Issuu on Google+

♦ Bio-Diesel as Alternative Fuel : An Economic Perspective

♦ Wine Industry must Emerge

♦ Ad Industry Seeks National Policy


www.corporatenepal.com.np

1


...TOWARDS

to Go ?

3 What Bhattarai should Do ?

ADVERTISING

PRECISION

20 Ad Industry Seeks National Policy

4 Performance Ind icators of Top Commercial Banks

22 DIGI MARKET

BANKING

24-41 COVER CHRONICLE

5 Commercial Banks Satisfactory Despite Challenges

26 'Economic break through is never possible without a severe crisis'

ENERGY 7 Bio-Diesel as Alternative Fuel : An Economic Perspective 10 APF-Flying Squad will Monitor Custom-Border Aomalies

42 An Account of Leakage

INDUSTRY 12 Wine Industry must Emerge HEALTH ECONOMY

RIDING

'Autonomous authority is necessary to handle trade'

44 Wow ! AVANZA brings Bonanza !! 45 Discover Your Stylish Ride MANAGEMENT

38

46 Time Value of Money

14 Health is Wealth or Vice versa ?

47 Management Med itation with Kamal Gynwali Time Management

INFORMATION TECHNOLOGY

BRANDING

17 E-Enterprise System : Where

48 Nano Pours New Joy in Nepal

2

36

40 Economic Policy Prescriptions CONTEXT

11 'We are focusing on academic courses'

'Twenty years plan is imperative for development'

31 In Pursuit of Asian Perspective

TAXATION

CORPORATE CHAT

24

'Micro financing could promote agriculture'

www.corporatenepal.com.np


...towards

What Bhattarai should Do ?

M

aoist vice chairman Dr. Baburam Bhattarai is Prime Minister of Nepal. The account does not conclude here, he has to show his ability as a take-charge person to control price hike, hoardings and inflation. He should remain aware of nepotism and partisan characteristics and should go ahead with rightful judgements. Dr. Bhattarai should be alert keeping his image neat and clean. ♦ Nepalese business community is feeling quite insecure. To make business community feel secured, the establishment of peace is necessary. For establishing peace in Nepal Prime Minister should convinced his comrades for the urgent integration of the People liberation Army. ♦ Constitution has been interlinked with the peace process. So the Prime Minister should succeed committing all parties on the integration model within the proposed timeframe. ♦ For the anticipated relief to the people Dr. Bhattarai should be aware of removing the supply side bottlenecks and monopolistic market of daily consumable goods. Nepalese grand festivals like Dashain, Tihar, Chhath are at hand, so the government should properly manage the supply and cost effective access of market. ♦ The effective supply system of petroleum products and its proper use should be ensured with effective plans. ♦ Government should emphasise on agriculture and tourism promotion for the development in coming days. Banks and financial Institutions should be encouraged to invest in commercial farming and the organic touristic products development. ♦ Government should introduce plans creating jobs to the educated and semi-skilled people and attract the new investors. ♦ Business community has been disturbed by labour unrests and on the other hand labours have been worried for the job security. The government should pave a road map solving issues for long run stabilising economic sector through healthy industrial relations. ♦ The utmost necessity at present is to introduce such a mechanism in which the misuse of public property by political authorities can be barred. Under the cover of political authorities public properties have been misused for earning personal returns. ♦ Government should be strict to control the electricity leakages. Since the winter season is nearer, government should have proactive plan to prevent lengthy hours of load shedding.

VOL. 02, ISSUE 01, SEPTEMBER 2011

Advisory Board Deependra Bd. Kshetry Radhesh Pant Dr. Chandra Mani Adhikari Krishna Acharya Prabal Raj Pokhrel - Media Tulasi Kafle - Corporate Law Rudra Sharma - International Law

Editor Amrit Kharel Managing Editor Indra Baniya Associate Editors Ramesh Ghimire Sara Devkota Khagendra Prasain Dharmendra Karna

All editorial enquires are encouraged to be sent to Email : editorial@corporatenepal.com.np All advertising enquires should be sent to Email : marketing@corporatenepal.com.np Tel: 01-4780082 Fax : 977-01-4780082 The Economic System is published from Kathmandu, by Corporate Media Partner Pvt. Ltd., Anamnagar-32, Kathmandu, Nepal. Email : corporate@corporatenepal.com.np Website: www.corporatenepal.com.np A note to readers : The views expressed in the articles are of the authors’ and do not necessarily reflect on the publisher. If you are interested in writing for 'The Economic System' please send in your articles, reports in approximately one thousand words on any economic issue that you feel strongly about. Write to: editorial@corporatenepal.com.np The content of this publication may not be published in any form whatsoever, without the prior consent of the publisher. But citation for academic and research purpose referring the source is permitted. All materials © The Economic System All rights reserved.

Printed by: Indreni Offset Press Pvt. Ltd. Anamnagar, Kathmandu. Distributor : R.B. News Paper Traders Newroad, Kathmandu Publisher

www.corporatenepal.com.np

Corporate Media Partner Pvt. Ltd. D.A.O. Office Regd. No 27/067/68 3


Precision

Performance Indicators of Top Commercial Banks Net Profits of Top Seven Commercial Banks in 2010/11

(Rs. in million)

14.64

Banks

Net Profit (Rs.) Market Share

Rastriya Banijya Bank Ltd. (RBB)

1,759.25

12.79%

AgriculturalDevelopment Bank Ltd. (ADBL)

1,608.08

11.69%

NABIL Bank Ltd. (NABIL)

1,294.04

9.41%

Nepal Investment Bank Ltd. (NIBL)

1,263.33

9.19%

Standard Chartered Bank Nepal Ltd. (SCBNL)

1,119.17

8.14%

Everest Bank Ltd. (EBL)

931.30

6.77%

Bank of Kathmandu Ltd. (BOK)

605.15

4.40%

billion is the total net profit of the commercial banks as of 2010/11. commercial banks have accumulated the growth rate of 2.28 percent on net profit in comparison to the last year.

Deposit Mobilisations of Top Five Commercial Banks in 2010/11

(Rs. in million)

Banks

Total Deposit (Rs.) Market Share

Rastriya Banijya Bank Ltd. (RBB)

73,924.07

11.43%

Nepal Investment Bank Ltd. (NIBL)

50,139.08

7.75%

NABIL Bank Ltd. (NABIL)

49,696.11

7.69%

Nepal Bank Ltd. (NBL)

46,804.20

7.24%

Nepal SBI Bank Ltd. (NSBI)

42,415.44

6.56%

EPS and ROE of Top Commercial Banks

29.10

rupees is the earnings per share (EPS) of overall commercial banks in Nepal as of the net profit up to the last fiscal year 2010/11.The average return on equity (ROE) is 14.11 percent compared to 17.33 percent of the prior fiscal year.

Banks

EPS (Rs.)

ROE (%)

EBL

83.18

25.32

SCBNL

69.51

22.73

NABIL

63.75

25.23

www.corporatenepal.com.np

4 Honesty is the best policy - when there is money in it. - Mark Twain


Banking

Commercial Banks satisfactory despite challenges Machhapuchre appears depressing in Fewa-Lake of indicators By Our Correspondent

F

acing various challenges in the entire fiscal year, Nepalese commercial banks have even so accumulated pleasing business level.The whole fiscal year 2010/11 had been terrifying the banking sector enfolded by political insatiability, low rate of economic growth, widening deficit in balance of payment (BoP), and liquidity crunch like challenges. Likewise decreasing growth rate in the remittance inflow, late arrival of the national budget, capital mobilisation in non productive sectors like real estate and automobiles, source declaration clause for more than 1 million rupees and some grievances related with improper

governance in banking sector were additional vulnerabilities in the banking sphere. Nepal Rastra Bank (NRB) failed putting forward concrete regulations for banking sector boldly which was somehow criticised and the latest mission of IMF article IV has suggested the central bank for its effective intervention to the maladies over pouring the financial system. In such terrifying condition commercial banks have accumulated the growth rate of 2.28 percent on net profit in comparison to the last year. The total net profit of commercial banks is recorded at Rs.14.64 billion as of 2010/11. Rastriya Banijya Bank Ltd. (RBB), the State owned bank having huge deposit mobilisation, has bagged the

highest net profit whereas Nabil Bank Ltd. (NABIL)has stood first of its kind, earning the most net profit among private ‘A’ class banks.

Machhapuchre Bank Remains Last in Most Indicators Sad news for the shareholders of Machhapuchre Bank Ltd (MBL)! This bank has remained almost in the last position taking the major banking indicators into consideration. It has witnessed the shortfall in its profit ratio by 93.56 percent in last fiscal year. Similarly the bank has declined in the operating profit ratio by 165.52 percent. MBL is standing with decrease of 9.05 percent in deposit mobilisation and 1.61

www.corporatenepal.com.np

I never had a policy; I have just tried to do my very best each and every day. - Abraham Lincoln

5


Banking percent drop in lending. With the very low level of corporate governance within it, MBL is bearing the non performing loan (NPL) of 4.17 percent which is taken as a risky position in banking. The most disappointing is the average price earning (P/E) ratio of its share value, which is at 262.64. This shows the bank is quite in vulnerable position and risky enough to hold its share while the market price of its share is 263 times more than the earning per share.

Global Bank is First in Net Profit Growth Rate Global Bank Ltd. has increased its net profit by some 210 percent that is the highest one. Likewise Himalayan bank has increased its net profit by 74.69 percent whereas NMB Bank Ltd. has come across the growth of 50.26 percent. Kist Bank Ltd. and Bank of Asia collected the growth in their net profit by 40.44 and 28.22 percent respectively. DCBL Bank Ltd., Sunrise Bank Ltd., NCC Bank

Ltd. and NB bank Ltd accounted decline rate of 24.59, 29.22, 52.22 and 59.16 respectively. The growth of operating profit (before provisioning) of the commercial banks is raised by 8.73% to Rs.15.70 billion as

6

compared with the corresponding period of the preceding fiscal year. NABIL has earned the highest operating profit among all the banks during the period. The overall growth of the deposits of commercial banks compared to the previous year is 8.93% to Rs.687.57 billion at the end of the last fiscal year. RBB has largest share in overall deposits among the commercial banks whereas Nepal Investment Bank Limited (NIBL) leads the race among all the private ones. Similarly, the higher lending rate and subsequent increment in the yield on asset has led the commercial banks to the increase of total net interest income by 12.75 percent.

corresponding period of foregoing fiscal year. This indicates more credit facility was provided for long term projects like hydropower, manufacturing industry and service sector. However, in the review period, the average NPL increased to 2.41 percent of total loans which used to remain at 1.92 percent in the earlier year. The NPL of the four ‘A’ class banks has remained above 5% that is considered as much risky. These are Nepal Bangladesh Bank Ltd. (18.20 percent), RBB (10.12 percent), ADBL (8.64 percent) and Nepal Bank Ltd. (5.29 percent).

NMB and Prime Commercial Bank Leads in Lending Expansion

The earnings per share (EPS) of overall commercial banks have remained at Rs.29.10 whereas only 9 banks have earned above industry average. The average return on equity (ROE) is 14.11 percent compared to 17.33 percent of the prior fiscal year. This shows that commercial banks have failed increasing their profit in the ratio of paid up capital growth. Having highest EPS, Everest Bank Ltd. (EBL) with Rs. 83.18, Standard Chartered Bank Nepal Ltd. (SCBNL) with Rs. 69.51 NABIL with Rs. 63.75 are the top trios. On the part of return on equity (ROE), EBL (25.32 percent) is first, NABIL (25.23 percent) is second, SCBNL (22.73%) third, Bank of Kathmandu Ltd. (22.73 percent) fourth and NIC Bank Ltd.(22.02%) has remained at fifth. The overall average P/E ratio of intact commercial banks is 11.75 that indicates the price of commercial banks’ share in the secondary market is now corrected. P/E ratio around 10 to 15 is regarded as the touch stone for accurate and fair stock price in the international standard. P/E Ratio of Machhapuchhre Bank is excluded in this calculation that is in worst position of 262.64 point.

There is a satisfactory growth in lending of commercial banks i.e. 12.60 percent during the review period at Rs. 520.46 billion. NMB Bank Limited and Prime Commercial Bank Limited are able to have an exceptional growth in lending exactly 43.02 percent and 20.97 p e r c e n t respectively. Out of 31 commercial banks, 12 commercial banks have their real estate loan exposure above 20 percent. DCBL Bank Limited has the highest percent of loan exposure in real estate, 28.58% whereas Agricultural Development Bank Ltd. (ADBL) has the lowest exposure of 0.03 percent. There is a significant growth in long term loan from the commercial banks by 15 percent during the review period compared to

Everest, Standard Chartered and NABIL: Top three with highest EPS

www.corporatenepal.com.np

A policy is a temporary creed liable to be changed, but while it holds good it has got to be pursued with apostolic zeal. - Gandhi


Energy 1

Bio-Diesel as Alternative Fuel : An Economic Perspective

2

3

By Maya Chhetri

1. Jatropha Fruits 2. Pongamia Seeds 3. Bio-Diesel Reactor

Before deciding on whether to embark on bio-diesel or not, there is a need to conduct a comprehensive study on the economic viability based on actual and primary data. Such a need has arisen from the fact that much of the available data on bio-diesel are proving not just hypothetical or myth but more as propaganda.

www.corporatenepal.com.np

7

Peace and friendship with all mankind is our wisest policy, and I wish we may be permitted to pursue it. - Thomas Jefferson


