Friday, December 31, 2010

Retrospect: 2010 Lost Opportunities

The year 2010 will be remembered as a year wasted in the history of Nepal as the politics again pushed the economy to the back seat.
The delayed-budget hurting the development activities, Balance of Payment (BoP) deficit, six fold higher imports to the exports coupled by ballooning trade deficit marked the year.
However, the government in the current fiscal year's budget — that was presented four months late than the regular schedule — has projected 4.5 per cent gross domestic product (GDP). But International Monetary Fund projected that the real GDP for the year 2010 is going to be at three per cent that could increase to four per cent in the year 2011.
However, finance secretary Rameshwor Khanal thinks that the three per cent growth is not bad in the transition phase of a country.
Similarly, the IMF projected the consumer price at 10.5 per cent against the government's projection of seven per cent that could not be contained due to the rising fuel prices and growing informal economy that is as big as the formal economy.
In the fiscal year that ended on July 16, the government had projected 5.5 per cent Gross Domestic Product (GDP), but the government's claim turned hollow after the country recorded almost the half to 3.5 per cent growth from the projection due to low yield in the agriculture — especially the major crops like maize and paddy — and non-agriculture sector's low output than expected. This year too the major indicators are not that encouraging.
The government also failed in curbing the price hike, as the inflation recorded 10.7 per cent against the projection of seven per cent.
The petroleum price hike this year has fuelled the price to go up making it difficult for the government or the central bank to crack whip on inflation. The double digit price hike and slower growth have had an adverse impact on the consumers’ purchasing power, posing a serious threat to the financial management.
Finance minister of the caretaker government Surendra Pandey also failed in increasing employment despite the year 2010 being more strike less compared to a year ago. But the new industry registration has come down making it more difficult for the government to create jobs in the country.
According to the 2010 Index published by Heritage Foundation and Wall Street Journal Nepal ranked 130th scoring 0.5 point lower than last year, reflecting declines in five of the 10 economic freedoms due to political instability that has hampered the development activities as the successive governments have not been able to spend properly on development activities.
Due to ballooning trade deficit and slowdown in growth rate of remittance, the Balance of Payment (BoP) has also registered deficit prompting the central bank to take IMF help.
The life line of Nepali economy — remittance — has also witnessed a drop in its growth rate that hovered around 10 per cent due to post-global economic crisis impact in the isolated economy like Nepal.
The whopping import that is over six times to the exports has also hurt forex reserve that has been depleting throughout the year.
Though, in the first four months of the current fiscal year, the country has reported a minimal increase of 7.1 per cent to Rs 4.37 billion exports compared to the same period last fiscal year, according to the Trade and Export Promotion Centre, the scenario is not very encouraging due to investors — local and foreigners — waiting the parliament to choose new Prime Minister to end the present dead-lock.
The country could not attract more foreign Direct Investment (FDI), not only due to lack of stable government but also due to chronic power shortage problem.
The country is witnessing indefinite hours of power outage due to mismatch between the increasing demand and supply coupled with government's apathy towards the hydropower sector that is the engine for the economic growth in a country like Nepal. The annual domestic energy demand is reportedly increasing by 10 per cent.
No new domestic and foreign investment has forced the 400,000 youths that come to the market every year opt for foreign jobs. More than 200,000 youths opt for the foreign employment making the country lose its human capital at a very cheap price.
The only good sign the country has seen is the sustained growth of tourist arrivals, but that has not been able to boost the foreign currency reserve, according to the central bank.

UNWTO secretary general to attend NTY 2011 launch

Taleb Rifai, the secretary general of the UN World Tourism Organisation (UNWTO), seven SAARC tourism ministers and the secretary of the Cambodian Tourism Ministry have confirmed that they will be attending the inauguration of Nepal Tourism Year 2011.
The NTY 2011 -- scheduled to be launched on January 14 at Dasrath Stadium -- aims one million touists. President Ram Baran Yadav is scheduled to inaugurate the ceremony.
"Tourism ministers from China and Japan have also expressed thei interest to participate in the function, but they have not confirmed," according to the Nepal Tourism Board (NTB) that is expecting over 28,000 people to participate in the three-hour-long inaugural event.
The government has invited the tourism ministers of 24 Asian countries to the inaugural to strengthen bilateral ties and promote tourism in the region.
SAARC tourism secretaries are scheduled to arrive on January 11. "There will be an extensive joint secretary level meeting of the SAARC Tourism Working Committee on January 12-13 where discussions will focus on the problems and barriers confronting tourism promotion," according to the board.On January 13, the SAARC ministers will endorse the meeting’s declaration and on January 14, NTY 2011 will be inaugurated amid a gala function in Kathmandu.
The SAARC inter-government body will discuss the possibility of joint marketing, softening the visa regime, giving access to cross-border driving licenses, making Indian currency more flexible and increasing inter-SAARC movement by air by the national flag carrier of each country, a government official said.
The NTB has proposed giving a public holiday to government staff on the day. The NTB said that all the districts would organise the NTY 2011 launching programme under the coordination of their respective chief district officers.
Similarly, tourist destinations like Pokhara and Chitwan, among other places, are aggressively preparing for their own special functions.According to the NTB data, Nepal received more than 500,000 tourists in 2009 and the numbers is expected to cross 700,000 in 2010. After a gap of almost 12-years since Nepal celebrated the Visit Nepal 1998, the country's tourism sector is expected to revive with promising tourist arrivals in 2010.
The Maoist-led government had announced the campaign in October 2008. The campaign goal of hosting one million visitors intensifies the prospect to opening up new opportunities for reinvestment and reinvigorated business paralysed for a long time.
Massive investments are being made in refurbishing existing hotels and establishing new ones with NTY 2011 round the corner.The Hotel Himalaya -- a four-star hotel in the Valley -- is upgrading to five-star rating while three new four-star hotels are coming up.
"This is first time such large investments are being made in the hospitality industry after the opening of the Hotel Hyatt Regency a decade ago," the NTB said.Currently, there are 10 five-star hotels including Hotel Radisson, Hotel Everest and Fulbari Resort that are under renewal process; two four-star hotels; 24 three-star hotels; 45 two-star hotels; 36 one-start hotels; 358 tourist standard hotels and resorts making it to a total of 475 licenced by the Ministry of Tourism and Civil Aviation.

Thursday, December 30, 2010

Nepal, Malaysia prepare to sign MoU

Malaysia and Nepal are drawing up a Memorandum of Understanding (MoU) on various issues including streamlining the recruitment of workers, said Human Resources Minister Datuk Dr S Subramaniam.
The memorandum, he said, is expected to be finalised by next year.
Speaking after a discussion with Labour and Transport Management (MoLTM) Minister Mohamad Aftab Alam in Kuala Lumpur, he said that there were 175,810 Nepalis working in the manufacturing sector in Malaysia.
Alam led a delegation to celebrate the 50th anniversary of the establishment of diplomatic ties between Nepal and Malaysia.
Dr Subramaniam said that Nepal had also requested that the number of maids from their country to Malaysia be increased.
"There are 84 maids from Nepal at present," Subramaniam said, adding that Malaysia has no objection but it has to make sure the maids are trained well.
The Malaysian minister was very happy with the good bilateral relations between the two countries. "There are many Nepali workers in Malaysia and we hope they would be given opportunity to work in other sectors including in the health sector,” he said.

