COLD, CLOUDY DAY GREETS KATHMANDUITES ON NEW YEAR 2012

A COLD, CLOUDY DAY GREETS KATHAMANDUITES ON NEW YEAR 2012
Kathmandu, 1 Jan: A cold cloudy day greeted residents of the capital on New Year Day 2012 Sunday morning.
There was no sunshine over the capital the entire day Sunday.
Heavy snowfall was reported from the hill and Himalaya districts affecting flights..
nnnn
TERAI ARMED GROUP IN JANAKPUR FOR TALKS WITH GOVT.
Kathmandu, 1 Jan.: Samyukta Janatantrik Tarai Mukti Morcha (Ajad Group) has reached Janakpur to hold second phase dialogue with the government, RSS reports from Janakpurdham.

Talking to media persons, Coordinator of the Group, Udaya Kant Mishra said the government should address problems as per the first phase dialogue held in Lumbini on August 19.

The Group has put forth different six demands including that the government should adjust 2,000 Tarai Mukti Army into National Army, release 34 cadres of the Group, who are in different jails, declare Tarai as a reserved state and declare constituencies on the basis of population.
nnnn



________________________________________

NC LEADER CHARGES PM BHATTARAI FOR POWER LUST STALLING PEACE
Kathmandu, 1 Jan.:: Central Working Committee member of the Nepali Congress, Gopal Man Shrestha, has said that peace process and constitution writing could not make progress due to Prime Minister Dr. Baburam Bhattarai's greed for power, RSS reports from .Tanahu

Speaking at a programme organised by the NC on the occasion of the Reconciliation Day, leader Shrestha charged the PM for not paying attention to the peace process and constitution writing though consensus has been forged among the parties over both the issues.

Shrestha said Bhattarai-led government was the most corrupt so far and bad-governance was on the rise this time.

Speaking at the programme, NC leader Amarraj Kaini said there were some lapses in the party management process rather than polity-based differences.
nnnn

JOINING HANDS WITH MAISTSS POSSIBLE SAYS NC LEADER DR. RAM SHARAN MAHAT
Kathmandu, 1 Jan.: Leader of the Nepali Congress, Dr. Ram Sharan Mahat said on Sunday that there was possibility of working together with the UCPN-Maoist if substantial progress in peace process was made at the earliest, RSS reports from Pokhara.

Speaking at a news conference here today, leader Mahat however refused to join hands with the former rebel party until the PLA combatants were rehabilitated and integrated.

Leader Mahat also demanded the return of the properties seized during insurgency to the rightful owners.

"At present, the NC is not in favor of changing the prime minister. We are giving opportunity to this government to conclude the peace process. But, the NC will be compelled to seek alternative to this government if the peace process is not taken ahead," Mahat warned.

Dr. Mahat further said that promulgation of the statute without completing the peace process would pose a serious threat to the country, and accused the Maoist party of being dishonest to the seven-point deal.
nnnn
CORRECTED BRITISH MUSEUM VERSION NOW SAYS THE BUDDHA BORN IN NEPAL NOT INDIA
Kathmandu, 1 Jan.:: The London-based British Museum has redressed the faulty information that lord Buddha was born in India, RSS reports.

The Global Federation for Nepali Literature (GFNL) said, it received a message from the British Museum that it corrected the defective fact on December 11.

A taskforce headed by former Foreign Secretary Murariraj Sharma and constituted by the Federation, is carrying out a study on the historical facts and information about Nepal kept inside the British Museum.

The taskforce will give its recommendation at the international level on completion of its task, according to the GFNL.

The taskforce had written to the British Museum sometimes back asking it to correct the fact related to the Buddha's birthplace.

GFNL general secretary Bishwas Deep Tigela said the taskforce has also found the same fact wrongly mentioned at a museum in South Korea and a meeting of the Federation has decided to write to that museum requesting it to correct the mistake.
nnnn
STRIKE BYDISQUALIFIED MAOIST COMBATANTS HITS CENTRAL REGION
Kathmandu, 1 Jan.:The region-wide shutdown enforced by the disqualified Maoist former combatants has affected normal life here since Sunday morning, RSS reports from Chitwan.

