NRB finalises formation of supporting mgmt group

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KATHMANDU, Feb 10 : The long running saga of management hand-over of the state-owned Rastriya Banijya Bank (RBB) to a private party formally completed after the board meeting of Nepal Rastra Bank (NRB) held last week finalised the formation of the high-level supporting management group by appointing five members.

According to a high-level government source, the board meeting approved selections of Gopal Rajbahak to the post of Chief Financial Officer and Sudarshan Raj Pandey as Audit Manager. Both of the chartered accountants are Nepali nationals with banking experiences of 10 to 12 years.

Similarly, other two appointees are British nationals Charles Sterling and Run Crafty, a Canadian, to the post of Chief Treasury and Information Technology Manager respectively.

The board meeting also appointed Australian national Robert Crawlfin to the post of credit manager and Crawlfin will join the management team from next week. However, the central bank has not made any appointment to the posts of Chief of Human Resources Department and Debt Restructuring Chief. "These posts would be filled in the future as per the need," said the source.

The candidates were selected from a total of 78 applications by a committee comprising the newly appointed Chief Executive Officer (CEO) Bruce Henderson and Rajan Singh Bhandari, chief of the Banking Operation Department of the NRB. However, as per the agreement signed with the new management, Henderson took the lead role in the process of selecting the members, added the source.

In December, the NRB had appointed Henderson, an American bank expert with 41 years of banking experience, to the post of CEO of the RBB. Henderson, in his personal Expression of Interest had quoted US$ 316,000 per year, but after negotiations, Henderson agreed to lower his annual remuneration to US$ 288,000.

As per the agreed Terms of Reference (ToR), the new management would have to submit a detail management and financial plans by mid-March. The management plan includes immediate help to stabilise the bank’s operations and restore its financial health, to develop and strengthen accounting capacity of the bank, developing a comprehensive human resource policy for the banks and designing and implementing an information technology plan for the bank.

Likewise, the management team would also be responsible for reducing the existing high Non-performing Assets (NPAs) of the bank to an acceptable level within two years. Similarly, the new management would also be entrusted with upgrading the existing accounting system of the bank to international standard.

The process of selecting CEO and the members of the management supporting group is a part of the plan drawn by the central bank, after Delloitte Touche Tomatsu (DTT), an American banking consultant, breached the RBB’s management take-over contract after signing the final agreement citing the worsening law and order condition of Nepal.

The management contracts of the banks will be initially for two years, which can be extended further depending upon the outcome of the project. The management team will be responsible for taking complete control of day to day running of the bank.

The government had embarked upon the management-transfer-project after KPMG Barnet, an international auditing firm last year, declared the two banks technically insolvent. The government had invited tenders from foreign consultants in September 2000.

NFC to begin procuring paddy, rice

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KATHMANDU, Feb 10 : After a month-long delay, Nepal Food Corporation (NFC) has finally decided to set the price of paddy and rice in the local markets of the Terai, the region from where it yearly procures the foodstuffs.

The NFC, a state owned enterprise responsible for the supply of food throughout the country, today directed all its regional offices to fix the price of rice, a staple food of the country, in the local markets of the Terai for procurement purpose.

"We have asked all our regional offices to set the price and to initiate immediately for the procurement process of foodstuffs," said Sanu Ratna Sthapit, Deputy Managing Director of NFC.

The purchasing price, however, may differ throughout the country, said Sthapit, adding that various price fixing local bodies have been constituted in different districts under the chairmanship of Chief District Officer (CDO) of the respective districts.

Such a decision of fixing the price of foodstuffs in the local markets, which the NFC used to decide at the end of harvesting season (usually during early January), however has been delayed this year.

The delay, according to the senior NFC officials, is largely due to the disastrous spell of cold wave this year, which blanketed entire Terai region for almost one and half months. "As cold wave was to damage the storage capacity thereby affecting its longevity, we decide not to procure required foodstuffs during early January this year," said a highly placed source at the NFC.

