Thursday, December 31, 2015

A year of disaster and depression

Massive disasters, lop-sided development strategy and economic depression are the buzz words for remembering the year 2015. The year will go down in history as the year that exposed policy makers, politicians and bureaucrats for their incompetency and visionlessness. The year again proved that Nepali political parties are 'economically illiterate', despite their tall talk of economic revolution.
The year 2015 was punctuated by the devastating earthquakes of April 25 and May 12 – that flattened over a million houses, including public and private – and the subsequent aftershocks.
The government prepared a Post-Disaster Needs Assessment (PDNA) and organised the International Conference on Nepal's Reconstruction (ICNR), where development partners generously committed Rs 401 billion for the country's reconstruction. The PDNA estimated a need of Rs 669.5 billion for funding reconstruction of damaged public infrastructure, including roads, health posts, government schools and utilities; historical and cultural heritage sites; and private sector infrastructure; and for compensation and other forms of support to the public. The devastating earthquake damaged Rs 517 billion worth of assets, the report stated, projecting economic growth to drop to around half the government's target of 6 per cent.
Though the formation of Nepal Reconstruction Authority (NRA) was expected to create huge employment and kick-start the economy through massive capital expenditure, political wrangling delayed the formation. Nine months after the quakes, the year is going to end without having seen a single physical infrastructure being reconstructed.
Moreover, the economy that was slowly recuperating from the earthquakes started crumbling again after the promulgation of the new Constitution on September 20. Against the popular expectation that the Constitution would pave the way for a prosperous Nepal, unrest in the Tarai-Madhes – supported by the Indian blockade – shook the economy to its foundations.
Agitations by the Tarai-Madhes centric political parties and the fallout on the economy not only exposed the successive governments and the political parties for their lop-sided development planning and lack of vision but also pulled economic growth down into negative territory.
The central bank, in its report, 'Impact of India's unofficial blockade on Nepal's economy', projected that economic growth would be negative or at best remain below 2 per cent. The Finance Ministry, in its White Paper on the current economic status, seconded the central bank's projection.
Likewise, the central bank also warned of stagflation, as consumer prices shot up by more than 10 per cent in the fourth month of the current fiscal year of 2015-16, while economic growth is expected to drop to its lowest in around one-and-a-half decades, coupled with a high level of unemployment.
But, according to senior economist Prof Dr Bishwhambher Pyakuryal, the country is heading towards hyperinflation. "Hyperinflation occurs when a country experiences very high and usually accelerating rates of inflation, like the current market prices, rapidly eroding the real value of the local currency and causing the populace to minimise their holdings of local money," he said, adding that people normally switch to holding relatively stable foreign currencies. "Under such conditions, the general price level within an economy increases rapidly as the official currency quickly loses real value."
Similarly, the Tarai-Madhes unrest has forced some 2,200 industries to close and some 220,000 people have become unemployment, according to the Federation of Nepalese Chambers of Commerce and Industry (FNCCI). People lost their incomes in the last four months – which is severe – due to the Tarai-Madhes unrest, unlike the earthquakes that has destroyed assets.
The prolonged strikes in the Tarai-Madhes supported by the Indian embargo have not only created shortages of essential supplies including petroleum products but also encouraged the black market and hoarding, making the lives of the people more difficult still. The central bank has already admitted that it cannot crack the whip on inflation as this is not increasing due to any monetary cause.
Low production and falling imports have pushed the market prices up to double digit, exposing weak governance, he added.
Government inefficiency has also been exposed in the failure to spend the development budget. According to the Finance Ministry, the government has been able to spend only 6 percent of the capital expenditure in five months of the current fiscal year, which is going to hit the performance of the national pride projects not only because they are going to be delayed but costs also will escalate, according to Pyakuryal.
Time and cost overruns will hit the social sectors like health and education, he said, adding that the resource allocations for these sectors will also decline due to low revenue generation. "It will also hit the government's target of graduating Nepal from the current status of Least Developed Country (LDC) to a developing country by 2020."
According to the Finance Ministry, the government has lost Rs 50 billion in revenue in the last three months.
The government has also made the year 2015 more memorable as the poverty head count is going to increase and the government-promoted black economy will further expands weakening democracy in the coming years.

Black economy expands
The year 2015 will also be remembered for the black economy and market distortion with the direct involvement of the government. Weak governance and lack of willpower to enforce the law are encouraging the black economy. There is growing criminalisation in society since almost the entire official machinery is involved in illegalities. Businessmen and politicians use the police and the bureaucracy to engage in illegality. When the latter get the license to commit illegality, they do it for their own ends also, that is, for making money. The result is that the force responsible for maintaining law and order, i.e., the police, is often a party to the illegality. The nexus among entrepreneurs, bureaucrats and politicians has promoted the black economy in recent months.
Police arrested Nepal Oil Corporation (NOC) Thankot depot chief Rabin Sharma and joint secretary at the Ministry of Environment Ram Adhar Shah – who is also former chief of Nepal Bureau of Standards and Metrology – for their involvement in the black market in fuel. This is only the tip of the iceberg. The controversial firm Birat Petroleum has openly sold petrol at inflated prices, without the government's approval. The government fixes the price and quality of fuel before it is sold to consumers. But Birat Petroleum sold petrol directly from its tanker at Dilli Bazaar, Kalikasthan without fulfilling the legal procedures. This would not have been possible without high-level political patronage. The current market-distorting scenario is a clear indication that the black economy is going to cause wide-ranging damage to not only economy but also to the democracy in the long run.
Likewise, corruption is yet another plague that is pushing the country towards an underground economy. The public has little choice in the matter since almost all the political parties have been caught indulging in corruption. According to a Transparency International (TI) report, Nepal is ranked 139th out of 174 nations in the Corruption Perceptions Index (CPI). The TI report has also exposed the increasing inefficiency of the bureaucracy, something that is costing the country dear.
An economy that has the potential of growing at 7 percent per annum has been crawling at an average of 3 percent per annum in the last decade due to black economy. The year 2015 will, thus be remembered as the year that promoted black economy as the Prime Minister KP OLi and his cabinet is full of ministers of suspicious back-ground. The 40-member cabinet is also adding more pressure on state coffer for their salaries, when the revenue generation is going down.
Likewise, the year 2015 is going to pull down economic growth to almost negative but people are making money through smuggling and black marketing. The unemployed youths of Tarai-Madhes are earning handsome money selling fuel they bring from across the border. The impact of drop in fuel import from India could not be seen as the people are riding on fuel bought in black in inflated price. The government is losing Rs 3 billion – in revenue per month – that it could have earned from Nepal Oil Corporation (NOC) – if NOC had been able to import fuel through the formal channel.
The black economy has pervaded life at the social, political, economic and cultural levels alike and individuals are overnight able to buy houses, land or cars with their ill-gotten gains.

Increasing poverty
The increase in poverty in a very short span of time – eight months from April to December in 2015 – is going to render the country the poorest in the South Asian region.
According to the PDNA report, the devastating earthquakes of April and May will end up pushing an additional 2.5 per cent to 3.5 per cent into poverty trap. It translates into at least 700,000 additional poor in the country of 16.5 million population.
Similarly, the Tarai-Madhes unrest and the Indian blockade have pushed another 4 per cent of Nepalis into the poverty trap, which translates into some 800,000 additional poor due to losses in agriculture, industry and service sector. The protracted political transition in the last four months made people in Tarai-Madhesh lose their employment and incomes.
Currently, one in four Nepalis is under the extreme poverty line, according to the Central Bureau of Statistics (CBS). But the number will rise and one in every three Nepalis will be poor, thanks to 2015.

Adios 2015!!!

Saturday, December 19, 2015

Nepal ranks 118th in Forbes' business list

Nepal has been ranked in 118th position – out of 144 nations – on annual list of the best countries for business in 2015, according to the 'Best Countries of Business in 2015' published by the Forbes magazine.
In South Asia, Nepal is behind Sri Lanka (91), India (97), Bhutan (101) and Pakistan (103) but ahead of Bangladesh (121).
The Forbes' ranking of the 'Best Countries of Business in 2015' is calculated on the basis of trade freedom, monetary freedom, property rights, innovation, technology, red tape, investor protection, corruption, personal freedom and tax burden.  
Nepal is almost at the bottom of the ranking. innovation, technology, monetary freedom, trade freedom and corruption, coupled with political uncertainty and a difficult business climate affected the country's overall ranking, according to the report.
Likewise, the report further states that Nepal is among the poorest and least developed countries (LDCs) in the world with one in almost four citizens living below the poverty line. "Nepal is also heavily dependent on remittances which amount to as much as 22 per cent to 25 per cent equivalent to the gross domestic product (GDP). Agriculture is the mainstay of the economy, providing a livelihood for more than 70 per cent and accounting for a little over one-third of the economy," the report states.
Additional challenges to Nepal's growth include its landlocked geographic location, persistent power shortages, underdeveloped transportation infrastructure, civil strife and labour unrest, and its susceptibility to natural disaster, the report further clarified. "Lack of political consensus in the past several years has delayed national budgets and prevented much-needed economic reform, although the government passed a full budget in 2013 and 2014."
Denmark tops the list, followed by New Zealand, Norway, Ireland and Sweden, according to the report that has placed Chad at the bottom of the list.

