Policy harmonisation needed to curb flow of dirty money

Greater policy harmonisation among government agencies has been urged to curb the flow of dirty money.
As some world leaders have resigned and others are under pressure to resign over the Panama Papers leak concerning international illicit money flows, government agencies in Nepal have also started debating policy harmonisation. "Nepal Investment Board approves mega foreign investments but it now has to be extra careful to investigate backgrounds before approving foreign investments," according to a high source at the Department of Money Laundering Investigation (DMLI).
Likewise, apart from cross checking foreign investments, banks and financial institutions also have to check the backgrounds before handling any transactions or opening accounts for foreign or domestic investors, the source said, adding that Article 6 of the Anti-Money Laundering Act has restricted the opening of accounts for shell companies – offshore bogus companies – and carrying out any transactions with them. "If found out, the banks and financial institutions will be punished under the Act."
Though banks and financial institutions already have to report transactions of over Rs 1 million or suspicious transactions to the Financial Information Unit (FIU) under the central bank, the Panama Papers leak has again raised a serious question over the possibility of such institutions becoming involved 'unknowingly'.
Banks and financial institutions have to be extra careful now, the source said.
Likewise, the government has also to seriously take stock of registered companies to curb the flow of dirty money, the official suggested. "Though Nepal has committed itself to curb the flow of dirty money – earnings through corruption, tax evasion and black marketing – the government itself is promoting black marketing and institutional corruption, and this could damage the economy in the long run."
Meanwhile, the DMLI today called on stakeholders including the revenue administration, the central bank's Financial Information Unit (FIU) and the police, to discuss the possibility of dirty money flowing into the country from offshore shell firms, and also the possible Nepali names in the Panama Papers leak.
Along with the DMLI, the FIU and the Department of Revenue Investigation (DRI) are the key government agencies that deal with issues of money laundering, terrorism financing and foreign exchange misappropriation.
According to DMLI chief Damodar Regmi, the meeting discussed the seven Nepalis fingered by the Panama Papers leak. "We are seriously discussing financial connections, transactions and the possibility of tax evasions," he said, adding that the department has also restarted the profiling of suspicious names that could be in the Panama Papers although the leak has not identified any of the names. "It has, however, claimed that the names will be published in May," Regmi added.
Last year also, the central bank, the DRI and DMLI had tried to investigate names that had figured in rumours following revelations of illegal outflow of money to a Swiss Bank.
Such investigations are very tricky, Regmi said, adding that without any authentic information it's impossible to track the flow of dirty money and the activities of bogus companies. "However, we have restarted the process of profiling names and restarting investigations," he added.
As Nepal has been seeing a steady rise in FDI commitments from the countries identified by the ICIJ as tax havens, the DMLI has said that it will now step up surveillance for FDI coming from these tax havens. There is a need of in-depth investigation, given the huge foreign direct investment (FDI) entering Nepal from tax havens in recent years, Regmi said, adding that statistics from the Department of Industry (DoI) reveals that of the total FDI commitments till last fiscal, about 20 per cent were from tax havens.
The rise in money entering Nepal from tax havens has raised question that it could be illegal money stashed abroad by Nepalis, though the government departments have no proper records of such money.
Apart from enhancing the supervisory capacity to monitor FDI commitments, the government agencies like the DoI and the Office of Company Registrar (OCR) should work together to fight the flow of dirty money.
Regmi said that now onwards the DMLI will adopt 'risk-based supervision system', instead of launching investigating after the incident of money laundering surfaces. But, the DMLI has any success success so far in investigating money laundering cases. The department has not filed any any case against money launderers at the Special Court in the current fiscal year, neither had it filed any case in the last fiscal year too.
Since its establishment some five years ago, the department had filed only 30 money laundering cases at the Special Court. The DMLI was established in 2011 after a huge international pressure on the government. The government had committed the Financial Action Task Force (FATF) – a global anti-money laundering body – that it would approve the anti money laundering act in line with global fight against the fight to dirty money flow.
The department has to be strengthened to get result against the cases of money laundering.
Currently, the department has been probing 700 cases and 200 of them are in 'advanced stage', according to Regmi.

