfully underwent reforms.
In 2013/14, NOC had had reported loss of Rs 6.25 billion.
Though profits of PEs have increased, their return to the government has decreased. In 2013/14, five PEs -- Nepal Telecom, Industrial District Management Ltd, Hydroelectricity Investment and Development Company, ADBL and Citizens Investment Trust -- had paid Rs 6.61 billion as dividend to the government. However, in the last fiscal year, only Nepal Telecom, Industrial District Management and National Housing Company paid Rs 6.45 billion dividend -- some 1.59 percent of GDP -- to the government.
"The return is only 5.12 percent of the government investment on PEs," the report said, adding that the rate of return is lower than the current interest rate. But PEs also pay income tax, Value Added Tax (VAT), and other non tax revenue to the government.
The government has made share investment of Rs 126.16 billion on PEs, according to the report.
Likewise, total operating income of 37 state-owned enterprises increased by 5.06 percent to Rs 270.48 billion in the last fiscal year from Rs 257.81 billion in 2013/14 -- 15.48 percent up from Rs 223.26 billion in 2012/13.
Though it alone cannot gauge the overall efficiency of PEs, the rise in operating income reflects improvement in efficiency of state-owned enterprises.
According to the report, three PEs -- Nepal Engineering Consultancy Service Center, National Construction Company Nepal and Janakpur Cigarette Factory have not submitted any financial data to the government as they have already paid off their employees.

Strikes bleeding national economy

The country came to a standstill today due to a strike by public transportation. While private vehicles were able to ply the roads, the strike by public transport limited movements in the industrial sector and movement by the public at large as well.
While a general strike for one day causes the country a loss of Rs 2 billion, a day's strike by public transport will cost the economy half that amount, or around Rs 1 billion, according to the Federation of Nepalese Chambers of Commerce and Industry (FNCCI), the umbrella organization of the private sector. As lack of movement will curtail the flow of goods, that will also send up the price of consumer goods too.
Strikes in the transport sector hit the industrial sector first, according to FNCCI President Pashupati Murarka.
The movement of industrial goods has been halted, causing a loss to industry, he said suggesting transporters not to take any extreme measures like going on strike and to sit for talks instead. "The government should also at least listen to them," he added.
Transport entrepreneurs and transportation workers associated with various transport associations including Nepal National Transport Entrepreneurs Association called the strike today to protest against the government's recent move to hike penalties for traffic rules violations, with effect from May 14.
The strike has inflicted losses on transport entrepreneurs also, according to Muraraka. "A truck owner, who could have earned Rs 10,000 a day lost that income," he added. "The transport sector itself is suffering from the Indian blockade of almost five months and this strike will not do any good to the thousands of people associated with this sector."
The transport sector is expected to grow by only 0.5 per cent in the current fiscal year because of the Indian blockade, according to the Central Bureau of Statistics (CBS).
Similarly, a study by Nepal Rastra Bank (NRB), the central bank, shows that the direct cost of general strikes during 2008-2013 stood at Rs 1.8 billion per strike day and Rs 27 billion for a year at current prices. "The lost output per year accounted for 1.4 per cent of the annual gross output," it reads, adding that the total accumulated output loss due to general strikes in the five-year period amounted to Rs 117 billion.
With such losses, general strikes decelerated annual GDP growth rates in a range between 0.6 percentage points and 2.2 percentage points during 2008-2013.
The transport strike, however, hit consumers hard also. "The monthly inflation rate jumped to over 9 per cent as a result of a two-day general strike while strikes called for three or more days led to an inflation of more than 10 per cent," the central bank report says.
The strikes not only hit the industrial sector but the social sector also as people could not get to hospitals for lack of taxis.

Tuesday, May 24, 2016

SDF, ADB ink pact for co-financing of projects

SAARC Development Fund (SDF) and Asian Development Bank (ADB) signed an agreement for co-financing of projects, regional connectivity and development of the SAARC region.
"ADB and SDF have signed a Memorandum of Understanding (MoU), agreeing to collaborate for the development of the SAARC region through co-financing of projects and programs focusing on regional connectivity/integration and economic cooperation among the SAARC member states," a statement issued today by SDF reads.
The two institutions have also agreed to provide technical assistance and investments for co-financing on the three windows of SDF, Micro Small Medium Enterprises (MSME) Programme and Social Enterprise Development Programme (SEDP), and any other new areas which can be covered under the pact, according to the statement.
Established to promote the welfare of the people of SAARC Region, improve the quality of life, and to accelerate economic growth, social progress and poverty alleviation in the SAARC Region, SDF recently has also signed yet another agreement with Asian Infrastructure Investment Bank (AIIB) in April to co-finance SAARC projects.
SDF, which was established in April 2010, has three financing windows; Social, Economic and Infrastructure.
The Social Window primarily funds projects, inter alia, on poverty alleviation, social development focusing on education; health; human resources development; support to venerable/disadvantaged segments of the society; funding needs of communities, micro-enterprises, rural infrastructure development that are in line with regional consensus as reflected in the SAARC Social Charter, SAARC Development Goals, SAARC Plan of Action on Poverty Alleviation and other SAARC agreed and endorsed plans, programmes and instruments.
Likewise, the Economic Window extends funding to non-infrastructural projects related to trade and industrial development, agriculture, service sector, science and technology and other non-infrastructure areas. Similarly, the Infrastructure Windows will be utilized to fund projects in areas such as energy, power, transportation, telecommunications, environment, tourism and other infrastructure areas.

