Shakya appointed NPC vice chair

The government today appointed former secretary Rabindra Kumar Shakya the vice chair of National Planning Commission (NPC) to avoid the plan holiday.
Since the former vice chair Deependra Bahadur Kshetry resigned on April 22, the national think tan remained vacant creating confusion among the development partners too, as there is only one-and-a-half month for the current Three Year Interim Plan (2010-13) comes to an end, but the draft of the third Three Year Interim Plan is yet to be approved by the Nepal Development Council.

The newly appointed vice chair was retired thirteen years ago as a secretary, after serving the country as bureaucrat.
Likewise, the cabinet also approved Rs 1.98 billion grant assistance of German government. The government has also decided to accept Rs 2.30 billion aid from the World Bank for co-operative sector reform

It has also extended lease of 4.961 hectare land given to Manakamana cable car for 40 more years.

Government claims there will be no plan holiday

Finance minister Shankar Koirala said there will be no plan holiday, assuaging the serious concerns of development partners.
Trying to satisfy development partners — during the Local Donor Meeting here today — regarding their concern on a 'plan holiday' due to the vacant National Planning Commission (NPC) at a crucial time when the third Three Year Interim Plan (2013-16) needs to be finalised, he said the government will appoint planning commission members including the vice chair soon.
The planning commission that remains vacant after vice chair Deependra Bahadur Kshetry and three members resigned on April 22, has not been able to call the meeting of National Development Council that will finalise the draft of the third Three Year Interim Plan.
Koirala, however, asked the development partners — who are waiting for the finalised draft of the plan — to align their respective country strategy papers in line with the government's development map.
Asking the development partners to also follow the Development Cooperation Report (DCR) 2013, which has concluded that foreign aid has been widely fragmented and not aligned to the government's ongoing second Three Year Interim Plan (2010-13), he blamed untimely and low disbursement, lack of effective oversight and low absorptive capacity as the key impediments to effective mobilisation of foreign aid.
"Aid effectiveness is key with accountability," he said, adding that effectiveness of foreign aid is also a concern of development partners that have been helping Nepal for the last six decades.
The development partners, however, asking the government to focus on four key areas as stop-gap measures to continue mutual accountability, transparency and aid effectiveness, asked for an update on the preparation status of the next three-year interim plan.
"The plan will provide the framework for long-term partnership and commitment of development partners, especially in the context of their next country partnership strategies," said World Bank (WB) country manager for Nepal Tahseen Sayed, speaking on behalf of the development partners.
She also asked the government to focus on budget and portfolio management for maximum development results; economic planning and programming; accountability and governance; and Foreign Aid Policy and aid effectiveness. "By adopting the MfDR approach in the plan, with associated results framework, greater harmonisation and alignment will take place," said Sayed, adding that more rapid progress in establishing a medium-term expenditure framework, with stronger linkages to budget allocation and outputs would bring more discipline and better oversight in managing the expenditure programme.
"We have recently seen unprecedented consensus among top political leaders on hydropower development and the government can use the opportunity to take administrative, legislative, and institutional measures to support hydropower development, including mechanisms for meaningful consultations with the local population," she added.
Hailing the release of the Auditor General's report on time, the development partners also asked the government to form an extraordinary committee — as an interim measure — to play the role of Public Accounts Committee (PAC) consisting of qualified personnel to scrutinise accounts and take necessary actions until a regular PAC is established.
On the occasion, they also welcomed and hailed the sharing of contours of the draft Foreign Aid Policy. "We understand that finalising the policy, in consultation with development partners, is a key priority of the government to bring more clarity with regard to foreign aid management," Sayed said.

Opposition doubts finance minister's intention

Amid protest from opposition parties, deputy prime minister and finance minister Bharat Mohan Adhikari again pressed for early budget today.
"The budget needs to be presented before May 28," he said at the Biratnagar Airport today. "I am trying to forge consensus among the parties including opposition Nepal Congress (NC) that is vocal about Adhikari's intention to bring budget before May 28 -- the deadline of the Constituent Assembly.
Though the budget session of the Legislature-Parliament has been summoned by President Dr Ram Baran Yadav from May 2 on Prime Minister Jhala Nath Khanal's recommendation, the premier himself has ruled out any possibility of tabling the budget before May 28 and has already informed Speaker of the House Subas Chandra Nemwang.
However, the Ministry of Finance has been preparing to present the budget for the fiscal year 2011-12 on May 23. Earlier too the cabinet on Adhikari’s proposal fixed the date of budget for May 3, which seemed impossible.

