Friday, March 30, 2012

Country to see economic growth: Kshetry

The country will see economic growth due to good agriculture production this year, according to the vice chair of the national think tank.
"This year the country will see growth as projected," said vice chair of the National Planning Commission (NPC) Deependra Bahadur Kshetry here today addressing the employees union of the central bank.
The increased agriculture production will push the economic growth this year compared to past years, he said, adding that the government has been focusing on encouraging investment and attracting foreign direct investment through Investment Board. "The Investment Board has been formed to create to facilitate investments," Kshetry added.
He also suggested the employees to work honestly for the institution they are with. "The mismanagement has led the government corporations to failures," he opined, citing an example of Janakpur Cigarette Factory that was once the largest revenue payer to the government coffer but is non-operational now. "They are financially burden to the government right now."
Similarly, he also showed concern over the higher lending rates of the banks and financial institutions that have contracted the private sector borrowing capacity despite liquidity surplus in the banks.
Central bank governor Dr Yub Raj Khatiwad, on the occasion, claimed that the financial sector has improved in recent times.

China world's largest exporter, importer of ICT products

For the first time, China is not only the top exporter of information and communications technology (ICT) goods like computers and cell phones but also – since 2010 – the largest importer.
The United Nations Conference on Trade and Development (UNCTAD) data revealed that China or Hong Kong (China) are the top destinations for seven of the world’s 10 largest ICT goods exporters. The numbers also indicated that developing nations are playing a larger role in ICT goods trade and that the sector displayed resilience during the global economic crisis, according to the data.
The statistics revealed that such goods, which include computers, smartphones, tablets, microchips, televisions and other audio equipment, weathered the financial and economic crisis that erupted in 2008 more successfully than most economic sectors.
For example, the decline in ICT goods imports in 2009 was smaller (14 per cent) than that of total merchandise trade (24 per cent), and the recovery in 2010 was more robust (24 per cent compared with 21 per cent). The crisis accentuated the trend towards a greater role for developing countries in the global production and consumption of ICT goods, it added.
In 2010, for the first time, developing countries saw larger imports of such products compared to developed countries. "With $284 billion of ICT goods imports, China also overtook the US as the largest importer," the report said, adding that the expanding role of China and Hong Kong (China) partly reflected close intraregional trade links in the sector.
The developing Asia exports increased from 58 per cent of global ICT exports in 2008 to 63 per cent in 2010. China ’s exports of such goods were 10 times the level reported at the start of the decade. Chine — in 2010 — exported close to $460 billion, ahead of Hong Kong (China) ($177 billion) and the US ($135 billion).
Between 2000 and 2010, the US, Japan, the UK and Northern Ireland, Canada, Ireland and several other developed countries have experienced steep falls in the absolute values of their ICT exports. But some of the fast risers are found among new European Union (EU) members like Bulgaria, the Czech Republic, Latvia, Poland and Slovakia. In other parts of the world markets also — India, Mexico, Tunisia and Turkey — have all gained market share.
Similarly, the UNCTAD's core indicators of international trade in ICT goods, defined by the Partnership on Measuring ICT for Development revealed the relative weight of ICT goods in each country’s imports and exports.
"Globally, ICT goods in 2010 accounted for 11.9 per cent of total merchandise exports," according to the UNCTAD data that showed that electronic components account for one third of all ICT goods exports.It is an illustration of the high degree of fragmentation characterising the ICT goods production system as well as of the increasing use of such components in non-ICT products like in transport equipment and domestic appliances.
The second largest category is computer-related equipment, but its share has declined from 37 per cent to 29 per cent over the past decade. However, communication and consumer electronic equipment has grown in importance. The relative role of the categories of ICT goods varies considerably by importing country, reflecting differences in levels of development and the extent to which countries are part of the ICT production system.
Computers and related equipment are the most important category in developed countries. But in developing Asia – the main ICT production hub – almost 60 per cent of trade is in electronic components.
In Africa and in the least developed countries, mobile phones and other communication equipment account for the largest share of imports. A more detailed look at the most traded ICT goods revealed that different kinds of electronic integrated circuits occupied the top two places among the most traded items in 2010.
Parts and accessories of computing machines, which excludes peripheral units, ranked third ($131 billion) down from the top rank in 2000 ($152 billion), it said, adding that cell phones represented total world exports of approximately $131 billion in 2010, double over the decade from $63 billion in 2000.
Similarly, the rate of increase was even more spectacular for laptops and other portable processing devices as they increased fivefold, from $25 billion to $125 billion.
The data also revealed the sharp increase in exports of photosensitive semiconductor devices, which include photovoltaic cells. These devices made it into the top 10 of traded ICT items in 2010, multiplying their exports by a factor of 10 in a decade, from $7.2 billion in 2000 to $72 billion in 2010.

Political stability key to attract investment

Political and policy stability, human capital, government's support for private sector, free and efficient bureaucracy, and liberal international trade regime will help a country attract foreign direct investment, according to a senior Japanese economist.
"These four domestic elements and one international element will help a country to attract foreign direct investment," said Prof Emeritus of Seikei University Ryokichi Hirono during an interaction on Investment organised by the Japanese Embassy and Investment Board here in the Valley today.
Incentives for industries will also encourage investments, he said, adding that a good labour relation is yet another aspect to attract investment.
"When Singapore brought an Act barring strike, the island economy started booming," he said citing the example of how Singapore achieved its goal of being a better economy in half a decade. "Nepal should take a lesson from Singapore."
Government should start taking initiatives to attract investment, said Hirono, who has a long experience of working with multilateral agencies like World Bank and UNDP.
The globalisation of trade and investment have helped push growth but it has darker sides too, he opined, adding that widening gap between rich and poor, environmental degradation and corruption are key challenges today, every nation is facing that could be addressed by sustainable development. "But sustainable development should have four pillars; economic, social, environmental and cultural sustainability," he reasoned. "Japan is planning for Sustainable Development Goals (SDGs) — which should be backed by economic growth — after the Millennium Development Goals (MDGs) will come to an end in 2015."
There is a huge optimism in Nepal, he said, adding that the optimism only could not guarantee economic growth. "Political stability with a new vision will help facilitate investments," the senior economist said, adding that political stability can guarantee Japan's Overseas Development Assistance (ODA) that has been revoked since 2001.
The Japanese government is considering resuming ODA loan," informed Investment Board chief executive Radhesh Pant, who returned from Japan — after marketing Nepal to attract investment — last month. "Japan's Ministry of Agriculture is willing to support commercial farming and agro-based industries," he said, adding that Japanese investors are also interested in clean energy with new technology, tourism, minerals and mines-based industries, export-oriented industries especially to India, vocational and technical schools.
The government has formed Investment Board to formulate policies to create investment-friendly environment, select priority sectors for investment, monitor, implement and execute approved investments and provide aftercare, provide appropriate incentives, and coordinate among different government agencies. "The board is planning to promote 50 viable projects from five to seven sectors," Pant said.

Thursday, March 29, 2012

Political stagnation drags Nepal down in International Property Rights Index 2012

The political stagnation dragged the country two positions down in the global ranking.
The International Property Rights Index 2012 released internationally today has ranked Nepal at the 102nd position from last year’s 100th. Though, Nepal dropped two positions to the 102nd — its overall score remained constant at 4.4 out of 10 — among the 130 economies. Last year, Nepal was ranked 100th among the 129th economies with the score 4.4 points, according to the report launched in the Valley by the Samriddhi, the Prosperity Foundation.
“Nepal’s score has seen no changes in the International Property Rights Index 2012 from a year ago, mainly due to no changes in Legal and Political stagnation, according the report.
Regionally, Nepal stands at almost the bottom at the 17th position out of 19nations in the Asian Pacific region.
However, Nepal was in the bottom 20 per cent of the quintile in the International Property Rights Index last year but this year it has been featured in the fourth quintile due to not so good performance of other nations.
Last year, Nepal had improved a little, scoring 0.4 more from 2010’s score of 4, due to improvement in Physical property rights. Among the three key indicators — Legal and Political Environment, Physical Property Rights and Intellectual Property Rights — the Physical Property Rights gained 0.1 point to 5.9 points from last year’s 5.8 points due to two of three of its subcategories increasing in 2012, the report said, adding that the two indicators’ scores — Legal and Political Environment and Intellectual Property Rights — remained unchanged at 3.2 points and 4.1 points, respectively, compared to last year. The Northern and Southern neighbours to Nepal — Peoples Republic of China and India — scored 5.5 points ranking 57th and 5.4 points ranking 62nd as the countries where there is more property rights.
Finland ranked first with a score of 8.6 points followed by Sweden at 8.5 points, according to the report. Finland has retained its top spot for the sixth year in a row, whereas in South Asia, Pakistan and Bangladesh that are below Nepal, scored 4.2 (113 rank) and 3.6 (125), respectively. In South Asia, Sri Lanka is ranked 76th with 5 points.
At the bottom of the ranking is Nigeria with 3.9 points, according to the report. The sixth edition of International Property Rights Index (IPRI) is a publication of the Property Rights Alliance, with sixty-seven think tanks and policy organisations in fifty-three countries involved in research, policy, development, education and promotion of property rights in various countries.

Right to property will lead to prosperity

Right to property will lead to prosperity, according to economists.
"The difference between prosperity and poverty is property," said economist Dr Chiranjivi Nepal during the launch of International Property Rights Index 2012 here today organised by Samriddhi, the Prosperity Foundation.
Legal backup to property rights will ensure economic growth, he said, adding that only democracy and natural resources will not propel economic growth. "Those countries that have more property rights have recorded better economic growth as compared to those that have fewer property rights," said Nepal, citing the example of North and South Korea."
Better legal and political environment for property rights will ensure economic growth," said former bureaucrat and economist Dr Bhola Chalise. "Traditionally, property is a right in our culture but the constitution also has to guarantee it as a fundamental right to push economic growth," he said, adding that the current government has done nothing to improve property rights in the country.
The report that has listed 130 economies that contribute around 97 per cent of the total gross domestic product of the world has also included intellectual property rights as one of the indicators.
"The guarantee of Intellectual Property Rights will attract more foreign direct investment," said executive director of IP Initiative Madhu Soodan Poudyal.

