Is Kathmandu Real Estate in a Bubble?

Realty boom continues, revenue grows 147 pc
MyRepublica.com, 24-Feb-09
MILAN MANI SHARMA

Realty transactions and subsequent revenue collections by the government has more than doubled over the past one year, as more speculative buyers rush to invest in land and houses.

Figures at the Department of Land Reforms and Management (DoLRM) show that land transactions in the cities and urban centers almost doubled over the first seven months of 2008/09 compared to same period last year. It generated for the government revenue of Rs 3.85 billion, which was up by some 150 percent compared to the collections made in the same period last year.

“The collection made during the period is already about 20 percent more than the target, which itself was 45 percent more that the target set for the last fiscal year,” said Raju Basnet, planning officer at the Department.

Though many staff at the Department say that they were initially worried about meeting the huge revenue target set by the Ministry of Finance, but given the tendency of the land transactions, they appear confident about meeting the target easily. “We are confident now of exceeding this year’s revenue target of Rs 4.80 easily,” Basnet said.

Officials at the Land Revenue Offices in three districts -- Kathmandu, Lalitpur and Bhaktapur -- attribute the rapid rise in land transactions to profit-taking and say land prices have more than doubled over the period. “Increased transactions along with upward revision of land prices contributed to the sharp rise in revenue collections,” they said.

In some parts of Bhaktapur and Lalitpur, the government had increased the official valuation of land by as much as 100 percent. In Kathmandu, official valuation in the outskirts was increased by up to 25 percent.

Rush at the five LROs in the Kathmandu Valley suggests that people’s desire to hold land has continued to grow, irrespective of the imposition of income disclosure policy on land and house transactions exceeding Rs 3 million and Rs 5 million respectively.

“The rush for holding land is so high that we are registering as much as 450 transactions every day,” said Krishna Prasad Niraula, under secretary at Chabahil LRO. He said that the office would deal with about 150 transactions per day in the past.

A report by LROs to DoLRM says that only about 25 percent of the transactions now are done for building private residences. The rest (75 percent) is done for reselling purpose, it says.

“Land price more than doubles in a year, so who would invest on gold or shares or other securities,” said Radhika Aryal, a resident of Babarmahal.

Radhika, who bought 5 annas of land at Gothatar in Kathmandu three years ago at Rs 1.4 million (Rs 280,000 per anna), is planning to pocket Rs 4.5 million from its sale now (at Rs 900,000 per anna) soon. The money, she said would go on to buying a larger stretch of land for reselling purpose.

The case of Radhika is just an indicative of how the city residents are responding to the present boom and capital gain opportunity it has created, noted LRO officials.

“Four anna land pieces are most preferred for residential purpose and fetch a good resell value as well,” said Tej Prasad Dahal, official at Kalanki LRO.

Contrary to the past, LROs reported that the transactions backed by commercial banks have dropped over the past one month, particularly as the central bank has directed them not to bet their money on the bubble created in the sector.

“However, finance companies and cooperatives have rapidly filled the gap and have moved aggressively to finance land deals,” said Dahal.

INTERVIEW with Ms. Geeta Rana, President of N-PABSON

myrepublic.com, 20-Feb-09
BHUWAN SHARMA

Private schools have been at loggerheads with the government over paying the five percent education service tax introduced this fiscal year. Only a negligible percentage of schools have paid the tax until now (the extended deadline for paying the tax was Jan. 9), prompting Finance Minister Dr Baburam Bhattarai to recently warn that students belonging to those schools which fail to pay the tax will be barred from sitting the School Leaving Certificate (SLC) examination. Little over a month left until the examinations, myrepublica.com caught up with the president of the National Private and Boarding Schools’ Organization of Nepal (N-PABSON), an umbrella organization of 1300 private schools, and principal of Galaxy Public High School Geeta Rana to discuss the topic.

Excerpts from the interview:

Has your school paid the education service tax?

We have already paid income, remuneration, house and land tax. The students are yet to give us education service tax, hence we haven’t paid it.

You mean to say you will not be paying the tax from the existing fee structure, but will instead collect it from students?

The government has, themselves, given us a directive to add a five percent education service tax in the existing fee structure.

If that is the case, why are private schools not collecting the tax from students?

One, it’s because of the student unions. They have been strongly protesting the education service tax. We fear they might resort to violence if we go ahead and collect it. Also, parents’ unions have been against paying the tax. This is the existing situation, and we are in a quandary as to what should be our next move.

N-PABSON’s opinion is that students should, on the contrary, get concessions. Yes, this may not be possible because of the country’s economic condition. Hence, what we think is that if the government is not able to provide concessions, then at least don’t burden them with taxes.

The Finance Minister recently said that students of schools that do not pay the education service tax will not be allowed to appear for the upcoming SLC examination? What will you do if such a situation crops up?

First, such a statement is uncalled for. Students are the future. For the present, they cannot play with the future. Again, the statement from the Finance Minister is weird, considering that, besides secondary schools, there are colleges and universities in the private sector. The focus is just on school students because they know that they cannot protest. The onus is now on the parents. Being the prime stakeholder, they should come up with a solution or come forward and pay the tax.

Even if it were only an issue of private schools, remember that 20 to 25 percent of students appearing for this year’s SLC examination are from these schools; hence, this is not a small thing. It concerns a significant chunk of the public. Now, since this is a public issue, the government should have introduced the education service tax by first taking this group of people into confidence. Our role is limited to collecting tax and handing it over to the government. The problem is that those who have to pay don’t pay, while the government threatens us with stern action. Again, there are student unions that have warned us of dire consequences if we go ahead and collect the tax.

Have you discussed the issue with the parents?

Yes, a lot of times. A working committee was formed with the joint participation of N-PABSON and PABSON. We had stressed that parents should also be included in the working committee. However, the government did not include the concerned parents’ unions. Now, what is the use of a committee that does include the prime stakeholders? The group supposed to pay the tax is missing from the committee.

Are you working with PABSON to handle this issue?

Yes, we are not only working with PABSON but everyone else, including medical and engineering colleges. Also, when a few medical colleges tried to collect this tax, they had to face the ire of students. When some schools in Bhaktapur tried to collect this tax, parents knocked on the doors of the Supreme Court. It’s quite weird the government has imposed tax on a sector where its investment in zero.

So, right now, the situation is in a limbo and you are unable to do anything other than wait and watch?

The government is trying to instill fear by making statements, such as the one by the Finance Minister and by raiding schools. This is how they have been trying to come to a solution. However, our view is that all groups should sit together and come to a consensus.

Also, there are differing views coming from the government. The Education Ministry says the school has to pay a five percent tax on total turnover. The Internal Revenue Department says it has to be paid by the students. The Finance Minster says they are just asking for five percent of the profit.

You mean to say you are yet to get a directive from the government?

No, we received a directive which says the tax has to be paid by the students. But again, different bodies of the government have been issuing conflicting statements. This has led to a situation where the parents think that the schools have to pay the tax. Also, the directive says that students have to pay the tax. In that case, why should the parents come forward to pay it?

What is the solution to the problem?

The working committee had presented a report to the government with many solutions. One solution is to revert back to collecting a 26.5 percent income tax from schools, industries and businesses. The government had brought down income tax by 1.5 percent to 25 percent. What we are saying is that they can continue levying the additional 1.5 percent tax in the form of “Education Tax” from schools as well as businesses and industries. After all, even industries and businesses need skilled manpower.

Kulekhani hydro-power project on the verge of closing

Nepalnews, 22-Feb-09

The 60 MW Kulekhani Hydro-power project is on the verge of closing due to the dipping water level.

Due to the prolonged dry spell, water level at the nation's only reservoir based hydro-project has reduced to 1495 metres. Production needs to stop when water level reaches 1483 metres, according to Sher Singh Bhat of the load forecast centre of Nepal Electricity Authority (NEA).

The project is currently producing 0.9 million KwH of electricity every month. At this rate, the reservoir can produce electricity only for next three weeks.

Run-off-the-river projects are supplying183 MW power currently. If the dry spell continues, production will reduce further.

With this bleak reality in the backdrop, the import of 60 MW power from India through the Kataiya-Duhabi transmission line will not provide any respite from the current 14 hours load shedding.

How the Stimulus Bill affects H1B visas, Greencards

IndiaPost.com, 19-Feb-09

What does the Stimulus Bill (American Recovery and Reinvestment Act of 2009) say about H-1 hiring and about green cards? Maryland-based attorney Rajiv S. Khanna, who runs an online immigration forum, explains:

1. If an employer receives TARP funding they can hire NEW H-1B workers only if they comply with certain requirements. Note that existing H-1 workers are not affected. Note also that there is no effect on existing or future green card applications of such employers.