Nonetheless, the delayed decision of the NFC to fix the price of foodstuffs has badly affected the local farmers. The local farmers, who were compelled to cut the price of their produce largely due to the flooding import of cheap Indian agro produces faced another dilemma due to the laxity of the NFC on procuring the local food stuffs.

The reluctance of the NFC in procuring the local agro produce in mid-January this year forced most farmers, especially those below the poverty line, to sell their produce at low price to local agro traders. The wide availability of cheap Indian rice in the local market further aggravated the problems of local farmers.

However, the delayed decision, which has adversely affected the local farmers, will be highly beneficial to agro traders of the Terai as they will have better margin of profit by selling low-cost agro produce at higher price to the NFC.

Together with the decision of setting the price of agro produce at local markets, the NFC has also decided to store at least 20,000 tons of rice in the current season. Besides procuring the large quantity of agro produce from the Terai region, the NFC, the food storehouse of the country, will also be supported by over 8,000 tons of French wheat.

Much to the agony of local people of the western region, which was badly hit by the drought this year, the NFC had earlier decided to cut the food supply to the remote parts of the country. While 8,400 tons of rice was supplied last year, the corporation has planned to provide only 6,400 tons of foodstuff to 31 remote districts of the country.

Textiles export to EU on recovery path

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KATHMANDU, Feb 10 : Textiles export to the European countries, which is done as per the understanding reached under the Nepal-EU Textiles Agreement, is lately on an upturn, data provided by the Department of Commerce for the month of January 2003 indicate.

Significant increase is seen in the issuance of both licenses and certificates of origin (COs) by the department. Either COs, or both license and CO, depending on the type of product being exported, are required for textiles export to the Euro zone under the Nepal-EU pact.

Statistics for the month of January show that while license for the export of 488,479 pieces of textiles products worth almost Rs 162 million was issued by the department, COs for the export of 492,576 pieces worth Rs 113 million was issued.

While the license issued for the first month of 2003 is over 66 per cent higher than that issued in the same period last year, the COs issued is over 11 per cent higher as compared to the issuance in the like period last year. The comparison is against the license issued for the number of textile products.

The department had issued licenses for the export of 293,754 pieces of textile products to the European Union in January last year. In the same vein, COs for the export of 443,218 pieces of textile products were given away by the department in January last year.

However, the monetary value of license issued in January this year is roughly at the same level as compared to the license issued during last January. On the other hand, against the issuance of COs valued at Rs 162 million this January, COs worth almost Rs 106 was issued in January last year.

The license issued for the month of January is the highest in over a year. Month-wise license issuance data show that the highest license issued in the whole of 2002 was made in March when license for the export of 302,865 units of textile products were issued.

Though March was the only month in which license issuance had crossed the 300,000 mark in 2002, January’s monetary value of license for exports is the highest in only six months. Department of Commerce had issued license for the export of textiles worth Rs 165 million in July last year.

Nepal and EU had reached an agreement in March 1999 that introduced licensing system for the export of textile products falling under five major textile categories, of the 161 categories as classified by the EU. The agreement was enforced from March 1, 2000.

The five categories, numbered 4, 5, 6, 7 and 26, include the major exporting textile items, such as shirts, T-shirts, light weight fine knit roll, jerseys, woven breeches, shorts other than swimwear and trousers, blouses, jumpers and pullovers made of wool, cotton or man made fibres among others.

The DC issues the license to the exporters on producing the order of goods or the receipt of advance payment made by the European importers to the Nepali exporters or if there exists a back-to-back or buy-back arrangement.

According to the agreement, exporters also have to acquire CO of all textile items, exported to the EU, endorsed by a competent government official, which were usually done by the local chambers of commerce. The DC has been entrusted with the responsibility of endorsing the CO.

The EU had initially demanded to initiate license system for 15 categories, which Nepal bargained down to 5. India and China are also manufacturing the textile items falling under these categories, which they export to the European market under the quota system.

Seminar on WTO held

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KATHMANDU, Feb 10 : A two-day seminar assessing the impact of Nepal’s membership to the World Trade Organisation (WTO) on the country’s industry-commerce sector concluded in Siddarthnagar today, states a press release issued by the Federation of Nepalese Chambers of Commerce and Industry (FNCCI).

