NEPAL ECONOMIC FORUM
nefport Docking Nepal’s Economic Analysis JULY 2013 | Issue 13
Contents 05
July 2013 | Issue 13
11
Energy
13
Foreign Aid
General Overview
15
Health
06
Political Overview
16
Infrastructure
07
International Economy
18
Manufacturing and Trade
Macroeconomic Overview
20
Real Estate
08
Agriculture
20
Remittance
10
Education
22 Telecommunication and Media
Editorial
23
Tourism
25
Macroeconomic Outlook
Review Issue 13 | July 2013
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Financial Markets
Publisher: Nepal Economic Forum Website: www.nepaleconomicforum.org
33
Capital Markets
P.O.Box 7025, Krishna Galli, Lalitpur - 3, Nepal Phone: +977 1 554-8400 email: info@nepaleconomicforum.org
36
Endnotes
40
NEF Profile
Editor: Serah Basnet Contributors: Anup Subedi, Chandni Singh, Pragya Ratna Shakya, Raju Tuladhar, Rojesh Shrestha, Shayasta Tuladhar, Shristi Singh Design & Layout: Big Stone Medium contact@bigstonemedium.com
Editorial
W
e are happy to present you the thirteenth issue of nefport, which provides an overview of the events of the past three months that had an impact on the Nepali economy. For this issue, we have used NPR 87.67 to a dollar, the quarterly average to the dollar amount. The Interim Election Council of Ministers in Nepal has finally announced November 19, 2013, as the date for holding the Constituent Assembly election. This is a welcome announcement as it puts aside political uncertainty, a constant in Nepali life. Up to some extent it is certain that the budget for the upcoming fiscal year 2013-14 will roll out in time unlike in the past when it was delayed due to political hiccups. However, due to the transitional nature of the government, the budget may only focus in maintaining the status quo. As the Nepali Rupee continues on its devaluation trend in the next quarter, a result of the fall in Indian Rupee against the dollar, there will be spiraling impact on oil prices and, commodity prices, thereby pushing inflation. The devaluation of the Nepali Rupee looks irreversible in the next quarter, although it may not cross the NPR 100 to USD 1 barrier. We continue to cover the sections in the manner readers are now used to: the first section provides a general overview of the macroeconomic state of Nepal’s economy. It goes into some depth within each sector and provides an overview of the key stories that have developed over the last quarter. This section also provides an outlook for the next quarter of the Nepali economy. Like in the previous issues, the second part of nefport presents an in depth review of the financial and capital markets, where we provide a detailed analysis and assessment of the performance and figures of banks, financial institutions and the Nepal Stock Exchange. This issue of nefport is also accompanied by the sixth issue of nefsearch, which is an investigative piece on financial fraud. Nepal Economic Forum, a division of beed, is a not-for-profit organization that functions as Nepal’s premier private sector led economic policy and research institution. We would like to thank beed invest and beed management for their support in making this issue possible. We are eager to receive your valuable feedback on how to make future issues of nefport more useful and user friendly. Please email us your suggestions at info@ nepaleconomicforum.org
Sujeev Shakya Chairman Nepal Economic Forum NEFPOrt issue 13 July 2013
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Political Overview Just when Nepal was gearing up for the June Constituent Assembly elections, news of the poll’s postponement until November has brought disappointment among the people. Even after the extension of the initial two-year term, the Constitution is still nowhere near ready. With major political parties continuing to squabble over numerous issues, people have now begun to question the political leaders’ commitment towards bringing peace and prosperity to the country. In the meantime, the Interim Election Council of Ministers in Nepal has finalized November 19, 2013, as the date for holding the CA elections. The newly appointed Chief Justice Khil Raj Regmiled government had been recommended to announce November 14 as the date for holding election by the Election Commission (EC). Though the election was to be held in June, the EC deferred the June polls to buy more time for the government to clear the existing constitutional and legal hurdles. Regmi’s government has also been requested to publicly notify the long pending ordinance to amend the Constituent Assembly Member Act and arrange logistics for the election without further delay. The EC has been inviting tenders for logistics and Electronic Voting Machines (EVM), raising funds and arranging voter roll printing machine. At present, the EC is verifying applications filed by 139 parties for registration.1 Election date proposed:
Controversial appointment of CIAA Chief: Despite extensive protests by the
civil society members and some opposition parties, President Ram BaranYadav on June 8 approved the appointment of controversial former royal regime figure Lokman Singh Karki as chief commissioner of the Commission for Investigation of Abuse of Authority (CIAA). Karki has been accused of smuggling gold when he was chief of the Department of Customs. A high-level probe committee led by former Justice Bhairab Lamsal had also accused him of
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amassing wealth disproportionate to his known sources of income. The Supreme Court had acquitted Karki of the charges on technical grounds.2 Dissatisfied by President Yadav’s decision, a member of the President’s Advisory Group, Hari Sharma tendered his resignation two days after Karki’s appointment.3 China encourages its private sector to invest in Nepal: Wu Chuntai, Chinese
ambassador to Nepal, has revealed that China’s private sector is eager to invest in tourism, hydropower, and agriculture in Nepal.4 Increase in Chinese investment in Nepal could help narrow the widening trade deficit between the two countries. Meanwhile, Chinese vice minister for education, Hao Ping, visited Nepal in May to share ideas on matters of common concern and mutual interests concerning the education sector as well as to promote bilateral assistance in the education sector. Terai Parties likely to join hands:
Serious talks on unification between Terai Madhes National Campaign (TMNC) and Rastriya Madhes Samjbadi Party (RMSP) are underway.5 The two sides have held a couple of rounds of negotiations and have agreed to unite on the basis of the agendas. Both sides are yet to work out the technical details such as number of
committee members. The madhesbased parties are making efforts to form an alliance for the planned Constituent Assembly election. Madhesi leaders say there is pressure from their constituencies to come up with a united front to take ahead the agendas of the Madhes.
outlook Though the Election Commission has recommended the government to hold the CA polls no later than November, it remains to be seen whether the government will promulgate the long pending electoral ordinance and complete the formation of a Constituency Delimitation Commission soon enough to facilitate the holding of elections within the EC recommended timeframe. One of the hindering blocks in announcing the poll ordinance is the failure of major political parties to reach an agreement on the disputed provisions in the ordinance, which include the one per cent threshold provision (which makes parties securing less than 1% of the total votes ineligible for seats under the proportional representation electoral system), a bar on convicts from contesting the elections before six years of the completion of their sentences, and the need to disclose property details of candidates. With the political parties seemingly making no headway in negotiations, it is doubtful if the country will go to polls this November.
docking nepal’s economic analysis
International Economy Global economic prospects have improved; however, bumpy recovery and skewed macroeconomic policies have complicated policymaking in emerging market economies. Rwandan sovereign bonds over subscribed: In April, the Government of
Rwanda sold USD 400 million (NPR 35.07 billion) dollar denominated 10 year bonds, with annual yield of 6.875%. The bond rated “B” was oversubscribed (bid-to-cover ratio) by nearly 10 times.6 Given the financial crisis in the developing world, emerging and even frontier markets prove to be more attractive. Rwanda joins other sub-Saharan African countries, namely Nigeria, Zambia, Ghana, Gabon, Senegal and Namibia in selling international debt. Nigeria, rated BB-, has yields of 4.06%, while Zambia, rated at B+, had a yield of 5.625%. Abenomics helps Japanese economy to bounce back: Japan’s Gross
Domestic Product (GDP) has grown by 4.1% annually and exceeded expected growth by 0.6%. According to the central bank study, the aggressive monetary and fiscal policies adopted by Prime Minister Shinzo Abe, via Abenomics—a push for big stimulus spending and monetary easing by the central bank, has helped weaken the yen and strengthen share prices. The central bank is, therefore, set to expand monetary stimulus and debate an overhaul of its policy framework. The weaker yen and bolstered share prices policy followed by the government is expected to have a
positive impact on the economy, and help it bounce back from the recession faced in the previous year.7 EU and IMF clash over Greece bailout:
The Greek economy continues to contract; it shrank by 5.6% within the first three months of 2013, as compared to the same period in the previous year.8 To reduce its debt burden, Greece restructured privately held Greek bonds in 2012, imposing losses of more than 70% on investors after the country’s prolonged recession. The International Monetary Fund (IMF) has blamed the Euro zone for postponing upfront debt restructuring to 2012, which should have occurred in early 2011. The IMF has also stated that European political failings such as poor implementation of reform by authorities, adverse political developments and inconsistent policy signals by euro leaders, has contributed to the lack of success of the program. This delay, according to IMF, has led to private investors selling off their bonds and shifting the burden to the euro zone governments and their taxpayers. The EU in turn has responded, disagreeing with the fact that a 2010 debt restructuring would have helped mitigate the situation.9 India records slowest growth in a decade: India grew by only 5% in
a decade wherein growth averaged at 10% according to the Central Statistics Office. The Indian economy, in contrast, grew by 6.2% in FY 2011-12. This drop in growth is said to be a result of low investor confidence and therefore slump in investments, uncertainties over taxation, bureaucratic delays, high inflation, weak export demand and continued restrictions on foreign direct investment.10 According to the global ratings agency Standard and Poor’s, India could face losing its grade rating amid new threats to economic growth. The Organization for Economic Cooperation and Development (OECD) has lowered its projections for India’s GDP to 5.3% in 2013, as compared to 5.9% previously.11
outlook Despite the global economy heading back towards a growth path, the International Monetary Fund (IMF) has downgraded its growth forecasts for 2013 by 0.2 percentage points to 3.3%, and 4% for 2014 warning on the dangers of uneven recovery. Similarly, the World Economic Outlook has outlined high to medium term risks stemming from the euro zone crisis, and the ability of US and Japan to cut public sector deficits and debt.
the FY 2012/13, its slowest pace in
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macroeconomic OVERview
Nepal’s economy in the last quarter witnessed some negative developments. Failure to update Nepal’s tourism promotion and marketing strategies resulted in a slump in the arrival of tourists to the country. A huge decline in the export of country’s major exportable items was also reported, with products identified as exportable goods in the Nepal Trade Integration Strategy failing to generate much revenue. Another negative trend seen in the agriculture sector was its growing dependence on chemical fertilizers, despite the government’s attempts to promote organic farming. With the CA polls postponed till November and the prevalent political instability, it is doubtful Nepal’s economy will fare any better in days to come. Agriculture Financing to the agriculture sector witnessed a significant increase in the first eight months of the current FY 2012-13; this followed the Nepal Rastra Bank’s directive to financial institutions to boost their lending to the sector. However, despite the financial boost, agricultural output failed to see any increase due to unfavorable weather conditions.
60 million allotted for organic fertilizer plants: The Ministry of Agri-
culture Development (MoAD) has earmarked NPR 60 million (USD 0.66 million) to set up organic fertilizer plants in five development regions in a bid to encourage chemical-free farm products.12 The government is preparing a “compost fertilizer promotion policy” through which it will be implementing the action plans for the fertilizer plants. The Trade and Export Promotion Center (TEPC) statistic shows import
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of chemical fertilizers is increasing at an alarming rate (see Figure 1). As per TEPC’s data, Nepal imported chemical fertilizers worth NPR 11.47 billion (USD 126 million) in the first 9 months of the current FY 2013-2014 compared to NPR 8.82 billion (USD 97 million) in the last FY 2012-2013. This increase in the use of chemical fertilizers not only has an adverse impact on environment and human health but also on Nepal’s economy keeping in mind the country is losing a huge amount of foreign currency in the import of chemical fertilizers. To promote organic fertilizers, the government has been providing 50% subsidy on purchase of equipment required for setting up production plants. Government not to ban FDI in agriculture: The government has decided
to turn down farmers’ demand for ban on FDI and on import of genet-
ically-modified (GM) crops in the upcoming Agriculture Development Strategy (ADS)13. ADS is in line with the existing Foreign Investment and Technology Transfer Act and, under the provision, it cannot ban FDI. Previously, the government was leaning towards imposing a ban on FDI in agriculture following criticisms from All Nepal Peasants’ Federation (ANPF). However, the government backflipped on its decision on grounds that the country was in need of foreign investment. Nonetheless, among the 22 point demand of ANPF, some of the major demands have already been addressed by the government, which include setting of minimum support price for staple crops, formation of National Farmers’ Commission, programs and activities to ensure farmer rights, and addressing food sovereignty. On the demand for a blanket ban on GM crops, an under-
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Macroeconomic Overview
standing has been reached with ANPF to conduct an extensive discussion with experts. Production of cash crop surges:
Potato, tea, coffee, large cardamom, garlic, and turmeric logged growth in production in the fiscal year 2012-13.14 Table 1: Increase in production of cash crops FY 2012-13 Cash Crops
% increase
Potato
6.4%
Tea
3%
Coffee
8%
Large Cardamom
32.75%
Garlic
40.44%
Turmeric
40.34%
Source: Economic Survey 2011/2012, Ministry of Finance
Garlic and turmeric recorded a significant rise in production compared to last year (see Table 1). Production of large cardamom, which is one of Nepal’s major exports, increased by 32.75%. Vegetable production is
expected to reach 3.33 million tons on 246,174 hectares this fiscal year. However, output of ginger, another major exportable item, fell by 10.46% to 228,501 tons. The fall in output is attributed to drastic rise in the price, which jumped nearly 11-folds to reach a three year high of NPR 130 per kg this fiscal year.
was limited to 3.34 million hector this year. Maize productivity witnessed the same trend and per hectare production dropped from 2.5 metric tons to 2.35 metric tons. Productivity of wheat and millet is about 2.47 metric tons and 1,114 metric tons, respectively. Quality certification for honey underway: Despite being listed in
Irregular monsoon and shortage of chemical fertilizers during the plantation has led to a fall in cereal production from 9.45 million tons to 8.73 million tons in the current fiscal year.15
the Nepal Trade Integration Strategy (NTIS) product list, honey export has seen a drop this fiscal year. The country only exported honey worth NPR 5000 in the eight months of the current fiscal year compared to export of NPR 215,000 in the same period of last fiscal year.16
Paddy production dropped by 11% in fiscal year 2012-13 and was limited to 4.54 million metric tons, while in the previous year, paddy production was 5.07 million metric tons (see Figure 2). This drop in production may worsen the food security situation unless the government builds an efficient mechanism to distribute food in the mid-and far-west hill districts. Reduction in cultivation area by 140,000 hectares is also a major reason for the fall in production. Cereal cultivation area
Nepal produces 10,000 tons of honey annually and an estimated of 125,000 beehives have been installed by farmers. Organic honey produced in the far western region is said to have a huge potential in the international market, especially European market, and can be sold at relatively higher prices due to its unique flavor, but quality certification has been a barrier for honey exporters. Food technology and Quality control has sent a Residue Monitoring Plan to the European Commission (EU) of its
Drop in cereal production:
Figure 1: Import of fertilizers for the last 4 years
Source: The Trade and Export Promotion Center
Figure 2: Yearly production of paddy and maze
Source: Trade Statistics, Annual trade data of FY2068/69, Ministry of Commerce and Supply Trade and Export Promotion Centre
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Macroeconomic Overview
approval on the honey quality certification which will enable the export of honey internationally. Credit to agriculture sector surges:
The central bank has stated that the total lending of the banks and financial institutions to the agriculture sector has increased by NPR 8.89 billion (USD 98 million) in the first eight months of the current FY 2012-13 as compared to an increase by NPR 4.89 billion (USD 53 million) in the same period of the last FY 2011-2012.17 The growth rate of agriculture sector is estimated at 4.9% as compared to 4.5% last year. The size of agro lending portfolio of the financial institution that lend to agriculture sector has increased from NPR 16.5 billion (USD 182 million) on July 2011 to NPR 37.08 billion (USD 409 million) by January 2013. Nepal Rastra Bank has directed financial institutions to float a minimum of 10% of their total lending to the agriculture sector by fiscal year 2013-14. In order to promote lending to agriculture sector, NRB is providing refinancing facilities for agriculture at 6.5% interest as it does with hydropower loans.18
Education The current state of public education in Nepal is pitiful and it doesn’t take much to understand why. Political interference, corruption and nepotism in the educational system, coupled with lack of commitment among teachers and absence of even the most basic of facilities for the students contribute to this current state of affairs. On the brighter side, dropout rates have decreased and there has been an increase in the student promotion rate in public schools.
