November 16: Nepali tea manufacturers are all set to participate in the 6th Mumbai World Tea Coffee Expo 2018 to be held in Mumbai, India from November 29 to December…
November 16: Nepali tea manufacturers are all set to participate in the 6th Mumbai World Tea Coffee Expo 2018 to be held in Mumbai, India from November 29 to December…
Remittance inflow during FY 2014/15 reached an amount equivalent to around 30 per cent of Nepal’s GDP, annual data from the central bank…
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The expo offers huge potential for appointing distributors, bulk deals, joint ventures, franchising, networking, meeting government officials, marketing alliances and overall branding, reads a statement issued by Sentinel Exhibitions Asia Pvt Ltd, the organiser.</p> <p>With 70+ exhibitors from seven countries including government pavilions and anticipated 4000+ trade visitors from across the world, companies participating at WTCE 2018 can expand their foothold in the market or enter newer markets, according to the organiser.</p> <p>“The show has become the ideal launch pad for new products especially for SMEs who don’t have large budgets,” the statement said.</p> <p>The 2018 edition shall feature tea and coffee brands/products, machineries, innovative technologies, flavours, ingredients, sugar/sweeteners, vending solutions, packaging, certifications, boards etc from Indonesia, Japan, Sri Lanka, Vietnam, Australia, Nepal and India.</p> ', 'published' => true, 'created' => '2018-11-16', 'modified' => '2018-11-16', 'keywords' => '', 'description' => '', 'sortorder' => '9214', 'image' => '20181116014039_pre.jpg', 'article_date' => '2018-11-16 00:00:00', 'homepage' => false, 'breaking_news' => false, 'main_news' => true, 'in_scroller' => false, 'user_id' => '20' ) ), (int) 1 => array( 'Article' => array( 'id' => '2842', 'article_category_id' => '37', 'title' => 'Remittance reaches close to 30 pc of GDP', 'sub_title' => '', 'summary' => 'Remittance inflow during FY 2014/15 reached an amount equivalent to around 30 per cent of Nepal’s GDP, annual data from the central bank shows.', 'content' => '<p>August 31: Remittance inflow during FY 2014/15 reached an amount equivalent to around 30 per cent of Nepal’s GDP, annual data from the central bank shows.</p> <p>According to Nepal Rastra Bank, Nepal received remittance worth Rs 600.17 billion through the formal banking channel during 2014/15. This is equivalent to around 29 per cent of the country’s GDP (which according to the central bank was around Rs 2.12 trillion). Like in the past, the amount of remittance Nepal received is roughly equivalent to the size of the government’s annual budget. </p> <p><iframe frameborder="no" height="300" scrolling="no" src="https://www.google.com/fusiontables/embedviz?viz=GVIZ&t=BAR&containerId=googft-gviz-canvas&q=select+col0%2C+col1%2C+col2+from+1P3sq89DtK_xa9iSGnS8gE70O6fjB0MNnlwtEJJbs&qrs=+where+col0+%3E%3D+&qre=+and+col0+%3C%3D+&qe=+limit+5&width=500&height=300" width="500"></iframe></p> <address><em>(Figures in Rs trillion)</em></address> <p><br /> The growth rate of remittance inflow was 25 per cent during FY 2013/14, but it has slowed down to 13.6 per cent in 2014/15.</p> <p>Central bank authorities were projecting a sharper decline in the growth of remittance as the number of workers going abroad had also registered a decline. But after the earthquake, the inflow has improved considerably, mainly due to money coming from abroad for post-earthquake reconstruction. According to government figures, the number of Nepali workers going abroad registered a decline of 2.8 per cent in FY 2014/15, compared to the same period last year.</p> <p><br /> According to the central bank, remittance inflow has been increasing faster than the country’s GDP for the last few years. In 2014/15 remittance was equivalent to 29 per cent of GDP, in 2013/14 it was 28 percent, 2012/13 25.5 percent, 2011/12 23.5 percent and in 2010/11 18.5 percent.</p> <p> </p> ', 'published' => true, 'created' => '2015-08-31', 'modified' => '2015-08-31', 'keywords' => '', 'description' => '', 'sortorder' => '2684', 'image' => null, 'article_date' => '2015-08-31 00:00:00', 'homepage' => false, 'breaking_news' => false, 'main_news' => true, 'in_scroller' => false, 'user_id' => '14' ) ), (int) 2 => array( 'Article' => array( 'id' => '2804', 'article_category_id' => '37', 'title' => 'Need For Green Banking', 'sub_title' => '', 'summary' => null, 'content' => '<div> <img alt="" src="/userfiles/images/ep1(6).jpg" style="width: 550px; height: 247px; margin-left: 10px; margin-right: 10px;" /></div> <div> </div> <div> <strong>--By Dwaipayan Regmi</strong></div> <div> </div> <div> The attack of human beings on nature is the cause of environmental deterioration. This deterioration is leading to global warming and climate change. It has been noticed that the temperature has risen up by 1 degree Fahrenheit in comparison to the previous century, leading to melting of Himalayan glaciers, bursting of lakes and rise of the sea level. Along with this, climatic changes have been causing natural disasters like cyclones, floods, landslides, and droughts. </div> <div> </div> <div> Combined efforts of governments, corporate sector and individuals can help in minimizing these various forms of environmental deterioration. For this, governments have to come up with strong policies; corporate houses should follow environmental protection guidelines more strictly; and individuals have to be self-aware to protect the environment around them. </div> <div> </div> <div> As part of the role to be played by the corporate sector, banks and financial institutions should embrace green banking — adopting process and strategies that promote environment-friendly practices to help in reducing carbon emission. Green banking helps in reducing internal carbon footprint as well as external carbon emission. </div> <div> Banks have been using lighting, air conditioning, electronic equipments, IT, high paper wastage in massive proportion. The resultant internal carbon footprint can be reduced through the use of renewable energy, automation and other measures. On the other hand, banks can reduce external carbon emission by financing projects and companies that are working for pollution reduction and adopting green technologies. Providing loans to firms that have concern for environment would ensure proper utilization of natural resources.</div> <div> </div> <div> Green banking avoids paper work and contributes to lower the cutting of trees. It makes the corporate world aware about environmental and social responsibility and thereby contributes to handing over a good environment to the upcoming generation. Adopting green banking policies are directly beneficial for the banks as well. </div> <div> </div> <div> Providing loans to firms and companies that abide by environment protection principles and regulations ensures that such clients do not become victims of natural calamities. Reputation and goodwill is very important for banks, and being a green bank provides them a distinct identity and reputation in the society. This also minimizes bad goodwill risk. Along with that, adopting such policies helps the banks avoid the risk of being left with securities like contaminated land as collateral. </div> <div> </div> <div> However, green banking is not a piece of cake; there are various challenges in making it a reality. It’s not only about reducing paper use and getting digital; there are strategies that a bank should follow.</div> <div> </div> <div> The most important step towards this objective is while providing loans. Any entrepreneur would think of green environment only when banks will restrict loans to businesses which might cause environmental degradation. Banks can deny loans to businesses that aim high profits by degrading the environment. The nature of business and its impact on the environment should be carefully considered before approving business loans. On the other hand, banks can offer low-interest loans to businesses that are environment friendly. In this way, banks can play a key role in promoting secondary source of energy like solar energy or bio gas energy.</div> <div> </div> <div> Next, banks can provide preference to green properties like homes equipped with solar energy, rain water harvesting facility, and properties with better environmental surroundings, for collaterals. And they should give secondary preferences, if at all, to properties such as polluting factory, or buildings emitting harmful waste in </div> <div> the environment.</div> <div> </div> <div> In terms of internal contribution, banks should embrace environment-friendly architectural design. Such designs help in reducing use of air conditioners and lights. Along with that, restricting use of carbon emitting machines, fans, energy inefficient bulbs, should be discouraged. Also, minimizing paper usage and promoting use of electronic transactions through rapid use of ATM cards, debit cards or other vending machines can help in being a green bank. </div> <div> </div> <div> Another area, where banks can contribute to green environment is the use of vehicles. Instead of providing sole vehicles to employees, banks should provide pick-and-drop services. This will not only help in reducing carbon emission but would also help in easing city traffic. This will also help in reducing the space needed for parking at banks. The space which would otherwise be used for parking could be used to build gardens and fountains. This will not only help the banks go green at the policy level but will also make it a green bank, literally too. </div> <div> </div> <div> As part of their corporate social responsibility (CSR), banks can invest in building and maintaining parks, gardens and forests in and around cities. They can adopt tree plantation as a means to mark their important achievements. This would help in inspiring other business ventures to adopt similar strategies. </div> <div> </div> <div> Banks have been providing many services to their customers such as free ATMs, Internet Banking and Any Branch Banking Service (ABBS). They could set up a basket ‘Disaster Emergency Fund’, for their client, in case the latter are victimized. The customers should be given a choice to opt for the fund by agreeing to provide certain amount of their interest to the fund on an annual basis. This would make such customers more secure from the impact of natural disasters on their finance. </div> <div> </div> <div> Banking has been a charming job in Nepal, and is regarded a prestigious job. To retain this image, it is necessary for banks to go green. Some of the recommendations made in this article might sound impractical considering the nature of their business and the stiff competition in the market to get better clients, still these measures are for banks which believe in ethical business.</div> <div> </div> <div> <em>The writer is pursuing his MBA at Jawaharlal Nehru Technical University, Andhra Pradesh, India.</em></div>', 'published' => true, 'created' => '2014-11-21', 'modified' => '2015-06-07', 'keywords' => 'new business age economy & policy news & articles, economy & policy news & articles from new business age nepal, economy & policy headlines from nepal, current and latest economy & policy news from nepal, economic news from nepal, nepali economy & policy economic news and events, ongoing economy', 'description' => 'The attack of human beings on nature is the cause of environmental deterioration. This deterioration is leading to global warming and climate change. It has been noticed that the temperature has risen up by 1 degree Fahrenheit in comparison to the previous century, leading to melting of Himalayan glaciers, bursting of lakes and rise of the sea level. Along with this, climatic changes have been causing natural disasters like cyclones, floods, landslides, and droughts.', 'sortorder' => '2660', 'image' => null, 'article_date' => '0000-00-00 00:00:00', 'homepage' => false, 'breaking_news' => false, 'main_news' => false, 'in_scroller' => false, 'user_id' => '0' ) ), (int) 3 => array( 'Article' => array( 'id' => '2788', 'article_category_id' => '37', 'title' => 'Policy For Inclusive Growth', 'sub_title' => '', 'summary' => null, 'content' => '<div> </div> <div> <strong>--By Hom Nath Gaire</strong></div> <div> </div> <div> The phrase 'Inclusive Growth' is quite popular in recent days not only among academia but also with policy makers, development partners and media as well. It seems that there is paradigm shift in development strategies among the stakeholders. The concept of inclusive growth refers to both the pace and distribution of economic growth. In order for growth to be sustainable and effective in reducing poverty, it needs to be inclusive. </div> <div> </div> <div> Traditionally, poverty (or inequality) and economic growth analyses have been done separately. However, recent works indicate that there may not be a trade-off between equity and efficiency as suggested by Okun (1975) and that it would be a big mistake to separate analyses of growth and income distribution. Inclusive growth has commonly been explained as about raising the pace of growth and enlarging the size of the economy by providing a level playing field for investment and increasing productive employment opportunities. The definition of inclusive growth implies direct links between the macro and micro determinants of the economy and economic growth. The microeconomic dimension captures the importance of structural transformation for economic diversification and competition, while the macro dimension refers to periodic changes in economic aggregates such as the country’s gross national product (GNP) or gross domestic product (GDP). </div> <div> </div> <div> Sustainable economic growth requires inclusive growth. Maintaining this is sometimes difficult because economic growth may give rise to negative externalities, such as a rise in corruption, which is a major problem in developing nations. However, inclusiveness lays emphasis on equality of opportunity in terms of access to markets, resources, and unbiased regulatory environment for businesses and individuals. The inclusive growth approach takes a longer-term perspective, as the focus is on productive employment as a means of increasing the incomes of poor and excluded groups and raising their standards of living. </div> <div> </div> <div> <strong>Determinants of Inclusive Growth</strong></div> <div> Different countries, especially developing countries, may have very different institutional as well as policy arrangements for promoting inclusive growth. Similarly, there may be a number of distortions preventing the allocation of limited resources in such a way that productivity in different sectors is equalized. The shift of resources from one sector to another may have an important effect on the overall level of output and growth. </div> <div> </div> <div> In this context, although growth theories have contributed to our understanding of how growth is determined and how it might be influenced, it has in many ways missed some of the crucial issues for developing countries. It may be possible to model the role of management and organization, the improvement of infrastructure, and sectoral transfer in developing economies to measure real determinants of growth and to the design of policy. </div> <div> </div> <div> They are directly concerned with the long-run growth in the sense of the steady-states as well as important for a medium term of some considerable duration. Government macroeconomic policies--- both fiscal policy and monetary policy--- are considered to be instrumental in promoting inclusive growth in the respective economy. </div> <div> </div> <div> <strong>Fiscal Policy and Inclusive Growth </strong></div> <div> Fiscal policy involves the use of government spending, taxation and borrowing to affect the level and growth of aggregate demand, output and jobs. It is also a means by which a redistribution of income and wealth can be achieved as an instrument of intervention to correct the market failures. Thus fiscal policy is considered more effective in encouraging both pace and size of economic economy. </div> <div> </div> <div> Based on this belief, Asian Development Bank (ADB) has recently urged the Asian governments to use their fiscal policy more adeptly to combat the widening income gaps in the region. “As the inequalities rising almost everywhere in Asia, governments need to urgently expand and improve their public investments in inclusive growth,” President Takehiko Nakao told in seminar titled, Leveraging Fiscal Policy for Inclusive Growth on the occasion of bank's 47th AGM. </div> <div> </div> <div> More than 80 percent of Asia’s population live in countries where inequality is worsening, meaning that many are being left behind even as globalization, technological progress, and market reform have led to strong economic growth. The bank emphasized on a range of issues including taxation to boost social and other spending, existing government programmes to promote equality, and the best balance spending to help the poorest without compromising fiscal sustainability.</div> <div> </div> <div> <strong>Monetary Policy and Inclusive growth</strong></div> <div> It is well accepted that macroeconomic stability and low inflation rates, inter alia, have positive effects on growth and on reducing inequality. In this connection, well-managed monetary policy is critical in achieving stable and inclusive economic growth. Similarly, monetary policy is mandated to achieve and maintain price stability in the interest of inclusive and sustainable economic growth along with maintaining financial stability. </div> <div> </div> <div> Price stability reduces uncertainty in the economy and provides a favourable environment for inclusive growth and cumulative employment creation over the longer term. Low inflation, on the other hand, helps to protect the purchasing power and living standards of all classes of people. Although low inflation may not necessarily in itself reduce income inequality, it does ensure the protection of income, which is particularly important for poor people who generally do not have the means to adjust their nominal incomes to take account of rapid price increases. </div> <div> </div> <div> <strong>PPP and Inclusive Growth </strong></div> <div> The Public Private Partnership (PPP) is a governance tool to bring together resources as well as strengths and share experiences of the public and private sector for the purpose of provisioning of public assets or services for public benefit. In order to achieve inclusive growth, developing countries should create more PPP opportunities to address their infrastructure gap and steer private money and skills into much-needed infrastructure projects. </div> <div> </div> <div> The infrastructure deficit in the developing countries like Nepal is so enormous that we can’t expect either private investors or the public sector to fill up it alone. It needs collaboration between the private and public players to make things work, and to bring critical services to the community. Good infrastructure is critical to inclusive growth, allowing communities to access essential social services, markets, and jobs, and making cities cleaner and easier to navigate. PPPs can help developing countries address critical infrastructure needs, from roads to hospitals to water supply systems. </div> <div> </div> <div> The PPP investment model with various structures is effective in helping centrally planned countries transition to private sector-oriented market economies. PPPs can be promoted through fully assessed and appropriate risk sharing and performance-based arrangements between the parties. The aim is to deliver “value-for-money” projects to provide a full set of benefits for investors, the public, and the economy.</div> <div> </div> <div> <strong>Knowledge Economy and Inclusive Growth</strong></div> <div> The development of the knowledge economy and inclusiveness has been seen as closely related. Global firms have built integrated international production chains, with innovation creating new products with added value in “knowledge” areas such as design and marketing and providing associated services. </div> <div> </div> <div> The growth of the knowledge economy is seen as part of the growth strategy to import jobs from low wage economies such as China and India investing heavily in knowledge. Shifting from low-cost manufacturing to economies based on knowledge, innovation, and high-end services is imperative for developing countries to achieve and sustain broad based inclusive growth. Emerging economies can reach and go beyond middle-income levels by becoming knowledge-based economies like Japan, the Republic of Korea, and Singapore. </div> <div> </div> <div> Similarly, least developed countries like Nepal can upgrade themselves to developing one through systematic investment in new information and communication, manufacturing and other technologies to promote knowledge economy. For this, they have to spend time and resources to move up the value chain by drawing on best practices and latest technologies, for example, shifting to smart energy grids, cloud computing, 3D manufacturing, and mobile rather than fixed-line communications.</div> <div> </div> <div> <strong>Rational </strong></div> <div> According to the World Bank’s Commission on Growth and Development, a persistent, determined focus on inclusive long-term growth by governments is a key ingredient of all successful growth strategies. Policies that encourage inclusive growth tend to emphasize removing constraints to growth, creating opportunity, and creating a level playing field for investment.</div> <div> </div> <div> To that end, developing countries need to increase investment in infrastructures as well as research and development to create knowledge based, innovative and competitive industries. For this, public funding may be needed to help companies start up. Public spending on education and health services improve the well-being of the poor and augment their productive capacity. </div> <div> </div> <div> Targeted subsidies and transfer payments protect the most vulnerable and deprived segments of society while better public infrastructure can make it easier for the entrepreneurs to create more jobs and additional value for the economy. Higher education and training need to be significantly improved to generate the skills and critical thinking processes vital to a modern competitive economy. </div> <div> </div> <div> In addition, governments need to put in place mechanisms and adopt policies that enable innovation and creativity to flourish. This includes protecting intellectual property rights, providing adequate financing options, and nurturing more flexible labour markets.</div> <div> </div> <div> <strong>Finally</strong></div> <div> Policies on both monetary and revenue front such as non-inflationary monetary and progressive taxation can promote inclusive growth. But among policy tools, fiscal policy with productive government expenditure and progressive taxation has a tangible effect on boosting equality and promoting inclusive growth.</div> <div> </div> <div> <div> <em><span style="font-size: 14px;"><strong>What is Inclusive Growth?</strong></span></em></div> <div> An IMF Commission on Growth and Development (2008) notes that inclusiveness—a concept that encompasses equity, equality of opportunity, and protection in market and employment transitions—is an essential ingredient of a successful growth strategy.</div> </div> <div> </div>', 'published' => true, 'created' => '2014-07-30', 'modified' => '2014-11-21', 'keywords' => '', 'description' => 'The phrase 'Inclusive Growth' is quite popular in recent days not only among academia but also with policy makers, development partners and media as well. It seems that there is paradigm shift in development strategies among the stakeholders. The concept of inclusive growth refers to both the pace and distribution of economic growth.', 'sortorder' => '2641', 'image' => null, 'article_date' => '0000-00-00 00:00:00', 'homepage' => false, 'breaking_news' => false, 'main_news' => false, 'in_scroller' => false, 'user_id' => '0' ) ), (int) 4 => array( 'Article' => array( 'id' => '2763', 'article_category_id' => '37', 'title' => 'Investment Issues In Nepali Insurers', 'sub_title' => '', 'summary' => null, 'content' => '<div> </div> <div> <div> <strong>--By Ujjwal Chand & Suraj Bansal</strong></div> <div> </div> <div> Currently, there are 25 insurance companies in Nepal -16 of them provide non-life insurance services and eight provide life insurance services while one provides both of these services. Insurance companies use their funds consisting of capital, reserves, premiums and loans to finance claim payments and other expenses. The remaining fund is invested as per the Investment Directives from the regulatory body, i.e. Insurance Board (Beema Samiti). As of FY 2011-12, these companies had investments to the tune of Rs. 60 billion out of which Rs. 52 billion was from life insurance companies and the rest was from non-life insurance companies.</div> <div> </div> <div> The insurance companies can put their investment funds in the sectors specified in the investment guidelines which specify that Life insurance companies must invest a minimum of 75% and non-life insurance companies minimum of 65% of their investment funds in combination of government securities, fixed deposits of commercial banks and development banks, and mutual fund/Citizen Investment Trust Schemes. They can put a maximum of 5% of their total investment fund in ordinary shares of public limited companies. Other areas for investment are secured debentures of Banks and Financial Institutions (BFI)s and Fixed Deposits (FDs) in finance companies. Non-life insurance companies can additionally invest in shares of real estate development or public limited housing company. </div> <div> </div> <div> <span style="font-size: 16px;"><strong>Importance of Returns from Investment </strong></span></div> <div> The operations of life and non-life insurance companies are different. Non-life insurance companies generate profit through both returns from investment and from regular insurance business. Life insurance companies, however, are suffering loss in the regular insurance business. Therefore, it is only due to the returns from investment that they are able to report positive bottom lines. Ganesh Dahal, deputy manager of Sagarmatha Insurance puts that “the contribution of investment returns to the company’s bottom line is at 40%”and in similar vein Suraj Rajbahak, CA of Shikhar Insurance, shared that “about 30% of the company’s returns are from investment returns”. Life insurance companies are far heavily reliant on the investment returns. Dip Bahadur BC, chief financial officer at Prime Life Insurance says, “Investment returns not only sustain the company’s expenses but also contribute to the bottom line”. Bigyan Shrestha, finance chief at National Life Insurance, seconds this and states that “the investment returns have been sufficient to sustain normal operations” for the company. </div> <div> </div> <div> <img alt="Returns from Investment" src="/userfiles/images/ep1%20(Copy)(6).jpg" style="width: 550px; height: 227px; margin-left: 10px; margin-right: 10px;" /></div> <div> </div> <div> <span style="font-size: 16px;"><strong>Investment returns of insurance companies </strong></span></div> <div> Of the twenty-five insurance companies, only twenty had published their annual report for FY 2011-12 by September 2013. An analysis of the same shows that 15 of the 20 companies posted returns from 8.5% to 10.5% from investments. This was primarily due to the high interest rates on the fixed deposits of the BFIs. </div> <div> </div> <div> But, the returns from their investment in ordinary share was relatively weak during this period - ranging from 0% to 5.42%. However, during the same period, Nepse increased by 14.7%. This shows that the insurance companies underperformed Nepse in terms of returns from ordinary shares investments.</div> <div> </div> <div> <span style="font-size: 16px;"><strong>Issues with current ordinary shares investment </strong></span></div> <div> There are few internal issues of the insurance companies themselves behind poor returns from ordinary shares investment. Additionally, there are some issues with the current ordinary shares investment practices that could damage these returns in the long run of the insurance companies. These internal issues are:</div> <div> </div> <div> <span style="font-size: 14px;"><strong>Passive investment – Over-reliance on dividends </strong></span></div> <div> Of the 20 insurance companies analyzed, four hadn’t invested in ordinary shares at all in FY 2011-12. In the remaining sixteen insurance companies, dividends contributed about 99.97% of the overall return from this avenue in 2011-12. This means only 0.03% of the returns came from capital gains. Thus passive investing, thereby over reliance on dividends for income from ordinary shares investments remained as the most important reason for poor performance in ordinary shares investments by insurance companies.</div> <div> </div> <div> <span style="font-size: 14px;"><strong>Lack of experts, research-based decision making</strong></span></div> <div> Further, the insurance companies did not follow research based decision making approach while selecting ordinary shares for investment. This is despite the fact that the insurance companies accept the high importance of investment decisions to the bottom-line. Moreover, investment team in these companies is made of up of generalists, i.e. overseeing all aspects of finance in the company, rather than specialists with specific field expertise. </div> <div> </div> <div> <span style="font-size: 14px;"><strong>Lack of Diversification</strong></span></div> <div> Investment gurus advocating diversification of fund always caution that “putting all your eggs in one basket is very dangerous”. These insurance companies lack proper diversification in ordinary shares investments, which could damage the returns from this avenue in the long term. The ordinary shares investments were heavily concentrated in stocks of major BFIs, constituting 96% of total ordinary shares investments. In terms of diversification at company level, they fare even worse. Although they had invested in 67 securities, they heavily concentrated on six companies, constituting 67% of the total ordinary shares investments. </div> <div> </div> <div> <span style="font-size: 16px;"><strong>Issues with overall current investments </strong></span></div> <div> High interest rate exposure is found to be triggering volatility on the overall investment returns. This exposure was also due to the conservative guidelines that made it mandatory for the insurance companies to park their fund in interest-rate volatile investment avenues like fixed deposits. The conservative investment guidelines are curtailing the diversification of investments, and thereby introducing concentration risk on the investments.</div> <div> </div> <div> <span style="font-size: 16px;"><strong>High interest risk exposure</strong></span></div> <div> Due to regulatory constraints, large portion of the investment fund is parked in BFIs as fixed deposit. This brings about high interest rate risk in the investments returns of the insurance companies. Sushil Kumar Luniya, manager at Gurans Life Insurance, sees “the decrease in interest rates of fixed deposits hampering insurance company returns for the current fiscal year”. Manoj Shrestha, head of finance department at NLG Insurance, too regards “the volatile bank interest rates as major factor deciding the investment returns”. </div> <div> </div> <div> Due to high interest rates prevalent during the sample period (average of 8.125% for commercial banks in FY 2011-12 as per the central bank’s Monetary Policy document), most of the insurance companies had fair returns on the investments. Imagine the effect of decrease in the rates to 5.2%, as predicted by NRB Monetary Policy for 2013-14, on the investment returns ! </div> <div> </div> <div> Now lets simulate this Simulating such scenario by decreasing the FY 2011-12 returns from fixed deposits of BFIs by the same proportion as the decrease in interest rate, i.e. from 8.125% to 5.2%. In FY 2011-12, it was found that only one insurance company was making loss. If the interest rates during this period were only 5.2, four insurance companies would have been at loss. </div> <div> </div> <div> <span style="font-size: 16px;"><strong>Lack of diversification options</strong></span></div> <div> The conservative investment guidelines put by the regulatory board give little room for diversification to insurance companies. Majority of the fund is to be parked in government bonds, and fixed deposit of commercial and development banks. Even in ordinary shares investments, insurance companies are finding hard to diversify from a stock market with over 76% concentration in BFIs. Thus there is huge concentration risk. If one bank or finance institution goes bust, the whole insurance industry would suffocate. One such event in Gurkha Development Bank has already occurred. Few insurance companies are still provisioning the losses from this bank’s tragedy.</div> <div> </div> <div> But, investment guideline isn’t the only sore finger. There is also lack of innovativeness among insurance companies in terms of diversifying their investments. As Dr. Fatta Bahadur KC, chairman of Insurance Board, claims, “The investment guidelines clearly indicate flexibility of alternative investment avenues for the insurance companies”. Upon request by insurance companies, the Board is ready to look into alternative investment proposals. But as this includes some hassles and would put the insurance company management under scrutiny if the innovation backfires, the insurance companies are reluctant to tread on this way.</div> <div> </div> <div> <span style="font-size: 16px;"><strong>Asset-liability mismatch</strong></span></div> <div> Asset-Liability mismatch is a major issue with life insurance companies. Safer investment assets with longer maturity are hard to find in Nepali market, where bonds and debentures have minimal presence. Debentures of commercial banks bring concentration risk with them for the insurance companies, which already have major portion of their investment fund in the banks as fixed deposits and their ordinary shares. Dr. KC, sees “Asset-Liability mismatch for life insurance companies as they issue policy for long term whereas they can invest for short term only”. Dip Bahadur BC, CFO of Prime Life, also considers “asset-liability maturity mismatch as a prevalent issue in all life insurance companies”.