Current fiscal year budget implementation weak: Report

Post Report

KATHMANDU, March 25 - The government presented the budget for the current fiscal year almost a month and a half before the usual time last year, with high hopes of effective implementation. However, the efficacy of the budget, as usual, proved rhetoric.

Despite an early initiation of budgetary estimations last year, which was passed almost a month in advance before the actual announcement of the budget, budgetary performance for the current fiscal year has not met the expectations.

Out of the total development expenditure envisaged by the government for the current fiscal year, only 80 per cent is expected to be utilized, equal to the proportion incurred in the last fiscal year.

The government had allocated Rs 48.10 billion for development purposes for the current year, out of which actual cash outflow in the first six months of the year stood at Rs 8.67 billion. Now, the revised estimate, according to the Mid-term Budget Review Report, of development expenditure stands at Rs 38.83 only.

Even Finance Minster Dr Ram Sharan Mahat last week, while addressing the donor agencies and state representatives, had conceded that the performance of the present budget was below expectations. He had assured that the next budgetary performance will not be weak.

According to high level officials at the Finance Ministry, the less-than-expected accomplishment of the budget is primarily due to political instability and weakness of the related authorities who actually spend the development budget.

"The laxity in delegating authority for carrying out development projects is another reason that has contributed to the failure of the budgetary expectations," he said. Even the report mentions that delay in approving projects and imparting authority to development projects caused a slash-down in development expenses.

The report stresses on the need to increase the capacity of foreign aided projects to expend the allocated funds. The budget had separated over 63 per cent of the total development expenditure to such projects. However, of the total 810 sub-titles in the budget, 510 of them foreign aided, expenses were made on only 186 sub-titles, the report mentions.

The budget for the current fiscal year also could not perform well in the areas of public resources management, economic reform programs and managerial capacity enhancement.

The increase in the regular expenditure in the first six months of the current fiscal year was also as high as 21.06 per cent. The cause of such an increase can be attributed to massive raise in the salary of civil servants, in addition to, expenses incurred as a result of increased outlay on social security and devaluation of rupee resulting in higher payment for clearing interest on foreign loans.

In addition, the government’s allocation of Rs 1.45 billion for pension for the current fiscal year would be inadequate, since Rs 1.63 billion was already expended within the first six months of the year.

The government with aims to accelerate the process of economic reforms had announced during the later part of last fiscal to initiate the implementation of the second phase of reform programs that laid high emphasis on enhancing the performance of the financial sector. However, the government’s efforts have pertained largely on the management hand-over of two of the largest commercial banks only, performing sluggishly in other areas.

Similarly, much remains to be achieved in the government’s third vision of enhancing institutional capacity. Poverty alleviation programs, programs on enhancing women’s rights and youth self-employment programs too did not fare well, which is shown by the performance within the first six months.

Courier business declining: Pahadi

Post Report

KATHMANDU, March 25 - Gobardhan Pahadi, Country Manager of the United Parcel Service (UPS) and President of the Courier Service Association of Nepal (COSAN), who knows the ins and outs of the courier business of the country, believes that courier service should be given the status and facilities equal to that of travel agency.

Pahadi has been in the business for the past 19 years and the history of courier service in Nepal is not older than his experience. He entered into the business by opening Nepal Air Courier and Cargo Service (P) Ltd and became the representative of UPS in 1989.

Talking to The Kathmandu Post, Pahadi said though the international companies are doing a good business, domestic companies’ performance is not satisfactory, in terms of earnings. There is price war and a lack of coordination among them. Currently, there are 42 courier companies and all are COSAN members.

However, he says, the international companies’ business dipped this year by 25 per cent due mainly to the decline in the export of pashmina products, the average growth rate of their business is about 20 to 30 percent. The UPS, DHL Worldwide, Federal Express and TNT are the four major international courier companies operating in Nepal.

Asked about the challenges of the business, Pahadi said, shortage of skilled manpower and complicated customs clearance procedures are the major problems. Though the UPS employs some 60 people directly and indirectly, he prefers recruiting women to men. Reason: women are more sincere in their job than men. Our employees are better paid, he said.