Top 5
1. Denmark
2. New Zealand
3. Norway
4. Ireland
5. Sweden

Bottom 5
144. Chad
143. Guinea
142. Libya
141. Haiti
140. Myanmar

Monday, December 14, 2015

Nepal to become poorest country in South Asia

Nepal is heading toward becoming the poorest country in South Asia, thanks to the prolonged Madhes unrest and the Indian economic blockade.
Currently, Nepal is the third poorest country in the region after Bangladesh and India, according to the latest  World Bank report, which has not included Afghanistan, the newest member of the regional body, SAARC.
However, the current Tarai-Madhes unrest and Indian blockade are pushing almost one million more Nepalis into extreme poverty. They will be joining the nearly one million already nudged into extreme poverty by the devastating earthquakes of April and May.
According to a central bank report - 'Impact of India's unofficial blockade on Nepal's economy' - some 800,000 more Nepalis will be pushed below the poverty line due to the current Indian embargo. This conclusion is based on a study of the losses faced by agriculture, industry as well as the service sector.
Currently, one in almost four Nepalis (23.7 per cent) is under the extreme poverty line - living on  $1.25 or less per day - and one in two (56 per cent) is under the poverty line of $2 per day, compared to 43.3 per cent in Bangladesh and 23.6 per cent in India living under the extreme poverty line, and 76.5 per cent and 59.2 per cent respectively under the poverty line, says the report.
The current political impasse coupled with the devastating earthquakes is going to push around 2 million Nepalis under the extreme poverty line. This means the rate of poverty is going to increase by almost 7 per cent, according to former vice-chairman of the National Planning Commission (NPC), Deependra Bahadur Kshetry. “It could be even worse in reality, due to the severe impact of the current fuel shortage, especially cooking gas,” he added
The increase in poverty in a very short span of time - eight months from April to December - is going to render the country the poorest in the region, he said.
Worse still, the population in the Tarai-Madhesh is going to be the poorest in the country as they have lost their employment and remain barred from economic activity due to the unrest.
According to the Small Area Estimation of Poverty conducted by the Central Bureau of Statistics (CBS) in 2013, the districts that were once prosperous - including Saptari, Siraha, Rautahat, Bara and Parsa - dropped into the list of the poorest districts following the Madhes movement in 2005-06. These same districts are going to be hit hard again as the current Tarai-Madhes agitation has forced some 2,200 industries to close, leaving around 220,000 people unemployed, as per figures from the Federation of Nepalese Chambers of Commerce and Industry (FNCCI).
 “From being the poorest country in the region in 1990, Nepal had improved its position to the third poorest behind Bangladesh and India," according to the World Bank global poverty estimates that monitor trends and progress toward achieving the Millennium Development Goals (MDGs). but the world has moved on to Sustainable Development Goals (SDGs) from this year.
Nepal moved ahead of Bangladesh in 1999 and India in 2008.
The recent World Bank global poverty estimates update has assessed poverty using two internationally comparable poverty lines - $1.25 and $2 per capita per day. Both international poverty lines are converted to local currency using the latest (2005) Purchasing Power Parity (PPP) exchange rates.

Wednesday, December 2, 2015

Permanent mechanism for addressing crisis suggested

Experts have suggested a permanent mechanism for fighting the current crisis and also for addressing long-term problems. They have recommended setting up a permanent mechanism – of at least joint-secretary level and including the Finance, Foreign and Commerce and Supplies Ministries – also to facilitate and fast-track intergovernmental cooperation.
Speaking at an interaction organised by Nepal Republic Media today, they also recommended governance efficiency and the promotion of track-2 diplomacy that includes the private sectors of both countries, for the immediate resolution to the current crisis.
They, likewise, recommended effective talks with the agitating Tarai-Madhes centric parties, and with India too for the early solution of the crisis.
In the absence of inter-governmental cooperation, it has taken long to seal a commercial petroleum deal with China, they observed, adding that government inefficiency has fuelled the black market, and the state coffer is losing Rs 3 billion in revenue from petroleum imports per month. "Consumers are compelled to pay Rs 400 per liter of petrol and Rs 6,000 for a cylinder of cooking gas in the black market and the government is losing Rs 3 billion in revenue from petroleum products per month," said trade economist Purushottam Ojha.
If the government does not rein in the black market immediately, it could hit the state mechanism and the state machinery will be unable to function, he added.
Likewise, suggesting that the government immediately start talks with the agitating parties and ensure energy and food security, he said India should be dealt with diplomatically. "Nepalis were united during earlier blockades – in 1970 and 1990 – by India," he said, "However, this time they are divided, which has given room for outsiders to interfere."
The Indian blockade violates international, regional and bilateral treaties, Ojha added. "Nepal, as a member of the World Trade Organisation (WTO), must internationalise the violation of its rights as a land-locked country," he said, also criticising the government for its lack of diplomatic skill. "The delay in signing a commercial agreement with China for the supply of petroleum products is also unacceptable to the people," said Ojha, who was commerce secretary for long.
Nepal needs to have good trade relations with both India and China, he suggested, adding that it is not good to play India against China.
Likewise, entrepreneur Ananda Bagaria said that the government should immediately start effective talks with the agitating political parties, and chart out short, medium and long term programmes to address crisis such as the current one. "It's high time Nepal revised the Nepal-India trade treaty for the greater benefit of Nepal."
The government should hold talks and promote domestic production in the short term, whereas in the medium term it should prioritise agriculture, and boost exports to India to develop interdependency in the long term, he suggested. "The government should also revise its policies and promote indigenous industry to develop a self-sustainable economy in the long term."
Nepal Freight Forwarders Association president Rajan Sharma seconded Bagaria's ideas. "In the short term, the government should use diplomatic, political and human rights channels to solve the current crisis, whereas in the long term, it should develop hydropower and open the six customs points on the China border, apart from revisiting the Nepal-India Trade Treaty," he suggested.
The Chinese government had earlier asked Nepal to work on opening the six customs points on Nepal-China border. However, the government and the vision-less bureaucracy did not give ear to the Chinese government's request, Sharma added.
Asking the government to sit with the private sector to chart out a plan to fight the current crisis, Sharma complained that the government has not been giving an ear to the private sector, which was suffering badly due to Tarai-Madhesh unrest and Indian economic blockade.

Thursday, November 26, 2015

Billionaire Chaudhary raises blockade issue at Commonwealth summit

President of Chaudhary Group (CG) and President Emeritus of Confederation of Nepalese Industries (CNI) Binod Chaudhary has drawn the attention of international community, stating that the ongoing blockade on Nepal will create extreme humanitarian crisis.
He also raised the issue of Indian blockade of key border trade points with India at the Commonwealth Summit in Malta, warning that it will create extreme humanitarian crisis in the country already reeling from the devastating earthquake.
Addressing the Commonwealth Heads of Government Meeting of the 53-member bloc, president of Chaudhary Group (CG) and President Emeritus of Confederation of Nepalese Industries (CNI) Binod Chaudhary said that Nepal already devastated by earthquake is pushed into economic crisis by the ongoing blockade. "The blockade has crippled daily lives of people and virtually shut down industries and businesses in the country," the only Nepali billionaire listed by Forbes said, addressing the meeting on 'Connecting Asia: Accelerating Regional Integration and Development’, today. Though Nepal is not a Commonwealth member country, Chaudhary was invited as a guest. Heads of nations, heads of governments and private sector leaders from around 80 countries are participating in the meeting. The meeting is an important international forum in which the heads of nation and government discuss common challenges, new opportunities, and priorities.
Stressing on the need for liberal leadership for regional integration in South Asia, he said that it would be possible only, if the leading country India shows liberal attitude towards its neighbours. "India should play as liberal role as Germany did during European Union’s establishment."
Chaudhary also expressed concern over the land-locked country’s deprivation from free transport facility. Pointing that Nepal has not received support from anywhere for ending the blockade, he said the situation has put the relevance and usefulness of SAARC under question. "SAARC is known as the weakest regional organisation in the world," a statement quoted Chaudhary, adding, "Despite occasional good initiatives and plans, the region has always lagged behind on regional integration and development due to mutual disagreements."
Development of infrastructure is a precondition for the development of SAARC, which is home to 40 per cent of the world’s poor. But due to mutual distrust and lack of cooperation, there hasn’t been any progress towards building infrastructure such as cross-country road networks, and institutions such as SAARC bank,” he added.
Stressing on the need of transportation network for regional development and integration, Chaudhary said in lack of it the cost of production and distribution among SAARC nations is high. Development of inter-national road network and unrestricted access to transportation is inevitable for the region that is home to landlocked countries like Nepal and Bhutan.
Nepal has been reeling under severe shortage of medicines and other essential goods due to unrest by Tarai-Madhes-centric parties, which are protesting against the new Constitution, and blockade of key border trade points by India.
Though, India maintains that there has been 'no blockade' and the problem is political in nature which has to be resolved by the Nepalese leadership through dialogue, Nepal is reeling under acute shortage of essential goods including petroleum products and even medicine, due to restriction on customs, where there is no protest.

