Poverty alleviation strategy daunting task for NPC

By Prateek Pradhan

KATHMANDU, April 23 - Despite various efforts of poverty alleviation in the past, the incidence of poverty has increased in Nepal between 1977 and 1996. The absolute number of the poor, according to government statistics is 42 percent whereas if calculated in terms of the definition of US $ 1 per day, the number reaches to 53 percent.

It seems, Nepal has shown a serious commitment to fight adamant poverty in the country, or at least that is what it has successfully managed to impress to the donors. Vice Chairman of National Planning Commission (NPC) Prithvi Raj Ligal’s comprehensive report on framework for Poverty Reduction Strategy in Nepal has definitely impressed the donors with hard work and commitment government has put for poverty alleviation.

However, poverty is not an issue that can be addressed by solitary effort. The elimination of poverty is the task more complex than economic growth of the country, because the former would require economic growth coupled with equitable distribution of resources.

So, when it comes to the point of poverty alleviation, it is increasing the Gross Domestic Product (GDP) of the country but with increased GDP of the rural and urban poor. Ligal himself has mentioned that, in order to fight poverty, the government would be implementing strategy for growth of agriculture, private sector, distribute more resources to social sector, Governance and special targeted programmes like Poverty Development Fund, social sector investment etc.

According to Ligal, under agriculture there will be thrust for increased resource, streamline resources for APP (Agricultural Perspective Plan) and involvement of private sector. Similarly, he has said that there will be a special package of incentives and promotion for the development of private sector.

Ligal also added that the government would be increasing the public resources, introduce programmes to reduce human inequality, involve private sector in the delivery of social services and decentralized management. He further said that coverage and outreach will be increased for good projects and the government would be providing special attention to Poverty Alleviation Fund. He also spoke, as Finance Minister Mahesh Acharya did in the same meeting, to improve the governance, provide impetus to decentralization etc.

Though NPC might have presented a separate paper on poverty alleviation, the Finance Minister also committed almost the same strategy. For that matter, the previous country assistance strategy presented by the government in 1996 has not much different agenda.

Hence, the theme is the idea of poverty alleviation as such is not a very noble concept for donor communities. The only point that could have impressed the donors is the commitment of the country to go ahead with the reforms in all the sectors including already pursued administrative reforms and widely announced financial sector reforms.

However, just announcing poverty alleviation programme is not enough. Except for minor statistics, Nepal severely lacks data to formulate and design the poverty alleviation programmes. On top of that the monitoring and supervisory aspects are also very weak.

There are multitudes of institutional, social and economic problems. Hence, it will be a tough challenge for Ligal and his team in the NPC to implement all these ideas, even with the monetary and technical support from donor countries.

Whether the NPC or the country as a whole become successful in implementing all these ideas or not, we have no other choice but to move ahead with the task and seriousness.

Bee keeping emerging business

By Vijay Babu Khatri

KATHMANDU, April 23 - Isn’t it a distant dream to receive Gorkha Dakshin Bahu being a beekeeper? Definitely. But Dev Bahadur Gurung has proven that even a humble farmer can be conferred with the prestigious medal.

Managing Director of Gandaki Bee Concern Dev Bahadur Gurung began apiary a decade ago made it his profession only five years back.

He owns more than 6 thousand and five hundred beehives at different parts of the country.

A hive of Nepalese species of bees produces 20 kg and a hive of introduced bees gives 60 kg of honey in a year on an average. Gurung purifies the honey and sells them in the domestic as well as international markets.

Of lately, Gurung has been collecting the honey of wild bees and selling them. He has set a target of selling 5 tons of honey this season.

Two thousand and five hundred in Chitwan, 1 thousand and 2 hundred in Tanahun, 700 in Udayapur, 6 hundred in Nawalparasi and more than 6 hundred families in Gorkha, Lamjung and Dadeldhura districts are rearing bees under the Gandaki Bee Concern, according to Gurung.

Nepal exports 50 tons of honey annually, which sells at $ 1 a kg in international market. Foreign buyers demand 500 thousand to 1 million kg of honey but we cannot meet the demand due to low production.

Nowadays, the demand for the wild bee honey is greater than that of the domestic ones, says Gurung. The demand for wild bee honey in the foreign market is 50 tons a year but Nepal can supply only 20 tons. I have targetted to export 5 tons of wild bee honey this year, says Gurung.

Wild bee honey is found in abundance in Udayapur, Gorkha, Dadeldhura, Jajarkot, Rukum, Rolpa, Sindhupalchowk and Kavrepalanchowk districts, which is mostly popular in Korea, Japan, France, America and the Arabian countries.

Bee Keeping has not only earned foreign exchange but also contributed to rural development, employment generation and poverty reduction. The Bee Concern, recognized by the government as resource centre, has provided training to 9 hundred farmers so far.

We are planning to provide technical assistance to the farmers of potential areas in association with Agriculture Enterprise Centres and buy their products, says Gurung.