The two-day seminar was organised with the joint initiatives of the FNCCI, Siddarthnagar Chamber of Commerce and Industry (SCCI), and the United Nations Development Programme funded ‘Nepal Accession to WTO’ project.

Inaugurating the seminar, Secretary at the Ministry of Industry, Commerce and Supplies Lab Prasad Devkota on Sunday said that Nepal must be able to thwart the challenges that it would confront after its accession into the WTO and tap the benefits that globalisation has in store.

Rajendra Kumar Khetan, Second Vice President of the FNCCI, said that Nepal cannot remain aloof from globalisation in the present context. However, Nepali entrepreneurs must be able to increase the competitiveness of their products to survive the threats inherent in a global market.

Khetan added that in order to improve the quality of Nepali goods and services that are to be delivered in the international markets, the government must play an active role in eradicating various hassles, including a reform in tax and export related laws, says the release.

In addition, Khetan said that the Export Year 2003 must not be confined to only the present year rather it should be given continuity to bring positive changes in the country’s export sector. That calls for revision in income tax laws, he specifically said.

Likewise, Omkar Prasad Gautam, President of SCCI, said that a poor country like Nepal needs to be properly prepared to survive the onslaught of globalisation and that the government must be clear about its policies regarding the private sector, especially small and medium enterprises, the release reads.

Dr Posh Raj Pandey, Programme Manager of Nepal Accession to WTO, also spoke on the occasion, highlighting the importance of WTO membership to Nepal. Likewise, Hari Raymajhi, President of Palpa Chamber of Commerce and Industry also expressed his views.

Revenue collection in Bhairahawa customs up

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BHAIRAHAWA, Feb 10 : The revenue collection from the Bhairahawa Customs Office (BCO), during the first half of the current fiscal year has recorded an impressive growth of 34 per cent as compared to the revenue mobilisation of the similar period last year.

According to statistics revealed by BCO, a total of Rs 1.55 billion was collected in revenue during the first half of the current fiscal year, up by Rs 395 million from the revenue collection of Rs 1.15 billion during the same period last year.

The notable surge in the revenue collection is due mainly to the hefty increase in customs revenue collection during the period. The statistics say that the office has collected Rs 767.74 million in customs revenue as against Rs 597.84 million collected during the same period last year.

The rise in the customs revenue collection is primarily fuelled by the surge in the import through this customs point during the first half of the current fiscal year, says an official at the BCO.

The customs point, during the period had been able to import goods valuing Rs 8.23 billion against the import of Rs 6.87 billion, last year. The export figure for the period was equal to Rs 1.06 billion against the export of Rs 1.36 billion during last year.

"The anti-corruption drive carried out by the Commission for the Investigation of Abuse of Authority (CIAA) last August helped curbing the revenue leakage to some extent, resulting in an increase in the revenue mobilisation," the official added.

Besides the increment in the revenue mobilisation from customs duty, the Value Added Tax (VAT) has also recorded an increment. According to the statistics, the VAT revenue during the first half of the current fiscal year went up to Rs 529.32 million from Rs 447.34 million mobilised during the similar period last year.

According to the statistics, the BCO during the first half of the current fiscal year collected Rs 634.18 million from imports, Rs 29.19 from exports, Rs 102 million from the Agriculture Development Fees and Rs 2.27 million from late fees and fines.

The similar figures for the like period of the last fiscal year were Rs 538.87 million from imports, Rs 26.45 million from exports, Rs 37.5 million from Agricultural Development Fee, and Rs 1.71 million from late fees and fines.

The revenue target for the current fiscal year of the office is Rs 1.71 billion. The office had mobilised Rs 2.58 billion revenue during the last fiscal year as against the anticipation of Rs 1.29 billion.

Trade deficit widens, forex reserves rise

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KATHMANDU, Feb 10 : Nepal witnessed a moderate growth in imports, and a historic low inflation during the first five months of the current fiscal year, but a hopping decline in the development expenditure, along with the exports are still a major problem, says a communiqué issued by the Nepal Rastra Bank.