Wednesday, March 28, 2012

Central bank sends United to liquidation, upgrades Annapruna finance

The central bank has sent the troubled United Development Bank to liquidation and upgraded Pokhara-based Annapurna Finance to a class 'B' development bank.
The Bara-based development bank was already under the scanner of the central bank. On January 5, the central bank had decided to liquidate it after it failed to improve despite the central bank’s repeated prescriptions. The development bank was declared ‘troubled financial institution’ in March, 2011 after a central bank study revealed a sharp deterioration in its financial health, mainly due to heavy embezzlement of funds by its promoters.
Inspection by a central bank team had revealed that the district-level development bank established with a paid up capital of Rs 85 million, had a negative net worth of Rs 120 million. The central bank had then asked it to recoup the money that the promoters had embezzled and instructed them to inject additional capital to improve its financials within six months. But the development bank failed to follow the central bank’s directives leaving it with no option but to send the development bank to liquidation.
It is the third financial institution sent to liquidation in the country's banking history after Nepal Development Bank and Samjhana Finance.
According to the central bank's records, the development bank got into trouble after its executive chairman Rabindra Bahadur Singh siphoned off Rs 65 million of the total paid up capital for personal use. The inspection revealed that Singh had created fake loans, and lent to promoters flouting central bank rules.
The central bank had also asked Nepal Police to take action against Singh and director of the development bank Radha Krishna Amatya under the Banking (Offenses) Act. Currently, Singh and Amatya are behind bars in Birgunj.
Similarly, the central bank decided to upgrade Annapurna Finance to a development bank. The development bank will be named Kailash Bikas Bank, according to the management.
There were 73 listed finance companies at the share market but after the upgradation of Annapurna Finance, it will drop to 72 and one more development bank will be increased under the development banks sub group making a total of 64 from the current 63 listed development banks.
Annapurna Finance that has listed 2,620,800 units shares at a face value of Rs 100 per unit, according to Nepse, last saw its shares traded at Rs 217 per unit on April, 22, 2010.

Declare Dhukuti illegal
KATHMANDU: The central bank has asked the Finance Ministry to officially declare Dhukuti illegal as lots of people have become victims of the informal deposit scheme. Recently, a woman committed suicide inside a police station due to Dhukuti, making the central bank think over the informal deposit scheme that has spread in the valley hitting the formal banking channel. "Either the government has to regulate it or declare it illegal as it has become a chronic problem in society forcing people to even commit suicides," the central bank said.

Sebon directs National Hydro to hold AGM

Securities Board of Nepal (Sebon) has ordered National Hydropower Company to hold its annual general meeting (AGM) within a month.
Public shareholders of the hydropower company have sought the regulator's support to pressurise the company to conduct its AGM which has not been held for the last three years.
"Sebon has directed the company to hold its AGM for fiscal year 2009-10 within mid-April," informed one of the directors of the company elected amongst public shareholders Prakash Rajoria.
Sebon has the authority to order any company to hold their AGM if it deems necessary. In this case too, the regulatory authority can ask the company to comply with the regulation by conducting the AGM itself if the executive board does not comply despite repeated orders and Sebon can also audit the company's balance sheet. The listed companies need to hold their AGM within five months of the end of a fiscal year.
"The company has not held its AGM of the last three fiscal years which has left retail investors in the dark about the financial status of the company," said Rajoria, who is also general secretary of Nepal Stock Investors' Association. Different investor associations had lodged a complaint against the company at Sebon. The company had held its AGM for fiscal year 2007-08 and 2008-09 in 2010 and had pledged six per cent cash dividend which was never realised.
The company's stocks were being traded at as high as Rs 600 during the capital market peak around five years back but now the share prices have plunged to around Rs 45.
National Hydropower Company which is promoted by the NB Group has 13,863,462 unit shares listed at Nepal Stock Exchange with about 10 million units owned by minority shareholders.
The group also owns majority stakes at other listed companies such as Nepal Bangladesh Bank, Nepal Credit and Commerce Bank, Harisiddhi Bricks and Tiles Factory and NB Insurance.

Tuesday, March 27, 2012

Government earns highest customs on rubber, plastic slippers, shoes, readymade garments

The government has earned the highest customs revenue on rubber, plastic slippers and shoes, and readymade garments in the first eight months of the current fiscal year as compared to the same period last fiscal year.
The customs revenue from rubber, plastic, slippers and shoes, and readymade garments increased by 718.32 per cent and 355.89 per cent, according to finance secretary Krishna Hari Baskota.
However, the government lost the most revenue on electric conductor and sugar among the 10 highest revenue losers, he said, adding that their revenue decreased by 71.47 per cent and 60.58 per cent respectively.
Similarly, the government lost some 54.66 per cent customs revenue on minibus imports, some 54.37 per cent revenue from bus and truck chassis imports and 50.55 per cent revenue from truck and mini truck imports, he added.
Not surprisingly, cooking gas, petrol and High Speed Diesel (HSD) also features among the high revenue payers.
Though the revenue from cooking gas has increased by 33 per cent, HSD by 21 per cent and petrol by 15 per cent in the first eight months of the current fiscal year against the same period last fiscal year, today's price hike will contribute more to the government coffers through the sale of petrol as the state oil monopoly has increased the price of petrol by Rs 4 per litre.
On average, the government has earned some 39 per cent more revenue from the top 10 products at customs as compared to an increase of 35 per cent in the eight months of the last fiscal year, the finance secretary said, adding that the decrease was recorded at 20.29 per cent from the top 10 revenue losers in the eight months of the current fiscal year as compared to the same period of last fiscal year.
The ministry is tightening all the loop holes to increase customs revenue, said Baskota, adding that vigilance at the customs has increased and a 24-hour control room has been set up to curb leakages at customs points.

Top five revenue earners
Rubber, plastic, slippers and shoes
Readymade garments
Stone and coal
Steel wire rod in coil

Top five revenue losers
Electric conductor
Bus and truck chassis
Truck and mini truck

World Bank suggests PAF to work on third phase programme

The World Bank has suggested Poverty Alleviation Fund (PAF) to carry out rigorous planning to qualify for a possible third phase of support.
"It is time to begin thinking about how PAF III would look like," World Bank country manager for Nepal Taseen Sayed said during an interaction with PAF senior officials here in the Valley today.
She also stressed the need to establish better coordination and linkages with the public sector in its next phase. The current programme — PAF II — is coming to an end in September 2014.
The World Bank has provided grants amounting to $215 million for PAF since 2004.
The World Bank Nepal Office chief also said that the bank was ready to offer technical support for providing identity card for the poor and establishment of an oversight agency for poverty.
"Transparency and targeting are of significant importance while issuing poverty ID cards," she said. Sharing her experience on her recent visit to a PAF programme in Dhading district, Sayed said that the programme has contributed to raising awareness among poor women through intense social mobilisation. "I am really impressed with the engagement and discourse from the women members," she added.
Earlier, PAF vice chair Janak Raj Joshi briefed the World Bank Nepal Office chief on the recent measures that PAF has taken in terms of its institutional reorganisation, policy shifts and reform measures within PAF.
"We are working to re-brand PAF in terms of its acceptability, national ownership and service delivery," Joshi said.Established in 2004, PAF is the largest community development programme targeting poor women, Dalits, Janjatis and other marginalised groups.
Currently implemented in 40 districts, the programme so far has supported 19,000 community organisations to implement different income generation, community infrastructure and capacity development schemes.

Monday, March 26, 2012

NAC needs aircraft to revive tourism sector

The country is losing billion in revenue due to insufficient numbers of aircrafts with the national flag carrier, according to the Prime Minister Dr Baburam Bhattarai.
He was of the view that the dispute regarding the aircraft purchase has to be resolved soon as the tourism sector is bearing the brunt due to prolonged row on purchase.
"The aviation sector has been suffering due to the lack of aircrafts with the Nepal Airlines Corporation (NAC) and the solution seems far away," he said, directing the concerned authorities to speed up plans to purchase aircraft for the NAC.
The government had promised to purchase two new aircraft for the national flag carrier in the budget for the fiscal year 2009-10 but has not been able to walk its talk due to pressure from various agencies since last two years.
Currently, Commission for Investigation of Abuse of Authority (CIAA) has filed a case at the Apex Court against aircraft purchase agreement between NAC and Airbus. The case is under consideration. "The government will request the Court to decide on the case sooner," said Bhattarai.
Similarly, Public Account Committee (PAC) under the Legislative Parliament had also directed the NAC to start new process scraping the old contract with Airbus.
Nepal Airlines had started two — one wide and one narrow body— aircraft purchase process three years ago.On Oct 26, 2009, the NAC board had decided to purchase two aircraft from Airbus—an Airbus A320-200 (narrow body) and an A330-200 (wide body)—to expand its international fleet. In its proposal, Airbus had quoted $41.28 million for the narrow body aircraft and $92.84 million for the wide body aircraft.
However, with controversy surrounding the purchase process, the PAC had directed the government to cancel the deal on December 28, 2009. Subsequently, on May 25, 2010, the Ministry of Finance had also directed Ministry of Tourism and Civil Aviation to scrap the purchase process.
"The government will remove all the hurdles in aircraft purchase process," Bhattarai said, adding that dispute among the different agencies has hurt not only the national image but also bleeding the country blue.
Minister for Tourism and Civil Aviation Lokendra Bista Magar has also started a process of purchasing two aircraft for NAC from China three months ago but it has also been challenged by various agencies.
Under the request of the Nepal Airlines, the Ministry of Tourism and Civil Aviation had expedited the process to acquire five 19-seater Harbin Y-12 twin-engine STOLs and three 58-seater MA60 turboprops. But the Chinese government had formally sent a letter to the Finance Ministry that it could provide two to three aircraft on grants and remaining on soft loan.