Energy

'S

tone age didn't end for lack of stone', the statement which came from a petroleum minister of the world's second largest oil producing country, Saudi Arabia, may possibly be revealing the bleak future of this money-spinning project. The statement has come amidst the debate over the future of petroleum stock which a group of scientists/experts believe is going to exhaust in the next 4/5 decades while at the same time new oil reserves are also being explored. The need to diversify energy sources including clean energy technologies like bio-fuel is realised not only to ensure energy security but also to combat and reduce the devastating contribution of carbon emission to the earth's atmosphere from the increasing use of fossil fuel. The two major bio-fuel sources are bio-ethanol and biodiesel. Ethanol is a substitute or blended with petrol, and biodiesel is used in diesel engine. Pure ethanol (E100) or pure biodiesel (B100) can be used in flex fuel vehicle (FFV) which have modified engines while a blend of up to 20 percent (E20, B20) is recommended for conventional vehicle with no or slight modification of engines. According to the International Energy Agency (IEA) currently, bio-fuel provides about 2 percent of the total transport fuel and is expected to increase to 27 percent by 2050. In Brazil, about 40 percent of vehicles are reported to run on ethanol derived from sugarcane which is claimed to be more efficient than corn ethanol that is being used in the United States of America (USA). So far, bio-diesel is made chiefly from the edible oil sources like the soybean, sunflower, rapeseed or canola, palm oil etc and is used in several countries of Europe, North, South America and the Asia-Pacific. The non-

edible oilseed plants like 'Jatropha', 'Pongamia', and 'Castor' are the emerging bio-diesel sources that are yet to enter into the fuel market. Currently, over 1.3 million tons of Castor seed is reportedly produced globally with India, China and Brazil as leading producers. Castor oil is used more as industrial oil than as bio-diesel feedstock. No authentic or reliable data is available on the volume of production of Jatropha and Pongamia seeds as yet. In Nepal, attempt was made to introduce sugarcane based ethanol into the fuel market through the cabinet decision in January 2004 that provided for a blend of 10 percent ethanol (E10) with 90 percent petrol. Encouraged by the decision, Shree Ram Sugar Mill based in Bara district had installed ethanol plant with reportedly a daily

Oil Price Trend

production capacity of 30 thousand litres. However, the cabinet decision which came without considering price factor led the mill in complication to find market for domestically produced fuel. Like ethanol, despite the proven technical viability of bio-diesel, economics is the ultimate factor that decides its role in the fuel

market. Commercial viability of biodiesel depends on the price and quality of feedstock (seeds), efficiency of oil extraction technology, opportunity for value addition of by-products such as bio-gas and bio fertilizer from press cake, and glycerine. Biodiesel production cost is sensitive to the quantity and price of feedstock. A higher oil extraction means lesser demand for the quantity of seeds and vice versa. Oil extraction technology generally in use is mechanical or expeller method, and chemical process or solvent method. Mechanical or expeller method is less efficient for the variety of seeds to use as bio-diesel feedstock as it leaves significant amount of oil in the press cake. Going by the experience in Nepal, the maximum oil extraction from Jatropha seed was about 10

'Jatropha', 'Pongamia', and 'Castor' are the emerging bio-diesel sources that are yet to enter into the fuel market.

percent from the relatively efficient expeller, and 36 percent from solvent extraction. Solvent method is considered appropriate for large scale production of over 100 ton a day due to its high operating cost. Producing biodiesel in this volume will require cultivation of energy crops in at least 30 thousand hectares that will meet 5 percent of the current supply level of petrowww.corporatenepal.com.np

8 Honesty is the best policy. - Benjamin Franklin


Bio-diesel Production Cost

. Particulars

Qty

Energy

Expeller method

Solvent method

(10% oil, 85% press cake )

(30% oil, 65% press cake)

Rate /unit (Rs.)

Amount (Rs)

Qty

Rate /unit (Rs.)

Amount (Rs)

Seed requirement (kg)

11.5

25.0

287.40

3.80

25.00

95.80

Oil extraction from seed (kg)

11.5

3.00

34.50

3.80

10.00

38.30

Cost A.

321.80

Press cake price (kg) B.

9.80

Raw oil cost (ltr) A-B

1.15

Transesterification cost (ltr)

1.15

Less raw glycerine (kg)

0.10

Bio-diesel production cost (ltr)

1.00

diesel. The table here showing simple calculation explains to what extent extraction technology can affect production cost. The price of seed and oil percentage is based on actual data. The other assumed parameters are also believed to be close to market reality. The given calculation expects to obtain 87 percent bio-diesel and 13 percent glycerine from raw oil after transesterification- a process of separating glycerine and ester. It is the ester that makes up bio-diesel. As evident from the table, biodiesel production cost by solvent or chemical process (Rs. 108 per litre) will also be much higher than the current market price of petro-diesel (Rs. 68.5 per litre). There is though the possibility of this cost being offset to some extent by State subsidy; the volume, efficiency and distribution system of bio-gas; and the effectiveness of bio fertiliser as substitute of chemical fertiliser. Market for glycerine may not be assured if produced in bulk. The annual average international crude oil price (Brent oil) shows an increase by more than 3 hundred percent over the last 10 years from USD 26.4 per barrel in 2002 to USD 110 per barrel in June 2011. The

12.00

134.10

117.20

2.50

204.60

1.15

12.00

12.00

1.15

12.00

12.00

50.00

7.50

0.10

50.00

7.50

209.10

1.00

impact of this rise is seen in the domestic market but at a lower rate of over 150 percent. The domestic market price of diesel has increased from Rs. 26.5 in 2002 to Rs. 68.5 per litre in June 2011. At this rate of increase diesel price is likely to reach Rs. 176 per litre in the next 10 years. Though there will also be simultaneous increase in commodity prices including the price of bio-diesel feedstock. Producing bio-diesel for marginal or no profit may be justified for public investment given its economic and environmental benefits but certainly not attractive for private investment. The indirect benefits to accrue for the country are reduced dependency on import of diesel and Liquid Petroleum Gas (LPG) when replaced by bio-diesel and bio-gas, and the reduced import of chemical fertiliser. These in turn not only help to save foreign currencies reserve and contribute to reducing trade deficit but also ensure their regular supply. A replacement of 5 percent of the current supply of petro-diesel can reduce trade deficit by a net amount of over Rs. 1 billion (bio-diesel production will also require import of processing plants and chemicals). Bio-diesel production makes productive use of waste

www.corporatenepal.com.np

Domestic policy can only defeat us; foreign policy can kill us. - John F. Kennedy

12.00

29.90 104.20

108.70

land, reduces carbon emission by a significant level. There may also be opportunity for earning from carbon trade with reduced carbon emission in the future. In Nepal, efforts were made at non-State level to promote Jatropha based bio-diesel since the late 1990s. By this time millions of Jatropha seedlings have been planted. Some of these plantations are now matured enough for harvesting. But seeds yield in all these plantations have been so low that more than its cost, seeds or feedstock productions seem to be the biggest problem in promoting biodiesel. It may not also be worthwhile to expect higher yield from plantation of energy crops in marginal soils or impoverished areas without scope for commercial farming or for improving productivity. Before deciding on whether to embark on bio-diesel or not there is a need to conduct a comprehensive study on the economic viability based on actual and primary data. Such a need has arisen from the fact that much of the available data on bio-diesel are proving not just hypothetical or myth but more as propaganda. (Author is researching on economics of bio-diesel and she can be accessed at chhetri.maya@gmail.com)

9


Taxation

APF-Flying Squad will Monitor CUSTOM-BORDER ANOMALIES The department is on the way to merge the custom declaration form with immigration form to ease the travellers in the international flight.

By Our Correspondent

D

epartment of Custom (DoC) is all set to deploy the Armed Police Force (APF) flying squads in each of the custom check-points all over the country by before the grand festive of Dashain this year. The special unit of APF will be arranged to work as the flying squads in the custom check points including Tribhuwan International Airport (TIA). 'We have discussed with the authorities of APF, thus ready enough to mobilise the force to control the irregularities in the border areas', informed Mr. Tanka Mani Sharma, Director General, DoC. The flying squads will be mobilised to prevent the leakages in custom and other illegal activities in the border areas. While the Asia/Pacific Group on Money Laundering (APG), in its mutual evaluation report of Nepal, has recently cautioned the government to control possible terrorist financing activities in the border area with India amid the transitional political satiation, DoC is likely to commence the inspection of the border areas. DoC is continuously focusing on trade facilitation,

10

with Department of Immigration (DoI) in this regard according to Sharma. Moreover, DoC has collected the sum of Rs. 7.43 billion custom duty in the first month of current fiscal year. This is more than 7 percent of the target of Rs. 6.93 billion.

Tax offices expansion in regions

In order to deliver effective tax services at local, the government is preparing to set up extra 13 taxpayer service centres in different districts outside Kathmandu valley. travel management and border 'We will operate 13 taxpayer area management to counter the service centres in the emerging illicit activities latent at the towns out of the capital bearing custom check points. 'We have in the mind where attention of taxpayers and business firms are growing', said Krishna Prasad Devkota, deputy director general, Inland Revenue Department (IRD).The government has already been operating such centres in the valley since last couple of years. The Ministry of Finance (MoF) has already given a nod to IRD to set up the offices Custom Office at International Airport with the arrangement of necessary human implemented the brief declaration resources. The proposed tax of custom form for any items offices will be opened in Ilam, purchased outside our border Dhankuta, Itahari, Rautahat, that costs more than Rs. 1 Baglung, Damauli, Palpa, Jumla, hundred', said Sharma, 'This Surkhet, Udaypur, Damak, provision is implemented to Bardibas and Banepa. discourage the illicit trading, The proposed offices are prepare the actual data of imports believed to educate tax payers and also educate citizens for the and boost revenue collection. habits of paying custom tariffs'. Once the 13 new offices come Furthermore, the department into operation, the total number has installed internet protocol of tax offices and service centers camera in TIA to monitor the across the country will reach custom clearance activities there. 49.The total number of taxpayers The department is on the way to has increased radically over 3 merge the custom declaration hundred thousand with the form with immigration form to ease enforcement of Permanent the travellers in the international Account Number (PAN) a few flight. DoC is discussing the issue years ago. www.corporatenepal.com.np

By definition, a government has no conscience. Sometimes it has a policy, but nothing more. - Albert Camus


Corporate Chat

We are focusing on academic courses

Rabin Shrestha

Æ

Chief Operations Director, Institute of Banking & Management Studies (IBMS) How is the business of banking training institutions in these days ? Well, the training institutions are growing day by day in Nepal. But we are focusing on training, research, academic courses and consultancy all together. More important is boosting up the institutions into their academic set up. Considering so, we are focusing towards the academic courses. IBMS has included an academic chapter that is running MBA and BBA courses.We had successfully run our first semester last year. What type of courses are available in IBMS ? We have academic blended courses like full time comprehensive MBA, MBA in banking and insurance, EMBA, integrated BBA, BBM and BBA along with all ranges of training, consulting and research solutions. What are the features of your academic syllabus and course of studies ? We have joint partnership with the highly renowned Indian university. This is Tamil Nadu Bharithiya University (BU) which is ‘A’ rated institution from the National Academic Accreditation Council (NAAC) of India. Courses are designed according to the syllabus of BU. We have state-of-the-art teaching methodology and selection of course that www.corporatenepal.com.np

offers our students 50 percent theoretical classes, 25 percent of research and rest of the internship methodology. How could you assure IBMS is generating the competitive human resources meeting the market demand ? Of course, we can meet market demand with the well

trained skilful human resources. Now, we have 1 hundred and 50 students in MBA streams and 80 students are in bachelor level. Most of our students are engaged in reputed professional institutions. We have also the faculty exchange programme with our institutional partner, BU.

11


Industry

Wine Industry must Emerge By Arjun Bhandari

Lighter tax on wine prevents consuming cheaper drinks and popularise wine as fruit juice among people. In western country a glass of wine is prescribed for heart disease patient but in Nepal it is listed as alcoholic drink.

12

www.corporatenepal.com.np

The one who adapts his policy to the times prospers, and likewise that the one whose policy clashes with the demands of the times does not. - Niccolo Machiavelli


Industry

A

s a wine educator, importer and distributor, I frequently get asked about whether wine can be produced from locally grown grapes in Nepal. Should we promote establishing commercial wine industry and wine tourism in Nepal ? ‘Must be’, I always answer it because Nepalese land is suitable enough for growing grapes to produce wine to thrive the new industry. More precisely to say Nepal has more potential to expand wine industry and produce international standard wine from grapes for wine lovers. Oenologists’ research says that grapevines thrive in between 20° south to 50° north latitude from the equator in the world. Nepal being at 26° 22’ north latitude from equator shows its potentiality to be one of the largest wine producers in the world. Well, Nepal knows growing grapes as decorative garden plant but has never thought of farming grapes to produce wine. Being Himalayan country, Nepal archives history of producing wine from rice, wheat or barley at home but never from grape or fruit. Many of Nepal have been remained untouched from the western drinking culture of fruit wine. Since restoration of democracy in Nepal wine culture has been taking its track widen. Nepal, though having huge propensity of producing grape wine, imports wine from European countries. Increasing duties on importing wine bears no fruit. It simply shifts one sector’s revenue (liquor import tax) to another sector’s expenditure (health and social problem). The expenditure cost will be higher than revenue. Barring wine industry and imposing duties on importing wine for the purpose of minimising consumption of wine will flow money oversees. People could not be barred from drinking wine once they knew wine was more positive than www.corporatenepal.com.np

other alcoholic beverage for health. Importance of wine for the society can be derived from the speech on wine by the third American President Thomas Jefferson, ‘I think it is a great error to consider a heavy tax on wines as a tax on luxury. On the contrary, it is a tax on the health of our citizens’. Here, President Jefferson implies to say expensive wine drives people drinking cheaper drinks that causes people ill. And the government has to pay for such illness. Study shows Nepal has to disburse budget for the treatment without realising some natural preventative substances. Reviewing the past one can say imposing heavy duty on wine products adds burden instead of minimising burden. President Jefferson’s quote throws light to consider wine as health drink if consumed moderately. Lighter tax on wine prevents consuming cheaper drinks and popularise wine as fruit juice among people. In western country a glass of wine is prescribed for heart disease patient but in Nepal it is listed as alcoholic drink. Justifiable reasons suggest Nepal should promote wine drinking as own fruit juice by establishing wine industry and minimising duty on wine for securing people from cheaper alcoholic drinks. For promoting and establishing wine industries, Nepal requires technical and professional knowledge of wine making grape seeds or cuttings (wine making grapes are different to edible that are seen in the market). The government of Nepal should support promoters of wine industry providing subsidies and ease in various form of taxations. European countries support wine industries even by cash subsidies along with 1 hundred years land leasing facility. Nepal seems unknown to such economic policy. For developing international standard vineyards in Nepal,

pockets of fertile land for growing grapes must be allocated and ensured. The determination of particular type of soil, fertile for growing variety of grape is more important considering the fencing facilities. For the wine industries the factors like sunlight, surrounding, flora and fauna, soil, and climate play important role. Our social practice is people enjoy happiness by drinking and share sorrow by the same. Nepal can grow its economy following this trend and promoting wine drinking as healthier drink. It is not only the concern of wine importers to establish wine industry or minimising duty but the change thinkers and concerned stakeholders in all areas should suggest the government. The reality is that existing society expenses on hard drinks and the government impose duty on wine. If traditional concept reforms, it will support economy positively. Wine importers risked their money and resources for bringing wine to Nepal from wherever they could outsource from. They have assisted to educate and convince people that wine should be treated as social drink and has greater health benefits and thus the culture is developed now. The dealers help to create over five folds of wine market at present with compare to the days 4 years ago. Now this business community should be provided with government assistance, encouragement and security over the investment in the area of wine industry where they will have great potential of having international wine industry as well as wine tourism in Nepal. Government assistance and encouragement is vital for development of wine industry in Nepal. Government’s help will not only improve quality of life in Nepal but also will generate large export revenue in sustainable way. (Author can be accessed at apashm@gmail.com)

13

I’ve said very clearly, including in a State of the Union address, that I’m against ‘don’t ask, don’t tell’ and that we’re going to end this policy. - Barack Obama


Health Economy

Health is Wealth or vice versa ? The private stakeholders too believe the large corporate groups often have short of service motives within their health business.

