Tuesday, January 31, 2017

Review of budgetary process urged

Secretaries of different ministries have said that the budgetary process should be reviewed.
Speaking at the Mid-Term Review of expenses of in the current fiscal year organised by the Finance Ministry, they complained that the ad hocism in the budget making process was the reason behind low development spending.
Blaming the low expenditure to unnecessary projects in the budget under their respective ministries, some of the secretaries even complained that they projects were included in the budget without consulting with them.
Speaking at the meeting, finance secretary Shanta Raj Subedi said that the progress in national pride projects have been very unsatisfactory. "Even the crucial projects that are expected to give dividends to the national economy in the long run have seen either no capital spending or very low,” he said, asking the secretaries of the key ministries that handle the big ticket projects to either surrender the unspent budget or expedite spending. "The ministries that have failed to spend on national pride projects should surrender the budget to the projects that have reported better performance."
Most of the secretaries blamed the delayed approval and authorisation of the programmes for low spending, though the National Planning Commission (NPC) and Finance Ministry claimed that they have given the approval and authorisation on the very first day of the fiscal year.
NPC vice chairman Min Bahadur Shrestha said that the commission was trying to simplify the approval process. "In the next budget, we are planning to scrap the rule of approval and authorisation of programmes," he said, adding that once the programme is published in the Red Book, it is supposed to be approved and authorised. "However, the process of allocating the budget to projects will be more stringent," he added.
Saying that some Rs 300 billion will be unspent by the end f the current fiscal year, he also urged the secretaries of the ministries that handle huge capital budget to spend wisely, otherwise, the government will look like a fool. "On one hand the people are dying due to poverty and on the other the government will have around Rs 300 billion unspent money ."
"In a country like Nepal, where there is resource crunch, we cannot let huge resource of around Rs 300 billion lie unspent," Shrestha said, linking the current credit crunch from supply-side to the failure of the budget spending by various ministries. "Currently, there is some Rs 230 billion in the government treasury also."
For the current fiscal year, NPC is focusing more on increasing capital spending. Shrestha also said that the unspent budget will be transferred to other projects that are doing better.
Deputy Prime Minister and finance minister Krishna Bahadur Mahara, on the occasion, asked the secretaries to expedite budget implementation. "We have to find a breakthrough somewhere, and it is the right time," he said, accepting that there is a flaw in the budgetary system.

10 ministries spend less than 10 per cent capital budget

The government agencies are losing their institutional capacity to expedite capital spending.
"Ten ministries and central authorities have been able to spend less than 10 per cent of their total capital budget by January 27,” says Financial Comptroller General Rajendra Prasad Nepal.
Likewise, 12 ministries have been able to spend between 10 per cent to 20 per cent of the allocated development budget, while only seven ministries have been able to spend between 20 per cent and 25 per cent by January 27, he added.
Population and Environment Ministry has managed to spend a paltry 0.72 per cent of its development budget, followed by Supplies Ministry (3.03 per cent), Youth and Sports Ministry (4.08 per cent) and Foreign Affairs Ministry (5.16 per cent). While Industry Ministry has spent only 7.94 per cent of its capital budget; Culture, Tourism and Aviation Ministry has managed to spend 8.39 per cent by January 27. "The other central authorities that are the Office of President and Office of the Prime Minister have also spent less than 10 per cent of their capital budget," Nepal informed.
On one hand the ministries have been unable to spend, and on the other they have been asking for more budget from out of the budget programmes. "Though the ministries have failed to spend, they have asked for more capital budget," finance secretary Shanta Raj Subedi said.
Ministries have sought additional budget of Rs 215 billion, which is nearly 69 per cent of the total capital budget, he said, adding that the inefficiency of ministries was worrying.
Inefficient bureaucracy, procedural hurdles, lack of carrot and stick policy, and ad hoc budget preparation process are blamed for low capital spending that could have contributed to not only in employment generation but also in economic development in the long run.
Nearly half a dozen ministries, including Education Ministry, Health Ministry, Agriculture Development Ministry, Physical Infrastructure and Transport Ministry and Irrigation Ministry that have the largest chunk of budget have failed to spend. They hold some 44 per cent of the total budget, according to Subedi.
“Their performance has not been satisfactory,” Subedi said, directing the ministries to either surrender the unspent budget or spend them effectively.
According to the Financial Comptroller General's Office, the government has been able to spend only 14.73 per cent of the total capital budget by yesterday. The erstwhile government, led by KP Oli, had brought Rs 1048.92 billion budget. Most of the secretaries of the related ministries, however, claimed that they were not consulted in the budget preparation process. They said that the budgetary allocation is of ad hoc nature.
The government so far has been able to spend Rs 45.96 billion capital budget which is 14.73 per cent of the total capital budget. The government has, by yesterday, been able to spend a total of Rs 304.60 billion that is only 29.04 per cent of the total budget.

Rs 34 billion reimbursements still to be claimed
KATHMANDU: The government is yet to claim reimbursements worth Rs 34 billion from different development partners. According to Financial Comptroller General's Office, many projects, which have already been closed, also have claims for reimbursements. Some 16 ministries have failed to claim reimbursements even though projects under them have already been closed,” Financial Comptroller General Rajendra Prasad Nepal said, adding that it has added additional financial burden on the government. "The ministries have to show more urgency to get reimbursements in time."

Monday, January 30, 2017

Share market sees free fall

The domestic share market was witnessed a free fall as the Nepal Stock Exchange (Nepse) index plunged by 65.44 points or 4.76 per cent to close at 1,309.70 points, nearly a 10-month low.
The share analysts attribute the current selling pressure to the impressive rates on fixed deposits being offered by the commercial banks due to credit crunch from supply side that has tightened margin type lending coupled with a recent statement by Beema Samiti chairman Chiranjibi Chapagain, who is said to have indicated that there would not be a mention of paid-up capital in the new insurance act for the panic sell off in the share market.
"The tightening of margin type lending by banks and financial institutions (BFIs) and rapid rise in interest rates in recent days has sent a jitters among investors, causing a panic sell off in the share market," according to spokesperson of Stock Brokers Association of Nepal (SBAN) Tanka Gautam.
The brokers said that investors wary of liquidity problem faced by the BFIs that have been intensifying their margin calls to borrowers who had taken loans upon stock pledges to buy shares during the stock market boom.
The central bank has said that ‘credit excesses in risky areas could divert bank credit from productive sectors. "Therefore, BFIs are required to exhibit prudent and cautious lending behaviour,” the central bank report reads.
BFIs’ margin type loans have jumped to Rs 38.34 billion in mid-December of the current fiscal year 2016-17 from Rs 26.75 billion during the same period of the last fiscal year.
“It was a gradual fall of stocks until today when there was a steep, unexpected and sudden decline in share prices," brokers said, adding that most of the investors panicked by various negative factors affecting the market seemed to be in rush to offload their shares.
Opening at 1,375.14 points, the Nepse index steadily moved on the downward trajectory throughout the day. Today’s was the second-biggest daily drop of the local share market. The largest slump was recorded on August 8, 2016, when Nepse had plummeted by 88.81 points on a day's trading.
The biggest loser of the day was Insurance sub group. Insurance saw the biggest dive of 546.55 points or 8.7 per cent to close at 5,737.24 points, followed by hotels sub group that slumped by 128.48 points or 7.24 per cent to settle at 1,646.84 points. Finance sub group was down by 35.92 points or 5.48 per cent to close at 619.30 points. Likewise, manufacturing and trading subgroups, which did not record any transactions, held steady at 2,145.43 points and 206.16 points, respectively.
Banking – that dominates the share market – plunged by 60.55 points or 4.63 per cent to land at 1,247.99 points. Hydropower sub group dropped by 73.09 points or 4.51 per cent to close at 1,547.83 points. The development banks sub group was down by 48.99 points or 3.41 per cent to settle at 1,389.57 points. The Others sub group lost 15.04 points or 2.14 per cent to close at 688.63 points.
Likewise, the sensitive index – that is the barometer of class ‘A’ shares – dropped by 14.41 points or 4.83 per cent to rest at 284.07 points, whereas the float index that measures the performance of shares actually traded also fell by 4.82 points or 4.74 per cent to close at 96.91 points.
Altogether nearly 1.13 million shares of 123 companies that amounted to around Rs 536.63 million changed hands through 5,649 transactions during today.
Despite the drop in the market some of the companies including Arun Finance, Oriental Hotels, Rastriya Beema Company, Reliance Finance and Excel Development Bank were the top gainers, whereas Prudential Insurance, Muktinath Bikas Bank, Himalayan General Insurance, Soaltee Hotel and Sagarmatha Insurance were the top losers today.

India gives $2.49 million for Hulak Rajmarga project

The Government of India has provided $2.49 million to Nepal for Hulaki Rajmarga – which is popularly known as postal highway – project.
The under-construction highway that runs across the Tarai region close to the Nepal-India border is in news in recent months due to delay in construction.
Indian Ambassador to Nepal Ranjit Rae handed over a cheque for Rs 249.71 million – that is equivalent to $2.49 million – to the minister for Physical Infrastructure and Transport Ramesh Lekhak at the latter's office today, according to a press release issued by the Indian Embassy in Kathmandu.
The highway, which was used to carry mails since the Rana regime, runs from Bhadrapur in the east to Dodhara in the west.

Sunday, January 29, 2017

Fourth Chinese aircraft arriving on Tuesday

Fourth China-made aircraft – Harbin Y12e – is arriving in Kathmandu on Tuesday.
The 17-seater aircraft - to be named Gauthali - is a part of grant and loan agreement that Nepal has signed with China for six aircraft. While two aircraft – one MA 60 and Y12e – were delivered more than two years ago, the third aircraft – MA 60 – landed at the Tribhuvan International Airport (TIA) on Thursday.
Nepal Airlines Corporation's (NAC) pilot Gopal Singh Bista flew the 56-seater plane, which has been named Fewa, all the way from Kunming via Dhaka. The aircraft has received 9N-AKR call sign from the Civil Aviation Authority of Nepal (CAAN).
NAC plans to operate 14 additional flights to different domestic destinations, according to Janakraj Kalakheti, commercial director of NAC. “The two MA 60s will operate 32 flights a week,” he said, adding that the new aircraft will help the NAC to expand its market share. "The Harbin Y12E will fly on the remote route, where earlier the Twin Otters were flying."
According to an agreement that NAC signed with AVIC International Holding in December 2012, China will provide two aircraft on grants, while it will arrange soft loans to purchase four aircraft.
Though NAC took delivery of two Chinese aircraft in 2014 itself, it was reluctant to receive the remaining four aircraft because of issues related to spare parts, training of pilots and engineers, load capacity and insurance.

