ADB projects 3.8 per cent growth

Asian Development Bank (ADB) has projected 3.8 per cent growth for 2011 due to low offfarm activities that have been hit hard by political uncertainty and long hours of power cut.
Releasing Asian Development Outlook (ADO) 2011 -- the flagship publication of ADB -- here today, ADB country director for Nepal Barry J Hitchcock -- assuming continued normal weather condition -- said that the growth is expected to improve modestly to four per cent in the year 2012.
The gross domestic production (GDP) growth inched up to four per cent in the fiscal year 2010 (ended on July 15, 2010) from 3.8 per cent in a fiscal year ago.

However, the government had targetted 4.5 per cent growth in its budget and the Central Bureau of Statistics has projected 3.45 per cent growth for the current fiscal year.
Political uncertainties, unfavourable weather and weakening remittance restrained economic growth in 2010, it said, adding that growth will fall below the five-year average of four per cent in this fiscal year primarily reflecting the protracted postconflict transition process but a modest pick up in foreseen in 2012, supportd by tourism and more vibrant construction activity. "However, key risks to growth are further delay to completing the transition, high food and oil prices, and potential impact of unrest in the Middle East."
The report also attributed marginal improvement in relatively small industry sector due to fewer political strikes and sustained expansion of service sector.
However, inflation -- a key challenge to Asian countries -- remains a biggest threat as it has been in double digits owing to high food prices which in turn originated in a low domestic crop and Indian high food-inflation.
The report has projected inflation at 10 per cent, due to external factors like high food and oil prices and domestic distortations like power cuts.
Similarly, both domestic and external factors wil challenge any further strenghtening of the Balance of Payment that has registered a deficit of Rs 12.57 billion in the seventh month of the current fiscal year.
The deceleration in remittance growth, alongside commercial banks' excessive lending to real estate and reduced liquidity in banking, drove interbank borrowing rates to a record high.
"Given the high volumn of commercial banks lending for real estate, surging loan defaults would repress normal financial activities," Hitchcock said, adding that the banks need to reorient their portfolio in future.
Exports as a share of GDP have been dwindling in the last few years because low productivity and infrastructure bottleneck have undermined competitiveness. "Conversly, imports as a share of GDP have been showing an increasing trend over several years, with growth more pronounced in 2010, as gold imports swelled," the report added. "Gold was the investment of choice, given paucity of attractive alternatives in a corecting real estate market."

ADB in hydro
KATHMANDU: Apart from helping transmission and distribution line construction, ADB has shown interest in Upper Seti hydro project. "ADB is helping prepare engineering design of the 127-Megawatt (MW) Upper Seti storage project," ADB country director for Nepal Barry J Hitchcock said, adding that preliminary estimates of the project comes to more than $300 million. "ADB has never pulled out of West Seti too," he added.

Nepal eyes EIF aid for trade mainstreaming

Nepal plans to apply for the Tier 2 aid under Enhanced Integrated Framework (EIF) Trust Fund that is meant for the Least Developed Countries (LDCs) under the global trade regime.
The $3 million Tier 2 aid could be granted for a period of five years for the countries that have already prepared National Trade Integration Strategy (NTIS) and need to implement the strategy.
"Though The Aid for Trade was meant for supply capacity enhancement of World Trade Organisation (WTO) members, most of the aid receipient countries are not LDCs," according to national coordinator of NECTRADE Shiv Raj Bhatta.
Nepal doesnot figure in the top 20 aid receipient countries, where India, Vietnam, Afghnistan, Iraq, Ethiopia are five of the top aid reciepients.
"However, Nepal has received aid from EIF Tier 1 Fund under the $170 million Trust Fund that has been established to help specifically to the LDCs," he said, adding that including Nepal only 14 countries have received the aid, whereas there are 49 LDCs are the members in global trade regime.
Aid for Trade aims to help developing countries, particularly LDCs, develop the trade-related skills and infrastructure that is needed to implement and benefit from WTO agreements and to expand their trade.
The EIF is the main mechanism through which LDcs access to Aid for Trade
The EIF is a multi-donor programme, which supports LDCs to be more active players in the global trading system by helping them tackle supply-side constraints to trade.
Earlier EIF was called Integrated Framework (IF) and was set up in 1997 at the WTO but subsequently reviewed in 2005.
The LDCs can use the EIF as a vehicle to assist in coordinating donors' support and to lever additional Aid for Trade resources, whereas donors can sign up to the EIF as a vehicle to deliver on their initial Aid for Trade commitments.
To access Aid for Trade, developing countries must clearly prioritise their needs. In return, their development partners need to provide trade-related assistance and capacity building to meet the demand with a supply of resources.
To bridge the gap between demand and supply as effectively as possible, developing countries need to mainstream their demand for Aid for Trade into their national development strategies, such as the Poverty Reduction Strategy Papers (PRSPs), since these form the platform on which donors base their aid planning.
Additional funds sought through the EIF process over and above the EIF Trust Fund represent a significant proportion of Aid for Trade. The EIF therefore forms a key pillar within the much larger edifice of Aid for Trade.Tier 1 of the EIF Trust Fund provides funding to strengthen LDCs' capacity to manage the benefits of Aid for Trade.
The funding helps to incorporate trade into national development plans and to translate trade priorities into bankable projects for broader Aid for Trade funding.
The Trust Fund also supports the implementation of some of the activities identified as priorities, taking into account the availability of alternative funding and the quality of the projects.
"Tier 2 of the Trust Fund provides bridging funding to 'jump start' activities through project preparation, feasibility studies, funding of smaller projects, including seed projects," he said. "However, for most activities identified through the EIF, resources for implementation have to be mobilised from other sources beyond the EIF Trust Fund."

