Trade deficit narrows; export, import dip

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KATHMANDU, Nov 1 - During the first two months of the fiscal year 2001/02, government expenditure registered a slower growth of 9.7 per cent amounting to Rs 6253.5 million in contrast to an increase of 26 per cent during the first two months of the previous fiscal year.

Of the total government expenditure, regular expense declined by 4.3 per cent to Rs 3662.4 million and development expense by 11 per cent to Rs 76.9 million and freeze expenditure by 80.1 per cent to Rs 1829.2 during the period, according to a press communiqué released by the Nepal Rastra Bank (NRB) today.

Despite a decline in both regular and development expenditure, the total government expenditure increased mainly due to a sharp rise in the freeze expenditure. In the previous year, Dashain expenses provided to the government employees during this period had pushed the regular expenditure up whereas such expense not being disbursed during the review period this fiscal year led to the decline of the regular expense compared to the previous year.

Late release of development expenditure due to delay in budget approval contributed to the decline in development expense during the review period.

Similarly, revenue collection also decreased by 1.1 per cent to Rs 6156.8 million in contrast to a growth of 26.9 per cent during the same period last year. But due to low mobilisation of resources, a budget deficit of Rs 12 million was incurred during the first month of the current fiscal year.

The national Urban Consumer Price Index, on point to point basis, increased by 4 per cent during the period in contrast to an increment of 1 per cent during the corresponding period last year. According to the release, of the over all price index, price of food and beverages rose by 4.3 per cent compared to a decline of 4.4 per cent the previous year.

However, the price of non-food and services group went up by 4.7 per cent during the first two months of the fiscal year 2001/02 as against the growth of 8.2 per cent in the same months the previous fiscal year, states the release.

During the review period, exports registered a decline of 5.1 per cent to Rs 8558 million compared to a growth of 38 per cent during the corresponding period of the previous financial year.

The growth of exports to India decelerated to 24.9 per cent from 73.6 per cent in the same period previous year whereas the exports to third countries plunged by 29.1 per cent as against a growth of 18.2 per cent during the first two months of the last fiscal year.

However, the export of jewellery, woollen carpet and tanned skin to third countries increased, but the export of pulses, pashmina and ready-made garments and woollen carpet and tanned skin plunged significantly during the review period.

During the first two months of the current fiscal year, imports dipped by 5 per cent to Rs 16690.7 million as against a growth of 6.6 per cent during the same period last fiscal year.

The import of cement, electrical equipment, medicine, chemical fertilisers, petroleum products, M S billet, M S wire, rod, and pesticides from India and petroleum products betel nut, medical equipment, electrical equipment, telecom equipment, medicine, polythene granules, copper wire and sheet, paper and silver from the third countries went up in comparison to that of the previous year.

In spite of a decline in both export and import by a similar rate, trade deficit narrowed down by 4.8 per cent to Rs 8132.7 million owing to the larger base of imports than that of exports. In the previous year, trade deficit had gone down by 14.1 per cent. The export/import ratio which was 51.4 per cent in the previous fiscal year, remained similar at 51.3 per cent during the first two months of the current fiscal year, states the release.

Based on the available balance of payments statistics for the preceding year 2000/2001, the balance of payments remained favourable by Rs 5762.8 million. In the first two months of this fiscal year, in spite of decline in net services income, current account deficit plunged by 20.2 per cent to Rs 7154.9 due mainly to decrease in trade deficit and increase in current transfer receipts compared to the corresponding period of the previous year.

However, a substantial inflow of official capital net and miscellaneous capital helped to make the balance of payments positive. The overall balance of payments recorded a surplus of Rs 373.8 million. Subsequently, foreign exchange holdings of the banking system increased by 8.4 per cent to Rs 105185.6 million in mid-September 2001. Of the total reserve, 76.1 per cent was accounted for by convertible currencies and the rest by non-convertible currency.

Market capitalisation of the companies listed in the stock exchange decreased to Rs 37.05 billion in mid-September 2001 from Rs 43.96 billion in the previous month. Similarly, Nepal Stock Exchange (NEPSE) share price index decreased from 322.15 in the previous month to 265.22 in mid-September 2001.

Nepal’s main agenda : LDCs’ WTO accession

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KATHMANDU, Nov 1 – With the date for the fourth ministerial meet of the World Trade Organization (WTO) nearing, Nepali officials are busy preparing to lay their one-point agenda at the crucial negotiations that is scheduled to be held at Doha, Qatar from November 9 to 13.

Though Nepal is not yet a member of the WTO, its voice would be heard by virtue of the observer’s status that it is enjoying presently. Officials are of the view that observer countries would be given three to five minutes for putting up their concerns.

