BBC Nepali Service interviewed Energy Minister Dr. Prakash Saran Mahat (प्रकाशशरण महत) on February 3, 2010 regarding load shedding and recent hike in electricity tariff.
Showing posts with label Interview. Show all posts
Showing posts with label Interview. Show all posts
Saturday, February 06, 2010
Energy Minister Mahat Defends Government's Policy
BBC Nepali Service interviewed Energy Minister Dr. Prakash Saran Mahat (प्रकाशशरण महत) on February 3, 2010 regarding load shedding and recent hike in electricity tariff.
Sunday, February 15, 2009
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.
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.
Sunday, February 08, 2009
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.
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.
Sunday, December 28, 2008
"Corruption and insecurity" the twin challenges for Nepali business
"Corruption and insecurity" the twin challenges for Nepali business
NepaliTimes, Issue #431 (26-Dec-08 to 01-Jan-09)
Volker Kleinn is a retired European executive who worked in senior management positions in companies such as Apollo Computer, Autodesk and PSInet. After retirement, he has worked as a business volunteer in Bosnia, Romania, Bulgaria and Nepal. He was in Kathmandu in November as a consultant to Himalmedia and other companies. Below is an extract of a conversation I had with him.
How did you get started on advising private businesses in developing countries?
Volker Kleinn: When I retired in 1999, I registered with the German Senior Expert Services (SES) and with the Swiss Senior Expert Corps (SEC), a branch of Swisscontact. These organisations offer an opportunity for retired professionals to share their experience and expertise with companies and individuals in developing countries on a voluntary basis. The 'veterans' offer their time free of charge, the German or Swiss tax payers contribute to travel expenses and the organisation that is asking for advice is supposed to cover expenses for accommodation and meals. My first assignments were in Bosnia in 1999.
What are some of the 'evergreen' business problems in developing countries?
Because of my experience and background in general management, I normally work with the CEO and his team on business processes, organisation and strategy. One topic that is always 'recurring' is measurement. It is my conviction that you can only manage what you measure, and measurement is only possible if there are goals and plans in place. Most of the companies that I have worked with in developing countries did not have formal budgets and goals, neither for revenue nor for expenses.
How would you evaluate the dynamism or lack thereof of the Nepali private sector?
Based on my experience over the last six years, I have observed a deficit of entrepreneurial behavior in Nepal. One of the prerequisites of management is initiative and drive. These attributes are underrepresented in the companies I have worked with. Furthermore I have experienced a reluctance of managers to subject themselves to measurements. This leads to a lack of accountability within an organisation.
What have you seen as Nepal's challenges for entrepreneurship and business growth in times ahead?
In all developing countries there are two major obstacles for development, investment and business growth. These are a) corruption and b) insecurity, unreliability and unpredictability of the legal system. These two hurdles make the life of entrepreneurs very difficult in Nepal as well. The result has been a withdrawal of foreign investment from the country. The main challenge of the private sector in Nepal will be to pressure the government to put an end to corruption and to provide assurance that the legal system will enforce the law.
Businesses are under attack in Nepal. How should Nepali businesses communicate what they do to the public?
The current demographic data suggest that many young people will enter into the 'working' age over the next few years. The public needs to understand that companies can only offer jobs if they are profitable. Profitability is an economic sign of health for a company. A company making losses will go bankrupt sooner or later and destroy jobs. Only in a positive business environment will entrepreneurs invest in order to create jobs.
You've worked in Asia, Europe and America. What differences have you found in these three regions when it comes to doing business?
One of the major differences I have observed is the time horizon. In America, the business is driven with a very short term view, ie to produce results this quarter. Although a lot of European companies are following this trend there is still a somewhat long-term view in European businesses. In Asia, especially in Japan, business people take a long-term view in their expectations of results. In addition, I have noted that the business environment in America is very homogeneous in comparison to Europe and Asia. This is amongst other factors due to which the US is one country with one language and one currency. Europe and Asia are much more diverse and heterogeneous.
NepaliTimes, Issue #431 (26-Dec-08 to 01-Jan-09)
Volker Kleinn is a retired European executive who worked in senior management positions in companies such as Apollo Computer, Autodesk and PSInet. After retirement, he has worked as a business volunteer in Bosnia, Romania, Bulgaria and Nepal. He was in Kathmandu in November as a consultant to Himalmedia and other companies. Below is an extract of a conversation I had with him.
How did you get started on advising private businesses in developing countries?
Volker Kleinn: When I retired in 1999, I registered with the German Senior Expert Services (SES) and with the Swiss Senior Expert Corps (SEC), a branch of Swisscontact. These organisations offer an opportunity for retired professionals to share their experience and expertise with companies and individuals in developing countries on a voluntary basis. The 'veterans' offer their time free of charge, the German or Swiss tax payers contribute to travel expenses and the organisation that is asking for advice is supposed to cover expenses for accommodation and meals. My first assignments were in Bosnia in 1999.
What are some of the 'evergreen' business problems in developing countries?
Because of my experience and background in general management, I normally work with the CEO and his team on business processes, organisation and strategy. One topic that is always 'recurring' is measurement. It is my conviction that you can only manage what you measure, and measurement is only possible if there are goals and plans in place. Most of the companies that I have worked with in developing countries did not have formal budgets and goals, neither for revenue nor for expenses.
How would you evaluate the dynamism or lack thereof of the Nepali private sector?
Based on my experience over the last six years, I have observed a deficit of entrepreneurial behavior in Nepal. One of the prerequisites of management is initiative and drive. These attributes are underrepresented in the companies I have worked with. Furthermore I have experienced a reluctance of managers to subject themselves to measurements. This leads to a lack of accountability within an organisation.
What have you seen as Nepal's challenges for entrepreneurship and business growth in times ahead?
In all developing countries there are two major obstacles for development, investment and business growth. These are a) corruption and b) insecurity, unreliability and unpredictability of the legal system. These two hurdles make the life of entrepreneurs very difficult in Nepal as well. The result has been a withdrawal of foreign investment from the country. The main challenge of the private sector in Nepal will be to pressure the government to put an end to corruption and to provide assurance that the legal system will enforce the law.
