Price starts looking up

Price hike has become a serious concern as it has not seen cooling down.

According to the central bank, the year on year (y-o-y) inflation -- as measured by the consumer price index -- recorded an increase of 12 per cent in Mid-February (seventh month of the current fiscal year) compared with the 13.7 per cent increase in the same period last year. It had recorded 11.8 per cent increase in mid-January (sixth month of the current fiscal year).

Propelled by the items in the food and beverage group, price indices of sugar and sugar related products -- that saw almost double and the highest increase of 77.6 per cent compared with an increase of 46.7 per cent in the same period last year -- the price hike continued to look upward, said the Nepal Rastra Bank (NRB).

Similarly, some of the items saw four fold increase in a year. "The price indices of spices, pulses, meat, fish and eggs as well as vegetables and fruits sub-groups increased in reviewed period by 36.7 per cent, 36.4 per cent, 22.7 per cent and 18.8 per cent respectively compared to an increase of 9.4 per cent, 26.5 per cent, 22.9 per cent and 19.4 per cent in the same period last year," the report added.

However, the grains and cereal products prices came a little down. "The index of grains and cereal products subgroup also witnessed an increment of 13 per cent compared to 14.7 per cent increase in the corresponding period of last year," according to the central bank's monthly price index. "Similarly, the price index of food and beverages group increased by 17.8 per cent whereas the index of non-food and services group rose only by 5.3 per cent. The index of food and beverages and non-food and services group had risen by 18.1 per cent and 9.1 per cent respectively in the same period last year."

Region-wise, the price index of Hills rose by 13 per cent and followed by 12.3 per cent in Terai and 10.8 per cent in Kathmandu Valley compared with 13.2 per cent, 13.8 per cent and 13.9 per cent same period last year.

Though the y-o-y wholesale price inflation increased by 14.2 per cent compared to 15 per cent a year ago, the indices of agricultural commodities and domestic manufactured commodities increased by 25 per cent and 11.2 per cent against to 18.8 per cent and 11.2 per cent a year ago. "Within the agricultural commodities group, the price index of pulses, livestock production and spices increased by 36.4 per cent, 35.2 per cent and 33.8 per cent compared with an increase of 19 per cent, 24 per cent and 10.3 per cent during the same period last year," it said.

Surprisingly, the price index of imported commodities declined by 0.5 per cent in the review period whereas it had increased by 11.8 per cent during the same period of last year.

Within the group of domestic manufactured commodities, the price index of food-related products increased by 18.9 per cent compared with a rise of 11.8 per cent a year ago.

However, the overall y-o-y salary and wage rate index rose by 16.7 per cent compared with a rise of 16.5 per cent a year ago. Similarly, the wage rate index also increased by 17.6 per cent compared with an increase of 16.4 per cent in the same period last year.

The wages of industrial labour increased by almost double. "Wages of agricultural, industrial and construction laborers increased by 20.7 per cent, 13.8 per cent and 12.9 per cent respectively in the review period. These wage rates had increased by 23 per cent, seven per cent and 15.3 per cent respectively in the same period last year," said the central bank.

The rising trend

Seventh month -- 12 per cent

Sixth Month -- 11.8 per cent

Fifth Month -- 11.3 per cent

First six months average -- 10.1 per cent.

Government target -- seven per cent

IMF paints bleak economic picture

The International Monetary Fund (IMF) -- apart from painting a bleak picture of the economy and lowering the real GDP growth to three per cent -- has cautiously warned against the rising risks in the domestic financial sector.
Though, the mission welcomed the central bank's recent directives on credit-to-deposit ratios, loan to value ratios, curb on real estate exposure, and reintroduction of Statutory Liquidity ratio (SLR), it also warned that risks in the financial sector have been building up and need to be addressed urgently.
"The financial system needs to adapt to an environment of slower growth and is likely to see deteriorating asset quality," suggested the mission concluding its Article IV Consultation discussion visit here today. "Appointing a new governor, who can provide strong and stable leadership for the central bank is urgent," said Laura Papi, the team leader of the IMF mission that blamed the accomodative monetary policy, weak supervision, and proliferation of financial institutions for rapidly increase in asset prices and overextension of banks.
"The macro-economic outlook is challenging," the mission said adding that after expanding by 4.7 per cent in the fiscal year 2008-09, the real GDP growth is expected to decelerate to three per cent in the current fiscal year due to poor monsoon, slowdown in remittance inflows and tighter monetary conditions.
Macroeconomic stability has been maintained in past years but the global crisis is having delayed impact on domestic economy and exposing its structural weakness, according to the mission. "However, Nepal wil recover from 2010-11," she added.
"High remittance has resulted in rising forex reserves despite lacklustre export performances, but the slowdown in the remittance inflow and rising imports have hit the forex reserve significantly in the recent months. Though the reserve has stabilised in recent weeks, the situation still remains fragile," the Fund warned.
It has also projected the current account deficit to about two per cent of GDP due to slowdown in remittance inflow and exports contraction.
"Revenue collection has been impressive in the past few years but expenditure should be oriented more towards investement that requires enhancing implementation capacity," it hsa suggested.
The interest rates needs to be maintained above those prevalling in India and the Nepal Rastra Bank (NRB) liquidity management needs to be be strenghtened, the Fund said. "When a general liquidity injection is not needed for the system, liquidity provision to sound individual banks with liquidity shortages should take place at present rates or at the bank rate under heightened supervision."
The team has, however, also suggested the government to tackle structural problems to achieve higher growth. "While Nepal's potential is high, progress is required in addressing the poor business climate, power shortage, infrastructural needs, weak governance and difficult labour relations apart from political stability and improved security."

