BBC Nepali Service Discussion on MRP Controversy

BBC Nepali Service's Ms. Rama Parajuli talks with PM's spokesman Mr. Bishnu Risal and Republica's reporter Mr. Kiran Chapagai on April 10, 2010 about the political controversy surrounding giving contracts to print Machine Readable Passport (MRP) to India.

Here is the timeline of events.

US-Nepal trade

US-Nepal trade
TKP, 6-Apr-2010
By Donald A. Camp

The US visit of the Nepali delegation headed by Commerce Secretary Purushottam Ojha has raised expectations in Washington and in Kathmandu. That is because officials in both capitals are eager to revitalise our commercial ties, and recent trade trends tell you why. Nepal’s total exports to the United States have declined dramatically, since peaking at nearly US $230 million in 2000. Last year, they fell to US $85 million. US exports to Nepal haven’t plummeted as precipitously, but they have fallen nevertheless, from US $35.1 million in 2000 to US $31 million in 2009. Beside the international economic downturn, concerns of US investors and traders are about Nepal’s political stability, the electricity crisis, and labour unrest.

But, there are many reasons to be optimistic about reversing recent trends, which is why we have high hopes for increasing US trade with Nepal. Efforts are underway to conclude the peace process and establish stable government institutions, which are crucial for improving Nepal’s competitiveness. Nepal has also enacted a new trade policy in response to economic changes that have occurred in recent years, both inside and outside the country. Additionally, the United States will soon launch a new, multi-million-dollar development assistance programme focused on building Nepal’s trade capacity.

The trade policy the government enacted last year replaces one adopted in 1992. It is sure to strengthen trade ties with the United States, as well as other countries, because it addresses new economic realities, including the fact that some of Nepal’s traditional exports, such as ready-made garments, no longer enjoy a comparative advantage in the global market — with or without favourable tariff treatment. The updated trade policy aims to promote, in partnership with the private sector, “new exportable goods of comparative advantage.”

Fifteen “special thrust areas” have already been identified. Nepal’s advantage in terms of production is not the only thing that makes these agricultural and handicraft goods prime targets for export promotion. All of these goods also fall within the various categories of products that enjoy duty-free access to the US market under the Generalised System of Preferences (GSP). And, twelve other countries currently have GSP schemes similar to that of the United States, which provides duty-free access to about 4,800 products.

In recognition of GSP’s export-boosting potential, the new trade policy calls for converting the government-run Trade and Export Promotion Center into an autonomous Trade Promotion Institute, charged with, among other things, encouraging more Nepali businesses to capitalise on duty-free access provided by GSP. The US Embassy in Kathmandu is also committed to helping Nepal take maximum advantage of GSP and, to promote this, it is planning a workshop for late July or early August to familiarise government officials and entrepreneurs with GSP processes.

The objectives of Nepal’s new trade policy are generally aligned with those of USAID’s new Nepal Economic, Agriculture Trade (NEAT) Activity, a US $30-million, multi-year initiative designed to strengthen the foundations for rapid, sustained and inclusive economic growth. For example, both are built on the belief that increased trade can provide substantial economic benefits to traditionally disadvantaged groups and marginalised communities. They also share a “value chain” approach to trade promotion, which fosters competitiveness by increasing efficiency of the numerous linked activities required to move a product from inception to consumer. Furthermore, many of the products USAID suggested its potential partners consider are also targeted by Nepal’s new trade policy. These include coffee, tea, cardamom, honey, essential oils, pashmina, and wooden handicrafts.

In a recent newspaper interview, Secretary Ojha said, “The main objective of the visit is to get tangible and formal public and private links established so that economic engagements between the two countries could be rejuvenated.” This is a commendable objective, and the US government has worked to ensure it is achieved by arranging for the delegation to meet with senior officials at the Office of the US Trade Representative, Department of Commerce and other relevant agencies. What makes this objective most pragmatic is its recognition of the vital role public-private partnerships will play in strengthening our economic relationship, a point Secretary Ojha further underscored by inviting top officials from business associations to join his delegation.