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PABSON demands amendment in school directives: The Private and
Boarding Schools’ Organization Nepal (PABSON) has demanded an amendment in the Institutional School Standards and Directives 2069, claiming that some provisions are against private schools. A 12-point declaration was issued during its ninth national general assembly, which demand (i) revocation of the education service tax, (ii) a separate act for regulation and monitoring of institutional schools, (iii) provision of training teaching and non teaching staff of private schools for their overall development, (iv) a check on drain of students to foreign countries, and (v) permission to institutional schools— both public and private—to register either as a company or as a guthi as per their wish. As per PABSON, the government imposed 45% scholarship provision creates a gulf between paying and non paying students.19
effective delivery of education in a federal state’. The project, which has been allocated a total budget of USD 378,000 (NPR 33 million), aims to contribute to the peace and development process in Nepal by fostering constructive dialogue and planning, leading to progress in constitution making. The project will work together with six implementing partners to contribute to a better understanding of issues related to federalism options in the education system. The project will also provide models, plans and coordination mechanisms and build the capacity of the Ministry of Education (MoE) to plan, implement and monitor the restructuring of the education system. The project will be overseen by the UNESCO office in Kathmandu in close partnership with the MoE, the National Planning Commission, and the Nepal National Commission for UNESCO.21 One million textbooks go missing:
Literate Nepal Mission a failure:
The District Education Office (DEO) at Dhanusha cancelled its literacy classes under the Literate Nepal Mission for the second consecutive year due to differences among political parties over sharing quotas and appointment of teaching staff. The district has the fourth largest illiterate population in the country with a total of 188,644 illiterate people, followed by Sarlahi, Mahottari and Rautahat as per a survey carried out by the Non-Formal Education Centre (NFEC). The DEO has been requested to return the allocated budget for the program.20
As per the Department of Education (DoE), over one million textbooks that were to be freely distributed among students in community schools are missing. While Janak Sikshya Samagri Kendra (JSSK), the government monopoly to publish textbooks for the Central, Mid West and Far West Regions, claims that 13.1 million units of books were handed to Sajha Publication for distribution, records from Sajha Publication indicate that only 12.1 million units were received for distribution. The estimated cost of one million books is over NPR 20 million (USD 0.23 million).22
UNESCO’s two year federal education plan: The United Nations’ Educa-
Yarsagumba affects schools in Mugu:
tional, Scientific and Cultural Organization (UNESCO) is all set to launch its two-year project titled ‘Planning
Over 18 schools in the Mugu district have been shut for a month due to teachers leaving to appear in the Teachers’ Service Commission exami-
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Macroeconomic Overview
Figure 3: Students appearing for the School Leaving Certificate Exam over the years
under the Education Act. More than 64 private schools are being illegally run in the district, with some institutions running higher classes despite having permission only to conduct lower classes. The District Education Office has been criticized for failing to take action despite the matter being brought forward multiple times.27
Energy
Source: Ministry of Education
nation, and most students heading to the upper belt for collection of yarsagumba, a prized herb also known as the Himalayan Viagra. According to the District Education Office (DEO), most schools in the district remain closed during this time of the year as both teachers and students go to hunt for yarsagumba, which fetches a good price in the market.23 Education Fair a success: An education
and career fair, jointly organized by Kantipur Publications and the Higher Secondary Schools’ Association Nepal (HISSAN), saw a footfall of 226,351 during the four day event. Apart from regular seminars, three seminars were held by renowned education and management experts. The fair, with its theme of “Excellent Education in Nepal”, was conducted to promote national educational institutes offering students various options available in line with their needs and ambitions.24 20% community schools lack toilets:
Despite the government’s claim of achieving 53% of the Millennium Development Goals (MDG) targets
in sanitation, 20% of community schools across the country do not have any toilets. Of the 28,000 community schools in the country, 80% have toilet facilities, with only 65% having separate facilities for boys and girls.25 The University Grants Commission (UGC) has decided to revise the 15 year old higher education policy which came into existence in 1998. In a bid to improve the quality of education, Tribhuvan University (TU) is, therefore, considering a revision of curricular structure to make it relevant to contemporary needs. Recommendations on policy changes will be made by TU officials to improve the existing policy.26 TU mulling policy shift:
Action sought against 64 illegal schools: A memorandum has been
submitted to the District Administration Office in Parasi, in the Nawalparasi district, seeking stringent action against illegally-run private schools in the district. Private schools in the district have found to be advertising and admitting students despite failure to meet the basic criteria to conduct classes
A slump in global crude oil prices has provided the debt and loss ridden Nepal Oil Corporation (NOC) a glimmer of hope, resulting in reduced losses for the state owned monopoly. According to a Reuters report, Brent crude oil hit an eight-month low to USD 101 (NPR 8854) per barrel in Mid April, 2013, as the outlook for global crude demand growth dimmed. This led to reduction of losses of NOC to NPR 67.2 million (USD 766,000) for the month of April28, which were further reduced to NPR 33.8 million (USD 385,000) for the month of June. Nonetheless, NOC continues to remain dependent on the government for loans to cover import costs. After demands of NPR 7 billion (USD 79.8 million) worth of loans from the government, the government extended credit of NPR 1 billion (USD 11.4 million) to NOC through Employees’ Provident Fund (EPF) along with a VAT refund of NPR 700 million (USD 7.9 million).29 Also, the Ministry of Finance, in the month of April, provided NOC with NPR 750 million (USD 8.5 million) to enable it to import adequate amounts of petroleum products.30 With this addition, the amount that NOC owes to government and other institutions has gone up to more than NPR 23 billion (USD 262.3 million). The other state owned monopoly, Nepal Electricity Authority, continues to be plagued by the same issues of growing losses and corruption. In an effort to curb losses, the
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Macroeconomic Overview
board of directors of NEA forwarded a proposal to the Electricity Tariff Fixation Committee (ETFC) to hike retail electricity tariff by 20%.31 ETFC is also working on a system to increase electricity tariff by 5% every year. Currently, the power tariff is NPR 7 (USD 0.8) per unit.
the poor, disadvantaged and marginalized groups. The new policy aims at increasing the number of renewable energy users from the current 1 million households.
Kulekhani resumes partial operations:
(NEA) has decided to go ahead with the upgradation of Upper Trishuli 3A hydro project from 60 MW to 90 MW, ignoring protests to do the contrary.36 The upgradation was resisted by five trade unions in NEA citing reasons that the delay in completion of the project would lead to increased losses to NEA. The NEA meeting reviewed the agreement signed with China Gezhouba Group Company to upgrade the hydro project. According to the revised decision, the cost of the project has increased to USD 132 million (NPR 11.6 billion) from USD 89 million (NPR 7.8 billion). Taking into account the time required for the upgrade, the project will now be completed in two years instead of one. Energy from the project will be produced at a cheaper rate of NPR 2.7 (USD 0.03) per unit as against the Power Purchase Agreement rate of Rs 4.80 (USD 0.05) for the summer and Rs 8.40 (USD 0.09) for the winter season.
After remaining shut for one and a half months, the Kulekhani Hydropower Project II resumed partial operations on May 30. The 32 MW plan located in Hetauda was shut down after a fire set ablaze three of its transformers on April 16. The damaged transformers, which had a capacity of 12 mpa each, were replaced by a single transformer with a capacity of only 10 mpa, thereby limiting the capacity of power generation to only 10 MW.33 During the shutdown, NEA lost a minimum of 287,000 units of energy, with daily losses amounting to NPR 2.29 million (USD 26,000).34 Although operations of the project have started, NEA continues to make losses from the loss of electricity generation that the project could have generated on full capacity. Project officials have identified a time frame of a month for the transformers to be fully functional. Collateral requirement removed in new Renewable Energy Policy: The
new Renewable Energy Grants Policy, 2069, endorsed by the Cabinet on February 26, provisions to provide a subsidy of 40% to households that install the renewable energy technology.35 The policy aims to make renewable energy more inclusive, with loans being managed through rural development banks and new policy waives off the collateral requirement to claim loans. The policy also includes provisioning for additional monetary support to install the technologies for
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Upper Trishuli hydro project upgraded: Nepal Electricity Authority
Deadline set for color coded LPG cylinders: Despite the government
proposing a fourth deadline of July 15 to enforce distribution of color coded cylinders, its implementation seems doubtful due to resistance from LPG dealers.37 Under the color-coded cylinder system, households will get red cylinders at subsidized rates, while commercial customers will use blue cylinders and pay the full rate. The Nepal LPG Industry Association (NLPGIA) has yet again put forth a 16
point demand, including a hike to their commission. If these demands are not fulfilled, the dealers have threatened to halt supply of LPG in the market. The government, on the other hand, is firm on not giving into the demands of the dealers as it will increase the financial burden on consumers. With both parties not reaching a settlement, implementation looks doubtful. Government fails to provide pledged facilities to hydro projects: Sixteen
hydropower projects have not received government-pledged facilities although it has been more than a year since the Ministry of Energy recommended their names for the same. Citing legal provisions, the Ministry of Finance has refused to offer Value Added Tax (VAT) exemption on construction materials. Reluctance of NEA to sign power purchase agreements with a higher rate has also prevented the government from providing facilities such as concessional loans; as such, loans are only sanctioned after the PPA signing. NEA, on the other hand, cites its poor financial health as reasons for not approving an upward revision in rates.38 Failure to provide the promised incentives has created confusion on whether to continue the provision. According to the Energy Ministry, an additional 70 projects have applied for such facilities. FNCCI seeks political commitment for hydropower development: In
order to facilitate hydropower development in the country, the Federation of Nepalese Chambers of Commerce and Industry (FNCCI) has sought political commitment on eight specific areas. Commitment of political parties are on areas regarding political stability, regulatory and institutional framework,
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Macroeconomic Overview
infrastructure development, private investment and financing, export of electricity, social and environmental concerns, and political mobilization, education and awareness. Leader of various political parties expressed their commitment by signing a document entitled “Political Commitment on the Development of Hydropower” on the occasion of the 47th annual general meeting of FNCCI. This initiative is hoped to help mega hydro power projects move ahead without hindrance. The document includes common principles and polices for hydropower development and also put emphasis on regulatory and institutional issues in the hydropower sector.39
Foreign Aid
gramme (UNDP) have partnered together to provide the Government of Nepal a grant assistance of USD 3.6 million (NPR 315 million) for election operations and capacity building of the Election Commission. In addition to funding, the Norwegian Ministry of Foreign Affairs will also provide support for the ongoing voter registration, electoral mapping, dispute resolution and strategic planning as a part of the second phase of UNDP’s Electoral Support Project. Through the grant, UNDP aims to strengthen the Election Commission and support it in carrying out its mandate of holding fair, credible and inclusive elections, enhance its institutional capacity at the central as well as local levels, and increase the capacity and reach of the newly established Electoral Education and Information Center.41 RoK aid for Disaster Recovery Center:
Foreign aid finances 60% of development programmes in Nepal, according to experts, and this dependence could lead to erosion of domestic mobilization capacities within the country. The only way the country can reduce its foreign aid dependency is improving its own domestic competency. So far, foreign aid has failed to achieve its target in the country. Hence, to optimize its effect, it is essential that the aid be channelized into prioritized sectors in addition to improving the country’s regulatory and absorptive capacity. The impact of foreign aid on inflation, exchange rate and other critical economic indicators, therefore, needs to be studied in detail for effective public expenditure management and formulation of appropriate fiscal and monetary policies.40
Norway, UNDP provides USD 3.6 million for elections: The Norwegian
Ministry of Foreign Affairs and the United Nations Development Pro-
The Republic of Korea (RoK) has agreed to provide a grant assistance of USD 4.6 million (NPR 403 million) to the Government of Nepal for the establishment of a Disaster Recovery Centre for the Government Integrated Data Centre (GIDC) in Hetauda. The aim of the project is to minimize losses in data on natural and human induced disasters by establishing a backup system of the Disaster Recovery Centre (DRC) and to create synergies in the data management of the government and the GIDC. The project will be implemented by the Korea International Cooperation Agency (KOICA) on behalf of the Republic of Korea and National Information Technology Center (NITC) in Nepal. KOICA will provide software, equipment and materials, dispatch Korean experts to Nepal, as well as provide trainings to Nepalese counterparts in Korea. The project is expected to reach completion
within 36 months.42 Promotion of Child Friendly Governance: The Royal Norwegian
Embassy, along with the United Nations Children’s Fund (UNICEF), has agreed to provide USD 7 million (NPR 613 million) in foreign aid to the Government of Nepal to strengthen and expand the implementation of its Child Friendly Local Governance (CFLG) Program across the country. The agreement aims at prioritizing children and adolescents in the national budget and policies, with increased investment on children reflected through 3-5 year plans, mainstreaming of the CFLG framework in ministry guidelines and policies, such as education, health, nutrition, water, sanitation and hygiene, social welfare and local development. The CFLG is a part of the government’s Local Governance Community Development Programme (LGCDP), which includes 21 indicators to be monitored at the Village Development Committee (VDC) level. The partnership is also expected to help strengthen the multi sector National Social Protection Act, and enhance the capacity of stakeholder at all levels to institutionalize a government that is child friendly.43 ADB loan to modernize wastewater services: A USD 80 million (NPR
7 billion) loan has been approved by the Asian Development Bank (ADB) to support the modernization of the wastewater network and treatment facilities in Kathmandu Valley by broadening and improving the wastewater systems. The USD 137 million (NPR 12 billion) project is expected to improve health and living conditions, as well as reduce river pollution within the valley where the wastewater network has been unable to meet its objective due to ever increasing
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population shifts. The Government of Nepal will be providing USD 40.7 million (NPR 3.5 billion), whereas the Organization of Petroleum Exporting Countries Fund for International Development (OFID) will be providing USD 16.3 million (NPR 1.4 billion) to be administered by ADB. The project, expected to be completed in 2018, aims at rebuilding or laying around 514 km of sewers, along with modernizing and expanding five waste water treatment plants. This will increase the treatment capacity from around 16 million liters of water per day to around 90 million liters of water per day. The goal of the project is to ensure that 80% of the area’s sewage is collected in these systems by 2018, with the current system collecting only 5% as of 2012.44 EIB
provides
Hydropower
loan:
A USD 71.8 million (NPR 6.29 billion) loan has been approved by the European Investment Bank (EIB) to the Government of Nepal for the construction and maintenance of Tanahu Hydropower Plant, which has an installed capacity of 140 MWe along the Upper Seti River. This is EIB’s first loan to Nepal through which it hopes to see the eventual provision of clean energy to the country. Energy being key to speeding up social and economic development, the loan hopes to achieve a significant improvement of living standards within the country and, thereby, its development goals. The Tanahu hydropower project will contribute in meeting peak electricity demands during the dry winter season shortages, and will operate as a base load power plant during the rest of the year.45 The project includes a program of rural electrification under which power will be supplied to 17 villages in the vicinity of the plant. The project will be co-financed by the Asian Development
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Figure 4: Comparison of Foreign Cash Loans for the first nine months over four years
Source: Recent Macroeconomic Situation, Nepal Rastra Bank
Bank (ADB), the Japan International Cooperation Agency (JICA), and the Abu Dhabi Fund for Development with the EIB loan representing 15% of the total cost of the project. The project is expected to reach completion by 2020.46 USD 77.6 million boost for climate change, food security projects: The
World Bank and the Government of Nepal have signed two project agreements, viz. the Nepal Agriculture and Food Security Project (NAFSP) for USD 46.4 million (NPR 4.06 billion) and the Building Resilience to Climate Related Hazards (BRCH) for USD 31.2 million (NPR 2.73 billion), with a combined value of USD 77.6 million (NPR 6.8 billion). The NAFSP aims to improve food and nutrition security as well as livelihood opportunities by targeting the poorest and most vulnerable population groups in mid and far western Nepal. NAFSP also hopes to address climate change through identification and promotion of drought tolerant crop varieties and resilient livestock breeds, which will contribute to smallholder farmers in mitigating or adapting to the impacts of climate change. The NAFSP
is expected to reach out to over 45,000 pregnant and nursing mothers in nearly 100,000 households in the mid and far western regions. The BRCH project on the other hand aims to build resilience as well as adaptive capacity of the hydro-meteorological services by transitioning it into a modern service oriented system. This is expected to increase the accuracy and timeliness of weather and flood forecasts and enhance the government’s disaster preparedness. The project will also support agricultural management information system services to help farmers mitigate climate-related hazards.47 UK aid for Family Planning Project:
The UK Government has agreed to invest USD 23.4 million (NPR 2 billion) to support the Family Planning Project and provide family planning services to 1.5 million women in Nepal. The four year long project will focus on poor, uneducated, socially excluded women and young girls living in remote areas. Through the project, a better range of modern contraceptives will be made available
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Macroeconomic Overview
Figure 5: Comparison of Foreign Cash Grants for the first nine months over four years
Source: Recent Macroeconomic Situation, Nepal Rastra Bank
to the disadvantaged groups who currently have no access to such facilities. The services are to be delivered by the Government of Nepal (GoN), as well as private sector providers. The aid aims at complementing existing efforts and support that the UK Government provides to the GoN’s health sector program.48 US Embassy supports “Teach For Nepal”: The Embassy of the United
States in Nepal has announced a USD 75,806 (NPR 6.6 million) grant in support of Teach For Nepal (TFN), a movement of university graduates and young professionals working towards ending educational inequity in Nepal. The Embassy, though its grant, aims at empowering talented young people in transforming the lives of disadvantaged children in some of Nepal’s most underserved communities. The grant will support the TFN’s initial training and ongoing professional development for the inaugural corps of 30 teaching fellows, in addition to the recruitment of the next cohort of fellows. These 30 young Nepali teaching fellows will be placed in government schools in the
Lalitpur district.49 EU grant for disaster risk reduction:
To support disaster risk reduction in different parts of Nepal, the Humanitarian Aid and Civil Protection Department of the European Commission (ECHO) will be providing a grant of NPR 360 million (USD 4.1 million) under its Disaster Preparedness Action Plan for South Asia. ECHO aims at reducing the vulnerability of rural populations living in areas most affected by natural disasters and those highly vulnerable to earthquakes—notably in urban settings—by increasing the preparedness and the response capacities of local communities and authorities to potential and frequent natural disasters. Though its Disaster Preparedness Action Plan, ECHO aims at conducting pilots and testing replicable community-based disaster preparedness models at the grass root level.50 UK grant assistance for Rural Access Program III: The UK Government,
through the Department for International Development (DFID), has agreed to provide a grant assistance of
USD 58 million (NPR 5.11 billion) to the Government of Nepal for the implementation of the Rural Access Program Phase III. The main objective of the program is to secure sustainable rural livelihoods for poor and disadvantaged groups and improve income opportunities through employment generation, providing sustainable access to markets and improved access to economic opportunities in the rural program area. The program, expected to be completed by March 201751, aims at lifting 20,000 people out of poverty, generate 7.5 million working days, maintain, rehabilitate, upgrade and construct 2400 km of roads and train over 500 government staffs and 200 maintenance committees. The program will be implemented by the Ministry of Federal Affairs and Local Development across the mid and far western districts of Nepal.
Health In the last quarter, the health sector saw a rise in the number of people suffering from eye problems. Also reported were a large number of cases of seasonal allergy and allergic conjunctivitis—health problems that usually arise during the dry seasons. Medical professionals attribute these problems to the dust and irritants emanating from the debris left behind by the government’s haphazard road-widening drive.
Corona Virus spreads globally, Nepal on alert: After the Middle East
Respiratory Syndrome Coronavirus (MERS-CoV) claimed 33 lives and affected 23 people globally, the Government of Nepal has directed hospitals and laboratories to be on high alert. The Epidemiology and Disease Control Division has asked the National Public Health Laboratory
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and Walter Reed Research Unit Nepal to conduct tests of MERS-CoV and H7N9 on patients suffering from various respiratory illnesses. According to World Health Organization (WHO), people with MERS-CoV develop symptoms such as acute respiratory illness with fever, cough, shortness of breath, and breathing difficulties. Most patients are found to have developed pneumonia and also gastrointestinal symptoms, including diarrhea. With the source or mode of transmission currently unknown, WHO suggests prudent measures to be taken to prevent respiratory illnesses such as to avoid close contact, when possible, with anyone who shows symptoms of illness (coughing and sneezing), and to maintain good hand hygiene.52 The Metropolitan Traffic Police Division, in association with Sumeru Hospital, organized a day long free health camp where traffic police personnel, both male and female, underwent health checkups and received medications. Of the 350 personnel who attended the camp, 345 officers were found to be suffering from various health conditions. Ninety seven officers were diagnosed with orthopedic ailments, 76 with ENT conditions, 60 with skin diseases, 51 with bronchitis, 15 with neurological conditions, 31 with reproductive problems and 25 with abdominal ailments at the four-hour camp.53 Since the traffic police personnel are deployed on the road for more than 16 hours a day and are constantly exposed to environmental pollution, doctors stressed on the use of protective masks and goggles for protection from vehicular exhaust that consists of toxic components.
Nepal Medical Association demand safety and security for health workers A study conducted by the Nepal Medical Association (NMA) indicates that 61 major cases of vandalism, threats and physical assault on doctors and health institutions have taken place in the last five years, with over 500 such cases going unreported every year. Manhandling of health personnel was found to be the most common, followed by physical assault and damages to hospital property. Though the Health Professional Protection Act, 2009, makes manhandling health workers and padlocking and vandalism of health institutions a punishable offence that could fetch a one-year jail term or fine up to NPR 300,000 (USD 3,421) or both, depending on the nature of the offence, lack of effective implementation has rendered this Act a toothless piece of legislation.
Concerned by these growing cases of threats and physical attacks on health workers and health institutions, NMA has demanded that the Act be implemented effectively by the government to secure the professional and personal security of health workers. Among the 61 major recorded cases, incidents of verbal spats with health personnel were the highest at 27, followed by 11 cases of physical assault on health personnel. Meanwhile, eight incidents of infrastructure damage, three incidents of damage to vehicles and abduction of nine health personnel were reported during the period. Such incidents not only hamper the health care delivery but also deprive patients of much needed services.55
Health camp for traffic police:
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Rise in the number of people with eye problems: There has been a
surge in the number of people suffering from eye problems. According to the Nepal Medical College and Teaching Hospital, the number of patients suffering from seasonal allergy and allergic conjunctivitis has also increased. This increase in eye related problems is attributed to the onset of the dry season, air pollution and hazy weather, along with the government’s haphazard road-widening drive, failure to remove debris and fix the roads on time. Of the total eye patients visiting the OPD, 10% suffered from allergic problems.54 Hospital to start kidney transplants:
The Department of Health Services (DoHS), under the Ministry of Health and Population (MoHP), has authorized Bharatpur-based College of Medical Sciences (CoMS) to begin
kidney transplantation services. This is for the first time that a non-governmental institution has obtained approval for kidney transplantation services in the country. CoMS has been authorized in accordance with the Kidney Transplantation Regulation 2011, which requires the hospital to inform the DoHS prior to surgeries.56 Appeal to make hospitals smokefree zones: Government authorities
have been urged by health experts to make hospitals areas a smoke-free zone and to fully implement the Tobacco Control and Regulation Act. Tobacco causes 16‚000 deaths per year in Nepal‚ 90% of which is through lung cancer. Tobacco causes hair loss‚ blindness‚ wrinkles‚ loss of hearing power‚ skin cancer‚ teeth damage‚ bone weakness‚ heart ailments‚ stomach ulcers‚ cancer of the cervix and miscarriage, asthma and other respiratory illnesses.57
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Macroeconomic Overview
Government to distribute over 2.5m mosquito nets: The Government of
Nepal is planning to distribute over 2.5 million Insecticide-Treated Bed Nets (ITNs) in its efforts to meet the national target of controlling malaria by 2015. The Epidemiology and Disease Control Division (EDCD) under the Department of Health Services plans to distribute 2 million ITNs in 31 districts affected by malaria, with 1.4 million nets to be distributed in the current fiscal year. According to the EDCD, around 20.5 million people from 65 districts are affected by malaria.58 Dang HIV cases up by 76: According to a recent survey, the number of HIV cases in Dang district has increased by 76 in the last nine months; the total number of HIV cases in the district has now reached 225. Among the victims, 121 are male, 82 women and 22 children. The number of victims in the current year is comparatively higher to that in the previous year. Unsafe physical relations have been found to be the main cause of infection among the teens, whereas infants have acquired the infection from their parents. Till date, 92 HIV infected victims have died in the district.59
plan includes development of the Koteshwor-Kalanki section to eight lanes with a four lane main road, two way service lanes, two way bicycle track and two way pedestrian paths. The first phase is expected to be complete within 40 months.60
during the current fiscal year, provided NPR 310 million (USD 3.5 million) to the project. The World Bank and Japan International Cooperation Agency have expressed interest in the BirgunjPathlaiya and Suryabinayak-Dhulikhel sections respectively.63
Fast track bid deadline extended:
Upper Tamakoshi hydropower project:
The date for submitting bids for the 76 km fast track highway project has been postponed to June 21,61 at the request of the shortlisted Indian firms (Reliance Infrastructure, Infrastructure Leasing & Financial Services and Larson & Turbo). This is the second extension since February.
The Upper Tamakoshi 456 MW hydropower project is expected to complete by April 2015. Currently, 46% of the construction works of the project has been completed.65
K a t h m a n d u - Ku l e k h a n i - H e t a u d a tunnel Road: Nepal Purbadhar Bikas
Infrastructure
Company acquired the final permission from the Ministry of Physical Planning and Transport to construct the 58 km highway at a cost of NPR 34.5 billion (USD 393,521). The project, expected to be complete by 2016, is aimed at reducing the travel distance and fuel consumption. The project is being executed under the “Private, Public and People Partnership Model” based on the Private Financing in Build and Operation of Infrastructure Act 2006. Under this model, the highway will be handed over to the government after 30 years of operation.62
Ring Road Expansion: If all goes as planned, the first phase of the Ring Road expansion plan, which includes road widening, bridge improvement and building of an underpass at Kalanki, will take off soon. The survey work began in April to widen the 2 km Koteshwor-Kalanki section as a model for other road expansions. Under the first phase of the project, 9 km of the road between Koteshwor and Kalanki will be upgraded. The upgradation
Trade Route Improvement Project: In 2010, the Government had decided to widen four major trade routes namely, Surya Binayak-Dhulikhel, BelhiyaButwal, Rani-Itahari and Birgunj-Pathalaiya sections, to boost trade with India and China. However, since the work has not moved ahead as anticipated, the Department of Roads has demanded NPR 1 billion (USD 11.4 million) in the upcoming budget to speed up the widening work. The government,
Manufacturing and Trade The first nine months of fiscal year (FY) 2012-13 has been disappointing for the Nepali manufacturing and trade sector as the total exports increased by just 3.5%, compared to the same period last year, with Nepal’s major exportable products like pashmina, woolen carpets and readymade garments witnessing a plunge in the third quarter of the current FY. The trade deficit also continued to widen further as imports increased by 20.3% during the same period. The continuous decrease in exports in the last 2 quarters of FY 2012-13 can be attributed to the lack of government support for branding and promotion of Nepali products in the international market, labor shortages and increasing production costs, ongoing energy crisis, and unfavorable foreign investment atmosphere in the country.
Balance of Payment record surplus:
During the first nine months of the fiscal year 2012-13, the country’s Balance of Payments (BOP) recorded a surplus of NPR 30.77 billion (USD 350.97 million) compared to a surplus of NPR 92.55 billion (USD 1055.66 million) during the same period the previous year. The workers’ remittances inflow
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into the country recorded a growth of 21.91%, with the figure rising to NPR 302.58 billion (USD 3451.35 million) from that of NPR 248.18 billion (USD 2830.84 million) the previous year.
Figure 6: Export comparison of country’s major export items (based on 6 months data)
The current account posted a surplus of NPR 22.23 billion (USD 253.56 million) in the review period as against a surplus of NPR 41.95 billion (USD 478.49 million) in the same period the previous year. The decline in surplus in the current account was largely due to a substantial rise in the imports of services as well as the slow growth of workers’ remittances in the review period.66 Exports of country’s major exportable items decline: The 3rd quarter ending
of the fiscal year 2012-13 witnessed a huge decline in the exports of country’s major exportable items, i.e. woolen carpets, pashmina and readymade garments (see Figure 6). During the review period, Nepal exported pashmina products worth NPR 122.38 crores (USD 13.96 million) as against NPR 238.26 crores (USD 27.18 million) last year, a decrease of 48.6%. Likewise, exports of readymade garments also took a plunge to NPR 238.81 crores (USD 27.24 million) from NPR 362.08 crores (USD 41.30 million), a decrease of 34%. Similarly, the exports of woolen carpets too witnessed a downfall in the review period, as the country was able to exports goods worth NPR 437.30 crores (USD 49.88 million) as against NPR 513.66 crores (USD 58.59 million), marking a decline of 14.9%67. Trade Deficit widens further: The trade deficit of the country, during the first nine months of fiscal year 2012-13, surged by a whopping 23.6% to NPR. 351.67 billion (USD 4011.29 million) compared to an increase of 18.4%
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Source: “Exports of garment, carpets, pashmina decline in Q1”, The Kathmandu Post, November 27, 2012.