Businesses are under attack in Nepal. How should Nepali businesses communicate what they do to the public?
The current demographic data suggest that many young people will enter into the 'working' age over the next few years. The public needs to understand that companies can only offer jobs if they are profitable. Profitability is an economic sign of health for a company. A company making losses will go bankrupt sooner or later and destroy jobs. Only in a positive business environment will entrepreneurs invest in order to create jobs.
You've worked in Asia, Europe and America. What differences have you found in these three regions when it comes to doing business?
One of the major differences I have observed is the time horizon. In America, the business is driven with a very short term view, ie to produce results this quarter. Although a lot of European companies are following this trend there is still a somewhat long-term view in European businesses. In Asia, especially in Japan, business people take a long-term view in their expectations of results. In addition, I have noted that the business environment in America is very homogeneous in comparison to Europe and Asia. This is amongst other factors due to which the US is one country with one language and one currency. Europe and Asia are much more diverse and heterogeneous.
‘There is no control over labour’
‘There is no control over labour’
ekantipur, 26-Dec-08
Sanjiv Keshava is managing director of Surya Nepal Pvt. Ltd. He has been with ITC of India, which owns 59 percent of Surya Nepal, since 1989. Before he came to Kathmandu in May, he set up ITC's Wills Lifestyle business. He talked to The Kathmandu Post about the company's garment business, labour and power problems and expansion plans. Excerpts:
Besides cigarettes, you are also involved in garments. Tell us about it.
We have a garment factory in Biratnagar. We export garments to India, which at the moment is the biggest market for us. We have also started exporting to Europe and the U.S.A. We also manufacture garments for the domestic market. We have two brands here - John Players and Springwood. It is very difficult to find out our share of the Nepali market because there is so much inflow from China and Thailand. That is really the unbranded segment, and we don't have statistics on that. According to our estimates, we have a 5 percent market share.
It's doing well because our factories are managed wonderfully. We have invested in technology. We provide continuous training to our labour force to upgrade their skills. We concentrate on high productivity. We have 330 workers directly employed and 300 who are contracted.
What are your expansion plans?
We have also entered the match sector - Teer. We have set up different standards for quality matches. We do not have the capacity to sell all over Nepal. And we are examining other sectors - food and personal care which includes cosmetics. We are examining a whole host of product categories to see their viability. That is still under consideration. There are many categories under food. We had a plan to get a hotel. We are still looking around for one.
You are at present facing a lot of problems with labour.
The major issue is that there is no control over labour. We are probably the highest payers in the country as far as labour is concerned. If you examine all the other industries, the average labour payout for skilled factory labour is almost Rs. 20,000 a month. That is a huge amount. Despite that the government announced minimum wages, and all our workers came back and wanted a minimum wage increase across the board. As you know, the Simara factory was closed for six days over the same issue.
The demands were unreasonable and illegal because we are already paying above the minimum wage table. It's a minimum wage revision. For workers earning below the minimum wage, the table has been increased. But for a person who is already earning Rs. 15,000 to 20,000 per month, why should he get a minimum wage revision? He is governed by the long-term agreement that the company has signed with him. And he is already getting an increment every year - a natural increase in the salary. Despite that they put forward various demands. They shut down the factory. Negotiations are still on. We are not going to give in to the minimum wage demand. We are looking at signing a new long-term agreement with labour. Labour is the biggest challenge at the moment.
How does it affect you expansion plans?
Definitely, it will slow down the entire expansion plan because unless this issue is resolved I don't think any investment is going to come to Nepal. The government needs to have some control over labour, they need to have some discipline, they need to have good arbitration, strengthen existing laws and create an investment friendly climate. It is one thing to say come and invest, but why should anyone invest when they are held to ransom?
You are also facing problems with power.
There is no power. Power is a major mismanaged issue. That puts a huge financial burden on us because we run on capital power. The differential in diesel generated power and hydropower is huge. Unless the government looks into this very seriously, there is no scope for any industrialisation happening in Nepal.
People who work in your marketing section are sought after. Why is this so?
I think it's the way we operate, the training we provide our people. The systems and processes we have are extremely strong. That is a very sought after quality. At the end of the day, an organization only consists of human resources.
How has working in Nepal been like?
It is a very rewarding experience. Nepal has its problems like any other country, but it also has its potentials. There is a lot that can be done to exploit that potential. It's a land with water and natural resources. I think all these can be worked with to create wealth. It's got tourism which is a major industry.
How do Nepali professionals compare with others you have worked with?
Perhaps the level of exposure and education here is not as high. India is a far more industrialised country. To that extent, the exposure to the global market is higher, there is more investment in technology and infrastructure is far more developed. There are very well educated Nepali resources available. I think your management and engineering schools are doing a wonderful job.
ekantipur, 26-Dec-08
Sanjiv Keshava is managing director of Surya Nepal Pvt. Ltd. He has been with ITC of India, which owns 59 percent of Surya Nepal, since 1989. Before he came to Kathmandu in May, he set up ITC's Wills Lifestyle business. He talked to The Kathmandu Post about the company's garment business, labour and power problems and expansion plans. Excerpts:Besides cigarettes, you are also involved in garments. Tell us about it.
We have a garment factory in Biratnagar. We export garments to India, which at the moment is the biggest market for us. We have also started exporting to Europe and the U.S.A. We also manufacture garments for the domestic market. We have two brands here - John Players and Springwood. It is very difficult to find out our share of the Nepali market because there is so much inflow from China and Thailand. That is really the unbranded segment, and we don't have statistics on that. According to our estimates, we have a 5 percent market share.
It's doing well because our factories are managed wonderfully. We have invested in technology. We provide continuous training to our labour force to upgrade their skills. We concentrate on high productivity. We have 330 workers directly employed and 300 who are contracted.
What are your expansion plans?
We have also entered the match sector - Teer. We have set up different standards for quality matches. We do not have the capacity to sell all over Nepal. And we are examining other sectors - food and personal care which includes cosmetics. We are examining a whole host of product categories to see their viability. That is still under consideration. There are many categories under food. We had a plan to get a hotel. We are still looking around for one.