In the lead up to the delegation’s visit, much has been written about a US-Nepal Trade and Investment Framework Agreement (TIFA). The possibility of signing a TIFA has generated enormous enthusiasm in certain sectors in Nepal. But the TIFA should not be overstated. TIFA is not a bilateral trade agreement, nor would it provide ready-made garments or other products duty-free access to the US market. TIFA provides a framework for resolving bilateral investment and trade disputes, an important and positive step, but one with limited impact on trade. Fortunately, a formal bilateral agreement is not a pre-requisite for revitalising trade between our two countries. The tools we need are already at our disposal, and we are committed to working with Secretary Ojha and his delegation to ensure they are put to good use.

Camp is Chargé d’Affaires, US Embassy, Kathmandu

Dr Pokharel appointed NPC vice-chair

Dr Pokharel appointed NPC vice-chair
Nepalnews, 11-Apr-2010

The government has appointed Dr Jagdish Chandra Pokharel as the vice chairman of National Planning Commission (NPC), Sunday.

A cabinet meeting held this afternoon appointed Dr Pokharel as NPC vice chair and Dr Ganesh Gurung as NPC member.

The position had fallen vacant after erstwhile vice chairman Yuba Raj Khatiwada got appointed as the governor of Nepal Rastra Bank. Dr Pokharel was backed by Nepali Congress.

Likewise, the government has appointed Bishnu Kumar Agrawal and Nur Pratap JBR as the Nepali Consulate Generals to Czech Republic and Afghanistan, respectively.

Today's cabinet meeting has also appointed Madhav Poudel as the chairman of Employees Provident Fund.

It has nominated Trilochan Uprety for the position of executive committee member on behalf of Nepal of United Nations Office of the High Commissioner for Human Rights (UNOHCHR).

News Roundup: Is Nepal Suffering From Financial Crisis or Not?

Roundup of Nepali Economic and Business News for Mar 31-Apr 10
By NepaliEconomy.com
News Archive

Is Nepal suffering from financial crisis or not? Nepal Rastra Bank (NRB) seems to think so. As such, it is putting restrictions on establishment of news banks and tightening rules on obtaining foreign currency and importing of gold to the consternation from the importers. It is deploying creative tools to alleviate the liquidity crunch by helping banks refinance loans up to Rs. 25 billion (aggregate?) in 4 key sectors. The performance of banks suggests otherwise. Laxmi Bank which turned 9 is expected to post Rs. 410 million operating profits in Q3 of 2009/10. Agriculture Development Bank which issued the largest IPO that was oversubscribed by 150 percent expects its profits to increase from Rs. 1.06 billion in 2008/09 to Rs. 2.06 billion in 2011/12. Everest Bank's operating profits are up 31 percent in the first 8 months of the fiscal year compared to the same period in the previous year. Nepalgunj based Bageshwari Development Bank plans to expand from 3 districts to 10 districts and issued 20 percent bonus shares to the shareholders. The likely reason for banks' profitability are (a) as noted by Governor Khatiwoda banks are maintaining excessive spreads (b) banks are changing interest rates arbitrarily especially for land developers. On another NRB news, it is launching plans to make financial services accessible to poorest districts by working with micro-lenders.

While the government is having trouble spending development budget, it seems to have no such problem in spending in other ways. Owing to higher government workers' salaries and bigger spending on security in Terai and for Machine Readable Passport (MRP), the MoF is likely to ask for Rs. 8-9 billion supplemental budget to meet the shortfall by the end of the fiscal year.