Remittance likely to slow down

The visiting International Monetary Fund (IMF) team has suggested adaptations in the economy as remittance rate is going to slow down.
Though remittance has buoyed the Nepali economy and reduced poverty, led to high credit growth, financed high imports while boosting forex reserves and played a major overall role in the economy, the current slowdown may give the government an opportunity to think about fixing the structural impediments, according to IMF's study on 'Remittance in Nepal and South Asia'.
The remittance inflow has seen a dramatic rise during the past couple of years. However, it has started slowing down since the begining of the current fiscal year. "Gross outflow of workers has helped remittance inflow to surge dramatically," said the report.
But the crisis in host countries like Malaysia and the Gulf -- where there is a major concentration of Nepali migrant workers -- has pulled down the number of migrant workers' outflow hitting remittance that has become an intregal part of Nepali economy.
"The remittance growth will continue but at a slower pace of around 10 per cent," said the study. "The slowdown of remittance will have an impact on the economy and it might also hit the financial system as it is more dependent on remittance."

Yet, it could be an opportunity to fix the domestic economic problems. "It may help focus minds on economy," said Laura Papi, IMF's Asia-Pacific region deputy director.
The drop in remittance growth will certainly have impact on consumption, imports and the financial system, according to the IMF study. "It will also have an indirect impact like drop in tax revenue due to low import," it said.
But, the drop in remittance inflow has helped push long overdue interest rates up, according to Papi -- the team leader of IMF Article IV Consultation team that is in Nepal since last week as part of its regular visits.
The successive IMF Article IV Consultation team has been suggesting the interest rates be raised to match the rates in India. However, financial institutions have never lent them an ear. They have started offering high interest rates in recent months due to liquidity crunch, partly fuelled by the drop in remittance.

Hong Kong ranked Asia's most innovative economy

Hong Kong has Asia's most innovative economy, thanks to its high level of creativity and well developed financial markets, a study said.

The Chinese territory beat regional rival Singapore, which was in second place in the Asian rankings, said the joint study by international business school INSEAD and the Confederation of Indian Industry released late on Thursday.

Worldwide, Hong Kong ranked third in the Global Innovation Index while Singapore placed seventh, the study showed.

Among the criteria used by the survey, economies were ranked by patents filed, publication of scientific journals, research and development spending and how innovation supported social welfare, competitiveness and growth.

Hong Kong, Singapore and New Zealand were the only Asia Pacific economies to make it to the top 10 in the global rankings.

Iceland topped the global innovation list despite its deep economic woes followed by Sweden, while Switzerland placed fourth after Hong Kong.

Rounding up the global top 10 list was Denmark in fifth spot, followed by Finland, Singapore, Netherlands, New Zealand and Norway.

The US, which took the top spot last year, slid down to 11th place amid growing challenges from other countries which are putting increasing emphasis on education, science and technology, the study said.

The study stressed innovation as a key driver of growth, playing "a critical role not only in facilitating countries' recovery but also in sustaining national competitiveness," it said. "National and business leaders are struggling to balance the near-term needs of survival with the long-term demand to find new sources of growth."

This year's Global Innovation Index Report covered 132 economies that account for 96 percent of the world's gross domestic product.

Japan, Asia's largest economy, ranked 13th in the index and South Korea was seven notches below at 20th spot. Australia was in 18th place.

Taiwan placed 25th and China, widely expected to overtake Japan as the world's second biggest economy, placed 43rd on the global index.

The study said China scored high marks when it came to scientific output as the government supported various moves to boost research and development, but the country was weak in creativity and market sophistication. AFP

Nepse starts trading from Biratnagar

Investors based in Biratnagar, rejoice!
Nepal Stock Exchange Ltd (Nepse) has started share trading from Biratnagar from today. Nepal Investment and Securities traded 350 units of shares for Rs 7,73,000 today -- the first day -- in four transactions from Biratnagar through Remote Work Station (RWS), said Nepse.
After Pokhara, Biratnagar has become the second city outside the valley to have started share trading, breaking away from the centralised system.
The Kathmandu-based secondary market has started diversifying its trading from different districts after it was automated. Investors outside Kathmandu Valley have long been asking Nepse to create a mechanism so that they could take part in share trading from their cities.
Nepal Stock House of Pokhara, that registered four transactions of three companies' 140 units of shares worth Rs 1,92,360 on March 1, today registered 23 transactions of 2,863 units of shares for Rs 1.52 million. "The expansion of the secondary market will help expand the capital market too as it will increase the number of investors and market capitalisation," said Nepse.
In the first phase, Nepse will start transactions in districts where there is optical fiber connection.
Premier Securities from Pokhara and Nepal Investment and Securities and Pragyan Securities from Biratnagar have got licences to start transactions from their respective districts.
Nepse -- in coordination with the securities brokers' association -- has planned to start share trading through remote work stations (RWS) in Birgunj, Narayangarh, Butwal and Nepalgunj.
Three brokers from Nepalgunj and four brokers each from Biratnagar, Birgunj, Narayangadh are ready to start share trading from their cities.

