Gruesome crime

The gruesome practice of witch hunting, which should have died out with the middle ages, seems to be prevalent still in parts of Nepal, especially in the central Terai hinterland. A group of villagers in Mahottari district, who recently assembled with the malicious purpose of identifying the witches among local women, broke into a brawl. Many women were manhandled and injured. This incident has demonstrated the bitter fact that superstitious beliefs continue to torment and haunt our society. This is also a reflection on how dogmatic and ruthlessly orthodox villagers can be. True, the country has been witness to several such incidents that went unreported in the past. But successive governments have neither come up with measures to ban witch hunting, nor have we recognized it to be the crime that it is and that should have been outlawed long ago. Nor should any such ban be confined to words and paper only. In the absence of effective law enforcement, such heinous crimes continue unabated, especially in central and northern India and in Nepal.

The story from Mahottari has it that it was the chairman of Simardahi Village Development Committee (VDC) who hired a witch hunter from India with handsome payment to pick up local "witches". Over 10,000 villagers attended the witch hunting ritual, with the local women forced to attend. The VDC chairman had also taken the initiative to organize the gathering. In the witch identifying ritual, the Indian who claimed to be a "promising witch hunter" began harassing and manhandling unsuspecting local women assembled to witness the ritual. The Indian witch hunter declared 13 innocent women to be witches. However, things took a new turn when the VDC chairman singled out one Marani Devi Shah as the sole woman practising witchcaft in the village. She had been blamed for the death of a local youth allegedly through black magic. This led to a brawl and the injuring of several people including the woman accused. Now, Marani Devi cannot even return to her village because of the allegation against her. The government has not arrested those involved in the brawl. How can an elected government official commit such a heinous crime and not be brought to account? If this is the case with supposedly responsible people, the attitude and understanding among semi-literate and illiterate people can easily be imagined. The incident has even caused a hue and cry in Parliament. Though instructions have been given to bring the culprit to book, matters languish still.

Witch hunting is no doubt a social crime that cannot be allowed any longer. Had the government introduced measures against such practices earlier, a crowd of over 10,000 men and women would never have gathered merely to witness a witch hunt. The VDC chairman who hired the Indian witch hunter was responsible for the incident and he should now be made to face the consequences. But mere investigation into the incident as ordered by the government will not suffice to prevent such social crimes in future. Nor will merely putting a law onto the statute book make much difference. Effective implementation of any such law is what really counts.

Can US pull world out of recession ?

By Bharat Jhunjhunwala

It is becoming increasingly clear that it is the US economy which, despite a sharp slowdown, is holding the world against a global recession. Americans are borrowing globally and using the money to consume the goods of the world. Alas! this can continue only as long as the US assets are greater than the liabilities. Such good days have to but end. Despite the slowdown the US continues to be the buyer of last resort because the world’s investors continue to put their wealth into the US securities—" the net purchases of US government and private securities have been running at record levels in recent months and totalled $469 billion for the 12 months ended in April," says a report in the Wall Street Journal. This money increases the liquidity of the US banking sector. It becomes possible for the US banks—led by the Federal Reserve Board—to cut interest rates. The US consumer is able to borrow and import goods with this money. In fact, USA is paying for imports from China with the money it has borrowed from the same China. At the end of the day the US will have to redeem the securities it has sold to China while the imports have been consumed away. The longevity of this cycle depends on the willingness of the foreign investors to put their money in US securities.

The investors could be betting on the US either because they feel that the US industry is efficient and will be able to hold out against a global slowdown; or they may feel that the accumulated wealth of the US is so huge that they will be able to get their repayment even in the event of a recession. The distinction is similar to buying a car from earned wages or by mortgaging the family silver. If the foreign investment is taking place due to efficiency of the US industry, it would be like buying a car with earned wages. Such a cycle can be prolonged indefinitely. If the same investment is taking place due to the wealth of the US, it would be like mortgaging the family silver. That will last only as long as there is silver in the house.

There are confusing signals on the efficiency of the US economy. Newsweek columnist Fareed Zakaria quotes the Financial Times to show that the US economy is much stronger than the rest of the world: "Italy’s budget will be three times the predicted size, making a "mockery" of Europe’s common fiscal policy; the IMF warns France that its economy remains too regulated and uncompetitive; Germany’s chancellor announces that his country will not make it easier for firms to hire and fire workers in response to economic conditions. Moody’s, the global credit agency, is unimpressed by the latest set of Japanese reforms and will maintain its negative outlook on that country’s economy. And emerging markets are weakening everywhere because of slow growth in the advanced world." Unquestionably the major economies of the world, except the United States, are slowly but inexorably inching towards a recession. On the other hand, many data of the US economy are no better. Another Newsweek story, having noted the US consumer’s exuberance, has this to say: "Many corporate executives, however, are unrelentingly pessimistic and bracing for tougher times.

