Monthly EconBiz Comment - Jan 2006

The key political developments were
a) Promulgation of the Interim Constitution – 2063 on January 15.
b) The onset of unrest and violence in terai region led by the Madhesi People's Right Forum (MPRF) following the promulgation of the interim constitution.
c) The dissolution of Maoists’ People’s Government on January 18.

The key economic developments were
a) The actuate shortage of electric power in the country leading to record amount of load shedding.
b) Dismal economic news – worsening trade balance, declining foreign employment and lack of FDI – continues unabated.
c) Political instability continues to wreck havoc on Nepal’s economy. On the inaugural day of “Visit Pokhara Year”, there was chakka jam in Pokhara and parts of Pritivi highway. The National Federation of Nepal Transport Entrepreneurs froze the nation’s highways with 3-day long transportation strke.
d) On the positive news, “Nepal Telecom (NT) is planning to distribute an additional 3.5 million mobile phone lines in the country within the next three years, thereby tripling the total teledensity to 16 lines per 100 people” and Nepal opened its first commodity exchange.

Key Political News
Prachanda directs cadres to allow police, VDC secys in villages (Jan 03, 2007)
Three royalist groups unite (Jan 10, 2007)
Eights parties 'agree' to share 48 parliamentary seats (Jan 10, 2007)
Maoists choose their MPs for interim parliament (Jan 12, 2007)
Jwala Singh demands separate, independent Terai state (Jan 15, 2007)
HoR promulgates interim constitution, dissolves itself (Jan 15, 2007)
MPRF protest interim constitution; calls Madhesh bandh (Jan 16, 2007)
Over two dozen MPRF activists arrested in the capital (Jan 16, 2007)
Nemwang, Yadav to remain Speaker, Dy Speaker; Maoists to get senior DPM's post (Jan 17, 2007)
Government releases Rs. 70 million to Maoists (Jan 18, 2007)
Maoists announce to dissolve all of their people's govt units (Jan 18, 2007)
Prime Minister will administer oath of office to Chief Justice (Jan 18, 2007)
CPN-UML elects Nepal as party leader in interim legislature (Jan 18, 2007)
Madhesi activists call indefinite vehicular strike in Janakpur (Jan 18, 2007)
One killed in Lahan over MPRF protests, administration clamps curfew (Jan 19, 2007)
Voters' registration to begin from January 23 (Jan 20, 2007)
12-hour curfew imposed in Lahan as unrest continues (Jan 22, 2007)
Koirala re-elected as NC parliamentary leader (Jan 23, 2007)
MJF protesters shut down Biratnagar (Jan 24, 2007)
Curfew clamped in Janakpur (Jan 24, 2007)
Government to remove King’s picture from notes (Jan 25, 2007)
Curfew clamped in Birgunj, Biratnagar, Janakpur and Siraha (Jan 25, 2007)
Rautahat tense; Madhav Nepal’s ancestral house vandalised (Jan 26, 2007)
Terai unrest may delay CA polls: CEC Pokhrel (Jan 27, 2007)
Curfew re-imposed in Birgunj, Lahan; bandh hits life in Terai districts (Jan 27, 2007)
Indigenous community expresses solidarity with Madhesi movement (Jan 28, 2007)
Curfew imposed in Gaur; protests continue in terai (Jan 28, 2007)
Another protester killed in police firing in Bara (Jan 28, 2007)
Janakpur, Birgunj and Kalaiya under curfew (Jan 29, 2007)
Tripathy resigns amid Terai crisis (Jan 29, 2007)
One protester killed in Biratnagar; curfew imposed (Jan 30, 2007)
Thapa, Mandal arrested for 'instigating' violence in Terai; other royalists under watch (Jan 30, 2007)
Bandh hits normal life in eastern districts (Jan 31, 2007)
Police Sub-inspector, protester killed in Biratnagar (Jan 31, 2007)
PM calls for talks to resolve all problems; Nepal will have federal system after CA polls (Jan 31, 2007)

Key Business News
Mid Marsyangdi builder issues notice to resume work (Jan 5, 2007)
NT acquires bandwidth from Indian firms (Jan 6, 2007)
Power cuts 8 hrs a week (Jan 7, 2007)
Business registration to go online (Jan 9, 2007)
NT reduces Internet tariff by 83 pc (Jan 11, 2007)
NEA to issue bonds to raise fund (Jan 12, 2007)
Chilime power plant resumes operation (Jan 12, 2007)
High-level committee for PEs privatization (Jan 18, 2007)
Export slips, import grows in first four month: NRB (Jan 18, 2007)
Foreign employment declines by 5 pc (Jan 19, 2007)
Transport entrepreneurs call nationwide strike (Jan 22, 2007)
FDI commitment nosedives by 80 pc (Jan 22, 2007)
NT to distribute 3.5m mobile lines by 2010 (Jan 24, 2007)
Transporters end their strike (Jan 24, 2007)
3 hrs per day power cut from Friday (Jan 25, 2007)
South Korea to permit Nepali workers (Jan 28, 2007)
Nepal in for round-the-year power cuts (Jan 29, 2007)
Terai unrest worsens petrol shortage (Jan 30, 2007)
Nepal gets its ‘commodities exchange’ (Jan 30, 2007)
Terai agitation cripples industries (Jan 31, 2007)

Nepal gets its ‘commodities exchange’

Nepal gets its ‘commodities exchange’
Indra Gurung
The Himalayan Times, January 30, 2007

For the first time in Nepal, commodities can now be bought and sold like trading of securities in the stock market, thanks to an initiative of Commodities & Metal Exchange Nepal Ltd (COMEN).

COMEN, Nepal’s first and only commodities exchange centre, provides a platform for investment where consumption asset converts into investment asset, said Vijay Satyal, executive director at COMEN, which began trading in agro-products from Monday.

“It’s a platform where a wide range of commodities will be available for trading as financial instruments,” he added.

“The commodities exchange is very similar to the stock exchange, where investors can choose ways to maximise profit and minimise risks by portfolio hedge and arbitrage,” he said. He added that the commodities exchange provides a platform for commodities and metals to trade and invest as derivatives in the financial market.

Although the concept is very new for Nepal, commodities like agro-products and metals are exchanging hands as derivatives for trade and investment in the international market for a long time, said Satyal, while talking to The Himalayan Times.

According to him, investors can enter the market through brokers and invest and trade on listed contracts. “At COMEN every consumable item is converted as contracts and whenever buyers/sellers buy/sell the listed items, it means they are buying or selling the contract of the listed commodities,” Satyal said.

Generally investors can enter in selected segment for buying or selling of listed contracts, which they can hold with optimisation of profit. If they have to enrol for new contracts on the holding of previous contracts, they can enrol with the offsetting of spreads between outgoing and new contracts.

In the commodities exchange, price fluctuation is the cause, which can provide profit and loss in an open position, Satyal said, adding that to minimise risk, investors can choose ways to hedge or arbitrage with different segments of the markets like forward, futures, spot or options in same or different portfolios.

To trade in commodities, COMEN provides margin trading system for listed contracts of commodities, where contracts are defined with trading period, delivery period, purity of commodities and margin amount for trading, he informed. “Settlement of trading would be done as cash settlement and physical delivery of the commodities,” he added.

According to Satyal, more than 70 commodities have been identified for trading through the commodity exchange. “The commodities exchange will facilitate trading of commodities providing options for both buyers and sellers, where investors can make profit from the price trend in the market, production and supply,” he added.

COMEN has licensed about a dozen brokers, who will facilitate trading between buyers and sellers. “It will also ensure the best price for buyers and sellers, as prices will be determined through the demand-supply situation,” Satyal said.

