Platform for collaboration on tax strengthened support to countries during the Covid-19 pandemic

The Platform for Collaboration on Tax (PCT) – a joint initiative of the IMF, OECD, UN and the World Bank (WB) – enhanced its support to countries in the area of domestic resource mobilisation during the Covid-19 pandemic, according to the PCT Progress Report 2021.

The report, released today, highlights that the PCT Partners are committed to deepening their tax collaboration further with a revamped work program to help countries develop resilient tax systems and better fiscal policies in response to the crisis.

The PCT Progress Report 2021 examines activities that the PCT has undertaken in five focus areas since July 2020: medium-term revenue strategies (MTRS), Covid-19, tax and sustainable development goals (SDGs), international taxation, and coordination. The new workstreams reflect the changing global tax landscape and the challenges of the pandemic for governments and policymakers as countries around the world try to balance the increased spending and lower revenues due to the Covid-19 crisis.

During this period, the PCT Partners increased their support to countries through the release of joint knowledge products, technical assistance concerning tax-related responses to the crisis, and workshops on critical issues, as the report reveals. The PCT released the final versions of two toolkits on Transfer Pricing Documentation and Tax Treaty Negotiations with virtual consultations and public workshops, hosting over 1,300 participants from governments and other stakeholders.

Additionally, the PCT Secretariat collaborated with the African Tax Administration Forum (ATAF) and the Asian Development Bank (ADB) to hold three regional workshops on MTRS, which provided 53 governments from Africa, Asia and the Pacific with a platform to exchange information on how the MTRS can benefit their tax system reform in the face of the pandemic. The PCT Partners also raised awareness on the role of taxation in promoting gender equality and growth through a joint blog and a public workshop.

The report illustrates that the PCT website continues to serve as a global resource on international taxation for tax officials from developing and emerging economies with its enriched content. The MTRS resource page, the e-learning calendar of the PCT Partners’ tax-related courses and the regularly updated Online Integrated Platform, which is the public database of domestic resource mobilisation activities and projects of the Partners, are among the new and existing products that provide countries with capacity-building support and transparent information.

Looking ahead, the PCT Partners will, in the coming months, focus on areas where coordination brings the most value by identifying new priorities and activities for their work in light of the recent developments in the global tax agenda. Further activities on the interconnection between tax and SDGs, more and improved resource pages on the PCT website and expanded engagement with countries on the PCT toolkits and MTRS are among the future PCT initiatives that aim to offer tax officials more capacity-building tools and resources.

The Platform for Collaboration on Tax (PCT) is a joint initiative of the International Monetary Fund (IMF), the Organisation for Economic Co-operation and Development (OECD), the United Nations (UN) and the World Bank Group (WBG). The PCT Secretariat is generously supported by the governments of France, Japan, the Netherlands, Norway, Switzerland, and the United Kingdom, according to the IMF.