Profits are in a free fall, and companies are slashing spending on new equipment and hacking away at payrolls (just last week Compaq, Alcatel and Corning announced a combined 7,500 layoffs). The government has released data showing that jobless claims jumped to their highest level in nine years. And many more companies will soon be pulling the trigger. A recent survey of 222 chief financial officers showed that more than a quarter of their firms plan to eliminate jobs in the next year. So we have two opposite scenarios before us. On the one hand, the rest of the world’s economies are weakening while the US’ is chugging along, even if a bit slowly. On the other hand, ‘slowly’ appears to be getting worse everyday.

Which of the two is the real trend, this is the central question. The buoyancy of the US economy appears to be more due to domestic consumption demand rather than ‘efficiency’ of production. The boom is in real estate, banking and automobile sectors. These are not where ‘efficiency’ counts. If the US industries were indeed efficient, it would have reflected in more, not less, jobs; and more, not less, exports. The increasing levels of unemployment and high levels of trade balance implies that the US economy is, after all, not so competitive. The US is not able to import iron ore and export steel as the Japanese are able to do. The flow of investment into the US, therefore, is not due to such competitiveness. The real story appears to be that of the family silver. The US is unquestionably still the world’s biggest economy.

It has vast natural resources. It has been the technological leader in most of the last century and has sucked in the wealth of rest of the world by selling its Boeing airplanes and Microsoft software in higher prices and buying tea and coffee cheap. It has huge foreign investments across the world. This accumulated wealth is like the family silver. The global investor is putting his money into the US because he is assured that his money will not disappear backed as it is with this enormous wealth. The US is, really speaking, mortgaging its wealth to borrow from the rest of the world and using that money to import consumer goods. In simple words, it is ‘selling’ the family silver to have a good meal. This explains the buoyancy in home prices and car sales despite pessimistic projections of profits and ever increasing levels of layoffs. The situation is not unlike that of 1997 at the time of the Thai crisis. The crucial difference, however, is that at that time the IT boom was in the making. The global investor was putting his money into the US not because his eyes were on the gold reserves lying in Fort Knox but because he expected the Nasdaq to deliver. There is no IT boom now. The money is flowing into the US only because it has a lot of family silver still waiting to be mortgaged.

This borrowing, obviously, can sustain only as long as the accumulated US wealth is sufficient to bear the burden of the debt. It is only a matter of time that the debt collector will knock at the US door. And that will precipitate a fall in the dollar. The slow slowdown will, most likely, then turn into a fast meltdown. The only saving feature can be that of a boom in biotechnologies. If biotech companies can convince the global investors, like the IT companies did back in 1998, that they can deliver profits then, once again, the global capital will flow to productive ends.
The slowdown would then have been averted. In the absence of such a boom, the world economy will surely sink into a recession.

Tabloid craze, can’t help it

By Binita Joshi

What is it like to be gossiped? We should ask this of them who have always been the target of media and gossipmongers. Virtually all famous people in the world have been hard hit by gossips in one way or another. In a sense this very gossiping culture has made them famous as well. From Madonna to Tom Cruise to Princess Diana, they have been the most-spicy ingredients for gossipmongers and we know this very thirst of people from the world of media better known as paparazzi, took the beautiful Lady Diana away from this world.

And when we talk about gossip media, one thing instantly comes to mind – the tabloid. With the advent of democracy, our country has had a number of gossip papers with an equal increase in the ratio of gossip readers. That’s why we don’t hesitate to buy and read an eight-page weekly tabloid at Rs 5, full of gossip and speculative news. May be by the end of the day, we might get intellectual satisfaction from such papers and treat them as trash. But it seems nothing stop humans’ yearning for gossip and more gossip. We want to see people suffer unnecessarily. We want to exaggerate others’ woes and worries. We want people to become victimized through the print media. Such feelings provide solace to our selfish and jealous human souls – an act of purgation, catharsis.

Once I met Mr. Shrestha, running a pro-leftist weekly tabloid. He boasted his paper had the highest circulation among the masses. He seemed to be irrationally interested in dicey, spooky and sensational news sans truth and reality, morale and ethics. He was a great newsmaker. He just needed a flick to burn fire. He loved misquoting people and putting words in their mouths. He enjoyed tarnishing the pride and dignity of people through his prejudiced pen-pusher-ship. And he was proud to be a journalist - "rastra ko chautho anga" - nation’s fourth estate.

Conversing with Mr. Shrestha, it seemed to me like, he’s been very sincerely catering to the ardent cravings of the human soul. Cooking up gossip, creating sensation and making easy money were his trademarks. In the middle of every week, one can see people, in torn shirts or broken slippers, clustered in one corner of a footpath, engrossed in reading his weekly dose.

We know that such tabloids lack credibility. Even then, we go in for gossip news. If we were truly interested in "happening" news, such tabloids would not have a field day in the capital and elsewhere. This popularity of gossip tabloids clearly shows that we people want to read more scraps,
more bogus news, and not hygienic news.

