Trade diversification still remains a slogan

Kathmandu, July 19

After getting bruised by the 6-month long Indian blockade about four years ago, Nepal had announced to diversify its international trade with immediate focus to Chinese market.

But the country has failed to diversify both of its exportable goods and foreign markets. Nepal’s trade concentration to and dependency on India has further solidified in the last four years.

Of the total trade of Rs. 746.9 billion in the first eleven months of 2015/16, about 62 per cent had happened with India, 16.4 per cent with China and 21.6 per cent with other countries.

India’s share in total export from Nepal was 56.1 per cent and China’s 2.4 per cent then.

After four years in 2018/19, Nepal’s trade with the northern neighbour has gone down both in terms of trade balance and export share.

In Rs. 1387.6 billion trade in the first eleven months in 2018/19, Nepal’s trade with India is 64.8 per cent and China 14.4 per cent. Export of goods to China has come down to 2.2 per cent while with India it has gone significantly up to 64.4 per cent.

At the same time, Chinese import to Nepal has also fallen to 14.4 per cent in 2018/19 from 15.1 per cent four years ago, but Indian imports have shot up to 64.8 per cent now from 61.5 per cent then.

For Nepal, trade diversification means diversification of both the import and export markets and expansion in the varieties of exportable goods.

But the concept of diversification couldn’t be realised even within the context of immediate neighbours.

“There has been no improvement in terms of diversifying the markets and products. Nepal has particularly failed to boost the trade with China,” said Dr. Posh Raj Pandey, a trade expert who heads South Asian Watch Trade, Economics and Environment (SAWTEE).

He said that trade with China was hampered by Non-Tariff Barriers (NTB) like customs clearance and complex documents.

Although the northern neighbour had announced to allow duty-free entry of about 5000 plus Nepali products, the list does not include the items on which Nepal has competitive advantage.

“What is the use of providing duty-free entry to the goods like airplane and nuclear technology in terms of Nepal?” asks Dr. Pandey.

Chairman of Trade Committee at the Nepal Chamber of Commerce Rastra Bhushan Chakubaji said that there were multiple hassles while trading with China.

“Apart from other requirements, companies in both the countries must obtain license from Chinese authorities to practice the international trade,” he said. “Nepali traders send the goods in a small quantity to many importers in China so it’s almost impossible to have all importers with license.”

Chakubaji suggested creating trading house in both the countries and facilitating the export to China. “We must create a strong collaboration between the public and private institutions to advance trade with China. It is a good market,” he said.

Dr. Pandey also emphasised on public-private collaboration to develop the trade with China in Nepal’s favour but stressed on strong policy mechanism to increase the exports.

“There must be a synchronisation in trade, industrial and fiscal policy. In addition to it, a separate strategy must be created, if we had to improve the trade with China,” he said.

Published in The Rising Nepal daily on 20 July 2019. 

NCC starts online services for CO

Kathmandu, July 19

Nepal Chamber of Commerce (NCC) has started online system for issuing the Certificate of Origin (CO). Secretary of the Ministry of Industry, Commerce and Supplies Kedar Bahadur Adhikari and NCC President Rajesh Kazi Shrestha jointly inaugurated the new system at the chamber secretariat.

NCC said that the development of online system has ushered in the export business to the digitised age with simple, efficient and fast services.

CO is a document that declares that certain products had met the criteria to be originated from a country. It is mandatory in the international trade.

Speaking at the launching ceremony, Adhikari expressed his confidence that the NCC would issue CO as per the policy and rules.

He said that the online system would make the export monitoring easy and fast. “All the services of Nepal Rastra Bank, Department of Customs and banks have entered into the digital practices, and the online issuance of CO will be another important step,” he said.

Shrestha said that the online system would reduce the number of papers and documents needed for the international trade. “It will reduce the cost and time which will contribute in making the Nepali products more competitive in the international markets,” he said.

He also said that the NCC would organise training and workshops on the use and utility of the new system.

Published in The Rising Nepal daily on 20 July 2019. 

‘Nepal, India should address challenges in bilateral relations’

Lalitpur, July 18

Minister for Foreign Affairs Pradeep Kumar Gyawali said on Thursday that inundation in the Terai and the border disputes had emerged as prominent issues in Nepal-India bilateral relations.

