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R&D Economic Research & Business Development

Date: August 9, 2009

Highlights

Nepali Prime Minister Madhav Kumar Nepal said on Friday that the agreements he would sign with India during his upcoming visit from Aug. 18, would not give rise to disagreement among political parties.

Prime Minister Madhav Kumar Nepal has said that he would be signing three treaties -- on trade, tax and investment -- during his upcoming visit to India.

Most of the political parties have failed to submit their concept papers on state restructuring to the Constituent Assembly´s (CA) Committee for Restructuring of State and Distribution of State Power within the deadline.

Nepal's Maoists disrupted parliament on Friday and threatened to launch street rallies to protest against the government's failure to resolve a row triggered by the sacking of the army chief, officials said.

Minister for Commerce and Supplies Rajendra Mahato has said that Vice President Paramananda Jha should make use of his position to continue fighting for the recognition of Hindi, instead of quitting his post.

The Government of Nepal has once again rejected the Maoists’ proposal, rather forwarded a challenge to the Maoists party to table an impeachment motion against Nepal’s First President Dr. Ram Baran Yadav, if it can, for what it claims “the unconstitutional moves of the President taken on May 3, 2009”.

Prime Minister Madhav Kumar Nepal met UCPN-Maoist chairman Prachanda this morning and urged him to let the parliamentary session function smoothly. Besides Prachanda, Mohan Baidya and Narayankaji Shrestha were also present during the meeting held at PM’s private residence in Koteshwor.

Chairman of the single largest opposition party, the Unified Communist Party of Nepal (Maoist) (UCPN-M), Prachanda is leaving for London on Saturday to meet his party cadres living there.

India has finally agreed to construct the re-regulating dam of Pancheshwar multi-purpose hydro-electric project in Rupaligad as demanded by the Nepali side by giving up its earlier stance of constructing the dam in Purnagiri.

The main square of Hetauda is turning into a hub for financial institutions. All major commercial banks and financial institutions have set up their offices in the major buildings around the main square. Hetauda now has branches of about two dozen financial institutions.

On Wednesday, the temperature in the engine of one of NAC´s Boeing 757s had shot up to abnormal level soon after taking off from Kathmandu´s 1


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Tribhuvan International Airport. This had forced the pilots to make an emergency landing. Since then the plane has not come into operation, disrupting many of its scheduled international flights. •

Sri Lanka’s Jetwing leisure group is expanding abroad and building links with foreign partners, including Nepal’s Chaudhary conglomerate which is also investing in the island, a top Sri Lankan official said.

Despite the frequent talks with the three labour unions, Gorkhali Tyre Industry which was shut down a month ago has not yet reopened as talks between the unions has not reached any conclusion.

Vicious spiral of rising prices is breaking the fiscal backbone of people across the country. Outside Kathmandu Valley, it is the Dhangadhi people who are the worst hit - facing an average of 21.37 per cent price hike compared to July 2008. The price of rice has increased by 10.5 per cent, lentils 45 per cent, cooking oil 20 per cent and vegetables 10 per cent.

The price of vegetables like potato, cucumber, tomato, garlic and ginger increased by 25 per cent in comparison to last month. However, the decrease in the price of some other vegetables may have provided relief to consumers this season.

The Nepal Stock Exchange (NEPSE) saw a decline in its index last week by 4.70 points to 700.01 points on the final day of trading Tuesday from 704.71 points on Sunday. The bad performance of the commercial banks was crucial to bring down the NEPSE last week with their index falling by 13.61 points.

The government is planning to reduce the number of small customs offices due to their ineffectiveness. The Department of Customs (DoC) has proposed a plan to the finance ministry to reduce such customs points to 96 from existing 143.

Gen Rookmangud Katawal, who opposed the entry of the Maoist guerrillas in the national army and caused the downfall of the Maoist government, goes on leave to be followed by retirement next month. Prior to that, on Sunday, he will hand over charge to his successor, Lt Gen Chhatraman Singh Gurung, the first chief of the Nepal Army to come from the indigenous tribes.

While the diarrhea and cholera spread in mid and far-western districts is yet come under control similar outbreak is feared in Sindhuli district. Three persons died of diarrhea at Kyaneshwor and Kalpabrikshya VDCS on Saturday, reports said.

Expressing concern over the rising incidence of harassment and thrashing of Chinese entrepreneurs, especially in the tourist area of Thamel in Kathmandu, the government has assured the Chinese Embassy of its commitment to ensure the safety and security of Chinese businessmen in the country.

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"The financial crisis to be followed by economic as well as social crisis has a tradition of affecting the people's lives severely," Vice chairman of National Planning Commission (NPC) Yubaraj Khatiwada said at third general assembly of South Asia Alliance for Poverty Eradication.

