Budget lacks plans for economic revival

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KATHMANDU, July 11 : Although the budget for the next fiscal year has analysed the country’s prevailing scenario excellently, it has failed to announce programmes for propelling the economy to recovery, viewed experts and former Vice-Chairmen of National Planning Commission (NPC).

"Prioritisation of objectives laying primary focus on security was important for gaining the investors confidence and to brew sense of security among commoners. However, the programmes incorporated to support anti-poverty drive is insufficient and weak," said Prithvi Raj Ligal, former Vice-Chairman of the NPC.

He viewed that the government did injustice to the Agricultural Development Bank (ADB/N), which is in dire need of rescue, by announcing various packages like remission of interests against the loans from the bank. Also the government neglected the financial system by not announcing any safety measures to the financial institutions which are facing tough days owing to bleaker performance of the real sector.

"This could prove costly in the near future," he said and asked Nepal Rastra Bank (NRB) to take charge of the matter. Legal further opined that the government has appeared too optimistic in terms of foreign grant mobilisation and added that a sharp increment in the district level budget should have been contained at a manageable level.

He warned the government to be cautious over the probable transfer of the fund from primary to secondary and tertiary development projects at ministerial level, especially during the election time, as the finance bill has failed to address it. "This might render the prioritisation of the projects useless," he added.

He said this while speaking at an interaction programme on budget for 2002/2003 organised by Nepal Intellectual Council (NIC) in the capital today.

Ligal also criticised the government programme of lending the Maoist-hit people through Poverty Alleviation Fund (PAF). "The PAF is basically the co-ordinating and monitoring body for effective running of the anti-poverty programmes. Developing it as an implementing agency goes against its norms and concept."

However, he lauded the government’s guts of slashing the development expenditure, bringing it at the feasible level.

On the contrary, Dr Dilli Raj Khanal, former Member of Parliament, lambasted the government for failing to address the fundamental issues for curbing terrorism and boosting economy. "The budget has failed to take into account growing dissatisfaction and marginalisation of the people, which in turn has been cashed in on by the rebellion," he added.

Even as the budget is silent on the issues like corruption, governance, financial terrorism, it has incorporated programmes like foreign employment for 100 thousand people and flexible labour policy taking election into account, he said. He also rapped the government for remaining silent on the structural and legal framework of the PAF.

"Decreased development expenditure along with siphoning off the money from the market and banking system will worsen the performance of the private sector, as it raises cost of fund. It will, in turn, worsen the unemployment problem," he stated.

Meanwhile, Dr Raghav Dhoj Pant declined to comment on the budget stating that the same has been announced against the constitution, verdict of the Supreme Court (SC) and principle of the rule of law. "The government did what it should not have done. There is no point to discuss the good and bad aspect of the budget, if the document itself stands on the false ground," he said.

Dr Pant was referring to the constitutional provision, which bars budget presentation out of the joint sitting of the parliament and the SC’s verdict (1995) which prevents the caretaker governments from announcing annual budget.

While Dr Mohan Man Sainju, former Vice Chairman of the NPC said that the budget has failed to incorporate empowerment of people and social strengthening of the rural poor, Dr Badri Prasad Shrestha, senior economist, viewed that the future of the budget itself is at stake and largely depend on the outcome of the election.

In the same vein, Bharat Mohan Adhikari, a CPN-UML leader, claimed that the government’s reiteration of the budget as a realistic and reform-oriented was a faulty statement as the regular expenditure will still cross over the estimated mark and development expenditure will lie below the mark. "Even the government will fail to mobilise the estimated revenue owing to the closure and bleaker performance of the manufacturing and trade sector," he said.

Budget fails to address burning issues: FNCCI

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KATHMANDU, July 11 : Federation of Nepalese Chambers of Commerce and Industry (FNCCI) has stated that the beauty of the newly announced budget is that it has not imposed any new tax burden, but absent of concrete plans and program to reactivate the ailing tourism, export and domestic industries is a pessimistic part.