By Sara Devkota

'H

ealth is wealth’. This used to be the primary proverb then but today something is more than that. Health has expanded more than a social service and its business horizon in Nepal is said to be heading for global standards. ‘ As the government is quite

incapable providing its health services to all from its own resources, the gap has encouraged private sector investing in the health services’ spoke out Dr. Banshidhar Mishra, former health State minister. However he felt pity on the commoditised packages in the private menu.

Private sector health service providers believed to have their 60 percent of the investment in this sector are in the tough contest to offer high-tech technologies and quality services. Government has made available the health services to its citizens through 1 hundred and 2 hospitals and 16 hundred 98 health posts all over the country. ‘But this is only about 40 percent of all total medial service outlets including the privately owned hospitals, nursing homes and community hospitals’, informed Mishra. Some of the private sector hospitals and medical colleges are reputed for their international level of amenities, just the same inaccessible to most of the Nepalese citizens with their per capita income 6 hundred 42 dollar. Moreover most of the private hospitals are tapered inside Kathmandu valley. ‘Some multi specialties hospitals being operated even in the major cities of the country are facing hard to manage the expert human resources,’ said Kul Bahadur Karki, general manager, Venus International Hospital. The problem is that the skilled health professionals are more concerned to stay at the city areas. The private stakeholders too believe the large corporate groups often have short of service motives within their business. ‘Nepal government doesn’t have particular policy to support the private health service providers’, opined Karki, ‘Government must stop the unethical and impractical commercial practices in this sector’. Some of the ‘international’ hospitals in Nepal are issuing the value added tax (VAT) bills to their patients. Though it is not obligatory to issue such bills to the patients, those hospitals are collecting huge sum of such added tax in their service. ‘It is

14 The internal effects of a mutable policy poisons the blessings of liberty itself. - James Madison

www.corporatenepal.com.np


Health Economy absurd to collect VAT from patients because no certain kind of value is added while providing health service’, said Karki. The ‘early budget’ this year has announced Rs.24.93 billion with the increment of 1.12 billion for the health programmes. Budget has insight new partnership in health investment from the cooperatives. The new bulk of health care facilities that government opted to expand this year seem good in plan. But the implementation is yet to be seen. The supply and demand side of health care facility in the country is now a part of great debate. From the supply side health facility the main barrier identified by some research reports is the unstable policy of the country. Whereas the demand side main barrier remains at poverty and lack of awareness. But the non-governmental organizations (NGOs) who are partially involved on providing service are more criticised by the health sector experts. ‘NGOs should not intervene the service providing part, they cannot be the alternative to the government’, said Basu Dev Neupane, independent health researcher and the consultant. On the basis of his work on demand side economics, Neupane suggested that the ‘health mart’ programme can also be the model from business perspective. It can down size the access barrier to the products from rural and disadvantage population.

www.corporatenepal.com.np

'Health Service is Commoditised' Dr. Bansidhar Mishra Former State Minister, Ministry of Health and Population Vice President, Nepal Health Care Cooperative Ltd.

How do you evaluate the present health service in term of its quality ? We are far behind the desired quality health service in our country. The government obeys duty towards its people empowered with the right to the health care services. International non-governmental agencies have been focusing health as the right envisioned by our interim constitution too. The government is incapable providing its health services to all from its own resources. This gap has encouraged private sector investing in the health services. Hence, health service has become something like

commodity. What is your understanding on the investment pattern in health business ? Putting aside the government investment heavily backed by the national budget and foreign donors, we can access the three layers of investment in the health sector. Health services are currently provided by community, international, national and individual donors and the profit motivated private companies. Comparatively private hospitals claim providing quality services but they are oriented to higher class of population. All service providers are supplementary to each other. It seems the share of

15

I am afraid we must make the world honest before we can honestly say to our children that honesty is the best policy.- George Bernard Shaw


Health Economy government investment is about 40 percent and rest from the private sector. Manmohan Memorial Institute of Medical Sciences run by your cooperative itself is running in the new pattern of investment. What is the motive of this initiation ? Manmohan Memorial Hospital is the new of its kind providing health services to the medium and low income based people. We are aware of providing quality health services at affordable cost in Nepalese context. Solidifying the concept of cooperative, a dedicated group promoted Nepal Health Care Cooperative Limited (NEHCO).NEHCO has established Manmohan Memorial Institute of Medical Sciences in 2006.Manamohan Memorial Institute of Health Sciences has been providing training courses and academic bachelor degree as well. And within six month we are sure to operate Manamohan Memorial Medical Sciences transforming it into Manamohan Adhikari Cooperative University.

16

'VAT Bills issuance to the patients must be stopped' Kul Bahadur Karki General Manager, Venus International Hospital As a new venture what have you featured at the Venus International Hospital ? It’s a 5o bedded general hospital except cardiac and neuron surgery. Especially we boost ourselves in Urology (kidney stone, surgery of prostate with laser technique), Hepatology (liver disease), general and laparoscopy surgeries, orthopaedic surgeries and well equipped ICU with advanced and latest ventilators accompanied by experienced and service oriented health professionals. Emergency, medical and surgical ward and ICU are 24 hour supported by the medical officers. How do you assess the centralised health business ? Do you have any decentralised service programme ? Most of the renowned and well set-up hospitals are only in Kathmandu valley but some multi specialties hospitals being operated even in the major big cities of the country are facing hard to manage the expert human resources. The problem is that the skilled health professionals are more concerned to stay at the city area despite the handsome salary with facilities in the rural area. Considering this phenomenon, we are opening a 50 bedded hospital with multi specialties at Biratnagar. There people will get well medical, surgical and ICU facilities. Our optimal target is to stop patients who come to the Kathmandu valley or go to India for the further treatment. Our interest is to decentralise Kathmandu valley oriented medical staffs and consultants. Private Sector’s involvement in health sector is encouraging. How do you think to make it a service motive business ? The involvement of different business houses and groups in health sector is positive part as they give priority from structural part to hospitals setup. But they should have service motive too. Nepal government doesn’t have particular policy to support it. From the side of government the unethical commercialisaton should be stopped. And the private hospitals' practice of issuing VAT bill to patients must be stopped. There is not any provision of VAT in medical treatment. How do you evaluate the present market of private hospitals and its future ? Running a private hospital, we do not have social security. It always alerts us to take each step as challenging one. We must be able to update ourselves medically and technically. Due to the investment and running cost of hospital, it is very hard to earn profit. To sustain and maintain the hospital business, we are going to run academic section as nursing college from next session. www.corporatenepal.com.np


Information Technology

E-Enterprise System : Where to Go ?

S

ometimes enterprises can get many more times margin than it is expected whereas in several instances, they only generate revenue at low level. This margin varies from time to time and enterprise to enterprise. Some enterprises are incessantly scaling ambitious growth and some are running out from the market. Business remains not only business, something beyond now. Nepal is experiencing very bad political situation which is leading the business organisations to the adverse environment. The numbers of banking and financials have grown up to undue volume concentrating in urban and less productive areas like real estate and margin lending. The investors and banking management seem to have greed and often they do not look into themselves and their own capacity. To earn more profit they just invest more money on long-term investment from their short-term resources. We also visualise some fraud cases and overlook from central bank, which is beyond people’s imagination. The faith, respect and image of central bank and whole banking industry is

decayed. To regain it, a long-term vision, hard-work and satisfactory service delivery mechanism is required with very careful handling of the financial business. To run a business in this era, we need some competitive advantage. It is not possible to point out all the list of competitive advantages. If we take example of tourism industry, it is until now seasonal and no innovation has been put into effect for the years. Nepal is unable to attract high value tourists for years due to the lack of good amenities including proper hotels and transportations in proper locations. Hydropower has become only word of mouth for the political leaders to sell their dreams to the public. If we take human resources into consideration, Nepal is supplying graduates to American and Australian universities with negligible chance to get returned. Malaysia and Gulf countries are enjoying less expensive workers from Nepal. No projects are here to consume the human power. If we talk about the manufacturing and service sector, can an investor think of doing business in some sixteen hours power cut, undue demands

www.corporatenepal.com.np

Kings will be tyrants from policy, when subjects are rebels from principle. - Edmund Burke

By Dibas Neupane

Many people do believe that internet is source of information but most of the truths are away from internet. This means Nepal is far behind from the knowledge economy.

17


Information Technology and unpredicted transportation, supply and distribution patterns ? Socio-cultural environment as well does not exist as much favourable to the business. Lots of school usually fold up due to the absence of students and teachers during the ‘Yarchagumba’ harvesting time. Attitude of people to work, family system, caste system, religion, education and even marriage is not supportive to the business in Nepal. Everyday there are immense changes in products, services, lifestyles and living conditions. These changes must be scrutinised by every business units and should adapt to these changes. The research, design and production of technological devices occur recurrently in the other countries however the enterprises in Nepal cannot get advantage of them because of limited knowledge, financing, human resources and availability. The enterprises we see in Nepal are having improper use of information technology devices and services. In Nepal, people think information technology matters to merely the hardware and equipments. The organisations are totally focused on purchasing hardware equipments but no any budget is allocated for software systems. Many organisations use computers for simply the typing job in the place of old-fashioned typewriters. Software systems are tools for simplifying business process, achieving goals, making easy to work flow, scaling high volume of business and digitalisation. It also increases competitive advantage to the organisation for profitability, market leading, globalisation and productivity. Industry-standard software systems are so much intelligent that they maintain cent percent accuracy and scope of business innovation. Most of those people leading, working and providing support to

18

Many organisations use computers for simply the typing job in the place of old-fashioned typewriters. Software systems are tools for simplifying business process, achieving goals, making easy to work flow, scaling high volume of business and digitalisation.

Nepalese organisations are having on the top of their mind with less investment in information technology systems which results at lower configuration in service delivered, lower quality assured and unsustainable service offerings than anticipated. The reasons for the after effects may come from budgetary constraints as well as limited knowledge in use of information system. The enterprises normally make the most of their information technology devices until the end of the devices’ life span or sometimes these devices are still used after the logical expiry. No enterprises do follow very strict procurement formalities and disposal policy. Thus enterprises are at risk of information theft and loss, which actually is a business risk. The other part of lacking is Nepalese enterprise are not conducting information system audit. How the chief executives are informed on their spending, either is it in right track or else ? Banking is major service industry in Nepal with good volume. Banking solely cannot remain live if other industries are facing the problems. The whole banking industry runs on the base of information systems. If the Information system used in banking is of the lower

configuration, it would certainly affect the investors, depositors and other stakeholders in the long run. The unaudited information system itself tells something critical. The management, investors, customers, apex authorities and the government have to take care of this. It has been visualised that if anyone is asked to do a certain task that is out of his understanding, then the search engine of ‘Google’ comes there. Business decision will be taken on the basis of a simple Google search. Is Google search enough for crucial business decision? What happens if Google or like search engines are showing the 60 percent of accuracy ? Many people do believe that internet is source of information but most of the truths are away from internet. This means Nepal is far behind from the knowledge economy. Scores of organisations run their business on good faith. Everybody in the organisation believes that no one will come with devil mind and the business is protected forever. We can see clearly that no one is governed with clear cut rules and regulations. No rules, regulations and policies really mean that the enterprise is running on good faith. Is good faith is really enough to run an enterprise ? The competition, globalisation, variation in life style and lower availability of resources often trigger some incidents. The incidents with bad results turn to the accidents when the enterprises cannot bear the cost. Such incidents become so fatal that enterprises cannot come to status-quo-ante. Make sure, you are safe with all above scenarios that may prevail in your organisation where you significantly rely on. Author is the chief executive officer, Sambad Technologies Private Limited. www.corporatenepal.com.np

I have a very strict gun control policy: if there’s a gun around, I want to be in control of it. -xClint Eastwood


DISCOVERING CAPITAL GROWTH THROUGH Investment Banking

Raising Capital

Public Issues of Equity/Debt Instrument Registrar to the Share Services

Portfolio Management

Underwriting Services

Investment Advisory Services

pkef]Qmf lxtsf nflu jfl0fHo ljefusf] cg''/f]w Ú ''s[lifsf] ljsf;, pTkfbgsf] cfwf/, ;xh cfk""lt{ pkef]Qmfsf] ;/f]sf/ .'' '';hu pkef]Qmf ;lqmo ;/sf/, pkef]Qmsf] lxtdf :jR5 Jofkf/ .'' ''u'0f:t/xLg, ld;fj6o'Q ' m j:t's ' f] laqmL gu/f},+ pkef]Qmf xslxtsf] ;Ddfg u/f}+ .'' pkef]Qmfx?nfO{ ahf/df ;fdfg v/Lb ubf{ s''g} ph''/L u''gf;f] ug''{ k/]df jfl0fHo ljefu, cg''udg zfvf, aa/dxndf kqfrf/ ug{ cg''/f]w ul/Psf] 5 .