POLITICS: Nepali PM: No controversial deal to be signed with India KATHMANDU, Aug. 8 (Xinhua) -- Nepali Prime Minister Madhav Kumar Nepal said on Friday that the agreements he would sign with India during his upcoming visit from Aug. 18, would not give rise to disagreement among political parties, local newspaper The Kathmandu Post reported on Saturday. "He, however, was not articulate on whether or not he would sign an arms-deal with India," the report said. The prime minister, who was responding to questions raised by members of the Constituent Assembly Committee on International Relations and Human Rights, appealed to all not to harbor any suspicion about his "goodwill visit". "No bilateral agreement signed during my India visit will create differences among parties," said the prime minister responding to committee members, including senior leader Narayan Kaji Shrestha of the single largest opposition party the Unified Communist Party of Nepal (Maoist) (UCPN-M), who had demanded clarification on whether he would sign any arms deal with India as suggested by Defence Minister Bidhya Bhandari on Thursday. However, Prime Minister Nepal was much more articulate on other issues, including the border disputes. He brushed aside the possibility of signing on the 98 strip maps prepared by the Nepal-India Joint Boundary Committee. "It's not that 98 percent of the border disputes have been resolved, but that a total of 98 strip maps have been prepared. And we are not going to sign those maps," said Nepal. The reported intimidation and violence meted out by Indian security forces, said the prime minister, have drawn the government’s attention and this will be discussed during the visit. He said that Nepal also had to establish a mechanism to monitor incidents of intimidation. He said that problems associated with water resources, Nepal-India Friendship Treaty of 1950, bilateral trade, problems of double taxation and Indian investment in Nepal would also be agendas during his India visit. "We are preparing a final draft of the agreements on promoting Indian investment in Nepal and addressing the problem of double taxation," he said.

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"It is purely a goodwill visit and we are not going to discuss the peace process," he added, "But I am hopeful that this visit will give new heights to Nepal-India relations." Foreign Minister Sujata Koirala, who was also present at the meeting, said Nepal would seek Indian assistance in controlling criminal activities in the Terai bordering India and also for monitoring the open border. "Since the open border has been one of the major reasons behind the frequent incidents of violence and crime in the Terai, Indian assistance in maintaining peace and security in the region is indispensable," said Koirala. Koirala will leave for New Delhi on Aug. 11 to prepare the ground for Nepal's scheduled visit. Source: news.xinhuanet.com

Nepal to ink treaties on trade, tax, investment Prime Minister Madhav Kumar Nepal has said that he would be signing three treaties -- on trade, tax and investment -- during his upcoming visit to India. Nepal said this to Maoist Chairman Pushpa Kamal Dahal Saturday morning when the latter called on the prime minister just a few hours before boarding a plane for Doha en route to London. Prime Minister Nepal informed Dahal that he would be signing treaties on trade (which will basically be an upgrading of the existing trade treaty), avoidance of double taxation, and investment protection. The initial drafts of the three treaties have already been agreed at the secretary level. According to sources close to the prime minister, Chairman Dahal, who was accompanied by senior Maoist leaders Mohan Baidya and Narayan Kaji Shrestha, requested the PM not to sign any major treaty that would have long-term political implications for Nepal. "The Maoist leaders categorically asked the prime minister not to sign any treaty on extradition and border disputes with India," said the source. India has been pressing Nepal to sign an extradition treaty requiring the two countries to extradite to each other anyone charged with crime, including third-country nationals. Similarly, a team of technicians from Nepal and India has finished "ninetyeight" percent of a strip map which shows that there are no border disputes between the two countries. However, the map has drawn criticism in Nepal. Political disagreement continues During the two-hour talks which began at seven in the morning at Nepal´s private residence at Koteshwar, Dahal requested Nepal to allow the Maoists to bring a resolution in parliament against President Ram Baran Yadav, which Nepal promptly turned down.

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“Your demand is against the spirit of the interim constitution and it will only invite confrontation in the country,” the prime minister´s press advisor, Bishnu Rijal, quoted him as saying. According to Rijal, Nepal urged the Maoist leaders not to obstruct parliamentary business as army chief Rookmangud Katawal, who was their “prime concern”, is already going on customary leave starting from Monday and would duely retire next month. The Maoists have stated that they would continue disrupting parliamentary meetings unless they are allowed to bring a resolution in parliament against President Yadav for reinstating Katawal. Talking to reporters at Tribhuvan International Airport prior to his departure for London, Maoist Chairman Dahal said the Maoists would not back down unless they are allowed to discuss the President´s issue in parliament. “The issue is not whether or not Katawal remains in his post. The issue is civilian supremacy vs military supremacy,” he said, “Madhavji was positive in one sense. He asked us to impeach the president and I told him that we would do so if he supports us.” He also said they agreed to hold further talks to seek a solution. Meanwhile, CPN-ML General Secretary CP Mainali has challenged the Maoists to bring an impeachment motion in parliament against the President if they really want a debate on the issue. He argued that it was against the law of the land to hold formal discussions on the President´s move unless there was an impeachment motion in parliament. Talking to media persons in Chitwan on Saturday, Mainali alleged that the Maoists have tried to impose the supremacy of their party in the name of civilian supremacy. Speaking at the same function, Minister for Land Reform Dambar Shrestha said that the issue raised by the Maoists has become irrelevant as army chief Katawal is already going on customary leave. Source: www.myrepublica.com Date: 08/09/2009 Parties miss deadline on state's setup Most of the political parties have failed to submit their concept papers on state restructuring to the Constituent Assembly´s (CA) Committee for Restructuring of State and Distribution of State Power within the deadline. A meeting of the committee held on August 4 had asked all the 25 political parties to submit suggestions on the number of states, a map with boundaries of provinces along with a concept paper to the committee by Sunday. The committee in writing had informed the parties that no discussion will be held on the maps and concept papers submitted after Sunday.

