NepaliBiz.com: April 2007

Saturday, April 28, 2007

Roundup of Economic & Business News (Apr 15 - Apr 27)

GMR Group suggested for Arun III, Upper Karnali

Budhi Gandaki shelved, GMR Group suggested for Arun III, Upper Karnali
eKantipur.com, 27-April-2007
BY BIKASH SANGRAULA

A committee constituted by the Ministry of Water Resources (MoWR) in October last year to evaluate the proposals of 14 companies interested in developing the 600 MW Budhi Gandaki, 402 MW Arun III and 300 MW Upper Karnali hydroelectric projects, has recommended India's GMR Group for both Arun III and Upper Karnali, sources said.

However, none of the companies that applied for Budhi Gandaki have been recommended for license award, as all the applications were ajudged sub-standard.

The committee, which is coordinated by former finance secretary Bhanu Prasad Acharya, submitted its recommendation to Minister of State for Water Resources Gyanendra Bahadur Karki Friday afternoon.

Sources close to the developments said that the five-member committee allotted points to each of the applications on the basis of 20 different parameters, including free energy and free equity offered to Nepal, financial capability, experience, royalty and construction deadline.

"Based on these parameters, GMR's proposal was judged the best for both Arun III and Upper Karnali," a source said. "Proposals made by KSK Electricity Finance India Ltd and Sutlej Jalbidhyut Nigam were judged second best for Upper Karnali and Arun III respectively," the source added.

Sources said GMR has offered substantial free equity and nominal free energy to Nepal for Upper Karnali. "The government had asked for free equity for Upper Karnali, as the project is listed in Nepal Electricity Authority's generation plan," a source said. Meanwhile, for Arun III, which does not feature in the state electricity body's generation plan, GMR has offered substantial free energy and nominal free equity.

The recommended company, upon being awarded project survey licenses by the government, will be required to produce bank guarantees that would be forfeit if the awarded projects are not completed on time. Under government policy, total ownership of the projects must be handed over to Nepal 30 years after the issue of license.

GMR Group, which entered India's power sector more than a decade ago after the sector was opened up for private investment, has three power plants in operation in India. They are GMR Energy Ltd in Mangalore, GMR Power Corporation Pvt Ltd in Chennai and Vemagiri Power Generation Ltd in Andhra Pradesh.

Three more power projects, also owned by the group, are being development. They are GMR Badrinath Hydro Power Generation Pvt Ltd in Alaknanda, Uttarakhand, Kamalanga Power Project in Orissa and Talong Power Project in Arunachal Pradesh, according to the company's official website.

Fourteen companies, namely Reliance Energy, GMR Energy, Jindal Steel and Power Ltd, Sutlej Jalbidhyut Nigam, Maytas NCC Consortium India, Jayprakash Associates, Larson and Tourbo, Bhilwara Energy Ltd India, National Hydroelectric Project Corporation of India Ltd, KSK Electricity Finance India Ltd, Athena Consortium, Brackel Corporation Netherlands, Sino Hydro Corporation and China National Oversees Engineering Corporation had applied for one or more of the three projects.

Reliance Energy and Jindal Steel and Power Ltd were close in the race, sources said.

Arun III and Upper Karnali are two of the most attractive run-of-river projects in the country. Both are meant for power export to India.

The committee has as members former chief of the Department of Electricity Development Lekh Man Singh Bhandari, Water and Energy Commission Secretariat chief Rajendra Kishore Chhettri, and Nepal Electricity Authority chief Arjun Kumar Karki. MoWR joint-secretary Anup Kumar Upadhyay is member-secretary of the committee.

Govt decides to invest in West Seti

Govt decides to invest in West Seti, Construction after monsoon
eKantipur.com, 25-April-2007
BY BIKASH SANGRAULA

A cabinet meeting Wednesday approved a proposal made by the Asian Development Bank (ADB), which ws forwarded by the Ministry of Finance, for the government's equity participation of US $ 45 million in the 750 megawatt (MW) West Seti project. ADB is extending the sum as loan to the government.