Global trade falls steeply in first half of 2020

The global trade fell sharply in the first half of the year, as the Covid-19 pandemic upended the world economy. However, rapid government responses helped temper the contraction, and World Trade Organisation (WTO) economists now believe that while trade volumes will register a steep decline in 2020, they are unlikely to reach the worst-case scenario projected in April.
The volume of merchandise trade shrank by 3 per cent year-on-year in the first quarter according to WTO statistics. Initial estimates for the second quarter, when the virus and associated lockdown measures affected a large share of the global population, indicate a year-on-year drop of around 18.5 per cent. These declines are historically large, but could have been much worse. The WTO's April 20 annual trade forecast, in light of the large degree of uncertainty around the pandemic’s severity and economic impact, set out two plausible paths: a relatively optimistic scenario in which the volume of world merchandise trade in 2020 would contract by 13 per cent, and a pessimistic scenario in which trade would fall by 32 per cent. As things currently stand, trade would only need to grow by 2.5 per cent per quarter for the remainder of the year to meet the optimistic projection. However, looking ahead to 2021, adverse developments, including a second wave of Covid-19 outbreaks, weaker than expected economic growth, or widespread recourse to trade restrictions, could see trade expansion fall short of earlier projections.
"The fall in trade we are now seeing is historically large, in fact, it would be the steepest on record,” said director-general Roberto Azevêdo. “But there is an important silver lining here: it could have been much worse,” he said, adding that it is genuinely positive news but we cannot afford to be complacent. “Policy decisions have been critical in softening the ongoing blow to output and trade, and they will continue to play an important role in determining the pace of economic recovery.”
“For output and trade to rebound strongly in 2021, fiscal, monetary, and trade policies will all need to keep pulling in the same direction,” he added.
In light of available trade data for the second quarter, the April forecast’s pessimistic scenario, which assumed even greater health and economic costs than what had transpired, appears less likely, since it implied sharper declines in the first and second quarters.
The Covid-19 pandemic and associated containment efforts intensified in the second half of March. Strict social distancing measures and restrictions on travel and transport were fully in effect in most countries throughout April and May, and are now increasingly being relaxed. These developments are reflected in a variety of economic indicators which, taken together, suggest trade may have possibly bottomed out in the second quarter of 2020. Global commercial flights, which carry a substantial amount of international air cargo, were down nearly three quarters (-74 per cent) between January 5 and April 18, and have since risen 58 per cent through mid-June. Container port throughput also appears to have staged a partial recovery in June compared to May. Meanwhile, indices of new export orders from purchasing managers' indices also started to recover in May after record drops in April. It is useful to keep in mind that these rebounds follow historic or near-historic declines, and will need to be monitored carefully before drawing any definitive conclusions about the recovery.
Looking ahead to next year, a slower-than-expected pace of economic recovery would weigh on trade growth, which will see trade growth for 2021 come in at closer to 5 per cent, which would leave it well below the pre-pandemic trajectory. On the other hand, a quick return to its pre-pandemic trajectory would imply trade growth in 2021 of around 20 per cent, in line with the April forecast’s optimistic scenario.
The World Bank, OECD and IMF have all released forecasts showing significant slowdowns in global trade and GDP; all are broadly consistent with the WTO's forecast for the current year. The World Bank's recent forecast would see global output decline by 5.2 per cent in 2020, falling between the WTO's optimistic and pessimistic range. Other international organizations' GDP forecasts for 2020 are also increasingly negative, even as their trade projections stay roughly in line with the WTO's optimistic scenario. These estimates imply a less negative trade response to declining GDP growth than was observed during the global financial crisis of 2008-09.
The responsiveness of trade to changes in income can be measured by the ratio of the growth of merchandise trade volumes to real GDP growth at market exchange rates, also referred to as the income elasticity of trade. The implied elasticity under the WTO's optimistic forecast for 2020 was 5.3 – in line with that seen during the financial crisis. However, if world GDP instead contracts by the World Bank's estimated 5.2 per cent with a trade decline of 13.4 per cent.

Masatsugu Asakawa elected ADB President

Masatsugu Asakawa has been unanimously elected President of the Asian Development Bank (ADB) by its Board of Governors. Asakawa, 61, currently special advisor to Japan’s Prime Minister and Minister of Finance, will assume office as ADB's 10th President on January 17, 2020. He will succeed Takehiko Nakao, who will leave office on January 16, 2020. Asakawa will finish the unexpired term of President Nakao, which ends on November 23, 2021.
“Asakawa’s extensive and diverse experience in international finance and development will serve ADB well in pursuing its vision of a prosperous, inclusive, resilient, and sustainable Asia and the Pacific,” said deputy prime minister and minister of Economy and Finance of the Republic of Korea and chair of the ADB Board of Governors Hong Nam-Ki. “The ADB Board of Governors looks forward to working with Asakawa.”
In a career spanning close to four decades, Asakawa has held a range of senior positions at the Ministry of Finance of Japan, including vice minister of Finance for International Affairs, and gained diverse professional experience in development policy, foreign exchange markets, and international tax policy.
He served as finance deputy for the 2019 G20 Osaka Summit and the G20 Finance Ministers and Central Bank Governors meeting in Fukuoka, Japan. Furthermore, in the immediate aftermath of the Global Financial Crisis, he took part in the first G20 Leaders’ Summit Meeting in his capacity as executive assistant to the then Prime Minister Taro Aso. Asakawa has had frequent engagement with the Organisation for Economic Co-operation and Development (OECD), including as chair of the Committee on Fiscal Affairs from 2011 to 2016.
Asakawa served as a visiting professor at the University of Tokyo from 2012 to 2015 and at Saitama University from 2006 to 2009. He obtained his Bachelor of Arts from the University of Tokyo in 1981 and MPA from Princeton University in 1985.
ADB is committed to achieving a prosperous, inclusive, resilient, and sustainable Asia and the Pacific, while sustaining its efforts to eradicate extreme poverty, it claims in a press note. “In 2018, it made commitments of new loans and grants amounting to $21.6 billion.”
Established in 1966, it is owned by 68 members, 49 from the region.