The disqualified Maoist former combatants have been on a phase-wise protest movement calling for the fulfillment of their various demands.

Only few vehicles are plying on the roads in Chitwan due to the shutdown. Transportation, educational institutions and market places have also been closed.

A group of banda organisers has held a demonstration in front of the Chitwan Medical College, burning tyres and chanting slogans.

The disqualified Maoist former combatants have waged protest programmes calling for removing the 'disqualified' tag given them and providing financial relief package in lump sum basis, among others.
nnnn

GOVT,BID TO BOOST HELLO SARKAR
Kathmandu, 1 Jan.: In the wake of dwindling public interest in government’s hotline service Hello Sarkar, the Prime Minister’s Office has started efforts to increase effectiveness to address complaints promptly, The Himalayan Times reports.

According to an official at Hello Sarkar, PMO has expedited the process of sending accumulated complaints to concerned offices.

“As there are some new staff deputed from the Ministry of General Administration recently, we have been sending piled up complaints to concerned offices,” said the official.

“It may take a week to clear all complaints and the new complaints would be processed promptly,” he added.

Separately, PMO secretary Leela Mani Paudyal is in talks with concerned offices to set up the online portal so that the complaints can be forwarded to the concerned offices promptly.

“There has been an online portal system which can be shared with the entire ministry. PMO has been working to expand the online portal to other government offices, departments and regional offices gradually,” he informed.

In the first phase, PMO is trying to prepare an online portal for Tribhuvan University, Department of Water Supply and Sewerage and Nepal Electricity Authority on which the control room receives most of the complaints.

According to the official, the control room can post the complaints in the online portal of concerned offices and the Prime Minister and Chief Secretary will have access to the portal.

The control room set up at the PMO used to get more than 300 complaints, however, the volume of complaints fell sharply in recent days to 60 a day. Hello Sarkar was set up with an aim to address public complaints at PM Baburam Bhattarai’s own initiative.

One can call at anytime at 1111 or lodge complaints via fax 1100 or e-mail 1111@opmcm.gov.np, or SMS 1111 or use www.opmsm.gov.np for service.
nnnn
BAIDHYA THREAT TO OVERTURN AGREEMENTS ON CONSTITUTION
Kathmandu, 1 Jan.: : Senior Vice-chairman of the UCPN-Maoist, Mohan Baidhya ‘Kiran’, today [Saturday] threatened to overturn decisions of the Constitutional Committee’s Problem Resolution Sub-committee, which has party Chairman Pushpa Kamal Dahal as its coordinator, Tika R. Pradhan writes in The Himalayan Times..

Addressing an interaction at his Gongabu-based residence, the senior Maoist leader said Dahal has been sticking to the sub-committee post, though the party has recalled him from the panel tasked with building a consensus on issues related to the new constitution.

He urged all concerned not to take Dahal’s decisions as the party’s as he has not bothered to stick to the party’s stances after becoming the sub-committee chief. “Why should the state pay so many CA members if the sub-committee takes all decisions?” Baidhya asked, challenging the parties to justify the decisions that the Dahal-led panel has taken.

“If the term ‘people’s war’ is not acceptable to the parties, the Maoists will not accept the ‘People’s Movement’, Baidhya said, demanding that the new constitution make mention of all movements.

Baidhya said that the Vice-chairman Baburam Bhattarai-led government should resign without delay for the sake of a unity government. “We had indeed proposed party General Secretary Ram Bahadur Thapa ‘Badal’ as the next PM, but now we have entrusted four top leaders of the major political parties to name the next PM,” he said. The leader of the hardliners’ faction in the Maoist party maintained that he is for peace and constitution, but not the way the establishment wants it.