Wednesday, November 25, 2015

Industrialist Mittal passes away

Noted industrialist Banwari Lal Mittal passed away today morning at his residence in Gyaneshwor, following a protracted illness. He was 79.
He had returned to Kathmandu on Monday after getting treatment at Medant Hospital, Gurgaon in India. Mittal had been ill since last one month. He is survived by his wife, a son and two daughters.
Mittal served as the president of Nepal Chamber of Commerce (NCC) and Marwadi Sewa Samiti. NCC has condoled Mittal’s death, saying that he was an active member of chambers movement in Nepal. He led NCC in the 1990s. A leading figure in the Nepali chamber movement, Mittal was also the founder chairman of the Contractors Association of Nepal and a founder member of Nepal Eye Hospital. A man of high moral integrity, Mittal however, made a name for himself in the aviation sector.
Best known for pioneering commercial helicopter services in Nepal, Mittal had started Shree Airlines around 16 years ago. In the 1990s, Mittal ventured out of the family business and entered the aviation sector, establishing Air Ananya – that has been renamed as Shree Airlines offering pilgrimage tours in Manasarovar, Mt Kailash and Muktinath, later – with a fully-owned fleet of five MI-17 helicopters when the government launched a liberal aviation policy.
Transporting cargo and essential items like food and medicines to remote areas that lack road transportation, the carrier quickly established itself in the domestic aviation market.
Today, Shree Airlines is the largest helicopter operator in Nepal with a fleet of six 24-seat Russian-made MI-17 helicopters and four Eurocopter AS350 B3e helicopters. In 2010, Shree Airlines spread its wings outside Nepal, flying baggage and equipment for United Nations Peacekeeping Forces in Africa, according to the airlines, that ha also condoled the demise of Mittal.
Involved in family-owned construction and textile businesses in the beginning, Mittal was also affiliated with various institutions like North Nepal Tea State and various social organisations.

Tuesday, November 24, 2015

Inflationary pressures to worsen: White Paper

The government has projected economic growth to hover around 2 per cent and inflationary pressures to increase due to supply side constraints.
Issuing a White Paper – 'Current Economic Scenario of the Country: Government's Immediate Action Plan' – today, finance minister Bishnu Prasad Poudel said that economic growth could plunge further, if the current obstacles and strikes continue. The government, in the budget for the current fiscal year, had projected 6 percent economic growth.
Lower development expenses and imports are also going to hit economic growth, Poudel added.
The government – after 100 days of the Tarai-Madhes unrest and two months of Indian
blockade – has brought the White Paper without mentioning 'Indian blockade,' let alone the measures to fight it.
Though he has failed to spell out any remedies to address the current economic crisis, he said that industries, agriculture and the service sector, apart from the social sector, have been badly affected. “The shortage of essential goods and services like drugs and fuel is leading toward a humanitarian crisis," he said.
The finance minister also said that the current obstructions have negatively impacted socio-economic conditions. The current crisis has added to the challenge for the incumbent government to graduate Nepal from developing country status by 2022 and to a mid-income status by 2030, he added. "The government also has the challenge of making the economy self-reliant."
Poudel has tried – without any concrete plans – to assure the people of energy security, food security, maintaining of law and order, and starting reconstruction work without delay to bring respite to earthquake victims.
He also did not forget to mention alternative routes for imports, encouragement of electric vehicles, involvement of the private sector in the petroleum business, continuity for the economic reforms programme, industrial security, facilitation of industries, good governance, increment of domestic production, encouragement to foreign investment, tourism promotion, economic diplomacy, and transparency in fuel distribution, apart from an effective monitoring system, though he lacked any concrete plans to address them.
However, the market is riddled with black marketeering in fuel, which has increased the pressure on inflation. The minister admitted that market prices are going up due to shortages and the black market.
The central bank in a report – Impact of Indian Blockade in Nepali Economy – last week had painted a bleak economic picture. It has also projected inflationary pressures due to the Indian blockade that has led to supply disruption and lower economic growth, even negative economic growth.
As inflation is going to post double-digit growth, the White Paper also projected that it will hit people hard. The central bank has – in its Monetary Policy for the current fiscal year – projected inflation to remain under 8 per cent. However, worsening shortage of essential goods and services, lower domestic production and the rampant black market are going to push inflation to more than 10 percent.
The population out of employment – due to the obstructions and strikes – is going to be hit hard by rising market prices, and they will be pushed under the poverty line. "The devastating earthquake has pushed some 700,000 Nepalis below the poverty line, and the number is going to increase due to the current crisis," Poudel said.

Monday, November 23, 2015

Cost of inaction higher, set up Economic War Room to handle crisis: Experts

Economists have suggested the government to set up an Economic War Room to fight the current crisis.
Accusing the government of not being serious even after 100 days of the Tarai-Madhes unrest and 2 months of Indian blockade, they said the government should go on a war footing to address the people’s woes.
The government lacks seriousness and has failed to address the people’s woes,” they said, adding that the people have been suffering due to shortages of essentials like cooking gas, petrol and life-saving drugs.
Saying that cost of inaction is higher, they also accused the government of lack of crisis management skills. “The government completely lacks crisis managerial skills,” said industrialist Hari Bhakta Sharma. “The government is ineffective and weak as it has failed to address the crisis,” he said, adding that it has also failed to maintain law and order. "The government, instead of solving the crisis, has only aggravated it."
The apathy of the political parties has also aggravated the crisis, Sharma said calling for diversification of the economy. “Trade diversification does not mean that Nepal imports from China what it used to import from India,” he explained.
Stating that the weak state machinery has fuelled the black market, he suggested the government making the distribution channels more efficient. "The demurrage and detention charges that industrialists have been paying will hurt the economy,” he added.
Urging the government to make clear its industrial and economic policy, the industrialist also gave examples of other countries where the governments had rescued the economy in times of crisis.
Foreign investment will not come to any country where domestic investment is not secure, he said also asking the government to safeguard domestic investment to save jobs too. Rising unemployment is perceived to create security problem later.
Linking the current economic crisis to national security, former member of the National Planning Commission (NPC) Swarnim Wagle said that a country can be either attacked directly with armed forces or the economy can be weakened for takeover.
He suggested analysing the current crisis from four angles: fiscal, monetary, external sector and real sector. “Under fiscal sector, revenue mobilisation is very discouraging,” he said, adding that revenue mobilisation in the first four months is only 70 per cent of target and half that of the same period of last fiscal year. “It will hit development work directly and economic growth in the long run, which is a serious matter.”
From the monetary angle, black marketeering has become rife and people are forced to pay four times the normal price of goods, which will hit the poor most and build up inflationary pressure.
Likewise, exports have dropped by 25 per cent in the first four months, whereas imports have dropped by 35 per cent. The decline in imports will ultimately hit exports also, he said, adding that remittance alone has cushioned the current trade imbalance. “It will pull economic growth down but we cannot yet see the floor of that effect.”
A strong aviation sector however could rescue land-locked countries like Nepal in times of blockades, Wagle suggested.
Asking the government to continue with its second generation reforms to build up economic competitiveness, he said it was necessary to improve interdependency with neighbours. “In normal times too, Nepal must have good trade relations with China, apart from improving customs arrangements with the southern neighbour for more cross-border trade.”
Madan Kumar Dahal, another economist, on the occasion, also said that Nepal Rastra Bank and the IMF have also painted a bleak economic picture. Calculating that the current crisis has caused the Nepali economy to lose Rs 540 billion, he also warned of a humanitarian crisis as there are no life-saving drugs in the hospitals due to the Indian blockade and the Tarai-Madhes unrest. Dahal also suggest the government to declare an emergency to maintain smooth supplies. The government must bring in austerity measures and start a discipline campaign to maintain good governance, he suggested, adding that weak governance has fuelled the black market and spawned a parallel economy, which will further weaken the state and hit the poorest of the poor hard. "The inflation will go out of control from government's hands."

Monday, November 9, 2015

Government formally requests India to end cross border obstacle

The government has officially requested Indian government to ease supplies through India-Nepal border.
Nepal is reeling under acute shortage of petroleum products including cooking gas and medicine since last two months after India imposed blockade on major customs points at Nepal-India border chocking the supplies.
Passing a special resolution, the Cabinet meet also urged the southern neighbour to strengthen ties between Nepal and India, without mentioning the word 'blockade'. The Cabinet meeting has urged the southern neighbour to help clear obstruction of transit and supplies through border points. The Cabinet asked Indian government to contribute in strengthening bilateral relationship by easing operation at entry points as it has affected import of essentials including medicines and fuel, informed minister for Information and Communication Technology Sher Dhan Rai, after the meeting.
The government decision comes after 50 days of India imposed blockade at Nepal-India border points, which has been obstructed following the promulgation of new Constitution.
Likewise, the Cabinet also urged the agitating Tarai-Madhesh centric parties to end their protests stating that attempts are on to seek solution through talks, arrangements have been made for free treatment to injured, process has begun to withdraw false cases and decision to provide Rs 1 million to deceased families has been implemented.
"We requested the protestors to end blockade at border points as festivals like Tihar, Chhath and Lhosar are at the door, he said, adding that the government is saddened by the inconvenience caused to Nepali people at Tarai-Madhesh and across the country. "We express gratitude to the general public for their patience and harmony during this critical time."