EU approves disbursement of €8.75 million in agriculture sector

The Euroepan Union (EU) has disbursed to Nepal €8.75 million, out of the initially €10 million planned as first tranche within the Agriculture and Rural Development support programme covering progress made during the fiscal year 2017-2018.
The programme foresees three disbursements totalling €36 million (equivalent to Rs 4.5 billion).
“I take this opportunity to congratulate the authorities for the results achieved in the agriculture sector since the launch of the Agriculture Development Strategy (ADS): agriculture services have been extended; export earnings have risen; and irrigation and rural connectivity have progressed,” EU ambassador Veronica Cody said, adding that in addition, reforms of the legal framework for land management and agribusiness activities, including agriculture markets, are underway. “Accountability measures have also been strengthened with the establishment of annual costed plans and a monitoring framework.”
The EU shares the importance that Nepal attaches to agriculture and remains a strong partner in this sector, she added.
Nepal has fulfilled most of the policy commitments agreed with the EU for the release of the first disbursement under the programme, as evidenced by the increase in the total value of processed dairy products from Rs 18.9 billion in 2014-15 to Rs 27.1 billion in 2017-18. Likewise, some 994 agriculture and livestock technicians were deployed to local governments during the year 2017-18. Moreover, progress on the legislative area is also underway, with a new bill on land management, and the preparation of a new bill on agribusiness promotion. These are important accomplishments for agriculture in Nepal at a time when the country is transitioning to a federal form of governance. In addition to agriculture-specific commitments, the EU disbursement assessment also takes into account progress related to reforms in the fields of public financial management, existence of stability-oriented macro-economic policy and progress on budget transparency and oversight.
The EU is providing technical support to further strengthen the ADS implementation and its monitoring framework. EU development cooperation helps improve life opportunities for millions of people across the world. The EU and its member states continued to be the world's leading provider of official development assistance, according to the latest OECD-DAC report, with over €74 billion in development in 2018 representing almost 57 per cent of the total global development assistance by all OECD-DAC donors.
The EU Multiannual Indicative Programme (MIP) 2014-2020 for Nepal (€ 360 million) focuses on three objectives including sustainable rural development (including nutrition), education (including vocational training) and, strengthening democracy and decentralisation. “In synergy with the MIP, EU also provides Aid for Trade (AfT), promotes sustainable consumption and production, and foster investments notably in energy connectivity, according to a press note issued by the Delegation of the EU to Nepal.