It is estimated that agro-products worth about Rs 1,000 million is being traded every day throughout the country, while the daily bullion trading is estimated at 16kg during the good season.

At present, COMEN has different trading time for agro-products and bullion, from 11am to 1 pm and 3 pm to 4.30 pm, respectively at its floor.

Nepal in for round-the-year power cuts

Nepal in for round-the-year power cuts
BY BIKASH SANGRAULA
eKantipur.com, Jan 28

Nepalis have more to worry about than just winter power cuts. From now onwards, the country will face power cuts, either planned or unannounced, throughout the year, including during the monsoon, according to Sher Singh Bhat, chief of Systems Operations Department of Nepal Electricity Authority (NEA).

The peak load this winter is 640 megawatts (MW). Nepal's run-of-river projects, which have a total installed capacity of 458 MW, are only producing 190 MW at the moment.

Even in the coming monsoon when these projects run at full capacity, the country will face massive power deficit, as the installed capacity is just over 600 MW, including 92 MW from the two storage type Kulekhani projects and 55 MW from the country's thermal plants. Minus transmission leakage of 24 percent, the actual power availability, even in monsoon, is just around 450 MW.

"Even if all these plants run at full capacity, which is technically impossible, there will still be a power deficit in the monsoon and we will have to manage with contingency power cuts," said Bhat. "The supply situation in winter is an entirely different story."

The annual rise of power demand in the country is about 8.4 percent, according to NEA's annual report. Nepal is importing 80 MW from India. While PTC India Ltd. is willing to supply additional power to Nepal, this will not be possible until high-voltage transmission corridors are built across the Nepal-India border.

As things stand, NEA will have to enforce six hours of daily power cuts from mid-February, seven to eight hours from mid-March and six hours from mid-April, said NEA's managing director Arjun Karki. "As much as 12 hours of power cuts may be required in April 2008," he added.

Apologizing to consumers for the inconvenience caused by power cuts, Karki also requested consumers to use power judiciously.

"Shifting power consumption to times when there is power supply is not going to help. After all, there is limited power available," he said, pointing at the growing tendency among people to use as many electrical appliances as possible during hours when there is power supply.

According to Karki, electric hoarding boards that flash along the city's thoroughfares at night consume as much as 1 MW of power per hoarding board. "If situation worsens, we might have to ask them to switch off the hoarding boards or we might have to resort to disconnecting supply if that does not work," he said.

Inverters, that many people have installed in their homes and offices, are also wasting a lot of power as there is huge power loss between charging inverters and then powering the electric appliances during load-shedding hours, according to Bhat. "Solar plants are the best option, inverters the worst," Bhat said.

Nepalis will be facing crippling power cuts at least till 2009, Karki said. "We hope we will be able to build the Butwal-Anandanagar and Duhabi-Purnia high-voltage transmission corridors in two years time and thereafter import power from India to address the crisis at home to a certain extent," he said.

NEA is working to build five projects, with a total capacity of 440 MW, by 2012/13 to address power crisis at home. Among them are the 309-MW Upper Tamakoshi which NEA is trying to build with internal funds; the 61-MW Upper Trishuli for which China has offered concessional loan; the 30-MW Chameliagadh that will be built as NEA-govt joint venture; the 27-MW Raughat; and the 14-MW Kulekhani III. The only sizeable project under construction, 70-MW Middle Marsyangdi, that has hit snag after snag, will not be of much aid when it comes into operation, as the deficit will have far surpassed its generation capacity.

Karki also informed that NEA is soon signing Power Purchase Agreements with private producers for projects of 100 MW size in total. "We are also working out a plan for building projects to meet power demand after 2012/13," he added.

Monthly Share Update: Bearish mood hugs share market

Himalayan News Service
Kathmandu, January 27:

With the fall in share prices of commercial banks, stock trading at Nepal Stock Exchange (Nepse) this week suffered a loss, as its index dropped by 6.18 points. Last week, Nepse index had lost about one point, whereas it had gained over 10 points a week before that.

According to weekly trading report of Nepse, stock trading at the country’s sole secondary market began on Sunday with its index at 529.81 points and closed at 523.63 points on Thursday.

Shares suffered throughout the week as the index dropped to 527.05 points on the second day, 526.33 points on the third day and settled at 523.63 points on the last day.

The weekly turnover decreased further compared to last week’s figure and stood at Rs 99.7 million with 227,295 unit shares having been traded through 1,491 transactions during the week.

A total of 309,034 unit shares worth over Rs 160.3 million were traded through 2,667 transactions. Out of the total 66 listed companies for share trading, 57 companies saw transactions this week.

Among the eight listed groups, the commercial banks group, the largest scrip at Nepse and plays a decisive role, suffered a heavy loss of 10.63 points. The group, which had a marginal gain last week, settled at 581.52 points on Thursday against its opening 592.15 points on Sunday.

Likewise, the other and insurance groups are among the losers, as their indices dropped by 0.75 point and 3.88 points, respectively. The other group’s index settled at 667.38 points from the opening 668.13 points on Sunday, while the insurance group dropped to 539.94 points from the opening 543.42 points.

The finance and the development banks groups also suffered a loss of 1.19 points and 5.33 points, as their indices struggled to settle at 392.02 points and 534.53 points, respectively. Earlier, the finance group began at 393.21 points, and the development banks group at 539.86 points on Sunday. The hotel group is the sole winner this week, as it posted a growth of 0.77 point. The group began trading at 190.25 points and closed at 191.02 points.

The manufacturing group and the trading group, however, remained constant at 322.36 points and 148.51 points throughout the week.
The commercial banks group continued its domination by capturing the largest share of the total trading. The group cornered 57.64 per cent of the total trading. The finance group came second with 27.51 per cent and development banks group had 9.87 per cent share in total trading. The insurance group also had a 3.14 per cent share, while the others group cornered 1.82 per cent of the total trading.
Sanima Development Bank topped all companies in terms of number of transactions with 644 transactions held for the week, while Janaki Finance stood first for the largest number of shares traded that stood at 20,000 units. But, Nabil Bank outshone others in monetary value with its shares worth Rs 9,453,270 having been exchanged during the week.

The floor opened for four days under the regular lot, where the shares of Nabil Bank Ltd, Nepal Investment Bank, Standard Chartered Bank, Nepal Bangladesh Bank, Bank of Kathmandu, Kumari Bank, Lumbini Bank, Siddhartha Bank, NCC Bank, Life Insurance Company, Nepal Merchant Banking and Finance, Sanima Development Bank and Development Credit Bank were traded throughout the week.

‘Tourism sector needs satellite accounting’

‘Tourism sector needs satellite accounting’
Prakriti Prasad
The Himalayan Times, January 25:

The contribution of tourism to Nepal’s economy has been a source of constant debate. While a certain section of the power-wielding, decision-making class maintains that despite all importance attached to it, tourism contributes a minuscule 1.5 per cent to the GDP, earning about $ 180 million, tourism entrepreneurs and stakeholders beg to differ. According to them, the exact contribution of tourism sector can only be gauged after taking into account the impact of tourism on other sectors of the economy.

According to Nepal Tourism Statistics 2005, total foreign exchange earnings from tourism in 2004-05 stood at 6,683.2 which accounted for 1.2 per cent of the GDP. While figure for 2005-06 has not been made available as yet, tourism officials claim it would be less than two per cent.

However, according to World Travel and Tourism Council (WTTC), tourism in Nepal contributes not less than eight per cent to the GDP and employs more than 500,000 people, directly or indirectly.