Saturday, January 28, 2017

Additional 25 MW from India from February 1, Birgunj to become load-shedding free

An additional 25 MW of electricity will be added to the national grid through the Muzaffarpur-Dhalkebar cross-border transmission line from coming Wednesday (February 1).
Following an agreement with Indian nodel aganecy for electricity import, Nepal Electricity Authority (NEA) had decided to use the full capacity of the Muzaffarpur-Dhalkebar transmission line and import an additional 40 MW of electricity from February 1. However, the full capacity utilisation of the transmission line could cause technical problems, the the NEA decided to import only 25 MW. However, it will be enough for the Kathmandu Valley and there will be no load shedding as before, said NEA managing director Kulman Ghishing
Earlier, NEA had signed an agreement with NTPC Vidyut Vyapar Nigam of India – a National Thermal Power Corporation – to purchase an additional 80 MW of electricity via the Muzaffarpur-Dhalkebar cross-border transmission line. With the agreement, Nepal had decided to import a total of 80 MW of electricity, 40 MW from December 31, 2016 – which NEA has been importing – and the remaining 40 MW from February 1.
However, only 25 MW of electricity will be supplied to the transmission line from Wednesday as importing the remaining 40 MW by utilising the full capacity of the transmission line would cause fluctuation in power supply giving rise to technical glitch,"  Ghishing said, confirming that there will be no load-shedding, though NEA will be importing 15 MW less than the agreed 40 MW. "More electricity could be imported from India, if needed, once the construction of the Raxaual-Parwanipur and Kasaha-Kataiya transmission lines is completed."
At present, a total of 355 MW of electricity is being imported from India. However, with the import of an additional 25 MW, the total electricity imported from India from Wednesday will be 380 MW. Nepal imported a total of 347 MW of electricity from India last year.
Though total electricity generation in the country has declined due to the decreased water level in rivers, NEA thinks electricity supply is still manageable as the demand has not risen significantly. At present, there is a demand-supply gap of 399 MW of electricity in the system but still there is virtually no load-shedding in the Kathmnandu Valley and Pokhara.
Ghising said that though the supply of electricity will be less than the demand especially in the months of January, February, March and April, there will be no load-shedding. "From May onwards, the country will be generating nearly 800 MW of electricity on its own,” he said, adding that there is two hours of load-shedding in Terai and four hours of load-shedding in industries at present, while the Kathmandu Valley and Pokhara have already become free from load-shedding.
The NEA has also resolved the low voltage problems in Birgunj and other Terai towns. As a result, Birgunj, too, will soon become load-shedding free after Kathmandu and Pokhara. Energy Minister Janardan Sharma has claimed that Birgunj will be free from load-shedding over the next 20 days.
According to NEA, national electricity demand at present stands at 1,265 MW. Currently, NEA projects are generating 334 MW while private sector projects are generating 175 MW. A total of 866 MW is being supplied at present, including the import from India.
Likewise, the current demand of electricity in the Kathmandu Valley in the peak hours is 320 MW.
Though the government has planned to import up to 560 MW of electricity from India to end load-shedding, it would not be needed as a total of 97 MW generated by five big projects has already been added to the national grid in the current fiscal year. Fifteen more projects will start generation in the current fiscal year, adding 142 MW of electricity to the national grid.
Meanwhile, the 220 kv Khimti-Dhalkebar transmission line will be operationalised from tomorrow. It will help channelise the extra electricity to the Terai and also brought to Kathmandu as and when needed.

Friday, January 27, 2017

Ncell's 'Early Flood Alerts' nominated for global award

Ncell's initiative of sending flood alerts to the people living in downstream river basin during monsoon has been shortlisted for the prestigious Global Mobile (Glomo) Awards 2017.
The initiative has helped people to safety and save livestock and other movable property during flood, a statement issued by Ncell said.
'Ncell Pvt Ltd for Early Flood Alerts' has been nominated under the Category 3: Social and Economic Development-Mobile in Emergency or Humanitarian Situations, GSM Association (GSMA) said in its release today.
The winners of the Global Mobile Awards 2017 will be presented throughout Mobile World Congress, which takes place on February 27 to March 2 in Barcelona, the GSMA's press note reads.
“The Glomo Awards recognise those companies and individuals that are driving innovation in the rapidly evolving mobile industry, and we are excited to this year introduce several new awards that highlight the very latest developments in this dynamic industry," chief marketing officer at the GSMA Michael O’Hara, said in the press note. "We wish the best of luck to the 2017 Glomo Award nominees."
"We are delighted that our early warning alerts initiative, which has made significant contribution in saving life and minimising loss, has been well appreciated and duly recognised by global industry community," said corporate communications export of Ncell Milan Sharma. "We value this collaboration with DoHM and are glad for being able to empower the people with crucial flow of life saving information."
In 2016 too, Ncell was crowned with GSMA Glomo Awards for Mobile in Emergency of Humanitarian Situations. The company had shared the awards with Flowminder Foundation for collaboration that tracked population movement during 2015 earthquake, contributing to effective targeting of humanitarian aid and relief support.

Cabinet okays RBB, NIDC merger proposal

The cabinet today approved a proposal for merger between Rastriya Banijya Bank (RBB) and NIDC Development Bank.
Deputy Prime Minister and finance minister Krishna Bahadur Mahara had tabled the proposal to merge the two state-owned financial institutions in the cabinet.
While RBB is a commercial bank, the objective of NIDC was to support industrial sector of the country. But with the changed scenario in the banking sector, the government transformed developed NIDC into a development bank.
Both the institutions had huge defaulted loans in the past. The RBB – along with Nepal Bank Ltd (NBL) – recovered under the financial sector reform programme (FSRP). But NIDC failed to work according to its objective and also could not compete with the mushrooming privately owned development banks, and was in loss till 2011.
Like all the other financial institutions, both the state-owned class 'A' and class 'B' financial institutions come under the purview of the central bank. Thus, they have to now follow merger rule like other financial institutions. The merger of both the government-owned financial institutions is expected to create a stronger class 'A' bank which is also planning to float shares like other financial institutions.
According to the chief executive officer of the RBB Kiran Kumar Shrestha, a merger committee comprising representatives from both the institutions will be formed now to finalize the merger process. "The merger committee will then form two teams to look into technical and managerial issues to execute the merger," Shrestha said, adding that the technical team will conduct valuation of assets of the two financial institutions and also appoint an independent auditor to conduct a due diligence audit (DDA). "It might take around six months to complete the merger process."
RBB has a paid-up capital of Rs 8.58 billion, while NIDC has a paid-up capital of Rs 415 million and a reserve and surplus of Rs 3.02 billion.
The merger of the two state-owned financial institutions has been discussed for long. In 2012, the Finance Ministry wanted the two institutions to undergo merger. But NIDC was not happy with the idea. Then again, the government – through the budget in the fiscal year 2013-14 – tried to turn NIDC into an infrastructure development bank. But the plan failed to take off after the central bank advised the government that NIDC does not have financial and managerial capacity to become an infrastructure development bank.
Again, in the budget for the fiscal year 2015-16, the government announced merger of NIDC with Hydroelectricity Investment and Development Company Ltd (HIDCL). However, the plan again failed to materialise.

Thursday, January 26, 2017

NAC receives China-made aircraft after 33 months

Nepal Airlines Corporation (NAC) today evening received the second China-made MA60 aircraft – after 33 months of receiving of the first MA-60 – as part of a six-aircraft deal between Nepal and China.
The 56-seater aircraft landed at the Tribhuvan International Airport (TIA) today evening, according to NAC general manager Sugat Ratna Kansakar. "With a call sign of 9N-AKR, the aircraft has been named ‘Fewa’ after the famous Fewa lake of Pokhara," he said, adding that the aircraft was flown by Captain Gopal Singh Bista from Kunming of China to Kathmandu via Dhaka of Bangladesh.
Senior officials of NAC and the Ministry of Tourism and Civil Aviation were at the airport to welcome the new aircraft that was flown from Dhaka of Bangladesh by Nepali crew members.
The Chinese side has agreed to provide the spare parts and technical support in Kathmandu itself.
With the addition of the new plane, the national flag carrier now has five aircraft – two MA60, two Twin Otter and an Y12e – in its domestic fleet. "Another aircraft Y-12e will also land this Tuesday," Kansakar added. The NAC has planned a schedule of 32 flights with the addition of the new aircraft in the domestic fleet. "We hope to increase our domestic market share significantly," he said, adding that with the arrival of Y12e this Tuesday, we can plan more domestic flights.
The delivery of the aircraft had been stalled after issues appeared in the first batch of China-made aircraft that arrived in 2014. There had been repeated technical problems with the first two China-made aircraft.
In November 2013, the Cabinet had gaven the go-ahead to the government to sign loan and grant agreements with China to procure six aircraft to enhance the domestic fleet of NAC.
China has provided one MA60 and one Y12e worth Rs 2.94 billion as gifts. The other aircraft are being bought with a soft loan of Rs 3.72 billion provided by China’s EXIM Bank.