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But leaders from the major political parties in a meeting of the committee on Friday requested committee chairman Lokendra Bista Magar to extend the deadline for submission of the concept papers. Gopal Man Shrestha of Nepali Congress (NC) was the first man to propose extension of deadline. Dr Mangal Siddhi Manandhar of CPN-UML and Pratibha Rana of the Rashtriya Prajatantra Party supported Shrestha´s proposal. Following the request, the chairman asked the parties to submit the concept papers as soon as possible. Though several members of the committee have submitted maps for proposed provinces, no major political party has so far submitted the official concept paper and maps of provinces to be delineated under federal set up. Gopal Kiranti of Unified CPN (Maoist), Shrestha and Narahari Acharya of NC and Dr Manandhar and Shankar Pokharel of CPN-UML earlier submitted their maps for discussion in the committee. Likewise, Anil Jha of Sadbhavana Party, Buddha Ratna Manandhar of Nepa Rashtriya Party and a member from Madhesi People´s Rights Forum (Democratic) also have presented their maps in the committee. Also, a member of the Rashtriya Janamorcha, which opposes federalism, has also submitted a concept of dividing the country into seven administrative provinces. The major political parties are still holding discussions on finalizing the maps. Unified CPN (Maoist) organized a workshop on Saturday for giving final shape to its map. CPN-UML is holding a party meeting to discuss its map on August 12. "We will submit our draft in about a week," Manandhar told myrepublica.com. The NC leaders say the party has lately intensified discussions on the matter but is yet to come up with a final version. CA Chairman Subash Nembang has urged the parties to present their draft reports no later than August 31, as the deliberations on all concepts and draft reports must be concluded by September 6 and sent to the Constitutional Committee (CC) by September 7 as per the amended CA calendar. CA members have pressed the committee to complete its task soon as deliberations on the preliminary drafts prepared by other committees in the CA have become meaningless because many important issues described in the drafts are entirely dependent on state restructuring. NC CA member Dr Ram Sharan Mahat in a CA meeting on Friday had described the ongoing deliberations like putting the cart before the horse. He said holding discussions on the drafts presented by other committees without first finalizing the governance system and the state restructuring is meaningless. Source: www.myrepublica.com Date: 08/09/2009

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Veep should fight for Hindi: Mahato JANAKPUR, Aug 8 - Minister for Commerce and Supplies Rajendra Mahato has said that Vice President Paramananda Jha should make use of his position to continue fighting for the recognition of Hindi, instead of quitting his post. Speaking at a programme in Janakpur on Saturday, Minister Mahato said that the VP should not resign from his post because he could use his position to struggle for the recognition of the language. Stating that he himself had taken the oath of office and secrecy in Hindi all three times when he was appointed minister, Mahato said that the Supreme Court's ruling over the swearing-in of the vice president was against the Madhesh and Madheshi people. Minister Mahato, who is the chairman of the Sadhbhawana Party, said that his party had been demanding that the constitution be amended so that president and the vice president could take the oath in any language they preferred. “If the demand is not fulfilled at the earliest, our party will launch a nationwide movement,” he warned. Source: www.kantipuronline.com

Nepal Maoist's challenged: Impeach President Yadav if you can! The Government of Nepal has once again rejected the Maoists’ proposal, rather forwarded a challenge to the Maoists party to table an impeachment motion against Nepal’s First President Dr. Ram Baran Yadav, if it can, for what it claims “the unconstitutional moves of the President taken on May 3, 2009”. Prime Minister Madhav Kumar Nepal at a meeting with the Maoists’ top-notch Saturday August 8, 2009, at his personal residence in Koteshwor, Kathmandu, summarily rejected the Maoists’ offer to hold further discussions on the controversial issue at the CA and suggested the Maoists’ party to table the Impeachment Motion to amicably solve the issue of the President if the party so desired. Later during the day, the Government’s spokesperson and the minister for Information and Communications Mr. Shankar Pokharel addressing a gathering in Kathmandu, Saturday August 8, 2009, also asked the agitating Maoists’ party to table an impeachment motion against President Dr. Ram Baran Yadav, if it could manage. Mr. Pokharel was also of the opinion that the Maoists agitation, halting the CA proceeding and heating up streets had neither political importance nor any significance. “If Dr. Yadav’s move to reinstate Rukmangad Katawal as the Army Chief was unconstitutional then what is the harm in tabling the impeachment motion” Pokharel questioned.

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The Maoists party on the other hand said that it had no plans to impeach the President rather wanted the issue sorted out right inside the parliament initiating a debate over Civilian Supremacy versus Military supremacy. “We have no intentions to remove the President”, clarified Pushpa Kamal Dahal, the Unified Maoists’ party chairman. Source: http://www.telegraphnepal.com

Nepal's UCPN-M chairman Prachanda on way to London KATHMANDU, Aug. 8 (Xinhua) -- Chairman of the single largest opposition party, the Unified Communist Party of Nepal (Maoist) (UCPN-M), Prachanda is leaving for London on Saturday to meet his party cadres living there, local newspaper The Himalayan Times reported. Prachanda, his wife Sita and his son Prakash are leaving for London via Qatar airways. "According to Prachanda's son, the aim of the visit is to attend a political training program organized by its party cadres living there," the report said. Prachanda, the former prime minister resigned on May 4, is also expected to strengthen ties with international communist organizations during his visit. The recent central committee meeting had decided to strengthen the ties with Revolutionary International Movement and Coordination Committee of Maoist Parties and Organizations of South Asia. However, Vice-chairman of the party, Narayan Kaji Shrestha, claimed that the party chairman had no such program to meet the members of international communist organizations besides attending the program being organized by the party cadres living there. He said that chairman Prachanda might meet British politicians but had not scheduled any programs for it. Prachanda was invited by the Joint Nepali Front which is close to the UCPN-M, Prachanda's aide Om Sharma said. Meanwhile, the UCPN-M on Friday started their month-long protest program at both the legislative parliament and the streets. Source: http://news.xinhuanet.com