“We want lasting peace in the country,” he said, adding that concerns of the hardliner faction should be addressed to ensure lasting peace. “Our faction is not for launching a people’s revolt immediately,” he said, reasoning that movements of the frustrated people will ultimately lead to a mass-based revolt.
Nnnn

NOT A BAD YEAR
Kathmandu, 1 Jan.: In spite of a high-level promise not to hold public strikes during 2011 made at Dasharath Stadium in early 2011 in front of cheering crowds gathered to celebrate the start of Nepal Tourism Year, a series of bandas were announced and enforced as early as April. All these were mostly peaceful featuring, in some cases, music and dance on the main intersections of the capital city. Highways were mostly trouble-free unlike in past years when the probability of getting stuck somewhere due to an impromptu “chakka jam” was much higher. However, in the final few weeks of 2011, we proved that we had not lost interest or faith in the power of burning tyres, former Finance Secretary Rameshwor Prasad Khanal writes in The Kathamandu Post.
The sad part of the story is the scores of photographs published in the media of tourists dragging carry-bags or taking a rickshaw ride to get to their destination. Most photos showed new faces, Chinese visitors in Pokhara and Kathmandu. Many of those
were first-timers, exploring a mystical
country. What impressions would they carry back home? How will they narrate the
story of their escape from hectic life of Chinese mega-cities to this mountain country? These two days in the final leg of 2011 were certainly not good for the tourism industry that was otherwise doing well, although we might not quite achieve the million-visitor target set for the year.
The year 2011 has not been good globally. The growth outlook remained discouraging in general. The downside risks went up. The discourse has shifted from positive outlook to one of describing the situation exactly they way it is—in economic terms—depression.
It might not really be so, but persistent problems in the Euro zone leads one to think no better.
The US Congress refused to grant approval to a bill presented by President Obama on extending the borrowing limit for months leading to panic not just in the financial markets of the US but in countries as far flung as China. In spite of the repeated calls of urgency by the Treasury Department, the US Congress sat on the bill until the first week of August 2011 when it became almost certain that the US government would default on its debt obligations. Finally, a deal was struck and the Debt Ceiling Bill got through, but this did not prevent the credit-rating agency Standard and Poor’s from downgrading the credit rating of the US government bonds for the first time in history.
This was reminiscent of the budget episodes that our own country had to go through in the years following the election of the Constituent Assembly. However, unlike in the US, we seem to have learnt from our past follies. Until January 2011, all mainstream political parties were debating whether a budget presented by a caretaker party should be allowed to sail through parliament. That was when more than six months of the fiscal year had passed. Come mid-February, the situation changed. Parliament approved all the bills presented along with the budget in quick succession within a fortnight of the formation of the new government.
Come August, the present government saw no point in unravelling the budget
presented by the earlier government and mustered all powers to get the same budget approved by parliament quickly. This was
the realisation that implementation is more important than the fancy words used in
the budget. The realisation that a timely budget is more important than a self-defined better budget is perhaps one remarkable development of 2011.
The year 2011 began with the Nepal Tourism Year fanfare. In fact, much before the fanfare started, many in the tourism business had taken the government’s words for granted and geared up to cooperate and collaborate with it in taking the tourism industry to a new height. Hotels and resorts were renovated and capacity was added. In some places, new hotels came up. The first three months of the year witnessed a remarkable growth in tourist arrivals. Back in March, everyone believed that the target would be achieved. But with successive bandas in the month of April, the growth started receding. Even as the situation improved in the second half, the losses could not be recovered. In spite of the problems, the growth in tourism and its contribution to foreign exchange remained impressive in 2011.