Though most of the Nepali concerns would be addressed through the regional bloc of the South Asian Association for Regional Cooperation (SAARC) and the grouping of the 49 Least Developed Countries (LDCs), Nepal is to raise the issue of accession of the LDCs into the global trading framework.

"Nepal will put up its concern at the WTO by virtue of its observer’s status. Nepal’s thrust would be on the complicated and the lengthy accession process," said Prachanda Man Shrestha, Chief of the WTO Cell at the Ministry of Industry, Commerce and Supplies. The Zanzibar and the SAARC declarations would cater to other issues of concern that Nepal has, said he.

The point that Nepal plans to lay emphasis on is important as no LDC has integrated into the WTO framework since the global trade regime came into being in 1995. 29 LDCs who are presently member of the 142-membered WTO acceded into the framework by virtue of their membership of the General Agreement on Trade and Tariff (GATT), the predessesor of the WTO.

"Member countries have to understand the problems that LDCs face. They must show flexibility to allow a smooth accession," he said. The only reason no LDC has acceded into the WTO framework after it was constituted in 1995 is due to the fact that the accession process is cubersome.

"Nepal’s thrust would be to make it clear that accession should be on the basis of the interests and capabilities of the acceding country. Its accession into the WTO framework should ensure that it does not get further marginalized, which would question the very essence and the existence of the WTO," said Shrestha.

Nepali officials are busy finalising the list of delegates to the WTO meet. Among others, the newly appointed Minster for Industry, Commerce and Supplies Purna Bahadur Khadka, Permanent Representative to the United Nations at Geneva Shambhu Raj Simkada, Nepali Ambassador to Qatar Shyamananda Suman, Secretary at the Ministry of Industry, Commerce and Supplies Bhanu Prasad Acharya, and Shrestha himself are likely to represent Nepal at the conference.

Shrestha also said that the Nepali team, at the conference, would hold informal discussions with member countries that had conducted bilateral negotiations with Nepal last year for its accession into the WTO.

The countries which has so far shown interest in holding talks with Nepal are United States, European Union, New Zealand, India, Sri Lanka, Malaysia, Canada and Australia. Nepal would press these countries to allow a period of transition to cushion the impact of the WTO membership.

"Nepal would look into its interests while negotiating. It would not bend on those areas where national interests conflict," said Shrestha. He further informed that Nepal would push for the second Working Party meet of the WTO very soon, after which Nepal is likely to obtain the WTO membership. The first Working Party meet was held in early 2000.

The major issues that have come up as impediments in the smooth entry of Nepal into the global trading system are binding tariff, agreement on the Trade Related Intellectual Property Rights (TRIPS agreement), and the opening of various service sector areas, among others.

Meanwhile, Nepal is also carrying out studies to examine the impact of the various WTO agreements on domestic economy. The areas of concern are agriculture, trade and services. Specifically, the thrust would be to minimize the impact of the revocation of the Multi-fibre Agreement on the garment industry.

Albeit studies to assess the impact of some agreements on Nepal have already been carried out even in the past, various unexplored areas, including some where adequate studies have not been carried out, are to be further studied.

The various areas that Nepal further needs to look into to assess the impact of the WTO agreements include agriculture, garments, service sector, legislative arrangements and revenue mobilization, among others.

New Securities Act soon

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KATHMANDU, Nov 1 - With an aim to revitalize the messy capital market in the country, the government is preparing to enact a new Securities Act, revoking the former Act of 2040 B.S.

The Securities Bill, which was recently registered at the Parliament Secretariat but could not be debated upon before the House prorogued, is likely to be passed during the Winter Session of the Parliament, officials said.

The Bill was prepared as a part of the government’s reform programme that it has undertaken partnering with Asian Development Bank (ADB). The Bill aims to bring more efficiency in the country’s capital markets by reforming the culture of corporate governance, among others.

"The Bill is the first step towards building infrastructure for ensuring an efficient capital market in the country," said an official of the Securities Board on conditions of anonymity.

The Bill, among others, tries to lay down rules that would raise the standard of the domestic securities markets. Furthermore, it also aims to simplify the registration and issuance of securities to the general public by ensuring a fair and transparent mechanism.

The Bill also tries to govern the working of the Nepal Stock Exchange (Nepse), the only secondary market in thecountry for securities transaction, by developing it into an
institution meeting international standards.

The major thrust of the Bill is to ensure the safety of investor’s money by minimizing risks through efficient dissemination of information for investment purposes, which today is the major lacking in the Nepali secondary market.

Once the Bill is enacted as an Act after it is passed by the Parliament, it would clearly define the enforcement mechanisms which in turn would ensure that the working of the capital markets would be in accordance to law.

The Bill was drafted at the initiation of the ADB-funded Corporate and Financial Governance Project.