Workers shutdown Ford Go Autocare

All Nepal Auto Mechanics Workers' Association unit at GO Ford Autocare has shut down the service centre of Ford vehicles in Shyambhu asking the management for 100 per cent pay and perks hike.
"The UCPN-Maoist affiliated unit of the mechanics association has locked the autocare centre since March 18, though they have been on strike from March 11," said the management that has also locked the autocare centre since yesterday.
"We want the union to start work and sit for talks," the management said, adding that the union had put forth its 21-point demand on March 9. Last year, on February 13, too the union went on strike forwarding 11-point demand, but both the union and management settled the issue through talks agreeing that there will be no strike for another two years.
But the union went on strike in a year, the management accused. The union has also started disturbing the Go Ford Automobiles in Thapathali from March 21.The trade union affiliated to UCPN-Maoist has demanded 100 per cent salary and allowance hike, and 10 per cent bonus, which according to the management is hard to fulfill.
The management also claimed that the union itself is registered under a wrong company. The GO Ford Autocare in Shyambhu and GO Ford Automobiles in Thapathali are separate companies, according to the management. "The union of GO Ford Autocare in Shyambhu has been registered under GO Ford Automobiles in Thapathali."
GO Automobiles (GO Ford) is the automotive division — that is administrative centre — of Golchha Organisation, whereas the GO Ford Autocare is the service centre that employees around 65 workers.

Sunday, March 25, 2012

Trade deficit increases, remittance inflow to match almost total budget outlay

The import-export gap has widened to six times.
According to the central bank's data, the country has imported merchandise worth Rs 254.95 billion in the seventh months of the current fiscal year, which is an increment by 16.9 per cent compared to the same period last fiscal year. "Similarly, the merchandise exports rose by 13.4 per cent to Rs 42.59 billion during mid-February compared to the same period of the fiscal year 2010-11," the central bank's macroeconomic situation for the seventh month said, adding that the total trade deficit went up by 17.6 per cent to Rs 212.36 billion.
"But trade deficit had declined by 1.4 per cent in the same period of the last fiscal year."
However, the increased remittance inflow and service accounts coupled with capital account surplus has pushed the Balance of Payment (BoP) to record surplus of Rs 75.09 billion compared to a deficit of Rs 13.04 billion in the same period of the last fiscal year, the central bank data revealed, though it has not elaborated swelled miscellaneous accounts.
The current account posted a surplus of Rs 34.67 billion in the mid-February compared to a deficit of Rs 6.67 billion in the same period last year due to rise in the growth of remittance inflow and improvement in service accounts. "In US dollar terms, the overall BoP recorded a surplus of $956.6 million against a deficit of $176.7 million in the same period of last year," it said, adding that the current account registered a surplus of $433.7 million compared to a deficit of $89.8 million in the same period last fiscal year.
Net service account witnessed a surplus of Rs 10.05 billion in contrast to a deficit of Rs 6 billion in the same period of last fiscal year. "Service receipts rose by 35.1 per cent while service expenditures declined by 15.1 per cent," it added. "Under services, tourism income rose by 28.4 per cent against a decline by 21.1 per cent in the same period of the last year. However, total travel expenses — under service account — saw decline by 27.2 per cent, including educational expenses by 24.9 per cent.
"But the net transfer account registered a growth of 30.2 per cent to Rs 222.12 billion compared to that of a year ago. "Under transfers, pension receipts declined by 1.2 per cent to Rs 15.44 billion, but remittance inflow increased by 35.5 per cent to Rs 188.19 billion compared to a growth of 11.7 per cent in the same period of the last fiscal year," it added.
If the current rate of remittance inflow continues, it is going to match almost the total budget outlay of Rs 384 billion. “The country will fall into remittance trap as it has only fuelled consumerism not helped increase domestic production," according to the economists.
In US dollar terms, remittance inflow increased by 25 per cent to $2.39 billion compared to a growth of 14.7 per cent in the same period last year.Likewise, under the financial account, foreign direct investment (FDI) of Rs 5.61 billion was recorded against Rs 4.84 billion in the same period a year fiscal year ago, the data revealed.

Price starts looking up
KATHMANDU: The year-on-year (y-o-y) inflation as measured by the consumer price index increased by seven percent in mid-February compared to 10.2 per cent in the same period of the last fiscal year. But the inflation has cooled down to 6.8 per cent in mid-January. The indices of food and beverage group and non-food and services group increased by 4.1 per cent and 9.6 per cent, respectively. These indices had increased by 16.6 per cent and five per cent respectively in the same period of last fiscal year. The rising price of petroleum prices coupled with transportation cost is likely to push the price further up. "Under the items of the food and beverage group, price index of milk products and egg sub-group increased by the highest rate, whereas under the non-food and services, the price index of transport increased by double to 18.5 per cent against an increase of 9.2 per cent in the same period of the previous year.”

Saturday, March 24, 2012

Forex reserve swells

The gross foreign exchange reserves surged by 32.3 per cent to Rs 360.14 billion in mid-February from a level of Rs 272.15 billion as at mid-July 2011, according to the Nepal Rastra Bank. Such reserves had declined by four per cent to Rs 258.10 billion in the same period of last fiscal year.
"Out of total reserve, NRB's reserves increased by 40.9 per cent to Rs 300.29 billion from a level of Rs 213.10 billion as at mid-July 2011 and in US dollar terms, the gross foreign exchange reserves increased by 14.6 per cent to $4.40 billion in mid-February from the level of mid-July 2011," it said, adding that such reserves had declined by 1.9 per cent in the same period last year.
"Based on the trend of import during the seven months of the current fiscal year, the current level of reserves is sufficient for financing merchandise imports of 10 months and merchandise and service imports of nine months.

Friday, March 23, 2012

Indo-Nepal trade to be more challenging

Trade between Nepal and India will be more challenging in the days ahead due to preferential erosion, despite a huge demand in the Indian market, according to experts.
"As India has provided similar preferential status to other countries in the South Asian region under the Least Developed Countries category, Nepal has no monopoly in the Indian market," said joint secretary at the Ministry of Commerce and Supplies Naindra Prasad Upadhaya addressing a 'Public-Private Dialogue on Nepal-India Trade and SAFTA-SATIS,' organised by South Asia Watch on Trade, Economics and Environment (SAWTEE) in association with USAID/NEAT here in the valley today.
However, chief executive director of SAWTEE Dr Ratnakar Adhikari recommended to speed up the enactment of the SEZ Bill, expansion of coverage of export incentives scheme, establishment of quality testing labs, enhancing access to credit and refinancing facility to boost exports to India.
"Similarly, the government has to reduce the cost of trading across the border through the timely implementation of the Customs Reform and Modernisation Action Plan, to improve the investment climate to attract investment in sectors with high export potential to India including sectors with intra-industry trade potential, and start planning for the Comprehensive Economic Partnership Agreement with India apart from addressing the challenges after the 2013 phase out of Agriculture Development Fee," he said, presenting a paper on 'Study on Nepal-India Trade', which he conducted in association with another researcher Chandan Sapkota and the SAWTEE team.
SAWTEE has conducted a study on Nepal-India trade and a diagnostic study on South Asian Free Trade Area (SAFTA) and SAARC Agreement on Trade in Services (SATIS). The major objectives of the two studies was to assess the problems and prospects of trade with India and other South Asian countries, evaluate the legal instruments of Indo-Nepal treaties — Nepal-India Trade Treaty, Nepal-India Transit Treaty, Nepal-India Agreement on Cooperation to Control Unauthorised Trade — SAFTA and SATIS and provide recommendations to the government on Nepal’s future trade negotiation strategies as well as addressing domestic constraints to trade with India and other South Asian countries.
To ease supply side constraints, the study recommended focusing on infrastructure like hydropower and road network, enhancing human capacity, and controlling political and labour strikes that have been hurting export-oriented industries, banning transport cartel through effective implementation of Competition Law, and upgrading the testing of infrastructure.Similarly, an amendment in the treaties has also been recommended by the study that has also suggested on exploiting the nexus between trade and investment to boost exports.
"The huge opportunity to access the Indian market has not been exploited," said Adhikari, adding that Nepal also failed to export high value products and move up in the value chain.India has a huge demand for products that Nepal has a competitive edge in, but the country has not been able to meet the demand, forcing India to import from a third country, he added.
"Looking at the products that Nepal exported with comparative advantage in 2010, considering the existing demand and supply, competitiveness and level of protection, and intra-industry trade dynamics between the two countries, Nepal is under utilising its potential," the study revealed adding that there is a huge potential for intra-industry trade of processed agriculture, light manufactured and heavy manufactured goods.
Earlier, inaugurating the session, National Planning Commission vice chair Deependra Bahadur Kshetri said that foreign direct investment and international trade can propel economic growth and the trade policy should not be seen as an isolated policy but has to be looked at in broader terms.

IMF provides training to curb flow of dirty money

A three-member team from the International Monetary Fund (IMF) provided trainings on anti money laundering to various bank officials.
The central bank invited the IMF team to train bankers to build their supervisory capacity to check money laundering and to provide tools needed to curb money laundering.
The team today also met with the central bank governor and handed a report 'A manual on reforms of central bank's supervisory capacity, inter agency coordination, and cooperation between the IMF and the central bank' on curbing the flow of dirty money.
Governor Dr Yubaraj Khatiwada on the occasion thanked the mission and appraised them of the central bank's supervisory capacity building and reforms it has taken to check money laundering. "The central bank currently has seven departments responsible for money laundering, supervision, regulation and analysis," he said.
The country has already started feeling the heat due to its inability to pass three key Bills — Mutual Legal Assistance Bill, Extradition Bill and Bill Against Organised Crime — which are related to anti-money laundering. US banks have already started asking the central bank to close its account due to 'technical reasons'.
Though the country escaped from being blacklisted by the Financial Action Task Force (FATF) — the global anti-money laundering watchdog — at the February 16 meeting in Paris due to international lobbying, the next face-to-face meeting in India will be tough for Nepal as the three Bills are still pending at the Parliament.
After the face-to-face meeting, the FATF plenary will meet on June 18-22 in Rome that will definitely blacklist Nepal, if the three crucial Bills remain pending.Earlier, on February 16, the inter-governmental body's plenary in Paris had blacklisted 15 other countries.
There was a high possibility of Nepal being either downgraded to ‘high-risk zone’ or blacklisted (the public statement) from the current risk zone but international lobbying had saved the country then.
The global anti-money laundering watchdog has extended the time frame for one last time as it had earlier extended the time twice due to Nepal's failure in fulfilling its commitments in preparing laws to fight the flow of dirty money.
Due to the UCPN-Maoist, the country has been failing to fulfill its international commitments, despite repeated pressure and time extensions, even though the government had tabled the Bills in the House on February 13.The government’s failure in fulfilling its international commitments in fighting the flow of dirty money is going to cost the country dearly. Apart from the financial sector, donors too will include more stringent conditions for aid and grants once the country is blacklisted and the country will lose its international market as the cost of exports will rise making Nepal’s exports expensive.
Earlier, Nepal had made a commitment to FATF to approve these Bills coupled with other reforms by December 2011, but the country — passing through a transition phase — has not been able to keep its promise.