India officially revoked additional 4 percent custom duties on Nepalese exports. Nepal's trade delegation is in the US to negotiate trade concessions under Trade and Investment Framework Agreement (TIFA). The two countries signed on 7-points agreement but Nepal could not get zero-tariff on garment exports. China is preparing to phase in zero-tariff treatment to 95 percent of Nepal's products without any conditions. The competition amongst Nepal's benefactors could benefit Nepal's export, especially garment industry, which saw another big decline in exports in March.

As reported early in the year, the government is preparing to divest shares of eights Public Enterprises (PEs) in a bid to boost their competitive strength. They include Dairy Development Corporation (DDC), Herbs Production and Processing Company Ltd (HPPCL), Hetauda Cement Factory (HCF), Nepal Drug Ltd (NDL), National Seed Company Ltd (NSCL), National Trading Ltd (NTL), Gorkhapatra Corporation (GC) and Agriculture Input Company Ltd (AICL).

Nepal is facing a twin problem of food deficit and food price inflation - 4o or 75 districts are facing food shortage this year. The causes are flood and drought. According to MoAC drought caused decline in wheat production by 17 percent, paddy by 11 percent and corn by 4 percent. To make the matter worse, Nepal Food Corporation (NFC) has stopped supplying rice to food deficit districts citing budget constraints. The total demand for grains is around 30,000 tons. Kathmandu is facing decline in supply of goats from 10,000 per week to 6,000-7,000. India supplies up to 80 percent of capital's goat demand. At the other end of the country, in Itahari, Shangri-La International Food Industry is exporting 60 tons of meat every month. Prices of meat remained stable despite cross-current of factors.

Hydropreneurs are not signing power purchasing agreement (PPA) with NEA because they failed to agree on the rate - NEA is offering Rs. 4.50 per unit but developers are demanding Rs. 6 to compensate for higher costs of building plants owing to adverse political and economic environment. Government wants to construct a micro-hydro in each of 4,000 village development committees. The big 4 hydro developers from India - GMR (300MW Upper Karnali, 600MW Upper Marsyangdi II), Bhilwara Energy (120MW Likhutar) and PES Engineers (110MW Phulkot Karnali) - want security guarantee for their investments in Nepal. Even domestic businessmen worry about insecurity and justifiably so when Police DIG's home gets robbed. In the midst of this all, Nepal's delegation in the US is trying to attract US investment the hydro sector.

Tourism arrivals were up about 35 percent in March 2010 and is the tenth consecutive monthly increase. To accommodate increase in tourism - Nepal has 669 tourist-level hotels with 26,063 beds but faces a shortfall of 822 beds daily - government considered relaxing its home-stay policy but it decided not to.

Here we go again. NOC is facing Rs. 250 million loss a month and cooking gas which costs consumers Rs. 1,250 and NOC Rs. 183 loss per cylinder is the main culprit. Prices are likely to go up in April. NOC is also delaying its plan to increase the availability of 91-octane petrol until October.

Nepal Telecommunications Authority is recommending that government provide broadband and VoIP accessible to one village development committee in 38 districts of 13 zones under ADB financed US$25 million Information and Communication Technology Development project (ICT).
Nepal is rich in limestone, the main ingredient for making cement. Yet the country only meets 15 percent of 2.5 million tons annual demand. New companies in pipeline, including Ghorahi Cement which will be operational in mid-2011, will enable domestic contribution to increase to around 50 percent by 2012.

The controversy over MRP continues. Here is the timeline of events. Following April 1 deadline, the government stopped issuing passports until MRP arrived from India, which won't be until early June. In order to prevent impacts on government revenue (5,000 passports are issued each day contributing Rs. 25 million to the national treasury) and remittances (over 700 Nepalese go abroad (ex-India) daily in search of work) the government started issuing handwritten passports on a need basis. But there is big political fallout as the PM conceded that the main reason for giving the no-bid contract to Indian government was because of political pressure from the neighbor. Supreme Court has joined the fray by ordering government not to proceed with the contract. For those heading to the UK for work/study/business, expect higher visa fees.

Massive expansion planned for TIA

Note: This is news from a month ago.