You are at present facing a lot of problems with labour.
The major issue is that there is no control over labour. We are probably the highest payers in the country as far as labour is concerned. If you examine all the other industries, the average labour payout for skilled factory labour is almost Rs. 20,000 a month. That is a huge amount. Despite that the government announced minimum wages, and all our workers came back and wanted a minimum wage increase across the board. As you know, the Simara factory was closed for six days over the same issue.
The demands were unreasonable and illegal because we are already paying above the minimum wage table. It's a minimum wage revision. For workers earning below the minimum wage, the table has been increased. But for a person who is already earning Rs. 15,000 to 20,000 per month, why should he get a minimum wage revision? He is governed by the long-term agreement that the company has signed with him. And he is already getting an increment every year - a natural increase in the salary. Despite that they put forward various demands. They shut down the factory. Negotiations are still on. We are not going to give in to the minimum wage demand. We are looking at signing a new long-term agreement with labour. Labour is the biggest challenge at the moment.
How does it affect you expansion plans?
Definitely, it will slow down the entire expansion plan because unless this issue is resolved I don't think any investment is going to come to Nepal. The government needs to have some control over labour, they need to have some discipline, they need to have good arbitration, strengthen existing laws and create an investment friendly climate. It is one thing to say come and invest, but why should anyone invest when they are held to ransom?
You are also facing problems with power.
There is no power. Power is a major mismanaged issue. That puts a huge financial burden on us because we run on capital power. The differential in diesel generated power and hydropower is huge. Unless the government looks into this very seriously, there is no scope for any industrialisation happening in Nepal.
People who work in your marketing section are sought after. Why is this so?
I think it's the way we operate, the training we provide our people. The systems and processes we have are extremely strong. That is a very sought after quality. At the end of the day, an organization only consists of human resources.
How has working in Nepal been like?
It is a very rewarding experience. Nepal has its problems like any other country, but it also has its potentials. There is a lot that can be done to exploit that potential. It's a land with water and natural resources. I think all these can be worked with to create wealth. It's got tourism which is a major industry.
How do Nepali professionals compare with others you have worked with?
Perhaps the level of exposure and education here is not as high. India is a far more industrialised country. To that extent, the exposure to the global market is higher, there is more investment in technology and infrastructure is far more developed. There are very well educated Nepali resources available. I think your management and engineering schools are doing a wonderful job.
Sunday, December 07, 2008
Next three years critical for hydropower
Next three years critical for hydropower
ekantipur, 6-Dec-08
Gyanendra Lal Pradhan, is one of the most vocal advocates of developing major hydropower projects in the country for the prosperity of its people. He has been campaigning for a hydropower revolution in Nepal for the last two decades. Given the new target set by the government producing 10000MW of power within the next decade, he has been working to convert this dream into reality. An electrical engineer from Maulana Azad College of Technology, India, he is the managing director of Trishakti Cable Industries. He is also the chairman of Nepal Hydro and Electric Pvt. Ltd. and Khudi Hydropower Ltd. He is one of the directors of Butwal Power Company and an executive member of Independent Power Producers Association in Nepal. Pradhan was also conferred with the 'Best Manager of the Year 2006' award by Management Association of Nepal and 'Best Entrepreneur' by Boss Business Magazine. He talked to Prithvi Man Shrestha of The Kathmandu Post about the current situation, prospect and strategies to be taken in the hydropower sector for larger development of the country.
Do you think the target of developing a 10000 MW hydropower project, is feasible or attainable in a decade?
There has been a national consensus among the political parties for the first time about the importance of developing the hydropower sector. It is one the few sectors, that has attained national consensus. Nepal has a huge potential of hydropower development and the desired market is just next door. Investors from around the world are ready to invest in the sector. In order to do so, the government has to try and create an investment friendly environment. Preparations for constructing a 3300MW plant have already started. If the government is able to retain investors' confidence for the next three years, then I don't think anyone can stop us from constructing such a big project. Therefore these three years are crucial in terms of determining the future of hydropower development in Nepal.
It has been a trend here for 'investors' to hold licenses for power projects that they don't make an attempt at developing. What do you think has to be done?
It is due to the government's weak policies of renewing such projects even when the construction companies have not started work. The government has the authority to revoke their licenses if they don't work. But, they should be allowed to take time until their license period is expired as per the law.
Why do you think the Nepali private sector is not enthusiastic in hydropower, even when there are foreign companies who are willing to invest?
The government needs to create a conducive environment for both domestic and international investors. The Nepali people are forced to live through extended periods of power cuts while Nepal Electricity Authority (NEA), a government entity, does not even rush to sign the Power Purchase Agreement (PPA) with the private investors. Last year, the authority signed an application for 7 MW against an application for 180 MW. Why will the private sector invest in projects if the power they generate is not purchased?
As an advocate of power export prospects of Nepal, what do you have to say about people who state that the country cannot prosper by exporting power so it should look at producing power for internal consumption only?
We have a potential of developing 200000MW hydropower. I don't support the idea that we are capable of producing just 84000MW. We will not require more than 20000MW by 2050. So what do we do about the surplus power? I support the idea that we need to ensure more domestic consumption first but we should also not rule out the export prospects.
Nepal's electricity is considered to be one of the most expensive in the world despite it being rich in water resources. Why?
The fault lies in the donor driven policy that rules us. When projects employ foreigners and massively use imported materials, the power will not be cheap. It might have been a necessity initially to employ foreigners just to transfer their skills and expertise. But, we have failed to learn their expertise and build up our own capability to develop the project. Another reason behind the expensive electricity can be the undersized projects in the country. For example, Likhu was initially licensed for 51MW. Now an Indian investor has licensed the same project for 121MW. It is not necessary to construct a big dam for a big project, but we need to focus on changing the size of machines used at the dam side. We need to focus on making the project as big is possible. Another factor to be taken under consideration is time management, if we complete the project before time or on time, then the project cost will definitely come down and result in lower electricity charges. The operation cost of power projects usually go down in later days unlike in other industries.