Table 2: Foreign Trade Indicators for the first nine months (in NPR millions) 2010-11
2011-12 R
2012-13 P
TOTAL EXPORTS
47660.7
55242.2
To India
31631.5
To Other Countries
Percent Change 2011-12
2012-13
57158.9
15.9
3.5
37437.4
37580.7
18.4
0.4
16029.2
17804.8
19578.2
11.1
10.0
TOTAL IMPORTS
287968.0
339844.0
408830.1
18.0
20.3
From India
194444.8
219829.1
270221.3
13.1
22.9
From Other Countries
93523.2
120014.9
138608.8
28.3
15.5
TOTAL TRADE BALANCE
-240307.3
-284601.8
-351671.2
18.4
23.6
With India
-162813.3
-182391.7
-232640.6
12.0
27.6
With Other Countries
-77494.0
-102210.1
-119030.6
31.9
16.5
TOTAL FOREIGN TRADE
335628.7
395086.2
465988.9
17.7
17.9
With India
226076.3
257266.5
307802.0
13.8
19.6
With Other Countries
109552.4
137819.7
158187.0
25.8
14.8
*based on customs data R=Revised / P= Provisional Source: NRB Report - Recent Macroeconomic Situation (9 months) 2069/70
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Macroeconomic Overview
during the same period last year (see Table 2 for Foreign Trade Indicators). During the review period, the total export figures were NPR. 57.15 billion (USD 651.87 million) whereas the total imports stood at NPR. 408.83 billion (USD 4663.28 million). Imports from India increased from NPR 219.82 billion (USD 2507.35 million) to NPR 270.22 billion (USD 3082.24 million), an increase of 22.9%, whereas the total imports from other countries increased from NPR 120.01 billion (USD 1368.88 million) to NPR 138.60 billion (USD 1580.92 million), recording an increase of 15.5%. A significant increase in demand for plastic utensils, raw cotton, baby food and milk products, and cement boosted the import figures from India. Likewise, imports from other countries increased primarily due to increase in imports of dry cell batteries, buttons, readymade garments, cardamoms, and shoes and sandals.68 Handicraft exporters identify new markets: The Federation of Hand-
icraft Associations of Nepal (FHAN) is planning to identify new markets in East Europe, Africa, Mexico and Brazil for export of handicrafts from Nepal. Western Europe has been Nepal’s traditional destinations for exports of handicrafts; however, due to recent economic slowdown in the existing markets, FHAN is planning to extend to new markets. Similarly, FHAN has also urged Trade and Export Promotion Centre (TEPC) for a financial assistance of NPR 7.5 million (USD 86,500) to study the market potential of new markets and organize handicraft fairs in the new identified destinations. Likewise, the SAARC secretariat has also shown
positive interest in assistance of development of required infrastructure for a development centre within the premises of Department of Cottage and Small industries, Tripureshwor, and will provide NPR 200 million (USD 2.31 million) to develop the handicraft design centre.69 Nepal to sign trade agreement with Turkey: The Government of Nepal
(GoN) has initiated process to sign a bilateral trade agreement with Turkey. The Turkish Government expressed its interest to partner and work with Nepal and had forwarded a proposal and a draft agreement, which seeks to establish trade, investment and economic relationship between the two countries. International Monetary Fund (IMF) has recognized Turkey as one of the emerging economies and one of the world’s newly industralized countries. Turkey being the world’s leading producers of agricultural products, textiles, motor vehicles, ships and other transportation equipment, construction materials, consumer electronics and home appliances, among others, would help both the countries in trade and promotion of each other’s products. The Turkish Government has also proposed to the GoN to establish Nepal-Turkey Joint Economic Commission to explore trade and investment-related opportunities and to identify and resolve challenges between the two countries. They have also committed to promote Nepal’s trade and strengthen Nepal’s private sector capacity in its proposed draft. Till date, the Government of Nepal has signed bilateral agreements with 17 countries, including India, the USA, China, Bangladesh, Czechoslovakia, England and Poland, among others.70
Exports to Afghanistan witness a surge: Nepal’s export to Afghanistan rose
a whopping 895% during the first nine months of fiscal year 2012-13. Nepal exported goods worth NPR 462.07 million (USD 5.33 million) in the first nine months, a whopping increase compared to NPR 46.2 million (USD 0.53 million) made from exports to Afghanistan during the same period last year. Similarly, exports to Turkey and China surged immensely by 188.2% and 175% respectively while shipments to traditional exports destinations of the Canada, USA and Germany dropped by 28.8%, 9.2% and 16.3%. The country’s major exports in the first nine months have been ginger, meat and edible meat products, tubes, pipes and hollow profiles of iron and steel, tea, lentils and Nepali handicrafts.71
Real Estate Real Estate shows sign of recovery outside the capital: During the first
six months of the current fiscal year 2012-13, registration of real estate properties increased by 8.7% in Kathmandu, Biratnagar, Janakpur, Birgunj, Pokhara, Siddharthanagar, Nepalgunj and Dhangadi. Nepalgunj recorded the highest property registration growth of 18.6%, followed by Biratnagar, Pokhara, and Birgunj which registered a growth of 17%, 14.2% and 6.5% respectively. Kathmandu recorded the lowest growth of 4.8%.72 A pilot phase automation program has been initiated by the Kathmandu Metropolitan City (KMC) and Lalitpur sub-Metropolitan City (LSMC) to introduce “Automated Building Plan Automation of building permits:
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Approval and Monitoring System” (ABPMS). The ABPMS program is being financed by Comprehensive Disaster Risk Management Programme (CDRMP) under the United Nations Development Programme (UNDP).73 Safer building guidelines: In view of the unsafe buildings that have been built without adhering to the national building code, the Department of Urban Development and Building Construction (DUDBC) has prepared a draft guidelines on retrofitting in collaboration with CDRMP, MRB & Associates, and Center of Resilient Development.74
Following the government’s announcement of its plan to spend NPR 450 million75 (USD 5.1 million) in purchase of 25 houses and 25 apartments, 10 property developers have filed Expression of Interest (EOI) applications at the Ministry of Urban Development to sell houses and apartments for VVIPs, VIPs and high ranking government officials. Former presidents, vice presidents, prime ministers, judges and members of constitutional bodies appointed after April 2007 would be eligible for such facility. Housing for government officials:
March/April compared to the value of the previous month of this fiscal year.
Migrant workers growth more than remittance growth: The number of
migrant workers leaving the country for foreign employment has reached 588,087 in the first 10 month of FY 2012-13. While for the month of April, remittance figures increased by 14%, the number of migrant workers, on the other hand, increased by 15% (see Figure 8). Delay in endorsing directives to regulate foreign employment sector:
Delay in endorsing four major directives that are aimed at regulating the foreign employment sector has led to migrant workers receiving the brunt of the setback. The Department of Foreign Employment was set to endorse drafts concerning the Standard Operating Procedures (SOP), Agency Agreement, Labor Agreement and a new guideline on license after the Department of Foreign Employment had forwarded these drafts to the Ministry a year ago. The drafts were aimed at providing a legal ground
for better and effective coordination among stakeholders to reduce workers’ obligation to visit several offices to do a single work. Government officials have recognized the importance of the directives in regulating the sector, but stated that involvement of multi-stakeholders has delayed the overall process. Representatives of MOLE also assured that the SOP would come into effect very soon.77 Personal consumption remittance: Increased
fuelled
Figure 7: Monthly Inflow of Worker’s Remittance for first 9 months of FY 2012-13
Remittance Remittance inflows to Nepal reached NPR 302.6 billion (USD 3.45 billion) in the first nine months of the fiscal year 2012-13, registering an increase of 21.9% as against an increase of 36.5% during the same period of last fiscal year. In US dollar terms, remittance inflow went up by 10.7% to USD 3.47 billion (NPR 304.2 billion) compared to an increase of 25.1% in same period of the previous year76 (see Figure 7). On a monthly basis, remittance inflows increased by 13.7% in
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by
remittance inflows are only fuelling consumption, especially imports, as per a study named ‘Assessment of Remittance Policies and Program in Nepal’ conducted by the International Migrants Remittances Observatory. The study stated that while in the short run, remittance inflow led to increased investment, imports and income, the long run impact was higher amounts of consumption. It further stated that an increment in remittance by NPR 1 million (USD 11,400) leads to additional consumption of NPR 300,000 (USD 3,421) and additional investment of NPR 710,000 (USD
Source: Current Macroeconomic Situation of Nepal Series, Nepal Rastra Bank
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Figure 8 : Monthly Breakdown of Migrant Workers Seeking Foreign Employment in the first 10 months of FY 2012-13
Table 3: New Minimum Wage for Gulf Countries Country
New Minimum Wage Amount in NPR
Amount in USD
Qatar
28‚934
330
Saudi Arabia
26‚290
300
UAE
23‚409
267
Kuwait
18‚447
210
Telecommunication and Media
Source: Monthly Progress Report for Preapproval Details for Magh 2069, Department of Foreign Employment
8,098).78 During the dissemination of the findings of the report, Yubaraj Khatiwada, governor of Nepal Rastra Bank, mentioned that income from remittance, which is mostly spent on short-term consumption, needs to be invested in human capital development such as education which will reap more benefit later on. Remittance fuelled widens trade deficit:
consumption
The total trade deficit during the first nine months of FY 2012-13 surged by 23.6% to NPR 351.67 billion (USD 4 billion) compared to an increase of 18.4% during the same period of the previous year.79 The positive correlation shows that both trade deficit and remittance income are moving in near perfect sync. Remittance has increased the income of households which is mostly spent in consumption‚ increasing the demand for commodities. However, since Nepal’s manufacturing capacity is limited‚ demand for imported goods has soared without actually boosting the national productivity. As per the
Central Bureau of Statistics‚ only 4% of the remittance is used in capital formation‚ which needs to be increased to strengthen the economy. Remittance to increase on account on increased salaries: As a result of
the hike in salaries in Gulf countries, namely, Qatar‚ Saudi Arabia‚ the United Arab Emirates (UAE) and Kuwait, remittance inflows for FY 2012-13 are projected to increase by NPR 35.9 billion (USD 409.4 million) from last fiscal year. The Ministry of Labor and Employment hiked the minimum wages for these countries between October 2012 and February 2013 (see Table 3 for New Minimum Wage for Gulf Countries). Gulf countries have always been the top destination for Nepali migrant workers which will positively impact remittance inflows. However, manpower agencies have refuted the projections stating that only 20% to 50% of the demand for migrant workers is being met by the new wage structure.80
Unlike other sectors in Nepal, the telecom sector has recorded an unprecedented growth. The teledensity increased from 28.5%81 in April 2010 to 75.46%82 in April 2013. In November 2010, the sector crossed the 10 million subscriber83 mark. Today, the number of subscribers stand at 19.99 million.2 The total number of subscribers for fixed line users during April 2013 stood at 833,3702, a nominal growth of 0.88% in the last three years (April 2010). Similarly, the total number of mobile subscribers during April 2010 stood at 6.82 million which increased to 17.74 million in April 2013, recording a growth of 160%. Nepal Telecom (NT) added a net 3.53 million mobile subscribers, including CDMA users, in the last three years’ time while fellow GSM provider Ncell added the single largest net gain of 7.37 million2 mobile users during the same period, i.e. April 2010 to April 2013. Currently, Nepal Telecom and Ncell market share stands at 44% and 49% respectively (see Figure 10 for market share of all telecom operators). The data/internet services penetration rate has increased from a mere 3% in April 2010
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to 25% in April 20132. Figure 9 shows the growth trend of telephone and data service penetration.
Chaudhary Group purchases 80% stake in STM Telecom: As per the share
purchase agreement, the business house purchased 8,000 shares worth USD 1.5 million (NPR 131.5 million) under the CG Telecom brand. AR Investments owns the remaining 20% stake. STM Telecom is the country’s first rural telecom service operator which operates under the Gramintel brand. Gramintel provides telecom services to 5,3632 subscribers across 628 village development committees (VDC) in 52 districts.84 The group plans to make initial investment of NPR 2 billion (USD 22.8 million) in STM. The government’s decision to issue unified Unified Telecom License:
license to United Telecom Limited (UTL) and Smart Telecom, which was expected to pave way for more GSM mobile services, has hit a brake. The Supreme Court, in April, passed a stay order on the issue of license to these two companies for the operation of multiple services under a single permission (Unified Telecom License). The stay order was in response to two writs that contested the legitimacy of the current Nepal Telecommunication Authority Board (NTA) that was formed in the absence of NTA chairman. The Supreme Court had, a day earlier, issued an interim order to halt the implementation of the spectrum policy “Radio Frequency Distribution and Pricing Policy 2012”. The policy has a provision to assign frequency for telecom companies acquiring the unified license.85
Quality test of telecom services: Con-
cerned by the deteriorating quality of wireless telecom service provided by the telecom companies, the Nepal Telecommunications Authority (NTA) has invited Expression of Interest (EOI) from interested consulting firms to conduct quality test of these services in the country. The Quality of Service survey will examine the services of Nepal Telecom, Ncell and United Telecom in 11 districts of Nepal.86
Tourism The government’s failure to address the problems faced by the adventure tourism segment, coupled with the use of inappropriate and traditional methods of marketing strategies, resulted in the country witnessing a drop of 3.2% in the arrivals of tourists to
Figure 9: Growth Trend of VoiceTelephone and Data Service Penetration
Source: Nepal Telecommunications Authority “MIS report dated February 2013”
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Figure 10: Market Share of Telecom Operators
Figure 11: Tourist Arrivals by air (March to May, 2013)
Source: Nepal Tourism Board
Source: Nepal Telecommunication Authority
Nepal by air during March to May 2013, as compared to the same period last year. A total of 160,717 tourists visited Nepal during the review period, with visitors from India, China, UK and the USA accounting for the highest volume of inflow into the country (see Table 4).
During March to May, a total of 160,717 tourists visited the country by air, a decrease of 3.2% as compared to the same period last year. Though Indian and Chinese tourists accounted for the highest share in terms of volume, there was a dip in arrivals from India by 29.76%. Also, Polish tourist arrivals witnessed a huge dip of 70% to 911 arrivals. Arrivals from Malaysia saw a huge growth; an increase of 58% during the review period.87
Tourist arrivals see a dip:
Trekkers flow to Annapurna trekking route rise: The number of tourists
trekking to the Annapurna Conservation Area (ACA) witnessed an exponential growth in 2013. During February and March, ACA wit-
nessed an inflow of 9,364 tourists as compared to 7,376 tourists during the same period last year, registering an increase of 27%. Annapurna trekking route is considered one of the world’s top 10 trekking routes and is the second famous route in Nepal after the Everest region. Annapurna Conservation Area witnessed a total flow of 44,531 tourists in 2012 as compared to 39,054 tourists in 2011. The trekking route begins from Nayapul of Kaski district and ends at Upper Mustang through Ghandruk, Chhomrung and Annapurna Base Camp.88 Tourist length of stay falls in 2012: As
per the Tourism Statistics Report 2012, the average length of stay of tourists in 2012 has slipped to 12.87 days from 13.12 days in 2011. This has been attributed to a shift in the country’s tourism demand to mass tourism, especially due to higher arrivals from India and China. Amongst all the tourists visiting Nepal, Indian tourists are the lowest in terms of length of stay in Nepal while China ranks third. Indian and Chinese tourists accounted for 30% of the total arrivals to Nepal in 2012. Visitors from these two neighboring countries are
particularly concentrated in the urban areas like Kathmandu and Pokhara, and they spend less time in the country as compared to other tourists who are more focused on trekking. As per the statistics of Ministry of Culture, Tourism and Civil Aviation (MoCTCA), 48% of the total tourists visited Nepal for travel and holidaymaking, 14% for trekking and mountaineering—a segment which requires tourists to spend a long period in the country, and 13% for pilgrimage.89 TAAN to explore new trekking routes in Humla: Trekking Agencies’ Association
of Nepal (TAAN) is preparing to recommend new trekking trials along the Great Himalayan Trial (GHT) in the Humla district. A 7 member team visited the region in April. The exploration trip was organised by TAAN and supported by GHT Development Programme under SNV Nepal.