Sunday, November 8, 2015

Shadow economy expands thanks to government fecklessness

The shortage of essential goods in recent weeks and months, caused by the Tarai-Madhesh unrest and the Indian blockade, has spawned a shadow economy. The increasing reach of the shadow economy – also due to structural deficiencies and market anomalies – is going to bring about another catastrophe in the country, warn economists.
The spread of the shadow economy will hurt the country in the long run as the country will slip out of the government's hand, if the current situation continues, they said.
Former finance secretary Rameshwor Khanal said the economy is slipping out of the government's hands. "The economy is being hijacked by black-marketeers, smugglers and criminals," he said, adding that in the long run these elements will run the economy into the ground and that will also be bad for cross-border trade. "The economy in criminals' hands will eventually hit the cross-border trade too."
According to the Central Bureau of Statistics (CBS), Nepal's economy is worth around $21 billion.
"That is also about the size of the shadow economy," claimed economist Prof Dr Madan Kumar Dahal. "In economic parlance it is called the parallel economy," he said, adding that earnings from smuggling, corruption and black-marketteering are all part of this parallel or black economy, which will ruin the economy and country in the run long run.
Government fecklessness has not only left consumers helpless but also boosted the shadow economy.
Thus, suggesting that the government declare an emergency in view of the increasing shadow economy, Dahal said, "Nepal has turned into a banana republic." According to him, the country is suffering because of its complete dependency on one country and failure at trade diversification over the past few decades.
The prolonged Indian blockade has pushed the prices of essential commodities, includes petroleum products, to more than double. People are forced to pay anything between Rs 250 to Rs 500 per liter of petrol that costs only Rs 104 per liter. Consumers have been paying Rs 10,000 for a cylinder of cooking gas, which is priced at Rs 1,400. Likewise, the price of edible oil has increased to Rs 250 per liter from Rs 120 a month ago, whereas rice, lentils and pulses have also doubled in price. "But the government is nowhere to be seen," said president of Nepal Retailers Association (NRA) Pabitra Man Bajracharya, during an interaction with Nepal Republic Media today.
Admitting that the prices of some commodities have jumped, he said, wholesalers have been charging retailers high prices, citing supply constraints and increased transportation charges due to the fuel shortage.
The government has been doing nothing to control these market anamolies, he said, adding that officials at the Department of Commerce and Supply Management (DoCSM), who are responsible for controlling such malpractices in the market and maintaining uniformity in prices, are in no mood to intervene. "They just say that the need of the hour is to get supply of goods," he added.
President of Consumer Rights Investigation Forum Madhav Timalsina seconded Bajracharya's views. "Nepali consumers are probably going through the toughest time ever," he said, accusing traders of creating artificial shortages to push up price. "As the government has been doing nothing, unscrupulous traders are having a field day," he added.
Despite the open black-marketeering, the government has done nothing, Timalsina said suggesting the government to scrap the consumer laws altogether, if it cannot enforce them.
The shortage has created opportunity for corrupt bureaucrats, black-marketeers and smugglers to earn illegal money distorting the market.
"The distortion in the market could be corrected, if government could monitor and regulate market, and also normalise the supply system," Khanal said, however, adding that government should let the market function smoothly, without intervention.
Likewise, Finance Secretary Suman Prasad Sharma also accepted that high demand and low supply had encouraged black-marketeering. "But the government has to act fast to stop the economy from going to the dogs," Sharma said, claiming that the government is trying to build confidence in the market by regularising the supply-side.

Tuesday, November 3, 2015

Economy bleeds as blockade continues

Nepal's economy is bleeding blue as the stand-off between government and Tarai-Madhesh centric political parties, and India lingers. Fecklessness on the part of both government and Tarai-Madhesh centric parties is pushing the situation toward the brink.
With the Madhes in turmoil since the last 80 days, importers have been incurring huge demurrage charges at Kolkata port, the key route for Nepal's third country trade. The importers have been paying Rs 40 million per day as demurrage charge at Kolkata port, according to president of Federation of Nepalese Chambers of Commerce and Industry (FNCCI) Pashupati Murarka. He also claimed that the country is losing Rs 2 billion per day due to the unrest and the government's politics first policy. "The country has already lost Rs 160 billion in these days," he said.
Likewise, the government has lost Rs 25 billion in revenue in the first three months of the current fiscal year as the revenue mobilisation has dropped by 10.22 per cent compared to the same period last fiscal year, mainly due to plunge in customs mobilisation, according to the Revenue Division under the Finance Ministry. "The government has lost Rs 1 billion in vehicle tax alone."
The government had aimed at 12 per cent revenue growth for the current fiscal year as against last fiscal year. But the government has been able to mobilise only Rs 75.66 billion against the target of Rs 95.78 billion – a shortfall of 21 per cent – in the first three months.
It is mainly due to low customs revenue and value added tax (VAT), the major contributors to government coffers," thee division explained, adding that VAT mobilisation dropped by 26.43 per cent to Rs 23.58 billion against the target of Rs 32.06 billion. "VAT mobilisation is 16.41 per cent less than last fiscal year's same period," the figures further revealed.
The blockade by India has hit the customs the most as customs mobilisation stood at Rs 13.63 billion – which is a drop by 26.7 per cent compared to the same period last fiscal year – against the government's target of Rs 18.32 billion in customs revenue for the first three months of the fiscal year.
Similarly, banks and financial institutions could have lent Rs 1 billion in a working day in an average, had there been no unrest and bandhs. However, the Tarai-Madhes unrest has crippled their lending capacity, according to Nepal Bankers Association (NBA) president Upendra Poudel. "The banks and financial institutions could have lent at least Rs 70 billion in the last 80 days," he said, adding that they have not been able to lend due to loss of confidence by borrowers, and this will have a cascading impact on the economy. "The sloth in lending will not only hit the banks and financial institutions themselves but shrink the economy also."
Central bank has warned of low economic growth due to the ungoing unrest and blockade that has hit not only the trade and transit, but also contracted the economy.
According to senior economist Prof Dr Bishwambher Pyakuryal, Nepal is facing a unique combination of economic collapse and is moving toward a failed state. "Hyper inflation – due to supply side constraints because of the blockade – falling production, and private sector's loss of confidence have pushed the country toward a failed state," he said, adding that the situation has aggreviated also due to communication-gap between the citizens and the government. "It seems as if there is no government in this country, the economist said, adding that the people are in queue for petroleum products since more than a month, and the government has no clue when it can supply essential products to its populace. "It has created a huge trust deficit on government, which will lead to a question of legitimacy of the government resulting in a failed state," he added.

Wednesday, October 28, 2015

US to train construction professionals

The US Government – through the US Agency for International Development (USAID) – today announced three initiatives to support Nepal’s model of owner-driven housing reconstruction following the devastating April 25 earthquake.
Building on previous investments, USAID programmes will train an estimated 13,500 local construction professionals and educate more than 285,000 affected homeowners on building earthquake-resistant homes over the next five years, reads a press note issued by the US Embassy in Kathmandu today.
Baliyo Ghar (Strong House) is a five-year, $8-million project that will train local masons, carpenters, engineers, and affected homeowners. Baliyo Ghar will also support the establishment of a National Reconstruction Technology Center and three training centers at the district and local levels in Dolakha, Dhading, and Nuwakot districts, it said, adding that Baliyo Ghar will be implemented by the National Society for Earthquake Technology (NSET) in cooperation with the Ministry of Urban Development, Ministry of Federal Affairs and Local Development, Council for Technical Education and Vocational Training, and National Planning Commission (NPC).
“This week, as Nepal marks six months since the April 25 earthquake, we are pleased to announce our new and expanded initiatives and pledge that we will continue to help rebuild a safer and stronger Nepal,” shared US ambassador to Nepal Alaina B Teplitz.
"These new projects and expansions of existing programs are valued at more than $20 million," she said, adding that they are part of the $130 million committed by the US government in response to the earthquake and demonstrate US continued commitment to Nepal.
According to the press note, USAID will also expand its ongoing resilience project, Sabal, to invest $2.7 million in training local masons in Sindhupalchok and Kavrepalanchok districts. In addition, USAID has made a $9.6 million contribution to the World Bank Nepal Earthquake Reconstruction Multi-Donor Trust Fund (MTDF). The contribution will directly support the government-led beneficiary survey in the 14 most-affected districts, as well as the provision of housing reconstruction cash grants to affected homeowners.