How are your companies, especially those related to the hydropower sector performing?
Butwal Power Company is doing good and we plan to develop projects of 100MW. We have established a new firm called 'Hydro Solution' which aims to develop many power projects by generating resources domestically and internationally. Hydro Solutions has set targets of completing works in 300MW projects within the next five years. We are planning to get involved in developing 10000MW within the next decade.
How has global recession affected investment in this sector?
Global recession has presented a golden opportunity
for hydropower developers as their project costs have decreased by 20 percent due to the fall of prices of steel rods and copper wires.
ekantipur, 6-Dec-08
Gyanendra Lal Pradhan, is one of the most vocal advocates of developing major hydropower projects in the country for the prosperity of its people. He has been campaigning for a hydropower revolution in Nepal for the last two decades. Given the new target set by the government producing 10000MW of power within the next decade, he has been working to convert this dream into reality. An electrical engineer from Maulana Azad College of Technology, India, he is the managing director of Trishakti Cable Industries. He is also the chairman of Nepal Hydro and Electric Pvt. Ltd. and Khudi Hydropower Ltd. He is one of the directors of Butwal Power Company and an executive member of Independent Power Producers Association in Nepal. Pradhan was also conferred with the 'Best Manager of the Year 2006' award by Management Association of Nepal and 'Best Entrepreneur' by Boss Business Magazine. He talked to Prithvi Man Shrestha of The Kathmandu Post about the current situation, prospect and strategies to be taken in the hydropower sector for larger development of the country.Do you think the target of developing a 10000 MW hydropower project, is feasible or attainable in a decade?
There has been a national consensus among the political parties for the first time about the importance of developing the hydropower sector. It is one the few sectors, that has attained national consensus. Nepal has a huge potential of hydropower development and the desired market is just next door. Investors from around the world are ready to invest in the sector. In order to do so, the government has to try and create an investment friendly environment. Preparations for constructing a 3300MW plant have already started. If the government is able to retain investors' confidence for the next three years, then I don't think anyone can stop us from constructing such a big project. Therefore these three years are crucial in terms of determining the future of hydropower development in Nepal.
It has been a trend here for 'investors' to hold licenses for power projects that they don't make an attempt at developing. What do you think has to be done?
It is due to the government's weak policies of renewing such projects even when the construction companies have not started work. The government has the authority to revoke their licenses if they don't work. But, they should be allowed to take time until their license period is expired as per the law.
Why do you think the Nepali private sector is not enthusiastic in hydropower, even when there are foreign companies who are willing to invest?
The government needs to create a conducive environment for both domestic and international investors. The Nepali people are forced to live through extended periods of power cuts while Nepal Electricity Authority (NEA), a government entity, does not even rush to sign the Power Purchase Agreement (PPA) with the private investors. Last year, the authority signed an application for 7 MW against an application for 180 MW. Why will the private sector invest in projects if the power they generate is not purchased?
As an advocate of power export prospects of Nepal, what do you have to say about people who state that the country cannot prosper by exporting power so it should look at producing power for internal consumption only?
We have a potential of developing 200000MW hydropower. I don't support the idea that we are capable of producing just 84000MW. We will not require more than 20000MW by 2050. So what do we do about the surplus power? I support the idea that we need to ensure more domestic consumption first but we should also not rule out the export prospects.
Nepal's electricity is considered to be one of the most expensive in the world despite it being rich in water resources. Why?
The fault lies in the donor driven policy that rules us. When projects employ foreigners and massively use imported materials, the power will not be cheap. It might have been a necessity initially to employ foreigners just to transfer their skills and expertise. But, we have failed to learn their expertise and build up our own capability to develop the project. Another reason behind the expensive electricity can be the undersized projects in the country. For example, Likhu was initially licensed for 51MW. Now an Indian investor has licensed the same project for 121MW. It is not necessary to construct a big dam for a big project, but we need to focus on changing the size of machines used at the dam side. We need to focus on making the project as big is possible. Another factor to be taken under consideration is time management, if we complete the project before time or on time, then the project cost will definitely come down and result in lower electricity charges. The operation cost of power projects usually go down in later days unlike in other industries.
How are your companies, especially those related to the hydropower sector performing?
Butwal Power Company is doing good and we plan to develop projects of 100MW. We have established a new firm called 'Hydro Solution' which aims to develop many power projects by generating resources domestically and internationally. Hydro Solutions has set targets of completing works in 300MW projects within the next five years. We are planning to get involved in developing 10000MW within the next decade.
How has global recession affected investment in this sector?
Global recession has presented a golden opportunity
for hydropower developers as their project costs have decreased by 20 percent due to the fall of prices of steel rods and copper wires.
Monday, February 18, 2008
Intervew: ‘Nepal’s pharmaceutical market is worth Rs 10b’
Intervew: ‘Nepal’s pharmaceutical market is worth Rs 10b’
eKantipur.com, 17-Feb-08
Umesh Lal Shrestha is managing director of Quest Pharmaceutical, one of the leading drug producing companies in Nepal. A science graduate, Shrestha has been involved in this sector for more than three decades. He is also the current president of the Association of Pharmaceutical Producers of Nepal (APPON). In an interview with the Post, Shrestha talked about the present status of the pharmaceutical sector and its prospects in Nepal. Excerpts:
Tell us about Quest's performance.
Quest is one of the leading pharmaceutical companies in the country. It is growing at an annual rate of 15 percent. Quest is also a pioneer producer of specialized products in Nepal like drugs used to treat heart disease, blood pressure and diabetes. The company was established seven years ago, and presently employs a staff of more than 150 persons. We believe in innovation and ethical marketing. Over the last seven years, our investment has doubled from Rs 50 million to Rs 100 million.
How is the sector expanding in Nepal?