The latter, understandably, takes into account the impact of tourism on other sectors of the economy like agriculture, manufacturing, handicrafts to name a few.
It is this detailed accounting of tourism, technically called Tourism Satellite Accounting (TSA), that the Nepal Tourism Board now plans to undertake in its endeavour to give the industry its due share of importance.

NTB is tying up with the Central Bureau of Statistics for all the data and expertise on accounting.

Although concept of TSA was theoretically pioneered by the World Trade Organisation, it was the WTTC which developed a method for measuring the economic impact of tourism on national economies over the past 15 years.

According to a NTB official, two important studies on the board’s agenda are: To take up detailed accounting of tourism or TSA in an attempt to identify the real impact of tourism on every sector of the economy; secondly, conduct an indepth survey of the expenditure pattern of international tourists in order to redefine its concept of value and volume markets.

“Satellite accounting will help us in ascertaining the total impact of tourism, besides giving the industry a better bargaining power with politicians who seem to be more concerned with their political agendas than the economy,” points out Basant Mishra, chairman, Nepal Association of Tour Operators (NATO).

Concurs Dhruba Narayan Shreshtha, president, Nepal Association of Tour and Travel Agents (NATTA) said, “We need to give tourism its due. Going by statistics that each tourist employs between 9-11 people, 500,000 tourists signify employment to over 5 million people.”

Shreshta maintains tourism and hydro-power are the only two promising sectors in Nepal’s economy. Nevertheless, according to Mishra this is not the right time for getting into TSA or any other research work.

“The focus of tourism officials and entrepreneurs should be in reviving the industry to the 1999 level of prosperity, targetting for half a million tourists. Only then should we take up any research work to establish the significance of the industry,” feels Mishra.

Bi-Weekly Data Highlight

Tourism Stat
[for enlarged version, please click on the picture]

Nepal generated $150 million from 375,000 tourists that visited the country in 2005. Although $150 million is a big revenue source, its just $400 per tourist. Nepal ought to do better!!

Roundup of Economic & Business News (Jan 20 - Jan 26)

Jan 20
NT to introduce WCDMA, GPRS (eKantipur.com)
Govt to double investment on infrastructure (eKantipur.com)
ADBL to issue shares this year (eKantipur.com)
VDCs wait for telephone extended (The Himalayan Times)

Jan 21
Cold takes toll of potato farming (eKantipur.com)
Rupee firms against dollar, gold dips` (eKantipur.com)
NATO denounces transport strike (Nepalbiznews.com)
Vehicular standstill cripples life across the nation (Nepalbiznews.com)
Fresh legislation on customs on anvil (The Himalayan Times)

Jan 22
Chakkajam brings nation to a halt (eKantipur.com)
Pro-Maoist unions lock Dhulikhel hotels (eKantipur.com)
Yamaha's new showroom in Kantipath (eKantipur.com)


Commentary
Country needs more development banks (Interview with Dr Bhola Nath Chalise) (eKantipur.com)
‘RBB: A bank of opportunity’ (Interview with Bruce F Henderson) (eKantipur.com)

Jan 23
FDI commitment nosedives by 80 pc (eKantipur.com)
Hotels in Dhulikhel reopen (eKantipur.com)
Imported rice irks Nepali farmers (eKantipur.com)
‘Prioritize energy sector’ (eKantipur.com)
Makwanpur exports leap (eKantipur.com)
BizNews Brief (Sky shoes in market, Nepal-Ireland chamber of commerce established, NATO condemns strikes) (eKantipur.com)
Entrepreneurs end transport strike (Nepalbiznews.com)

Jan 24
NT to distribute 3.5m mobile lines by 2010 (eKantipur.com)
Banks asked to enter rural areas (eKantipur.com)
Tatopani Customs opens as strike ends (Nepalnews.com)
FM Dr Mahat happy over RBB reforms (The Himalayan Times)

Jan 25
Nepali movies of benchmark standards launched (eKantipur.com)
3 hrs per day power cut from Friday (eKantipur.com)
Transport entrepreneurs clinch major gains (eKantipur.com)
Maoists ask farmers not to repay loans (eKantipur.com)
BizNews Brief (FNCCI, Labor Court sign MoU, MTA concerned over strikes) (eKantipur.com)
Power cut duration extended by 13 hours per week (Nepalbiznews.com)
New notes to feather Buddha (Nepalbiznews.com)
Government secretary expresses concern over huge trade deficit (Nepalnews.com)
Indian assistance of 5.1 crore (Nepalnews.com)
‘Tourism sector needs satellite accounting’ (The Himalayan Times)
Cargo trucks stranded at Biratnagar (The Himalayan Times)
Joint efforts urged to curb unofficial trade (The Himalayan Times)

Commentary
Promote FDI (eKantipur.com)

Jan 26
NOC loss lessens to Rs 5.4m (eKantipur.com)
Nepal-Pak sign a document on agriculture development (Nepalbiznews.com)
NEA imposes crippling hours of load shedding (Nepalnews.com)

Commentary
Labor market distortion (eKantipur.com)

FDI commitment nosedives by 80 percent

FDI commitment nosedives by 80 percent
eKantipur.com, Jan 22 2007

As deteriorating industrial relations drove away investors, fresh commitments for foreign direct investment in the country suffered a whopping decline by 80 percent during the first half of the current fiscal year.

Statistics of Department of Industries (DoI) show that new foreign investment commitments for the period totaled a mere Rs 252.36 million, whereas the country had received FDI commitment of Rs 1.25 billion during the same period last year.

“Restoration of peace raised prospects of attracting more FDI. However, the protracted labor stir had its negative impact,” said a senior official at the department, elaborating the reason for the decline in foreign investment.

He informed the Post that the number of foreign investment ventures registering with the DoI went down close to half the number of similar period last year. DoI issued operation license to 36 new FDI ventures as of mid-January 2007. In the same period last year, a total of 70 FDI ventures were registered with the DoI.

The total project cost and total fixed cost of FDI ventures registered during the period this year stood at Rs 287.99 million and Rs 224.67 million respectively. Those figures were Rs 1.86 billion and Rs 1.31 billion respectively in the same period last year.

The new ventures, if they begin operations, would generate additional employment opportunity for 1,220 persons.

The very claim of investors that manufacturing sector has been badly hurt by the labor stir was reflected in the trend of FDI commitments as well, as contrary to the past, FDI coming into the manufacturing sector went down drastically this year.

Number of foreign investment projects under manufacturing sector slid to 7 from 25 for the similar period last year. The FDI commitment in the sector also plummeted to Rs 82.74 million, whereas in the same period last year, it was Rs 654.87 million.

As a result, service sector became the largest FDI attracting sector during the period.

The sector received a total FDI commitment of Rs 128.99 million through 21 new projects. However, the FDI received under the sector is a mere one fourth of what was received during the same period last year.

As usual, no FDI commitment came under agriculture sector. Tourism sector received 7 new projects with FDI commitments totaling Rs 33.54 million, while one project was registered under the construction sector with FDI commitment of Rs 7.09 million.

Those two sectors had lured FDI commitments worth Rs 97.72 million and Rs 28.23 million during the same period last year.

Likewise, the largest chunk of FDI commitments came from China during the period, whereas regular topper, India, stepped down to the fourth position after South Korea and Japan.

According to DoI statistics, the country received FDI commitments of Rs 94.63 million from China. FDI commitments from South Korea, Japan and India totaled Rs 48.80 million, Rs 36.74 million and Rs 21.30 million respectively.

Govt to double investment on infrastructure

Govt to double investment on infrastructure
eKantipur.com, Jan 19 2007

The government is preparing to nearly double its public investment on development of infrastructure in the next three years in order to revitalize the conflict-hit economy.