WTO members review preferences granted to LDCs’ service suppliers

A dedicated session of the WTO Services Council – held yesterday and today – reviewed how World Trade Organisation (WTO) members are making use of the services waiver that allows them to grant more favourable treatment to service suppliers from least-developed countries (LDCs). Members also discussed transparency issues and cybersecurity measures in a regular meeting of the Services Council today.
The dedicated session on the WTO Services Waiver consisted of a workshop and a formal meeting of the Council for Trade in Services. The workshop provided an opportunity to ‘focus our attention on the task of better integrating LDCs into international services trade’ and of ‘making the trading system more inclusive’, director-general Roberto Azevêdo said in his opening remarks yesterday.
A total of 36 WTO members are classified as LDCs.
The workshop reviewed ways of increasing LDCs' services exports, including through maximising the use of the preferences available, and the challenges lying ahead. The participants noted that LDCs account for 1 per cent of world services and only 0.3 per cent of world services exports. LDCs' exports are expanding rapidly – 11 per cent per year on average – but from a low base. Bangladesh is the leading LDC services exporter, followed by Cambodia and Myanmar, and tourism is the LDCs' most traded services sector. To date, 51 WTO members – both developed and developing countries – have notified preferences under the Services Waiver. “These members together account for 86 per cent of global GDP and 86 per cent of global trade,” a press note from the WTO reads.
A review of the waiver was mandated by the 2015 Nairobi Decision. A services waiver was first established in 2011 allowing WTO members to grant more favourable treatment to LDC service suppliers. The Nairobi Decision extended the waiver until December 31, 2030. The purpose of the waiver is to enhance the participation of the world's poorest countries in world trade.
One theme emerging from the dedicated session of the Services Council was the need for more detailed trade data and for reporting of bilateral trade flows. The European Union (EU) was cited as one of the few members to report on the evolution of its imports of LDC services. It was noted that Bangladesh was one of the few LDCs to publish data about its services exports. The EU was reported as being the top destination for Bangladesh's services exports.
The LDCs also drew attention to the potentially restrictive effect regulations can have on market access for LDC service suppliers, including raising the costs of trade. They called on preference-granting members to tailor their preferences to the collective request tabled by the LDCs in 2014, which calls for, among other things, to end requirements for the recognition of qualifications and market access restrictions, including residence obligation for professionals from LDCs. Strategies on strengthening national capacities for service supply should be tailor-made to respond to the specific capacity constraints LDCs are facing, the group said.
In addition, an overview of the recent improvements to the services-related statistics databases was presented, including the TiVA database – developed by the Organisation for Economic Cooperation and Development (OECD) and the WTO – that measures trade in value added (TiVA) terms, and the Trade in Services database by mode of supply, which measures services trade by sector.
The dedicated session highlighted the need for efforts from national agencies in charge of statistics for financial resources to collect and compile data and to promote multi-level cooperation. The need for specific technical assistance for LDCs was also emphasized. Improving data collection at the national, regional and international levels will be essential to better capture the progress made on implementing the Services Waiver.
Another issue highlighted, on the occasion, was the regional disparity among LDCs. For example, tourism services are concentrated mainly in Asian countries, and while the share of LDCs' services exports is growing in Asia, it has been declining in Africa since 2005.
The preference-granting members shared recent initiatives and practices to translate the waiver into concrete market share for LDCs. These include easing the granting of visas for service suppliers seeking to access foreign markets, assisting LDCs in building a robust and sustainable tourism sector by helping to build roads and hotels and enhancing presence on the Internet, organising traineeships and organising targeted technical assistance activities. It was also stressed that the waiver should complement other efforts.
Several LDC service suppliers presented their success stories, the challenges they face and made suggestions on how to facilitate their further integration into the global trading system. It was said that certification remains a key challenge for service suppliers from LDCs, especially given its close link with consumer confidence.
LDCs called on members to grant additional preferences and to reduce regulatory barriers.
Improving transparency
In a meeting of the Council for Trade in Services today, WTO members discussed transparency and notification requirements for services-related measures following a communication sponsored by several developing countries. All members that intervened said that they shared the proponents' objective to improve transparency, although many noted the capacity constraints faced by developing countries and LDCs in complying with notification requirements, including internal coordination challenges. Several indicated that they were ready to engage in a conversation on how the transparency of services trade measures could be improved.