Consumer price moderates

The price hike has moderated in the first four months of the current fiscal year.
"The year-on-year inflation as measured by the consumer price index stood at 8.4 per cent in mid-November from 9.1 per cent in the same period last year, due to price index of food and beverage group that grew by 13.3 per cent," according to the microeconomic report of first four months of the current fiscal year released here by the central bank.
Prices of Spices, sugar and sweets, milk products, and meat have almost doubled in mid-November.
"The price index of food and beverage group grew by 13.3 per cent and the price index of non-food and services group increased by 4.5 per centagainst the increase of 16.6 per cent and 3.1 per cent respectively in the same period last year," the report said.
Of the items under food and beverage group, price indices of spices sub-group increased by a whopping 34.9 per cent compared to an increase of 19 per cent in the same period last year. "Similarly, the price indices of sugar and sweets, which had increased by 50.3 per cent in the same period of the last year, have increased by 28.8 per cent and the price indices of vegetables, cereals grains and their products, and restaurant and hotel increased by 15.9 per cent, 15.4 per cent and 15 per cent against their respective increase of 45.4 per cent, 7.6 per cent and 19.7 per cent in the same period last year." it said.
Meanwhile, the price index of milk product, meat and fish and tobacco increased by 14.3 per cent, 12.9 per cent and 8.1 per cent respectively, which had increased by 8.6 per cent, 21.3 per cent and 11.7 per cent respectively in the same period last year. But the price index of legume varieties declined by 9.8 per cent against an increase of 28.9 per cent last year.
"Within the group of non-food and services, the price index of clothing and footwear increased by 10 per cent against last year's increase of 8.2 per cent," the analysis said, adding that the price indices of transport and housing and utilities increased by 7.8 per cent and 7.4 per cent, respectively against their decline of 8.7 per cent and 3.6 per cent in the same period last year.

Valley most expensive
KATHMANDU: Region-wise, the price index increased highest in Kathmandu Valley by 11.5 per cent in Mid-November against an increase of 8.5 per cent in the same period last year. However, the prices in the Hills has increased by 9.4 per cent followed by 5.8 per cent in Terai comapared to 9.4 per cent and 9.3 per cent in the same period of last year.

Wednesday, December 29, 2010

Nepse starts to loose

Nabil Bank lost Rs 35 per unit share to drag the banking index down by 2.23 points to close at 366.22 points today.
Except trading, all the other eight groups witnesed their shares being traded today. But three groups including the market propeller banks group lost, whereas the five groups gained.
However, these groups couldnot lift the Nepse and investors' confidence as the Nepse lost 0.12 point to close today's trading at 404.06 points.
The book close of the most of the companies coupled with the low return has repealed the investors from the secondary market currently.
The secondary market has started to go down after a little recovery from the bottom low of 390-point.Meanwhile, the year on year (y-o-y) Nepse index declined by 25 per cent to 424.9 points in mid November 2010. The index had stood at 566.9 in the same period last year.
The decline in share prices was on account of the significant increase in the supply of securities.
Similarly, the y-o-y stock market capitalisation decreased by 12.8 per cent to Rs 362.0 billion in mid November. The decrease in market capitalisation has also brought its ratio with gross domestic product (GDP).
The ratio of market capitalisation to GDP stood at 27.4 percent in mid November. "The ratio was 35.1 per cent a year ago. Of the total market capitalisation, the share of bank and financial institutions stood at 72.5 per cent followed by manufacturing and processing companies (2.3 per cent), hotels (1.5 per cent), business entities (0.4 per cent), hydropower (4.6 per cent) and other sectors (18.7 per cent).
The total paid-up capital of the listed companies stood at Rs 90.1 billion in mid-November, registering an increase of 33.5 per cent over the period of one year. The increase was largely due to the additional listing of securities at the secondary market.
As at mid November, additional securities worth Rs 14.6 billion (ordinary share worth Rs 5.3 billion, bonus share worth Rs 0.7 billion, right share worth Rs 3.6 billion and government securities worth Rs 4.9 billion) were listed at the Nepse.
The total number of companies listed also increased to 186 in mid- November from 163 last year. Among them, 154 were banks and financial institutions (including insurance companies), followed by production and processing industries (18), hotels at four, business entities at four, hydropower companies at four and companies in other groups at two.

BoP deficit stands at Rs 5 billion

The Balance of Payment (BoP) has registered Rs 5.03 billion deficit in the first four months (mid-November) of the current fiscal year.
Nepal Rastra Bank (NRB) data revelas that the overall BoP has recorded a deficit of Rs 5.03 billion during the four months of the current fiscal year compared to a deficit of Rs 15.78 billion in the same period last year. "The current account has also registered a deficit of Rs 1.92 billion -- compared to a deficit of Rs 14.78 billion in the same period last year -- due to decelerating growth rate of trade deficit and an improvement in the growth rate of transfer income particularly grants and remittances.
The workers' remittances has increased by 13.6 per cent to Rs 76.88 billion compared to 6.6 per cent growth in the same period last year. "On a monthly basis, the remittance inflows, however, declined by 16.3 per cent in October-November compared to a month ago of this fiscal year," theh central bank said, adding that under the financial account foreign direct investment (FDI) of Rs 3.42 billion has been recorded compared to the level of Rs 744 million in the same period a year ago.
However the report also shows that the import-export gap has not been bridged. Nepal's import continues to be six times higher than the exports as exports stand at Rs 21.64 billion against the imports worth Rs 121.35 billion. "Merchandise exports increased by 8.3 per cent to Rs 21.64 billion but imports -- on the other hand -- grew by two per cent to Rs 121.35 billion," the central bank said.

Liquidity cruch continues
KATHMANDU: Around Rs 15 billion revenue has been unspent in the government account sqeezing the liquidity from the market," the central bank governor Dr Yubraj Khatiwada, said here. "Had the budget come on time, the liquidity crunch would have been eased," he added. The budget was four months delayed from the regular schedule. The macroeconomic report shows that there is 'still' a gap between the deposit mobilisation and lending by commercial banks in mid-November. "The deposit mobilisation of commercial banks declined by Rs 4.5 billion during the first four months of 2010-11 -- against the growth of Rs 19 billion in the same period last year -- due to the diversion of deposit to other financial institutions on account of relatively higher interest rate offered by them," it added.

Tuesday, December 28, 2010

Central bank to pull out of Nepal Bank Ltd

The central bank is pulling out of the Nepal bank Ltd's (NBL) management in a year.
"Nepal Rastra Bank (NRB) has prepared a road-map to pull out its representatives from running the bank, in a year, as there is a chance of conflict of interest if the central bank continues to run the NBL," according to the central bank governor Dr Yubraj Khatiwada.
The central bank is appointing a chief executive officer (CEO), who will prepare the plan for exit of the central bank, holding an annual general meeting in a year, he added.
NBL has been under the central bank's direct supervision after the foreign management team of the Bank of Scotland (Ireland) Ltd, ICC Consulting decided to walk out suddenly, unhappy over NRB’s decision to extend the contract for another three months, in 2007.
The NBL management contract to the foreign management was part of the financial sector reform programme that started in 2002.
The donors including World Bank and DFiD-funded Financial Sector Technical Assistance Project (FSTAP) has suggested to reengineer the NBL and Rastriya Banijya Bank (RBB).
Though, there has been a debate on either the reform programme became successful or not, the first phase of the reform programme will come to an end by this December," Khatiwada informed, adding that the central bank is into negotiation with the donors to start second phase of reform programme.
The second phase will be more focised on financial service expansion and consolidation, he added.
However, the central bank's idea to appoint CEO in the NBL at present condition has raised eyebrow. "When the bank is run by the board that has no representation of the all shareholders, how can the board appoint the professional CEO," questioned former finance minister Dr Ram Sharan Mahat here at the sub-committee under the Parliamentary committee on Finance and Labour Relations.
The sub-committee -- led by Constituent Assembly (CA) member Hari Rokka -- has also asked the finance secretary Rameshwor Khanal to assure the professionality and impartiality before appointing the CEO.
"Earlier too, the bank's financial health deteriorated due to political bickering," Mahat added.Though NBL’s 61 per cent stake is owned by the private sector and bank employees, it is declared as a troubled bank and its board has representatives appointed by the central bank. The private shareholders have no representation in the board of directors at present.
The government has also been extensively holding interaction on the future road-map of the bank and FSTAP as a whole.
NBL has 4.89 per cent NPA and Rs 4.77 billion negative core capital, whereas RBB -- the other bank under the FSTAP -- has 9.81 per cent NPA and Rs 10.05 billion negative core capital at present.

