Political unrest has hit industry
SANGAM PRASAIN
JULY 15 -
Dinesh Shrestha is managing director of Pacific Commercial Company, authorized dealer of Mahindra two-wheelers in Nepal. Shrestha, who is also an executive committee member of the Federation of Nepalese Chambers of Commerce and Industry, has interests in trading, education, manufacturing and health. Sangam Prasain of The Kathmandu Post talked with Shrestha on the business environment and Pacific's business interest. Excerpts:
The Economic Survey 2009/10 shows a rise in vehicle sales. How has your company that deals in Mahindra scooters performed?
There has been a significant rise in the sale of vehicles from four-wheelers to two-wheelers. With ever increasing population and urbanisation, owning a vehicle has become a necessity. As we don't have an efficient mass transportation system in place, people living in urban areas have no choice but to go for private vehicles. This has increased the demand for two-wheelers in major cities including Kathmandu. Hence, business has been good for every automobile company this fiscal year. In our case, we've sold around 1,500 units of Mahindra scooters in the last eight months.
How many models of Mahindra scooters are available in the market?
We are currently selling the four-stroke 125 cc Mahindra Duro, 124.6 cc Mahindra Flyte and Mahindra Rodeo. Though we've recently started selling Mahindra scooters in Nepal, our market share is between 20-25 percent in the overall scooter segment.
Due to safety features, mileage and pickup, demand for scooters has been increasing gradually. Even then, sales are relatively low compared to motorbikes; but we're optimistic that they will go up.
Your group has recently entered the FMCG sector with snacks. How is the new business going, and what are the new products you are planning to launch?
We have recently launched our FMCG products under the Mum's brand in the Nepali market. Mum's brand is a processed food and snacks from India's Amrapali Group. The response so far has been positive. With snacks and processed foods becoming popular in Nepal, we aim to expand and diversify the existing product line. We want to provide customers the finest taste with the highest quality. As the Amrapali Group has recently started juice production, we'll be launching it in the Nepali market in the near future.
The government has failed to present a complete budget once again. What impact will it have on the private sector?
It shows that the economic agenda has never been a priority for our political parties. This is the second instance that the country has missed a complete budget. When the entire industrial sector is on the brink of collapse and investors are unwilling to invest in the country, a full-fledged budget was the need of the hour.
Entrepreneurs always study the budget before making their business and expansion plans. The delay in the budget will affect the entire industrial and business sector. The private sector has suggested to the government to introduce import substitution measures among other issues to narrow the trade deficit; but with the special budget, we can't think of lessening the trade deficit.
What are the major problems that the private sector is facing and which need to be addressed immediately?
Political instability has made the business climate pessimistic and spread a sense of insecurity. As in the previous years, load-shedding and labour problems have made the cost of doing business expensive. This year, we also faced difficulties in getting loans from banks due to the liquidity crunch. Despite the central bank asking commercial banks to finance the industrial sector, no bank is willing to invest. None of the banks wants to bear losses putting money in industry in this business climate.
Monday, July 19, 2010
Sunday, July 18, 2010
Paddy sowing recorded at a meager 40pc
SANGAM PRASAIN
KATHMANDU, JUL 19 - With the rain god being more favourable this year, paddy plantation in the country has been recorded at 40 percent even with the main planting season in the Tarai yet to start.
The preliminary estimate of the Ministry of Agriculture and Cooperatives (MoAC) said that plantation this season had been good compared to the same period last year.
Dr. Hari Dahal, spokesperson at the MoAC, said that paddy plantation in the Tarai had just started, and in response to the current monsoon, the plantation rate would increase in the months of August and September.
Of the total 3.1 million hectares of arable land, paddy plantation occupies over 1.5 million hectares.
The Tarai, which is a major paddy producing region, has 71 percent of the total arable land. Similarly, the hill region has 25 percent and the high hill region a 4 percent share of the total arable land.
This plantation season, paddy plantation in Jhapa has been recorded at 33,600 hectares out of the total 96,161 hectares. Morang has recorded
over 31,000 hectares out of 88,000 hectares and Sunsari has recorded 25 percent out of its total 53,600 hectares, Dahal said.
Similarly, plantation in Siraha has been recorded at 10 percent of its total 70,000 hectares and Sarlahi with 12 percent of its total 68,000 hectares. Plantation in Kapilvastu, Rautahat and Dhanusha has been recorded at 10 percent, 15 percent and 20 percent respectively.
