Parliamentary committee directs government to adopt one-door policy for relief aid

International Relations and Human Rights committee today directed the government to take all the foreign assistance for relief and rehabilitation through government fund.
"We have directed the government to take the much-needed foreign assistance only through the government fund based on one-door policy,” the parliamentary committee chairman Prabhu Sah said, adding that they asked the government to prepare a plan and criteria to take aid for search, rescue, relief, resettlement and reconstruction. "Petty aid and wishful spending won’t bring any positive results."
The committee's directive came on a time, when most of the development partners have been interested in distributing aid through their own channels making the government think on their intentions. Due to prolonged political transition the international aid agencies have been hesitant to provide cash to the Prime Minister’s Disaster Relief Fund instead they have said to spend through their own channels.
Though the government is asking the donors to channel the aid through the Fund, the Fund has only Rs 503 million – mostly donated by domestic donors – by Tuesday, though the Finance Ministry has already released Rs 4 billion till now.
The parliamentarians also opined that aid by some friendly nations and international organisations and their expenditures have not been transparent as they have spent according to their wishes. Directing the government to ask foreign rescue workers to return immediately, they also lashed out at the government for its failure for keeping record of the number of foreign rescue wworkers.
The lawmakers hailed the security agencies for their active role in rescue operations but criticised Home, Finance and Foreign Ministries for their lack of coordination.
They also directed the Office of Prime Minister and Council of Ministers to make necessary arrangement to make Prime Minister’s Disaster Relief Fund transparent.
Defense secretary Ishwori Prasad Poduel, who holds the command of the Central Natural Disaster Relief Committee, briefed the meeting on works of the committee and the ministry.
He informed the parliamentarians that some 65,017 Nepal Army personnel have been deployed for rescue and the Nepal Army choppers made 641 flights to quake-hit areas and rescued 4,974 people. Likewise, Nepal Army rescued some 2,372 people alive, treated some 984 people and dig out some 357 dead bodies.
Turkey, Malaysia, Pakistan and some Indian Army retuned on May 5, after concluding search and rescue operations, he said, adding that Polish, Israeli, Thai, Indonesian, remaining Indian, Algerian and Sri Lankan returned home on May 6.

IRD fails to audit 75pc of 'suspicious' tax fraud cases

The Inland Revenue Department (IRD) has failed to complete a full audit of one-third of 'suspected' tax frauds.

"IRD has started full audit of 11,334 tax payers — carried over from to last fiscal year from a year ago — but it has been able to complete full audit of only 2,942, which is only 25.96 per cent," according to the report of the Auditor General.

"The full audit of the 2,942 tax payers has helped the government mobilise an additional Rs 8.68 billion," the report said, suggesting the IRD to expand the sampling size and accelerate the full audit process of pending files to check revenue leakage.

Generally, a tax payer files tax on self assessment and the IRD, honouring the tax payers’ integrity, accepts it. However, IRD annually cross checks 1.4 per cent of the files — of tax payers — through random sampling on the basis of risk and does desk review. "If there is any suspicion during the desk review, IRD starts a full audit of them," according to an official at IRD.

However, the department has failed to do a full audit of 8,392 tax payers — till last fiscal year — as it is more involved in administrative work rather than concentrating on audit.

"IRD, instead of being involved in administrative work, should focus on tax compliance and audit, which could contribute more to the government coffer," he said, adding that the unproductive administrative staff has to be minimised and channelised to productive work including expansion of the sampling size.

"If the sampling size of the current 1.4 per cent is increased to five per cent, revenue mobilisation will also go up by three times that will help the government mobilise resources for development activities."

The Auditor General's report has also revealed IRD's incompetency. "The IRD has not only failed to complete full audit of samples within time, but also has no concrete basis of sampling," it said, adding that IRD has failed to comply with the Income Tax Act 2058 BS and VAT Act 2052. "Some of the acts of IRD are also against the Interim Constitution 2063 BS."

However, due to the absence of Public Accounts Committee (PAC) after the dissolution of the Parliament on May 27 last year, there is no check and balance mechanism.

