RBB, NBL management handover may be delayed

By Bhaskar Sharma

KATHMANDU, June 17 – The World Bank has raised serious objections over the preliminary selection procedures of the aspirant companies vying for the management contracts of one of the two largest commercial banks in Nepal citing faulty technical evaluation.

Four companies competing for the management of Nepal Bank Ltd. (NBL), cleared by a committee formed by the Nepal Rastra Bank (NRB) to carry out technical assessment, was termed unfit by the World Bank. All the four companies had actually failed to score enough for qualifying through the initial Request for Proposal (RFP).

All four companies, including Development Partnership - UK, ICC Bank - UK, Ernst and Young, and PriceWaterHouseCoopers, had scored below 70 per cent as required by the RFP. The highest that any company could score was 67.

The World Bank has alleged that the companies were cleared during the preliminary technical evaluation without a firm basis. According to sources, the World Bank now is preparing to propose the NRB to re-evaluate the technical aspects of the companies.

Sources at the World Bank, however, informed that there arises no doubt over the capacity and ability of the vying companies to successfully run the ailing banks. Despite their failure to obtain the minimum score, the initial proposals placed in by the companies are better than what the NRB had initially expected.

Sources informed that such technical fault took place due to differences between the two of the NRB’s committee members, also representing the Board of Directors of NBL. One of the committee members had even tendered his resignation recently following the differences.

The committee almost two months back had submitted a list of four potential companies each for the management handover of NBL and Rastriya Banijya Bank (RBB). Though no problem has risen in the case of RBB, where one company managed to obtain the minimum said score, the overall handover is likely to be delayed by three months, which should have been completed within this month. However, following the latest skirmish, the handover is likely to be delayed by three months, according to Bank sources.

The dilly-dallying in the handover process is likely to affect loan flow from the World Bank, including the Poverty Reduction Growth Facility (PRGF) under the International Monetary Fund (IMF). While the World Bank has declared to freeze new loans flow until the management of the two banks is handed over to consultants, the IMF has adamantly said that it would not reach any agreement on PRGF until the contracts are handed.

The management contract is being awarded under Nepal Financial Sector Reform Project supported by International Development Association, the World Bank. About 50 consultant and management groups, some among the world class, had applied for the management contract of NBL, the oldest bank of the kingdom and RBB, the only state-owned bank.

The management contract of the bank will be initially for two years. The management team will be responsible for; taking complete control of day to day running of the banks, providing immediate help to stabilize the banks operations and restore their financial health to an acceptable level, working in close cooperation with a locally recruited accountancy team (recruited as part of these management contracts) to develop and strengthen the accounting capacity of the banks, developing a comprehensive human resource policy for the banks and designing and implementing an information technology plan for the banks.

Nepal Rastra Bank had published a notice in The Economist on 30 September for management contract of these banks. The government decided to hand-over the management of these banks following an investigation by KPMG Barnet Group, an international audit firm, which declared two banks as "technically insolvent," - bankrupt, to use a more common terminology.

The investigation report submitted to the government during the third week of May last year had said, "The banks’ lending process, loan files and the loan portfolio itself are deeply flawed and the banks are technically insolvent."

The report had pinned the net negative worth of NBL in the range of 6-10 billion rupees, while the figure for RBB was estimated in between 9-15 billion rupees. The combine losses of the two banks represent 4.5 to 8.5 percent of GDP and 24 to 45 percent of budget in 1999 - an amount enough to trigger a financial melt-down elsewhere under a prudent banking system.

Birgunj Customs revenue dips

Post Report

BIRGUNJ, June 17 - Revenue collection of Birgunj Customs Office dropped sharply during mid May to mid June due to a three-day general strike called by the main opposition party CPN-UML, the Royal massacre and the hearsay that customs tariffs would change in the next budget.

Owing to the hearsay, businessmen are not importing goods as they used to do in previous months, directly affecting the revenue collection.

The customs office fell short of raising Rs 250 million during mid May to mid June. It failed to realize a revenue of Rs 141 million and Rs 100 million in value added tax (VAT) during the same period.

The office had set a target of collecting a revenue of Rs 546 million but has been able to raise Rs 404 million, according to Ishwor Pokhrel, Chief of the Customs Office.

Similarly, the Office had targeted to collect Rs 420 million in VAT and has been able to realize only Rs 338 million during the period.

The office had set a greater target of revenue collection during mid May to mid June compared to the earlier month, but it could not collect the amount it raised during the previous period.

In the previous month, according to the Nepali calendar, the office collected Rs 539 million in revenue while the target was Rs 528 million. Similarly, it had collected Rs 373 million in VAT during the previous month.

Though the revenue collection right from the beginning of the current fiscal year was lower than the target, it had been able to realize a revenue more than the target during the past two months after Royal Nepalese Army was mobilized some three months back.

However, due to such unavoidable circumstances, the revenue collection dipped during the period. But the customs officials are not so disappointed at it. "Owing to such unexpected events, our revenue collection has gone down, but given the annual target, the collection during the recent month is not so disappointing", said Customs Chief Pokhrel.

Though the revenue collection went down by 140 million during mid May to mid June, the statistics show that the overall collection is satisfactory. The customs Office had set a target of collecting a revenue of Rs 5.96 billion by mid June, which has fell short of Rs 170 million only.

Compared to the last fiscal year, the Customs Office had set a target of collecting revenue by 18 per cent more. On average, the office collects an annual revenue of Rs 11 billion, according to the customs officials.

SAFFA elects new executive committee

Post Report

KATHMANDU, June 17 - The second annual general meeting (AGM) of South Asia Freight Forwarders Association (SAFFA) held on June 1-2 has elected a new executive committee.

According to a press release issued by the Nepal Freight Forwarders Association here today, R Shreenivasan, President of India Federation of Freight Forwarders Association has been elected unopposed to the post of President.

Similarly, Islam Salim, President of Pakistan Freight Forwarders Association, Nyamgyal Lama, general secretary of Nepal Freight Forwarders Association and Helal Yuddin, President of Association of Cargo Agents of Bangladesh have been elected to the posts of Vice-president, general secretary and treasurer respectively.

Likewise, Ramesh David, President of Sri Lanka Freight Forwarders Association and D R Hallak, former president of SAFFA have been elected executive members of the Association.

The AGM has also decided to held the Association’s meeting in every six months and the next AGM is to be held in November either in Nepal or Mumbai, India. The Association is headquartered in Sri Lanka.

The meeting also observed a two-minute silence over the tragic demise of Their Majesties and other members of the Royal Family on June 1 and expressed heartfelt condolences, states the release.

Meanwhile, a separate press release issued by the NEFFA here today states that Rabindra Man Singh, President of NEFFA has left for the Philippines to participate in the 28th conference of the Federation of Asia Pacific Aircargo Association (FAPPA) being held in Manila from June 17 to 20.

The conference is expected to ratify Nepal as the member of FAPPA. According to the NEFFA release, FAPPA will establish relationship with The International Federation of Freight Forwarders Association (FIATA) in order to make freight forwarding and cargo profession commercial.

FAPPA members include Nepal, Hong Kong, Australia, Japan, Korea, Philippines, Taiwan, Thailand, Singapore, Indonesia, Makau, Malaysia, India, Sri Lanka, Brunei and Bangladesh, concludes the release.