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R&D Economic Research & Business Development

Date: December 18, 2009

Highlights •

As part of its ongoing drive to declare federal states despite facing widespread criticism, the Unified CPN (Maoist) declared Magarat and Tamuwan autonomous states on Thursday. With this, the number of Maoist-declared autonomous states has reached twelve. To the much dismay of the Indian establishment, Madhav Kumar Nepal, considered as Nepal’s Prime Minister of India’s choice, during his impending visit to China which is set to begin December 26, 2009, will concentrate mainly on inviting further Chinese investments in this India locked country. The Commission for the Investigation of Abuse of Authority (CIAA) has grilled the Ministry of Energy, the Ministry of Industry, and the Company Registrar’s Office for allowing “technically and financially-unqualified companies” to hoard hydropower survey licences of at least 10,000 MW. Soaring capital flight has further exacerbated what appears to be an economic crisis in the making. Nepal Rastra Bank (NRB) has concluded that large amounts are going to India through the ‘banking system’ itself. In a bid to put a check on financial institutions' over exposure on real estate and housing loan, Nepal Rastra Bank (NRB) on Thursday issued new directives, putting ceiling on lending. As per the new directives, financial institutions now can't lend more than 25 percent on real estate sector. And their exposure to real estate and housing loan shouldn't cross over 40 percent. Government is soon imposing cap on land and housing loans of Saving and Credit Cooperatives -- one of the key financers that have been moving the realty market without being regulated by any financial authority -- in a bid to check the real estate bubble. Commercial banks have started to revise interest rates on bank loans as the liquidity crunch tightens further. Major revisions have been made on auto and housing loans. The new interest rate on housing can go as high as 14 percent, and on auto loans it could be around 13 percent. The liquidation process of Nepal Development Bank (NDB) has finally begun. The Patan Appellate Court on Thursday appointed Chartered Accountant Narayan Bajaj as the liquidator and asked him to complete the process within three months. Rajesh Kaji Shrestha, president of the Nepal-China Chamber of Commerce and Industry, has underscored the need to bring Chinese banks to Nepal due to the increasing trade between the two countries.

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The recently amended Financial Assistance Directive has revoked the prime minister´s privilege of distributing financial assistance from state coffers to near and dear ones through his direct recommendation. The Nepal Telecommunic-ations Authority (NTA) is reviewing the frequency renewal charge after which telecom operators holding more frequencies than assigned will be charged five times the normal rate. Nepal Telecom (NTC) is launching ADSL internet service in the districts of the Far West Region. The ultramodern service would be launched in Kailali, Kanchanpur, Doti and Dadeldhura districts. The NTC Far West Regional Directorate, Attariya, said that a total number of 5,000 lines would be distributed within a month. It is common for Kathmanduites to spend hours in queues in front of petrol pumps since the last three years. These unfortunates will have to suffer more in coming days, because the fate of the much-vaunted Raxaul-Amlekhgunj pipeline is uncertain. Bullion traders said that sales of the yellow metal despite the ongoing wedding season had decreased by around by 50 percent compared to the same period last year due to the record high price hike in the national and international markets. At a time when Nepal’s northern neighbor has exhibited its serious concerns over the construction of Air-Base in Surkhet with the support of the government of India, Nepal’s Defense Minister Mrs. Bidya Devi Bhandari has made the on-the-spot visit of the construction site in Surkhet, Nepal. British Council in association with the Association of the Youth Organizations in Nepal (AYON) has on Thursday announced the launch of the Active Citizens Project in Nepal. The subcommittee formed under the State Affairs Committee (SAC) of parliament to probe into the alleged financial irregularities in the procurement of logistics for Nepal Police personnel deployed for UN peacekeeping in Sudan has traced a suspicious bank account with one million USD deposited in the name of a Chinese national. Human rights defenders and legal experts have expressed serious concern over Nepal Army's "point-blank refusal" to hand over Major Niranjan Basnet, who has been implicated in the torture and murder of Maina Sunuwar in 2004, to the civilian court. Gurkhas champion Joanna Lumley has won the backing of the Prince of Wales as she returned to the campaign trail to raise millions of pounds for elderly veterans in Nepal.