Sebon to host international conference on financial consumer protection

The capital market regulator is organising a two-day ‘Conference and Roundtable on Financial Consumer Protection and Education in Asia Pacific’.
The Securities Board of Nepal (Sebon) in collaboration with International Network on Financial Education (INFE) under the Organisation for Economic Co-operation and Development (OECD) is organising the conference that will discuss on the measures to promote financial literacy in developed and developing countries, financial inclusion, consumer protection and demographic changes, executive chairman of Sebon Dr Rewat Bahadur Karki said at a press meet today.
The conference and roundtable will help in identifying challenges and opportunities for Nepal on financial inclusion, he said, adding that the event will provide an opportunity for the country to develop the relationship with regulatory agencies of other countries and forge relationship with them in the future for regulatory cooperation. “A total of 125 participants including 40 foreign delegates representing regulatory bodies and other organizations from the financial sector including OECD, Securities and Exchange Board of India, and Australian Securities and Investments Commission are joining the conference and roundtable.”
According to the organiser, the conference will hold roundtable – on the second day – with representatives of central banks, Sebon, Beema Samiti, and other regulatory bodies to discuss financial consumer protection. The conference and roundtable is scheduled to be inaugurated by finance minister Dr Yuba Raj Khatiwada.
The Sebon has acquired the full membership of the OECD’s INFE in January. The OECD/INFE with 86 organisations from 64 countries as full members and 172 organizations from 95 countries as regular members promotes and facilitates international co-operation between policy makers and other stakeholders on issues related financial education worldwide.

NBI gets OECD affiliation

National Banking Institute (NBI) has received the affiliation with the Organisation for Economic Co-operation and Development (OECD)/ International Network on Financial Education (INFE) membership, France.
With the international affiliation with OECD/ INFE, NBI looks forward to capitalise on the huge resource base of INFE with expertise and serve the community through Financial Education with its rich global networks it offers, it said in a press note.
OECD is an international organisation that works to build better policies for better lives with the goal to shape policies that foster prosperity, equality, opportunity and well-being for all. The organisation draws on almost 60 years of experience and insights to better prepare the world of tomorrow. Together with governments, policy makers and citizens, they work on establishing international norms and finding evidence-based solutions to a range of social, economic and environmental challenges.
Through the membership the delegates through NBI shall be invited to attend OECD financial education global events and specific dedicated session of OECD/INFE Technical Committee meetings as per determined by the Advisory Board, the press note reads, adding that the membership would allow NBI to be consulted systematically and in priority when a financial education document is issued by the OECD or the OECD/INFE for public consultation.
Since the inception of NBI, it has been in the forefront of Financial Education in Nepal. In addition it has been actively engaged in Financial Literacy throughout the country and has done many innovating work. Mobile learning App on Financial Literacy is one of our unique initiatives that have drawn huge attention both nationally as well as at the international front.

David Malpass becomes 13th president of World Bank Group

The executive directors of the World Bank (WB) today unanimously selected David R Malpass as president of the World Bank Group for a five-year term beginning on Tuesday, April 9, 2019. The board expressed its deep gratitude to interim president Kristalina Georgieva for her dedication and leadership in recent months, reads a press note issued by the World Bank.
Malpass previously served as under secretary of the treasury for International Affairs for the United States (US). As under secretary Malpass represented the US in international settings, including the G-7 and G-20 deputy finance ministerial, World Bank-IMF Spring and Annual Meetings, and meetings of the Financial Stability Board, the Organisation for Economic Cooperation and Development (OECD), and the Overseas Private Investment Corporation (OPIC).
The executive directors followed the selection process agreed in 2011, the note reads, adding that the process included an open, transparent nomination where any national of the bank’s membership could be proposed by any executive director or governor through an executive director. "This was then followed by thorough due diligence and a comprehensive interview of Malpass by the executive directors."
The Board looks forward to working with Malpass on the implementation of the Forward Look and the capital package agreement as articulated in the Sustainable Financing for Sustainable Development Paper.
In his role as under secretary, Malpass played a crucial role in several major World Bank Group reforms and initiatives, including the recent capital increase for IBRD and IFC. He was also instrumental in advancing the Debt Transparency Initiative, adopted by the World Bank and IMF, to increase public disclosure of debt and thereby reduce the frequency and severity of debt crises.     
Prior to becoming under secretary, Malpass was an international economist and founder of a macroeconomics research firm based in New York City. Earlier in his career, Malpass served as the US deputy assistant secretary of the Treasury for Developing Nations and Deputy Assistant Secretary of State for Latin American Economic Affairs. In these roles, he focused on an array of economic, budget, and foreign policy issues, such as the US involvement in multilateral institutions, including the World Bank.
Malpass has served on the boards of the Council of the Americas, Economic Club of New York, and the National Committee on US–China Relations. Malpass earned his bachelor’s degree from Colorado College and his MBA from the University of Denver.  He undertook advanced graduate work in international economics at the School of Foreign Service at Georgetown University.
The World Bank president is chair of the boards of directors of the International Bank for Reconstruction and Development (IBRD) and the International Development Association (IDA). The president is also ex officio chair of the boards of directors of the International Finance Corporation (IFC), the Multilateral Investment Guarantee Agency (MIGA), and the Administrative Council of the International Centre for Settlement of Investment Disputes (ICSID).