Rajendra K Khetan, Acting President of FNCCI, the apex body of Nepalese businessmen and industrialists, unveiling the official reaction on the budget here today praised the budget as a realistic and said it has taken a number of steps to maintain the fiscal balance. But, in the same breath, he said that the budget has ignored number of burning issues particularly steps towards reviving deep-troubled tourism and export-oriented industries.

"The budget has incorporated some of suggestions of FNCCI as proper investment for peace, poverty reduction and bold steps to bailing out the economy from present turmoil and if implemented effectively, it can have positive impacts," states a release distributed on the occasion.

Nominal adjustments in tax rates without imposing extra tax burden on taxpayers, increment of limit of personal income tax exemption, announcement of compulsion provisions to use domestic products and steps to reduce unproductive government expenditures are some of the appreciable steps of the budget.

Similarly, efforts to woo domestic as well as foreign investments like establishment of single point service center, administrative reforms and establishment of Assets Management Company are other merits of the budget, states the release.

"Despite all these positive efforts, implementation has been the chronic problem in Nepal in which all the outcomes of the plans and programmes will depend," Khetan stressed.

However, the FNCCI also expressed its opposition that the budget has not been able to inject a fresh effort to anchor the waning confidence of the investors and businessmen. "The budget has failed to announce policies and programmes that were recommended by the FNCCI to revive the sliding economy of the country," states the release.

The federation had recommended bringing down the existing exports and import duties including the low interest rates on the loans to export-oriented industries but, the budget couldn’t bring any foreign trade promotional programmes.

Similarly, the FNCCI also criticized for not announcing any concrete programmes to revive the ailing tourism industry. "The budget should have brought plans to encourage both the foreign and domestic private airlines to operate more flights from and into Nepal," said the release.

Khetan on the occasion also stressed that government should have lowered the visa fees and airport handling charge to aid the tourism industry given the fact that Nepal’s airport handling charge is one of the most expensive in the entire South Asian region.

The federation also welcomed those budget initiatives to attract investments from Non Residents Nepali (NRNs) as well as from foreigners, but underscored the lack of concrete policies in this regard due to which similar past efforts failed to achieve desired results.

The release also points out that the budget has failed to address the need of detail homework before Nepal enters into the World Trade Organisation (WTO). "The budget failed to pay due attention in bringing anti-dumping and safeguard provision in order to protect national interest," Khetan added.

FNCCI also praised the continuation of the low-interest financing to the sick industries, but stressed on clear procedures on rescheduling loans. It also appreciated the announcement of flexible monetary policy since it can injects more liquidity into the market and urged to speed up the financial sector reform.

However, the FNCCI flayed the latest decision to decrease the customs discounts on the goods imported form India and China and has said that such move would increase the general price level and might fuel illegal trade.

Jagadish Rathi, Chairman of Revenue Committee of FNCCI, on the occasion said that the revenue target set by the budget is achievable, if sincere efforts are made.

The increment in the tax rate on dividends from insurance could hurt the emerging insurance business, said he. The cent per cent increment of Agriculture Service Fee would not be helpful to upgrade the competitiveness of the Nepali farmers, who are already facing tough days due to their inability to compete with the Indian products.

Second amendment to listing bylaw

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KATHMANDU, July 11:The Securities Board (SEBO) has cleared the second amendment to the listing bylaw incorporating new provisions allowing the suspension and de-listing of companies not complying with the working regulations of the secondary market.

According to a press release issued here today, the amended bylaw also contains provisions laying down the procedures by which the de-listed companies could be allowed to re-enter the stock market for share trading.

The amendment of the listing bylaw comes in a bid to define the modalities by which the Nepal Stock Exchange (Nepse) could de-list companies that fail to abide by the stock market laws.

The amended bylaw with provisions on suspension, de-listing and re-listing of companies comes almost a year after the secondary market first announced to de-list as many as 25 companies. Nepse then had even issued a 35-day public notice asking the said companies for explanation.