Extradition treaty caution for PM Prime Minister Madhav Kumar Nepal met UCPN-Maoist chairman Prachanda this morning and urged him to let the parliamentary session function smoothly. Besides Prachanda, Mohan Baidya and Narayankaji Shrestha were also present during the meeting held at PM’s private residence in Koteshwor. Nepal asked the main 8


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opposition to cooperate with the government on passing the fiscal budget on time. UCPN-Maoist obstructed the House on Friday demanding discussion in parliament on the President’s “unconstitutional” move to reinstate army chief Rookmangad Katawal, who was sacked by the then Prachanda-led government on charges of defying the government orders. “We did not obstruct the House proceeding all of a sudden,” Shrestha said, adding: “We had informed the government that we would not let the parliament function unless our concerns are taken up at the House.” He said the issue of civilian supremacy could not be given up. He said they had even proposed to discuss the President’s unconstitutional move in the House with the respective parties sticking to their stance. “But the PM refused to discuss the issue citing parliamentary rules and regulations,” Shrestha said. He said they also dwelt on the PM’s visit to India beginning on August 18. He said they cautioned the PM not to reach any agreement on Extradition Treaty proposed by India. Maoist leaders also alerted the PM against allowing the installation of a screeningmachine on the tarmac of the Tribhuvan International Airport as sought by Air India. He said the country’s sovereignty would be undermined if Air India is allowed to install such a facility at the TIA. But Maoist leader Hisila Yami, who was Minister for Civil Aviation and Tourism, had given permission to such a facility. She admitted having granted the permission despite opposition by the then secretary at the ministry. The Maoist leaders asked the PM to do the needful to scrap the 1950 Peace and Friendship Treaty and replace it with a new one. PM said the treaty was being reviewed at the foreign-secretary level. The PM is also learnt to have sought the Maoist leaders’ opinion regarding the execution of the multi-million dollar Pancheshwor Hydropower Project, which is part of the Mahakali River Treaty, signed between Nepal and India in 1996. “We told the PM that the project is plagued with controversy. This project should not be executed without sorting out the water sharing issue between the two countries,” he said. He also said a resolution (sangkalpa prastav) passed by the then House of Representatives should be made a part of the Mahakali River Treaty. Thought it has been 13 years since the signing of the treaty, no progress has been made on Detailed Project Report of the project. Maoist advice • • • •

Do not reach any agreement on Extradition Treaty Do not allow Air India to install screening-machine on TIA ground Scrap the 1950 treaty and replace it with new one Do not agree on executing Pancheshwor without sorting out water-sharing issue

Source: The Himalayan Times Date: 08/09/2009

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Nepal Maoists disrupt parliament, launch new protests KATHMANDU, Aug 7 (Reuters) - Nepal's Maoists disrupted parliament on Friday and threatened to launch street rallies to protest against the government's failure to resolve a row triggered by the sacking of the army chief, officials said. The Maoists waged a decade-long civil war until a 2006 peace deal brought them to the mainstream. They scored a surprise victory in last year's election and formed the nation's first government after the abolition of the 239-year-old monarchy. But in May, their leader Prachanda resigned as prime minister after President Ram Baran Yadav rejected his decision to sack army chief General Rookmangud Katawal, saying he had refused to take orders from the civilian government. The Maoists say Yadav's move was "unconstitutional", and are demanding that it be debated in the parliament, which the government has so far refused. On Friday, senior Maoist leader Narayan Kaji Shrestha said his party, that dominates the parliament, will launch street protests from next week to press for their demand, stoking fresh political turmoil in the nascent Himalayan republic. "There is no alternative to this," Shrestha said. "We will put massive popular pressure on the government which has refused to listen to us." He then led Maoist deputies, shouting "establish civilian supremacy" slogans to the rostrum of the speaker, forcing him to adjourn parliament until next week. Analysts said the move by the Maoists highlighted the mistrust with the government and threatens a peace deal that ended a conflict which caused more than 13,000 deaths. The peace process has been stalled since May when the Maoists walked out of the government. A recent report by U.N. Secretary-General Ban Ki-moon said the crisis had prevented it from completing its work of monitoring the peace deal and agrees on the future of more than 19,000 Maoist fighters living in camps. Source: www.reuters.com

POLICY: India agrees to construct dam in Rupaligad India has finally agreed to construct the re-regulating dam of Pancheshwar multipurpose hydro-electric project in Rupaligad as demanded by the Nepali side by giving up its earlier stance of constructing the dam in Purnagiri, Nagarik daily reported. “The Indian ambassador has agreed to construct the dam at the place Nepal demanded,� the daily quoted energy minister Dr Prakash Sharan Mahat. The issue 10