Connectivity and inclusiveness highlighted at opening of Aid for Trade global review

Continued support is needed to improve connectivity, lower trading costs and increase women’s participation in trade, particularly in developing and least developed countries (LDCs), speakers at the opening plenary session of the Aid for Trade (AfT) Global Review 2017 said.
Providing the support will ensure trade contributes further to alleviating poverty and achieving the Sustainable Development Goals (SDGs), the speakers said, on the occasion.
"Many factors inhibit connectivity and inclusiveness, whether it’s poor infrastructure, high trading costs, or gender discrimination," WTO director-general Roberto Azevêdo said at the opening of the three-day event. "And they all act as major constraints on sustainable development," he said, adding that work to bring down these barriers can go a long way to connect more people and improve more lives.
The biennial Global Review provides a platform for high-level discussions on the Aid for Trade initiative, which aims to build the trading capacity of developing countries and LDCs. This year’s Global Review is dedicated to the theme of 'Promoting Trade, Inclusiveness and Connectivity for Sustainable Development'.
According to DG Azevêdo, the right infrastructure must be in place to activate trade’s ability to deliver sustainable development. This includes the physical infrastructure of essential roads and ports, the soft infrastructure of rules, institutions and skills that help players take part in trade, and the digital infrastructure to connect people to the global marketplace at lower costs.
"The Trade Facilitation Agreement," he added, "is also a tool that helps cut trade costs, with developing countries and LDCs to benefit most. We need to make a difference in all of these areas – and this is why Aid for Trade is so important."
Since the Aid for Trade initiative was launched, almost $300 billion has been disbursed for Aid-for-Trade support in 146 developing countries and LDCs, DG Azevêdo said, pointing to data in the WTO-OECD publication titled 'Aid for Trade at a Glance 2017', which was launched at the opening session. "A huge body of research, including some 500 case stories, illustrate further the difference Aid for Trade has made," DG Azevêdo added.
Likewise, UNCTAD secretary-general, Mukhisa Kituyi highlighted the constraints faced by developing countries and LDCs in participating in trade, particularly online. "At a time when global commerce is going electronic, if you are not visible, you are not existent," Kituyi said.
Aside from digital connectivity, physical connectivity remains an important factor for trade, secretary-general of the Organisation of Economic Co-operation and Development (OECD), Angel Gurría said, adding that trade facilitation and the offline infrastructure for trade - roads, ports, and bridges - are ever more important in the digital world.
"Aid for Trade is central in ensuring benefits from cross-border trade reach women, small firms, entrepreneurs, farmers, everyone everywhere,” senior director of the World Bank Trade and Competitiveness Global Practice Anabel Gonzalez said, adding that Aid for Trade initiatives work best when they are done in a coordinated manner in partnership with all stakeholders.

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.

The Business of Going Out of Business in Nepal

Closing an enterprise is tougher than opening a business in Nepal, despite the government devising legal provisions necessary for an exit.

