FEDAN requests NRB to intervene Rupee depreciates further vis-à-vis dollar

By Ameet Dhakal

KATHMANDU, Aug 4 - Foreign Exchange Dealers Association of Nepal (FEDAN), a club of eleven commercial banks dealing with foreign exchange, today requested Nepal Rastra Bank (NRB) to float 7 to 12 million US dollars to arrest the fresh round of volatility in the forex market. Bijaya Bahadur Shrestha, Chairman of FEDAN informed The Kathmandu Post that the Association requested the Central Bank for intervention this afternoon following a mounting demand for dollars by importers, prompted by sliding Nepali rupee vis-à-vis dollar. After maintaining stability for over two years, Nepalese currency has been sliding, albeit gradually, since May 28. In the last two months Nepali currency has tumbled by 2.7 percent. The depreciation, however, has nothing to do with the fundamentals of Nepalese economy or Nepalese forex market. It is simply a "drag effect" of the sliding Indian currency against dollar. As the Nepali rupee maintains a fixed exchange rate with Indian currency (IC), any volatility in the Indian forex market gets transmitted automatically to the shore of Nepali market. Nepali rupee further faltered by 35 paisa for a dollar today, as the market looked a bit shaky. Nepali rupee has depreciated by over 25 percent since August 1997, when Nepali currency started to tumble breaking a stability of over one and a half-year. From Rs 57.25 for a dollar in August 26 1997, the rupee slipped to as low as Rs 63.70 for a dollar within a year. It was the after-shock impact of the contagious South East Asian currency crisis, which prompted depreciation of the Nepali currency in 1997, transmitting via Indian forex market. Nepali rupee underwent another major round of depreciation along with the Indian currency in March 1998. Nuclear test by India on March 11, 1998 did not only invite international condemnation and wave of international sanction against India but it also nerve-shook the Indian stocks and forex market. Consequently, Nepali currency depreciated to as low as Rs 69 for a dollar. Winners and Losers Commercial Banks are the major gainers out of depreciating rupee. Currently, commercial banks hold a total reserve of over 25 billion rupees equivalent convertible currency. The 2.7 percent depreciation of Nepali currency in the last two months vis-à-vis dollar has earned them a wind fall profit of about 675 million rupees. If calculated from August 1998 level, the accumulated forex fluctuation gain for commercial banks is about 5.4 billion rupees, assuming that the banks consistently maintained a reserve of over 20 billion rupees equivalent forex during this period. The tumbling currency is a boon to exporters as it maximizes their export earnings. While it is a bane to the importers for it inflates import bill. However, as the importers later on shift the cost of depreciation to consumers through price hike, it is consumer who will be the ultimate loser. Conflicting interest of the exporters and importers often worsens the depreciating currency. Exporters want to postpone expatriation of their earning to maximize export earning. While the importers want to prepone their import to minimize import cost. "It is this mismatch in the interest of the importers and exporters that further triggers depreciation," says Shrestha. On the other hand, government loses as the debt-servicing bill keeps on soaring with depreciation. Assuming the accumulated foreign loan of 180 billion till August 1997, the loan bill has increased by almost 45 billion rupees due to depreciation of Nepali currency alone. Private sector investors, who have borrowed dollar-denominated loans from abroad, make up another group of losers.

Oriental Hotel's shares oversubscribed 7 times

By a Post Reporter

KATHMANDU, Aug 4 - The shares of Oriental Hotels Limited, managed by Radisson International, has been oversubscribed by almost seven times. The hotel had invited applications for 125 million equity shares of par value Rs 100 on July 25. However, at the end of the seven-day period, the duration for which applications have to be accepted as per the guidelines of the Securities Board, over 75,000 applications equivalent to Rs 860 million poured in. Of the total number of applications, shares worth over Rs 140 million was applied through the brokers. Similarly, application for shares of Rs 140 million came from NIDC Capital Markets Ltd, and the rest from other collection centres. According to B K Shrestha, Managing Director of the hotel, this is the first time that investors have shown such confidence in hotel business. "We are encouraged by the overwhelming response of investors. Till today, investors' confidence could only be seen in the banking sector," he said talking to The Kathmandu Post. He informed that shares would be distributed according to the guidelines of Securities Board. This is the first time that shares of any hotel have been oversubscribed by 7 times. Prior to this, the shares of Taragaon Regency Hotels had been oversubscribed by three times. Oriental Hotels Ltd has an authorized capital of Rs 500 million, issued capital of Rs 750 million and total paid up capital of 475 million rupees.