Nepal, Bangladesh trade talks by March end

The commerce secretaries of Bangladesh and Nepal will hold a two-day meeting in Dhaka on March 30 to facilitate bilateral trade and establish connectivity between the two countries under a proposed transit deal.
The meeting will focus on further integration in sub-regional perspectives and mutual recognition of each other's testing and standardisation certificates, according to experts.
Officials at Bangladesh's Ministry of Commerce (MoC) said the commerce secretaries of the two countries are expected to devise a strategy for the implementation of relevant clauses of the joint communiqué, signed by the premiers of India and Bangladesh at New Delhi in January.
A joint communiqué, co-signed by Indian Prime Minister Dr Manmohan Singh and his Bangladeshi counterpart Sheikh Hasina has assured of giving Nepal and Bhutan access to Mongla and Chittagong ports.

The prime ministers -- in the joint communiqué -- also agreed that Rohanpur-Singabad broad gauge railway link would be available for transit to Nepal.
"The upcoming secretary level meeting between Dhaka and Kathmandu will pave the way for implementation of commitments made by Prime Minister Sheikh Hasina during her recent visit to New Delhi to boost the sub-regional integration on both trade and connectivity fronts," the Bangladesh Ministry of Commerce said.

Besides, a Memorandum of Understanding (MoU) between the two countries on mutual recognition of standardisation is likely to be inked at the meeting. The trade talks to be held between the countries will also focus on problems relating to loading and unloading of goods at zero point of the border.
At present, Nepali trucks cannot enter Bangladesh and they need to load/unload at zero point of the border. Most of the traded goods of Nepal are carried via Banglabandha land port.
Similarly, due to absence of such agreement, Nepali trucks cannot reach the warehouses of the land port and they need to wait on no man's land for Bangladeshi trucks to come for re-loading, which increases the cost of business.
The volume of bilateral trade between the two countries is very low, less than $60 million a year. Bangladesh exported goods worth $6.70 million to Nepal in 2008-2009, its imports figured $53 million. Major exports from Bangladesh to Nepal include pharmaceuticals, woven garments, plastic goods, furnace oil, zippers, duck down, dry cell battery, ceramic table ware and handicrafts. Pulses, lentils, rice and wheat make up Bangladesh's import basket from Nepal.

South Asia, China spur tourist arrivals

Tourist arrivals via air have been encouraging in the last couple of months -- South Asian and Chinese arrivals especially posted robust growth.
Figures released by Immigration Office, Tribhuvan International Airport (TIA), reveal that visitor arrivals in February -- compared to the same month last year -- increased by 33 per cent to 33,492. The entire South Asian region posted overall positive growth of 12.1 per cent, with arrivals from India growing by 1.8 per cent, Bangladesh by 110.2 per cent, Pakistan by one per cent and Sri Lanka by 11.6 per cent.
China, one of the largest source markets for Nepal, bounced back with a remarkable growth of 242.5 per cent. Similarly, other Asian countries maintained upward trend with Japan by 31.7 per cent increase, Malaysia by 38.9 per cent, Singapore by 55.9 per cent and South Korea by 21.6 per cent. However, arrivals from Thailand witnessed negative growth by 54.7 per cent. In aggregate, the Asian segment registered a robust growth of 69.5 per cent.
An overall growth of 20.6 per cent was observed from European markets with arrivals from major markets such as the UK, France, Germany, Italy, and the Netherlands up by 1.8 per cent, 46.8 per cent, 12.4 per cent, 44 per cent and 87.5 per cent, respectively. However, Norway, Spain, Russia and Switzerland registered decrease in arrival figures by 41.8 per cent, 22 per cent, 10.4 per cent and 2.4 per cent, respectively.
The figures also show an increasing trend in visitors' arrival from the United States of America with a notable growth of 53.2 per cent, said Nepal tourism Board (NTB).
Canada, Australia and New Zealand also maintained positive growth with 20.5 per cent, 26.9 per cent and 246.6 per cent, respectively.
This is the ninth consecutive month that Nepal has witnessed growth in the international tourist arrivals and this confirms the improved prospects for Nepal in the year 2010 with rising business and consumer confidence.
A total of 33,441 foreign tourists departed via TIA in February 2010. The number of Nepali arrivals stood at 49,288 while 54,564 Nepalis departed via TIA in February.