"We are planning to increase investment on infrastructure by up to 100 percent in the upcoming interim three-year plan, which is scheduled to be implemented from the upcoming fiscal year," said Dr Pushpa Raj Rajkarnikar, member of the National Planning Commission, talking to the Post

He said the interim plan's main strategy will include coping with poverty, and rehabilitation and reconstruction of infrastructure.

"As the private sector is not encouraged to make more investment right now, the government itself is attempting to raise the amount of investment to stimulate the economy in the post-conflict period," he said.

As the current Tenth Plan is to end by coming mid-July, the government is going to introduce the three-year interim plan, instead of giving continuity to five-year plans.

The Tenth Plan has mainly focused on reducing poverty to 30 percent, from 42 percent. The plan seems to have 'accidentally' achieved its target, thanks to soaring inflow of remittance. "We will encompass all successful programs of the Tenth Plan," said Karnikar.

As part of its continued effort to prepare the three-year interim plan, a team of the NPC on Thursday has left for the Far Western Region to consult with local stakeholders.

"This team that will be based in Dhangadhi is scheduled to begin work from Saturday," said Shyam Sunder Sharma, joint secretary at the NPC.

The NPC had assigned each team under the leadership of its member in every development region to carry out necessary consultation for preparing the plan. "Other remaining four teams are also preparing to leave for their respective regions to get views of the locals in plan preparation," he said.

He said all teams are expected to finish their tasks within a month. "Each group will spend around 15 days in the field and prepare a report in the remaining days," he said.

Stating that they are trying to go in-depth in understanding the locals' concerns this time, he said the commission has decided to consult with representatives from the village development committees (VDCs) as well. "During the preparations of the previous Plans, the consultations were limited to district levels," he said.

“Depending on the service customers subscribe to, they can browse the Internet, watch movies and live telecasts, conduct video conferencing, and send and receive large volumes of data, including pictures,” Sharma added.

According to Sharma, subscribing to GPRS will allow mobile phone users to go online, and send and receive small bursts of data, including small video clips and multimedia messages, including high resolution pictures.

While, WCDMA service, which is being introduced for the first time in the country, not only gives faster data connection than GPRS, but also allows clients to hold video conferences.

One of the special features of WCDMA service, besides high speed data transfer, is its ability to telecast videos and television program on real time basis. “In other words, live telecasts or other videos routed via NT's server could be watched on mobile phones instantly, without any glitches,” Sharma said. Apart from that, clients can make video calls with another user who has subscribed to similar service and hold simultaneous data and voice connection, meaning that user can browse the Internet and talk on the phone at the same time, Sharma added.

However, Sharma informed that it is also essential that the phones being used by customer support the services that NT is introducing. “Mobile phones that are 3G, WCDMA or UMTS compatible usually support WCDMA, whereas most of the cell phones available in the market support GPRS,” he added.

Bi-Weekly Data Highlight

Hydro Power Generating Stations By Type Installed Capacity And Year Of Commissioning
[please click on the picture for larger version]

Nepal is very rich in water resources. The potential amount of hydropower generation according to experts is around 83,000 MW but only 1/2 of that or 42,000 MW can be feasibly exploited. The actual production is lot lower (around 1% of 42,000 MW). According to a recent news story, "The country's run-of-river projects that can produce 440 MW in total when run at full capacity produced only 230 MW Saturday due to a sharp decline in water level in the rivers. The peak demand these days is 640 MW. The power availability at the moment is owed to 40 MW produced by the country's thermal plants and 85 MW being imported from India." (please click here for the story)

Roundup of Economic & Business News (Jan 13 - Jan 19)

Jan 13
NT acquires bandwidth from Indian firms (eKantipur.com)
Eight Nepali laborers rescued (eKantipur.com)
Tourism recovery slower than expected (eKantipur.com)
Construction works at Mid-Marsyangdi likely to resume soon (Nepalbiznews.com)
Terai Banda continues affecting life (Nepalbiznews.com)

Jan 14
Government set to rebuild infrastructure (eKantipur.com)
Business leaders call for robust policy (eKantipur.com)
Strike cripples life in Terai (Nepalbiznews.com)
Utilise enormous water resources : Minister Karki (Nepalbiznews.com)
Weekly Stock Analysis: Nepse Bounces back with 10.96 pts (Nepalbiznews.com)

Jan 15
Strike cripples terai districts for 3rd day (eKantipur.com)
Maoists padlock hydel project (eKantipur.com)
StaR City ES: lightweight but powerful bike (eKantipur.com)
BizNews Brief (SDBL to give 10 pc dividend, Sanima gets new board members, LG Time Machine TV soon in market, Crystal holds 6th AGM, MBL receives ISO certification) (eKantipur.com)
NPC to go at local level for counsel (Nepalbiznews.com)
CAN Info-Tech concludes (Nepalbiznews.com)

Commentary
‘Global Bank will offer the best service’ (Interview) (eKantipur.com)

Jan 16
Near zero bond trading at NEPSE (eKantipur.com)
EBL opens 19th branch in Nepalgunj (eKantipur.com)
Indian dairies to purchase Nepali milk (eKantipur.com)

Jan 17
Deduction for arrears pinches supply (eKantipur.com)
Surya Nepal to open garment factory (eKantipur.com)
Himalayan Tea Garden avoids (eKantipur.com)
Deduction for arrears pinches supplyeKantipur.com

Jan 18
Trading in NDB shares suspended (eKantipur.com)
High-level committee for PEs privatization (eKantipur.com)
Gorkha Beer in Hong Kong (eKantipur.com)
Export slips, import grows in first four month: NRB (Nepalbiznews.com)

Jan 19
Foreign employment declines by 5 pc (eKantipur.com)
Differences persist on bilateral investment protection agreement (BIPA) (eKantipur.com)
PM directs to solve the issue of NWSC (Nepalnews.com)
Nepalese garments to continue enjoying preferential access to Eu (Nepalnews.com)
BOK opens new branch (The Himalayan Times)
BizNews Brief (SKBL’s lucky winners, NEA to collect dues) (The Himalayan Times)

Commentary
Resolving border disputes for trade benefits (Commentary) (eKantipur.com)

High-level committee for Public Enterprises privatization

High-level committee for Public Enterprises privatization
eKantipur.com, Jan 17, 2007

The government has formed a high-level committee to provide impetus to the stalled restructuring process of loss-making public enterprises, and expedite the privatization process of closed state-owned companies.

The seven-member committee, led by Dr Bhola Chalise, has currently been entrusted with the task of providing necessary recommendations to this extent by May.
Based on suggestions offered by the team, the government will finalize the privatization modality for different liquidated firms and decide on whether to close and sell, or continue operation of the loss-making enterprises, stated a document of Ministry of Finance.

The high-level committee was constituted as per the announcement made through the budget speech, considering the deteriorating financial health of almost all of state-owned enterprises (SOEs).

Of the 36 companies run by the government, performance of very few, like Nepal Telecom (NT) is commendable. Most of the public enterprises (PEs) are operating on loss and only increasing financial burden on the state.

According to latest statistics, the government had received a mere Rs 3.35 billion in dividends from the entire PEs in 2004/05 as against Rs 59.68 billion equity and Rs 64.55 billion loan investment it made. Of the total earning it made in that year, 98.5 percent or Rs 3.3 billion had come from a single institution, namely NT.
It is widely stated that problems of overstaffing, inefficiency and incompetent management are major problems that are plaguing PEs.

The committee will identify core causes that led to the fall of public companies and recommend whether it would be profitable for the government to continue running these enterprises or liquidate them, said the document.