During the Local Donor Meeting recently, development partners had suggested the formation of an extraordinary committee to play the role of the PAC — as an interim measure — consisting of qualified personnel to scrutinise accounts and take necessary action until a regular PAC is established.

"The audit observations keep piling up year after year with limited efforts towards institutional public financial management improvements," they had said.

Finance secretary asks development partners to follow due procurement process

The government has asked development partners to follow the law of the land on procurement to avoid confusion.

Speaking during the Nepal Portfolio Performance Review meeting, today, at

the Finance Ministry, finance secretary Shanta Raj Subedi requested development partners to follow the Procurement Act of Nepal to smoothen the procurement process. He also requested donor-funded projects to submit the audit report of the projects as most of them have failed to submit the reports within the given time frame.

The government is committed to providing matching funds for donor supported projects, he said, adding that there will also be no implementation and coordination problems for these projects.

Representatives of development partners presented their progress report in the meeting that was chaired by the finance secretary. The next Nepal Portfolio Performance Review (NPPR) meeting will be held in July.

Lack of budget, monitoring hits development projects

The delay in the full-fledged budget, frequent and untimely transfer of project staff, and weaknesses in financial and procurement management, coupled with limited performance monitoring have posed a serious risk to implementing World Bank-funded projects, affecting their performance and results.

"However, regular review meetings could help unlock implementation issues to enable the projects to accomplish their results," according to participants of the government and World Bank joint review meeting of World Bank supported projects in the country.

The World Bank currently supports 17 projects in Nepal through concessional and grant financing amounting to $1.3 billion. But the meeting reviewed 10 projects that are considered risky and slow-moving, or heading towards closure later in the year.

"Nepal’s achievements in the areas of health, education and livelihoods have made a positive impact on people’s lives, especially girls and women," said World Bank country manager for Nepal Tahseen Sayed, who led the bank's team.

She welcomed the commitment made by the Finance Ministry and line ministries to expedite implementation, curtail staff transfers, and unlock the issues impeding progress in energy sector projects.

This year's second joint portfolio review meeting — that was coordinated by joint secretary and chief of the Foreign Aid Coordination Division at the finance ministry Lal Shankar Ghimire and chaired by finance secretary Krishna Hari Baskota – noted Nepal’s good development results including progress in poverty reduction, gender parity in education, reduction in maternal mortality, and improved infrastructure access.

The World Bank has been supporting Nepal in poverty reduction, gender parity in education, reduction in maternal mortality, and improved infrastructure access.

Welcoming the World Bank as a large and stable development partner, Baskota said that budget allocations will be made available on time, and implementation of five projects that will end in 2013 will be accelerated, ensuring proper utilisation of the remaining amount available under these projects.

He also offered organising a high-level meeting to address implementation issues, including compliance with social and environment safeguards, which is slowing down progress in the energy sector.

According to the Finance Ministry, World Bank — that has contributed 23.7 per cent of the total disbursement — was the largest donor among the development partners in fiscal year 2010-11.

The top five multilateral donors were the World Bank Group ($ 256.1 million), Asian Development Bank ($184.4 million), United Nations Country Team ($112.5 million), European Union ($42.4 million) and the Global Fund to Fight AIDS, Tuberculosis and Malaria ($19 million) in 2010-11, the ministry added.

Trade deficit serious problem: Donors

The donor community has shown serious concern on rising trade deficit, though, they hailed the effort of the government in mainstreaming trade in development plans and policies.

Speaking at the programme organised by the Ministry of Commerce and Supplied to review Nepal Trade Integration Strategy 2010, they, however, said that the trade deficit has been serious problem.

They also said that the strategy will help reduce trade deficit of the country.

The country has exported merchandise worth Rs 7.20 billion and imported merchandise worth Rs 46.98 billion making it a deficit of Rs 39.78 billion in the first month of the current fiscal year.

The government should facilitate trade, the participants at the review meeting said, adding that the government should also proactively play role to reduce Technical Barriers to Trade (TBT), address the concern on Sanitary and Phytosanitary Measures (SPS) and help in diversification of the market.