Impressive rate of headcount poverty reduction remained headline news for days. Some simply did not want to believe it. Others questioned the validity. There were hardly a few takers as the headcount poverty was reported to be less than 13 percent using the same poverty definition as was used in the last Living Standards Survey. Even those who did the survey and used the best of the tools available were awed by the results. The agency then took time to review the results changing the yardstick used to measure poverty. They came with a new number, which is certainly an indication of improvement.
The Demographic and Health Survey results were equally astonishing. It showed not just improvement in the health indicators but a remarkable decline in the fertility rate to 2.6, barely a few points above the replacement rate indicating that Nepal’s population would very soon stabilise.
Many sceptics were surprised by the current government’s bold move to conclude a long-standing bilateral investment promotion agreement and a double tax avoidance agreement with India. Some saw it as an emergence of consensus on major economic policies that the country should pursue. It is certainly a good sign. Without additional investments in the economy, higher production growth cannot be achieved, and without growth, the equity agenda remains only on paper—insufficient and unfunded.
In the first few years of economic liberalisation, even the most die-hard liberals were against the foreign “thing” in the media, let alone media houses. However, in 2011 not just one but two media houses have joint mechanisms with foreign publications. What led to this change of mindset cannot be properly described now. We need to wait to see if there’s more to it than meets the eye.
Agriculture gave renewed hope in 2011. It is not just because of favourable weather leading to a monumental rise in paddy productivity and production (an all-time high of 5 million tons), maize and other summer crops, the rise of livestock and cash crops remains mostly unnoticed. But we are certainly heading to a production level that will contribute to higher exports in the near future. What is more remarkable is that the younger generation, which in the past thought agriculture was a profession not
suited to their style, is coming back with innovation and zeal.
The current finance minister occasionally mentions with pride that most of the macro-economic indicators are positive. Only economists know how vulnerable they are. Macro-economic indicators are most often a paradox that one can take credit for during good times and blame others during bad times. This has been so in the case of inexplicable inflation that we have been facing for quite a few years now. Money supply and inflation moved almost in opposite directions for most of
2010 and parts of 2011.
However, the year 2011 ends with some satisfaction in terms of the balance of payments situation, foreign exchange reserves and liquidity in the financial sector. The culprit called “liquidity” became the biggest snag in the banking sector in the first half of 2011, and it has become so again. However, the definition has changed diametrically. In the first half, it was a shortage of liquidity that became a matter of public discourse; and now in the second half, it is an abundance of liquidity.
Strangely, it was Nepal Rastra Bank that got blamed on both occasions. One thing that has become clear is that when lending rates do not decline in spite of excess liquidity, bankers have a difficulty with their assets. We are in a situation where good borrowers have to subsidise bad borrowers. That’s not fair.
The year 2011 certainly did not remain good for the manufacturing sector. Growth remained stunted in spite of new ventures in cement manufacturing. Power shortages and security still remain challenges. Surya Nepal Garments closed. Several people have blamed trade union militancy for the closure. Others argue that the company escaped continued losses by blaming the trade unions.
Trade unions and employers associations definitely realised the need for a better industrial environment to protect industry and employment. They struck many agreements; but before they could get implemented, splinter groups of workers emerged to create troubles in major industrial hubs.
Notwithstanding the bleak outlook in the global economy, the number of youths leaving the country for jobs is increasing. Remittance is expected to remain robust
for the foreseeable future. There’s much less that can be said about government’s development efforts, particularly in infrastructure. Project performance in every sector has become weak. The reasons are known very well, but there’s hardly any zeal in the system to correct it.
News about tax fraud took lots of space in the media in 2011. There has been some action, but the speed seems to have slowed down. The investigation has brought at least one good result—the month-on-month VAT collection growth rate in 2011 has remained very impressive.
NNNN