Thursday, March 22, 2012

Xalted bags Nepal Telecom

Xalted Information Systems — the principal operating subsidiary of Kranem Corporation — announced that Nepal Telecom has selected Xalted's Roaming Fraud Detection and Analytics solution, xNODE, as an integral technology in connection with the expansion and upgrade of Nepal Telecom's GSM Roaming and NRTRDE System.
It is the second time that Xalted has been awarded a contract by Nepal Telecom for the installation and deployment of Xalted's xNODE Hardware, Software and Services, it said.
The revenues expected to be generated by Xalted in connection with this expansion order is approximately $200,000. The first contract for Xalted's xNODE solution was in 2009. Nepal Telecom is one of the leading players in telecommunications sector — as it has the largest market share in the telephony in the country — and provides GSM cellular telephone services to millions of subscribers.
The telecom service provider, which provides roaming services to postpaid subscribers in 75 districts, has already been using Xalted's xNODE solution for GSM Roaming and NRTRDE-compliance.Xalted supplied, delivered, installed and commissioned successfully the initial GSM Roaming and NRTDTE solution for Nepal Telecom in 2009, it said, adding that the expansion order provides NT with a 300 per cent increase in capacity as compared to the previous implementations of the xNODE system.
Xalted's xNODE technology provides Nepal Telecom with a solution that reduces roaming charge revenue that would otherwise be lost by NT as Xalted's xNODE can efficiently manage NT's roaming related data transfer and Fraud detection systems. "Nepal is a growing telecom market and the GSM operator NT needed roaming revenue maximisation solution that could help them achieve competitive advantage by offering advanced services in a faster way while keeping the total cost of ownership of solution lowest. We are proud that our Innovative technology solution has not only supported operator's vision to be a major player in the Nepal telecom market, but also accomplished the inherent need for revenue maximization," chairman and chief executive of the Kranem/Xalted Group Ajay Batheja, said, adding that they are seeing more of others opting for Xalted's Telecom and Digital Security Solutions. "IT is testament to the quality of our Analytics and Security portfolio. Implementing multiple Telecom Security solutions will enhance the CSP's operational efficiency, leading to better service for their customers."
The Kranem/Xalted Group is a leading global provider of end-to-end actionable Intelligence, Analytics and Revenue Maximization software and solutions serving some of the world's largest law enforcement agencies, government agencies and telecom and data services providers.
The company is headquartered in San Jose, California, USA, with additional offices located in Mumbai, Delhi, Bengaluru, and Baddi, India and Rome, Italy.

Wednesday, March 21, 2012

Banks' share price correction fails to lure investors

The banking sector that is the key player in the share market in terms of volume and returns till date, is correctly priced, if one goes by the average price-to-earnings ratio (PE ratio) of the listed banks, though they might not be able to pay the return compared to last few years.
The average PE Ratio — that measures the price paid for a unit of share relative to the annual net income or profit earned by the company per unit — of the listed 25 banks stands at 17.60 times, which is the correct pricing. "It stood at 19.55 times in the second quarter of the last fiscal year."
Similarly, the PE ratio under 10 means the stocks are underpriced. "But the current average PE ratio that stands at 17.60 times means that the banks shares are correctly priced but they may not be able to pay dividend cheque, compared to last few years as other indicators do not support," said share market analyst Rabindra Bhattarai.
The investors should buy the stocks that have high return on assets and low price-to-earnings (PE) ratio, he added.
Return on assets (RoA) — that reveals how profitable a company's assets are in generating revenue — has come down to 1.21 per cent in the second quarter of the current fiscal year from last fiscal year's same period's 1.75 per cent.
Similarly, the low PE ratio has not been able to make the investors feel comfortable as other key indicators of the listed banks' like earning per share, return on equity, capital adequacy ratio, cost of fund and non performing assets could not ensure equal dividend cheque compared to the last fiscal year.
The measuring rod of the rate of return on shareholders' equity of the common share holders, return on equity (RoE) has also come down to 11.54 per cent this fiscal year's second quarter from last year's same period's 17.17 per cent. It also revealed banks' efficiency at generating profits from every unit of shareholders' equity.
Similarly, the earning per share — that is the amount of earnings per unit share — came down to an average of Rs 19.68 per unit in the second quarter of the current fiscal year compared to Rs 25.98 per unit in the same period of the last fiscal year, which means the shares could not earn as much as they earned thus the investors will also get less return.
Similarly, the non performing assets (NPA) — that compels banks to make loan loss provisioning hitting their profits — has increased to 3.24 per cent from last fiscal year's second quarter's 2.49 per cent, which means the investors will get less dividend next year. Some banks non performing assets have reached to the highest accepted level by the central bank, which will ban the banks to open new branches after they cross the minimum NPA level.
However, the capital adequacy ratio (CAR) has seen increase to 14.04 per cent from the last fiscal year's second quarter's 13.59 per cent. The increase in capital adequacy ratio — that is a ratio of a bank's capital to its risk to ensure that it can absorb a reasonable amount of loss and complies with statutory capital requirements — shows further growth possibility of the banks through lending, which has contracted lately.
The central bank data revealed that the banks have Rs 29 billion liquidity till March 12. The high interest rate has made the private sector shy away from borrowing despite banks sitting on surplus liquidity.
The banks have been unable to lower the interest on lending due to high cost of fund, which has increased to 8.38 per cent from last year's same period's 7.39 per cent. The cost of fund that is interest paid on deposits has also forced the banks to lower new deposit rates.
The industry average not only helps the investors to take informed decision while buying shares but also help compare the players within the sector on where they stand.

Listed banks’ indicators
Indicators — Unit — This Year Six Months — Last Year Six Months
Cost of Fund — per cent — 8.38 — 7.93
CAR — per cent — 14.04 — 13.59
RoE — per cent — 11.54 — 17.17
RoA — per cent — 1.21 — 1.75
NPA — per cent — 3.24 — 2.49
EPS — Rupees — 19.68 — 25.98
PE Ration — times — 17.60 — 19.55*
(*Machhapuchhchhre Bank (150 times), Kist Bank (84 times) and Sanima Bank (84 times) are omitted while calculating PE Ratio as their much higher PE Ratio could distort the overall PE Ratio average. The indicators are an average of 25 listed banks only. Source: SRCS)

Tuesday, March 20, 2012

Identification of below poverty line households to start soon

Bureaucrats today suggested the Poverty Alleviation Fund (PAF) to start identifying the extremely poor and distributing identity cards in a phase wise manner.
During a joint meeting of two high level panels on poverty today, director general at the Central Bureau of Statistics (CBS) Uttam Narayan Malla, who also heads the technical committee, proposed to start the identification process from some 13 village development committees (VDC) as a pilot survey. "In the beginning, the CBS suggests to start the programme from 13 VDCs — four in Tarai, and three each in the Hills and Mountains — to identify households below the poverty line," he said, adding that the survey and distribution across the country will be completed in three years. "But the data needs to be updated every five years to delete the graduates from extreme poverty and add new ones, if any."
"These 13 VDCs have more than the average poverty incidence," he briefed the meeting that decided to complete the ground work for identifying the poor within the current fiscal year and start distributing identity cards to them from the next fiscal year.
"One in every four Nepalis are below the poverty line, according to the third National Living Standard Survey (NLSS) III that has stated 25.2 per cent poor in its report," said Poverty Alleviation Fund (PAF) vice chair Janak Raj Joshi, who is the coordinator of the steering committee that will identify the real poor and distribute the identity cards. "However, the decision to distribute the identity cards in either a phase-wise manner or at once has yet to be made," he said, adding that the PAF board will decide on the modality.
The meeting also decided to form a five-member working group including representatives from National Planning Commission, CBS, Ministry of Local Development, Ministry of Home and PAF to assist the technical committee to suggest a methodology and approach to carry out the task of developing an acceptable standard for identifying the poor.
The group that will be based at National Planning Commission, will finalise its groundwork by the end of April and the technical committee will forward it to the cabinet for approval, added Joshi.
The first meeting of the committees also tried to find synergy among the National Identity Card Management Centre under the Home Ministry, and the Election Commission that has distributed voter ID cards to enhance inter-agency cooperation.
Agreeing that a political commitment at the highest level is required to begin the task of identifying the poor and distributing the identity cards, the steering committee decided to meet senior leaders of major political parties after the working group prepares some indicators to identify households below the poverty line.
A board meeting of PAF, under the chairmanship of Prime Minister Dr Baburam Bhattarai on February 27 had formed a steering committee and a technical committee to begin the task to establish a national standard to identify the poor and issue identity cards to them.