Friday, May 20, 2016

Government told to start work for granting transit rights to India, China

Experts have proposed to the government start homework for granting transit rights to both the neighbors.
Presenting a paper entitled 'Toward a New Framework for Nepal's Trade and Industrial diversification' at the International Conference on Key Trends in China-Nepal-India Relations and New Development Strategy for Nepal,' jointly organised by South Asian Institute of Management (SAIM), Institute for Integrated Development Studies (IIDS) and Nanyang Technological University of Singapore, in Kathmandu today, former finance secretary Rameshwor Khanal said that the two neighbours – India and China – will, sooner or later, ask for transit rights. "Nepal should start homework right now to make sure that transit agreements would be in its favour,” he added.
He also proposed implementing connectivity infrastructure projects that support transit and trade diversification in the changed context of recent trade and transit blockade.
As the need of the hour is to diversify trade for a self-reliant economy, Khanal also proposed promoting energy-intensive industries, developing cross-border energy market and economic corridors along north-south transit routes, and promoting high value niche products and specialized services for trade diversification.
“Nepal has failed to diversify trade and transit even though each periodic plan – after the second periodic plan – has been emphasising on trade diversification, export promotion, foreign investment promotion,” Khanal said, adding that the country is still harping on trade diversification after six decades of the planned development practice.
Nepal started planned development practice from 1956 when over 95 per cent of its trade was with India. Trade with Tibetan Autonomous Region of China was confined to border region and most of it was bartering. Nepal had little to export to outside world then.
With foreign assistance, particularly from the then Soviet Union and China, critical manufacturing factories that aimed at import substitution were established in the decade following 1956. But following the calibrated reforms of 1985-86, policy reforms spanning all sectors of the economy were implemented between 1990 and 1992, he added. "The reforms led to trade diversification, growth of manufacturing sector, export growth, and some of the positive changes could also be seen lasting until 1998."
However, overall development policy did not support the trade and industrial policies started during the economic reforms of post-1990. Lack of continuity of reforms, weak institutions, and above all no infrastructure support held back the growth, Khanal said.
Commenting on his paper, chief executive of Investment Board Nepal (IBN) Radhesh Pant said that finance is not the problem for infrastructure development in Nepal. "Finance is the least of the problems," he said, giving examples of how foreign investors have been eager on putting money on Nepal's infrastructure development ranging from hydropower projects to cement factories.
Nepal needs huge investment in infrastructure development to meet the gap that can fuel economic growth, according to former member of the National Planning Commission (NPC) Swarnim Wagle. Hailing Chinese approach to development, Wagle said that quick delivery of aid without strings attached will help infrastructure development in Nepal.
In his paper on 'Asian Infrastructure Investment Bank (AIIB) and Infrastructure Construction in South Asian Countries', Prof Dai Yonghong, Director of Center for Myanmar Studies in Sichuan University and Deputy Director and Center for Nepal Studies in Sichuan University, highlighted benefits of Nepal as a transit economy. "It will help strengthening sub-regional cooperation between Sichuan-Tibet and SAARC, adjusting the area of cooperation, establishing Sino-Nepal FTA, and build Nepal overland trade route," he said, adding that it will also strengthen infrastructure development in border areas, apart from expansion of trade preferences and encourage investment, and expanding tourism cooperation, innovation and tourism business one-stop service mode.

Tuesday, May 17, 2016

Kathmandu more riskier due to informal building expansion, World Bank reports

Earthquake risk in Kathmandu is expected to double in next 2 decades due to informal building expansion, according to a new report by World Bank.
The report ‘The Making of a Riskier Future: How Our Decisions are Shaping the Future of Disaster Risk’ claims that earthquake risk in Kathmandu is expected to increase by 50 per cent by 2045 due to informal building expansion.
The new report has also warned that the world is ill-prepared for an increasing rise in disasters, spurred by climate change, rising populations and increasing vulnerability of people in large cities and unregulated housing.
It calls for a radical new approach to assessing risk, which takes into account extremely rapid changes in global disaster risk.
Using vulnerability curves developed through incremental dynamic structural analysis for each possible building configuration, a stochastic building expansion model was presented to simulate possible expansion sequences over the lifetime of a building. The model was then used to simulate an entire neighbourhood in the Kathmandu Valley area, and analysed to understand neighbourhood-level risk over time, based on a reproduction of the 1934 Nepal-Bihar earthquake that destroyed the city.
The researchers found that there is a significant earthquake risk linked with informal building expansion. While the risk is easy to overlook for a single building or short time frame, given enough time and scaled to entire neighbourhoods, the study revealed that the incremental expansion process can profoundly shift earthquake risk.
“Governments should consider policies to control the most dangerous expansions and/or should develop design guidelines for expanding safely,” the report reads, adding that both of these steps would have significant impact on reducing the future risk of cities.
It further said that the disaster risk of rapidly changing cities is predictable, even if it has significant uncertainty. Probabilistic hazard models can be combined with modern structural analysis tools, simulated building expansion, and other models to gain an understanding of the main trends in the disaster risk of cities.
“As part of efforts to ensure that cities are resilient to future disasters, these tools can serve as the basis for risk-informed urban planning and policy analyses that place urban environments on a trajectory to minimise future risk," it adds.
Annual total damages from disasters have been increasing for decades and models show that population growth and rapid urbanisation could put 1.3 billion people and $158 trillion in assets at risk from river and coastal floods by 2050, according to the report.
“With climate change and rising numbers of people in urban areas rapidly driving up future risks, there’s a real danger the world is woefully unprepared for what lies ahead," World Bank Group’s senior director for climate change John Roome has been quoted as saying in the media release issued today. “Unless we change our approach to future planning for cities and coastal areas that takes into account potential disasters, we run real risk of locking in decisions that will lead to drastic rises in future losses,” he said.
In examining literature and case studies from around the globe, the report cites studies showing that densely populated coastal cities are sinking and when coupled with rising sea levels, annual losses in 136 coastal cities could increase from $6 billion in 2010 to $1,000 billion in 2070.
It also cites research warning that in Indonesia, river flood risk may increase 166 per cent over the next 30 years due to rapid expansion of urban areas, while the country’s coastal flood risk could rise by 445 per cent.
Over 700 experts and thought leaders will gather in Venice in May end to examine the critical role of technological advances in disaster risk management. The 2016 Understanding Risk Forum, hosted by Global Facility for Disaster Reduction and Recovery (GFDRR), will showcase the latest innovations, exchange ideas and form partnerships on risk identification and assessment.