Cooperatives : Emerging model of micro finance

By Yogendra Timilsina

Cooperative Societies in Nepal are registered under the Cooperative Act 1992. They are formed in accordance with cooperative principles with the objective of providing services and facilities to members for their economic and social development. A cooperative is different from a business. Profit motive is the driving force that encourages an individual to carry on a business in an open economy, but a cooperative society has no profit motive. It is formed for the sole purpose of promoting the welfare to its members. Therefore, low income-earning groups of people like farmers, workers and artisans who on the basis of mutual cooperation join hands for their socio-economic development can register a cooperative society with the Registrar after applying for that purpose with its by-laws, a work plan and a statement of shares which the members have agreed to subscribe to. A cooperative society can be formed with at least twenty-five persons as members. It is an autonomous body corporate with perpetual succession and has limited liability.

Around six thousand cooperatives with about a billion rupee capital fund are in operation at present in Nepal. However their nature of operation differs. More than 25 percent of the cooperatives are savings and credit cooperatives, out of which only 35 cooperatives have received approval from Nepal Rastra Bank (NRB) to undertake limited banking activities. They usually forget the basic principles of cooperatives and show their disappointment with the restrictions that the cooperative act has imposed. The act provides that one-fourth of the net surplus of a cooperative for any year should be transferred to its Reserve Fund and the amount of dividend on shares should not exceed fifteen percent of the share capital. They can carry out only limited banking functions specified by NRB. They are not allowed to undertake transactions like guarantee, commitment or acceptances based on fess or commission, letter of credit, foreign exchange transactions, lending against the security of gold and silver and so on.

The Cooperative Act, 1992 before amendment, allowed cooperative societies to accept deposits from members as well as non-members, which encouraged them to collect quite a big amount in public deposits. The amendment of the act that took place on 6 December 2000 has restricted cooperatives to accepting deposits from and advancing loans to members only. Most of the financial cooperatives have their activities oriented to the urban areas. They are anxious to expand their business and earn more profit rather than to see whether a particular activity is consistent with cooperative principles.

Considering the fact that low-income groups in urban areas do not have access to commercial banks, alternative forms of financial intermediary need to be developed. Moreover, commercial banks have a wide area of operation and are subject to higher market risk, default risk and liquidity risk. The cooperative model of micro finance is the oldest one that has already proved successful. It operates within a limited geographical area and has low risks compared to commercial banks. A micro finance model should be adopted under the potentials and constraints of each local environment. Cooperative societies, as such, are to be encouraged to operate even in urban areas to provide limited banking services like accepting deposits and advancing of loans. It involves low operating cost and can be managed by a relatively smaller number of people. Cooperative forms of financial intermediary could become an effective tool of poverty reduction in an economy like ours. Only members are entitled to deposit savings in and avail themselves of credit from a savings and credit cooperative. Their savings in the form of loans are best utilized in productive activities like crop farming, cattle and poultry farming, inputs supply, rural trading and undertaking other small income- earning activities in rural areas. Even in urban areas groups of small traders, beetle nut sellers (paanwala), low paid employees or factory workers having regular but low incomes may join hands with a commitment to cooperate with each other under an institution formed with cooperative principles. Thus, members can generate self-employment opportunities through cooperative services. Increase in the production of goods and services would increase the level of income and consequently the aggregate demand of the members in a particular geographical area.

Many cooperatives have been using words like ‘cooperative finance’ in their names and in advertising widely through the media as if they are finance companies. Because of this misuse, people are unable to differentiate a finance company from a cooperative society and consequently they are misguided. A finance company is a financial organization registered under the Companies Act and carries out transactions for profit in accordance with the Finance Companies Act under the regulation and supervisory framework of Nepal Rastra Bank. Many people who are actually dealing with cooperative societies often think that the financial institution they are dealing with is a finance company. Though, according to the amended act no cooperative society can carry out banking transactions without the approval of Nepal Rastra Bank, this provision has not become effective in a strict sense. Many cooperative societies have collected a huge amount of public deposits recklessly and advanced loans haphazardly creating temporary members with a minimum share amount refundable at the time of loan repayment. Some of them disappeared with the public deposits because of the lack of a strong regulatory and supervisory framework. As such, cooperative societies are autonomous corporate bodies; they must be properly managed by representatives of their members. They should run under self-governance and the self-regulatory system. If they themselves are unable to regulate, control and supervise the working of their cooperative, they cannot achieve their basic objectives of providing services to members and ultimately fail.

Cooperative societies both financial as well as non-financial can play an equally important role in the achievement of socio-economic objectives both in rural and urban areas. However, they should run under dynamic regulation and in an effective supervisory framework. District administrative wings of the Cooperative Department of HMG as well as branches of the central bank should be strengthened and equipped with necessary technical manpower to supervise their workings.