The opposition party has raised serious objection on Adhikari's intention for the budget at a time when the economy is heading towards severe crisis due to political instability.
"There is no condusive investment climate due to rising insecurity," former finance minister Dr Ram Sharan Mahat said, adding that the cost of production of domestic products is going high making them less competitive resulting in low exports.
After failed attempt of deputy prime minister and finance minister Bharat Mohan Adhikari’s to bring Supplementary Budget to distribute remaining budget to the party cadres and pardon the fake VAT bill users, the Finance Ministry has been under severe pressure to prepare early budget for the next fiscal year.
Though the Three Year Interim Plan (2010-13) aims at providing jobs to 1,75,000 people every year, "the budget and its orientation seems to be losing its focus and going to be distributive instead of production-oriented” he said, adding that the budget also failed to create condusive environment for investment that could have boosted exports and generated employment too.
The Three Year Interim Plan has fixed the ceiling of Rs 385 billion, out of which Rs 175 billion is separated for capital expenditure and Rs 208 billion for recurrent expenditure.
"Amid double digit inflation, balloning trade deficit due to import growth outspacing exports by six times, difficult labour relations is pushing the country to economic collapse," the former finance minister said.
Price hike stood at 10.7 per cent in the first eight months that is expected to rise further once petroelum products'' prices are raised next week.
Similarly, the government has been able to spend only Rs 33 billion capital expenditure -- meant for development activities lowering the capital formation.
The government has in the budget for current fiscal year targetted a growth of 4.5 per cent. However, the economy is projected to grow by 3.45 per cent only.
Balance of Payment has registered a deficit of Rs 11.30 billion in the first eight months of the current fiscal year failing the monetary policy that has targetted Rs 9 billion surplus.
Neither central bank''s monetary policy nor government's fiscal policy could give respite to the exports by encouraging the productive sectors not could they help raise competitiveness of tradeable goods.
On one hand share of manufacturing sector to the economic growth is declining and on the other prolonged tight liquidity situation in the banks has been hurting lending to productive sectors due to high interest rates, forget the energy crisis that has pushed the cost of operation high up.
Capital markey is yet another indicator that proves the economy is passing through a rough water due to government apathy.
Capital market that is said to be the mirror of economy also proves the poor economic performance. The secondary market index has dropped to five year low to 347 points and has been hovering below the psychological 400 points since last four months.
Similarly, revenue mobilisation -- that is largely import-based -- has also failed government target by five per cent. The Finance Ministry has been able to mobilise Rs 145.65 billion revenue -- in the first nine month -- that is 95.8 per cent of the target.
Unlike the past couple of years, when the government had been exceeding revenue target, this year it is also going to be a failed attempt.

Economic growth stalls below four per cent

Poor industrial performance has pulled the economic growth below four per cent against the government projection of 4.5 per cent.
According to the preliminary report of the Central Statistics Bureau (CBS), the growth is projected to be around 3.9 per cent. "The low manufacturing growth, slowdown in the construction sector due to tight liquidity situation and higher interest rates; and regular power outage stalled the industrial growth pulling the obverall growth," said former member of National Planning Commission (NPC) Dr Puskar Bajracharya.
The industrial growth stands around 1.7 per cent, according to the preliminary forecast -- due to plunge in the key manufacturing items. The Manufacturing Price Index has recorded a growth of a mere 1.23 per cent in the second quarter compared to the first quarter of this fiscal year.
However, the agriculture growth recorded a good four per cent and service sector growth that stood around 5.2, according to the preliminary report, boosted the overall growth to nearly four per cent, though, it is not encouraging, he added.
According to the preliminary estimates of the Ministry of Agriculture and Cooperatives, the summer crop production has increased by 11 per cent and 11.5 per cent for paddy and maize, respectively compared to last year, while millet production has increased by one per cent giving relief to the agriculture growth.
The agriculture, that used to have around 40 per cent contribution in the gross domestic production (GDP), however, at present contributes to almost a quarter to the GDP that was projected to grow by 5.5 per cent in the Three Year Interim Plan.
"However, the delayed budget that slowed down the government spending, trade and consumption, coupled with the private sector economic activities hit the economy hard," he said, adding that there is also not any encouraging signal from the political quarters creating policy dilemma.
The economy grew by 3.53 per cent in the last fiscal year and by 3.95 per cent a fiscal year ago in 2008-09. In the last one decade, only in the fiscal year 2007-08, the country had witnessed a growth of 5.80 per cent.

