DTT seeks deadline extension

By Milan Mani Sharma

KATHMANDU, March 6 : Deloitte Touche Tomatsu (DTT), an American consultancy firm that recently won the management contract for Rastriya Banijya Bank (RBB), has asked the Nepal Rastra Bank (NRB) to extend the deadline for take-over of the bank’s management by fifteen days. The request came prior to the expiry of the deadline on March 15.

The central bank at the time of signing the US$ 5.8 million two-year contract with DTT on January 31 had asked the consultancy firm to submit a comprehensive management plan within 45 days from the day of signing of the contract.

Sources at the NRB said that the DTT was prompted to extend the deadline for the take-over given the fragile security status in the country. The request from the foreign consultancy firm closely follows Nepal’s enlistment in the US government’s travel advisory as a state having security problems.

"In a letter issued by the DTT to the central bank, the firm has expressed concern over the security status of the country and has asked the central bank for additional 15 days to take over the management," said highly placed officials of the central bank on condition of anonymity.

However, the source informed The Kathmandu Post that the central bank is yet to respond to the firm’s request. Nevertheless, the response from the NRB is likely to be in the affirmative, he said.

The central had asked the DTT to develop comprehensive management plan to ensure that the RBB’s management is carried out smoothly. The plan is to be first approved by the central bank before the contract winner can actually take-over the management of RBB, the state-owned bank termed technically insolvent two years back.

The new management has been team will take complete control of day to day banking operation, provide immediate help to stabilize the bank’s operation and will be responsible to restore its financial health at an acceptable level.

For this DTT will be working closely with a locally recruited accountancy team (recruited as part of these management contracts) to develop and strengthen the accounting capacity, incept a comprehensive human resource policy and to design and implement an information technology plan.

Garment exports tumble by 50 pc

Post Report

KATHMANDU, March 6 : Plagued by a multiplicity of causes as eroding competitiveness, global economic slowdown, and internal security problem, the export of ready-made garment has registered a whopping double-digit tumble during the first two months of 2002.

Statistics compiled by the Garment Association - Nepal (GAN) show that garment export to the United States (US), the single largest buyer of the Nepali garment products absorbing 85 per cent of the total garment exports went down by over 50 per cent as compared to the corresponding period last year.

According to the GAN figures, with a whopping decline of 56 per cent alone in the month of February, the garment exports continued to register a steep decline posing a serious threat to the very existence of the garment industry. Such slump in the month of January was 45 per cent.

Value wise, the export figures to the US during the first two months of 2002 remained at US$ 20.84 million whereas such value during the same period last year was US$ 42.3 million. The total exports to the American market in 1998, 1999, 2000, and 2001 stood at US $ 106, 126, 164, and 136.52 million respectively.

The current slump clearly indicates that the future of the garment industry is extremely bleak and the rate of export will further decline in coming years. "For a sector that has enjoyed a healthy swell in the past, the continuing decline is extremely depressing," says Uday Raj Pandey, General Secretary of GAN.

Garment entrepreneurs are not just deeply worried over the current slump. Even more worrisome is the fact that the current volume of orders is remarkably low, which will reflect in the days to come.

"The gloom of the industry can be easily sensed by the volume of orders that we get now. And since the orders have has been nominal in comparison to the orders that we used to get in the previous years, it is sure that the exports will further tumble," Pandey said.

Concerned entrepreneurs claim that more than 75 per cent of the garment industries have already closed down and the remaining 25 per cent too are running utilizing less than 50 per cent of their capacities.

With the latest signs of strain in the garments sector that has been the number one foreign exchange earner, the overall economy is beginning to face a number of problems.

"The current slump of the industry has given rise to social problems since more than fifty thousand people have been laid off in the past one year alone," Pandey says.

The cause of the latest export dwindle, entrepreneurs say, is many, including the recent series labors’ business unfriendly activities and the slowdown of the American economy.

"The agitation staged labours about 6 months ago greatly damaged Nepal’s credibility in the international market and it will take years to regain the level of credibility for which we had sacrificed years to make," Puskar Dev Pant, Vice-President of GAN.

Garment entrepreneurs believe that persuading the American government for duty-free and quota-free access into the American market is the only possible way to revive the industry.

"The Nepali ambassador to the US should play a leading role in that direction and the government should also form a special mission to lobby for Nepal’s demand in the US," Pandey adds.

One of the major causes for the slide in Nepali orders is the shift in the preference of American importers to import garments from the Sub-Saharan African countries, which have been entering the US markets free of duty and quota.

The Nepali garment currently pays 15 to 25 percent customs to enter into the US market. Furthermore, the cost of production of Nepali garments is around 15 per cent higher than its neighboring competitors basically due to lack of sea access.

However, some silver lining has appeared for the pessimistic garment entrepreneurs. The slowing soaring export of Nepali garment products to Europe and India has given some sign of relief.

"After the revocation of duties on garment, the export is slowly surging but we are still facing tough competition and it will take time to establish a brand name in the European market," Pandey says.

Entrepreneurs are of the opinion that the government should take concrete steps to explore the full potential of the Indian market. "If we are given the facilities that we are getting while exporting to US market, the Indian market can observe up to 15 per cent of the total Nepali production," he says.

Govt drafting Anti-dumping Act

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KATHMANDU, March 6 : At a time when Nepal is preparing for joining the World Trade Organization (WTO), and when provisions on safeguard measures were included in the amended Nepal-India Trade Treaty, the government is drafting an Anti-dumping Act.

Minister for Industry, Commerce and Supplies Purna Bahadur Khadka gave the information today while speaking at a press meet organized by the ministry to inform the press about the recently signed Nepal-India Trade Treaty.

He said that no changes have been made in the main clauses of the bilateral Treaty. However, some amendments have been made in protocol V and some appendices related to it, and a new protocol IX has been added to it.

He also stated that the automatic renewal provision of the Treaty is intact while the rules of origin have been re-defined. Also, as per the new Treaty, Nepali products with 25 per cent value addition on material and labour only would enjoy duty- and quota-free access to the Indian markets. The value addition slab from the second year is to be increased to 30 per cent.

Likewise, quantitative restrictions have been imposed on four articles of contention: acrylic yarn, vegetable ghee, copper wire and zinc oxide. Nepal can now export 100 thousand tons of vegetable ghee, 10 thousand tons of acrylic yarn, 7,500 tons of copper wire and 2,500 tons of zinc oxide to India free of basic duty and quota. However, amounts exceeding the limit on those articles would get most favoured nation (MFN) facility, added the minister.

Similarly, articles whose 4 digit HS code has not been changed and have fulfilled the criteria of value addition will be enjoy duty- and quota-free access in the Indian market case by case depending whether they are processed or manufactured, he said.

The newly signed Treaty has a provision adopting remedial measures if the export of any country injures or if there is a threat of injury to the domestic industries, by forming a joint team of the two countries and find measures to the problem within 60 days.

And if the team fails to address the problem within 60 days, one country can request the another for appropriate remedial measures. A separate protocol has been added which allows an Inter-governmental Committee to look into the matter, he said.

Likewise, the products of small Nepali industries as defined by the Industrial Policy would continue to enjoy the existing facility which waives additional duty that Indian government imposes on Nepali exports.

A transition period of six week has been provisioned in order to allow the implementation of the new provision on certificate of origin. The existing system will be valid up to April 16, 2002. And the goods enlisted in the negative list would enjoy an MFN treatment in their export to India, said the minister.

The new provision of safeguard measure allows both the countries equal opportunity to protect their industries, which will preserve domestic products and industries, said Minister Khadka.

Secretary at the ministry Bhanu Prasad Acharya also spoke on the occasion.