Central bank monitoring unpredictable lending rates

The governor said that the central bank has been closely monitoring the 'rising' lending rates.
"Though the central bank has already left the practice of fixing interest rates under liberal market economy, it is monitoring the rates closely and will not let the consumers suffer," said central bank governor Dr Yubraj Khatiwada here today at the Parliamentary committee on Finance and Labour Relations.
Lately, the banks and financial institutions (BFIs) have been increasing the lending rates claiming that their cost of fund coupled by asset-laibility mismatch has increased.
The committee -- led by Constituent Assembly (CA) member Hari Rokka -- has asked the central bank governor and finance secretary Rameshwor Khanal on how they can safeguard the consumers' interests from the unpredictable lending rates that has been steadily going up lately.
"The lending rates are bound to go up but not more than 12-13 per cent and there also has to be transparency," the governor said, adding that the rising cost of fund has fuelled the lending rates.
"The interest on deposit also should match the inflation rate, he said, however, in the competitive market spread rate -- between interest on deposit and interest on lending -- has to come down, which is not happening."
"Low interest rate has dried the deposit," finance secretary Rameshwor Khanal, said, adding that till last fiscal year the BFIs deposit was growing by 20 per cent. "But the deposit growth rate has come down lately.
"Delayed budget, low spending in donor-funded projects coupled by informal economy has squeezed the capital forcing the banks to increase the deposit rates that has pushed the lending rates up too.However, the finance ministry is serious on not letting the priority sectors hit by the rising lending rates hard, according to him.
"For the specialised sectors like Small and Medium Entreprises (SMEs) the central bank is also providing refinancing facility," Khatiwada said.
"One of the sectors that has bear the burnt of the rising lending rates is the hydropower sector," he said. "However for the hydropower the government has formed an Energy Fund in the budget with Rs 1 billion seed money."
"There has also been some problem in housing sector but it is not worse," he said, assuring that it could not hit the banking sector hard.
Of the total loan of Rs 500 billion, seven per cent is in housing sector, according to the central bank's figure. "If the housing prices drop to a half too, there will not be repayment problem."

PAC directs government to collect dues or close casinos in a month

Public Accounts Committee (PAC) of the Legislature-Parliament has directed the government to cancel registration of the casinos, if they do not clear their dues within 35 days.
The government still has to recover Rs 193.5 million from five casinos -- Casino Anna, Casino Royal, Casino Shangrila, Casino Nepal and Casino Fulbari. It has recovered Rs 77.4 million from some of the Casinos recently after a massive crackdown.
When Casino Nepal -- the first casino in Asia -- was started in 1968, it was open only to foreigners but the casinos lately are blamed of entertaining the Nepalis against the law of the land. "The Casinos have not been following the law of the land and entertainng the Nepalis," said Som Bahadur Thapa, secretary at the PAC that has directed to revoke the licence of the Casinos immediately, if they are found entertaining the Nepalis, now onwards.
The committee also blamed the Ministry of Tourism and Civil Aviation -- that issues the licence to the Casinos -- for not regularly and preperly monitoring the Casinos. Not only the Casinos, the Ministry of Tourism and Civil Aviation is also blamed for not monitoring the 475 hotels licenced by itself on either they have followed the law of the land or not.
"The Casinos have been renewed repeatedly without any proper regulation," the committee said, directing the ministry not to issue any new licence without preparing the regulation.As the hotels are issued the licence to operate Casinos, there is still a confusion over who is laible to pay tax if the Casinos won't pay.
Nepal's casino industry is considered the oldest in South Asia but lately it has been in news for all the wrong reasons like tax evasion and entertaining Nepalis.According to the ministry, the country currently has 10 casinos; Casino Royale (Hotel & Yeti), Casino Venus (Hotel The Malla), Casino Rad (Hotel Radisson), Casino Grande (Hotel Pokhara Grande), Fulbari Casino (Hotel Tha Fulbari), Casino Nepal (Hotel Soaltee), Casino Anna (Hotel De'l Annapurna), Casino Everest (Hotel Everest), Casino Tara (Hotel Hyatt) and Casino Shangrila (Hotel Shangrila).
The ministry has informed the committee that there are 10 five-star hotels including Hotel Radisson, Hotel Everest and Fulbari Resort that are under renewal process; two four-star hotels; 24 three-star hotels; 45 two-star hotels; 36 one-start hotels; 358 tourist standard hotels and resorts making it to a total of 475 licenced under the ministry.
The ministry has recently issued licence to operate mini-Casinos at Hotel Vaishali (Thamel), Hotel Ratna (Biratnagar), Hotel Grande (Pokhara), Hotel Sneha (Nepalgunj) for healthy entretainment, increase in tourist number and their stay duration, and generate employment.

Monday, December 27, 2010

NT seeks strategic partner

elecom (NT) has sought a stratagic partner as it is losing its ground fast to the other telecom service providers.
The company that has been paying Rs 10-billion to the national coffer annually has been witnessing a loss of 10 per cent in its profit growth rate every four months, said the telecom service provider in the sub committee meeting under the Privatisation Cell here today.In the meeting attended by the central bank governor Dr Yubraj Khatiwada, revenue secretary Krishnahari Baskota, industry secretary Pratap Kumar Pathak, information and communication secretary Sushil Ghimire and National Planning Commission (NPC) member Dr Pushkar Bajracharya under the sub-committee’s co-ordinator and Constituent Assembly (CA) member Hari Rokka, the telecom urged to take decision soon to save it.
However, Rokka said that it needs wider political consensus. “The issue has to be discussed seriously,” he said, adding that the government also has to amend the law regardng the privatisation as it has been a hinderance in expansion of the company.
“NT’s case is going to be presented at the Economic and Labour Relation Committee under the Legislature-Parliament next week,” Rokka informed.

Sunday, December 26, 2010

Budget allocates less fund for infrastructure

The government has earmarked very less budget for the infrastructure in the current budget.
"The current budget has separated Rs 20.81 billion for the public infrastructure," said Bodh Raj Niraoula, chief of the Budget Department at the Finance Ministry.
Though, finance minister Surendra Pandey has separated Rs 129.54 billion for the capital expenditure, the development activities, the real amount for the public infrastructure comes to Rs 20.81 billion, which is only 6.7 per cent of the total budget of Rs 337.90 billion.
Similarly, the government has allocated Rs 2.40 for the compensation of the land, the government will take for the infrastructure development, he said, adding that the delay in budget could make it difficult for the total amount to be compensated as the people are more demanding.
According to the budget, the major infrastructure includes 10 new modern cities for business and residential purpose in the vicinity of Mid-hills Highway (Lok Marga) and North-South corridors.
The old bridges of Godawari of Dhangadhi, Bheri of Surkhet, Dharke and Mugling, and bridges across Pathalaiya to Koshi that have been put under government's priority list and construction of six lane wide roads linking international trade routes namely Birgunj-Pathlaiya, Belahiya-Butwal, Rani-Itahari and Surya Binayak-Dhulikhel.
Of the total budget for infrastructure, the government will spend Rs 65 billion from its own purse, whereas Rs 36 billion will be spent from the foreign loan and Rs 23 billion from the foreign grants, Niraoula added.
However, the experts doubt the government's capacity to spend the whole budget due to four-month delay -- from the regular schedule -- in budget and the new rule that has fixed the ceiling for the expenditure for each quarter of the fiscal year.
"Unlike previous years, we have tried to discourage the spending habbit at the end of the fiscal year," he said, adding that the budget has clearly spellt out the percentage of expenditure that could be done on the fixed quarter of the fiscal year."By mid-May, the government has to spend 60 per cent of the budget," according to the new rule that has barred to spend more than 15 per cent in the last month of the fiscal year.
The finance ministry also holds a regular review meeting every alternative month for the effective monitoring of the spending. "We held review meeting with the secretaries of different ministries last month to monitor the spending," Niraoula said, adding that the next meeting is scheduled for next month.Realising the difficulty in budget implementation, the Budget Department has also prepared Result Based Budget (RBB) syatem and change in the coding system to GFS 2001 from the next fiscal year's budget.
"The budge for the next fiscal year would be more effective," the department chief added.