Monday, March 19, 2012

Public transportation becomes dearer

After the airfares, the public transportation is going to be dearer due to hike in the prices of petroleum products.
The government hiked the fares of public transportation including buses, trucks and taxis to be effective from tomorrow.
A meeting between government representatives and transport entrepreneurs at the Department of Transport Management today had decided to increase the fares of public transport by 4.5 per cent to eight per cent.
According to the Department of Transport Management, the government has raised the public transportation fare by 4.54 per cent and meter taxi by 8.19 per cent, while 5.26 per cent and 5.29 per cent has been raised for trucks and tankers operating in the Tarai and Hilly routes, respectively.
The hike in transportation fare is going to push the inflation up putting pressure on the central bank to control the price hike that has started cooling down recently.
The minimum public transportation fare stands at Rs 14 for the shortest travel in the capital. The revised fare structure means the charge for travelling in public vehicles will go up from Re 1 for the shortest ride to Rs 70 for the longest route — Kathmandu to Sanfebagar.
The department consented to adjust the fare for public transport after receiving a green signal from the Ministry of Labour and Transport Management, according to the department. The fare for trucks and tankers has been increased by 5.26 per cent per tonne per kilometre in Tarai areas and 5.29 per cent on hilly routes, according to the department. The price hike is completely based on the influence from transport entrepreneurs, said consumer rights activist Jyoti Baniya.
Nepal Metre Taxi Entrepreneurs' Association had demanded the government to increase the fare by at least eight percent but the government increased taxi fares by 8.19 per cent to Rs 32 per km against the previous rate which stood at Rs 29.70 per km. "Isn't this a tangible proof that the government has received benefits from entrepreneurs," he questioned.
Consumers want the quality of service to go up with the rise in fares, said Baniya. "But, the government has not mentioned even a single word about transporters having to ensure consumer rights."
It is the second time in four months that the government has decided to increase transportation fares citing the hike in the price of petroleum products. Transport entrepreneurs had been putting pressure on the government to increase public fares by at least five percent to six percent due to the hike in fuel prices in late February this year.

Rise in food price to push more Nepalis into extreme poverty

A 10 per cent rise in food prices could push 0.6 million more Nepalis into extreme poverty, according to a new report by the Asian Development Bank (ADB).
"Similarly, 20 per cent rise in prices could push 1.1 million and 30 per cent rise in food prices could push 1.7 million more Nepalis into extreme poverty," the report 'Food Price Escalation in South Asia – A Serious and Growing Concern', said, adding, the hike in food prices would, however, hit Nepal less among the South Asian countries.
Nepal and Sri Lanka would be less affected, although a further surge in wheat prices would be especially painful for Sri Lanka, which is completely dependent on imports of the staple and has already seen prices hit historical highs in recent years, said the report.
"A 10 per cent rise in food prices could push almost 30 million more Indians and nearly four million more Bangladeshis into extreme poverty. Pakistan is also at risk, with the same price leap causing an additional 3.5 million more people to drop to or below the $1.25-a-day income mark," it added.
A spike in the cost of food staples like rice and wheat could push tens of millions more people into extreme poverty in South Asia but food subsidies targeted at the very poorest in the region would help them cope with still-high prices, according to the report.
South Asia’s high population growth rates and the high number of people already living on or close to the extreme poverty line of $1.25-a-day mean it is one of the most vulnerable regions in the world to food price shocks. Spending on food already accounts for half the total budget of low-income households.
“Subsidising the cost of a basic meal for the poorest and most vulnerable in places like India means the help goes to those who need it the most without putting an excessive burden on government finances,” said an economist in ADB’s South Asia Department and an author of the report Hiranya Mukhopadhyay.
The report – Food Price Escalation in South Asia – A Serious and Growing Concern — noted that after peaks in 2008 and 2011, prices of key food commodities have eased somewhat, although the rate of decline has been slower in South Asia than the international average.
In addition, the region suffers from higher overall food inflation rates than the rest of developing Asia, with food making up a bigger share of items measured by the consumer price index.
Short-term weather shocks and costlier oil account for some of the past price upside but the study said that rapid population growth, changing food consumption patterns linked to higher incomes, and stagnating agricultural output are more critical factors driving rising food demand and inflation.
Although governments in the region have taken steps to counter higher prices, some measures may not be helpful to neighboring countries. India’s temporary food export restrictions, for example, could have had adverse impact on prices in neighbouring countries, as India is the world’s second largest rice producer.
Long term, governments must step up support for agricultural research to spark another 'green revolution' to lift output and help develop crops more resistant to weather extremes. More investment in infrastructure, such as irrigation systems and farm-to-market roads to improve distribution and reduce post harvest losses is also essential.
Strengthening home-grown initiatives such as the food bank established in 2008 by the South Asian Association for Regional Cooperation (SAARC) may also help to smooth out price volatility and improve food security in the South Asian region during times of shortage, the report added.

SEZ Act to come through ordinance: Minister

Ministry of Industry is planning to bring Special Economic Zone (SEZ) Act through ordinance, according to the minister for Industry Anil Kumar Jha.
"Development of SEZ for the industrial development is a key," he said, addressing a workshop on ‘Proposed Industrial Enterprises Act 2068' organised by Confederation of Nepalese Industries (CNI) here today.
"We are also working to amend the Industrial Enterprise Act,” he said, adding that the government is committed to development of industrial sector.
However, the participants urged for the stable policy that could recognise opportunities as well as threats for the development of the industrial sector.
President of the confederation and CA member Binod Chaudhary also focused on development of Industrial Promotion Board as a strong forum. "The board was formed some ten years back but it has not been able to show its presence,” he added.
However, vice president of the confederation Hari Bhakta Sharma presented current challenges faced by the industrial sector. "Extreme load shedding, labour problems due to highly politicised unions, lack of innovation and cut throat competition with foreign companies are the major challenges for the domestic manufacturing and service industries,” Sharma said, adding that the productivity of workforce is, however, far lower than other South Asian countries, apart from underdeveloped infrastructure that has hit the industrial growth.
He also urged the government to focus on SEZ bill and Anti-Dumping Law to encourage the industrial sector. "CNI has already submitted its concept paper on SEZ and Industrial policy," he said, asking the government to provide tax holiday for innovative industries.
According to Sharma, contribution of the manufacturing sector to the gross domestic product (GDP) stood at 6.50 per cent in 2010-11. "There is a huge potential in the country, if the government amends and adds the suggestions made by the private sector in the proposed Industrial Enterprise Act," Sharma added.
The suggestions will help rapid growth of the industrial sector, increase income and improve competitiveness by accelerating industrial development, boost export capability and self sustainability, he added.

Vibor, Bhajuratna merger by fiscal year end

The merger process of Vibor Bikas Bank and Bhajuratna Finance and Savings is going to complete within this fiscal year.
"We are planning to operate as a merged entity within this fiscal year," said chief executive of Vibor Bikas Bank Ajaya Ghimire."After the central bank's Letter of Intent (LoI) last week, the merger of Vibor Development Bank and Bhajuratna Finance and Savings has gathered momentum," he said, adding that the merged entity will be called Vibor Bikas Bank.
The merger will help Vibor to channel its energy towards more innovation and growth and also make one of the oldest business group in the country — Jyoti Group — more visible in the financial sector.
The development bank that faced an acute cash crunch last year has come out of its crisis currently, he said, adding that it has paid central bank and other banks and financial institutions back and is secure now, Ghimire, added.
"However, we will be looking for more partners to merge as the more stronger capital base will give Vibor more room for growth," he said, without elaborating on its prospective partners. "We are talking to many informally."
The merged entity will have a paid-up capital of Rs 1.36 billion, Ghimire said, adding that it will also raise additional Rs 208.9 million by inducting new strategic partners and merging with other institutions.
The structure of the new board of directors in the merged entity will have two directors each from Vibor and general share holders, one each from Bhajuratna and other merger or strategic partner entity, and one independent director. The bank is planning to maintain 61:39 promoter-public share ratio after merger or rights offerings.
"We remained on a low profile due to central bank's changed regulatory norms, but merger with Vibor will help us grow now," director of Bhajuratna Dr Roop Jyoti said, adding that the merger is a win-win proposition.
Vibor has listed 6,800,000 unit shares with a face value of Rs 100 per unit in Nepal Stock Exchange and its share was traded at Rs 112 on December 12, 2011, whereas Bhajuratna Finance and Saving has listed 561,602 units of shares at a face value of Rs 100 and it was last traded at Rs 116 on November 27, 2011.
Vibor was forced to merge with Bhajuratna after it was unable to repay the depositors due to cash crunch. The central bank while offering it a rescue package of Rs 500 million under 'lender of last resort' facility, has also made it commit on merger.

Sunday, March 18, 2012

Nepal Telecom's book closure pulls share market down

Nepal Telecom (NT) lost Rs 43 per unit share dragging not only the others sub group under which it is listed but also the overall market index by 7.59 points to close the market at the lowest ever in the last two years at 303.2 points today.
The telecom share that was traded at Rs 447 for a unit on Thursday — the last trading day of last week and before book close — today dropped by Rs 43 to Rs 404 a unit pulling the others subgroup by 50.51 points to close at 475.87 points.
It covers almost one-fourth of the total market capitalisation — as of today's trading price — bringing the whole share market down due to the absence of a dividend adjustment mechanism at the share market.
The standard methodology employed by Dow Jones, Standard & Poor's, Reuters and Bloomberg always adjusts for special dividends plus all of the normal capital adjustments like splits, reverse splits, rights issues, capital returns, demergers and spinoffs but absence of such mechanism in the domestic market has always been hurting the general investors' confidence.
Nepal Telecom has announced its fourth annual general meeting on April 4. The annual general meeting is also going to approve Rs 45 per unit share cash dividend.At today's closing price of Rs 443 per unit of NT share, its market capitalisation stands at Rs 66.45 billion which is 23.22 per cent of the total market capitalisation of Rs 286.10 billion.
A slight movement in the share prices of Nepal Telecom changes the direction of the share market due to the existence of 150 million unit shares of the company. It could send a wrong message to investors that shares of other companies are also not doing well as the benchmark index plunged today, despite Securities Board of Nepal, Finance Ministry and central bank's efforts to boost the investors' confidence.