Sunday, May 15, 2016

Government targeting 6.3 per cent growth for next fiscal year

The government is targeting 6.3 per cent economic growth in the budget for the next fiscal year.
Releasing an approach paper for the 14th three-year plan during a meeting of National Development Council (NDC) today, National Planning Commission (NPC) vice chairperson Dr Yubraj Khatiwada said that the 14th periodic plan has targeted an economic growth of 6.3 per cent for the next fiscal year 2016-17. "The government is preparing budget for the next fiscal year," he said, adding that it will be based on the approach paper of the 14th periodic plan.
He also said that the plan has targeted agriculture sector to grow by 4.5 per cent in the next fiscal year, followed by 7.3 per cent growth of non-agriculture sector. "Likewise, the industry sector is estimated to grow by 8.7 per cent, and service sector is estimated to grow by 6.9 per cent in the next fiscal year," he added.
Khatiwada also said that the 14th periodic plan has targeted average economic growth of 7.1 per cent in the next three fiscal years.
The 14th periodic plan – which starts from the next fiscal year 2016-17 and last till 2018-19 – will be the fourth interim three-year periodic plan instead of the traditional five-year periodic.
The plan has envisaged economic growth of 6.3 per cent for 2016-17, 7.2 per cent for 2017-18 and 7.9 per cent for 2018-19, Khatiwada said, adding that by the end of the 14th periodic plan the country will see an average economic growth of 7.1 per cent.
He also claimed that the country most post economic growth of more than 7 per cent not only to achieve developing country status from current Least Developed Country (LDC) status by 2022 but also to upgrade to the middle income country by 2030 from the current low income country status.
However, country's economy will grow by a mere 0.77 per cent in the current fiscal year, according to the Central Bureau of Statistics (CBS). The government had targeted economy growth of 6 per cent for the current fiscal year.
Country's average annual economic growth remained 2.92 per cent in the 13th periodic plan period which had targeted an average economic growth of 6 per cent in the past three fiscal years, including the current fiscal year which was hit by subpar monsoon, five months of Indian economic blockade since September 20, and the devastating earthquakes of April and May last year.
"This fiscal year we have an excuse because of the earthquakes and supply obstructions due to Tarai-Madhesh unrest," prime minister Khadga Prasad Sharma Oli, who is also the chairperson of NDC. He, however, said that the country has to move forward toward economic prosperity.
The first periodic plan after the promulgation of constitution envisages preparing a base for the welfare state and socialism-oriented economy, though the government has also reiterated to give enough room for the private sector for economic growth. The country needs to invest Rs 2.40 trillion – for next three years – to achieve an average growth of 7.1 per cent. But the eroding government capacity to spend has been a huge challenge lately.
Premier Oli accepted that the government has been unable to spend development budget. "The depleting absorptive capacity of the development budget has to be corrected," he said without elaborating on how his government plans to boost development expenses.

13th periodic plan misses most of the targets

Lack of a coherent framework while preparing an approach paper for the plan and persistence of political instability and policy inconsistency coupled with unprecedented natural shocks and a massive erosion of implementation capacity have resulted in the 13th periodic plan failing measurably and missing most of its targets.
The plan – that is coming to an end by July 15 – has only achieved targets that can be counted on one's fingertips during the plan period spanning the last three fiscal years, according to data from the National Planning Commission (NPC).
According to former member of the NPC Swarnim Wagle, the 13th periodic plan lacked basic maturity of preparation, raising a question mark over how realistic the targets were. "Likewise, the last three years also saw three different governments in a continuation of the political instability that contributed hugely to policy inconsistency," he said, adding that unprecedented shocks such as the devastating earthquake and the Indian blockade also played havoc with the targets. "The erosion of implementation capacity was likewise a key factor in missing most of the targets of the periodic plan," he added.
The 13 periodic plan – that commenced in fiscal year 2013-14 – had a target of preparing the base for the country's graduation to developing country status by 2022 from the current status of Least Developed Country (LDC). In preparing the base for the graduation, the plan targetted achieving 6 per cent economic growth on average in the three-year plan period. However, the government has failed to achieve the growth target as the average economic growth rate plunged to 2.92 per cent, according to the planning commission.
Reviewing the 13th plan, NPC vice chair Dr Yubraj Khatiwada said that the transitional plan has failed to achieve not only the economic growth target but also a host of other targets, including inflation reduction, average employment rate growth, poverty reduction, access to electricity, generation of electricity, drinking water supply and sanitation, enrollment in primary schools, irrigation and road connectivity.
"Though increased government spending in the social sector has helped achieve some of the targets under the Millennium Development Goals (MDGs), low implementation capacity and absence of elected local bodies have made the achievement of the targets impossible," Khatiwada said, adding that low economic growth and less employment opportunity have left the country still more dependent on foreign employment.
The planning commission had targetted an annual increase of 3.2 per cent on average in employment in the last three fiscal years, but the achievement has been stuck below target at 2.9 per cent. Likewise, the plan has missed the poverty reduction and inflation targets. The plan had a target of bringing the poverty rate down to 18 per cent from 24.2 per cent but the current rate of poverty stands at 21.6 per cent, according to the panning commission. The government's failure in cracking down on spiraling prices has kept the average inflation rate at 8.8 per cent, which is above the plan target of 7 per cent.
Khatiwada attributed the misses to the devastating earthquake and border disruption that helped squeeze economic growth in the current fiscal year. The plan has, however, surpassed the targets in telephony penetration, including mobile phones, and in the area covered by forests. "The increase in telephony penetration has nonetheless failed to contribute to economic growth," Khatiwada added.
The 13th periodic plan was the third three-year interim plan following the second democratic movement that overthrew the monarchy and made Nepal the youngest republic in the world. Earlier, the planned development process that started some six decade back had been under five-year periodic plans, till the 10th plan.

