Mutual Fund likely to be modified

Post Report

KATHMANDU, Aug 1 - Board of Directors (BoD) of Nepal Capital Market Mutual Fund is preparing to introduce a new package in order to give continuity to the Fund after its 5-year redeemable shares recently matured.

The BoD is formulating its plans in keeping with the possible sales of all shares. Shareholders are still undecided whether to give continuity to the Fund, said Manoj Bhattarai, coordinator of the management board. "They are in a mood of wait and see till the evaluation of Fund is completed."

According to Bhattarai the board is going to propose a more attractive and comprehensive low-risk package. "In this regard, discussions are on to issue debentures at attractive rates to raise the necessary capital," he said.

"The board would concentrate on providing high returns to shareholders thereby regaining the credibility of the Fund," he said. Now we are assessing on how much the shareholders are benefitted in terms of the present market price, he added.

Established in 1994, the first-ever Mutual Fund of the country faced many ups and down during it course. The Fund nearly collapsed two years after its establishment due to faulty investment decisions and inefficient management. The Fund revived only after Nepal Rastra Bank (NRB) and Nepal Industrial Development Corporation (NIDC) injected new funds of Rs 60 million. A Mutual Fund is one of the various types of financial institutions created with an aim to widen its investment portfolio to minimize risk of loss. Such investment protects small investors from exposure to single-investment risk, since his or her money is invested in a diverse portfolio.

The Fund so far has invested in 25 companies. Though the fund was established as an open-ended institution, it was turned into a close-ended following the reinvestment made by the NRB and NIDC. Presently, NRB holds 52 per cent of the shares of the Fund, while NIDC and the general public command 24 per cent each.

Indosuez's French partner announces withdrawl

By Bijaya Ghimire

KATHMANDU, Aug 1 - Credit Agricole Indosuez, a French banking group that ranks among the top ten in the world, officially declared to withdraw its investment from Nepal at the meeting of the Board of Directors of Nepal Indosuez Bank today.

Credit Agricole Indosuez’s decision to exit from the Nepalese banking sector comes despite contrary requests by other board members. Even the government, through a Cabinet decision recently, bowed down to the long standing demand of the group to allocate 67 per cent stake in the bank, up from the present 50 per cent.

Rastriya Banijya Bank and Beema Sanathan share 15 per cent stake each in the bank’s capital. The rest 20 per cent is held by the general public. The bank presently has a paid up capital base of Rs 500 million.

A source told The Kathmandu Post that Marc Dumetz, Chief Executive of the bank, at the meeting, cited worsening economic condition of the country and policy of the French banking group to invest in only large ventures as the main reasons behind the withdrawal of the investment. The group is planning to pull out from other South Asian economies as well, the source said.

However, the source informed that other board members at the meeting today argued that exit by the French group from the Nepalese banking sector despite the positive response shown by the government is unethical.

The French group during the meeting decided to sell its holdings to a single party, the source said. However, it has requested for replies from other promoters of the bank within a week if they are interested to take over the group’s holdings.

However, the invitation to Rastriya Banijya Bank and Beema Sansthan for procuring the share of the French group is a mere formality since the government owned institutions cannot invest in more than ten per cent of the total capital of any other institution. The 15 per cent share by each was procured before the ten per cent limit was clamped six years back. Nepal Indosuez Bank was established when the government opened up its banking sector under the Structural Adjustment Program.

Despite the group’s invitation to other promoters for the takeover, the source informed that the French group has already reached an understanding to sell the shares to some group and an agreement to the effect has also been signed.

The divestment by the French banking group is a major blow to the government’s plans to increase foreign investment in the banking sector. The government is under tremendous pressure to win back the confidence of Credit Agricole Indosuez, the source said.

With a view to woo foreign banking partners, Finance Minister Dr Ram Sharan Mahat had even announced to open foreign investment upto two-thirds of the total capital in the recently announced budget.