The government has been organising the review meeting regularly on Nepal Trade Integration Strategy 2010 to identify the appropriate resources and to avoid overlapping and duplication in the projects funded by donors.

The meeting is organised by donor community and the ministry in rotation.

In the programme, joint secretary at the ministry Toya Narayan Gyawali highlighted the importance of mainstreaming trade in the development policies and programmes.

Power outage, political instability and corruption are not only the problem of Nepal but of the entire Sough Asian region, said Diep Nguyen Van Houtte of the World Bank (WB).

She also described the cost structure, the country is facing at the time of export of goods, situation of physical infrastructure and regulation and projects being carried out by the World Bank to facilitate the trade activities.

On the occasion, Udo Weber from German Embassy suggested the government to strengthen monitoring of the projects.

Similarly, he also indicated the problem of lack of impact study of completed projects and lack of mainstreaming of the development assistance in trade in the policy of both the government and the aid agencies.

Representatives from the private sector, on the other hand, emphasised that the government should not be focused on remittance for short term benefit rather it should utilise it in productive sector

Enabling environment key to development

An enabling business environment is key to a country's development, according to a Japanese economist.

"An enabling business environment — that includes political stability, policy stability, domestic savings channelled to investment besides grants and foreign investment, investment in human capital, and collaboration among stakeholders — could help a country move ahead in the development path," said Prof Ryokichi Hirono of the Seiki University.

"Political and policy stability are key for investors, whereas the savings of the people is a must as only foreign aid will not be enough to help any country develop," he said, adding that investment in human capital will help create a human resource pool to support economic development.

But collaboration among the five stakeholders — government, business people, labour, consumer society, and academia — is also key in monitoring policy implementation, said the professor. "The private sector could play a good role by insisting on policy stability to create an investment friendly environment."

The domestic private sector had tried to boost the morale of the business community by proposing the Investment Year, said president of Federation of Nepalese Chambers of Commerce and Industry (FNCCI) Suraj Vaidya.

"The campaign will not only help boost the morale of domestic investors, but also foreign investors," he said, adding that the private sector is planning a slew of visits to attract investments from various countries once the Investment Board comes up with concrete projects in a couple of months. "Investments will help generate employment in the country," added Vaidya.

As more Nepalis are going abroad for employment, the country needs to create more employment back home, said Prof Hirono, adding that the remittance from migrant workers should also be utilised in production.

He also urged for the creation of an investment fund from the remittance received. "The major chunk of remittance has been used for consumption that has increased imports," said Hirono, who is leading the Japanese Overseas Development Assistance (ODA) evaluation team to Kathmandu currently.

Japan was the second largest bilateral donor after the United Kingdom in Nepal in fiscal year 2010-11, according to the Finance Ministry.

United Kingdom ($92.1 million) was followed by Japan ($58.7 million), India ($50.7 million), the US ($48.5 million) and Norway ($32.8 million) in fiscal year 2010-11, the Donor Cooperation Report of the ministry revealed.

Japan with 5.4 per cent stood fifth — after the World Bank, Asian Development Bank (ADB), United Nations (UN), and United Kingdom (UK) — among the sources of aid disbursement in Nepal in fiscal year 2010-11, when the country received a total of $1.08 billion aid disbursement from donors.

However, Hirono suggested that the effective utilisation of aid by the government, private sector, and non-governmental organisations, might increase ODA from Japan. "Accountability and transparency will help increase ODA," he added.

Japanese ambassador to Nepal Kunio Takahashi, on the occasion, said that there has not yet been any official decision on the increment of ODA, but both sides should simultaneously increase cooperation with each other.

 

Nepal-Japan bilateral trade

Fiscal Year — Export — Import

2006-07 — Rs 559.45 million— Rs 3,228.97 million

2007-08 — Rs 488.05 million — Rs 6,148.08 million

2008-09 — Rs 572.65 million — Rs 6,111.18 million

2009-10 — Rs 554.15 million — Rs 6,267.57 million

2010-11 — Rs 652.35 million — Rs 3,957.91 million

(Source: Trade and Export Promotion Centre)