Friday, May 13, 2016

Nepal fails to reap digital dividend

Nepal has failed to reap digital dividends, according to the vice chair of the National Planning Commission (NPC) Dr Yubraj Khatiwada.
"Expansion of technology has failed to boost the productivity of Nepali people," he said, releasing a World Development Report 2016: Digital Dividends' in Kathmandu today.
Nepal has 103 per cent telephony penetration and 50 per cent internet penetration, Khatiwada said, adding, "however, the access to technology has failed to boost productivity and contribute to the economic growth."
The World Development Report 2016 delves on digital dividends. "The Digital technologies have spread rapidly in much of the world," it reads, adding that digital dividends that is, the broader development benefits from using these technologies have lagged behind. "In many instances, digital technologies have boosted growth, expanded opportunities, and improved service delivery. Yet their aggregate impact has fallen short and is unevenly distributed."
Khatiwada was also of the view that Nepalis failed to reap the digital dividends despite huge digital penetration and expansion. "It could have helped efficient public service delivery and increase productivity," he said, highlighting that the increasing engagement on social sites has helped massive outflow of money from the country, instead of increasing productivity.
The report has also stressed that investment in the information and communication technology (ICT) sector should be matched by reforms in complementary areas like regulatory environment, labour market and governance, to foster economic growth, create more jobs, reduce income inequality, prevent rise of monopolies and reap maximum digital dividend.
With increasing digital technologies including internet and mobile phones, the number of mobile phone and internet users is also going up globally, according to the report that has claimed that the people, businesses and governments are more connected than ever before, creating a profound sense of social connectedness and global community.
However, Khatiwada, on the occasion, gave examples of some villages in Nepal, where farmers are taking help of mobile phones and internet to check weather for harvesting. "The farmers in some parts of Nepal are using technology to be update on weather for their crops," he said, without elaborating. "They have been also using technology to get real time market price of their agriculture produces," the vice chair added.
But increase of technology has also exposed people to various risks, Khatiwada said, adding that the cyber crimes have been increasing in recent years. "But these are the international issues, and a country like Nepal cannot fight alone."
He also suggested fighting unitedly against such international crimes.
"Although digital technologies, in many instances, have boosted growth, expanded opportunities and improved service delivery, the report reads, adding, "their aggregate impacts have so far been smaller than expected’ and ‘are unevenly distributed’.
“For digital technologies to benefit everyone everywhere requires closing the remaining digital divide, especially in internet access,” it adds.
"The unfinished task of connecting everyone to the internet – one of the targets of the Sustainable Development Goals (SDGs) – can be achieved through a judicious mix of market competition, public-private partnerships and effective regulation of the internet and the telecom sector,” adds the report. "But making internet service universal is not the only condition for fair distribution of digital dividends."
The report has also recommended countries to work on analogue complements — by strengthening regulations that ensure competition among businesses; by adapting workers’ skills to the demands of the new economy; and by ensuring that institutions are accountable to get most out of digital revolutions. "What these priorities highlight is that core elements of the development agenda – business regulations that ease market entry, education and training systems that deliver skills that firms seek, and capable and accountable institutions – are becoming more important with the spread of the internet."
It generally means ‘digital development strategies should be much broader than ICT strategies’, it added.
The report has also highlighted that the internet may have been automating tasks but workers may not have been possessing necessary skills, which is promoting inequality, rather than efficiency. "The internet may have also helped overcome information barriers but the government may have remained unaccountable, thus, leading to greater control, rather than greater empowerment and inclusion."
Countries should come up with regulations that allow firms to connect and compete; develop skills that technology augments rather than replaces; and create institutions that are capable and accountable to take full advantage of the opportunities the internet and other related technologies have presented, the report concluded.