Economists urge tough laws against money laundering

Economists have suggested to the government to strengthen the law to curb the illegal outflow of money from the country.
Their suggestion came a day after the Panama Papers leak that has also fingered seven Nepalis having partnership firms in several tax havens. "Though the issue will not have any impact on Nepal at present, it will definately have adverse impact on revenue mobilisation in the future," said former chief secretary Bimal Koirala, speaking at an interaction in the capital today.
Citing the recent example of how the government is unwilling to charge capital gains tax (CGT) on the sale of TeliaSonera's ownership in Ncell to Axiata, Koirala asked the government to start tracking the money. "The Panama Papers should be a lesson for the government to make its law strong enough to prevent such illegal flow of money."
The names of the seven Nepalis mentioned in the Panama Papers have yet to be disclosed.
Koirala suggested to the government to bring all manner of earning under the tax net so as to prevent money laundering. "If the government fails to bring strong legal provision to curb illicit flow of money, drug peddlers and armed smugglers could misuse the country for stashing their illegal earnings," he said, "Such earnings from corruption and tax evasion is sent to offshore firms and back channeled to the country under the pretexts of loans and investments."
The government also needs to find ways to plug the loopholes if there are any to curb the flow of dirty money.
He also cited the example of the central bank's freezing of Rs 3.5 billion that entered Nepal in the name of Mukti Shree Group, suspecting back channeling of black money, and also asked the government to prioritise the foreign investment. "The government should not accept all kinds foreign investments," Koirala said, suggesting the government to accept only those foreign investments that pay taxes and generate employment in the country.
Likewise, senior economist Prof Dr Bishwhambher Pyakuryal, on the occasion, said Nepal's mention in the Panama Papers has raised a question mark over the country's credibility. The deficiency in trust will result in low foreign borrowings and grants, which will in the longer term hit the development and social sectors, he said, adding that it will hit the social sector hard in the long run. "Tax evasion will hit revenue mobilisation resulting in low government spending in the social sectors."
Previous international reports have also mentioned about Nepalis stashing their illegal earnings in various tax havens. The report 'Illicit Financial Flows from Developing Countries' published by Global Financial Integrity (GFI) had last year revealed that $754 million on an average every year was siphoned away from Nepal between 2003-2012.
According to the report, trade misinvoicing – misreporting the value of a commercial transaction on an invoice submitted to customs – accounted for most of the capital flight.
Likewise, the prolonged political transition in Nepal has made it easier for domestic and foreign firms operating in Nepal to launder money out of the country, the economists said.
"If the current situation persists, Nepal could face blacklisting by the international community," Pyakuryal added. Blacklisting of a country means it will not be able to do international trade and will have restricted movement of its citizens across the globe.
"Nepal should thus enter into an agreement with the tax haven countries for information sharing relating to tax and banking transactions," he suggested.
Meanwhile, a day after the Panama Papers exposé, Department of Money Laundering Investigation (DMLI) today said that it would start probe to find whether Nepalis too are holding offshore accounts.
It is calling a meeting of key stakeholders –Financial Intelligence Unit (FIU) under Nepal Rastra Bank, Department of Revenue Investigation (DRI) and Nepal Police – tomorrow to discuss on whether Nepalis have offshore accounts and whether the government agencies are aware of such accounts.
In one of the biggest leaks in the history, International Consortium of Investigative Journalists (ICIJ) on Monday made public a huge cache of documents showing how the world’s rich, powerful and famous exploit the secretive offshore tax regimes and hide their money. The documents also named the top 10 destinations, known as tax havens, where the world’s rich and powerful stash their money. 

