Prime Minister Sher Bahadur Deuba’s week-long goodwill visit to India concluded with promises from India to look into the requests of Nepal. Before starting on the visit, PM Deuba had announced a nine-point agenda which included operationalization of the Birganj dry port for which the railway treaty with India is essential. India has promised to make the railway service operational within a couple of months.

The complaint of the Nepali side about the quarantine restrictions on Nepal’s agricultural exports to India are promised to be resolved when the Indian Agriculture Minister visits Nepal in the near future.

However, Deuba entourage was not successful to convince the Indian government to lift the special additional duty on Nepali goods exported to India. Such a duty was imposed by the Indian budget announced when the trade delegations of the two countries were finalizing their six-month long negotiation for the renewal of the Nepal-India trade treaty more to the satisfaction of India.

Another most important development detrimental to Nepal-India trade after Deuba’s visit is Nepal’s consent to channelise vegetable ghee exports from Nepal to India through India’s state trading corporation. The authorities are showing it as an achievement because earlier India was insisting for such arrangement also for zinc oxide, copper product and acrylic yarn.

CB Boards Suspended

In an unprecedented development in the country’s banking sector history, Nepal Rastra Bank (NRB) has suspended the entire board of directors of Nepal Bank Ltd. (NBL) and Lumbini Bank Ltd. (LBL). Separate management committees have been set up for both banks in place of the Boards. While Basudev Ram Joshi, a retired NRB officer and former Deputy General Manager of Nepal Arab Bank Ltd., heads the management committee in NBL, Narayan Das Manandhar is to head the committee for LBL.

The suspensions however did not come as a total surprise. The central bank had sought written explanation from the Boards a few weeks ago in a prelude to the suspension which is necessitated, in case of NBL, by the obstacles set by its board in the process to hand over the management contract of the bank to an international accounting firm. In case of LBL, its board was suffering from a rift among the directors and could not honour NRB directives.

The government had started steps to hand over the management to Rastriya Banijya Bank (RBB) and NBL together some two years ago. While the agreement is already signed for the management handover in case of fully government owned RBB (which is to go to Deloitte Touche Tohmatsu), NRB is ready but still unable to sign similar agreement with ICC Bank of Ireland for the management of NBL. The NBL board had almost become empty when it was suspended. All the members of the Board had resigned during or before the rumour of the imminent suspension.

Lumbini Bank, a private sector institution with shareholding also from the Employee Provident Fund (a public sector financial institute) has its headquarters in Narayangarh and is alleged to have violated NRB directives in the operations from the Darbarmarg branch in the capital. However, with the suspension of the LBL board, NRB has lifted the ban on LBL’s Durbarmarg branch to accept deposits.

Coalition Against AIDS

Taking cue from the Global Business Council on HIV/AIDS, the Nepali business community too is readying for similar cooperative initiative also in Nepal. In this connection, FNCCI, the apex chamber of the country, organized what it called "a consultative meeting on corporate sector response to HIV/AIDS’ recently in Kathmandu in cooperation with the Asian Business Coalition (ABC) on AIDS. Independent business coalitions have been developed in ten Asian countries – Thailand, Lao PDR, Cambodia, Myanmar, Vietnam, Malaysia, India, Bangladesh and the Philippines. Nepal will also have one in the near future, say the FNCCI sources.

The Global Business Council on HIV/AIDS was established in October 1997 with 12 founding members. Its members today include AOL Time Warner, Bristol Myers Squibb, Kelvin Klein Inc., Coca-Cola, Daimler Chrysler, Edelman Public Relations Worldwide, Eskom, GlaxoSmithKline, Levi Strauss & Co, Standard Chartered Bank, Tata Iron & Steel Co, The Body Shop International, Unilever and Viacom, among others.

HIV/AIDS will increase absenteeism, reduce productivity and increase labour turnover, warn experts about its effects to the business. Moreover, as the companies have resources, skills and access to multiple cultures, their involvement will be more effective in the fight against HIV/AIDS, they say.

There are already an estimated 38,000 people in Nepal with HIV/AIDS and the number is increasing, says FNCCI. Though Nepal is still rated a low HIV prevalence country, it is predicted that without effective preventions, there may be a generalized epidemic by the end of the current decade with an estimated sero-prevalence of 1-2% in the age group 15-49 years, the major source of working age population.

Garment Meet

The Garment Association of Nepal (GAN) concluded its 14th AGM selecting a new executive committee and with a renewed call on the government for steps to resolve the problems facing the readymade garment industry, the largest Nepali exporter overseas.

According to data revealed by GAN, garment exports from Nepal to USA during January and February of 2002 were 50% lower than the corresponding period last year. The decline was even severe in exports to Canada, 92%. However, the figures show a positive growth in exports to Europe.

While the US market is being lost due to duty-free access granted by USA to African and Carribean countries, the GSP facilities provided by European Union has helped for an export growth to EU. Now, EU has put Nepal also under EVA (everything but no arms) which provides for quota free GSP till 2004. "This offers very good prospect for us to expand market in Europe", said Brij Gopal Inani, the outgoing president of the organization, addressing the gathering.

Inani also reiterated the demand of garment entrepreneurs for intense diplomatic efforts from the government in the market countries and to create a more investment-friendly environment by amending the labour law and setting up garment production areas so as to streamline the specific services required by this industry.

Right now 195 of total 212 readymade garment units in Nepal are located in Kathmandu valley, according to GAN sources.

Due to the EU condition which provides quota-free GSP for Nepali garments produced with textile imported from SAARC countries, Nepal’s import of Indian textile in growing.