TAAN is set to design a new trekking itinerary for the Humla–Mugu region and develop a trekking map, along with a documentary, to promote the region.90 National Tourism Plan in pipeline:
The Government of Nepal is pre-
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Macroeconomic Overview
Table 4: Total tourist arrivals by air, February 2013 May
Total ( Jan-May)
Country of Nationality
% Change
% Share ‘13 % Change
2012
Jan - May
2012
2013
2013
ASIA (SAARC)
21,876
20,103
-8.1%
84,074
66,251
-21.2%
27.5%
ASIA (OTHER)
5,367
7,932
47.8%
49,966
59,096
18.3%
24.5%
EUROPE
7,518
7,267
-3.3%
66,520
61,976
-6.8%
25.7%
OCEANIA
1,158
1,384
19.5%
7,973
9,773
22.6%
4.1%
AMERICAS
3,847
4,483
16.5%
21,739
23,670
8.9%
9.8%
OTHERS
3,054
2,987
-2.2%
20,509
20,404
-0.5%
8.5%
Total
42,820
44,156
3.1%
250,781
241,170
-3.8%
100.0%
Source: Nepal Tourism Board
paring to formulate a national tourism plan incorporating the Tourism Policy 2065, Vision 20, the country’s threeyear interim plan and related acts for sustainable and strategic development of the tourism industry. The Netherlands Development Organisation (SNV) Nepal is providing technical assistance in preparation of the strategic document. The master plan to be developed would include three major strategies to guide the country’s development in the tourism arena – development, promotion and marketing .The government has earmarked to complete the tourism master plan by 2014 and has planned to hire national and international experts in formulation of the strategic document.91 Turkish Airlines plans direct flights to Kathmandu: Turkish Airlines, one of
Europe’s leading airlines, is expanding its fleet to the Nepali skies with its maiden flight from Istanbul to Kathmandu on September 1, 2013. The airlines plans to have four direct flights a week. Nepal and Turkey had signed an Air Service Agreement (ASA)
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| docking nepal’s economic analysis
in September 2010 to operate 14 flights per week between the two countries. Zenith Travels has been appointed the general sales agent (GSA) in Nepal for all the sales and marketing activities from March 1.92
Group led by Shiv Kumar Agarwal, has signed a management agreement with a subsidiary of Marriott International, a leading hotel chain based in Maryland, US, to open a four star hotel—Fairfield Inn—in Kathmandu.
Tourism sector accounted for 3.6% of total employment in 2012: The Travel
The proposed 10 storey hotel, currently under construction in Thamel, is spread across 13,700 sq. ft. (0.30 acres). The Group has plans of commercially operating the hotel by the beginning of 2016. With an investment of over NPR 650 million (USD 7.41 million ), the hotel will have 108 rooms, an all-day dining restaurant with outdoor seating, a bar and a fitness center. Marriott International will look after the management of the hotel. The promoters of MS Group hope to attract additional demand for tourism in Nepal by offering the branded, quality and consistent hospitality excellence that the Fairfield by Marriott brand offers.
and Tourism sector accounted for 3.6% (553,500 jobs) of the total employment in Nepal in 2012. The total employment includes employments in hotels, travel agencies, airlines and other passenger transportation services sector, restaurants and other leisure industries supported by the tourists. As per the Travel and Tourism Impact 2012 published by the World Travel and Tourism Council (WTTC), the total employment generated by the travel and tourism sector is expected to rise by 7% by 2013 and further rise by 3.4% per annum to reach 8,29,000 jobs by 2023.93 Marriott enters Nepal: Nepal Hospitality
Group (NHG), a subsidiary of the MS
Similarly, MS Group is also planning to open a five star hotel in Naxal, Kathmandu, for which land has already been acquired.94
docking nepal’s economic analysis
Macroeconomic Overview
Macroeconomic Outlook Agriculture, the sector which contributes most to the country’s GDP (39%) and provides employment to 66% of the total population, recently witnessed a financing boost, thanks to the central bank’s directive to financial institutions to float a minimum of 10% of their total lending to the agriculture sector by fiscal year 2013-14. What also witnessed an increase was the import of chemical fertilizers— Nepal imported chemical fertilizers worth NPR 11.47 billion (USD 126 million) in the first 9 months of the current FY 2013-2014—costing the country a huge amount of foreign currency in the process.
the onset of the monsoon season. However, without political stability and willingness from the government and NEA to take off new projects, the situation is not likely to improve.
Meanwhile, to promote organic farming, the government has introduced perks and subsidies, such as low interest rate on loans and 50% subsidy on the purchase of equipment required for setting up of organic fertilizer production plants. The government has already applied to the European Union for quality certification of Nepali honey and organic agriculture products in a bid to introduce Nepali agriculture products in the international market. Yet, despite these measures, output of organic agriculture products failed to see an increase in the last quarter. With growing dependence on chemical fertilizers, and the government’s pending decision on a blanket ban on import of genetically modified crops, it remains to be seen if Nepal’s organic dreams will ever be realized.
Despite the government’s initiative to promote and identify new market destinations for exports of Nepali products, the continuous fall in the export figures is something the government needs to ponder upon. Trade experts have long been demanding that the government implement the trade sector-wide approach (SWAP) to enhance the effectiveness of Official Development Assistance (ODA) and Aid for Trade (AfT). The trade SWAP is one of the major initiatives that the government needs to take to make Nepal Trade Integration Strategy (NTIS) 2010 a success. Likewise, exports of honey, instant noodles, handmade paper and paper products, and cardamom, which have been identified as exportable goods in the NTIS, have also not been able to generate much revenues, and export of the same have been witnessing a negative growth.
The performance of the education sector in the last few months was dismal. The major factors contributing to this is political interference and nepotism in the functioning of the education system, widespread corruption, general disregard for the basic wellbeing of students, and a marked lack of commitment among the teachers. Quality education and an ethical support system within this sector is the need of the hour. But these cannot be achieved unless strict monitoring and stringent measures are put into place to deter those flouting the rules. Shortages of fuel supply will continue in the next quarter mainly due to two reasons, the inability of NOC to pay IOC on time due to the heavy losses and due to dealers halting supply to meet their demands. Though the existing laws do not allow strikes that affect distribution of petroleum products, the government has failed to effectively implement them. The losses of NOC cannot be mitigated since political parties do not allow NOC to adjust prices according to the international market. Also, in the absence of competition, there is no such incentive for the state owned monopoly to cut costs, as a result of which losses of NOC will not be curbed anytime soon. On a positive note, the load shedding hours are expected to reduce with
Meanwhile, despite the Government of Nepal’s attempt at funneling foreign aid into high priority projects, dissemination is still fragmented. Fragmentation in aid has resulted in higher spending in administration and less in groundwork, resulting in increased management overheads, duplication, wastage of resources and project delays.
Over the last four years, the housing sector has gone through possibly the hardiest times. The positive growth this sector has recorded in recent times can be attributed to Nepal Rastra Bank’s directive to permit loans up to NPR 10 million (USD 114,064) under the home loan category. Despite Nepal Rastra Bank’s directive, the sector has recorded a slow growth due to people waiting for the prices to decrease to a more realistic figure. Besides, housing developers concentrate on developing homes that cater to the upper section of the society which is beyond the purchasing power of low and middle income population. The introduction of Automated Building Plan Approval and Monitoring System by Kathmandu Metropolitan City and Lalitpur sub-Metropolitan City will not only simplify the process of acquiring building permits but also integrate safer building codes into the existing building approval system, make work more transparent, ensure up to date records of physical infrastructures, help generate urban data, record the physical changes in core areas, help in land use zoning, and facilitate in monitoring building by-laws and national building code.
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Macroeconomic Overview
During the first nine months of FY 2012-13, the balance of payments recorded a surplus of NPR 30.7 billion (USD 350.1 million) compared to a surplus of Rs. 92.55 billion (USD 1.1 billion) during the same period of the previous year. The decrease in surplus is largely due to a substantial increase in imports and slow growth of remittance in the review period. With an increase in remittance, and given the current scenario of dependence on imports, Nepal trade deficit will continue to rise in the next quarter. Nonetheless, a higher increase in remittance will help boost the surplus in the balance of payments. The government should place more importance on formalizing the foreign employment sector with a view to promoting formal channels, increasing and enhancing productive role of remittance, and ensuring the security of migrants. In the telecommunication sector, the increase in teledensity and the penetration of internet services is a positive reflection of Nepal’s growth in this industry, its ability to provide services and access to information. However, there is need for other telecom operators to enter the GSM mobile segment so as to provide users an alternative to break away duopoly of Nepal Telecom and Ncell. Further, increased number of telecom operators will usher competition
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| docking nepal’s economic analysis
between existing players to provide reduced tariff rates and better quality of facilities to its customers. Though the country witnessed a drop in the tourists’ average length of stay from 13.12 days in 2011 to 12.87 days in 2012, there has been an increase in the total number of tourists. With the Ministry of Culture, Tourism and Civil Aviation planning to develop a new trekking route connecting the four hills of the capital valley—Phulchowki, Shivapuri, Champadevi and Chandragiri—we can expect the next tourist season to see a better inflow of tourist. Similarly, to attract more tourists to the area, the Pashupati Area Development Trust has requested the government for over NPR. 1 billion (USD 11.41 million) to improve upon the infrastructure in the surrounding areas. They plan to pool in 14 ropanis 95 of the area surrounding the area and ban the entry of vehicles once the renovations are complete. For the tourism sector to perform well, the government needs to urgently work on some major priority areas, including the promotion of adventure sports and the long awaited selection of the CEO of the Nepal Tourism Board.
docking nepal’s economic analysis
Macroeconomic Overview
Review
NEFPOrt issue 13 JULY 2013
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R ev i e w
Financial Markets Bank and Financial Institutions continue to showcase strong performance amidst gloomy economic performance and bleak political outlook.
Trends in deposit, credit and liquidity The deposit mobilization of BFIs at the end of the first nine months of the current FY 2012-13 demonstrates slow deposit growth rate as compared with the same period of the previous fiscal year. As per the report published by Nepal Rastra Bank (NRB), the deposit mobilization of BFIs increased by 8.4%, i.e. NPR 85.44 billion (USD 974.56 million), as compared to a growth of 13.5%—NPR 110.73 billion (USD 1.26 billion)—during the same period last fiscal year. During the review period, deposit mobilization of commercial banks, development banks and finance companies increased by 7.5%, 10.9% and 7.3% respectively as compared to a growth of 15.8%, 10.8% and 1.6% respectively during the same period last fiscal year. The deposit mobilization of commercial banks decreased substantially during the review period while the finance companies enjoyed positive response from depositors largely due to low interest rate offered by BFIs in deposits. The net liquidity of commercial banks stood at 30.18% at the end of third quarter which is 10.18% higher than the required level, i.e. 20%, thus easing the credit flow during the review period. The banking credit grew by 14.9%—NPR 143.94 billion (USD 1.64 billion)—as compared to a growth of 10.1%—NPR 86.49 billion (USD 986.54 million)—during the same
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| docking nepal’s economic analysis
period in the previous fiscal year. Amongst the BFIs, commercial banks saw the highest growth of credit mobilization by 14.3%, followed by 10.8% in development banks and 8.1% in finance companies. Similarly, the Central Bank mopped up net liquidity equivalent to NPR 8.5 billion (USD 96.95 million) via open market operations during the review period, while it injected net liquidity of NPR 180.69 billion (USD 2.06 billion) through the net purchase of USD from the foreign exchange market (commercial banks). Also, during the review period, the central bank purchased Indian Currency (IC) equivalent to NPR 198.27 billion (USD 2.26 billion) by selling USD 2.28 billion (NPR 199.88 billion) in the Indian money market.
Merger Drive After NRB introduced the Merger Bylaws in May 2011 with the objective to develop, expand and maintain stability in the financial system, the Nepali banking system has witnessed substantial number of mergers. Till date, there have been 16 mergers in the banking sector wherein 13 mergers have occurred after the introduction of the merger bylaws. Similarly, two commercial banks have
already received final approval from NRB for merger and 26 other BFIs have received Letter of Intent (LOI) from NRB for merger. Likewise, number of BFIs are currently engaged in merger exercise to formally begin merger process with NRB’ consent. In the current merger drive, two large scale ‘A’ class commercial banks—Nepal Industrial and Commercial (NIC) Bank and Bank of Asia Nepal—have also come together for merger and have already received final merger approval from NRB. The merger between these two banks has send positive message across the banking industry about merger. Likewise, Global IME bank which is the outcome of merger between Global bank, IME financial institution and Lord Buddha finance has been the most active institution towards merger as Global IME bank has further signed agreements with Social Development Bank and Gulmi Development Bank for merger. During the period where existence of large number of BFIs in a relatively smaller market is being questioned, merger has emerged as a primary solution for minimizing the numbers. Since mergers provide opportunities for both consolidation and growth, there has been a significant increment and enthusiasm for merger between BFIs. One of the primary
docking nepal’s economic analysis
Review
reasons for merger between BFIs has been the capital requirement stipulated by the central bank, as BFIs need to increase their capital base by the end of the current FY. Hence, most of BFI have opted for merger as the best solution since they are left with no other options. Besides capital requirement, the other common reasons for merger are financial strength and growth, economies of scale, merger incentives, provision for forceful merger and common shareholders.
Table 5: List of BFIs currently under merger process Name of merging BFIs
Status
1
Premier Finance and Imperial Finance
LOI
2
Hama Merchant & Finance and NDEP Development Bank
LOI
3
Public Development Bank and Siddhartha Development Bank
LOI
4
Mankamana Development Bank, Infrastructure Development LOI Bank, Yeti Finance, and Valley Finance
5
Five Regional Rural Development Banks
LOI
NRB has recently published the Financial Stability Report 2012; this is the first time that the central bank has published a report of such nature and the assessment is based on the data as of mid-July 2012. As per NRB, the report outlines NRB’s assessment of risks and threats that could jeopardize financial stability in the country and the capacity of the system to withstand potential shocks. It also reports the regulatory and supervisory developments, including the measures undertaken by the central bank to ensure financial stability. The report aims to promote greater understanding among various stakeholders of the financial system on issues affecting financial stability.
6
Prabhu Finance, Baibhava Finance and Samabriddhi Development Bank
LOI
7
Araniko Development Bank and Surya Development Bank
LOI
8
Central Finance and Patan Finance
LOI
9
Diyalo Bikas Bank and Professional Bikas Bank
LOI
10
Bageshowri Development Bank and Shangrila Development Bank
LOI
11
Royal Merchant Banking and Finance, Rara Development Bank and Api Finance
MOU
12
Vibor Bikas Bank and Kist Bank
MOU
13
Biratlaxmi Development Bank and Khandbari Development Bank
MOU
14
Arun Finance, Progressive Finance and Lalitpur Finance
MOU
According to the report, the stress tests (a risk management tool used to evaluate the potential impact on a bank of a specific event and/or movement in a set of financial variables) results of commercial banks as of mid-July 2012 on credit, liquidity and market shocks reveal banks’ ability to withstand high shocks.