Thursday, May 12, 2016

Economists suggest government to bring innovative and practical budget

The economists have suggested the government to bring innovative and practical budget.
Nepal Economic Association (NEA) organising a pre-budget interaction 'Nepal’s Forthcoming Budget: Priorities and way forward', suggested the government to focus on innovative and practical budget which can be implemented for sustainablt growth.
The organisation of economists also recommended the government to focus for overall economic revival in the wake of recent earthquake and blockades. With less than one per cent economic growth currently, it is ridiculous to see that state has billions of rupees in surplus but economic activities are not being carried out properly, they said, asking the government why it failed to implement budget and programmes, utilise money and invigorate economic activities. "The existing system has failed to work in a productive way which needs timely overhauling," they suggested.
As the earthquake has really brought Nepalis many challenges for the survival, the budget for the fiscal year 2016-17 should help gear the nation towards economic revival focusing on productivity, implementing rules and regulations and mobilizing government machineries effectively, they said, adding that the country is currently stands at a crossroad of low equilibrium of investment, decreasing business confidence, damaging investment climate that have failed to enhance economic activities, create employment opportunities through the enhanced capacities of the government and the private sector.
From the chair president of the assiociation Prof Dr Bishwambher Pyakuryal said that Nepal has gone through difficult stages in maintaining macroeconomic stability over last one year largely because of three fundamental reasons undesirably low economic performance before disaster, massive post-disaster destruction of human and physical infrastructures by the earthquake of April 25 and five months long economic blockade in Nepal’s Southern border beginning September 20. "Despite the fact that macroeconomic fundamentals were satisfactory, the capacity constraints in the productive sectors followed by declining exports and non-performance in infrastructure development limited economic potential in Nepal," he said, adding that the country is facing hyperinflation where general price level within an economy has increased rapidly and Nepalese rupees are losing real value.
He also urged the better coordination between Nepal Rastra Bank (NRB), Finance Ministry, National Planning Commission (NPC) and Office of Prime Minister urgently to rescue people from such impact, he suggested, asking the government to tighten monetary as a macro policy undertaken by the central bank and government’s commodity-specific policies to contain price need to go together.
Likewise, another economist Prof Dr Madan Kumar Dahal, on the occasion, said that the prolonged transition, dismal domestic investment, weak foreign investment and energy crisis have taken toll in the economy. "On the other, weak initiatives for giving relief for earthquake victims, low efforts in reconstruction, increased corruption and black marketing have made the people suffer," he said, adding, "In such a paradox, Nepal heavily plunged into the economic crisis which needs immediate revival with increased investment, attracting foreign investors and implementation of programmes effectively."
On the occasion, association's secretary general Gopal Prasad Tiwari and executive member Dr Shiva Raj Adhikari jointly made a presentation on 'Nepal’s Forthcoming Budget: Priorities and Way Forward”. They also stressed on budget allocation according to the defined programmes focusing on reconstruction needs to be expedited with sound working mechanisms.
Making a self-reliant economy is a tough choice which can be achieved with the expansion of linkages with the global economy, encouraging investors, focusing on agriculture with sufficient budget, implementing the programmes effectively, they mentioned while presenting the paper.
The programmes and policies endorsed by the parliament has also stressed support for youths on innovating ideas and loans to them based on qualification and certificates are very significant announcements, which might bring revolution in the economic sector if implemented with mechanism properly with frequent monitoring, they added.
Likewise, finance minister Bishnu Prasad Paudel, on the occasion, reiterated that the government is focusing on economic agendas rather than political issues.

Wednesday, May 11, 2016

Government encouraging pseudo-industrialisation

Manufacturing sector – victimised by politics and energy crisis – has been further damaged by the government's equal treatment to raw materials and finished products.
The government has been encouraging deindustrialisation by levying equal customs duty on raw materials and finished products, according to business fraternity. The government levies equal tax on most of the raw materials and finished products, which is discouraging the industrial sector, according to president of the Confederation of Nepalese Industries (CNI) Haribahkta Sharma.
There is a need to eliminate negative protection, he said, adding that industries have to pay equal customs for import of raw materials and finished products.
Most of the business groups have entered into trading business in recent years, pulling down shutters on their industry due to equal treatment to finished products and raw materials apart from deteriorating investment climate.
On one hand politics in labour unions has reduced productivity of employees and on the other lack of energy has squeezed production capacity of the plants, he said, adding that prolonged political transition will only increase the pace of deindustrialisation despite the government promise to encourage industrialisation in the country.
Likewise, the increasing cost of energy due to lack of regular power supply has made the domestic products expensive, eroding comparative and competitive capacity of domestic industries, added Sharma.
Managing director of Nimbus Ananda Bagaria seconded Sharma. According to him, the government has to immediately revisit its tax policy on raw materials.
The government is preparing the budget for the next fiscal year aiming to increase agriculture productivity and kick-start industrialization. However, without changing the existing tax policy that has failed to encourage industries, it seems Nepal will not see any industrialisation, said Bagaria.
The business fraternity has also asked the government to set separate customs duty for raw materials and finished products. "In many cases, import duty for finished products and concerned raw material are same," Bagaria said, adding that such policy does not protect domestic industries. "To promote industrialisation, there must be level playing field while converting raw material into finished products."
The industrialists have requested the government, which is preparing budget for the next fiscal year aiming at encouraging industrialisation, to adopt a clear policy of 2 tier difference in import duty on raw materials versus finished product.
The government policy in the past has encouraged industries based on duty difference with India, like the vegetables ghee industry. The government has to promote industries that have local raw material strength, according to Bagaria.
He opined that the country has been trapped into pseudo-industrialisation, fueling imports and increasing trade deficit, despite have huge local resources with competitive advantage over imported finished products.
According to the Central Bureau of Statistics (CBS), the manufacturing sector will contract by 9.86 per cent in the current fiscal year 2015-16. "The negative growth is likely to reduce manufacturing sector's contribution to the economy to 5.53 per cent in the current fiscal year from as high as 9.03 per cent in 2000-01," the CBS data revealed.