Sebon scraps rule of parking money collected in IPO,FPO at NRB

While bankers are ruing shortage of loan-able funds due to slow growth in deposits, Securities Board of Nepal (Sebon) has scrapped a rule that required the money collected in the initial public offering (IPO) or follow-up public offering (FPO) to be parked at the central bank for a certain period of time.
The decision comes in the wake of 'credit crunch' in the banking system which has crippled the capacity of the banks and financial institutions (BFIs) to float loans to borrowers.
“The rule has been scrapped because there are complaints of liquidity shortage in the market which was also affecting the secondary market," deputy spokesperson of the Sebon Niranjaya Ghimire, said. "Also the requirement is soon becoming redundant due to implementation of Applications Supported by Blocked Amount (ASBA) system."
Earlier, issue manager of any IPO or FPO was required to deposit all the money collected in the process at its account in the Nepal Rastra Bank (NRB) within six days of closing of the issuance for at least six days. Such requirement had also worsened the bank’s liquidity position as huge fund, like Rs 52 billion of money collected from the FPO of Nepal Life Insurance Company Ltd, gets stuck in the central bank’s vault.
With the new directives from the regulator of the capital market, the central bank is also expected to release Rs 52 billion tomorrow that would help ease the credit crunch in the financial system. Welcoming the Sebon decision, bankers also say the scrapping of rule will provide some respite to them.
With FPOs of some other big companies in pipeline, bankers had worried that more funds would end up at central bank’s vault, worsening their liquidity problem. The central bank's vault is already swollen by over Rs 200 billion also due to government's inability to spend and aggressive revenue mobilisation by the second quarter end.

US provided $160 million in assistance to Nepal in 2016

The US government has provided $160 million in assistance in 2016 to improve health, education, environment, agriculture, earthquake reconstruction and governance in Nepal, according to a press release issued by the US Embassy in Kathmandu.
The statement also read that the approximately $133 million of these funds are managed by several US departments and agencies operating in Nepal, including the US Agency for International Development (USAID), the US Departments of Defense, Agriculture, and State, and the Millennium Challenge Corporation (MCC) among others.
In addition, $27 million of these funds were provided through the US Department of Defense to enhance Nepal's disaster response and strengthen its ability to participate in United Nations Peacekeeping Operations globally, the press release stated.
Among the key US foreign assistance in Nepal in 2016 was earthquake reconstruction support. In support of Nepal's high priority earthquake reconstruction activities, the US Embassy confirmed that its 2016 assistance included $41 million for earthquake reconstruction. "The amount was above and beyond the $130 million in immediate post-earthquake assistance pledged and provided in 2015 for relief, recovery, reconstruction and preparedness efforts," it said. "The assistance will help to rebuild schools and hospitals and provide training and technical assistance for construction professionals and homeowners on earthquake-resistant homes." The funding will also be used to improve water supply, sanitation, and hygiene conditions in the most earthquake-affected districts.
In addition, the US Government, through the Department of Defence, provided $18 million in 2016 to provide fixed-wing aircraft to the Nepal Army to assist with disaster response efforts, it added.
The US Government's Millennium Challenge Corporation (MCC) also provided $10 million in July of 2016 to evaluate projects for funding in the electricity transmission and road transport sectors. The final size of a next phase, multi-year assistance 'Compact' between MCC and the Government of Nepal, will be decided later this year.
Ninety-five per cent of US assistance in Nepal is awarded to international and local organisations through competitive processes and is regularly subject to financial and performance audits, the Embassy claimed, adding that MCC procurements are done through international competitive bidding with no preference to local or US firms.
This year marks the 70th anniversary of the bilateral relationship between the United States and Nepal with events and programmes planned throughout the next twelve months in partnership with the Government of Nepal, civil society, and the private sector.

Wednesday, January 25, 2017

Nepal third most corrupt country in South Asia

The Corruption Perception Index (CPI) 2016 – released today by Transparency International (TI) – has shown that Nepal is the third most corrupt country in South Asia after Afghanistan and Bangladesh.
Among 176 countries ranked on the CPI 2016, Nepal has been placed at the 131st position with a score of 29. With a score of 27, Nepal was ranked 130th among 168 countries on CPI 2015, according to the global anti-corruption watchdog.
With increasing corruption in the country, Nepal has dropped one spot down to 131st position compared to last year though Nepal gained two points in this year’s index from 27 in 2015.
TI Nepal chapter attributed the slip in Nepal’s position to ineffective mechanisms put in place to curb corruption. The corrupt leapt like a rabbit while the agencies responsible for curbing corruption slow-paced like a tortoise,” said TI Nepal chapter chairman Shree Hari Aryal at a press meet today.
With a score of 65, Bhutan is ranked 27th whereas with a score of 40, India has been ranked 79th. Likewise, Maldives and Sri Lanka are at the 95th position. With a score of 32, Pakistan is ahead of Nepal on CPI 2016 at the 116th position.
According to CPI 2016, New Zealand is the least corrupt country while Somalia is the most corrupt country in the world. According to the report, Denmark and New Zealand are at the top of the charts as the least corrupted country with 90 points followed by Finland, Sweden and Switzerland with 89, 88 and 86 points respectively. "But, Somalia is the most corrupted country and lies at the bottom of the table with only 10 points."
According to the TI, unaccountable governments, lack of oversight, insecurity and shrinking space for civil society, pushing anti-corruption action, high-profile corruption scandals, in addition to everyday corruption issues, undermined public trust in government and the benefits of democracy and the rule of law were among the indicators to determine the position.

CNI urges central bank to hike CCD ratio, lower CRR

Against the International Monetary Fund (IMF) Article IV mission's prescription of not changing the CCD ratio, the Confederation of Nepalese Industries (CNI) has called on the central bank to increase credit to core capital-cum-deposit (CCD) ratio to 85 per cent until the time banks and financial institutions create adequate stock of loanable funds.
The IMF has said that hiking the CCD ratio – as asked by the bankers – will encourage financial indiscipline. Currently, the banks and financial institutions have to maintain CCD ratio at 80:20 meaning of every Rs 100 deposit they collect, they can only lend up to Rs 80.
The CNI has, however, asked the central bank to increase the CCD ratio to 85:15 from current 80:20.
"With deposit flow remaining comparatively lower, CCD ratio of some of the banks has exceeded 80 percent mark," according to the central bank data.
The body of manufacturing and services enterprises has also urged the central bank to reduce cash reserve ratio (CRR) for banks and financial institutions by a percentage point for the time being to enable them to extend loans.
Currently, commercial banks have to maintain CRR-portion of total deposit that needs to be parked at the central bank of 6 per cent, while development banks and finance companies have to maintain CRR of 5 per cent and 4 per cent, respectively.
Lately, some banks and financial institutions are facing severe shortage of funds that could be immediately extended as loans. Though, they are claiming of liquidity crunch, it is more of a credit crunch as they have almost no loanable funds at present.
Banks have collected fresh deposits of Rs 154 billion since the beginning of the current fiscal year from mid-July till January 13, according to the latest data of the Nepal Bankers’ Association (NBA). "But the credit flow stood at Rs 204 billion in the same period."
This mismatch in deposit collection and credit disbursement is the major reason for shortage of loanable funds.
Their aggressive lending on unproductive sectors – as the central bank claims – has sqeezed their lending capacity.
Saying that the current liquidity crunch has increased lending rates in the financial sector, the CNI said that higher lending rates will hit the economic growth.

Tuesday, January 24, 2017

Nepal presents TFA instrument to WTO

Nepal has presented the instrument of acceptance of the Trade Facilitation Agreement (TFA) to the World Trade Organisation (WTO) in Geneva after the country’s Parliament ratified it last week.
Nepal’s Ambassador and Permanent Representative to the United Nations, Deepak Dhital met the WTO director-general Roberto Azevêdo today to submit the documents, according to Nepal’s Permanent Mission in Geneva.
Nepal is the 108th WTO member and the 14th least developed country (LDC) to ratify the agreement. It would come into force after two more ratifications from WTO members to meet the mandatory acceptance from the two-thirds of WTO membership.
Concluded at the WTO’s 2013 Bali Ministerial Conference, the TFA contains provisions for expediting the movement, release and clearance of goods, including goods in transit. It also sets out measures for effective cooperation between customs and other appropriate authorities on trade facilitation and customs compliance issues, according to a WTO media release. The TFA further contains provisions for technical assistance and capacity building in this area.
Full implementation of the TFA would reduce members’ trade costs by an average of 14.3 per cent, with developing countries having the most to gain, according to a study carried out by WTO economists.
The TFA also has the ability to reduce the time to import goods by over a-day-and-a-half while also reducing time to export by almost two days, representing a reduction of 47 per cent and 91 per cent respectively over the current average. The TFA also has the potential to increase global merchandise exports by up to $1 trillion.
Prior to Nepal, Hong Kong China, Singapore, the United States, Mauritius, Malaysia, Japan, Australia, Botswana, Trinidad and Tobago, the Republic of Korea, Nicaragua, Niger, Belize, Switzerland, Chinese Taipei, China, Liechtenstein, Lao PDR, New Zealand, Togo, Thailand, the European Union (on behalf of its 28 member states), the former Yugoslav Republic of Macedonia, Pakistan, Panama, Guyana, Côte d’Ivoire, Grenada, Saint Lucia, Kenya, Myanmar, Norway, Viet Nam, Brunei Darussalam, Ukraine, Zambia, Lesotho, Georgia, Seychelles, Jamaica, Mali, Cambodia, Paraguay, Turkey, Brazil, Macao China, the United Arab Emirates, Samoa, India, the Russian Federation, Montenegro, Albania, Kazakhstan, Sri Lanka, St. Kitts and Nevis, Madagascar, the Republic of Moldova, El Salvador, Honduras, Mexico, Peru, Saudi Arabia, Afghanistan, Senegal, Uruguay, Bahrain, Bangladesh, the Philippines, Iceland, Chile, Swaziland, Dominica, Mongolia, Gabon, the Kyrgyz Republic, Canada, Ghana, Mozambique, Saint Vincent & the Grenadines and Nigeria have accepted the TFA, the WTO media release added.