None of the companies, however, responded to the notice following which the Nepse pledged to accelerate the de-listing process, which was, however, delayed due to the lack of adequate rules and relevant provisions on de-listing.

The earlier listing bylaw did not contain provisions that could explain the suspension and de-listing processes. Furthermore, it said nothing by which the shares of de-listed companies could be again allowed for trading in the secondary market floor.

The Nepse was prompted to announce to de-list the companies in line with the budgetary announcement of the then Finance Minister Dr Ram Sharan Mahat. Former Minister Mahat then had announced to de-list those companies that did not provide financial statements for more than two consecutive years.

Under the first phase of the de-listing programme, the Nepse had decided to waive off the names of those companies from the roster that did not pay annual registration fees or whose shares have not been transacted for long. The annual fees range from Rs 15-50 thousand.

Also, the companies proposed to be de-listed had failed to conduct their annual general meeting for consecutively more than three years and to provide relevant information sought by the stock exchange.

The de-listing of the companies by the stock exchange whose shares are held by the public is likely hurt small investors since the action would freeze share transactions.

Most of the companies that are in the eyes of Nepse officials for de-listing belong to the manufacturing and processing group. There are presently 119 companies listed with the Nepse, with Oriental Hotels Ltd. (Radisson Hotel) and Nepal Development Bank being the last two registrants.

The new bylaw empowers Nepse to suspend or de-list companies that fail to clear their registration fees, to provide necessary information sought by the stock market, act against the interests of shareholders and to abide by the agreement reached during their enlisting with the stock market.

NSP flays new budget

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KATHMANDU, July 11:Nepal Sadhbhawana Party (NSP) has flayed the Prime Minister and Finance Minister Sher Bahadur Deuba’s budget for fiscal year 2002/03 presented Monday arguing that it has ignored the economic well being of the country in the name of security.

The reaction of the NSP comes against a major allocation of budget for security purposes, which was hiked by 46 percent from a little over Rs 10 billion for the current fiscal year to almost Rs 15 billion for 2002/03. The NSP alleged that an excessive chunk of development budget was diverted to security.

The party came down heavily on over the slashing of development budget, which the caretaker government cut by over 23 percent. Deuba had presented a Rs 96 billion budget, earmarking only Rs 38 billion for development purposes.

The budget was presented through an ordinance promulgated by His Majesty King Gyanendra Bir Bikram Shah Dev. The need for the ordinance came in the wake of a dissolved Lower House of Parliament.

The NSP argued that the root cause of the ongoing violence was poverty and unemployment. "The government should spend on development activities in remote districts rather than on security," the NSP opined.

The NSP was reacting to the budget at a press conference called by the party in its office premises here Thursday. "For sustained peace, development is necessary," Badri Prasad Mandal, acting national president of the party, said on the occasion.

Conceding that the budget is realistic to some extent, Hridayesh Tripathi, member of the dissolved Lower House, said that the budget has failed to announce programmes and policies that would help in realising the targets and objectives of the Tenth Plan that begins next fiscal year.

The NSP also argued that the budget allocation by Deuba is unfair. For the sick industries of the industrial sector that contributes 11 percent to the Gross Domestic Product (GDP), the government has allocated over Rs 1.5 billion. But for the agriculture sector that contributes around 40 percent to the GDP, the allocation is merely around Rs 2 billion, said Tripathi.

"Poverty can be reduced only by enhancing the living standards of farmers," he said. He also flayed the subsidy removal policy. The government a few years back removed subsidies in fertilisers and shallow tube wells.

The NSP party also showed its scepticism over the efficacy of hollow programmes announced by Deuba for uplifting the women and marginalised sections of the society, especially in the light of the possible dissolution of local bodies. The term of local bodies expires on July 16.

Stating that economics and politics are the two faces of the same coin, Mandal said that it is the political wrangling and instability that has led the economic condition of the country to such a low level.