There are 40 pharmaceutical companies in Nepal at present. Likewise, the size of the pharmaceutical market has crossed Rs 10 billion. This sector has made a huge leap forward over the period of the last two decades, but we still depend on imports to fulfill more than 60 percent of the total national drug requirement. Investments in the pharmaceutical industry have swelled to around Rs 5 billion. The overall market for pharmaceutical products is growing by around 13 percent annually. However, competition among the producers is very intense, and that has depressed the rate of return for the companies.
How does APPON assess the government's policies?
The government's Drug Act has become obsolete. It should be amended as per the changing situation in order to encourage Nepali pharmaceutical producers. The government should provide different incentives like tax exemptions and other rebates to indigenous producers. The government should learn from the success of Bangladesh, which has emerged as one of the leading exporters of pharmaceutical products by expanding its market to more than 92 countries. We can also reach international markets like Bangladesh has done, but developing this sector does not figure in our government's list of priorities. The government should establish a Special Economic Zone for the pharmaceutical sector and provide electricity and water at concessionary rates.
Can Nepal really export pharmaceutical products to the international market?
Yes, it can. Our labor cost is low, and the customs duty imposed on raw materials is less than in other countries. That places us in an advantageous position. There are 100 countries in the world that do not manufacture any medicinal drugs. That market represents a huge potential for our industry to tap. Of course, we need modern technology and skilled manpower to increase our competitiveness in the international market. But with the right mix of policy support and investment and technology, we can overcome this constraint. If we realign our focus and garner state priority, Nepal has ample scope to export medicines.
How sensitive are domestic producers about making medicines more accessible to poor people?
We are providing more than 20 medicines, which are used to treat common diseases, at nominal rates. Our efforts so far have remained insufficient because imported medicines are mostly sold at higher prices. Our efforts alone will not be sufficient if the government continues to turn a deaf ear to this issue. Government support is crucial to bring down the cost of production.
APPON organized the second Pharma Expo 2008 on Saturday and Sunday. How did the event go?
It was successful in terms of meeting the objectives, which was to inform entrepreneurs and the public about the latest technologies and products available in the international market. A total of 43 foreign and 32 local companies were active participants in the two-day fair. Products worth Rs 100 million were traded. More than 5,000 people visited the expo, which was far more than our initial estimate of 3,000 visitors.
What are your future plans?
As a leading pharmaceutical producer, we will continue to focus on innovation and come up with new products in the future. We have recently introduced Methyl Cobalimine, a vitamin which is a specialized product. We are penetrating South Asian markets and countries of the former Soviet Union as part of our plan to explore international markets. We are also developing skilled manpower through different training and specialized courses in and outside the country.
eKantipur.com, 17-Feb-08
Umesh Lal Shrestha is managing director of Quest Pharmaceutical, one of the leading drug producing companies in Nepal. A science graduate, Shrestha has been involved in this sector for more than three decades. He is also the current president of the Association of Pharmaceutical Producers of Nepal (APPON). In an interview with the Post, Shrestha talked about the present status of the pharmaceutical sector and its prospects in Nepal. Excerpts:
Tell us about Quest's performance.
Quest is one of the leading pharmaceutical companies in the country. It is growing at an annual rate of 15 percent. Quest is also a pioneer producer of specialized products in Nepal like drugs used to treat heart disease, blood pressure and diabetes. The company was established seven years ago, and presently employs a staff of more than 150 persons. We believe in innovation and ethical marketing. Over the last seven years, our investment has doubled from Rs 50 million to Rs 100 million.
How is the sector expanding in Nepal?
There are 40 pharmaceutical companies in Nepal at present. Likewise, the size of the pharmaceutical market has crossed Rs 10 billion. This sector has made a huge leap forward over the period of the last two decades, but we still depend on imports to fulfill more than 60 percent of the total national drug requirement. Investments in the pharmaceutical industry have swelled to around Rs 5 billion. The overall market for pharmaceutical products is growing by around 13 percent annually. However, competition among the producers is very intense, and that has depressed the rate of return for the companies.
How does APPON assess the government's policies?
The government's Drug Act has become obsolete. It should be amended as per the changing situation in order to encourage Nepali pharmaceutical producers. The government should provide different incentives like tax exemptions and other rebates to indigenous producers. The government should learn from the success of Bangladesh, which has emerged as one of the leading exporters of pharmaceutical products by expanding its market to more than 92 countries. We can also reach international markets like Bangladesh has done, but developing this sector does not figure in our government's list of priorities. The government should establish a Special Economic Zone for the pharmaceutical sector and provide electricity and water at concessionary rates.
Can Nepal really export pharmaceutical products to the international market?
Yes, it can. Our labor cost is low, and the customs duty imposed on raw materials is less than in other countries. That places us in an advantageous position. There are 100 countries in the world that do not manufacture any medicinal drugs. That market represents a huge potential for our industry to tap. Of course, we need modern technology and skilled manpower to increase our competitiveness in the international market. But with the right mix of policy support and investment and technology, we can overcome this constraint. If we realign our focus and garner state priority, Nepal has ample scope to export medicines.
How sensitive are domestic producers about making medicines more accessible to poor people?
We are providing more than 20 medicines, which are used to treat common diseases, at nominal rates. Our efforts so far have remained insufficient because imported medicines are mostly sold at higher prices. Our efforts alone will not be sufficient if the government continues to turn a deaf ear to this issue. Government support is crucial to bring down the cost of production.
APPON organized the second Pharma Expo 2008 on Saturday and Sunday. How did the event go?
It was successful in terms of meeting the objectives, which was to inform entrepreneurs and the public about the latest technologies and products available in the international market. A total of 43 foreign and 32 local companies were active participants in the two-day fair. Products worth Rs 100 million were traded. More than 5,000 people visited the expo, which was far more than our initial estimate of 3,000 visitors.
What are your future plans?
As a leading pharmaceutical producer, we will continue to focus on innovation and come up with new products in the future. We have recently introduced Methyl Cobalimine, a vitamin which is a specialized product. We are penetrating South Asian markets and countries of the former Soviet Union as part of our plan to explore international markets. We are also developing skilled manpower through different training and specialized courses in and outside the country.