Maintain fuel storage to meet 90 days' demand, PM tells NOC

Prime Minister Pushpa Kamal Dahal has directed the officials concerned to maintain storage of petroleum products to meet the demand for 90 days.
Speaking at a meeting with the officials of the Supplies Ministry, Finance Ministry and Nepal Oil Corporation (NOC) at his office today, Dahal assured that the government would provide necessary budget to build petroleum storage facilities. He also directed the officials to extend the Raxaul-Amlekhgunj petroleum pipeline up to Chitwan.
On the occasion, officials of the Ministry of Supplies officials requested the PM to allocate Rs 57 billion for building petroleum storage facilities. "The total cost of expansion of petroleum storage facilities is estimated at Rs 117 billion," briefed supplies minister Deepak Bohara to the Premier on the occasion. "The government should provide us Rs 57 billion as we don't have sufficient budget to build storage facilities," he said, adding that the ministry sought budget as the NOC is planning to build one storage facility in each of the seven provinces. "The NOC is planning to build storage facilities under public-private partnership."
The budget includes both for building of petroleum storage infrastructure to cater the demand of at least three months and also to purchase petroleum products – petrol, diesel, kerosene, LPG – that will remain in stock for the same period.
The Finance Ministry has also principally agreed to support Supplies Ministry to expand petroleum storage facility by releasing the required budget.
Nepal currently has reserve capacity of 5,184 kilolitres (kl) petrol, 42,400 kl diesel, 15,500 kl kerosene and 8,500 kl aviation turbine fuel (ATF). This storage is able to fulfil the domestic demand for three to four days. If fuel storage capacity is to be increased targeting three month’s consumption in Nepal, the current reserve capacity of petrol has to be expanded to 135,000 kl and that of diesel to 405,000 kl, according to NOC.
Similarly, reserve capacity of kerosene and ATF has to be upgraded to 5,100 kl and 60,000 kl, respectively. Also, LPG reserve capacity has to be increased to 120,000 metric tonnes to meet three month’s demand.
As NOC's existing storage facility can meet the demand of few weeks only, long queues can be seen in petrol pumps, if fuel supply is affected for even a day.
While NOC has sought Rs 57 billion for build petroleum facilities, it is preparing to distribute Rs 1.14 billion worth of bonus to its staffers. A source at the NOC said that the petroleum monopolist was preparing to distribute after the corporation became debt-free this year.
Last year, NOC had set aside Rs 900 million to distribute bonus among its staffers.
However, its plan could not materialise as the Finance Ministry and Supplies Ministry directed it to repay the loans first. This time around, NOC has allocated Rs 2 billion for bonus. But it knocks the doors of the government whenever, if faces loss.
Likewise, NOC also collects millions of rupees from customers in the name of Infrastructure Fund. But it does not spend the amount thus raised for infrastructure development rather has been paying government loan to become debt-free so that it can distribute bonus to the staffers.

Monday, January 23, 2017

IMF forecasts 5.5 per cent economic growth

The International Monetary Fund (IMF) has revised Nepal’s economic growth forecast upward to 5.5 per cent for the current fiscal year. The IMF had previously predicted Nepal’s economy to expand by only 4 per cent in the current fiscal year 2016-17. However, it has upgraded the growth forecast on the back of expectations of a big jump in agricultural output due to a good monsoon and higher government spending.
The growth estimate of the IMF, however, is lower than government’s target of 6.5 per cent, but higher than the World Bank’s projection of 5 per cent and the Asian Development Bank’s estimate of 4.8 per cent.
Nepal’s economy is rebounding following the slowdown caused by the 2015 earthquakes and trade disruptions, and supported by the government’s efforts to revitalise the reform agenda,” head of IMF’s Article IV mission to Nepal Geert Almekinders said here today.
The economic growth was looking down in the last two fiscal years due to devastating earthquakes of of April 25, 2015 and cascading effects of the earthquake coupled with almost five-month-long Indian trade embargo, which made the economy grow by only 2.3 per cent in the fiscal year 2014-15 and to 0.77 per cent in 2015-16.
The economy will bounce back in this fiscal year owing to normalisation of economic activities, increased agriculture output due to favourable monsoon, accommodative monetary policy and accelerated post-earthquake reconstruction, Almekinders said, adding, "most importantly, the base-effect – low base of economy due to low growth – of last fiscal year will be supportive for the economy to achieve the aforesaid growth rate."
The paddy production, which makes a contribution of around 6 per cent to the gross domestic product (GDP) is projected to jump by 21.66 per cent in the current fiscal year due to a good monsoon which has also raised some hopes of economic rebound.
"Accommodative monetary policy and rising government spending are also supporting economic activities to normalise,” he said, adding that Nepal must put appropriate policies in place to sustain growth rate that is likely to be achieved in the current fiscal year.
Strong policies are needed to enhance confidence amid ongoing political uncertainty, and to meet the authorities long-term goal of becoming a middle-income country by 2030, the mission noted.
"Strengthening of key institutions and administrative capacity which are critical for overcoming the chronic under-implementation of the budget and boosting private investment and growth is key," he added.
Almekinders also prescribed the government to give momentum to the economic reforms. "The medium-term outlook for Nepal critically depends on the authorities’ efforts to sustain and deepen the nascent reform momentum,” he said, warning that the growth would likely revert to average of the past decade – that is around 4 per cent – and fall short of substantially improving living standards and social indicators, in the absence of strong policies.
Lately, Nepal has made some efforts to introduce policy reforms. The government has introduced new Industrial Enterprise Act, Special Economic Zone Act and Bank and Financial Institution Act. The parliament is also reviewing drafts of Labour Bill and Foreign Investment and Technology Transfer Bill, which are expected to be endorsed soon.
Along with this initiative, the government should do more to implement the capital budget, the IMF prescribed.
Though, the government has brought a populist and expansionary budget – that also in time – it has failed to spend. By the end of the six months of the current fiscal year, the government has been able to spend only a quarter of the budget.
Ogf the total spending, the capital spending stood at mere 11.03 per cent of the total allocation in the first half of this fiscal year, reflecting the inefficiency and government’s indifference attitude towards bridging the infrastructure gap, which has emerged as the major binding constraint for growth.
The IMF also stressed on the need to introduce a realistic budget that effectively prioritises spending with the largest growth dividends, including in social spending areas of highest importance, for inclusive growth. "In scaling up public spending, care should also be taken not to exceed the economy’s aggregate absorptive capacity."
"Nepal should also come up with a fiscal policy that could be implemented rather than an aspirational budget,” Almekinders said, adding that the monetary policy should also chart out medium-term inflation path, rather than one-year target, so that Nepal doesn’t lose competitiveness with India. "Nepal can however meet the inflationary target in the current fiscal year."
The mission also stressed on the need for accelerated financial sector reforms and strong supervision of the financial sector to mitigate macrofinancial risks and increase access to finance. It also emphasised on enhancing the regulatory capacity of the central bank through strengthening several aspects of the regulatory framework.
“It would include enhancing loan classification and provisioning and upgrading banks’ risk management," it added.
In the context of recent lobbying by bankers seeking the central bank to revise the existing credit-to-deposit (CCD) ratio, which is 80:20 at present, the IMF mission showed strong reservations. "The ceiling on the loan-to-deposit ratio should be maintained as this alone can contribute in moderation of credit growth and normalisation of interest rates." It noted.
Nepal’s external position remains strong as international reserves with the central bank reached a record high of $8.7 billion in December 2016, equivalent to about 10 months of prospective imports and goods and services," the IMF mission said. "However, following large surpluses in recent years, the external current account is now broadly in balance, which reflects recovering imports and moderating growth of remittances."
The International Monetary Fund (IMF) team, led by Almekinders, visited Nepal from January 11-23 to hold discussions for the 2017 Article IV consultation. The team met deputy prime minister and finance minister Krishna Bahadur Mahara, Central Bank governor Dr Chiranjibi Nepal and other high-level government officials, apart from representatives of the private sector, labour unions, and the donor community.