g]kfn ;/sf/ jfl0fHo tyf cfk""lt{ dGqfno Durbar Marg, Kathmandu, Nepal Tel: 977-1-4222939, 4222987 Fax: 977-1-4222802 Website: www.growmoremerchant.com

jfl0fHo ljefu ;Dks{ kmf]g g+ M )!–$@$#(#( j]e;fO6 M www.doc.gov.np

lwtf] k q -z] o /, l8j] ~ r/ cflb_ df nufgL ubf{ lgDg s' / fx?k| l t ;d] t ;hu /xg' ' x f] ; \ . ♦

♦ ♦ ♦ ♦ ♦

;DalGwt sDkgLsf] sfo{;Dkfbg l:ylt, ljQLo l:ylt -k|lt;]o/ g]6 jy{, k|lt;]o/ cfDbfgL, lwtf]kqsf] d"N" o cfo cg'k' ft, gfkmf gf]S;fg l:ylt cflb _, Joj:yfkg kIf, hf]lvd kIf tyf j[l4sf] ;Defjgf h:tf s'/' fx?sf] ljZn]if0f u/]/ dfq nufgL ;DaGwL lg0f{o ug'{xf];\ . sDkgL;“u ;DalGwt lwtf]kqsf] d"N" odf k|efj kfg{ ;Sg] ;+jb] gzLn ;"r " gfx?k|lt ;hu /xg'x' f];\ . lwtf]kqdf ul/g] nufgLsf] hf]lvd tkfO{ :jodn] Joxf]g{' kg]{ x'b“' f xNnf, cgfjZos k|rf/ k|;f/ jf s;}sf] axsfpaf6 k|l] /t geO{ cfkm\gf] :jljj]sdf g} nufgL ;DaGwL lg0f{o ug'x{' f];\ . a}s + ljQLo ;+:yf;“u ;Demf}tf u/L lwtf]kqsf] ;'/' If0f -Collateral_ df C0f lnO{ nufgL ubf{ C0f ;Demf}tfsf zt{ tyf lwtf]kqsf] d"N" odf cfpg ;Sg] lu/fj6af6 x'g' ] hf]lvd k|lt ;hu /xg'x' f];\ . lwtf]kqdf nufgL ;DaGwL lh1f;f, z+sf jf u'g' f;fx? eP lwtf]kq bnfn, lwtf]kq ljlgdo ahf/ tyf g]kfn lwtf]kq af]8d{ f ;Dks{ /fVg'x' f];\ . lwtf]kq nufgLstf{x?n] Wofg lbg'k' g]{ cGo s'/' fx?sf] nflu g]kfn lwtf]kq af]8s { f] j]e;fO6 http://www.sebonp.com x]g'{xf];\ .

g]kfn lwtf]kq af]8{ nufgLstf{sf] lxtsf nflu k|sflzt

www.corporatenepal.com.np

kf]=a= g++= ()#!, ljhorf]s, sf7df8f}+ kmf]g M $!!)#@%, $!!)#$# O–d]n M sebo@ntc.net.np 19


Advertising

Ad Industry seeks National Policy It is estimated that approximately Rs 25 million is going out of Nepal every year through subscription of foreign television channels.

N

By Nirmal Raj Poudel

o doubt, N e p a l e s e advertisement sector has been witnessing phenomenal growth over the last decade. This can be attributed to repercussions of globalisation, growing economic activities, drastic surge in media channels and growing literacy rate. Advertisement has emerged as an indispensable tool for both the media and business product to survive in this highlycompetitive world. And there has been a paradigm shift in the way as the notion of advertisement is perceived. Business entities are increasingly looking upon advertisement as a wise investment not just an expense. However, it does not allude that all is well with the Nepalese advertising sector. Even though it has grown to record annual turnover of over Rs 3.5 billion; the State still seems reluctant to

develop this sector as a viable industry of the nation. Despite its substantial contribution to national coffers, the state has long been myopic towards the robust growth of the sector. Not that the government has done nothing to deal with the problem, but the government efforts are too little to bring any positive changes. Nepalese advertising entrepreneurs are not clamouring for special privileges but they just want to positive support from the concerned authorities. The advertising entrepreneurs are often stifled from participation in the process of devising the governing mechanisms pertaining to advertising profession. This flawed tendency must be corrected to expedite the growth of advertising sector. In the same vein, there is a conspicuous absence of comprehensive legal framework to efficaciously govern the

20 I want to make a policy statement. I am unabashedly in favor of women. - Lyndon B. Johnson

www.corporatenepal.com.np


Advertising sector. On the other side of picture, the sector is also devoid of skilled human resource and other cutting-edge equipments and facilities. This has created some sort of obstacle to align Nepalese advertising with the evolving trend in the global advertising arena. Unhealthy competition and lack of adequate awareness about the significance of advertising in today's communication driven world are some of other key challenges we have to come. Undeniably, the challenges the advertising world is confronting will not vanish in a burst. In order to enable the industry to constructively align itself with the dynamics of change, the greater collaboration and vision amongst the ad professionals is sine qua non. Among others, the breakthroughs in the realm of Information and Communication Technologies (ICTs) have opened up a new vista of opportunities for Nepalese advertisement sector. So, rather than perceiving this digital revolution with suspicion and fear, the sector should embrace and exploit the same to the hilt. It goes without saying that innovation and creativity will shape how effectively the sector can overcome the hurdles brought by a rapid development in technological and other domains. What sorts of strategies are needed to convince digital era consumers? What are the factors responsible for the fast changing marketing components? How can the technological advancement be cashed in on for the constructive reorientation of the ad business? These are amongst the crucial issues that demand prudent thinking and proactive action. The process of giving a whole new impetus to the business will largely be determined by the level of agility and deftness Nepalese ad professionals can demonstrate. The advertising www.corporatenepal.com.np

revenues ensure the independent, pluralistic, affordable media with competing channels of information for consumers, which also ensure that individuals have choices. The government sometime back came up with a policy, making it mandatory for foreign television channels to register in Nepal before letting local cable operators carry their signals. However, the licensing fee is quite low that it hardly restricts channels from airing ever increasing foreign commercials − one of the major problems that the Nepalese advertisement industry has been facing. In this light, the Advertising

Clean feed is a content filtering system, which can be used to block foreign commercials aired through foreign channels from reaching Nepalese audiences.

Association of Nepal (AAN) has been constantly demanding the government to introduce a system called 'clean feed'. Clean feed is a content filtering system, which can be used to block foreign commercials aired through foreign channels from reaching Nepalese audiences. Foreign channels like HBO and Star Movies have clean feed system. If this system is implemented, multinational companies will be compelled to invest in Nepalese ad agencies to promote their products and services in Nepal. This will definitely generate more jobs and uplift the stature of Nepalese ad industry. Every year a huge sum of money is flowing out of Nepal through foreign channels. Furthermore, Nepal´s trade deficit is also swelling as it imports more foreign goods that are advertised through foreign channels. It is estimated that approximately Rs 25 million is going out of Nepal every year through subscription of foreign television channels. At the same time when advertising agencies and media are growing rapidly, lack of new products and services that need massive campaigns has emerged as a major challenge in term of long-term financial sustainability of the industry. I strongly believe that in line with the improvement in political scenario, the economic growth will witness an upward spiral. Subsequently, many businesses domains including advertising business can safely be expected to receive a new boost. All in all, championing advertising as a catalyst of socioeconomic growth has become all the more important. (Author is the central working committee member of Federation of Nepalese Chambers of Commerce and Industries (FNCCI) and the immediate past president, AAN. This article was written originally in Nepalese Language and translated subsequently.)

21

Human rights is the soul of our foreign policy, because human rights is the very soul of our sense of nationhood. - Jimmy Carter


Digi Market

Dual Screen in Nepal

M

ercantile Office Systems Private Limited, the authorised distributor of Acer notebooks in Nepal, has launched Acer ICONIA series of portable computers in Nepal. The models launched recently are Acer ICONIA Touchbook Dual Screen Tablet and Acer ICONIA Tab (A500 and W500).

The Acer ICONIA Touch-book, the world’s first 10-finger multitouch, dual-screen tablet combines the versatility of a 14" form factor with the unique dual-touchscreen layout and highly intuitive multi-touch functionality. Acer ICONIA tab A500 is an android tablet device, running on Android 3.0 (Honeycomb). The device boast of Dual Core 1Ghz ARM Cortex-A9 processor, along with full size USB port, taking your browsing, computing and storage experience to a totally new level. Acer ICONIA W500 is a

Windows tablet device, running on Windows 7 Home Premium OS. The device carries 1Ghz AMD C50 processor with 2 GB DDR2 RAM, and 2 of the USB connectors. Both the devices have HDMI output, to play videos on bigger TV screens. Mr. Sanjib Raj Bhandari, CEO, Mercantile Office Systems Private Limited, expressed his satisfaction that Mercantile’s customers would enjoy more by Acer ICONIA Series.

with tri band network, dual SIM; 2.6 inch full touch screen and battery talk time up to 14.3 hours. The handset comprises GPRS/

EDGE, JAVA embedded games, input device with stylus pen, camera resolution of 1.3 megapixel, 2x digital zoom with shot mode and video p l a y e r, recording, messaging a n d streaming facilities. S a m s u n g lovers will e x p r e s s satisfaction for its connectivity available like Bluetooth 2.1, USB 2.0, WAP 2.0, USB mass storage options with external memory card up to 16 GB and all these features are available for some Rs. 8 thousand only.

HAVE dual SIMs, TALK with SAMSUNG

T

o proffer its dual SIMs feature for the m o b i l e affectionate segment in Nepalese market, Samsung has brought Champ DUOS with full capabilities of multimedia. While the young guys are fond of having Samsung since the near past, International Marketing Services Pvt. Ltd. the authorised distributor for Samsung mobile in Nepal has put forward the new Samsung Champ DUOS featured

22

www.corporatenepal.com.np

From now on it is only through a conscious choice and through a deliberate policy that humanity can survive.- Pope John Paul II


www.corporatenepal.com.np

23


Cover Chronicle

Dr. Baburam Bhattarai Right Honourable Prime Minister, Government of Nepal

24 24

www.corporatenepal.com.np


Cover Chronicle

TWENTY YEARS PLAN IS IMPERATIVE FOR ECONOMIC GROWTH AND EMPLYOMENT

D

r. Baburam Bhattarai, the newly elected 35th prime minister of Nepal who came across as fourth in series of prime ministers of Federal Democratic Republic Nepal is eminent for his visionary leadership and magnetic personality that he has shown in his almost four decade long political social life either in underground state or else. His simple living and philosophical comprehension, sound implementation of the dreams and technocratic management is experimented successfully as the first ever finance minister of FDRNepal. He has successfully motivated the private sector and geared up the overall revenue generation process in his tenure in the Ministry of Finance. Amid highly vulnerable situation in the transitional phase, as the experts opine, the overall indicators of the national economy are not in the right direction. Newly designated Prime Minister Dr. Bhattarai often shares his vision to lift up the country’s socio-economic status at a boom with double digit growth. He has shared his visions, how he could lead the nation to a prosperous status. talking with Amrit Kharel and Indra Baniya for THE ECONOMIC SYSTEM.Here are the excerpts of the thought provoking interview with Prime Minister Dr. Bhattarai –

Dr. Bhattarai! Given that general public these days seem losing their confidence on overall system while milieu for new investment seems deteriorating, it is believed Nepalese economy is likely to come upon the severe recession. How do you assess the phenomenon ? It is true our economy is in the moment of great risk. Different economic data too indicate so while growth rate is incapable to go upward more than 3 to 3.5 percent from some time. Unemployment rate is increasing; foreign trade deficit is tremendously mounting. Reviewing these all situation, it is justified our economy is crisis stricken. International surveys have shown that investment is in the downward trend instead of its growth. What an essence of overall phenomenon is the possible recession can never be solved until and unless the implementation of the agenda of national industrialisation through the alteration in traditional, dependable, agro based economy in a scientific way through the revolutionary step. The most

Æ

important task of today is to be centred at the long term economic development ending the political instability as soon as possible. What would you do for the successful ‘economic revolution’ you usually refer to that can be harmonised with the shifted paradigm in the structure within last few years ? We should have made a transitional economic policy in view of the transitory phase and current changes in the structure. Accordingly we had posited a few of the realisations within the guiding principles of the State in the interim constitution 2007 as well as the policies and programmes. For an instance, we had clearly stated the agenda of building national industrial economy, ending all of the residues of feudalism as the key policy of the economy in the constitution. What this means to say is for the economic development of the nation there is no other means than obligatory change in our agricultural economic pattern that comprises one third contribution to the gross domestic production (GDP) Read more on page 29

www.corporatenepal.com.np

25


Cover Chronicle

Dr. Prakash Chandra Lohani Former Finance Minister, Hon. Member, Constituent Assembly

''Economic break through is never possible without a severe crisis'' F

ormer Finance Minister Dr. Prakash Chandra Lohani, joint chairman of Rastriya Janashakti Party, the member of Constituent Assembly is highly admired as the successful leader of his generation. He is well regarded as a knowledgeable democratic political economist who always stresses on private public partnership and liberal economy. THE ECONOMIC SYSTEM has talked with him in view of what could be the new policy for the economic development in Nepal while the country is heading towards a new constitution. Here are the excerpts –

26

www.corporatenepal.com.np

In most recent times, as the West started being hostile to us, we deliberately declared a Look East policy. - Robert Mugabe