</div> <div> </div> <div> <span style="font-size: 18px;"><strong>The Way Ahead</strong></span></div> <div> </div> <div> <span style="font-size: 16px;"><strong>Resolving Internal Issues</strong></span></div> <div> Internal issues - lack of research based decision making, diversification and active investing - can be resolved through robust internal research systems. To boost their ordinary shares investment performance through research backed investments, the insurance companies could build their own internal system and processes but at a huge cost. It would also mean taking two diverse businesses in parallel, i.e. insurance business and investment business. Outsourcing of ordinary shares investment management by availing the customized portfolio management service given by several financial intermediaries like Kriti Capital, Nabil Invest and Beed Management, seems more beneficial. Such outsourcing will not only enable insurance companies to focus on their core business, but also get better returns from their investments via expert handling of their funds at a relatively lower cost.</div> <div> </div> <div> <img alt="Isues with Investment" src="/userfiles/images/ep2%20(Copy)(2).jpg" style="margin-left: 10px; margin-right: 10px; width: 550px; height: 400px;" /></div> <div> </div> <div> <span style="font-size: 16px;"><strong>Resolving external issues</strong></span></div> <div> There are limitations faced by insurance companies while investing their fund as per current investment guidelines. Fixed deposits have inbuilt interest rate risks. The life insurance companies face an additional issue of asset-liability maturity mismatch, with investments maturing in about 1-1.5 years and liabilities remaining active for about 10-13 years. There is need for long term investment alternative. </div> <div> </div> <div> Further, diversification of fund is hard in a secondary market with heavy concentration of BFI stocks. With the investment fund increasing rapidly (CAGR of 21.35% from 2004-05 to 2011-12), there is a need to look for additional investment avenue to resolve these issues. This is not just voiced by the insurance company professionals but also by the insurance regulatory board.</div> <div> </div> <div> Dr. KC feels that “although the investment guidelines give flexibility to insurance companies to come up with alternative investment proposals, the time has come to review the overall investment guidelines”.</div> <div> </div> <div> A suitable avenue to be added in the investment guidelines could be private placements in infrastructure companies. This will not just help the insurance companies to resolve the issues of diversification and the infrastructure companies in getting easier financing, but also help the overall economy of the nation. Dr. KC says that the Board is “positive on investment made by insurance companies in hydropower and other infrastructure companies, and these avenues could be opened for investments”. Most of the insurance companies also state that they are willing to invest in hydropower and other infrastructure companies, if allowed by investment board.</div> <div> </div> <div> Insurance Board should allow investments by the insurance companies via private placements, as the secondary market doesn’t have appropriate diversification opportunities. Further, the insurance companies would be able to invest at a bargain in the infrastructure companies due to their sheer investment fund size. Also, if SEBON comes up with more liberal rules on the issuance of shares at premium, the infrastructure companies could benefit hugely from private placements. Even if the insurance companies decide on being risk averse and just invest in debentures, they could do so in infrastructure debentures. As there isn’t presence of these instruments in secondary market, private placement would be ideal way for diversification of by insurance companies. On the other hand, the infrastructure companies would have lower issue costs and lesser regulatory hassles than going public for raising finance. Also, in case of debentures, these companies would be avoiding interest rate exposure. Similarly, the promoters of infrastructure companies would be able to delay issuing the shares to public, thereby being in position with better financial statements before going public. This would help get better response on public issuance of shares at premium. </div> <div> </div> <div> Thus the insurance companies should initiate this by coming up with effective proposal and lobbying with the Insurance Board for liberal investment guidelines.</div> <div> </div> <div> But, investment in private placements of the infrastructure companies (if allowed by the Board) requires expert knowledge on these companies and regular monitoring. Also, the entry and exit strategies must be taken into account as these investments are relatively less liquid as compared to secondary market investments. There will be need of diversification as well as policy and strategy development for the insurance companies vying to invest via private placements. So, to benefit from this additional investment avenue, insurance companies will have to develop in-house expertise or outsource private placements management services for financial intermediaries.</div> <div> </div> <div> <em>(The article is based on a joint research conducted by Ujjwal Chand and Suraj Bansal as part of their academic requirement at KUSOM. The researchers can be contacted at: chandujjwal@gmail.com)</em></div> </div> <p> </p>', 'published' => true, 'created' => '2014-03-24', 'modified' => '2014-03-24', 'keywords' => 'new business age economy & policy news & articles, economy & policy news & articles from new business age nepal, economy & policy headlines from nepal, current and latest economy & policy news from nepal, economic news from nepal, nepali economy & policy economic news and events, ongoing economy', 'description' => 'Insurance companies use their funds consisting of capital, reserves, premiums and loans to fi nance claim payments and other expenses.', 'sortorder' => '2608', 'image' => null, 'article_date' => '0000-00-00 00:00:00', 'homepage' => false, 'breaking_news' => false, 'main_news' => false, 'in_scroller' => false, 'user_id' => '0' ) ), (int) 5 => array( 'Article' => array( 'id' => '2641', 'article_category_id' => '37', 'title' => 'Financial Inclusion Must For Inclusive Growth', 'sub_title' => '', 'summary' => null, 'content' => '<div> <strong>--By Hom Nath Gaire</strong></div> <div> </div> <div> Finance has come a long way since the time when it wasn't recognized as a factor for growth and development. It is now attributed as the life blood of an economic system and most economies strive to make their financial systems more efficient. It also keeps policymakers on their jobs as any problem in this sector could freeze the entire economy and even lead to a contagion. </div> <div> </div> <div> The financial services include the entire range - savings, loans, insurance, credit, payments etc. The financial system has to provide its function of transferring resources from surplus to deficit units but both deficit and surplus units are those with low incomes, poor background etc. By providing these services, the aim is to help them come out of poverty. So far, the focus has only been on delivering credit such as microcredit and has been quite successful in some countries. However, similar success has to be seen in other aspect of finance as well.</div> <div> </div> <div> In this context, financial inclusion is the most for efficient financial system and to exert positive impact in the economic growth as well as development. Financial inclusion could expediteeconomic activities and promote entrepreneurship with the maximum use of information, communication and technology-enabled services supported by an extensive Financial Literacy mission. </div> <div> </div> <div> <span style="font-size: 16px;"><strong>What is Financial Inclusion?</strong></span></div> <div> Authorities and policymakers worldwide including advanced economies like the United Stateshave set up specific task force/committees to understand what financial inclusion is and how it can be achieved. </div> <div> </div> <div> Former UN Secretary-General Kofi Annan said: "The stark reality is that most poorpeople in the world still lack access to sustainable financial services, whether it issavings, credit or insurance. The great challenge before us is to address the constraints that exclude people from full participation in the financial sector. Together, we can and must build inclusive financial sectors that help people improve their lives.” </div> <div> </div> <div> Similarly, according to the UK Financial Inclusion Taskforce, there are three main concerns in financial inclusion; access to banking, access to affordable credit and access to freeface-to-face financial advice. Therefore, the term 'Financial Inclusion' is defined as an extension ofbanking and financial services at an affordable cost to unbanked people of thecommunity. </div> <div> </div> <div> India also set up a committee under the chairmanship of Dr. C. Rangarajan, the then Governor of Reserve Bank of India (RBI) to suggest measures to increase financial inclusion in 2007. The Rangarajan committee defines financial inclusion as: "the process of ensuring access to financial services and timely and adequate credit where needed by vulnerable groups such as weaker sections and low income groups at an affordable cost." </div> <div> </div> <div> Therefore, financial inclusion means easy and affordable access of financial services by the economically poor and unbanked people of society at appropriate, low-cost, fairand safe financial products and services. Constraints of Financial Inclusion </div> <div> </div> <div> Financial Inclusion is especially needed for rural and underprivileged masses that may be the future growth engine of the economy. From the recent initiatives undertaken by the world governments to foster financial inclusion, one cannot undermine the need to include the economically underprivileged in the mainstream banking sector. However, many people across the globe are now excluded from mainstream banking. Theserange from people with low income to people with low information and accessibility to peoplewith no social security or insurance cover. The main reasons behind the financial exclusion are: </div> <div> </div> <div> <span style="font-size: 14px;"><strong>Lack of information:</strong></span> Lack of information about the role and function of banks, banking services and products, interest rates, etc. stop people from including themselves in mainstream banking. </div> <div> </div> <div> <span style="font-size: 14px;"><strong>Insufficient documentation:</strong></span> Many unbanked people (even in municipalities and urban areas) areunable to show their self identification documents during the opening of a bank accountor during taking a loan. </div> <div> </div> <div> <span style="font-size: 14px;"><strong>Lack of awareness:</strong></span> Many people are unaware of the banking terms andconditions laiddown by banks and regulators from time to time. </div> <div> </div> <div> <span style="font-size: 14px;"><strong>High transaction costs: </strong></span>Various commercial banks across the globe levytransaction charges on credit or debit transactions, on over usage of banking services, on chequebook issuance etc. </div> <div> </div> <div> <span style="font-size: 14px;"><strong>Lack of access:</strong></span> Accessibility is a problem to all those people who live ingeopolitically isolated regions. Moreover, as most of the commercial banks are locatedin the cities and surrounding area, people in rural areas mainly in least developed countries like ours have a geographical barrier in accessing banks. </div> <div> </div> <div> <span style="font-size: 14px;"><strong>Illiteracy:</strong></span> Because of illiteracy, a substantial number of people are unable to takerecourse to banking services. </div> <div> </div> <div> <span style="font-size: 14px;"><strong>Stringent regulations:</strong></span> Stringent regulations such as Know your Customer (KYC) and Anti-Money Laundering and Counter Terrorist Finance (AML-CTF) norms are also considered as hindrances for financial inclusion. Financial Inclusionin Nepal </div> <div> </div> <div> <img alt="Economy and Policy" src="/userfiles/images/ep1%20(Copy)(5).jpg" style="width: 550px; height: 286px; margin-left: 10px; margin-right: 10px;" /></div> <div> </div> <div> Nepal is one of the LDCs with economically challenged huge rural population. Financial Inclusion is indispensible in its case for the sustainable growth of its economy. However, even in such scenarios, many businesses have been successful in showing consistent as well as continued development. One of the most important sectors of this kind is the financial services sector. With just 2 commercial banks in the early days, the country has actually managed to expand this sector, which at present includes 31 commercial banks. Similarly in the past 30 years, different development banks, co-operatives, finance companies, insurance companies have grown by more than 10 fold.</div> <div> </div> <div> <img alt="Economy and Policy" src="/userfiles/images/ep%20(Copy)(3).jpg" style="float: left; margin: 0px 10px; width: 250px; height: 263px;" />In the mean time, branches of commercial banks, development banks and finance companies totalling at 2483 in mid of march of 2013. Of the total branches, commercial banks have occupied 1472 followed by development banks 713 and finance companies 298. Similarly, from the side of regional distribution, the majority branches of BFIs are situated in the Central Development Region totalling 1168, followed by Western Development Region 606 and Eastern Development Region 401. The minimum branches of BFIs are in the Far-Western Development Region totalling 111 followed by Mid-Western Development Region 197. </div> <div> </div> <div> Increase in number of branches of BFIs is considered as one of the indicators of financial inclusion. Banking Industry, normally, occupies a bigger chunk in the financial system. However, a larger chunk of banking services is still concentrated in urban areas. More especially, the banking services still seem to be concentrated in capital city. The districts with highest number of bank branches are Kathmandu, Lalitpur and Rupandehi with 335, 77 and 67 branches respectively. This level of reach and penetration also means that the financial inclusion is yet to strengthen to follow economic progress in the country. </div> <div> </div> <div> This sector has always been driven by a keen need of growth as well as is being pushed by various regulations. Over a period of time, this sector has deeply gone to the roots of urban, semi-urban as well as to the rural Nepal. This penetration level, in particular, has benefitted millions of people living in the country who fall below the poverty line in both the rural as well as semi-urban areas of the country.</div> <div> </div> <div> The latest figures indicate that the financial services are used only by a section of the population (around 40%) in Nepal.There is demand for these services but it has not been provided. The excluded regionsare rural, poor regions and also those living in harsh climatic conditions where it is difficult to provide these financial services. The excluded population then has to rely on informal sector for availing finance that is usually at exorbitant rates. </div> <div> </div> <div> This leads to a vicious cycle. First, high cost of finance implies that first poor person has to earn much more than someone who has access to lower cost finance. Second, the major portion of the earnings is paid to the money lender and the person can never come out of the poverty. </div> <div> </div> <div> <span style="font-size: 16px;"><strong>Factors Forcing People to be Informal </strong></span></div> <div> <span style="font-size: 14px;"><strong>High cost:</strong></span> It has also been seen that poor living in urban areas don't utilize the financial services as they find financial services are costly and thus are unaffordable. Hence, even if financial services are available, the high costs deterthe poor from accessing them.</div> <div> </div> <div> <span style="font-size: 14px;"><strong>Non-price barriers: </strong></span>Access to formal financial services also requires documents of proof regarding a persons' identity, income etc. The poor people do not have these documents and thus are excluded from these services. They may also subscribe to the services initially but may not use them as actively as others because of various non-price barriers. </div> <div> </div> <div> <span style="font-size: 14px;"><strong>Behavioural aspects:</strong></span> Research in behavioural economics has shown that many people are not comfortable using formal financial services. The reasons are difficulty in understanding language, various documents and conditions that come with financial services etc. </div> <div> </div> <div> <span style="font-size: 16px;"><strong>Externalities of Financial Inclusion</strong></span></div> <div> There are a number of positive externalities of financial inclusion. </div> <div> •<span class="Apple-tab-span" style="white-space: pre;"> </span>One of theimportant effects is people able to reap the advantages of network externality of financial inclusionas the value of the entire national financial system increases.</div> <div> •<span class="Apple-tab-span" style="white-space: pre;"> </span>Another reason as financial inclusion is a quasi-public good the consequent fuller participation by all in the financial system makes monetary policy more effective and thus enhances the prospects of noninflationary growth.</div> <div> •<span class="Apple-tab-span" style="white-space: pre;"> </span>One important point that is essential for financial inclusion in rural and agriculture based LDCs like ours is to ensure the growth of banking system to meet the needs of a modern economy, expansion in geographic terms and improve access to banking services. </div> <div> </div> <div> <span style="font-size: 16px;"><strong>Way Forward </strong></span></div> <div> In order to strengthen the financial inclusion in the country, NRB as the monetary authority of country, has been adopting some promotional measures so far such as providing additional incentives to BFIs to go to the remote as well as underprivileged areas. Similarly, it has been encouraging the microfinance institutions to be more inclusive while directing the commercial banks to lent a given portion of their loan portfolio to the deprived sectors. </div> <div> </div> <div> However, the indicators of financial inclusion are yet to improve. In this context, the following measures should be adopted under the existing infrastructure framework to speed up the financial inclusion in Nepal. </div> <div> </div> <div> <span style="font-size: 14px;"><strong>Postal Network:</strong></span> The government should consider tying up with BFIs to deliver financial solutions to the un-banked, using its extensive postal network. The synergistic outreach of the existing postal system supplemented by banking functions is the answer to the challenges posed by rural markets. As Nepal has the largest postal network in the remotest areas, the excluded masses can graduallyconnect with the full-fledged banking services. </div> <div> </div> <div> <span style="font-size: 14px;"><strong>Mobile Banking:</strong></span> The transaction costs can be radically reduced even in remote locations through mobile banking. The costs, which ease of access for the consumers and the profitability of provider will ultimately opt the level of wireless services. </div> <div> </div> <div> <span style="font-size: 14px;"><strong>Use of Technology:</strong></span> Rural banking can be expanded in an easy and user friendly way through universal technology with innovative applications. The role of various ICT tools and associated technologies in providing financial solutions to the unbanked is also substantial. Rural ATMs, plastic cards like smart cards, biometric cards including mobile payment (branchless banking) technologies do have the ability to engage the unbanked sections. </div> <div> </div> <div> <span style="font-size: 14px;"><strong>Financial Literacy: </strong></span>Steps have to be taken by the government for the expansion of banking services and linking of opportunities among various segments of financial sector like capital markets, insurance, etc. To achieve this aim the government should come up with an extensive campaign of financial literacy. </div>', 'published' => true, 'created' => '2014-02-20', 'modified' => '2014-02-20', 'keywords' => 'new business age economy & policy news & articles, economy & policy news & articles from new business age nepal, economy & policy headlines from nepal, current and latest economy & policy news from nepal, economic news from nepal, nepali economy & policy economic news and events, ongoing economy', 'description' => 'The financial system has to provide its function of transferring resources from surplus to deficit units but both deficit and surplus units are those with low incomes and poor background etc.', 'sortorder' => '2481', 'image' => null, 'article_date' => '0000-00-00 00:00:00', 'homepage' => false, 'breaking_news' => false, 'main_news' => false, 'in_scroller' => false, 'user_id' => '0' ) ), (int) 6 => array( 'Article' => array( 'id' => '2496', 'article_category_id' => '37', 'title' => 'Nepal’s Macroeconomic Challenges In 2014', 'sub_title' => '', 'summary' => null, 'content' => '<div> </div> <div> </div> <div> <strong>--Dr Rewat Bahadur Karki</strong></div> <div> </div> <div> After the second democratic movement in FY 2007/08, Nepali economy recorded rosy picture including higher GDP growth of 5.8 percent. However, after the constituent assembly (CA) election in 2009 macroeconomic situation went on declining with low growth mainly due to uncertainty of economic policy and deteriorating investment environment. But pre-last year -2011/12 was exceptional i.e. better along with moderate growth of 4.5 percent, the highest in the last five years primarily because of windfall (exogenous) gain caused by weather and remittance, while last year (2012/13)’s performance is poor with the lowest growth 3.5 percent according to the estimates of Central Bureau of Statistics (CBS), and double digit inflation. </div> <div> </div> <div> Analyzing last year’s situation in brief, efforts have been made to estimate and analyze this fiscal year’ macroeconomic scenario mainly comprising of real sector and price, monetary, fiscal and external sectors based on realistic approach. In FY 2013/14, following six strong bases/assumptions indicate rosy macro economic situation.</div> <div> </div> <div> 1. <span class="Apple-tab-span" style="white-space: pre;"> </span>The current non political government has announced next three year plan (starting from this FY-2013/14) with a growth of 6 percent by fixing the target of upgrading Nepal to developing country from low income country within 10 years as against the UN target of 18 years. The government has announced an ambitious budget in this line too.</div> <div> </div> <div> 2. <span class="Apple-tab-span" style="white-space: pre;"> </span>The government has made its efforts to present the pro-productive and investment-friendly budget instead of loading it populist programmes.</div> <div> </div> <div> 3. <span class="Apple-tab-span" style="white-space: pre;"> </span>The full budget, despite being an election budget, which has come without any disturbance since the first CA election in 2008 AD, has exerted some positive impact in the economy</div> <div> </div> <div> 4. <span class="Apple-tab-span" style="white-space: pre;"> </span>There will be positive impacts in the Nepali economy from the slight improvement (from 3 percent to 3.2 percent in 2013) in world economy and also in neighbouring countries –India and China as forecast by IMF.</div> <div> </div> <div> 5. <span class="Apple-tab-span" style="white-space: pre;"> </span>The last budget as brought by this non-party government in early 2013 gave a clear-cut direction regarding adoption of liberal economic policy and important role of private sector in the economy and thus, has exerted a positive impact.</div> <div> </div> <div> 6. <span class="Apple-tab-span" style="white-space: pre;"> </span>Weather so far is favourable, which will have a positive impact on the economy.</div> <div> </div> <div> Nonetheless, there are following weak bases or assumptions, which will make the economic scenario weak.</div> <div> </div> <div> 1. <span class="Apple-tab-span" style="white-space: pre;"> </span>Although the election government brought an ambitious election budget it will have minimum impact on economic growth and will instead accelerate inflation</div> <div> </div> <div> 2. <span class="Apple-tab-span" style="white-space: pre;"> </span>IMF has forecast that Nepal’s macroeconomic situation would not improve significantly for the coming five years.</div> <div> </div> <div> 3. <span class="Apple-tab-span" style="white-space: pre;"> </span>Since the first CA election, highest growth of 4.5 percent was recorded last year whereas average growth of last three-year plan is less than four percent as against 5.5 per annual average target. </div> <div> </div> <div> 4. <span class="Apple-tab-span" style="white-space: pre;"> </span>Absorptive capacity for capital expenditure is very poor in Nepal.</div> <div> </div> <div> 5. <span class="Apple-tab-span" style="white-space: pre;"> </span>Unfavourable investment climate due to some extremist political parties and their affiliate organizations (which are against investment), and acute problems relating to load shedding, rigid labour laws, infrastructures etc.</div> <div> </div> <div> 6. <span class="Apple-tab-span" style="white-space: pre;"> </span>Results of the second CA election, held peacefully in Marga 2070, has brought in Nepali Congress, credited for introducing liberal economic policy in the 90s, as the largest party. This is expected to bring a positive effect on the economy.</div> <div> </div> <div> Based on the above mentioned strong and weak aspect for the estimate, a midway analysis/estimate, which gives the realistic picture, has been made in this article. During 2013/14, some macroeconomic indicators will remain better than that of last year. GDP is estimated to increase from 4.5 percent to a maximum of 5 percent as agricultural sector, the mainstay of the economy, is estimated to grow 3-3.5 percent due to favourable weather condition. Situation of summer crops, mainly paddy and maize, seems better this year. Production of paddy is estimated to have increased by more than 10 percent, compared to the sharp decline of 14 percent, last year. </div> <div> </div> <div> With regard to non agricultural sector, it will record around 5.5 percent growth, higher than last year’s 5 percent. The manufacturing sector will move up from 1.6 percent to 3 percent as investment climate is expected to improve slightly despite election year. Similarly, trade sector’s growth will shoot up due to the sharp import growth, while other sub-sectors of this sector will remain normal. This growth is supported by high ratio of fixed investment (fixed capital formation) to GDP, which is estimated to rise to 24 percent due to higher capital expenditure as a result of full-fledged budget presented by this non-party government.</div> <div> </div> <div> <img alt="Economy and Policy" src="/userfiles/images/ep2%20(Copy)(1).jpg" style="width: 550px; height: 321px; margin-left: 10px; margin-right: 10px;" /></div> <div> </div> <div> The inflation, which rose almost by two digit i.e. 9.9 percent last year and has increased at the rate of 10percent during the first four months of this fiscal year (2013/14), is estimated go up annually to 12 percent, which will be very close to the level reached in 2008/09 (13 percent). Being an election year, current expenditure has shot up with remarkable rise in election budget along with sharp rise in private and informal expenditure. The sharp rise in salary (18 percent) and provision of Rs. 1000allowance to the government employees, coupled with sharp appreciation of the American Dollar against Rupee, will lead to high inflationary pressure. Despite higher estimated GDP growth this year, higher money supply caused by above factors will lead to high inflation of 12 percent this fiscal year. Containing the inflationary pressure this year is a big challenge to the authorities. </div> <div> </div> <div> In terms of government finance, the non-political government has been able to bring the budget on track despite late in the third quarter of last fiscal year-2012/13. Last year, total revised budget was around Rs.370 billion but due to substantial election expenditure as well as full-fledged budget, this year’s total budget estimate is Rs. 517 billion. Government estimates forecast capital expenditure to rise from around Rs. 55 billion level to Rs. 85 billion this year, while Rs. 78.7 billion has been set aside for financial provision. </div> <div> </div> <div> Although government has given priority to enhance capital expenditure, such expenditure is just 9 percent of the budgeted total capital expenditure in the first five months of this fiscal year (2013/14), while regular expenditure is almost 30 percent in this period. This trend shows that though the capital expenditure will be far below the target, the regular expenditure can cross the target. With the sharp rise in import, the import-based total revenue is estimated to rise by more than 20 percent this year. Thus, in the fiscal sector, increasing the capital expenditure and containing the regular expenditure will remain, as usual, the major challenge for the government. </div> <div> </div> <div> The election will have an expansionary effect on monetary sector. Both money supply (M1 and M2) will rise sharply than last year. Private sector’s credit growth level would be higher this year than the last year. Similarly, full budget will push the deposit growth and the broad money liquidity (M3). The financial sector has been facing instability, as more than a dozen of BFIs have been declared problematic and some even dissolved. Thus, stabilising and making this sector strong by strengthening the supervisory capacity of the central bank and by enhancing good governance in both the BFIs and the regulator, is a major challenge. </div> <div> </div> <div> The depressed share market has improved especially after the CA election’s result positioned Nepali Congress, known for its liberal economic policies, as the lead party in the CA. The share market on the whole will record bullish trend this year compared to last year. </div> <div> </div> <div> External sector in 2013/14 is estimated to register a weak scenario instead of registering any structural improvements. Rise in demand for consumer as well as capital goods, triggered by full-fledged budget and the election expenses, is likely to increase money supply as well as imports. As a result, imports will register sharp growth of 30 percent, and reach about one third of the GDP. Export is estimated to rise by 10-12 percent higher than the last year due to the sharp appreciation of US Dollar and the expected reforms in the export incentive. Due to high import and low export, export-import ratio will go down from current 14 percent to 11 percent, and the trade deficit to one-third of the GDP next year. Consequently, the steady rise in trade deficit will continue. High import growth will make large current account deficit this year. However, increased remittance, which is due to sharp Dollar appreciation, will ultimately lead to BOP surplus in 2013/14 but not in a significant manner. Thus strengthening the external sector, by decelerating the trade deficit through import management and export enhancement, will remain a major challenge. </div> <div> </div> <div> <img alt="Economy and Policy" src="/userfiles/images/ep3%20(Copy)(1).jpg" style="width: 550px; height: 413px; margin-left: 10px; margin-right: 10px;" /></div> <div> </div> <div> Considering the overall macroeconomic scenario and challenges, the new government, which is expected to form soon, should concentrate on economic agenda and in addressing major issues and challenges that Nepal’s economyis confronting. The elected government first of all has to pursuade all major political parties to form common economic agenda, and in setting future direction for the economy. Along with that the government should take initiatives to reform policies for addressing immediate economic concerns. In this regard, priority should be given to creating conducive environment for investment, reducing poverty, unemployment and bad governance. Along with that the government should provide special incentive to exports, energy and agriculture sector. It should focus on capacity enhancement of capital expenditure, containing double-digit inflation and decelerating trade deficit along with strengthening banking system. Nonetheless, along with the government, the private sector and other sections of societies should make collective efforts to strengthen the national economy.</div> <div> </div> <div> <em>(Writer is Expert Member at Securities Board of Nepal.)