Bankers oppose salary ceiling

The bankers showed their serious concern over the central bank's move to fix the perks and benefits of the chief executive officers (CEOs), directors and other high-ranking staffers.
"The central bank's move to make the perks and benefits transparent is weclome," told Sashin Joshi, president of Nepal Bankers Association (NBA) and CEO of NIC Bank here today talking to scribes. "But to fix it is not practical," he said adding that banking is one of the most competitive sectors in Nepal at present. "Such move might start brain-drain in banking sector," Joshi added.
The Monetary Policy for the fiscal year 2010-11 -- announced yesterday by Nepal Rastra Bank (NRB) -- has hinted at controlling perks and benefits of chief executive officers (CEOs), directors and other high-ranking staffers to make it compatible with economic condition of the country.
"Pays and perks should be tied up with performance," suggested Rajan Singh Bhandari, vice-president of NBA and CEO of Citizens Bank Nepal.
The bankers were also concerned over the central bank's interference in the open market. "Reading between the lines, it seems the central bank also wants to control rates," they said adding that the market decides the rates, not the central bank. However, the bankers have themselves, recently, formed a 'gentlemen-agreement' on rates. Though, they claimed that the 'gentlemen-agreement' was not to let the rates go over the board.
The bankers think that increasing the Statutory Liquidity ration (SLR) after adding money at bank's vault is positive move but NRB's indication to dictate rates and fees is not according to the free market economic policy that Nepal is towing.
"The Policy has also failed to clarify how it's going to encourage Merger and Acquisition (M&A), though its a welcome move," Joshi said adding that the tax policy and labour law need to be clear to encourage the M&A. "Similarly, deposit insurance is a good move but it might send wrong message."
The bankers also called the central bank not to discourge Interbank deposits and bring the foreign institutional investors in the capital market, apart from strict regulation on credit cooperatives.
The central bank has apart from Early Warning Signal (EWS) to further strengthen the banks and financial institutions brought -- for the first time -- stress testing, which would predict the impact of economic ups and down in the financial system.
The domestic banks carry high credit and liquidity risks, according to International Monetary Fund (IMF). "Some banks are even facing high solvency risk," the IMF added.
The formal announcement of the Monetary Policy has a very short history of less than a decade in Nepal. But it used to be announced after the budget to support the fiscal policy. This time, it has been announced before the budget and is broadly based on Three Year Interim Plan (2010-2013).

BUDGET BUZZ: Bring a consensus budget

Nepal is passing through a critical period of the peace process and political consensus is the first and foremost need of the country today. This factor needs to be seriously considered while preparing the budget so that it is owned by all parties and get success in implementation.
The Three Year Interim Plan is a consensus document of major political parties of the country. Likewise the Common Minimum Programme of coalition partners of the government. Hence, the budget should be based on mainly these two documents and as set in the TYIP, priority should be accorded to agriculture, tourism. Hydropower and infrastructure. TYIP has adopted a development model of three pillars viz public sector, private sector and cooperative sector. The budget should therefore be able to mobilize all these three sectors.
A safe and investment friendly environment should be created to enhance private sector activities and provisions made to promote and expand cooperatives all over the country in different economic activities. The government should, on one hand, facilitate these sectors and on the other, build public private partnership to develop infrastructure. The government should take the lead in developing the social sector.
The incumbent government is led by CPN-UML. Like the historic and popular budget of 2052-53 presented by the then CPN-UML government, the upcoming budget should be guided by the principle of a welfare state and provide relief measures to downtrodden people and marginalised sections of society. While providing such relief, it would be better if it is linked with economic empowerment and social transformation wherever possible.
Build Own Village Yourself was the most popular programme introduced in the budget of 2052-53 by the UML government. Subsequent governments also continued this programme under different names. However, it is natural to expect that the programme be continued with the original name.
The present government is an interim government. Its main responsibilities are to promulgate a new constitution and complete the peace process. Thus, the budget should focus on projects which are near completion rather than introducing new big projects. Completion of SEZ in Bhairahawa is a case in point.
The Task Force formed by the government has already drafted a new Industrial policy and Foreign Investment policy. The government need to approve them and make necessary budgetary provisions. Similarly, good projects like Investment Board, which was provisioned in the previous budget, should also be continued and implemented. This will help in bringing mega projects.

Dr Pushpa Raj
former member, National Planning Commission (NPC)

Experts provide public sector mantras

The Centre for Empowerment and Development-Nepal (CEMID- Nepal) has brought out its second publication, Sarbajanik Chhetraka Bahuaayamik Pakchhyaharu (Multidimentional aspects of the Public Sector).The volume covers a wide range of comtemporary issues -- economic and social -- in 28 articles penned by experts having long academic and professional experience. Dr Champak Pokharel has reviewed the much-discussed Three Year Interim Plan whereas Dr Chiranjibi Nepal has analysed the Public-Private Partnership in Economic Development where he writes that economic growth without social justice is inhuman, but social justice without economic growth is impossible.
Tula Raj Basyal has analysed the White Paper on Economy and Prof Dr Gopal Prasad Pokharel gives the reader an insight of New Nepal's economic diplomacy.
Bimal Wagle, a senior bureaucrat, has delved into Economic Liberalisation and Financial Sector Reforms in Nepal.
At a time when everyone is pondering whther the global financial crisis will hit Nepal or not, Dr Govind Bahadur Thapa takes a serious look at the global crisis and its possible impact on Nepal and prescribes solutions as well. The articles on Foreign Aid and challenges therein by Madhav Prasad Ghimire, Revenue Mobilisation and its challenges and possibilities by Balgovind Bista, Advantages and Disadvantages of Foreign Employment by Sthaneshwor Devkota, Local Government and Performance-based Funding in Nepal by Krishna Babu Joshi and State Restructuring by Dr Surendra KC are some interesting and academic reads in the book that provokes debate.

BOOK REVIEW
Book: Sarbajanik Chhetraka Bahuaayamik Pakchhyaharu (Multidimensional aspects of the Public Sector)
Publisher: CEMID-Nepal
Price: Rs 335
Pages: 346