अकुत धन विदेशतिर

नेपालमा भ्रष्टाचार तथा कर छलेर कमाएको सम्पत्ति विदेशमा लुकाउने प्रवृत्ति तीव्र देखिएको छ। स्वदेशी–विदेशी कम्पनी सञ्चालक तथा लगानीकर्ताले राजनीतिक संक्रमणको फाइदा उठाउँदै जुटाएको अकुत आम्दानी विदेश पुर्याएका हुन्।
अनुसन्धान पत्रकारको संस्था इन्टरनेसनल कन्सोर्टियम अफ इन्भेस्टिगेटिभ जर्नालिस्ट (आइसिआइजे) ले आइतबार सार्वजनिक गरेको दस्तावेजमा विश्वका विभिन्न 'ट्याक्स हेभन' मा कालो धन थुपार्नेमा सात नेपालीसमेत छन्।
तर, संस्थाले सातमध्ये नेपाल भेन्चर्स लिमिटेडको नाम मात्र खुलाएको छ। पेरुमा काम गर्ने भनिएको उक्त कम्पनीको अन्य पृष्ठभूमि भने केही खुलाइएको छैन।
राजनीतिक संक्रमण लम्बिँदा स्वदेशी, विदेशी कम्पनी तथा लगानीकर्ता पछिल्ला दिन नेपालमा गरेको कमाइ कानुनअनुसार कर नतिरी विदेश पठाउन सक्रिय रहेको एक उद्योगीले नाम नबताउने सर्तमा नागरिकलाई बताए। सरकारी हस्तक्षेपबिना सम्पत्ति शुद्धीकरण अनुसन्धान विभागले गम्भीर छानबिन गर्ने हो भने पछिल्ला दिन अकुत सम्पत्ति सबैभन्दा बढी बिदेसिएको भेटिने उनले दाबी गरे। 'यो लहरोमा राजनीतिज्ञ, व्यवसायी र कर्मचारी सबै तानिन्छन्,' उनले भने। संविधानसभा चुनावपछि कमजोर सरकार, नीतिगत अन्योल र खुला भ्रष्टाचार नै कालो धन बाहिरिनुको मूल कारण रहेको उनको भनाइ छ।
आइसिआइजेले आठ महिनाको अनुसन्धानपछि मध्य अमेरिकाको पानामास्थित कर छलीको पैसाबाट कम्पनी स्थापना गर्ने ल फर्म 'मोसाक फोन्सिका' का दस्तावेज सार्वजनिक गरेको हो। दस्तावेजमा शक्तिशाली राजनीतिज्ञ, कलाकार तथा व्यापारी गरी विश्वका १ सय २८ जनाले गरेका गोप्य आर्थिक कारोबारको विस्तृत विवरण छ।
दस्तावेजअनुसार कालोधन विदेशमा थुपार्नेमा कम्युनिस्ट मुलुकका नेता तथा तानाशाहहरू, बलिउड कलाकार अमिताभ बच्चन, उनकी बुहारी ऐश्वर्या राय पनि छन्। रसियाका राष्ट्रपति भ्लादिमिर पुटिनले सहयोगीमार्फत २ अर्ब अमेरिकी डलर गोप्य कारोबार गरेकोदेखि पाकिस्तानी प्रधानमन्त्री नवाज सरिफ, साउदी अरबका राजा, चिनियाँ नेता सी जिनपिङ, भ्रष्टाचारविरुद्ध सुधार अभियान चलाएको भन्दै आएका युक्रेनी राष्ट्रपति पेट्रो पोरोसेन्कोका कम्पनी पनि दस्तावेजले सार्वजनिक गरेको छ। यस्तै, फोर्ब्स पत्रिकामा सूचीकृत २९ अर्बपतिदेखि चर्चित फुटबलस्टार मेसी र फिफा इथिक्स कमिटी सदस्य पेड्रो दामियानीको पनि गोप्य आर्थिक कारोबार विवरण सार्वजनिक भएको छ।
आइसिआइजेले मोसाक फोन्सिका ल फर्मका १ करोड १० लाख गोप्य दस्तावेज सार्वजनिक गरेको हो। उक्त फर्मका कार्यालय विश्वका ४० देशमा छन्।