It will also suggest restructuring measures that need to be introduced on some of the enterprises that have been classified as 'companies providing essential service' to the public.

Milken Says Credit Could Free $100 Trillion for Poor Countries

Milken Says Credit Could Free $100 Trillion for Poor Countries
Bloomberg, 2007-01-18
By John Glover

Michael Milken, the junk bond billionaire turned philanthropist, says developing counntries could free up trillions of dollars by developing markets based on mortgages, credit cards and loans.

Poorer nations could release as much as $20 trillion for investment through securities based on mortgages, Milken will say in a speech at a conference in London today. Financial products linked to loans, bonds and credit cards could help to raise between $50 trillion and $100 trillion, according to an outline of his speech e-mailed by conference organizer BNP Paribas SA.

``Financial innovations have driven every advance of civilization since the development of banking in Mesopotamia 4,000 years ago,'' Milken, 60, will say. ``Financial technology produces more jobs, more economic development.''

Milken is credited with popularizing the market for junk bonds that now generates more than $200 billion of financing a year for non-investment grade companies worldwide. He's advocating bonds and derivatives that he says helped smaller companies in the U.S. create 58 million new jobs since 1970.

U.S. institutions sell about $1 trillion of asset-backed bonds every month, according to the Securities Industry and Financial Markets Association's Web site. More than $20 trillion of derivatives based on debt known as credit-default swaps are outstanding worldwide, according to Basel, Switzerland-based Bank for International Settlements.

Innovative Products

The U.K.'s lead in building a market for innovative financial products in the 1990s helped reduce unemployment to 4 percent from 10 percent, while the jobless rate in Europe stayed above 10 percent, Milken will tell people attending the conference on high-yield, high-risk debt.

``When the U.K. adopted financial technologies in the 1990s, things changed,'' says Milken.

Milken at Drexel Burnham Lambert Inc. helped fuel the M&A boom of the 1980s by selling bonds to newly created funds. By 1989, the junk bond market had crashed and two years later Milken was jailed for violations including securities fraud. He paid more than $1 billion in civil settlements and fines, and was banned for life from the securities industry.

Junk Bond Resurgence

Milken's work these days is focused more on health and economic research than the financial markets through organizations including the Milken Institute.

Appetite among western investors for high-risk debt has returned. Companies sold a record $151 billion of junk bonds in the U.S. and $48.4 billion in Europe last year, according to data compiled by Bloomberg. The securities are rated below Baa3 by Moody's Investors Service and BBB- by Standard & Poor's.

For developing countries, the cost to borrow has never been lower, with emerging-market bond yields at an average 1.79 percentage points over U.S. Treasury notes, according to JPMorgan Chase & Co.'s EMBI Global Diversified index.

Health care is key to development, Milken says, putting the value of ``human capital'' at $4,000 trillion worldwide. Increased life expectancy in the U.S. added $2.6 trillion a year between 1970 and 1998, according to Milken.

``Ultimately we make the effort not because of productivity gains but because each life is precious,'' he says.

U.S., Indian companies interested in Nepal's hydropower

U.S., Indian companies interested in Nepal's hydropower
Bloomberg, 11-Nov-2006

The U.S. and Indian companies are showing interest to invest in Nepal's hydropower sector as the country is heading towards permanent peace, local media reported on Friday.

"So, they are participating in a power summit organized by U.S. agencies in partnership with related Nepali institutions here on Friday," Kantipur F.M. radio quoted organizers of the meeting as reporting.

The U.S. Embassy, the U.S. Aid Agency (USAID), Nepal-America Chamber of Commerce and Industry and International Resource Group are jointly organizing the conference, titled Powering Nepal:

Connecting Markets.

Sandeep Shah, president of Nepal Independent Power Producers Association, an organizer, said that the conference was organized to inform U.S. companies working in India as well as Indian companies about the prospect of investing in Nepal's hydropower sector.

The potential of partnership with the Nepali government for power development, legal status of Nepal and condition of transmission lines are the main agendas of the summit, Shad said.

Anup Kumar Upadhyaya, joint secretary at the Nepali Ministry of Water Resources said that the government would inform the participants about Nepal's policy, potentials of power export and legal system regarding participation of foreign companies in the sector.

The American Information Center has stated in a press release that the summit is aimed at constituting a business group among the government and private partners that would coordinate with foreign investors and donor agencies for speedy development of hydropower sector in Nepal.

It is the second huge conference being held in Nepal within one and half months on the issue following Nepal-India power summit concluded in mid-September this year.

Tourism recovery slower than expected

Tourism recovery slower than expected
eKantipur.com, Jan 12 2007
BY KRISHNA REGMI

When peace was restored to this conflict-ridden Shangri-La, all had high hopes. They thought tourists would flock to Nepal in huge numbers. However, figures gathered so far suggest a different picture. Immediate boost for the tourism industry remains elusive as ever.

Neither the Nepali tourism industry seems to take advantage of rising outbound tourists from neighboring countries, nor can it receive any trickle-down effect from the booming Indian tourism industry.

Getting rooms at five-star hotels in India is a daunting task, where the average room rate has skyrocketed to US$ 350 a night. But, Nepali deluxe five-star hotels sell rooms at the very cheap price of around US$ 50. Still, many rooms in Nepali hotels are empty as sufficient numbers of tourists have not yet come.

On the back of its growing economy and strong emergence of its middle class, India has been generating around seven million outbound tourists annually, while 31 million Chinese enjoy foreign tours every year.

Of this astounding figure, Nepal attracted just 6,000 Chinese tourists and 95,000 Indians in 2006. The overall tourist arrivals grew only marginally by 0.4 percent in December to 26,462, falling far short of earlier expectations.

All this justifies that conflict alone is not the stumbling block to tourism growth and a string of obstacles continue to cripple the industry.

Shortage of product diversification, constraints in air accessibility, ineffective marketing strategy and poor tourism infrastructure deter the industry from sailing through with success, tourism entrepreneurs said.

“We (tourism sector and the government) are just moving ahead with the same faults, blaming our shortcomings to one excuse or another,” said Yogendra Shakya, former president of Hotel Association of Nepal. “Potential is there, but we are unable to tap it.”

He said the tourism industry needs to come out from its sole focus on the niche market of adventure tourism. “The pie for niche tourists in the international market is very low. The preference of global tourists has mainly concentrated on man-made products, instead of natural beauties,” he said. “There is immediate urgency to look into what Nepal needs to do to meet the diversified choices of tourists, as we lack foothold in the international market for mass travelers.”

Observing that nobody has seriously thought about tourism, he said even five-star hotels have given special focus to domestic tourists, rather than trying to woo foreigners.

Basant Mishra, president of Nepal Association of Tour Operators (NATO) said marketing strategy has remained weak, not being able to overcome the dented image of Nepal in the international market. “The growth is painfully slow. So, we have to realize something is gravely wrong in the way we operate the industry,” he said. Despite the peace, highways have been blocked frequently at different places, which has impeded tourism growth, he added.

Besides, bottleneck on air-accessibility has further prevented new opportunities from translating into visible gains, he said. Airlines flying to Nepal have been running out of air seats for the last couple of months.