</em></div>', 'published' => true, 'created' => '2014-01-24', 'modified' => '2014-01-26', 'keywords' => 'new business age economy & policy news & articles, economy & policy news & articles from new business age nepal, economy & policy headlines from nepal, current and latest economy & policy news from nepal, economic news from nepal, nepali economy & policy economic news and events, ongoing economy', 'description' => 'After the second democratic movement in FY 2007/08, Nepali economy recorded rosy picture including higher GDP growth of 5.8 percent. However, after the constituent assembly (CA) election in 2009 macroeconomic situation went on declining with low growth mainly due to uncertainty of economic policy and deteriorating investment environment. But pre-last year -2011/12 was exceptional i.e. better along with moderate growth of 4.5 percent, the highest in the last five years primarily because of windfall (exogenous) gain caused by weather and remittance, while last year (2012/13)’s performance is poor with the lowest growth 3.5 percent according to the estimates of Central Bureau of Statistics (CBS), and double digit inflation.', 'sortorder' => '2343', 'image' => null, 'article_date' => '0000-00-00 00:00:00', 'homepage' => false, 'breaking_news' => false, 'main_news' => false, 'in_scroller' => false, 'user_id' => '0' ) ), (int) 7 => array( 'Article' => array( 'id' => '2180', 'article_category_id' => '37', 'title' => 'Current Road Expansion: A Four Lane Road To Unsustainability', 'sub_title' => '', 'summary' => null, 'content' => '<div> </div> <div> </div> <div> <strong>--By Bimal Rijal</strong></div> <div> </div> <div> G<span style="font-size: 12px;">overnment authorities often throw around the word “development” while describing the recent trend inside Kathmandu. With the mushrooming high-rise apartment buildings, and of course, the ongoing road expansion project in the various parts of the city, the so called development seems to be rampant all of a sudden. However, before submitting to these claims and letting the government carry on with its “development” plans for Kathmandu, it is imperative that we as inhabitants of Kathmandu understand what it means to live in a more developed city.</span></div> <div> </div> <div> In old school development studies, the word “development” was referred to an elevated level of economic activity. Tall buildings and wider roads most definitely spark an increase in the level of economic activity, but they do not define development. Yes, infrastructures such as wider roads that facilitate better mobility inside the city and high-rise buildings that provide crucial commercial and retail space are important to the process of development. But they alone cannot define development. </div> <div> </div> <div> When improved infrastructures such as wider roads and taller buildings contribute in improving people’s living standard, we can then say that they are contributing to the development of the city. The key here is not to emphasize only on developing physical infrastructure but also increasing their contribution in bringing positive effect in the lives of the people. </div> <div> </div> <div> In other words, development projects are the ones which ameliorate people’s living standard; not deteriorate existing one. This is why even the international community is increasingly accepting the Human Development Index (HDI) as a metric to measure development. To move up in the Human Development Index, a country not only needs to pay heed to economic growth (a component to which construction of new infrastructures such as roads, factories, etc., contribute to) but also genuinely improves people’s living standard by ensuring quality health, education and environment for </div> <div> its citizens. </div> <div> </div> <div> Kathmandu’s development should not be evaluated on the basis of whether or not we have four lane roads. More important questions like are these roads going to increase traffic mobility by reducing jams, how beneficial will the wider roads be to pedestrian, what air quality will the people get to breath, and so on should be primarily asked and evaluated. The present implementation of the road widening projects and the way the notion of development is attached to it makes me skeptical about the understanding of the term among politicians and city planners. </div> <div> </div> <div> From development’s perspective, the current road expansion is particularly concerning for a couple of reasons. Needless to say, in a few years time, much of Kathmandu’s two lane roads will be transformed into four-lane. But does this justify its labeling as a ‘development project’? Is it really going to help the ailing transportation system inside Kathmandu on a sustainable scale? My answer is a resounding no.</div> <div> </div> <div> <img alt="Road Expansion in Nepal" src="/userfiles/images/ep1%20(Copy)(3).jpg" style="width: 550px; height: 391px; margin-left: 10px; margin-right: 10px;" /></div> <div> </div> <div> The current road expansion project undertaken by the government of Nepal to “rescue” Kathmandu’s populace from the blight of traffic congestion is assuredly going to prove counterproductive in the future. Having wider roads is only a temporary solution for Kathmandu because wider roads invite more cars and eventually the roads are going to be even more congested leading to even more intense traffic jams. Much of the current expansion of roads for gas consuming vehicles has been at the expense of pedestrian footpath. By norm, sidewalks alongside the roads need to be at least 2 meters wide. The new pedestrian sidewalks are barely half of it. Additionally, availability of lesser space has nullified the possibility to carry out plantations alongside the roads. </div> <div> </div> <div> To sum up the consequences of the road expansion: firstly, there are going to be more vehicles on the road emitting more harmful gases than ever and thereby further degrading air quality. Secondly, with no plans to improve mass transit in place, influx of more cars in the days ahead will reduce the mobility of vehicles further. Thirdly, lack of modest pedestrian sidewalk will affect mainly the working class, the senior citizens, and children walking back and forth from school. This will force the pedestrians to walk on the roads and presumably increase road accident frequency. Therefore, let alone the amelioration of living standard, wider roads are only going to degrade an average man’s living standard in the next five years. So, can such a project that increases pollution, worsens traffic problem, and puts the lives of senior citizens, small children and the working class at risk be called a development project? The answer is for the planners and the politicians to think of.</div> <div> </div> <div> Personally, even the economic prospect from this project does not make sense. I do not understand why we are so much inclined towards widening our roads when we already know that the new vehicles, that are going to fill them up, and the fuel that will consume, will be imported from foreign countries. A bicycle ride doesn’t require importing or burning of fuels nor does a walk, for those who prefer it. In such a scenario, why don’t we have pedestrian sidewalks and cycling tracks in our list of priorities? These would not only help in retaining currency from flowing out but also improve living and health standards of the general public as more and more people will take to cycling and walking. </div> <div> </div> <div> Current road expansion seems to be worthy of pursuing to some extent only if the government personally takes the responsibility of managing the operation of public transport within the city, of planting trees on the sidewalks, and </div> <div> of ensuring that public health won’t be affected due to the project. Without these commitments and corresponding plans to implement them, the current endeavor is going to prove a wet blanket for the citizens.</div> <div> </div> <div> Kathmandu is remarkably Nepal’s administrative and the financial capital. Legacy of centralized development, focused intensely within ring road, is at the heart of this city’s problem of traffic congestion. The government confronted it’s inadequacies in foreseeing the long term impacts of centralizing development, when severe traffic jams and immobility posited itself as a serious concern. In such a context, it could either reverse the trend of centralized development, opting to not expand the road, or it could carry on with the age old legacy of centralized development and expand the road eventually inviting more vehicles and people inside Kathmandu. </div> <div> </div> <div> A much better alternative to the current expansion would have been to ocus on developing more efficient express highways that link Kathmandu with its peripheral hubs like Banepa, Dhulikhel and others, and simply pay heed to the maintenance of roads inside Kathmandu. Such an effort would not only create new financial centers and commercial hubs outside Kathmandu but also relieve Kathmandu from its population pressure and pressures on its roads and physical infrastructures. With an increase in the level of economic activity, the people living outside Kathmandu and its periphery would be better off; and with lesser cars, lesser congestion, lesser pollution and lesser people, Kathmandu would be better off. In the long run, people living inside and outside Kathmandu would both benefit leading to genuine realization of development rather the current unsustainable growth.</div> <div> </div> <div> While other nations across the world are stressing on promoting sustainability, we seem to be moving in the opposite direction. While governments in other nations stress on preserving and promoting greenery through green roofing or through the protection of public parks, our government at home chops off three hundred trees to construct a landmark dedicated to “Ganatantra”. While other nations stress on constructing artificial flood control systems to protect its citizenry from unexpected flooding. In Kathmandu, the government instead destroys natural flood control systems like Manohara, Dhobokhola, Tukucha and other stream systems to develop riverside road network. </div> <div> </div> <div> Kathmandu - once tagged as naturally air-conditioned city by tourists - has now turned into a concrete jungle that experiences extreme temperatures. Ongoing unmanaged and disproportional road expansion has tarnished the image of this city even further. Adding to it, reluctance of the government to resort to sustainable development initiatives brings into question the fate of the city itself. If the government is not planning a sustainable future for it, than who will? </div> <div> </div> <div> <em>(Senior urban planner Rijal is chief of Urban Development Department and also chief at city planning commission.)</em></div>', 'published' => true, 'created' => '2013-11-28', 'modified' => '2013-12-02', 'keywords' => 'new business age economy & policy news & articles, economy & policy news & articles from new business age nepal, economy & policy headlines from nepal, current and latest economy & policy news from nepal, economic news from nepal, nepali economy & policy economic news and events, ongoing economy', 'description' => 'Government authorities often throw around the word “development” while describing the recent trend inside Kathmandu. With the mushrooming high-rise apartment buildings, and of course, the ongoing road expansion project in the various parts of the city, the so called development seems to be rampant all of a sudden.', 'sortorder' => '2040', 'image' => null, 'article_date' => '0000-00-00 00:00:00', 'homepage' => false, 'breaking_news' => false, 'main_news' => false, 'in_scroller' => false, 'user_id' => '0' ) ), (int) 8 => array( 'Article' => array( 'id' => '2065', 'article_category_id' => '37', 'title' => 'Nepali Federalism From Economic Perspective In Nepal', 'sub_title' => '', 'summary' => null, 'content' => '<div> </div> <div> </div> <div> <strong>--By Dr Chandra Mani Adhikari</strong></div> <div> </div> <div> There is lot of hue and cry for a new constitution that will have highly suitable federal structure. But, it does not look conducive enough for a successful election followed by good governance.</div> <div> </div> <div> A better Nepal is still a distant dream. Being optimistic, one can say things can be brought back on right track but that is possible only with a strong determination and attitude backed by a rigt thought. It requires quality leaders with logical, inclusive and judicious representation as well as balanced executive 9or administrative structure.</div> <div> </div> <div> The date of election has been set and the Election Commission is working within a given framework. But issue and essence require more debate while it is also urgent to have constitution.</div> <div> </div> <div> In this regard, some observations on the basis of the international experience and national reality are pertinent. The state’s structure can be divided into three systems. One is related to formation of the government. The second is defined power of the government whereas the third is the mechanism to serve the grassroots. The federal system has been developed since 17th century.</div> <div> </div> <div> The unitary form of governance was implemented after the First World War which didn’t work properly in practice. Regarding the forms, the main question regarding the federal or unitary system is motive of separation of rights for balancing different levels of the government.</div> <div> </div> <div> In some federal countries, the center seems more powerful in others the states are more powerful. In principle, federalism is the system of self-governance by the state based on rule-of-law. Thus, federal system would not be meaningful in undemocratic environment.</div> <div> </div> <div> Nepal is already a federal republic, if we go only by the Interim Constitution of Nepal. But in practice, it is still to be federal. Many questions such as those related to the structure of the state, basis of restructuring, methodology of building the federal nation, the form of government, election system and judicial system are still unanswered. Moreover, there is still no consensus on the issues of culture, geography, economic resources, population, infrastructure, level of social understanding and nature resources that a state needs to have to qualify to be a federal state.</div> <div> </div> <div> Other hot topics for discussion are the number of federal states, their geographical border and authorities of the legislative and executive bodies of the federal states.</div> <div> </div> <div> <img alt="" src="/userfiles/images/epn1%20(Copy).jpg" style="width: 550px; height: 252px; margin-left: 10px; margin-right: 10px;" /></div> <div> </div> <div> Two best examples of successful federalism are Switzerland and USA where many smaller nations tied up into the confederation. However, in USA the confederation was not working properly in the beginning. So, in 1781, USA declared the Federal Constitution with relatively more power to the center.</div> <div> </div> <div> After 50 years of experience with its own style of federalism, Switzerland too issued American model constitution in 1848 that aimed to enhance cooperation among the states. Germany introduced cooperative base federal constitution in 1871 and Belgium, France, Spain and South Africa followed it. Some countries like Bosnia and Herzegovina, Ethiopia, Congo and Iraq entered into federal system with background of conflict and other historical accords.</div> <div> </div> <div> On some instances, economic disparity, religious differences and geographical differences too have led to federalism. Canada is one such example.</div> <div> </div> <div> Nepal declared itself a federal state after people’s movement. And there are various reasons and logic behind the Nepali federalism. These include safety to the local community from encroachment of outsiders, institutionalization of democracy and making the state more inclusive. But what is happening (and has happened) in Nepal is different than the global experience.</div> <div> </div> <div> Nepal’s need is to end all sort of social and economic disparities by ensuring a conducing economic and political infrastructure through a political and constitutional consensus, using federalism as an instrument. In this context, it’s irrelevant to ask whether the state should be restructured on ethnic lines. Lengthy debate on the question whether the states should be based on single ethnicity or multi-ethnicity identification has proved futile.</div> <div> </div> <div> To make federalism successful in its objectives, we should scrutinize the real challenges and potentials, which are directly related to state restructuring. These include Nepali ethnicity management (with a goal of transforming current Nepali society into socially-economically and politically prosperous future) geographical balance and finding an optimum in terms of types, name, levels, numbers and size of federal and state governments. Also challenging is the question of whether optimization can be achieved with identification of appropriate determinants like population, geography and some other context.</div> <div> </div> <div> Among such contexts, the distribution of resources plays a prominent role. This is related with the need divide and assign the economic and revenue rights — PROPERLY — between the governments where resources can be mobilised in right proportion through (double, united or moderate) mechanism. This may require establishing a new set of institutions to run the system. The total size of the national budget will grow as each state will have its own government-legislature, chief minister and ministers and so on. We need consensus to determine a manageable size for all these. </div> <div> </div> <div> While determining the size and number of the provinces, presently available physical and economic resources, density of population, geographical area, level of technology, means of transportation etc should be considered. Another prominent reality to be accepted is the beauty of diversity. The Mountains, hills and the plains — these three geographical regions are interdependent; however all aspects of such dependencies are not measurable economically.</div> <div> </div> <div> The strength of the Hills is water as well as some other natural resources and high possibility of tourism industry. Whereas the strength of the Terai lie in the vast fertile land, urbanization, dense population and more economic activities.</div> <div> </div> <div> However, these factors may change in the future for example; migration may change the demographic structure. In this context, all the political parties and the policy makers need to be careful while allocating the economic resources and political rights between the states and the centre.</div> <div> </div> <div> In conclusion, striking a balance between the economy, politics and social aspirations of people is needed to design an optimum form of federalism. It is really the responsibility of present leadership to work for the next generation for a better and prosperous Nepal.</div> <div> </div> <div> <em>(Writer is an economist and also chairman of National Council for Economic and Development Research (NAREC Nepal)</em></div>', 'published' => true, 'created' => '2013-10-29', 'modified' => '2013-10-29', 'keywords' => 'new business age economy & policy news & articles, economy & policy news & articles from new business age nepal, economy & policy headlines from nepal, current and latest economy & policy news from nepal, economic news from nepal, nepali economy & policy economic news and events, ongoing economy', 'description' => 'There is lot of hue and cry for a new constitution that will have highly suitable federal structure. But, it does not look conducive enough for a successful election followed by good governance. A better Nepal is still a distant dream. Being optimistic, one can say things can be brought back on right track but that is possible only with a strong determination and attitude backed by a rigt thought. It requires quality leaders with logical, inclusive and judicious representation as well as balanced executive 9or administrative structure.', 'sortorder' => '1913', 'image' => null, 'article_date' => '0000-00-00 00:00:00', 'homepage' => false, 'breaking_news' => false, 'main_news' => false, 'in_scroller' => false, 'user_id' => '0' ) ), (int) 9 => array( 'Article' => array( 'id' => '1970', 'article_category_id' => '37', 'title' => 'Commercial Bench In Nepali Courts Prospects And Challenges', 'sub_title' => '', 'summary' => null, 'content' => '<div> <strong>--By Rudra Sharma</strong></div> <div> </div> <div> The Word ‘commercial’ is not easy to define and thereby making it further difficult to define what is commercial case and what a commercial bench is supposed to address. However, there were demands of a commercial court/bench for the last 20 years or so. People in seminars organized by Nepal Rastra Bank in association with the World Bank and International Monetary Fund identified the need of a commercial court/bench in Nepal for appropriate and speedy dispensation of justice in commercial case.</div> <div> </div> <div> In 2063 BS, the Supreme Court has set up a task force on this regard. The task force reviewed several exercises together with some international practices for establishment of Commercial Bench. The Task Force studied the reports of Court Management Committee, 2055 Court Strengthening Committee, 2058 and the Five Year Strategic Planning of the Court (2061- 2066). The Ministry of Law and the Ministry of Industry had also carried out some consultation with the Supreme Court in the year 2059 for the establishment of Commercial Court.</div> <div> </div> <div> A project carried out under the loan assistance of Asian Development Bank namely Improving Legal Enforcement Mechanism and Judicial Capacity had a component called Establishment of Commercial Bench under its package 2 activity. From Manshir 2059, this project carried out activities on establishment of Commercial Bench. This project had hired an expert Hon. C.</div> <div> </div> <div> W. Pincus QC who submitted a report recommending a number of things on establishment of commercial bench. Nepal Judicial Academy (NJA) also worked very closely with this project on the Commercial Bench component. This project had also worked with private sectors like Federation of Nepalese Chambers and Commerce and Industry (FNCCI) and others in this course.</div> <div> </div> <div> According the report of the Task Force, Commercial Cases Baseline Survey, 2003 carried out by Nepal Law campus presents 17 different kinds of cases as commercial cases tried and tested in several courts all over the country. The 17 different kinds of cases are - Company, Secured Transaction, Contract, Insolvency, Banking and Negotiable Instruments, Arbitration, Intellectual Property, Finance, Foreign Investment, Insurance, Security Transaction, Agency, Partnership, Construction, Leasing/Rent, Transportation and any others.</div> <div> </div> <div> Analysing the evolution of concept of Commercial Bench and a comparative study on commercial dispute settlement of some other countries like United Kingdom, United States, India and China, the Task Force has finally put forth 26 suggestions.</div> <div> </div> <div> <span style="font-size: 14px;"><strong>Establishment of Commercial Bench </strong></span></div> <div> On 2065 Magh 1, the government of Nepal established a Commercial Bench in four Appellate Courts namely Biratnagar, Patan, Butwal and Nepalgunj and later added Hetauda Appellate Court also through a notification on 2067 Baisakh 1. These Commercial Benches are provided with jurisdiction to look after cases of Secured Transaction Act, 2063, Competition Promotion and Market Promotion Act, 2063, Company Act, 2063 and Insolvency Act, 2063.</div> <div> </div> <div> Later, the government of Nepal, through a notification published on 2065 Shrwan 5, extended the jurisdiction of the Commercial Benches for the disputes under Banking Offence and Punishment Act, 2066. Most of the cases going to Commercial Bench were filed in the Commercial Bench of Patan Appellate Court. Some 99 commercial cases were filed in the Patan Appellate Court up to the fiscal year 2067, some 154 cases were filed in the fiscal year 2067/068, some 237 cases were filed in the fiscal year 2068/069 and some 263 cases were filed before the completion of the fiscal year 2069/070.</div> <div> </div> <div> After the establishment of the Commercial Bench, a procedure for the same was supposed to be made. In fact, a procedure is also drafted. However, the procedure has not come into force. Company Act, 2063 and Competition & Market Promotion Act, 2063 have provided that lawsuits under these Acts should follow summary proceeding. The Insolvency Act provides for a procedure within itself and that procedure is being followed now generally.</div> <div> </div> <div> No special procedure is prescribed for Secured Transaction Act and Banking Offence Act. These two Acts seem to follow general procedure. Despite the lack of a specific procedure for the Commercial Bench, Chief Judge of the Appellate Court where the Commercial Benches reside have provided for necessary procedural matters as and when required. For example, cases of Commercial Bench are heard by a division bench, other cases related to the case filed in the Commercial Bench are also heard in Commercial Bench, so on and so forth.</div> <div> </div> <div> <span style="font-size: 14px;"><strong>Commercial Bench & Expectations</strong></span></div> <div> The primary expectation with the Commercial Bench was that it would look after all the commercial cases gradually. It was a good beginning that the Commercial Bench was assigned to hear cases under three categories and later under five categories. However, it was very unfortunate that the jurisdiction of the commercial bench was not extended to other cases under other Acts.</div> <div> </div> <div> The basic benchmark to evaluate the function of the Commercial Bench is its comparative worth and value, i.e. what and how it contributed compared to previous court system where there were not Commercial Benches. There are hardly any evidences that the Commercial Bench could prove its worth. This is because, we already have had a regular court system and the Commercial Bench was brought to existence for a better performance and better dispensation of justice with respect to commercial cases. But, unfortunately it did not happen.</div> <div> </div> <div> The Task Force report mentions that the erstwhile judiciary of Nepal was looking after some ten kinds of commercial cases even if there were no such commercial benches. The cases were - dispute related to loan or credit, dispute about security or pledge, dispute related to buying and selling of property, dispute related to trademark, dispute related to commercial loan, dispute related to liquidation of company, dispute related to shareholders of company, Torts related trade and commerce and other economic cases.</div> <div> </div> <div> According to primary expectations and the decade long preparations, the scope of the Commercial Court was supposed to be extended to other commercial cases too and subsequent legal reform as well as administrative reform were also supposed to be made in order to pave a way for the same.</div> <div> </div> <div> It did not happen unfortunately, and this proved to be a major setback for creating condusive environment for invitation of foreign investment in Nepal and also for maintaining as well as retaining investment in Nepal. The exact expectation of about the Commercial Bench was to develop it as a real center for commercial dispute settlement.</div> <div> </div> <div> The Task Force report states that the concept of commercial bench was evolved in an endeavour to create sufficient legal and judicial environment for business as well as economic activities. But we can hardly find evidences to understand how the commercial bench contributed to create such environment. However, it does not mean that the commercial bench did not do anything. But, it should be judged in comparison to the contribution of the regular court system before establishment of commercial bench. According to the Task Force report, the regular court system was looking after 10 different kinds of commercial cases. As the commercial benches took up only cases under five categories, it gave a kind of impression that commercial cases are related to those five cases only.</div> <div> </div> <div> <span style="font-size: 14px;"><strong>Major Challenges</strong></span></div> <div> The major challenge of the Commercial Bench is the mindset of the judicial leadership. The judicial leadership probably thinks that the regular Appellate Courts would be less important if all commercial cases would go to the Commercial Bench. I wish to be wrong at this point. But, it would be very dangerous if the judicial leadership continues to be influenced by such thinking.</div> <div> </div> <div> Another challenge is the lack of competent human resources required for the Commercial Bench. This challenge can be overcome with appropriate will power and leadership of the judicial administration. We cannot import or invent such competent human resources. However, there would be no additional cost for managing the resources already available in the market.</div> <div> </div> <div> On the one hand, commercial cases are not coming to the Commercial Bench due to lack of proper legal arrangements on jurisdiction and on the other hand, there are competing and repeating jurisdictions for the dispensation justice through commercial cases. Several cases are put in arbitration process. Almost all of them are commercial cases. But, the appeal on arbitration settlement goes to the Appellate court but not to the Commercial Bench. The Debt Recovery Tribunal hears cases relating to debt recovery of the banking institutions. Revenue Tribunals look after cases related to taxes. Labour Court hears the cases related to labour issues.</div> <div> </div> <div> The money laundering related cases are handled by the money laundering department. Corruption cases are handled by Commission for the Investigation on Abuse of Authority (CIAA). Criminal Investigation Bureau of Nepal police also carries out investigation in some commercial cases.</div> <div> </div> <div> Thus, the commercial cases are scattered and thereby losing the scope of making the Commercial Bench a hub for settlement of commercial disputes.</div> <div> </div> <div> The Commercial Bench has jurisdiction over the Banking Offense Statute, but it does not have jurisdiction over Banking and Financial Institutions Act (BAFIA). It has been ridiculous practically. Such examples are there in other sectors too.</div> <div> </div> <div> Some of the practices of Appellate Court where the Commercial Bench resides have defeated the very purpose of the Commercial Bench. A case demanding for interim relief does not go to the Commercial Bench. Regular Bench hears it. Once a party receives interim order, it keeps on postponing the hearing date, pending the interim order. Sometimes, such cases are postponed for many times even from the weekly calendar putting a trouble to the opposite party to even to identify whether the hearing date was postponed or not.</div> <div> </div> <div> Such practices are serious fraud on the administration of justice and responsible persons must be punished.</div> <div> </div> <div> In most of the times, dispute on contract cases that happen to be commercial cases do not go to Commercial Bench. The prevailing contract law has provided interim relief in the form of appropriate order. In such situation, the existence of Commercial Bench happens to be a great irony.</div> <div> </div> <div> Great difficulty is experienced in Nepal for administration of contract, especially international contract. The courts generally provide stay order depriving the aggrieved party from carrying out the necessary activities according to the contract. Such a situation causes great mockery of the existence of the Commercial Bench.</div> <div> </div> <div> Due to the above reasons, the expectation that Commercial Bench would establish a minimum predictable legal environment on doing business in Nepal remains a distant dream. This has put a great threat for the invitation of foreign investment in Nepal. The Commercial Bench should overcome all these challenges in the time to come.</div> <div> </div> <div> <span style="font-size: 14px;"><strong>Experiences of India on Commercial Bench</strong></span></div> <div> In the year 2009, the Lok Shaba of India passed the Commercial Division of High Court Bill, 2009. But, the Bill is yet to be passed by the Rajya Saba.</div> <div> </div> <div> The Bill envisages separate divisions in each high courts to handle commercial disputes above certain value along with a procedure for the same. In the same year 2009, the Delhi high court established arbitration center and gave a message that the Indian judiciary was not anti-arbitration. In the same year 2009, London Court of International Arbitration set up a center in India. These two institutions paved way for institutional arbitration in India as an effective tool for settlement of commercial disputes.</div> <div> </div> <div> The Indian courts have made controversial interpretations of the Indian Arbitration & Conciliation Act, 1996. In the case of SBP & Co versus Patel engineering the Indian Supreme Court upheld the role of courts in appointment of arbitrator if one of the parties fails to nominate an arbitrator. This decision has been criticized as it put a great hurdle to separate arbitration from court. But in the year 2012 September, the Indian Supreme Court in the case of Bharat Aluminum Company Ltd. ( BALCO) versus Kaiser Aluminum Technical Service ruled that the Indian Arbitration Act will not apply if the arbitration proceeding are held outside India. This ruling of the Indian Supreme Court has been praised from many quarters as it has helped to separate domestic and international arbitration as well as separating arbitration from the courts.</div> <div> </div> <div> It seems that the establishment of arbitration center at the Delhi high court demonstrates the willingness of Indian judiciary to make the high court as hub of settling commercial dispute and the Supreme Court ruling of</div> <div> </div> <div> 2012 in the case of BALCO shows the willingness of Indian judiciary to separate arbitration from judiciary. It seems that these all issues will be categorically addressed by the pending Bill called the Commercial Division of High Court Bill, 2009. The underlined aim of all these schemes would be making India a preferred investment destination as the courts will provide a minimum predictability on legal environment.</div> <div> </div> <div> <span style="font-size: 14px;"><strong>International Dimensions</strong></span></div> <div> Nepal became member of World Trade Organization (WTO) nine years ago making several commitments for harmonization as well as standardization of administration of trade law in accordance with the provisions of the United Nations Commission on International Trade Law (UNCITRAL). Section 34 of the Arbitration Act, 2055 provides for enforcement of foreign arbitral awards.