Not just the government, but even the French Embassy in Nepal had put in a lot of interest in the Indosuez squabble. French officials had even requested Former Prime Minister Girija Prasad Koirala during his trip to France last year to look into the issue. The investment by the banking group is the largest investment by any France based multinational.

Nepal Festival of Life extended

Post Report

KATHMANDU, Aug 1 - Nepal Festival of Life (NFL), the mega campaign of Nepal Tourism Board (NTB), especially organized to attract the Indian tourists has been extended for next two months.

NTB had announced to organize the three months "Nepal Festival of Life -Fun Next door Like Never Before" campaign starting from 1st of May to the end of July 2001 to address the plunging incoming tourists arrival. However, the especial tourist focused festival could not produce desired outcome due to various unexpected incidents including the unfortunate Royal Palace incident of June 1st.

Addressing the press conference, Pradeep Raj Pandey, chief executive officer at NTB clarifying the need to extend the festival said that despite the positive response received in the initial phase of the program, all the proposed events had to be withdrawn due to some unfortunate incidents. "We received warm response on NFL campaign but due to untimely demise of their majesties, NFL campaign almost came to a halt. After the incident, we could not run the program effectively , which forced to an extension of the campaign for next few months."

CEO Pandey informed the gathering that the duration of NFL campaign has been extended till coming September. He further said that the program will be especially concentrated on regaining the previous image washing up the wrong perception among the Indian tourists against Nepal.

The campaign gives Indian tourists more value during their visit to Nepal. A total of over 300 establishments like hotels, restaurants, shopping arcades, travel agencies, etc are partnering NTB in offering Indians special privileges and value added offers during the celebration of the Festival of Life. NTB is also issuing especial privilege cards to all the incoming Indian tourists upon their arrival at the airport free of cost.

Varun Shrestha, secretary at Ministry of Culture, Tourism and Civil Aviation, speaking on the same occasion highlighted the close relationship between Nepal and India and said that the program is focussed mainly on Indian tourist because of an increasing inter dependency between Nepal and India. He was confident that the program would be able to increase the inflow of Indian tourists curtailing the wrong perception among the aspirant Indian tourists about Nepal.

Tek Bahadur Dangi, director at NTB stressed upon the need of joint-effort of the media and tourism related officials to reassure that Nepal is still a safe place to visit and there is no such serious security problems as being covered by some media.

The press release issued in the conference states that NFL campaign aims to make the Indian visit more fun-filled and memorable by providing them attractive privileges in Nepal than elsewhere. The release also expressed its gratitude to concerned tourism related organizations and the government for extending necessary cooperation in launching the program.

The NFL is the first ever campaign run by NTB solely targeting Indian tourists with the arrangements of special incentives and facilities to check the shrinking statistics of Indian tourists that comprises around 33 per cent of the total incoming tourists.

HAN denounces flight accord annulment

Post Report

KATHMANDU, Aug 1 - Hotel Association Nepal (HAN) today flayed the decision to cancel the agreement between the Royal Nepal Airlines Corporation (RNAC) and China South West Airlines (CSWA).

In a press release issued here today, HAN said that tourism sector is passing through the degrading phase at present and with this shocking news the tourism sector will be much affected. With the present statistics, the tourist arrival has gone down by 56.83 per cent in the last one month compared to the same period last year whereas the Indian tourist arrival has fallen down by 72.48 per cent during the same period.

HAN has said that the hotel industry, which is already in the difficult position, would be forced to close down if the flights to Europe are cancelled at the beginning of the tourist season.

Meanwhile, Mohan P Khanal, Director of External and Public Affairs at the RNAC admitted that the Corporation and the CSWA have agreed in principle to terminate the contract nearly two months before it expires. The agreement is valid until 27th September, 2001.

Although admitting that some of the international sectors operated by the RNAC would be hit by the termination of the contract, he added that the routes that would be affected have not been finalized yet. They would be finalized in a week.