Tibet eyes Nepali rice 
Experts demand broader trade solutions

By Milan Mani Sharma

KATHAMANDU, Aug 10 : While the government officials are preparing to formally request China to provide duty-free market access to Nepali exports, Tibetan Cereal Bureau (TCB) has approached the Nepali government to supply it with rice.

"For the first year, the demand has been placed for 5,000 tons of rice," Govinda Kusum, Joint Secretary at Ministry of Industry, Commerce and Supplies (MoICS) told The Kathmandu Post.

The proposal was placed after a delegation of the Bureau led by Zhao Fang Chun, its Deputy Director, visited Kathmandu in the first week of august.

It has expressed an interest to secure the supply from Nepal Food Corporation (NFC) and Salt Trading Corporation (STC) and has even informed that the demand could soar if Nepal fulfils the supply on time and ensure its quality.

"For final negotiation, mainly on price and quality of supply, a Nepali team comprising the officials of STC and NFC officials are leaving for Tibet soon," said Kusum.

Officials take the latest proposal in positive light, especially as it has come at a time when they are informally negotiating with Chinese officials in Kathmandu for better trade facilitation measures to boost bilateral trade.

"The proposal, if finalised, would pave way for other agriculture products like ghee, oil, wheat and flour among others," they said.

Various studies have shown that supply of construction materials and consumer goods to Tibet is more feasible from Nepal than Mainland China. "This would, in fact, rather help the Chinese government reduce its liabilities, as it has been providing high subsidies in commodities being supplied to Tibet," states an FNCCI study.

Owing to geographical proximity and financial factors, even the United Nations Conference on Trade and Development (UNCTAD) has identified Nepal as a strategic transit facilitator to Tibet’s development thrusts.

Currently, China is constructing a broad-gauge railway to link Lahsa with the Major Chinese markets. "But that would not change the trade opportunities for Nepal," said experts. On the contrary, Nepali officials have been requesting China to extend the railways service up to Khasa, citing that it would facilitate Nepal’s trade with northern neighbour.

However, to expand the trade, the FNCCI has been recommending the government to seek the duty-free market access facility with China. "This is necessary to bridge widening trade gap between two neighbours," states its report.

Noodles, beer, cement, steel rods and vegetables have been identified other the major potential exportable products from Nepal. However, owing to higher customs duty and other charges, their competitiveness has been eroding presently.

"In this connection, providing special provisions for Nepali exports is decisive to bridge the widening trade gap," said experts. Nepal has experienced a trade deficit of over Rs 8 billion with China in 2002 alone.

This is also crucial in expanding trade with Mainland China, as 40 per cent duty on Nepali exports and the distance factor have been eroding competitiveness of Nepali products in the Chinese market, states the FNCCI study.

"The government should pick up the issue of trade expansion on broader spectrum, rather than on commodity basis, and deal with the matter at higher levels," said Rajesh Kaji Shrestha, President of Nepal Chamber of Commerce (NCC).

Nepal has bilateral trade agreement with China since 1981. The treaty is being automatically renewed every three years with no proposal for reviewing coming from either governments.

In fact, the two governments have never sat down together and assessed its impacts since the time of signing the bilateral treaty.

‘Economic revival linked to peace’: Governor

Post Report

KATHMANDU, Aug 10 : Governor of Nepal Rastra Bank (NRB), Dr Tilak Rawal, today said that unless non-economic factors that have been weighing heavy on the national economy is straightened all efforts to revive it would fail.

"Cease fire has sent a ray of hopes in the economy. However, if the condition deteriorates it will see bleaker days," he said.

Speaking at an interaction on Challenges of Monetary Policy Implementation organised by Society Of Economic Journalists Nepal (Sejon) today, Dr Rawal said the central bank would increase the list of commodities that could be imported on foreign currency from India to 40. Currently, such facility exists for 33 commodities.

He added that the sharp depletion in Indian currency reserve recorded of late would not affect the economy as the country has adequate foreign currency reserve to support imports for 11 months.

Narendra Bhattarai, President of Nepal Bankers’ Association (NBA) lauded the monetary policy for allowing the trading sector to open special letter of credit for exports, stating that it would address the current gloom of the sector.

"However, the facility might result in outflow of interest earning and affect the national players in the long run. The central bank should retract the decision once the economy assumes further growth," he said.

Bhattarai further welcomed the NRB’s decision to increase the limitations to US $ 100,000 and decrease the guarantee requirement to 10 per cent for ‘cash against document’. "This would boost the exports," he said.

Binod Bahadur Shrestha, President of Federation of Nepalese Chambers of Commerce and Industry (FNCCI), meanwhile, said that the banking sector’s service charge, which is on a higher side, should be curtailed. "Unless cost of capital is decreased, the monetary policy would fail to boost investment," he said.