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POLITICS:

Maoists take autonomous states count to 12; declare Magarat and Tamuwan As part of its ongoing drive to declare federal states despite facing widespread criticism, the Unified CPN (Maoist) declared Magarat and Tamuwan autonomous states on Thursday. With this, the number of Maoist-declared autonomous states has reached twelve. Maoist general secretary Ram Bahadur Thapa 'Badal' declared the Magarat state from a mass meeting in Tansen, the district headquarters of Palpa, this afternoon. The announcement was made amid the cacophony of firecrackers and sloganeering. The Magarat state comprises Palpa, Rolpa, Rukum, Baglung, Myagdi, Arghakhanchi, Pyuthan, Gulmi and Salyan. Similarly, Maoist central committee member Dev Gurung declared the Tamuwan autonomous state amid a programme organized in Pokhara of Kaski district. The Tamuwan state comprises Lamjung, Gorkha, Tanahun, Manang, Mustang, Kaski, Parvat and Syangja. Speaking on the occassion, Gurung said that the Maoists were compelled to declare autonomous states to exert pressure on the government to be serious towards timely drafting of the constitution. He also claimed that the autonomous state declaration programme of the party was not against the interim constitution or the ongoing peace process. Meanwhile, student unions affiliated to various political parties including ruling CPN (UML), Nepali Congress (NC) and Madhesi Janadhikar Forum - Loktantrik (MJF-L) shut all education institutions in Kaski district today protesting the Maoist plan to declare Tamuwan autonomous federal state. Schools and colleges in the district remained closed today to the strike. The Maoists had declared Newa and Tamsaling states on Wednesday. The Maoists are set to declare Madhesh state on Friday. Defying calls from several quarters to withdraw the autonomous state declaration programme, the Maoists went ahead with its plan to declare 13 autonomous states based on ethnicity and region from Dec 11. Source: www.nepalnews.com Date: December 17, 2009

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Nepal to seduce China for Huge Investments: Reports To the much dismay of the Indian establishment, Madhav Kumar Nepal, considered as Nepal’s Prime Minister of India’s choice, during his impending visit to China which is set to begin December 26, 2009, will concentrate mainly on inviting further Chinese investments in this India locked country. What a Joke! To recall, after China and Nepal recently signed agreement to construct a Hydro-Plant in Nepal, the Indian media termed the event as Chinese grand penetration in Nepal’s hydropower sector that remained the sole prerogative of India as of now. Be that as it may, this visit to China will be Mr. Nepal’s first visit after his elevation as the country’s prime minister. “The visit though dubbed as a goodwill one, will also focus on inviting further Chinese investment(s) in Nepal”, reports quote sources at ministry of foreign affairs as saying. “Inviting Chinese investment in Mega Hydropower projects of Nepal and reminding China of its long commitment to ensure Tariff Free regime for Nepal’s domestic products in the Chinese market will be the prime agenda of the Nepal PM visit”, reports add. Including Foreign Minister Sujata Koirala, Finance Minister Surendra Pandey, Energy Minister Dr. Prakash Saran Mahat, Vice Chairman of the National Planning Commission Dr. Yub Raj Khatiwada, Chief Secretary Madhav Prasad Ghimire, some twenty people will be the part of the Prime Ministerial delegation to China. Interestingly, Nepal’s leaders as and when they visit China have made it a point to eulogizing the Chinese leadership and China’s astounding progress accomplished in the economic sector. “The Prime Minister of a poor country like Nepal, whenever embarks on a visit to China-the economic giant in the North, will certainly have proposals for investments” says Foreign Secretary Dr. Madan Kumar Bhattarai. “We are still doing our homework to bring in the Chinese investments in Nepal”, said Bhattarai but did not disclose for how long the homework will continue. Ad infinitum perhaps? The Chinese Ambassador to Nepal, Mr. Quo Guohang has already left for his home country to arrange important meetings for Nepal’s Prime Minister. To recall, in 2005, Mr. Madhav Kumar Nepal, now Nepal PM, had strongly criticized Beijing by being in Delhi. Source: www.telegraphnepal.com Date: 2009-12-18

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BANKING: Capital flight threat looms large Soaring capital flight has further exacerbated what appears to be an economic crisis in the making. Nepal Rastra Bank (NRB) has concluded that large amounts are going to India through the ‘banking system’ itself. “In the first four months of this fiscal year, more than Rs. 10 billion has gone to India for different investment purposes,” said a highly placed source at NRB. The central bank blames the tendency to buy policies from Indian insurance companies, open accounts in Indian banks, invest in shares and purchase of property in India for the intensified capital flight. “We’ve found hundreds of transactions that misuse legal arrangements for draft exchange up to INR 100,000 to India,” said the source. The central bank had recently conducted a study on a few banks involved in high transactions in Indian currency. A banker admitted that the tendency to exchange draft in Indian currency is more prevalent in the Tarai region. Most prevalent is people’s penchant for buying life insurance policy from reputed Indian insurance companies such as LIC, ICICI Prudential, Bajaj Allianz, Reliance and Sahara, which are raking in good amounts from Nepal as insurance premium. “More than Rs. 2 billion has gone to India in the form of insurance premium,” said the source. The remaining amount, said the source, seems to have gone to India for other investment purposes. “Insurance returns from Nepali companies are one-fourth less than that of the Indian companies,” said an entrepreneur, who has bought an Indian insurance policy. “The country’s fluid politics have also increased the outflow,” added the source. “Investigate more, you will even find politicians and civil servants with Indian insurance policies.” “Due to labour dispute, no one wants to invest in Nepal’s productive sector,” said another businessman. These factors have resulted in Nepal buying INR 47 billion after selling US $ 810 million in the first four months. Meanwhile, the central bank on Thursday instructed commercial banks to stop issuing drafts for premium payment of Indian insurance policies to check the capital flight. It has also directed banks not to give exchange facility for investment in shares and purchase of property in India. Likewise, NRB has also asked banks not to conduct transactions in Indian currency or accept travellers cheques, drafts and credit cards in Indian currency except from Nepali and Indian citizens.