According to the ministry, paddy plantation in the Central Development Region has been recorded at 39 percent, 25 percent in the Eastern Development Region, 49 percent in the Western Development Region, 52 percent in
the Mid-Western Development Region and 48 the percent in Far-Western Development Region.
Plantation has been recorded at cent percent in Rolpa, Dolpa and Humla. The average paddy plantation in the Tarai, hills and high hills has been recorded at 33 percent, 57 percent and 62 percent respectively. The Kathmandu Valley
has recorded 80 percent paddy plantation.
Production of paddy declined by 11 percent last year due to a long drought that delayed paddy planting. Output dropped to 2,716 kg per hectare from 2,907 kg per hectare recorded last year.
Paddy plantation
Region Plantation %
Eastern 25
Central 39
Western 49
Mid-Western 52
Far-Western 48
Wednesday, July 14, 2010
Arrivals up, stay duration down
SANGAM PRASAINKATHMANDU, JUL 15 - Tourist arrivals in Nepal increased by 1.9 percent in 2009, however, their average length of stay has declined.
According to the Economic Survey 2009/10, the average length of stay has gone down from 11.8 days in 2008 to 11.6 days in 2009.
Tourists had started staying longer in the country in 2006 following the comprehensive peace accord ending the Maoist conflict. Since then, however, it has been decreasing constantly.
Tourism entrepreneurs say that tourist stay in Nepal has been affected by political uncertainty, strikes and bandas. Hotels too suffered labour unrest in 2009 forcing visitors to cut short their Nepal tour.
“One of the reasons behind the drop in tourist stay could be the global recession which prompted vacationers to opt for shorter holidays,” said Raju Bikram Shah, general manager of the Shangri-La Hotel.
“We didn’t see a drastic change in tourist stay,” said David Yonjan of Yeti Travels. “The length of stay depends on the tour package.”
Tourist entrepreneurs are hopeful of the length of stay increasing with the number of tourists coming for recreation growing. As per the Economic Survey, 34 percent of the arrivals in 2009 came for recreation compared to 29.6 percent in 2008. Tourism entrepreneurs say that if the political situation remains stable, the trend of taking longer holidays could increase.
“The significant rise in the number of visitors coming for recreation is a result of the increasing options for leisure activities in Nepal,” said Prachanda Man Shrestha, chief executive officer of the Nepal Tourism Board. According to the Economic Survey, there has been a marginal increment in the number of visitors coming for pilgrimage from 9 percent in 2008 to 10.4 percent in 2009. Tourists putting down trekking and mountaineering as their purpose of visit amounted to 20.9 percent in 2009.
Likewise, 4.7 percent came for trade, 7.6 percent for formal visit and 1.4 percent for meetings and seminars.
Declining stay
Year 2009 2008 2007
Days 11.60 11.78 11.96
Purpose of visit
Year 2009 2008 2007
Recreation 34.0 29.6 30.6
Trek/Mountaineering 20.9 21.0 19.20
Pilgrimage 10.4 9.0 10.0
Trade 4.7 4.6 4.6
Formal visit 7.6 8.6 8.6
Meeting/seminar 1.4 1.4 1.4
Other purposes 15.6 19.9 19.5
Undefined purposes 5.0 5.9 6.3
Tuesday, July 13, 2010
'A peanut is not a meal’
SANGAM PRASAINKATHMANDU, JUL 13 -
The business community and economists have pointed out that delay in presenting a full-fledged budget will hinder the country’s economic growth and private sectors’ investment plans.
At an interaction on ‘Delay in Budget and its Impact in Country’s Economy’, organised jointly by Federation of Nepalese Chambers of Commerce and Industry (FNCCI) and Society of Economic Journalists of Nepal (SEJON) on Tuesday, economists said that disturbances in regular budget presentation cycle would ultimately hamstring the overall economy.
At a time when country was looking for a full-fledged budget to address bottlenecks in the economy, the government’s special budget will widen existing trade deficit, constrain revenue mobilisation and hit private sector confidence, said economists. They pointed out that the political leadership had failed to realise the country’s economic agenda and priorities.
“Investors are in a dilemma whether to invest or not as there is no concrete programme and policy of the government in the special budget,” said Kush Kumar Joshi, president of the FNCCI. Joshi said that trade deficit would further widen in the next fiscal year.