Tuesday, May 10, 2016

Ncell contributes Rs 129 billion to government coffer

Ncell Pvt Ltd (Ncell) today announced that it has contributed approximately Rs 129 billion to the national treasury, in the form of fees, royalty and taxes to date. As a long-term and committed investor in the country, Ncell aims to maintain its lead as the largest tax payer of the country in coming years as well, it said.
"As of May 4, Ncell has contributed Rs 128.63 billion to the government in the form of tax, royalty and fees," managing director of Ncell Simon Perkins said.
"I am encouraged that Ncell has made significant contributions to the state treasury, which serves as important source of public funding in areas where it matters the most – such as building roads, schools and medical infrastructures that are core to the well being and welfare of the people of Nepal,” he said.
Ncell is the highest taxpayer in Nepal and has contributed steadily to government coffers for the fiscal years 2012-13 (2069-70) and 2013-14 (2070-71).
"In the fiscal year 2014-15 (2071-72) alone, Ncell paid more than Rs 28.6 billion to the government as tax, royalty and fees,” Perkins said, adding that the company wishes to continue with this trend and maintain its lead as the largest taxpayer for the longer-term.”
In order to maintain the lead and take the company to the next level, Ncell on May 9, has announced its largest ever capital expenditure (capex) spend of $120 million (approximately Rs 12 billion) for the remainder of 2016, aiming to expand 3G aggressively in rural and remote areas and also to enhance quality in areas where it is already present.
Ncell presently has network coverage that reaches out to 92 per cent of population, and serves more than 13 million customers. In recent years, Ncell has been rapidly expanding 3G, and has requested Nepal Telecommunications for approval for the company to provide 4G services.
Divulging more on revenue contribution, Perkins disclosed that Ncell as of May 4, has paid Rs 30.69 billion in advance tax, Rs 39.66 billion in Value Added Tax (VAT), more than Rs 7 billion in license fees, as well as approximately Rs 8.95 billion in royalty, among others. The company has also contributed Rs 4.20 billion to the Rural Telecommunications Development Fund (RTDF).
The telecommunication company’s contribution to the state coffers has been growing significantly year-on-year, which reflects Ncell’s ambitious investment plans and growth. Ncell has also been solidly contributing towards socioeconomic development in various areas of Nepali society, the telecommunication company added.
In keeping with its unblemished profile as a responsible corporate citizen committed to the welfare of the people and nation of Nepal, Ncell also aims at working closely with the regulator and the government to fulfil national goals to benefit Nepalis populace through the use of technology that can bring immediate and impactful results in education, health and mobile financial services, among others.

Sunday, May 8, 2016

Please-all Policy and Programme lacks teeth

The government today unveiled a 'please all' Policy and Programme for the next fiscal year.
President Bidhya Devi Bhandari presented the government's Policy and Programme at the Parliament – the first since the promulgation of the new Constitution – with 'something for everyone' but it is said to lack the willpower and also structural and institutional capacity for implementation.
Economists and the business fraternity have expressed doubts about the implementation of the 'ambitious' Policy and Programmes, also in view of the short lifespan of the incumbent government coupled with eroding governance capacity, among other things.
The government's policy is populist, according to senior economist Prof Dr Madan Kumar Dahal. He opined that the government should have focused on the next one fiscal year instead of the next decade, which is somewhat populist and impractical. "The policy also lacks specific strategy for accelerating capital budget spending that could fuel economic growth, if indeed the government wants to spur economic growth," he added.
Likewise, another senior economist Prof Dr Bishwhambher Pyakuryal, said the 'ambitious policy' has failed to strike a balance between the incentives it has announced and the present bureaucratic and structural deficiencies. "The policy has something for everyone but no teeth to bite," he added. "It also fails to give continuity to the policies of earlier governments, which could lead to a policy void."
The earlier government had started second generation reform programme and was preparing to amend and bring new laws that could help create investment climate in Nepal. But the Policy and Programme presented by the incumbent government is silent on the second generation reform programme that was supposed to attract more domestic and foreign investment to kick start stalled industralisation and employment generation in the country.
"Though the policy has everything in its contents, the government lacks the basic infrastructure to meet the ambitious targets," said former member of the National Planning Commission (NPC) Dr Chandramani Adhikari. This 'ambitious policy' at a time of political transition could bring more frustration to the people, he said, adding that the government might have come up with a long policy document that includes something for everyone so as to win the confidence of the people as it has failed to deliver so far. "However, due to eroding bureaucratic capability and low political willpower, people will lose confidence in the government."
"There could be therefore more trust deficit between the government and the people," he added.
Adhikari also opined that there is policy ambiguity. The planning commission is coming out with a three-year plan, other institutions have their own periodic plans, and the Policy and Programme speaks of achieving everything in the next five years. "It is going to add more challenge to the government," he said, adding that "going by the historical trend, the implementation part is the most challenging aspect for all successive governments, though they all had something or the other for the people."
Likewise, another challenge is how the budget will help allocate resources on a structural and institutional basis to meet those targets," according to Adhikari. The Policy and Programme has to be supported with resources through the budget to meet the targets. The success or failure of the Policy and Programme will also be gauged by the budget that will either announce qualitative or quantitative projects to support it, he said.
The government is going to announce budget for the next fiscal year on May 28 to support the Policy and Programme presented today at the parliament.
Economist Dr Dilli Raj Khanal seconded Adhikari's views. "The current structural and systemic problems, including bad governance, is a key challenge in implementing the ambitious Policy and Programme," he said, hoping that the budget would bring some clarity how the Policy and Programme is going to be implemented.
Implementation is key as usual, according to president of the Federation of Nepalese Chambers of Commerce and Industries (FNCCI) Pashupati Murarka. 'Though the language is pleasing to the business community, the implementation part is doubtful as usual," he said, adding that the private sector's involvement in infrastructure projects, industrial zones and fines for calling bandhs and strikes is, however, encouraging.
The Policy and Programme has many populist slogans like loans against educational certificates or citizenships, which could mean gross misuse of people's deposits in banks and financial institutions.
Likewise, the Policy and Programme is in itself a 'confusing' document. The Policy claims that the new Constitution will be implemented and it also claims that the local elections will be held in January. The election of local bodies according to the old Constitution is the waste of time and resources, if the government is committed to federalism. The Policy raises serious concern on whether the government is implementing federalism according to new Constitution or back tracking the political course.
Though the Policy paper says that a new era of national independence and dignity, democracy, durable peace, good governance, development and prosperity has begun, the letter and spirit of the document have failed to provide any concrete basis for people to live the change as it has announced the election of the local bodies, according to the old structure.
The government has also reiterated its commitment to the reconstruction of damaged private houses and archeological heritage, to providing energy for all and employment to all, competitive and sustainable industrial development, and to a socialism-oriented economy.
The country has now moved in the direction of prosperity by means of equitable and sustainable economic growth, the Policy reads, but lacks any evidence of that or any programmes to achieve economic growth, except some earful populist slogans.
The Policy has also mentioned that reconstruction work has now been intensified although it took some time to prepare the necessary institutional and legal foundation due to the unfavorable situation created in the country.
The government is going to provide soft loans of Rs. 300,000 without collateral to owners of private houses, under their collective guarantee, it reads, adding that it is in addition to the grants of Rs 200,000 and soft loans of Rs 1.5 million in rural areas and Rs. 2.5 million in Kathmandu Valley, which was announced almost a year ago but not implemented yet.
The Policy also claims that it is going to bring about a self reliance-oriented, multi-interdependent economic system – realising the challenges that excessive dependence on one foreign country in trade, investment and supplies may generate – but in practice the people are still suffering due to the shortage of essential products since last half year.
Similarly, the Policy has greater focus on the agriculture sector and claims that the government will increase investment in agriculture so that the country will basically become self-reliant within two years in major food items and attain food security. However, going by the trends, the country has become more dependent on agricultural imports in recent years, despite successive government promises.
Likewise, the Policy document – that has no sense of accountability – has promised to supply electricity at a basic level within a year and to meet the actual demand within two years through implementation of the National Energy Crisis Reduction and Electricity Development Decade Action Plan- 2072, which is meant to produce an estimated 10,000-MW in a decade. In reality, the country is still reeling under 12 hours of load shedding that has handicapped economic activities and industries have been running in the 50 per cent capacity hitting employment generation, and pushing Nepal to import economy instead of self-reliant economy as claimed by the Policy and Programme. The best part is that mega hydropower projects that could help reduce load shedding hours are not anywhere near to completion within one year, as claimed by the Policy.
Last but not the least, the Policy document reads as if the incumbent coalition government is staying in power for decades, which is going to be purely a election propaganda as the government is going to be changed – according to the 9-point deal between the key stakeholders of the government CPN-UML and UCPN-Maoist – in a month.

