Regulation of gold imports to hit revenue

By Bhaskar Sharma

KATHMANDU, June 23 - Government’s decision to delegate authority to Nepal Rastra Bank (NRB) for regulating gold imports might put an effective check on unauthorized gold imports but it is also likely to hit revenue collection.

Experts argue, Finance Minister Mahesh Acharya’s budgetary announcement to channel gold imports through the central bank will significantly curb the import volume of the precious metal thereby shaving off a chunk of revenue accrued from its import.

Dr Yuba Raj Khatiwada, Chief Economic Advisor to the central bank, agrees that the regulation will have an adverse impact on the much-needed revenue mobilization and estimates the revenue loss at around Rs 400 million.

But defending the decision he says, "It is a bold decision for a right cause."

"Right cause," as Khatiwada phrases, refers to budget’s avowed committment to discourage unauthorized trade in the country. In his last budget, FM Acharya announced three important polices to dishearten traders who wanted to play foul with country’s foreign trade. Besides supervising gold imports, the budget vowed to administer imports from Tibet and India through banking channel.

Decidedly, gold import was one area where scarce foreign currency was being spent relentlessly. In the last one-decade alone, businessmen imported over 80 billion rupees’ worth gold, which by any standard is "too high" for 23 million Nepalese population, half of which languishes below the official poverty line.

Besides draining off the scarce foreign currency, gold import had also earned a bad name to the country abroad, especially in India. Lately, it was being linked to a dangerous combination of terrorists and smugglers.

Moreover, officials hope, the regulation will divert the resources from being poured into unproductive gold imports to productive economic activities. It is also expected to promote better vigilance over the bullion markets and discourage unfair practices such as unwarranted artificial shortage.

However, the task will be daunting. Absence of relevant data on the total demand of gold in the country creates a practical difficulty.

Khatiwada argues that the central bank will ensure smooth supply of gold by closely monitoring the market demand. "NRB will not falter in policy implementation, neither it will let market price swing unnecessarily," says he.

The government’s decision to regulate the bullion market has received a mixed reaction. Retail jewelers are happy with it but resent the bureaucratic hassles they will have to overcome.

"We welcome the government’s decision since it is likely to regulate gold flow as per the market demand but we fear, it would invite more bureaucratic hassles," says Niranjan Ratna Shakya, president of Gold-Silver Traders’ Association.

Retail jewelers have one more apprehension: the bullion market would be dominated by big gold traders and the market would sucumb to speculative attacks.

Big businessmen dealing in bullion deny the possibility of speculative attack but flay the policy saying it would be virtually impossible for the government to regulate gold imports. By failing to asses the market demand, it will only fuel price fluctuation, says Nirmal Jyoti Tuladhar, a gold merchant.

"The regulation of gold imports is not a good strategy the government has adopted " says Tuladhar.

Moreover, they claim that regulation of gold business is against free market and liberalization policies adopted by the government.

Workshop on Wind Energy organized

KATHMANDU, June 23 (PR)- Department of Electrical and Electronics Engineering, Kathmandu University, Dhulikhel, organized a one day workshop on "Wind Energy in 2000" in the university premises on Monday.

Dr Peter Freer, visiting Professor, Chonam National University, Research Centre for High Quality Electric Components and System, South Korea, was the resource person. Starting from the renewable energy resources in general, the workshop was able to highlight the different aspects of harnessing wind energy to generate electricity.

The workshop also shed light on the design of wind turbines, tower and also on the installation and maintenance of wind energy generators.

Thirty-nine persons from various academic institutions, government and non-government organizations, researchers and individuals participated in the workshop.

Male Fashion alleged of trans-shipment

By a Post Reporter

KATHMANDU, June 23 - Male Fashions Industries, a joint venture between a Belgian investor and Nepali partners, has been alleged of transshipment. According to documents received by The Kathmandu Post, it appears that the said garment industry labeled goods exported from Vietnam as Nepalese products.

Khai Hoan Garment Company Limited of Ho Chi Minh City of Vietnam sent a consignment of ladies’ pants to Singapore, whose final buyer was Sedi S.A of Geneva on 3rd of May, 2000. Male Fashions, on its part, has also issued export license and Certificate of Origin for a consignment for the same number of ladies’ pants with the same style reference and to the same buyer on 10th of May.

It has been alleged that the company changes all the shipping marks in its Singapore Company and sends the goods as Made in Nepal, and the documents are sent directly to the consignee.

As Nepal enjoys GSP (Generalized System of Preference) facility from European Union and not burdened by quota restrictions, the transshipment is profitable for the exporter. According to Surendra Shakya, who was with Male Fashion till recently, the Garment Company is in a good position to enjoy transshipment as the owner of the company has branches in Vietnam, Singapore, Bangladesh and Nepal.