Thursday, October 15, 2015

Shesh Ghale re-elected as NRNA president

Shesh Ghale has been today elected as the president of Non-Resident Nepalese Association (NRNA) with an overwhelming majority for the second term.
He secured 867 votes – out of the total 1,089 votes – while his contender TB Karki garnered just 226 votes.
Likewise, Bhawan Bhatta has been elected as the vice president securing 538 votes. His contender Kumar Pandey secured 513 votes. Dr Badri KC with 555 votes has been elected as the general secretary and Hitmat Thapa with 264 votes as treasurer of the NRNA for next two-year term.
The reelected president of the NRNA Ghale is constructing a five-star hotel in Kathmandu. Prime Minister Sushil Koirala had laid foundation stone of the 17-storey five-star Sheraton Kathmandu Hotel last October. The hotel is being built with an investment of Rs 8 billion. The hotel, which is expected to come into operation in February 2018, is being built by MIT Group Holdings Nepal, a member of the Ghale Group of Companies, which has diverse businesses in Australia and other countries too.
Ghale has also been appointed Nepal's special envoy for reconstruction in the aftermath of the devastating earthquakes of April 25 that floored down thousands of houses, infrastructures and heritage sites, apartfrom loss of lives.

Tuesday, October 13, 2015

NRNs failed Nepal in the time of crisis

The Non-Resident Nepalis (NRNs) from 71 countries, who have gathered in Kathmandu for 7th Global Conference, have committed to work for reconstruction.
It is praiseworthy. However, while they are preparing for global conference, Nepal is under India’s ‘unofficial blockade’. The lives of Nepalis have been hit hard by the shortage of essential goods, including petroleum products, and even medicine in some parts of the country. In the current situation of humanitarian crisis, the NRNs have failed their motherland, in their own words.
“We discussed Nepal’s current issues in the meeting of International Coordination Council (ICC),” said Non-Resident Nepalis Association (NRNA) vice president Bhawan Bhatta.
The NRNs, who have resources and network across the globe, apart from their formal institution in 71 countries, have failed to prove that they really care for their motherland. They have been repeatedly claiming that the country can use their expertise and network for the benefit of Nepal, if the government award them citizenship. The new constitution of the country – that has become the key reason for the current unofficial blockade by India – has given NRNs the right to get special citizenship. The NRNs have welcomed the provision, but failed to help the country at this critical juncture.
However, Bhatta said that the NRNs raised the issue of current crisis in the ICC meeting. “Majority of the NRNs feel that they have to internationalise the current crisis,” he said, adding that they had also planned a symbolic programme in all the 71 countries at the same time and on the same date. “But the ICC meeting did not endorse the agenda.”
However, Japan National Coordination Council (NCC) – in Bhatta's leadership – organised a symbolic programme in Tokyo.
After Nepal promulgated new constitution with 90 per cent majority on September 20, India has stopped movement of cargo trucks at its border points, blaming the protests Tarai-Madhesh districts. Nepal is not only landlocked, but also India-locked as the country is surrounded by India in the east, west and south. The behaviour of New Delhi with a small country like Nepal has not only affected lives of Nepalis but also left bordering Indian markets deserted.
Nepal Oil Corporation (NOC) – the state-owned oil monopoly – has been rationing petroleum products to manage the situation. Because of the Indian blockade and shortage of petroleum products, the country is going to lose more than what it lost from the devastating earthquake in April and May. Schools and industries have been shut down, and long queues have been formed at handful of pumps distributing fuel. The blockade has dealt severe blow on the already shattered Nepali economy.
Though NRNA has been involved in various activities under its charity programme, including the plan to rebuild 1,000 houses for earthquake victims within two years, it has to come up to help the country in situation like this.
The NRNA General Assembly and Global Conference that is being held in Kathmandu from October 14 to 17 is going to see around 1,500 delegates from various countries. The conference is also going to elect a new executive committee for a two-year term. But the conference will also have to come up with clear and concrete plans, apart from reconstruction and rebuilding, to help their motherland at this critical time. Because its their turn to help Nepal.

Thursday, October 8, 2015

ADB approves Japan-funded grant to rebuild schools, livelihoods

The Asian Development Bank (ADB) today approved a new $15 million grant to rebuild schools, provide microloans to help restore livelihoods, and to boost awareness of disasters in the 14 districts most severely affected by the recent earthquakes in Nepal.
 The grant is provided by the Japan Fund for Poverty Reduction (JFPR), a fund set up by the Japanese government in 2000 to support poverty reduction and social development in ADB projects. ADB will manage the grant.
“Destroyed homes, farmland, and business and lost livestock and harvests will push at least 700,000 additional Nepalis below the poverty line, many of them in the hard-hit rural central hill and mountain areas where poverty was already high,” said financial sector specialist with ADB’s South Asia Department Mayumi Ozaki. “We must help families get back on their feet as soon as possible so they can rebuild their lives.”
On top of the $15 million grant, the Nepal government will provide an additional $1.3 million and the Small Farmers Development Bank, a Nepali umbrella microfinance bank, will provide $1.5 million.
Around $8.1 million of the overall funding will be used to rebuild at least 14 model disaster-resilient schools, $7.0 will be mobilised to provide microcredit to at least 12,500 households in the affected districts, and a further $1.9 million will finance training to help people better understand how to prepare and cope with disasters. The remaining funds will be used for contingencies.
The 7.8 magnitude earthquake of April 25, followed by a major aftershock on May 12, affected the livelihoods of an estimated 2.3 million households and 5.6 million workers across 31 districts. This resulted in personal income losses of around $170 million in the fiscal year to July 15.
Most of these poor households have no access to the formal banking system, with many relying on microfinance institutions which cannot meet demand for credit from affected households due to their own limited funding. Schooling was also disrupted by the tremors which destroyed over 26,000 classrooms in public and private schools and damaged a further 26,000. Damage and losses in the education sector are estimated at around $310 million. Lengthy periods away from school are linked to poor education attainment and lower job prospects.
The $15 million grant adds to a $3 million disaster-response grant approved by ADB on 27 May and a $200 million emergency loan approved on June 24. ADB may also reassign funds from existing projects in Nepal to help the country recover.
ADB – based in Manila – is dedicated to reducing poverty in Asia and the Pacific through inclusive economic growth, environmentally sustainable growth, and regional integration. Established in 1966, it is owned by 67 members - 48 from the region. In 2014, ADB assistance totaled $22.9 billion, including cofinancing of $9.2 billion.

Wednesday, October 7, 2015

NOC calls bids from international fuel suppliers

After India refused to send the petroleum products to Nepal – since the last two weeks – Nepal Oil Corporation (NOC) has called global tender to supply fuel to Nepal.
A board meeting of NOC today evening decided to issue a public notice tomorrow calling for global bids from fuel suppliers for 15 days, a source at the state oil monopoly said requesting anonymity.
It is the first time in history that NOC has called global bids from international fuel companies for petroleum supply.
Despite four decades of commercial association and agreement with the Indian Oil Corporation (IOC) – the sole petroleum supplier to the NOC – the latter has failed to supply fuel to Nepal citing security reasons – due to protests in the Tarai-Madhesh – since the past two weeks. While responding to the NOC official's request, the IOC officials said that they have been told not to supply petroleum products to Nepal, though India claims to have not been imposed blockade on Nepal.
IOC has slashed the fuel supply to Nepal by over 90 per cent compared to normal times though NOC has not violated the contract with IOC. NOC and IOC had renewed agreement in 2012. It is valid till 2017. According to the commercial agreement between NOC and IOC, the latter will supply as much as petroleum products NOC needs.
Following the unofficial India-imposed economic blockade, the IOC has refused to supply fuel – including cooking gas – to Nepali tankers and bullets reached in the Indian depots.
Likewise, the Indian customs officials have also been preventing loaded fuel tankers from entering Nepal.
Reeling under acute shortage of petroleum products – after IOC's failure in maintaining smooth supply – NOC has been left with no option other than to call global bids. After the IOC's reluctance to supply fuel that has not only paralysed normal life but has also crippled the economy, the NOC has no option to call global tender, the official said, adding that the NOC is expected to select the fuel supplier to Nepal through a competitive bidding process."
An unofficial blockade by India restricting the flow of oil tankers and trucks into the country has also caused disruptions in transportation and made schools to shut down. Hospitals are also running low on medicine. There could soon be humanitarian crisis, if India does not lift its embargo.
The cabinet had this week directed, the Ministry of Commerce and Supplies, to explore the alternative, in case the IOC does not cooperate. The cabinet had asked the ministry to ease the supply of petroleum products – including aviation fuel, petrol, diesel, kerosene and LPG (cooking gas) for 15 days – as a temporary measure. However, it is high time, Nepal should think of long-term option as the political arm twisting of India through IOC has made the Nepalis suffer a lot. NOC took long time to come to conclusion and look for alternative also due to non-cooperation of the ministry that has never thought of easing supply during the crisis in the past too.
The state-owned oil monopoly has asked the interested bidders to submit their Expression of Interest (EoI) within three days. "NOC wants 200 kilolitre of diesel, 100 kilolitre of petrol, 200 kilolitre of ATF, 200 kilolitre of kerosene and 100 metric tonnes of LPG immediately for 15 days either through land or air route," the bid read.
Earlier this week, NOC had even sent a letter to IOC requesting immediate resumption of regular supply. But the IOC did not heed NOC's request forcing the latter to call for gloal tender to maintain fuel supply.