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Source: www.ekantipur.com Date: December 17, 2009 NRB tightens lending exposure In a bid to put a check on financial institutions' over exposure on real estate and housing loan, Nepal Rastra Bank (NRB) on Thursday issued new directives, putting ceiling on lending. As per the new directives, financial institutions now can't lend more than 25 percent on real estate sector. And their exposure to real estate and housing loan shouldn't cross over 40 percent. The central bank's move comes amid growing concern over the loan exposure of financial institutions on real estate sector. The NRB also instructed the financial institutions to lend money for housing and real estate not exceeding 60 percent of the fair market value of the property. It has also set timelines for the financial institutions to reduce their exposure on real estate and housing loan. As per the NRB directives, financial institutions have to reduce real estate loan to 15 percent by mid-July 2011 and to 10 percent by mid-July 2012. Similarly financial institutions have to downsize both real estate and housing loan to 30 percent by mid-July 2011 and to 25 percent by mid-July 2012. Bankers have termed the directives as practical solution. According to Sashin Joshi, President of Nepal Bankers' Association, the NRB directives have given a clear message to the financial institutions not to overexpose to the real estate. "It was necessary to avoid systemic risk due to over concentration of lending in one sector," said Joshi. The timeline set by the directives to reduce the loan exposure will help avoid panic in the banking sector. Bankers said the NRB move will also help correct the escalating real estate price. "It would also discourage financial institutions from additional lending to the real estate," said Joshi. On Wednesday, the government had said that one of the reasons of liquidity crunch was commercial banks' ever-increasing lending in unproductive sectors. The ministry had said that capital deposit ratio (CD Ratio) of six banks to have been more than 100 percent. The central bank has been asking the commercial banks to be stringent in providing real estate loans. As per NRB estimates, the commercial banks have invested 20 percent on average in the real estate sector. "Some of the banks have even higher percentage of exposure in the real estate," said the official. According to NRB, out of 26 commercial banks, seven have invested more than 25 percent of the total loan in real estate sector.

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Nrb directives Ceiling on real estate and housing loan Loan exposure to be limited to 10 percent by mid-July 2012 CD Ratio to be maintained below 95 percent

Source: www.ekantipur.com Date: December 17, 2009 Govt to cap cooperatives loans in housing, real estate Government is soon imposing cap on land and housing loans of Saving and Credit Cooperatives -- one of the key financers that have been moving the realty market without being regulated by any financial authority -- in a bid to check the real estate bubble. Following the footsteps of the central bank, Department of Cooperatives is issuing the first ever financial directives, asking the saving and credit cooperatives to limit their housing and real estate credit to 15 percent of their total loans portfolio by the end of this fiscal year. "The directives will be enforced in a day or two," a highly-placed government source told Republica. Once the directives come into effect, the saving and credit cooperatives will have to lower their real estate loans to 10 percent and housing loans to 15 percent by mid-July 2010. Also, the cooperatives will need to slash their Credit-Deposit (CD) ratio to 85 percent by this fiscal year end and further cut it down to 80 percent by the end of the next fiscal year. According to an estimate, saving and credit cooperatives operating in the urban areas hold as much as Rs 70 billion in the form of deposits of their members, and two-third of the money has been invested in the housing and real estate business. "Cooperatives are the major financer in the sector. If the government forced them to slash their loans exposure in the realty business to 25 percent, they will have to rapidly pull back their investments. This will bring hue and cry among their clients," said a land dealer. Source: www.myrepublica.com Date: December 17, 2009