</div> <div> </div> <div> But, there are some cases where the Appellate Court has refused for enforcement of some foreign arbitral awards and the appeal on such decisions of the Appellate court are pending at the Supreme Court. Our legal ecosystem should be clear at this point and the commercial bench should take lead on this.</div> <div> </div> <div> <span style="font-size: 14px;"><strong>How Commercial Bench should be </strong></span></div> <div> Therefore, the commercial bench in future should be able to be a hub and ultimate resort for the settlement of disputes related to commercial laws.</div> <div> </div> <div> Further, it should be established as a center of trust among the investors as well as among the public that the commercial bench ensures settlement of commercial disputes in tune of time. It will not be necessary that the commercial bench itself hears all disputes. But it should be the ultimate resort for settlement of such disputes. For this purpose, we need to make legal as well as administrative mechanisms that all commercial law related cases can ultimately reach to the commercial bench.</div> <div> </div> <div> We can continue separate arrangements of hearing commercial law related cases at the court of first instances like Labour Court, Revenue Court or Tribunal, Debut Recovery Tribunal. Besides, we also need to encourage to settle commercial law related cases through the means of alternative dispute settlement like arbitration, mediation, conciliation etc. However, commercial law disputes settled in all these court of first instances and cases settled through alternative dispute settlement mechanism should ultimately find their way to the commercial bench. Such arrangements should be all over the country not only in Kathmandu. We can make an arrangement that disputes involving certain amount or above should go directly to the commercial bench instead of the court of first instances.</div> <div> </div> <div> The commercial bench should also take over the newly emerging commercial cases. Cases related to banking institutions are prominent example, such as cases related to bounced, dishonoured of cheques, debt recovery and banking offence. There is a need of legal as well as administrative provisions on asset management. Lack of this has hampered expected functioning of banking system.</div> <div> </div> <div> The commercial bench in future should look after comparatively complex cases on banking law. There is a room to argue that the Banking Offenses Act seems to be draconian, providing scope for being misused. This Act is disproportionate since this gives higher hand to the regulating body Nepal Rastra Bank to take such action that may kill the institution instead of correcting it and functioning it again after action from Nepal Rastra Bank.</div> <div> </div> <div> Nepal Rastra Bank may feel the need of such law since the court system is not effective as mentioned above. However, a draconian law would not be an answer for non-effective court system. So, we need to improve the court system rather than practicing draconian laws. We need such legal system where the central bank can take action against the banking institutions for corrective measures, put them in the legal process and the banking institutions again functions after the central bank takes action. Taking action by central bank against banking institution should be a regular process rather than a fateful disaster.</div> <div> </div> <div> Other newly emerging cases on commercial law are related to money laundering, insolvency and trans-border commercial cases. Money laundering is a part of criminal law. But since it is a matter of financial crime but still it can be seen within the parameter of commercial law. International commitments as well as domestic needs have compelled to make the legal as well as administrative regimes on money laundering more stringent. It is said that this regime in the offing will compel to change over 40 prevailing laws on administration of criminal justice. The future commercial bench should be a center for hope and trust for the settlement of cases related to these all emerging commercial laws.</div> <div> </div> <div> The commercial bench should have a proper reporting system. The cases settled by commercial bench should be discussed publicly in the Bars and among the academics.</div> <div> </div> <div> <span style="font-size: 14px;"><strong>Conclusion and Recommendations </strong></span></div> <div> Though Commercial bench could not prove its expected significance as we need to appreciate the initiations made and need to continue efforts to update and standardise it in accordance with need of the day.</div> <div> </div> <div> <span style="font-size: 14px;"><strong>Recommendations</strong></span></div> <div> 1. We need to seriously review the efforts made till date for establishment of Commercial Bench together with mapping the expectations made during such endeavours.</div> <div> 2. We need to extend the scope as well as jurisdiction of the commercial bench ensuring that all commercial cases either directly go to the commercial bench or go to other courts or tribunals that are supervised by the commercial bench.</div> <div> 3. There should be commercial benches covering all jurisdictions of Nepal.</div> <div> 4. Some cases having commercial issues may not go to commercial bench if such cases have monetary value in the disputes less than prescribed. Principally, it should be determined that commercial bench is to serve the purpose of establishing a preferred destination for investment, and therefore, it serves the creating conducive atmosphere for investment rather than establishing judicial principles. Prolonged judicial process and lengthy interpretations of statues can be done in regular courts not by commercial benches.</div> <div> 5. Among the commercial bench all over the country, there should be one commercial bench at the center Kathmandu with fast tract procedure. Commercial cases with certain threshold of investment and some other special circumstances should only go to this Fast Track Commercial Bench. Such arrangement would boost up confidence of investors.</div> <div> 6. There should be proper reporting system of the cases decided by the commercial benches so that the legal community as well as business community can provide feedback on the decisions by carrying out discussion on them.</div> <div> 7. There should be special efforts for legal reforms in order to accomplish the task of transforming the present commercial bench so that it can carry out all above mentioned matters.</div> <div> 8. Administration of commercial cases and legal reform should be carried out considering the international commitments of Nepal under WTO, UNCITRAL and other similar mechanisms.</div> <div> </div> <div> 9. Success stories of some countries like Singapore should be considered and we need to make analysis why Singapore scores over India on settlement of corporate conflict.</div> <div> </div> <div> <em><span style="background-color: rgb(240, 255, 240);">(Based on a paper prepared under an assignment of Commercial Law Committee of Supreme Court Bar Association. The writer is associated with Transactional Law House, an international law firm based in Kathmandu. He can be reached at rudralawyer@gmail.com. Cell- 9851057087.)</span></em></div> <div> </div> <div> <hr /> <div style="text-align: center;"> <span style="font-size: 16px;"><strong>“Lacunae in the legal system need to be minimised to attract foreign investors”</strong></span></div> <p> </p> <div> <strong style="font-size: 14px;"><img alt="Shreekant Poudel, the spokesperson of the Supreme Court" src="/userfiles/images/ep1.jpg" style="float: left; margin: 0px 10px 0px 0px; width: 200px; height: 246px;" />Shreekant Poudel</strong><span style="font-size: 14px;">, the spokesperson of the Supreme Court, in an interview with Britant Khanal of New Business Age he shed light on the introduction of commercial bench and its need.</span><strong style="font-size: 14px;"> Exceprts:</strong></div> <div> </div> <div> <span style="font-size: 14px;"><strong>Could you highlight the reason behind establishing the commercial bench?</strong></span></div> <div> The first and foremost reason behind the establishment of this bench is the need for speedy justice, easy access and quick legal remedies for the commercial sector. Even more important is the demand made by the law in many acts after the Second Jana Andolan. It is clearly mentioned that such and such cases will be dealt by the commercial bench like for instance in Section Z8 of the Company Act. After 2006, the World Bank had also suggested the requirement of such a bench. The Company Act, the Secured Transaction Act and other acts related to safe competition have mentioned the requirement of this bench. Was this issue initiated by ADB? I don’t think so but the ADB had some general interest and it had recommended on bringing such a bench too.</div> <div> </div> <div> <span style="font-size: 14px;"><strong>What new prospects will the bench bring? Will it have the same old practices disguised as new?</strong></span></div> <div> In the process of establishing this bench we had to train judges, judicial staffs and even lawyers. The training lasts from one to one-and-a-half months as it required. The judges who attend the training are only sent to the bench for hearing commercial cases. The new commercial bench will therefore slowly shed some old ways.</div> <div> </div> <div> <span style="font-size: 14px;"><strong>There seems to be a paradox in the bench being established for the benefit of the commercial sector while the jurisdiction seems a bit scattered, vague and ambiguous. Could you talk a little about this? </strong></span></div> <div> We are still in the initial phase of establishing the bench. As I know, the initial requirement was to set up a separate commercial court, which came down to establishing a commercial bench in appellate courts. This was required because cases related to the commercial sector are heard in a scattered manner. For example, cases of contract are first heard by the district court, patents are heard by the department of industry, and many other cases are addressed by the Nepal Rastriya Bank (NRB) too. Therefore, a common institution to streamline all commercial cases and bring them under one umbrella seemed to be necessary.</div> <div> </div> <div> Home work is yet to be completed. It was rightly questioned whether or not offences in banking will be dealt by the commercial bench. The issue is still subject to research and analysis. There are other issues including intellectual property and cases of revenue tribunal. We are striving to bring all of these cases under the commercial bench.</div> <div> </div> <div> <img alt="Fiscal Year 2069/70 Cases Regarding Commercial Bench." src="/userfiles/images/ep2.jpg" style="width: 500px; height: 187px; margin-left: 20px; margin-right: 20px;" /></div> <div> <span style="font-size: 14px;"><strong> </strong></span></div> <div> <span style="font-size: 14px;"><strong>Has the bench been established in all appellate courts in the country?</strong></span></div> <div> No, we have not established commercial benches in all appellate courts as they are established in a need-based manner. The previous chief justice had recommended the bench to be established in six places including Pokhara but later it was only established in four places. We therefore have established this bench in five places including one in Hetauda which was established in 2011 and rest four at Biratnagar, Butwal, Nepalgunj and Patan.</div> <div> </div> <div> <span style="font-size: 14px;"><strong>Because this is a new and western practice, will we require a foreign consultation for the bench?</strong></span></div> <div> For now our resources have being doing a very good job but like you suggested, if there is a situation that demands foreign consultation, we can higher or send our resources for foreign education and exchange programmes but again, that will require the demand of the context.</div> <div> </div> </div> <hr /> <div style="text-align: center;"> <strong><span style="font-size: 16px;">“Judges need training”</span></strong></div> <p> </p> <div> <span style="font-size: 14px;"><img alt="Gandhi Pandit" src="/userfiles/images/ep3.jpg" style="float: left; margin: 0px 10px 0px 0px; width: 200px; height: 246px;" />A well known advocate <strong>Gandhi Pandit</strong>, in an interview with Britant Khanal of New Business Age highlighted a pragmatic approach to commercial bench. <strong>Exceprts:</strong></span></div> <div> </div> <div> <span style="font-size: 14px;"><strong>What is your opinion on the newly established commercial benches?</strong></span></div> <div> The judges must be competent to deal with all kinds of cases, but honestly, that is not possible all the time because of growing trade issues in the domestic and global markets. Some of the cases are so sophisticated that they require experts, which is not available in the country. Smooth functioning of the economy will require a better legal system, which will support rapid growth and development. Therefore, current situation demands a specialised commercial bench. </div> <div> </div> <div> <span style="font-size: 14px;"><strong>Where can we trace the footprints of this system?</strong></span></div> <div> This system can be traced to the continental legal system, commonly understood as the French and German legal system. In these systems, we can see the trends of a commercial tribunal, a labour tribunal, an industrial tribunal, among others. In these kinds of tribunals, the specialised skills of various sectors are brought together for the better understanding of the case. And this system was later followed by Britain and the US. This pragmatic approach has led to speedy justice and quick legal remedies in these nations. But in our context, we are still lagging behind. Our judges are still traditional and are only specialised in traditional issues such as cases of land dispute, writ petition, etc. We don’t have expertise on cases like letter of credit, IT law, intellectual property law, cases of trademark and so on. Even if they want to learn it, they have not been able to acquire such knowledge due to lack of infrastructure.</div> <div> </div> <div> <span style="font-size: 14px;"><strong>What could be the possible solution to such lacunae?</strong></span></div> <div> Only establishing the bench will not do the justice. Establishing the bench is one thing and effectiveness is another. The benefit expected has not yet been reaped due to inexperienced people in the field and it is not unwillingness on their part - they don’t have that access to knowledge. As judges are frequently transferred to places without access to such knowledge, they will require a proper training, and attending the training only once will not make an impact as there has to be periodic training which we are lacking. The national judicial academy has been training judges but in the same traditional cases only. Not enough training has been provided in the field of modern commercial issues. Another major problem is procedural delay. Our legal system has a very lengthy procedure before the cases reach the final hearing. These kinds of hurdles will further delay justice and so they will have to be reduced to a minimum. Such deficiencies in the system will give a very wrong message to foreign investors.</div>', 'published' => true, 'created' => '2013-10-09', 'modified' => '2013-10-17', 'keywords' => 'new business age economy & policy news & articles, economy & policy news & articles from new business age nepal, economy & policy headlines from nepal, current and latest economy & policy news from nepal, economic news from nepal, nepali economy & policy economic news and events, ongoing economy', 'description' => 'The Word ‘commercial’ is not easy to define and thereby making it further difficult to define what is commercial case and what a commercial bench is supposed to address.', 'sortorder' => '1821', 'image' => null, 'article_date' => '0000-00-00 00:00:00', 'homepage' => false, 'breaking_news' => false, 'main_news' => false, 'in_scroller' => false, 'user_id' => '0' ) ), (int) 10 => array( 'Article' => array( 'id' => '1869', 'article_category_id' => '37', 'title' => 'The Gold Price Paradox', 'sub_title' => '', 'summary' => null, 'content' => '<div> </div> <div> </div> <div> The price of yellow metal (gold) has fallen sharply by more than 25 per cent in the international market during last four consecutive business months.</div> <div> And to be more precise it is the biggest drop in the last 35 years. Market study revealed that it has fallen approximately 30 per cent per ounce in 2013 only.</div> <div> </div> <div> The steep fall in the gold price drew mixed reactions and different opinions among bullion experts, economists, buyers, central bankers as well as the bullion traders.</div> <div> </div> <div> Some of them fear that the gold price will further go down in the near future citing the Cyprus crises, which is planning to sell off a huge gold reserve worth 400m Euros.</div> <div> </div> <div> Not the least, the unanticipated slowdown in the Chinese economic growth, continuous improvements in the US markets and decline in demand from India drove the yellow metal to fall further to the worry.</div> <div> </div> <div> A section of market experts have argued that the recent fall in gold price is not supported by the fundamentals rather it is the result of speculation in derivatives markets following the untested rumors and sparked declines across commodities. Hence they believed that the gold price will go up after the biggest plunge.</div> <div> </div> <div> According them, the price of gold will be backed by good demand from physical investors, arbitrators and jewelers.</div> <div> </div> <div> In June 15 analysts surveyed by Bloomberg expected that the gold prices will increase in near future. They have also researched experts view and analysts about the movement of gold price.</div> <div> </div> <div> According to the Bombay Bullion Association (BBA) the gold price will go up as the Asian buyers have stepped up their purchase following its fall in terms of price, imports by India, which is the world’s biggest consumer. BBA expected that the demand for gold in India is likely to jump by 36 percent in the 2013.</div> <div> </div> <div> However, Goldman Sachs Group, an American multinational investment banking firm that engages in global investment banking, securities, investment management, and other financial services primarily with institutional clients, predicted that the gold price may drop below USD 1000 per ounce within this year as the biggest hedge funds have reduced bets on gold at higher prices. Similarly, another school of thought argued that the investment on exchange-traded funds (ETFs) linked to gold have dropped by USD 37.2 billion in the first half of 2013, the fastest fall in last five years. In this back drop, they expected that the price of gold will further drop.</div> <div> </div> <div> At the same time, central banks that hold large gold reserves are also divided in to two fractions fueling the controversy on gold price movement. The central bankers are also being the part of paradox whether gold is cheap enough to increase investment as the price is USD 750 cheaper per ounce since the record high in November, 2011.</div> <div> </div> <div> The central bank of Sri Lanka and Scotland already said that the falling prices are an opportunity for nations to raise gold reserves. But the central banks of Korea and Australia said the plunge in gold price is not a big concern because gold has no intrinsic value and holding the yellow metal is part of a long-term strategy for diversifying currency reserves.</div> <div> </div> <div> Likewise, Deutsche Bank said that the gold has entered a new reality and may reach as low as USD 1050 an ounce to bring its valuation back to the historical averages. The trend line draw from the USD 435 an ounce, average of 2005, also indicates that the inflation adjusted price of gold should now be hanging around the psychological level of USD 1000 per ounce. </div> <div> </div> <div> Regarding the determinants of gold price, various scholars have conducted scientific studies with well researched econometric models and attempted to draw conclusions about the determinants of the gold price. Traditionally, most of the empirical studies closes down to three major findings, which emerge with respect to the analysis of long-run determinants of gold price.</div> <div> •<span class="Apple-tab-span" style="white-space: pre;"> </span>First, there is a long-term relationship between the price of gold and the US inflation indicated by the consumer price index.</div> <div> •<span class="Apple-tab-span" style="white-space: pre;"> </span>Second, the global inflation and gold price move together in a statistically significant long-run relationship. This evidence substantiates the belief that gold is a long-term hedge against inflation.</div> <div> •<span class="Apple-tab-span" style="white-space: pre;"> </span>Third, an external shocks that causes a deviation from this long-term relationship and there is a slow reversion back towards it.</div> <div> </div> <div> This means, although there is a possibility of seasonal variation as well as cyclical movement in the gold price in short and medium term, in the long run it will be guided by the global inflation in general and US inflation in particular.</div> <div> </div> <div> In effect, the consequences of external shocks, there may be the deviation from the long-term relationship between the price of gold and the US inflation. This attracted the scholars and analyst to think beyond the long-run determinants and that the US economy as well as the USD is only the counterpart of the gold in international market. They attempted to analyze the short-run determinants of gold price taking other factors than US inflation and USD into consideration. Accordingly, the short-run analysis found that there is a positive relationship between gold price movements and changes in global interest rate along with major macroeconomic variables, US inflation volatility and credit as well as operation risk in the major financial markets of the world. </div> <div> </div> <div> <img alt="" src="/userfiles/images/ep7%20(Copy).jpg" style="width: 500px; height: 284px; margin-left: 20px; margin-right: 20px;" /></div> <div> </div> <div> Some other studies have revealed that there is a negative relationship between changes in the gold price and changes in the US dollar trade-weighted exchange rate against the major currencies, which are included in the basket of global reserve currencies. However, the findings reveal that the significant negative parameter on the “error correction mechanism” reflects the slow return of the gold price to its long-run relationship. These findings are in accordance with the theoretical framework put forward that the gold is safe haven for the versatile investors and one of the assets class for government and the central banks. Besides, there are some fundamentals of demand and of supply, which can influence the price of gold as in case of other commodities in perfect competition market.</div> <div> </div> <div> However, some of the empirical studies reveal that there was no significant relationship between changes in gold price and its physical demand. Rather the price of gold has been driving by the virtual demand generated from the derivatives markets since there are hundreds times higher demand than that of the actual gold production across the world. Such artificial demand has especially been created by the speculators who want to mint money over the fluctuating price of any assets including gold. Every time they were trying to catch changes in gold price citing the change in world inflation, interest rate volatility, world income and the unproved rumors like central bank X is planning to sell this much of gold or huge gold reserve is identified in Y country etc.</div> <div> </div> <div> Against these theoretical as well as hardnosed backgrounds, there is a major unresolved issue that gold is the most attractive as well as the most risky asset worldwide. The crucial question one may ask include — Is gold the long-run hedge of US inflation? If so, is that matters for countries other than the US? Was there positive relationship between the price of gold and the US inflation during the recent financial crisis when the US inflation was almost zero or negative in some quarters but gold price was breaking record high successively? These are the crucial questions that no study or school of thought can answer correctly.</div> <div> </div> <div> But the fact is this is the glitter of gold and will remain same in the future as well. </div> <div> </div> <div> <em>(Writer is Deputy Director at Confederation of Nepalese Industries (CNI) )</em></div>', 'published' => true, 'created' => '2013-09-25', 'modified' => '0000-00-00', 'keywords' => 'new business age economy & policy news & articles, economy & policy news & articles from new business age nepal, economy & policy headlines from nepal, current and latest economy & policy news from nepal, economic news from nepal, nepali economy & policy economic news and events, ongoing economy', 'description' => 'The price of yellow metal (gold) has fallen sharply by more than 25 per cent in the international market during last four consecutive business months.', 'sortorder' => '1730', 'image' => null, 'article_date' => '0000-00-00 00:00:00', 'homepage' => false, 'breaking_news' => false, 'main_news' => false, 'in_scroller' => false, 'user_id' => '0' ) ), (int) 11 => array( 'Article' => array( 'id' => '1680', 'article_category_id' => '37', 'title' => 'Gold And So-Called Regulated Gold Market In Nepal!', 'sub_title' => '', 'summary' => null, 'content' => '<div> </div> <div> <strong>--By Chittaranjan Pandey</strong></div> <div> </div> <div> Gold is a very important component of the human lives on the earth today. Gold not only has the metallic value but also has been used as a hedge against several risks in the human life. Today gold is used from medicines to luxury. The use of gold carries lots of historical and mythological values beyond the regular usage we talked about. </div> <div> </div> <div> <div> अग्नेः प्रजातं परि यत् हिरण्यम्</div> <div> अमृतं दघे अधिमत्र्येषु</div> <div> यएनव्देद स इदेनमर्हति</div> <div> जरार्मृत्युर्भवति यो बिभर्ति ।।</div> <div> – अथर्व वेद, काण्ड १९, सूक्त २६, ऋचा १</div> </div> <div> </div> <div> The above lines from Atharvaveda mean “I adorn gold created or originated from fire which bestows eternity. One who adorns it is liberated from the fear of untimely death.” This signifies how gold has gained so much of significance for us. To go deep with the importance of gold, the yellow metal is believed to be the most sattvik, meaning holy, divine or serene. It is also believed that gold destroys most of the harmful germs in our body and using gold enhances the absorption of divine energy to greater extent. Specifically, in case of women, it is believed that when women put on gold ornaments, the shakti-roop is activated and the whole family is protected. </div> <div> </div> <div> The above mentioned reasons only signify why gold has received so much of mythological importance. Coming to these days, when people have started to take themselves above the cultural and traditional barriers, most of the things do not have the same shape. Yet, gold is successful enough to declare its commercial importance and has been luring people almost every corner of the world. </div> <div> </div> <div> When I talk about gold, how can I miss out talking about its importance in the currency management worldwide? Gold has played an important role in backing up the currency worldwide for long but these days, the scenario is different. We usually hear about the inverse relation of gold and US dollar. To explore the same, we need to dig back further. It was long back during the World War I when the warring nations shifted their money to a miniscule gold standard, thus bloating their own currencies to finance the war. Gold backed currency system thus lasted for long but the problem it invited was that all the countries wanted to deposit more gold to strengthen their currency which resulted major economic shocks. Coming to the era of Second World War also, the world was still tangled with the hard power and humanitarian crisis. But after the Second World War, Bretton Woods conference was organized and International Bank for Reconstruction and Development (IBRD-present World Bank) and International Monetary Fund (IMF) - called Bretton Woods Institutions were formed. Gold standard and the direct convertibility of the currencies were eradicated. Because United States was the most dominant power after the war, US Dollar was backed by gold and almost all other currencies in the world accepted US dollar to back up their currencies. Besides that, gold is held by many in various forms as a hedge against inflation and other economic disruptions. One of the most common forms of usage of gold in our society is the jewelry. Gold itself is very inert so gold salts are used for various medicinal purposes also. Gold salts are used for the treatment of arthritis; gold based injections heal and minimize the pain and swelling of rheumatoid arthritis and tuberculosis. Gold is also important in dentistry helping for restorations. Other very important use of the gold is for electroplating of gold onto base metals. </div> <div> </div> <div> After we go through the various usage forms of the precious yellow metal, we can explore why this stands as a luring metal in the market to earn maximum profit in various ways. The news heating the market these days is that the gold price is decreasing rampantly but domestic price of the gold in Nepal is not responding to it well. When there is a price hike, gold traders in our country do not wait a second to raise the price but when it is falling, the traders do not want to sell any gold to the people. Isn’t this pathetic regulation? More frustratingly, the strike of the gold traders broke with an interesting end- “Not penalizing the guilty”. The gold traders would start selling gold only when the government assures that the thug is not penalized. </div> <div> </div> <div> Please have a look at table to know how the price of gold is derived and how much of profit our gold traders earn: </div> <div> </div> <div> For instance, I have taken the price of gold on 26th June, 2013, the moment when price was US$1223.20 per ounce. </div> <div> </div> <div> Through various newspaper articles, people must be aware that the market demand for gold remains around 40 kg per day whereas traders believe that the daily consumption of gold in the market remains around 30 kg on an average. On the contrary, Nepal Rastra Bank sells only 15 kg of gold daily in the market through various assigned commercial banks. On an average, there is a deficit supply of almost 15 kg. We all know gold market is REGULATED in Nepal. So let’s not focus much on where the remaining gold to meet the market demand comes from. Rather I would like to explore with the economic benefit from the gold trading only. Even if we deduct Rs. 1000 per 10 grams as the additional costs, insurance cost- which is too much in itself and usually comes to almost half of that amount, the profit of the traders is Rs. 1085.23 per 10 grams. This means in one kilogram of gold, the traders earn Rs. 1,08,523.00 on an average. Similarly, for the official 15 kg of gold, the total earning of the traders become Rs. 16,27,845.00 on an average. These numbers will keep on growing if we intend to show their weekly and monthly income. </div> <div> </div> <table align="center" bgcolor="#E5E4E2" border="0" cellpadding="10" cellspacing="0" style="width: 500px;" td=""> <caption> <strong><span style="font-size: 14px;">Gold Price Calculation</span></strong></caption> <tbody> <tr> </tr> <tr> <td> <strong>Particulars</strong></td> <td> <strong>Price (NRs.)</strong></td> <td> <strong>Remarks</strong></td> </tr> <tr> <td> <strong><span style="font-size: 11px;">Per Ounce (As per Reuters)</span></strong></td> <td> <strong><span style="font-size: 11px;">1223.20 (USD)</span></strong></td> <td> </td> </tr> <tr> <td> <strong><span style="font-size: 11px;">NPR/USD Selling Rate (As per NRB)</span></strong></td> <td> <strong><span style="font-size: 11px;">95.51</span></strong></td> <td> </td> </tr> <tr> <td> <strong><span style="font-size: 11px;">Gold Rate in USD (Per 10 Grams)</span></strong></td> <td> <strong><span style="font-size: 11px;">391.35</span></strong></td> <td> <strong><span style="font-size: 11px;">(((1223.20*0.995))/31.1)*10</span></strong></td> </tr> <tr> <td> <strong><span style="font-size: 11px;">In NPR (Per 10 Grams)</span></strong></td> <td> <strong><span style="font-size: 11px;">37,224.77</span></strong></td> <td> <strong><span style="font-size: 11px;">(392.24*95.51)</span></strong></td> </tr> <tr> <td> <div> <strong><span style="font-size: 11px;">Add Customs</span></strong></div> <div> <strong><span style="font-size: 11px;">(As per Republica Article)</span></strong></div> </td> <td> <strong><span style="font-size: 11px;">3000</span></strong></td> <td> </td> </tr> <tr> <td> <strong><span style="font-size: 11px;">Total (Per 10 Grams)</span></strong></td> <td> <strong><span style="font-size: 11px;">40,224.77</span></strong></td> <td> <div> <strong><span style="font-size: 11px;">(Adding Price in NPR</span></strong></div> <div> <strong><span style="font-size: 11px;">and Customs)</span></strong></div> </td> </tr> <tr> <td> <strong><span style="font-size: 11px;">Market Price (NEGOSIDA)</span></strong></td> <td> <strong><span style="font-size: 11px;">42,310.00</span></strong></td> <td> </td> </tr> <tr> <td> <strong><span style="font-size: 11px;">Difference in Price (Per 10 Grams)</span></strong></td> <td> <strong><span style="font-size: 11px;">2085.23</span></strong></td> <td> <div> <strong><span style="font-size: 11px;">(Additional Cost, Insurance</span></strong></div> <div> <strong><span style="font-size: 11px;">and Profi t)</span></strong></div> </td> </tr> </tbody> </table> <div> </div> <div> The story does not end here. When we look into the real scenario, if jewelry is made out of 10 gram gold, 1 gram of other metal, besides gold,is used on an average for the bonding and many other purposes. This means that when a customer buys 10 gram of gold, s/he actually purchases only 9 grams of gold on an average. Besides that, when the price of gold increases internationally, the increment in price is implemented so promptly but when the price of gold decreases internationally, the case is different. It takes a long time for the authorized traders’ association to adjust the decreased price of gold. This clearly shows that the ethics is slumping in the REGULATED gold market of the country. Moreover, the traders go on strike, the shops are closed when price goes down as if there is no gold supply in the market which is totally against the economic theory. Other things remaining the same, the price of a commodity goes down only when the supply of the commodity increases. Unethical cartel is rampant in the gold market here. </div> <div> </div> <div> Is there no option to this? Globally, the option to this is the authorized commodity exchange which can deliver gold to the public cheaper than the other sellers. People can buy gold from the exchange and ask the jewelry shops to make the jewelry as per their requirement or they can also trade back the gold on their will. A remarkable benefit from the exchange is that people do not have to wait for hours or days for the gold price adjustments, the adjustments happen promptly in the software of exchange. Quality of the gold is not compromised; it is the same that the Nepal Rastra Bank authenticates, because the exchange will buy gold from the banks only. On the same price level given in the example above, the exchange can deliver gold at price below Rs. 41,200 per 10 grams. Isn’t this profitable to customers? This will exactly be the WIN-WIN situation for both the counterparties. </div> <div> </div> <div> What the country is lacking is the regulatory framework and the market is lacking the business ethics on the whole, thus losing the customers’ faith and confidence from the market. Isn’t it high time government starts taking commodity exchange as an alternative to maintain market equilibrium?