ट्याक्स हेभन भन्नाले ब्रिटिस भर्जिन आइल्यान्ड, पानामा, सिंगापुरजस्ता कर छुट हुने देश बुझिन्छ। यस्ता देशमा विश्वका धनी र प्रख्यात नेता तथा कालोबजारीमा संलग्नले छाया कम्पनी दर्ता गर्छन्। आइसिआइजेका अनुसार अफसोर उद्योगमा अधिकांश सेवा कानुनी नै हुन्छन्। तर, अनुसन्धान गरिएका कागजातले बैंक, ल फर्म र अरू अफसोर खेलाडीले कानुनी आवश्यकता पूरा नगरेको देखिने आइसिआइजेले जनाएको छ।
आइसिआइजेले मोसाक फोन्सिका ल फर्मबाट प्राप्त १ करोडभन्दा धेरै कागजात जर्मनीको सुडडएचे चाइटुडजस्ता विश्वका सयभन्दा बढी समाचारसंस्थाको सहकार्यमा अनुसन्धान गरी यस्ता छाया कम्पनी तथा लगानीकर्ताबारे पत्ता लगाएको हो।
नेपालमा पनि पछिल्ला वर्ष ब्रिटिस भर्जिन आइल्यान्डजस्ता 'ट्याक्स हेभन' बाट धेरै लगानी आएको छ। उद्योग विभागको तथ्यांकअनुसार नेपालमा लगानी प्रतिबद्धता जनाउने प्रमुख तीन देशमा भारत र चीनपछि ब्रिटिस भर्जिन आइल्यान्डका कम्पनी छन्।
एनसेलको ८० प्रतिशत सेयर होल्डिङ गर्ने कम्पनी रेनल्ड्स होल्डिङ्सदेखि अजयराज पराजुली (सुमार्गी) को मुक्तिश्री समूहले ऋणका नाममा ल्याएको पैसासमेत ब्रिटिस भर्जिन आइल्यान्डकै कम्पनी हो। शंकास्पद देखिएकैले मुक्तिश्री समूहले ऋणका नाममा ल्याएको साढे ३ अर्ब रुपैयाँ नेपाल राष्ट्र बैँकले अहिलेसम्म फ्रिज गरिराखेको छ।
कालो धन सेतो बनाउने क्रममा नेपालबाट अकुत पैसा बाहिर पठाउने, ट्याक्स हेभनमा छाया कम्पनी दर्ता गरेर त्यही पैसा उक्त विदेशी कम्पनीको ऋणका नाममा भिœयाउने प्रचलन रहेको पनि व्यवसायीले नागरिकलाई बताए।
गत वर्ष पनि यस्तो समाचार प्रकाशित भएपछि नेपाल राष्ट्र बैंक र राजस्व अनुसन्धान विभाग तथा सम्पत्ति शुद्धीकरण अनुसन्धान विभागले छानबिन गर्ने प्रयास गरेकोमा कुनै आधिकारिक सूचना नपाइएको अनुसन्धानमा संलग्न अधिकृतले जानकारी दिएका छन्।
अघिल्लो वर्ष राष्ट्र बैंकले राजस्व अनुसन्धान विभागलाई चिठी लेखेर अनुसन्धान अगाडि बढाउन भनेको थियो। यस्ता सूचनाको आधिकारिकता पुष्टि नहुने तथा अनुसन्धान गर्ने सञ्चारसंस्था अथवा उक्त देशका बैंक पनि सूचना दिन बाध्य नरहेकाले समस्या पर्ने अनुसन्धानमा संलग्न अधिकारीले बताए।
यस्तै, अघिल्लो वर्ष सम्पत्ति शुद्धीकरण अनुसन्धान विभागले शंकास्पद नाम 'प्रोभाइलिङ' गर्ने, सम्बन्धित देशसँग सूचना माग्न सुरु गरेको तर द्विपक्षीय सम्झौता तथा दोहोरो कर उन्मुक्ति सम्झौता नभएका देशसँग आधिकारिक रूपमा सूचना माग्न नसकिएको उनीहरूको भनाइ छ ।