HITS AND MISSES OF 2011
Kathmandu, 1 Jan.:Unlike 2010, we are ending 2011 on an optimistic note. Peace and constitution drafting processes are moving in a positive direction, raising hopes for the economy heading into 2012, The Kathmandu, Post writes.
Promising political developments also guided key economic indicators to the positive direction. The budget was presented and approved on time as political actors finally learned the lesson from past mistakes that stalled development activities.
Then, good news about reduction in poverty came. Agriculture production surged drastically, balance of payments situation got comfortable and the liquidity crunch in the financial sector came to an end.
However, there were also a few disappointments. The manufacturing sector could not grow as expected due to a number of factors, including power shortage and labour militancy. Inflation continued to remain high although the country is still in the single-digit inflation.
BIPPA, DTAA with India
Perhaps, the deal of the year. Amid criticism from his own party, Prime Minister Baburam Bhattarai took a calculated risk when he decided to go ahead with the signing of the Bilateral Investment Promotion Protection Agreement (BIPPA) with India during his visit to the southern neighbour in October. A month later, Nepal signed yet another important agreement with India—the Double Taxation Avoidance Agreement (DTAA).
Never before did any trade deal with India provoke such a strong polarisation of opinions as by the Bilateral Investment Promotion and Protection Agreement (BIPPA). Both—BIPPA and DTAA—are being widely considered to be instrumental in attracting Indian investment in the country. The next two years, 2012 and 2013, will tell whether Bhattarai’s gamble will pay off.
Finance secretary’s resignation
Competency and honesty have hardly ever been honoured in the country’s bureaucracy. The shocking resignation of former Finance Secretary Rameshore Khanal suggested the extent of politicisation of the country’s bureaucracy.
His irreconcilable differences with the then Finance Minister Bharat Mohan Adhikari over Value Added Tax (VAT) evasion probe and supplementary budget saw Khanal put an end to his glittering civil service career at its height. It suggested that competent bureaucrats like Khanal always feel squeezed. Khanal’s resignation created an unexpected uproar from the main opposition Nepali Congress, seeking the prime minister’s clarification. Even the parliamentary Public Accounts Committee summoned Adhikari for explanation. Khanal’s exit from the Finance Ministry also illustrated the fact that a powerful nexus between businessmen and politicians is hell bent on manipulating economic and fiscal policies.
Surya Nepal’s garment unit closure
In a major setback to plans for attracting more foreign direct investment, Surya Nepal Private Limited (SNPL), one of country’s largest joint-ventures, decided to shut down its garment unit permanently. The reason: long-running labour dispute.
SNPL’s garment unit in Tankisinuwari, Biratnagar was instrumental in keeping the country’s flagging readymade garment sector going, apart from providing jobs to over 500 women. SNPL’s decision to close down its garment business shows how militant trade unionism has hit the private sector, making even multinationals like SNPL helpless.
Although SNPL was reportedly considering setting up an FMCG unit in Biratnagar, the damage has already been done. A handful of trade union leaders not only robbed hundreds of workers’ jobs and livelihood, but also tarnished Nepal’s image as an FDI destination.
VAT evasion probe
The exposure of the dark side of the Nepali private sector that raised questions about their integrity and ethics. The probe into Value Added Tax (VAT) evasion remained in news throughout the year as almost all major business houses figured in the list of VAT evaders. Investigations by Inland Revenue Department unearthed that over 500 firms either used fake VAT bills or bought VAT bills of other firms, thus inflating costs and reducing their tax liabilities.
Until the end of 2011, the IRD has completed the probe on 435 firms and slapped them a penalty of Rs 3.88 billion. With some of the investigators transferred to other departments, the probe has now lost its steam. But it has done wonders when it comes to maintaining VAT compliance.
Nepal Tourism Year: Unachieved target
Even before the announcement of the Nepal Tourism Year (NTY) 2011, it was a well known fact that attracting 1 million tourists in 2011 would be a herculean task. The country could attract only over 700,000 tourists. However, those who were involved in the programme say NTY has set the tone for tourism development.
Perhaps they are right, as the tourism sector saw new investments and expansion after several years, tourism earning increase impressively and international airlines start Nepal operations.
However, due to the delay in international promotion, neither the target of attracting 265,000 tourists from China and India was achieved nor tourists’ stay and spending in Nepal increased.
Never-ending NOC woes
Throughout the year, the Nepal Oil Corporation (NOC) remained in news for two reason—its inability to ensure smooth petroleum supply and its failure pay oil import bills even after five fuel price hikes.
With 2011 ending, long queues at gas stations are back and the government’s financial institutions are at loggerheads with NOC over the interest rate on the loan that the government agreed to sanction to the oil monopoly.
The government is yet to act on the reform measures that the High-Level Petroleum Sector Reform Taskforce recommended, including structural and operational reforms. The only silver-lining, NOC has initiated moves to appoint its managing director through free competition.
Public Enterprises reforms
This could end up as one of the major achievements of the Baburam Bhattarai-led government and also a landmark decision for the reform of Public Enterprises (PEs). The government has recently endorsed the PE Directorate Board (Formation and Operation) Order, making the appointment of PE chiefs through free competition mandatory.
The PE Directorate Board, which will oversee the entire state-owned enterprises, will be involved in formulating policies, restructuring PEs and monitoring and evaluating them, among others. After the board starts functioning, the government can remove political appointees, chief executives and board members of all the PEs and appoint new ones through free competition.
Upper Tamakoshi construction begins
Amid increasing power shortage, the laying of the foundation stone of the Upper Tamakoshi Hydroelectric Project (UTKHEP) raised some hopes. The year 2011 saw financial closure and formal commencement of the construction of UTKHEP, the first big hydel project developed through the mobilisation of national resources. Former Energy Minister Gokarna Bista led the financial closure. If everything goes as planned without obstructions, the national grid will get an additional 456 MW by the next four year
Nnnn