BoP deficit surges against central bank's projection

The Balance of Payment (BoP) deficit doesnot seem to come under control, though export-import gap has been reduced marginally.
The central bank has projected BoP to be at Rs 9 billion surplus in the Monetary Policy for the current fiscal year, however, during the seventh month, it recorded a deficit of Rs 12.57 billion against the first six months' deficit of Rs 4.43 billion.
Similarly, the country's import is still six times the export as Nepal exported Rs 37.91 billion worth merchandise and imported Rs Rs 218.59 billion.
"The current account also registered a deficit of Rs 6.78 billion compared to a deficit of Rs 31.67 billion in the same period last year, said the central bank's macroeconomic situation report of the seventh month (January15-February 15) published here today.
The decline in trade deficit along with improvement in service account and transfer income attributed to such a remarkable decline in the current account deficit compared to that of the previous year. "However, the overall BoP could not improve as expected on account of increased imbalances in financial account," the report added.
Merchandise exports increased by 6.6 per cent to Rs 37.91 billion against a decline of 10.4 per cent to Rs 35.57 billion in the same period last year. "Exports to India increased by 10.8 per cent in contrast to a drop of five per cent in the same period last year, whereas exports to other countries decreased by 0.8 per cent against a plunge of 18.5 per cent in the same period last year," according to the central bank.
Merchandise imports also declined by 0.1 per cent to Rs 218.59 billion against a growth of 40.1 per cent to Rs 218.79 billion in the same period last year. Imports from India grew by 24.7 per cent compared to a growth of 35.5 per cent in the same period last year, whereas imports from other countries declined by 29.6 per cent in contrast to a growth of 46 per cent in the same period last year creating a total trade deficit of Rs 180.68 billion.
The Freight on Board (FOB)-based merchandise trade deficit dropped marginally by 3.1 per cent to Rs 174.58 billion against the growth by 62 per cent in the same period last year, whereas service account deficit declined significantly by 30.4 per cent to Rs 5.99 billion. Service account deficit had increased by 9.4 per cent to Rs 8.60 billion in the same period last year.
"The net transfer account registered a growth of 13 per cent to Rs 170.6 billion compared to the same period of last year," it said, adding that under the transfers sub-group, grants increased by 26.2 per cent to Rs 16.06 billion while pension receipts rose marginally by 0.4 per cent to Rs 15.63 billion, workers' remittances increased by 11.7 per cent to Rs 138.9 billion compared to its growth of 13.6 per cent in the same period last year. "But on a monthly basis, the remittance inflows decreased by 6.5 per cent in January-February compared to the value of the previous month of this fiscal year."
However, under the financial account foreign direct investment (FDI) of Rs 4.84 billion was recorded against Rs 1.45 billion in the same period a year ago.

Inflation in double digit
KATHMANDU: The y-o-y inflation as measured by the consumer price index (2005-06=100) increased to 10.2 per cent in mid-February 2011 from 10.9 per cent in the same period of last year. The index of food and beverage group increased by 16.6 per cent and the index of non-food and services group increased by five per cent against an increase of 17.5 per cent and 5.6 per cent respectively in the asme period last year.