Panama papers finger seven Nepalis, identity still unknown

There has been no end to illegal outflow of money accumulated through tax evasion and corruption, according to international investigations.
The International Consortium of Investigative Journalists (ICIJ) yesterday disclosed that there are seven Nepalis, who are shareholders in offshore firms in tax havens. The ICIJ investigation has, however, not revealed any names, though the documents do name a company, Nepal Ventures Limited. Details about the company – either it is a real Nepali company or the name only is Nepal Ventures – have not been provided.
The prolonged political transition in Nepal has made it easier for domestic and foreign firms operating in Nepal to swindle money out of the country, according to an investor, who does not wish to be named. "They have been evading tax and sending the illegal funds to offshore firms," he said. He, however, claimed that detailed investigations by the Department of Money Laundering Investigation (DMLI) could expose the outflow of money accumulated through tax evasion and massive corruption, if the government has the political will to investigate. "The probe will expose the nexus between politicians, bureaucrats and business people."
Unstable governments and policies due to political transition and weak governance, coupled with a lack of political will to crack the whip on corruption have encouraged the illegal outflow of money, according to him.
ICIJ, a nonprofit based in Washington DC, has published a report on the offshore financial dealings of 128 of the world's rich and famous. The report has been prepared after long and extensive investigations by an international coalition of media outlets is based on documents provided by an anonymous source.
According to the ICIJ, as many as 72 world leaders from Russian president Vladimir Putin to Pakistani prime minister Nawaz Sharif and Indian actor Amitabh Bachchan have hidden their assets in the offshore companies.
The German newspaper Süddeutsche Zeitung received 11.5 million encrypted internal documents of a Panama-based law firm, Mossack Fonseca, spanning between 1970s and 2016, and shared them with the ICIJ. The leak thus dubbed the 'Panama Papers' contains mostly emails, PDF files, and photo files belonging to Mossack Fonseca, one of the largest providers of offshore financial services.
A global network with 600 people working in 42 countries, the law firm operates in tax havens including Switzerland, Cyprus and the British Virgin Islands, and in the British crown dependencies of Guernsey, Jersey and the Isle of Man.
British Virgin Islands is one of three key investment sources - after India and China - for Nepal, according to latest data.
The central bank had freezed Rs 3.5 billion that entered Nepal in the name of Mukti Shree Group, suspecting back channeling of black money.
Earnings from corruption and tax evasion is sent to offshore firms and back channeled to the country in the name of loans, according to business people.
Most of the services the offshore industry provides can be used for legal purposes and by law-abiding customers. "But the documents show that banks, law firms and other offshore players often fail to follow legal requirements to make sure clients are not involved in criminal enterprises, tax dodging or political corruption," the papers read, adding that the files show how these fixers and middlemen protect themselves and their clients by concealing suspect transactions. "In some instances, they work to head off official investigations by backdating and destroying documents."
Last year also, the central bank, the Revenue Investigation Department (RID) and the Department of Money Laundering Investigation tried to investigate suspects, after yet another revelation of illegal outflow of money in a Swiss Bank.
However, we could not find any authentic information, said one of the investigation officer not wanting to be named.
The central bank wrote to RID to look into the matter, the official said, adding that the countries where such bogus companies have been registered are not compelled to provide information, nor can the banks be forced to share their clients' details.
Likewise, the Department of Money Laundering Investigation had also started to profile names that were under suspicion. "But due to lack of Double Taxation Avoidance Agreements (DTAA) and bilateral agreements to share banking information, our investigation reached nowhere," the investigating official shared.