Massive expansion planned for TIA
TKP, 14-Mar-2010
SANGAM PRASAIN

Tribhuvan International Airport (TIA) has been marked for a massive infrastructural expansion project to enable it to provide high-performance and operational safety-based service as per international standards.

The TIA improvement project is being implemented in four phases and will give Nepal's only international airport a completely new appearance. Work is slated to be completed by 2028 and is expected to cost US$ 600 million.

The first phase of the project is being conducted with financial support from the Asian Development Bank (ADB) of US$ 80 million (US$ 70 million in loans and US$ 10 million in grants) and is scheduled to be finished by 2015, said Prem Raj Lohani, project director.

By 2028, TIA will be expanded to 90,000 sq m. The airport is presently spread over 36,000 sq m with the international terminal occupying 32,000 sq m and the domestic terminal the rest.

As per the first phase of the expansion plan, the international terminal building will be built where a golf course currently stands, said Lohani. The present international terminal will be used to handle domestic flights.

TIA will have 12 new aircraft parking bays for international flights and 27 for domestic flights. Currently, there are 15 aircraft parking bays for domestic flights. Similarly, the runway will be lengthened to 3,350 m from the present 3,000 m towards the south.

The Nepal Army barracks will be relocated to the north side of the runway to make space for the expansion plan. TIA will also be equipped with advanced communication, navigation and fire fighting systems. The existing drainage, water supply and electricity supply will be upgraded.

The project has started the selection procedure for a consulting firm to do the project's detailed design and supervise the construction. On August 2, 2009, the project had short-listed six consulting companies from 25 countries. "We have asked for a technical and financial proposal from them," Lohani said.

The ADB grant assistance will also be utilised to upgrade Lukla, Simikot, Rara and other airports.

Developers keeping PPA signing on hold

Developers keeping PPA signing on hold
Republica, 1-Apr-2010
Dinesh Karki

Rapid rise in interest rates of commercial banks has distracted potential investors as they are delaying the signing of Power Purchase Agreement (PPA) with Nepal Electricity Authority (NEA).

According to NEA, the sole authority for power distribution, 26 hydro projects are ready to sign PPA but the developers are hesitating to come for negotiations. Commercial banks have jacked up interest rates for hydropower projects to 13-14 percent. The interest rate was about 11 percent about a few months ago.

Hari Bairagi, chairman of Small Hydropower Developers´ Association Nepal (SHDAN), said developers are keeping PPA negotiations on hold due to skyrocketing prices of construction materials and political hooliganism, besides high bank rates. “The rate proposed by NEA is very low. Private sector can´t generate electricity at the present rate,” he added.

NEA has been offering an average rate of Rs 4.50 per unit for private developers. However, the developers are demanding that the NEA purchase electricity as Rs 6 per unit. NEA is importing electricity from India at the price (Rs 9.80 per unit) double than the rate offered by it to the private sectors due to massive power deficit.

Private developers, who have already met necessary criteria for PPA, are also not encouraged to sign PPA. Shashisagar Raj Rajbhandari, director of Power Trade Department at NEA, said earlier they used to sign at least three PPAs every month. “But we signed PPA with only three projects in the past four months,” Rajbhandari told myrepublica.com.

NEA has signed PPA with 63 hydropower projects so far. It has received application for additional 110 projects.

According to developers, the rate of return in hydropower projects has dropped down to 12 from 15 percent due to different constraints in hydropower development.

Pradip Gangol, executive manager of Independent Power Producers´ Association of Nepal (IPPAN), said commercial banks do not invest on projects where the rate of return is lower than 15 percent. “The developers are in dilemma. They are not interested to commission new projects due to high construction cost. But if they don´t develop projects on time, they might lose their license,” Gangol added.

Investment climate in the country has deteriorated in recent days. “Developers complain about extortion by different groups and skyrocketing prices of construction materials,” Rajbhandari shared.