2. These requirements are already in place for employers whose workforce contains a substantial number of H-1 workers. These employers are referred to as H-1B DEPENDENT employers.

3. The additional requirements that TARP accepting companies have to follow are: (a) They must not displace U.S. workers in similar positions nor may they place H-1B employees at places where such displacement has or will occur; (b) They must have made good faith efforts to recruit US workers (there is a whole bunch of regulations on how we are supposed to do this; and (c) TARP employers are bound by these requirements even if they hire exempt workers. An exempt worker is one who makes at least $60,000/year OR possesses a Master’s or higher degree in his/her filed. Normally the additional requirements of non-displacement and good faith recruitment do NOT apply with respect to exempt H-1B workers. Nevertheless, the Bill says, this exemption is not available for TARP recipients.

4. This restriction on hiring H-1B workers will stay in effect for two years after the President signs the Bill.

5. There appears to be no change regarding L-1 provisions.

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Nepal's Faltering Peace Process

International Crisis Group, Asia Report #163, 19-Feb-09

Please click here to download the full report.

EXECUTIVE SUMMARY AND RECOMMENDATIONS

Despite successful elections and a lasting military ceasefire, Nepal’s peace process is facing its most severe tests yet. Major issues remain unresolved: there is no agreement on the future of the two armies, very little of the land seized during the conflict has been returned, and little progress has been made writing a new constitution. Challenges to the basic architecture of the 2006 peace deal are growing from all sides. Key political players, particularly the governing Maoists and the opposition Nepali Congress (NC), need to rebuild consensus on the way forward or face a public backlash. International supporters of Nepal must target assistance and political pressure to encourage the parties to face the threats to peace.

The April 2008 Constituent Assembly (CA) elections delivered a convincing victory for the Maoists but left them short of an outright majority. The major parties promised to continue working together but the NC, which came second, refused to join the government that was eventually installed in August 2008. For all its weaknesses, this government is Nepal’s best hope but it is not living up to its promise and there are no viable alternatives. There can be no functional government without the Maoists on board, let alone any hope of proceeding with a constitution-writing process in which they can wield a blocking vote.

Yet the Maoists have not fully adjusted to democratic politics, nor has mainstream politics adjusted to their arrival. There is little unity of effort or intent among the governing coalition partners. Opponents of the Maoists talk up the prospects of a government collapse. Conservative wings of both the NC and the moderate Communist Party of Nepal (Unified Marxist-Leninist), the largest coalition partner, have been reinvigorated. In the face of continued instability, armed protest and burgeoning identity-based movements, the immediate threat to Nepal is not Maoist totalitarianism but a dangerous weakening of the state’s authority and capacity to govern.

Maoist commitment to political pluralism is still highly questionable. Debate within the party – renamed the Unified Communist Party of Nepal (Maoist), UCPN(M), following its merger with a smaller group – shows the goal of a communist “people’s republic” is still in place. Although leading the government, Maoist leaders continue to threaten renewed revolutionary struggle and the “capture of state power”. Such threats have been underlined by cadres’ continued violent behaviour and an apparent drive to consolidate alternative power bases through affiliated organisations like trade unions.

However, the essence of the peace process, from the November 2005 agreement between the CPN(M) and the mainstream seven-party alliance onwards, was a double transformation. The Maoists were to renounce violence and accept multiparty democracy and international human rights norms. The mainstream parties were to develop more inclusive and democratic internal structures and renounce the bad behaviour that had weakened the post-1990 exercise of democracy. The old politics was discredited and still faces the challenge of renewing itself – with the established parties needing to earn legitimacy.

The Maoists have made a greater effort to change than other parties but their democratic transformation is far from complete. They should take the lead to rebuild confidence by unambiguously renouncing violence and reaffirming their commitment to political pluralism. The Nepali Congress is in a state of organisational and political disarray. The Maoists’ coalition partners also face internal power struggles and tough policy decisions. In short, the democratic alternatives to the Maoists are alarmingly weak: the other parties suffer from exclusiveness and weakened support and offer no fresh options to complete the peace process.

The state of public security and law and order is worrying. Although the incidents that draw most attention – killings, explosions and shutdowns – have all decreased since peaks in the first half of 2008, there is little sense of stability. Districts across the Tarai, from the eastern and central heartland of the Madhesi movement to the far west, continue to be plagued by insecurity and, in many areas, a near collapse of governance and policing. While the police are demoralised, the Nepalese Army (NA) remains a law unto itself, resisting both democratic control and investigation of alleged war crimes during the conflict.

International actors, India, the UN and Nepal’s longstanding donors, have played important roles in promoting peace and now need to maintain consistent pressure on all parties to live up to their commitments. Allowing parts of the peace agreements to drift into abeyance will put the entire process at risk. The common struggle against the monarchy was not the sole foundation for the original negotiations, nor were the initial talks based solely on parties’ self-interest. The search for peace was a powerful, and popularly backed, rationale. All sides knew that the deal deferred some important, difficult topics but they were right in opting to tackle them within a peace process, however contentious, rather than allowing the pursuit of a perfect deal to threaten a return to war. Despite significant political differences, this spirit of consensus underpinned a remarkable peaceful transition. Nepal’s political leaders must urgently rebuild this collaborative spirit and recommit themselves to seeing through the process.

RECOMMENDATIONS

To All Political Actors Party to the Peace and Constitutional Processes:

1. Reestablish a basic consensus on completing the peace process and set up the necessary mechanisms, for example by:

a) forming an appropriate political coordination mechanism, such as an inter-party committee or high-level commission, to set priorities, resolve disputes and keep the process on track;

b) establishing an independent monitoring body, with nationwide presence, convening capacity and neutral but respected leadership, to observe and report on all parties’ adherence to their peace commitments and provide impartial, factual updates on shortcomings;

c) seriously considering the possible benefits of international technical and/or secretarial support to such a body; and

d) ensuring the newly constituted Army Integration Special Committee (AISC) promptly starts substantive discussions on integration and rehabilitation of Maoist army combatants.

2. Ensure the constitutional process moves forward by:

a) adhering to the promises of consensus and cooperation set out in all agreements from November 2005 until the June 2008 multiparty commitment;

b) recognising the primacy of fulfilling promises made to the Nepali people as a whole by making a fresh public commitment to this effect;

c) promptly activating the CA committees and ensuring they seek public input in their areas of competence and maintain transparency in their discussions; and

d) making every effort to adhere to the foreshortened timetable but avoiding the temptation to meet deadlines by short-circuiting meaningful debate.

To the Government of Nepal:

3. Focus on peace process implementation by:

a) setting up the commissions and committees specified in the Comprehensive Peace Agreement (CPA) with as broad participation as feasible;

b) ensuring decision-making bodies have capable, senior representation and are adequately empowered, and administratively supported, to fulfil their mandates; and

c) even if independent monitoring mechanisms are established, using government systems to report regularly to the cabinet on progress or problems.

4. Set clear peace process and development priorities by:

a) clarifying and restating, with the support of all coalition members, the key goals of the government’s September 2008 statement of policies and programs;

b) shaping the agenda for donor support by developing clear requests for bilateral and multilateral assistance, and making the most of technical assistance; and

c) improving public communications, framing realistic timetables to manage expectations and building public confidence in the peace process by highlighting success stories.

5. Deliver tangible improvements in the weak law and order situation, by:

a) supporting the work of the home ministry’s public security task force and seriously considering its recommendations, if appropriate requesting international support to implement them;

b) cracking down through non-lethal methods on illegal disruptive protests, while guaranteeing the basic right to strike and peaceful protest;

c) keeping major roads and other infrastructure secure and well patrolled, as well as providing more intensive, community-oriented policing in unstable areas; and

d) strictly controlling the illegal activities of party youth wings, in particular their unlawful efforts to fulfil parallel policing functions.

6. Do not use the stability of the peace process as an excuse for ignoring pressing calls for justice, by:

a) ending the culture of impunity by pursuing investigations and prosecutions of all serious alleged crimes;

b) empowering police to resist pressure to refuse to file cases or drop investigations and take action against individuals and institutions seeking to pervert the course of justice;

c) bringing draft bills on disappearances and the truth and reconciliation commission into law only after consulting victims, experts and the general public, meeting international standards and subjecting legislation to parliamentary approval rather than using ordinances to bypass debate;

d) requesting appropriate international technical assistance for investigations; and

e) responding substantively to the UN Office of the High Commissioner for Human Rights reports on serious and systematic human rights abuses during the conflict, by pursuing criminal investigations and prosecutions of those named as allegedly responsible for repeated, grave breaches of international humanitarian law.