EXECUTION OF NEPALI STAYED IN SAUDI ARABIA

Kathmandu, 1 Jan :In what comes as a huge relief to the family of Umesh Yadav, a Nepali worker convicted of killing a Pakistani national, the death sentence slapped by a Saudi Arabian court against him has been put off for the time being, Om Astha Rai reports in.Republica.

According to Uday Raj Pandey, Nepal´s ambassador to Saudi Arabia, the Riyadh-based Pakistani embassy on Saturday wrote to the Saudi Kingdom´s foreign ministry to “put off the execution till the issue of blood money is finalized.”

“The Pakistani embassy must have got some kind of consent from the victim´s family for pardoning Yadav in exchange of blood money,” said Pandey. “The embassy would otherwise never have asked the Saudi kingdom to put off the execution. This means that Yadav is likely to get clemency.”

Nepal had recently offered 30,000 Saudi riyal -- approximately NRs 630,000 -- as blood money to the family of Mohammad Wasir, accidentally killed by Yadav during a scuffle in 2006. If Wasir´s family accepts blood money, Yadav will not be beheaded, said Pandey.

According to Sagar Prasad Phunyal, second secretary at the Nepali embassy in Riyadh, who has led the clemency campaign, Yadav is most likely to be released, if pardoned by Wasir´s family, since he has already spent over five years in a Saudi Arabian jail.

“A murder convict serves 2-6 years in jail, if pardoned by the victim´s family, in Saudi Arabia,” said Phunyal. “As he has been languishing in jail since 2006, Yadav is likely to be freed once Wasir´s family pardons him.”

A poor migrant worker from Machijhitakaiya village of Dhanusha district, Yadav has a wife, two sons, father and mother back home. Yadav had landed in jail on the charge of murder within months of reaching Jubail of Saudi Arabia. A court in Jubail sentenced him to death some two months back.
nnnn



________________________________________




PARLIAMENTAR COMMITTEE AGAINST RECRUITMENT IN FREGN ARMIES
Kathmandu, 1 Jan : A parliamentary committee overseeing issues related to the country´s foreign relations has proposed bringing halt to the recruitment of Nepali youths in Indian and British Gurkha armies, Kosh Rak Koirala reports.in Republica.

A new Concept Paper on Nepal´s Foreign Policy on Changed Context that was passed unanimously by the parliamentary committee on International Relations and Human Rights made the proposal to shut down Gurkha recruitment centers in Nepal, concluding that the recruitment of Nepali youths in the armies of foreign countries had done more harm than good to Nepal.