The plunging index
2011-7-18 — 370.15 points
2011-9-18 — 318.56 points
2011-11-18 — 329.38 points
2012-1-18 — 319.92 points
2012-3-18 — 303.2 points
(Source: Nepal Stock Exchange Ltd)

Employment creation will halt migration

Creating more employment back home will help halt the current trend of migration by youth and their potential can be utilised for sustainable development and poverty reduction, according to experts.
Speaking at the inauguration of the six-day 'Training Programme on Improving Stakeholder Relations' in Dhangadhi today, secretary at the Ministry of Industry Uma Kant Jha stressed on the importance of utilising and optimising the potential of Nepali youth. "The country should tap their energy instead of impelling them to migrate abroad for foreign employment because it isn’t a permanent solution for sustainable development and poverty reduction," he said. "Though the country has been receiving huge remittance, Nepal will fall into the remittance trap in the long run."
The purpose of the training programme that runs till March 23 is to promote Private Public Dialogue (PPD) and the Nepal Business Forum (NBF) which is led by the prime minister.
The training was inaugurated by former prime minister Lokendra Bahadur Chand, who also hails from the region. Chand, on the occasion, launched the training manual on 'Improving Stakeholder Relations' that was prepared on the initiation of Federation of Nepalese Chambers of Commerce and Industries (FNCCI) and German International Cooperation (GIZ).
Chand appreciated FNCCI, GIZ and the World Bank Group for considering the Far Western Development Region and its corridors in their economic development priorities.Similarly, vice president of FNCCI Bhawani Rana, said that the event is a milestone towards establishing a forum in the Far West, a region that has been neglected by successive governments. "There is huge potential in the region which has been suffering from a mass exodus of youth due to the lack of employment," she said, adding that the German government and GIZ who are involved in enterprise development and creating youth employment, agriculture value chains and private sector promotion, could help the region develop.Programme manager of GIZ Include Horst Ammann expressed his commitment towards supporting the Far Western Region for economic development by focusing on the private sector.
Joint secretary at the Ministry of Industry and the focal person of NBF Anil Kumar Thakur explained about the process of NBF and the government’s commitment in promoting the private sector.
Similarly, senior private sector development specialist of IFC Laura Watson, president of Far Western Regional Chambers of Commerce and Industry Nara Bahadur Chand and CDO of Kailali district also spoke on the occasion.Participants of the district chamber of commerce and industries, district development committees and Department of Cottage and Industries from the Mid-Western and Far-Western Development Regions will be exposed to the five modules related to Private Public Dialogue – Communication, Negotiation, Workplace Cooperation, Conflict Management and Effective Advocacy.
The event is supported by the German International Cooperation Inclusive Development of the Economy (GIZ Include) Programme.

Saturday, March 17, 2012

IMF to extend Extended Fund Facility arrangement

The Executive Board of the International Monetary Fund (IMF) approved an amendment to the Extended Fund Facility (EFF) to allow extended arrangements to be approved for up to a maximum of four years from the current three years. "Until now, the policy allowed approval for up to three years only with the possibility of subsequently extending the arrangement to up to four years," according to the executive board meeting which opined that reforms have enabled the fund to better respond to the wide-ranging needs of member countries by, among other things, establishing new and more tailored facilities, increasing access limits, clarifying exceptional access criteria, streamlining conditionality, and reforming charges — including by strengthening price incentives via commitment fees — while maintaining adequate fund safeguards.
The EFF, which was established in 1974, to address balance of payments difficulties of members with imbalances arising from serious structural impediments in production and trade, requiring a prolonged period of adjustment and major policy shifts to restore the member’s balance of payments — will determine whether approval of a four-year arrangement is appropriate from the outset would be predicated on, inter alia, the existence of a balance of payments need beyond the three-year period, the prolonged nature of the adjustment required to restore macroeconomic stability, and the presence of adequate assurances about the member’s ability and willingness to implement deep and sustained structural reforms. Consistent with the spirit of the reforms of the IMF lending toolkit since 2009, which have injected substantial flexibility and allowed better tailoring to countries’ varying circumstances and needs, the use of the EFF over time has broadened from low- and middle-income countries with prolonged balance of payments needs to more developed countries facing larger financing needs, such as those that have arisen in the Euro area crisis. Allowing approval of extended arrangements of up to four years from the outset would make the EFF more flexible and help better support adjustment in the context of longer-term balance of payments needs.
While prolonged balance of payments needs would normally continue to be addressed with extended arrangements of up to three years, approvals of extended arrangements of up to four years would be appropriate in some cases, including if a balance of payments need beyond a three-year period exists, the necessary economic adjustment is of prolonged nature and is envisaged from the outset to take longer than three years, and adequate assurances exist that the member is able and willing to implement deep structural reforms.
Purchases under extended arrangements would be expected to be evenly phased, consistent with normal fund practice. Implications of this change to the EFF for the design of blended EFF-PRGT financing will be considered in the upcoming review of low-income-countries facilities. A member that contemplates making a request for an extended arrangement should consult the managing director before making a request under this decision. A request by a member for an extended arrangement in order to deal with a problem of the kind referred to in this decision will be met.

Friday, March 16, 2012

Education sector largest foreign aid recipient, World bank Group largest donor

Nepal received the largest amount of foreign aid in the education sector in the last fiscal year, according to the latest report of the Finance Ministry.
Four sectors — education, local development, health, and road transportation sector — received above $100 million each in the last fiscal year," the Development Cooperation Report - the first report on foreign aid - for fiscal year 2010-11 said.
"The education sector received $202.8 million, local development $135.1 million, health $129.6 million, and road transportation sector received $111 million," it said, adding that the country received an official development assistance from over 40 donors, including 35 resident agencies.
About half the aid resources use national systems like budget or procurement systems and a significant portion of aid is spent outside national systems, which the aid monitors have recently started questioning due to the lack of effectiveness sans transparency.Similarly, the World Bank Group topped the list among the largest donor for Nepal in the last fiscal year. "The World Bank Group ($256.1 million), the Asian Development Bank ($184.4 million), the UN Country Team ($112.5 million), the EU ($42.4 million) and the Global Fund to fight AIDS, Tuberculosis and Malaria ($19 million) were the top five multilateral donors in the last fiscal year," the report stated, adding that the UK ($92.1 million), Japan ($58.7 million), India ($50.7 million), US ($48.5 million) and Norway ($32.8 million) were the top five bilateral donors.
Similarly, region-wise, the Mid West and Far West regions received more than $120 million and $104 million, whereas the Central Region received the highest amount of foreign aid worth $141 million.
This fiscal year too, the government has expected an aid commitment of Rs 110 billion from the multilateral and bilateral donors, according to finance secretary Krishnahari Baskota. "But the rate of disbursement will depend on our absorptive capacity," he said, adding that the ministry has set up the Aid Management Platform (AMP) — an online information system in the Ministry of Finance — for aid transparency and aid predictability.
"All development partners have been given access and requested to report regularly," he added. Due to the low effectiveness of foreign aid, both the government and donors have been under pressure to become more transparent, apart from increasing capacity building to absorb foreign aid as there is a huge gap between the commitment and disbursement.Disbursements for fiscal year 2010-11 correspond to $40.6 of foreign aid per capita, a relatively low figure, compared with countries with a similar level in the human development index like Senegal ($84 per capita).
The donors reported total disbursements amounting to $1.08 billion in fiscal year 2010-11. "Of the total, around 58 per cent came from multilateral donors, while 36 per cent came from OECD-DAC bilateral donors and over six per cent from bilateral South-South cooperation partners," it stated. "Similarly, an analysis of the types of aid received in the last fiscal year revealed that grants represent 57 per cent of disbursement, loans 24.3 per cent and technical assistance 18.5 per cent."
Foreign aid represents 5.8 per cent of the country's GDP, according to the report prepared by the Foreign Aid Coordination Division of the Ministry of Finance. Foreign aid plays a key role in socio-economic development representing 26 per cent of the budget.
Meanwhile, the ministry has also planned to hold a meeting with development partners next month followed by another such meet in April. It has hoped to create an environment for the development partners to assist in economic development. It has vowed to start consultations with donors to hold the Nepal Development Forum meet, which was earlier scheduled for February.

Development spending still low, revenue mobilisation fall short

The government has been able to spend Rs 156.86 billion — including cash and non-cash — in the eighth month of the current fiscal year.
"The total spending stood at 40.76 per cent of the total budget, whereas by mid-March, only 21.21 per cent budget had been spent on development activities," said finance secretary Krishnahari Baskota.
However, the Finance Ministry has been able to mobilise 97 per cent of the revenue target till the eighth month of the current fiscal year.
"Though revenue mobilisation has witnessed a 20.2 per cent growth to Rs 144.47 billion by the end of Falgun (mid-March), it is a shortfall of around Rs 4 billion of the target," he said. "The ministry had set a revenue target of Rs 148.45 billion for the eighth month of the current fiscal year."
The shortfall will be covered by next month, he claimed, adding that the government — as on the ninth month — apart from tightening the loopholes in revenue leakage and controlling leakage at the border customs, the Finance Ministry has recently revaluated the customs, made Past Credit Audit effective to push the customs mobilisation up, and tightened rental tax. "Nepal Telecom will give around Rs 3 billion dividend to the ministry under the non-tax head that has witnessed a 16 per cent shortfall from the target."
Similarly, the slowdown in the housing and real estate business, and vehicle sales has hit the revenue target by 25 per cent each, the finance secretary said, adding that excise has also seen a seven per cent shortfall.
However, excise will witness a rise once the department tightens the screw on excise stickers, he said, adding that by the ninth month the government will meet its target.
The ministry has been able to mobilise Rs 46.09 billion under VAT, Rs 27.85 billion under income tax, Rs 26.08 billion under customs, Rs 20.11 billion under non-tax, Rs 19.27 billion under excise and Rs 5.04 billion under registration and vehicle tax headings to add to the total of Rs 144.4 billion.