Nepal has improved the opening process by going online last year, but deregistration and liquidation of businesses is still the same tedious task it always has been. Stakeholders blame a lack of awareness among entrepreneurs, the consolidated Act for bankruptcy and the lengthy nature of the ordeal investors are compelled to go through.

“The Company Act has provisions for a company to deregister and liquidate,” says deputy registrar of the Office of Company Registrar, Toya Nath Adhikary. Records from the Office of the Company Registrar (OCR) revealed that in recent years, the number of company deregistrations has increased.

Some 42 industries have already been deregistered or liquidated in the first four months of the current fiscal year, according to data provided by the OCR. In the last fiscal year, the number stood at 139, from 114.

Once a company is registered with the OCR, the company must submit its annual reports every year. Otherwise it will have to pay a fine, according to the legal provision. “Low compliance of law due to lack of corporate culture has also made it difficult for both the OCR and enterprises,” adds Adhikary.

The company creates unlimited liability to the state, various institutions and shareholders, and while closing the company; the government must be proactive in protecting the rights of the state, institutions or individuals, if the company has any liability. Legal experts say that a company has to go through court procedures for insolvency, and also to identify the liability-asset status of the company.

If a company has more loans than liabilities, it will be sent for liquidation, whereas if a company has more liabilities than loans, it is declared insolvent and sent to court, says corporate advocate Gandhi Pandit, who is also one of the architects of the Insolvency Act.

“The concept of deregistration, liquidation and insolvency has not been clear. Rather, it has sent the wrong message to enterprises that it’s difficult to close the business,” he says.

The government has established a commercial bench – at the Appellate Courts across the country – that looks into insolvency cases. When the Nepal Development Bank went bankrupt due to lack of good governance, the central bank moved to the Patan Appellate Court on July 9, 2009 asking permission for its liquidation. However, the bank’s lawyers, including Pandit, asked the court to send it for insolvency.

But the Patan Appellate court sent Nepal Development Bank to liquidation – the first such case in the banking history of Nepal – on December 18, 2009 as its liabilities were valued higher than its assets.

Likewise, the Nepal Rastra Bank sought the permission of the court to send United and Samjhana Development Banks for liquidation. The court concurred with the central bank and also appointed liquidators for these institutions.

However, the Doing Business Report 2014 of the International Finance Corporation (IFC), an arm of the World Bank Group, has reported that it takes five years to resolve insolvency in Nepal compared to the South Asian average of three years and the OECD average of 1.7 years.

The time and costs required to resolve bankruptcies show weaknesses in existing bankruptcy law and the main procedural and administrative bottlenecks in the bankruptcy process. The recovery rate, expressed in terms of how many cents on the US dollar claimants – creditors, tax authorities, and employees – recover from the insolvent firm, the time taken for insolvency is more in Nepal compared to the South Asian average.

But for the last couple of years, there have been no changes in the resolving insolvency indicator score that has been continuously at 25.95 – including time taken, cost and recovery rate – except the ranking of the indicator that varies compared to other economies. It also means that despite the act, domestic and foreign investors do not feel comfortable with the insolvency act and are seeking an easier exit policy, according to Pandit.

The Insolvency Act directs a company to settle the issue only through court, which takes some time. “As a business has to go through court, it might take some time but not much,” Adhikary agrees. The business fraternity, however, says that it’s a tedious process to deregister a company due to labours issue and tax administration.

Though there is a provision to deregister VAT and PAN, it’s a very tedious process, says Federation of Nepalese Chambers of Commerce and Industry vice president Pashupati Muraraka. “Likewise, compensation packages for labour is another hurdle for closing the business,” he adds. Adhikary also accepts that a consolidated Act could shorten the time frame for insolvency, despite the current provisions.

“A comprehensive dialogue among the private sector, legal experts and business people is a must for a consolidated act that is applicable to the domestic context,” he adds. Nepal improved in the Doing Business report due to reduced paperwork and time frames to register a business, but there is a stark need to look again at the closing business environment, to instill confidence in investors.