The cost of power generation hovers around Rs 150 million to Rs 170 million per megawatt, according to experts.

Suggestions to govt

Hydro power developers have forwarded various suggestions to the government to incorporate them in the budget for fiscal year 2010/2011.

Issuing a joint press statement, Independent Power Producers´ Association (IPPAN) and Small Hydropower Developers´ Association Nepal (SHDAN), on Wednesday demanded the government to endorse Electricity Act and Nepal Electricity Regulatory Commission Act at the earliest.

They have also sought exemption of VAT on construction materials, plants and machineries and impose customs duty of one percent, as included in the proposed Electricity Act.

“The exemption of VAT on construction materials and machineries can significantly reduce production cost and ultimately attract more investment,” the statement added.

At present the government is imposing 28 percent tax on the service of foreign consultants in hydropower projects. Developers have asked the government to reduce the tax to 15 percent.

They have demanded to change the criteria for dry and wet season for Power Purchase Agreement (PPA) rate. They have also demanded the government to fix PPA rate at Rs 5.99 per unit. They have also demanded exemption of income tax for ten years.

NEPSE Weekly: Bearish trend continues ahead of ADBL IPO

Bearish trend continues ahead of ADBL IPO
Republica, 2-Apr-2010

The market continued to remain in a highly oversold stage as buyers backed away before the Agricultural Development Bank Limited (ADBL) initial public offering (IPO) which opens on Sunday. The Nepal Stock Exchange (Nepse) index dropped to a 3 years 5 months low of 443.17 points on Wednesday before retracing in the final trading day of the week. The benchmark index closed at 452.46 points, losing another 2.92 percent.

Despite the impressive performance of NMB Bank (+Rs 26), which closed its further primary issuance on April 2, the Commercial Banking sub-index (-3.08 percent) continued its fall. The loss can be attributed to Bank of Asia (-Rs 52) and Laxmi Bank (-Rs 90). Madhyamanchal Gramin Bikas Bank (+Rs 45) booked top gains again this week but the Development Banking sector (-6.77 percent) posted a huge decrease with the fall in share price of Narayani Development Bank (-Rs 98).

Likewise, the Finance sector (-3.31 percent) posted major decline as NIDC Capital Market (-Rs 151) and Nepal Housing and Merchant Finance (-Rs 130) recorded the highest losses. Weak performance of National Hydropower (-Rs 16) impacted the Hydropower sector (-2.72 percent). Similarly, the Insurance sector (-1.27 percent) fell as well due to the decline in Lumbini General Insurance (-Rs 9). Likewise, the ´Others´ sub-index (-6.15 percent) also plunged as Nepal Telecom Company (-Rs 30) shed value.

The Supreme Court has given a verdict in favor of NRB to limit promoter shares of banks and financial institutions held by a single family to 15 percent. NRB has also decided to provide up to 80 percent refinancing to the banks and financial institutions against good loans. Securities Board of Nepal (SEBON) announced that it is working to promote the entrance of more institutional investors into the secondary market.

Amongst declarations, World Merchant Banking and Finance (-Rs 10) will be giving out 16 percent bonus shares and 6 percent cash dividend instead of 30 percent bonus shares and 10 percent cash dividend. Universal Finance, which closed its books on April 1, has proposed 10 percent bonus shares. On the IPO front, Agricultural Development Bank is set to open its IPO for 9,600,000 units on April 4. The top turnover of the week was booked by Bank of Kathmandu (Rs 8,790,170) which accounted for 8.18 percent of the total volume. Additionally, Bank of Kathmandu Promoter Shares (Rs 7,472,250) also traded significantly during the week.

Technical analysis tools indicate that the market still remains at an oversold stage which marks a further downtrend exacerbated by the light trading volume.

This is an analysis from Beed Invest Pvt Ltd. No expressed or implied warrant is made for usefulness or completeness of this information and no liability will be accepted for consequences of actions taken on the basis of this analysis.