Cabinet appoints deputy governors

The cabinet has today appointed Gopal Kafle and Maha Prasad Adhikari as the deputy governors in the central bank.
Accordig to the Nepal Rastra Bank Act, the central bank should have two deputy governors. But both the posts remained vacant after deputy governor Bir Bikram Rayamajhi retired from the post last week on December 21.
Earlier, another senior deputy governor Krishna Bahadur Manandhar has retired nine months ago. Manandhar has also taken charge as acting governor for almost two years, when the then governor Bijayanath Bhattarai was suspended after the government anti-graft body filed a case against him.
Kafle and Adhikari both were executive directors at the central bank. Kafle was the spokesperson and heading micro credit department and Adhikari was heading the regulation department.
The central bank governor Dr Yubraj Khaitwada had recommended four names -- Gopal Kafle, Maha Prasad Adhikari, Bhaskarmani Gyawali and Gokulram Thapa -- for two posts.

NAC resumes domestic flight

The Nepal Airlines Corporation's (NAC) will resume domestic flights from tomorrow after 12 days of disruption.
The NAC employees' unions agreed to let the operations of their domestic flights from tomorrow after they received a letter from the Ministry of Tourism and Civil Aviation (MoTCA) that it will form a committee under the ministry's coordination.
The committee will also have representatives from Ministry of Law and Justice, Ministry of Finance, Ministry of Foreign Affairs, Nepal Airlines Corporation including its employees' unions, and Civil Aviation Authority of Nepal (CAAN) to sort out the demands of the unions.
The unions have been demanding the MoTCA to revoke the desicion to allow Air Arabia fly on Kathmandu-Kuala Lumpur route and take immediate decision of buying the new aircraft for the ailing national carrier for the international route.
"Though financially NAC doesnot loose by not flying on the domestic routes, we have decided not to let the passengers of the remote districts suffer," Nimananda Khanal, vice-president of NAC Employees Organisition.
The airlines incur an annual loss of Rs 220 million from the domestic flights, according to the national flag carrier that flies around 15 flights in an average daily to various 25 destinations in the countries with its four -- of the seven -- 19-seater DHC-6-Twin Otter aircraft. The three Twin Otter aircraft are grounded.
The 25 destinations include Thankharka, Bhojpur, Kangel, where other private domestic airliners won't have any flights.
The flights were obstructed since December 15 and the three Twin Otters were grounded in Kathmandu and one in Biratnagar.
"But we are continuing the protest programmes to pressurise the management and the government," he said, adding that they will not let any high officials into the NAC office. The managing director K B Limbu was also not allowed in the office today as he is also a plitical appointee, according to the unions, who have two demands -- revoke the Kathmandu-Kuala Lumpur route of Air Arabia and early purchase of new aircraft for the international route as one of NAC aircraft is grounded due to technical glitch since a couple of weeks.

Air Arabia
KATHMANDU: UAE General Civil Aviation Authority (GCCA) has asked the CAAN on why was its low-cost airliner Air Arabia stopped from flying on Kathmandu-Kuala Lumpur route one day before its scheduled flight. "I urge your authority to immediately grant permission to Air Arabia to exercise unrestricted fifth freedom traffic rights on Kathmandu-Kuala Lumpur sector in compliance with the Article 6 of the MoU," said Omar Bin Ghaleb, director general of the GCCA in his letter to Ram Prasad Neupane, director general of CAAN. Air Arabia was scheduled to start its flight on the route from December 16 but has shelved its plan until further notice.

Saturday, December 25, 2010

Report reveals poor transparency, accountability in budget

The International Budget Partnership released the Open Budget Survey 2010 -- the only independent, comparative, regular measure of budget transparency and accountability around the world recently.
Produced every two years by independent experts not beholden to national governments, the report reveals that 74 of the 94 countries assessed fail to meet basic standards of transparency and accountability with national budgets. This opens the door to abuse and inappropriate and inefficient use of public money.
“Greater transparency enables better oversight, better access to credit, better policy choices, and better service delivery,” said Warren Krafchik, director of the International Budget Partnership. Krafchik cited Nigeria as an example of how a lack of budget transparency allows corruption and mismanagement to go unchecked. He noted Mexico as a case in which access to budget information ensured that poor farmers received subsidies intended for them that previously were diverted to wealthy farmers.
Based on documented evidence, the Open Budget Survey finds that just seven of 94 countries assessed release extensive budget information, and 40 countries release no meaningful budget information. Without this information, it is difficult for the public and oversight institutions to hold government accountable or to have meaningful input into decisions about how to use public resources.
South Africa, New Zealand, the United Kingdom, France, Norway, Sweden, and the United States score in the top tier of transparency, while the worst performers include China, Saudi Arabia, Equatorial Guinea, Senegal, and newly democratic Iraq, which provide little to no information to their citizens.
The Open Budget Survey uses internationally recognised criteria to give each country a transparency score on a 100-point scale called the Open Budget Index. Despite the general lack of budget transparency around the world, the Open Budget Survey 2010 revealed a nine-point average improvement among the 40 countries that have been measured over three consecutive Open Budget Surveys. Some of the most dramatic improvements came from previously low-scoring countries, such as Mongolia and Liberia, which still do not meet best practices but have improved significantly over time.
“The good news is that all governments -- no matter their income levels or political systems or dependence on aid -- can improve transparency and accountability quickly and with very little additional cost or effort by publishing online all of the budget information they already produce and by inviting public participation in the budget process,” said Krafchik. “In the long term, we would like to see the international community establish a set of global norms for budget transparency. Such norms could codify broadly accepted principles and guidelines with respect to transparency and would provide civil society organisations, the media, and legislatures a powerful tool to leverage improvements within countries."
An initiative of the Centre on Budget and Policy Priorities, the International Budget Partnership collaborates with civil society around the world to use budget analysis and advocacy as a tool to improve effective governance and reduce poverty. The Ford Foundation, the Open Society Institute, the Flora and William Hewlett Foundation, and the UK Department for International Development (UKaid) provide funding for the Open Budget Initiative at the International Budget Partnership.
The International Budget Partnership and the Centre for Budget and Policy Priorities are not affiliated with and do not receive funding from the US government.

Friday, December 24, 2010

Nepal ranks 45 in Open Budget Survey

Nepal ranks at 45th position in Open Budget Survey (OBI) among 94 countries‚ surveyed in 2010.
“Nepal’s ranking is slightly higher than the average score of 42 but lower than several other South Asian countries in the survey including Bangladesh (48)‚ India (67) and Sri Lanka (67)‚” said Taranath Dahal‚ chairperson of the Freedom Forum that was the local partner of the survey. In the South Asian region‚ Afghanistan is at 21st and Pakistan at 38th positions.
“Nepal’s score indicates that the government provides the public with some information on the budget and financial activities‚” he said‚ adding that it makes challenging for citizens to hold the government accountable for its management of the public’s money.
The government provides with some‚ albeit incomplete‚ information to the public in its budget documents‚ according to him‚ who surveyed with a structured 92 questions from the Open Budget Survey 2010. “The result also indicates the country’s relative transparency in the whole budget preparation and information dissemination process‚” Dahal said.
The International Budget Partnership’s Open Budget Survey assesses the availability in each country assessed of eight key budget documents‚ as well as the comprehensiveness of the data contained in these documents. Grades for the comprehensiveness and accessibility of the information provided in each document are calculated from the average scores received on a subset of questions from the OBS.
“Nepal falls in the C-category‚” he said‚ adding that the country could have scored more had the budget come on time last year. The country scored nil in three indicators — pre-budget statement‚ enacted budget‚ and citizens budget — out of the eight indicators.
“Overall‚ Nepal’s ranking is not bad‚” said Bodh Raj Niraoula‚ chief of the Budget Department at the Finance Ministry.
Beyond improving the availability and comprehensiveness of key budget documents‚ there are other ways in which Nepal’s budget process can be made more open‚ said the report. “These include ensuring the existence of a strong legislature and supreme audit institutions that provide effective budget oversight‚ and providing greater opportunities for public engagement in the budget process.”
The Survey has recommended Nepal to publish the Enacted Budget‚ produce and publish a Citizens Budget and Pre-Budget Statement‚ improve the comprehensiveness of the Executive’s Budget Proposal‚ provide opportunities for the public to testify at legislative hearings on the budget‚ empower SAIs to publish comprehensive Audit Reports‚ including reports on extra‚ and budgetary funds.


