How long can govt afford self-deception?

By Satyendra Timilsina

KATHMANDU, Feb 10: The recently concluded Nepal Development Forum (NDF) meet underscores the fact that the donors are ready to help bailout Nepal from any crisis. But then, it is the government that now has to capitalise on the support that the donors have pledged for.

The donor community has played their part well. Their endorsement to the Poverty Reduction Strategy Paper (PRSP), the Tenth Five-Year Plan (TFYP) and the Medium Term Expenditure Framework (MTEF) and commitment to provide US$ 500 million annually is a notable achievement.

But most important is the positive response the donors showed to the PRSP, which outlines that the donors would not be allowed to select priority areas of their own but should rather work in areas that the government stipulates.

And now that Nepal received what it had dreamt for at the meet, it is faced with the task of meeting the donor’s expectations. In short: "The ball is now in the Nepali court and all depends on what it does to keep up to the promises it made during the meet."

The NDF meet had begun with a bold statement from the vice president of the World Bank who lambasted Nepal’s poor governance. She had stated that Nepal currently faced a crisis of good governance. But she had added, "Poverty in Nepal is the poverty of means, not minds."

And though Nepal reciprocated by convincing the donors that it would carry out the promised reforms zealously, question arises if the government would really be able to overhaul the corrupt bureaucratic system where service delivery is beyond the reach of the general public.

The government had made a number of commitments even in the past. Though successes cannot be denied, governance has always remained a problem. But henceforth, failure to deliver on "governance" would only taint Nepal’s image in the international arena, and that is what the government needs to keep in mind.

The finance minister indeed was able to assure the foreign delegates that he would mobilise the foreign-acquired resources efficiently. He even admitted that Nepal would loose its moral rights to ask for additional financial support if it fails to incorporate the donors’ genuine demand. Unfortunately, the finance ministry alone cannot improve the country’s weak governance.

The actual disbursement of the committed financial support would rely mostly on how the government initiates its actions to fulfil its commitments – improve weak governance by strengthening its implementation machinery. However, to ensure that development endeavours go unrewarded, there is an urgent need to increase even the absorptive capacity.

Taking into the fact that the only half of the budgeted development expenditure is disbursed and even less is actually utilised, the government has to strengthen the implementation machinery for the desired output of the perspective plans.

This calls for strong co-ordination among the line ministries, whose functioning so far has been blighted by power struggle and political interventions. Therefore, a major task before the implementation of the reform programme is to improve the work culture in the ministries to increase the efficiency in service delivery.

Furthermore, the success of the government’s will to improve governance depends a lot on the endemically weak political leadership that is prone more to self-seeking and petty squabbling than honestly reasoning together in the interest of public good and personal image.

The need of the hour is to ensure that the donors’ expectations are met. Especially under the present circumstances when resources mobilised internally are below regular expenses. And if Nepal fails to deliver even at this juncture, perhaps a long wait would be required to see any silver lining in Nepal’s development.

It is now high time that we stop deceiving ourselves. Especially since the figures are there to speak for themselves. Almost 38 per cent of the population live under poverty line, 300,000 unemployed people enter the job market annually, irrigation is yet to cover two-thirds of the cultivable land, many district headquarters have not even seen road links and essential services are yet to reach out to the total population.

Task force formed to solve frequency row

Post Report

KATHMANDU, Feb 10 : The Ministry of Information and Communications (MoIC) has constituted a three-member task force to calculate frequency fee in order to resolve the row over the allocation of frequency band between the Ministry and Nepal Telecommunications Authority (NTA).

A recent meeting of Radio Frequency Policy Determination Committee, headed by the Minister for Information and Communications, took the decision on forming the task force to address frequency-related problems, said a highly placed official at the Ministry.

The row has delayed the licensing of operating cellular mobile phone service by the private sector by over four months, barring the customers from getting cheaper cell phone service and discouraging foreign investment. The company has been saying that it would provide the service at a very competitive price.

"We will begin distributing cell phone connections within three months of acquiring the licence and will provide the service at almost half of the current price," said a senior official at Spice Cell Nepal, requesting to be unnamed.

The task force formed last week comprises two members from the private sector and one from the Ministry. The Ministry has directed the task force to submit its report within two weeks of commencing its work.

The task force would study the request for proposal document (RFPD) of the applicant of private cell phone operator, Spice Cell Nepal, a joint venture between the Khetan Group of Nepal and Spice Cell Limited of India, and suggest optimum frequency fee.

Apart from settling the dispute, the task force would also solve the problem of frequency band allocation and fees charged to very small aperture terminal (VSAT) network providers and VSAT users. The official also said that the decision would have far-reaching consequences on collecting and generating a considerable amount of revenue to the government.

The company, which is expected to operate cell phone service based on Global System for Mobile Communications (GSM) technology, had submitted required documents in September 2001, for acquiring licence to operate the service throughout the kingdom.

The licensing of the company was further delayed by over seven months after the Telecommunications Employees Association of Nepal (TEAN) filed a case with the Supreme Court on December 28, 2000, naming Khetan Group, the MoIC, NTA and Nepal Telecommunications Corporation (NTC) as defendants.