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will be discussed and finalised during Prime Minister Madhav Kumar Nepal’s impending India visit. Mahat is also accompanying the PM to India. India gave up its stance to construct the dam in Purnagiri as Nepal was against it saying a lot of Nepali land would be inundated if the dam was constructed in Purnagiri. Rupaligad is some 20 km south of the main dam of the project located in Pancheshwar VDC of Baitadi district. Studies on Pancheshwar hydel project have shown, a re-regulating dam either in Rupaligad or Purnagiri is necessary to control flood that could be ensued by the water released from the main dam in Pancheshwar. The main project of Pancheshwar is expected to produce 6480 MW electricity. Additional 300 MW electricity will be produced from the re-regulating dam in Rupaligad. If the dam is constructed in Purnagiri, an additional 1000 MW can be generated. The Nepali side demanded the dam be constructed in Rupaligad even though more more electricity would be produced if the dam was constructed in Purnagiri to save Nepali land from being inundated. The main dam in Pancheshwar will be 315 metres high. It will inundate 18 VDCs of Baitadi and surrounding districts. According to chief of the project Dilli Bahadur Singh, the total estimated cost of the project is Rs 347 billion out of which Nepal will invest 39 percent of the cost and India will invest 61 percent of the cost. Some 93000 ha of Nepali land can be irrigated from the project. India has been demanding, it should be allowed to irrigate 1.6 million ha of its land. The issue is under consideration in a secretary level standing committee and a minister level joint commission. However, Nepal and India will share equal proportions of the produced electricity. After the completion of the project Nepal will earn about Rs 45.88 billion from electricity and Rs 5.69 billion from irrigation, said project chief Singh. There are plans to generate up to Rs 10 billion revenue from fishery and tourism. Another Rs 4.42 billion can be earned if the project is considered for carbon trading. PM Nepal wishes to bring up the project during his India visit. However, leader of main opposition Pushpa Kamal Dahal has urged the PM not to take the project any further at this moment. Source: www.nepalnews.com Date: August 9, 2009

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BANKING:

Banks throng to Hetauda HETAUDA, Aug 8 - The main square of Hetauda is turning into a hub for financial institutions. All major commercial banks and financial institutions have set up their offices in the major buildings around the main square. Till two years ago, these buildings used to house groceries and hotels. But with no other suitable building available, financial institutions have started setting up their offices on Kanti Rajpath. Among them is Guheshwari Merchant Banking and Finance who has opened its Hetauda branch on Friday. Hetauda now has branches of about two dozen financial institutions. In the last two years, 15 financial institutions have established their offices in Hetauda. All these financial institutions are located within a 500 metre distance from each other. All this is happening when economic activities are on decline. "The establishment of financial institutions is good," said Jeevan Kazi Shrestha, president of Makawanpur Chamber of Commerce and Industry. "However, unnecessary concentration in one area may not be helpful as people of other areas will be deprived of banking service." According to Shrestha, financial institutions should open their offices in those areas where there are no banking services. It is often apparent that financial institutions open their branches outside Kathmandu in order to add more branches in the capital. According to NRB regulations, for every branch in the capital bank and financial institutions have to open one branch outside Kathmandu Valley. Source: www.kantipuronline.com

BUSINESS & ECONOMY: NAC likely to hire an engine on lease Nepal Airlines Corporation (NAC) is mulling measures to replace the engine of the aircraft, which has been grounded for the last three days after problems in the heart of the airplane. On Wednesday, the temperature in the engine of one of NAC´s Boeing 757s had shot up to abnormal level soon after taking off from Kathmandu´s Tribhuvan International Airport. This had forced the pilots to make an emergency landing. Since then the plane has not come into operation, disrupting many of its scheduled international flights.

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“We are now thinking of getting an engine on lease,” KB Limbu, managing director of NAC, told myrepublica.com. “We are currently communicating with European companies that offer such service.” If it is affordable, NAC will then ask for quotations from various companies and hire an engine on lease from the one that quotes the lowest price. In between, NAC has already contacted a maintenance company in Spain to repair one of its spare engines. This out-of-order spare engine is currently lying in Hong Kong and will be sent to Spain in a few days. “It might take at least one-and-a-half month to get that repaired,” PB Kansakar, a high ranking official of NAC´s engineering department, said. In the meantime, NAC is planning to issue a tender notice asking interested companies to bid for carrying out repair works on the engine which went kaput on Wednesday. Although what exactly went wrong in the engine and what led the temperature to shoot up beyond normal level is still not known, it is certain that the management had clearly ignored to check the flying hours of the aircraft, which had already shouldered its share of burden. According to Kansakar, aircraft engines have to be overhauled after flying for around 10,000 to 12,000 hours. The aircraft, in which the engine problem was detected, had already flown for 11,000 hours and should have been sent for maintenance in March. “I don´t know why the management didn´t send the engine then, as I had been removed from my post at that time,” Limbu said. On July 21, another Boeing 757 of NAC had made an emergency landing in Tribhuvan International Airport in Kathmandu after encountering a leak in its hydraulic system. The plane, on its way to Kathmandu from New Delhi, was carrying 35 passengers and 12 crew members. NAC currently has two Boeing 757s, both of which are more than 20 years old. Source: www.myrepublica.com Date: 08/09/2009 Chaudhary Group has one foot in Lanka hotel sector Sri Lanka’s Jetwing leisure group is expanding abroad and building links with foreign partners, including Nepal’s Chaudhary conglomerate which is also investing in the island, a top Sri Lankan official said. Chaudhary Group, through its unit Cinnovation, has already bought a 50 per cent stake in Royal Heritage Hotel, which owns the Jetwing nature reserve ‘Vil Uyana’ and a 49 per cent stake in Seashells Hotel, when Sri Lanka’s Hayleys group exited last month, Sri Lankan Business online news reports.