</div> <div> </div> <div> <span style="font-size: 11px;"><em>(Pandey is Assistant Manager, Research & Development Department at MEX Nepal Ltd.)</em></span></div> <div> </div> <div> <em>Disclaimer: The views and expressions expressed in the article are entirely personal and my employer has nothing to do with it. This is an informational piece of writing and has no intention to provoke any individual, group or entity.</em></div> <div> </div>', 'published' => true, 'created' => '2013-08-23', 'modified' => '0000-00-00', 'keywords' => 'new business age economy & policy news & articles, economy & policy news & articles from new business age nepal, economy & policy headlines from nepal, current and latest economy & policy news from nepal, economic news from nepal, nepali economy & policy economic news and events, ongoing economy', 'description' => 'Gold is a very important component of the human lives on the earth today. Gold not only has the metallic value but also has been used as a hedge against several risks in the human life.', 'sortorder' => '1541', 'image' => null, 'article_date' => '0000-00-00 00:00:00', 'homepage' => false, 'breaking_news' => false, 'main_news' => false, 'in_scroller' => false, 'user_id' => '0' ) ), (int) 12 => array( 'Article' => array( 'id' => '1012', 'article_category_id' => '37', 'title' => 'Can Nepal Achieve 7 Per Cent Economic Growth Rate?', 'sub_title' => '', 'summary' => null, 'content' => '<p> <span style="font-size: 12px;">The Nepali economy has not been doing well for the past many years. According to Nepal Rastra Bank (NRB), the country’s economic growth rate has remained sluggish for the past many years, mainly because of the decade-long conflict and political instability. In the period from FY 2001/02 to 2011/12, Nepal’s GDP growth rate has crossed the five percent mark only once (in FY 2007/08 when the growth rate was 6.10 per cent), according to the Central Department of Statistics. However, Nepal’s highest GDP growth rate so far was recorded in FY 1994/95, a year before the Maoist insurgency started in Nepal. Almost all economists and development experts agree that Nepal’s economic performance will not improve unless there is political stability. </span></p> <p> We find that the economic growth rate increases when the agricultural growth rate is high (agriculture contributes to more than one-third of Nepal’s GDP). However, the growth in agriculture is dependent on monsoon rains; it is high when the country receives a good rainfall and low when the rainfall is low. The projected economic growth rate for the current fiscal year 2012/13 has already been revised twice – first from 5 per cent to 4.1 and then to 3.5 most recently. This means Nepal will have to double its current economic growth rate if it is to achieve a healthy growth rate of 7 per cent. That is clearly a tall order. </p> <p> However, is that an impossible target for Nepal? Or can the country really achieve this target? If it can, how and through what measures? We asked these questions to a number of economists and development experts. Their responses are given below: </p> <p> <a href="http://newbusinessage.com/Economy%20&%20Policy/1011">‘Focus on agriculture and industrialisation’</a></p> <p> <a href="http://newbusinessage.com/Economy%20&%20Policy/1010" style="font-size: 12px;">‘Political stability <span style="font-size: 12px;">is a must’ </span></a></p> <p> <a href="http://newbusinessage.com/Economy%20&%20Policy/1009">‘Seven percent growth rate possible’</a></p> <p> <a href="http://newbusinessage.com/Economy%20&%20Policy/1008">‘Need for political consensus on fundamental issues of development’</a></p> <p> <a href="http://newbusinessage.com/Economy%20&%20Policy/1007">‘Nepal has the potential to achieve 7% growth rate’</a></p> <p> <a href="http://newbusinessage.com/Economy%20&%20Policy/1006">‘Focus on tourism, productivity and exports’</a></p> <p> <strong style="font-size: 12px;"><br /> </strong></p> <p> <strong style="font-size: 12px;">Economic Prospects</strong></p> <p> <span style="font-size: 12px;">The economic outlook for Nepal hinges on how political uncertainties are resolved, the weather, and remittance inflows. Investor confidence is depressed by concerns over the political transition, now in its fifth year, following the dissolution in May 2012 of the Constituent Assembly, which failed to agree on a constitution. Recently, the political parties agreed to form a caretaker government led by the Chief Justice, which is expected to hold a Constituent Assembly election by 21 June 2013.</span></p> <p> In view of the unfavorable monsoon, the shortage of fertilizers during the peak paddy planting season, low business confidence, the lack of a parliamentary-approved full budget, and subdued growth in India, GDP is projected to slow to 3.5% in FY2013. Production of paddy is projected to fall by 11.3%, maize by 8%, and millet by 2%. The lack of a full budget is causing funding shortages for ongoing development activities. While the industry sector performance is expected to remain weak, services growth is expected to continue to grow at around 5.4%. With a favorable monsoon, adequate fertilizer supplies, the timely adoption of a budget, and moderate expansion of remittances, GDP growth would rebound to 4.2% in FY2014.</p> <p> <img alt="Annual GDP growth rate" height="319" src="http://www.newbusinessage.com/ckfinder/userfiles/Images/economy_and_policy_may2013_annual_gdp.jpg" style="margin:0 10px 0 0;" width="595" /></p> <p> (Source: Asian Development Outlook 2013)</p>', 'published' => true, 'created' => '2013-05-23', 'modified' => '2013-06-08', 'keywords' => 'Can Nepal Achieve 7 Per Cent Economic Growth Rate?', 'description' => 'The Nepali economy has not been doing well for the past many years. According to Nepal Rastra Bank (NRB), the country’s economic growth rate has remained sluggish for the past many years, mainly because of the decade-long conflict and political instability.', 'sortorder' => '887', 'image' => null, 'article_date' => '0000-00-00 00:00:00', 'homepage' => false, 'breaking_news' => false, 'main_news' => false, 'in_scroller' => false, 'user_id' => '0' ) ), (int) 13 => array( 'Article' => array( 'id' => '1011', 'article_category_id' => '37', 'title' => '‘Focus On Agriculture And Industrialisation’', 'sub_title' => '', 'summary' => null, 'content' => '<p> <strong style="font-size: 12px;">Can Nepal Achieve 7 per cent <span style="font-size: 12px;">Economic Growth Rate?</span></strong></p> <p> ‘Focus on agriculture and industrialisation’</p> <p> Nepal cannot achieve a healthy economic growth rate so long as there are political instability, labour problems and low production in the country. Nepal witnessed economic stability in FY 1994-95 and that was for very short period of time. The agriculture sector could help to increase the country’s economic growth rate but the government has not been able to make enough investment in this sector. We must be able to commercialise our agricultural sector by introducing modern technologies in our traditional farming system. Simultaneously, we should also focus on industrial development which is the backbone for the development of any country in this age. </p> <address> <strong>Himalaya Shamsher JBR</strong></address> <address> <strong>First NRB Governor </strong></address>', 'published' => true, 'created' => '2013-05-23', 'modified' => '2013-05-23', 'keywords' => 'Focus on agriculture and industrialisation', 'description' => 'Nepal cannot achieve a healthy economic growth rate so long as there are political instability, labour problems and low production in the country. Nepal witnessed economic stability in FY 1994-95 and that was for very short period of time.', 'sortorder' => '886', 'image' => null, 'article_date' => '0000-00-00 00:00:00', 'homepage' => false, 'breaking_news' => false, 'main_news' => false, 'in_scroller' => false, 'user_id' => '0' ) ), (int) 14 => array( 'Article' => array( 'id' => '1010', 'article_category_id' => '37', 'title' => '‘Political Stability Is A Must’', 'sub_title' => '', 'summary' => null, 'content' => '<p> <strong style="font-size: 12px;">Can Nepal Achieve 7 per cent <span style="font-size: 12px;">Economic Growth Rate?</span></strong></p> <p> <span style="font-size: 12px;">‘Political stability is a must’</span></p> <p> For a rapid economic growth, we need proper plans, policies and programmes. However, we cannot expect a robust economic growth rate unless we have political stability in the country. Political stability is a must. Similarly, we need to substantially increase the investment in the agriculture sector and make concerted efforts to modernize it. The services sector in Nepal has good prospects. A sustained growth in this sector, too, can help Nepal achieve a healthy economic growth rate. So, we must focus on agro-processing industries and on the development of new software technologies. Similarly, we must be able to use the ever increasing remittance inflows in a more productive manner if we are to achieve a growth rate of seven percent or more. </p> <address> <strong>Dr Narayan Khadka</strong></address> <address> <strong>Former Vice-chairman</strong></address> <address> <strong>National Planning Commission</strong></address>', 'published' => true, 'created' => '2013-05-23', 'modified' => '2013-05-23', 'keywords' => 'Political stability is a must', 'description' => 'For a rapid economic growth, we need proper plans, policies and programmes. However, we cannot expect a robust economic growth rate unless we have political stability in the country.', 'sortorder' => '885', 'image' => null, 'article_date' => '0000-00-00 00:00:00', 'homepage' => false, 'breaking_news' => false, 'main_news' => false, 'in_scroller' => false, 'user_id' => '0' ) ) ) $current_user = null $logged_in = falseinclude - APP/View/Elements/side_bar.ctp, line 60 View::_evaluate() - CORE/Cake/View/View.php, line 971 View::_render() - CORE/Cake/View/View.php, line 933 View::_renderElement() - CORE/Cake/View/View.php, line 1224 View::element() - CORE/Cake/View/View.php, line 418 include - APP/View/Articles/index.ctp, line 157 View::_evaluate() - CORE/Cake/View/View.php, line 971 View::_render() - CORE/Cake/View/View.php, line 933 View::render() - CORE/Cake/View/View.php, line 473 Controller::render() - CORE/Cake/Controller/Controller.php, line 968 Dispatcher::_invoke() - CORE/Cake/Routing/Dispatcher.php, line 200 Dispatcher::dispatch() - CORE/Cake/Routing/Dispatcher.php, line 167 [main] - APP/webroot/index.php, line 117
Warning (2): simplexml_load_file() [<a href='http://php.net/function.simplexml-load-file'>function.simplexml-load-file</a>]: I/O warning : failed to load external entity "" [APP/View/Elements/side_bar.ctp, line 60]file not found!Code Context// $file = 'http://aabhiyan:QUVLg8Wzs2F7G9N7@nepalstock.com.np/api/indexdata.xml';if(!$xml = simplexml_load_file($file)){$viewFile = '/var/www/html/newbusinessage.com/app/View/Elements/side_bar.ctp' $dataForView = array( 'articles' => array( (int) 0 => array( 'Article' => array( [maximum depth reached] ) ), (int) 1 => array( 'Article' => array( [maximum depth reached] ) ), (int) 2 => array( 'Article' => array( [maximum depth reached] ) ), (int) 3 => array( 'Article' => array( [maximum depth reached] ) ), (int) 4 => array( 'Article' => array( [maximum depth reached] ) ), (int) 5 => array( 'Article' => array( [maximum depth reached] ) ), (int) 6 => array( 'Article' => array( [maximum depth reached] ) ), (int) 7 => array( 'Article' => array( [maximum depth reached] ) ), (int) 8 => array( 'Article' => array( [maximum depth reached] ) ), (int) 9 => array( 'Article' => array( [maximum depth reached] ) ), (int) 10 => array( 'Article' => array( [maximum depth reached] ) ), (int) 11 => array( 'Article' => array( [maximum depth reached] ) ), (int) 12 => array( 'Article' => array( [maximum depth reached] ) ), (int) 13 => array( 'Article' => array( [maximum depth reached] ) ), (int) 14 => array( 'Article' => array( [maximum depth reached] ) ) ), 'current_user' => null, 'logged_in' => false ) $articles = array( (int) 0 => array( 'Article' => array( 'id' => '9434', 'article_category_id' => '37', 'title' => 'Nepal to participate in Tea and Coffee Expo in India', 'sub_title' => '', 'summary' => 'November 16: Nepali tea manufacturers are all set to participate in the 6th Mumbai World Tea Coffee Expo 2018 to be held in Mumbai, India from November 29 to December 1.', 'content' => '<p>November 16: Nepali tea manufacturers are all set to participate in the 6th Mumbai World Tea Coffee Expo 2018 to be held in Mumbai, India from November 29 to December 1.</p> <p>The organisers claimed that global companies are converging for the expo with India growing leaps and bounds in the tea and coffee sector – both in terms of production and consumption as well as innovation.</p> <p>According to the organisers, WTCE marks South Asia’s largest dedicated annual business gathering of the tea, coffee and related segments. The expo offers huge potential for appointing distributors, bulk deals, joint ventures, franchising, networking, meeting government officials, marketing alliances and overall branding, reads a statement issued by Sentinel Exhibitions Asia Pvt Ltd, the organiser.</p> <p>With 70+ exhibitors from seven countries including government pavilions and anticipated 4000+ trade visitors from across the world, companies participating at WTCE 2018 can expand their foothold in the market or enter newer markets, according to the organiser.</p> <p>“The show has become the ideal launch pad for new products especially for SMEs who don’t have large budgets,” the statement said.</p> <p>The 2018 edition shall feature tea and coffee brands/products, machineries, innovative technologies, flavours, ingredients, sugar/sweeteners, vending solutions, packaging, certifications, boards etc from Indonesia, Japan, Sri Lanka, Vietnam, Australia, Nepal and India.</p> ', 'published' => true, 'created' => '2018-11-16', 'modified' => '2018-11-16', 'keywords' => '', 'description' => '', 'sortorder' => '9214', 'image' => '20181116014039_pre.jpg', 'article_date' => '2018-11-16 00:00:00', 'homepage' => false, 'breaking_news' => false, 'main_news' => true, 'in_scroller' => false, 'user_id' => '20' ) ), (int) 1 => array( 'Article' => array( 'id' => '2842', 'article_category_id' => '37', 'title' => 'Remittance reaches close to 30 pc of GDP', 'sub_title' => '', 'summary' => 'Remittance inflow during FY 2014/15 reached an amount equivalent to around 30 per cent of Nepal’s GDP, annual data from the central bank shows.', 'content' => '<p>August 31: Remittance inflow during FY 2014/15 reached an amount equivalent to around 30 per cent of Nepal’s GDP, annual data from the central bank shows.</p> <p>According to Nepal Rastra Bank, Nepal received remittance worth Rs 600.17 billion through the formal banking channel during 2014/15. This is equivalent to around 29 per cent of the country’s GDP (which according to the central bank was around Rs 2.12 trillion). Like in the past, the amount of remittance Nepal received is roughly equivalent to the size of the government’s annual budget. </p> <p><iframe frameborder="no" height="300" scrolling="no" src="https://www.google.com/fusiontables/embedviz?viz=GVIZ&t=BAR&containerId=googft-gviz-canvas&q=select+col0%2C+col1%2C+col2+from+1P3sq89DtK_xa9iSGnS8gE70O6fjB0MNnlwtEJJbs&qrs=+where+col0+%3E%3D+&qre=+and+col0+%3C%3D+&qe=+limit+5&width=500&height=300" width="500"></iframe></p> <address><em>(Figures in Rs trillion)</em></address> <p><br /> The growth rate of remittance inflow was 25 per cent during FY 2013/14, but it has slowed down to 13.6 per cent in 2014/15.</p> <p>Central bank authorities were projecting a sharper decline in the growth of remittance as the number of workers going abroad had also registered a decline. But after the earthquake, the inflow has improved considerably, mainly due to money coming from abroad for post-earthquake reconstruction. According to government figures, the number of Nepali workers going abroad registered a decline of 2.8 per cent in FY 2014/15, compared to the same period last year.</p> <p><br /> According to the central bank, remittance inflow has been increasing faster than the country’s GDP for the last few years. In 2014/15 remittance was equivalent to 29 per cent of GDP, in 2013/14 it was 28 percent, 2012/13 25.5 percent, 2011/12 23.5 percent and in 2010/11 18.5 percent.</p> <p> </p> ', 'published' => true, 'created' => '2015-08-31', 'modified' => '2015-08-31', 'keywords' => '', 'description' => '', 'sortorder' => '2684', 'image' => null, 'article_date' => '2015-08-31 00:00:00', 'homepage' => false, 'breaking_news' => false, 'main_news' => true, 'in_scroller' => false, 'user_id' => '14' ) ), (int) 2 => array( 'Article' => array( 'id' => '2804', 'article_category_id' => '37', 'title' => 'Need For Green Banking', 'sub_title' => '', 'summary' => null, 'content' => '<div> <img alt="" src="/userfiles/images/ep1(6).jpg" style="width: 550px; height: 247px; margin-left: 10px; margin-right: 10px;" /></div> <div> </div> <div> <strong>--By Dwaipayan Regmi</strong></div> <div> </div> <div> The attack of human beings on nature is the cause of environmental deterioration. This deterioration is leading to global warming and climate change. It has been noticed that the temperature has risen up by 1 degree Fahrenheit in comparison to the previous century, leading to melting of Himalayan glaciers, bursting of lakes and rise of the sea level. Along with this, climatic changes have been causing natural disasters like cyclones, floods, landslides, and droughts. </div> <div> </div> <div> Combined efforts of governments, corporate sector and individuals can help in minimizing these various forms of environmental deterioration. For this, governments have to come up with strong policies; corporate houses should follow environmental protection guidelines more strictly; and individuals have to be self-aware to protect the environment around them. </div> <div> </div> <div> As part of the role to be played by the corporate sector, banks and financial institutions should embrace green banking — adopting process and strategies that promote environment-friendly practices to help in reducing carbon emission. Green banking helps in reducing internal carbon footprint as well as external carbon emission. </div> <div> Banks have been using lighting, air conditioning, electronic equipments, IT, high paper wastage in massive proportion. The resultant internal carbon footprint can be reduced through the use of renewable energy, automation and other measures. On the other hand, banks can reduce external carbon emission by financing projects and companies that are working for pollution reduction and adopting green technologies. Providing loans to firms that have concern for environment would ensure proper utilization of natural resources.</div> <div> </div> <div> Green banking avoids paper work and contributes to lower the cutting of trees. It makes the corporate world aware about environmental and social responsibility and thereby contributes to handing over a good environment to the upcoming generation. Adopting green banking policies are directly beneficial for the banks as well. </div> <div> </div> <div> Providing loans to firms and companies that abide by environment protection principles and regulations ensures that such clients do not become victims of natural calamities. Reputation and goodwill is very important for banks, and being a green bank provides them a distinct identity and reputation in the society. This also minimizes bad goodwill risk. Along with that, adopting such policies helps the banks avoid the risk of being left with securities like contaminated land as collateral. </div> <div> </div> <div> However, green banking is not a piece of cake; there are various challenges in making it a reality. It’s not only about reducing paper use and getting digital; there are strategies that a bank should follow.</div> <div> </div> <div> The most important step towards this objective is while providing loans. Any entrepreneur would think of green environment only when banks will restrict loans to businesses which might cause environmental degradation. Banks can deny loans to businesses that aim high profits by degrading the environment. The nature of business and its impact on the environment should be carefully considered before approving business loans. On the other hand, banks can offer low-interest loans to businesses that are environment friendly. In this way, banks can play a key role in promoting secondary source of energy like solar energy or bio gas energy.</div> <div> </div> <div> Next, banks can provide preference to green properties like homes equipped with solar energy, rain water harvesting facility, and properties with better environmental surroundings, for collaterals. And they should give secondary preferences, if at all, to properties such as polluting factory, or buildings emitting harmful waste in </div> <div> the environment.</div> <div> </div> <div> In terms of internal contribution, banks should embrace environment-friendly architectural design. Such designs help in reducing use of air conditioners and lights. Along with that, restricting use of carbon emitting machines, fans, energy inefficient bulbs, should be discouraged. Also, minimizing paper usage and promoting use of electronic transactions through rapid use of ATM cards, debit cards or other vending machines can help in being a green bank. </div> <div> </div> <div> Another area, where banks can contribute to green environment is the use of vehicles. Instead of providing sole vehicles to employees, banks should provide pick-and-drop services. This will not only help in reducing carbon emission but would also help in easing city traffic. This will also help in reducing the space needed for parking at banks. The space which would otherwise be used for parking could be used to build gardens and fountains. This will not only help the banks go green at the policy level but will also make it a green bank, literally too. </div> <div> </div> <div> As part of their corporate social responsibility (CSR), banks can invest in building and maintaining parks, gardens and forests in and around cities. They can adopt tree plantation as a means to mark their important achievements. This would help in inspiring other business ventures to adopt similar strategies. </div> <div> </div> <div> Banks have been providing many services to their customers such as free ATMs, Internet Banking and Any Branch Banking Service (ABBS). They could set up a basket ‘Disaster Emergency Fund’, for their client, in case the latter are victimized. The customers should be given a choice to opt for the fund by agreeing to provide certain amount of their interest to the fund on an annual basis. This would make such customers more secure from the impact of natural disasters on their finance. </div> <div> </div> <div> Banking has been a charming job in Nepal, and is regarded a prestigious job. To retain this image, it is necessary for banks to go green. Some of the recommendations made in this article might sound impractical considering the nature of their business and the stiff competition in the market to get better clients, still these measures are for banks which believe in ethical business.</div> <div> </div> <div> <em>The writer is pursuing his MBA at Jawaharlal Nehru Technical University, Andhra Pradesh, India.</em></div>', 'published' => true, 'created' => '2014-11-21', 'modified' => '2015-06-07', 'keywords' => 'new business age economy & policy news & articles, economy & policy news & articles from new business age nepal, economy & policy headlines from nepal, current and latest economy & policy news from nepal, economic news from nepal, nepali economy & policy economic news and events, ongoing economy', 'description' => 'The attack of human beings on nature is the cause of environmental deterioration. This deterioration is leading to global warming and climate change. It has been noticed that the temperature has risen up by 1 degree Fahrenheit in comparison to the previous century, leading to melting of Himalayan glaciers, bursting of lakes and rise of the sea level. Along with this, climatic changes have been causing natural disasters like cyclones, floods, landslides, and droughts.', 'sortorder' => '2660', 'image' => null, 'article_date' => '0000-00-00 00:00:00', 'homepage' => false, 'breaking_news' => false, 'main_news' => false, 'in_scroller' => false, 'user_id' => '0' ) ), (int) 3 => array( 'Article' => array( 'id' => '2788', 'article_category_id' => '37', 'title' => 'Policy For Inclusive Growth', 'sub_title' => '', 'summary' => null, 'content' => '<div> </div> <div> <strong>--By Hom Nath Gaire</strong></div> <div> </div> <div> The phrase 'Inclusive Growth' is quite popular in recent days not only among academia but also with policy makers, development partners and media as well. It seems that there is paradigm shift in development strategies among the stakeholders. The concept of inclusive growth refers to both the pace and distribution of economic growth. In order for growth to be sustainable and effective in reducing poverty, it needs to be inclusive. </div> <div> </div> <div> Traditionally, poverty (or inequality) and economic growth analyses have been done separately. However, recent works indicate that there may not be a trade-off between equity and efficiency as suggested by Okun (1975) and that it would be a big mistake to separate analyses of growth and income distribution. Inclusive growth has commonly been explained as about raising the pace of growth and enlarging the size of the economy by providing a level playing field for investment and increasing productive employment opportunities. The definition of inclusive growth implies direct links between the macro and micro determinants of the economy and economic growth. The microeconomic dimension captures the importance of structural transformation for economic diversification and competition, while the macro dimension refers to periodic changes in economic aggregates such as the country’s gross national product (GNP) or gross domestic product (GDP). </div> <div> </div> <div> Sustainable economic growth requires inclusive growth. Maintaining this is sometimes difficult because economic growth may give rise to negative externalities, such as a rise in corruption, which is a major problem in developing nations. However, inclusiveness lays emphasis on equality of opportunity in terms of access to markets, resources, and unbiased regulatory environment for businesses and individuals. The inclusive growth approach takes a longer-term perspective, as the focus is on productive employment as a means of increasing the incomes of poor and excluded groups and raising their standards of living. </div> <div> </div> <div> <strong>Determinants of Inclusive Growth</strong></div> <div> Different countries, especially developing countries, may have very different institutional as well as policy arrangements for promoting inclusive growth. Similarly, there may be a number of distortions preventing the allocation of limited resources in such a way that productivity in different sectors is equalized. The shift of resources from one sector to another may have an important effect on the overall level of output and growth. </div> <div> </div> <div> In this context, although growth theories have contributed to our understanding of how growth is determined and how it might be influenced, it has in many ways missed some of the crucial issues for developing countries. It may be possible to model the role of management and organization, the improvement of infrastructure, and sectoral transfer in developing economies to measure real determinants of growth and to the design of policy. </div> <div> </div> <div> They are directly concerned with the long-run growth in the sense of the steady-states as well as important for a medium term of some considerable duration. Government macroeconomic policies--- both fiscal policy and monetary policy--- are considered to be instrumental in promoting inclusive growth in the respective economy. </div> <div> </div> <div> <strong>Fiscal Policy and Inclusive Growth </strong></div> <div> Fiscal policy involves the use of government spending, taxation and borrowing to affect the level and growth of aggregate demand, output and jobs. It is also a means by which a redistribution of income and wealth can be achieved as an instrument of intervention to correct the market failures. Thus fiscal policy is considered more effective in encouraging both pace and size of economic economy. </div> <div> </div> <div> Based on this belief, Asian Development Bank (ADB) has recently urged the Asian governments to use their fiscal policy more adeptly to combat the widening income gaps in the region. “As the inequalities rising almost everywhere in Asia, governments need to urgently expand and improve their public investments in inclusive growth,” President Takehiko Nakao told in seminar titled, Leveraging Fiscal Policy for Inclusive Growth on the occasion of bank's 47th AGM. </div> <div> </div> <div> More than 80 percent of Asia’s population live in countries where inequality is worsening, meaning that many are being left behind even as globalization, technological progress, and market reform have led to strong economic growth. The bank emphasized on a range of issues including taxation to boost social and other spending, existing government programmes to promote equality, and the best balance spending to help the poorest without compromising fiscal sustainability.</div> <div> </div> <div> <strong>Monetary Policy and Inclusive growth</strong></div> <div> It is well accepted that macroeconomic stability and low inflation rates, inter alia, have positive effects on growth and on reducing inequality. In this connection, well-managed monetary policy is critical in achieving stable and inclusive economic growth. Similarly, monetary policy is mandated to achieve and maintain price stability in the interest of inclusive and sustainable economic growth along with maintaining financial stability. </div> <div> </div> <div> Price stability reduces uncertainty in the economy and provides a favourable environment for inclusive growth and cumulative employment creation over the longer term. Low inflation, on the other hand, helps to protect the purchasing power and living standards of all classes of people. Although low inflation may not necessarily in itself reduce income inequality, it does ensure the protection of income, which is particularly important for poor people who generally do not have the means to adjust their nominal incomes to take account of rapid price increases. </div> <div> </div> <div> <strong>PPP and Inclusive Growth </strong></div> <div> The Public Private Partnership (PPP) is a governance tool to bring together resources as well as strengths and share experiences of the public and private sector for the purpose of provisioning of public assets or services for public benefit. In order to achieve inclusive growth, developing countries should create more PPP opportunities to address their infrastructure gap and steer private money and skills into much-needed infrastructure projects. </div> <div> </div> <div> The infrastructure deficit in the developing countries like Nepal is so enormous that we can’t expect either private investors or the public sector to fill up it alone. It needs collaboration between the private and public players to make things work, and to bring critical services to the community. Good infrastructure is critical to inclusive growth, allowing communities to access essential social services, markets, and jobs, and making cities cleaner and easier to navigate. PPPs can help developing countries address critical infrastructure needs, from roads to hospitals to water supply systems. </div> <div> </div> <div> The PPP investment model with various structures is effective in helping centrally planned countries transition to private sector-oriented market economies. PPPs can be promoted through fully assessed and appropriate risk sharing and performance-based arrangements between the parties. The aim is to deliver “value-for-money” projects to provide a full set of benefits for investors, the public, and the economy.