Revenue mobilisation
VAT — Rs 46.09 billion
Income Tax — Rs 27.85 billion
Customs — Rs 26.08 billion
Non-tax — Rs 20.11 billion
Excise — Rs 19.27 billion
Registration & Vehicle tax — Rs 5.04 billion
(In eight months of current fiscal year. Source: Finance Ministry)

Thursday, March 15, 2012

Ministry to study three-star hotels' occupancy rate

Ministry of Tourism and Civil Aviation is preparing to study room occupancy rates of the three-star hotels across the country.
"We will start to collect information from 25 registered three star hotels at the ministry from across the country in a fortnight," said under secretary at the ministry Rabi Kayastha.
"The study — that is expected to take around a month — will in future, help prepare a data base for Tourism Satellite Account," he said, adding that the contribution of tourism to the total gross domestic product (GDP) has not been correctly calculated in the absence of Tourism Satellite Account, though tourism sector is not only one of the highest foreign currency earners but also one of the largest employers.
The ministry has started to collect the primary information that could in future help prepare Tourism Satellite Account, Kayastha said, adding that the ministry has recently collected the room occupancy rate of the five-star hotels across the country.
According to the Hotel Occupancy Rate Indicator prepared by the ministry, of the total 10 five-star hotels — eight in the Valley and two in Pokhara — there are 641,670 total available rooms and some 395,459 rooms were occupied in 2011. "The total occupancy rate last year stood at 61.63 per cent," it revealed, adding that in the valley the occupancy rate stood at 66.11 per cent, whereas in Pokhara the occupancy rate stood at 38.27 per cent."
Similarly, of the 538,375 total rooms available in the Valley, some 355,925 rooms were occupied, whereas in Pokhara, of the 103,295 rooms available only 39,534 were occupied in 2011, when the country was celebrating Nepal Tourism Year 2011.
"The month of November was the peak season, whereas July was the lean season, according to the study that was conducted with the help of Hotel Association of Nepal (HAN)."
The month of November last year witnessed the highest occupancy in the five star hotels at 85.96 per cent, whereas the month of July saw the lowest occupancy at 47.57 per cent," it reported. "Similarly, the eight five-star hotels in the Valley also saw the highest occupancy in November at 89.81 per cent and the lowest in July at 51.34 per cent.
The five-star hotels in Pokhara also witnessed the highest occupancy in November at 65.92 per cent and the lowest in July at 27.96 per cent.""In the first phase, the ministry has studied only the five-star hotels' occupancy rates and in the second phase, it is working on three-star hotels, Kayastha said, adding that the study of the five-star hotels also revealed the room occupancy rate against the tourist arrivals.
The tourist arrivals touched the highest in October (96,970), November (83427) and August (71,378) in 2011, whereas the highest occupancy rate has been registered in November (85.96 per cent) followed by October (77.43 per cent) and April (67.73 per cent), according to the report.

Importers only need to fill central excise form: NRB

The central bank has asked the importers to fill a separate form 'ARE 1' instead of the forms that were is use currently.
After the Duty Refund Procedure (DRP) has been scrapped under the revised Indo-Nepal Trade Treaty, the importers now need not fill 'Nepal Invoice' or 'Invoice of goods liable to central excise duty in India transmitted under excise seal to Nepal' that was one of the most important documents while opening Letter of Credit (LC) for imports in foreign currency, according to the central bank that has asked the 'class A' commercial banks and 'class B' development banks to follow the directive while opening the LC in foreign currency payment for importers from India.
The importers, since March 1, do not need to fill the 'Bill of exports for duty free goods' form along with LC, as the Duty Refund Procedure has been scrapped. Earlier Indian Central excise used to refund the duty to the government and the forms were used to calculate the duty to be refunded.
Earlier, purchases from India were normally paid for in Indian Currency since the currency is fully convertible in Nepal. When Indian suppliers sell their products to Nepali importers, they used to pay Indian excise duty and used to be refunded.
Both Nepali and Indian governments had agreed to implement the Duty Refund Procedure according to the revised Nepal-India Trade Treaty signed in 2009. Nepal also allows imports of specified products from India with payment in foreign currency. The Nepal Rastra Bank has listed the products imported from India against the payment in foreign currency. Of the total imports from India, around 60 per cent of the goods are imported in foreign currency instead of Indian Currency, according to the Finance Ministry.
Nepal has got rid of the time-consuming process of duty refund which the Indian government used to charge and refund, but it also is feared to encourage under invoicing by the importers, according to the ministry.India is the largest trading partner of Nepal.
Exports to India went up by 13.9 per cent during the six months of the current fiscal year compared to an increase of 9.3 per cent in the same period of the last fiscal year. Similarly, imports from India increased by 10.1 per cent compared to a growth of 28.2 per cent in the same period of the last fiscal year.

Wednesday, March 14, 2012

Nepal’s trade policy under WTO review

The trade policy came under scanner at a global forum in Geneva yesterday.
The first session of the Trade Policy Review of Nepal, held in the World Trade Organisation (WTO) headquarters, is the first-ever Trade Policy Review of the country, which joined the global trade regime in 2004.
As provided in the Agreement Establishing the Trade Policy Review Mechanism, all WTO members are subjected to review under the Trade Policy Review Meeting at different times.
Nepal, as an LDC, is entitled for review at a period exceeding six years.In an address to the Trade Policy Review body, Commerce and Supplies Secretary Lal Mani Joshi, the leader of the 10-member Nepali delegation comprising, among others, Permanent Representative of Nepal in Geneva, Shanker Bairagi, and officials from various ministries, reinforced Nepal’s deep faith in the WTO-embodied multilateral trading system.
“Nepal has maintained a liberal investment regime and has opened up a wide range of economic sectors for foreign investment,” Nepal’s Permanent Mission in Geneva said in a statement quoting Joshi.
During the review, a number of delegations, including donors, said Nepal has honoured its commitments to the WTO by opening up its trade and investment regime as well as significantly reducing tariffs.

EU provides grant worth Euro4 million to WFP

The European Union (EU) is providing a grant assistance of Euro4 million (approximately Rs 420 million) to institutionalise the Nepal Food Security Monitoring System -- Nepal Khadya Surakshya Anugaman Pranali -- popularly known as (NeKSAP) and to gradually hand it over to Nepal.
This contribution will be used to implement capacity development activities in the areas of food security over a period of four years. This is the second phase of funding provided by the EU to develop the NeKSAP.
"The European Union has prioritised food security as a key area for poverty reduction and economic development across the developing world. We believe this programme will strengthen the government’s capacity to understand the many facets of food insecurity in Nepal and to formulate and implement appropriate evidence-based policies and programmes" said ambassador and head of the Delegation of the European Union (EU) to Nepal Dr Alexander Spachis.
He explained that the grant provided to WFP would be instrumental to develop the capacities at the field level to monitor food security trends and developments.
“We are very grateful for this generous assistance from the EU, which will play an important part in embedding this comprehensive food security monitoring system within the government structure,” said WFP Nepal country representative Nicole Menage.
The NeKSAP was established in 2002 and is currently managed by WFP in collaboration with the Ministry of Agriculture and Cooperatives.
It is considered the most comprehensive food security monitoring system now operational in Nepal and has as its primary objective the collection, consolidation and analysis of food security data to be used by decision makers, allowing them to take coordinated and timely action to alleviate food insecurity in the country.
The District Food Security Networks (DFSNs) form the core of the NekSAP and are established in 72 out of the 75 districts. They are composed of officials and representatives from district-based government agencies, local and international NGOs, and civil society. The DFSNs assess and monitor the food security situation in the respective districts using a standardized food security phase classification approach.
The NeKSAP collects, analyzes and disseminates information from across the country on topics such as household food security, emerging crises, markets, agricultural production and nutrition.
Building upon the extensive knowledge and experience that WFP has gained in the area of food security monitoring and analysis, this programme will ultimately allow Nepal to manage and maintain the NeKSAP on its own and ensure its sustainability at the central, regional and district levels.

Tuesday, March 13, 2012

Investment Board discusses regulations

The meeting of Investment Board today discussed on making the foreign investment regulations investor friendly.
"We discussed on regulations that needs to help function the board according to the Investment Board Act," a member of the Investment Board said, adding that the meeting chaired by Prime Minister Dr Baburam Bhattarai has, however, not been able to finalise the regulations today and is meeting within a week again.
Earlier, the Board has formed a committee under National Planning Commission vice chairman Deependra Bahadur Chhetri to work out regulations to support Investment Board Act in attracting investments.
The Board has also been working on harmonisation of various investments related regulations to attract projects worth around Rs 500 billion.Similarly, the Board invited today an expert from IFC to brief on hydropower development. "The expert briefed on various aspects of hydropower development and its challenges," the member said, adding that the meeting shared a lots of experiences on hydropower development.Apart from the regulations, the Board is also working on incentive packages to offer the investors to encourage them to come to Nepal. The country needs above Rs 600 billion to achieve double digit growth and "the Board has been working on to attract at least 50 big projects worth Rs 10 billion to give a boost to the economic growth with employment creation," said chief executive of the Board Radhesh Pant.
The country has been witnessing around three to four per cent growth in recent years due to low investment forced by political instability and unpredictable situation. The investors, either foreign or domestic, want the predictable environment for investment planning but this time around the country that is passing through the transition has been trying to lure them with policy harmonisation and incentive packages.

Monday, March 12, 2012

Chopper operators seek compensation from Eurocopter

Nepali helicopter operators have sought Airlines operators Association of Nepal (AOAN) help in getting compensation from the French helicopter manufacturer Eurocopter.
The manufacturer has provided Mountain Helicopters, Simrik Air and Fishtail Air helicopters with 'faulty engine', the operators claimed in the letter to the AOAN.
"Though the helicopters are delivering best performance at high altitude flight, the operators are suffering from premature engine failure," they said, adding that the manufacturer should pay the compensation for the repair cost as well as business loss.
Basically the Time Between Overhaul (TBO), the engine manufacturer (Turbomeca, France) assured us 3,500 hours but the engines have started showing premature failures in 230 hours to 1,100 hours creating huge loss to the operators, they claimed, asking the AOAN to take up the issue with Eurocopter, and lend support to the claims of aggrieved operators.
"Both Eurocopter and Turbomeca should take up the issue at their higher management level as we feel that this is not being solved to the operators satisfaction at the field representatives level," they added.They have taken the issue to the Civil Aviation Authority of Nepal (CAAN) also.
The AOAN had also formed an investigation committee on premature failure of 2B1 engines of Eurocopter helicopters and the committee has already submitted the report to the AOAN.
After investigating the case of problems on engine module 3 of ARRIEL 2B1 engines installed on AS-350B3 currently operating in Nepal, the team concluded that all the AS350B3 operators have found similar problems of degradation of T4 margin during Power Assurance Check (PAC); premature failure resulting untimely replacement of Engine module 3 (MO3); the manufacturer is not taking the issue seriously and being adequately responsive to the operators; despite operators strictly following the procedures laid down on the Maintenance Manual as well as the specialist’s advises from Turbomeca, the problem still persists; due to the engine premature failure problem, Fishtail Air and Mountain Helicopter have already replaced MO3 on their engines and Simrik Air has also closed its high altitude operations compelling all the three of them to rethink the viability of B3 operation in Nepal and they should be compensated for the repair cost as well as business loss.
The committee reported that each of three engines has the same symptom — HP turbine blade tips were found damaged by rubbing on shroud — apart from the same symptoms of rapid drop in T4 margin and Boroscopic finding of turbine blade rubbing on the shroud. "It seems that the engine is not being able to cope up the high temperature over long periods which have resulted in the turbine rubbed as evidence in the Boroscopic check," the committee concluded.