NOC in red, staffers in pink

Though the state-oil monopoly has been in the red due to rising petroleum prices, the Nepal Oil Corporation (NOC) staffers get 60 litres of kerosene for free per month, so do around 200 leaders of political parties. And that too at the cost of tax-payers’ hard earned money. Consumer rights activist Jyoti Baniya said the provision of doling out freebies to the staff and leaders is bleeding the NOC blue.
NOC has around 700 staffers, according to the corporation. Currently, a litre of kerosene costs Rs 68.50, which makes the total monthly cost of 60 litres of kerosene for the entire staff Rs 2.88 million, while the annual loss comes to around Rs 34.52 million. “The provision should be scrapped at the earliest,” Baniya added.
The consumer rights activists also blamed the corporation for providing fuel to the leaders. “Top leaders of political parties and former ministers have been getting petroleum products regularly from the corporation for free,” another rights activist said, advising NOC to cut freebies before claiming the mounting losses.
The NOC has added Rs 49.89 for a cylinder of cooking gas under transportation, insurance, compensation and technical loss, apart from Rs 105.81 for transportation and insurance cost.
Besides, the NOC has revealed technical loss of Re 0.86 on petrol, Re 0.54 on diesel, Re 0.47 on kerosene, Re 0.57 on Air Turbine Fuel and Rs 1.39 on cooking gas.
The President of Gas Dealers’ Federation of Nepal, Gyaneshwor Aryal has sought a probe into the pricing mechanism, adding that NOC can reduce its losses, if it shows readiness to scrap the unnecessary provisions and administrative costs that are irrelevant.
NOC incurred Rs 511.4 million as administrative cost last fiscal, according to Digambar Jha, managing director at the corporation.
The NOC has said that it will incur a los of Rs 1.77 in April according to the new rate list it received from its supplier Indian Oil Corporation. It has imported Rs 7.62 billion worth 114,451 kilolitre (KL) petrolem products in March. "It sold 112,893 kl petroleum products and incurred Rs 1.40 billion loss in March," it said.

Rastriya Banijya Bank management contract ends

The management contract of Rastriya Bannijya Bank (RBB) led by CEO Janardan Acharya has expired from April 1 as one of the component of DfID under Financial Sector Reform Programme has ended on March 31.
Though, the selection committee has been under scanner of Financial sub-committee of Constituent Asembly (CA) due to its structure, the chairman of government bank Ram Prasad Adhikari will for the time being work as a chief executive as well. "Since my term has ended on March 31, I have stopped going to the office," said Janardan Acharya, who had been managing the bank for last eight years.
Both Rastriya Bannijya Bank and Nepal Bank Ltd have been under the Financial Sector Reform Programme to restructure them and hand over as healthy financial institutions to the private sector, according to the primary agreement between the World Bank -- a key partner of the Financial Sector Reform Programme started in 2002.
Nepal Rastra bank and the World Bank had also planned bidding for the selection of management team for the Nepal Bank Ltd that is being managed by a team sent from the central bank unlike Rastriya Banijya Bank.
"We have prepared a road-map to hand the Nepal Bank management to the competent management," said deputy governor Maha Prasad Adhikari.
After a sudden walkout of the ICCMT, an Irish/Scottish consulting firm that was handling the management of the troubled NBL for some five years since the Financial Sector Reform Programme started the central bank has been sending a team to manage it.
"A professional team should be selected on performance basis," according top Dr Ram Sharan Mahat, a CA member and a member of Financial sub-committee. "But the selection committee has to be restructure to make the selection process more competent and transparent," he said, adding that the current structure of the selection committee has a prossibilities of selecting partisian management rather than a professional one.
Nepal started financial sector reform programme in 2002. The main objective of the programme was to develop a healthier financial sector, which intermediates funds more efficiently and effectively for the benefit of all the segments of the society and in a manner that supports private sector development, increased investment, and faster growth.
The programme was not only related to Nepal Bank and Rastriya Banijya Bank but the broader aspect of it is also to reengineer central bank and make it more efficient in monitoring aspect.
"Only a well-regulated financial sector can facilitate sustained economic growth, fostering a robust and vibrant financial market," the programme has said. "Revamping research and financial monitoring strength and enhancing the capacity of Nepal Rastra Bank -- the regulatory authority -- to oversee an operated banking system are prime objectives of the series of reforms, and boosting its supervision capacity was one of the key agendas of the reform.