Cover Chronicle How do you evaluate the ongoing tendency of setback ruling entire Nepalese economy counting financial intermediaries to the productive sector ? We have been failing to achieve our targeted 4.5 percent economic growth though it has remained insufficient itself in contrast to the growth of neighbouring India and China. We are not even capable to keep the economic elements like price stability, foreign exchange, balance of payments and all that balanced. Mainly the reasons behind the slow down pace consists of failure of Nepal government to invest in capital formation as per its commitment. And we know it vividly there exists highest chance of misusing the resources even if the investment is disbursed which means shortfall in productivity. Following the peace process, infrastructure bottlenecks − primarily the power shortage is hindering the manufacturing industries to produce the merchandises at full range of capacity. It has been inflating the cost of production too and thus leading our system as a high cost economy. Likewise poor transportations, strikes and harassments to the industrialists are the governing factors on the supply side constraints to the productivity. Private sector as well concentrated exceptionally in the real estate sector for last few years but the leverage of remittances and banks lending were not able to sustain it durably. Besides these economic factors, the growing imbalance and disorder in Nepalese political arena is pumping up the political risks related with the investment. The combination of both the economic and political lapses is the ground reality for the sluggishness at this time. At the same time as our economy is facing severe challenges, private sector is being suspicious of whether the

State is moving ahead in the controlling regime overstressing the cooperatives. What is your opinion in this regard ? It is still highly elusive in Nepal what sort of guiding principles and policies are adopted so far. In People’s Republic of China, president Mao Tse-tung ended all form of private investments and brought the ownership of entire terrain under commune. Private production even in a single inch of land was prohibited and thus Chinese peasants were obliged to work as the labourer of commune. With an aim to end all

Together with decentralisation, the mode of devolution that means transfer of rights to the resources is imperative now for development process.

form of capitalism, all socioeconomic liabilities were incorporated within State mechanism. This finally led then existing economy of China to an almost end. The failure of Mao’s economic model paved the ground for emerging the Deng Xiaoping economic model. It was a break through in China’s economy and paradigm shift from Maoism to Deng-ism. Since then State controlled economy was transformed into the private owned competitive economy though the political command has been reined by the Communist Party of China. Conversely, in India Prime Minister Jawahar Lal Nehru was highly influenced by the

economic model of Soviet Russia despite the fact that he denied to accept its political essence. Nehru used to perceive the westernised model of capitalism was the continuation of imperialism and that was designed to exploit the colonies. Thus he adopted such a policy in which political system was run in democratic pattern but the commanding height of the economy was State-controlled. That means State should lead in large investment and mass production controlling and limiting the private sector. The bureaucracy in India played the role of reining to control overall private sector through the extreme license rule (license razz). Private sector was obliged to get license for each and every activities of expansion. By 1990s this model was almost collapsed which led State’s coffer to the bankruptcy. Foreign currencies reserve in India was not even sufficient to meet the import for fifteen days. Accordingly 47 tons of gold from Reserve Bank of India (RBI) was deposited at the International Monetary Fund (IMF) for the lending purpose. This severe crisis made a thrust, breaking the 40 years long Stateinfluenced economy. Prime Minister P.V. Narasimmha Rao and Manamohan Singh led governments pushed India towards the quantum jump through advancement of private sector ownership. These democratic governments introduced programmes those involved cutting government regulations and red tape, abandoning subsidies and fixed prices and privatising State-run industries to set the private sector as the driver of economy. These efforts to liberalise the economy spurred industrial growth and foreign investment. The gist of these two economic reviews reveal that both China and India are moving forward in the path of economic growth

www.corporatenepal.com.np

The American temptation is to believe that foreign policy is a subdivision of psychiatry. - Henry A. Kissinger

27


Cover Chronicle following the break through that developed a new form of capitalism based on private public coordination. In Nepalese concern, its economy is yet waiting a break through which is expected to move towards the capitalism abandoning the traditional feudal structure. However, the economy here is transforming into a neo-feudal one that is to say making undue earnings by the authorities, politicians and political parties misusing all the means of State mechanism. The economic break through is never possible without a severe crisis and Nepal has never encountered such a miserable economic situation in real sense because of the flow of remittances. Do you see the possibility of boost up in the economic system through any kind of stimulative package ? The ruling parties do not seem able to bring any kind of stimulative package right now. The most important stimulative package will be the new constitution to stabilise the economy which shall set the guiding political-economic principles and requisites for the investors, workers and general people to move on the progress. Until and unless the new constitution with clear economic vision will address the existing binding constraints like anarchism, insecurity, lack of law and order, there is high risk of misusing resources those expended by the government. What do you consider as obligatory to enhance the agriculture explicitly the most competitive advantageous sector yielding one third of gross domestic production with merely support of 3.2 percent of total credit flow from the commercial banks ? In view of the agricultural subsectors’ average growth rate in most recent decade, horticulture has witnessed an

28

Both China and India are moving forward in the path of economic growth following the break through that developed a new form of capitalism based on private public coordination.

average growth of 8 percent, livestock 7.5 percent and fisheries 5 percent. But the ruthless problem subsists in the cereal grains with only 2 percent of growth rate. Since its production area is Terai region, I think people might have been impoverished there in last decade. Food insecurity has been rising day by day at a new height. There are altogether 4.1 million families in Nepal as per the recent data. Concerning the structure of peasants’ status, more than one million families among them possess no land, some 1.2 million families each own 0.1 to 0.5 hectare of land, 0.9 million families are the owner of each 0.5 to 1 hectare of land and 0.7 million only possess 1 to 5 hectare of land which is suitable for commercial farming. There are some 50 thousands or thereabouts families with more than 5 hectares land property. This shows the large portion of the families comprise marginal and landless farmers in Nepal. No more than those having 1 to 5 hectare of lands are able to sell their surplus and handle the risk for commercial farming. Growth in small and commercial farming will be feasible for employment generation in non agricultural sector as well like in storage facilities, transportations and other technical parts. Cooperatives as alleged by the private stakeholders, is booming like an informal sector of economy whereas some argue it as the drive of socioeconomic change. How could

this issue be well managed ? Cooperative is obviously the private sector. Private sector consists of small grocery outlets to large private or public companies, or the cooperatives. Each member has an individual ownership in the cooperatives though their form of organisation is a bit different. Community ownership like community forest is rather a different form of collective ownership. Cooperatives are more successful in common service providing matters. It is ridiculous to define cooperative as a new pillar of economy. Development planning so far in Nepal is someway guided by the viewpoint of modernisation. Do you find this perspective to the development appropriate at present while participatory approach is realised as a better methodology in third world ? Decentralisation in real sense and ensuring the access of local stakeholders to the resources is yet to be done in Nepal. Together with decentralisation, the mode of devolution that means transfer of rights to the resources is imperative now for development process. In devolution mode, centre cannot interfere in the rights of the local States that is clearly stated in the constitution. This model is possible to apply in both unitary and federal mechanism. Though United Kingdom is not a federal State, the model of devolution is well employed there. Similarly in United States, the model of devolution is applied within federalism. We are trying to ensure the mechanism in which local governments will have contribution and access up to 40 percent in the entire resources and the rest will be responsibility of the central government. Again I would like to mention the binding constraints for these all should be confiscated as much as earlier through new constitution. www.corporatenepal.com.np

The Democrats have no actual policy proposals of their own unless constant carping counts as a policy.- Ann Coulter


Cover Chronicle

Twenty years plan... Contd. from page 25

and two third of the national labour force in it. But we could not put forward new plans for the transformation of agricultural sector. Poverty and unemployment are the by products of agricultural and rural areas and without resolving these problems, transformation in the economy won’t be tangible. On the other hand, reformation in the financial sector and industrial sector is equally necessary to bring change in the agro sector transformation. For this, investment should be increased, by capital mobilisation in industrial sector both internal and foreign. But we were not able to do so. In recent years, it has been decreased, the contribution of industrial sector in GDP from 10 percent to 6 percent. Thus neither industrial sector was developed nor the agricultural sector. So an immediate transitional plan for relief and a 20 years economic plan are necessary for long term development. What should be the features

of the twenty years long economic plan to cope with what you often analyse like non economic parties, extracting the economic surplus values ? I would like to emphasise once again the foremost theme of new economic transformational plan and policy should always be renovation of the agriculture. At second, the plan should focus on identification of competitive advantageous sector for industrial production like hydropower, tourism, cement and other industries those based on domestic labour and raw materials so that we will increasingly be self-reliance on our own productions ending the import based overdependence syndrome. The third one is the issue of financial sector which seems too much parasitic in nature. We call it bureaucratic and intermediary nature of capital which only brings foreign products inside for the sake of commissions. We should rather promote the native capital to bring the widening foreign trade

Nepal, situated in between the two big economies, should work like the bridging line to be benefited with abundant trade earnings. We have to maintain balance with both of these countries defending our sovereignty and should develop our economy as a transit route for the international trading.

deficit to a close. This is only possible through the prevention of all those misconducts led by the limited capitalist class in our country such as running ambiguous economic activities and investments in unproductive sector from the undue profits made by corruption under the hood of State authorities. Hence to carry out these all, our main slogan should be ‘economic growth together with employment’ and the twenty years plan must incorporate the minimum target of economic growth in double digits and employment generation inside own territory at the optimum level. In yet another debate while private sector looks like unconvinced on what sort of policies will the State adopt, do you perceive any possibility of developing a new economic model in our own context ? I think we are incapable to escape entirely from the global market economy right now. Thus we have to focus on certain

www.corporatenepal.com.np

Love and war are the same thing, and stratagems and policy are as allowable in the one as in the other. - Miguel De Cervantes

29


Cover Chronicle sector identifying our competitive advantages. In the beginning, we should be selfsufficient in the segment of food grains for the sustainable growth in the economy. Since the human resources, climate and biodiversities are all favourable for agriculture, we have immense possibility of earning billions of foreign currencies through the production of herbs and medicinal plants in high hilly regions, animal farming in mountainous region, production of cash crops like tea, cardamom, jute in eastern region and food crops in plain lands of Terai. After that tourism is another feasible industry in Nepal due to our natural and cultural heritages, beauty with simplicities and unique living. What do you suppose as the actual impediments to gear up our development process, is it solely the inadequate investment or the question of proper management with visionary leadership ? Investment friendly environment seeks political stability and security. Moreover clear cut policy is imperative as well for the trustworthy atmosphere of development. However, we do not have proper clarity and focus on the priorities of our development. Policies seem varying in each time a new prime minister appears in the scene. Hence a common minimum understanding between the major political parties on the issue of development is of the greatest need to ensure the policy stability henceforth. There must be a visionary leadership to balance in between the adequate capital mobilisation for rapid development along with the implementation of agriculture and labour oriented economic policy. On the part of corruption, as major political parties and their top leaders themselves are often allegedly found to be entangled within, what sort of

‘

I think we are incapable to escape entirely from the global market economy right now. Thus we have to focus on certain sector identifying our competitive advantages. In the beginning, we should be selfsufficient in the segment of food grains for the sustainable growth in the economy.

’ measures should be followed to avoid these ? These are the by products of transitional phase where there is no proper growth of industrial economy and baseless easy capital remains in the usage. The policy makers and leaders by means of the State authority often misuse that kind of capital and earn undue income, deposit it in the foreign banks etcetera. Initially a structural change in the economic policy and overall pattern is necessary to tackle

with this problem whereas law and order should be maintained in an uncompromising way to ensure corporate good governance. Dr. Bhattarai, you are well admired among the incredibly wide segment of people as a technocrat leader and the potential change master for national development. As you are the prime minister right now, how do you envisage the future prospect of new Nepal ? Actually I perceive a very well future of Nepal since we are at the position of first fifteenth country in the world in term of resources. I am quite hopeful we can achieve a quantum jump in our economic growth within a short span of time if there is political stability, proper vision amidst national consensus. There is no any other alternative than the national consensus to conclude the ongoing peace process and promulgate the new constitution. Subsequently we can move towards the prosperity and economic development of the country. Similarly, how do you see the possibility in regional and international trade of Nepal with its specific geopolitical existence in the midmost of the South and East Asian trading giants ? China and India have the opportunity to advance as the largest two economies of the twenty-first century. China is now the second largest economy of the world whereas India is on the way to be third largest economy in next few years. Nepal, situated in between the two big economies, should work like the bridging line to be benefited with abundant trade earnings. We have to maintain balance with both of our neighbours defending our sovereignty and should develop our economy as a transit route for the international trading. This will certainly lead us to an independent and successful economy. www.corporatenepal.com.np

30 You do the policy, I’ll do the politics. -Dan Quayle


Cover Chronicle

In Pursuit of the

ASIAN PERSPECTIVE Connected via land side by side with two largest growing economies of Asia, Nepal is itself an extended trade hub, a potential natural dry port of the global market.

By Amrit Kharel

D

evelopment can never be a treasure hunt game. Though lot of challenges do exist in the course, development hardly ever has its superhero following the trails of clues in search of hidden wealth, captured ecstasy and a miraculous future of all people of his time. Of course the ordinary ones have to hurry up in this route that means we are ourselves accountable for our prosperity, imperatively responsible to secure the tomorrows of our next generation. Nepal, a ‘developing nation’as the global players has termed, lying in the midst of Asia Pacific and South Asia, along with its

people those witnessing the changes in the socio-economic circumstances afar their perimeter is yet been ‘told’ the development is essential to this soil. To my surprise we are believed not to have known yet what we require as development. Thus we were ‘told’ to follow the development progression since earlier than we possessed our self-governing system, over again told to follow the path of development as they did and time and again we had been told to achieve the change in the way they have demonstrated. Struggling for a long to attain the basic structural freedom, Nepal and its people have witnessed some four different sorts of regime in last six decades − the

www.corporatenepal.com.np

Foreign policy is really domestic policy with its hat on. - Hubert H. Humphrey

foremost liberation from Ranas, Pachayat regime with active monarch, constitutional monarchy and finally the existing republican electoral system. Sorry to say we still have not been able to discover the core perspective what the development really means to us. The proponents of the laissezfaire doctrine often believe the free market economy is the base system followed by Nepal since the movement in 1990 which has no ever any alternatives to go through. They even accept as true the existing republican electoral is the best model of people’s sovereignty practiced so far. Nonetheless democratic scholar Dr. Prakash Chandra Lohani could not be satisfied of

31


Cover Chronicle what the development we have availed with ‘mimic adoption’ of neo-classical economic rationales. Waiting a u-turn shift in the paradigm he said, ‘a certain systemic break through is indispensable for a quantum growth in our societal conditions’. To Dr. Lohani, neither China nor India moved towards the growth without the step forward in their conventional notions. Likewise Prime Minister Dr. Baburam Bhattarai, the Marxist thinker regarded Nepal, heading to an advent of capitalism with emancipation from the deep rooted classical feudal structure. He is in the favour of healthy capitalism that will have its all features, functioning well as proposed in the maxim. With the eye of Marxist interpretation, Nepal has remained sandwiched between the internal feudal structures based on disadvantaged agricultural pattern and the external expansionist cum imperialist market forces. The exponent of mixed economic approach, Deependra Bahadur Kshetry, former

g o v e r n o r, Nepal Rastra

32

Bank insisted, ‘Development is meaningful only when the fruits are distributed evenly so as to assure human development, better health, education and institutional setup to take care of sustainable services taking care of spatial and demographic concerns’. Private industrialists frequently complain for the existing adverse climate to invest further. Private investment and re-investment are the core theme of the liberal economy however deteriorating in Nepal. Advisor to Federation of Nepalese Chambers of Commerce and Industries (FNCCI) and member of the Constituent Assembly, Rajendra Khetan opined, ‘Due to the lack of confidence and faith upon the system, private sector investment in the non productive sector is booming these days.’