KATHMANDU: An average score between 0-20 is considered scant information and graded as E; 21-41‚ minimal information‚ graded as D; 41-60‚ some‚ graded as C; 61-80‚ significant‚ graded as B and 81-100‚ extensive‚ graded as A‚ under which South Africa‚ New Zealand‚ United Kingdom‚ France‚ Norway‚ Sweden and United States fall.

NRB bars hidden charges

The banks cannot take any hidden charges, according to the central bank.
Nepal Rastra Bank has issued guidelines for banks and financial institutions to cut the jargon and be transparent in matters concerning their services and service charges. The move is meant to ensure that BFIs do not dupe the unsuspecting customers with hidden charges they are not aware of.
NRB’s directive regarding service and hidden charges wants BFIs to throw light on‚ and not hide‚ these charges. ‘Conditions apply’ and conditions written in fine print will not suffice. The BFIs have to publish the additional service and other charges‚ such as rate of penalties‚ as well as any limitations and conditions‚ on the BFIs’ websites‚ leaflets and brochures – in simple language free of banking and legal jargon.
Likewise‚ the BFIs have to publish the rate of interest for depositors and borrowers‚ fine interest‚ management fees and service charges in simple language on the BFIs’ websites‚ brochures and notice boards in their branches‚ so that a layman can easily comprehend the real earnings from the deposits and the real burden of borrowings.
Similarly‚ the directive has also tried to bring uniformity to the service charges being charged by BFIs while conducting collateral valuation‚ blacklisting‚ removing from blacklist‚ issuing cards and providing insurance. In essence‚ this means that service charges being charged from the customers by one BFI should not be higher than that of another.
BFIs will not be allowed to charge the customers while activating the inactive accounts. Due interest will have to be paid for inactive accounts as well. Moreover‚ the BFIs cannot reduce the balance from accounts as penalty for failure to maintain the minimum balance in the account.
BFIs have also been directed to establish information and grievance-hearing desk to redress the woes of customers.

Thursday, December 23, 2010

Service industry under central bank's scanner

The central bank has asked the travel agencies, tour operators and all the service industry players to report their foreign currency earnings every month regularly.
Nepal Rastra Bank (NRB) has suspected that they are not reporting the foreign currency earnings, though there is a rule of monthly reporting to the central bank. "The agencies also have to deposit foreign currecy in their account within 24 hours," according to the rule.
But the central bank data of service sector income doesnot match the arrival figures giving enough room to suspect foreign currency being not reported.
Tourism entrepreneurs also do not rule out the possibilities.
"Some agencies might not be following the rule," said Uttam Raj Karki, president of Society of Travel and Tour Operators Nepal (SOTTO-Nepal). "Big agencies with a big volumn of business and foreign currency earnings might not be reporting the foreign currency earnings," he said, adding that some of the agencies might be reporting late and taking advantages, but sooner or later they have to report.
The central bank has been seriously concerned with the low foreign currency earnings compared to the rising tourist arrivals.
Earlier also, the agencies were reporting their foreign currency earnings, but the mismatch between the tourist arrivals and foreign currency earnings has forced the central bank to again ask them to report regularly on the monthly basis.
Had the tourist arrivals figure and service sector income matched, the current account would have already been surplus helping to ease Balance of Payment (BoP) deficit.
The current account has registered a deficit of Rs 2.17 billion in the first three months of the current fiscal year hurting the overall BoP to a deficit of Rs 6.88 billion.
"At a time when Nepali economy is suffering from huge informalisation, we are serious to bring the service sector income into formal channel, if it is not coming," the central bank governor Dr Yubraj Khatiwada said.
The country has witnessed a steady growth of tourist arrivals since the begining of 2010. Till November Nepal received 412,446 by air, according to Nepal Tourism Board (NTB).

Home, auto loan interest rates to go up

Asset-liability mismatch, repricing risk and increasing interest rates on deposits are forcing the banks to readjust the lending rates making auto loan and home loan costlier.
The banks and financial institutions (BFIs) are increasing interest rates on consumer loans -- especially on housing and auto loans - as they have been operating on very thin margin, lately. "Some of the BFIs have already increased the rates," said Anil Shah, chief exective officer (CEO) of Mega Bank. "But the rates could be stabilised after the second quarter ends by January 15."
Last year, when the BFIs faced liquidity crunch, they have increased the deposit rates. Since the banks are offering high rates on deposits, they have no option than to increase the lending rates. As they have high deposit rates, they will naturally find it difficult to fund loan.
On top of that there is an asset-liability mismatch in the banking sector. The BFIs take maximum deposits for one to two year-term and has to lend for a longer period of five to ten years. According to the central banks directives, they also have to maintain deposit-lending ratio pushing the cost of loan higher.
"The interest rates on deposit is also increasing as there is a high risk of repricing making the cost of the fund high," according to the CEO of Commerz and Trust Bank, Anal P Bhattarai, who thinks the banks are operating on a very thin margin and 'readjustment of the rates is evident.'
Currently housing loans are available at an average of 13 per cent interest rates and auto loans at available at an average 14 per cent per cent interest rates. They have to be match asset-liability by readjusting the rates to around 18 per cent.
Sashin Joshi, president of Nepal Bankers Association (NBA) thinks that there is no 'strong' evidence supporting the perception that the rates will go up. "Many banks are even today offering housing loans at 13 per cent to 14 per cent and auto loans at 13.5 per cent to 14.5 per cent," he said.
The central bank data reveals the commercial banks deposit stands at Rs 600 billion and lending stands at nearly around Rs 500 billion.

Govt still has to recover Rs 193.5 million from five casinos

The government still has to recover Rs 193.5 million from five casinos.
Finance minister Surendra Pandey at the Parliamentary Accounts Committee (PAC) today informed that the government still has to recover revenue from Casino Anna, Casino Royal, Casino Shangrilla, Casino Nepal and Casino Fulbari.
"The government has been able to recover Rs 77.4 million from the casinos recently," Pandey informed, adding that the government is in the process to recover the remaining sum.
"If the casnos don't pay, the hotels are laible to pay tax as the casino license is issued to the hotels only," he added.
Nepal's casino industry is considered the oldest in South Asia but lately it has been in news for all the wrong reasons like tax evasion and entertaining Nepalis.
When Casino Nepal -- the first casino in Asia -- was started in 1968, it was open only to foreigners but the casinos lately are blamed of entertaining the Nepalis against the law.
The country has currently 10 casinos. Casino Royale (Hotel & Yeti) is run by Raj Bahadur Singh, and Casino Venus (Hotel Malla) and Casino Rad (Hotel Radisson) are run by Valley Links Pvt that also owns a third outside Kathmandu, Pokhara Grande. The Fulbari Casino is in Hotel Fulbari in Pokhara, whereas Nepal Recreation Centre (NRC) runs five casinos -- Casino Nepal, Casino Anna, Casino Everest, Casino Tara and Casino Shangrila.
However, Kathmandu District Administration Office has already instructed to vacate Shangrila Casino from its existing premises at Hotel Shangrila after the hotelier Shyam Bahadur Pandey formally lodged an application at the DAO, requesting Shangrila Casino to remove. Pandey requested the DAO as NRC had not been paying the rent due to the hotel.
"After listening from the finance ministry officials, we has decided to invite Sarat Singh Bhandari, minister for Tourism and Civil Aviation tomorrow for further clarifition on the issue of Casinos as the ministry issues the licences for the casinos," said Som Bahadur Thapa, secretary at the PAC.

