News Roundup: Highlights from H2 2011

Roundup of Nepali Economic and Business News for May 1-Dec 31
By: NepaliEconomy.com
Archive: Roundup of Economic and Business News

The JNK government unveiled 2011/12 budget amounting to Rs. 385 billion in early July. One of the provisions was the increase in salaries of public servants by a whopping 30%-43%. On August 29, 2011, Dr. Baburam Bhattarai became the PM of Nepal, the 36th in Nepal's short history.

Nepal's economy continues to chug along with a small segment of the society enjoying opulence while the significant majority struggling with the daily living. The case in point is the wedding costs in the capital. If you want to host one at a fancy location, prepare to pony up at least Rs. 1,100 plus tax per person. If you want to welcome the new Gregorian year, be ready to fork out at least Rs. 1,700 per person. Given the increased demand from high-end consumers, the retail giant Bhat-Bhateni Group is increasing its footprint in Kathmandu and expanding into Pokhara - you can even order online at bhatbhatenionline.com.

The average folks have to deal with rising food inflation, which is likely to persist for a foreseeable future if the famed investor Jim Rogers is right. He is super-bullish on agricultural commodities. In Nepal, the number of food deficit districts in Terai, the bread-basket of the country, has increased to 10. Food price are up across the board - chicken (Rs. 160 per kg), mutton (Rs 600 per kg), fruits (Rs. 130 kg for apple, Rs. 60 per kg for orange), sugar (Rs 75 per kg), imported coffee, noodles and mustard oil (Rs 135 per liter). The good news is that ag production is rising - Nepal is self-sufficient in paddy for the first time since 1990 - and poultry output is also on the rise.

Energy policy in Nepal is a mess. The NOC continues to incur massive losses. It has implemented price hikes, diesel and kerosene recently but not enough of offset rise in global prices and had to get government loans to pay off its debt. That's resulting in shortage of diesel. Government is trying to attract private investment in the fuel sector but the investment necessary is huge (Rs. 20 billion for crude oil & refinery, Rs 10 billion for refined products and Rs. 3 billion for LPG). Shortage of electricity continues with load-shedding increased to 69 hours per week. The government is trying to alleviate the problem by increasing import of electricity from India to 245MW by 2013 from 100MW currently.

On the macroeconomic front, the BoP surplus swelled to Rs. 34 billion in Q1 2011/12 on the back of Rs. 76 billion in remittances. The NLSS 2010 is set to declare 13 percent poverty rate in Nepal. Poverty is defined as less than 2,200 calorie consumption per day.

Tourism is a relatively bright spot with introduction of skydiving and expansion of paragliding in Pokhara, and enlargement of Nagarkot resort. Annapurna area saw 100K visitors during 2009/10. On the flip-side, Oberoi Group has sold Rs. 123 million stake in the Soaltee Hotel to NE Group.

Telecom is another hot area. MoF's Economic Survey confirms the strength of the sector. Around 42% of the population has access to telecom service (90% of that is mobile). Not surprisingly, NT's daily revenue has reached Rs. 90 million.

Investment climate in Nepal is not conducive and that's a well known fact. Bhrikuti Paper and Pulp Limited closed after 25+ years in service. Also more than 32 factories have closed in the Sunsari-Morang Industrial Corridor. One of the problems is militant labor but an agreement between FNCCI and big trade unions on no-work-no-pay could help towards solving that issue. Government is also trying too enable investment by establishing SEZ in different parts of the country - Panchkhal (Kavre) and 12 other locations.

Interesting tidbits - Nepal TV is going digital by 2017. Khetan Group sold 22% stake in Bottlers Nepal to Gorkha Brewery for Rs 725 million. Now you can order your daura Suruwal online from a variety of vendors. Biratnagar has the first apartment complex but ready to pay Rs 2.2 milion for 470 sq ft "hole in the wall".