Thursday, May 5, 2016

Budget to declare next decade as 'Decade of Economic Growth'

The government is declaring the next decade as a 'Decade of Economic Growth' in the budget for the next fiscal year.
Tabling the government's principles and priorities of the budget for the next fiscal year in the parliament today, finance minister Bishnu Poudel said that the government will declare the next decade as the 'Decade of Economic Growth'.
"The next three fiscal years, starting from fiscal year 2016-17, will be called the 'courageous starting' phase for economic growth," he said, adding that another three fiscal years, from 2019-20 to 2021-22, will be called 'encouraging transformation phase' for economic growth.
"Likewise, Fiscal Year 2022-23 to 2024-25 will be called the 'phase for double digit economic growth', and 2025-26 will be called the 'sustainable economic growth phase'," Poudel said, adding that the next decade will spur upward spiral economic growth.
The finance minister also stressed that the government's focus will be on service sector, including agriculture, industry and tourism, claiming that these are the key drivers of economic growth. "The government will help increase production and productivity in these sectors to accelerate growth," he added.
However, the country has been reeling under low economic growth of around 3 per cent in the last decade due to political and policy instability, inefficient bureaucracy and eroding spending capacity of development projects that could have created wealth and helped redistribute the wealth.
Without increasing efficiency of bureaucracy, qualitative spending capacity of development projects, increasing economic growth is a distant dream. The budget for 2015-16 had also declared the current fiscal year as the budget implementation year. But the government has failed to spend capital budget in the current fiscal year.
According to the Financial Comptroller General's Office (FCGO), the government has spent only 20.46 per cent of the capital budget till May 4. Of the total capital budget of Rs 208.87 billion, the government has been able to spend only Rs 42.17 billion so far.
The government is sitting on a cash pile of Rs 100 billion due to its eroding spending capacity which has pulled the economic growth down to 0.77 per cent in the current fiscal year.
Nepal needs to post economic growth of around 8 per cent to achieve developing country status by 2022 from the current status of Least Developed Country (LDC), and also to upgrade to middle-income country by 2030 from the current low-income country.
But the slew of economic reforms programmes and age-old Acts have been blocking the economic growth rate, which had once in the 90's touched 8 per cent due to economic reforms of the 90s post democratic movement. The government has failed to start the second generation economic reform programmes that is the root cause for the low economic growth trajectory.