7. Improve the management of state security forces, by:

a) bringing the NA under meaningful democratic control, including establishing parliamentary oversight, fully auditing expenditure and developing the constitutionally mandated work plan for democratisation of the army;

b) making the recently constituted National Defence Council functional, providing it with secretariat support and using it as a forum to feed professional expertise into the political decision-making process;

c) building the functions and capacity of the defence ministry and embarking, if appropriate, with international support, on the joint administrative training of military and civilian officers;

d) ending the obstruction by both state and non-state security forces, in particular the NA, People’s Liberation Army (PLA) and Nepal Police, of investigations into crimes committed during the conflict; and

e) avoiding politicisation of promotions, transfers and operational matters, perhaps by empowering a multi-party body such as the AISC, in the case of the army, to scrutinise important decisions.

To the Unified Communist Party of Nepal (Maoist):

8. Start the process of restoring confidence by unequivocally reaffirming the ceasefire and CPA conditions on ceasing all political violence and the commitment to political pluralism, in word and deed.

9. Fulfil the prime minister’s promise to put the People’s Liberation Army (PLA) under the control of the AISC and end the practice of PLA commanders speaking publicly on sensitive political issues.

10. Fulfil outstanding peace process commitments, in particular:

a) demilitarising the Young Communist League (YCL) and vacating seized premises it currently occupies;

b) promptly discharging under-age and otherwise disqualified combatants from the cantonments, cooperating with the government and international agencies on rehabilitation programs;

c) respecting press freedom, human rights and political pluralism;

d) returning property seized during the conflict; and

e) cooperating with investigations and prosecutions of alleged crimes committed during the conflict and ceasefire periods.

To the Major Established Parliamentary Parties:

11. Make efforts to win back popular legitimacy by:

a) reforming party structures with serious steps towards internal democracy and increased responsiveness to popular demands;

b) taking urgent steps to improve the representation of women and marginalised ethnic, caste and regional groups at all levels of party structures; and

c) considering, at the individual party level or collectively, a renewed public commitment to the promises for changed behaviour embodied in the 2005 twelve-point agreement accompanied by a clear program of action.

To the International Community, in particular India, China, the U.S., EU, UN and Donors:

12. Recognise that the peace process is fragile and incomplete and maintain a commitment to high-level political engagement, including:

a) strongly warning the government and political parties that relations will be damaged by any breakdown in the peace process or failure to control political violence and underlining strong international expectations of consensus and cooperation;

b) calling for a public and definitive Maoist renunciation of violence;

c) pressuring all parties to adhere to the CPA and other agreements and to have debates within that framework; and

d) urging investigations into the worst alleged conflict abuses and offering technical support as appropriate.
13. Recognise that completing the peace and constitutional processes is an essential basis for all development programs and target assistance appropriately, by:

a) developing programs to buttress public confidence in the peace process, for example by encouraging the government to focus on creating jobs and opportunities for youth;

b) maintaining a strong emphasis on human rights, political pluralism and conflict resolution at the heart of all policies, including development aid and military cooperation; and

c) supporting the government’s Nepal Peace Trust Fund, with appropriate emphasis on transparent accounting and fiduciary risk but without earmarking, as well as the UN Peace Fund.

14. Recognise that delay in reforming the security sector compromises all development by draining resources and undermining political progress, by:

a) pushing for concrete, step-by-step progress on building democratic control of the security sector;

b) providing technical assistance, as requested, to parliamentary oversight mechanisms as well as the ministry of defence; and

c) pressing the Nepalese Army to accept civilian oversight and assist in training and capacity building of civilian and military officers.

Govt calls global firms for study of east-west railway

MyRepublic.com, 19-Feb-09
KIRAN CHAPAGAIN & PRABHAKAR GHIMIRE

The Ministry of Physical Planning and Works (MPPW) has called for expression of interest by international firms in carrying out a feasibility study on a Mechi-Mahakali Electric Railway Line, also known as east-west railway. The prime minister, in his second address to the nation on January 25, had directed the ministry to start work on such a study.

Hari Prasad Sharma, spokesperson at MPPW, said interested international firms which have experience working on railway construction, can apply by March 1. A notice to this effect was published on January 30. The ministry plans to begin the study work on the 1,200 km railway, which will connect the Mechi river in the east to the Mahakali in the west, by June 1. The plan is to complete the study work within eight months.

At present, the country has only one operational railway line, the 29-km Janakur-Jainagar Railway that links Nepal to India.

Meanwhile, MPPW has requested the Ministry of Finance (MoF) to float the government plan on feasibility study before bilateral and multilateral donors to canvas their help. A letter to this effect was sent to MoF on February 11.

“As construction of an electric railway is very ambitious and expensive for a country like ours, we requested the Ministry of Finance to seek interested donors for conducting a feasibility study,” Dhruba Regmi, joint secretary at MPPW who is overseeing the project, told myrepublica.com.

However, Krishna Gyawali, chief of Foreign Aid Co-ordination Division at MoF, said MoF has not approached any donors regarding the MPPW request on the proposed railway. He added that the World Bank, the Asian Development Bank, Japan and Korea are possible donors for the project.

Sharma added that the feasibility study will prepare preliminary engineering designs for the railway, estimate the cost of tracks, bridges, overhead electric lines and a signal system among other things. Besides, it will also prepare modalities for project implementation.

In the annual budget for the current fiscal year, the government has allocated Rs 15 million for construction of an electric railway in the Tarai from Mechi to the Mahakali along with upgrading and widening a Jainagar-Janakpur-Bardibas rail line and carrying out a study for a Kathmandu-Pokhara line.

A pre-feasibility study of the railway system carried out by Promotion of Renewable Energy Efficiency and Greenhouse Gas Abetment (PREGA) in 2006 says that the proposed railway line could be constructed at an estimated cost of US$ 2.07 billion.

NepaliEconomy.com: A Re-Introduction

NepaliEconomy is the most comprehensive website for news, views/comments, discussion, research, data and general information on Nepal's economy, business and finance.

Information will be available on the following topics,
(a) Economy: Nepal economy; Nepal's economy; Nepali economy; Nepalese economy
(b) Business: Nepal business; Nepal's business; Nepali business; Nepalese business
(c) Economic news: Nepal economic news; Nepal's economic news; Nepali economic news; Nepalese economic news
(d) Economic research: Nepal economic research; Nepal's economic research; Nepali economic research; Nepalese economic research
(e) Business news: Nepal business news; Nepal's business news; Nepali business news; Nepalese business news
(f) Financial news: Nepal financial news; Nepal's financial news; Nepali financial news; Nepalese financial news
(g) Economic commentary: Nepal economic commentary; Nepal's economic commentary; Nepali economic commentary; Nepalese economic commentary
(h) Agriculture: Nepal agriculture; Nepal's agriculture; Nepali agriculture; Nepalese agriculture
(i) Hydropower: Nepal hydropower; Nepal's hydropower; Nepali hydropower; Nepalese hydropower; Hydropower in Nepal
(j) Hydroelectricity: Nepal hydroelectricity; Nepal's hydroelectricity; Nepali hydroelectricity; Nepalese hydroelectricity; Hydroelectricity in Nepal
(k) FDI: Nepal FDI; Nepal's FDI; Nepali FDI; Nepalese FDI; FDI in Nepal
(l) Remittances: Nepal remittances; Nepal's remittances; Nepali remittances; Nepalese remittances; Remittances in Nepal
(m) Telecom: Nepal telecom; Nepal's telecom; Nepali telecom; Nepalese telecom; Telecom in Nepal
(n) Tourism: Nepal tourism; Nepal's tourism; Nepali tourism; Nepalese tourism; Tourism in Nepal
(o) Economic data: Nepal economic data; Nepal's economic data; Nepali economic data; Nepalese economic data; Economic data of Nepal
(p) National account: Nepal national account; Nepal's national account; Nepali national account; Nepalese national account
(q) Labor: Nepal labor; Nepal's labor; Nepali labor; Nepalese labor; Labor in Nepal
(r) Inflation: Nepal inflation; Nepal's inflation; Nepali inflation; Nepalese inflation; Inflation in Nepal
(s) CPI: Nepal CPI; Nepal's CPI; Nepali CPI; Nepalese CPI; CPI of Nepal
(t) Budget: Nepal budget; Nepal's budget; Nepali budget; Nepalese budget; Budget of Nepal
(u) White page: Nepal white page; Nepal's white page; Nepali white page; Nepalese white page; White page of Nepal
(v) Yellow page: Nepal yellow page; Nepal's yellow page; Nepali yellow page; Nepalese yellow page; Yellow page of Nepal
(w) Misc: NEPSE, Nepal Stock Exchange, SAWTEE

GMR project halted in Nepal

IANS, 17-Feb-09

A year after it broke the ice in Nepal’s politically charged hydropower sector by becoming the first Indian company to win a major power project, GMR Energy is now facing the pricks experienced by other foreign investors with work obstructed by villagers in remote western Nepal.