Aid simplification, RBS upgradation
KATHMANDU: Finance minister Surendra Bahadur Pandey speaking at the Parliamentary Accounts Committee (PAC) said that the modernisation of Rastriya Beema Sansthan is on the cards. Similarly, the foreign aid policy flowing through NGOs and INGOs will also be strictly monitored.

Central bank to take stock of share market

Financial Sector Oversight Committee is taking stock of the plunging Nepse, according to the central bank governor Dr Yubraj Khatiwada.
The committee -- led by the finance minister -- was formed for a better policy coordination among the regulatory authorities, and the finance ministry.
The committee has the chiefs of all the regulatory authorities -- Nepal Rastra Bank (NRB), Securities Board of Nepal (Senon) and Beema Samiti (Insurance Board) apart from finance secretary as the members to chalk out a uniform regulation and have regular policy interaction among themselves.
"The regular coordination among the money market, capital market and insurance market is the need of an hour," according to the Finance Ministry that informed that the Committee is meeting tomorrow, instead of today due to finance minister's busy schedule.
"In the last one decade, the financial market has expanded and there needs a policy coordination to better manage them," according to the finance ministry sources. "As their decisions affact each other, there should be a regular interaction among themselves to better develop the financial market."
The committe is a permanent structure that has go the cabinet approval.
Currently, there has been a lots of confusion among the institutions on whose guidelines to follow -- due to lack of coordination among the regulatory authorities -- as there are some contradictory regulations.
According to the central bank -- the regultor of the banks and financial institutions (BFIs), they have to publish their financial reports within a month. But according to the Securities Board of Nepal (Sebon) regulation, a listed company has to publish its financial report within 35 days. Most of the BFIs are listed in the secondary market and they have to follow both the regulator -- the central bank and Sebon and most of them are following the Sebon regulation on financial statements publications.
Similarly, the central bank wants to end cross holding of shares but according to Sebon, the issue manager has to underwrite the 50 per cent share, if all the primary issue is not subscribed.
The Committee will look after all such issues and iron them out.

Rs 180m ADB loan for Upper Seti Hydro

The Asian Development Bank (ADB) agreed to provide a technical grant of Rs 180 million to the government for 127-Mega Watt (MW) Upper Seti Hydro Electricity Project (USHEP).
Finance secretary Rameshore Khanal and officer-in-charge of the ADB Yukihiro Shiroishi signed a Memorandum of Understanding (MoU) today on behalf of their respective institutions for a technical grant to conduct a detailed study of the project.
Dr Jivendra Jha‚ managing director of the Nepal Electricity Authority (NEA)‚ said the Upper Seti Project‚ Damauli‚ in Tanahun district can now move with this agreement. He also sought soft loans for the project. The ADB’s assistance will be used for a detailed engineering study that includes development of design options‚ specifications and drawings for the civil works and the electromechanical‚ hydro- mechanical works and transmission facilities and the bidding process.
Of the total cost of $ 2.95 million for the detailed engineering study‚ the ADB is providing $2.5 million and the NEA will spend the remaining amount. The study is expected to be completed by September 2012. The NEA has already completed the Upgrading Feasibility Study of the project with technical assistance from the Japan government through JICA in 2006-07.

Wednesday, December 22, 2010

Kailali district gets more budget compared to last fiscal year

Kailali district has become the luckiest district this fiscal year in terms of districwise budgetary allocation followed by Bardia district and Kaski district compared to last fiscal year, according to the districtwise budgetary allocation.
Kailali received 116.2 per cent more budget this fiscal year compared to last fiscal year, whereas Bardia receives 78.4 per cent more and Kaski received 70.1 per cent more than last fiscal year's budget.
Kailali district was allocted Rs 16.07 billion -- Rs 700 million for the Dhangadi Airport and Rs 410 billion for various programmes under Local Development Ministry more -- for this fiscal year comapared to Rs 7.43 billion in the last fiscal year.
Similarly, Bardia was allocated Rs 1.28 billion for this fiscal year compared to Rs 723 million in the last fiscal year. Kaski received Rs 1.06 billion for this fiscal compared to Rs 627 million in the last fiscal year.
"The districts received more budget for this fiscal year due to more programmes in these districts," clarified Dr Jagdish Chandra Pokharel vice-chairman of the National Planning Commission (NPC) that passes budget for programmes districtwise, regionwise and nationwise.
"Apart from the districtwise allocation, if the district has projects of national importance, the budget is also separated under the central level programmes too," he said, adding that the Bardia received more budget for the Karnali bridge, alternative energy, irrigation and local development, whereas Kaski received more budget for agriculture, road, and local development activities in the district.
Kathmandu district received Rs 2.09 billion, 35.9 per cent higher budget compared to last fiscal year.
Similarly, Regionwise Central Development Region received 27.89 per cent more budget this fiscal year compared to last fiscal year.
Farwestern Development Region has received only 11.85 per cent more to Rs 25.46 billion budget compared to last fiscal year. Farwestern Development Region has nine districts.
Meanwhile, the Constituent Assembly (CA) members from Farwestern Development Region has been protesting against the less budget for their region that is the less developed region among all the five development regions in the country.
In the Rs 337.90 billion budget for the fiscal year 2020-11, the government has separated Rs 178.61 billion for the development activities. "It is 53.72 per cent of the total budget," Pokharel said, doubting that the delay in the full-fledged budget could make it more difficult for the implementation of the programmes. "Of the total development budget Rs 70.95 billion has been allocated under the districtwise budgetary allocation that is 21 per cent of the total development budget."

NPC has no information
KATHMANDU: National Planning Commission (NPC) has no information and means to go to Constituent Areas to collect detalied informations and depends on the report ministries provide to it, according to NPC vice-chair Dr Jagdish Chandra Pokharel. It gives rise to suspecion on the popular belief that the ministers spend more budget in their Constituenties only. However, he tried to defend the allegation.

IMF concludes gold sales

The International Monetary Fund (IMF) announced the conclusion of limited sales programme covering 403.3 metric tonnes of gold that was approved by the Executive Board in September 2009.
These sales are a central element of the new income model for the IMF that was endorsed by the Executive Board in April 2008. They will also increase the Fund’s capacity to support low-income countries under a strategy endorsed by the Board in July 2009.
The gold sales were conducted under modalities to safeguard against disruption of the gold market. All gold sales were at market prices, including direct sales to official holders.
There were no immediate details of the final sale, but the IMF has previously announced the sale of 200 metric tonnes to India, ten tonnes to Mauritius, ten tonnes to Sri Lanka and ten tonnes to Bangladesh.
The sale to those countries was said to be around $7.6 billion. IMF members agreed in 2008 that the fund could sell an eighth of its gold assets in order to diversify its financial modelso that it no longer relies on lending. The fund is one of the world’s largest holders of the precious metal.
The IMF held 93.8 million ounces (2,917.1 metric tonnes) of gold at designated depositories at end July 2010. The IMF’s total gold holdings are valued on its balance sheet at $5.9 billion on the basis of historical cost. As of July 31, 2010, the IMF’s holdings amounted to $109.6 billion at current market prices