Both the countries need to work together to address these issues, he said while speaking at a talk programme on 'Nepal-India Relations: Development and Dynamics' organised by Pushpa Lal Memorial Foundation.

Minister Gyawali expressed confidence that the old treaties and agreements between the two neighbours would be amended and made relevant along with the changing time and situation.

It is high time Nepal and India worked together to address various challenges in the bilateral relations since the countries are having favourable situation in relations which was rare in the past, he said.

"This is the golden opportunity for both the countries, and we must work to tap the opportunity unfolded by this unprecedented situation," he said.

 He said that continued dialogues, exchange of ideas and dozens of bilateral mechanisms have supported to strengthen the bilateral relations between the two countries. However, additional commitment and capabilities are needed to remove difficulties and bridge the gap, he added.

Stating that India was the major source of investment, tourists, development cooperation, goods import and export, he stressed on creating a win-win situation for both the countries.

"There are wide areas of cooperation like natural resources, young and active population and culture and civilisation. Climate change has emerged an important area for collaboration and it calls for urgent actions to minimise and mitigate its impact," said Gyawali.

He appreciated India for its support in petroleum pipeline which came into operation from Thursday, Kathmandu-Raxaul Railways, Postal highway and other infrastructure projects, and support during the disasters like 2015 Gorkha Earthquake.

He also sought Indian support to make the Visit Nepal Year 2020 a success and in attracting investment in national priority areas like infrastructure, energy, information technology and service sector.

Speaking on the occasion, former Prime Minister and Chairman of the Foundation Madhav Kumar Nepal stressed on open dialogue between the two neighbours to sort out the problems, challenges and hurdles in the bilateral relations.

He said that peace and stability in Nepal would help India as well. "Nepal should overcome the 'small nation psychology' and India must not have 'big nation psychology' in the bilateral relations between the two countries," he said.

Nepal said that the relations between the two countries dated back to the Mahabharat era when King Birat of Nepal led a troop to Mahabharat War and the Ramayana era when Prince of Ayodhya Lord Rama came to Janakpur to marry Sita.

According to him, national pride is in blood of all Nepali people which should be sensed and clearly understood by all of our neighbours.

Indian Ambassador to Nepal Manjeev Singh Puri said that both the countries were currently involved in three major partnership projects – Integrated Check Post in Birgunj, Guest House at Pashupatinath and 900 MW Arun III Hydroelectricity project.

"At the same time, the process is expedited to reimburse the quake support or Rs. 100 billion announced by our Prime Minister Narendra Modi. We are releasing the housing grant for 50,000 houses in Nuwakot and Gorkha districts," he said.

He said that Nepal can be benefitted significantly from Indian tourists who come for Muktinath, Pashupatinath and Kailash Mansarovar.

"India is the best suited economic partner of Nepal with the largest number of tourists, 32 per cent growth in export trade this year, and 45 per cent share in 130 million US Dollars Foreign Direct Investment," he said.

Published in The Rising Nepal daily on 19 July 2019. 

DPR ready for three industrial zones

Kathmandu, July 17

The government has approved the Detailed Project Report (DPR) of industrial districts in Mayurdhap of Makwanpur, Motipur of Rupandehi and Naubasta of Banke districts.

Likewise, the Industrial District Management Limited (IDML) has approved the DPR draft of industrial districts in Daiji of Kanchanpur, Shaktikhor of Chitwan and Lamki of Kailali district.

"The government has allocated budget for the development of basic infrastructure in those proposed industrial areas so the work will begin within a couple of months," said the IDML.

It has completed the feasibility study for the industrial area at Laxmipur in Dang district. The industrial area will be established in about 371.82 hectares of land.

The IDML is also preparing the DPR of industrial areas in Sagarnath of Sarlahi, and preliminary feasibility study is being conducted in Chhinchutar of Tanahun and Chupra of Dailekh district.

The industrial districts are being developed in multiple locations in all seven provinces as per the government policy to establish at least one such facility in at least 1,000 bigaha of land in each province.

Of the 11 industrial districts under the roadmap, six in Jhapa, Makwanpur, Chitwan, Rupandehi, Banke and Kanchanpur had already been announced, and Sarlahi, Dang, Kailali, Tanahun and Dailekh are in the process of announcement.