GMR Energy’s associate vice-president (hydro business) Harvinder Manocha flew down to Kathmandu from New Delhi Tuesday to firefight the obstruction to the 300-MW Upper Karnali hydropower project that spans three remote districts.

Villagers stopped work in the Bhairavsthan area of Accham district and Satla in Dailekh from Sunday, alleging that the company had not informed them about the work.

On Feb 11, a local committee formed by residents of these two and three other villages issued a statement, warning they would stop work if their demands were not met.

Local dailies quoted GMR officials as saying that the obstruction was causing a loss of Nepali Rs.10 million (Rs.623,800) per day.

GMR Energy officials have reportedly written to the chief district officers of Achham, Dailekh and a third district Surkhet, that too will come under the ambit of the project, seeking security.

All three districts are Maoist strongholds. Ironically, during the 10-year Maoist insurgency, the project could not be developed due to the lack of security in the region.

Last year, GMR Energy pipped several formidable Indian bidders to wrest the licence for the hydropower project that they target to develop in seven years.

Another foreign investor, Australian Snowy Mountain Energy Corp, is also finding it an uphill task to develop the 750-MW West Seti project, Nepal’s biggest hydropower deal, due to local resistance.

India is closely watching the progress of work on West Seti in western Nepal, in which the Mumbai-based Infrastructure Leasing and Financial Services is a partner. The Indian government-owned Power Trading Corp will purchase the power.

While new projects are moving at snail’s pace due to local obstruction, Nepal is smarting under a massive power crisis with nearly 18-20 hours’ blackout daily.

The GMR problem comes at a time when India’s foreign secretary Shivshankar Menon is in Kathmandu to review the progress of the commitments made by Nepal during Prime Minister Pushpa Kamal Dahal Prachanda’s visit to New Delhi last year.

They include working with India for mutual benefit to generate 10,000 MW of power in the next decade that could transform Nepal’s economy.

There is lack of R & D in agriculture

ekantipur, 14-Feb-09

Diwakar Golcha, 54, is vice chairman of Golcha Organization. He joined his family business in 1974 entering its agro-based industries. He has been involved in setting up sugar, rice, daal, flour mills as well as other factories like steel. At a time when the government is talking about increasing the role of agro-based industries he talked to The Kathmandu Post about his experiences and why the agro-based businesses have not taken off in the past. Excerpts:

Your family has been involved in the agro-business for a long time.

My great grandfather was displaced from present-day Bangladesh before the Indian partition. He used to distribute jute seeds to the farmers in Biratnagar area, buy their jute and sell it in Calcutta. Later a jute mill was established in Kathihar in Bihar. Then the Biratnagar Jute Mills was set up. All this was before the Rana rule ended. We used to deal in company currency. Nepal Bank Limited was opened later. When I got into the jute business in 1976 we used to export to 33 countries. Then we set up daal and rice mills as well as and sugar and flour in the 1970s and 80s.

There seems to be a lot of potential. Where is the state lagging?

There is very little priority given to research and development. There should be different institutes like a jute development board or a sugar institute. These could develop and introduce new varieties of different crops. The fertility of the soil is going down because of use of fertilizer which has created a layer between the topsoil and subsoil. There could be research on what can be done about it. There is also a lack of orientation to farmers. For example, a two-feet gap is needed between lines of sugarcane plants for optimum production. In between those lines there could be intercropping and sweet potatoes and pulses could be grown. But who will tell farmers that or for that matter which is the best variety.

Surely, the state must have done something.

It has opened up agricultural research centres and they have done some work but we are talking about massive extension programme. There needs to be more interaction between experts and the people. We have technical workers regularly visiting every village in Morang. New varieties of crops developed have to be gradually planted in large areas. The determination has to be there and also skilled manpower is required. The sugarcane research centre in Jitpur, for example, has not been able to take off. The people are eager to learn. In Rautahat district when we introduced sugar cane in the 1990s there were three tractors but now there are 1,200 - all purchased from the profits.

Why can't that be done?

Our education system is defective. Students are not taught objectively. People think that SLC is a very worthy degree but what use is it in the job market? Once someone passes SLC they do not want to be involved in agriculture. They want a job in a proper office but they have no skills. Institutes have to be set up where students are given qualifications to be able to go and work in the field. There is an agricultural institute but there needs to be more across the country and students encouraged to study there.

How has the lack of subsidy for fertiliser affected the agricultural sector?

Our land is addicted to fertiliser but the government has removed subsidies on it. The Agricultural Inputs Corporation and later the private sector imported fertiliser to sell to farmers but there was a big loss. In India fertilisers are heavily subdised and costs only 15 to 20 percent of the international market prices. As a result there is a lot of smuggling of fertilisers across the border and farmers do not want to buy non-subdised expensive fertiliser. But the government does not seem to be concerned. When the Prime Miniser had gone to India last year I had suggested that he only ask for fertiliser.

Why can't the labour disputes be resolved permanently?

A reported 200,000 enter the labour market every year but only some 10,000 persons are absorbed because of the state of our economy. No one wants to lose his or her job because of the excessive politicization in all aspects of society including labour, workers do not feel that they can get sacked if they do not perform well. There are as many as 15 unions in one factory. Industrialists have reached a stage when they will say enough is enough and shut down factories. That is what happened in the case of Jyoti Spinning Mill which had 2,500 workers.

How do think things will turn out?

For the past two and half years there has been a wave of labour militancy. At this rate this will get worse before they can get better. Unless there is a realization that the conflict does not benefit anyone and there is cooperation between the industrialists and the workers, things will not be better.

Global Prospective: Chicken Farmers in the US Hit by Economic Crisis

Farmers Face Empty-Nest Syndrome Amid Chicken Housing Crisis
Wall Street Journal, 12-Feb-09
By LAUREN ETTER

Poultry Growers Lose Contracts, Can't Pay Off Their Pricey Coops; $200,000 Per House

Like many Americans, Darris and Sarah Dixon are struggling with mortgage payments and trying to avoid bankruptcy.

But the home the Dixons live in isn't the problem. The problem is their three chicken houses, on which they owe nearly $500,000.

"There's no way we'll make the chicken house payments," Mr. Dixon says from his farm abutting the Ozark Mountains.



A chicken housing crisis has cropped up in the U.S., and it's producing some of the same bleak results as the human one -- foreclosures, lawsuits and devastated homeowners.

In the wake of last year's bankruptcy filing by poultry giant Pilgrim's Pride Corp., hundreds of farmers suddenly find themselves unable to make mortgage payments on their pricey chicken coops.

To cut costs, Pilgrim's, the nation's second-largest chicken company, has terminated contracts with at least 300 farms in Arkansas, Florida and North Carolina. Under these contracts, farmers receive a set price per pound for raising chicks supplied by Pilgrim's until they are ready for slaughter. The company turns the birds into nuggets, wings and other food.

Pilgrim's still has contracts with more than 5,000 growers nationwide, and executives say they are trying to cut as few as possible. They say the reason the 300 farms weren't needed was that Pilgrim's stopped or reduced production at processing plants in those areas. "It's a very sad situation," says Don Jackson, the company's president and chief executive. But "the company is in bad shape." Last year Pilgrim's had a loss of nearly $1 billion.

For the farmers who have been cut loose, no contract means no chicks, which means no revenue -- and no money to pay off the coop mortgages. Chicken houses without chickens or contracts have virtually no resale value. And with the poultry industry in retreat, rival producers aren't looking for new growers. Tyson Foods Inc., the largest chicken company, and Perdue Farms Inc., the third largest, both say they're not cutting contracts with their farmers because of the industry downturn.

Today's chicken houses are bigger and more sophisticated than the coops of yore. Made from corrugated metal and wooden beams, the cavernous shacks can be longer than a football field and cost more than $200,000. To maximize profits, many farmers own at least four, meaning high-six-figure mortgages are common.

Inside the biggest such coops, more than 20,000 chickens spend their lives pecking at feeders and water spigots on a dirt floor. Computers regulate temperature. Most houses are kept dark to minimize activity so birds pack on more pounds.