Nepal's per capita to reach $2,500

Nepal has projected a more than three-fold increase in gross national income (GNI) in the next one-and-a-half-decade.
Nepal, under its Sustainable Development Goals (SDGs), has projected a per capita GNI of $2,500 by 2030 from the current $772, according to the national preliminary report on Sustainable Development Goals 2016-2030, drafted by the National Planning Commission (NPC).
GNI measures income received by a country both domestically and from overseas, including the remittance earnings that migrant workers – living and working abroad – send back home. For many countries like Nepal, money coming in from remittances is an important source of national income, adding to their GNI.
The projection is also based on Nepal's plan to graduate to developing countries status by 2022 from the current least developed country (LDC) status, and middle income country status by 2030.
However, the government needs to invest – in the country – double of what it is investing currently and help grow the economy by 8 per cent every year, if it is to achieve the target of achieving almost four-fold income growth.
Raising the income level and eliminating absolute poverty is one of the key SDG targets, according to vice chairman of the National Planning Commission (NPC) Dr Yuba Raj Khatiwada. Though eliminating poverty is almost impossible, Nepal targets eliminating the under $1.5-per day absolute poverty, he said, adding that the population below the national poverty line could be brought down to 5 per cent in the next 15 years.
Ending absolute poverty in Nepal by 2030 is an ambitious target, particularly given the reversals caused by the recent devastating earthquakes. "In the next six months, the planning commission will calculate the cost and financing needs to achieve the SDGs goals, including poverty elimination and income growth," he said.
Currently, a quarter of the population – or some 24.8 per cent – in Nepal is under the absolute poverty line, according to NPC. The government will also start formulating budgets from the next fiscal year 2016-17, keeping in mind the need to meet the above targets.
"Resource generation from domestic and international sources, the implementation capacity and distribution mechanism have to be made robust," he added. "Rise in income and distribution along with social security are key to the SDGs."
The SDGs, a follow-up on MDGs that started from January 2016, is the blueprint of long-term development strategy with the socio-economic and environmental focus on 17 targets. "It also targets on increasing access, utility and quality of services," according to director general of the Central Bureau of Statistics (CBS) Suman Aryal.
The NPC has come up with long-term governance and rights-based visions to achieve the targets including ending all types of poverty, food security and sustainable agriculture development, quality education to all, gender equality, and women empowerment.
Among other priority areas are enhancing access to energy supply, change in consumption and production modality, fighting climate change and setting up effective, inclusive and accountable institutions for incorporating all in social upliftment.
The NPC has also developed indicators based on the country’s needs rather than adopting global indices. The Millennium Development Goals (MDGs) – 2000-2015 – had set targets at low levels, and as a result, maximum targets had been met. Although the country has witnessed a remarkable change in the people’s living standards under MDGs, qualitative growth is still a far cry. Stating the maternal mortality rate was reduced to almost half to 415 per 100,000 live births during the MDG period, the SDG plans to ensure proper health service to all.
The SGDs will focus on generating employment opportunities, justifiable distribution of social security schemes, education system up to secondary level, agricultural productivity and health services in particular. Some other goals include reducing inequality within and among countries, making cities inclusive, safe, resilient and sustainable, ensuring sustainable consumption and production patterns, and taking urgent action to combat climate change and its impacts.
These goals, which have to be achieved by 2030, have potential to change the face of the country as they focus on bridging inequality of all forms, raising access to basic public services, ensuring access to justice and sustainable economic development.
The SGDs have considered infrastructure development as a fundamental factor for sustainable development and have targeted increasing hydropower generation capacity to 10,000-MW by 2030 from 818-MW in 2014. It has also envisaged increasing the industry’s share in the GDP to 25 per cent from 15 per cent in 2014.
Meanwhile, Nepal has also started advocating for easier access to technology through Technology Bank. Lately, developed countries have reduced aid for LDCs, while copyright and patent issues have made it utterly difficult for countries like Nepal to gain access to technologies available in the developed nations. "It calls for better coordination and cooperation between LDcs and developed countries, so that all the SDGs can be met within the deadline," he added.

What is GNI
According to the World Bank, GNI is the sum of value added by all resident producers plus any product taxes – minus subsidies – not included in the valuation of output, plus the net receipts of primary income – compensation of employees and property income – from abroad.