15
Global IME Bank and Social Development Bank
MOU
16
Global IME Bank and Gulmi Development Bank
MOU
17
NMB Bank and Clean Energy Development Bank
MOU
18
Sagarmatha Merchant and Finance and Reliance Finance
MOU
19
Khadbari Bikas Bank and Birat Laxmi Finance
MOU
20
Kathmandu Finance and Civil Merchant Finance
Merger Process Cancelled
Financial Stability Report 2012
• Credit Shock: Among the 32 existing commercial banks, a standard credit shock would push capital below the regulatory minimum in 22 banks, and 2 commercial banks would be undercapitalized. Standard credit shock has
Note: MOU-Memorandum of Understanding reached between merging entities to start merger process, LOI-Letter of intent received from NRB to begin formal merger process.
NEFPOrt issue 13 JULY 2013
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29
been defined as 15% of performing loans deteriorating to substandard, 15% of substandard loans deteriorating to doubtful, and 25% of doubtful loans deteriorating to loss and 5% of performing loan deteriorating to loss.
Table 6: List of merged BFIs till date Name of merging BFIs
New Entity
Merger year
1
Laxmi Bank and Hisef Finance
Laxmi Bank
FY 04/05
• Liquidity Shock: Sustained deposit withdrawals over five consecutive days would render 5 banks illiquid, and liquidity ratios of 17 banks would fall below 20% in the event of sudden large withdrawals by institutional depositors. Standard withdrawal shock is the withdrawal of customer deposits by 2% and 5% in the first two days and 10% each in the following three consecutive days.
2
Nepal Bangladesh Bank and NB Finance
Nepal Bangladesh Bank
NA
3
Narayani Finance and National Finance
Naryani National Finance
FY 09/10
4
Himchuli Development Bank and Birgunj Finance
H&B Development Bank FY 10/11
5
Nepal Sri Lanka Merchant Banking & Finance and Nepal Bangladesh Bank
Nepal Bangladesh Bank
• Market Shock: All the commercial banks’ (excluding two state owned banks) Capital Adequacy Ratio (CAR) was above the regulatory requirement when calibrate through interest rate, exchange rate and equity price shocks.
6
Kasthamandap Development Bank and Kasthamandap Shikhar Finance Development Bank
FY 11/12
7
Business Development Bank and Universal Finance
Business Universal Development Bank
FY 11/12
8
Global Bank, IME Financial Institution and Lord Buddha Finance
Global IME Bank
FY 11/12
9
Pashupati Development Bank and Uhdyam Bikas Bank
Axis Development Bank FY 11/12
10
Machhapuchchhre Bank and Standard Finance
Machhapuchchhre Bank
FY 11/12
11
Annapurna Development Bank and Suryadarshan Finance
Supreme Development Bank
FY 11/12
12
Infrastructure Development Bank and Swastik Merchant Finance
Infrastructure Development Bank
FY 11/12
13
Prudential Finance and Gorkha Finance
Prudential Finance
FY 12/13
14
Alipic Everest Finance, Butwal Finance and CMB Finance
Synergy Finance
FY 12/13
15
Vibor Bikas Bank and Bhajuratna Finance
Vibor Bikash Bank
FY 12/13
16
Resunga Bikash Bank and Shine Development Bank
Shine Resunga Bikash Bank
FY 12/13
17
NIC Bank and Bank of Asia Nepal*
NIC Asia Bank
Pending
Commercial banks’ Third quarter performance analysis Commercial banks continued to exhibit strong performance at the end of the third quarter of the current FY. As per the published unaudited data for the third quarter of the current FY, of the 32 banks, 29 banks saw their net profit increase while 31 banks saw their operating profit increase as compared to the same quarter in the previous fiscal year. During the period, the operating profit margin of commercial banks rose by a staggering 71.51%, whereas the net profit margin grew by 45.2%. The commercial banks deposit grew merely by 2.8% while its credit grew by 5.1% during the third quarter of the current FY. Commercial banks continued to decrease their cost of fund, the average cost of fund of commercial banks stood
FY 10/11
Note: *Final merger approval from NRB has been received
243.7
376.8
185.4
276.0
235.6
200.9
176.1
168.4
140.0
131.2
160.2
247.9
160.4
169.4
161.9
225.3
210.2
234.0
200.0
201.5
200.0
200.0
200.0
200.0
163.1
140.0
200.0
108.0
201.6
Nabil Bank
Nepal Investment
Standard Chartered
Himalayan Bank
Nepal SBI Bank
Nepal Bangladesh
Everest Bank
Bank of Kathmandu
NCC Bank
NIC Bank
Lumbini Bank
Machhapuchchhre
Kumari Bank
Laxmi Bank
Siddhartha Bank
Global IME Bank
Citizens Bank
Prime Commercial
Bank of Asia Nepal
Sunrise Bank
Grand Bank
NMB Bank
KIST Bank
Janata Bank
Mega Bank
Commerz & Trust
Civil Bank
Century Bank
Sanima Bank
444.4
2,378.7
850.2
947.4
Agriculture Dev. Bank
Total 7,692.5
-759.3
177.3
Rastriya Banijya Bank
-443.2
32.5
9.9
11.6
9.6
28.4
18.6
18.9
52.9
32.3
35.5
29.7
63.9
40.9
64.7
84.8
88.5
94.2
32.3
54.8
114.8
76.5
144.4
345.0
125.5
139.1
259.0
311.9
363.0
453.6
Reserve & Surplus
Nepal Bank
Public Sector Banks
Paid up Capital
Bank
3 QTR
4,723.4
8,588.7
5,706.3
1,617.8
935.5
1,153.6
896.3
1,284.2
1,200.8
2,102.0
1,964.1
1,648.2
2,217.1
1,577.2
2,567.0
2,142.1
3,033.5
2,723.2
2,420.8
2,392.4
2,474.0
966.0
2,336.2
1,853.5
2,415.3
5,129.3
1,470.8
5,366.7
4,791.6
3,825.5
5,852.5
90,586.1 93,135.4
4,497.2
8,616.7
5,701.4
1,447.1
816.1
1,100.2
839.7
1,182.7
1,042.5
2,098.4
1,705.2
1,629.9
2,215.8
1,608.3
2,439.5
1,963.6
2,936.6
2,671.4
2,371.7
2,342.3
2,255.2
920.1
2,213.8
1,858.6
2,397.4
4,922.3
1,510.5
5,409.9
4,753.7
3,705.0
5,513.7
5,759.8
2 QTR
5,899.6
FY 12/13
FY 12/13
Deposit
2.8
5.0
-0.3
0.1
11.8
14.6
4.9
6.7
8.6
15.2
0.2
15.2
1.1
0.1
-1.9
5.2
9.1
3.3
1.9
2.1
2.1
9.7
5.0
5.5
-0.3
0.7
4.2
-2.6
-0.8
0.8
3.3
6.1
-2.4
% Change
68,364.5
3,600.4
4,320.5
3,241.7
1,299.3
720.9
978.2
786.0
1,088.9
1,000.4
1,758.7
1,477.1
1,367.4
1,779.0
1,430.9
2,039.3
1,689.5
2,391.7
2,157.2
1,822.1
1,917.5
1,861.3
836.9
1,784.1
1,562.2
2,115.9
4,219.3
1,239.4
2,809.6
3,896.3
1,982.4
4,644.9
4,545.5
2 QTR
FY 12/13
71,823.1
4,684.3
4,509.7
3,520.8
1,420.2
821.4
1,053.6
847.0
1,161.9
1,111.5
1,713.1
1,589.4
1,403.6
1,779.0
1,417.9
2,139.2
1,806.4
2,490.7
2,221.0
1,915.0
1,976.2
2,006.9
898.2
1,881.8
1,591.5
2,162.6
4,185.4
1,281.4
2,855.0
4,018.0
2,157.4
4,693.0
4,510.0
3 QTR
FY 12/13
5.1
30.1
4.4
8.6
9.3
13.9
7.7
7.8
6.7
11.1
-2.6
7.6
2.6
0.0
-0.9
4.9
6.9
4.1
3.0
5.1
3.1
7.8
7.3
5.5
1.9
2.2
-0.8
3.4
1.6
3.1
8.8
1.0
-0.8
% Change
Loans and Advances
956.5
-23.1
1.8
22.7
12.3
-3.6
1.1
0.6
6.2
6.9
-15.4
8.2
18.7
-6.1
18.3
26.1
11.9
26.8
23.2
38.5
13.2
-5.4
14.8
41.2
9.7
61.1
123.1
20.8
44.3
88.7
123.4
85.0
161.5
3 QTR
FY 11/12
1,640.5
85.8
61.1
2.5
31.3
3.7
13.3
9.0
20.5
19.8
-6.7
35.0
21.2
19.3
18.4
52.2
31.5
44.5
45.9
40.8
26.4
6.7
15.6
62.8
26.9
62.1
162.1
22.6
82.1
112.0
128.9
174.0
209.2
3 QTR
FY 12/13
71.5
85.7
3,294.4
89.0
154.5
202.8
1,109.1
1,400.0
230.6
187.0
-56.5
326.8
13.4
416.4
0.5
100.0
164.7
66.0
97.8
6.0
100.0
224.1
5.4
52.4
177.3
1.6
31.7
8.7
85.3
26.3
4.5
104.7
29.5
% Change
Operating Profit
888.8
85.7
66.2
18.9
7.8
-3.6
0.7
4.0
4.0
4.4
-15.4
6.7
14.1
7.9
11.7
17.1
10.1
17.2
14.8
25.0
8.6
0.6
10.8
26.4
11.5
40.0
78.6
48.0
31.9
57.0
85.0
80.1
113.0
3QTR
FY 11/12
1,290.3
94.5
103.3
24.9
21.2
2.4
8.4
5.7
13.0
12.6
-5.5
26.5
16.2
21.8
12.0
38.9
22.9
36.1
28.4
27.8
16.9
9.8
11.7
40.0
23.9
42.8
103.4
31.1
54.9
71.8
84.8
134.7
153.4
3QTR
FY 12/13
Net Profit
45.2
10.3
56.0
31.7
171.8
166.7
1,100.0
42.5
225.0
186.4
-64.3
295.5
14.9
175.9
2.6
127.5
126.7
109.9
91.9
11.2
96.5
1,538.3
8.3
51.5
107.8
7.0
31.6
-35.2
72.1
26.0
-0.2
68.2
35.8
% Change
3.01
8.44
10.58
5.44
0.87
0.00
0.00
NIL
NIL
0.03
4.81
2.77
1.14
4.01
2.42
1.25
3.10
1.89
1.97
1.73
4.46
4.27
0.93
1.16
4.02
2.73
0.49
10.32
0.84
4.36
1.00
2.30
2.96
3QTR
2.63
6.27
5.95
5.19
0.06
1.19
0.61
1.04
1.84
0.97
7.89
1.90
1.45
3.74
3.54
2.92
2.45
2.30
2.46
1.41
4.83
2.73
1.37
1.10
3.69
1.86
0.70
3.50
0.48
3.91
0.88
2.53
3.40
3QTR
FY 12/13
NPL (%) FY 11/12
Table 7: Third Quarter Results of Commercial Bank – Unaudited FY 2012-13 (NPR in ten millions)
8.30
6.19
4.69
5.03
10.38
10.77
10.91
9.82
8.95
9.45
9.09
9.28
8.93
9.53
9.99
9.75
8.62
8.59
9.10
8.45
8.61
9.01
9.56
9.17
8.60
7.21
6.96
7.90
5.40
7.20
3.58
7.80
7.18
3QTR
FY 11/12
6.06
5.49
3.71
4.80
7.75
7.32
7.86
7.43
5.22
7.05
6.43
6.95
7.55
6.48
7.17
6.92
6.38
6.74
6.40
5.97
6.6
6.58
6.61
6.78
6.41
5.03
4.59
6.05
4.50
4.77
2.40
5.50
4.59
3QTR
FY 12/13
-2.24
-0.70
-0.98
-0.23
-2.63
-3.45
-3.05
-2.39
-3.73
7.05
6.43
-2.33
-1.38
-3.05
-2.82
-2.83
-2.24
-1.85
-2.70
-2.48
-2.43
-2.95
-2.95
-2.39
-2.19
-2.18
-2.37
-1.85
-0.90
-2.43
-1.18
-2.30
-2.59
Change
Cost of Fund (LCY)
9.57
11.27
6.77
9.78
10.10
11.49
11.95
11.45
9.80
10.37
10.25
9.32
10.00
10.21
9.69
10.01
9.38
9.64
10.22
9.47
10.00
10.13
10.32
9.38
9.50
8.83
7.03
10.48
9.31
8.60
6.57
7.80
7.10
3QTR
FY 12/13
BASE RATE
Review
Insurance Merger Directive 2013 Keeping pace with the banking industry, Insurance Board (IB)—the regulatory body of insurance sector in Nepal—has also recently introduced Merger Directive 2013 to encourage both life and non-life insurance companies to opt for merger to strengthen their risk absorption capacity and stabilize overall insurance sector. As the deadline for meeting the capital requirement stipulated by the IB is approaching, i.e. Mid-April 2013, the insurance companies are left with no option besides merger. The life insurance companies need to increase their capital to NPR 500 million (USD 5.70 million) from existing NRP 250 million (USD 2.85 million) while non-life insurance companies need to increase their capital to NPR 250 million from existing NPR 100 million (USD 1.14 million). Some of the key highlights of the merger directive are as follows: • Forceful merger applicable if IB deems it necessary. • Merged entity will be provided one year extension to meet the required paid-up capital in the event of failure to meet the deadline. • One year cushion will be provided to merged entity to bring the investments in fixed areas within specified ratio. • Up to two years extension will be provided to bring down the share of any individual, group or company to below 15% if it exceeds the specified level post-merger. Meanwhile, the merger process of two non-life insurance companies, Neco Insurance and Premier Insurance has started. If successful, it will be the first merger in the history of Nepali insurance sector.
