NATIONAL 5 (Spotlight Weekly)]

BUDGET 2000

Claims And Counter-claims

By A CORRESPONDENT

While the ruling party legislators supported the budget estimates presented by Finance Minister Mahesh Acharya for the year 2000-01 as "growth oriented," opposition members criticized it as being unrealistic and inflated one. "The budget has failed to introduce concrete programs for the agriculture, industry and trade secotors nor it has encouraged poor, jobless, women and downtrodden communities," said former Finance Minister and UML leader Bharat Mohan Adhikari.

Acharya : Time to deliver

Besides announcing a massive increase in the pay scales for the government employees, the budget has raised the sum at the discretion of the Members of Parliament to be used in their respective constituencies from Rs 500,000 to Rs one million. "Though it has not talked about long-term Agriculture Perspective Plan, it has got new programs like special program for Karnali zone, rural electrification, rural road repair," said Nepali Congress lawmaker and former Minister Dr. Ram Sharan Mahat. "The government should work hard and seek cooperation from all sides to realize the revenue target of collecting Rs 53 billion," he added.

Finance Minister Mahesh Acharya too agreed that the Rs. 91 billion-plus budget estimates were ambitious both the revenue and development expenditure targets in the budget were realistic and attainable. Addressing a press meet, Minister Acharya admitted that the targets set by the budget were full of challenges. "These targets will be met with the help of the private sector as the government can't be a sole player," he said. Minister Acharya said the estimated shortfall of nearly Rs 12.5 billion in the budget would be met with the internal revenue mobilization by making the revenue administration more effective. Mobilization of foreign aid could be another vital source to manage this shortfall, he added. While maintaining macro-economic stability, the new budget has aimed at sustaining the present 6 percent growth rate of economy and increase it slightly, said Acharya

The business community, on the other hand, was guarded in its response. The Federation of Nepalese Chambers of Commerce and Industry (FNCCI), the apex private sector body, took the budget in a positive note. In a statement issued last week, the Federation said in general the principles, approach and policies adopted by the budget are positive. The budget has taken a courageous step to put the country on a high economic growth path. If the development budget is spent in a judicious way, it would have positive impact on the entire economy, the Federation said. FNCCI observed that the government could attain its revenue target of nearly Rs 53 billion by creating a taxpayer-friendly environment by removing suspicion among the taxpayers and increasing the quality of services delivered by the government.

Nepal Chamber of Commerce (NCC), another business organization, said 44.5 percent increase in development budget this year dose not seem credible. The proposal to set up an Export Promotion Center is positive but it lacks a plan of action for implementation, the Chamber said. The 5 percent tax levied on the import of agricultural goods will make essential commodities of daily use dearer and the consumers will be hit hard, the Chamber said. Business organizations have lauded the government for its initiatives to check illegal trade and bring them under the tax net. But imposition of Value Added Tax (VAT) in products like flour have been criticized. The flour mills in different parts of the country remained closed in protest of the budgetary provision to impose VAT on flour products.

On the whole, the budget has attempted to please different sections in the society while it has failed to make any concrete proposal to make poverty alleviation program effective. "There are no new proposals for poverty alleviation program. Even the Poverty Alleviation Fund proposed in the last year's budget remains unimplemented," said Shri Krishna Upadhyay, former member of the National Planning Commission. "With the support of donors, the Fund should be mobilized to support local level initiatives being carried out by private sector, NGOs and user groups."

In view of poor implementation capacity of development programs in Nepal, the budget has banked on boosting morale of the civil servants through pay hike. But, this measure alone would not be sufficient. "Such measures should be complemented by pushing forward other administrative reform measures including delegation of clear authorities to the employees and reward and punishment," said Dr. Hiramani Ghimire, Under Secretary at the Ministry of Industry, Commerce and Supplies, who has served as member of the Administrative Reform Commission.

Minister Acharya will also need to get cooperation from the entire cabinet and his own party if he wants to kick start second phase of economic reforms as promised in the Nepal Development Forum meeting in Paris in April this year. "Much will depend on political stability and the Finance Minister's capability to make things happen," said an analyst. Testing times have already started for Acharya.