Slow reconstruction taking toll on economy, says ADB

Slow post-earthquake reconstruction and recovery, trade and transit disruption, and unfavorable monsoon-led agriculture growth slowdown will pull the economic growth for the current fiscal year down, according to Asian Development Bank (ADB).
Launching Asian Development Outlook 2016 here today, the multilateral development partner also projected a 1.5 per cent economic growth for the current Fiscal Year 2015-16, after a 3 per cent growth last fiscal year.
"However, the growth rate is expected to pick up to 4.8 per cent in the next fiscal year 2016-17, if the political climate stabilises, reconstruction works accelerates and normal monsoon favour agricultural growth," ADB country director for Nepal Kenichi Yokoyama, said launching the outlook.
ADB has also suggested an urgent need to accelerate reconstruction and implementation of development programmes to prevent a further slowdown in economic growth. "The economic growth is possible only through the speedy reconstruction drive and focusing on sectors of energy, tourism and agriculture," he said, adding that very low growth is seen in services, particularly in wholesale and retail trade, transport and communication, and tourism, which are worst affected by the supply disruptions.
The Ministry of Agricultural Development expects harvests of paddy to drop by 10 per cent and maize by 5 per cent, slowing agriculture growth to a projected 0.5 per cent. Likewise, industry is projected to see little or no growth owing to fuel shortages and the lack of raw materials for manufacturing and construction. Inflation has also looked up due to supply side constraints because of economic blockade by India.
"Nepal witnessed an inflation rate of 7.2 per cent in 2014-15, whereas it was significantly higher in January this year, standing at 12.1 per cent due to blockade," the report said, adding that inflation is projected to rise to 10.5 per cent, higher than the target of 8.5 per cent set by the central bank in its Monetary Policy. "Although lower global oil prices are being passed through to administered fuel prices – a policy adopted in September 2014 –average inflation in fiscal year 2015-16 will be elevated on the combined effects of a smaller harvest, acute shortages of fuel and other essential commodities, and higher transport costs during much of the year."
The flagship publication of ADB also noted that the devastating earthquakes challenged the growth and development prospects over the short to medium term. The disaster exacted a huge human toll, taking nearly 9,000 lives and destroying 750,000 homes, factories, and cultural heritage sites. It upended the livelihoods of 5.4 million, pushing an estimated 3 per cent of the population into poverty. The government's Post-disaster Needs Assessment (PDNA) estimated $5.2 billion in capital stock losses and another $1.9 billion in economic losses. The combined losses are estimated to equal one-third of GDP. The cost of recovery and rebuilding the lost capital stock is estimated at $6.7 billion.
Notwithstanding the significant cost of reconstruction and recovery, the key policy challenge is not a dearth of resources, it said, adding that Nepal's development partners pledged $4 billion in reconstruction aid during the International Conference on Nepal's Reconstruction (ICNR) that the government successfully organized in the aftermath of the earthquakes. "Further, in response to the earthquakes, the government presented an ambitious budget for the current fiscal year, which calls for total spending to increase to equal 32.1 per cent of GDP from 24.3 per cent in 2014-15, while capital expenditure is to more than double to 10 per cent of GDP. The $910 million allocation for reconstruction is nearly half of the capital budget," it added.
But more than 8 months into the fiscal year, only a small fraction of the reconstruction budget has actually been spent, reflecting institutional and procedural bottlenecks that constrain the timely execution of capital works.
ADB has also outlined key factors holding back rapid reconstruction including delay in establishing the National Reconstruction Authority (NRA), which particularly affected the speedy initiation of housing reconstruction; significant damage in vast rural areas with difficult access; the limited capacity of sector institutions that oversee private housing, schools, hospitals, roads, and other community infrastructure to assess damage, plan reconstruction, procure materials, and implementation reconstruction with quality control; and the limited availability of such human resources as masons, engineers, and social workers.

TAKE ADVANTAGE FROM CHINA
KATHMANDU: Asian Development Bank (ADB) has suggested that Nepal should grab the opportunities from neighboring China to achieve the targeted economic growth rate for the next two years. Launching Asian Development Outlook 2016 here today, ADB said Asia's leading economy China's structural change in imports can create immense opportunities for the border-sharing Nepal. "China's structural change is a golden chance for Nepal," ADB country director for Nepal Kenichi Yokoyama said. "Thus, it's perfect time to attract direct foreign investment from the northern neighbor to strengthen economy."