Changing agriculture

Changing agriculture
TKP, 2-Apr-2010
By Jagannath Adhikari

The use of hybrid seeds is growing in Nepal, especially in vegetables, paddy and maize. These seeds mainly come from India, and their use is more common in the Tarai. We do not know much about the prevalence of genetically modified organisms (GMOs)—both the seeds and the produce of such seeds—in Nepal. But it is likely that GMOs are also prevalent, especially among imported seeds and foods.

Hybrid seeds and GMOs have changed agriculture, especially in developing countries. They produce more output provided they are used with high amounts of inputs in the form of fertilizers, irrigation and other chemicals. As the production of these seeds is expensive, only rich private sector companies and Multinational Corporations (MNCs) can do so. The companies also make the inputs required for these seeds. As a result, the cost of production is extremely high.

Another feature of these modified seeds is that they either do not produce seeds at all because of a terminator gene (genes that cause second-generation seeds to be sterile), or that the productivity declines drastically in the next generation. Therefore, farmers cannot produce their own seeds if they use hybrid or GMO seeds, and they have to buy seeds every year from the companies. As a result, farmers become seed-insecure. This is especially so if a government does not secure the seeds’ supply and control their prices and quality. Because of this, farmers become dependent on companies that produce these seeds.

In the past, farmers used their own open-pollinated seeds, in which the best of the current produce were selected as seeds. This would produce better seeds for the next generation of crops. But improving productivity through this ‘selection’ process takes a longer time.

Though these new seeds are more productive when used with higher inputs, these seeds could ruin farmers in developing countries because of various factors: very high costs of production; seed insecurity; dependence on companies for seeds and inputs; and the possibility that companies take monopolistic advantage and artificially increase the price.

In a country like Nepal—where the government does not have any mechanism to control the quality of seeds and other inputs, or a mechanism that ensures producers and distributors are accountable for their actions—farmers will suffer when low quality and untested seeds are available in the market. This is exactly what happened in Sarlahi and Mahottari with the maize crop. This incident, which lost farmers about Rs. 2 billion, was because of total negligence from government agencies in checking the quality of seeds in the new context of agricultural technology. If farmers had used traditionally-produced open-pollinated seeds, there would not have been such a problem, and farmers would not have been ruined.

Even though hybrid seeds and GMOs could have been developed with an intention of increasing food production, a political-economic analysis of this technology reveals that it has not been beneficial for farmers of poorer nations where government agencies are not prepared to deal with the risks. The farmers’ own knowledge has become obsolete in the light of new technology generated by MNCs. As a result, their dependency on these MNCs for seeds and other inputs has been growing.

On the other hand, increasing costs and possible low selling prices, or a lower output, may ruin farmers. In India, a large number of farmers committed suicide a few years ago when the price of cotton, for which they had used GMO seeds, fell and farmers could not pay the loans taken to use this expensive technology. Moreover, this technology and the control of the whole food system by MNCs are changing the way of life for farmers. They will, in the long run, become a small cog in an assembly line of a food system that is managed by MNCs. If this happens, a country may lose its independence in food production.

In order to deal with such a potentially-risky situation, which has already been observed at a small scale recently, the government needs to develop these technologies locally with the participation of farmers. Similarly, the government must show responsibility in setting up a quality-control mechanism to deal with new inputs and new technologies that are used in farming.

Adhikari is a Martin Chautari researcher with specialisations in food, agriculture and migration

Global Prospective: Banks anticipate sharp decline in commodity prices

A deceleration in prices of commodities globally would ease prices for those products in Nepal. That would help ease double-digit inflation ravaging the country because commodities make up a significant portion of Nepal's CPI basket.

China's credit curbs pose mounting risk to commodities
Telegraph, 1-Apr-2010
By Ambrose Evans-Pritchard

The big global banks are quietly preparing for a slide in commodity prices over coming months as China clamps down on excess lending and the US Federal Reserve takes away the liquidity pot.