"The cabinet has approved the proposal," said State Minister for Water Resources Gyanendra Bahadur Karki. "With this decision, the project, whose license was issued 12 years ago, has reached conclusion. It will enter construction after two or three months," Karki added.

ADB will charge the London Interbank Offered Rate (LIBOR) on the loan plus minimum percentage points, providing a concession on percentage points that it normally charges above the LIBOR rate. The government itself will loan out the sum to Nepal Electricity Authority (NEA), which will own shares of the project. The government charges a loan interest of eight percent to NEA.

The project's developers aim to start its construction immediately after monsoon this year. "We aim to make shareholding decisions next month, and seal financial closure by the end of monsoon, after which we aim to start construction," said Himalaya B Pande, director of SMEC West Seti Hydroelectric Corporation Ltd.

ADB, which will itself have a separate equity participation worth 20 percent through its private sector window in the US $ 1.2 billion project, had made the proposal to the government to win over Chinese investors, who are set be the biggest investors in the project. The project is being financed on a 75/25 debt/equity ratio, with most of the debt contribution sought from Chinese financial institutions, including Export Import Bank of China and Bank of China.

The project will also have equity participation of 25 to 30 percent from Australia's Snowy Mountain Engineering Corp (SMEC), which holds the project's generation license. China National Machinery and Equipment Import and Export Corporation (CMEC) that will build the project, and some Indian agencies will also have equity participation. A company is soon being registered in Hong Kong to run the project.

SMEC has an agreement for providing 10 percent royalty to the Nepal government, in the form of 75 megawatts of peaking power from the storage project.

The peaking station of the storage project is targeted to stabilize the power grid in northern India, which faces a tremendous shortage of peaking power. SMEC, which obtained license for the West Seti project in 1994, has a Power Purchase Agreement with PTC India Ltd at around five cents per unit.

West Seti project site lies in Doti district in far-western Nepal, some 865 km from Kathmandu. The project's construction is estimated to take five-and-a-half years. All studies needed prior to project construction have been completed.

Carpet export dips by 3.05 percent

Carpet export dips by 3.05 percent
eKantipur.com, 23-April-2007
By Tapas Barsimha Thapa

Woes for the Nepali carpet industry continues, as the export of hand-knotted woolen carpet went down by 3.05 percent during the first nine months of current fiscal year, compared to the same period last year.

According to the data compiled by Trade and Export Promotion Center (TEPC), a total 976,782.08 square meters of the woolen carpet was exported to more than 48 different countries and the quantity was 13.69 percent less than what was exported during the same period last year.

Along with the fall in the quantity of export, total earnings from export also witnessed a decline of 3.05 percent to US$ 56.09 million as against US$ 57.85 million seen last year. But things could be getting better slowly.

Amid slowly improving business environment, knowledgeable carpet traders said that the fresh flurry of delivery of backlogged products has pushed up export figures.

Export in the mid-March-April of 2006/07 increased by 13.69 percent to stand at US$ 7.2 million compared to exports during same period last year, when it was US$ 6.3 million.

Kabindra Nath Thakur, president of Nepal Carpet Exporters Association (NCEA) attributed the rise to the end of terai unrest and decrease in strikes, chakkajams and bandas. “That helped in delivery of products, which were supposed to be delivered in the previous months,” said he.

This is evident considering that the export figure in the ninth month of this fiscal year was 42.32 percent more than that in the eighth month. The monthly export in the period between mid-December 2006 and March 2007 stood at around the five million US dollar mark owing to the general and labor strikes in the industry.

Thakur, however, warned that the recent increase should not be taken too positively, as the overall picture of export of hand-knotted woolen carpet is still dismal.

“The labor problem that mired the industry is almost resolved. If peace persisted, we can produce and deliver carpets in time. But don't expect too much good news. A lot of other factors have increased the cost of production,” he said.

He informed that a settlement with the labor unions to end labor strike has added five to ten US dollars to the current cost of producing per square meter of carpet. The cost of processing, wool and other factors of production has also gone up.