The Hallucination Modernisation

of

Normally better societal conditions and life style, sustained economic growth, increased income, higher employment rates are considered as the indicators of development. ‘But these indicators, sometimes mislead’, stated Kshetry. The modernisation perspective of the

development based on neo classical economic fundamentals has widely been propagated in our context just as it was popular in the decade of 1960s in some other underprivileged countries notwithstanding the perspective is facing fatal criticism afterwards the global recession is hanging

round the western economies. The massive volatility and sharp equity-price correction are the causes behind the latest setback in the international financial market. Financial risk caused by too much private-sector debt and leverage is responsible to lead western liberal economies to a potential double dip recession. The factors like high oil and commodity prices, Japan’s earthquake and tsunami, America’s fiscal problems and ratings degradation, euro zone debts and upheaval in the Middle East are considered as the supporting elements for the consequence. And some of pundits of economy are now wondering and pondering over the viewpoint of Karl Marx that is to say the ‘redistribution of income and wealth from labour to capital could lead capitalism to self-destruct’. Neither the capitalist nor the mixed approach of economic policy is carried out hitherto in the full fledged spirit to drive the engine of Nepalese economic system. Liberal capitalist model of economy comprises of the private means of production and the ownership pattern of private individuals, the global free trading system, interrelated market of all means of productions i.e. land, labour and capital, investmentoptimum income-reinvestment series and the essence of competitiveness. Since the production relationship in Nepal seems semi colonial in term of the exploitation of resources including production and investment in the industrial enterprises, the virtues of modernisation are many times failed to meet the results. Agriculture sector has been neglected by both the State authority and private individuals although it is contributing the one third of gross domestic production (GDP) in our context. The credit flow in agricultural www.corporatenepal.com.np

If the staff lacks policy guidance against which to test decisions, their decisions will be random. - Donald Rumsfeld


Cover Chronicle sector from the commercial banks remained at Rs.12.04 billion that is only 2.30 percent of the total credit flow Rs. 521.78 billion as of the first eleven months of the fiscal year 2010/11. The theme of modernisation and the implications of technological innovations were rather meted out than the adoption by general consent. The practice of unethical risk sharing with the deprived sector and uneven distribution of the fruits to the core influential were quite unbearable for a long. People’s War for a decade in Nepal was the bitter consequence of the awkward adoption of the mediated version of liberalism, unfit to our ignorant social phenomena then. We have been counting the development in the certain premodelled indexes which seems pretty ridiculous where the base of economy to the date is in control of some limited fists. Following the emergence of capitalist industrialists and their active role in policymaking in India after Rajiv Ghandhi’s assassination, Nepal is in the same way going behind the Indian pace. ‘Prime Minister P.V. Narasimmha Rao and Manamohan Singh led governments in India, introduced programmes those involved cutting government regulations and red tape, abandoning subsidies and fixed prices and privatising state-run industries to set the private sector as the driver of economy’, said Dr. Lohani. The Capitalist segment of the Indian private sector gradually started to contribute in national production, manufacturing and even in the reformation of agriculture sector. On contrary, the guided imitation of the private ownership in Nepal resulted into a hollow growth of national economy, fizzed and inflated with the vacuum inside.

The immature Nepalese private sector had been perpetually dealing with import of the productions, encouraging the consumption, earning from the brokerage commissions with

The ‘revolutionary’ like ‘communist’ leaders had presented themselves as the ‘messenger’ of people while they were in the opposition. Once came in the power, they just blew their own horn and wordlessly bowed their head kneeling down before the tenets of the modernisation.

additional prices on the merchandise products. State had been enjoying charging custom duties and tariffs extremely on the imports as its part of revenue generation. Private sector has neither its base rooted in any typical production nor any exceptional manufacturing, however more or less alleged for hoardings, unethical practices of cut throat competition, price instability and ultimately the a r b i t r a t i n g characters. Private sector often remarks in its double stand demanding State’s intervention in those areas quite unfavourable or even reimbursement for the fail institutions where the essence of corporate governance has lapsed. This sector should invest its capital and generating the income, should reinvest it as per the theme of healthy capitalism. But few of the private moguls reportedly generate income and often take it as investment to the other countries. The core system of capitalism is not properly functioning in Nepal due to the impediment in cyclic investment schedules. Forward and backward linkages of the transnational economies and the international companies those expanding their market horizons often thrust the local production system backwards. ‘The easy money making procedures and windfall gainers do not advance the private sector to a sustainable growth’, spoke out industrialist Khetan, ‘The small enterprises and entrepreneurships in productive sector should be developed well’. We did not derive any core theme of the technologies but simply recite the taught formulae from the west. The ‘revolutionary’ like ‘communist’

www.corporatenepal.com.np

War is regarded as nothing but the continuation of state policy with other means. - Karl Von Clausewitz

33


Cover Chronicle leaders had presented themselves as the ‘messenger’ of people while they were in the opposition. Once came in the power, they just blew their own horn and wordlessly bowed their head kneeling down before the tenets of the modernisation. We have 2 hundred and 19 banks and financial institutions spread all over the territory but no access to the credit for the needy. We have more or less half a dozen of universities; more than 52 thousands of schools but still almost 46 percentage of the total population are yet to know ABC. People in the rural areas are still dying of common diseases like fever, diarrhoea and gastric though we have received international awards for making progress towards achieving the millennium development goals. In traditional days, our labour force used to toil as mercenaries of British force and today thousands of the youths are sharing the worst fate in the gulf countries. State has no any programmes for employment generation rather than counting the remittance.

Anticipation of the Asian Perspective ‘There is no universal path to development. Each society must find its own strategy’, M. Friberg and B. Hettne have pointed out in their classic ‘Development as Social Transformation (1985: 220)’. Development remains no more any myth or certain formula that is applicable everywhere to any variables. Development thus is not any hidden treasure that could be found passing a long voyage to the Treasure Island. No matter what the way must be followed but almost all stakeholders are agreed we should choose our original destiny to achieve the sustainable development in true sense. Connected via land side by side with two largest growing economies of Asia, Nepal is itself an extended trade hub, a potential natural dry port of the

34

The Asian virtues best encompass the oriental philosophy of ‘Takshila’ school of thought. Ancient philosophers from ‘Takshila’, the oriental educational centre of Asia had put forward the virtues of humanity, equity, kindness, friendliness, brotherhood and the mutual cooperation among the people including the nation States.

global market. With our own virtues from the entire Asian region, shared approach of values, philosophical roots and the common cultural themes are applied, Nepal − anticipated to demonstrate relatively a newer perspective of economic development concluding its transitional phase has got an outstanding chance to address it through the upcoming constitution. This is truly essential to begin the open debates without more ado encompassing the potential thinkers, policymakers, analysts, private stakeholders and the public opinion leaders how could be the Asian values incorporated within the developmental theme. O. Fals-Borda’s remark in the important opus, ‘Action and Knowlege: Breaking the Monopoly with Participatory Action Research (1991:14)’ is quite relevant while talking about the regional perspective. ‘People

cannot be liberated by a consciousness and knowledge other than their own’. In the lack of our own conscientiousness, by no means we will acquire the prosperity, moreover control in its steering to direct ahead in certain direction we would like to take the engine forwards. The Asian virtues best encompass the oriental philosophy of ‘Takshila’ school of thought. Ancient philosophers from ‘Takshila’, the oriental educational centre of Asia had put forward the virtues of humanity, equity, kindness, friendliness, brotherhood and the mutual cooperation among the people including the nation States. These high calibres seem reverse to the qualities possessed by the modernisation. Kautilya, widely known as ‘Chaanakya’, the foremost economist of the eastern world had put forward his philosophy on international trade, taxation system and the economic model prior to some 2 thousand years. However his works were lost for more than 14 hundred years since towards the end of Gupta dynasty in India in 500 AD and were not rediscovered until early in the twentieth century. Unlike his contemporary, Aristotle, Channakya’s views were unknown to the modern neo classical economic theorists, David Hume, Adam Smith, David Ricardo and so on. They were not benefited with the viewpoints of the Asian values. Thus it is imperative now to discuss widely over our values to integrate them as our new perspective. Chaanakya in his ‘Arthashastra’ (economy) has stated the guiding principles for international trade, taxation and www.corporatenepal.com.np

I think Americans should have a policy of love. That should be the foreign policy, love. Export Love. - Ziggy Marley


Cover Chronicle Chaanakya in his ‘Arthashastra’ (economy) has stated the guiding principles for international trade, taxation and the labour value theory. He has stated the foreign relations should be guided strongly by trade considerations. the labour value theory. He has stated the foreign relations should be guided strongly by trade considerations. He has insisted for bilateral trade arrangements with exchange in commodities for commodities that will enrich both the nations discouraging the imports and exports for the money only. Taking the taxation into the account, his principles are taxing power is limited, taxation should not be felt to be heavy or exclusive, tax increases should be graduated. In the part of labour value theory, as stated by Benoy Chandra Sen in his treatise, Economics in Kautilya, Channakya has proposed the following. ‘A uniform and flat rate of wages for labourers of all sorts is impracticable in an advanced economic condition where commodities of various gradation of value representing different kinds and degrees of manufacturing skill are produced and used by consumers. It depends on the cost of production, cost of material used.’ These guiding principles were foremost principles of economic model proposed by the Asian thinker. With due consideration to these views, we can analyse some other Asian values that is relevant today. The positive feelings of abdication, no temptation for the admiration, collectivistic approach, selfreliance on the basic needs, common marketing system and fair competition are some other values of Asian culture. For instance the great author of the ‘Vedas’, the richest in philosophy had chosen to remain anonymous which is the worthiest ever feelings of abandonment.

The emergent economies in Asia namely the Chinese, Indian and Thai have their distinct features in certain areas. China has maintained a balance in between the labour and production relations encompassing the most of its labour force in the employment. One of the important laws took effect in 2008 that is expected to have the insightful impact on China’s development. It was the Labour Contract Law that required written contracts to formalise employment relationships between workers and employers. The new law made it more difficult to terminate workers and gave workers the right to file complaints and be compensated for wrongful termination. Labourers are obliged to work in dutiful manner and productivity is therefore increased. Equally, India has witnessed the tremendous growth in Information Technology (IT) sector generating world class human resources. Lots of Indians young people are today working all over the world as an important segment of white collars jobs. The investment friendly environments promoted by the local governments, provincial competition for the industrial developments are the features of Indian economy. Likewise Thailand has adopted its own policy of ‘Self-Sufficient Economy’ which is an unmatched model for the modernisation of agriculture. With the policy, Rice is not only the main staple crop of the country but also the primary agricultural export. Thailand has

www.corporatenepal.com.np

The policy of being too cautious is the greatest risk of all. - Jawaharlal Nehru

for decades been one of the world’s largest rice exporters. Thailand got its first position in 2010 among the rice exporters of the world. On contrary to these references, Nepal’s position is in a miserable condition. An exemplar of the trend of foods and vegetables commodities import from India shows an alarming growth of 63.30 percent of rice imports in first eleven months of 2010/11. In that very period, Nepal has imported the rice equivalent to Rs. 1.89 billion, vegetables of Rs. 1.56 billion, sugar worth Rs 772.90 million and fruits of Rs. 599.40 million. An immediate alteration in the prevailing context is only possible with the development of a concrete model of economy blending all good virtues of Asian oriental ethos with positive aspects of the emergent economies of Asia. Participatory and communitarian approach of development has its successful implementations in some areas of community forests and handicrafts production in Nepal. This should be promoted in other areas of productions too. ‘Local participation, local materials, human resources and if possible ownership are provided, the projects rarely fail to deliver their goals’, stated Kshetry. The development of local areas for the local people in participation of the local private stakeholders may well avail the society. This is how the new intermingling is prospective in the developmental approaches to demonstrate the new perspective.