Replying a query about the reliability of courier companies, he said there have been some problems with the domestic companies as sometimes they accept parcels for a destination where they have no branch. And, when they send parcels through other agents, they are likely to be delivered late and possibility of pilferage is also there. But generally it is not problematic.

So far as international companies are concerned, they are very much aware of their duty and are reputation-conscious, so there is very little chance of complaints from the customers, he added. Put together, the business has provided jobs to about 800 people.

How does courier service help promoting Nepal’s export? We deliver handicraft items, silver jewelry and pashmina products to various destinations worldwide, which are the major exportable items. Therefore, we are the promoter of Nepal’s export business, he claimed.

The government should reduce customs duty on the import of vehicles and other equipment needed to the courier business. Frequent bandhs badly affect the business. Therefore, there should be no general strikes, he added.

Talking about UPS, he said, it is the world’s largest carrier and package delivery company, which delivers 105 million packages door to door worldwide daily. It has 560 aircraft of which it owns 260 and the rest are leased and has 160,000 trucks.

Established in 1907 in Seattle and headquartered in Atlanta, the UPS has representation in 205 countries and territories. The company which employs 320,000 people worldwide has added one feather to its hat by buying Fritz, an American freight company, at $ 450 million recently.

Economy, finance and market

By Supa Upadhyay

Domestic money market:

The Average Weighted Discount Rate (AWDR) of 91-day Treasury Bills (TBs) and 364-day TBs dipped further by 21 basis points and 40 basis points to 3.91 and 4.92 respectively compared to the previous week. The rupee was traded higher at 99.16 and lower at 99.03 for 91-day TBs and higher at 95.80 and lower at 95.51 for 364-day TBs. The NRB had received 28 bids worth NPR 2400 million against the notified amount NPR 750 million for 91-day TBs and 25 bids worth NPR 1345 million against the notified amount NPR 300 million for 364 day TBs. The Repo rate for member Banks and Institutions has been quoted at 4.1992 for the trading period 20-26 March. The outright purchase facility on TBs is also available. In the regular weekly auction, the NRB is going to issue 91-day TBs worth NPR 600 million on March 27, 2001.

Domestic capital market:

The prices of stock further slumped and closed lower at its previous 7 months level. The banking stocks went on a tailspin as many banks closed their books for the F.Y. 1999/2000. The NEPSE Index-100 opened lower at 388.40 from the previous week close of 390.20 fell further in all consecutive days and eventually closed at 376.98 for the week, neeting a sharp loss of 13.22 points. This week, trading was estimated at 37718 shares valued NPR 22.4 million compared to 169220 shares valued NPR 91.10 million of previous week. This week, Commercial banks and Finance Companies shareed 58.52 percent and 38.20 percent respectively of total traded amount. This week, the Index of Commercial Banks, Production sector, Hotel sector and Finance/Insurance lost. While Other Sector improved. Business Sector remains unchanged at its previous price. This week, brockers had quoted the prices of 50 companies on the trading board but only 39 companies were traded. Out of thirty-nine traded companies, eight companies improved, twenty-five companies lost and six traded companies remained unchanged at their previous prices. Soaltee Hotel, Bank of Kathmandu and NIC Bank registered the first, the second and the third most traded company trading 7565, 4694 and 3710 shares respectively. Share of Nabil Bank, Himalayan Bank, Everest Bank, Bank of Kathmandu, NIC Bank, Sagarmatha Insurance and Lumbini Finance were able to trade in all five working days. Likewise, Nepal Bank Ltd, Nepal Grindlays Bank, Taragaon Regency Hotel and Necon Air were able to trade in four working days.

Forex round-up:

The US Dollar continues to strengthen against both the Euro and Sterling for reasons which are harder to define. The GBP has fallen to low of 1.4250 despite good economic data and EUR has fallen to a low of 0.8885 despite falling US equity markets. The yen also nose-dived about half of a percent over the week as the greenback has been well supported by the economic fundaments. Mori comments this week that he had not discussed foreign exchange with Bush during their meeting, and that Japan would not guide the yen lower for purpose of boosting the economy.