However, the alleged consignment is a very small one. The order — sent from Ho Chi Minh and as alleged by the papers from Kathmandu — is a small consignment of only 677 ladies’ pants amounting to US dollars 2301 only. "There could be many already done or are in the line. After all it is an illegal act and should not be measured in terms of volume and money," claims Shakya.

Mrinalini Giri, who was a previous joint venture partner of Male Fashion said that such an act will severely hit the country’s business. "It could trigger European Union to act against the whole country and drop the GSP facility. In such a case all the exporters will suffer," she said.

Govind Pokharel of Male Fashions plainly denied the charges. He said the company has already submitted the yellow paper, the export proof, of the alleged consignment. "If you look at the quantity of the consignment, you would not allege a company which has been exporting over 1 million pieces of garment every year worth approximately 5 million dollars," he said.

According to Pokharel, it is a sheer example of how joint venture partners harass the foreign partners after breaking up. Department of Industry and Garment Association of Nepal are investigating the issue. "I don’t have to say anything, the government investigation will prove our innocence," he said.

Grindlays to start ATM services

By a Post Reporter

KATHMANDU, June 23- Grindlays 24 Hour Moneylink, full service Automatic Teller Machines (ATMs), was inaugurated by Arun Nangia, Regional General Manager of Middle East and South Asia, ANZ Grindlays Bank Limited, at Nepal Grindlays Bank Limited’s branch at Grindlays Bhawan, Naya Baneshwor.

The ‘Grindlays 24 Hour Moneylink’ ATMs will initially be installed in the Bank’s branches in Naya Baneshwor and Kantipath, as well as offsite at Pulchwok, Thamel and Lakeside, Pokhara, according to a release received here today.

"Grindlays 24 Hour Moneylink are full service on line real time ATMs. Qualifying accountholders will be issued Access cards, which will enable them to withdraw cash, make deposits and check their balances from any ATM 24 hours a day, 365 days a year," the release quotes Nangia as speaking on the occasion.

In addition to the facilities provided to our accountholders, the Grindlays 24 Hour Moneylink will also enable tourists visiting the Kingdom from across the globe to withdraw cash advances in Nepali rupees against their Visa and MasterCards. This will further assist in increasing foreign exchange inflow into the Kingdom, the release says.

Grindlays 24 Hour Moneylink ATMs will provide services like cash withdrawal, cash and cheque deposit, fund transfers between accounts, mini statement, cheque book and draft request, the release says.

According to the release, R.J.Cox, General Manager, Nepal Grindlays Bank Limited said, "No other ATM in Nepal currently provides all these services. With the installation and testing underway, the Bank will soon start the commencement of producing individual access cards for its accountholders, whereby enabling them to transact any time, any day, anywhere."

"Now, in addition to being able to conduct transactions on a account from any branch of the Bank in the Kingdom, one can also have access to the account through the Grindlays 24 Hour Moneylink," he said, according to the release.

The ATM’s will begin full customer operations within the Kingdom with the commencement of the new Nepali financial year.

Inflation dips, trade deficit widens, budget deficit up

By a Post Reporter

KATHMANDU, June 23- During the first ten months of the current fiscal year 1999/00, the growth rates of both narrow as well as broad money have slowed down compared to the same period last year. In spite of an acceleration in the growth of development expenditure, total government expenditure has decelerated mainly due to control in regular expenditure.

According to a press communique released by Nepal Rastra Bank, higher budgetary deficit has been recorded as a consequence of sluggishness in resource mobilization in comparison to government expenditure. The rate of inflation on point to point basis has decelerated to a lower single digit level mainly because of decline in the prices of food and beverages group. In the external sector, although the growth rate of exports has outpaced that of imports, trade deficit has widened substantially mainly due to the relatively larger volume of imports. The foreign exchange holdings of the banking system as per the monetary records have substantially gone up due to a surplus in the balance of payment emanating from the growth in net service and transfer income as well as miscellaneous capital inflows. The existing foreign exchange reserve is sufficient to cover merchandise imports of ten months and a half as per the current trend. In the share market, although the number of transactions has declined, transaction value and NEPSE index have increased compared to previous month.

During the first ten months of the current fiscal year, broad money has registered a decelerating growth of 14.5 percent (Rs. 22,169.9 million) amounting to Rs. 175,065.6 million compared to the growth of 18.7 percent (Rs. 23,651.6 million) last year. This is mainly due to deceleration in the growth of net domestic assets of the banking system. As a consequence of downward revision of interest rate on deposit, improvement in share market, growth of imports and expansion in activities of non-bank financial institutions, growth of time deposits has decelerated from 21.2 percent (Rs. 17,201.8 million) last year to 15.7 percent (Rs. 15,974.9 million) this year. Likewise, narrow money has also decelerated by 12.1 percent (Rs. 6,195.0 million) this year compared to the growth of 14.3 percent (Rs. 6,449.8 million) last year, states the communique.