Roundup of Economic & Business News (Jan 5 - Jan 12)

Jan 5
NT acquires bandwidth from Indian firms (eKantipur.com)
Royalty’s salaries remain untouched (eKantipur.com)
Nepal and India to construct high- voltage transmission links (Nepalbiznews.com)
Mid Marsyangdi builder issues notice to resume work (Nepalbiznews.com)

Jan 6
Nepal Telecom acquires bandwidths via optical fiber network (Nepalbiznews.com)

Jan 7
Power cuts 8 hrs a week (eKantipur.com)

Jan 9
Business registration to go online (eKantipur.com)
Healthcare outsourcing now $300m biz, growing at 150% (The Economics Times (India))
'Indian retail to touch Rs 100,000 cr' (The Economics Times (India))

Jan 10
Women outdoing men in salon business (eKantipur.com)
Increase public investment: SAARC study (eKantipur.com)
‘Govt. to make concrete decision on NOC’s issue’ (Nepalbiznews.com)
Govt mulling over funding sick industries (Nepalbiznews.com)

Jan 11
$100 laptop for Nepali students soon (eKantipur.com)
NT reduces Internet tariff by 83 pc (eKantipur.com)
IT entrepreneurs launch Fortune Cookie Ventures (Nepalnews.com)

Jan 12
NB Bank recovers Rs 656m N (eKantipur.com)
Interim govt 'will eliminate transport syndicates' (eKantipur.com)
Pokhara Blue Bird hotel to reopen (eKantipur.com)
Maoists continue extortion from tourists (eKantipur.com)
NEA to issue bonds to raise fund (Nepalbiznews.com)
Central bank reduces NPA of NB bank to 34 percent (Nepalbiznews.com)
Terai bandh affects normal life (Nepalnews.com)
Chilime power plant resumes operation (Nepalnews.com)

NEA to release Rs 3 billion worth power bonds

NEA to release Rs 3 billion worth power bonds
nepalnews.com
Jan 12 07

With the intention of raising domestic capital to construct hydropower projects, the Nepal Electricity Authority (NEA) is planning to release power bonds worth Rs 3 billion.

The power bonds will be offered to the public and institutions and the capital raised thereof will be used in starting construction of 30 MW strong Chameliya project; 14 MW strong Kulekhani III project and also in the undergoing 70 MW strong Middle Marsyangdi project.

The NEA has signed an understanding with Nepal Merchant Banking and Finance Limited to release the power bonds within March.

According to NEA managing director Arjun Kumar Karki, the bonds will have the maturity period of 5 years; and 90 percent of them will be offered to banks, finance companies and insurance companies while 10 percent will be offered to general public.

This will be the first time such power bonds are going to be issued in the country.

Nepal Telecom reduces Internet tariff by 83%

Nepal Telecom reduces Internet tariff by 83%
eKantipur.com
Jan 10, 2006

Nepal Telecom (NT), the state-owned telecom giant, has reduced the tariff rates of Internet service, for business purposes, by as much as 83 percent.

Talking to the Post, Som Nath Bhattarai, chief of computer division of NT, said that the price of 64 kbps-lease-line Internet service has come down to Rs 5,000 per month from the previous Rs 18,000. While tariff rate of 128kbps-ISDN Internet service has come down to Rs 3,000 per month from Rs 13,600 of earlier.

“The new prices will come into effect from today,” Bhattarai said, adding - “The price reduction will benefit customers and companies that require high-speed as well as constant and reliable connection.”

According to Bhattarai, both the services are unlimited and dedicated, meaning that customers will be able to avail the service 24 hours a day without any fluctuation in speed.

The announcement to reduce the tariff rates comes five days after the state-owned telecom started procuring bandwidth from BSNL - an Indian telecom company - using the information superhighway.

This was the first time the country had used the optical fiber network, laid along East-West highway, for cross-country data transfer. Internet Service Providers (ISPs), until now, have been resorting to satellites, a much more expensive means, to purchase bandwidth from international vendors.

In the first phase, the state owned telecom had purchased 16Mbps of bandwidth at a cost of Rs 16 million - “four times cheaper than that being paid by other ISPs”.

“If we are able to procure more bandwidth using the optical fiber network, we will certainly reduce the tariff rates of Internet services meant for home users,” Bhattarai said.

Nepal-India Trade Treaty Issues

Nepal-India Trade Treaty Issues
Making it easier to access the fast-growing Indian market is a challenge.
New Business Age, December 2006
By Madan lamsal & Keshav Gautam

With the existing Nepal-India treaty on trade due to expire in March 2007, debate on whether to renew it for the next seven years or to revise it has started.

The debate started after India proposed to have a Comprehensive Economic Partnership Agreement (CEPA) in October covering not only the goods trade, but also investment as well as trade in power and services.

While there would be no problem in having a CEPA, as linking Nepal to fast-growing, easier to access the Indian market is for Nepal ’s benefit, the debate is centred on whether to go for it right away or to leave it till later. The Federation of Nepalese Chambers of Commerce and Industry (FNCCI), the apex chamber of the country, has said that the CEPA proposal should not delay the automatic renewal of the existing treaty. The fear is that such a delay would cause uncertainty as it did when the treaty's renewal was delayed by three months in 2002. FNCCI has suggested continuing the discussion on CEPA without affecting the continuity of the present trade treaty.

But the Confederation of Nepalese Industries (CNI), formed by a group of businessmen who broke away from FNCCI, has demanded for a revision in the existing treaty. In it, they want to incorporate provisions that would effectively address newly emerging trade issues in the region which are gradually liberalising regional trade under the framework of the South Asian Free Trade Agreement (SAFTA) and entering into a cross-regional alliance in the form of BIMST-EC. On this, the FNCCI comment is that any additional provisions that may be agreed upon between the two governments can be incorporated as protocol to the existing treaty whenever such an agreement is reached.

Kush Kumar Joshi, the second Vice-President of FNCCI says, under the present fluid political situation, by trying to tweak the existing treaty, Nepal may lose some benefits that it already has. Badri Ojha, Executive Chairman of Sanima Development Bank views that putting investment as well as trade in power and services in the same treaty may also create problems in implementation.

Despite this debate, both associations agree that several provisions in the existing treaty need to be revised while many others need to be properly implemented. More importantly, as CNI's Vice-President JP Agrawal says, Nepal should break the tradition of simply being the taker of concessions from India .

"Now the treaty between the two countries should be on the basis of equality with both sides giving and taking something in exchange. Nepal should shun the feeling of being the small country which always looks towards favours from India ," he says.

Quoting the bilateral trade data between Nepal and India , he says India 's exports to Nepal are not limited to what is reflected in the official figures. Almost an equal volume as shown as formal imports is coming to Nepal through informal channels. Nepal 's trade deficit with India is over Rs. 65 billion per year as per the latest data estimates. "This means, Nepal is not a small market for India . But we have not been able to make India realise this," he adds. Though Agrawal's estimates for informal trade is a bit higher, a recent study by Readers Dr. Puspa Kandel and Dr. Rajendra Shrestha has estimated informal imports at about 40 per cent of the total formal trade and there is no doubt that India too is benefiting a lot. As per the study by Kandel and Shrestha, it is estimated that Nepal suffered an informal trade deficit of over 7 per cent of Nepal 's Gross Domestic Product.

Meanwhile, indications are that India will not like to go for a full-fledged Free Trade Agreement (FTA) with Nepal or, for that matter, with any of its neighbours. The existing FTA with Sri Lanka has been already revised by fixing quotas on items like vegetable ghee which were allowed into India from Sri Lanka without any restrictions until recently. A study by the World Bank has recently advised India not to go for FTA with Bangladesh either. Rather, it has suggested to further liberalise bilateral trade with Bangladesh . The same idea seems to be behind the CEPA proposed with Nepal. But some analysts have also guessed that the proposed CEPA is similar to the one India signed with Singapore recently.

Existing problems

As the details of the Indian proposal for the CEPA are not made public, Nepali authorities seem to still be in a dilemma about it while the time for the decision-making is passing by quickly as the renewal date for the existing treaty is pretty close. However, the Nepali business community is still full of complaints regarding the non-compliance of the provisions of the existing treaty. In such a situation, it is difficult to see the benefits, if any, in the proposed changes.