Double GDP, investment key to Nepal's graduation

Nepal has to grow at the rate of 7 to 8 per cent – double from the current growth rate – annually not only to graduate to the league of developing countries by 2022 but also to graduate to medium income country by 2030 from the current low-income country status, according to economists.
Speaking at a day-long seminar on 'Envisioning Nepal 2030' organised by National Planning Commission (NPC) and Asian Development Bank (ADB) in Kathmandu today, they also stressed the need to focus on key competitive and comparative advantage sectors for structural transformation and acceleration of economic growth for the graduation.
Addressing the seminar, prime minister Khadga Prasad Sharma Oli said that Nepal needed a long-term strategic development plans and policies to graduate to the status of a developing country from the current least developed country (LDC) status.
Stressing on implementation of those mechanisms to achieve Sustainable Development Goals (SDGs) by 2030, he said that the country has to double annual investment, and build essential infrastructures like strategic road and railway networks, communication, and electricity. "We have shifted our attention and efforts and are gearing toward economic development and prosperity after promulgation of the new constitution," he said, adding that Nepal's unique geographical locations, abundant natural resources, biodiversity and landscapes that widen connectivity across the borders toward a self-reliant economy has been able to reduce poverty, achieve most of the Millennium Development Goals (MDGs) and make significant social development particularly in health and education.
After the promulgation of Constitution, the main task before Nepal is to empower the people through implementation of economic and social agenda enshrined in the Constitution, he said, adding that it would only be possible through structural transformation of existing economic and social institutions, production relations, and social values. "However, focus must be on addressing the crippling energy crises that hold key to unleash rapid growth of many industries, as well as on connectivity to reach all Nepali villages within the country, and the vast markets of the neighbouring countries."
The seminar provided a platform for all stakeholders to contribute and work for climate change, sustainable development activities and renewable energy resources.
Speaking at the seminar, ADB vice president Wencai Zhang hailed Nepal's intent to graduate from LDC status by 2022, and become a middle-income country by 2030, while achieving the sustainable development goals. "However, this calls for a credible vision and a strategy to achieve it by setting out policies, prioritising public expenditure and investments to build physical and human capital, improving governance and the business environment, building a competitive industrial base and enhancing regional cooperation and integration," he said.
Welcoming the guests in the seminar, vice chairman of the National Planning Commission (NPC) Dr Yuba Raj Khatiwada said that Nepal needs higher economic growth to reduce poverty by 2030. "We have to learn how to accelerate the growth from our neighbours," he said, adding that the government will formulate Development Strategy 2030 by incorporating inputs from the seminar.
"Nepal must step-up and sustain a growth in the range of 6 to 8 per cent per year to make meaningful headway in uplifting the living standard of people,” he said, adding, "To achieve this growth rate, we must ramp up capital expenditure and make sure public investment equivalent to 8.5 per cent of the gross domestic product is made every year to bridge the infrastructure deficit."
At the programme, participants and panelists suggested the government to chalk out a national development strategy on the basis of Nepal's competitive and comparative advantages. They also said that Nepal has been trapped in poverty also due to lack of diversification from subsistence agriculture to commercialisation. "The government should provide first movers incentive to encourage entrepreneurs to venture in new areas that can provide impetus to economic growth and create employment," they suggested.
On the occasion, finance minister Bishnu Poudel accepted that the government has a challenge to develop sufficient infrastructures that could propel economic growth.
The seminar is expected to chalk out a blueprint that will basically chart out strategies and action plans to raise Nepal’s per capita income by more than three folds to $2,500 by the next one-and-a-half decades, eradicate poverty and rapidly improve other major socio-economic indicators by ensuring social justice.
The National Planning Commission (NPC) will incorporate recommendations and feedback collected from the conference – where renowned domestic and international economists, policymakers and development experts including Bibek Debroy, Justin Yifu Lin, Joon-Kyung Kim, Ajay Chibber, Nagesh Kumar, Bindu Nath Lohani, Shankar Sharma and Swarnim
Wagle took active part – in preparing the final Vision 2030 document.