(Published in Business 360 magazine December 2013 issue)

UN study finds 200 million fewer women online than men

There are currently 200 million fewer women online than men, and the gap could grow to 350 million within the next three years if action is not taken, according to a report released by the UN Broadband Commission Working Group on Broadband and Gender.

The report revealed that around the world, women are coming online later and more slowly than men. Of the world’s 2.8 billion internet users, 1.3 billion are women, compared with 1.5 billion men.

While the gap between male and female users is relatively small in OECD nations, it widens rapidly in the developing world, where expensive, ‘high status’ ICTs like computers are often reserved for use by men. In sub-Saharan Africa, for example, the report’s authors estimate that there are only half the number of women connected as men.

Worldwide, women are also on average 21 per cent less likely to own a mobile phone – representing a mobile gender gap of 300 million, equating to $13 billion in potential missed revenues for the mobile sector.

Report authors also believed that today’s untapped pool of female users could also represent a market opportunity for device makers, network operators, and software and app developers that might equal or even outstrip the impact of large emerging markets like China or India.

In developing countries, every 10 per cent increase in access to broadband translates to a 1.38 per cent growth in GDP. It means that bringing an additional 600 million women and girls online could boost global GDP by as much as $18 billion.

The report also outlined the importance of encouraging more girls to pursue ICT careers. By 2015, it is estimated that 90 per cent of formal employment across all sectors will require ICT skills. Professionals with computer science degrees can expect to earn salaries similar to doctors or lawyers – yet even in developed economies, women now account for fewer than 20 per cent of ICT specialists.

WTO sees gradual recovery in coming months despite cut in trade forecasts

World trade growth in 2013 and 2014 is likely to be slower than previously forecast.
World Trade Organisation (WTO) economists now predict 2013 growth of 2.5 per cent – down from the 3.3 peer cent forecast in April – and 4.5 per cent in 2014 – down from five per cent – but they say conditions for improved trade are gradually falling into place.

The demand for imports in developing economies is reviving but at a slower rate than expected. It hindered the growth of exports from both developed and developing countries in the first half of 2013 and was the reason for the lower forecasts, they said.

“There is a message for the WTO in it,” the global trade regime director general Roberto Azevêdo said, adding that the past two years of sluggish trade growth reinforce the need to make progress in the multilateral negotiations. “Although the trade slowdown was mostly caused by adverse macro‑economic shocks, there are strong indications that protectionism has also played a part and is now taking new forms which are harder to detect.”
“Fortunately, there is something we can do about this,” he said. “Negotiations under way in Geneva can address these problems, facilitating greater trade and opportunities to spur economic growth.”

“I am encouraged at the level of commitment shown by WTO members,” Azevêdo said, adding, “But much hard work remains in the coming weeks if we are to deliver a successful outcome at the ministerial conference in Bali.”
Some short-term prospects are improving with encouraging data coming from Europe, the US, Japan and China.
Reports on private sector activities from purchasing managers – purchasing managers’ indices, which give some indication about future activity – shipping rates, automobile production and other leading indicators, suggest that the economic slowdown has bottomed out and that a tentative recovery is underway. “It is expected to be reflected in rising quarterly growth in the months ahead,” WTO economists said.
The European sovereign debt crisis has eased significantly since last year, unemployment in the US has fallen to 7.3 per cent from a post-crisis high of 10 per cent, and growth of gross domestic product (GDP) – a measure of a country’s output – in Japan has accelerated since the adoption of new fiscal and monetary policies.

Although large developing economies have slowed appreciably in recent months, the latest figures from China on industrial production suggest that the country may be regaining some of its dynamism. On the other hand, India’s economy is still in the midst of a sharp contraction according to composite leading indicators calculated by the Organisation for Economic Cooperation and Development (OECD).

However, since the European Union (EU) consumes roughly one third of the world’s traded goods – including shipments between member countries within the EU – and the EU unemployment rate is likely to remain at or near record levels for some time, growth in trade can be expected to be below average — that is, below the 20-year average of 5.4 per cent — in the coming quarters.