According to the press release, the weighted average treasury bills rate stood at 3.75 percent in mid-December 2002 compared to 4.95 percent in mid-December 2001. Major indicators of the stock market registered a decline during the review period. The NEPSE index slumped by 69.9 points (24.6 percent) to 214.57. Market capitalisation of the listed companies also went down by 16.9 percent to Rs. 33.8 billion. The value of share transactions also decreased during the year.

Budgetary Operation

Based on the cash flow data, total government expenditure declined by 1.9 percent to Rs. 23.3 billion as against a rise of 9.8 percent last year. Of this, regular expenditure increased by 6.6 percent to Rs. 19.0 billion in comparison to the growth of 14.6 percent last year. The development expenditure, however, declined sharply by 33.2 percent to Rs. 2.9 billion as against the decline of 13.1 percent last year. The freeze expenditure declined by 12.7 percent to Rs. 1.3 billion in contrast to the rise of 50.4 percent last year. The difficulties in carrying out development activities due basically to adverse law and order situation and weak overall resource position led to a decline in the development expenditure.

Total non-debt creating resources (revenue, non-budgetary and other receipts and foreign grants) increased by 6.4 percent to Rs. 19.7 billion as against the growth of 6.2 percent last year. Of this, revenue collection, the major source of the government resources, went up at a slower rate of 5.1 percent to Rs. 17.7 billion compared to the growth of 7.1 percent last year. The revenue collection decelerated due to the continued sluggishness in industrial production, tourism as well as other economic activities. Foreign grants slumped by 50.3 percent to Rs. 562 million in contrast to the rise of 5.2 percent last year. However, non-budgetary receipts, net, increased by 7.5 percent to Rs. 976 million.

Decline in government expenditure and increase in non-debt creating resources resulted in a decline in the budget deficit by 31.6 percent to Rs. 3.6 billion in contrast to a rise of 24.8 percent last year. In order to meet this deficit, HMG mobilised foreign loans amounting to Rs. 1.4 billion, issued development bonds equivalent to Rs. 2 billion and used surplus of Rs. 18 million from its other accounts. The remaining gap of Rs. 153 million was met through an overdraft from the Nepal Rastra Bank.

Price Situation

The National Urban Consumer Price Index, on point-to-point basis, rose by 2.1 percent compared to a rise of 2.7 percent last year. The price index of food and beverages group increased by 1.7 percent compared to an increase of 4.1 percent last year. Despite an increase in the prices of oil and ghee, beverages, grains and cereals products, meat, fish and eggs, restaurant meals and pulses, the sharp decline in the prices of vegetables and fruits, spices as well as sugar and related products resulted in a lower rate of price rise in the food and beverages group. The price index of non-food and services group also went up moderately by 2.5 percent compared to a growth of 1.3 percent last year. In the non-food and services group, the price of cloths declined by 1.8 percent. Regionwise, the price indices of Terai, Kathmandu Valley and Hills increased by 2.8 percent, 1.5 percent and 1.3 percent respectively. Low aggregate demand and better supply situation contributed to a lower rate of price rise. The wholesale price index increased marginally by 0.7 percent compared to a rise of 5.9 percent last year.

Foreign Trade

On the external front, aggregate export further shrank by 14.9 percent to Rs. 19.2 billion compared to a decline of 5.8 percent last year. Export to India witnessed a reversal this year as it declined by 25.2 percent to Rs. 10.5 billion compared to the marked rise of 31.6 percent last year. Export to the third countries, which had declined by 35.8 percent last year, increased by 2.1 percent to Rs. 8.7 billion this year. Exports of readymade garments and jewellery to the third countries surged up by 40.5 percent and 24.5 percent respectively whereas that of the woollen carpets, Pashmina and tanned skin declined sharply by 30.8 percent, 13.8 percent and 59.0 percent respectively. Export to the third countries turned moderately positive, which is attributed to improved exports of readymade garments and jewellery. Export to India declined following the introduction of quantitative restrictions in the renewed Nepal-India trade treaty.