Of all the projects, Damak Industrial District has entered into the construction stage following the government-private sector agreement to develop it as per the BOOT (Build-Own-Operate-Transfer) model.

Project offices have been established for the construction of the industrial districts at Naubasta, Mayurdhap, and Motipur. Likewise, public hearing had been conducted for the Environmental Impact Assessment (EIA) at Naubasta, Shaktikhor and Daiji.

Provinces 3 and 5 have two industrial districts each, Mayurdhap and Shaktikhor, and Motipur and Naubasta respectively.

Likewise, Provinces 2, Sudur Paschim and Karnali have an industrial zone each – Sagarnath, Daiji and Lamki respectively.

Sagarnath is the largest industrial zone by area, which has been expanded to 2031.33 hectares followed by Shaktikhor 1178.76 ha. and Lamki 744.82 ha. Mayurdhap is the smallest one covering just 135 hectares.

Nepal currently has 10 industrial zones – Balaju, Hetauda, Patan, Nepalgunj, Dharan, Pokhara, Butwal, Birendranagar, Bhaktapur and Rajbiraj.

Published in The Rising Nepal daily on 18 July 2019. 

SC upholds stay order on Pesticides test

Kathmandu, July 17

The Supreme Court has upheld its stay order on the embargo of importing vegetables without testing pesticides residue in them.

A joint bench of justices Hari Krishna Karki and Bam Kumar Shrestha had given the verdict against the Cabinet decision of July 4 which halted the order published in the national Gazette on June 17 that declared to test the pesticides in the vegetables and fruits being imported to Nepal and put an embargo on the imports of caffeine goods like Redbull that do not have 75 per cent validity time.

Since the country has pesticides testing facilities at Birtamod of Jhapa, Biratnagar of Morang, Nawalpur of Sarlahi, Butwal of Rupandehi, Pokhara of Kaski, Nepalgunj of Banke, Attariya of Kailali and Kalimati of Kathmandu districts, there is no difficulty in implementing the June 17 information, reads the full-text of the verdict.

"If the Cabinet decision of July 4 is implemented, it will have severe repercussion on public health and may cause unrecoverable loss which is against the decision of Consumer Protection Act, 2075 and fundamental rights of the citizens," read the text.

The government in its decision had said that there was only one internationally accredited lab at the Department of Food Technology and Quality Control (DFTQC) at the central level for pesticides testing, and there were no accredited lab at the customs points or near them. It also said that the import of vegetables and fruits would be continued without pesticides testing until the development of proper infrastructure for the same.

But the Gazette information had imposed a mandatory provision of quarantine and pesticides testing in fresh vegetables and fruits.

The Supreme Court has made a special reference to the Article 44 of the Constitution that says every consumer has the right to have quality goods and services. Similarly, the Consumer Protection Act, 2075 Article 3(2) protects consumers from the sales and distribution of goods and services that could have negative impact on human lives, health and properties.

Lawyer Bishnu Prasad Timilsina had filed a writ on behalf of the Consumer Right Protection Forum for the certiorari on government decision on allowing the vegetables from India and other countries without pesticides testing.

 Published in The Rising Nepal daily on 18 July 2019. 

FM Khatiwada for converting microfinance into development banks

Kathmandu, July 16

Finance Minister Dr. Yuba Raj Khatiwada has pointed towards the possibility of merging the microfinance companies and developing them into larger and powerful development banks.

"The rate of poverty is going down significantly and in the next five years absolute poverty would be alleviated. As the microfinance companies are established to help in poverty reduction, they will have no business," he said while speaking at the handover ceremony of the Rural Self-Reliance Fund (RSRF) to the Sana Kisan Bikas Laghubitta Bittya Sanstha Limited, a microfinance company formerly known as Small Farmers Development Bank Limited at the Ministry of Finance (MoF).

There is a paradox – the size of poor population is decreasing while the number of microfinance banks is increasing, which is expected to cross 100 in the future as the Nepal Rastra Bank (NRB) has converted the non-profit Financial Intermediary Non-Government Organisations (FINGOS) to the profit-oriented class 'D' microfinance banks.

Therefore, in the long-run, the microfinance companies will be developed as the class 'B' development banks, said Dr. Khatiwada.