This has added some seven to seventeen US dollars to the current rate for the finished products. Another factor affecting the market is the sharp decline in the value of the US dollar.

Thakur said that the government's apathy toward the industry, which is Nepal's biggest foreign currency earning export, still continues pushing clients toward neighboring India.

According to Thakur, 1,484,484.42 square meters of carpets were exported in 2005/06 fiscal year, while exports would not even cross the 1.2 million mark this fiscal year.

Citizens Bank begins operations

Citizens Bank begins operations
eKantipur.com, 20-April-2007

Citizens Bank International Ltd came into operation from Friday, becoming the 20th commercial bank in the country.

The bank offers home loan for a tenure of 25 years -- the longest duration of payment among financial institutions -- with interest rate ranging from 8 to 10.5 percent annually.

The new bank's other products include small and medium enterprise (SME) loan for up to five years at interest rate of 7.75 percent to 10 percent, and mortgage loan for up to 10 years with interest rate between 9 percent to 9.5 percent. Likewise, the bank has auto and education loan schemes. Finance Minister Dr Ram Sharan Mahat inaugurated the bank, which has begun its services with a slogan 'Your Partner for Progress'. Its paid-up capital totals 560 million rupees and its authorized capital stands at two billion rupees.

Speaking at the inauguration function, Mahat said that banks need to reverse their trend of confining their services to urban areas and urged them to expand into rural sectors. “Lots of opportunities are in the rural areas,” he said. Noting the importance of the financial sector for development, he said that the sector has to lead development efforts rather than becoming a follower. “The banks should focus on providing long-term finance to invest in infrastructure,” he said.

He noted that banks cannot sustain if they fail to provide quality services, are not professionally sound, and do not have a huge capital base.

Radhesh Pant, president of Nepal Bankers Association said vast number of people still do not have access to banking services. “The banking sector has grown faster than other sectors although its sustained growth remains a challenge,” he said.

Dr Shankar Sharma, chairman of the new bank, said the institution has strategies to enhance its financial intermediary efficiency to raise deposit rate and reduce lending rate.

“We are also attempting to contribute to reenergize the real sector,” he said. Rajan Singh Bhandari, chief executive officer of the bank, said it would strive to provide financial services targeted at giving a push to development.

Friday, April 27, 2007

36,805 leave for foreign jobs

36,805 leave for foreign jobs
eKantipur.com, 20-April-2007

Foreign employment agencies have exported a total of 136,805 job aspirants to 15 different foreign employment destinations in the first nine months of the current fiscal year, an increment of 0.49 percent.

A total of 136,131 workers had left the country for employment purpose in the similar period last fiscal year.

Of the total number of people who left the country during the review period, around 40 percent were absorbed by Malaysia. Another 26 percent left for Qatar and around 19 percent were employed in Saudi Arabia.

According to Labor Department, Malaysia, the largest Nepali labor absorbing country, imported a total of 54,752 job aspirants in the first nine months. This is, however, a decline of around 16 percent compared to that of the similar period of the last fiscal year.

Officials of the department attributed the cause of decline to lower wages and high income taxes.

"Unskilled Nepali workers in Malaysia, who earn a salary of around 481 ringgit, have to pay almost a quarter of their salary as levy to the government. This is the major reason behind the fall in the number of workers leaving for Malaysia," he said.

The latest report of the government has also showed a decline in number of job aspirants leaving for Qatar. In the review period, labor export to second largest Nepali labor absorbing country fell by around 20.9 percent to 35,056.

Officials of the department said that the fall in labor demand from the country caused the total export to decline.

"Demand for construction workers in Qatar, which had increased tremendously prior to commencement of the Asian Games, has now started to wane following its completion," the official said. However, the trend has begun to reverse and number of people leaving for the labor destination went up by around 50 percent in the month of mid-March to mid-April, which is encouraging, he added.

Despite lowered exports to the two major labor destinations, the number of job aspirants leaving for Saudi Arabia and United Arab Emirates (UAE) surged by around 110 percent and 30 percent, during the review period.