Import witnessed positive reversal during the year. Aggregate import increased by 8.8 percent to Rs. 47.3 billion in contrast to the decline of 7.4 percent last year. Import from India increased by 13.2 percent compared to a decline of 0.7 percent last year, while import from the third countries increased by 5.6 percent in contrast to the decline of 11.7 percent last year. Imports of thread, rice, agricultural equipment and parts, cement, electrical equipment, petroleum products, MS wire, rod, tire, tube, MS billet, steel sheet, medicine, industrial chemicals, cold and hot rolled sheet as well as other machinery and parts from India and petroleum products, cloths, video, TV, computer parts, transport equipment and parts, medical equipment, raw wool, plastic granules, cotton as well as telecommunications equipment and parts from the third countries went up this year.

Due to the decline in export and increase in import, the trade gap widened by 34.3 percent to Rs. 28.1 billion as against the decline of 9.0 percent last year. The export/import ratio, which was 51.9 percent last year, went down to 40.6 percent this year. This ratio with India fell sharply to 50.7 percent from 76.8 percent last year, while the ratio with the third countries fell marginally to 32.8 percent from 33.9 percent last year.

Balance of Payments

Based on the available BOP statistics for the first three months of FY 2002/03, the service, net, deteriorated further as it declined by 55.9 percent to Rs. 1 billion following the decline of 53.2 percent last year. The transfer, net, which had risen by 21.0 percent last year, went up modestly by 3.9 percent to Rs. 6.9 billion this year. Consequently, the current account deficit widened sharply by 104 percent to Rs. 8.3 billion compared to the rise of 75.3 percent last year. However, the BOP remained favourable at Rs. 933 million in comparison to a deficit of Rs. 1.5 billion last year due mainly to a sharp rise in capital, net, though the monetary statistics for the first five months showed a BOP deficit of Rs. 2.2 billion.

The foreign exchange reserve of the banking system (including exchange valuation) grew by 1.1 percent to Rs. 105.6 billion in mid-December 2002. The share of convertible currencies in the total reserve rose to 77.8 percent from 75.3 percent last year, resulting in a decline of 2.5 percentage points in the share of non-convertible currency at 22.2 percent.

Most farmers fail to benefit from interest-free repayment scheme

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MANTHALI, Feb 10 : Majority of the local farmers has failed to benefit from the interest-free loan repayment scheme offered by the government some months ago as a relief package to small borrowers due to their weak financial condition and threats from the Maoist.

Only about 25 per cent of the total borrowers who were otherwise unable to repay the loans due to high amount of interest over a long time, have paid back the interest-free principals to the Agriculture Development Bank (ADB/N).

The deadline set by the government to repay the interest-free principals at the district branch of the bank came to end on mid-January. Within this deadline, only 1,136 farmers had paid back the principals, which is only about 75 per cent of the total farmers who failed to pay back the loans.

The dissolved Sher Bahadur Deuba government had announced this relief package to the farmers borrowing up to Rs 10,000 from the ADB/N. The government will compensate the interest amount coming as a deficit to the ADB/N, according the government plan.

According to the Manthali Branch of the ADB/N, only Rs 6.987 million was collected from the farmers. The major reason for the failure of the farmers to repay the loans is their weak financial conditions, according to Madan Chapagain, an official at the bank.

"We had done our best to publicise the interest-free loan repayment programme and had sent notices to every Village Development Committee," he said, adding, "But as the farmers are suffering hard even to eek out a mere subsistence, they failed to pay back even the principals. Further, Maoist threats also pulled them back from coming to the bank office at the district headquarters."

Some months ago, the branches of ADB/N and Small Farmers Development Project situated in remote Wanti and Lakhanpur villages of the district were relocated at the district headquarters due to Maoist fears. "The relocation of bank branches is another reason why the farmers could not repay the loans as expected," said a bank employee requesting anonymity. "The Maoist have even threatened the farmers in several villages not to pay back the loans."