WTO IP rules amended to ease poor countries’ access to affordable medicines

An amendment to the agreement on intellectual property (IP) entered into force today securing for developing countries a legal pathway to access affordable medicines under World Trade Organisation (WTO) rules.
The amendment to the WTO Trade Related Aspects of Intellectual Property Rights (TRIPS) Agreement marks the first time since the organization opened its doors in 1995 that WTO accords have been amended.
The WTO secretariat has received in recent days notifications from five members that they have ratified the protocol amending the WTO TRIPS Agreement. These notifications — from Burkina Faso, Nigeria, Liechtenstein, the United Arab Emirates and Viet Nam — brought to two-thirds the number of WTO members which have now ratified the amendment. The two-thirds threshold was needed to formally bring the amendment into the TRIPS Agreement.  
Members took the decision to amend the TRIPS Agreement specifically to adapt the rules of the global trading system to the public health needs of people in poor countries. This action follows repeated calls from the multilateral system for acceptance of the amendment, most recently by the United Nations General Assembly High-Level Meeting on Ending AIDS in June 2016.
"This is an extremely important amendment," said WTO Director-General Roberto Azevêdo "It gives legal certainty that generic medicines can be exported at reasonable prices to satisfy the needs of countries with no pharmaceutical production capacity, or those with limited capacity," he said, adding, "By doing so, it helps the most vulnerable access the drugs that meet their needs, helping to deal with diseases such as HIV/AIDS, tuberculosis or malaria, as well as other epidemics. I am delighted that WTO members have now followed through on their commitment and brought this important measure into force."
In video statements, some of the key players also shared their thoughts on the TRIPS amendment.
Unanimously adopted by WTO members in 2005, the protocol amending the TRIPS Agreement makes permanent a mechanism to ease poorer WTO members’ access to affordable generic medicines produced in other countries. The amendment empowers importing developing and least-developed countries (LDC) facing public health problems and lacking the capacity to produce drugs generically to seek such medicines from third country producers under 'compulsory licensing' arrangements.
Normally, most medicines produced under compulsory licences can only be provided to the domestic market in the country where they are produced. This amendment allows exporting countries to grant compulsory licences to generic suppliers exclusively for the purpose of manufacturing and exporting needed medicines to countries lacking production capacity.
"As important as trade policy is, health and well-being must take precedence,” said Kenya’s foreign minister, who chaired the WTO General Council at the time when the amendment was approved in December 2005, Amina Mohamed. “WTO members recognise this and have proven how seriously they take health issues by ratifying and putting into force an amendment to WTO rules which will facilitate access to essential medicines in low income countries.”
The amendment provides a secure and sustained legal basis for both potential exporters and importers to adopt legislation and establish the means needed to allow countries with limited or no production capacity to import affordable generics from countries where pharmaceuticals are patented. More and more WTO members are taking practical steps to implement the system in their laws. The bulk of global medicine exports is covered by laws enabling exports under this system, opening up new options for potential beneficiaries to access a wider range of potential suppliers and enabling new, innovative procurement strategies.
Flexibilities such as compulsory licensing are written into the TRIPS Agreement, governments can issue compulsory licences to allow companies to make a patented product or use a patented process under licence without the consent of the patent owner, but only under certain conditions aimed at safeguarding the legitimate interests of the patent holder.
Some governments were unsure of how these flexibilities would be interpreted, and how far their right to use them would be respected. At the Doha Ministerial Conference in November 2001, WTO members struck a deal which clarified the accords and provided governments in the developing world with greater clarity and certainty that protection of patents does not and should not prevent members from taking measures to protect public health.
But one more element was needed, how to guarantee that countries lacking the capacity to produce generic drugs could still procure them affordably. Paragraph 6 of the Doha Declaration on the TRIPS Agreement and Public Health recognised that "WTO members with insufficient or no manufacturing capacities in the pharmaceutical sector could face difficulties in making effective use of compulsory licensing under the TRIPS Agreement”, and instructed the Council for TRIPS to find an expeditious solution to this problem.
In August 2003, WTO members decided to remove an important obstacle to affordable drug imports by waiving the limitation in the TRIPS Agreement to predominantly supply the local market. The decision says that if the importing country could not secure access to needed medicines at affordable prices, these medicines could be produced under compulsory licence by drug makers in third countries, and be imported to poorer countries unable to manufacture the medicines themselves.
Two years later, WTO members agreed on December 6, 2005 to permanently incorporate the 2003 waiver decision into the TRIPS Agreement subject to the acceptance of two-thirds of WTO members. Through the entry into force of the amendment, the flexibility to protect public health becomes an integral part of the TRIPS Agreement.

Sunday, January 22, 2017

Trade unions give 3-week ultimatum to hotels

The row between the hoteliers and trade unions is going to hit the tourism sector hard, if the government does not intervene immediately, Hotel Association of Nepal (HAN) has warned.
Organising a press meet in Kathmandu today, HAN said that the trade unions have given ultimatum to provide them entire 10 per cent service charge amount.
Claiming that the agreement between HAN and unions – some 11 years ago – to share the service charge was not in favour of the workers, the trade unions – Nepal Tourism and Hotel Labourers Association joint struggle committee – have announced protest programs from today. "If our demands are not met, we will be forced to announce more stricter protest from February 12,” a ultimatum letter by the trade unions reads, adding that they have started their protest programs from January 22.
"But the ultimatum given by trade unions could hit the tourism sector hardly as it has just started to pick up again,” president of HAN Amar Man Shakya said speaking at a press meet.
Shakya also said that tourists planning to visit Nepal will cancel their booking and will change their travel plan and go to other countries, if there is disturbance in the tourism sector. “It will directly affect the tourism sector,” he said, adding that the service tax should be charged only after providing quality facilities to the customers. “Making the service charge compulsory has already passed a bad impression to both domestic and foreign tourists.”
In 2006, HAN had decided to levy 10 per cent service charge compulsory from the customer’s after the trade unions and employees pressurised the hoteliers to charge customers. According to the agreement, the amount thus collected from the service tax would be shared between employees and hotel.
The hotel management has been taking 32 per cent of service charge to maintain and improve its facilities and service and employees are getting the remaining 68 per cent of the total service charge. But the trade unions lately have been asking for all the service charge.
The number of tourists travelling to Nepal has started increasing after the massive earthquake in 2015 and the economic blockade imposed by India.
In 2016, more than 700,000 tourists visited Nepal which is around 200,000 more as compared to 2015. But the disturbance in the tourism sector will again push the number of arrivals.
The association also informed the government of the unions demand that is going to hit the tourism sector very hard, Shakya added. "But there is no rationale behind service charge."
The hoteliers have stressed that the hospitality industry needs to remove such additional charges, which is a burden on consumers.
HAN said that as the salary and allowance of the employees in hotels and restaurants are adjusted every two years, there is no rationale behind the protest by trade unions seeking the entire amount levied as service charge.
Taking into context the removal of such charge in neighbouring India, the hospitality business in Nepal also needs to think about removing such service charges, according to HAN. The Indian Department of Consumer Affairs has recently announced that ‘service charges’, which restaurants include in the bill in addition to taxes, are actually optional and not mandatory.
Currently, three tourism and hotel labour associations have demanded that the staff should get all of the amount collected as service charges.
"The concerned authorities will have to take responsibility for any harm caused to the tourism industry from the protest,” the committee said in a joint statement.
The mandatory service charge system came into force on January 1, 2007. Since then, hotel and restaurant customers have been paying 24.3 per cent extra on top of the advertised prices as 10 per cent compulsory service charge and 13 per cent value added tax (VAT).

Friday, January 20, 2017

Rs 2.43 billion pledged for investment in hydropower projects

A campaign of Energy Ministry calling for commitments for investment in hydropower projects has received an overwhelming response.
Till now, commitments of Rs 2.43 billion have been made, according to the Ministry. The commitments were made by 24,249 individuals and 27 companies.
The call for online application was announced on January 9. Launching the portal, energy minister Janardan Sharma had appealed for investment commitments in hydropower.
He came up with an investment drive in hydropower under the slogan ‘Nepal’s water and people’s investment’. The minister had said that he came up with the idea after finding genuine interest among members of the public as well as migrant workers in Malaysia and the Middle East to invest in hydropower.

Thursday, January 19, 2017

Nepal's GDP will grow significantly through power trade: Report

Nepal's gross domestic product (GDP) could reach to Rs 13,100 billion (over $120 billion) in 2045, which is 39 per cent more than with existing trading mechanisms, with accelerated power trade (APT) between India and Nepal, according to a report.
The report, 'Economic Benefits from Nepal-India Electricity Trade,' released here today, also states that the growth in GDP is driven in part by the three-fold increase from Rs 310 billion in 2030 to Rs 1,069 billion in 2045 in revenue earned from electricity trade.
However, Nepal needs to invest up to Rs 2,596 billion in between 2012 and 2030 and another Rs 2,216 billion in between 2031 and 2045 to harness electricity of this quantum, the report added.
Highlighting the key findings of the report, chairman of Integrated Research and Action for Development (IRADe) – which conducted the study – Kirit Parikh said that the increased power trade will also fuel Nepal's per capita electricity demand to jump from the current 139 kWh/year to 1,500 kWh/year by 2045.
The report attributes it to increased domestic hydropower production that is 34.4 Gigawatt (Gw) in 2045. "Per capita electricity demand reflects strongly on the Human Development Index (HDI) of a country as increased access to electricity is directly linked to better quality of life," it added.
Nepal’s per capita electricity consumption stood at a low of 139 units per year in 2012, as against South Asian average of over 600 units and global average of around 2,800 units.
The first of its kind study was conducted by the India-based research institute IRADe under the fourth phase of the South Asia Regional Initiative for Energy Integration (SARI/EI) Programme. SARI/EI is a United States Agency for International Development's (USAID) programme that works to promote cross-border electricity trade for revitalising and accelerating regional economic development in South Asia.
Member of National Planning Commission (NPC) Swarnim Wagle, Chargé d'Affaires at the US Embassy in Kathmandu Michael Gonzales and second secretary at the Indian Embassy in Kathmandu Mala Narendra, released the report amid a function here today.
The report analyses the potential of cross-border electricity trade (CBET) between Nepal and India, and its feasibility and impact on the economy, power systems and power infrastructure of both countries.
Wagle, on the occasion, said that the report will be useful for the NPC while preparing periodic plans. "Electricity trade and hydropower development can significantly energise Nepal's economy and can help in the process of industrialisation," he said, adding that both the countries stand to gain from India-Nepal electricity trade. "Bangladesh and other South Asian countries also stand to reap benefits from the power trade."
Saying that power shortage is the biggest binding constraint to Nepal’s economic growth," he further added that Nepal can revive the manufacturing sector, if it can generate more electricity. "This could absorb youths, who want to move away from subsistence agriculture, reducing outflow of workers to various labour destinations."
He also opined that abundant supply of clean and reliable power through hydro sources will not only drive economic development but also improve the country’s ranking in HDI.
Nepal, home to around 6,000 rivers, rivulets and tributaries, has the potential to generate over 40 Gw of electricity through hydropower plants. But as of now, the country’s installed capacity stands at less than 1,000 MW, whereas peak demand stood at around 1,385 MW in the last fiscal year.
There is a big gap in demand and supply of electricity because Nepal has not been able to build relatively bigger hydropower plants since 70MW Middle Marsyangdi Hydroelectric Project, located in Lamjung, came into operation in 2008.
Nepal has now set an ambitious target of generating 10 Gw of electricity through hydro resources in the next 10 years, which, many say, is achievable.
However, Nepal will not be able to take advantage, if there is a delay in capacity addition. For instance, if project implementation is delayed by five years, not only will the country lose the earnings from power exports in that period, it will also have to pay for the power that it imports until the projects are implemented, the report reads, adding that the country will be net importer of electricity and will have to spend more to purchase power, if project implementation is delayed. Currently, the country has been importing around 450 MW of electricity from India to manage its power deficit. However, Nepal has planned to export electricity to India and gradually to the regional power market from the fiscal year 2021-22.
The country will require around Rs 2,596 billion to develop 18.6 Gwof power by 2030 and Rs 4,812 billion to exploit 34.4 Gw of hydropower potential, according to the study. "Nepal itself has huge possibility to increase consumption, as the share of electricity in the total energy demand of the country is merely two per cent."
Based on the IRADe-System for Analysis of Power Trade and Economic Growth (I-SAPTEG) modeling system, the research uses five models – three power system models and two macro-economic models to capture the impacts of electricity trade in India and Nepal under three scenarios – trade, business as usual and delayed capacity addition.
The study assesses potential power trade and the price of tradable electricity in between 2012 and 2050 consistent with the country’s macroeconomic framework. It also quantifies and analyses socioeconomic benefits of cross-border electricity trade arising from investment, export revenue and reduced electricity price between Nepal and India.
Similarly, on the occasion, Gonzales said that Asia, which is the fastest growing region in the world, lacks reliable power infrastructure. "With optimum utilisation of resources and a coherent regulatory framework in place, better regional integration could be achieved through CBET," he said, adding that the report rightly points out Nepal can gain tremendously from CBET. "For India, the benefits are more in terms of lower electricity system costs due to electricity imports from Nepal." Additionally, the import of hydropower electricity from Nepal will reduce carbon emissions of the power sector in India as the country's electricity generation is largely coal-based," he added.
Calling the findings of the report 'a win-win opportunity for both India and Nepal,' Mala Narendra said that India was committed to cross-border electricity trade in South Asia.
"To facilitate this, India's Ministry of Power in consultation with Ministry of External Affairs recently issued the 'Guidelines on Cross Border Trade of Electricity',” she added.
However, experts have been claiming that the guideline is against the ethos of Power Trade Agreement (PTA) signed between Nepal and India.
On the occasion, Jyoti Parikh of IRADe said that the power systems of the two countries are linked for different periods – peak and off-peak hours – to capture the compatibility for trade in the model which gives very different insights. "Our aim was to see, if Nepal too can follow Bhutan's example in transforming its economy," she said, adding that the primary objective of the study is to provide critical research on the viability and advantages of CBET so as to assist policy-makers in making strategic decisions.