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Chaudhary Group owns hotels in Nepal and other areas. “We are looking at managing some of Nepal hotels,” Jetwing group director Shiromal Cooray said. The Nepali conglomerate — headed by businessman Binod Chaudhary — also has interests in power generation and food and beverages. Cinnovation has a presence in Sri Lanka through Taj Asia, which controls Colombo’s Taj Samudra hotel. Taj Asia is a joint venture between Cinnovation and India’s Tata connected Taj hotel division. Jetwing is also starting the management of Indochina Hotel in Hanoi with Vietnamese partners. It has also been chasing an Indian hotel. But with the end of a 30-year war in Sri Lanka prospects at home are also looking up. The mainstay of Sri Lanka’s leisure sector is Western European tourists. In June, tourist arrivals increased eight per cent. Britain has already relaxed the travel advisory to some parts of the war-torn island, according to the news report. “I am sure this winter will be excellent,” says Cooray. “Arrivals have increased. Our foreign partners are saying the bookings are better.” Sri Lanka and Nepal are planning to restart direct air connection between Kathmandu and Colombo soon. The direct air link is expected to give a boost to the Nepali tourism sector as a majority of the Sri Lankans are Buddhists and love to visit Nepal — especially Lumbini — the birth-place of Lord Buddha. Sri Lanka’s economic growth has been uneven due to adverse shocks like the decades-long ethnic conflict. However, the relatively strong growth record has proved inadequate in substantially reducing poverty beyond the urban areas. The two South Asian countries — both of whom have come out of political disturbances — are on the path to economic recovery. Source: The Himalayan Times Date: 08/09/2009 Gorkhali still shut GORKHA, Aug 8 - Despite the frequent talks with the three labour unions, Gorkhali Tyre Industry which was shut down a month ago has not yet reopened as talks between the unions has not reached any conclusion. All Nepal Industrial Labour Union, All Nepal Chemical and Iron Labour Union and Nepal Factory Labour Association earlier closed the industry after their demands were not fulfilled by the management. Among the demands were dismissing Hari Kafle who was appointed in the advisory committee, life insurance of the workers and providing proper facilities for production. The workers called the strike after they were not paid their full salary for four months after the government declared an increase in the wage rates last year. The General Manager of the Gorkhali Tyre Industry, Vinod Tiwari said that management hadnotbeen able to increase workers' since the finance ministry had not sent a written notice.

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The management and the union representatives have been discussing this issue in Kathmandu since last week. Of the 17 demands, both the parties have reached agreement on 16 of them, said the management. Meanwhile the Chairman of the Nepal Factory Labour Association, Ishwor Pariyal said that once the management agrees to the last demand, the unions would agree to resume operations in the industry. Source: www.kantipuronline.com

Price hike leaves nation groaning Vicious spiral of rising prices is breaking the fiscal backbone of people across the country. Outside Kathmandu Valley, it is the Dhangadhi people who are the worst hit - facing an average of 21.37 per cent price hike compared to July 2008. The price of rice has increased by 10.5 per cent, lentils 45 per cent, cooking oil 20 per cent and vegetables 10 per cent. Usually, price of commodities soar during June-September period in the country. But, going by the records, this year’s prices have broken all records. According to Nepal Rastra Bank, region-wise price rise was 14.5 per cent in Kathmandu Valley followed by 11.5 per cent in the Tarai and the hills till mid-June this year. Prices of essentials goods like rice, lentils and cooking oil have almost doubled in a year. However, the sudden and unprecedented rise has been recorded since early June. Biratnagar, Janakpur, Birgunj, Naryangarh, Pokhara and Bhairahawa have not been spared either. “We’re not making much profit,” said Bishnu Prasad Sharma, a retailer at Bhairahawa. “Our profit is not more than 10 per cent.” Retailers in other towns agreed that market intervention was a must to curb the recent trend. “Stockists are the main culprits for creating such a situation,” blamed Shankar Man Gurung, owner of Gurung Provisional Store at Chipledhunga, Pokhara. “Some stockists are manipulating the entire market.” Pokhara is experiencing an all-time high price of vegetables — cauliflower Rs 80/kg, tomato Rs/55 kg and green chilly Rs 90/kg. “Prices are at an all-time high,” Lakshmi Bastola (45), a housewife, said. In the towns bordering India, the lowest prices of food grains are in Birgunj — a major transit point of the country. Lentils are priced highest in the town at Rs 130 and Rs 100 for a kg of rahar and masuro pulses, respectively. Interestingly, the price hike has not affected less consumed commodities. “Though the prices of lentils has increased by 30-40 per cent, the prices of beans — kerau, bodi, bhatmas — are more or less stable,” said Shyam Prasad Sah, president, Janakpur Chamber of Commerce.

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Propelled by food and beverages, the year-on-year inflation as calculated by the consumer price index rose to 12.3 per cent in mid-June 2009 from 11 per cent in the same period last year. The price of sugar and sugar-related products rose by 12 times to a whopping 62.3 per cent in comparison to an increase of 5.5 per cent in the same period in the last fiscal. The price indices of vegetables and fruits increased by 55.5 per cent in sharp contrast to last year’s decline of 3.3 per cent. Similarly, the price indices of meat, fish and eggs, as well as pulses’ sub-groups in the review period, grew by 29.8 per cent and 27.7 per cent, respectively, as compared to an increase of 12.6 per cent and 11.1 per cent in the same period last year. Source: The Himalayan Times Date: 08/09/2009 Majority of vegetables’ price in pole vault mode The price of vegetables like potato, cucumber, tomato, garlic and ginger increased by 25 per cent in comparison to last month. However, the decrease in the price of some other vegetables may have provided relief to consumers this season. “The price of potato has increased from Rs 70 to Rs 85 per kg this month whereas garlic has reached Rs 100 per kg and ginger Rs 75 per kg,” said Sunti Shrestha, a vegetable dealer at Kalimati, who has been in this business for 10 years. She added that rainfall has increased the production of green vegetables but some of the vegetables are in short supply due to the off-season.The price of green vegetables has dropped tremendously compared to the previous month.The major reason for this drop is the rainfall that has occurred after a long drought. Cabbagde price has gone down sharply. It is Rs 35 per kg whereas it was Rs 50 the previous month. “There is limited profit in vegetables as these are perishable goods and have to be sold as soon as possible,” vendor Laxmi Rana said adding that it is a false opinion that the vendors are responsible for fake shortage of vegetables in the market. She added that they have been selling vegetables at a very nominal profit. Meanwhile, the price of some vegetables like tomato has skyrocketed from Rs 30 to Rs 40, onion from Rs 18 to Rs 25 and garlic from Rs 60 to 100. On the other hand, the price of green vegetables like bitter gourd, cabbage, cauliflower, French bean, capsicum, brinjal, radish has decreased sharply around this time of the season. The reason for increased price of such vegetables was mainly the off-season and the additional cost of importing these vegetables from neighbouring countries, mainly India and China. Even so, the price difference can still be observed from shop to shop. “There is a slight difference in the price of vegetables from one shop to another because of the additional transportation cost,” said Bantilal Gupta, another vegetable dealer. “Chemical fertilizers have boosted production and maintained the supply graph,” said