The report states that a total of 25,825 workers left for Saudi Arabia and another 15,892 job aspirants left for UAE in the review period.

Among others, 1,725 workers left for Bahrain; 1,463 opted for Kuwait; 675 left for Oman; 433 accepted employment in South Korea; 347 chose Israel; 311 left for Macau; 161 went to Hong Kong; 77 left for Afghanistan and 70 found employment opportunity in the US.

Country	Total	%
Malaysia	54,752	40%
Qatar	35,056	26%
Saudi Arabia	25,825	19%
UAE	15,892	12%
Bahrain	1,725	1%
Kuwait	1,463	1%
Oman	675	0%
S Korea	433	0%
Isreal	347	0%
Macau	311	0%
Hong Kong	161	0%
Afganistan	77	0%
US	70	0%
Total	136,787	100%

BoK's projects 20 pc increase of profit

BoK's projects 20 pc increase of profit; gives priority to small investors
Nepalnews.com, 18-April-2007

Bank of Kathmandu (BoK) has informed that its operating profit this year is set to grow by 20 percent compared with the previous fiscal year.

A press statement by the bank, issued on the occasion of 13th anniversary of the establishment of the bank, states that while it posted profit of Rs 400 million last fiscal year, the same for the first nine months of the current fiscal year has already crossed Rs 330 million.

Likewise, the total deposits and lending amount of the bank has increased from Rs 10.49 billion and Rs 7.49 billion, respectively, last year, to Rs 12.03 billion and 8.94 billion till mid-April this year. The bank also distributed 18 percent cash and 30 percent bonus share dividend to its shareholders last year, the press statement adds.

"The BoK's target group does not only include urban customers, big businesses and projects. General public, small and medium-scale entrepreneurs and rural areas comprise the bank's priority service area," adds the statement.

The bank has 80,000 customers and it also operates BoK Money Transfer – a remittance service – through 180 outlets across the country.

In order to shoulder the Corporate Social Responsibility, the BoK has continued to contribute to health, education and environment sector, the statement says.

It added that the BoK wishes to contribute to the building of new Nepal and be able to face international competition in future when banking sector will be opened up.

NOC's gas loss widens

NOC's gas loss widens
eKantipur.com, 16-Apr-2007

Per cylinder loss to the state-owned Nepal Oil Corporation (NOC) has increased by Rs 15.38 after it decided to reduce import prices for gas companies as part of deal reached with the agitating gas suppliers to end the month long protest.

However, following the agreement, NOC has started pushing for hike in retail prices of gas by Rs 200 per cylinder, to cope up with widened loss for the state-owned import monopolist.

“As the retail price has remained unchanged, the new rate has widened the corporation's loss per cylinder to Rs 262 from Rs 247,” Biswa Nath Goyal, NOC chief told the Post, seeking rise in retail prices of gas.

He added that the price rise was also necessary because the latest rise in import quota would further balloon monthly loss for corporation from existing Rs 150 million.

Ichchha Bikram Thapa, NOC spokesperson, told the Post that NOC agreed to slash import prices for gas companies by 19 percent, raising transportation subsidy coverage for them. The corporation on Sunday also agreed to raise import quota to 9,000 tons from previous 7,200 tons.

Going by the agreement, NOC from Monday issued Purchase Delivery Order (PDO) to gas companies at the rate of Rs 703 per cylinder.

NOC officials said that subsequent to the latest agreement with the gas companies, the corporation has proposed the government to raise retail prices of gas by Rs 200 per cylinder. “We have floated two options for the government to consider,” said Goyal.

Under the first option, the corporation has requested the government to raise prices of gas by Rs 50 per month for four consecutive months.

As an alternative of the first option, NOC has suggested the government to go for wholesale pricing system, whereby it should deregulate the retail prices.

“Under this mechanism, we have has recommended the government to scrap subsidy and fix the wholesale price, opening companies to add further cost and decide on consumer prices,” said Goyal.

