Licenceraj hurts economy, accepts NPC vice chair

Licenceraj is hurting the economy, accepts the National Planning Commission (NPC) vice chair.

Speaking at a programme organised to mark 24th Annual General Meeting of the Society of Economic Journalists Nepal (SEJON) today, NPC vice chair Dr Bishwo Nath Poudel said that the Licenceraj has promoted syndicate. “The practice of licence being sold has distorted the economy,” he said, adding that licenceraj has also promoted monopoly. “There should not be monopoly in any sector including banking.”

Every sector including banking and insurance is suffering from the syndicate, the vice chair said, adding that there is no possibility of opening or closing bank or insurance companies due licenceraj, which has promoted syndicate.

In last few years, the government, backtracking from the liberal market policy, has started distributing licence, he added. “The licence distribution is the mother of corruption.

Poudel represents the Nepal Congress that has in the 90s started the liberal economic policy propelling the economy but the incumbent government, led by the Nepali Congress president Sher Bahadur Deuba, is also backtracking the liberal economic policy and promoting the licenceraj.

He even asked the central bank governor Maha Prasad Adhikari, who was sharing the dias with him, to abolish the licence and liberal, again, the banking sector. However, central bank governor did not say anything on the issue. Lately, the Insurance Board is under scrutiny for distributing, licence for the reinsurance company and also micro-insurance company, though it has directed insurance companies to go for merger claiming that the number of insurers have increased compared to the market size. The inconsistent licence policy by the regulator has been promoted by the political parties and the government, as they have been blamed for taking bribes for licence.

The Nepal Rastra Bank (NRB) governor Maha Prasad Adhikari, on the occasion, said nothing about the licencing policy and claimed that the lonable fund crisis can be corrected only with an improvement in the country’s balance of payments (BoP) position. “The government’s increased expenses on a periodic basis will help BoP position to be positive,” he said, adding that the lonable fund crisis will continue to persist in the banking system. “The bank deposit has increased by Rs 167 billion during a month between mid-June and mid-July, due to increased government expenditure and inflow of remittance and tourist arrivals.”

Without blaming the central bank governor, as he used to do earlier, finance minister Janardan Sharma also claimed that the economy is gradually returning to normalcy due to the timely caution maintained by the government. “The increased remittance inflow due to nearing festival season, is also helping the economy to remain afloat.”

He also argued that the increase in remittance would help foreign currency reserves go up. “The finance ministry has already instructed all the concerned ministries to make this fiscal year's budget expenditure effective,” he claimed but failing to understand that the Finance Ministry only helps mobilise the revenue, its on the five ministries, related to the development works, to spend the budget. In the last fiscal year also, Sharma claimed to spend 10 per cent budget every month, but at the end of the fiscal year, the government failed to expedite the capital expenditure. His Finance Ministry, also failed to meet the revenue target for the fiscal year.

Effective public finance management a challenge for fiscal federalism

Stakeholders have underlined the need for the effective public finance management (PFM) for smooth transition to and effective implementation of fiscal federalism.
Speaking at an interaction programme on ‘Public Finance Management’ organised by Society of Economic Journalists-Nepal (SEJON) with the support of Public Expenditure and Financial Accountability (PEFA) secretariat today, they also pointed out various challenges for the effective public finance management – in ensuring transparency putting in place better reporting standards and strengthening institutions involved in public spending – in the new federal system.
"As the country is implementing the fiscal federalism, institutional capacity, fiscal capacity and technical capacity building is the key challenge for the effective public finance management," secretary at the National Natural Resources and Fiscal Commission (NNRFC) Baikuntha Aryal said, adding that the capacity of Finance Ministry alone is not adequate for the efficient resource allocation. "All spending agencies should have similar capacity."
However, there is a huge question on the capacity of the Finance Ministry as well.
Likewise, chief of Budget and Programme Division at the Finance Ministry Hari Saran Pudasaini, on the occasion, pointed out the problem of lack of database and reporting system at the sub-national level. He also said that the lack of functionaries at the local levels have led to the poor execution of capital budget. "We have handed over the functions and finances to the local level governments," he said, "But, there was delay in sending functionaries which has led to low spending of the capital budget, particularly that should have been spent through local-level governments."
Former Financial Comptroller General Suresh Pradhan warned that lack of proper accounting, recording and reporting system at local level could lead to financial indiscipline. 
"The public finance management in recent years is getting linked with the macro-economy of the country, rather than limiting it to budget cycle," said coordinator at the PEFA Secretariat Sushil Pandey. "The public finance or spending should be aimed at increasing social equity, maintaining financial balance and ensuring justifiable results,” he added.
Likewise, lead financial management specialist at the World Bank Office in Nepal
Franck Bessette, opined that the public finance management remains a core part of democracy. "Having right and experienced people able to prepare, discuss and implement the budget and do the procurement works at the local level in the new federal system remains a challenge."
Despite the early budget approval from last couple of years – according to the Constitution – the government spending has not been increased due to inefficient bureaucracy, lack of capacity and technical knowhow of the not only local governments but also the federal government.
Though, the government has been working to simplify the public procurement process to boost spending on development projects, it has not been able to due to mainly lack of an effective oversight agency. Almost every year, the government fails to spend budget allocated for the development projects. According to the Financial Comptroller General Office, only 28.89 per cent of the total Rs 313.99 billion earmarked for capital expenditure for the current fiscal year 2018-19 had been spent as of mid-March.
Even if the budget is spent, lack of quality, transparent and accountability has always been under question.
Former finance secretary Shankar Prasad Adhikari, on the occasion, said that the government needed to devise a mechanism to promptly address issues related to quality assurance and project design. 