Thursday, October 04, 2007
Interview - Siddhant Pandey (CEO, Ace Development Bank)
Interview - Siddhant Pandey (CEO, Ace Development Bank)
New Business Age, September 2007
Siddhant Pandey, CEO, Ace Development Bank, spells down the strategies of his company after it recently upgraded officially to a development bank from a finance company.
What are your plans for now after being a development bank?
The limited area of operation as a finance company was very restricting not only in terms of capital but also in terms of products and services. The upgrade has changed all this drastically. Now we can provide various services including multi currency transactions, traveler’s checks, debit and credit cards, ATMs, over draft facilities, current account, personal loans, locker facilities, e-banking, etc. With the capital increment our single borrower limit has increased three folds, which is going to enable us to have larger exposure in various projects. We are also planning to get very involved in micro-financing. In a nutshell our risk capacity has increased. The most significant risks to continuing growth currently relate to political and macro events which are outside our control. Recognizing that the effect of such risks materializing could be immediate and potentially severe, we remain strongly capitalized and liquid.
How are you going to use the massive increment of Rs. 230 million in the paid up capital?
The actual increment in term of cash was Rs. 196 million through our Rights issue. The Rs. 34 million addition to the paid up capital was through a bonus share dividend of 40 per cent that we declared in FY 2005-2006 before the Rights were issued. We are already making use of our funds, which can be seen through our high Credit to Deposit ratio. Our policy is to grow gradually with risk mitigation being the foremost factor.
What changes have you made in the organizational structure, human resource and market access to achieve the objective of profitably utilizing the additional capital?
The changes in the organization structure and recruitment of staffs to facilitate the growth have been taking place for the past year. We built our own building to meet the requirements of a development bank. The various new market areas we are penetrating has been facilitated by various departments which have been formed to meet those targets and expectations. Policy manuals and guidelines govern each and every department and the staff follow them in concert. Team work is expected from the staff members. For instance, for the past six months we have concentrated on the Merchant Banking activities, for which new staff were recruited to lead that department. Our treasury department works very closely with the Merchant banking department as does the credit and business development departments. There is a inter linkage between the various departments to lead the company to success. The newly formed compliance department ensures that good governance is consistently in practice.
What are going to be the major competitive strategies of Ace Development Bank? Rates, technology, branch network, range of services or something else?
In a highly competitive market we have to continue to evolve. However, the problems that belie that are a) small market and b) restrictive regulatory constraints on innovative financial products. In terms of reinventing the wheel, we will be providing all the facilities that the other development banks are providing as I mentioned earlier. In terms of being innovative, we have applied to the regulators for permission for a few products that will be different and we are awaiting their permission. These products will be concerned with infrastructure development and micro financing. Micro finance is an area I would like to get Ace Development Bank heavily involved in.
Our first branch will be in operation by mid-September in Birgunj and after that there will be another venue that we will open up, which awaits permission from NRB. The plan is to set up, at least, two branches in the first and second years and three thereafter.
If the regulatory bodies do not evolve then the question of development in the financial sector will be shunted and all we will see is growth and no development. What then will be our next trick in the banking industry? To invent fire?
Will you continue with the merchant banking services even after becoming a development bank?
We are now the only development bank with the license to undertake merchant banking activities. As I mentioned earlier we will continue to be aggressive in this area.
What explains the nearly 11 percent decline in the net profit of the company in the fiscal year 2006-07 compared to the previous year? The financial summary for 06-07 also shows a massive decline in the other operating income as well as in other operating expenses. How is it so?
The operating profit before provision increased by 14% in FY 2006-07 as compared to corresponding year. However, the net income decreased by 10.6 percent due to the heavy depreciation on the new building and equipment. There has been across the board increase in deposits, lending, fee income etc. The other factor that we could not capitalize in as in the previous year was the profit from sale of shares (44 million) and provisioning write back (38 million). In 2006-07 we had a total NPA of 1.15% as opposed to 1.51 the previous year.
The development banks and finance companies seem to be virtual commercial banks as they all are allowed to operate checking accounts. In this context, how logical do you think the current system of dividing them into categories?
There is a vast difference in the product range between a finance company and a development bank, but between a development bank and a commercial bank the only two activities that we cannot undertake are opening letters of credit and loan hypothecation. Finance Companies cannot give overdraft facility or give personal loans. Also the multi-currency transaction, demand drafts and the like are also not permitted. The division by category is only based on the capital structure and therefore seems to be the only parameter to weigh risk. Due to the lack of a credit rating agency, this seems the only method however illogical it may seem. Some “C” class institutions are performing better than some “A” class commercial banks. It is imperative that an independent credit agency be set up so that the public will be able to assess the risk methodologically.
How do you feel about the complaints from various quarters of the society including the NRB and the Finance Ministry that the banks and financial institutions are not going to the rural areas and not helping the SMEs? How well-founded is this complaint? What are more practical approaches to provide financial services to the rural areas and the SMEs?
There has to be a different directive governing loans and advances to the rural sector. The present rules dictate that collateral is a prerequisite. If the project is good and you base the loan on the future cash flow then the regulator will make you provide heavy provisioning. In order for the private sector banks to enter such a market there needs to be some malleability to the present directives. The new monetary policy has mentioned some improvements; but we have yet to see the new directives.
Looking at the future, hopefully peace will prevail and due to the competition it will be imperative for the banking sector to start penetrating the rural sector. Ace Development Bank has a strategy to commence operations in the rural sector. For which we plan to partner with rural communities.
New Business Age, September 2007
Siddhant Pandey, CEO, Ace Development Bank, spells down the strategies of his company after it recently upgraded officially to a development bank from a finance company.
What are your plans for now after being a development bank?
The limited area of operation as a finance company was very restricting not only in terms of capital but also in terms of products and services. The upgrade has changed all this drastically. Now we can provide various services including multi currency transactions, traveler’s checks, debit and credit cards, ATMs, over draft facilities, current account, personal loans, locker facilities, e-banking, etc. With the capital increment our single borrower limit has increased three folds, which is going to enable us to have larger exposure in various projects. We are also planning to get very involved in micro-financing. In a nutshell our risk capacity has increased. The most significant risks to continuing growth currently relate to political and macro events which are outside our control. Recognizing that the effect of such risks materializing could be immediate and potentially severe, we remain strongly capitalized and liquid.