Economy, Finance and Market

By Supa Upadhyay

Domestic money market :

The Average Weighted Discount Rate (AWDR) of 91-day Treasury Bills (Tbs) rose sharply by 19 basis points to 5.22 percent compared to previous week. The rupee was traded higher at NPR 98.74 and lower at NPR 98.70 for 90-day TBs. The NRB had received 40 bids worth NPR 2060 million against the notified amount NPR 670 million for 90-day TBs. The Repo rates for member banks and institutions have been quoted at 6.2211 for the trading days 12 to 18 February 2002 for 91-day TBs. The outright purchase facility for bank, institutions and other on TBs is also available. In the regular weekly auction, the NRB is going to issue 91-day TBs worth NPR 700 million and 364-day TBs worth NPR 500 million on February 12, 2002.

Domestic capital market :

The stock market classified 31 listed companies under category ‘A’ class. Last year only 26 companies were classified as class ‘A’. This year, Bank of Kathmandu, Everest Insurance, Lumbini Finance, Nepal Marchant Bank & Finance, Narayani Finance and Annapurna Finance were able to upgrade.

This week also, the stock market witnessed a weaker week. With declining trend of domestic economy, the activities in the market seemed very lackluster amid thin trading. The Ministry of Finance has informed that after the completion of time given for VDIS Scheme, the government is coming-up strictly against the defaulters who are in potential tax payer group. As the stock holding is a registered wealth with the companies, many investors have ran out from stock market.

The NEPSE Index-100 opened weaker at 246.72 dipped further in all consecutive trading days and eventually closed lower to 236.42, netting a loss of 14.99 points over the week. This week, all the sectors like Hotel Sector, Finance sector, Insurance sector, Commercial banks, Development bank sector, Business Sector, Other Sector and Production Sector lost. Out of forty-six traded companies, only six companies improved, twenty-six companies lost and fourteen traded companies remain unchanged at their previous prices. Nepal Development Bank, NIC Bank and Oriental Hotel registered the first, the second and the third most traded companies trading 13410, 5706 and 4090 shares respectively. Shares of Nepal Bank Ltd, Standard Chartered Bank, Nepal SBI Bank, Everest Bank, NIC Bank, Nepal B’desh Bank, Bank of Kathmandu, Taragaon Regency Hotel, Oriental Hotel, Lumbini Finance and Nepal Development Bank were able to trade in all five working days. Lidewise, Nabil Bank, Everest Insurance, Neco Insurance, Siddhartha Finance, Nepal B’desh Finance, and Nepal Merchant Bank & Finance were able to trade in four working days.

Forex round-up:

The US Dollar lost against its major trading partners over the week on losses on Wall Street which was hit by continued ripple effects from the Enron affair. In the absence of any data or obviously market moving UK news, analysts said the sterling would be driven by movements in the dollar. Meanwhile, the widely expected bank of England decision to leave interest rates steady at 4.0 percent had no impact on the pound.

Euro hits two-week highs above $0.8730 getting support from bearish picture for U.S. stocks. Dealers expect Euro still likely capped by offers at $0.8750.

The INR lost further sharply against the dollar over the week. Demand of dollar was increased on payment for Telecommunication and other corporate demand. The RBI later support 48.67 level on the ground that the INR is still over valued against its major trading rivals.

The NPR also buoyed with INR depreciated quickly by 50 paisa against the dollar over the week.

Changes sought in central bank’s directives

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KATHMANDU, Feb 10: Promoters of finance companies asked the central bank to sort out the shortcomings of the new directives issued by the Nepal Rastra Bank (NRB) to finance companies.

"The directives is likely to bring forth practical problems and that should be dealt with on time to imbibe the financial efficiency in the finance companies," they stressed.

The central bank had recently announced the prudential norms for regulating the finance companies effective from January 14.

"However, implementing it at an odd time of the fiscal year will question its practicality and create problems in maintaining the balance sheets," they stressed and appealed the central bank to make it effective only from the new fiscal year.

They were speaking at an interaction programme on "Finance Companies Directives 2002" organised by the NRB on Sunday.

Ajay Ghimire, Chief Executive Officer (CEO) of Ace Finance said, "At a time when the finance companies are operating at a very low profit margin, mandatory retention of liquid cash reserve will affect their ability to flow investment."

He even viewed that ceiling on deposit was unnecessary after the enactment of capital adequacy provisioning. "This will hit innovation on capital mobilisation," he stressed.

Governor Dr Tilak Rawal said that the central bank issued the prudential norms to the finance companies to make the sector vibrant, self-sufficient and resilient to crises that might shock the country if the current socio-economic scenario is protracted for long.

Restoration of peace and security is important to boost up investment and economic activities whereon it is based the performance of the finance companies as well.

Dr Rawal further said that the prudential norms were to discipline the financial companies’ practices and enhance their efficiencies. "The central bank is ready to incorporate promoters’ recommendations even as it will review the norms and bail out the finance companies if the problems is seen in due course of its implementation," he added.

Dr Ram Babu Pant, Deputy Director, NRB, said the new directives were announced in line with the Depository Financial Institution Act (DFIA) which the NRB will introduce soon. "It will enhance the growth of the finance companies and enable them to operate in a broader framework."

He further said that the NRB is mulling to categorise the finance companies on the basis of their capital base and performance.