</div> <div> </div> <div> <strong>Knowledge Economy and Inclusive Growth</strong></div> <div> The development of the knowledge economy and inclusiveness has been seen as closely related. Global firms have built integrated international production chains, with innovation creating new products with added value in “knowledge” areas such as design and marketing and providing associated services. </div> <div> </div> <div> The growth of the knowledge economy is seen as part of the growth strategy to import jobs from low wage economies such as China and India investing heavily in knowledge. Shifting from low-cost manufacturing to economies based on knowledge, innovation, and high-end services is imperative for developing countries to achieve and sustain broad based inclusive growth. Emerging economies can reach and go beyond middle-income levels by becoming knowledge-based economies like Japan, the Republic of Korea, and Singapore. </div> <div> </div> <div> Similarly, least developed countries like Nepal can upgrade themselves to developing one through systematic investment in new information and communication, manufacturing and other technologies to promote knowledge economy. For this, they have to spend time and resources to move up the value chain by drawing on best practices and latest technologies, for example, shifting to smart energy grids, cloud computing, 3D manufacturing, and mobile rather than fixed-line communications.</div> <div> </div> <div> <strong>Rational </strong></div> <div> According to the World Bank’s Commission on Growth and Development, a persistent, determined focus on inclusive long-term growth by governments is a key ingredient of all successful growth strategies. Policies that encourage inclusive growth tend to emphasize removing constraints to growth, creating opportunity, and creating a level playing field for investment.</div> <div> </div> <div> To that end, developing countries need to increase investment in infrastructures as well as research and development to create knowledge based, innovative and competitive industries. For this, public funding may be needed to help companies start up. Public spending on education and health services improve the well-being of the poor and augment their productive capacity. </div> <div> </div> <div> Targeted subsidies and transfer payments protect the most vulnerable and deprived segments of society while better public infrastructure can make it easier for the entrepreneurs to create more jobs and additional value for the economy. Higher education and training need to be significantly improved to generate the skills and critical thinking processes vital to a modern competitive economy. </div> <div> </div> <div> In addition, governments need to put in place mechanisms and adopt policies that enable innovation and creativity to flourish. This includes protecting intellectual property rights, providing adequate financing options, and nurturing more flexible labour markets.</div> <div> </div> <div> <strong>Finally</strong></div> <div> Policies on both monetary and revenue front such as non-inflationary monetary and progressive taxation can promote inclusive growth. But among policy tools, fiscal policy with productive government expenditure and progressive taxation has a tangible effect on boosting equality and promoting inclusive growth.</div> <div> </div> <div> <div> <em><span style="font-size: 14px;"><strong>What is Inclusive Growth?</strong></span></em></div> <div> An IMF Commission on Growth and Development (2008) notes that inclusiveness—a concept that encompasses equity, equality of opportunity, and protection in market and employment transitions—is an essential ingredient of a successful growth strategy.</div> </div> <div> </div>', 'published' => true, 'created' => '2014-07-30', 'modified' => '2014-11-21', 'keywords' => '', 'description' => 'The phrase 'Inclusive Growth' is quite popular in recent days not only among academia but also with policy makers, development partners and media as well. It seems that there is paradigm shift in development strategies among the stakeholders. The concept of inclusive growth refers to both the pace and distribution of economic growth.', 'sortorder' => '2641', 'image' => null, 'article_date' => '0000-00-00 00:00:00', 'homepage' => false, 'breaking_news' => false, 'main_news' => false, 'in_scroller' => false, 'user_id' => '0' ) ), (int) 4 => array( 'Article' => array( 'id' => '2763', 'article_category_id' => '37', 'title' => 'Investment Issues In Nepali Insurers', 'sub_title' => '', 'summary' => null, 'content' => '<div> </div> <div> <div> <strong>--By Ujjwal Chand & Suraj Bansal</strong></div> <div> </div> <div> Currently, there are 25 insurance companies in Nepal -16 of them provide non-life insurance services and eight provide life insurance services while one provides both of these services. Insurance companies use their funds consisting of capital, reserves, premiums and loans to finance claim payments and other expenses. The remaining fund is invested as per the Investment Directives from the regulatory body, i.e. Insurance Board (Beema Samiti). As of FY 2011-12, these companies had investments to the tune of Rs. 60 billion out of which Rs. 52 billion was from life insurance companies and the rest was from non-life insurance companies.</div> <div> </div> <div> The insurance companies can put their investment funds in the sectors specified in the investment guidelines which specify that Life insurance companies must invest a minimum of 75% and non-life insurance companies minimum of 65% of their investment funds in combination of government securities, fixed deposits of commercial banks and development banks, and mutual fund/Citizen Investment Trust Schemes. They can put a maximum of 5% of their total investment fund in ordinary shares of public limited companies. Other areas for investment are secured debentures of Banks and Financial Institutions (BFI)s and Fixed Deposits (FDs) in finance companies. Non-life insurance companies can additionally invest in shares of real estate development or public limited housing company. </div> <div> </div> <div> <span style="font-size: 16px;"><strong>Importance of Returns from Investment </strong></span></div> <div> The operations of life and non-life insurance companies are different. Non-life insurance companies generate profit through both returns from investment and from regular insurance business. Life insurance companies, however, are suffering loss in the regular insurance business. Therefore, it is only due to the returns from investment that they are able to report positive bottom lines. Ganesh Dahal, deputy manager of Sagarmatha Insurance puts that “the contribution of investment returns to the company’s bottom line is at 40%”and in similar vein Suraj Rajbahak, CA of Shikhar Insurance, shared that “about 30% of the company’s returns are from investment returns”. Life insurance companies are far heavily reliant on the investment returns. Dip Bahadur BC, chief financial officer at Prime Life Insurance says, “Investment returns not only sustain the company’s expenses but also contribute to the bottom line”. Bigyan Shrestha, finance chief at National Life Insurance, seconds this and states that “the investment returns have been sufficient to sustain normal operations” for the company. </div> <div> </div> <div> <img alt="Returns from Investment" src="/userfiles/images/ep1%20(Copy)(6).jpg" style="width: 550px; height: 227px; margin-left: 10px; margin-right: 10px;" /></div> <div> </div> <div> <span style="font-size: 16px;"><strong>Investment returns of insurance companies </strong></span></div> <div> Of the twenty-five insurance companies, only twenty had published their annual report for FY 2011-12 by September 2013. An analysis of the same shows that 15 of the 20 companies posted returns from 8.5% to 10.5% from investments. This was primarily due to the high interest rates on the fixed deposits of the BFIs. </div> <div> </div> <div> But, the returns from their investment in ordinary share was relatively weak during this period - ranging from 0% to 5.42%. However, during the same period, Nepse increased by 14.7%. This shows that the insurance companies underperformed Nepse in terms of returns from ordinary shares investments.</div> <div> </div> <div> <span style="font-size: 16px;"><strong>Issues with current ordinary shares investment </strong></span></div> <div> There are few internal issues of the insurance companies themselves behind poor returns from ordinary shares investment. Additionally, there are some issues with the current ordinary shares investment practices that could damage these returns in the long run of the insurance companies. These internal issues are:</div> <div> </div> <div> <span style="font-size: 14px;"><strong>Passive investment – Over-reliance on dividends </strong></span></div> <div> Of the 20 insurance companies analyzed, four hadn’t invested in ordinary shares at all in FY 2011-12. In the remaining sixteen insurance companies, dividends contributed about 99.97% of the overall return from this avenue in 2011-12. This means only 0.03% of the returns came from capital gains. Thus passive investing, thereby over reliance on dividends for income from ordinary shares investments remained as the most important reason for poor performance in ordinary shares investments by insurance companies.</div> <div> </div> <div> <span style="font-size: 14px;"><strong>Lack of experts, research-based decision making</strong></span></div> <div> Further, the insurance companies did not follow research based decision making approach while selecting ordinary shares for investment. This is despite the fact that the insurance companies accept the high importance of investment decisions to the bottom-line. Moreover, investment team in these companies is made of up of generalists, i.e. overseeing all aspects of finance in the company, rather than specialists with specific field expertise. </div> <div> </div> <div> <span style="font-size: 14px;"><strong>Lack of Diversification</strong></span></div> <div> Investment gurus advocating diversification of fund always caution that “putting all your eggs in one basket is very dangerous”. These insurance companies lack proper diversification in ordinary shares investments, which could damage the returns from this avenue in the long term. The ordinary shares investments were heavily concentrated in stocks of major BFIs, constituting 96% of total ordinary shares investments. In terms of diversification at company level, they fare even worse. Although they had invested in 67 securities, they heavily concentrated on six companies, constituting 67% of the total ordinary shares investments. </div> <div> </div> <div> <span style="font-size: 16px;"><strong>Issues with overall current investments </strong></span></div> <div> High interest rate exposure is found to be triggering volatility on the overall investment returns. This exposure was also due to the conservative guidelines that made it mandatory for the insurance companies to park their fund in interest-rate volatile investment avenues like fixed deposits. The conservative investment guidelines are curtailing the diversification of investments, and thereby introducing concentration risk on the investments.</div> <div> </div> <div> <span style="font-size: 16px;"><strong>High interest risk exposure</strong></span></div> <div> Due to regulatory constraints, large portion of the investment fund is parked in BFIs as fixed deposit. This brings about high interest rate risk in the investments returns of the insurance companies. Sushil Kumar Luniya, manager at Gurans Life Insurance, sees “the decrease in interest rates of fixed deposits hampering insurance company returns for the current fiscal year”. Manoj Shrestha, head of finance department at NLG Insurance, too regards “the volatile bank interest rates as major factor deciding the investment returns”. </div> <div> </div> <div> Due to high interest rates prevalent during the sample period (average of 8.125% for commercial banks in FY 2011-12 as per the central bank’s Monetary Policy document), most of the insurance companies had fair returns on the investments. Imagine the effect of decrease in the rates to 5.2%, as predicted by NRB Monetary Policy for 2013-14, on the investment returns ! </div> <div> </div> <div> Now lets simulate this Simulating such scenario by decreasing the FY 2011-12 returns from fixed deposits of BFIs by the same proportion as the decrease in interest rate, i.e. from 8.125% to 5.2%. In FY 2011-12, it was found that only one insurance company was making loss. If the interest rates during this period were only 5.2, four insurance companies would have been at loss. </div> <div> </div> <div> <span style="font-size: 16px;"><strong>Lack of diversification options</strong></span></div> <div> The conservative investment guidelines put by the regulatory board give little room for diversification to insurance companies. Majority of the fund is to be parked in government bonds, and fixed deposit of commercial and development banks. Even in ordinary shares investments, insurance companies are finding hard to diversify from a stock market with over 76% concentration in BFIs. Thus there is huge concentration risk. If one bank or finance institution goes bust, the whole insurance industry would suffocate. One such event in Gurkha Development Bank has already occurred. Few insurance companies are still provisioning the losses from this bank’s tragedy.</div> <div> </div> <div> But, investment guideline isn’t the only sore finger. There is also lack of innovativeness among insurance companies in terms of diversifying their investments. As Dr. Fatta Bahadur KC, chairman of Insurance Board, claims, “The investment guidelines clearly indicate flexibility of alternative investment avenues for the insurance companies”. Upon request by insurance companies, the Board is ready to look into alternative investment proposals. But as this includes some hassles and would put the insurance company management under scrutiny if the innovation backfires, the insurance companies are reluctant to tread on this way.</div> <div> </div> <div> <span style="font-size: 16px;"><strong>Asset-liability mismatch</strong></span></div> <div> Asset-Liability mismatch is a major issue with life insurance companies. Safer investment assets with longer maturity are hard to find in Nepali market, where bonds and debentures have minimal presence. Debentures of commercial banks bring concentration risk with them for the insurance companies, which already have major portion of their investment fund in the banks as fixed deposits and their ordinary shares. Dr. KC, sees “Asset-Liability mismatch for life insurance companies as they issue policy for long term whereas they can invest for short term only”. Dip Bahadur BC, CFO of Prime Life, also considers “asset-liability maturity mismatch as a prevalent issue in all life insurance companies”.</div> <div> </div> <div> <span style="font-size: 18px;"><strong>The Way Ahead</strong></span></div> <div> </div> <div> <span style="font-size: 16px;"><strong>Resolving Internal Issues</strong></span></div> <div> Internal issues - lack of research based decision making, diversification and active investing - can be resolved through robust internal research systems. To boost their ordinary shares investment performance through research backed investments, the insurance companies could build their own internal system and processes but at a huge cost. It would also mean taking two diverse businesses in parallel, i.e. insurance business and investment business. Outsourcing of ordinary shares investment management by availing the customized portfolio management service given by several financial intermediaries like Kriti Capital, Nabil Invest and Beed Management, seems more beneficial. Such outsourcing will not only enable insurance companies to focus on their core business, but also get better returns from their investments via expert handling of their funds at a relatively lower cost.</div> <div> </div> <div> <img alt="Isues with Investment" src="/userfiles/images/ep2%20(Copy)(2).jpg" style="margin-left: 10px; margin-right: 10px; width: 550px; height: 400px;" /></div> <div> </div> <div> <span style="font-size: 16px;"><strong>Resolving external issues</strong></span></div> <div> There are limitations faced by insurance companies while investing their fund as per current investment guidelines. Fixed deposits have inbuilt interest rate risks. The life insurance companies face an additional issue of asset-liability maturity mismatch, with investments maturing in about 1-1.5 years and liabilities remaining active for about 10-13 years. There is need for long term investment alternative. </div> <div> </div> <div> Further, diversification of fund is hard in a secondary market with heavy concentration of BFI stocks. With the investment fund increasing rapidly (CAGR of 21.35% from 2004-05 to 2011-12), there is a need to look for additional investment avenue to resolve these issues. This is not just voiced by the insurance company professionals but also by the insurance regulatory board.</div> <div> </div> <div> Dr. KC feels that “although the investment guidelines give flexibility to insurance companies to come up with alternative investment proposals, the time has come to review the overall investment guidelines”.</div> <div> </div> <div> A suitable avenue to be added in the investment guidelines could be private placements in infrastructure companies. This will not just help the insurance companies to resolve the issues of diversification and the infrastructure companies in getting easier financing, but also help the overall economy of the nation. Dr. KC says that the Board is “positive on investment made by insurance companies in hydropower and other infrastructure companies, and these avenues could be opened for investments”. Most of the insurance companies also state that they are willing to invest in hydropower and other infrastructure companies, if allowed by investment board.</div> <div> </div> <div> Insurance Board should allow investments by the insurance companies via private placements, as the secondary market doesn’t have appropriate diversification opportunities. Further, the insurance companies would be able to invest at a bargain in the infrastructure companies due to their sheer investment fund size. Also, if SEBON comes up with more liberal rules on the issuance of shares at premium, the infrastructure companies could benefit hugely from private placements. Even if the insurance companies decide on being risk averse and just invest in debentures, they could do so in infrastructure debentures. As there isn’t presence of these instruments in secondary market, private placement would be ideal way for diversification of by insurance companies. On the other hand, the infrastructure companies would have lower issue costs and lesser regulatory hassles than going public for raising finance. Also, in case of debentures, these companies would be avoiding interest rate exposure. Similarly, the promoters of infrastructure companies would be able to delay issuing the shares to public, thereby being in position with better financial statements before going public. This would help get better response on public issuance of shares at premium. </div> <div> </div> <div> Thus the insurance companies should initiate this by coming up with effective proposal and lobbying with the Insurance Board for liberal investment guidelines.</div> <div> </div> <div> But, investment in private placements of the infrastructure companies (if allowed by the Board) requires expert knowledge on these companies and regular monitoring. Also, the entry and exit strategies must be taken into account as these investments are relatively less liquid as compared to secondary market investments. There will be need of diversification as well as policy and strategy development for the insurance companies vying to invest via private placements. So, to benefit from this additional investment avenue, insurance companies will have to develop in-house expertise or outsource private placements management services for financial intermediaries.</div> <div> </div> <div> <em>(The article is based on a joint research conducted by Ujjwal Chand and Suraj Bansal as part of their academic requirement at KUSOM. The researchers can be contacted at: chandujjwal@gmail.com)</em></div> </div> <p> </p>', 'published' => true, 'created' => '2014-03-24', 'modified' => '2014-03-24', 'keywords' => 'new business age economy & policy news & articles, economy & policy news & articles from new business age nepal, economy & policy headlines from nepal, current and latest economy & policy news from nepal, economic news from nepal, nepali economy & policy economic news and events, ongoing economy', 'description' => 'Insurance companies use their funds consisting of capital, reserves, premiums and loans to fi nance claim payments and other expenses.', 'sortorder' => '2608', 'image' => null, 'article_date' => '0000-00-00 00:00:00', 'homepage' => false, 'breaking_news' => false, 'main_news' => false, 'in_scroller' => false, 'user_id' => '0' ) ), (int) 5 => array( 'Article' => array( 'id' => '2641', 'article_category_id' => '37', 'title' => 'Financial Inclusion Must For Inclusive Growth', 'sub_title' => '', 'summary' => null, 'content' => '<div> <strong>--By Hom Nath Gaire</strong></div> <div> </div> <div> Finance has come a long way since the time when it wasn't recognized as a factor for growth and development. It is now attributed as the life blood of an economic system and most economies strive to make their financial systems more efficient. It also keeps policymakers on their jobs as any problem in this sector could freeze the entire economy and even lead to a contagion. </div> <div> </div> <div> The financial services include the entire range - savings, loans, insurance, credit, payments etc. The financial system has to provide its function of transferring resources from surplus to deficit units but both deficit and surplus units are those with low incomes, poor background etc. By providing these services, the aim is to help them come out of poverty. So far, the focus has only been on delivering credit such as microcredit and has been quite successful in some countries. However, similar success has to be seen in other aspect of finance as well.</div> <div> </div> <div> In this context, financial inclusion is the most for efficient financial system and to exert positive impact in the economic growth as well as development. Financial inclusion could expediteeconomic activities and promote entrepreneurship with the maximum use of information, communication and technology-enabled services supported by an extensive Financial Literacy mission. </div> <div> </div> <div> <span style="font-size: 16px;"><strong>What is Financial Inclusion?</strong></span></div> <div> Authorities and policymakers worldwide including advanced economies like the United Stateshave set up specific task force/committees to understand what financial inclusion is and how it can be achieved. </div> <div> </div> <div> Former UN Secretary-General Kofi Annan said: "The stark reality is that most poorpeople in the world still lack access to sustainable financial services, whether it issavings, credit or insurance. The great challenge before us is to address the constraints that exclude people from full participation in the financial sector. Together, we can and must build inclusive financial sectors that help people improve their lives.” </div> <div> </div> <div> Similarly, according to the UK Financial Inclusion Taskforce, there are three main concerns in financial inclusion; access to banking, access to affordable credit and access to freeface-to-face financial advice. Therefore, the term 'Financial Inclusion' is defined as an extension ofbanking and financial services at an affordable cost to unbanked people of thecommunity. </div> <div> </div> <div> India also set up a committee under the chairmanship of Dr. C. Rangarajan, the then Governor of Reserve Bank of India (RBI) to suggest measures to increase financial inclusion in 2007. The Rangarajan committee defines financial inclusion as: "the process of ensuring access to financial services and timely and adequate credit where needed by vulnerable groups such as weaker sections and low income groups at an affordable cost." </div> <div> </div> <div> Therefore, financial inclusion means easy and affordable access of financial services by the economically poor and unbanked people of society at appropriate, low-cost, fairand safe financial products and services. Constraints of Financial Inclusion </div> <div> </div> <div> Financial Inclusion is especially needed for rural and underprivileged masses that may be the future growth engine of the economy. From the recent initiatives undertaken by the world governments to foster financial inclusion, one cannot undermine the need to include the economically underprivileged in the mainstream banking sector. However, many people across the globe are now excluded from mainstream banking. Theserange from people with low income to people with low information and accessibility to peoplewith no social security or insurance cover. The main reasons behind the financial exclusion are: </div> <div> </div> <div> <span style="font-size: 14px;"><strong>Lack of information:</strong></span> Lack of information about the role and function of banks, banking services and products, interest rates, etc. stop people from including themselves in mainstream banking. </div> <div> </div> <div> <span style="font-size: 14px;"><strong>Insufficient documentation:</strong></span> Many unbanked people (even in municipalities and urban areas) areunable to show their self identification documents during the opening of a bank accountor during taking a loan. </div> <div> </div> <div> <span style="font-size: 14px;"><strong>Lack of awareness:</strong></span> Many people are unaware of the banking terms andconditions laiddown by banks and regulators from time to time. </div> <div> </div> <div> <span style="font-size: 14px;"><strong>High transaction costs: </strong></span>Various commercial banks across the globe levytransaction charges on credit or debit transactions, on over usage of banking services, on chequebook issuance etc. </div> <div> </div> <div> <span style="font-size: 14px;"><strong>Lack of access:</strong></span> Accessibility is a problem to all those people who live ingeopolitically isolated regions. Moreover, as most of the commercial banks are locatedin the cities and surrounding area, people in rural areas mainly in least developed countries like ours have a geographical barrier in accessing banks. </div> <div> </div> <div> <span style="font-size: 14px;"><strong>Illiteracy:</strong></span> Because of illiteracy, a substantial number of people are unable to takerecourse to banking services. </div> <div> </div> <div> <span style="font-size: 14px;"><strong>Stringent regulations:</strong></span> Stringent regulations such as Know your Customer (KYC) and Anti-Money Laundering and Counter Terrorist Finance (AML-CTF) norms are also considered as hindrances for financial inclusion. Financial Inclusionin Nepal </div> <div> </div> <div> <img alt="Economy and Policy" src="/userfiles/images/ep1%20(Copy)(5).jpg" style="width: 550px; height: 286px; margin-left: 10px; margin-right: 10px;" /></div> <div> </div> <div> Nepal is one of the LDCs with economically challenged huge rural population. Financial Inclusion is indispensible in its case for the sustainable growth of its economy. However, even in such scenarios, many businesses have been successful in showing consistent as well as continued development. One of the most important sectors of this kind is the financial services sector. With just 2 commercial banks in the early days, the country has actually managed to expand this sector, which at present includes 31 commercial banks. Similarly in the past 30 years, different development banks, co-operatives, finance companies, insurance companies have grown by more than 10 fold.</div> <div> </div> <div> <img alt="Economy and Policy" src="/userfiles/images/ep%20(Copy)(3).jpg" style="float: left; margin: 0px 10px; width: 250px; height: 263px;" />In the mean time, branches of commercial banks, development banks and finance companies totalling at 2483 in mid of march of 2013. Of the total branches, commercial banks have occupied 1472 followed by development banks 713 and finance companies 298. Similarly, from the side of regional distribution, the majority branches of BFIs are situated in the Central Development Region totalling 1168, followed by Western Development Region 606 and Eastern Development Region 401. The minimum branches of BFIs are in the Far-Western Development Region totalling 111 followed by Mid-Western Development Region 197. </div> <div> </div> <div> Increase in number of branches of BFIs is considered as one of the indicators of financial inclusion. Banking Industry, normally, occupies a bigger chunk in the financial system. However, a larger chunk of banking services is still concentrated in urban areas. More especially, the banking services still seem to be concentrated in capital city. The districts with highest number of bank branches are Kathmandu, Lalitpur and Rupandehi with 335, 77 and 67 branches respectively. This level of reach and penetration also means that the financial inclusion is yet to strengthen to follow economic progress in the country. </div> <div> </div> <div> This sector has always been driven by a keen need of growth as well as is being pushed by various regulations. Over a period of time, this sector has deeply gone to the roots of urban, semi-urban as well as to the rural Nepal. This penetration level, in particular, has benefitted millions of people living in the country who fall below the poverty line in both the rural as well as semi-urban areas of the country.</div> <div> </div> <div> The latest figures indicate that the financial services are used only by a section of the population (around 40%) in Nepal.There is demand for these services but it has not been provided. The excluded regionsare rural, poor regions and also those living in harsh climatic conditions where it is difficult to provide these financial services. The excluded population then has to rely on informal sector for availing finance that is usually at exorbitant rates. </div> <div> </div> <div> This leads to a vicious cycle. First, high cost of finance implies that first poor person has to earn much more than someone who has access to lower cost finance. Second, the major portion of the earnings is paid to the money lender and the person can never come out of the poverty. </div> <div> </div> <div> <span style="font-size: 16px;"><strong>Factors Forcing People to be Informal </strong></span></div> <div> <span style="font-size: 14px;"><strong>High cost:</strong></span> It has also been seen that poor living in urban areas don't utilize the financial services as they find financial services are costly and thus are unaffordable. Hence, even if financial services are available, the high costs deterthe poor from accessing them.</div> <div> </div> <div> <span style="font-size: 14px;"><strong>Non-price barriers: </strong></span>Access to formal financial services also requires documents of proof regarding a persons' identity, income etc. The poor people do not have these documents and thus are excluded from these services. They may also subscribe to the services initially but may not use them as actively as others because of various non-price barriers. </div> <div> </div> <div> <span style="font-size: 14px;"><strong>Behavioural aspects:</strong></span> Research in behavioural economics has shown that many people are not comfortable using formal financial services. The reasons are difficulty in understanding language, various documents and conditions that come with financial services etc. </div> <div> </div> <div> <span style="font-size: 16px;"><strong>Externalities of Financial Inclusion</strong></span></div> <div> There are a number of positive externalities of financial inclusion. </div> <div> •<span class="Apple-tab-span" style="white-space: pre;"> </span>One of theimportant effects is people able to reap the advantages of network externality of financial inclusionas the value of the entire national financial system increases.</div> <div> •<span class="Apple-tab-span" style="white-space: pre;"> </span>Another reason as financial inclusion is a quasi-public good the consequent fuller participation by all in the financial system makes monetary policy more effective and thus enhances the prospects of noninflationary growth.