Wednesday, January 18, 2017

Government unveils Immediate Implementation Action Plan

Deputy prime minister and finance minister Krishna Bahadur Mahara today unveiled Immediate Implementation Action Plan aiming at boosting development spending.
But the action plan, in many places, has promised to establish special purpose agencies or complete tasks on back dates, which could be sheer negligence on part of the government or mere copy paste of the earlier action plans.
Though it has recommended actions and schedule for the concerned ministries and agencies for effective implementation of Mahara's vision, the 'negligence' in preparing the schedule – that are back-dated – has ridiculed the Finance Ministry's working style.
"The government plans to spend at least 80 per cent of the capital budget with the implementation of the Immediate Implementation Action Plan," Mahara said, unveiling the document at a press meet at the Finance Ministry.
If the line ministries do not approve programmes within the first four months, they will not be authorised to spend the budget, Mahara said, adding that the officials, who do not provide enough staff and technical manpower to the projects, will also be punished. "The ministry will deploy a Rapid Monitoring Team for monitoring of mega projects."
The government has not been able to increase capital expenditure due to its eroding institutional spending capacity. By the end of the first half of the current fiscal year 2016-17, the government agencies have been able to spend only 11.30 per cent of the total budget allocated for development spending.
According to the Financial Comptroller General's Office, the government has been able to spend only Rs 35.25 billion of the allocated Rs 311.94 billion in the first six months of the current fiscal year, lower than the average spending of around 14 per cent of the capital budget by the end of the first half of the earlier fiscal years.
Though, resource mobilisation is the key task of the Finance Ministry and spending the capital budget is the primary task of development activities related line ministries like Physical Planning and Transport Minsitry, Energy Ministry and Urban Development Ministry. These ministries have not been able to perform upto the mark putting the pressure on Finance Ministry. "If the ministries are not able to spend the allocated funds by mid-March, they would have to surrender such unspent budget to the Finance Ministryso that the ministry can transfer the funds to the projects that are showing good progress," Mahara added. "The move would ensure that projects with good performance record do not face resource crunch and also prevent rampant mobilisation of resources at the last moment of the fiscal year."
Though, he claimed to have given emphasis on proper implementation of budget – though the action plan – to move forwards with higher growth trajectory, the eroding effective and productive spending capacity of the government agencies have been the key to holding the development back.
"As retarded growth, slow employment generation and huge trade imbalance have long since been identified as the structural problems facing the economy, we need to address these issues to move forward,” Mahara said, adding that effective implementation of budget, acceleration of post-earthquake reconstruction works, incentives for banks and financial institutions to float credit to productive sector and expanding credit to rural families, utilisation of remittance in productive sector through issuing the foreign employment bonds are some priority areas of the action plan.
Mahara also claimed to have prioritised reforms in legal and administrative fronts to harness the results within the stipulated timeframe.
The finance minister has claimed that the government will form a separate agency to implement mega projects including Budhigandaki Hydropower Project, Kathmandu-Tarai Fast Track, Second International Airport, Postal Highway, Smart City, Health Insurance and Social Security, and also to institutionalise the mechanism for mega projects. But Mahara neither elaborated on the modality of the agency, nor explained how the agency will work. He simply claimed that the agency will be formed within January 15. But there has been no sign of such agency even though it's already January 18. This gives enough room to doubt the implementation of programmes outlined in the action plan.
Though, Mahara himself is not convinced about the immediate implementation of his Immediate Implementation Action Plan, he said that it would help change the mentality of the bureaucracy as they have been working under a tunnel of laws and rules. "For development, we have to envision some methods that can implement projects in a fast track mode," he added.
Likewise, the action plan – filled with popular slogans and no better than the earlier ministers' paperwork – has also claimed to cancel the agreements with contractors that have been slow in implementing projects. "Such contractors will be blacklisted and deemed ineligible to bid for government tenders again," it reads, adding that the ministry, now onwards, will select only the projects that have undergone the 'Project Readiness Filter'.
Though, the finance minister claimed that his action plan will heal all the economic ills concerned with low growth, slow capital expenditure, supply-side constraints, lack of employment generation, lack of access to finance, ineffective utilisation of foreign assistance, it could be only on the paper as the implementation capacity of the government agencies have – in the recent years – witnessed an erosion due to excessive political bickering, nepotism and red-tape.
However, the 63-point ambitious action action plan envisages construction of Kerung-Kathmandu Railway Project, Kathmandu Valley Metro and Mono Rail Projects, Electric Railway Project, Second International Airport at Nijgad, reservoir-type hydroelectric projects with installed capacity of 300-500 MW and expansion of East-West Highway under engineering-procurement-construction-financing model. This project development model, it is said, expedites project completion, as a single party has to complete procurement works, build the project on its own and mobilise necessary funds to build the project as well.
The action plan also proposes to provide easy credit access to vegetable farmers, establish labourers’ bank to create database of workers available for different jobs, generate self-employment opportunities for 50,000 people within this fiscal year, create national single window to facilitate overseas trade and establish infrastructure development bank under leadership of the private sector.

Tuesday, January 17, 2017

Nepal tops regional ranking in inclusive development index

Nepal is not only advancing – in the last five years – in the Inclusive Development Index (IDI) but also ranks first in the South Asian region, a global report published today shows.
"Under the developing economies category, with overall score of 4.24, Nepal ranks 27th on the IDI, showing remarkable improvement over the last five years,” the Inclusive Growth and Development Report-2017 published by the World Economic Forum (WEF) reads.
"Nepal ranks 26th in Growth with a score of 3.35, whereas the country ranks 51st in Inclusion with a score of 3.25, but ranks 1st in Intergenerational Equity with a score of 6.11.”
“Intergenerational equity, which refers to whether economic performance is being pursued at the expense of future generations, is another limitation of GDP," the report reads, adding that increasing output, which at first glance would be 'good' for GDP, may come at the expense of externalities such as environmental damage, reduced leisure time, or the depletion of natural resources. "In other words, there is no link between GDP and the sustainability of the economy."
Though the country is ranked second to Lesotho – under the developing economies – for most improved five-year trend, it far below at 72 in GDP per capita, the report adds.
“Nepal, among the six countries, registered IDI scores that are 20 or more places higher than its GDP per capita rankings, suggesting that its development model is considerably more balanced and inclusive than that of countries with a comparable national income per capita.”
Notably, Nepal’s poverty rate has declined by 25 percentage points in this time, and its income inequality – net income Gini – by almost 8 percentage points, it reads, adding that Nepal outperforms all others on the intergenerational equity pillar during the most recent year, and has relatively low unemployment, including youth unemployment, and strong female participation in the workforce. “However, it performs poorly on GDP per capita and labor productivity.”
The framework indicates that the informal sector is dogged by low wages, leaving many workers in poverty. Priority areas include tackling corruption and administrative barriers to starting and growing a business, as well as continuing to improve infrastructure and basic services including education; particularly the availability and quality of vocational training, the report added.
Regionally, Nepal ranked 27th is followed by Bangladesh at 36th, Sri Lanka at 39th, Pakistan at 52nd and India at 60th in the IDI -2017.
The Inclusive Development Index (IDI) has been calculated by giving equal weight to the three pillars – growth, inclusion, and intergenerational equity – as well as the 12 indicators therein. However, if the bottom-line measure of national economic performance is sustained, broad-based progress in living standards, then a case could be made that the indicator or indicators that most closely approximate this concept should be weighted more heavily.
As measured by household surveys, median household income is attracting growing interest as an alternative to GDP per capita, the more commonly cited measure of a country’s material wellbeing. One drawback with GDP per capita is that it takes no account of distribution: it simply divides a nation’s income by the size of its population, the report states, adding, “If inequality in that country is very high, the resulting figure will provide a misleadingly optimistic suggestion of living standards for most individuals.”
Analysis of the 12 Key Performance Indicators (KPIs) that comprise the Inclusive Development Index, alongside the seven pillars of Policy and Institutional Indicators, suggests that median household income is indeed a reasonable proxy for inclusive growth and development as a whole even though it captures only one of the four dimensions of broad-based progress in living standards – income; opportunity; security; and quality of life – emphasised in the report.