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at 6.06%, which was at 8.30% during the same period last year. Similarly, the average base rate of commercial bank stood at 9.57% which was 9.43% at the end of second quarter of the current FY, and the average difference between base
rate and cost of fund stood at 3.57% at the end of third quarter. Likewise, the average Non-Performing Loans (NPL) of commercial banks remained on the lower side at 2.63%, which was at 3.01% during the same period of the previous FY.
outlook The banking system experienced some liquidity tightening during the review period largely due to sluggish capital expenditure of the government. However, the current situation may be short-lived as government spending is expected to be expedited during the last quarter of the fiscal year. The initiation taken by NRB to produce Financial Stability Report is a welcome step. If assessed strategically, the report up to some extent can be expected to aid country’s central bank to take proactive measures to prevent and counter problems in time, contrary to being reactive or just taking corrective measures after a problem originates. As per the report, given the amount and nature of exposure, commercial banks are relatively less vulnerable to market shock. While the resilience of the commercial banks to credit and market shocks have increased over time, the liquidity scenario analysis shows some potential risk. The participation of BFIs for merger has been overwhelming. Since merger is a relatively new phenomenon, it’s too early to judge the outcome of merger; however, the initiative taken by NRB should be lauded. Having said that the role of NRB has also further increased. NRB should be vigilant to monitor BFIs which have merged or are in the process to merge to ensure they are able to achieve desired synergy and results; otherwise such mergers may create even bigger problems in the future. Moreover, NRB should create a favor-
able environment via corrective measures and policies in place wherein BFIs opt for merger not out of compulsion but voluntarily to achieve synergy as it is a proper and sustainable model. During the review period, two more financial institutions, namely General Finance and World Merchant Banking and Finance, have been declared problematic by NRB. With their addition, the total number of problematic BFIs have reached 9 and 2 BFIs are already under liquidation process. The problem illustrates that few of the BFIs are still vulnerable and depositor’s money is at high risk which may further dampen the confidence of depositors towards financial institutions and therefore poses some risk to the overall financial stability. Therefore, NRB in the days ahead need to further strengthen its supervision and monitoring capacity to ensure such developments are curved effectively without hampering depositors. On a positive note, Nepal is unlikely to be blacklisted by the Financial Action Task Force (FATF), a global anti-money laundering body, as the president has endorsed the second amendment to the Anti-money Laundering Act 2008 and the Proceeds of Criminal Bill. Nepal is currently listed as Improving Global AML/CFT Compliance Ongoing Process, also recognized as the Grey List. However, with this endorsement, Nepal’s status may change in the upcoming FATF meeting in June 2013.
docking nepal’s economic analysis
Review
R ev i e w
Capital Markets The Nepal Stock Exchange (NEPSE) Index (+26.8%) continued with its upward momentum at the end of the first eleven months of FY 2012-13. The Index gained valuable 104.62 points to reach 494.34 points during the review period.
Market Performance
The performance of Nepal Stock Exchange (NEPSE) Index (+26.8%), the sole secondary market of the country, so far has been encouraging. The market has continued with its upward momentum at the end of the first eleven months of FY 2012-13, gaining 104.62 points to close at 494.34 points and the market is likely to end the current fiscal year on a positive note. As shown in Table 8, during the review period all the major subindices were able to gain value except for the Finance sub-index (-4.9%). The insurance sector (+78.2%) was the highest gainer amongst the sub-indices as insurance companies declared attractive bonus shares to its shareholders to meet the capital requirement stipulated by the Insurance Board. Similarly, the hydropower sub-index (+51.1%) followed suit as the shares of
hydropower companies continued to be good buy for the general investors. The commercial banking sub-index (+36.1%) continued to appreciate further due to better than expected third quarter financial results of most of the commercial banks. Amongst the remaining sub-indices, the development banking sub-index (+3.4%) and the ‘Others’ sub-index (+4.4%) were able to book marginal gains only.
Ongoing Developments
Table 8: Sector Wise Performances of Sub-Indices Indicators
July 15, 2012
Jun 15, 2013
% Change
NEPSE Index
389.72
494.34
26.8%
Commercial Bank Index
358.57
488.1
36.1%
Development Bank Index
245.43
253.83
3.4%
Hydropower Index
683.56
1032.95
51.1%
Finance Index
265.66
252.56
-4.9%
Insurance Index
497.86
886.97
78.2%
Others Index
590.98
616.82
4.4%
Hotels Index
489.04
659.82
34.92
Promoter Shares convertibility Source: NEPSE
SEBON has smoothened the process to convert additional 19% promoter shares of BFIs in to public shares. Now onwards, promoter shares can be converted in to ordinary public shares through secondary market trading
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Review
as well. Earlier, SEBON allowed the conversion of promoter shares; however, the process was lengthy as offer documents had to be prepared along with quoted sales price as per SEBON’s Security Registration and Issue Regulation. The central bank allows BFIs to increase the public shareholding structure up to 49% from existing 30%, and the additional 19% promoter shares can be converted only after the lock in period of five years and approval from the Annual General Meeting (AGM).
Credit Rating
Besides Himalayan Bank’s debenture, the company has rated three other upcoming issues so far. The company has rated ‘LA minus’ for the upcoming debenture of NIC Bank, rated ‘IPO Grade 2’ to the proposed right shares issue of Life Insurance Corporation Nepal, and has rated ‘IPO Grade 4’ to the proposed IPO of Manaslu Bikas Bank.
ICRA Nepal, a subsidiary of ICRA Limited India, which is the first credit rating agency licensed by SEBON, has started credit rating services. ICRA Nepal has commenced the service by rating debenture of Himalayan Bank Limited, it has awarded ‘LA’ to the
As per the existing provision, companies issuing primary shares (ordinary shares), bonds, debentures, right shares, preference shares, Further Public Issue (FPO) and issuance of shares in premium exceeding NPR 30 million (USD 342.19 thousand ) in value will
Figure 12: NEPSE Index Long Term Performance
34
upcoming debenture of the bank worth NPR 750 million (USD 8.55 million). As per the rating company, instruments with ‘LA’ rating are considered to have adequate degree of safety regarding timely servicing of financial obligations, and such instruments carry low credit risk.
| docking nepal’s economic analysis
have to rate themselves by a credit rating agency. Credit Rating is expected to aid investors to make sound investment decision as credit rating agency provides ratings of the company based on companies’ financial position, management and governance amongst others.
Primary market
The Initial Public Offering (IPO) of Mega Bank has received mega response from the investors. Mega Bank’s public offering of NPR 699 million (USD 7.97 million) was oversubscribed by 22 times. The subscription rate of Mega indicates that investors are willing to invest in BFIs primary shares provided sound financials, quality management and good corporate governance practices are in place. Last fiscal year, IPO of few BFIs were undersubscribed amidst dwindling secondary market and low investors’ confidence; therefore, institutions willing to float
docking nepal’s economic analysis
Review
primary shares were skeptical about the subscription. The encouraging participation of investors in primary offering of recent institutions such as Commerz and Trust Bank and NLG Insurance among others indicates improving investor’s sentiment towards the primary offerings. By the end of the current fiscal year, primary offering of Manasalu Development Bank, Namaste Bittiya Sanstha, Mission Development Bank, Century Commercial Bank, Gaumukhi Bikas Bank and Rural Micro Finance Development Centre are expected to come up. The primary market has also witnessed issuance of debentures of key commercial banks. Since debentures provide fixed rate of return during the holding period, it can be a good investment alternative for investors who wants steady return with minimal risk. The market, so far, has witness debenture issue of Bank of Kathmandu’s NPR 400 million (USD 4.56 million) redeemable 8% debenture, Siddhartha Bank NPR 500 million (USD 5.70 million) redeemable 8% debenture, and Everest Bank NPR 700 million (USD 7.98 million) redeemable 8% debenture. The commercial banks are coming out with debentures as it will facilitate banks to meet capital adequacy requirement as stipulated by the central bank. The upcoming debentures issues are Himalayan Bank’s debenture worth
outlook The market has been hovering between 490 to 520 points for some time now which is also a long term support level. Though the third quarterly results of listed companies, especially BFIs, have been encouraging, it has failed to attract investors as they seem to be in a cautious and dubious mode and are in wait and see position. The news about smoother convertibility of promoter shares into public shares also deteriorated general investor’s mood up to some extent as they fear that the secondary market will be flooded by promoter shares, meaning it will increase supply of shares and bring the share prices down. An ideal situation would be to have no differentiation between promoter and public shares for greater market efficiency; moreover, the current changes will not have any immediate short term impact on the market besides some room for speculation as it’s the market which eventually decides the future course.
NPR 750 million (USD 8.55 million) and NIC banks debenture worth NPR 500 million (USD 5.70 million).
Mutual funds
After the successful entry of Siddhartha Mutual Fund Growth Scheme 1 (NPR 500 million-USD 5.70 million) offered by Siddhartha Capital, a subsidiary of Siddhartha Bank, and Nabil Balance Fund 1 (NPR 800 million-USD 9.12 million) offered by Nabil Investment, a subsidiary of Nabil Bank Limited, the Nepali capital market can expect to witness a few more mutual fund schemes in near future.
Recently, Global IME Bank and Nepal Investment Bank have also received permission from Securitas Board of Nepal (SEBON) to operate mutual fund. Likewise, NMB capital, a subsidiary of NMB Bank, and Laxmi Capital, a subsidiary of Laxmi Bank, are also planning to offer mutual fund schemes in the near future as these banks have already obtained license to operate mutual fund from SEBON. Meanwhile, SEBON has proposed exemption of capital gains tax on investments of up to NPR 50,000 (USD 570) in mutual funds and expects the new provision to be endorsed through upcoming annual budget.
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Endnotes 1. “EC proposes Nov 14 election date”, The Kathmandu Post, June 7, 2013, http://www.ekantipur.com/the-kathmandu-post/2013/06/06/top-story/ecproposes-nov-14-election-date/249634.html 2. “Despite hue ‘n’ cry, Karki nominated CIAA chief”, eKantipur, June 10 2013, http://www.ekantipur.com/2013/05/06/top-story/despite-hue-n-crykarki-nominated-ciaa-chief/371162.html 3. “Karki appt fallout: Prez political advisor tenders resignation”, The Kathmandu Post, May 12, 2013, http://www.ekantipur.com/thekathmandu-post/2013/05/12/top-story/karki-appt-fallout-prez-politicaladvisor-tenders-resignation/248662.html 4. “China wants to share its prosperity with neighbours, says envoy”, The Kathmandu Post, May 31, 2013, http://www.ekantipur.com/thekathmandu-post/2013/05/31/money/china-wants-to-share-its-prosperitywith-neighbours-says-envoy/249430.html 5. “Bhandari, JP Gupta likely to join hands”, The Kathmandu Post, May 31, 2013, http://www.ekantipur.com/the-kathmandu-post/2013/05/31/topstory/bhandari-jp-gupta-likely-to-join-hands/249401.html 6. Lyubov Pronina & Chris Kay, “Rwanda Debut $400 Million Eurobond Yields at Bottom of Range,” Bloomberg, April 25, 2013, Accessed on June 06, 2013, http://www.bloomberg.com/news/2013-04-25/rwandadebut-400-million-bond-said-to-yield-at-bottom-of-range.html 7. “ Positive Shift in Economic Sentiment in Japan,” The New York Times, April 01, 2013, Accessed on June 6, 2013, http://www.nytimes. com/2013/04/02/business/global/positive-shift-in-economic-sentimentin-japan.html?_r=0 8. “Greek economy shrinks further, EU hits back at IMF over bailout”, Euro News, June 07, 2013, Accessed on June 10, 2013, http://www.euronews. com/2013/06/07/greek-economy-shrinks-further-eu-hits-back-at-imfover-bailout/ 9. Kerkin Hope, “EU rejects IMF jibe over Greece’s bailout”, Financial Times, June 06, 2013, Accessed on June 10, 2013, http://www. ft.com/intl/cms/s/0/942c3e26-cec3-11e2-8e16-00144feab7de. html#axzz2Vmj6IUF3 10. Victor Mallet, “India records slowest growth in a decade”, Financial Times, May 31, 2013, Accessed on June 10, 2013, http://www. ft.com/intl/cms/s/0/df6827be-c9bf-11e2-af47-00144feab7de. html#axzz2Vmj6IUF3 11. “India records slowest growth in a decade: FY 2010/13 at a glance”, Dimension Today,June 01, 2013, Accessed on June 10, 2013, http:// www.dimensiontoday.com/latest-business-news-online/india-recordsslowest-growth-in-a-decade-fy-2012-13-at-a-glance-06566.html 12. “Rs 60m allotted for organic fertilizer plants”, The Kathmandu Post, May 15, 2013, http://www.ekantipur.com/the-kathmandu-post/2013/05/14/ money/rs-60m-allotted-for-organic-fertiliser-plants/248766.html 13. “Govt rejects demand for ban on FDI in farm”, The Kathmandu Post, May 2, 2013, http://www.ekantipur.com/the-kathmandu-post/2013/05/01/ money/agriculture-development-strategy/248262.html 14. “Production of cash crops up 3pc”, The Kathmandu Post, May 21, 2013, http://www.ekantipur.com/the-kathmandu-post/2013/05/20/money/ production-of-cash-crops-up-3pc/248989.html 15. “Cereal production drops‚ food security to worsen”, The Himalayan Times, May 16, 2013, http://www.thehimalayantimes.com/fullNews.php? headline=Cereal+production+drops%E2%80%9A+food+security+to+wo rsen+&NewsID=376721&a=3 16. “Nepali honey to get quality certification soon”, The Himalayan Times,
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| docking nepal’s economic analysis
April 24, 2013, http://thehimalayantimes.com/fullTodays.php?headline= Nepali+honey+to+get+quality+certification+soon+&NewsID=374010 17. “Credit to agriculture sector doubles”, The Himalayan Times, April 17, 2013, http://thehimalayantimes.com/fullTodays.php?headline=Credit+to +agriculture+sector+doubles&NewsID=373172 18. “Loan to agro sector increases”, The Himalayan Times, March 6, 2013, http://thehimalayantimes.com/fullTodays.php?headline=Loan+to+agro+ sector+increases&NewsID=368483 19. “PABSON wants school directives amended”, The Himalayan Times, June 03, 2013, Accessed June 04, 2013, http://www.thehimalayantimes. com/fullNews.php?headline=PABSON+wants+school+directives+amen ded&NewsID=378799 20. “Literacy project fails due to parties’ dispute”, The Himalayan Times, June 02, 2013, Accessed June 04, 2013, http://www.ekantipur.com/thekathmandu-post/2013/06/02/nation/literacy-project-fails-due-to-partiesdispute/249494.html 21. “Planning effective delivery of education in a future federal state”, UNESCO, May 28, 2012, Accessed on June 04, 2013, http://www. unesco.org/new/en/kathmandu/education/unpfn-education-andfederalism-project/ 22. “1 million textbooks meant for student of community schools go missing”, The Kathmandu Post, May 26, 2013, Accessed on June 04, 2013, http://www.ekantipur.com/the-kathmandu-post/2013/05/26/topstory/1-million-textbooks-meant-for-students-of-community-schools-gomissing/249191.html 23. “Yarsa hunt shuts Mugu Schools”, The Himalayan Times, May 25, 2013, Accessed June 04, 2013, http://www.thehimalayantimes.com/fullNews. php?headline=Yarsa+hunt+shuts+Mugu+schools&NewsID=377793 24. “Mega education fair concludes”, The Kathmandu Post, May 19, 2013, Accessed June 04, 2013, http://www.ekantipur.com/the-kathmandupost/2013/05/19/aiming-higher/mega-education-fair-concludes/248919. html 25. “20 pc community schools do not have any toilet facilities”, The Himalayan Times, May 13, 2013, Accessed June 04, 2013, http:// thehimalayantimes.com/fullTodays.php?headline=20+pc+community+s chools+do+not+have+any+toilet+facility&NewsID=376351 26. “TU mulling policy shift”, Educate Nepal, May 08, 2013. Accessed on May 10, 2013 http://www.educatenepal.com/news/detail/tu-mullingpolicy-shift 27. “Action sought against 64 illegal schools”, The Himalayan Times, April 26, 2013, Accessed on May 9, 2013, http://thehimalayantimes.com/ fullTodays.php?headline=Action+sought+against+64+illegal+schools+& NewsID=374250 28. “Slump in global crude price reduces NOC loss”, The Kathmandu Post, April 17, 2013, http://www.ekantipur.com/2013/04/17/top-story/slump-inglobal-crude-price-reduces-noc-loss/370129.html 29. “NOC to clear IOC dues by March 28”, Republica, March 24, 2013, http://www.myrepublica.com/portal/index.php?action=news_ details&news_id=51999 30. “FinMin gives NOC Rs 750m to import adequate fuel”, The Kathmandu Post, April 25, 2013, http://www.ekantipur.com/the-kathmandupost/2012/04/25/money/finmin-gives-noc-rs-750m-to-import-adequatefuel/234194.html 31. Bhoj Raj Poudel, “NEA proposes hiking electricity tariff by 20 pc”, Republica, May 27, 2013, http://www.myrepublica.com/portal/index.