"We believe overheating risks in China are escalating," said Michael Lewis, commodities chief at Deutsche Bank. "Heading into the second quarter, we believe China will become the main source of event risk for commodity markets, specifically industrial metals."

Mr Lewis said Beijing is likely to slash growth in spending on infrastructure from 120pc last year to just 7pc this year. Deutsche expects China's central bank to cut loan quotas by almost a quarter to 7.5 trillion yuan ($1.1 trillion) this year, raise rates, and tighten reserve rules to choke inflation, while local authorities take their own measures to curb the property boom. Lead, zinc, copper, and nickel are all highly leveraged to China's building cycle.

The Royal Bank of Scotland echoed the concerns, saying China has kept the prices of raw materials buoyant by sucking in the world's supply. "A hefty proportion of these imports have undoubtedly been stockpiled, some by private speculators. We do not believe that much unreported stock has yet been eroded," said the bank's commodity team, Nick Moore and Stephen Briggs.

"Our central theme remains to be wary of a general price lapse for the commodity complex over the next six months – not a major price collapse, more of a hiatus. Then sunlit uplands beckon," they said. RBS said a surge of pent-up supply from mines is "waiting in the wings to make its grand entrance" just at the wrong moment as the global recovery goes through a patch of turbulence.

The family of energy, metals, and farm goods has already lagged equity prices since the start of the year. The Reuters/Jefferies CRB commodities index peaked in January and is threatening to slip below its 50-day moving average, a key technical level.

This may offer a better gauge of underlying monetary forces in the world economy than stock markets. The M3 money supply has been contracting since mid-2009 in both the US and the eurozone. It has been slowing in other areas such as Saudi Arabia, where the M3 growth rate has fallen for five months.

The faltering commodity rally has been disguised by the strength of oil, itself sui generis because OPEC can defend the price by cutting output. Crude flirted with $85 a barrel on Thursday, but may struggle if OECD stocks remain above average levels for long.

Sugar has crashed 47pc since its speculative peak in February, punctured by the effects of record planting and the waning weather effects of El Niño – now giving way to La Niña's dry winds over Brazil. Natural gas prices are down by a third. A surge in shale gas supply in Pennsylvania and Colorado unlocked by new technology has combined with a flood of liquefied natural exports from Qatar and Malaysia. Supply has met demand with a vengeance.

Wheat, corn, zinc, soybeans, uranium, and cocoa, are all down this year. But while every commodity has its own story, the sector as whole moves in rhythm with the global liquidity cycle. It is eagerly watched for clues, like the Baltic Dry Index for bulk shipping. The BDI has fallen by a third since November. The 90pc rise in iron ore contracts extracted last week by Rio, BHP Billiton, and Vale for the next quarter may soon look inflated.

RBS is most bearish on gold, forecasting a 17pc drop to $925 an ounce later this year. The metal will lose its 'anti-dollar' appeal as the dollar grinds higher and the Fed tightens, but shoot to fresh records above $1,300 by 2013.

The bank sees parallels with the commodity rally of 1982, which faltered after nine months as the US economy tipped into a double-dip recession. Raw material prices then relapsed for another couple of years. "We expect the path ahead to be strewn with many risks associated with unwinding strategies, rising rates and taxes, and the debt burden," it said.

Of course, China was a marginal force at the time. It consumed 5pc of global metal supply, compared to 40pc today. Paul Volcker was Fed chairman, executing a ferocious monetary squeeze. Ben Bernanke is a different animal.

Deutsche Bank is looking back further, eyeing the choppy action on Wall Street in the mid-1930s when sharp swings in confidence led to deep corrections. The ups and downs of the US stock market over the last year have mimicked the action between March 1933 and February 1934. The curiosity is whether this pattern – perhaps coincidental – will continue to hold. Wall Street fell 22pc the late Spring and early summer of 1934.