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Auto, housing loans to cost more Commercial banks have started to revise interest rates on bank loans as the liquidity crunch tightens further. Major revisions have been made on auto and housing loans. The new interest rate on housing can go as high as 14 percent, and on auto loans it could be around 13 percent. Interest rates on housing and auto loans were between 10 and 11 percent just six weeks ago. As the liquidity shortage in the market worsened, the inter-bank rate rose to a record 12.3 percent on Thursday. State-owned Rastriya Banijya Bank and Laxmi Bank and NIC Bank were the only three lenders in Thursday´s inter-bank lending market whereas leading banks including Nabil and Himalayan were borrowers. A quick survey conducted by Republica among major commercial banks showed that a majority of banks have revised their lending and deposit rates upwards within the last two weeks. Among the lending categories, the interest rate on real estate lending, mainly for speculative investment in land, is the highest, ranging up to 17 percent against 15 percent just six weeks back. According to bankers, the short-term Trust Receipt (TR) is among loan categories that carry the lowest interest of 10 percent. Along with lending rates, interest rates on deposits have also moved upwards by as high as three percentage points within a month, as banks have entered a fresh round of fierce competition to lure new depositors. For instance, Bank of Asia has started to offer 10.25 percent interest on one-year fixed deposits -- so far the highest rate offered by a commercial bank. Development Credit Bank has announced to offer 10 percent. However, not all banks are following in these footsteps. An officer at Standard Chartered Bank Nepal ruled out immediate changes in its rates. The bank did not believe in knee-jerk reactions; however, it would assess the market dynamics and take appropriate action, he said. According to bankers, indications are strong that interest as well as deposit rates will go further up, as there is neither concrete reason nor any immediate action to correct the tight market liquidity. However, many pointed toward the huge deposits accumulated with the cooperative sector, which is not yet tied up with the formal banking system, along with huge and quick transactions taking place in the real estate sector that is estimated to have frozen billions of rupees, as the principal causes for the liquidity shortage. Some bankers like Rajan Singh Bandari, CEO of Citizen Bank International, are of the opinion that both lending and deposit rates will continue to grow to touch the highest interest rate witnessed in 1987 when the banking sector was very competitive. "After a 23-year cycle, we are heading toward the interest rate highs of 1987 where lending and deposit rates used to be 21 and 13 percent respectively on average," he said.

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Though the central bank has been injecting capital through repo -- a monetary instrument to inject additional liquidity into the market, the repo amount, according to bankers, is inadequate for bridging the liquidity gap. NRB on Wednesday made a repo call amounting to Rs 4 billion. "The existing liquidity gap stands between Rs 18- 20 billion and there is need for a huge short-term repo call amounting to at least Rs 15 billion to deal with the problem," said Parshuram K Chettri, CEO at Bank of Asia. Source: www.myrepublica.com Date: December 17, 2009

NDB goes into liquidation The liquidation process of Nepal Development Bank (NDB) has finally begun. The Patan Appellate Court on Thursday appointed Chartered Accountant Narayan Bajaj as the liquidator and asked him to complete the process within three months. The court's verdict on Thursday has endorsed Nepal Rastra Bank's decision to liquidate the bank. The central bank had filed a petition on July 3 at the court seeking liquidation of the troubled bank. It had decided to send NDB on liquidation on June 2 after efforts to revive the bank failed. The court on July 29 had appointed Chartered Accountant Tirtha Raj Upadhyaya to probe the financial status of NDB and instructed him to submit a report to the court in three months. Interestingly, Upadhaya's report, admitting that the bank was insolvent, had suggested to the court that it could be revived. After NRB filed petition in the court, two groups had shown interest to revive the bank by injecting adequate capital. Nimbus, a leading agro-business enterprise and another group, led by Badri Prasad Bhattarai had expressed their interest in pumping in the required capital to revive the bank. As a liquidator, Bajaj's job will be examining the assets and liability of the bank and will see how much can be recovered. The Bank and Financial Institution Act has given first priority to ordinary depositors after the liquidator's expenses followed by fixed depositors and then only other types of depositors. Apart from ordinary depositors, the bank has deposits of the Employees' Provident Fund and the Nepal Army worth Rs. 331 million and Rs. 180 million respectively. Institutional depositors have been classified as other types of depositors. Source: www.ekantipur.com Date: December 17, 2009

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Urge to open Chinese banks in Nepal Rajesh Kaji Shrestha, president of the Nepal-China Chamber of Commerce and Industry, has underscored the need to bring Chinese banks to Nepal due to the increasing trade between the two countries. Addressing a meeting with a delegation from the Commission for Education, Science, Culture and Public Health Standing Committee of Guangzhou Municipal People's Congress, he said that most of the Chinese goods imported into Nepal came from Guangzhou and that trade was increasing each year. He said that opening banks in Nepal would facilitate business between the two countries. At the meeting, deputy director general of the commission Zhou Guosheng said that the main aim of their visit was to help Nepali traders and learn about the problems being faced by them. He also urged Nepali traders to take an active part in the Canton Fair being organised in Guangzhou. Shrestha also requested the delegation to provide stalls at free of cost to Nepalis participants in the fair. The meeting was attended by members of the Nepal-China Chamber of Commerce and Industry and entrepreneurs from various business fields. Source: www.ekantipur.com Date: December 17, 2009