Many rural people are attracted towards this profession at present because of investment and operating cost.

Economy, finance and market

By Supa Upadhyay

Domestic Money Market:

The NRB has lowered its refinance rate (Bank Rate) by 1.5 percent to 7.5 percent. This rate is offered for priority sector lending extended by Commercial Banks, Agriculture Development Bank and Nepal Industrial Development Corporation. In addition, the NRB has also significantly cut its bank rate by 2.5 percent to 6.5 percent for the Rural Development Bank and other Micro Finance institutions. It is believed that now small farmer, small entrepreneurs and deprived people would be able to access soft loan from formal sector. The prevailing interest rate of rural credit ranges 20-24 percent, which is too high.

The average weighted yield on 91-day TBs rose modestly by 08 basis points to 5.69 percent while the yield on 364-day TBs moved sharply by 13 basis points to 6.16 percent. The NRB had received 20 bids worth NPR 830 million against the notified amount NPR 760 million for 91-day TBs and 23 bids worth NPR 1150 million against the notified amount NPR 600 million for 364-day TBs. The rupee was traded higher at 98.62 and lower at 98.57 for 91-day TBs and it was traded higher at 94.25 and lower at 94.12 for 364-day TBs. In the regular weekly auction, the NRB is going to issue 91-day TBs worth NPR 700 million on April 25, 2000.

Domestic capital market:

The NRB had also floated a five year maturity National Saving Certificate (NSC) worth NPR 700 million bearing 8.5 percent non-tax interest. As the rate of interest is comparatively high with that the rates offered by CBs in time deposits, all the NSC was subscribed in the first single day.

The Share prices further rose sharply. Gains in banks continued. The NEPSE index-100 opened higher at 333.44 from the previous week close of 331.88 zoomed up smartly in all consecutive days and closed on all time high at 349.71 for the week, netting a gain of 16.10 points over the week. Trading was estimated a 98685 shares valued NPR 31.8 million compared to a 1543456 shares valued NPR 17.4 million of previous week. Commercial banks alone shared 72.0 percent of total traded amount. This week, the Index of Production Sector dipped while commercial bank, Hotel Sector, Finance/Insurance and other sector improved. Business Sector remained unchanged. Brokers had quoted the prices of 52 companies on the trading board but only 45 companies were traded. Twenty-five companies improved while only six companies lost. Other fourteen traded scrips remained unchanged at their previous prices. Share of Nepal Bank Ltd, Nabil Bank, Nepal Grindlays Bank, Nepal SBI Bank, Nepal B’desh Bank, Everest Bank, Bank of Kathmandu, Taragaon Regency Hotel and United Insurance were able to trade in all five working days.

Forex round-up:

Sterling strengthened modestly against the USD on favourable data released this week.

The recent decision of ECB to leave Euro interest rates unchanged could not be an effective step stopping the European single currency from further fall.

The yen has been bought after the G7 meeting with USD/JPY down to 130.30 from 105.60 as Japans coalition parties urged the government to use public funds to shore up the Nikkei. At present it is difficult not to come to the conclusion that USD/JPY should test 100.00 in the near future.

NEPSE Trading (Closing prices in NPR)

                               Top Gainers

                                Top Losers

Exchange rate movement (middle rate)

Critical review of Telecommunications Act & Policy

By Sudhir Parajuli

In the era of globalization, a country has to improve its infrastructure for the fast, efficient and reliable transfer of information and communication to keep abreast of the rapidly metamorphosing world.

Nepal too cannot remain isolated from this universal phenomenon. In this context, the government has done a commendable job by realizing the fact that the development of the communication facility inside the country has to be taken up as a top priority. The government took the step by repealing Telecommunications Act, 1962 and re-introducing Telecommunications Act, 1997.

The new Act has empowered the government to appoint a new Nepal Telecommunications Authority (NTA) to regularize and systematize the telecom services in Nepal. The Act covers the constitution of the authority, its functions and duties, power to issue orders and to settle disputes, the issue of licensing the services, etc. In 1999 NTA came out with Telecommunications Policy.

The Policy has liberalized the telecom services ending the monopoly enjoyed by Nepal Telecommunications Corporation (NTC) allowing private players to invest in the telecom sector.

The Policy stresses upon the development of voice communication and data communication, which constitutes the backbone of IT industry.

However, the Act has many flaws. The law has given power to NTA both for issuing the licence and settling disputes among the licencees but does not say anything about the dispute between the NTA itself and the licencee. This might make NTA authoritarian in nature.

The law states that if the applicant is denied the licence by the NTA, he can appeal to the government within 35 days of such intimation by the NTA. However, since the NTA is under the government, the appellant might not get justice from the government as there is every chance of the officials at the Ministry of Information and Communications upholding the NTA’s decision. Similarly, the government is likely to side with NTC if any dispute arises between any other licencee and the NTC.