The trade treaty signed between Nepal and India in 1996 is hailed as a milestone in Indo-Nepal trade relations but the revisions made in 2002 have proved to be restrictive. For example, in 1996/97, only 26 per cent of the total imports of Nepal was from India . That increased to 57 per cent in 2002/03. During that period, the share of India in Nepal's total imports grew from a mere 23 per cent to 57 per cent while India's share in Nepal's total exports grew from 23 per cent to 53 per cent.

But the 2002 revision in the treaty that imposed a quota restriction on major items of Nepal 's exports, decelerated this trend. The share of India in total exports and imports in Nepal increased marginally to 67 per cent and 62 per cent only in 2005/06.

The problems, however, do not lie simply on the quota restrictions. The problems that the Nepali business community is raising repeatedly can be grouped under headings like non-tariff barriers, bureaucratic hassles and tariff issues.

The issues

Various state governments of India have been imposing sales tax and luxury tax on goods imported from Nepal. The Nepali business community says this is against the basic spirit of the trade treaty. The treaty is based on the principle of not discriminating against the Nepali goods that are imported into India by fulfilling the requirements specified in the treaty.

The other issue is related to the relief to the products of Nepali small scale units imported into India. Clause number (3) under article V of the treaty protocol has provided for relief in excise duty on products produced by small-scale Nepali industries. The Nepali business community says this provision has not been implemented at all till now.

The most frequently raised issue is the one related to quarantine. While the number of quarantine check posts in India along the Nepal-India border is not sufficient, the service charge levied on testing agricultural products is very high. More importantly, India has not allowed partial shipment of less than 100 MT for quarantine purposes. These restrictions have posed hurdles in the development of such businesses as seed production and plant nurseries are the core areas of competency of Nepal.

Similar to quarantine is the problem of laboratory to test drugs and cosmetics. Raxaul is the only entry point specified for drugs and cosmetic exports from Nepal to India. But as Raxaul has no testing facility, the samples have to go to Kolkata for the tests. Though the Indian government has promised to open a testing facility at Raxaul, the matter has been pending for a long time. Till the Raxaul facility is set up, the Nepali business community suggests that the previous practice of allowing well-known brands of drugs and cosmetics from Nepal to India without the laboratory test should be reintroduced.

Another problem is again related to the quality or standard concern of India regarding imported products. Indian authorities require the products entering India to meet the standard fixed by the Bureau of Indian Standards (BIS). Though there have been several meetings between the authorities of both countries to recognise the standard of the Nepal Bureau of Standard and Metrology (NBSM) to be equivalent to the BIS standard, this is still not finalised. The Nepali business community has suggested that both parties follow the previous rule as long as this issue of equivalency of NSBM and BIS standard is not finalised.

The quota restriction is understandably the other major issue about which the Nepali business community is complaining. But the complaint is not simply on the quota. Instead, it is on the rationality of the blanket quota restriction.

For example, the quota fixed for copper products is applicable also on copper handicraft items even if India has no problems of import surges in such items. The Nepali business community suggests that the quota restriction should be applicable only on items in which India faces surges in imports. As it may be recalled, India has claimed a surge in bare copper wire only, while the quota restriction has covered all products of copper and copper alloys.

Another point raised by the Nepali business community is more specific about the spirit of the treaty which is to provide a level playing field to Nepali products in India . While the Nepali manufacturing units import raw material form India , they have to pay excise duty on them in India . When the products from Nepal (including those made by using the Indian raw materials) are exported to India , countervailing duty (CVD) is to be paid on them and this duty is levied on the maximum retail price of the products. This has made the Nepali products uncompetitive in India . Nepali exporters claim that the Nepali exports would have been Rs. 3 billion higher per year than what they are now if these problems didn't exist. Their demand is to waive excise on raw materials exported to Nepal and to levy the Indian CVD on Nepal 's exports to India only on the transaction value.

Predictability Concern

As can be evident, the points raised by the Nepali business community are related with the concerns of predictability of access to the Indian market. The basic reason undermining the predictability is not so much on the treaty's provisions as it is on the Indian bureaucracy which in turn is caused by the fact that the trade between Nepal and India is through land routes. The unpredictable behaviour of Indian customs and excise authorities and state governments who change the rule and practice frequently is causing unnecessary additional costs to Nepali exporters.

The Nepali business community even claims that the Indian excise authorities are not sufficiently aware about the procedure of export to Nepal (hence the archaic excise rules on exports to Nepal , particularly of raw material). As this has been discouraging the Indian exports to Nepal, the Nepali trade negotiators would do better by trying to do solid homework on this and convince the Indian negotiators how this system is discouraging Indian exports.

In exports to India , the problem with the Indian excise administration, as pointed out specifically by the Nepali business community, is related to the excise administration of Bihar and UP. They have been frequently detaining consignments from Nepal citing different excise rules whereas these rules are not applicable in case of goods imported in India from Nepal with valid certificates of origin issued in compliance with the provisions of the Indo-Nepal trade treaty. Another problem related with the certificate of origin is due to the file appraisal system practiced in Indian Customs. Nepali business community says the file appraisal is quite redundant as it is already replaced by the provision of certificate of origin made in the Indo-Nepal trade treaty.

Another instance of archaic interpretation of the rules by the Indian bureaucracy is provided by the cases under goods imported through Letters of Credit (L/C). Indian Customs officers insist that the goods being exported to Nepal should arrive at the Customs point by the date of shipment mentioned in the L/C. This is an archaic interpretation as anyone can see that the shipment date mentioned in L/C is the date when the goods have to be dispatched from the premises of the exporter (or at best the date when the transporter issues the date of receiving the consignment for dispatch).

The Nepali business community has also demanded a system to quickly redress the trade disputes when they arise between Nepali and Indian parties. Also demanded is a system through which the holidays in the Indian Customs coincide with holidays at the Nepali Customs. At present the Indian Customs are closed on Sundays for weekly holidays whereas in Nepal they are closed on Saturdays. Because of this, 50 days of business are lost in a year. But why this problem has not been resolved is still a mystery because it can be solved by the Nepali government itself because it can easily order the Nepali Customs offices along the India border to observe weekly holidays on Sundays instead of on Saturdays.

India 's concern

India 's main concern in trade with Nepal is the possibility of trade deflection, i.e. possibility of third country goods being re-exported to India . Hence the frequent changes in the rules and the excessive discretionary powers vested on the Customs and excise authorities of India . And this was the main concern even in 1970s. Obviously, the maze of myriad rules and discretionary powers vested in Customs and excise officers have not proved as effective as desired. Also, Indian government authorities are more likely to listen to the points of the Nepali exporters if the Nepali trade negotiation team puts these points across logically. India's proposal to have a CEPA should be taken as an opportunity in this regard as it allows the review of the gamut of Indo-Nepal trade and economic relations, not only on the micro issues, as noted above.

But there are two internal hurdles within Nepal . First, Nepal lacks a competent body for international trade negotiations. The Ministry of Industry, Commerce and Supplies (MOICS) and the Department of Commerce, manned by frequently transferred government employees, cannot have such competency. Second, a point which is closely related with the first, is the likely dillydallying till March in doing the necessary homework. This is more probable because the Nepali government bureaucracy has a tradition of going by fire brigade style of management (or management by creating crisis) and this has not changed even after Janaandolan-2. Third, as the political situation is still in the transitional stage, pressures from different vested interest groups (both from industry and commerce as well as political sectors) are likely to make it difficult for the Nepali trade negotiators to take a pragmatic approach while negotiating with India . Perhaps this is on the mind of Purushottam Ojha, whom the government has reappointed as the Joint Secretary of MOICS after moving him around other ministries for some years. When he was addressing a discussion organised recently by South Asia Watch on Trade, Economics and Environment (SAWTEE), Ojha remarked that Nepal should be careful when negotiating for the treaty's revision, otherwise there is risk that even some of those benefits that are already there may be lost.