Deutsche Bank lists plenty of risks, not least a Greek default that spreads contagion, a larger bond market crisis in big industrial states, and regulatory overkill on banks. But the greatest looming danger is a Sino-American showdown over the yuan.

"Political rigidities appear to be building both within China to resist change, and within China's trading partners -prominently the US – to try to force change. This is a toxic mix."

Becoming self-sufficient in cement

Becoming self-sufficient in cement
Republica, 31-Mar-2010
Ang Sanu Lama

Cement covers around 29 percent of the total construction cost in Nepal, according to contractors and developers. Price of cement in Nepal is highly correlated to that in India as it is a huge importer of readymade Indian cement and clinkers -- a mixture of cement elements heated in a kiln that is grounded and mixed with gypsum to form cement.

According to the Department of Customs, Nepal imported 649,244 tons of clinkers and 586,294 tons of readymade cement in fiscal year 2065/66, an increase of 10 percent and 85.4 percent respectively from the previous fiscal year.

There has been a decline in cement prices in recent months due to decrease in demand. But the price is expected to go up as soon as demands shoot up as India has recently increased excise duty on cement to 2 percent. The duty change will increase the prices in India and ultimately in Nepal as the country is highly dependent on India for clinkers and readymade cement.

Annual demand of cement in Nepal is around 2.5 million tons, according to industrialists and developers. “Domestic mine-based industries meet only 15 percent of this demand. Remaining 85 percent -- in the form of readymade cement and clinkers -- is imported from India,” PL Sanghai, managing director of Vishwakarma Cements, told myrepublica.com.

Nepal is rich in limestone reserves, which is one of the key raw materials for cement. “Nepal has a total limestone reserve of 1 billion tons and proven reserves of 210 million tons,” Krishna Dev Jha, senior divisional metallurgical engineer at Department of Mines and Geology (DMG), told myrepublica.com.

The abundant limestone reserves mean Nepal can not only meet its demand but can also export cement to other countries.

Two of the six mine-based cement industries in the country -- Hetauda Cement Industries and Udayapur Cement Industries -- are state owned with total production capacity of 1550 tons per day (TPD). The remaining industries are privately owned with a combined production capacity of 1,550 TPD.

Unfortunately, the government-owned companies produce only 40-50 percent of their total capacity and privately owned industries produce only 50-90 percent of the total capacity because of production lags like strikes, lack of power and obstruction in supply of other raw materials among others.

Department of Mine and Geology has permitted companies to operate 26 mines across the country, according to Jha. Of them, four companies - Butwal Cement, Sagarmatha Cement, Dang Cement and Bhardau Cement -- are busy constructing their own clinker manufacturing plants, according to Jha. Other companies like Ghorahi Cements are scheduled to start production by July, 2011.

The total production capacity of the new companies would be approximately 3,850 TPD, which is about 1,155,000 tons annually. If these companies operate to their full capacity, they would meet 46.2 percent of the annual cement demand in the country.

While taking permission from Department of Mine and Geology, industries usually agree to start production within 3 to 4 years of registration. But it takes a lot of time due to technicalities like Environmental Impact Assessment (EIA) and infrastructure developments like access road, water supply and power source among others.

According to a recent policy decision made by the Industry Promotion Board, companies should start preparation for production. “If they do nothing for five years, they will be given a six-month ultimatum after which they will be prosecuted,” said Dhrubaraj Joshi, director of Department of Industry.

The government hopes the recent policy change will encourage groups that have not started construction despite getting permission. “This policy applies to the hydropower sector and other mine-based industries. We are hopeful that the new policy will discourage the trend of holding license but doing nothing to start production,” Joshi added.

Despite having tremendous potentials, lack of political stability and business doing environment in the country has been deterring investors from putting their money in large-scale industries. If the government ensures suitable business doing environment, Nepal has the potential to emerge as one of the major cement producers in South Asia.