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Prakash Aryal, a vendor at Kalimati. He also stressed on the need for providing concession in fertilizers in order to increase productivity. Prices going up • • • • • • •

Potato (Red) Rs 32 Potato (White) Rs 26 Tomato Rs 40 Onion Rs 25 Ginger Rs 70 Garlic (Nepali) Rs 80 Garlic (Chinese) Rs 100

Prices coming down • Cabbage Rs 32 • Cauliflower Rs 40 • Brinjal Rs 30 • French bean Rs 40 Prices per kg Source: The Himalayan Times Date: 08/08/2009 MARKET:

NEPSE down with commercial bank index KATHMANDU, Aug 8 - The Nepal Stock Exchange (NEPSE) saw a decline in its index last week by 4.70 points to 700.01 points on the final day of trading Tuesday from 704.71 points on Sunday. In three-day trading of shares, the index climbed down continuously although margin of decline is not so high. There was no trading on Wednesday and Thursday because of public holidays. The bad performance of the commercial banks was crucial to bring down the NEPSE last week with their index falling by 13.61 points. The group comprising development banks witnessed a decline of 5.41 points followed by hydropower sector with 1.96 points. The insurance group also witnessed a decline in its index by 1.94 points. The group categorized as others saw the biggest rise in its index with 15.27 point increase. The group representing financial companies saw an increase of 5.62 points in its index while trading group also witnessed an increase of 2.23 points. However, the indices of both manufacturing and hotel groups remained stable over the entire week at 434.32 and 363.95 points respectively.

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The shares of 84 companies were traded over the week. As many as 516,400 units of shares worth Rs. 263.38 million were traded over the week via 4046 transactions. In the previous week, 711,600 units of shares worth Rs. 472.80 million were traded via 5,716 transactions. This represents 44.29 percent decline in turnover amount last week compared to previous week which is chiefly due to just three day trading last week. Generally, shares are traded for five days in NEPSE in a week. Citizens Bank International topped in terms of transactions amount whereas National Hydropower Company topped in terms of total number of shares traded. Bank of Asia stood first in terms of number of transactions. Weekly review Date

Total Turnover (Rs. in million) Nepse Index (in points)

04/08/09 03/08/09 02/08/09

79.28 79.65 104.44

700.01 700.16 704.71

Top Five in turnover Company

Turnover Amount

Citizens Bank International Nepal Investment Bank Bank of Asia Nepal National Hydropower Company Nepal Bangladesh Bank

21.42 20.69 17.06 16.30 14.55

Source: www.kantipuronline.com

Customs offices to be reduced KATHMANDU, Aug 8 - The government is planning to reduce the number of small customs offices due to their ineffectiveness. There are five to six small customs offices in most of the districts bordering India. The Department of Customs (DoC) has proposed a plan to the finance ministry to reduce such customs points to 96 from existing 143. The proposal of reducing the small customs office was made on the basis of potential of trade, law and order situation and distance between each customs offices, according to him. In addition to this, the under secretaries will head an additional five customs offices after upgrading them.

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The DoC will place under secretaries at upgraded customs offices in Sarlahi, Gaur, Jaleshwor, Siraha and Saptari districts. These are now headed by section officers. He said that the five customs offices would be upgraded as their potentials for business were identified higher. The proposal finance ministry to add the vacancy for under secretary is under consideration at the Ministry of General Administration. Revenue secretary Krishna Hari Baskota said that the ministry was feeling that the small customs offices too high and they have not been monitored well. "We can manage them properly if their number remains low." Some customs offices have already turned useless due to changes in transportation and trade. Some offices are not being run due to the insecurity and absence of government employees. For example, only three of 11 such small customs offices under Birgunj customs are under operation currently. Kable Prasad Bhandari, chief of Birgunj customs said that some small customs offices could not be operated due to shortage of government employees. "Our aim is to reduce the number of small custom offices and make them effective," said Shyam Dahal, director of DoC. Most of the small customs offices in Terai have dysfunctional due to insecurity. According to Baskota, the government had provided Rs. 230 million to the Armed Police Force last year to establish 64 border outposts in order to maintain border security and control smuggling of goods. There had been homework for reducing the number of small customs offices during the decade long conflict too. However, it its process came into effect after this issue was incorporated in the customs reform work plan. Most of customs offices have their small customs offices under them except of those including Kimathanka, Larke, Rasuwa, Mugu and Yari customs. There are a total of 29 customs offices in the country. Source: www.kantipuronline.com

GENERAL: Nepal Army undergoes revolution More than 200 years after remaining the main prop of Nepal's royal dynasty, the army, dominated by the country's elite and the aristocracy, is now undergoing a revolution itself with its chief to come from the rank of commoners for the first time in its history.