Stakeholders welcome amendments in SEZ Act

Stakeholders today opined that the recent amendments in the Special Economic Zones (SEZ) Act will encourage investors towards injecting investments in the SEZs.
Addressing a roundtable discussion on ‘Problems faced by industries inside the Bhairahawa SEZ', organised by the Society of Economic Journalists of Nepal (Sejon) in the capital today, they said that the government’s decision to reduce the compulsory export provision for industries inside SEZ to 60 per cent from existing 75 per cent is investment-friendly. "It will encourage the private sector towards investing in such protected zones," they added.
With various amendments intended to lighten up the export provisions for industries inside SEZ and assure further tax incentives, the cabinet had endorsed the SEZ Bill last week. The SEZ Bill has been tabled at the Parliament for the final nod.
Along with reducing the mandatory export provision for industries operating within the SEZ to 60 per cent of their production, the new SEZ Bill also assures 100 per cent income tax waiver for such industries for the first five years and 50 per cent income tax waiver thereafter. Likewise, the Bill has also reduced the rental fee for industries within SEZ to Rs 20 per square meter per month from Rs 150 per square meter month.
Furthermore, the SEZ Bill has also reduced the minimum investment ceiling for industries inside SEZ to Rs 20 million from Rs 50 million.
"The SEZ Act has been amended keeping in priority to boost the morale of investors inside the SEZ," executive director of SEZ Authority Nepal Chandika Bhatta said. "If necessary, we can be further flexible in the export provision for such industries in future,” he said, adding that the new SEZ Bill has also incorporated a provision whereby industries inside SEZ get all assured tax waiver facilities under the recommendation of SEZ Authority itself.
Speaking at the discussion programme, former vice-chairman of the National Planning Commission (NPC) Dr Shankar Sharma said that though the SEZ Bill has attempted to promote investment inside the SEZs, the government should now focus on effective implementation of the SEZ Bill. "The new SEZ Bill has addressed some of the key issues raised by investors inside the SEZ," he said, adding that it, however, is crucial that the government implements the law properly through enhanced cooperation between the government agencies.
Likewise, director general at the Department of Customs Toyam Raya said that available laws of the government are contradictory resulting to difficulty in their effective implementation. "Thus, the government should ensure that any laws should not contradict with one another while bringing them,” said Raya.
On the occasion, deputy managing director at the Nepal Electricity Authority (NEA) Hara Raj Neupane assured that the authority is serious in providing necessary power supply in the industrial sector, including the Bhairahawa SEZ.
Meanwhile, former commerce secretary Purshottam Ojha said that the government should focus on implementing the one-door policy for industries inside SEZs. 