“Though the Gurkha recruitment centers have provided small employment opportunities for Nepali youths, the recruitment in the army of foreign countries has left the country unable to uphold national prestige. Nepal´s foreign policy regarding Gurkha recruitment centers calls for a review as the country is put in additional loss especially after the provision made by the UK government to give citizenships to Gurkha soldiers,” states the policy concept paper finalized after consultations with various line ministries and stake holders.

“The agreement reached between Nepal, India and the UK on Gurkha army does not serve our national interest. We should stop recruitment of Nepali youths in the foreign armies after making alternative employment arrangement at home,” said Padam Lal Biswakarma, the chairman of the parliamentary committee.

“This is a very sensitive issue. Nowhere in the world has this type of system of recruiting youths from other countries in their army,” Bishwakarma further said.

Thousands of Nepali youths fought during first and second world war on behalf of East-India Company. After the independence of India in 1947 from the United Kingdom, it was decided between the two governments to split the Gurkha regiments between the British and Indian armies six Gurkha units became part of the new Indian Army, while four were made a part of British Army.

The parliamentary committee had formed a sub-committee some six month ago to formulate a draft concept paper on Nepal´s Foreign Policy in the changed political contexts in the country. “We are preparing to take the policy concept paper to the parliament before sending it to various ministries for further consultation,” Bishwakarma added.

The concept paper while identifying foreign employment, trade, industries, foreign direct investment, tourism, water resources, service sectors and agro-forestry sectors as possible areas of economic diplomacy has also made various recommendations to promote economic diplomacy.

Among other things, the policy concept paper has proposed that Nepal should adopt a policy of equi-proximity while dealing with India and China.

The policy concept paper has sought amendments in various unequal treaties with India such as Peace and Friendship Treaty (1950), Koshi Treaty (1959), Strengthening of Army and Arm Procurement Treaty (1965) in tune with changed contexts through diplomatic channel.

“We have also made detailed study on the functioning of foreign ministry and diplomatic missions and other agencies under the aegis of the ministry and made several recommendations as a part of institutional reforms,” said Bishwakarma.
nnnn