Monday, October 5, 2015

Some 286 branchless banking points to open in underserved regions

Seven banks are opening 173 branchless banking points in 14 districts affected by the devastating earthquake of April 25.
Seven commercial banks and Sakchyam Access to Finance Program signed an agreement today to open 173 Branchless Banking (BLB) outlets in 14 districts affected most severely by the earthquake. "As part of the partnership, Citizens Bank, Global IME Bank, Nepal Investment Bank, NMB Bank, Rastriya Banijya Bank, Sanima Bank and Siddhartha Bank have already setup 55 branchless banking points with the remaining to be established by the end of November," a statement read.
The launch of these crucial financial services comes at a point when the financial sector is under pressure to provide quick access to financial services in far-flung areas of the 14 districts.
The central bank is moving aggressively to expand branchless banking outlets throughout the country in line with its monetary policy, Nepal Rastra Bank governor Dr Chiranjibi Nepal said, addressing the signing ceremony. "The central bank is committed to working with banks and the government to provide a sustainable basis for expanding its goals of financial inclusion and expediting government to people (G2P) payments in an efficient manner," he added.
"The establishment of delivery points and making them sustainable holds key in achieving financial inclusion," joint secretary at the Finance Ministry Suresh Acharya. "The government intends to establish the right incentives for banks working with the central bank to rollout G2P and other cash transfer programmes, through networks such as the ones created by banks with Sakchyam support," he added.
Likewise, director general at the Department of Civil Registration Basanta Raj Gautam said that the government was finalising pricing structure for its implementation. "We have had presentations from Sakchyam on the basis for pricing and been looking at international as well as our own experiences to date," he said, adding that government would work closely with the banks to develop a sustainable model for delivery of G2P services.
Likewsie, reiterating the Government of UK's commitment to accelerate the deepening of access to financial services in rural Nepal, Economic Development Team Leader at DfID Gareth Weir, said that the active deliberation will enable retail finance and G2P payments through the banking sector.
On the occasion, Sakchyam Team Leader Baljit Vohra briefed about Sakchyam's achievements. "Sakchyam is supporting opening of 286 branchless banking outlets in mid and far-west and in quake-affected districts," he said, adding that the transformational BLB strategy includes the use of Point of Sale (PoS) machines, mobile phones and tablets enabled through agents, extensions counter and physical branches to rollout micro-banking products, G2P payments and value chain financing models that will further deepen financial-service penetration for households and enterprises in the remotest areas of the country.

Sunday, October 4, 2015

Nepal's economic growth to drop to 3.4 per cent: World Bank

Nepal is expected to see drop in economic growth to 3.4 per cent from expected 5 per cent in the current fiscal year, though the country has begun to recover after the loss of life and economic devastation from the April 25 and May 12 earthquakes, according to the World Bank.
"From an expected 5 per cent, Gross Domestic Product (GDP) growth is expected to drop to 3.4 percent this year," it said. "But the economic growth will tick up to 3.7 per cent in 2016," the multilateral institution said in its twice-a-year 'South Asia Economic Focus' published today. "Although macroeconomic fundamentals remain strong, weak execution of public investment slows down both infrastructure development and post-disaster reconstruction."
However, the World Bank is hopeful that many South Asian countries show potential for accelerated growth in the short to medium term. The transition in Afghanistan, the earthquakes in Nepal, and revisions to national accounts in Sri Lanka, has resulted in all three countries experiencing slower growth than previously expected, it added. "Led by a resilient India, South Asia is expected to maintain its lead as the fastest-growing region in the world, with economic growth forecasted to accelerate from 7 per cent in 2015 to 7.4 per cent in 2016," the report stated.
But the positive performance hinges on solid growth in services, domestic consumption, and a gradual rise of investments. Limited exposure to the financial turmoil and an improved external position have given most South Asian countries important policy space, it added.
Given India's weight in the region, its performance greatly influences the projections for South Asia as a whole. Improved investor sentiment and resilience to external shocks are expected to increase India's growth rate to 7.5 per cent in fiscal year 2015 and further to 7.8 per cent in the fiscal year 2016.
"While the region is now in a position of strength, structural constraints holding back export and investment growth do persist," World Bank South Asia chief economist Martin Rama said, adding that to keep the momentum and accelerate job creation, governments should enact reforms easing infrastructure bottlenecks and paving the way to greater competitiveness. "Fiscal space remains limited while financial sector vulnerabilities persist."
Thanks to low food and commodity prices, as well as a slowdown in the growth of administered prices, inflationary pressures have eased markedly in South Asia, it added. "Yet the pace of disinflation varies depending on the price index considered. Revisions to national accounts, together with new comparable data on purchasing power around the world, also raise questions regarding the measurement of prices in the region."
According to the report, South Asia could actually have cheaper prices, faster growth and bigger economies than previously thought.
Rapid growth has not yet translated into significantly higher government revenue generation and improved fiscal balances. Budget deficits are expected to remain at 6.5 percent of GDP in 2015, the highest among all developing regions. Tax collection remains well below estimates, and has even deteriorated across major South Asian economies."
"Mobilising revenue is critical for the region to develop its infrastructure and deliver better social services, while creating a financial cushion to address potential shocks in the
future," World Bank South Asia vice president Annette Dixon said, adding that in some cases introducing and rolling out modern tax instruments holds the key to higher revenue, but containing exemptions and special regimes are crucial across most of the region.

Thursday, October 1, 2015

IFC appoints White Lotus as fund manager of Business Oxygen

IFC, a member of the World Bank Group, has appointed White Lotus Centre as fund manager for Business Oxygen, its SME ventures fund in Nepal.
White Lotus will make equity investments in Nepal's high-growth small and medium enterprises (SMEs), helping them achieve their potential and create more jobs.
Business Oxygen is Nepal's first private-equity fund. IFC has committed $7 million to this $14 million sector-agnostic fund. The fund combines risk capital financing with advisory support to help investee small and medium enterprises develop fundamental financial systems, quality-assurance standards, and corporate governance frameworks.
Chairman of White Lotus, Siddhant Raj Pandey, after signing the agreement said, "Despite the challenges posed by this year's earthquake, there is significant potential for SMEs in Nepal. White Lotus will develop a robust portfolio of investee firms that will become a strong contributor to Nepal's commercial growth."
SMEs are a vital component of Nepal's economy. They employ 1.75 million people and account for 22 per cent of the country's GDP. There are an estimated 111,442 operational SMEs, out of which 63 per cent were registered over the last decade.
Improved access to finance is essential for growth of these SMEs. Only 39 per cent of firms in the micro, small, and medium enterprise segment have adequate access to finance, compared to 78 per cent of large enterprises. Business Oxygen is designed to address this challenge.
"Business Oxygen's ability to provide risk capital to SMEs in Nepal provides a vital solution for firms too small or too new for traditional commercial bank financing," said IFC's country manager for Bangladesh, Nepal, and Bhutan Wendy Jo Werner. "The fund is unique because it provides equity and also advisory to catalyze the growth of small businesses."
Similarly, Tracy Washington, SME Ventures' programme manager, on the ocaasion, said that White Lotus will play an important role in developing the private equity sector in Nepal. "We look forward to supporting the team as it demonstrates that new funds, even in challenging markets, can achieve promising results," she added.
Business Oxygen is part of IFC's SME Ventures programme, which supports the creation of risk capital funds in fragile, frontier, and post-conflict markets. With four funds covering six countries, SME Ventures is expanding to new markets where the need for risk capital remains high and potential for growth makes private equity an effective market solution.