Rising international price to push domestic petroleum products price up

Consumers are going to feel the heat of increasing international petroleum prices as loss making state-oil monopoly has no alternative to hike the prices, sooner or later.
"Even if the government lends us, there is no option to hike the price of petroleum products," said a higher official from Nepal Oil Corporation (NOC).
"If government lends, it could help smooth supply as we can pay supplier on time," he said, adding that price hike will only reduce the rising loss that is going up to Rs 1.77 billion from this month against the earlier estimate of Rs 1.55 billion loss.
According to the NOC, it will incur a loss of Rs 1.77 billion monthly based on a new price list that the state-oil monopoly received today from its sole supplier Indian Oil Corporation (IOC).
"Except in Air Turbine Fuel (ATF), NOC will incur losses in all other petroleum products including cooking gas," said the officials. "The state-oil monopoly's losses seem only increasing due to international price that has been on raise since last couple of months."
It was incurring a loss of Rs 1.55 billion till March and Rs 1.33 billion till February.
According to the new rate of today, the NOC will incur Rs 288.89 loss in a cylinder of cooking gas, Rs 3.75 loss per litre petrol, Rs 20.96 loss per litre diesel and Rs 11.25 loss per litre kerosene.
The sole supplier IOC sends new rate every first and 16th day according to the gregorian calender. On the 16th of every english month, IOC sends the prices petrol, diesel, kerosene, whereas on the first, it sends the rate of all the petroleum products including cooking gas and ATF, on which NOC will still earn Rs 9.20 profit per litre this month too.
The state-oil monopoly has been, however, critised by the consumers for being importer, supplier and regulator of the petroleum sector.
However, consumer rights activists demanded to end the monopoly of NOC arguing that competition will help reduce prices and quality of service.
"The mismanagement of NOC is responsible for the rising losses," Premlal Maharjan, president of Consumers Network for Consumers' Rights, said, demanding to form a separate Petroleum Board to regulat the petroleum sector.
"Political parties are also to blame for the losses," he said, adding that the partis should not politicise it and price has to be adjusted either based on international price or Indian market price.
"The upward or downward price adjustment according to the international price or Indian market price can salvage the state oil-monopoly and the consumers both," he added.

South Asian tourist arrivals posts robust growth

Propelled by the robust growth of the South Asian arrivals, the tourist arrivals in the third month of this year has registered sustained positive growth in the international visitor arrivals.
According to figures released by Immigration Office at the Tribhuvan International Airport (TIA), visitor arrivals in March -- compared to the same month last year -- have increased by 4.6 per cent to 46,491.
India -- which constitutes the major market of Nepal -- has recorded a positive growth of 28 per cent along with Sri Lanka and Pakistan with 38.3 per cent and 6.8 per cent, respectively.
However, the arrivals from Bangladesh have declined by 2.5 per cent. In aggregate the South Asian segment has registered a positive growth of 22.5 per cent, though all the regions have shown positive growth.
Arrivals from Asia -- except South Asia -- have also recorded positive growth of 15.1 per cent in aggregate. The visitor's arrivals from China have increased by 15.2 per cent. Japan -- after being struck by natural disaster -- has also registered increase in arrivals by 9.6 per cent.
Similarly, the arrivals from South Korea, Thailand, Malaysia and Singapore have also increased by 12.1 per cent, 51.9 per cent, 16.2 per cent and 10.8 per cent respectively.
However, an overall negative growth of 12.6 per cent has been observed from the European markets with mixed performance from the individual countries. "Arrivals from markets such as France, Italy, Russia, Sweden and Denmark are up by 28.8 per cent, 8 per cent, 36.2 per cent, nine per cent and 13.5 per cent," the data revealed adding that the arrivals from the major generating markets such as the UK, Germany, the Netherlands, Spain, and Switzerland have registered negative growth by 27 per cent, 16.1 per cent, 20.3 per cent, 43 per cent, and 7.7 per cent, respectively.
Tourist arrivals from USA have increased by 22.7 per cent whereas the arrivals from Australia, New Zealand and Canada saw negative growth by 3.7 per cent 13.5 per cent and 5.3 per cent respectively.
Between January to March -- in three months -- international tourist arrivals to Nepal increased by 12.5 per cent to 116,989 over the same three - month period a year ago, according to the statistics.
A total of 47,343 foreign tourists departed from TIA in March, whereas the number of Nepali arrivals stood at 60,295 and 64,860 Nepalis departed from TIA in March.