RNAC The Lease Deal

The national flag carrier agrees to lease purchase an older aircraft

By A CORRESPONDENT

The state-owned Royal Nepal Airlines Corporation (RNAC) has agreed to lease a two-year-older Boeing 767 from an Australian company, reports said. Earlier, the RNAC had agreed to lease purchase a five-year-old Boeing 767-300 ER from Enset Worldwide Services. RNAC had to agree to lease the older aircraft after Enset notified it that they could not provide the aircraft within the stipulated time. An agreement had been signed on last Wednesday to lease the five-year-old Boeing 767 at the rate of US$ 3,530 per flight hour for a period of 300 flight hours a month over 18 months. The newly proposed older aircraft will be made available to the RNAC at US$ 100 per hour less than the previous deal. The Australian Company will be responsible for the repair, maintenance and insurance of the aircraft which is scheduled to put into services from June 28, the Corporation said.

E-commerce : Are we ready !!

By Gaurab Raj Upadhyaya

Worldwide, the "dot com" boom has created many millionaires, and the ones who choose the e-com amongst the "dot coms" have become billionaires. The technology of the Internet, combined with the advanced e-payment mechanism, has created an altogether new field of electronic commerce. Developed countries, including the USA, and EU along with Japan are in the forefront of the use and deployment of the new modem of business. But, what about the developing and the least developing countries.

The growth and boom, which as the outcome of the Business to Consumer (B2C) model of business, with "amazon.com" leading the pack has now reached the critical point, beyond which the competition is stiff. As shown by the downturn in the tech stocks last month, investors are weary of companies, making no profit at all. But, the growth is still there, the impetus being the huge potential of the Business to Business (B2B) e-commerce. Already, the likes of Cisco, have e-commerce revenue from B2B amounting into billions of dollars. More and more business are now moving ahead with automating their work and supply chain flow. Internet goods exchanges are being built, which are helping the business to be more competitive. International trade relations between the EU and US are now mostly electronic, and it is expected to be completely Internet based by the year 2004.

For the LDC, e-commerce has the potential in an altogether different area. Experts express the belief, that the e-commerce development in developing countries would be led by the Business to Government (B2G) model. Infrastructure constraints, legal issues, e-payment problems all point towards the fact that unless the government is an active participant in the scene, the development cannot move ahead. The B2G model is expected to enhance the concept of e-governance, and in turn bring in transparency in government procedures. But others are skeptic, on whether the conventional government bureaucrats would readily accept the openness.

In Nepal case, the pending cyber law and the much awaited IT bill promises to bring in legal mechanism for e-commerce. This would probably aid in the B2B arena, but for B2C to take off in Nepal, fundamental changes are required in the foreign exchange regulations, and payment gateways needs to be set up. To copy the growth in the Internet sector, mostly the result of the liberalization in the telecom arena, something similar is needed.

The government would have to give up a lot of control on how businesses operates. E-payments and e-delivery of materials means that government would have to completely trust the businesses. Lack of customs receipts and letter of credits would have to be accepted. The result would also aid the development of the overseas software market. As things stand now, people working with foreign partners in software, are not able to show their legitimate source of income from exports of software. The result is business houses deposit the money in foreign banks, costing the country valuable foreign currency.

As we move into the 21st century, the question still persists, are we ready for the new technology? Answers were sought in a two day round conference organized in Kathmandu, by United Nations Conference on Trade and Development (UNCTAD)in co-operation with Ministry of Science and Technology, in the capital last week. As the organizers put it, among others, the main objective of the round table was to familiarize the participants with different aspects of e-commerce, and share experiences. But with limited experience or no experience at all for the majority of participants, the event was mostly a learning experience. Different issues pertaining to e-commerce in LDCs, with development perspective were discussed. Issues like, infrastructure, legal mechanism, Intellectual Property Rights, and co-operation among the LDCs were discussed.

For Nepal, the National Planning commission has time and again committed towards formulation of the policies, and the bill is expected to be tabled in the parliament soon. But the major question which remains unanswered is that of implementation. As the PM Girija Prasad Koirala put it in the opening ceremony, "By overcoming the hurdles we face as a landlocked mountainous country, e-commerce can also help us to promote trade in goods and services within and outside Nepal" provided the government goes beyond lip service and do things it promised.