________________________________________


________________________________________

INTERVIEW
BANKS ARE FREE FFOM LIQUIDITY CRUNC


Ganesh Kumar Shrestha is the Chief Executive Officer (CEO) of the Century Commercial Bank Limited. Having more than three decades of experience in the banking sector, Shrestha worked in various capacities with the Nepal Rastra Bank (NRB).
Shrestha says that the country’s banking sector has now been in a comfortable position in terms of liquidity with a growth in deposits. He however, says that the banks have facing more challenges for utilizing deposits due to lack of an investment-friendly environment.
Shrestha talked to Laxman Kafle of The Rising Nepal on a wide range of issues concerning the Nepalese banking sector. Excerpts:
How do you assess the existing status of the banking sector?
This sector has now been in a comfortable position. It is free from a liquidity crunch. The banks have seen a significant growth in deposit collection and they are able to invest the resources in productive sectors.
Despite having more deposits, the banks are facing a challenge for mobilizing the amounts. Another challenge is that entrepreneurs are not taking loans from banks because they have yet to find a more investment-friendly environment in the country.
Thus, the banks are still in a ‘wait and see’ position to invest the growing flow of deposits. Remittances have contributed deposits to banks. Due to an overvaluation of US$, there has been an increased inflow of remittances into the banking sector. Similarly, because of various problems seen in the development banks, customers have started saving their money in commercial banks. Deposits have returned to the banking sector from cooperatives, too.
The banks have been able to invest around Rs.40 billion by maintaining the C/D ratio as per the norms of the central bank. Deposits in the banks have increased to Rs. 750 billion, while the lending reached around Rs. 540 billion till date. During the first quarter of the current fiscal year, deposit has gone up by Rs. 45 billion, but the lending has soared just by Rs. 15 billion.
If the banks fail to drive deposits in a right way and right time, how will it affect them and the country’s overall economy?
Banks and the country’s overall economy might be affected if the former fail to drive the deposits properly. Banks should be serious about mobilizing deposits in an effective way in order to check possible problems. It will affect the banks’ image, which ultimately hits profitability causes an increase in operating expenses.
Besides, this will have an adverse impact on the country’s entire economy. The widening gap between the ratio of deposit and lending of banks and other financial institutions will create problems in the macroeconomic stability. It helps increase inflation and trade deficit and it does not create jobs.
The banks should not delay in investing the resources in the productive sector with appropriate interest rates. We have to identify the potential sector and start making investments. The banks should also reduce credit rates if they hinder in the process of investment.
It will take few months for us to mobilize deposits properly because it requires at least six months for analyzing the sectors of investment. So, banks, creditors, the government bodies and other relevant authorities should be sincere and carry out their respective responsibilities related to loan procedures. Similarly, the government should motivate banks as well as entrepreneurs to invest in the productivity sectors by assuring of them an investment-friendly climate.
As the peace and constitution drafting processes are gaining due momentum, we are hopeful that we will be able to invest in the productive sectors.
Entrepreneurs have called for reducing the credit rate. As a banker, what do you say about it?
They have requested for decreasing credit rates. I do not think that the banks have been charging so higher rates. However, banks have started reducing credit rates considering the entrepreneurs’ demand. The credit rates depend on risk of investments. So, where there are higher risks, interest rates are slightly higher. If the banks invest in rural areas and new sectors, the banks’ operating costs are definitely higher. This is also another reason why we charge a little bit higher inertest.
Our bank has reduced by around 0.5 per cent in credit rates. Earlier, we used to charge from at least 14 per cent in credit rates.
The number of banks and financial institutions has been increasing in the country. How are they competing with one another?
Despite having more banks and financial institutions in the country, there has been a healthy competition among them until now. With the growth in the banking sector, I think consumers stand to benefit more. Such institutions have expanded their services to remote and rural areas. So, those who had no access to the banking services have now started reaping benefits. Because of the growing competition among the banks, they have increased interest rates in deposits and been offering new and advanced services to customers.
In Nepal, there are around 31 commercial banks, 83 development banks, and more than 140 financial institutions. The healthy competition among the banks will be helpful for the institutions and customers. But unhealthy practices will tarnish the image of the banks themselves in long-run. Till date, all the commercial banks have been maintaining the norms set by the NRB, and good governance.
Despite a growth in the number of banks, two third of the people in Nepal are deprived from banking services. So, banks and financial institutions should expand their services to remote areas targeting the deprived lot if they really want to improve livelihoods of such people and grow their business.
How do you see the government’s banking policy?
The central bank, as a regulatory body, needs to introduce new policies for leading banks and other financial institutions to a right track as per the need of the hour. The government should also amend its policies and see whether the banks and financial institutions are guided by only by profits.
The NRB should come up with its strategic plans in order to motivate the banks to expand their services across the country. The central bank’s recently introduced policy on merger is positive. This helps improve the capability of banks for investment.
Commercial banks are not able to invest huge amounts in big projects. So, such banks and financial institutions have started making joint investments in bigger projects. So far, big commercial banks have the capacity to invest only up to Rs.2 billion. If they joint hands with other institutions, they could invest up to Rs. 5 billion.
Earlier, the NRB had adopted the policy of controlling investments in the real estate sector. Although it was the central bank’s corrective way, the regulatory authority should be flexible on transactions of real estate to recover the debts.
As the latest bank of the country, what is the present status of your bank?
Although we are the latest bank, we are successfully competing with other banks in term of offering services and maintaining good governance.
Since its inception, the bank has managed adequate amount of Rs. 2 billion in order to compete with other banks. We have targeted the people living in the remote and rural areas.
Now, we have around Rs. 2.40 billion as a deposit and lent about Rs.1.60 billion. We have planed to invest in the hydropower, agriculture, hotel industry, hospital and other potential sectors. We have many projects worth Rs. 1 billion for investment. We will invest in those projects within three months.
Similarly, we have planned to open other branches in various places this year. At present, we are providing banking services through four branches in various places.
nnnn