Tuesday, May 3, 2016

Economic growth plunges to 13-year low at 0.77 per cent

The economic growth for the current fiscal year has squeezed to almost zero, according to the Central Bureau of Statistics (CBS).
Releasing the gross domestic product (GDP) estimate for the current fiscal year today, the CBS said that the economy will grow by a mere 0.77 per cent – which is a 13-year low – in the current fiscal year. In the fiscal year 2001-02, the country – under the King Gyanendra's rule – had recorded economic growth of 0.16 per cent. Likewise, the CBS has also revised last fiscal year's economic growth downward to 2.32 per cent from earlier estimation of 3.04 per cent.
The subpar monsoon that resulted in weak agricultural output, almost five months of economic blockade, and stalled reconstruction work in the aftermath of the last year's devastating earthquakes have pulled the economic growth down to a 13-year low, according to CBS director general Suman Raj Aryal.
The economy did not plunge into negative zone also due to better performance by the service sector including health and education sectors, he added.
The largest contributor to the economy, agriculture, is estimated to grow by only 1.14 percent, though its contribution to the economy is 31.19 per cent, whereas the lowest contributor – fisheries' sector – has just 0.5 per cent share in the economy.
The report also revealed that the total size of the economy is going to grow to Rs 2.25 trillion in the current fiscal year, from Rs 2.12 trillion in the last fiscal year.
Likewise, the largest contributors to the economy are agriculture (31.19 per cent); followed by wholesale and retail trade (14.23 per cent); real estate (9.16 per cent); transportation, communication and storage (8.42 per cent); construction (6.88 per cent); education (6.76 percent); and production (5.53 per cent) sectors, according to the CBS.
However, of the 15 sectors that are used to calculate the GDP growth, some six sectors are going to record negative growth in the current fiscal year.
Various national and international institutions have projected the Nepali economy to grow between -0.9 per cent and 2.2 per cent, whereas the government has in its white paper projected the growth at around 2 per cent, during the current fiscal year. The central bank had projected a negative growth for the economy whereas UNESCAP yesterday projected that the economy will grow by 2.2 per cent.
According to Aryal, various institutions are involved in making projetctions about GDP growth, but the CBS' projection is the authentic and most dependable one. "The CBS has projected the economic growth on the basis of nine months' data of the current fiscal year," he said, adding that the remaining 3 months could see some increment in economic activities, which could lead to improved economic growth.

Has gross national income increased?
Despite low economic growth, the CBS has projected an increment in per capita gross national income (GNI) to Rs 80,921 in the current fiscal year from last year's Rs 77,079. The increment of Rs 3,842 is 4.98 per cent compared to the last fiscal year, the CBS said. However, the increment in GNI per capita covers only half the inflation rate for the year, which is around 10 per cent, according to the central bank.

Savings lowest in last 22 years
Likewise, gross domestic savings as percentage of gross domestic product (GDP) is the lowest in the last 22 years, according to the CBS. The gross domestic savings as percentage of gross domestic product (GDP) is likely to stand at 5.26 per cent in the current fiscal year, as the country has failed to enhance its productive capacity. The figure is the lowest since fiscal year 1994-95.

Sectoral growth (compared to last fiscal year)
1. Agriculture and Forestry – 1.14 per cent
2. Fisheries – 11.76 per cent
3. Mining and quarrying – 6.54 per cent (negative growth)
4. Manufacturing – 9.86 per cent (negative growth)
5. Electricity, gas and water – 1.66 per cent (negative growth)
6. Construction – 3.98 per cent (negative growth)
7. Wholesale and retail trade – 1.13 per cent (negative growth)
8. Hotels and restaurants – 4.85 per cent (negative growth)
9. Transport, storage and communications – 2.55 per cent
10. Financial intermedeation – 3.30 per cent
11. Real estate, renting and business activities – 3.72 per cent
12. Public administration and defence – 5.78 per cent
13. Education – 6.69 per cent
14. Health and social work – 8.85 per cent
15. Other community, social and personal service activities – 5.60 per cent

Monday, May 2, 2016

UN body asks government to strike balance between fiscal and monetary policy to spur productive growth

A UN body has asked the government to strike balance between Fiscal Policy and Monetary Policy to spur productive growth.
Speaking at a function organised to unveil the report of 'Economic and Social Survey of Asia and the Pacific 2016' produced by United Nations Economic and Social Commission for Asia and the Pacific (UNESCAP) in Kathmandu today, economic affairs officer at the Macroeconomic Policy and Financing for Development Division of UNESCAP Sudip Ranjan Basu said that the Monetary Policy alone cannot shoulder the growth and that the Fiscal Policy has become more important to boost and redistribute the growth. "Productive growth has been slowing in recent years," he said, adding that quality of labour, access to finance to SMEs, and poor infrastructure are hitting productivity. "Productivity could be increased, if the government manages to strike balance between the Fiscal Policy and the Monetary Policy."
The contrast in Fiscal and Monetary Policy has hampered the economic growth, the UNESCAP report stated, suggesting the government to boost under disbursement of allocated budgets, improve tax administration and compliance, and accelerate reconstruction activities through issuance of reconstruction bond. "The government for maximum utilisation of domestic resources in increasing productivity as the Official Development Assistance (ODA) from rich countries have been drying for various reasons,"
Analysing the findings of the report executive chairperson of the South Asia Watch on Trade, Economics and Environment (SAWTEE) Posh Raj Pandey, said a proactive Fiscal Policy could help speed up spending. "Smart and active Industrial Policy, ensuring investment climate, and social protection for transition class, could help poor out of the poverty line," Pandey said, adding that active and efficient governance is a must to ensure growth.
The report, one of the oldest reports coming from UN agencies, states that some 1.7 million people could be out of poverty, if the agriculture productivity could be increased.
The Asia Pacific report also stated that the region as a whole has experienced considerable slowdown in economic growth and productivity gains in recent years. "The Asia Pacific region's progress on poverty reduction is slowing, inequalities are rising and prospects of decent employment are weakening," it said, adding that productivity and Sustainable Development Goals (SDGs) are closely linked and investing in these goals will increase productivity and help economic growth.
The regional report has projected Nepal to grow by 2.2 per cent in the current fiscal year, which is the lowest in the region. However, the inflation that the report has projected is the highest in the region.
Catastrophic earthquakes in April 2015, subpar monsoon season that resulted in weak agricultural growth and recent strikes and disruptions of trade routes in certain parts of the country have hit the growth in the near term. In the medium-term, the report states, a trade agreement with the USA and also an agreement with India to develop two large-scale hydropower projects could spur growth in the coming fiscal years.