BUSINESS & ECONOMY:

Cabinet curbs PM's power to release financial aid The recently amended Financial Assistance Directive has revoked the prime minister´s privilege of distributing financial assistance from state coffers to near and dear ones through his direct recommendation. A cabinet meeting took a decision to this effect, amending and merging the directive on such financial assistance and three other directives last week. The new provision has revoked the authority of the Finance Section at the Office of the Prime Minister and Council of Ministers (OPMCM) to distribute assistance under the direct recommendation of the prime minister. Only a few months back, the Ministry of Finance (MoF) had declined to release additional money for financial assistance sought by Prime Minister Madhav Kumar Nepal, citing budgetary limitations and misuse of such assistance. The Nepal-led government, after spending within three months the annual budget of Rs 3 million allocated for financial assistance, had sought additional money from MoF under the financial assistance head.

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The amended directive has authorized the Ministry of Home Affairs to distribute financial assistance to those recommended by the prime minister after assessing the assistance seeker´s status, living standard and genuine need. According to Lila Mani Paudyal, Secretary at OPMCM, the government has also fixed a ceiling for the amounts to be released as financial assistance in the names of former presidents and vice-president, former prime ministers, ministers, bureaucrats, litterateurs and national figures. As per the new provisions, former presidents, vice-presidents and prime ministers will get a maximum of Rs 1.5 million for medical treatment while former chief justices and speakers will get one million for the same purpose. The amount to be released in the names of former ministers, administrators, litterateurs and national figures will not exceed Rs 500,000. "Earlier, there was no budgetary limitation on such financial assistance for high-ranking national figures," said Secretary Paudyal, adding, "The amended directive aims to control the unsystematic distribution of assistance." The government only recently decided to bear nearly Rs 20 million in expenses incurred in former prime minister Girja Prasad Koirala´s treatment in Singapore. The directive has also tightened the release of such assistance in other ways. Government officials will have to release treatment costs only to government hospitals instead of to particular individuals. Assistance seekers are required to produce the hospital bills to claim assistance. Similarly, the directive has also made it mandatory for the embassies cocncerned to deal with the treatment costs if any national figure undergoes treatment abroad. The directive has reduced from Rs 1 million to 700,000 the amount to be released in the names of those killed in the line of duty. The government will not provide compensation to individuals killed while attacking security personnel. The government had been providing Rs 300,000 to 500,000 to people killed in police action even if they attacked the police first. The government directive provides only Rs 150,000 to those killed during the people´s movement period and in any rioting or violence. The government had been providing Rs 1 million to those killed in the above-mentioned circumstances. The government has also decided to provide scholarships to the offspring of disappeared people. Earlier, it used to provide scholarships only to the offspring of martyrs. According to the new provision, those who claim compensation and assistance after 30 days of the incident will not receive any support. "The directive, in its bid to check possible anomalies, had brought in a provision that the authorities who issue financial assistance and compensation in violation of the directive will face legal action." Secretary Paudyal said.

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Those who submit fake documents to receive assistance will face legal action, reads the directive. The government last week merged various directives after amending the financial assistance directive, the directive on losses incurred during the conflict period, and the directive on property damage and compensation and conflict-affected people. Source: www.myrepublica.com Date: December 17, 2009

Frequency renewal charge to be revised The Nepal Telecommunic-ations Authority (NTA) is reviewing the frequency renewal charge after which telecom operators holding more frequencies than assigned will be charged five times the normal rate. The national telecom regulator said that it had recommended to the Ministry of Information and Communication that the price of frequencies be increased with the view of stopping telecom operators from keeping frequencies provided for temporary use. The NTA charges telecom operators Rs. 14 million per MHz of bandwidth. The operators, namely Nepal Telecom, Spice Nepal, UTL and Nepal Satellite have been holding more frequencies than they need, said a source at the authority. Once the ministry approves the proposal, telecom operators who have been delaying returning temporary frequencies citing reasons of expansion and upgrading will be charged five times the usual rate. "A committee under the leadership of the information and communication minister is studying our suggestion," said NTA president Bhesh Raj Kanel. "We will implement the provision as soon as the ministry approves it." According to an NTA source, Nepal Telecom is using only 25-30 percent of the frequencies of the total 33 MHz it holds, and Spice Nepal is using 30-35 percent of 19 MHz. UTL, which had asked for additional frequencies a few months ago, has been using less than 10 percent of the 18.4 MHz it is occupying. The source said that the new provision would help the authority to manage frequencies in a planned manner, increase revenue for the government and open the door to new operators. "We have provided additional frequencies for only six months, but telecom operators have been holding them without using them," said Kanel. "We will assign 2.4 MHz to Smart Telecom within one and a half months after getting it back from other telecom operators."