“The private sector has demanded stimulus packages to address the growing trade deficit issue, industrial insecurity and load-shedding, all in vain,” added Joshi.
Economist Biswombhar Pyakurel described the advance budget as too meagre. He said that the public distribution system had become a joke. “No political parties is serious about the country’s economic agenda,. This will adversely impact the country’s economy in the long run,” he added. This is the second time in three years that a full-fledged budget has been delayed.
Economist Dilli Raj Khanal said that if the political class fails to address the country’s economic agenda, a crisis would erupt. “There is need for political consensus to address the deepening problem,” said Khanal. Economist Chiranjivi Nepal said that as the country is witnessing a huge balance of payment deficit and decline in foreign currency reserves, delay in full-fledged budget would worsen the economic crisis. “It is unfortunate that no political party is serious about economic issues,” he lamented.
Finance secretary Rameshwor Khanal said that investment would decrease if the economy does not stay stable. “Delay in budget announcement will discourage both domestic and international investors, and without investment we cannot have economic growth,” he said.
He said that the targeted economic growth for the next fiscal could be affected. “The government plan to provide incentives and facilities to production and agriculture sector for import substitution and accomplishing the three-year plans will also be affected,” he said.
Monday, July 12, 2010
Nepal 14th in tourists’ beeline
Nepal ranked No. 14 in foreign visitor arrivals with 87,487 Nepali tourists travelling to India by air in 2009, according to the Indian Tourism Ministry.
Nepali outbound to India was greater than Indian inbound to Nepal last year in terms of air travellers. According to the Nepal Tourism Board (NTB), 86,696 Indian holidaymakers arrived in Nepal by air in 2009. CEO of NTB Prachanda Man Shrestha, however, said that Nepal was not in a deficit position as around 300,000 Indian tourists visit the country overland annually.
Tour operators cited three reasons for the substantial rise in the number of Nepali visitors to India — popularity of pilgrimage destinations, growing trend of using India as a transit point for onward flights to Europe and the US due to cheap tickets, and rising frequency of guardians visiting their children enrolled in Indian schools Sudhir Upadhyay, managing director of Ama Travels whose main business is operating tours to India, said that more medium-class Nepalis were travelling to India as tourists. Earlier, only high-income people used to visit India.
C.N. Pandey, managing director of Samrat Travels & Tours, said political instability had forced large numbers of Nepali students to pursue their studies in India.
Economy Survey 2009/10
"Target bar was set too low, scoffs study"
The Economic survey released on Sunday shows the pace of growth in both the agriculture and non-agriculture sector remained slow.
According to the survey, growth of non-agriculture sector is expected to grow by 5.1 percent. Growth in sub-sectors like mining and quarries, industry, gas and water, construction, hotel and restaurant, financial intermediation, real estate, leasing, and commercial services pushed the growth of non-agriculture sector to 5.1 percent.
In the non-agriculture sector, construction is estimated to grow at 6.6 percent. The sector registered good growth due to rapid construction of homes, residential apartments and office buildings in Kathmandu valley and other urban areas.
Growth of commercial services like real estate, leasing and other services that had nominal growth of 1.8 percent in the previous fiscal year is estimated to grow by 4.9 percent this year.
Among the sectors that recorded lower growth in 2009-10 in comparison to 2008-09 are agriculture and forestry, fisheries, wholesale and retail trade, transport, communication and warehousing, public administration and defense , education, health and social works, and other community, social and personal services.
The growth of agriculture sector that has the biggest weightage in the total gross domestic product (GDP), according to the survey would be limited to 1.2 percent mainly due to decline in production of paddy and maize.
According to the survey, cereal production decreased
to 77,62000 metric tonnes against 81,15000 metric tonnes last fiscal. The production of paddy and maize decreased while production of wheat,
barley and millet witnessed growth. The cultivation area for cereal production also shrank to 3383,000 hectares from 3418,000 hectares.
Among cash crops, the total production grew to 5224,000 metric tonnes this year from 4931000 metric tonnes last year in the expanded cultivation of 458000 hectares of land from 434000 hectares. The production of sugarcane, oilseeds (telahan), potatoes and jute increased while production of tobacco was constant this year .
Among other cash crops, pulses (dalahan), fruits and vegetables all saw a growth and their total production grew to 3968000 metric tonnes from the 3695000 metric tonnes last year.