How are you going to use the massive increment of Rs. 230 million in the paid up capital?
The actual increment in term of cash was Rs. 196 million through our Rights issue. The Rs. 34 million addition to the paid up capital was through a bonus share dividend of 40 per cent that we declared in FY 2005-2006 before the Rights were issued. We are already making use of our funds, which can be seen through our high Credit to Deposit ratio. Our policy is to grow gradually with risk mitigation being the foremost factor.
What changes have you made in the organizational structure, human resource and market access to achieve the objective of profitably utilizing the additional capital?
The changes in the organization structure and recruitment of staffs to facilitate the growth have been taking place for the past year. We built our own building to meet the requirements of a development bank. The various new market areas we are penetrating has been facilitated by various departments which have been formed to meet those targets and expectations. Policy manuals and guidelines govern each and every department and the staff follow them in concert. Team work is expected from the staff members. For instance, for the past six months we have concentrated on the Merchant Banking activities, for which new staff were recruited to lead that department. Our treasury department works very closely with the Merchant banking department as does the credit and business development departments. There is a inter linkage between the various departments to lead the company to success. The newly formed compliance department ensures that good governance is consistently in practice.
What are going to be the major competitive strategies of Ace Development Bank? Rates, technology, branch network, range of services or something else?
In a highly competitive market we have to continue to evolve. However, the problems that belie that are a) small market and b) restrictive regulatory constraints on innovative financial products. In terms of reinventing the wheel, we will be providing all the facilities that the other development banks are providing as I mentioned earlier. In terms of being innovative, we have applied to the regulators for permission for a few products that will be different and we are awaiting their permission. These products will be concerned with infrastructure development and micro financing. Micro finance is an area I would like to get Ace Development Bank heavily involved in.
Our first branch will be in operation by mid-September in Birgunj and after that there will be another venue that we will open up, which awaits permission from NRB. The plan is to set up, at least, two branches in the first and second years and three thereafter.
If the regulatory bodies do not evolve then the question of development in the financial sector will be shunted and all we will see is growth and no development. What then will be our next trick in the banking industry? To invent fire?
Will you continue with the merchant banking services even after becoming a development bank?
We are now the only development bank with the license to undertake merchant banking activities. As I mentioned earlier we will continue to be aggressive in this area.
What explains the nearly 11 percent decline in the net profit of the company in the fiscal year 2006-07 compared to the previous year? The financial summary for 06-07 also shows a massive decline in the other operating income as well as in other operating expenses. How is it so?
The operating profit before provision increased by 14% in FY 2006-07 as compared to corresponding year. However, the net income decreased by 10.6 percent due to the heavy depreciation on the new building and equipment. There has been across the board increase in deposits, lending, fee income etc. The other factor that we could not capitalize in as in the previous year was the profit from sale of shares (44 million) and provisioning write back (38 million). In 2006-07 we had a total NPA of 1.15% as opposed to 1.51 the previous year.
The development banks and finance companies seem to be virtual commercial banks as they all are allowed to operate checking accounts. In this context, how logical do you think the current system of dividing them into categories?
There is a vast difference in the product range between a finance company and a development bank, but between a development bank and a commercial bank the only two activities that we cannot undertake are opening letters of credit and loan hypothecation. Finance Companies cannot give overdraft facility or give personal loans. Also the multi-currency transaction, demand drafts and the like are also not permitted. The division by category is only based on the capital structure and therefore seems to be the only parameter to weigh risk. Due to the lack of a credit rating agency, this seems the only method however illogical it may seem. Some “C” class institutions are performing better than some “A” class commercial banks. It is imperative that an independent credit agency be set up so that the public will be able to assess the risk methodologically.
How do you feel about the complaints from various quarters of the society including the NRB and the Finance Ministry that the banks and financial institutions are not going to the rural areas and not helping the SMEs? How well-founded is this complaint? What are more practical approaches to provide financial services to the rural areas and the SMEs?
There has to be a different directive governing loans and advances to the rural sector. The present rules dictate that collateral is a prerequisite. If the project is good and you base the loan on the future cash flow then the regulator will make you provide heavy provisioning. In order for the private sector banks to enter such a market there needs to be some malleability to the present directives. The new monetary policy has mentioned some improvements; but we have yet to see the new directives.
Looking at the future, hopefully peace will prevail and due to the competition it will be imperative for the banking sector to start penetrating the rural sector. Ace Development Bank has a strategy to commence operations in the rural sector. For which we plan to partner with rural communities.
Monday, September 24, 2007
‘Garment industry can regain past glory’ - PK Pokhrel, MD, Ami Apparels
‘Garment industry can regain past glory’
eKantpur.com, 23-Sep-2007
Prashant K Pokhrel is managing director of Sunsari-based Ami Apparels, which is one of the leading exporters of readymade garment products. Pokhrel holds Master's degree in Economics and is the first Vice-President of Garment Association - Nepal (GAN). He talked to the Post about problems and prospects of the largest foreign currency spinning industry of Nepal. Excerpts
Tell us about the performances of Ami Apparels?
It is one of the few garment factories that are operating at this most adverse situation in decades. Despite the situation, our exports has maintained a moderate growth and hovered around US$4.4 million a year in the last few years. India, which is an emerging market for Nepal, consumes the major share of our exports. We have focused on product diversification in Europe and other countries, including India, where Nepal enjoys a duty free access. We contribute around Rs 3 million to the national coffer as income tax each year. We boast of being in a list of top five garment factories in the country, which are performing well amid hard time. Ami employs nearly 1000 workers at present and almost all of them are Nepalis. We commenced our business with the investment of Rs 10 million, which now has reached to around Rs 60 million.
What about the overall scenario of garment industry in Nepal?