PM Koirala tries to woo IT investors

HYDERABAD, Aug 4 (RSS)- Prime Minister Girija Prasad Koirala has called upon the businessmen of India to have an open and extensive interaction with the Nepalese businessmen to explore and assess the prospects for business and investment in Nepal. Primier Koirala, speaking at the luncheon hosted in his honour by the Federation of the Indian Chamber and Commerce and Industries (FICCI) here today, said there are good and untapped prospects for investment and business in Nepal. "With the restoration of multiparty democracy in 1990, we have adopted open and liberal economic policy," he said, adding "sectors of our economy such as hydropower generation, tourism, manufacturing, agro processing and Information Technology (IT) are all open for foreign investment in a profitable way." Koirala, while speaking to the business leaders of this city which has been known as "Cyberabad," said "I am reminded of the fact that today's world is increasingly being oriented towards what is known as the knowledge industry. Your achievements in science and technology in general and information technology in particular have been impressive and this seems to be real trendsetter for the new millennium." Stating that he has been nurturing the idea of establishing a centre of excellence in Nepal in the field of science and technology with particular focus on Information Technology, he said, "I hope that that your experiences and expertise in this field would be of help and value to us as well." Noting that relations betweem Nepal and India are rooted in history and culture and mutual respect, he said understanding of each other's legitimate interests concerns have always been the hallmarks of bilateral relations between the two. The Prime Minister observed- "As we enter the new millennium, our efforts should focus on making it more forward looking and friendly." Minister for roads, building and ports of Andhra Pradesh K. Vijayarama Rao said the state is emerging as an Information Technology center of the region and there is a need of joint investment in various fields between Andhra Pradesh and Nepal. The visit of the Nepalese Prime Minister Koirala will be very fruitful in further enhancing the friendly ties and promoting trade and investment between the south Indian state and the Himalayan Kingdom, he added. President of the Federation of Nepalese Chamber of Commerce and Industry (FNCCI) Pradip Kumar Shrestha, calling on the business community of India to invest in Nepal, said there are the possibilities of joint investment in many areas including Information Technology in Nepal. President of Federation of Andhra Pradesh Chamber of Commerce and Industries (FAPCCI) Mohan Lal Gupta and past president A. S. Kasliwal also spoke of the need to promote trade and joint investment in Nepal and said the visit of the Prime Minister would be very fruitful for that purpose. In the presence of the Prime Minister, an agreement was also signed between FNCCI and FAPCCI on Information Technology and agriculture business in Nepal. FNCCI president Shrestha and FAPCCI president Mohan Lal Gupta signed the agreement. Minister for Foreign Affairs Chakra Prasad Bastola, Royal Nepalese Ambassador to India Dr. Bhekh Bahadur Thapa, Indian Ambassador to Nepal Deb Mukherjee, the Chief Secretary, the Foreign Secretary, the Prime Minister's daughter, the principal private Secretary to the Prime Minister, high level officials of Andhra Pradesh and other members of the Prime Minister's entourage were also present on the occasion.

Govt to ask proposals for Pokhara int'l airport

By a Post Reporter

KATHMANDU, Aug 4 - Following the recent signing of a Memorandum of Understanding (MoU) between the government and a French multinational, Alpha Consultant Company, to standardize the Gautam Buddha Airport in Bhairahawa, the government is now preparing to ask proposals from private sector for constructing the country's third international airport in Pokhara. "The government recently decided to call upon the private parties to submit their proposals for constructing a new international airport in Pokhara," said Prithvi Raj Ligal, Vice-Chairman of National Planning Commission (NPC), talking to The Kathmandu Post. "The government is working to invite proposals from private sector for taking up the airport venture in Pokhara. The proposals is expected to be invited next week after the completion of necessary paperwork," he said. The airport would be constructed at Chindara Phant, that lies in ward numbers 14 and 18 of Pokhara sub-municipality, where the government owns over 3,100 ropanis of land, acquired in 1976. He said that the proposal would be called on BOT (Build, Operate and Transfer) system, on which the cabinet passed a policy last week. The government would take further decisions based upon the proposals made by the private parties. It has not yet decided on whether the venture is to be carried out on equity sharing or on lease basis. However, the government has aimed to operationalize the airport by 2003. The construction of an international standard airport in the famous tourist destination, which is visited by almost a quarter of the tourists coming to Nepal, is expected to give an impetus to the tourism industry of the country. Direct flights to international terminals abroad, especially India, is expected to help in attracting more tourists to Pokhara. NFEA protests allowance cut By a Post Reporter KATHMANDU, Aug 4 - Nepal Financial Employee's Association (NFEA), a sister organization of ruling Nepali Congress, Friday announced a nation-wide agitation against the recent directive of ministry of finance to cut down various allowances in the public enterprises. According to a press release issued by the Association, various agitation programmes will be launched till August 10 at the central and district level, which include stringent measures like pen down and ghaerao at such enterprises. "We are launching the agitation programmes as the government did not listen to our 5-point demand. Therefore, the government will be responsible of any consequence of the agitation", the press release reads. Pushkar Acharya, General Secretary of Nepal Trade Union Congress (NTUC), however, assured that their agitation would not affect sensitive services. He also informed that if their demands were not fulfilled, a meeting of National Movement Coordination Committee on August 12 would decide further protest programmes. The release also states that a delegation led by Laxman Bahadur Basnet, President of NTUC had met the finance minister and finances secretary and apprised them of the demands. "Despite the positive assurance from the finance minister and finance secretary, the ministry last week made a surprise decision to cut all allowances except for remote area allowance" adds the release.