A chick typically arrives weighing about three ounces and leaves six to nine weeks later at a plump four to eight pounds. Pilgrim's growers say they earn about 5 cents per pound per bird, although that varies. A typical farmer with four large chicken houses can gross between $125,000 and $150,000 a year. Expenses often amount to more than 30% of their income.

The houses grew in number and size as world-wide chicken consumption spurred greater production. In 2008, a record 36.5 billion pounds of chicken were produced in the U.S., up 32% from a decade earlier, says the National Chicken Council. Pilgrim's expanded its contract base to more than 5,000 growers, up from 1,300 in 1998.

But chicken demand has slowed along with the global economy. For the first time since 1975, the U.S. is expected to produce less chicken than in a prior year. Poultry companies typically cut back by reducing the number of chicks given to each farmer, but Pilgrim's finances were so dire that it decided to terminate some contracts, says Mr. Jackson, the president and CEO. The Pilgrim's spokesman says it's "not unusual for contracts to be terminated on an ongoing basis -- albeit at a very low rate."

Brad and Robin Dunlap of Springfield, Ark., lost their contract with Pilgrim's in August. The couple, who have three small children, say they owe about $200,000 on four chicken houses.

To make ends meet, Mrs. Dunlap, 27 years old, took a job at a medical-device company and Mr. Dunlap, 31, went into dairy farming with his father. They worry about having to file for bankruptcy protection.

"It makes you sick," Mrs. Dunlap says over beef-stew in her dining room. "Right now we're still feeding our kids. But our credit will probably be ruined after all this is over with."

Plumerville, Ark., farmer Steve "Peewee" Dixon (no relation to Darris or Sarah Dixon), 50, had his Pilgrim's contract terminated while still owing more than $100,000 on two chicken houses. Last month, he filed for bankruptcy after his lender foreclosed. "That was my retirement," Mr. Dixon says.

In Arkansas, 74 chicken farms have banded together to sue Pilgrim's. In their lawsuit, filed in state court in Van Buren County., the farmers say company representatives induced them to build chicken houses by making promises like their "grandkids will have chickens," according to court documents.

A Pilgrim's spokesman declined to comment on pending litigation. The company says contract terminations were a legal, necessary step to reduce costs amid volatile commodity markets and depressed chicken prices.

Losing their contract was a blow to Darris Dixon, 30, and wife Sarah, 27. In April 2005, they'd been married just over a year when Mr. Dixon quit his job delivering ice and took out a $532,000 loan from Farm Credit Services of Western Arkansas to build three chicken houses.

Under the Dixons' contract, Pilgrim's provided chicks, feed and other services in exchange for shelter and waste disposal, among other things. Things went well for three years. "We had no trouble making our loan payments," says Mr. Dixon, a lanky man in blue jeans and a John Deere cap. "I had more money than I ever had." The family spent $140,000 remodeling their three-bedroom home and bought a new tractor for $25,000.

Last May, a tornado whipped through Center Ridge, population 1,332, demolishing two of the Dixons' chicken houses. Their $370,000 insurance payment wasn't enough to rebuild; they grappled with whether to quit.

Mr. Dixon says he received a visit from a Pilgrim's representative who said, "Build them back as quick as you can and get 'em rolling again."

The Pilgrim's spokesman says, "At the time of the May tornado, the company was in need of square footage for housing...But no one could have foreseen the dramatic changes that occurred in the U.S. chicken industry last summer."

The Dixons tapped their savings to rebuild. On Aug. 1, a fresh batch of Pilgrim's chicks took up residence. Ten days later, Pilgrim's called to say those chicks would be the last.

"It was just a shock at first," recalls the Mrs. Dixon, tears welling as her newborn son slept in a bassinet.

One recent day, Mr. Dixon swung open the door to one of his 500-foot-long chicken houses. Feathers blew around the cool, damp floor. Instead of clucking chickens, silence filled the air. "It's hard to just see [the houses] sitting there," Mr. Dixon said.

He fears the Dixons won't be able to afford the $60,000 payment they owe in May. They've cut back on dining out and left unfinished the walk to their home. As for bankruptcy, Mr. Dixon says, "If that's what it takes, we'll just have to do it."

The road to 10,000 MW

ekantipur, 14-Feb-09
Peeyush Tiwari

The issue of hydropower development is once again in the spotlight. Unlike in the past, the present government seems quite serious about the development of hydropower in the country and attaining the much talked about goal of generating 10000 MW in 10 years and two digit growth figure within the next three years. Honestly, water resources is by far the only resources we can really bank upon; since other resources such as petroleum are out of the question, and the industrial resource is still a far cry. Similarly, our experience with tourism shows that we have not been able to actually leapfrog in economic development as expected.

Nepal's water resources have been by far a wasted asset. Though its potential is never undermined, we have not been able to tap into this goldmine and reap the benefits. Although water resources have seemingly unlimited uses, looking into the picture, and the overall development of the nation at stake, hydropower seems to be the only option. That is, if we are talking about being export oriented and such. The much hyped 83,000 MW potential and 43,000 MW which the experts believe to be economically viable indicates that our power market must be export-oriented. And given Nepal's geographical location, it is clear that India is our only market. The chairman of Power Trading Corporation of India (PTC), Mr. T.N. Thakur, during his visit to Nepal has clearly indicated that within the next 10 years, India is looking forward to develop 50,000 MW of hydropower, though it will need 140,000 MW of power within that time. It doesn't need a rocket scientist to understand that there should be supply when there is demand in the market. It is estimated that the cost of generating 10,000 MW of energy would cost about NRs. 200 billion. Since such a huge investment is not quite practical for a fragile economy like ours, and for the local investors, investing in hydropower is regarded as too big a gamble. This is where the issue of attracting foreign investors comes in.

In the last decade, the country has seen some landmark agreements regarding foreign investments in the hydropower sector. In 1995, the government of Nepal signed a deal with SMEC for the development of the 750 MW West Seti Hydroelectric project. This agreement was signed as a Public Private Participation (PPP), with the government of Nepal investing 15 percent (with loan from ADB). Similarly, the past year saw the agreements reached between the government of Nepal and Sutlej Jal Vidyut Nigam (SJVN) for the development of the 402 MW Arun-III hydel project, and GMR-ITD Consortium for the development of 300 MW Upper Karnali Project.

The issue of water resources management has been fiercely debated. Some people have preset notions about the dealings with India and have repeatedly raised the issue of past deals such as the Koshi, Gandaki and Mahakali Treaties where Nepal did not quite receive the benefits it was entitled to. During his visit to Nepal, the Indian State Minister for Energy and Commerce, Mr. Jairam Ramesh said in a televised interview that we must not spend our time pondering over the past; that we must look into the future and work towards it. India will try to reap as much benefit from a deal as it can. It is their duty towards their people. That's what we too must do. It's our duty to get good deals out of our agreements. In the recent agreements of Arun-III, Upper Karnali and West Seti, I think our country has got good deals with the private developers. These projects are to be implemented on the Build Own Operate Transfer (BOOT) principle, where the projects would be handed over to the Government of Nepal "in good running condition" after 30 years of operation. So, if the goal of 10,000 MW in 10 years is attained and all the power is exported, we will have at least 1000 MW for free, which is nearly double what we have been able to generate in the past 100 years.

However, to attain such goal, the challenges need to be met. Investors are a sensitive lot. The government needs to ensure that there is an investment-friendly environment so that they can feel safe to invest here. Having potential alone doesn't guarantee investors. For example, we could not find any investors for the 650 MW Burhi Gandaki. Even after calling the Expression of Interest (EOI) twice, no investors turned up. We must take an example of the Tata Motors pullout from Singur after investing billions; we cannot afford to bear such a letdown. We must work our best to convince the investors that investing in Nepal wouldn't be risky. The issues regarding displacement of locals and ecosystem are in place; but we must look for the proper management of such issues. An example can be made of the 18,200 MW (stated to be finally 22,400 MW) Three Gorges Project of China, where 1.2 million people were successfully relocated.

Lastly, after the recent political breakthrough, it's high time for the country to attain an economic breakthrough. As Mr. Jairam Ramesh had said, all this time we have been born members of the NATO (No Action Talk Only). Now we need to change that perspective. Concrete measures need to be taken to transform this decade into a decade of economic revolution, as finance minister Dr. Baburam Bhattarai hinted in his budged speech. It's imperative that we now do something so that the next generation will regard the first decade of the 21st century as the dawn of development.