Wednesday, September 30, 2015

Nepal 3rd most competitive economy in South Asia

Nepal has improved its score in Global Competitiveness Index (GCI), becoming third most competitive economy in South Asia, according to a report.
According to the Global Competitiveness Report 2015-2016 published globally today by World Economic Forum, Nepal ranked 100 – with a score of 3.9 – among 140 economies in the world. With improved score, Nepal is the third most competitive counry for investment in South Asia. The more the score – measured from 1 to 7 – the more competitive is the economy.
With score of 3.8, Nepal was ranked 102 in the Global Competitiveness Report 2014-2015, among 144 economies in the world, the report said, adding that the macroeconomic environment, and health and education – two of the 12 pillars that gauge the competitiveness of the economy – have improved. "Nepal ranks among the factor-driven countries," said country coordinator for the report Prof Dr Ramesh Chandra Chitrakar.
India (55) is the most competitive economy followed by Sri Lanka (68) and Nepal (100) in South Asia. Bhutan ranks 105, Bangladesh is in 107th position and Pakistan ranks 126 in the index.
The set of institutions, policies, and factors determine the level of productivity of a country. The level of productivity, in turn, sets the level of prosperity that can be earned by an economy, Chitrakar added.
The ranking – based on the assessment of 140 economies on parameters such as infrastructure and institutions, macroeconomic environment, health and education, among others – claimed that quality of Nepal's institutions has also improved apart from macro-economic environment, health and education.
However, Nepal needs to improve its technological readiness and efficiency enhancers to graduate to the efficiency-driven economy from current-factor driven economy, he said, adding that the graduation of Nepal to developing country by 2022 will also be determined by the increased competence. "The report encourages the government to fix policy, institutions, and factors to make the economy more competitive or productive that can propel economic growth."
Switzerland, Singapore and the US are the top three ranked economies, unchanged from the previous year, according to the report. Three Asian countries – Singapore, Japan and Hong Kong – are in the top ten ranking of the report. Likewise, in Asia, Malaysia ranked 18th, up two places, Indonesia ranked 37th, down three notches, while Thailand ranked 32nd, down one position.
The report also stated that emerging and developing Asia is the world's fastest-growing region since 2005 but it will retain for medium term. "The region accounts for some 30 per cent of global GDP, with China alone accounting for 16 per cent," it reported, adding that ASEAN bloc is performing well, but no countries in SAARC is above the rank of 50.

Saturday, September 26, 2015

Government concerned over Indian blockade

Nepal has officially showed concern over 'India-imposed blockade' since last four days that has made the lives of Nepalis hard.
Foreign Ministry today – releasing a press note – said that the government is concerned over 'undue delay on the movement and clearance of cargo vehicles resulting in significant decrease in the flow of essential goods to Nepal from India via different border checkpoints for last few days.'
"It decreased flow has been noted particularly since September 23, whereas the security situation in Tarai has remained the same for more than a month and now has been improving gradually,” the ministry said in a statement.
Minister for Health and Population Khaga Raj Adhikari – who is officiating foreign
minister in an absence of foreign minister Mahendra Pandey – during his meeting with ambassador of India to Nepal at the Foreign Ministry in Singha Durbar yesterday, had informed about the fact and requested for necessary cooperation from Indian government for early release of cargo vehicles stuck at border checkpoints on the Indian side, according to the ministry.
A handful of vehicles – with perishable goods – were allowed to enter Nepal through Mechi and Dhangadhi check point. "Due to the blockade, Nepalis have begun to feel shortage of daily supplies on the eve of festive season,” the ministry said, further adding that as many as 29 cargo vehicles carrying perishable goods had managed to enter Nepal yesterday and the day before through Bhairahawa checkpoint.
The ministry also informed that 17 cargo vehicles, including three with petroleum products, through Mechi checkpoint and 25 cargo vehicles, including 20 with petroleum products, through Dhangadhi check point could enter Nepal, today.
"The situation of supply, however, has not improved ever since," it said, adding, "Not a single cargo vehicle could enter Nepal through Biratnagar, Birgunj, Bhairahawa, Krishnanagar and Nepalgunj checkpoints until 5 pm today."
India has – showing its displeasure over promulgation of constitution through Constituent Assembly (CA) on September 20 – blocked cargo vehicles, including petroleum products, despite agreement to supply petroleum products to Nepal Oil Corporation (NOC) by Indian Oil Corporation (IOC), the sole supplier of petroleum products to Nepal. India sent a 7-point recommendation to add in the constitution, which Nepali leaders rejected. The Indian bureaucracy has taken the issue as its prestige issue and entered into ego-war with a tiny landlocked neighbour Nepal.
"Hundreds of vehicles carrying petroleum products and other essential goods are awaiting clearance to enter Nepal on the Indian side of the border,” the statement added, “Tankers have not been filled up with petroleum products."
Large number of vehicles have not been allowed to enter the Indian side and due to which people in Nepali side have begun to feel shortage of daily supplies on the eve of festive season, the statement further read. "Given the friendly relations existing between the two countries, Nepal sincerely hopes that the India will take all necessary steps at the earliest to ensure uninterrupted entry of vehicles carrying essential supplies, including petroleum products, to Nepal as before. It also reiterated that there would not be any problem inside the Nepali territory for the transport vehicles and their personnel since arrangements are already in place for their security.
Though not permitting transit right to a landlocked country like Nepal is a breach of freedom of transit rights of landlocked countries. If India continues to impose embargo on Nepal, Nepal can lodge complaints in the multilateral trade mechanism as it is the right of landlocked country. The transit and free supply of consumables is Nepal’s right and India should facilitate it without any hindrance, according to the multilateral and bilateral agreement.

Friday, September 25, 2015

ADB to double annual climate financing to $6 billion by 2020

Asian Development Bank (ADB) president Takehiko Nakao today announced that ADB will double its annual climate financing to $6 billion by 2020, up from the current $3 billion. ADB's spending on tackling climate change will rise to around 30 per cent of its overall financing by the end of this decade.
ADB's announcement comes against the backdrop of a promise by developed countries to mobilize $100 billion every year from 2020 to counter climate change in developing countries.
Out of the $6 billion, $4 billion will be dedicated to mitigation through scaling up support for renewable energy, energy efficiency, sustainable transport, and building smart cities. The $2 billion will be for adaptation through more resilient infrastructure, climate-smart agriculture, and better preparation for climate-related disasters," ADB said in a press statement.
ADB's doubling of climate financing reflects its strategic priorities as well as the increase in its overall financing capacity by up to 50 per cent due to more efficient use of its balance sheet by combining the equities of its Ordinary Capital Resources and Asian Development Fund (concessional finance window) in 2017.
"World leaders gathering in New York this weekend will commit to achieving 17 historic Sustainable Development Goals (SDGs) by 2030 and ADB stands ready to be an important part of global efforts to finance these goals," Nakao said, adding that nowhere is tackling climate change more critical than in Asia and the Pacific, where rising sea levels, melting glaciers, and weather extremes like floods and droughts are damaging livelihoods and taking far too many lives.
SDG 13 specifically calls for urgent action to combat climate change and its impacts. Also, mitigating and adapting to a changing climate are key to most of the other goals including ending poverty, achieving food and water security, providing access to energy, and building sustainable cities.
Later this year, at the Conference of the Parties to the United Nations Framework Convention on Climate Change (COP21) in Paris, the international community is expected to finalize a new global climate agreement and the way to finance it.
In addition to scaling up its own climate financing, ADB will continue to explore new and innovative co-financing opportunities with public and private partners. For example, ADB will seek to mobilise concessional financing from the Green Climate Fund, which is becoming operational, for ADB's adaptation projects in poorer countries. ADB will tap institutional investment through private equity funds like the ADB-sponsored Asia Climate Partners. ADB will also issue more green bonds as an important source of funding for its climate operations.
Nakao stressed the importance of technology in tackling climate change, and said that ADB will adjust its procurement systems in order to facilitate the integration of cleaner and more advanced technology into its projects. ADB will also strengthen partnerships with centers of excellence across the world to provide its member countries with cutting-edge knowledge and expertise on climate change.

Thursday, September 24, 2015

Government working on to reopen Tatopani, Rasuwagadhi customs

The government has started preparation to reopen the customs with the northern neighbour China due to problem on the southern border.
The two customs offices along Nepal-China border – Tatopani and Rasuwagadi – have not been operational since the April 25 earthquake. But the unrest in Tarai for the past one-and-a-half months and fresh 'blockade' enforced by India has forced the government to expedite the process to reopen the two customs offices on China border. "The festive season next month has also forced the government," according to Ministry of Supplies.
The Chinese government is positive about reopening both the customs offices by October 15," secretary at the Ministry of Commerce and Supplies Naindra Prasad Upadhyay told a parliamentary committee on commerce today morning. "We had discussion with the Chinese officials yesterday too," he said, adding that the northern neighbour is ready to help Nepalis get enough supplies for festivities. The festivals – Dashain and Tihar – fall in the last week of October and the first half of November this year.
The unrest created by the Tarai-Madhes parties and India's 'blockade' is sure to make the lives of Nepalis hard – also due to hike in rices of essential supplies – during the festivities.
The agitating Tarai-Madhesh parties today disrupted supplies from the southern plains to pile pressure on the government. However, they forgot that the blockade will only widen their distance with Kathmandu and other region, as their protest will create shortage before the festivals.
Likewise, India has also halted more than 1,000 oil tankers and trucks with essential supplies from entering Nepal to express its dissatisfaction with political parties who didn't take Indian recommendations for the constitution.
Though India's Ministry of External Affairs has said that the Indian government has not prescribed any recommendations, the Indian media published New Delhi's 7-point recommendations to Nepal government.
According to customs officials, around 1,500 oil tankers from India used to enter Nepal every day from the Jogbani Customs Office. But there has been no movement for the past three days, creating shortage in Nepal. Long queues have started forming at petrol pumps as people rush to fill tanks of their bikes and cars fearing prolonged shortage.
Meanwhile, Nepal Oil Corporation (NOC) has also requested people to use public vehicles to lessen demand for petroleum products.
Due to the disturbance in southern plains – where there are major customs points – since more than last one and half months, revenue mobilisation has plunged by 35 per cent in Bhadra – the second month of the current fiscal year 2015-16, according to the Department of Customs.