Banks start pulling deposit rates down, sit tight on lending rates

With an increase in deposits and easing liquidity situation, the banks have started to decrease interest rates on deposits but they are sitting tight on lending rates due to increasing cost of fund.
The banks that were offering as high as 12 per cent interest to attract the deposits during last fiscal year's liquidity crunch has come down to nine per cent in an average due to higher cost of fund.
According to the second quarter reports of listed 25 banks' — among the total 32 —the cost of fund has increased to 8.38 per cent compared to 7.93 per cent in the same period last fiscal year.
Cost of fund is the interest paid on deposits. It is important input cost for a bank, since a lower cost will generate better returns when lent on short-term and long-term. The spread between the cost of fund and interest rate on lending is one of the main sources of profit.
According to some bankers, the lending rates will go down only after the third quarter. But others opined that the lending rates will not go down even after the third quarter because of the tight Capital Adequacy Ratio (CAR) of the most of the banks as they do not have enough room to lend putting pressure on decreasing the interest rates on deposits.
But decrease in interest rates on deposits and not on the lending rates could increase the spread, which according to the central should be at around three per cent in an average only.
Had the lending rates also been lowered, the private sector borrowing would have been increased benefitting the economy that is going to witness low manufacturing contribution to the gross domestic product (GDP) due to contraction in private sector demand.
The central bank's six months data revealed that loan and advances of all the banks and financial institutions increased by 6.5 per cent to Rs 55.25 billion compared to a growth of 8.6 per cent to Rs 63.75 billion in the same period last fiscal year. Similarly, the deposit mobilisation of banks and financial institutions has increased by 10.4 per cent to Rs 85.68 billion during the six months of the current fiscal year 2011-12 against only 3.7 per cent to Rs 26.64 billion in the same period of the last fiscal year, according to the central bank data. “Deposit mobilisation of commercial banks, development banks, and finance companies increased by 11.4 per cent, 11.6 per cent and 1.7 per cent respectively, against 0.6 per cent, 11.2 per cent and 8.3 per cent in the same period last fiscal year.”
However, the increase in deposits has made no changes to the banks' Capital Adequacy Ratio (CAR).
The second quarter report of the listed 25 banks revealed that they have an average of 14.04 per cent CAR, which should be 10 per cent, according to the central bank's directive. The listed 25 banks have Rs 617.54 billion total deposits, which mean they have Rs 24.94 billion loan able amount.
Sanima Bank has the highest CAR at 28.26 per cent meaning it has more room for lending followed by Lumbini Bank with 23.62 per cent CAR and DCBL Bank with 20.01 per cent CAR.

ADB reports increase in number, complexity of integrity violations

Some 225 allegations of corruption or integrity violations were submitted to the Asian Development Bank (ADB) last year, leading to 34 individuals and 31 firms being debarred from doing business with the organization, according to a report.
Twelve individuals and 37 firms were cross-debarred in accordance with an agreement signed with other multilateral development banks. Seven firms and six individuals were submitted by ADB to other multilateral development banks for cross-debarment. More than half of all complaints were submitted by ADB staff.
“Our achievements are not measured in warnings or debarments. They are seen in the delivery of desired results and streamlined services that benefit the poor of Asia and the Pacific,” said Peter E Pedersen, head of ADB’s Office of Anticorruption and Integrity (OAI), which is responsible for investigating allegations of fraud, corruption, collusion, coercion or obstruction in ADB-related activities. “To the extent debarments help us to mitigate the negative impacts of fraud and corruption in ADB financed projects, then these numbers are important.”
The findings of integrity investigations are delivered to ADB’s Integrity Oversight Committee (IOC) for possible sanction.
The 2011 OAI annual report noted an increase in the number of subscribers to ADB’s password-secured debarment database, with more than 45 developing member country agencies and 13 development institutions requesting database access. Access increases these agencies’ ability to conduct due diligence before awarding contracts on ADB projects and prevents contracts from inadvertently being awarded to debarred firms or individuals.
In 2011, OAI introduced a series of due diligence training courses for ADB staff, emphasizing the importance of preventive measures to reduce poor contract performance and waste of critical development funds.
OAI anticipates complaints will continue to increase in number, complexity and sensitivity, requiring sophisticated investigative techniques. Procedures related to investigations, as well as principles and guidelines governing integrity, will be updated in 2012

Central bank bans account maintenance charge

The central bank has asked the banks and financial institutions not to charge any fees from clients for operating accounts.
Similarly, they have to set up a separate 'Sick Industry Desk' — for the maintenance and monitoring of the sick industries — under their Loan Department, the central bank said today.
However, the central bank has allowed the banks and financial institutions to calculate the long term loan of five years or more in foreign currency that it had received as its core capital or local currency loan.
The banks and financial institutions were earlier asked to bring down credit-cum-core capital to deposit (CCD) ratio to 80 per cent to maintain liquidity. "However the foreign currency loans can be calculated as core capital now," according to the central bank," it added.
Almost all the commercial banks have already met the credit-cum-core capital to deposit (CCD) ratio of 80 per cent.Similarly, the licensed banks and financial institutions can take local currency (LCY) loans and grant from the foreign agency or its branch in Nepal with prior approval from the central bank. But the loan or grant should not increase the banks and financial institutions' liability, said the central bank that had earlier allowed them to take loan or grant in foreign currency only.
A finance company and its branches in 30 districts — that have no access to finance, according to the central bank — can do foreign currency (FCY) transaction — purchase foreign currency and sell it to the central bank or the commercial banks — after getting licence for the foreign currency transactions from the central bank, the new directives said, adding that a bank or financial institution can buy loan of the other institution at not less than the double of the total due loan and its interest in case the interbank loan, according to the amended directive.

EU provides grant worth Euro2m (Rs 210m ) to develop sustainable construction practices in ten districts

The European Union (EU) has provided Euro 2 million (around Rs 210 million) to Deutsche Management Akademie Niedersachsen (DMAN, Germany) to implement the project ‘Vertical Shaft Brick Kiln and other Sustainable Construction Practices, SCPs’ under the EU SWITCH - Asia Programme: Sustainable Consumption and Production.
The EU grant covers 90 per cent of the project cost while the remaining part is being borne by the consortium partners DMAN, Federation of Nepal Cottage and Small Industries (FNCSI) and Skat Foundation, Switzerland.
The project is being implemented in the central part covering ten districts. “It aims at promoting energy efficient and environment friendly production methods,” said the EU office in Kathmandu.
The 40-month project aims to tackle global warming and environmental degradation and is planned as the continuation and scaling up of activities under the former Swiss-funded VSBK/CESEF Project Nepal.
The reduction of environmental degradation will be achieved through interventions at the grassroots level in the construction business focusing on supply chain actors including production and construction workers, technicians, engineers, architects and entrepreneurs like contractors, construction materials producers and real estate developers.
The project will address both the supply and demand sides of the construction business. A further component will be to support Government Institutions to develop Green Building Policies, further underlining sustainable construction practices.

Aviation sector has seen progress: PM Bhattarai

The country's aviation sector has seen a tremendous progress after Nepal adopted liberal sky policy but more has to be done to serve common people, according to Prime Minister Dr Baburam Bhattarai.
Inaugurating the 51st International Federation of Air Traffic Controllers’ Association (IFATCA) conference here in the Valley today, he said the government is ready to partner with private sector for the development of the aviation sector.
"The air traffic growth during 1990s versus 2010s has been noticeable," he said, adding that Nepal supports the policy of progressive liberalisation ensuring safety and security. "The main thrust of Nepal's international air transport policy is to increase global accessibility, optimise utilisation of Nepali air space and maximise economic benefits to the nation by promoting tourism and trade with safe and efficient air transportation."
"With phenomenal growth in air traffic, the role of civil aviation in the world economy and social affairs has increased considerably," he said, adding that international air transport service carries more people and time-sensitive cargo than any other mode of international transport.
The conference — with the slogan of One sky, One capacity and one Voice — would be successful in achieving its goals of promoting safety, efficiency, and regularity in international air navigation, sharing knowledge and professional efficiency among air traffic controllers, Bhattarai added.
Globalisation, liberalisation and solidarity are the drivers of modern aviation industries that should be encouraged without compromising safety standards, the premier said, adding that a great volume of the world trade in value terms now moves by air. "The global passenger traffic is also growing in a considerable percentage per annum not only in Asia/Pacific region but also across the globe."
President of the IFATCA Alexis Brathwaite, on the occasion, said that remarkable development was made in the international air transport and there was lot more to do for quality services.
Similarly, director general of Civil Aviation Authority of Nepal (CAAN) Triratna Manandhar emphasised on the use of modern technology, infrastructure development and effective use of security regulations.
The five-day conference held in Nepal after four years of efforts has some 500 air traffic controllers of 70 countries as participants.
Nepal has been one of the Contracting Member States of ICAO by ratifying the Convention on International Civil Aviation 1944 (Chicago Convention). It has ratified the Tokyo Convention 1963, The Hague Convention 1970 and The Monrreal Convention 1971 relating to aviation security and safety. In Air Carriers Liability, Nepal has ratified The Warsaw Convention 1929 and The Hague Protocol 1955 as well. Being a land-locked and mountainous country with unique topographical situation, the development of air transport is not a choice from the point of view of economic analysis but a social obligation.