'A peanut is not a meal’

SANGAM PRASAIN
KATHMANDU, 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.

Nepal 14th in tourists’ beeline

SANGAM PRASAIN

KATHMANDU, JUL 07 -

The number of Nepali tourists visiting India has been steadily increasing to earn the country a slot in the southern neighbour’s list of top arrivals.

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"

KATHMANDU, JUL 11 -

Though agriculture and non-agriculture sectors failed to achieve set targets,   Nepal´s economy expanded to Rs 1,183 billion and GDP per capita touched Rs 41,851 in 2009-10.

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 -

Private airlines operators on Sunday said heavy tax levied by the government in the domestic airline operations since 2002 has made it difficult for the aviation sector to survive.

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.

Biz sector slams special budget

SANGAM PRASAIN
KATHMANDU, JUL 12 -
Economists and business leaders on Monday said that the ‘special budget’ presented on Monday will not address problems the economy is currently facing. They also regretted the fact that the budget, once again, became a prey to political uncertainties.

 Economists and business leaders said the ‘special budget’ will affect the investment and employment opportunities in the next fiscal year. It will also hit the government target of reducing poverty, they added.

Until the Appropriation Bill for the next fiscal year is presented in the legislature parliament, the government has to manage expenditure and income through the ‘special budget.’

When will the full-fledged budget come? It all depends on how quickly major political parties resolve the deadlock over the formation of a new government. Former Finance Minister Prakash Chandra Lohani told the Post that the compulsion to bring in the ‘special budget’ shows the major political parties are not serious about the economy. 

“Constitution making has been delayed, corruption has increased and now the government fails to present a full-fledged budget. It indicates we’re gradually moving towards a failed state,” Lohani said.

Economist Biswombhar Pyakurel said a recent study of South Asian countries shows Nepal as an example where low political will and instability has marred the economic growth. “If the government fails to expedite development expenditure, economic activities will slow down affecting the poor,” said Pyakurel.

The private sector that was looking for incentives in the export sector through a full-fledged budget is also disappointed with the government presenting the ‘special budget.’ The special budget has failed to address the problems the economy is currently facing. The private sector that contributes 70 percent in investment is worried about the situation that forced the presentation of the ‘special budget.’

The heads of two apex bodies of the Nepali private sector, Kush Kumar Joshi and Binod Kumar Chaudhary lamented that political leadership is yet to realise the grave consequences of not coming up with a full-fledged budget.

Joshi, the president of Federation of Nepalese Chambers of Commerce and Industries, bluntly termed the ‘special budget’ as a move to provide salaries to civil servants. “We cannot term it a budget as it has no policies and programmes,” he told the Post.

“Once again, the country’s development process and economy has taken a backseat,” said Chaudhary, the president of Confederation of Nepalese Industries (CNI). “Economic development can’t be accelerated through a special budget.”

No chill pill, for sure 

"Govt presents Rs 110.21 b special budget"

KATHMANDU, JUL 12 -
For the second time in three years, there is a special budget, thanks to political wrangling. The government has managed a way out for regular government expenditure but development and expansion of economy will be hit.

Even Finance Minister Surendra Pandey regretted that the budget was a victim of political tussles.

“It is not a happy  situation,” said Pandey on Monday. He presented a special budget of Rs 110.21 billion, tabling the ‘Bill Empowering Government to Withdraw Money from Consolidated Fund’ to carry out regular services in the coming fiscal year.

The bill will give the government authority to incur expenditure up to one-third of the total revised expenditure of the current fiscal year from the consolidated fund until the Appropriation Bill, 2010 is tabled in the Legislature-Parliament.

Of the Rs 110.21 billion, the government proposes Rs 31.40 billion for chargeable expenditure (that does not need parliamentary approval) for the whole fiscal year 2010-11 and Rs 78.81 billion for expenditure appropriated from the consolidated fund which will amount to one-third of the actual expenditure of the current fiscal year.



Economists and business leaders say the special budget will affect investment and employment opportunities in the new fiscal year. With GDP growth declining and major economic indicators including balance of payment bleak, the special budget was not the right prescription. “This is not a budget,” said Kush Kumar Joshi, president of Federation of Nepalese Chambers of Commerce and Industry. “It will reverse economic development.”

Pandey acknowledged, “The economy will suffer if the formation of a government is delayed,” said Pandey.

“A full fledged budget is a must.” Delay in full-fledged budget will have multiple impact on the economy. It will not only hit the growth of revenue collection but also delay investment and expansion plans of the private sector. As no changes can be made in tax structure, revenue collection will be hit.

Also hit will be new employment opportunities that the annual budget would provide through new programmes. “From government expenditure to foreign grants, loans and funds for multi-year contracts, all will be affected,” said Minister Pandey.

Import substitution a must, says govt

SANGAM PRASAIN

KATHMANDU, JUL 03 -

The government will take import substitute measures to protect the domestic industry in the areas of meat, vegetables and fruits, cements and dairy. With the trade deficit as high as 52 percent and Balance of Payment deficit at Rs. 17.36 billion, the government is seeking to reduce imports.

Finance Secretary Rameshwor Khanal on Saturday said the measure would substitute imports worth Rs. 25-30 billion. Nepal imports 55,000 tonnes meat annually while import of other agro products is high and which has triggered BOP deficit to some extent.

“We have low competitive edge products compared to neighboring countries. In this situation, substituting import of these products will be viable as we cannot think of exporting products that reduce the ballooning trade gap immediately,” he said.

He said that the government would also take some tough measures on petroleum products (PoL) and hike electricity tariff in the upcoming budget. “We have to take these measures keeping in mind the increasing demand for PoL products as the government will not be able to subsidize the products that account for the huge BOP trade,” Khanal said at a pre-budget discussion organised by Society for Economic Journalists of Nepal (SEJON).

The government will also be harsh on electricity tariff. If the same tariff remains, the Nepal Electricity Authority (NEA), which is reeling under a huge loss, could go bankrupt. “This will affect people for a short time but will be beneficial and sustainable,” he said.

The upcoming budget has also adopted measures to substitute some import based industrial and agro products by prioritising their production and encouraging them in the home country. Among the industrial products, import of cement and dairy products would be substituted by domestic production. Secretary Khanal said that by mid-January there will be an additional 12,000 tonnes cement production in the country, which will help substitute import of cement.

“If one more big dairy processing industry is established, it will help import substitution,” Khanal said adding that the government was committed to provide all facilities regarding roads and electricity in those industries.

The government is planning to bring the advance budget by the next week. “A full-fledged budget will be announced by the national consensus government,” said Khanal quoting the Prime Minister who resigned recently.

Khanal said the development budget will take a slow growth path due to lack of political commitment. Delay in budget will not hamper the monetary policy and other issues related to it, but it will severely impact the development budget.