News Roundup: Nepal will be a Trillion Rupees Economy

Roundup of Nepali Economic and Business News for Mar 4-Mar 13
By NepaliEconomy.com
News Archive

Nepal's GDP is expected to grow 3.5 percent to Rs. 1,176.5 billion in 2009/10. Poor harvest will impact agriculture output. Manufacturing is expected to grow by +2.6 percent for the first time in three years. Services sector, which makes up half of GDP is likely to grow at 5.3 percent on the back of strong tourism and healthcare sectors.

Nepal is suffering from a high quality problem. It cannot spend the money it is supposed to. Of Rs 106.29 billion allocated for capital expenditure only Rs. 18.41 billion or 16 percent has been spent thus far. And now the government is making plans to spend aggressively in its 3-Year Plan, which commences next fiscal year. It expects private sector to invest Rs. 555 billion and government Rs. 251 billion to achieve GDP growth of 5-6 percent and to generate 6 million jobs. Now try to square this with the IMF's view that the macroeconomic outlook is challenging, remittances will slow and the risks in the financial system are building up.

Business climate in Nepal is worsening. Another media executive received a death threat. Marwari community is threatening to quit Nepal if violence against them is not stopped. Himalayan Spring Water, a Korean venture in Rasuwa district, suspended its US$ 12 million venture following an attack on its President. Another casualty of the political instability is the garment industry, which saw another big drop in exports to the US. Apparently, it costs 17 percent more to produce garment in Nepal than in sub-Saharan and Caribbean countries. Not surprisingly, foreign investment is down 36 percent, from Rs. 9.81 billion to Rs. 6.25 billion. According to the minister for Industry Mahendra Raya Yadav, Nepal loses Rs. 250 million a month on bands. There are few bits of good news. A feasibility study on US$ 1 billion Nijgadh-Dumarwana (Bara district) International Airport to be operated under BOOT model is being done. India's Vishwakarma Cements plans to open a production unit in Laxmipur VDC of Dang district with annual production capacity of 360,000 tons, which will meet 14.4 percent of the annual cement demand in the country and employs about 2000 people directly and indirectly.

Pharma industry started their 3-day expo on March 5. Apparently Rs. 12 billion of medicine is sold annually in Nepal and that's growing at 20 percent annually.

Despite so-called "liquidity crisis" the Big Three banks registered strong profits in the first half of 2009/10. Profits were up 39 percent at Nabil, 27 percent at Nepal Investment Bank and 13 percent at Standard Chartered. According to a government study, bank promoters are taking loans against their shares and in the process manipulating share prices

Political wrangling over the selection of Nepal Rastra Bank Governor continues; it's NPC vice chairman Yubaraj Khatiwada (UML) versus deputy Governor Bir Bikram Rayamajhi (NC). NepaliEconomy.com is baffled because the dispute seems to be over personality rather than policy.

Inflation continues to run amok. In first seven months of fiscal year, CPI stood at 12 percent. The government has lowered import duties to curb inflation but the likely impact will be no impact on inflation but rise in already large trade deficit. And trade deficit has increased 60 percent in the first 6 months of the fiscal year. Traders can now re-export goods brought in the country for the purpose of domestic consumption to any country, except India. The government has plans to increase exports and decrease imports - give us a break!

Here we go again. Load-shedding will increase by 1 hour to 12 hours per day. At the same time, NEA wants to increase electricity tariff from Rs. 6 to Rs. 9 per unit.

A global business deal is affecting Nepal. Met Life's purchase of AIG's Alico means that Alico in Nepal will get transferred to Metlife. Alico has 300,000 policyholders in Nepal.

Promotional activities are initiated to make Nepal Tourism Year 2011 a success. The aim of the campaign is to bring 1 million tourists in 2011. Progams include installing a billboard along Route-710 in Los Angeles. Nepal Tourism Board is trying come up with policies on Home Stay for tourists. So much for no band pledge during NTY 2011. Maoists shut down Bheri and Karnali for 2 days. They went further and called for restriction on trekking workers in the Annapurna Circuit.