Service (not) included

We still don't understand the link between good service and revenue
NepaliTimes, Issue #438 (13-Feb-09 to 19-Feb-09)
ARTHA BEED

Last week, when the Beed was taking a few friends out late one evening, it was shocking to see a city that should be gearing up to receive hoards of visitors in the next few years so customer-unfriendly. Restaurants were behaving as if they were doing us a favour by even letting us step into their eateries. A five star hotel refused to serve us even when we told them it was still half an hour till their official closing time.

The deterioration in quality of service in the hospitality sector in Nepal is of serious concern. Everyone revisiting Nepal for the first time in a decade can tell the difference between the world class service people used to get and the crass service we get now. It's not just the fault of the workers in hotels and restaurants. In the bid to share out the service charge, the establishments have created a monster that they cannot tame. In the myopia of splitting that 10 per cent, both the establishment and the workers have lost the focus on the person who actually pays them that 10 per cent.

Nepali orientation towards service is traditionally very poor. Look at our tax offices. The people who pay taxes honestly are penalised. Why would someone be willing to pay the highest tax rates when one can find a way of investing the taxes to be paid over many years and get away with paying just 10 per cent? What is the additional service one gets from the state for diligently paying taxes? Similarly, when you go to the offices of the Employee Provident Fund, you are not treated as a customer. Like the restaurant owner, the state seems to think it is doing you a favour by keeping your money. It takes ages to get your own money back, and one has to bribe the official with tea money just to withdraw one's own hard-earned savings.

The dis-service issue is everywhere. You take a cab and pay a horrendous amount that has no correlation with the price of petrol. You pay a high mobile phone tariff to use your gadget as an antiquated pager. You pay for cable television and never get to watch anything because the cable operator does not have backup power. In fact, the state electricity utility, which provides power only eight hours a day, is just a backup power supplier. You pay the highest airport tax in the region and never get a trolley to cart your luggage. You pay for food products and the weight on the packets never matches the weight of the contents. You barely question why yoghurt prices shoot from Rs 40 to Rs 68 per litre in a span of a couple of months. When you run out of mains water because there is no electricity to pump it at the allocated time, you patiently wait four days for a tank to be delivered, but it doesn't turn up.

If the Nepali economy is to grow then businesses must seek to understand the wants and needs of the customer. If businesses and the government are to start generating revenues, they need to take care of the customer who holds the purse strings. Nepal Tourism Board as well as the numerous tourism bodies and hospitality entrepreneurs could start by taking a long hard look at themselves before springing into action.

In this new republic, customer may not be king, but customer should be president.

Laid-Off Foreigners Flee as Dubai Spirals Down

New York Times, 11-Feb-09
Robert T Worth

Sofia, a 34-year-old Frenchwoman, moved here a year ago to take a job in advertising, so confident about Dubai’s fast-growing economy that she bought an apartment for almost $300,000 with a 15-year mortgage.


Now, like many of the foreign workers who make up 90 percent of the population here, she has been laid off and faces the prospect of being forced to leave this Persian Gulf city — or worse.

“I’m really scared of what could happen, because I bought property here,” said Sofia, who asked that her last name be withheld because she is still hunting for a new job. “If I can’t pay it off, I was told I could end up in debtors’ prison.”

With Dubai’s economy in free fall, newspapers have reported that more than 3,000 cars sit abandoned in the parking lot at the Dubai Airport, left by fleeing, debt-ridden foreigners (who could in fact be imprisoned if they failed to pay their bills). Some are said to have maxed-out credit cards inside and notes of apology taped to the windshield.

The government says the real number is much lower. But the stories contain at least a grain of truth: jobless people here lose their work visas and then must leave the country within a month. That in turn reduces spending, creates housing vacancies and lowers real estate prices, in a downward spiral that has left parts of Dubai — once hailed as the economic superpower of the Middle East — looking like a ghost town.

No one knows how bad things have become, though it is clear that tens of thousands have left, real estate prices have crashed and scores of Dubai’s major construction projects have been suspended or canceled. But with the government unwilling to provide data, rumors are bound to flourish, damaging confidence and further undermining the economy.

Instead of moving toward greater transparency, the emirates seem to be moving in the other direction. A new draft media law would make it a crime to damage the country’s reputation or economy, punishable by fines of up to 1 million dirhams (about $272,000). Some say it is already having a chilling effect on reporting about the crisis.

Last month, local newspapers reported that Dubai was canceling 1,500 work visas every day, citing unnamed government officials. Asked about the number, Humaid bin Dimas, a spokesman for Dubai’s Labor Ministry, said he would not confirm or deny it and refused to comment further. Some say the true figure is much higher.

“At the moment there is a readiness to believe the worst,” said Simon Williams, HSBC bank’s chief economist in Dubai. “And the limits on data make it difficult to counter the rumors.”

Some things are clear: real estate prices, which rose dramatically during Dubai’s six-year boom, have dropped 30 percent or more over the past two or three months in some parts of the city. Last week, Moody’s Investor’s Service announced that it might downgrade its ratings on six of Dubai’s most prominent state-owned companies, citing a deterioration in the economic outlook. So many used luxury cars are for sale , they are sometimes sold for 40 percent less than the asking price two months ago, car dealers say. Dubai’s roads, usually thick with traffic at this time of year, are now mostly clear.

Some analysts say the crisis is likely to have long-lasting effects on the seven-member emirates federation, where Dubai has long played rebellious younger brother to oil-rich and more conservative Abu Dhabi. Dubai officials, swallowing their pride, have made clear that they would be open to a bailout, but so far Abu Dhabi has offered assistance only to its own banks.

“Why is Abu Dhabi allowing its neighbor to have its international reputation trashed, when it could bail out Dubai’s banks and restore confidence?” said Christopher M. Davidson, who predicted the current crisis in “Dubai: The Vulnerability of Success,” a book published last year. “Perhaps the plan is to centralize the U.A.E.” under Abu Dhabi’s control, he mused, in a move that would sharply curtail Dubai’s independence and perhaps change its signature freewheeling style.

For many foreigners, Dubai had seemed at first to be a refuge, relatively insulated from the panic that began hitting the rest of the world last autumn. The Persian Gulf is cushioned by vast oil and gas wealth, and some who lost jobs in New York and London began applying here.

But Dubai, unlike Abu Dhabi or nearby Qatar and Saudi Arabia, does not have its own oil, and had built its reputation on real estate, finance and tourism. Now, many expatriates here talk about Dubai as though it were a con game all along. Lurid rumors spread quickly: the Palm Jumeira, an artificial island that is one of this city’s trademark developments, is said to be sinking, and when you turn the faucets in the hotels built atop it, only cockroaches come out.

“Is it going to get better? They tell you that, but I don’t know what to believe anymore,” said Sofia, who still hopes to find a job before her time runs out. “People are really panicking quickly.”

Hamza Thiab, a 27-year-old Iraqi who moved here from Baghdad in 2005, lost his job with an engineering firm six weeks ago. He has until the end of February to find a job, or he must leave. “I’ve been looking for a new job for three months, and I’ve only had two interviews,” he said. “Before, you used to open up the papers here and see dozens of jobs. The minimum for a civil engineer with four years’ experience used to be 15,000 dirhams a month. Now, the maximum you’ll get is 8,000,” or about $2,000.

Mr. Thiab was sitting in a Costa Coffee Shop in the Ibn Battuta mall, where most of the customers seemed to be single men sitting alone, dolefully drinking coffee at midday. If he fails to find a job, he will have to go to Jordan, where he has family members — Iraq is still too dangerous, he says — though the situation is no better there. Before that, he will have to borrow money from his father to pay off the more than $12,000 he still owes on a bank loan for his Honda Civic. Iraqi friends bought fancier cars and are now, with no job, struggling to sell them.

“Before, so many of us were living a good life here,” Mr. Thiab said. “Now we cannot pay our loans. We are all just sleeping, smoking, drinking coffee and having headaches because of the situation.”

Related Story
Escape to Dubai (New York Magazine, 24-Nov-08)

Self disclosures touch Rs 3.45b

MyRepublica.com, 10-Feb-09
Milan Mani Sharma

KATHMANDU, Feb 10: Inland Revenue Department (IRD) on Tuesday collected revenue worth Rs 205 million under the Voluntary Disclosure of Income Scheme (VDIS), as people who had not paid taxes earlier for their property rushed to legalize their property on the second last day of the scheme.

On the day, some 500 persons disclosed their property worth Rs 2.05 billion, said Kapil Dev Ghimire, director general of IRD. “That raised our collections to Rs 345 million under VDIS,” he told myrepublica.com.