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According to Kanel, the frequency assigned permanently to Nepal Telecom allows it to expand its customer base to 10 million, and Spice Nepal can use its frequency to increase the number of its customers to 4 to 4.5 million. As of Oct. 15, 2009, Nepal Telecom had 4.7 million subscribers and Spice Nepal 2 million. Source: www.ekantipur.com Date: December 17, 2009

ADSL service in Far West Nepal Telecom (NTC) is launching ADSL internet service in the districts of the Far West Region. The ultramodern service would be launched in Kailali, Kanchanpur, Doti and Dadeldhura districts. The NTC Far West Regional Directorate, Attariya, said that a total number of 5,000 lines would be distributed within a month. Service recipients would be able to download necessary materials at a short period once the service is brought into operation. Source: www.ekantipur.com Date: December 17, 2009

Petrol shortage, pipeline uncertain It is common for Kathmanduites to spend hours in queues in front of petrol pumps since the last three years. These unfortunates will have to suffer more in coming days, because the fate of the much-vaunted Raxaul-Amlekhgunj pipeline is uncertain. Sudden strikes and road blockades have been hampering the supply of petroleum products like petrol, diesel, LPG gas since mid-November. The government envisioned the pipeline concept in 2007 for undisturbed petroleum supplies to Kathmandu and adjoining hill districts. As per the plan, Nepal Oil Corporation (NOC) and its Indian counterpart Indian Oil Corporation (IOC) have to set aside a joint-venture (JV) company for this Rs 1.6 billion project. But, the delay in forming the JV from Nepal’s side has angered IOC. “There is nothing like that,” said Minister for Commerce and Supply (MoCS) Rajendra Mahato, “We are preparing the modalities.” Nepal has purposed to build a pipeline in its own territory by respective agencies, he added. Of the 34-km long pipeline, four km falls in India. Moreover, shortage of tankers is fuelling the shortage in Kathmandu Valley. IOC has barred old tankers from entering the filling station after the Jaipur fire last month.

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“Nearly 50 per cent tankers do not meet IOC standards and that is a crisis,” officebearers of the Petroleum Dealers’ Association Nepal said. NOC has backed away from the decision to phase-out 20 years old tankers early this year after the protest of tanker owners. Minister Mahato does not agree with it. “The present crisis is due to strikes and road blockades,” he said, “Once the strike in Birgunj gets over, supply will be smooth.” NOC is working to increase its storage capacity in Kathmandu. “We are increasing the storage capacity of all kind of petroleum products at least for a month,” said Mahato. It may take three years, he added. Until then, Kathmanduites have no option but to grin and bear it. Source: www.thehimalayantimes.com Date: December 17, 2009

Gold trade down 50 percent Bullion traders said that sales of the yellow metal despite the ongoing wedding season had decreased by around by 50 percent compared to the same period last year due to the record high price hike in the national and international markets. According to Tej Ratna Shakya, president of the Nepal Gold and Silver Dealers Association, trade in the yellow metal reached 750 kg per month during this season last year as more wedding ceremonies are held during this time. The amount of gold traded was 80 kg in the first week of last month, 130 kg in the second, 105 kg in the third and 45 kg in the final week. Shakya said the price hike was the main reason for the decrease in sales. Source: www.ekantipur.com Date: December 17, 2009

GENERAL: Nepal Surkhet Air-Strip building to begin soon, Likely target is Tibet. At a time when Nepal’s northern neighbor has exhibited its serious concerns over the construction of Air-Base in Surkhet with the support of the government of India, Nepal’s Defense Minister Mrs. Bidya Devi Bhandari has made the on-the-spot visit of the construction site in Surkhet, Nepal. Minister Bhandari is in Surkhet since Wednesday.