Govt urges World Bank to revise ‘Doing Business’ methodology

The government has again expressed strong concerns regarding the ‘Doing Business’ report, which was published by the World Bank (WB) on October 31.
At a programme organised by the Society of Economic Journalists-Nepal (Sejon) to mark the 21st Sejon Day in the Valley, finance minister Dr Yubaraj Khatiwada, said that the report had reflected a negative picture of the country’s economic condition and investment environment.
“We had expressed our concern to the World Bank over the report," he said, adding that the World Bank mission officials have already arrived in Nepal and have started reviewing the report.
Minister Khatiwada rued the fact that the World Bank had been using six months old data to prepare report. "The World Bank must use the latest data as much as possible if it wants to provide a relevant report,” he emphasised, adding that it should include data till at least October. However, the World Bank (WB) prepares the report according to its annual schedule despite the change in governments in any of the countries. It also uses the data according to its annual calendar, not according to each of the country. But Khatiwada claimed that the World Bank collects data till May only and it is the major reason for a gloomy investment picture of the country.
Nepal ranked 105th in the ‘Doing Business’ ranking in 2017 but this year the country has dropped to the 110th position, hinting at a weakening state of trade and investment climate as it has failed to simplify the tax payment process. But Khatiwada claimed that the tax regime in Nepal is more progressive and simplified against what the World Bank reported. He also reiterated that the incumbent government has created an investment friendly environment by taking the initiative to strengthen existing policies and the system of the government but the report does not reflect that.
“World Bank needs to change the methodology of its research," the finance minister added, though the World Bank doesnot change the methodology for any one country.
Khatiwada, on the occasion, also defended the whopping trade deficit. "We recently acquired two wide-body aircraft for Nepal Airlines Corporation,” he said, adding that Nepal needs to import the equipments for development works like hydropower, which will in long run pay off. "We are planning to generate 10,000 megawatts of electricity in the next decade and for that we have to import machinery and equipment, so import in itself should not be taken as a negative development."
On the occasion, Sejon presented Rudra Khadka of Nagarik Daily and Subash Yonjan of Capitalnepal with the annual Sejon Award.
Khadka has awarded under the print media category. He was recognised for his series of in-depth stories on Sikta Irrigation Project. Khadka has been honoured with a cash prize of Rs 50,000 and a certificate of appreciation.
Similarly, in the online category, Subash Yonjan from CapitalNepal.com was honoured with the Sejon award for writing in-depth stories on fake rescue scams in the mountaineering and trekking sectors. Likewise, Bhagwan Khanal from Karobar National Economic Daily was awarded Late Sanjay Neupane Research Grant, while Amar Baduwal and Arun Sapkota were given Hydro Solution Fellowship grants.
Likewise, editor of Karobar National Economic Daily Kuber Chalise, chief editor of Abhiyan Daily Madan Lamsal, Hridaya Gautam from Ajako Artha and news chief of Kantipur TV Prashant Aryal were honoured by the Sejon for their long contributions in economic journalism.

Nepal still 'least free' country economically

Nepal ranks 121 acoring 5.54 among the 141 economies in the Economic Freedom of the World Report released today in Nepal by Samriddhi -- The Prosperity Foundation -- in association of Society of Economic Journalists-Nepal (Sejon).
The report shows that over the last one decade economic freedom has steadily regressed in Nepal to 5.54 this year from 5.75 in 2000.
"Though Nepal’s rank has slightly improved this year with a score of 5.54 because of the decrease of score of other countries, Nepal’s economic freedom score has in fact decreased from last year’s score of 5.68," said senior economist and former secretary Dr Bhola Chalise.
"Nepal continues to be one of the least free countries in the world in case of economic freedom," he said, adding that the areas that caused a decline in Nepal’s overall performance are size of government, access to sound money, freedom to trade internationally and Regulation of Credit, Labour, and Business.
"The only area where Nepal improved slightly is legal structure and security of property rights, with its score (rank) going up from 3.40 (112) to 3.51 (111)," Chalise added. "Nepal capacity to trade internationally has taken a plunge over last one decade."
The annual peer-reviewed Economic Freedom of the world report is produced by the Fraser Institute -- Canada’s leading public policy think-tank -- in cooperation with independent institutes in 80 nations and territories.
The Report uses 42 different measures to create an index ranking countries around the world based on policies that encourage economic freedom. The cornerstones of economic freedom are personal choice, voluntary exchange, freedom to compete, and security of private property. This year’s publication ranks 141 nations representing 95 per cent of the world’s population for 2008, the most recent year for which data is available.
"Economic freedom is measured in five different areas like size of government, legal structure and security of property rights, access to sound money, freedom to trade internationally, and regulation of credit, labour, and business.
The Report shows that individuals living in countries with high levels of economic freedom enjoy higher levels of prosperity, greater individual freedoms, and longer life spans. This year’s report also contains a new research showing the impact of economic freedom on the rates of unemployment and homicide. "Increase in economic freedom decreases homicide and unemployment rates," according to the Report that also shows that countries with more economic freedom have substantially higher per-capita incomes, higher growth rates, Life expectancy is about 20 years longer in freer countries.
People living in countries with more economic freedom report more life satisfaction. With fewer regulations, taxes, and tariffs, economic freedom reduces the degree of corruption.
Hong Kong maintains the highest level of economic freedom worldwide, with a score of 9.05out of 10. The other top scorers are Singapore (8.70), New Zealand (8.27),Switzerland (8.08), Chile (8.03), the US (7.96), Canada (7.95), Australia (7.90), Mauritius (7.82), and the UK (7.81).
Zimbabwe maintains the lowest level of economic freedom among the 141 jurisdictions analysed, followed by Myanmar, Angola, and Venezuela
Initiated by Milton Friedman, one of the most famous economists of 20th century and Michael Walker, the founder of Fraser Insitute and prepared by Fraser Institute, a leading think tank based in Canada, the report is supported by Economic Freedom of the World Network’s member organisations in more than 80 countries all over the world.

Society of Economic Journalists elects new team

The newly elected team of Society of Economic Journalists, Nepal (Sejon) -- president Narayan Sapkota, vice-president Kuvera Chalise, general secretary Pradeep Chapagai, secretary Bigyan Bibhu Ghimire, tresurer Asha Thapalia and members Sudarshan Sapkota, Kamala Thapa, Lomas Joshi, Suresh Neupane and Baburam Khakda.