Following Tuesday’s disclosure, the volume of property disclosed has soared to Rs 3.45 billion. It generated Rs 345 million in revenue to the government. The highest single disclosure recorded on the day was Rs 1 billion, Ghimire told myrepublica.com.

“Collections grew by more than 150 percent on Tuesday compared to Monday. As more people are flocking in to disclose their property, we are hopeful about collecting about Rs 1 billion in revenue through VDIS,” said Ghimire.

So far, about 750 people have legalized their property under the scheme.

Moreover, in a bid to meet the VDIS’ revenue target of Rs 1 billion, IRD continued to send SMS, make phone calls and send reminder emails and letters potential taxpayers.

Ghimire hopes that a large number of taxpayers will turn up on Wednesday -- the last day of the scheme -- to benefit from the scheme.

The government announced VDIS in this year’s budget in October, 2008 giving opportunity to the people, who have amassed property without paying due taxes, to pay taxes and legalize their property.

It has even promised it will not seek the sources of the income thus disclosed in a bid to lure people to come into the tax net. But to the people who refuse to take benefit of the scheme, the government has warned of tougher actions like confiscation of property and fine and penalty up to 100 percent.

Meanwhile, the business community resisting the scheme has demanded the government to extend the deadline of the scheme, which expires on February 11, 2009.

Organising a press meet in the evening, six business organizations, including Federation of Nepalese Chambers of Commerce and Industry (FNCCI), Confederation of Nepalese Industries, Nepal Chamber of Commerce (NCC) and Nepal Bankers Association demanded the government not to seek sources of initial investment, as entrepreneurs have been paying taxes for their existing property.

"The government must clear the list of the people who should disclose their property under the scheme, and extend the deadline to enable them comply with it," said Kush Kumar Joshi, FNCCI president. NCC president Surendra Bir Malakar even announced of launching a street protest if the government did not extend the scheme.

However, IRD chief Ghimire said that the scheme would not be extended. "We have clarified the business community´s confusions now and again. There is no need to extend its (VDIS) deadline," he told myrepublica.com.

Govt to readjust fuel prices after NOC clears its debts

Nepalnews, 8-Feb-08

Minister for Commerce and Supplies Rajendra Mahato Saturday promised that the government would review the prices of petroleum products in the domestic market in line with the prices of crude oil in the international market, according to media reports.

However, he was quick to add that the government will take this move only after the Nepal Oil Corporation (NOC), the sole supplier of petroleum products in the country, clears its outstanding debt.

While speaking at an interaction programme organised at Parsa district headquarters Birgunj, Minister Mahato also attributed the government’s inability to readjust the fuel price as per the international market value to huge debts of NOC.

Soon after the NOC clears its debt that amounts to Rs 16 billion, the government will readjust the domestic fuel prices in accordance to the prices of crude oil in the international market, he said.

Related news
Fuel prices cut nominally (2-Feb-09)

Trend of living in flats growing

ekantipur, 7-Feb-09

Sudhir Basnet entered business trading in telecommunications equipment. Today he is involved in real estate and housing, transportation and aviation. He is chairman of Kohinoor Hill Housing, Oriental Housing, Agni Yatayat and Agni Air. Basnet talked to The Kathmandu Post about his latest housing venture, a sector which he entered in 1995, and other businesses he is involved in. Excerpts:

You are one of the biggest real estate developers in Nepal. Tell us about your projects.

We were the first to introduce housing with flat system in Nepal. We initially made 100 apartments and sold them. When we started we had sold an apartment for just Rs. 800,000. The prices of those apartments have now doubled and tripled. We have now introduced a new project that will have 796 apartments at a single site. It took us fours years to prepare for the Vegas City project and we are now advertising the flats. Our flats are relatively cheaper than others. We want to sell the product for as little as possible building huge number of flats. Despite increased construction costs we are selling at a lower price with just 5-6 profit margins.

How much do your flats cost?
The prices are different depending on which floor they are on, where they face, and their sizes. All desire south-facing flats. But we can not provide similar flats for all. The middle range apartments cost Rs. 2.4 million and upper range ones cost Rs. 4.4 million.

As 796 families are staying in a single site, don't you think it will be difficult to manage so many families?
There will be a society of flat dwellers and it will manage the entire site. The society will hire professionals to manage the building. About 95 persons be employed in the building. We will establish a fund from which the employees will be paid. Flat dwellers will have to separately manage the recyclable and non-recyclable waste. Although the apartments will not be under our ownership, we are going to make some rules before handing them over to owners.

Can you tell us how this trend of living in flats is picking up?
People are increasingly coming to flats as the land has become expensive. People can not afford land inside the ring road and there is not enough land available. Building a house far from the centre will make it difficult to commute. There is also a security problem.

I have found four types of people living in flats. People whose children have gone to foreign countries and are alone in Kathmandu. Those who find it diffucult to manage a large house with limited family members, others are also choosing flats for security reasons and some seek community living provided by flats.

The prices of construction materials have nosedived recently internationally. Their prices have also come down in Nepal. How has it benefited you?
The prices of construction materials in Nepal are not as low as they should have been given that international prices have come down drastically. This is because the cement and iron industries are suffering from power outage. Prices of construction materials have decreased to some extent despite the load shedding. But, we have failed to capitalise on this opportunity due to same problem.

The banks are now more careful about real estate lending. How has this affected your business?
Yes, they are but they are not adverse to individual builders who are good customers. We are getting loans from banks without difficulty. We take loans to buy land and take advances from the customers who have booked flats. Banks alone can not finance us because our new project costs Rs. 2.5 billion.

You have begun a major project. Don't you think the government's attempt to seek sources of income will discourage your customers to buy flats?
The potential customers are more concerned about the government's tax policy. They are saying that they first would know about the tax policy before booking the flats. A third of potential customers are saying this. But I say that everybody should pay tax if he or she is lawfully required to pay. It is not that if anybody invests in the real estate, the source of income is identified and the source is not identified in case the investment is made in other sectors.

You are also involved with transportation sector. How has the existing syndicate system affected Agni Yatayat?
The situation of most of the companies is precarious because of continuous strikes and possibility of buses and trucks being burnt down. There is no need to fight for an individual transport company and companies running syndicates. We had problems regarding the system. But at present climate of insecurity we should not fight against each other.

How is Agni Air doing?
The aviation industry is doing well as people are increasingly travelling by planes nowadays. This situation has come about because land routes are obstructed frequently. We have three planes for remote areas and one for more accessible places. We are currently serving in Lukla, Jomsom and Tumlingtar, Biratnagar and Pokhara.

Inflation at 14.4 percent, up from last month: NRB

ekantipur, 6-Feb-09

While the world is witnessing decline in inflation rates, prices continue to rise in Nepal. Although Nepal Oil Corporation (NOC), the sole importer of petroleum products in the country, is cutting down the petroleum prices and the prices of construction materials has gone down, the inflation is rising in the country.

Nepal Rastra Bank (NRB) said in its latest report on inflation on Friday that the country witnessed inflation of 14.4 percent in the period mid-December to mid-January up from 14.1 percent in mid-November to mid-December.

The consumer price index had actually gone down during mid-November to mid-December from 14.5 percent in the earlier month. It was expected that the trend would continue but it has been found otherwise now.

The inflation was at just 5.8 percent during mid-December to mid-January last year. The NRB report has however presented a unique picture of inflation that the wholesale price index was higher than consumer price index in mid-December to mid-January.

The wholesale price index rose by 14.7 percent against 14.4 percent of consumer price index. Generally, wholesale price index remains low compared to consumer price index as many costs are added in consumer prices.

The NRB has said that the inflation witnessed a rise this year as the price food and beverage category saw increase in their prices by 18.3 percent and non-food and service category witnessed 10.3 percent rise in prices against 7.3 percent and 4.2 percent respectively last year.

Amongst the products in the food and beverage group, sugar products witnessed the highest price rise by 37.3 percent. The prices of sugar products had declined by 14.2 percent last year.

Likewise, cooking oil, fish, meat, eggs and restaurant foods also saw higher price rises this year against last year. Non-food items also saw huge price rises by 20.7 percent in the sixth month of the current fiscal year. This group had witnessed price rise by just 7.5 percent last year.

According to the NRB report, Kathmandu valley saw the highest price rise at 15.8 percent during mid-December to mid-January period. The hilly region saw increase in inflation by 14.2 percent whereas Terai saw it gone up by 13.6 percent.

In a recent survey of the World Food Programme conducted in coordination with government and private sectors also reveled the interesting fact that inflation higher in Kathmandu than that witnessed in Rolpa and Salyan which have a difficult terrain.