docking nepal’s economic analysis
Endnotes
php?action=news_details&news_id=55278 32. “EIB grants first loan for renewable energy”, The Himalayan Times, May 7, 2013, http://www.thehimalayantimes.com/fullNews.php?headline=EIB +grants+first+loan+for+renewable+energy&NewsID=375543 33. “Kulekhani II resumes partial operations”, The Kathmandu Post, May 30, 2013, http://www.ekantipur.com/the-kathmandu-post/2013/05/30/money/ kulekhani-ii-resumes-partial-operations/249396.html 34. “Hydro project repairs to take six months”, The Himalayan Times, May 9, 2013, http://www.thehimalayantimes.com/fullNews.php?headline=Hydro +project+repairs+to+take+six+months+&NewsID=375852 35. “Subsidy Policy for Renewable Energy 2069BS”, February, 2013, Ministry of Science, Technology and Environment, Government of Nepal 36. Rudra Pangeni, “Upper Trishuli hydel upgraded to 90 MW”, The Himalayan Times, May 31, 2013, http://www.thehimalayantimes.com/ fullNews.php?headline=Upper+Trishuli+hydel+upgraded+to+90+MW+& NewsID=378461 37. “COLOUR CYLINDER DEADLINE”, The Kathmandu Post, May 29, 2013, http://202.166.193.40/the-kathmandu-post/2013/05/29/money/ colour-cylinder-deadline/249354.html 38. “Hydropower projects fail to get govt-pledged facilities”, The Kathmandu Post, May 24, 2013, http://www.ekantipur.com/the-kathmandupost/2013/05/24/money/hydropower-projects-fail-to-get-govt-pledgedfacilities/249143.html 39. Bhoj Raj Poudel, “FNCCI to seek political commitment for hydropower development”, Republica, April 10, 2013, http://www.myrepublica.com/ portal/index.php?action=news_details&news_id=52873 40. “Foreign aid a necessary evil”, The Himalayan Times, May 27, 2013, Accessed June 03, 2013, http://thehimalayantimes.com/fullTodays. php?headline=%27Foreign+aid+a+necessary+evil%27&News ID=377990 41. “Norway provides USD 3.6 million for elections operation and capacity building of the Election Commission”, United Nations Development Programme, May 28, 2013, Accessed June 03, 2013, http://www.np.undp.org/content/nepal/en/home/presscenter/ pressreleases/2013/05/28/norway-provides-usd-3-6-millionfor-elections-operation-and-capacity-building-of-the-electioncommission/ 42. “ROK to provide Rs 403 million for disaster recovery centre”, The Himalayan Times, May 14, 2013, Accessed June 03, 2013, http://www. thehimalayantimes.com/fullNews.php?headline=ROK+to+provide+Rs+ 403+million+for+disaster+recovery+centre&NewsID=376412 43. “Pact to promote child friendly governance”, The Himalayan Times, May 13, 2013, Accessed June 06, 2013, http://thehimalayantimes.com/ fullTodays.php?headline=Pact+to+promote+child-friendly+governance+ &NewsID=376348 44. “ADB Loan to Support Better Wastewater Services in Kathmandu Valley”, Asian Development Bank, May 02, 2013, Accessed June 04, 2013, http://www.adb.org/news/nepal/adb-loan-support-better-wastewaterservices-kathmandu-valley 45. “Nepal: first EIB loan for renewable energy”, European Investment Bank, May 07, 2013, Accessed June 04, 2013, http://www.eib.org/projects/ press/2013/2013-061-nepal-first-eib-loan-for-renewable-energy.htm 46. “Hydro project gets $70 m in EIB loan”, The Himalayan Times, May 8, 2013. Accessed on May 10, 2013, http://thehimalayantimes.com/
fullTodays.php?headline=Hydroproject+gets+%2470+m+in+EIB+loan+ &NewsID=375604 47. “Improving Food Security and Livelihood Opportunities”, The World Bank, April 30, 2013, Accessed, June 04, 2013, http://www.worldbank. org/en/news/press-release/2013/04/30/building-climate-resilience-fornepals-vulnerable-populations 48. “UK injects Rs. 2 billion aid for family planning”, The Himalayan Times, April 26, 2013, Accessed June 04, 2013, http://www.thehimalayantimes. com/fullNews.php?headline=UK+injects+Rs.+2+B+aid+for+family+plan ning&NewsID=374171 49. “U.S. Ambassador Announces Support for Teach For Nepal”, Embassy of the United States, April 18, 2013. Accessed on May 10, 2013, http:// nepal.usembassy.gov//pr-04-18-2013.html 50. “European Commission grants EUR 3.2 million (NPR 360 million) to launch Disaster Preparedness and mitigation programmes in different parts of Nepal”, European Union Delegation to Nepal, April 09, 2013, Accessed June 04, 2013, http://eeas.europa.eu/delegations/nepal/ documents/press_corner/2013.04.09.en_.pdf 51. “Press Release”, Ministry of Finance, March 11, 2013, Accessed June 04, 2013, http://www.mof.gov.np/ajw/uploads/uploaded_ image/11march13(1).pdf 52. As coronavirus spreads globally, Nepal on alert”, The Kathmandu Post, June 03, 2013, Accessed on June 04, 2013, http://www.ekantipur. com/the-kathmandu post/2013/06/03/nation/as-coronavirus-spreadsglobally-nepal-on-alert/249523.html 53. “Cops with complications galore visit health camp”, The Himalayan Times, June 01, 2013, Accessed on June 04, 2013, http:// thehimalayantimes.com/fullTodays.php?headline=Cops+with+complicat ions++galore+visit+health+camp+&NewsID=378547 54. “Number of people with eye problems rising of late”, The Himalayan Times, May 18, 2013, Accessed June 04, 2013, http:// thehimalayantimes.com/fullTodays.php?headline=Number+of+people+ with+eye+problems+rising+of+late&NewsID=376828 55. “NMA urges safety, security for health workers”, The Himalayan Times, May 17, 2013, Accessed on June 04, 2013, http://www. thehimalayantimes.com/fullNews.php?headline=NMA+urges+safety%2 6sbquo%3B+security+for+health+workers&NewsID=376861 56. Hospital to start kidney transplants”, The Kathmandu Post, April 29, 2013. Accessed on May 14, 2013. http://www.ekantipur.com/ the-kathmandu-post/2013/04/28/nation/hospital-to-start-kidneytransplants/248120.html 57. “Health experts urge govt to make hospitals smoke-free zones” The Himalayan Times, April 27, 2013. Accessed on May 14, 2013. http:// thehimalayantimes.com/fullTodays.php?headline=Health+experts+urge +govt+to+make+hospitals+smoke-free+zones&NewsID=374362 58. “Health insurance in the offing in five districts”, The Kathmandu Post, April 25, 2013. Accessed on May 10, 2013. http://www.ekantipur.com/ the-kathmandu-post/2013/04/24/nation/health-insurance-in-the-offingin-five-districts/247959.html 59. “Dang HIV cases up by 76”, Republica, April 17, 2013. Accessed on May 14, 2013. http://myrepublica.com/portal/index.php?action=news_ details&news_id=53193 60. “Ring road expansion to begin on June 1” The Kathmandu Post, Money, May 22, 2013 61. Ramesh Shrestha “Bid deadline for KTM-Tarai Fast Track extended till
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June 21”, The Kathmandu Post, Money, May 22, 2013 62. “KTM-Hetauda Tunnel Highway gets letter of permission”, The Kathmandu Post, Money, May 21, 2013; “KTM-Hetauda tunnel road to be operational from 2017”, The Himalayan Times, May 21, 2013; “Construction works on tunnel highway within a month”, Republica, May 21, 2013 63. “Road Department demands NPR 1b for widening trade routes”, The Kathmandu Post, May 18, 2013. 64. Ashok Thapa “Upper Trishuli 3A hydropower project”, The Kathmandu Post, May 31, 2013 65. Laxman Kafle “Construction of 456 MW Upper Tamakoshi hydropower project going smoothly”, Gorkhapatra, May 20, 2013. 66. Nepal Rastra Bank. “Macro-economic Situation (Based on the Nine Months’ Data of FY 2012/13)” 67. Nepal Rastra Bank. “Macro-economic Situation (Based on the Nine Months’ Data of FY 2012/13)” 68. Nepal Rastra Bank. “Macro-economic Situation (Based on the Nine Months’ Data of FY 2012/13)” 69. “Exporters identify new markets”, The Himalayan Times, May 30, 2013, http://www.thehimalayantimes.com/fullNews.php?headline=Exporters+i dentify+new+markets&NewsID=378330 70. “Government preparing to sign trade agreement with Turkey”, The Kathmandu Post, April 6, 2013, http://www.ekantipur.com/thekathmandu-post/2013/04/06/related_articles/government-preparing-tosign-trade-agreement-with-turkey/247318.html 71. Trade and Export Promotion Centre, “Trade Statistics (First nine months of Fiscal Year 2069/70)” http://www.tepc.gov.np/news-events/details. php?id=13 72. “Realty biz bouncing back outside capital”, The Kathmandu Post, May 23, 2013 73. “Building permits to be automated soon” The Himalayan Times, may 11, 2013 74. “Govt to introduce guidelines for safer buildings” Republica, April 17, 2013 75. “10 property developers apply: Housing for govt officials” The Kathmandu Post, March 18, 2013 76. Current Macroeconomic Situation of Nepal (Based on Nine Months’ Data of 2012-13), Nepal Rastra Bank 77. Roshan Sedhai, “MoLE delay hinders reforms in foreign employment sector”, The Kathmandu Post, May 21, 2013, http://www.ekantipur.com/ the-kathmandu-post/2013/05/21/related_articles/mole-delay-hindersreforms-in-foreign-employment-sector/249010.html 78. “Remittance mostly spent on personal consumption: Report”, The Himalayan Times, May 7, 2013, http://thehimalayantimes.com/
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fullTodays.php?headline=Remittance+mostly+spent+on+personal+cons umption%3A+Report&NewsID=375581 79. Current Macroeconomic Situation of Nepal (Based on Nine Months’ Data of 2012-13), Nepal Rastra Bank 80. Yadav Raj Joshi, “Dept projects increase in remittance”, The Himalayan Times, April 7, 2013, http://www.thehimalayantimes.com/fullNews.php?h eadline=Dept+projects+increase+in+remittance&NewsID=372053 81. Nepal Telecommunication Authority “Management information System”, published May 2010 82. Nepal Telecommunication Authority “Management Information System”, published May, 2013 83. Subscriber means both fixed telecommunication line and cellular users 84. “Chaudhary Group planning to hit telecom market in big way”, The Kathmandu Post, Money, March 6, 2013, http://www.telegeography.com/ products/commsupdate/articles/2013/03/12/cg-purchases-80-stake-innepals-stm-telecom/, assessed June 4, 2013. 85. Ramesh Shrestha “Supreme Court stays unified telecom License”, The Kathmandu Post, Money, April 16, 2013 86. “NTA to conduct quality test of telecom services”, The Kathmandu Post, April 28, 2013 87. Tourist Arrivals Statistics, Nepal Tourism Board, http://welcomenepal. com/promotional/about-us/tourist-arrivals/ 88. “Tourists increases by 17 pc to Annapurna trekking route”, Nepal News, April 29, 2013, http://www.nepalnews.com/archive/2013/apr/apr29/ news05.php 89. “Tourist length of stay down to 12.87 days in 2012”, eKantipur, April 28, 2013, http://www.ekantipur.com/2013/04/28/business/tourist-length-ofstay-down-to-12.87-days-in-2012/370727.html 90. Trekking Agencies’ Association of Nepal, http://www.taan.org.np/ newsdetail/taan-completes-humla-exploration 91. “Govt mulls another national tourism master plan”, eKantipur, April 15, 2013, http://ekantipur.com/2013/04/15/related-article/govt-mulls-anothernational-tourism-master-plan/370013.html 92. “Turkish Airlines to fly direct to Kathmandu by year end”, The Himalayan Times, October 6, 2012, http://www.thehimalayantimes.com/fullTodays. php?headline=Turkish+Airlines+to+fly+direct+to+Kathmandu+by+year+ end&NewsID=349873 93. World Travel and Tourism Council, Travel & Tourism Economic Impact 2013, Nepal, http://www.wttc.org/site_media/uploads/downloads/ nepal2013_2.pdf 94. “Marriott International to open hotel in Nepal”, Travel Biz News, http:// www.travelbiznews.com/component/k2/item/1559-marriott-internationalto-open-hotel-in-nepal
Nepal Economic Forum (NEF) strives to be the premier private-sector led economic policy and research organization by redefining the economic development discourse in Nepal. Established as a not-for-profit organization under the beed (www.beed.com.np) eco-system, NEF has benefited from extensive exposure, experience and network of beeds who contribute in the research and dialogue process. With Sujeev Shakya as Chair, NEF benefits from the leadership of one the most respected economic analysts in Nepal, known for his bestseller Unleashing Nepal - Past, Present and Future of the Economy (Penguin 2009). NEF has worked in partnership with many Nepali and International institutions in its quest to mainstream the discourse on the Nepali economy, which has not received the necessary space it deserves. NEF broadly works under three areas: First, the Business Policy Research Center (BPRC), which engages in research, dialogue and dissemination relating to pertinent economic policy issues. Through BPRC, NEF has been producing nefport, a quarterly economic publication docking economic analysis and research, nefsearch, a periodic research publication, conducting neftalk, a platform for policy discourse, and nefcast, an online dissemination platform. BPRC is in the process of starting nefsource a resource center, and holding a nefclave, a platform for discourse on economy and beyond, which is scheduled for September 2013. Second, through the Center for Public, Private and Community Partnerships (PPCP), the partnerships discourse is further elaborated through addition of the community dimension to the existing models of public private partnerships. The concept stems from the need to integrate the community dimension to economic development strategies especially as Nepal moves towards a federated structure. Apart from standalone interventions, the PPCP perspective is integrated in many of the work that NEF and beed initiate. Thirdly, through Development Consulting, NEF engages with a plethora of multilateral, bilateral and International Non-Governmental Organizations in areas where a fresh pair of lenses are required to view the formulation and implementation of strategies. Hands on experience along with a wide ‘cultural bandwidth’ put NEF in a unique position to deliver Glocal solutions. With an international network and extensive Nepal experience, NEF uses solution-oriented approach to assignments. Currently, NEF is helping to incubate the US based Accountability Lab’s Nepal operations. With transparent financial systems, high standards of conflict of interest disclosures, strong support of beed back-end infrastructure, access to high quality global and local human resources and firms, NEF is poised to set high delivery and ethical standards for firms operating in Nepal.
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