Nepali readymade garment industry is facing a tough time at the moment due to impact of decade long conflict, labor problems and phase out of quota system in global apparel trading from 2005. Over the past five years, number of garment factories have dropped to about fifty from over 1200, dragging down the employment in the industry to meager 5,000 from around 100,000. Total export of garment slid down to US $47.7 million in 2006, from $105.9 million in 2002. It is expected to nosedive to around $30 million in 2007. In the past we were entirely dependent on the US market, but now we have diversified markets to Canada, Australia and India. As a result, share of exports to USA has dropped significantly compared to the past. Once the sector used to account for some 45 percent of total exports, but now, it is hardly contributing 15 percent. Out of the total investment of Rs 6 billion, only one billion is currently operational.
Do you see any possibility of Nepali garment industry regaining that past glow?
Despite all obstacles, I see a tremendous potentiality in the sector. India this week decided to lift 4 percent extra duty on Nepali garment exports. We can capitalize on it and tap the vast market of India, as Bangladesh is aspiring to recently. Geographical proximity with India will add advantage to Nepal. We will also get an opportunity to retrieve the lost US market, as USA is expected to provide duty free access to garment products of least developed countries like Nepal. We are also enjoying comparatively lower production cost compared to our competitor countries.
How will duty-free import agreement India signed with Bangladesh impact Nepali readymade garment exports to India?
I don't think it will pose any serious threat to the Nepali exports. India is a huge market. Besides, Bangladesh has received duty free export facility for just 8 million pieces, whereas we enjoy the facility for unlimited quantity. But still, there is no room for complacency in the business. We must build deeper business ties with diverse set of importers. Most importantly, we must settle all internal constraints to enjoy the benefits in the Indian as well as other markets.
How are you coping with the increasing global competition?
Well, adoption of new technology has helped us stand out better than other countries. We are using latest technology in the business. Situation of skilled manpower crunch does not exist now because as we have sufficient Nepali manpower specialized in different lines of production.
What sort of problem is the industry facing from labor?
The problem of labor exploded after Maoist launched labor union expansion drive in a bid to strengthen the party's position in open politics. To attain that, it placed various high-sounding but unreasonable demands. The workplace harmony vanished as already existing trade unions opposed the Maoist's drive. Ultimately, that caused dozens of factories to close down productions. Despite the situation, I believe labor problem can be solved soon. Of late, trade unions have begun to understand the problems of the industry. If employers are allowed to adopt hire and fire policy with a condition of employees' social security, labor problem will be solved. So, a policy of flexicurity- a combination of flexibility and social security - should be embraced to end labor unrest.
eKantpur.com, 23-Sep-2007
Prashant K Pokhrel is managing director of Sunsari-based Ami Apparels, which is one of the leading exporters of readymade garment products. Pokhrel holds Master's degree in Economics and is the first Vice-President of Garment Association - Nepal (GAN). He talked to the Post about problems and prospects of the largest foreign currency spinning industry of Nepal. Excerpts
Tell us about the performances of Ami Apparels?
It is one of the few garment factories that are operating at this most adverse situation in decades. Despite the situation, our exports has maintained a moderate growth and hovered around US$4.4 million a year in the last few years. India, which is an emerging market for Nepal, consumes the major share of our exports. We have focused on product diversification in Europe and other countries, including India, where Nepal enjoys a duty free access. We contribute around Rs 3 million to the national coffer as income tax each year. We boast of being in a list of top five garment factories in the country, which are performing well amid hard time. Ami employs nearly 1000 workers at present and almost all of them are Nepalis. We commenced our business with the investment of Rs 10 million, which now has reached to around Rs 60 million.
What about the overall scenario of garment industry in Nepal?
Nepali readymade garment industry is facing a tough time at the moment due to impact of decade long conflict, labor problems and phase out of quota system in global apparel trading from 2005. Over the past five years, number of garment factories have dropped to about fifty from over 1200, dragging down the employment in the industry to meager 5,000 from around 100,000. Total export of garment slid down to US $47.7 million in 2006, from $105.9 million in 2002. It is expected to nosedive to around $30 million in 2007. In the past we were entirely dependent on the US market, but now we have diversified markets to Canada, Australia and India. As a result, share of exports to USA has dropped significantly compared to the past. Once the sector used to account for some 45 percent of total exports, but now, it is hardly contributing 15 percent. Out of the total investment of Rs 6 billion, only one billion is currently operational.
Do you see any possibility of Nepali garment industry regaining that past glow?
Despite all obstacles, I see a tremendous potentiality in the sector. India this week decided to lift 4 percent extra duty on Nepali garment exports. We can capitalize on it and tap the vast market of India, as Bangladesh is aspiring to recently. Geographical proximity with India will add advantage to Nepal. We will also get an opportunity to retrieve the lost US market, as USA is expected to provide duty free access to garment products of least developed countries like Nepal. We are also enjoying comparatively lower production cost compared to our competitor countries.
How will duty-free import agreement India signed with Bangladesh impact Nepali readymade garment exports to India?
I don't think it will pose any serious threat to the Nepali exports. India is a huge market. Besides, Bangladesh has received duty free export facility for just 8 million pieces, whereas we enjoy the facility for unlimited quantity. But still, there is no room for complacency in the business. We must build deeper business ties with diverse set of importers. Most importantly, we must settle all internal constraints to enjoy the benefits in the Indian as well as other markets.
How are you coping with the increasing global competition?
Well, adoption of new technology has helped us stand out better than other countries. We are using latest technology in the business. Situation of skilled manpower crunch does not exist now because as we have sufficient Nepali manpower specialized in different lines of production.
What sort of problem is the industry facing from labor?
The problem of labor exploded after Maoist launched labor union expansion drive in a bid to strengthen the party's position in open politics. To attain that, it placed various high-sounding but unreasonable demands. The workplace harmony vanished as already existing trade unions opposed the Maoist's drive. Ultimately, that caused dozens of factories to close down productions. Despite the situation, I believe labor problem can be solved soon. Of late, trade unions have begun to understand the problems of the industry. If employers are allowed to adopt hire and fire policy with a condition of employees' social security, labor problem will be solved. So, a policy of flexicurity- a combination of flexibility and social security - should be embraced to end labor unrest.
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