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Reports claim that Mrs. Bhandari, who is considered to be close to the K.P. Oli camp in the Nepal Communist Party-Untied Marxist Leninists, and thus by extension she too is close to the Indian establishment. Mrs. Bhandari talking to the press men in Birendranagar said that the construction works of the Air-Strip will begin soon with the Indian assistance. Mrs. Bhandari is still in Surkhet, say media reports. “The Defense Minister is currently in a mission to finalize the construction of Airstrip,” media reports add. However, Nepal’s defense analysts claim that the decision of Nepal government to benevolently invite India for the construction of Air-Strip for the Nepal Army was dangerous both in content and its intent as it was a highly security sensitive issue and thus the Indian engagement in the construction of the Air Strip in Nepal could well be held under suspicion. The construction of Surkhet air base by the Indian government is primarily the brainchild of the Indian establishment, claim Nepal’s defense analysts. China has become hyper sensitive as would be evident from the media coverage being made of late by the Chinese mainstream media as regards the Air-strip construction in Surkhet. (See Beijing Daily online edition dated 17 December, 2009). China fears that this air base in Surkhet will eventually allow the Indian military to strike on the heart of Tibet should there be a war between the two Asian giants-China and India. The Maoist party’s mouthpiece, Jana Disha Daily had earlier reported that the Nepalese government had given a green signal to India to construct the airstrip. Minister Bhandari’s mysterious long stay in Surkhet is sure to increase the Beijing annoyance. The decision to invite India to construct the air-strip was taken at a consultative meeting held between the representatives of the Government of India and Nepal, held during December 4-7, 2009 in Kathmandu. Much ahead of this, telegraphnepal.com sources in Delhi claimed that the construction of this air base in Nepal was first mooted by the Indian Foreign Minister Krishna when he was greeting the Nepal defense minister Mrs. Bidya Devi Bhandari in New Delhi some four months back. Minister Bhandari provided her positive nod to her Indian friend instantly, claim reports. However, the strategic location of the Airstrip has raised eyebrows in the country and in the eventuality that India and China go to War, the airstrip could be used exclusively and intensively by the Indian Air force to hit mainland Tibet which is presumed to be the real target.

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Only freshly, incidents have been recorded wherein Indian Fighter Aircrafts have repeatedly breached Nepal’s Airspace. The incidents of air space breach must have seriously jolted the Chinese establishment, analysts presume. Source: www.telegraphnepal.com Date: December 18, 2009 British Council launches Active Citizens Project British Council in association with the Association of the Youth Organizations in Nepal (AYON) has on Thursday announced the launch of the Active Citizens Project in Nepal. Secretary at the Ministry of Youth and Sports Sushil Sumsher Rana launched the project amidst a function held in Kathmandu. He said that the ministry was committed to consolidate the role of the youth segment in the national development. The project is aimed at encouraging the large number of youths who are bereft of formal education to contribute positively to the sustainable development of local as well as global community through social network. The first phase of this three-year long project will be implemented in the Bhaktapur district. Some 200 youths will be selected from the district, according to the British Council. Speaking on the same occasion, Paula Middleton, Country Director, British Council Nepal, said that the project would create network between active youths to deal with major global challenges collectively. Earlier, the Council had launched this project in 9 countries around the world. Source: www.nepalnews.com Date: December 17, 2009 Subcommittee traces suspicious US$ 1m bank account The subcommittee formed under the State Affairs Committee (SAC) of parliament to probe into the alleged financial irregularities in the procurement of logistics for Nepal Police personnel deployed for UN peacekeeping in Sudan has traced a suspicious bank account with one million USD deposited in the name of a Chinese national. The parliamentary subcommittee started investigation into the bank account as all the authority to transact is given to Shambhu Bharati, proprietor of Bhagwati Traders.

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Bhagwati Traders is under scanner of the probe committee as it was involved in the procurement of eight armored personnel carriers (APCs) for the police in Sudan. The one million USD was deposited on 27 July, 2008, in the bank account of Chinese national WU-Lixiang at Bhaisepati branch of Nepal Bangladesh Bank, said Pradip Gyawali, who heads the subcommittee, in a meeting of SAC on Wednesday while presenting his preliminary findings on the scam. SAC formed the subcommittee after the UN-AU Mission in Darfur (UNAMID) made public a report in connection with the procurement deal. The UNAMID report states that the APCs, catering, communication systems, furniture and health facilities, among other things, do no meet standards. Last month, an investigation team sent to Sudan under the aegis of the Home Ministry and Nepal Police came up with a shocking report according to which the 140 Nepali peacekeepers currently deployed in the region face serious security threat as they are operating without APCs. The eight APCs sent to the Nepal mission in Darfur were nonfunctional. Interestingly, 55 million rupees has been spent in the name of spare parts for the APCs while the vehicles have remained nonfunctional ever since they were dispatched to the mission, according to the subcommittee. “We are yet to receive the three-page document on spare parts that is supposed to be signed on 12 June, 2008. We need to further investigate into it,” Gyawali said. Subcommittee members to visit Darfur The meeting of the full committee approved the subcommittee´s proposal on the need for a field visit to the Darfur region to inspect the APCs on the ground, among several other things related to the scam. A team of seven members will visit Sudan to find out the facts. The meeting also extended the subcommittee´s deadline to submit its report. The term of the subcommittee was earlier extended by 45 days. As per the latest deadline, it will have to come up with its final findings within 15 days after the seven-member team returns home. 5 million rupees proposed for the trip Home Minister Bhim Rawal, who was present in the meeting, said that the ministry has recommended five million rupees for Sudan trip. “We have sent the proposal to the council of ministers. Hope, the next cabinet meeting will approve it,” Rawal said. Earlier, the ministry had recommended 8.2 million rupees for the trip. But the proposal was later amended as the finance ministry delayed in approving it. “Later, we removed some locations from the list of places to be visited. This time we have directly sent the proposal to the cabinet,” Rawal said.