Friday, September 18, 2015

Ghale announces candidacy for NRNA president for second term

The incumbent president of Non-Resident Nepalese Association (NRNA) Shesh Ghale has announced his candidacy for the post of president for second term.
Addressing a meeting in London yesterday late evening, Ghale said that he is contesting for the presidential post in the 7th NRNA Global Conference to be held in Kathmandu from October 14 to 17 due to pressure from his friends. "There are many unfinished jobs," he said, adding that his continuation will help complete many unfinished jobs started by him.
On the occasion, Ghale, one of the successful businessmen and Australia-based billionaire, said that Nepal is passing through hard times after the devastating earthquakes and subsequent aftershocks. "Nepal needs to carry out reconstruction works effectively," he said, adding that the pending issue of migrant Nepali workers, knowledge and skill transfer, and construction of NRNA building are some of the unfinished jobs that need to be completed.
Thanking the government for providing citizenship to NRNs through new constitution, he said that the ball is now on the court of NRNs. "Now, it is the turn of NRNs to prove that we care for our motherland," he added.
Since its establishment, NRNA had been lobbying for dual citizenship. Though NRNs claim to have invested heavily in Nepal, there are only a few who have invested in their motherland.
Ghale, along with founding president Upendra Mahato, former president Jiba Lamichhane, incumbent vice president Bhawan Bhatta, and a couple of NRNs have invested in Nepal. Ghale is building a five-star hotel in Kathmandu. Prime Minister Sushil Koirala had laid foundation stone of the 17-storey five-star Sheraton Kathmandu Hotel in October last year.

The hotel is being built with investment of Rs 8 billion. The hotel, which is expected to come into operation in February 2018, is being built by MIT Group Holdings Nepal – a member of the Ghale Group of Companies – which has diverse businesses in Australia and other countries.
Ghale has also been appointed Nepal's special envoy for reconstruction in the aftermath of the devastating earthquakes that floored down thousands of houses, infrastructures and heritage sites.

Thursday, September 17, 2015

A Nepali spends Rs 176 a day: Household Survey

A Nepali spends an average of Rs 176 but earns Rs 205 per day, according to a survey.
The fifth Household Survey conducted by the central bank revealed that daily savings of Nepalis stand at only Rs 29.

The outcomes of survey unveiled in Kathmandu today shows a Nepali family spends an average of Rs 25,928 every month. Average monthly earning of Nepali family is Rs 30,121.
A Nepali family has an average of 4.9 members, according to the census.
The spending pattern of Nepalis also revealed that they spend more on consumption compared to non-consumption. "A family spends Rs 23,883 per month on consumption," the survey reported, adding that their spending on non-consumption comes to an average of Rs 2,045. "The spending pattern of the rural and urban populace is not very much different in non-consumption."
The rural populace spends Rs 2,024 per month on non-consumption, whereas the urban populace spends Rs 2,063, according to the survey. However, rural families spend Rs 20,904 per month on consumption, compared to Rs 26,411 by urban families. The total spending of an urban family comes to Rs 28,474 per month, whereas a rural family spends a total of only Rs 22,928, making a difference of Rs 5,546 per family spending per month between urban and rural family, the survey revealed.
The survey, which is conducted every 10 years – by the central bank – to study income and expenditure pattern, has used Acquisition Approach. It has also included domestic production, barter, and gifts and service under consumption of goods and services.
Both the urban and rural family spends the most on food and non-alcoholic drinks, whereas they spend the least on alcohol, cigarette, and tobacco. The spending on house rent, water, gas, electricity and other fuels comes second both for urban and rural families.
Meanwhile, the central bank has also changed the weightage of food and non-food items for the calculation of Consumer Price Index (CPI) that is used to reflect inflation. The new weightage calculation will come into effect from the current fiscal year, Nepal Rastra Bank (NRB) said.

Wednesday, September 16, 2015

End of transition could lead to prosperity

If things go as planned, Nepal will get a new constitution on September 20 since it has been endorsed by overwhelming majority of two-thirds in the Constituent Assembly (CA) today.
The much-awaited supreme law of the country is expected to pave the way for a prosperous Nepal, according to business leaders, who, however, are still cautious about the Tarai unrest.
After continuous efforts of eight years, the CA finally approved the Constitution of Nepal 2015 by two-third majority today late evening. The promulgation of the new constitution on September 20 at 5 in the evening is expected to end the prolonged political transition that has bled the economy blue.
"It is indeed a historical moment," Pashupati Murarka, president of Federation of Nepalese Chambers of Commerce (FNCCI) said. Stating that he was hopeful that the promulgation of new constitution will be the stepping stone for a prosperous Nepal, Muraraka said that the country will now move forward with economic agenda. "Political parties will now have no excuse to focus on economic agenda," he added.
Private sector, however, knows that constitution is not a magic wand. "But it can be a base for a stable and prosperous Nepal," Murarka said.
Business leaders also said constitution can be amended to address concerns of Madhes-based parties and other disgruntled forces. "The amendment process should be made easier," senior vice president of Confederation of Nepalese Industries (CNI) Hari Bhakta Sharma said. He further said the new constitution should be the stepping stone toward a stable and prosperous Nepal. "The political parties should make clear that constitution is not an end, but a means to achieve economic prosperity," he said, adding that everyone should get a chance to earn a living and right to economic activities.
The constitution has ensured the right to economic freedom that can ensure people's access to economic opportunity. "Most of the ills of the society is also due to lack of opportunity," Sharma opined.
Everyday around 1,500 youths leave the country searching for greener pastures abroad due to lack of employment opportunity at home. The youths are the precious human capital – one of the assets of the country for development, according to pundits of development theory that states human capital, natural resources and capital as prerequisites for development of a country – have been wasting their productivity in foreign land.
More than 50 per cent of the population is youth – from age 15 to 35 – according to the recent census. The country also has abundant natural resources.
With the promulgation of new constitution, foreign investors will be eager to put their money into different projects in Nepal. It would, in turn, create more jobs within the country. More investment mean naturally more employment opportunity. The end of political transition will therefore create employment opportunities at home making the best use of youths.
More investment in mega projects and infrastructures will not only create employment opportunity but also push economic growth upwards. With increased investment, historical growth rate of 3.5 percent will also get a boost, according to business leaders.
Likewise, Nepal, which has set a target of graduating to a league of developing countries by 2022 from the current status of Least Developed Country (LDC), needs growth rate of more than 6 per cent growth which will no more be a distant dream.
The constitution is certainly not a panacea for all ills, but it can solve most of our problems, a hopeful Murarka said.

Saturday, September 12, 2015

Indefinite strike bleeding economy blue

Private sector representatives asked for security of their properties and end to indefinite strikes that has crippled the country since last one month bleeding the economy blue.
Federation of Nepalese Chambers of Commerce and Industry (FNCCI) said that the indefinite strike in Tarai is posing more risk to economy than the damage caused by devastating earthequake of April 25.
Briefing Prime Minister Sushil Koirala at his official residence Baluwater, today the delegation led by FNCCI president Pashupati Muraraka, said that the country’s business sector is sustaining daily losses of around Rs 20 million due to Tarat unrest.
Likewise, traders are forced to incur loss as cargo trucks have been left stranded leaving businesses with no option than to pay detention and demurrage charge, apart from other fines. According to study, a day of bandh causes the country loss of Rs 2.5 billion. The country has already lost around Rs 90 billion in last one month, which is almost equal to a year's export receipt.
Muraraka, on the occasion, also briefed the premier of private sector's request to the agitating parties. The economy is bledding blue, and the agitators are not giving ear to private sector, he said, asking Koirala to be serious. He also requested to create a business friendly environment and deliver confidence to the entrepreneurs for operating industrial establishments.
There has been increase in number of attacks against private properties and industrial establishments in the Tarai region, including incidences of protestors hurling petrol bombs and vandalising factory installations. They also asked the government to provide needful security to traders and their businesses during the time of bandhs and strikes.
Finance minister Dr Ram Sharan Mahat, minister for Physical Infrastructure and Transport Bimalendra Nidhi, and minister for Forest and Soil Conservation Mahesh Acharya were also present at the meeting.
Prime Minister Koiral, on the occasion, asked the delegation to submit a written suggestion on what they seek from the government. "The government is committed to help businesses and industries withsand such adverse environment," Koirala said, adding that the government is working tirelessly to address political demands raised by various groups and parties regarding the constitution drafting process.
He also informed the privatesector that the major parties have decided to slow down the constitution writing process in order to take disgruntled parties on board.
The government has however failed to control criminal activites in Tarai in the name of politics. The increasing politicisation of criminal activities in the Tarai in the last one month is not going to help solve the issues of Tarai and tarai Madhesh people, rather the region will be famous for gruesome killings and murders of security personals. Some politicisna might benefit from increasing impunity but most of the Tarai people will get nothing as they will continue to be deprived of opportunities for a decent life.