35


…Autonomous authority is necessary Cover Chronicle

to handle foreign trade regime With the national policies put into practice so far resulting not much considerable economic development, what do you envision the strategy should be like to drive the economy towards an exceptional growth ? By far we did not develop the integrated vision to propel our economy in well-off direction. Economy was made contracted up to the annual budget, policy and programmes. Industrial growth is a long run process which cannot be limited within an annual programme. Besides the discrepancies in law and order, insecurity and incidents of unrest are the rascal impediments to growth. To address these issues, mainframe guiding policy should be lasting in decade-wise series whereas respective government shall bring the supporting annual policy and programmes. With general minimum consent among the political heads, policymakers and the economists, our State should endorse a fifteen years long plan. Well, how could the 15 years long plan incorporate the programmes to enhance our competitive advantageous sector ? Even as our industrial sector is rather disappointed since last few years due to the lack of investment friendly environment along with soared trade deficit and unemployment on the rise, I

think the proposed plan have to comprise the three major programmes − identification of such productions that will acquire exclusive market easily, secondly the five years long campaign for promotion of countrywide agricultural as well as industrial productions and finally the revitalising package for industries in rural areas. Since you are the honourable member of the first ever constituent assembly of Nepal that is underway to endorse the new constitution, would you please inform what sort of provisions for economic freedom will be guaranteed to avail the people with business rights ? The ‘Natural Resources, Economic Rights and Revenue Allocation Committee’ has incorporated all forms of economic rights like freedom of profession, business, employment and investment in the proposed draft of constitution. The right to food, right to property, right to residence and right to employment are proposed to be listed in the section of fundamental rights. The issue of land reformation without compensation is only the issue in debate at present. Similarly, what will be the role of two newly proposed constitutional commissions namely the National Natural Resources Commission and

36 It is my view that we cannot conduct foreign policy at the extremes. - Joe Biden

Æ

National Financial Commission ? Of course these two commissions are proposed to plan the development in new sense after the restructuring of nation. National Financial Commission is proposed to address the issues of overlapping rights and jurisdiction of the central government with the respective provincial authorities. In addition, the Natural Resources Commission will deal with the conservation and utilisation of the natural resources, biodiversities and intellectual properties. This commission is assumed to distribute certain percent of preferential share of the royalties collected to the affected groups or ethnicities while mobilising particular natural resources. Labour related issues are often pushed and shoved by the political motives and thus function as the hindrances to smooth industrial environment. How do you consider the issue should be tackled ? Political parties should stop right away using the trade unions just as mulching cow. The labour related issues should be correlated with both the social security and productivity. There should be a tripartite agreement between the employers, trade unions and the State for healthier industrial relations. The small enterprises and entrepreneurships should be www.corporatenepal.com.np


Cover Chronicle Rajendra Khetan Advisor, Federation of Nepalese Chambers of Commerce and Industries, Hon. Member, Constituent Assembly

developed well to flourish the employment. Business sector in Nepal is hardly ever free from the allegations it involves in the tax evasion and often lobbies to defend the evaders. Is there any solution ? Business enterprises should have their obligations towards the law and order. Nonetheless some of the business enterprises in our context may well try to inflate their profit by the means of leakages due to the lack of competitiveness. The all forms of direct contact in between the tax officers and the tax payers should be altered with the systematisation. If system works, evasion will definitely be halted. Nepal, being the member of World Trade Organisation (WTO) is though adopting the essence of global free market, still remained quite backward in foreign trade. Why this situation does exist ? WTO membership covers five core areas of capacity building, enhancing competitiveness, securing intellectual property rights, biodiversities and internationalisation of legal frameworks, accounting and auditing standards. Being the member of WTO, we had accomplished the Nepal trade competitiveness study, amended and approved 35 different laws and regulations. But there are yet many more to do in the direction of trade promotion. An autonomous authority is necessary to handle the trade regime in the international mainstream. The overlapping trading issues with other regional bodies like SAFTA, BIMSTEC should be solved through the authority. www.corporatenepal.com.np

37


Cover Chronicle

Ashoke SJB Rana President, Nepal Bankers' Association CEO, Himalayan Bank Ltd.

financing could “ Micro promote agriculture � How do you oversee the recent sluggishness suffering the entire Nepalese banking sector ? The difficulties in our banking sector at present are somewhat a correction as well. It was reasonably mandatory to limit the lending in the bubbling real estate sector at any cost. Banking professionals however seem hesitating to tolerate the sluggish pace in the profit range. Profit does not necessarily mean always

an upward trend. We have to balance the risks and profits according to the market scenario. Why the economic policies endorsed up to now do not seem much resulting in Nepal ? Our economic policies so far did not seem resulting appropriately. It is because democratic norms are yet not functioning properly in our context. State is not able to implement the rule of law, good

38 A dynamic economy begins with a good education. - Bob Taft

governance and transparent system. Thus the policies are limited within the documentation. How do you consider the role and policies employed by Nepal Rastra Bank regarding the banking sector ? I always perceive Nepal Rastra Bank as the guardian of overall financial sector. Central bank in the leadership of present governor Dr. Yubaraj Khatiwada seems moving independently www.corporatenepal.com.np


Cover Chronicle It may require strong lobby for the expansion of commercial farming. Government should give due attention to the food price control mechanism

ahead in implementation of corrective measures in banking sector. For an instance, the over exposure in the real estate sector is on the way of correction subsequent to the capping in the lending. This portion of credit at this moment covers less than 15 percent of the total credit flow. The issue in the Vibor Bank recently is also associated with the overexposure to a sole sector specifically the real estate. Thus banking sector should cooperate and follow the regulative directions of central bank for the betterments. Cooperatives are presented as a third pillar of economy by the preceding government. What would you like to say in regard of this ? Cooperative is simply a distinct form of collecting and gathering the funds. But neither can it be any pillar of economy nor the alternative of banking system. It is only a method of collecting funds from the people and bringing it to mobilise further. It is also a part of private sector which is the real engine of the growth. What sorts of policies should be adopted to expand the concentration of banking access to the public in reasonable manner as it is often alleged the banking horizon seems limited in the urban sector ? Though the banking sector is witnessing an unprecedented quantitative expansion, the deposit mobilisation is coming upon the sluggish route. This

tendency seems quite paradoxical and what I think the solution is to insist in encouragement for banking habits, maintain reasonable interest rates and easing the access to banking branches. Do you envision any scheme to boost the public depositors’ confidence right now ? Depositors are not a bit convinced regarding the information collection system in compliance with Anti Money laundering. They are not assured that the information won’t be misused for any other purpose like land reformation, revenue investigation or whatsoever. Thus it is hindering the confidence of the medium and large depositors. Investment in agriculture sector remains at the minimal level though it has its share of one third in gross domestic production. How is it possible to increase the investment in agriculture ? The particular governments in the west often provide subsidies and promotional packages targeting the peasants. But our government does not have such programmes to facilitate the farming. It may require strong lobby for the expansion of commercial farming. Government should give due attention to the food price control mechanism as food security is the burning issue worldwide. Micro financing could be an option to promote agriculture. For instance in Sri Lanka, micro financing has been used as tools to alleviate poverty that yielded a result of 20.1 percent reduce in poverty in some four years. About 27 percent people in Sri Lanka used to remain below the poverty line in 2006 while the percentage in 2011 is 6.9 only. They have focused in the balanced growth in the regions. Government in Sri Lanka had disbursed a huge amount of credit worth Rs. 6 hundred billion for the farmers through the private banks. This

may possibly be a good model for us. What would you think the reason behind the banking sector has not been developed towards specialisation ? Since our banks and financial institutions (BFIs) do not possess long term funds, seem rather unable to practise specialised banking. BFIs should bring long term instruments and collect such type of funds. We even do not have bond market and market for mutual funds. Without adequate funding, specialisation can hardly ever prolong. What could be the ways you pay for implementing merger and acquisition procedures in Nepalese banking ? Merger shall not be significant if the bank shall run in the same way yet again once the merger takes place. While there exist too many BFIs in the market, tendency of risk bearing is expected to raise at the most unpleasant level. Unless there are selected BFIs all robust in the market, supervisory obligation might not be carried out well. Where there is no tendency for adequate provisioning of bad loans, absence of credit rating agencies and very few portions of non-deposit income, merger and acquisition could possibly best suits in such market. It can offer a large capital base which is necessary for the strength of the BFIs. What do you foresee the ways to advance the corporate governance in BFI’s ? Corporate governance should be ensured by the means of strict implementation of reasonable policies and regulations. NRB has implemented various provisions related with board and managements in order to prevent the undue doings in the BFIs. Political interference should not entrap the central bank and other regulatory bodies that can therefore constitute good governance in overall banking.

www.corporatenepal.com.np

If your company has a clean-desk policy, the company is nuts and you’re nuts to stay there. - Tom Peters

39


Cover Chronicle

Economic Po l i c y Prescriptions

M

By Dr. Janak Raj Shah

Values of communitarian society include firm loyalty, social responsibility for skills, government and business working together to promote growth, teamwork, and industry strategies.

40

otives of economy are reflected in economic policies. Therefore, the motives of economy are part of the social, economic and developmental factors guided by political ideology taken by the state. Further, motives of economy are delineated with the degree of control and autonomy in the economy viz. economic policy. Economic policy prescriptions in control vs. autonomy dilemma are most debatable one in present time. There was cut throat competition between these two regime − control and autonomy. However, in recent time, ‘control’ regime of economy seems more relevant over ‘autonomy’ because of the ‘economic crisis’ in the developed countries in few years back. Hence, some observations have been made regarding what makes conducive to prescribe appropriate economic policy.

Social Tendency More importantly private economy, where higher degree of autonomy exercised, is not focused on the social factors of the economy. Therefore, in such circumstances, social factors are often coined in terms of strife, unemployment and even political unrest. Society’s attitude towards ‘control’ and ‘autonomy’ in the economy is determined by different values deep rooted in the mind of the society. For example, societal stratification

and level of time orientation influence a society’s attitude towards degrees of control and autonomy. A low or causal attitude towards time suggests that a society believes that time is to be enjoyed; one must not become a slave of time; hurrying and rigorous schedules are to be avoided; understanding and preservation of past is to be protected against change. In other words, people work to live in a society that has a casual attitude toward time. Laissez-faire is sought in economic activities in this tendency of society. Therefore, ‘control’ would face more resistance for some time. However, ‘control’ seems inherent to change this value of society. Conversely, a high or intense attitude towards time by society suggests correlating time with productivity and progress; time must not be wasted- keep busy; time is money; punctuality is important; preparations for future are essential. In such a tendency ‘control’ or planned regime of economic policy is better suited. Therefore, in such circumstances ‘control’ would feel comfort and society will proactively support this regime.

Political Regime Attributes of the political factors of development include the political orientation and the degree of democracy, e.g. control and autonomy. Political orientation is further delineated into two sub-attributes of www.corporatenepal.com.np

It would be our policy to use nuclear weapons wherever we felt it necessary to protect our forces and achieve our objectives. Robert McNamara


Cover Chronicle

communitarian philosophy and individualistic philosophy. Communitarian philosophy implies that society works together as a group in order to achieve greater overall success. Values of communitarian society include firm loyalty, social responsibility for skills, government and business sector working together to promote growth, teamwork, and industry strategies. Inversely, it is argued that American or British society is based on individualistic capitalism, and values, which are demonstrated through individual achievement. These values include ease of firing and quitting, profit maximisation, the entrepreneurship, individual responsibility for skills, and large wage differentials. However, there is a range from liberal to illiberal democracies.

Development Philosophy Economic policies are the products of developmental philosophy adopted. For example, it is conceptualised how economic policy of national industries impact both domestic and global competitiveness through the factors of development, industry structure, and a firm’s strategy and rivalry. National capacity, industrial development base and firm strategy influence a nation’s global competitiveness and which in turn have a reciprocal effect upon a nation’s national capacity which influences the industrial development base, firm strategy

and rivalry. Industrial development base depends upon various factors of development. There are two sub-attributes of factors of development: natural and manmade. Natural factors of development include the natural environment, fuel, land, minerals, and elements, and other factors, which are found in nature naturally and are exhaustible. The man-made factors of development include a nation’s infrastructure, human resources, knowledge resources, and capital resources. Further, as firms become more competitive domestically, they also tend to compete in global markets in a more effective manner and as nations become more globally competitive, national capacity increases.

Approaches to Economic Policy Based on social, political and economic developmental factors, gradual or control and market shock (autonomy) are the two primary approaches to implementing economic policy in the country. Conversely, market shock (autonomy) is the immediate introduction of vast liberalisation of markets. This approach often results in social and political unrest. The gradual (control) approach is an incremental approach to slowly and steadily make reforms while learning from their own mistakes and mistakes made by other nations. The gradual approach alleviates much of the social strife associated with the market shock liberalization.

Policy Prescription to Nepal Nepal, now in a political transition, as one of the least developed countries and can be characterised as having a high level of societal stratification (i.e. caste and economic) and low or casual attitude toward time. Moreover, the Nepalese economy consists of few rich, a minority middle class, and a majority of people living in poverty. These

attributes would suggest Nepal as non-conducive for liberalisation or autonomy orientated economic policy, but needs State control mechanism. Otherwise, the socioeconomic factors act as a constraint to the private economy. It is also concluded that a nation, which can be characterised with a high level of societal stratification and a low or casual attitude toward time have a social environment that is lowly conducive to the private economy. In case of Nepal, it would more likely to adopt a communitarian style of economic policy based upon its socialistic roots. By the nature of existing political forces, communitarian style of economy and a low degree of democracy suggest that Nepal is nonconducive to laissez-faire or autonomy rather needs control or socialism. Presently, Nepal can be potrayed as moving relatively high levels of autonomy, which is nonconducive to country’s context in the perspective of society. Because, nations that have nonconducive social and political factors toward laissez-faire will not make rapid progress from a free market economy. From the developmental perspective Nepal is lagging behind. From the market perspective Nepal is in transition from a monopolistic market to a learning market and it has been lacking factors of development and industry structure, the firm strategy and rivalry may not be considered conducive to the global competitiveness. Therefore, with the contextual reference to the developing countries, it can be often prescribed that there is linkage between social, political and economic development factors and the degrees of economic policy i.e. autonomy vs. control regime. (Author is the president, Management Association of Nepal MAN)

www.corporatenepal.com.np

If a policy is wrongheaded, feckless and corrupt, I take it personally and consider it a moral obligation to sound off and not shut up until it’s fixed. - David Hackworth

41


Context

An Account of Leakage

By Raju Shrestha

N

epal Electricity Authority (NEA), the authorised and responsible body to produce, expand and distribute the electrical power all over the country is in reserved loss of Rs. 28 billion. Among many reasons for NEA to be falling in loss, the main challenge has been to control the leakage of electric power. The report of Electricity Power Leakage Control Mission (EPLCM) 2011 says that the 29 percent is the leakage out of the total distributed electrical power by NEA. According to the report the 15 percent is technical leakage and remain by theft. By annual leakage NEA has been increasing its liabilities at 7 billion rupees. The calculated leakage of 28.6 percent in fiscal year 2008/ 09 was increased to 28.91 percent in successive fiscal year though NEA had officially mentioned its leakage 26.5 percent and claimed the leakage

42

not to be exceeded by 23.8 percent. If the trend of leakage remains the same, the leakage will be more than 29 percent in the current fiscal year, is cautioned in the report. The project for energy efficiency loss prevention programme has been running with an aim to minimise the leakage. Project will be supported by Asian Development Bank (ADB) up to 2013/14. However the symptoms of programme are signalling the effort will be in vain. Accepting previous work plan failed to minimise leakage, NEA has established the Electricity Control Directorate to minimise leakage by 20 percent. According to report if leakage is limited around 20 percent, NEA will earn more than Rs. 2 billion. But some say the current structure and working nature of NEA will miss to hit the target of limiting leakage around 20 percent. Given that government has high priority to leakage control, an ambitious work plan is included in the

budget speech this year to control 9 percent leakage within 6 months at the rate of 1.5 percent per month. For this, the government has formed the Electricity Leakage Control Monitoring and Directing Committee in the leadership of Mr. Subas Karmacharya, leader of Communist Party of Nepal, Unified Marxist Leninist (CPN-UML) the board member of NEA. By the end of last decade, the government had the target of limiting leakage by 22.9 percent but all previous efforts of the government were fruitless. NEA has 3689.27 Giga watt electricity produced annually and it purchase 612.58 Giga watt power from India per annum. NEA manages total 4301.85 Giga watt hours energy annually. According to the report published by nationmaster.com online service in 2004, the highest leakage rate was in Congo 73.63 percent, Haiti 53.2 percent, China 6.32 percent, Japan 4.56 percent, South Korea 3.49 www.corporatenepal.com.np

A true leader has to have a genuine open-door policy so that his people are not afraid to approach him for any reason. - Harold S. Geneen


Context percent and Israel 2.82 percent,. Likewise among South Asian countries the highest leakage rate was 26.29 percent in India, Pakistan 24.58 percent, Burma 19.51 percent, Sri Lanka 16.73 percent, Bangladesh 9.49 percent and Nepal 19.49 percent then. In those countries leakage has been minimised but in Nepal it rose by 10 percent. The provision in the sub article 1 of article 7, Electricity Leakage Control Act has clearly stated the topic of electricity theft offence. But according to the sub article 2, whenever the leakage is not done by the customer, it shall not be confirmed as electricity theft offence. Mostly leakage happens by long expansion and distribution line, wearing substations, low quality of transformers. These are the technical leakages and can easily be controlled.