</div> <div> •<span class="Apple-tab-span" style="white-space: pre;"> </span>One important point that is essential for financial inclusion in rural and agriculture based LDCs like ours is to ensure the growth of banking system to meet the needs of a modern economy, expansion in geographic terms and improve access to banking services. </div> <div> </div> <div> <span style="font-size: 16px;"><strong>Way Forward </strong></span></div> <div> In order to strengthen the financial inclusion in the country, NRB as the monetary authority of country, has been adopting some promotional measures so far such as providing additional incentives to BFIs to go to the remote as well as underprivileged areas. Similarly, it has been encouraging the microfinance institutions to be more inclusive while directing the commercial banks to lent a given portion of their loan portfolio to the deprived sectors. </div> <div> </div> <div> However, the indicators of financial inclusion are yet to improve. In this context, the following measures should be adopted under the existing infrastructure framework to speed up the financial inclusion in Nepal. </div> <div> </div> <div> <span style="font-size: 14px;"><strong>Postal Network:</strong></span> The government should consider tying up with BFIs to deliver financial solutions to the un-banked, using its extensive postal network. The synergistic outreach of the existing postal system supplemented by banking functions is the answer to the challenges posed by rural markets. As Nepal has the largest postal network in the remotest areas, the excluded masses can graduallyconnect with the full-fledged banking services. </div> <div> </div> <div> <span style="font-size: 14px;"><strong>Mobile Banking:</strong></span> The transaction costs can be radically reduced even in remote locations through mobile banking. The costs, which ease of access for the consumers and the profitability of provider will ultimately opt the level of wireless services. </div> <div> </div> <div> <span style="font-size: 14px;"><strong>Use of Technology:</strong></span> Rural banking can be expanded in an easy and user friendly way through universal technology with innovative applications. The role of various ICT tools and associated technologies in providing financial solutions to the unbanked is also substantial. Rural ATMs, plastic cards like smart cards, biometric cards including mobile payment (branchless banking) technologies do have the ability to engage the unbanked sections. </div> <div> </div> <div> <span style="font-size: 14px;"><strong>Financial Literacy: </strong></span>Steps have to be taken by the government for the expansion of banking services and linking of opportunities among various segments of financial sector like capital markets, insurance, etc. To achieve this aim the government should come up with an extensive campaign of financial literacy. </div>', 'published' => true, 'created' => '2014-02-20', 'modified' => '2014-02-20', 'keywords' => 'new business age economy & policy news & articles, economy & policy news & articles from new business age nepal, economy & policy headlines from nepal, current and latest economy & policy news from nepal, economic news from nepal, nepali economy & policy economic news and events, ongoing economy', 'description' => 'The financial system has to provide its function of transferring resources from surplus to deficit units but both deficit and surplus units are those with low incomes and poor background etc.', 'sortorder' => '2481', 'image' => null, 'article_date' => '0000-00-00 00:00:00', 'homepage' => false, 'breaking_news' => false, 'main_news' => false, 'in_scroller' => false, 'user_id' => '0' ) ), (int) 6 => array( 'Article' => array( 'id' => '2496', 'article_category_id' => '37', 'title' => 'Nepal’s Macroeconomic Challenges In 2014', 'sub_title' => '', 'summary' => null, 'content' => '<div> </div> <div> </div> <div> <strong>--Dr Rewat Bahadur Karki</strong></div> <div> </div> <div> After the second democratic movement in FY 2007/08, Nepali economy recorded rosy picture including higher GDP growth of 5.8 percent. However, after the constituent assembly (CA) election in 2009 macroeconomic situation went on declining with low growth mainly due to uncertainty of economic policy and deteriorating investment environment. But pre-last year -2011/12 was exceptional i.e. better along with moderate growth of 4.5 percent, the highest in the last five years primarily because of windfall (exogenous) gain caused by weather and remittance, while last year (2012/13)’s performance is poor with the lowest growth 3.5 percent according to the estimates of Central Bureau of Statistics (CBS), and double digit inflation. </div> <div> </div> <div> Analyzing last year’s situation in brief, efforts have been made to estimate and analyze this fiscal year’ macroeconomic scenario mainly comprising of real sector and price, monetary, fiscal and external sectors based on realistic approach. In FY 2013/14, following six strong bases/assumptions indicate rosy macro economic situation.</div> <div> </div> <div> 1. <span class="Apple-tab-span" style="white-space: pre;"> </span>The current non political government has announced next three year plan (starting from this FY-2013/14) with a growth of 6 percent by fixing the target of upgrading Nepal to developing country from low income country within 10 years as against the UN target of 18 years. The government has announced an ambitious budget in this line too.</div> <div> </div> <div> 2. <span class="Apple-tab-span" style="white-space: pre;"> </span>The government has made its efforts to present the pro-productive and investment-friendly budget instead of loading it populist programmes.</div> <div> </div> <div> 3. <span class="Apple-tab-span" style="white-space: pre;"> </span>The full budget, despite being an election budget, which has come without any disturbance since the first CA election in 2008 AD, has exerted some positive impact in the economy</div> <div> </div> <div> 4. <span class="Apple-tab-span" style="white-space: pre;"> </span>There will be positive impacts in the Nepali economy from the slight improvement (from 3 percent to 3.2 percent in 2013) in world economy and also in neighbouring countries –India and China as forecast by IMF.</div> <div> </div> <div> 5. <span class="Apple-tab-span" style="white-space: pre;"> </span>The last budget as brought by this non-party government in early 2013 gave a clear-cut direction regarding adoption of liberal economic policy and important role of private sector in the economy and thus, has exerted a positive impact.</div> <div> </div> <div> 6. <span class="Apple-tab-span" style="white-space: pre;"> </span>Weather so far is favourable, which will have a positive impact on the economy.</div> <div> </div> <div> Nonetheless, there are following weak bases or assumptions, which will make the economic scenario weak.</div> <div> </div> <div> 1. <span class="Apple-tab-span" style="white-space: pre;"> </span>Although the election government brought an ambitious election budget it will have minimum impact on economic growth and will instead accelerate inflation</div> <div> </div> <div> 2. <span class="Apple-tab-span" style="white-space: pre;"> </span>IMF has forecast that Nepal’s macroeconomic situation would not improve significantly for the coming five years.</div> <div> </div> <div> 3. <span class="Apple-tab-span" style="white-space: pre;"> </span>Since the first CA election, highest growth of 4.5 percent was recorded last year whereas average growth of last three-year plan is less than four percent as against 5.5 per annual average target. </div> <div> </div> <div> 4. <span class="Apple-tab-span" style="white-space: pre;"> </span>Absorptive capacity for capital expenditure is very poor in Nepal.</div> <div> </div> <div> 5. <span class="Apple-tab-span" style="white-space: pre;"> </span>Unfavourable investment climate due to some extremist political parties and their affiliate organizations (which are against investment), and acute problems relating to load shedding, rigid labour laws, infrastructures etc.</div> <div> </div> <div> 6. <span class="Apple-tab-span" style="white-space: pre;"> </span>Results of the second CA election, held peacefully in Marga 2070, has brought in Nepali Congress, credited for introducing liberal economic policy in the 90s, as the largest party. This is expected to bring a positive effect on the economy.</div> <div> </div> <div> Based on the above mentioned strong and weak aspect for the estimate, a midway analysis/estimate, which gives the realistic picture, has been made in this article. During 2013/14, some macroeconomic indicators will remain better than that of last year. GDP is estimated to increase from 4.5 percent to a maximum of 5 percent as agricultural sector, the mainstay of the economy, is estimated to grow 3-3.5 percent due to favourable weather condition. Situation of summer crops, mainly paddy and maize, seems better this year. Production of paddy is estimated to have increased by more than 10 percent, compared to the sharp decline of 14 percent, last year. </div> <div> </div> <div> With regard to non agricultural sector, it will record around 5.5 percent growth, higher than last year’s 5 percent. The manufacturing sector will move up from 1.6 percent to 3 percent as investment climate is expected to improve slightly despite election year. Similarly, trade sector’s growth will shoot up due to the sharp import growth, while other sub-sectors of this sector will remain normal. This growth is supported by high ratio of fixed investment (fixed capital formation) to GDP, which is estimated to rise to 24 percent due to higher capital expenditure as a result of full-fledged budget presented by this non-party government.</div> <div> </div> <div> <img alt="Economy and Policy" src="/userfiles/images/ep2%20(Copy)(1).jpg" style="width: 550px; height: 321px; margin-left: 10px; margin-right: 10px;" /></div> <div> </div> <div> The inflation, which rose almost by two digit i.e. 9.9 percent last year and has increased at the rate of 10percent during the first four months of this fiscal year (2013/14), is estimated go up annually to 12 percent, which will be very close to the level reached in 2008/09 (13 percent). Being an election year, current expenditure has shot up with remarkable rise in election budget along with sharp rise in private and informal expenditure. The sharp rise in salary (18 percent) and provision of Rs. 1000allowance to the government employees, coupled with sharp appreciation of the American Dollar against Rupee, will lead to high inflationary pressure. Despite higher estimated GDP growth this year, higher money supply caused by above factors will lead to high inflation of 12 percent this fiscal year. Containing the inflationary pressure this year is a big challenge to the authorities. </div> <div> </div> <div> In terms of government finance, the non-political government has been able to bring the budget on track despite late in the third quarter of last fiscal year-2012/13. Last year, total revised budget was around Rs.370 billion but due to substantial election expenditure as well as full-fledged budget, this year’s total budget estimate is Rs. 517 billion. Government estimates forecast capital expenditure to rise from around Rs. 55 billion level to Rs. 85 billion this year, while Rs. 78.7 billion has been set aside for financial provision. </div> <div> </div> <div> Although government has given priority to enhance capital expenditure, such expenditure is just 9 percent of the budgeted total capital expenditure in the first five months of this fiscal year (2013/14), while regular expenditure is almost 30 percent in this period. This trend shows that though the capital expenditure will be far below the target, the regular expenditure can cross the target. With the sharp rise in import, the import-based total revenue is estimated to rise by more than 20 percent this year. Thus, in the fiscal sector, increasing the capital expenditure and containing the regular expenditure will remain, as usual, the major challenge for the government. </div> <div> </div> <div> The election will have an expansionary effect on monetary sector. Both money supply (M1 and M2) will rise sharply than last year. Private sector’s credit growth level would be higher this year than the last year. Similarly, full budget will push the deposit growth and the broad money liquidity (M3). The financial sector has been facing instability, as more than a dozen of BFIs have been declared problematic and some even dissolved. Thus, stabilising and making this sector strong by strengthening the supervisory capacity of the central bank and by enhancing good governance in both the BFIs and the regulator, is a major challenge. </div> <div> </div> <div> The depressed share market has improved especially after the CA election’s result positioned Nepali Congress, known for its liberal economic policies, as the lead party in the CA. The share market on the whole will record bullish trend this year compared to last year. </div> <div> </div> <div> External sector in 2013/14 is estimated to register a weak scenario instead of registering any structural improvements. Rise in demand for consumer as well as capital goods, triggered by full-fledged budget and the election expenses, is likely to increase money supply as well as imports. As a result, imports will register sharp growth of 30 percent, and reach about one third of the GDP. Export is estimated to rise by 10-12 percent higher than the last year due to the sharp appreciation of US Dollar and the expected reforms in the export incentive. Due to high import and low export, export-import ratio will go down from current 14 percent to 11 percent, and the trade deficit to one-third of the GDP next year. Consequently, the steady rise in trade deficit will continue. High import growth will make large current account deficit this year. However, increased remittance, which is due to sharp Dollar appreciation, will ultimately lead to BOP surplus in 2013/14 but not in a significant manner. Thus strengthening the external sector, by decelerating the trade deficit through import management and export enhancement, will remain a major challenge. </div> <div> </div> <div> <img alt="Economy and Policy" src="/userfiles/images/ep3%20(Copy)(1).jpg" style="width: 550px; height: 413px; margin-left: 10px; margin-right: 10px;" /></div> <div> </div> <div> Considering the overall macroeconomic scenario and challenges, the new government, which is expected to form soon, should concentrate on economic agenda and in addressing major issues and challenges that Nepal’s economyis confronting. The elected government first of all has to pursuade all major political parties to form common economic agenda, and in setting future direction for the economy. Along with that the government should take initiatives to reform policies for addressing immediate economic concerns. In this regard, priority should be given to creating conducive environment for investment, reducing poverty, unemployment and bad governance. Along with that the government should provide special incentive to exports, energy and agriculture sector. It should focus on capacity enhancement of capital expenditure, containing double-digit inflation and decelerating trade deficit along with strengthening banking system. Nonetheless, along with the government, the private sector and other sections of societies should make collective efforts to strengthen the national economy.</div> <div> </div> <div> <em>(Writer is Expert Member at Securities Board of Nepal.)</em></div>', 'published' => true, 'created' => '2014-01-24', 'modified' => '2014-01-26', 'keywords' => 'new business age economy & policy news & articles, economy & policy news & articles from new business age nepal, economy & policy headlines from nepal, current and latest economy & policy news from nepal, economic news from nepal, nepali economy & policy economic news and events, ongoing economy', 'description' => 'After the second democratic movement in FY 2007/08, Nepali economy recorded rosy picture including higher GDP growth of 5.8 percent. However, after the constituent assembly (CA) election in 2009 macroeconomic situation went on declining with low growth mainly due to uncertainty of economic policy and deteriorating investment environment. But pre-last year -2011/12 was exceptional i.e. better along with moderate growth of 4.5 percent, the highest in the last five years primarily because of windfall (exogenous) gain caused by weather and remittance, while last year (2012/13)’s performance is poor with the lowest growth 3.5 percent according to the estimates of Central Bureau of Statistics (CBS), and double digit inflation.', 'sortorder' => '2343', 'image' => null, 'article_date' => '0000-00-00 00:00:00', 'homepage' => false, 'breaking_news' => false, 'main_news' => false, 'in_scroller' => false, 'user_id' => '0' ) ), (int) 7 => array( 'Article' => array( 'id' => '2180', 'article_category_id' => '37', 'title' => 'Current Road Expansion: A Four Lane Road To Unsustainability', 'sub_title' => '', 'summary' => null, 'content' => '<div> </div> <div> </div> <div> <strong>--By Bimal Rijal</strong></div> <div> </div> <div> G<span style="font-size: 12px;">overnment authorities often throw around the word “development” while describing the recent trend inside Kathmandu. With the mushrooming high-rise apartment buildings, and of course, the ongoing road expansion project in the various parts of the city, the so called development seems to be rampant all of a sudden. However, before submitting to these claims and letting the government carry on with its “development” plans for Kathmandu, it is imperative that we as inhabitants of Kathmandu understand what it means to live in a more developed city.</span></div> <div> </div> <div> In old school development studies, the word “development” was referred to an elevated level of economic activity. Tall buildings and wider roads most definitely spark an increase in the level of economic activity, but they do not define development. Yes, infrastructures such as wider roads that facilitate better mobility inside the city and high-rise buildings that provide crucial commercial and retail space are important to the process of development. But they alone cannot define development. </div> <div> </div> <div> When improved infrastructures such as wider roads and taller buildings contribute in improving people’s living standard, we can then say that they are contributing to the development of the city. The key here is not to emphasize only on developing physical infrastructure but also increasing their contribution in bringing positive effect in the lives of the people. </div> <div> </div> <div> In other words, development projects are the ones which ameliorate people’s living standard; not deteriorate existing one. This is why even the international community is increasingly accepting the Human Development Index (HDI) as a metric to measure development. To move up in the Human Development Index, a country not only needs to pay heed to economic growth (a component to which construction of new infrastructures such as roads, factories, etc., contribute to) but also genuinely improves people’s living standard by ensuring quality health, education and environment for </div> <div> its citizens. </div> <div> </div> <div> Kathmandu’s development should not be evaluated on the basis of whether or not we have four lane roads. More important questions like are these roads going to increase traffic mobility by reducing jams, how beneficial will the wider roads be to pedestrian, what air quality will the people get to breath, and so on should be primarily asked and evaluated. The present implementation of the road widening projects and the way the notion of development is attached to it makes me skeptical about the understanding of the term among politicians and city planners. </div> <div> </div> <div> From development’s perspective, the current road expansion is particularly concerning for a couple of reasons. Needless to say, in a few years time, much of Kathmandu’s two lane roads will be transformed into four-lane. But does this justify its labeling as a ‘development project’? Is it really going to help the ailing transportation system inside Kathmandu on a sustainable scale? My answer is a resounding no.</div> <div> </div> <div> <img alt="Road Expansion in Nepal" src="/userfiles/images/ep1%20(Copy)(3).jpg" style="width: 550px; height: 391px; margin-left: 10px; margin-right: 10px;" /></div> <div> </div> <div> The current road expansion project undertaken by the government of Nepal to “rescue” Kathmandu’s populace from the blight of traffic congestion is assuredly going to prove counterproductive in the future. Having wider roads is only a temporary solution for Kathmandu because wider roads invite more cars and eventually the roads are going to be even more congested leading to even more intense traffic jams. Much of the current expansion of roads for gas consuming vehicles has been at the expense of pedestrian footpath. By norm, sidewalks alongside the roads need to be at least 2 meters wide. The new pedestrian sidewalks are barely half of it. Additionally, availability of lesser space has nullified the possibility to carry out plantations alongside the roads. </div> <div> </div> <div> To sum up the consequences of the road expansion: firstly, there are going to be more vehicles on the road emitting more harmful gases than ever and thereby further degrading air quality. Secondly, with no plans to improve mass transit in place, influx of more cars in the days ahead will reduce the mobility of vehicles further. Thirdly, lack of modest pedestrian sidewalk will affect mainly the working class, the senior citizens, and children walking back and forth from school. This will force the pedestrians to walk on the roads and presumably increase road accident frequency. Therefore, let alone the amelioration of living standard, wider roads are only going to degrade an average man’s living standard in the next five years. So, can such a project that increases pollution, worsens traffic problem, and puts the lives of senior citizens, small children and the working class at risk be called a development project? The answer is for the planners and the politicians to think of.</div> <div> </div> <div> Personally, even the economic prospect from this project does not make sense. I do not understand why we are so much inclined towards widening our roads when we already know that the new vehicles, that are going to fill them up, and the fuel that will consume, will be imported from foreign countries. A bicycle ride doesn’t require importing or burning of fuels nor does a walk, for those who prefer it. In such a scenario, why don’t we have pedestrian sidewalks and cycling tracks in our list of priorities? These would not only help in retaining currency from flowing out but also improve living and health standards of the general public as more and more people will take to cycling and walking. </div> <div> </div> <div> Current road expansion seems to be worthy of pursuing to some extent only if the government personally takes the responsibility of managing the operation of public transport within the city, of planting trees on the sidewalks, and </div> <div> of ensuring that public health won’t be affected due to the project. Without these commitments and corresponding plans to implement them, the current endeavor is going to prove a wet blanket for the citizens.</div> <div> </div> <div> Kathmandu is remarkably Nepal’s administrative and the financial capital. Legacy of centralized development, focused intensely within ring road, is at the heart of this city’s problem of traffic congestion. The government confronted it’s inadequacies in foreseeing the long term impacts of centralizing development, when severe traffic jams and immobility posited itself as a serious concern. In such a context, it could either reverse the trend of centralized development, opting to not expand the road, or it could carry on with the age old legacy of centralized development and expand the road eventually inviting more vehicles and people inside Kathmandu. </div> <div> </div> <div> A much better alternative to the current expansion would have been to ocus on developing more efficient express highways that link Kathmandu with its peripheral hubs like Banepa, Dhulikhel and others, and simply pay heed to the maintenance of roads inside Kathmandu. Such an effort would not only create new financial centers and commercial hubs outside Kathmandu but also relieve Kathmandu from its population pressure and pressures on its roads and physical infrastructures. With an increase in the level of economic activity, the people living outside Kathmandu and its periphery would be better off; and with lesser cars, lesser congestion, lesser pollution and lesser people, Kathmandu would be better off. In the long run, people living inside and outside Kathmandu would both benefit leading to genuine realization of development rather the current unsustainable growth.</div> <div> </div> <div> While other nations across the world are stressing on promoting sustainability, we seem to be moving in the opposite direction. While governments in other nations stress on preserving and promoting greenery through green roofing or through the protection of public parks, our government at home chops off three hundred trees to construct a landmark dedicated to “Ganatantra”. While other nations stress on constructing artificial flood control systems to protect its citizenry from unexpected flooding. In Kathmandu, the government instead destroys natural flood control systems like Manohara, Dhobokhola, Tukucha and other stream systems to develop riverside road network. </div> <div> </div> <div> Kathmandu - once tagged as naturally air-conditioned city by tourists - has now turned into a concrete jungle that experiences extreme temperatures. Ongoing unmanaged and disproportional road expansion has tarnished the image of this city even further. Adding to it, reluctance of the government to resort to sustainable development initiatives brings into question the fate of the city itself. If the government is not planning a sustainable future for it, than who will? </div> <div> </div> <div> <em>(Senior urban planner Rijal is chief of Urban Development Department and also chief at city planning commission.)</em></div>', 'published' => true, 'created' => '2013-11-28', 'modified' => '2013-12-02', 'keywords' => 'new business age economy & policy news & articles, economy & policy news & articles from new business age nepal, economy & policy headlines from nepal, current and latest economy & policy news from nepal, economic news from nepal, nepali economy & policy economic news and events, ongoing economy', 'description' => 'Government authorities often throw around the word “development” while describing the recent trend inside Kathmandu. With the mushrooming high-rise apartment buildings, and of course, the ongoing road expansion project in the various parts of the city, the so called development seems to be rampant all of a sudden.', 'sortorder' => '2040', 'image' => null, 'article_date' => '0000-00-00 00:00:00', 'homepage' => false, 'breaking_news' => false, 'main_news' => false, 'in_scroller' => false, 'user_id' => '0' ) ), (int) 8 => array( 'Article' => array( 'id' => '2065', 'article_category_id' => '37', 'title' => 'Nepali Federalism From Economic Perspective In Nepal', 'sub_title' => '', 'summary' => null, 'content' => '<div> </div> <div> </div> <div> <strong>--By Dr Chandra Mani Adhikari</strong></div> <div> </div> <div> There is lot of hue and cry for a new constitution that will have highly suitable federal structure. But, it does not look conducive enough for a successful election followed by good governance.</div> <div> </div> <div> A better Nepal is still a distant dream. Being optimistic, one can say things can be brought back on right track but that is possible only with a strong determination and attitude backed by a rigt thought. It requires quality leaders with logical, inclusive and judicious representation as well as balanced executive 9or administrative structure.</div> <div> </div> <div> The date of election has been set and the Election Commission is working within a given framework. But issue and essence require more debate while it is also urgent to have constitution.</div> <div> </div> <div> In this regard, some observations on the basis of the international experience and national reality are pertinent. The state’s structure can be divided into three systems. One is related to formation of the government. The second is defined power of the government whereas the third is the mechanism to serve the grassroots. The federal system has been developed since 17th century.</div> <div> </div> <div> The unitary form of governance was implemented after the First World War which didn’t work properly in practice. Regarding the forms, the main question regarding the federal or unitary system is motive of separation of rights for balancing different levels of the government.</div> <div> </div> <div> In some federal countries, the center seems more powerful in others the states are more powerful. In principle, federalism is the system of self-governance by the state based on rule-of-law. Thus, federal system would not be meaningful in undemocratic environment.</div> <div> </div> <div> Nepal is already a federal republic, if we go only by the Interim Constitution of Nepal. But in practice, it is still to be federal. Many questions such as those related to the structure of the state, basis of restructuring, methodology of building the federal nation, the form of government, election system and judicial system are still unanswered. Moreover, there is still no consensus on the issues of culture, geography, economic resources, population, infrastructure, level of social understanding and nature resources that a state needs to have to qualify to be a federal state.</div> <div> </div> <div> Other hot topics for discussion are the number of federal states, their geographical border and authorities of the legislative and executive bodies of the federal states.</div> <div> </div> <div> <img alt="" src="/userfiles/images/epn1%20(Copy).jpg" style="width: 550px; height: 252px; margin-left: 10px; margin-right: 10px;" /></div> <div> </div> <div> Two best examples of successful federalism are Switzerland and USA where many smaller nations tied up into the confederation. However, in USA the confederation was not working properly in the beginning. So, in 1781, USA declared the Federal Constitution with relatively more power to the center.</div> <div> </div> <div> After 50 years of experience with its own style of federalism, Switzerland too issued American model constitution in 1848 that aimed to enhance cooperation among the states. Germany introduced cooperative base federal constitution in 1871 and Belgium, France, Spain and South Africa followed it. Some countries like Bosnia and Herzegovina, Ethiopia, Congo and Iraq entered into federal system with background of conflict and other historical accords.</div> <div> </div> <div> On some instances, economic disparity, religious differences and geographical differences too have led to federalism. Canada is one such example.</div> <div> </div> <div> Nepal declared itself a federal state after people’s movement. And there are various reasons and logic behind the Nepali federalism. These include safety to the local community from encroachment of outsiders, institutionalization of democracy and making the state more inclusive. But what is happening (and has happened) in Nepal is different than the global experience.</div> <div> </div> <div> Nepal’s need is to end all sort of social and economic disparities by ensuring a conducing economic and political infrastructure through a political and constitutional consensus, using federalism as an instrument. In this context, it’s irrelevant to ask whether the state should be restructured on ethnic lines. Lengthy debate on the question whether the states should be based on single ethnicity or multi-ethnicity identification has proved futile.</div> <div> </div> <div> To make federalism successful in its objectives, we should scrutinize the real challenges and potentials, which are directly related to state restructuring. These include Nepali ethnicity management (with a goal of transforming current Nepali society into socially-economically and politically prosperous future) geographical balance and finding an optimum in terms of types, name, levels, numbers and size of federal and state governments. Also challenging is the question of whether optimization can be achieved with identification of appropriate determinants like population, geography and some other context.</div> <div> </div> <div> Among such contexts, the distribution of resources plays a prominent role. This is related with the need divide and assign the economic and revenue rights — PROPERLY — between the governments where resources can be mobilised in right proportion through (double, united or moderate) mechanism. This may require establishing a new set of institutions to run the system. The total size of the national budget will grow as each state will have its own government-legislature, chief minister and ministers and so on. We need consensus to determine a manageable size for all these. </div> <div> </div> <div> While determining the size and number of the provinces, presently available physical and economic resources, density of population, geographical area, level of technology, means of transportation etc should be considered. Another prominent reality to be accepted is the beauty of diversity. The Mountains, hills and the plains — these three geographical regions are interdependent; however all aspects of such dependencies are not measurable economically.</div> <div> </div> <div> The strength of the Hills is water as well as some other natural resources and high possibility of tourism industry. Whereas the strength of the Terai lie in the vast fertile land, urbanization, dense population and more economic activities.</div> <div> </div> <div> However, these factors may change in the future for example; migration may change the demographic structure. In this context, all the political parties and the policy makers need to be careful while allocating the economic resources and political rights between the states and the centre.</div> <div> </div> <div> In conclusion, striking a balance between the economy, politics and social aspirations of people is needed to design an optimum form of federalism. It is really the responsibility of present leadership to work for the next generation for a better and prosperous Nepal.</div> <div> </div> <div> <em>(Writer is an economist and also chairman of National Council for Economic and Development Research (NAREC Nepal)</em></div>', 'published' => true, 'created' => '2013-10-29', 'modified' => '2013-10-29', 'keywords' => 'new business age economy & policy news & articles, economy & policy news & articles from new business age nepal, economy & policy headlines from nepal, current and latest economy & policy news from nepal, economic news from nepal, nepali economy & policy economic news and events, ongoing economy', 'description' => 'There is lot of hue and cry for a new constitution that will have highly suitable federal structure. But, it does not look conducive enough for a successful election followed by good governance. A better Nepal is still a distant dream. Being optimistic, one can say things can be brought back on right track but that is possible only with a strong determination and attitude backed by a rigt thought. It requires quality leaders with logical, inclusive and judicious representation as well as balanced executive 9or administrative structure.', 'sortorder' => '1913', 'image' => null, 'article_date' => '0000-00-00 00:00:00', 'homepage' => false, 'breaking_news' => false, 'main_news' => false, 'in_scroller' => false, 'user_id' => '0' ) ), (int) 9 => array( 'Article' => array( 'id' => '1970', 'article_category_id' => '37', 'title' => 'Commercial Bench In Nepali Courts Prospects And Challenges', 'sub_title' => '', 'summary' => null, 'content' => '<div> <strong>--By Rudra Sharma</strong></div> <div> </div> <div> The Word ‘commercial’ is not easy to define and thereby making it further difficult to define what is commercial case and what a commercial bench is supposed to address. However, there were demands of a commercial court/bench for the last 20 years or so. People in seminars organized by Nepal Rastra Bank in association with the World Bank and International Monetary Fund identified the need of a commercial court/bench in Nepal for appropriate and speedy dispensation of justice in commercial case.