Roundup of Nepali Economic and Business News for Apr 11-Apr 30By NepaliEconomy.com
News Archive
Economics takes back seat to politics in Nepal. Political polarization has come to a tipping point. The Maoists have commenced their nationwide indefinite general strike to force their political agenda on the government following the show of force during the May Day parade. The MK Nepal-led 22-party coalition government has so far refused to budge. How this political posturing will end is anyones' guess. Meanwhile the deadline to write a new constitution (May 12, 2010) is fast approaching but given the limited progress made thus far, the country will most likely end up in a constitutional limbo. There are great risks that extremist elements - both on the right and on the left - will try to take advantage of this fluid situation. Nepal looks eerily like the Weimar Republic, and if its ends like that, then we'll see a strong-man ruling the country in not so distant future.
The economic engine of the country continues to run despite harsh political backdrop but the going is not that great. ADB has issued a rather pessimistic forecast of Nepal's economy. It expects the economy to grow 3.5% in 2010 versus 4.7% in 2009 and 5.3% in 2008 on the back of poor monsoon. NepaliEconomy.com begs to differ on growth forecast (expects to be lower) and Nepalese meteorologist on weather forecast (think monsoon this year will be normal). To spur economic activity, the government is planning to issue new Industrial Policy to replace the Industrial Act of 1992. And Ministry of Finance (MoF) is proposing Rs. 300 billion budget.
Nepal Rastra Bank (NRB) and MoF are putting policies to restrict financial activities. NRB has put limits on multiple-ownership of banks. Promoters owning 2% or more of paid-up capital need NRB's permission to transfer ownership. Also anyone depositing more than Rs. 1 million has to provide proof of source of income. MoF is requiring land transactions of over Rs 5 million do be done through bank checks. MoF is also unveiling new policies to facilitate M&A of M&A financial companies. Nepal's regulators need to step-up their efforts given that a financial scandal involving Unity Life International has come to light.
On trade front, Nepal´s exports dropped 8 percent during the first eight months of the fiscal year 2009/10 and stood at just Rs 40.41 billion. All sectors were affected, carpets (-29%), garment (-25%) and pulse (-28%). Remittances flow was also muted (+9.9% or Rs. 144 billion) and the country suffered from Rs. 32.5 billion current account deficit. To support fragile exports, Nepal Rastra Bank (NRB) slashed exports refinance rate from 2.0% to 1.5%. Meanwhile, India is trying to limit exports of Nepalese tea, which amounted 6.5 million kg in the first 10 months of 2009. Tea production in Illam is being cut to half by drought and tea farmers want government subsidy. Talking about Nepal-India trade, Nepal plans to resume exports of stones to India in limited quantity which has been banned since January. A SAARC-wide trade framework would benefit Nepal's trade but the organization is more a talk-shop than where things get done. Just look at Nepal-Bangalesh trade, which stands at meagre Rs. 5.15 billion. Moreover, Bangladesh imposes a hefty 40% imports tax on Nepal's agriculture exports. But both countries are tying to facilitate more trading. There is a bright spot in otherwise dismal international trade news. A Nepali company has bagged a multi-million contract from a US company.
Despite political instability, entrepreneurs are gearing up for Visit Nepal Year 2011. Hoteliers in Chitwan and Pokhara are expanding capacities. Now you can fly from Manang to Jomson without stopping in Pokhara. And Kingfisher airlines is commencing Kathmandu-Delhi flight.
Lack of opportunities at home and V-shaped recovery in the global economy is causing outflow of Nepalese workers. In the first nine months of 2009/10, 202,794 (18.5% growth) left Nepal - that's 750 a day. Even Uganda is becoming an official labor destination (108th). But there is one sector in Nepal that is feeling the impact of this outward flow of labor and that is construction sector. Not all can leave Nepal or build houses like the rickshaws pullers; for them, the government is providing concessional micro-loans under its self-employment program.
National Planning Commission (NPC) under the new vice-chair Dr Jagdish Chandra Pokharel finalized investment component of Three-Year Plan that it will submit to National Development Council (NDC) for approval. It plans to invest Rs. 1 trillion (64% private and 36% public) to achieve 5-6% growth rate and generate 200K jobs a year. This comes on the heel of the news that the government has not been able to spend money it has been allocated - only 80% of development budget has been spent thus far.
Despite political instability, entrepreneurs are gearing up for Visit Nepal Year 2011. Hoteliers in Chitwan and Pokhara are expanding capacities. Now you can fly from Manang to Jomson without stopping in Pokhara. And Kingfisher airlines is commencing Kathmandu-Delhi flight.
Lack of opportunities at home and V-shaped recovery in the global economy is causing outflow of Nepalese workers. In the first nine months of 2009/10, 202,794 (18.5% growth) left Nepal - that's 750 a day. Even Uganda is becoming an official labor destination (108th). But there is one sector in Nepal that is feeling the impact of this outward flow of labor and that is construction sector. Not all can leave Nepal or build houses like the rickshaws pullers; for them, the government is providing concessional micro-loans under its self-employment program.
National Planning Commission (NPC) under the new vice-chair Dr Jagdish Chandra Pokharel finalized investment component of Three-Year Plan that it will submit to National Development Council (NDC) for approval. It plans to invest Rs. 1 trillion (64% private and 36% public) to achieve 5-6% growth rate and generate 200K jobs a year. This comes on the heel of the news that the government has not been able to spend money it has been allocated - only 80% of development budget has been spent thus far.
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