IDI-2017 (Nepal)
GDP – 3%
Labour productivity and growth – 2%
Health lIfe expe nctancy trend – 1 yrs
Employmemt trend – (-0.3%)

Net Income GINI Trend – (-7.7)
Poverty Trend – 25.3%
Wealthy GINI Trend – 11.8
Median Income Trend – $1.2

Adjusted Net Savings Trend – 3.4%
Carbon Intensity Trend KG per$ of GDP – (-4.4)
Public Debt Trend – (-3.7%)
Dependency Ratio Trend – (-8.8%)

Saturday, January 14, 2017

NAC to buy European aircraft from US company

Nepal Airlines Corporation (NAC) today selected an American Company to purchase 2 wide-body European aircraft.
The corporation will issue a letter of intent (LoI) to the American leasing company – AAR Corp – tomorrow to supply two-wide body Airbus A 330-200 aircraft, NAC managing director Sugat Ratna Kansakar informed. A letter of intent is a document expressing an intention to enter into a contract at a future date.
The NAC board – led by secretary of Ministry of Culture, Tourism and Civil Aviation – today unanimously agreed to award the supply contract to US-based AAR Corp.
The board has selected the lowest bidder – AAR Corp – which has proposed to supply each aircraft for $104.8 million, he said, adding that the negotiations with the supplier will be held very soon in Kathmandu. "The cost of the aircraft and delivery date will be finalised during the negotiations."
Kansakar said that the ‘offer price’ quoted by the company was not the final price as it may go up slightly up due to inflation when final contract negotiations are completed. "When the cost of the aircraft will be finalised, a purchase agreement will be signed after the negotiations."
"We will ask the supplier to come to Nepal as soon as possible to sign an initial memorandum of understanding (MoU),” he said, adding that the corporation has targeted concluding the MoU within two weeks so that it can begin detailed technical and financial negotiations. A technical team consisting of members of the two parties would be formed to hold detailed negotiations. The entire process could be completed within three to four weeks.
There were six bidders in the final round. The corporation board selected AAR Corp due to the appropriate rate it proposed and the credibility of the company. Though the bid evaluation committee had evaluated the proposals of 10 bidders, four did not qualify in the initial stage itself.
A notice inviting proposals from aircraft manufacturers, airlines, aircraft leasing companies and bankers for two Airbus A330-200 aircraft was issued on September 26. There were 11 hopeful suppliers, and the highest price quoted was $146 million.
The corporation has stipulated that the jets should not have more than 1,000 flight hours on them, and that the date of manufacture should not be before January 2014.
The AAR Corp has – in request of proposal – offered to deliver the first aircraft by September 2017 and the other by March 2018.
The supplier should include the cost of a minimum set of flight and maintenance crews for the duration of at least one year. It should also include the cost of consumable spares and tools required for day-to-day line maintenance up to the ‘A’ check level for a year.
The carrier has proposed procuring long-range jets to serve destinations in North America, Japan, Australia and the UK as they have been identified as prospective markets for Nepal over the next 20 years.
The corporation had purchased two Airbus A320-200 aircraft in 2015 by borrowing Rs 10 billion from the Employees Provident Fund (EPF) in its first fleet expansion in 27 years.
The national flag carrier currently has two narrow-body Airbus aircraft and one narrow-body Boeing aircraft in its international fleet. The fleet is flying to eight destinations. After addition of two wide-body aircraft, the corporation start flying on long haul destinations, as the average flight range of the A 330-200 series aircraft will be nine to 10 hours.
The national flag carrier is preparing to fly to Japan and South Korea with the new two wide-body aircraft that is expected to not only increase its market share but also recover its lost glory.
So far, the national flag carrier has received landing permit for Inchhan International Airport in South Korea and Saudi Arabia. Kansakar also informed that the corporation has also approached civil aviation authority of Japan to receive landing permit. "In the long run the corporation also plans to expand its network to Australia and Europe," he added.
Though, international lenders are ready to invest on corporation, the corporation has approached EPF and Citizen Investment Trust (CIT) for the loan to buy the two aircraft.
The corporation had – in the past too – borrowed from the EPF and CIT to purchase the two narrow-body Airbus aircraft. The government-owned financial institutions have been charging nine per cent interest rate from NAC. "But this time the corporation has also approached some private banks," Kansakar said, adding that the private financial institutions are positive about consortium financing. "They are expected to quote an interest rate that is lower than that of the government-owned financial institutions."
The government is giving guarantee for the loan that NAC is planning to obtain.
The corporation will soon finalise loan agreement with the government-owned financial institutions, as the supplier has been issued LoI and invited for negotiations," he added.

Friday, January 13, 2017

Nepal has 20-35 percent working poverty: Report

Nepal has 20 per cent to 35 per cent working poverty, according to an international report.
World Employment and Social Outlook: Trends 2017 (WESO), which was published by International Labor Organization (ILO) today, said that 20 per cent to 35 percent of the country's workforce is living on less than $3.10 per day.
The outlook has also highlighted that Nepal has 55 per cent to 70 per cent vulnerable employment. "The percentage of own-account workers and contributing family workers as a share of total employment is more than half," the report added.
However, the report states that Nepal has unemployment rate of 4 per cent. This is equal to the United States and less than the UK and Germany.
According to ILO, persons in employment comprise all persons above a specified age, who during a specified brief period, either one week or one day, were in the following categories, paid employment or self employment.
The report also highlighted that the global unemployment rate is expected to rise modestly from 5.7 per cent to 5.8 per cent in 2017, representing an increase of 3.4 million in the number of jobless people.
The number of unemployed persons globally in 2017 is forecast to stand at just over 201 million - with an additional rise of 2.7 million expected in 2018 - as the labour force growth outpaces growth in job creation, according to the report.
The ILO's World Employment and Social Outlook: Trends 2017 takes stock of the current global labor market situation, assessing the most recent employment developments and forecasting unemployment levels in developed, emerging and developing countries.
It also focuses on trends in job quality, paying particular attention to working poverty and vulnerable employment.
"We are facing the twin challenge of repairing the damage caused by the global economic and social crisis and creating quality jobs for the tens of millions of new labor market entrants every year,” ILO director-general Guy Ryder said in the report.
“Economic growth continues to disappoint and underperform, both in terms of levels and the degree of inclusion," he said, adding that it paints a worrisome picture for the global economy and its ability to generate enough jobs. "Let alone quality jobs. Persistent high levels of vulnerable forms of employment combined with clear lack of progress in job quality - even in countries where aggregate figures are improving - are alarming. We need to ensure that the gains of growth are shared in an inclusive manner."
The report shows that vulnerable forms of employment – that is contributing family workers and own account workers – are expected to stay above 42 per cent of total employment, accounting for 1.4 billion people worldwide in 2017.
“In fact, almost one in two workers in emerging countries are in vulnerable forms of employment, rising to more than four in five workers in developing countries,” ILO senior economist and lead author of the report Steven Tobin, said.
As a result, the number of workers in vulnerable employment is projected to grow by 11 million per year, with Southern Asia and sub-Saharan Africa being the most affected.
Turning to policy recommendations, the authors estimate that a coordinated effort to provide fiscal stimulus and an increase in public investment that takes into account each country’s fiscal space, would provide an immediate jump-start to the global economy and reduce global unemployment in 2018 by close to 2 million compared to our baseline forecasts.
However, such efforts should be accompanied by international cooperation.
“Boosting economic growth in an equitable and inclusive manner requires a multi-facetted policy approach that addresses the underlying causes of secular stagnation, such as income inequality, while taking into account country specificities,” Tobin said.

Thursday, January 12, 2017

Malaysia reverses scrapping of levy

Malaysia has reversed the scrapping of levy and decided to continue with deducting levy from wage of foreign workers until January 2018, after its decision to shift the levy burden to employers, announced on New Year’s Eve, hit a snag.
The Malaysian National News Agency reported that the cabinet meeting yesterday agreed to postpone the implementation of levy payment on foreign workers by employers. "The levy payment will be enforced under the Employer Mandatory Commitment to next year."
Earlier, on December 31, the Malaysian government had announced that the levy should be paid by the employers on behalf of foreign workers. The scrapping of the levy would have increased the flow of remittance to Nepal as Malaysia is one of the most favoured destinations of the Nepali migrant workers.
According to president of Nepal Association of Foreign Employment Agencies Bimal Dhakal, the decision came as a bad news for both the migrant and the country’s economy.
“It sure would hit workers’ earning and flow of remittance," he said, adding that the decision will further discourage fresh migrant from going Malaysia.
Though, number of migrant workers going to Malaysia has dropped since earthquake of April 25, 2015, a period that saw numbers of policy level changes including Nepal’s decision to adopt free-ticket-free-visa policy and Malaysia’s move to regulate inflow of foreign workers to create more job opportunities for workers, it is estimated that over 700,000 Nepali migrant workers are currently working in Malaysia.
And they have been paying levy to the Malaysian government themselves, as of now.
Nepali workers used to pay up to 250 ringgits as levy for every 1,000 ringgits they earned.
With the decision put on a hold, foreign migrants working in the manufacturing, construction and service sector will continue to pay annual levy of 1,850 ringgit from their hard-earned wage, the Malaysian news agency reported, adding that the Malaysian authorities were forced to defer the date for the enforcement of the new levy related policies following protest from the employers’ unions. "It is not just on levy, but on the rights of the employer to have direct access towards the workers, rather than going through a middle man, how to cut down bureaucracy procedures and how to have fast employment of foreign workers."
It remains unclear whether the stalled new policies would be pursued after the extended deadline of 2018 or not.
Malaysia’s employers’ unions together with local workers’ unions had stood against shifting the burden of levy on local businesses arguing that it would increase the cost of production. They had also warned that the consumers would eventually end up paying more for their products and services if the levy is imposed on the local business. Workers’ unions, on their part, claimed that exempting foreign workers from levy would attract more migrants, dampening the prospect of locals getting the jobs.
Malaysia had first decided to impose levy on workers in 2013, shortly after raising the minimum salary of foreign workers to RM 900, up from RM 650. The minimum wage was later raised to RM 1,000. The levy rate was revised several times in the following years.
On the eve of New Year, Malaysian deputy prime minister Ahmad Zahid announced another major change shifting the burden of levy from foreign workers to employers, a decision that draw cheers from foreign workers and right groups, and strong opposition from employers’ and local workers’ unions.