Commentary: Nepali companies need to adopt and adapt if they want to survive

Nepali Times, Issue #437 (6-Feb-09 to 12-Feb-09
ASHUTOSH TIWARI

While teaching a weekly course on corporate governance in an evening program at a management college last year, one requirement I had for students was to visit and study two Nepali companies, and write about those companies' corporate governance practices. That is, explain how those companies were directed and controlled for stronger business results.

Most students wrote about public companies such as banks and manufacturing units, in part because information obtained from them could be verified from other sources.

The two key findings were as follows:

Family on Board: The board composition of most Nepali-owned public companies raised too many red flags. Unqualified relatives and family members of the founders were assigned seats on the company's board to such an extent that even nominally public companies were ran like family businesses under the control of a patriarch who brooked no dissent.

With the independence of the Board thus compromised, hiring was mostly about getting relatives, friends and loyal hangars-on into the company.

Often, there was no audit committee to make sure that the company's financial reporting was truthful. And the Board members themselves ran the companies on a day to day basis, telling the hand-picked management staff what to do and not do. Besides, with no one questioning their actions, such Board members found it easier to repeatedly use the company assets for personal use with little thought to what shareholders might say.

Indeed, if we examine why some Nepali financial institutions went into receivership in the last three years, the inherently faulty composition of their boards-which then led to board members' treating banks as personal piggy-banks?comes up as trigger point that eventually led to their downfall.

Management mistakes: Often, managers at most companies have to perform in such a way that they hardly have time or interest to deepen the necessarily unglamorous tasks of cleaning up their company's innards that lead to long-term stability.

As such, most companies have lofty mission statements, but no code of ethics, no employee manuals and no agreed-upon and written operating procedures. True, not having these documents helps a manager consolidate power, especially when it comes to hiring his chosen people and then fixing pay packages. In practice, however, such control comes at the cost of enervating office politics that lead to low staff morale and low productivity.

Besides, the absence of such documents reduces the management to making decisions under pressure, and on an ad-hoc basis. When employees always have to guess what the management's decisions might be, that does not help the company to establish a culture of openness, predictability and accountability.

And it's no exaggeration to say that most trade union-related problems in Nepali companies have their start in the management's inability or reluctance to establish and maintain the basic standards of corporate governance.
In all fairness though, most public companies in Nepal do know about the importance of adopting stronger corporate governance practices. But their understanding is comparable to that of a couch potato comprehending the benefits of regular exercise.

My students learnt that the internal control mechanisms at companies they studied were too set to change anytime soon, though some have recorded progress in the presence of professional management and shareholders who ask pointed questions.

Still, the best hope lay in speeding up the magnitude of change in the external context of competition (for customers, managerial talents and resources) in such a way that the companies that want to grow are soon left with only one of two choices: either adopt better corporate practices so that decision rights are clear for stronger business results or exit from the marketplace all together.

ADB expects 3.5 percent growth in Nepal

REPUBLICA, 5-Feb-09

The country director of the Nepal Resident Mission of Asian Development Bank (ADB) Barry J. Hitchcock said despite the global down turn, Nepal will see a 3.5 percent growth rate this year.

“Given the economic performance of Nepal, we have expected that Nepal’s economic growth would hover around 3.5 percent this year. However, the growth depends on what will happen in the agriculture sector, the main stay of Nepal’s economy,” said Hitchcock, while delivering a statement about the ADB-financed projects during 2008 at a press conference on Thursday.

Answering queries about future assistance to Nepal, Hitchcock said that the ADB would double the volume of its assistance to more than US$ 200 million each year in the next two years, including 2009, where the ration of grant and loan will be equal.

“However, the future assistance will be based on the performance of Nepal in implementing the development programs,” Hitchcock said.

The ADB had approved the grant assistance of US$ 8 million and US$25 million for the education sector, and information and communication development.

A grant of US$ 106.3 million was approved for the development of local governance and community development.

The ADB office’s mission statement issued during the press conference stated the portfolio for Dec 31, 2008 comprised of 18 loans worth US$586 million net, 10 investment grants worth US$ 332 million, and 33 ongoing technical assistance projects totaling US$ 29 million.

The ADB’s contract awards and disbursement to Nepal reached US$145 million and US$127 million, respectively.

Hitchcock painted the encouraging picture based on the assistance modality in different projects in Nepal.

“The year 2008 was a good year for the ADB in term of assistance, as all of our assistance for investments projects are in the form of grants,” said Hitchcock.

The ADB statement said no projects were considered at risk at the end of 2008, a remarkable achievement compared with 14 percent in 2007 and 17 percent in 2006.

The resident representative also categorically mentioned that the price increase for construction materials in high fuel prices delayed approval of government budget and Koshi flooding were the major challenges in development works during the review year.

“Now, shortage of electricity has emerged as a major change, as in the absence of electricity we cannot think of desirable economic activities,” Hitchcock said.

He also said that the ADB would take the initiative to fund more hydropower projects to deal with the ever-increasing power shortage in the country.

“We are looking for the possibility of funding storage project to solve the problem of the power crunch during the winter when water level in the rivers recedes,” he added.

He also noted that the successful completion of the CA election in April has paved the way for the establishment of lasting peace and enhanced prospects for sustainable growth in Nepal.

Revenue mobilisation augments by 33.1%

Revenue mobilisation augments by 33.1%
Nepalnews, 3-Feb-09

During the first five months of the current fiscal year, revenue mobilisation grew by 33.1 percent to Rs 43.1 billion compared to an increase of 21 percent in the same period last year, according to a report on the latest micro-economic situation of the country released by Nepal Rastra Bank (NRB) on Monday.

The revenue growth is ascribed to high growth of income tax, VAT revenue, excise, vehicle tax and registration fee as well as high growth in non-tax revenue.

According to NRB, the country’s exports also registered a growth of 30.9 percent during the period against a decline of 4.4 percent during the same period last year.

Overall balance of payment (BoP) saw a surplus of Rs 22.8 billion compared to a surplus of Rs 31.1 million the last fiscal year. Similarly, remittance grew by 65.8 percent in the first five months against a growth of 17.6 percent in the same period last year.
On the other hand, imports also soared by 32.6 percent this year against an increase of 8.2 percent last year. “During the first five months of this year, the government spending increased by 2.5 percent to Rs 48.5 billion compared to an increase of 44.3 percent in the same period last fiscal year,” the report said.

However, the government was absolutely unable to control price rise which stood at 14.1 percent in mid-December 2008 from 5.7 percent in the same period last year.

NRB: Remittance up despite global blues

NRB: Remittance up despite global blues
ekantipur, 2-Feb-09

Despite a global recession, the inflow of remittances increased by 65.8 percent during the first five months of the current fiscal year, according to a report on the latest micro-economic situation of the country released by Nepal Rastra Bank (NRB) on Monday.

The surge in remittances contributed to a surplus in the current account of Rs. 12.3 billion from a deficit of Rs. 7.5 billion during the same period last year. The growth of remittance flow was 17.6 percent last year.

However, recent moves by Malaysia and the United Arab Emirates (U.A.E.) to discourage foreign workers might affect remittances in the future. Remittances account for 17.4 percent of Nepal's Gross Domestic Product (GDP).

The balance of payments also recorded a significant surplus of Rs. 22.8 billion during the first five months of the current fiscal year compared to a surplus of Rs. 31.1 million during the same period last year.

According to NRB, the country's exports also grew by 30.9 percent during the period against a decline of 4.4 percent during the same period last year. Exports to India grew by just 15.1 percent compared to a 64 percent rise in third country exports.

An increase in the export of readymade garments, shoes and sandals, tooth paste, G.I. pipes and noodles was primarily responsible for the increase in exports to India. A surge in the export of pulses, woollen carpets, pashmina, readymade garments and herbs accounted for the tremendous growth in third country exports.

Likewise, imports also grew by 32.6 percent this year against an increase of 8.2 percent last year. Imports from India were up by 17.1 percent compared to 57.2 percent for third country imports. Inflation rose to 14.1 percent this year against 5.7 percent last year, according to the central bank.

During the five-month period under review, the government budget showed a surplus of Rs. 2.2 billion against a deficit of Rs. 9.8 billion previously. An increase in revenue and foreign cash grants accounted for the budget surplus during the period.

Domestic credit was up 6.5 percent compared to a growth of 10.4 percent last year. NRB stated that low government expenditure contributed to the slowdown in the growth of domestic credit in the review period.

The growth of private sector credit also went down marginally during the first five months of the current fiscal year compared to the corresponding period last year. Credit to the private sector increased by 10.1 percent this year against 10.9 percent last year, according to NRB.