He also directed the Sana Kisan Microfinance to expand its outreach in the local units where there is poor access to finance. "Create collaboration with the cooperatives. You should also submit an assessment report of the company to enhance the institutional capacity," asked the Finance Minister.

According to him, the Rs. 1 billion RSRF run by the central bank so far was consolidated with the government-run microfinance to save the NRB from the conflict of interest as it was engaged in the operation and supervision of the fund.

Likewise, the jurisdiction of the central bank has increased significantly with the expansion of the economy and the number of branches of the banks and financial institutions have been doubled in the last couple of years. The number of branches have reached 732 now from 350 two years ago.

Governor of the central bank Dr. Chiranjibi Nepal said that it was a right step to separate operation and regulation from the NRB's responsibility.

"Sana Kisan Microfinance is serving about 63,000 families with Rs. 6 billion loan mobilisation and the transfer of Rs. 1 billion fund would help it in expanding the business and increasing the capacity," he said.

The government had announced in the budget of the Fiscal Year 2018/19 that the government funds established for employment promotion and entrepreneurship development would be consolidated. The provision has realised in the last day of the fiscal.

Sana Kisan was established in 2001 to provide wholesale credit along with the technical support services mainly to the Small Farmers Agriculture Cooperatives and similar types.  With its conversion to the microfinance company, it has started providing wholesale credit to other cooperatives and microfinance institutions.

Similarly, the RSRF was instituted in 1991 by the NRB for poverty reduction where the government and the central bank contributed Rs. 540 million and Rs. 25.34 billion respectively. It used to provide wholesale credit to the cooperatives and the NGOs at subsidised rate of interest to on-lend to the poor.

Published in The Rising Nepal daily 17 July 2019. 

Private sector companies to be allowed to set the IPO price

Policy and Programmes of Securities Market for FY 2019/20

Kathmandu, July 15

The Securities Board of Nepal (SEBON) announced on Monday that it will start the practice of Book Building system in the share market to allow the investor company to determine the price and number of the Initial Public Offering (IPO) of shares.

SEBON announced it in the Policy and Programmes for Securities and Commodities Market for the next fiscal year 2019/20.

"This is the best international practice that allows a company to set the premium price in a competitive way," said Dr. Rewat Bahadur Karki, Chairman of the board. Large private sector companies in the country have long been demanding the Book Building System to issue their shares to the public.

In order to attract manufacture sector companies to the securities market, concessional loan will be provided to them, and facilitation would be offered to the industrial establishments of Rs. 500 million or above for the same.

The SEBON is preparing a reporting format for the real sector and hydropower companies and revising the lock-in-period (duration to restrict the promoters to sell their shares after the issue of IPO) to protect the investors interest in those sectors.

Similarly, the securities market regulator is amending the provision that allows the investors to apply for the right shares only as per the size of their shares. Investors can apply for more right shares than their part, and the policy will be implemented at the earliest.

The SEBON is issuing licenses to two commodities trading companies in the next fiscal as per the existing policy and said that it would arrange the transaction of the contracts of the local commodities in those exchanges.

The third edition of the policy and programmes, which was started from FY 2017/18, also has the provision to expand the secondary market of the securities to the districts according to the capacity of the Nepal Stock Exchange (NEPSE).

Likewise, risk-based supervision has got priority. The SEBON has announced that it would formulate bylaws for the risk-based supervision in order to check the money laundering in the capital market and transaction of securities traders, and would supervise the market as per the new instrument.

Creating profiles of mutual funds, credit rating agencies, securities brokers and listed companies, creating draft of Trust Act, implementing Insiders Trading Bylaws and developing Automated Market Surveillance System in collaboration with the regulators of the South Asian countries are other priority programmes.

The SEBON is also planning to expand the working area of the merchant bankers and securities brokers and establishing Securities, Futures Market and Financial Education Institute (SFFEI).

"Our efforts of the structural reforms in the capital market and infrastructure development and government's policy to promote the securities market will result in the development and expansion of the capital market in the country," said Dr. Karki.

According to SEBON, the total capital mobilisation in the capital market in the 11 months of the current fiscal year is about Rs. 35 billion which is about 16 per cent less than the previous fiscal's Rs. 42 billion.

Published in The Rising Nepal daily 16 July 2019.