Electricity Theft Electricity theft has really been a big problem for NEA. Some individuals steal electricity imitating others but some others steal it deliberately challenging the law and order. To manage energy measuring metres unable to read the rate of consumption is also an offence of electricity theft. NEA had not mentioned anything about the electricity theft in its first code, Electricity Authority Act 1985, but the issue was addressed in the first amendment in 1992. The government introduced the electricity theft as an offence against State and implemented Electricity Theft Prevention Act in 2001. According to the provision of section 7 of the act, bypassing energy measurement machine and anyone directly or indirectly consumimg electricity from expansion line without official permission for lightening road, building or running factory using any technology or disconnecting any official seal or

uses of unofficial seal shall be offence of electricity theft.

Major Places of Electricity Theft With the political influence, the existing tendency of no penalty or any punishment against the offence has been promoting the activities of electricity theft. Hooking, meter tempering, bribing meter reader and barring meter reading to read meter are the major ways of electricity theft. The high rates of electricity theft from 40 to 70 percent are seen in Rauthat, Bharatpur, Bhaktpur, Lalitpur, Sarlahi, Tandi, Mahottari, Kalaiya, Rajbiraj, Taulihawa, Gulariya, Damak, and Dhanusha like districts.

Punishment for Electricity Theft The punishment and penalty for theft has been provisioned in the section 16 part 4 in the first amendment of the regulations of Electricity Leakage Control Act. Under the sub section 1 of the same regulations, the court shall fine Rs. 5 thousand or 3 months jail or both fine and jail along with loss and compensation claimed by the distributer if the offence is proved . Likewise under the subsection 2 the court shall

fine Rs. 10 thousand or 6 months jail or both along with 2 hundred percent of loss and compensations claimed by the distributer if the offence is proved second time. EPLCM has proposed to enrol the culprit in black list and reduce the facilities given from the State found in electricity theft offence.

Leakage Control Possible Where the government owns strong will power to take action against the offence, there the leakage will be controlled. Improving the quality of equipments, managing short distanced expansion and distribution line, using good cable and load shading in focused theft area and offender be boycotted in society might be some measures to control leakage. For the leakage control public awareness campaign against electricity theft should be launched, weaker provisions should be rectified and automatic or remote meter reading process should be provisioned. Though NEA has 1.8 million customers but it has been in loss because of increasing leakage rate. Leakage control not only helps NEA to be in profit but also mitigates the crisis of energy in Nepal.

ADMISSION OPEN RSC NEPAL, LITS College announces admission open in

ANM, CMA, Lab Technician and Diploma in Pharmacy

RSC NEPAL, LITS College Butwal-10, Sukhanagar, Rupandehi, Nepal

www.corporatenepal.com.np

There was a policy at Hughes against drinking at lunch, but the men ignored it. - Esther Williams

43


Riding

Wow ! AVANZA brings Bonanza !! TOYOTA offers a ‘Golden Touch Membership’ to all of its AVANZIAN. This membership authorises the customer to have free service for one year. By Our Correspondent

O

ops! The recession barred enjoying l u x u r i o u s , comfortable and royal ride on TOYOTA brand four wheelers. Hey, if you think so, not need to be much worried now because TOYOTA has brought for you, the bonanza that is named as ‘AVANZA’. With seven luxurious and comfortable seats, AVANZA offers you the range of innovative styling with an unexpected surprise. Available in two options, 1.3 and 1.5 it conveys a sense of quality with remarkable stability and most enduring impression − highly efficient packaging among the emergence of a new category of versatile MPV. On top you need not to stretch your pocket while

44

you could have it for only Rs. 3.14 million that is the best ever available price among the luxurious brand four wheelers series. Going on the long drive with family members can be much more memorable with your AVANZA that seems alike to the SUV model. ‘We have made it available in six different colours so far and now we will provide in black segment too’ informed Sahara K.C., marketing director, United Traders Syndicate, the sole distributor of TOYOTA in Nepal ‘Furthermore it will have an auto transmission side mirror facility that we will free install to all AVANZA’s we have provided by now’. Engine built in Indonesia;

AVANZA has almost won the entire choice of four wheelers buyers in Bangladesh. Multi reflector headlamps that offer best-in-class driver visibility, protected by high integrity cabin with front and rear crumple zones as well as side-door impact beams to resist a side-on collision, spacious cargo room facilities and supplementary restraint system are the core features packed within AVANZA. TOYOTA offers a ‘Golden Touch Membership’ to all of its AVANZIAN. This membership authorises the customer to have free service for one year and 20% discount in maintenance and spare parts afterwards. ‘Golden Touch’ card holders will enjoy the benefit of discounts at malls, restaurants and photo studios too. www.corporatenepal.com.np

The fact is, Bush’s war policy has failed. It’s failed! Who better to say so than Jack Murtha? - Rahm Emanuel


Riding

Technical Specifications Engine

Type Displacement Max.Net Torque Max.Net Power Max Speed Gears Suspension Front Rear Brakes Front Rear Tyres & Wheels Front Rear Wheels Fuel Tank Capacity Reserve Dimensions &Weight Wheelbase Ground Clearance Kerb Weight Electricals Battery Headlamp Tail lamp

Discover Your Stylish Ride

DTS-i, 4-stroke, naturally air cooled 124.6 cc 10.8 Nm @5500 rpm 11 Ps @ 8000 rpm 100 Kmph 5 Gears, All down Telescopic, 130 mm fork travel Nitrox Gas filled, 110 mm rear wheel 200 mm Disc/130 mm Drum 130 mm Drum 2.75X17'’ 3.00X17'’ Aluminum Alloy Die Cast 8 litres full 2.3 litres, usable reserve 1.5 ltrs 1305 mm 165 mm 118.5 Kg. Maintenance Free, 12V (DC), 5 Ah 12 V, 35 / 35 W LED Type

By Our Correspondent

M

ore excitements and efficiency are what you could discover with the all new Discover 125. HH BAJAJ, authorised distributor of BAJAJ Auto Ltd. India has been offering it in the local market to meet the budding demand among the middle class. Discover 125 with state-of-the-art 125cc DTS-i powered engine simply suits to all generation of Nepalese society. The Discover offers people a pride ride, smooth driving facilities and high millage rate with wider rear tyre for better grip, electric start, instant-stop disc brakes, auto colour change decals, stylish LED tail lamps and sturdy Nitrox suspension installed. Just a married couple can feel romantic discover ride and matured couple can recall their romantic days. The Discover ride is bridging between the teen days to matured age. Shape, size, smoothness and stylish like all elements are fine tuned to discover DTS-i Discover 125.

www.corporatenepal.com.np

If you don’t have 30 years to devote to social policy, don’t get involved. - Daniel Patrick Moynihan

45


Management

TIME VALUE OF MONEY

M

ost financial transactions involve a series of cash flows − regular or irregular - over a period of time. When evaluating these cash flows the basic concept used is the time value of money. If you are offered the choice between having Rs. 100 today and having Rs. 100 at a future date, you will usually prefer to have Rs. 100 now. If the choice is between paying Rs. 100 now or paying the same Rs. 100 at a future date, you will usually prefer to pay Rs. 100 later. But why is this ? Rs. 100 has the same value one year from now also. Actually, although the value is the same, you can do much more with the money if you have it now; over the time you can earn some interest on your money. The time value of money (TVM) is one of the basic concepts of finance. We know that if we deposit money in a bank account we will receive interest. Because of this, we prefer to receive money today rather than the same amount in the future. Money we receive today is more

46

valuable to us than money received in the future by the amount of interest we can earn with the money. This is referred to as the time value of money. The term time value of money can be defined as 'The value derived from the use of money over time as a result of investment and reinvestment. This term may refer to either present value or future valaue calculations. The present value is the value today of an amount that would exist in the future with a stated investment rate called the discount rate.' For example, with a 10 percent annual discount rate, the present value today of Rs. 110 one year from now is Rs.100. Financial Management Considering time value of money is important in decision making, for the purpose of financial decision making expected cash flows are evaluated from the time frame of present time. In finance, we often have a decision making situation wherein cash investment today is evaluated with reference to expected cash flows in future. The reason why

there is time value of money is as follows: Opportunity Cost: There are alternative productive uses of money. The cost of any decision includes the cost of the next best opportunity forgone. You can save and invest, get interest and spend. Inflation: It erodes the value of money. Risk: There are always financial and non-financial risks involved. The trade-off between money now and money later depends on, among other things, the rate of interest you can earn by investing. It impacts business finance, consumer finance and government finance. Time value of money results from the concept of interest. Interest rate is the cost of borrowing money as a yearly percentage. For investors, interest rate is the rate earned on an investment as a yearly percentage. (This text is thankfully extracted from ‘Cost Accounting and Financial Management' published by The Institute of Chartered Accountants of India) www.corporatenepal.com.np

It is always good policy to tell the truth unless of course you are an exceptionally good liar. - Jerome K. Jerome


Management Meditation

with Kamal Gynwali

Management 1. To the known fact, time is money, so never let it go in vain prioritising your all duties for proper Time Management (TM). 2. Make the clear distinction between the regular works and unpredicted but imperative ones. 3. Always allocate specific time for a particular work either meeting or anything else avoiding the indefinite nature of lingering issues. 4. You should always talk to the point precisely otherwise focal point may be missed in the vague discussions. 5. Since TM demands appropriate distribution of works, have your confidence upon the subordinates to get assistance accordingly. 6. Share the nature of your job with your assistants well because commanding personal assistants are able to lessen the burden of works if trained perfectly. 7. Do not get engaged in all sorts of dealings, concentrate within your responsibility letting other departments to cope with so. 8. Take care of your health with regular exercises like Yoga and meditation that will erase tensions and prevent the loss of time.

Time Management

9. Try to fix your bed and wake up time, breakfast and meals hour to run the schedule smooth every day. 10. Continue your hobby with some one or two hours daily that amuses and encourages you for living creatively with much more work efficiency.

www.corporatenepal.com.np

That’s part of the policy: To keep switching gears.- Ridley Scott

47


Branding

By Our Correspondent

Nano Pours New Joy in Nepal

L

ong awaited eyes in Nepal are sharing the happiness since the most economical segment in four wheelers − Tata Nano has started running on the roads. Nano offers four adult seats with the length of 3.1 metres, width of 1.5 metres and 1.6 metres height. With a turning radius of just 4 metres and a high ground clearance of 180 mm, it allows anyone an easy drive even on bad roads. Nano comes with a 2-

48

cylinder aluminium MPFI 624 cc petrol engine mated to a fourspeed gear box. The car is available in three variants and their key features as company stated in the first of it includes single-tone seats, with tubeless radial tyres and fold-down rear seat. The second option is Tata Nano CX, in five colour options, with heating and air-conditioning, two-tone vinyl seats, parcel shelf, booster-assisted brakes, folddown rear seat with nap rest. Last but not the least, third one is the Tata Nano LX that in addition to the features of the

Nano CX, offers central locking, front power windows, body coloured exteriors in three premium colours, fog lamps, electronic trip meter, cup holder in front console, mobile charger point, and rear spoiler. Performance level declared as 2cylinder 624 cc engine – delivering 35 PS at the rate of 5250 rpm enables the car to have a top speed of 105 kilometres (km) per hour. As claimed by the company, Nano has its fuel efficiency of 23.6 km per litre that is the highest for any petrol car in Nepal. In addition it comes with a warranty of 4 years or 90 thousand km whichever is earlier, this is the highest amongst all other cars in the segment in Nepal. The third largest passenger vehicle marketer in Nepal, Tata Motors with its distributor, Sipradi Trading Pvt. Ltd. (STPL) introduced Tata Nano car in its launching ceremony calling ‘Nano Yatra Nepal’. The introductory price of the Tata Nano in Nepal marked Rs. 7 hundred and 98 thousands was disclosed in the occasion. The company’s portfolio of passenger vehicles in the country comprises Indica Xeta, Indica V2, Indica Vista, the Indigo CS, Manza, Sumo,Grande, Safari and Aria. www.corporatenepal.com.np


D.A.O Kathmandu Regd. No. 27/2067/68


The Economic System (Policy and Perspective Issue September 2011)