As a result of growing claims on the government and private sector, total domestic credit of the banking system has increased by 14.6 percent (Rs. 19,674.2 million) during the review period compared to an increase of 12.8 percent (Rs. 14,797.8 million) during the same period last year. In spite of a slow growth in industrial credit, the growth rate of bank credit to the private sector has increased to 15.8 percent (Rs. 14.323.1 million) from 13.9 percent (Rs. 10,707.5 million) last year, mainly due to the increase in credit flow to import and service sector.

On the fiscal front, government expenditure has increased by 10.2 percent amounting to Rs 40,850.5 million during the review period compared to 14.6 percent last year. Of the total expenditure, regular expenditure has increased by 9.5 percent, development expenditure by 10.0 percent and freeze expenditure by 41.4 percent. During the review period, regular expenditure has decelerated while development expenditure has slightly moved up compared to that of the previous year. Resource mobilizations has marked a sluggish growth of 8.3 percent during the review period compared to 15.5 percent last year. Revenue collection, a major source of resource mobilizations, stood at Rs. 30,801.8 million marking a 11.5 percent growth compared to 11.2 percent growth last year. In addition to it, decline in the receipts from foreign cash grants and non-budgetary income are also accountable for such a sluggish growth in the resource mobilization. As a consequence of lower resource mobilization compared to expenditure, budget deficit of Rs. 7,853.6 million has been recorded and this is 19.2 percent higher than that of the previous year. During the review period, the government has received foreign cash loan amounting to Rs. 2,805.0 million and issued treasury bills as well as national saving bonds worth Rs. 2,510.0 million and Rs 700.0 million respectively. The remaining amount of Rs. 1,838.6 million has been overdrawn from the Nepal Rastra Bank.

The communique further says, national Urban Consumer Price Index, on point to point basis recorded a rise of 1.8 percent during the review period compared to a rise of 10.3 percent last year. A rapid fall in the prices of food and beverages group has helped lower down the price index to a single digit. Price index of food and beverages group has declined by 3.0 percent compared to 14.5 percent increase last year. Despite an increase in price index of restaurant meal, meat, fish and eggs, beverages, milk and milk products as well as spices, the declining prices of oil and ghee, vegetables and fruits, cereal products, sugar and sugar products and pulses have contributed for such a decrease in the price index of food and beverages group. However, price index of non-food and services group has increased from 5.4 percent last year to 7.8 percent during the review period mainly due to the rise in prices of transport and communications, education and recreation, housing, medicine and personal care, tobacco, cloth, clothing and sewing services as well as shoes. Regionwise, prices in Kathmandu has recorded a higher growth of 3.2 percent followed by 1.2 percent in Terai and 0.9 percent in Hills.

On the external front, both exports and imports have respectively registered a growth of 42.4 percent to Rs 41,742.0 million and 25.0 percent to Rs. 87,859.7 million during the first ten months of FY 1999/00. In the export side, export of readymade garment and Pashmina to third countries have increased significantly whereas that of woolen carpet and jewellary have shown only a marginal increment. During the review period, Rs 4.8 billion worth of Pashmina has been exported. However, exports of pulses, tanned skin and nigerseed have declined during the review period. Export-import ratio, which was 41.7 percent last year, has increased to 47.5 percent during the review period. A surge in import is attributed to higher imports of foodgrains, medicine, cement, textile, thread, glass and glassware, chemicals, agricultural tools, machinaries etc. from India and sugar, copper wire and sheet, thread, transportation goods and spare parts, aeroplanes and its parts, chemicals, gold and other machineries as well as spare parts from third countries. Although exports have increased at a higher rate than imports, trade deficit which had declined last year increased by 12.6 percent amounting to Rs 46.117.7 million mainly due to a relatively larger volume of imports compared to exports, adds the release.

Based on the available statistics for the first eight months of the current fiscal year, the balance of payment has remained favourable by Rs. 11,915.0 million. During the review period, the growth in trade deficit outpacing the increase in net service and transfer income has resulted in the current account deficit of Rs. 3333.1 million. However, a substantial inflow of miscellaneous capital item net has helped balance of payment to register a sizeable surplus. Based on the monetary statistics for the first ten months of the current fiscal year, the overall balance of payment has recorded a surplus of Rs. 13,469.0 million. As a result, foreign exchange holdings of the banking system has increased by 21.4 percent to Rs. 9175.6 million as at mid-May 2000. Of the total reserve 84.9 percent accounted for convertible currency and 15.1 percent for non-convertible currency.