He said that the spread rate and gap between selling and buying rates of foreign currency were still high to promote industrial activities. "The NRB’s announcement to strengthen Credit Information Bureau (CIB) is laudable. But that should not developed to terrorise business community," he said.

Reiterating FNCCI’s commitment to establishing financial discipline, he said that the federation is developing a list of industries that has taken a significant sum of loans and the lender to facilitate the disciplinary process. "However, players other than the private sector too should come up with similar commitment on the matter," he added.

Rajesh Kaji Shrestha, President of Nepal Chamber of Commerce (NCC) viewed that the monetary policy has remained silent on financial institutions other than banking system and a need to expand formal financial intermediation in rural areas.

"Also, the central bank should focus on monitoring the capital outflow, which has increased in recent years in the absence of better return," he said.

Govt bars recruitment of additional manpower in SOEs

Post Report

KATHMANDU, Aug 10 : Issuing a circular last week, the government has barred all state-owned enterprises (SOEs) to recruit additional manpower and announce promotions to their existing staff. The SOEs have also been directed to cancel unnecessary vacancies and follow austerity measures in expenditure.

"The circular is aimed at introducing efficient expenditure management system in the public enterprises to increase their productivity," a high-level government official informed The Kathmandu Post. This directive aims to contain the government’s liabilities on these SOEs to the present level.

The latest directive is issued in response to the government-report on public enterprises released last month. The report has said that three dozen SOEs, for the first time in Nepalese history incurred the cumulative loss of more than Rs 5 billion during the last fiscal year.

The SOEs, that were once a major source of government revenue, failed due to mismanagement and political intervention. Overstaffing, failed corporate culture and lacking competitiveness are the other factors that have contributed for the weak financial status of these institutions. It is not the first time that the government has taken steps to strengthen the financially burdensome public entities. Of number of announcements, the government has recently announced a reward and punishment system to the chiefs of the public enterprises.

Some 14 public enterprises lack up-to-date accounts and are yet to complete the audit for one or more years. The inadequate financial statement has been problem for the government to initiate privatization of some of these loss-making ventures. Meanwhile in response to the state-directive and enhance the working efficiency the Civil Aviation Authority of Nepal (CAAN), the Ministry of Culture, Tourism and Civil Aviation has formulated a special committee.

"The three member committee led by its board member Arun Poudel will suggests to strengthen CAAN through both cost effective and work effective measures," Minister for Culture Tourism and Civil Aviation Survendra Nath Sukla said.

Economy, Finance and Market

By SupaUpadhyay

Domestic money market:

The Average Weighted Discount Rate (AWDR) of 91-day Treasury Bills (TBs) lost by 09 basis points to 3.88 percent while, the 364-day Treasury Bills (TBs) rose by 13 basis points to 5.37 percent compared to previous week.

The rupee was traded higher at NPR 99.07 and lowers at 99.01 for 91-day and traded higher at NPR 95.83 and lowers at 95.24 for 364-day. The NRB had received 23 bids worth NPR 920 million against the notified amount NPR 670 million for 91-days and 21 bids worth NPR 1030 million against the notified amount NPR 1250 million for 364-days.

The Repo rates for member banks and institutions have been quoted at 4.3807 for the trading days 05 to 11 August 2003 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 1250 million on August 12, 2003.

Domestic capital market:

The stock market witnessed a very encouraging week this time. The NEPSE Index-100 rose by 1.75 points over the week. The Index opened higher at 202.70 and gain in all traded working days and eventually closed higher at 204.44 for the week. This week trading was estimated at 37340 shares valued NPR 11.1 million compared to 65017 shares valued NPR 12.8 million of pervious week. Commercial banks and Finance companies shared 76.56 percent and 14.68 percent respectively of total traded amount. This week, index of Commercial Bank, and Insurance Sector improved while Finance Sector, Hotel Sector, Other Sector and Development Bank lost. Business Sector and Production Sector remain unchanged. Out of forty-seven traded companies, nineteen companies improved, sixteen companies lost and twelve traded companies remain unchanged at their previous
prices.

Machhapuchhre Bank, Oriental Hotel and Nepal Life Insurance registered the first, the second and the third most traded companies trading 7550, 3740 and 3360 shares respectively. Share of Nepal SBI Bank, Bank of Kathmandu, Machhapuchre Bank Ltd., Nepal Life Insurance, Life Insurance, International Leasing & Finance and Premier Finance were able to trade in all five working days.

Likewise Standard Chartered, Oriental Hotel, Union Finance, United Finance, Shree Investment Bank and Finance, Nepal Investment Bank, Nepal B’desh Bank, Everest Bank and Nepal ShreeLanka Merchant Bank were able to trade in four working days.

Forex round-up:

The USD lost against all its major trading partners over the week. The green back could not manage it’s recovery on the soft data while traders are awaiting further figures.The INR improved on flood of dollar inflows in the banking system. Whereas, The NPR follows USD/INR rate for business adjustment and improved 25 paisas over the week.