The country saw growth in production of meat, dairy products, eggs and fish last
year as well. Irrigation facility expanded to additional 13119 hectares of land although the facility was expanded by just 2612 hectares last year.
The manufacturing sector is expected grow by 2.6 percent this year as compared to 1 percent negative growth last year.
The production of noodles increased to 42,000 metric tonnes from 40669MT.
Tea production grew to 16,000MT from 15506MT, liquor production grew to 12,000MT from 11907Mt, cigarettes, shoes, soaps, cements and industrial equipments all saw a growth.
The number of hotels went up to 744 this year from 669 last year. Star hotels grew by just 1 to 97, while non-star hotels grew to 647 from 573.
While the number of hospitals remained unchanged
at 102, the number of health posts went up to 1176 from 676 last year, but the number of sub-health posts decreased to 2617 from 3114 last year.
The number of manpower in the health sector also could not grow much as it reached 92181 from 92010.
The survey also revealed that in total, roads expanded to 20138 km from 19209 km in the road expansion year. Black-topped roads expanded to 6304 km from 5859km.
Gravelled roads expanded to 4832 km from 4717km and fair weather roads expanded to 9002km from 8635 km.
Sectors that saw growth
• Mining and quarrying (from 0.7 percent to 4.2 percent)
• Industry (from -1.0 percent to 2.6 percent)
• Electricity, gas and water (from -0.9 percent to 0.5 percent)
• Construction (from 0.9 percent to 6.6 percent)
• Hotel and restaurant (from 3.0 percent to 8.5 percent)
• Financial intermediation (from 1.5 percent to 1.6percent)
• Real estate, rent, professional services (1.7 percent to 4.8percent)
Sectors whose growth declined
• Agriculture and forestry (from 3.0 to 1.1 percent)
• Fisheries (from 5.7 percent to 5.3 percent)
• Wholesale and retail trade (from 5.9 percent to 5.6 percent)
• Transport and communication (from 7.6 percent to 6.5 percent)
• Public administration and defense (from 7.3 percent to 4.2 percent)
• Education (from 11.3 percent to 6.5 percent)
• Health and social works (from 11.2 to 5.6 percent)
Hefty tax weighs airlines down
SANGAM PRASAIN
KATHMANDU, JUL 11 -
At an interaction on 'Existing Issues of Nepalese Aviation Sector', here on Sunday, the umbrella organisation of private airline companies, the Airlines Operators Association of Nepal (AOAN), said heavy lease tax, landing charge, parking charge,
navigation charge, housing charge and other taxes levied on this sector has affected the efficiency and services, adversely affecting passengers.
The AOAN has suggested the government consider the issue in the upcoming budget so as to make the sector sustainable in the long run and one that would deliver more efficient and competitive services.
It also suggested the Civil Aviation Authority of Nepal (CAAN), the regulatory body which is preparing to revise the existing airfares, make the revision on a “scientific basis.” The airlines have not revised the airfare since 2006. In 2006, the aviation fuel was Rs. 53 per litre, which now costs over Rs. 75 per litre.
The airlines are also suffering from extra Value Added Tax As per the VAT Act 1995, airlines are not allowed to raise the tax from passengers. However, the government imposes VAT on every spare part and other materials imported. “This is totally impractical as per the international theory,” said Yog Raj Kandel, general manager of Simrik Air, presenting a paper on 'Existing Issues of Nepalese Aviation Sector'.
According to him, the government's rigid lease tax has also affected the growth of private airline companies.
No aircraft has been leased for the past 7-8 years because of the 10 percent lease tax levied on leasing an aircraft.
The lease tax was 3 percent before the government revised the Income Tax Act in 2001. The same tax is 1 percent in India. “This clearly shows that the private airline services in Nepal cannot compete with other international airlines,” Kandel said.
Similarly, over 50 percent tax on ground supporting equipment, tools catering equipment and other imported tools has also led to the airlines having to bear a high operating cost. Kishore Thapa, the newly-appointed secretary at the Ministry of Tourism and Civil Aviation (CAAN), said the recommendation made by the AOAN will be discussed.
He said the aviation industry needs to deliver efficient services so as to be awarded tax incentives and other financial packages.
Rameshwar Thapa, president of AOAN, said Nepali private airlines have started cross-border flights, which is boosting the aviation industry.
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