Sources said that the corporation has mainly pushed for the second option, as its enforcement would deregulate retail prices, enable companies to compete on end prices and pave way for the private sector to import gas from other sources as well.

“This will facilitate the government to enforce its decision to end NOC's import monopoly and open gas import to the private companies,” said the source.

Even though the government took a decision to that regard in February 2006, the private sector has shied away from venturing into gas import business due mainly to subsidy and administered retail pricing.

“However, serious discussion on NOC's fresh proposals is yet to begin,” said the source.

Sunday, April 15, 2007

Roundup of Economic & Business News (Apr 6 - Apr 14)

Apr 6
Tourist arrivals jump by 33.5 pc (eKantipur.com)
Improve NEPSE, say experts (eKantipur.com)
Garment export declines by 47 percent in March (Nepalnews.com)
Nepal Tourism Board (NTB) launches new promotion campaign in India (Nepalnews.com)
NT suspends distribution of pre-paid SIM-cards (Nepalnews.com)

Apr 7
FNCCI prez faces forgery charge (eKantipur.com)
Smuggling out of sandalwood unabated (eKantipur.com)
New leadership at Society of Economic Journalists of Nepal (SEJON) (eKantipur.com)
Nepal Credit and Commerce (NCC) Bank to raise paid-up capital (eKantipur.com)
Cooking gas supply dries up (eKantipur.com)
India plans to extend railway network to Nepal (Nepalbiznews.com)

Apr 8
Panchakanya starts production of Panmix (eKantipur.com)
Biz News Briefs (NCC Bank, UWTC, Nepal SBI, Annapurna Lifan, DSFPPL) (eKantipur.com)
Gas dealers to resume gas supply from Monday (Nepalbiznews.com)

Commentary
Gorakhkali eyes B'deshi market (eKantipur.com)
‘Nepal needs economic diplomacy’ - Sahana Pradhan (eKantipur.com)

Apr 9
Terai banda paralyzes life (eKantipur.com)
Rural infrastructure project to spend Rs 57b (eKantipur.com)
Workers close Jyoti Farm (eKantipur.com)
NOC to increase petrol storage capacity (eKantipur.com)
All-in-one event center unveiled (eKantipur.com)
60 Nepali workers stranded in Qatar (Nepalnews.com)

Apr 10
Govt to introduce Rs 159b budget (eKantipur.com)
Inflation on high trajectory (eKantipur.com)

Apr 11
Employment package for Karnali residents launched (eKantipur.com)
‘No new financial institutions this fiscal year’, NRB (eKantipur.com)
NIC Sajilo Karza unveiled (eKantipur.com)
Cybernetics becomes sole Lenovo distributor (eKantipur.com)
Biz News Briefs (Standard Chartered Bank, Global Bank, Ohm Solution) (eKantipur.com)
NPC aims for 5.5 percent growth (Nepalnews.com)

Apr 12
All Pokhara hotels booked for New Year (eKantipur.com)
Lack of law stalls Bhairahawa SEZ (eKantipur.com)
‘Promulgate NRN Act soon’ (eKantipur.com)
Govt asks embassies to cancel visa of 80 bank defaulters (Nepalnews.com)

Apr 13
India can give only 35 MWs more to Nepal (eKantipur.com)
Govt to review air service agreement (ASA) (eKantipur.com)

Apr 14
Handicraft exports decline by 5 percent (eKantipur.com)
Exports to India to face competition (eKantipur.com)
Country’s largest shopping mall inaugurated (Nepalnews.com)

Friday, April 06, 2007

Roundup of Economic & Business News (Apr 1 - Apr 5)

Apr 1
Biz News Briefs (Laxmi Bank completes 5 years, CG completes 136 years) (eKantipur.com)
Locals intimidate officials of Melamchi project (Nepalbiznews.com)
LG gas supply worsens in valley (Nepalbiznews.com)
Floriculture Trade Fair to kick off from April 5 (Nepalbiznews.com)
Nepal Tourism Board (NTB) organises sales mission in China (Nepalnews.com)