Nepal's Trade with India and Third Countries




If this is the case, it may be wiser to go for automatic renewal, rather than revision. However, this will definitely delay the pace of the progress Nepal could make by opening new opportunities in revising the treaty to suit present times. But the heavy influence of leftist parties in the present government is likely to make it difficult as they strongly believe in the Dependency Theory and take India as the force that always wants to keep Nepal dependent. Perhaps Indian authorities understand this and they have indicated they will be more accommodative with Nepal now. The latest indication came from the Indian Foreign Minister Pranab Mukherjee while on his one-day Nepal visit on December 17 when he said India was ready to discuss reviewing even the 1950 Peace and Friendship Treaty between Nepal and India. All the left parties have repeatedly demanded the review or even abrogation this treaty.

Power cuts 8 hrs a week

Power cuts 8 hrs a week
eKantipur.com, Jan 6
BY BIKASH SANGRAULA

Power cuts are being increased over threefold from Sunday in most parts of the country, with generation from run-of-river projects dropping to less than half their capacity.

From the existing two-and-half-hour per household per week, power cuts are going up to eight hours per week in most parts of the country. In the far-western region the existing power cut duration will remain unchanged, but the region from Hetauda to Birgunj will face the worst power cuts of three hours every day.

Even worse news is that after a month there will be steep and frequent raises in power cut durations, culminating in over 40 hours per week per household, according to a Nepal Electricity Authority (NEA) forecast.

Meanwhile, of the 33 MW that PTC India Ltd recently proposed to supply Nepal to ease the power crunch here, it is feasible to take only 23 MW as the rest cannot be synchronized with the country's grid, according to NEA chief Arjun Karki. The 23 MW that can be taken are also under negotiation.

The country's run-of-river projects that can produce 440 MW in total when run at full capacity produced only 230 MW Saturday due to a sharp decline in water level in the rivers. The peak demand these days is 640 MW. The power availability at the moment is owed to 40 MW produced by the country's thermal plants and 85 MW being imported from India.

Production from the country's run-of-river projects is soon expected to dip as low as 185 MW.

Owing to pressure to supplement supply, the two Kulekhani projects, which have a combined capacity of 90 MW and are also the only storage type projects in the country, were losing as much as 23 centimeters of water level per day in their reservoirs during the last few days. The decision to raise power cut durations has been taken to slow the reduction of water level in the reservoirs to 16 centimeters a day as power production from the Kulekhani projects will be essential in February when run-of-river projects will be operating at very low capacity.

Power cut schedule

According to NEA's Load Dispatching Center, households in Kathmandu Valley will face power cuts from 5 am to 8 am once a week, and from 5 pm to 7:30 pm twice a week.

In most places outside Kathmandu Valley, power cuts will occur from 6 am to 9 am once a week and from 6 pm to 8:30 pm twice a week per household. Meanwhile, from Lahan onwards in eastern Nepal, power cuts will occur from 5 am to 8 am once a week and from 5:15 pm to 7:45 pm twice a week. In the west, starting from Kohalpur, the existing power cuts of two-and-half-hours per week will remain constant. From Hetauda to Birgunj, there will be power cuts for three hours every day owing to transmission problems.

Click For Foreign Labor

Click For Foreign Labor
BusinessWeek, Jan 15 2007
Companies are using online middlemen to find legitimate unskilled workers

When she could not find enough workers for the construction firm owned by her son Thomas, Ann Carroll decided to go online. After typing in such search terms as "construction laborer" and "Mexican workers," she landed on the Web site for Labormex Foreign Labor Solutions. Within days she had a quote: $100 each for 11 Mexican workers and $1,340 to cover the visas. In October, Carroll Construction Co.'s recruits began laying sewer pipes in Ocean Springs, Miss., where the company is located. "I don't know what we would've done if we didn't go this route," says Carroll. "We're very happy with the workers."

Amid a federal crackdown on illegal immigration--including the December arrest of 1,282 Swift & Co. meatpacking workers--and a roiling political debate over expanding guest-worker programs, companies are turning to online middlemen to find legitimate foreign laborers. Job sites such as Monster.com (MNST ) and CareerBuilder.com have been helping companies scour the globe for white-collar talent since the late 1990s. Now unskilled workers, too, are a few clicks away, a boon for such chronically labor-starved industries as construction, agriculture, and catering.

As with all things Web-related, there are shady characters hoping to cash in, and immigration officials are hard-pressed to police the scores of Web sites that have popped up in recent years. "The Internet opens up channels for both above-board and fraudulent outfits," says Eli M. Kantor, a veteran Beverly Hills immigration and employment lawyer. "There's not much regulation of [online] recruiting."

But as Carroll's experience shows, using a legit online middleman can be efficient and cost-effective. Labormex was founded in 2002 by Seymour Taylor, an entrepreneur descended from a family of American settlers in Mexico. Business took off when he set up a Web site about a year ago and began advertising on Yahoo (YHOO ) and Google (GOOG ). The site boasts of "hardworking people acclimated to tough physical labor and who have worked under severe warm-weather conditions"--guys like Andreas Alcala Martinez, 29, who works for Carroll Construction. "Little money, but not hard work," says Martinez. He makes $9 an hour and arrived on an H-2B visa, of which the U.S. issues 66,000 annually for low-skilled work. He can work for Carroll for 10 months, with the option of renewal.

MAJOR CLIENTS
Next to the big job sites, Labormex is a minnow. Taylor says he placed about 200 people in 2006 and expects to triple that in '07. But the company, which has offices in New York and Monterrey, Mexico, has reeled in big clients, including Super 8 Motels and the Sonic Drive-Ins (SONC ) fast-food chain. "Labormex has been very helpful," says Gary Wilkerson, president of Kergen Brothers Inc., which owns 40 Sonic franchises in Louisiana and has placed 25 Labormex workers in its kitchens. "Working with them has put us a step ahead of our competition."

The Labor Dept. lists hundreds of officially sanctioned recruiting agencies on its Web site. But many online recruiters are nowhere to be found there, including latinworkers.com, ranchworkers.com, and us-guestworkers.com. The latter boasts that it can supply "high-quality workers from Nepal, where all students learn English from age 5." Founder Sandesh Prajapati says he has placed workers in Colorado and Massachusetts. When asked why his company did not appear in the Labor Dept.'s database, he said he expected it to be there in 2007.

Agency spokeswoman Peggy Abrahamson acknowledges the Labor Dept. doesn't "analyze Web sites" to determine recruiters' legitimacy. The enforcement of immigration laws falls to the Homeland Security Dept.'s Immigration & Customs Enforcement (ICE) unit. Its Cyber Crimes Center has the task of policing the Net, but ICE, citing security issues, refuses to disclose how many people are working on the issue full-time.

The online recruiters are already providing ammunition for immigration critics. "They're getting employers addicted to a supply of cheap labor and lowering incentives for them to look for domestic workers," says Jessica M. Vaughn, a senior policy analyst at the Center for Immigration Studies, which opposes expanding guest-worker programs. But with many Americans unwilling to mow lawns, build houses, and wait tables, many companies see online recruiters as a necessary way to tap a labor pool that is increasingly global.


By Moira Herbst