The law also states that no case can be initiated in any courts of the country against the decision taken by the NTA. This might be detrimental to the developmental activities in the telecom sector.

Creating two separate bodies for issuing licences and dispute settlement could be the solution to this problem. NTA can also be bifurcated into two separate bodies: one to distribute licences and to regulate, and the other to settle disputes among the licencees and between the NTA and the licencees. Moreover, licencees should be given a right to challenge the decision of dispute settlement agency in court.

The Act also states that Rural Telecom Development Fund is to be raised for the development of telecom services in the rural areas. For this, a fixed percentage of the annual turnover of the licencees has to be deposited in this fund. The law does not specify any implementation agency to use this fund for the developmental activities. Hence, there is chance of misusing the fund. It is advisable that the government constitute a fund management board to utilize this fund.

The Act states that if any person is found providing the telecom service without a proper licence from the NTA, he can be fined up to RS. 25,000. This punishment is too mild in that the turnover might run into millions of rupees.

Telecommunications Policy 1999 is positive on liberalizing telecom services but has some impractical clauses in it. The Policy stresses the fact that priority should be given to utilize the means and resources available within the country in developing and expanding the services. But says that only one licence will be granted each to operate the basic and mobile telephone services.

Since the initial investment in the telecom infrastructure is very large, it will be very difficult to find Nepalese players with enough funds. Hence, the licence will eventually land up with a company having a majority stake of a foreign investor.

Moreover, the infrastructure development process will be extremely slow as the areas to be covered by a single company will be very large and the remote places will be left over by the private company as it will try to profit more from the more lucrative urban areas.

One of the solutions to this problem may be that the whole geographical region of Nepal be divided into five circles similar to the existing five developmental regions and the licences be distributed accordingly. This will help the licencees to focus in their circles, which will eventually result in the faster development of the infrastructure.

Coming to the competitive bidding process, the Policy says that the licences will be granted to the highest bidder. Government should learn from India where the licence distribution through the competitive bidding eventually became the biggest hindrance in the development of the telecom sector.

The companies participating in the bidding process tend to quote more than the proposed net cash inflow in a greed to get the licence but later on realize the reality. Due to this, out of the eight licences given to the private parties through the bidding process in India, only two could operate the basic telecom services. Now, India has realized its mistake and has decided to switch over to revenue sharing basis.

Nepal too can follow the same process in a more innovative way. The licence may be given through the competitive bidding process but bidding may be on the percentage of revenue sharing with the government. The bidder quoting the highest percentage may be awarded the licence. A nominal entry fee may also be fixed for all the bidders.

The policy also indicates that the private basic telephone service providers should only use the WLL (Wireless in Local Loop) technology to distribute its services to customers which will restrict the level playing field between the NTC and the private players.

However, it is evident that the government has overlooked the recent research and development in the telecom sector while formulating the policy. The Policy requires that the companies should get separate licences for providing internet/email, videotext, fax mail, audio conferencing and local data communication. It is practically impossible to demarcate a line between these services as all these services have been converged by the recent developments in the telecom sector.

For instance, if a person gets an internet connectivity from an Internet Service Provider (ISP), he can avail all of these services even without the consent of the ISP or the knowledge of the NTA. Therefore, it is highly recommendable to bundle all these services into a single licence.

The policy does not speak of any incentives to the ISPs which provide the internet services through their own cable networks or through wireless (both new emerging technologies). As these services need extra investment and the customers will get faster connectivity with cheaper resources, extra incentives have to be given to those ISPs.

Moreover, the ISPs are debarred from connecting their services to the PSTN exchanges both inside and outside Nepal. This is to prevent the usage of internet telephony. However, there are companies outside Nepal which offer these services through their websites and it is impossible to monitor that.

The policy has taken a right step towards the privatization of the NTC but it does not mention any time frame. The policy indicates the strategic sale of the ownership of NTC to the private players but does not pinpoint to what extent. It is the high time that the government should transfer the ownership to the private players through public offerings and strategic placement of its shares. Since, NTC also has to work for providing the telecom services to the rural areas, the government may hold a minimum amount of the shares having a veto vote so as to be in a position to guide NTC’s activities.

It is commendable that the Policy has legalized the use of VSAT for data communications. However, the licence for the user of the VSAT services is pecked at Rs 300 thousand per terminal, which is very high. For an instance, Rastriya Banijya Bank or Nepal Bank Limited has over 500 branches. If they decide to interconnect all of their branches through Very Small Aperture Terminal (VSAT) to provide efficient and faster services to their clients, they have to cough up at least Rs 150 million for the licence fees alone. It would have been better if it were made necessary to get only one licence for one company to use VSAT for its own purpose regardless of number of terminals used.

The Policy has cleared the path for infrastructure development in the country. Now, it all depends on how seriously and quickly the NTA will look into the much-needed changes in the policy. It now remains to be seen how much the NTA will be successful in breaking this precedence.

(The author is doing an MBA at the University of Roorkee, India.)