This week, the INR remained about stable while the NPR depreciated by 25 paisa against the dollar, later this week, adjusting with its major partner INR which was weakened in the previous few weeks.

Army mobilized due to police inefficiency: FM  

Post Report

BIRGUNJ, March 25 - Finance Minister Dr Ram Sharan Mahat has said that the Royal Nepal Army (RNA) has been mobilized in the customs points because of the inefficiency of the police. Once the revenue police are activated, the deployment of army will be withdrawn, he said.

Though the economic growth is six per cent, export has risen by 23 percent, inflation is just two per cent and foreign exchange reserves has crossed one billion rupees, revenue collection is not satisfactory compared to government expenditure, said the finance minister.

He also said that such an environment should be created so that all the industrialists, businessmen and other tax payers fear the employees of the revenue department.

"In other countries, taxpayers tremble at the word `employees of revenue department’. But we do not have such a situation. It is the duty of the employees of the revenue department to create such a situation", said the finance minister addressing the gathering of the chiefs of the revenue, value added tax (VAT) and customs departments of the central development region here today.

"There should be difference between the employees of the revenue department. All frauds and revenue evaders should tremble at your presence. I am ready to provide you necessary resources and means, but you should create such an environment", assured FM Mahat.

He said he would provide all facilities including cellular mobile phone to them in order to raise more revenue.

"I had allocated budget to facilitate revenue while I was finance minister three years ago. But following my departure from the ministry, it was not mobilized. Now it will be mobilized," he pledged. It will be a mere dream to collect more revenue without necessary resources and means. I will provide all that but I demand excellent revenue collection, he exacted.

The FM also warned the computer-illiterate employees to learn computer within a month or two as automated system of customs data (ASYCUDA) has already been implemented in most of the customs offices.

"I will give a time of one or two months to learn computer. If you are not computer-literate by that time, I will transfer you", he warned.

Meeting of LDCs to focus on tourism

Post Report

KATHMANDU, March 25 - As a part of the preparatory process for the Third United Nations Conference on the Least Developed Countries, to be held in Brussels from 14 to 20 May, a high-level four-day meeting is to kick off Monday in the Canary Islands.

According to a press release received here today, the meeting to be held from 26-29 March will focus on the potential of tourism — the world’s fastest-growing industry - in the 49 least developed countries. The meeting is being organized by UNCTAD with the financial cooperation of the Spanish Agency for International Cooperation and the Council of Transport and Tourism of the Canary Islands, in collaboration with the World Tourism Organization.

Although the LDCs account for only 0.8% of the world’s total exports of international tourism services, tourism is regarded as one of the sectors offering the greatest potential for steady economic growth in these countries, states the release.

Tourism is one of the few economic areas expected to reduce LDCs marginalization from the global economy, the release says. In 18 LDCs, tourism is already a prominent economic sector, ranking first, second or third among all export sectors. In 10 other LDCs, tourism has been a less prominent but growing area of activity demonstrating significant progress over the last decade.

Well over half of all LDCs have placed international tourism at the heart of their development strategy and expect the sector to be a spearhead of their economic re-specialization. But their structural disadvantages (poverty, lack of skilled man power and infrastructure, economic vulnerability) prevent them from benefiting from international tourism as significantly as they would like. Accordingly, they hope the international community will be able to support their efforts to participate in the international tourism economy, the release says.

The meeting will examine the main trends in the tourism development performance of the LDCs, with particular reference to the role of tourism in the evolution of the economic specialization of these countries. The various handicaps and limitations they face in developing tourism activities will be highlighted in order to allow effective identification of solutions, the release states.

The meeting will then focus on the most desirable tourism development policies and strategies to be pursued or envisaged by the LDCs, in such areas as product specialization, investment, promotion and multilateral trade policy. The ultimate aim is to identify the main practical needs of LDCs with regard to tourism development and recommend a range of ways in which the international community can meet these needs. This is expected to facilitate the formulation of an international plan of action to support tourism development in the LDCs. This plan of action will be presented to the conference in Brussels, adds the release.

Participating in the meeting will be four government ministers and over 30 senior officials responsible for tourism development policies in the LDCs, as well as officials and experts from other countries and representatives of international and regional organizations.