According to the results of the election, GAN has selected Kiran Saakha as its new president. He defeated Puskar Dev Pant. Saakha was the first Vice President in the outgoing GAN executive committee. The intensely fought election which also included some bitter remarks by the factions against each other is feared to have developed severe rift in the industry. The new leadership faces the challenge of keeping the industry united.

New GAN Leadership

Garments Exports from Nepal
(January & February of each year)
value in million US dollars

SAPTA 4th Round

The first meeting of the fourth round of negotiations under South Asian Preferential Trading Arrangement (SAPTA) started in Kathmandu soon after India forced Nepal to sign a trade treaty reducing the duty concessions earlier allowed to Nepal.

Over the last seven years, the seven members of SAPTA have put 5,500 products under the preferential trading arrangement. It represents only 10% of total tradeable items among the seven countries, say experts.

To speed up the process, the negotiators now are said to have gone for sector-wise negotiation instead of product-by-product negotiation of the past.

Govt. Appointment in CB Boards

In a significant reversal of the financial sector reform program, HMG has appointed some bureaucrats, politicians and others in the Board of Director of a few private sector commercial banks.

Though the names of people so appointed are not officially made public, some shareholders of a private sector commercial banks are reported to have filed a complaint with the Commission for the Investigation of Abuse of Authority (CIAA) against the government decision.

The decision is based on an authority vested on the government by a section in the existing Commercial Bank Act which provides that the government may appoint two directors in the Board of the commercial banks.

Some private commercial banks already have government nominees since their establishment. But experts advising the government and the central bank have been suggesting to withdraw such nominees so that the government would be able to perform better as a regulator.

Bear, Bull & Bear

In a dramatic reversal in the market trend, the all-inclusive Nepse index of Nepal Stock Exchange rose 22.85 points over a week (March 15-22, 2002) following a precipitated fall for several consecutive months.

Nepse was 186.22 at the weekend close on Friday March 15 as compared to 290.57 on the Friday close of December 14, 2001. It bounced back to 209.07 when the market closed for the weekend on March 22, 2002. But it again fell back to 198.81 on the following weekend (March 29, 2002).

While the continuous fall of the index was attributed to external factors such as the state of emergency, the voluntary disclosure of income scheme (VDIS) and restrictions imposed on banks to distribute dividends, the experts are yet to come up with convincing reasons for the recent sudden revival and the equally sudden slump. The fall and rise are beyond market fundamentals, said a market observer.

However, some developments worth noting preceding and during the week when the market saw the sudden revival include renewal of Nepal-India trade treaty, some achievements of the security forces in the war against Maoist terrorists, constitution of the judicial commission to probe corruption of the post-1990 period and speeding up of the process to hand over the management of the biggest but ailing commercial banks to international consultants.

One explanation that seemed most accurately explaining the sudden rise in the share prices recently was that the prices had already fallen too low hitting the floor. Therefore, there was only one direction for them - to bounce back. But the following fall is again inexplicable. Some analysts attribute it to the sudden rise in the gold prices.

Tea Auction Initiated

Responding to India’s reluctance to allow Nepali tea into Kolkata or any other tea auctions in India, Nepali tea growers held their first tea auction in Nepal at Birtamod of Jhapa on the second day of three-day National Tea Fair (March 26-28).

Though no buyer was ready to accept at the floor prices the tea offered by the six growers participating in it, the auction is regarded as a good beginning provided it is given continuity. The floor prices were fixed on the basis of the report of tea-tasters invited from India. The tea was later sold on open bids basis.

Tea auctions are, however, not totally new for Nepal. Before its privatization, Nepal Tea Development Corporation (NTDC) used to follow thisglobally popular method of tea sale . Still the Birtamod auction was the first to involve other growers as well. However, NTDC was the major participant also in the Birtamod auction.

Foreign buyers should be attracted for the success of the auction, suggest experts.

Nepali Business & Global Compact

Twenty-one Nepali companies expressed their commitment to the UN Global Compact on March 27 at a round table meeting organized jointly by ILO and FNCCI in Kathmandu.

They did so by filling out a survey questionnaire. Now they have to write a letter to UN Secretary General expressing support for the Global Compact. The compact is an initiative of UN Secretary General Kofi Annan launched in January 1999 as a call to business worldwide to help to build the social infrastructure of the new global economy by improving their own corporate practices.

The Global Compact is not a code of conduct, but rather a voluntary call to action, says UN Secretary General Annan.

The companies engaging in Global Compact have to issue a clear statement of support to the Compact and its nine principles and to publicly advocate the compact. The activities for this include informing employees, shareholders, customers and suppliers, integrating the Global Compact and its nine principles into corporate development and training programs and company’s mission statements, including the Global Compact Commitment in the Company’s annual report and other public documents and issuing press releases to make the commitment public.

In addition to that, the company has to provide once a year a concrete example of progress made or lesson learned in implementing the principles.

International Labour Organization (ILO), UN Environment Program (UNEP) and UN High Commissioner for Human Rights (UNHCR) are the lead UN agencies involved in Global Compact.

The Nine Principles of the Global Compact

Human Rights

Business should support and respect the protection of internationally proclaimed human rights;

and make sure that they are not complicit in human rights abuses.

Labour Standards

Business should uphold the freedom of association and the effective reorganization of the right to collective bargaining;

the elimination of all forms of forced and compulsory labour;

the effective abolition of child labour; and

eliminate discrimination in respect of employment and occupation.

Environment

Business should support a precautionary approach to environmental challenges;

undertake initiatives to promote greater environmental responsibility; and

encourage the development and diffusion of environmentally friendly technology.

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