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On Monday, the controversial army chief, Gen Rookmangud Katawal, who opposed the entry of the Maoist guerrillas in the national army and caused the downfall of the Maoist government, goes on leave to be followed by retirement next month. Prior to that, on Sunday, he will hand over charge to his successor, Lt Gen Chhatraman Singh Gurung, the first chief of the Nepal Army to come from the indigenous tribes. In the past, Nepal's army chiefs had always been chosen from the three elite classes: the Shahs, allied to the royal dynasty, the Ranas, allied to the former hereditary prime ministers, and the Chhetris. Though Katawal himself was a commoner, he had been adopted by King Mahendra, deposed king Gyanendra's father, and had the backing of the palace. Gurung, who has received his military training from institutions in Dehra Dun, the US and China, has a squeaky clean image. He also holds a black belt in taekwondo. Though Katawal exits next week, his legacy of unrest however lives on through the resumed protests by the Maoists who from Friday began a second blockade of parliament. The previous siege, started in May after Pushpa Kamal Dahal Prachanda resigned as prime minister, had lasted for over two months and caused the peace process to be badly obstructed. The renewed obstruction, Prachanda has warned, could prevent the new constitution from coming into effect next year. Before he left for London on Saturday, Prachanda also said the Maoist protests would not be assuaged by Katawal's retirement. "We have asked the government to prove that it puts civilian supremacy above the military," the Maoist chief said. "If Katawal had been removed before going into retirement, it would have been a positive gesture.� Source: timesofindia.indiatimes.com

Diarrhea outbreak feared in Sindhuli, too; three die While the diarrhea and cholera spread in mid and far-western districts is yet come under control similar outbreak is feared in Sindhuli district. Three persons died of diarrhea at Kyaneshwor and Kalpabrikshya VDCS on Saturday, reports said. The victims have been identified as Bhakta Bahadur Bishwokarma, 55, of Kyaneshwor and 7-yr-old Raju Lama and 4-yr-old Rita Nepali of Kalpabrikshya VDC. The details of how many villagers have been affected by the disease are still awaited. A medical team has left for these areas from the district headquarters following reports of the deaths. Source: www.nepalnews.com Date: August 8, 2009

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Govt reassures Chinese businessmen security Expressing concern over the rising incidence of harassment and thrashing of Chinese entrepreneurs, especially in the tourist area of Thamel in Kathmandu, the government has assured the Chinese Embassy of its commitment to ensure the safety and security of Chinese businessmen in the country. Prime Minister Madhav Kumar Nepal and Foreign Minister Sujata Koirala interacted with the Chinese ambassador and other embassy officials recently over the recurrent incidents of attacks on the Chinese businessmen, especially the restaurant operators. A Chinese Embassy official told myrepublica.com that the prime minister spoke to the ambassador over the phone soon after the embassy drew his attention to the need to guarantee the safety of its Chinese businessmen in Nepal. The embassy had in the first week of July written to the prime minister and the International Labor Organization (ILO) drawing their attention to such "unwanted" incidents. The embassy took up the issue strongly after the incident at Beijing Hotel International, Jamal, where the General Federation of Nepalese Trade Unions (GFONT) members and former employees of the hotel beat up the owners -- Pan William and Yang Sun -- and five staff of the hotel on June 27 alleging them of not enforcing labor laws in the hotel. An eight-member delegation of Chinese businessmen had then met with the head of the business trade section of the Chinese Embassy and sought embassy´s proactive role in helping them run business in secure environment in Nepal. In the span of seven years, of the 260 Chinese manufacturing companies registered with the government of Nepal, more than 100 companies have closed down. There are now just about 70 such companies producing items such as medicines, bicycle, motor parts, chemicals, detergents, plastic items and napkins. Except for the construction business, a majority of Chinese businessmen residing in Nepal on business visa are engaged in hotel and restaurant business. Foreigners pay a meager $300 a year for acquiring a business visa and are required to only show a plan to invest a minimum of $20,000 in a business venture in Nepal. The visa is renewed each year. Source: www.myrepublica.com Date: 08/09/2009 Social crisis looms large KATHMANDU, Aug 8 - Vice chairman of National Planning Commission (NPC) Yubaraj Khatiwada said on Saturday that social crisis looming large due to current financial crisis could be catastrophic.

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R&D Economic Research & Business Development

"The financial crisis to be followed by economic as well as social crisis has a tradition of affecting the people's lives severely," he said at third general assembly of South Asia Alliance for Poverty Eradication. The increase in infant mortality rates and other social setbacks have been identified in the previous crisis, he said. He said that there might be serious implications in country's economic and social sector if the flow of remittance was decreased due to current recession. However, the growth of remittance flow has remained robust until 11 month of last fiscal year. The number people going for foreign employment have come down after the recession began. Although the financial crisis began as a result of greed on the part of capitalists, capitalism is still irreplaceable, Khatiwada said. "There is no viable alternative system viable to replace the capitalist system," he said. Participants from various South Asian countries however stressed on the need for change in capitalist world economic system with a more just economic system. Representative from Pakistan Karamat Ali said that the new labour law introduced in Pakistan resulted in deprivation of many labourers from legal protection against abuse of rights by factory owners. Pakistan went for new labour law as the International Monetary Fund put condition for labour law reforms before releasing its loan to Pakistan. Source: www.kantipuronline.com

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