Automated cheque clearance on cards

Nepal Rastra Bank (NRB) along with commercial banks and Smart Choice Technologies (SCT) have set up Nepal Clearing House Ltd (NCHL). NCHL today signed an agreement with Jordan-based software developing company ProgresSoft Corporation to develop the software for Cheque Truncation System (CTS) in the country.
The new system is expected to start operation in eight months. At present‚ a single cheque clearance takes anything between two days to months as it is done manually by the central bank.
The customers have to wait for weeks for transaction to materialise. The cheques had to get to the central bank’s clearing office‚ then the staff there clears the cheques‚ then permit the banks to make and receive transfers.
The process being time-consuming‚ general public avoids‚ making cheque payments of the bank other than the one from which cheque has been drawn.
NCHL will introduce and implement CTS that will provide automated cheque clearance service so that cheques will be cleared within seconds so that beneficiaries can access the fund the same day. “The company has plans to later establish a national payments gateway to facilitate the electronic payments and financial transactions across banks and financial institutions in Nepal‚” said Sashin Joshi‚ president of Nepal Bankers’ Association (NBA) that has been actively involved in the project.
The automated system is supposed to make whole cheque clearing system less tedious‚ quicker and efficient‚ encouraging people to rely more on payments through cheques.
“The operation of NCHL will relieve the central bank from its subsidiary work and free the resources so that it can focus more on its core activities‚” said Dr Yubaraj Khatiwada‚ Governor of the central bank that has 10 per cent stake in the Nepal Clearing House Ltd.
The ProgresSoft’s software is the system that electronically transfers cheque images that eliminates the need of physically transporting cheques from banks to the central bank’s clearing office. Electronic cheque clearance is the specialty of ProgresSoft as the company has successfully implemented the system in Qatar‚ Oman‚ Jordan among others.

Tuesday, December 21, 2010

MEX Nepal gets membership of SAFE

Mercantile Exchange Nepal Ltd (MEX Nepal) -- the only ISO 9001:2008 certified commodity exchange -- is affiliated with South Asian Federation of Exchanges (SAFE) under the affiliate membership.

"The membership with SAFE is a result of continuous support from Securities Board of Nepal (Sebon) and Nepal Stock Exchange (Nepse)," according to the MEX Nepal that is the first commodity exchange in Nepal to get such an affiliation.

"Our affiliation with SAFE shows our services and parameters are equal to global standards," it claimed.

SAFE is a forum of 24 member entities of South Asian Region, UAE and Mauritius. The federation has provided a platform to share, exchange and promote the technologies, experiences for the rapid growth and development of capital market and work towards the regional as well as global integration.

On November 5-8, the SAFE has organised a SAFE Executive Leadership Forum meeting in Tashkent, Uzbekistan.

The programme featured a mix of lectures and case studies to be delivered by highly accomplished leaders both from the academic and corporate sector having education and training from institutions like Harvard, Yale, LSE and Wales.

Besides the high class training, it had also exposed the participants to the rich cultural and historical landscape of Tashkent.

Similarly, SAFE held its third conference on April 22 in Balaclava, Mauritius.

The event hosted by MCX Stock Exchange (India) and Global Board of Trade (GBOT) Mauritius was attended by Adnan Afridi, chairman of SAFE and more than 100 prominent experts from the financial markets and from exchanges of the South Asian region. A ten-member delegation led by Nepse chairman Tanka Prasad Paneru took part in the third SAFE conference.

Global shipping industry recovers

International seaborne trade contracted by 4.5 per cent in 2009 putting the trade at below 2007 levels, reports UNCTAD’s Review of Maritime Transport 2010. However, it had climbed to an all-time high in 2008.
The Review of Maritime Transport 2010 estimates total seaborne trade during 2009 at 7.84 billion tonnes. Although a global recovery is currently under way, it is uneven, slower than the recoveries that have followed previous recessions, and subject to numerous uncertainties and to the fragile global economic conditions, the study said. "Signs show that the shipping industry and seaborne trade are recovering, but it will likely take some time for the industry to return to its 2009 levels."
The focus in the 2010 edition is on developments in Asia since 2007, when UNCTAD last reported on the region. GDP growth in the Asia-Pacific region decelerated to four per cent in 2009 – its lowest level in eight years. In tandem with the economic situation, growth in international merchandise trade in the region decelerated in 2008 and contracted in 2009. By 2010, economic indicators were showing a recovery in the region’s economic growth and trade, with some economies already showing signs of a return to pre-crisis growth and export levels. However, the recovery remains fragile and is subject to downside risks. Maritime transport is the single most important transport mode; it has around 80 per cent of the market share in the international movement of goods. However, in some developing countries this percentage is much higher, due to cumbersome cross-border procedures and an underdeveloped land transport infrastructure. The Review of Maritime Transport 2010 also covers developments from January 2009 to mid-2010 in other modes of transport, such as road, rail, and inland waterways.
Seaborne trade in dry bulk commodities – such as iron ore, grain, coal, bauxite/alumina and phosphate, which represent around one quarter of seaborne trade – actually grew by an estimated 1.4 per cent in 2009.
However, the data masks fluctuations by commodity type. Bauxite and alumina, which are key components in aluminium production and are used primarily in the transport and construction industries, suffered a 23.2 per cent decline. Phosphate rock, used as a fertilizer by the agriculture industry, suffered a 38.7 per cent decline. Iron ore shipments rose to an estimated 907 million tons in 2009 – an increase of 7.8 per cent over the previous year. China accounted for much of the increase in iron ore trade, with imports growing by 38.9 per cent, whereas Japan ’s imports declined by 24.8 per cent and Western Europe ’s imports declined by 38.2 per cent. The supply of new vessels showed no signs of abating. At the beginning of 2010, the world merchant fleet reached 1,276 million deadweight tons (dwt) – an increase of 84 million dwt over 2009. This growth resulted from record new deliveries of 117 million dwt, compared to demolitions and other withdrawals from the market totalling about 33 million dwt.
New deliveries in 2009 were 42 per cent higher than in 2008 because of the orders that had been placed prior to the downturn in global demand. The resulting oversupply of tonnage then led to an over 300 per cent surge in demolitions of older tonnage. However, despite this increase, the combined effect of a downturn in demand and an oversupply of vessels meant that freight rates for many vessel types remained depressed. World container port throughput declined by an estimated 9.7 per cent to 465.7 million twenty-foot equivalent units (TEUs) in 2009, the report said.
UNCTAD’s Liner Shipping Connectivity Index revealed that the average ranking of the least developed countries (LDCs) in 2010 was 111, compared to an average ranking of 78 for other developing countries and 64 for developed countries. The rating indicates that LDCs remain isolated from major or frequently serviced shipping routes. Between 2004 and 2010, the connectivity ranking of LDCs improved by just one point.
The Review of Maritime Transport 2010 also details recent developments in maritime legislation, such as steps by the International Maritime Organization regarding the scope and content of an international regime to control emissions of greenhouse gases from international shipping. In April 2010, a Protocol on the 1996 Hazardous and Noxious Substances Convention was adopted which aims to bring about wider adoption of the Convention.
Every year, the Review of Maritime Transport looks at transport developments in a particular region.