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The subcommittee had earlier summoned former Inspector General of Police (IGP) Om Bikram Rana, incumbent IGP Ramesh Chand Thakuri and other officials involved in the deal to record their statements. Source: www.myrepublica.com Date: December 17, 2009 Rights defenders dismayed at NA's refusal to hand over Maj. Banest to civilian court Human rights defenders and legal experts have expressed serious concern over Nepal Army's "point-blank refusal" to hand over Major Niranjan Basnet, who has been implicated in the torture and murder of Maina Sunuwar in 2004, to the civilian court. "We strongly demand to produce Major Basnet, who is an absconding suspect, in court without further ado and thereby respect the rule of law," human rights workers, legal experts and media personalities representing 20 different organisations stated in a joint press release Thursday. Basnet was arrested on December 12 from Tribhuvan International Airport upon his arrival after being expelled from the UN peacekeeping mission in Chad. The NA has said Basnet is in its security and that investigation is underway on the accusation of murdering the teenage girl from Kavre. The press release issued by the rights activists also reminded that the Interim Constitution of Nepal has adopted the principle of independent judiciary, and empowers the court to exercise the judicial power regarding the administration of justice. "The Army Act also provides for the arbitration of murder cases involving civilians under the jurisdiction of a civilian court." They said, "Therefore, we strongly demand that Maj. Basnet be produced before the Kavre District Court without any delay and legal action be proceeded against other perpetrators, viz. Amit Pun, Sunil Adhikari and Babi Khatri, for ending impunity and upholding the rule of law." Although the army officials involved in the murder of Maina were punished by the Court Marital, the Apex Court had ruled that the said punishment was against the existing law and issued the order of mandamus in the name of the Office of Attorney General and the Nepal Police to duly register a case in the Kavre District Court. Following the Supreme Court's order, the Kavre-based Office of Public prosecutor had filed a charge sheet on the murder pinpointing the name of Major Basnet along with other alleged perpetrators. Those signing the statement included rights activist Subodh Pyakurel, Charan Prasain, journalist Kanak Dixit, president of Federation of Nepalese Journalists Dharmendra Jha, Nepal Bar Association general secretary Raman Shrestha, Rameshwor Upadhaya of Nepal University Teachers Association, Dr Renu Rajbhandri of WOREC and Mandira Sharma of Advocacy Forum.

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Source: www.nepalnews.com Date: December 17, 2009 Charles backs Lumley's Gurkha cause Gurkhas champion Joanna Lumley has won the backing of the Prince of Wales as she returned to the campaign trail to raise millions of pounds for elderly veterans in Nepal. The actress is hoping to raise ÂŁ10 million for 10,000 Gurkhas and their widows in the wake of her success in securing the right for veterans to settle in the UK. Launching the campaign, Lumley said: "Our debt of honour to the Gurkhas remains." "They helped fight our wars and keep our peace. They stood up for us and now is the time to stand up for them. "There are 10,000 very elderly veterans in Nepal who need our support right now." She was due to read out a message of support from Prince Charles during the launch. The message from the Prince read: "The money will fund a variety of vital projects, including the provision of a monthly welfare pension for 10,000 gallant Gurkha veterans and widows; help provide much needed medical care and provide essential services such as the provision of water and sanitation in Gurkha villages. "These projects will help ensure these wonderfully loyal and courageous men receive the support they so deserve." The Debt of Honour campaign, launched with the Gurkha Welfare Trust, claim many veterans are surviving on little more than ÂŁ30 a month. All the money raised will go towards providing monthly welfare pensions, medical care and community aid projects for Gurkha villages. Source: uk.news.yahoo.com Date: December 17, 2009

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R&D_NewsBrief_18thDec  

R&D_NewsBrief_18thDec

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