Company Profile
Moving Ahead:United Insurance (eKantipur.com)

Apr 2
Nepal allowed to import from third country (eKantipur.com)
Chinese apples displace Indian ones (eKantipur.com)
Discotheque business in record slump (eKantipur.com)
Asian Paints closes down (eKantipur.com)
Maruti Zen's new avatar launched (eKantipur.com)
Share market registers sound growth (Nepalbiznews.com)
Supply of LP Gas worsens in valley (Nepalnews.com)
No curb on foreign investment in media now: Minister Mahara (Nepalnews.com)

Apr 3
International tour companies returning (eKantipur.com)
Nepal to go it alone on Raxaul-Amlekhgunj pipeline (eKantipur.com)
Substandard medicines still widespread (eKantipur.com)
Maoist cadres beat up GEFONT officials (Nepalbiznews.com)
NEA further reduces load shedding hours (Nepalnews.com)
NPC unveils three-year plan for rural reconstruction (Nepalnews.com)

Apr 4
Yami against privatizing water utility (eKantipur.com)
Surkhet airport blacktopped after 41 years (eKantipur.com)
Melamchi staff halt work, demand security (eKantipur.com)
No civil registration for MA-60 aircraft (eKantipur.com)
Alico declares bonus at flat rate (eKantipur.com)
Nepal SBI Bank declares 5pc dividend (eKantipur.com)
India to bring custom rate to zero (Nepalbiznews.com)

Apr 5
Garment export declines 55 pc (eKantipur.com)
Nepal’s largest business complex to open April 14 (eKantipur.com)
Tourist arrival surges in March (Nepalbiznews.com)

Discotheque business in record slump

Discotheque business in record slump
eKantipur, 2-April-2007
BY UTTAM BHLON

Shani Shrestha, a young entrepreneur, was once the owner of Yale Pub and Café, a discotheque located in Patan, Lalitpur. After running the club for around two years, he recently sold it away due to soaring losses.

“I was doing good business in the initial days….hordes of youngsters used to come to the club for dance parties,” Shrestha told the Post. But with the decline in the business and sudden intensification in extortion spree, the financial burden started mounting, forcing its disposal, he said.

Beset with bitter experiences, the person, who was once determined to stay in the country and make some contribution, is now contemplating going abroad for some years.

This is just a case in point. There are more than 20 other investors like Shrestha who are either planning to close their discotheques or switch to other business, putting a question mark on the investment of millions of rupees. Of around 20 discotheques operating in Kathmandu Valley about a year ago, more than nine have already shut down, according to the Restaurant and Bar Association of Nepal (REBAN).

“The closure, on one hand, has inflicted a loss of around Rs 40 million to promoters along with the loss of hundreds of jobs,” said Narendra Man Singh, secretary general of REBAN.

Disco culture hit Nepal around a decade ago. But its future, which looked prosperous in the initial days, has suddenly started to look bleak, as investors have lost enthusiasm and those existent are also planning to fold up.

“Our business has gone down by almost 40 percent. Our daily sales used to hover at Rs 120,000 around a year ago. But now it has gone down to Rs 72,000 mainly due to fragile law and order condition,” said Mohan Shrestha, bar in-charge of Fire Club of Thamel.

Robin Sitaula, founder of PartyNepal.com, shares the same argument but added that unlike in the previous days, more people are now interested in going to lounge bars or family restaurants rather than discotheques.

Talking to this daily, various promoters said that at a time when business is at an all time low, pressures from various groups to provide donations is virtually pushing the 'disco business' to the verge of collapse. “Maoists and police officials each demand huge donations per month, which is not affordable under present circumstances,” a proprietor of one of the discotheques said requesting anonymity.

According to him, both police and Maoists force them to close the discotheques at 10 pm if the demanded amount is not paid in time, customers who have paid charges to enter the place are harassed.

“By doing this they are indirectly discouraging our customers from visiting our place,” he said. He opined that the problem would be solved if the government introduces a new regulation and allows entities registered as discos to conduct business till late at night.

NepaliBiz.com