Monday, December 20, 2010

Budget gives boost to revenue mobilisation

Four-month delay in full-fledged budget has hit the national coffer hard, though after the full fledged budget the revenue mobilisation has registered an encouraging growth.
“In the first five months, the revenue mobilisation has registered a shortfall -- of Rs 6 billion -- in the target, due to delay in the full-fledged budget,” according to the finance ministry that has however, claimed that the revenue mobilisation after the budget has posted an increasing trend. Finance minister Surendra Pandey of the care taker government of Madhav Kumar Nepal has presenting Rs 337.9 billion budget for the current fiscal year through ordinance after a long tug of war with the opposition UCPN-Maoist.
The feel-good budget that focused on eduction, health and social service apart from export promotion, infrastructure, and agriculture had targetted a growth of 4.5 per cent and inflation at seven per cent for the fiscal year 2010-11.
The full-fledged budget was announced on November 20 — four months later than the regular schedule — due to political deadlock. The Rs 337.90 billion budget has aimed at collecting Rs 216.64 billion in revenue in the current fiscal year.
However, the government has collected Rs 65.10 billion — a growth of 11.1 per cent — in the first five months of the current fiscal year compared to the same period last fiscal year, when the collection stood at Rs 58.60 billion.
“The sixth month will be crucial as we are expecting to collect Rs 24.56 billion in a month,” said Revenue Secretary Krishnahari Baskota, who is hopeful of the positive impact of the budget.
The sector-wise revenue collection trend reveals that the revenue is import based as the Value Added Tax (VAT) contributes the largest chunk to the government coffer.
By the first five months, VAT contributes Rs 26.16 billion, followed by customs at Rs 14.2 billion, excise duty Rs 10.85 billion, income tax Rs 8.51 billion, non-tax sector Rs 2.84 billion, vehicle registration Rs 1.40 billion and registration fees contributes Rs 1.40 billion to the government coffer, according to the finance ministry.

Trade deficit with China widens

The country’s trade deficit with China is widening.
“Nepal has been incurring heavy losses in trade with China,” Prime Minister Madhav Kumar Nepal said inaugurating the 11th annual general meeting of Nepal-China Chamber of Commerce and Industry (NCCCI) here today.
“The increasing trade deficit is a matter of great concern for a small country like Nepal,” he said, adding that the government has introduced some export promotional programmes to reduce the trade deficit. “But government’s lone effort could not bridge the widening trade gap and China and private sector’s active help is essential.”
“Nepal has many opportunities for foreign investment on different sectors such as hydropower, mines, Agriculture, pharmaceuticals, finances, IT, Education and tourism,” said NCCCI president Dr Rajesh Kazi Shrestha.
“China is one of the important trade partners of Nepal
and our trade is in increasing trend, he said, adding that though, in the fiscal yeat 2008-09 Nepal posted a trade deficit of $442 million with China.
Welcoming the 60-member Chinese delegation led by China Council for Promotion of International Trade (CCPIT) Wan Jifei, he requested to explore market opportunities in Nepal.
On the occasion, China’s ambassador to Nepal Qiu Guohong said that bilateral trade between Nepal and China has increased by 36 per cent in the first 10 months of this fiscal year compared to the same period last year.
“The arrangement of duty-free access to some Nepali products will help promote bilateral trade,” he said,
Similarly, CCPIT chief Jifei said that Nepal should try to bring in foreign investment in agriculture, infrastructure, tourism and hydropower sectors as many Chinese companies are ready to invest in these sectors.
Nepal being situated between two rapidly growing economic powerhouses — China and India — could be used as a transit route not only to promote bilateral trade but regional trade as well.
“Nepal is celebrating Nepal Tourism Year 2011 and the government of China has declared Nepal as its outbound tourist destination,” Shrestha said, “but the arrival of Chinese tourists is not satisfactory.”
“The existing frequency of air flights must be increased and airlink must be added in major cities of China like Beijing, Shanghai and Kunming to facilitate and attract more Chinese tourists,” he said, adding that there is a need of establishing the Nepali counselor office in major cities of China like Guangzhou, Kunming, and Chengdu.
Permier Nepal on the occasion also inaugurate NCCCI Directory and facilitated three institutions — Tibet House, Air China and Singhal Group — for their contribution in the bilateral trade.

Sunday, December 19, 2010

NAC board raises spending ceiling for top brass

The board meeting of the national flag carrier today increased the ceiling of amount that the chairman and managing director can spend for the maintenence of aircraft engine.
"The board decided to increase the ceiling to Rs 300 million that the chairman can spend and Rs 270 million that the managing director can spend," said a union leader. Earlier ceiling was Rs 200 million only.
"The engine of the one of the Boeing 757 -- that flies on the nternational route -- could now be brought back soon after its maintenence due to this decision. It is currently in Israel for the maintenence.
The protesting Nepal Airlines Corporation (NAC) employees unions gheraued the head office of the NAC to force the board to take decision. However, they are still not satisfied due to board's reluctant on other pressing issues.
"NAC board has seven directors but one director representing finance ministry was not present in the meeting today," the employee added.
Of the two Boeing 757s, the NAC is flying only one aircraft reducing its international flghts to a half due to technical glitch in the engine of one of its aircrafts. The reduction in the number of international flights has hurt the national flag carrier as it is compelled to fly only three flights on its most profitable route Kathmandu-Kuala Lumpur and New Delhi.
The ailing NAC has been long planning to buy two aircraft to add on its international route where there are more than two dozen international airlines are flying.
Due to lack of aircraft the NAC has not been able to fly a direct flight to European country that could be the key to its existance.

Increasing bank rates make Nepse less attractive

Increasing interest rates, over supply and margin call made investors lose confidence in the domestic capital market, making it lose its charm.
The one-year fixed deposit interest rate has gone up in the almost equal per cent compared to the Nepse's downfall.
The one-year fixed deposit interest rate has gone up by 65 per cent from 5.23 per cent in September 2008 to 8.64 per cent this September, according to a renowned market analyst Rabindra Bhattarai.
Similarly, the market has plunged to 404.43 points from 976 points in last two years. "In the last two years, the Nepse has also dropped by 68 per cent pulling the market capitalisation to around Rs 350 billion from Rs 500 billion," he said, adding that the number of shares has also nearly doubled due to rightsd shares and number of listed companies increase.
There were 144 listed companies in September 2008 and this September it reached 180 that is an increase of 25 per cent. Similalry, the exceeding supply of stock in comparison to demand is also reason for index not being able to perform well. Likewise, the stock market cycle that had inflated the stock values abnormally pushing Nepse index is itself deflating the prices of those overvalued stocks which is also bring down the index.
Meanwhile, this week too bearish trend continued as the week saw Nepse plunging deeper to 392.04 points. Nepse went further down by 6.84 points from a week ago to close at 398.14 points.
Last Sunday morning, the market opened at 398.14 points and on Friday it closed at 392.04 points.
According to Bhattarai, the new benchmark could be around 350 points and lower as by the mid-January, the investors get the margin call from the banks, they have taken loans against the shares as collateral leaving them with no option but to sell their stocks that will pull the Nepse further down.
Nepse observed transaction worth Rs 127 million through 7,085 transaction of 483,317 unit shares of 111 companies during the last week. The transaction amount has increased by 14.65 per cent compared to a week ago. The sensitive index -- that measures the Class A listed companies’ index -- also went down by 1.59 points. While float index -- that represents only tradable shares -- has also dipped by 0.85 points.
Manufacturing, hotels and others sub group ended up in green zone as Unilever Nepal, Soaltee Hotel and Nepal Telecom were able to earn throughout the trading week. Similarly, insurance companies, development banks, hydropower and commercial banks, finance companies and trading subgroup lost.
Bank of Kathmandu topped the chart in terms of transaction amount with the transactions worth Rs 15.7 million and in terms of number of shares traded Patan Finance was the forerunner with 48,814 shares changing hand and in terms of number of transactions Zenith Finance topped with 825 transactions.
The week’s top five performers in terms of transaction amount was Bank of Kathmandu (Rs 15.77 million), Nepal Investment Bank (Rs 9.25 million), Nepal SBI Bank (Rs 8.21 million),Nabil Bank (Rs 6.64 million) and Himchuli Bikas Bank (Rs 6.22 million).
Almost all of the major commercial banks lost throughout last week resulting in commercial banks subgroup losing 12.33 points but today -- the first day of the week -- the commercial banks gained a marginal 0.56 point to close the sub group at 346.62 points, though it could not push the Nepse up that ended at losing 1.06 points to close the day's trading at 390.98 points.