Saturday, January 7, 2017

Nishan Shrestha to compete in global finals

A student of Kathmandu-based Ratna Rajya Laxmi Campus Nishan Shrestha has won the Global Student Entrepreneur Awards (GSEA) Nepal competition.
The competition – organised by Entrepreneurs' Organisation Nepal (EON) in partnership with Nepalese Young Entrepreneurs' Forum (NYEF) in Silver Mountain School of Hotel Management – chose Shrestha to lead Nepal in the Global Student Entrepreneur Awards (GSEA).
Shrestha's company Eco Cell Industries produces reliable, economic, environment-friendly and earthquake-resistant building materials. "It is pioneering the production of interlocking bricks in Nepal," a press release issued by NYEF, the apex body of young entrepreneurs in Nepal, reads.
Shrestha will represent Nepal at the 2016-17 GSEA Global Finals to be held in Frankfurt, Germany. He will be competing against the top student entrepreneurs from around the world to win $400,000 in cash and donated prizes, the NYEF release reads, adding that he has won a cash prize of Rs 50,000 in GSEA Nepal Finals.
Similarly, Johnson Bokati, a student of Kathmandu University, has been declared first runner-up. His company, Endeaver, is an app development company whose first product is an app which helps people to receive calls despite their busy schedules.
Johnson has won a cash prize of Rs 25,000.
Likewise, the third place went to Bikesh Sapkota of Nagarjuna College of IT. His company, Cryptic Thread Technology is an IT company whose main product is a school management system. Bikesh has won a cash prize of Rs 10,000.
Speaking on the occasion, Samir Thapa, GSEA chair for Nepal, said that the competitions like GSEA can provide a learning opportunity and exposure to student entrepreneurs and will also inspire other students to pursue entrepreneurship.
Fluer Himalayan managing director Ajay Pradhanang, iCapitla chairman and managing director Ajay Shrestha, Merchantile Group chief investment officer Amod Rajbhandari, Arya International managing director Anuj Shrestha, Siddhi Ganesh Enterprise managing director Pragun Rajbhandary and Wellness Hopital chairman Sudahrshan Basnet were in the panel of judges.  
The Global Student Entrepreneur Awards (GSEA) represents more than 1,700 of the prominent student entrepreneurs from more than 37 countries. Built on a mission to inspire students to start and grow entrepreneurial ventures, GSEA brings global visibility to pioneering student business owners.

Thursday, January 5, 2017

Langtang features in NYT's '52 places to go' list

Nepal's Langtang Region has been featured in The New York Times-Travel '52 places to go in 2017' list.
Stating that there are thousands of getaways to explore this year, The New York Times has listed Langtang Region of Nepal at the 43rd spot among the 52 places to visit in 2017.
Visitors to this hinterland 40 miles north of Kathmandu dwindled following the 2015 avalanche that nearly wiped out Langtang village, the nerve center of the area, the newspaper writes, saying that a crumbled town springs back. "In an effort to revive tourism, the travel outfitter Intrepid now offers a spectacular 15-day Tamang Heritage Trail Trek through alpine terrain, verdant midlands, rustic villages and monasteries," it further writes, adding that the newly opened portion of Langtang National Park called the Tamang Heritage Trail affords an opportunity to meet the Tamang people, originally Tibetan horse traders.
Canada tops the list followed by Atacama Desert of Chile in the places to go in 2017.
After the last year's devastating earthquake, tourists have started to come to Nepal as the country offers unique geography, a part of the Himalayan range, and, of course, the highest peak of the world, Mt Everest. The government has also been planning to promote the country as tourism is the key source of foreign currency and one of the largest employment providers.
Last week, Nepal Tourism Board (NTB), during its anniversary celebration, announced to celebrate the year 2017 as a 'Visit Nepal Year' in Europe as part of its initiatives of promoting Nepal as a tourism destination and with the aim of bringing maximum number of tourists from European countries.

Tuesday, January 3, 2017

NAC to start Kathmandu-Seoul direct flights from October

Nepal Airlines Corporation (NAC) is planning to launch Kathmandu-Seoul flights soon.
The national flag carrier has recently received ‘take off and landing’ permission from a major South Korean airport, according to the airlines. "Incheon International Airport of South Korea has allowed NAC to take off and land on every Sunday and Wednesday," the corporation said, adding that Nepali airline has not yet been flying to South Korea till now.
According to corporate director and NAC spokesperson Ram Hari Sharma, NAC will start flying to and from South Korea sometime in October this year as per the slot provided by Incheon International Airport.
NAC will be flying its wide-body Airbus of the series of A330-200 with a capacity of 250 to 280 seats for its flight on Kathmandu-Seoul route.
"Our flight will take off every Sunday and Wednesday at 7:20 pm from Kathmandu," he said, adding that the aircraft will return at 7:15 am local time. "It takes 6 hours of direct flight from Kathmandu to Seoul."
NAC has also made business plans to fly from Kathmandu to Seoul and from Seoul to Tokyo, he added. "NAC will prove a good connecting flight for those traveling to the western parts of the US from Seoul and Tokyo."
Not only those returning to Nepal from those parts will also find it easy but lots of Nepalis working in Korea will also be able to fly own national flag carrier.

Monday, January 2, 2017

PM directs ministers, secretaries to expedite development spending

Prime Minister Puspa Kamal Dahal today directed the government officials and ministers to expedite development spending and prepare criteria for qualifying projects as national pride projects.
Addressing the ministers and secretaries of various ministries during the meeting of National Development Action Committee (NDAC) – the prime minister-led mechanism that looks after the development projects – Dahal asked them to spend at least 80 per cent of the development budget citing there has been no significant progress when compared to the previous fiscal year, which had retarded the economic growth of the country.
Accepting the government’s apathy toward development work, he also directed the ministers and secretaries to prepare unified development plans and implement them accordingly to show the outcomes.
"As we have envisioned moving towards higher growth trajectory to upgrade our status to a middle-income country by 2030, we have to fully implement the budget to achieve the desired results," he said also instructing them to conduct regular monitoring of top priority projects – P1 projects – and introduce ‘carrot and stick’ policy targeting the project chiefs.
Asking them to prepare criteria for qualifying projects as national pride projects, Dahal also directed them to come out with a concrete plan, to complete the national pride projects, within a month.
Prime minister expressed concerns over dismal progress of critical projects including Kathmandu-Tarai fast track, Budhigandaki Hydroelectric Project, Second International Airport in Nijgadh, West Seti Hydro Project and Postal Highway.
The concept of national pride project was first introduced in 2012 in a bid to expedite the construction of schemes considered to be crucial for the country’s sustained development. However, there is no standard process based on which a project is described as ‘national pride’.
Currently, 21 projects have been identified as national pride projects. They include four irrigation projects, three hydropower projects, three international airports, six road projects, an electric railway project, a drinking water project, two projects aimed at promoting the holy sites of Pashupati and Lumbini and an environment conservation project.
The completion of these projects, according to experts, can change the face of Nepal and put it on a high growth trajectory. However, more than half of these projects failed to meet 50 per cent of their performance target in the first four months of the current fiscal year, according to the latest report of the National Planning Commission (NPC).
The Kathmandu-Tarai Fast Track Project, for instance, met only 0.1 per cent each of the physical and financial targets, making it the worst performer in the first four months of this fiscal year.
Likewise, the 1,200-MW Budhi Gandaki Hydroelectric Project has met only 1.1 per cent each of the physical and financial targets. Another worst performing project is the Lumbini Area Development Trust, which has achieved 7 per cent of the physical target and 10 per cent of the financial target.
Some of the common problems faced by these projects are delays in land acquisition, disputes between project officials and locals over the compensation amount offered by the government, unclear relocation and resettlement strategy, lack of coordination among officials and protests launched by their staff.
“Many projects also face problems while conducting Initial Environment Examination (IEE) and Environmental Impact Assessment (EIA),” said NPC vice chair Min Bahadur Shrestha, on the occasion. “We will list all the problems faced by these projects and try to address them by providing them certain benefits as directed by the prime minister," he added.
“If the bureaucracy continues to follow its traditional approach toward development works, we are not going to get any outcome,” the Prime Minister said, asking to change their working culture. "We have to think unconventionally to ramp up the capital expenditure."
Speaking at the meeting, the secretaries of various ministries updated PM Dahal on the progress of development projects being implemented under them.
Earlier in September too, PM Dahal had said that he would personally monitor the implementation status of national pride projects. Addressing the NDAC meeting, Dahal had said that he would prepare the schedule for implementation of concerned projects and monitor their progress.
His instructions, however, failed to speed up development spending. The government has, according to the Financial Comptroller General’s Office (FCGO), been able to spend only 8.89 per cent of the total capital budget by yesterday.
The first half of fiscal year is ending in mid-January. And of the total development budget of Rs 311.94 billion, the government has been able to spend only Rs 27.71 billion by January 1, according to the FCGO. Of the total budget of Rs 1048.92 billion, the government has managed spend only Rs 232.85 billion till yesterday.
The government had tabled the budget – for the current fiscal year 2016-17 – one-and-a-half months before the start of fiscal year calendar to break the trend of slow capital expenditure. However, the situation in the current fiscal year is no better than the last fiscal year.
While the government has not been able to spend, revenue mobilisation has been exceeding the target. As a result, the government treasury is ballooning. The government is sitting on a cash pile which is neither being productive, nor contributing to the economy. Had the government been able to spend, the private sector would have felt encouraged to spend, resulting in capital formation. However, the bulging treasury caused by the government’s inefficiency will hurt the economic growth and slow down capital formation in the coming fiscal years too.