</div> <div> </div> <div> In 2063 BS, the Supreme Court has set up a task force on this regard. The task force reviewed several exercises together with some international practices for establishment of Commercial Bench. The Task Force studied the reports of Court Management Committee, 2055 Court Strengthening Committee, 2058 and the Five Year Strategic Planning of the Court (2061- 2066). The Ministry of Law and the Ministry of Industry had also carried out some consultation with the Supreme Court in the year 2059 for the establishment of Commercial Court.</div> <div> </div> <div> A project carried out under the loan assistance of Asian Development Bank namely Improving Legal Enforcement Mechanism and Judicial Capacity had a component called Establishment of Commercial Bench under its package 2 activity. From Manshir 2059, this project carried out activities on establishment of Commercial Bench. This project had hired an expert Hon. C.</div> <div> </div> <div> W. Pincus QC who submitted a report recommending a number of things on establishment of commercial bench. Nepal Judicial Academy (NJA) also worked very closely with this project on the Commercial Bench component. This project had also worked with private sectors like Federation of Nepalese Chambers and Commerce and Industry (FNCCI) and others in this course.</div> <div> </div> <div> According the report of the Task Force, Commercial Cases Baseline Survey, 2003 carried out by Nepal Law campus presents 17 different kinds of cases as commercial cases tried and tested in several courts all over the country. The 17 different kinds of cases are - Company, Secured Transaction, Contract, Insolvency, Banking and Negotiable Instruments, Arbitration, Intellectual Property, Finance, Foreign Investment, Insurance, Security Transaction, Agency, Partnership, Construction, Leasing/Rent, Transportation and any others.</div> <div> </div> <div> Analysing the evolution of concept of Commercial Bench and a comparative study on commercial dispute settlement of some other countries like United Kingdom, United States, India and China, the Task Force has finally put forth 26 suggestions.</div> <div> </div> <div> <span style="font-size: 14px;"><strong>Establishment of Commercial Bench </strong></span></div> <div> On 2065 Magh 1, the government of Nepal established a Commercial Bench in four Appellate Courts namely Biratnagar, Patan, Butwal and Nepalgunj and later added Hetauda Appellate Court also through a notification on 2067 Baisakh 1. These Commercial Benches are provided with jurisdiction to look after cases of Secured Transaction Act, 2063, Competition Promotion and Market Promotion Act, 2063, Company Act, 2063 and Insolvency Act, 2063.</div> <div> </div> <div> Later, the government of Nepal, through a notification published on 2065 Shrwan 5, extended the jurisdiction of the Commercial Benches for the disputes under Banking Offence and Punishment Act, 2066. Most of the cases going to Commercial Bench were filed in the Commercial Bench of Patan Appellate Court. Some 99 commercial cases were filed in the Patan Appellate Court up to the fiscal year 2067, some 154 cases were filed in the fiscal year 2067/068, some 237 cases were filed in the fiscal year 2068/069 and some 263 cases were filed before the completion of the fiscal year 2069/070.</div> <div> </div> <div> After the establishment of the Commercial Bench, a procedure for the same was supposed to be made. In fact, a procedure is also drafted. However, the procedure has not come into force. Company Act, 2063 and Competition & Market Promotion Act, 2063 have provided that lawsuits under these Acts should follow summary proceeding. The Insolvency Act provides for a procedure within itself and that procedure is being followed now generally.</div> <div> </div> <div> No special procedure is prescribed for Secured Transaction Act and Banking Offence Act. These two Acts seem to follow general procedure. Despite the lack of a specific procedure for the Commercial Bench, Chief Judge of the Appellate Court where the Commercial Benches reside have provided for necessary procedural matters as and when required. For example, cases of Commercial Bench are heard by a division bench, other cases related to the case filed in the Commercial Bench are also heard in Commercial Bench, so on and so forth.</div> <div> </div> <div> <span style="font-size: 14px;"><strong>Commercial Bench & Expectations</strong></span></div> <div> The primary expectation with the Commercial Bench was that it would look after all the commercial cases gradually. It was a good beginning that the Commercial Bench was assigned to hear cases under three categories and later under five categories. However, it was very unfortunate that the jurisdiction of the commercial bench was not extended to other cases under other Acts.</div> <div> </div> <div> The basic benchmark to evaluate the function of the Commercial Bench is its comparative worth and value, i.e. what and how it contributed compared to previous court system where there were not Commercial Benches. There are hardly any evidences that the Commercial Bench could prove its worth. This is because, we already have had a regular court system and the Commercial Bench was brought to existence for a better performance and better dispensation of justice with respect to commercial cases. But, unfortunately it did not happen.</div> <div> </div> <div> The Task Force report mentions that the erstwhile judiciary of Nepal was looking after some ten kinds of commercial cases even if there were no such commercial benches. The cases were - dispute related to loan or credit, dispute about security or pledge, dispute related to buying and selling of property, dispute related to trademark, dispute related to commercial loan, dispute related to liquidation of company, dispute related to shareholders of company, Torts related trade and commerce and other economic cases.</div> <div> </div> <div> According to primary expectations and the decade long preparations, the scope of the Commercial Court was supposed to be extended to other commercial cases too and subsequent legal reform as well as administrative reform were also supposed to be made in order to pave a way for the same.</div> <div> </div> <div> It did not happen unfortunately, and this proved to be a major setback for creating condusive environment for invitation of foreign investment in Nepal and also for maintaining as well as retaining investment in Nepal. The exact expectation of about the Commercial Bench was to develop it as a real center for commercial dispute settlement.</div> <div> </div> <div> The Task Force report states that the concept of commercial bench was evolved in an endeavour to create sufficient legal and judicial environment for business as well as economic activities. But we can hardly find evidences to understand how the commercial bench contributed to create such environment. However, it does not mean that the commercial bench did not do anything. But, it should be judged in comparison to the contribution of the regular court system before establishment of commercial bench. According to the Task Force report, the regular court system was looking after 10 different kinds of commercial cases. As the commercial benches took up only cases under five categories, it gave a kind of impression that commercial cases are related to those five cases only.</div> <div> </div> <div> <span style="font-size: 14px;"><strong>Major Challenges</strong></span></div> <div> The major challenge of the Commercial Bench is the mindset of the judicial leadership. The judicial leadership probably thinks that the regular Appellate Courts would be less important if all commercial cases would go to the Commercial Bench. I wish to be wrong at this point. But, it would be very dangerous if the judicial leadership continues to be influenced by such thinking.</div> <div> </div> <div> Another challenge is the lack of competent human resources required for the Commercial Bench. This challenge can be overcome with appropriate will power and leadership of the judicial administration. We cannot import or invent such competent human resources. However, there would be no additional cost for managing the resources already available in the market.</div> <div> </div> <div> On the one hand, commercial cases are not coming to the Commercial Bench due to lack of proper legal arrangements on jurisdiction and on the other hand, there are competing and repeating jurisdictions for the dispensation justice through commercial cases. Several cases are put in arbitration process. Almost all of them are commercial cases. But, the appeal on arbitration settlement goes to the Appellate court but not to the Commercial Bench. The Debt Recovery Tribunal hears cases relating to debt recovery of the banking institutions. Revenue Tribunals look after cases related to taxes. Labour Court hears the cases related to labour issues.</div> <div> </div> <div> The money laundering related cases are handled by the money laundering department. Corruption cases are handled by Commission for the Investigation on Abuse of Authority (CIAA). Criminal Investigation Bureau of Nepal police also carries out investigation in some commercial cases.</div> <div> </div> <div> Thus, the commercial cases are scattered and thereby losing the scope of making the Commercial Bench a hub for settlement of commercial disputes.</div> <div> </div> <div> The Commercial Bench has jurisdiction over the Banking Offense Statute, but it does not have jurisdiction over Banking and Financial Institutions Act (BAFIA). It has been ridiculous practically. Such examples are there in other sectors too.</div> <div> </div> <div> Some of the practices of Appellate Court where the Commercial Bench resides have defeated the very purpose of the Commercial Bench. A case demanding for interim relief does not go to the Commercial Bench. Regular Bench hears it. Once a party receives interim order, it keeps on postponing the hearing date, pending the interim order. Sometimes, such cases are postponed for many times even from the weekly calendar putting a trouble to the opposite party to even to identify whether the hearing date was postponed or not.</div> <div> </div> <div> Such practices are serious fraud on the administration of justice and responsible persons must be punished.</div> <div> </div> <div> In most of the times, dispute on contract cases that happen to be commercial cases do not go to Commercial Bench. The prevailing contract law has provided interim relief in the form of appropriate order. In such situation, the existence of Commercial Bench happens to be a great irony.</div> <div> </div> <div> Great difficulty is experienced in Nepal for administration of contract, especially international contract. The courts generally provide stay order depriving the aggrieved party from carrying out the necessary activities according to the contract. Such a situation causes great mockery of the existence of the Commercial Bench.</div> <div> </div> <div> Due to the above reasons, the expectation that Commercial Bench would establish a minimum predictable legal environment on doing business in Nepal remains a distant dream. This has put a great threat for the invitation of foreign investment in Nepal. The Commercial Bench should overcome all these challenges in the time to come.</div> <div> </div> <div> <span style="font-size: 14px;"><strong>Experiences of India on Commercial Bench</strong></span></div> <div> In the year 2009, the Lok Shaba of India passed the Commercial Division of High Court Bill, 2009. But, the Bill is yet to be passed by the Rajya Saba.</div> <div> </div> <div> The Bill envisages separate divisions in each high courts to handle commercial disputes above certain value along with a procedure for the same. In the same year 2009, the Delhi high court established arbitration center and gave a message that the Indian judiciary was not anti-arbitration. In the same year 2009, London Court of International Arbitration set up a center in India. These two institutions paved way for institutional arbitration in India as an effective tool for settlement of commercial disputes.</div> <div> </div> <div> The Indian courts have made controversial interpretations of the Indian Arbitration & Conciliation Act, 1996. In the case of SBP & Co versus Patel engineering the Indian Supreme Court upheld the role of courts in appointment of arbitrator if one of the parties fails to nominate an arbitrator. This decision has been criticized as it put a great hurdle to separate arbitration from court. But in the year 2012 September, the Indian Supreme Court in the case of Bharat Aluminum Company Ltd. ( BALCO) versus Kaiser Aluminum Technical Service ruled that the Indian Arbitration Act will not apply if the arbitration proceeding are held outside India. This ruling of the Indian Supreme Court has been praised from many quarters as it has helped to separate domestic and international arbitration as well as separating arbitration from the courts.</div> <div> </div> <div> It seems that the establishment of arbitration center at the Delhi high court demonstrates the willingness of Indian judiciary to make the high court as hub of settling commercial dispute and the Supreme Court ruling of</div> <div> </div> <div> 2012 in the case of BALCO shows the willingness of Indian judiciary to separate arbitration from judiciary. It seems that these all issues will be categorically addressed by the pending Bill called the Commercial Division of High Court Bill, 2009. The underlined aim of all these schemes would be making India a preferred investment destination as the courts will provide a minimum predictability on legal environment.</div> <div> </div> <div> <span style="font-size: 14px;"><strong>International Dimensions</strong></span></div> <div> Nepal became member of World Trade Organization (WTO) nine years ago making several commitments for harmonization as well as standardization of administration of trade law in accordance with the provisions of the United Nations Commission on International Trade Law (UNCITRAL). Section 34 of the Arbitration Act, 2055 provides for enforcement of foreign arbitral awards.</div> <div> </div> <div> But, there are some cases where the Appellate Court has refused for enforcement of some foreign arbitral awards and the appeal on such decisions of the Appellate court are pending at the Supreme Court. Our legal ecosystem should be clear at this point and the commercial bench should take lead on this.</div> <div> </div> <div> <span style="font-size: 14px;"><strong>How Commercial Bench should be </strong></span></div> <div> Therefore, the commercial bench in future should be able to be a hub and ultimate resort for the settlement of disputes related to commercial laws.</div> <div> </div> <div> Further, it should be established as a center of trust among the investors as well as among the public that the commercial bench ensures settlement of commercial disputes in tune of time. It will not be necessary that the commercial bench itself hears all disputes. But it should be the ultimate resort for settlement of such disputes. For this purpose, we need to make legal as well as administrative mechanisms that all commercial law related cases can ultimately reach to the commercial bench.</div> <div> </div> <div> We can continue separate arrangements of hearing commercial law related cases at the court of first instances like Labour Court, Revenue Court or Tribunal, Debut Recovery Tribunal. Besides, we also need to encourage to settle commercial law related cases through the means of alternative dispute settlement like arbitration, mediation, conciliation etc. However, commercial law disputes settled in all these court of first instances and cases settled through alternative dispute settlement mechanism should ultimately find their way to the commercial bench. Such arrangements should be all over the country not only in Kathmandu. We can make an arrangement that disputes involving certain amount or above should go directly to the commercial bench instead of the court of first instances.</div> <div> </div> <div> The commercial bench should also take over the newly emerging commercial cases. Cases related to banking institutions are prominent example, such as cases related to bounced, dishonoured of cheques, debt recovery and banking offence. There is a need of legal as well as administrative provisions on asset management. Lack of this has hampered expected functioning of banking system.</div> <div> </div> <div> The commercial bench in future should look after comparatively complex cases on banking law. There is a room to argue that the Banking Offenses Act seems to be draconian, providing scope for being misused. This Act is disproportionate since this gives higher hand to the regulating body Nepal Rastra Bank to take such action that may kill the institution instead of correcting it and functioning it again after action from Nepal Rastra Bank.</div> <div> </div> <div> Nepal Rastra Bank may feel the need of such law since the court system is not effective as mentioned above. However, a draconian law would not be an answer for non-effective court system. So, we need to improve the court system rather than practicing draconian laws. We need such legal system where the central bank can take action against the banking institutions for corrective measures, put them in the legal process and the banking institutions again functions after the central bank takes action. Taking action by central bank against banking institution should be a regular process rather than a fateful disaster.</div> <div> </div> <div> Other newly emerging cases on commercial law are related to money laundering, insolvency and trans-border commercial cases. Money laundering is a part of criminal law. But since it is a matter of financial crime but still it can be seen within the parameter of commercial law. International commitments as well as domestic needs have compelled to make the legal as well as administrative regimes on money laundering more stringent. It is said that this regime in the offing will compel to change over 40 prevailing laws on administration of criminal justice. The future commercial bench should be a center for hope and trust for the settlement of cases related to these all emerging commercial laws.</div> <div> </div> <div> The commercial bench should have a proper reporting system. The cases settled by commercial bench should be discussed publicly in the Bars and among the academics.</div> <div> </div> <div> <span style="font-size: 14px;"><strong>Conclusion and Recommendations </strong></span></div> <div> Though Commercial bench could not prove its expected significance as we need to appreciate the initiations made and need to continue efforts to update and standardise it in accordance with need of the day.</div> <div> </div> <div> <span style="font-size: 14px;"><strong>Recommendations</strong></span></div> <div> 1. We need to seriously review the efforts made till date for establishment of Commercial Bench together with mapping the expectations made during such endeavours.</div> <div> 2. We need to extend the scope as well as jurisdiction of the commercial bench ensuring that all commercial cases either directly go to the commercial bench or go to other courts or tribunals that are supervised by the commercial bench.</div> <div> 3. There should be commercial benches covering all jurisdictions of Nepal.</div> <div> 4. Some cases having commercial issues may not go to commercial bench if such cases have monetary value in the disputes less than prescribed. Principally, it should be determined that commercial bench is to serve the purpose of establishing a preferred destination for investment, and therefore, it serves the creating conducive atmosphere for investment rather than establishing judicial principles. Prolonged judicial process and lengthy interpretations of statues can be done in regular courts not by commercial benches.</div> <div> 5. Among the commercial bench all over the country, there should be one commercial bench at the center Kathmandu with fast tract procedure. Commercial cases with certain threshold of investment and some other special circumstances should only go to this Fast Track Commercial Bench. Such arrangement would boost up confidence of investors.</div> <div> 6. There should be proper reporting system of the cases decided by the commercial benches so that the legal community as well as business community can provide feedback on the decisions by carrying out discussion on them.</div> <div> 7. There should be special efforts for legal reforms in order to accomplish the task of transforming the present commercial bench so that it can carry out all above mentioned matters.</div> <div> 8. Administration of commercial cases and legal reform should be carried out considering the international commitments of Nepal under WTO, UNCITRAL and other similar mechanisms.</div> <div> </div> <div> 9. Success stories of some countries like Singapore should be considered and we need to make analysis why Singapore scores over India on settlement of corporate conflict.</div> <div> </div> <div> <em><span style="background-color: rgb(240, 255, 240);">(Based on a paper prepared under an assignment of Commercial Law Committee of Supreme Court Bar Association. The writer is associated with Transactional Law House, an international law firm based in Kathmandu. He can be reached at rudralawyer@gmail.com. Cell- 9851057087.)</span></em></div> <div> </div> <div> <hr /> <div style="text-align: center;"> <span style="font-size: 16px;"><strong>“Lacunae in the legal system need to be minimised to attract foreign investors”</strong></span></div> <p> </p> <div> <strong style="font-size: 14px;"><img alt="Shreekant Poudel, the spokesperson of the Supreme Court" src="/userfiles/images/ep1.jpg" style="float: left; margin: 0px 10px 0px 0px; width: 200px; height: 246px;" />Shreekant Poudel</strong><span style="font-size: 14px;">, the spokesperson of the Supreme Court, in an interview with Britant Khanal of New Business Age he shed light on the introduction of commercial bench and its need.</span><strong style="font-size: 14px;"> Exceprts:</strong></div> <div> </div> <div> <span style="font-size: 14px;"><strong>Could you highlight the reason behind establishing the commercial bench?</strong></span></div> <div> The first and foremost reason behind the establishment of this bench is the need for speedy justice, easy access and quick legal remedies for the commercial sector. Even more important is the demand made by the law in many acts after the Second Jana Andolan. It is clearly mentioned that such and such cases will be dealt by the commercial bench like for instance in Section Z8 of the Company Act. After 2006, the World Bank had also suggested the requirement of such a bench. The Company Act, the Secured Transaction Act and other acts related to safe competition have mentioned the requirement of this bench. Was this issue initiated by ADB? I don’t think so but the ADB had some general interest and it had recommended on bringing such a bench too.</div> <div> </div> <div> <span style="font-size: 14px;"><strong>What new prospects will the bench bring? Will it have the same old practices disguised as new?</strong></span></div> <div> In the process of establishing this bench we had to train judges, judicial staffs and even lawyers. The training lasts from one to one-and-a-half months as it required. The judges who attend the training are only sent to the bench for hearing commercial cases. The new commercial bench will therefore slowly shed some old ways.</div> <div> </div> <div> <span style="font-size: 14px;"><strong>There seems to be a paradox in the bench being established for the benefit of the commercial sector while the jurisdiction seems a bit scattered, vague and ambiguous. Could you talk a little about this? </strong></span></div> <div> We are still in the initial phase of establishing the bench. As I know, the initial requirement was to set up a separate commercial court, which came down to establishing a commercial bench in appellate courts. This was required because cases related to the commercial sector are heard in a scattered manner. For example, cases of contract are first heard by the district court, patents are heard by the department of industry, and many other cases are addressed by the Nepal Rastriya Bank (NRB) too. Therefore, a common institution to streamline all commercial cases and bring them under one umbrella seemed to be necessary.</div> <div> </div> <div> Home work is yet to be completed. It was rightly questioned whether or not offences in banking will be dealt by the commercial bench. The issue is still subject to research and analysis. There are other issues including intellectual property and cases of revenue tribunal. We are striving to bring all of these cases under the commercial bench.</div> <div> </div> <div> <img alt="Fiscal Year 2069/70 Cases Regarding Commercial Bench." src="/userfiles/images/ep2.jpg" style="width: 500px; height: 187px; margin-left: 20px; margin-right: 20px;" /></div> <div> <span style="font-size: 14px;"><strong> </strong></span></div> <div> <span style="font-size: 14px;"><strong>Has the bench been established in all appellate courts in the country?</strong></span></div> <div> No, we have not established commercial benches in all appellate courts as they are established in a need-based manner. The previous chief justice had recommended the bench to be established in six places including Pokhara but later it was only established in four places. We therefore have established this bench in five places including one in Hetauda which was established in 2011 and rest four at Biratnagar, Butwal, Nepalgunj and Patan.</div> <div> </div> <div> <span style="font-size: 14px;"><strong>Because this is a new and western practice, will we require a foreign consultation for the bench?</strong></span></div> <div> For now our resources have being doing a very good job but like you suggested, if there is a situation that demands foreign consultation, we can higher or send our resources for foreign education and exchange programmes but again, that will require the demand of the context.</div> <div> </div> </div> <hr /> <div style="text-align: center;"> <strong><span style="font-size: 16px;">“Judges need training”</span></strong></div> <p> </p> <div> <span style="font-size: 14px;"><img alt="Gandhi Pandit" src="/userfiles/images/ep3.jpg" style="float: left; margin: 0px 10px 0px 0px; width: 200px; height: 246px;" />A well known advocate <strong>Gandhi Pandit</strong>, in an interview with Britant Khanal of New Business Age highlighted a pragmatic approach to commercial bench. <strong>Exceprts:</strong></span></div> <div> </div> <div> <span style="font-size: 14px;"><strong>What is your opinion on the newly established commercial benches?</strong></span></div> <div> The judges must be competent to deal with all kinds of cases, but honestly, that is not possible all the time because of growing trade issues in the domestic and global markets. Some of the cases are so sophisticated that they require experts, which is not available in the country. Smooth functioning of the economy will require a better legal system, which will support rapid growth and development. Therefore, current situation demands a specialised commercial bench. </div> <div> </div> <div> <span style="font-size: 14px;"><strong>Where can we trace the footprints of this system?</strong></span></div> <div> This system can be traced to the continental legal system, commonly understood as the French and German legal system. In these systems, we can see the trends of a commercial tribunal, a labour tribunal, an industrial tribunal, among others. In these kinds of tribunals, the specialised skills of various sectors are brought together for the better understanding of the case. And this system was later followed by Britain and the US. This pragmatic approach has led to speedy justice and quick legal remedies in these nations. But in our context, we are still lagging behind. Our judges are still traditional and are only specialised in traditional issues such as cases of land dispute, writ petition, etc. We don’t have expertise on cases like letter of credit, IT law, intellectual property law, cases of trademark and so on. Even if they want to learn it, they have not been able to acquire such knowledge due to lack of infrastructure.</div> <div> </div> <div> <span style="font-size: 14px;"><strong>What could be the possible solution to such lacunae?</strong></span></div> <div> Only establishing the bench will not do the justice. Establishing the bench is one thing and effectiveness is another. The benefit expected has not yet been reaped due to inexperienced people in the field and it is not unwillingness on their part - they don’t have that access to knowledge. As judges are frequently transferred to places without access to such knowledge, they will require a proper training, and attending the training only once will not make an impact as there has to be periodic training which we are lacking. The national judicial academy has been training judges but in the same traditional cases only. Not enough training has been provided in the field of modern commercial issues. Another major problem is procedural delay. Our legal system has a very lengthy procedure before the cases reach the final hearing. These kinds of hurdles will further delay justice and so they will have to be reduced to a minimum. Such deficiencies in the system will give a very wrong message to foreign investors.</div>', 'published' => true, 'created' => '2013-10-09', 'modified' => '2013-10-17', 'keywords' => 'new business age economy & policy news & articles, economy & policy news & articles from new business age nepal, economy & policy headlines from nepal, current and latest economy & policy news from nepal, economic news from nepal, nepali economy & policy economic news and events, ongoing economy', 'description' => 'The Word ‘commercial’ is not easy to define and thereby making it further difficult to define what is commercial case and what a commercial bench is supposed to address.', 'sortorder' => '1821', 'image' => null, 'article_date' => '0000-00-00 00:00:00', 'homepage' => false, 'breaking_news' => false, 'main_news' => false, 'in_scroller' => false, 'user_id' => '0' ) ), (int) 10 => array( 'Article' => array( 'id' => '1869', 'article_category_id' => '37', 'title' => 'The Gold Price Paradox', 'sub_title' => '', 'summary' => null, 'content' => '<div> </div> <div> </div> <div> The price of yellow metal (gold) has fallen sharply by more than 25 per cent in the international market during last four consecutive business months.</div> <div> And to be more precise it is the biggest drop in the last 35 years. Market study revealed that it has fallen approximately 30 per cent per ounce in 2013 only.</div> <div> </div> <div> The steep fall in the gold price drew mixed reactions and different opinions among bullion experts, economists, buyers, central bankers as well as the bullion traders.</div> <div> </div> <div> Some of them fear that the gold price will further go down in the near future citing the Cyprus crises, which is planning to sell off a huge gold reserve worth 400m Euros.</div> <div> </div> <div> Not the least, the unanticipated slowdown in the Chinese economic growth, continuous improvements in the US markets and decline in demand from India drove the yellow metal to fall further to the worry.</div> <div> </div> <div> A section of market experts have argued that the recent fall in gold price is not supported by the fundamentals rather it is the result of speculation in derivatives markets following the untested rumors and sparked declines across commodities. Hence they believed that the gold price will go up after the biggest plunge.</div> <div> </div> <div> According them, the price of gold will be backed by good demand from physical investors, arbitrators and jewelers.</div> <div> </div> <div> In June 15 analysts surveyed by Bloomberg expected that the gold prices will increase in near future. They have also researched experts view and analysts about the movement of gold price.</div> <div> </div> <div> According to the Bombay Bullion Association (BBA) the gold price will go up as the Asian buyers have stepped up their purchase following its fall in terms of price, imports by India, which is the world’s biggest consumer. BBA expected that the demand for gold in India is likely to jump by 36 percent in the 2013.</div> <div> </div> <div> However, Goldman Sachs Group, an American multinational investment banking firm that engages in global investment banking, securities, investment management, and other financial services primarily with institutional clients, predicted that the gold price may drop below USD 1000 per ounce within this year as the biggest hedge funds have reduced bets on gold at higher prices. Similarly, another school of thought argued that the investment on exchange-traded funds (ETFs) linked to gold have dropped by USD 37.2 billion in the first half of 2013, the fastest fall in last five years. In this back drop, they expected that the price of gold will further drop.</div> <div> </div> <div> At the same time, central banks that hold large gold reserves are also divided in to two fractions fueling the controversy on gold price movement. The central bankers are also being the part of paradox whether gold is cheap enough to increase investment as the price is USD 750 cheaper per ounce since the record high in November, 2011.</div> <div> </div> <div> The central bank of Sri Lanka and Scotland already said that the falling prices are an opportunity for nations to raise gold reserves. But the central banks of Korea and Australia said the plunge in gold price is not a big concern because gold has no intrinsic value and holding the yellow metal is part of a long-term strategy for diversifying currency reserves.</div> <div> </div> <div> Likewise, Deutsche Bank said that the gold has entered a new reality and may reach as low as USD 1050 an ounce to bring its valuation back to the historical averages. The trend line draw from the USD 435 an ounce, average of 2005, also indicates that the inflation adjusted price of gold should now be hanging around the psychological level of USD 1000 per ounce. </div> <div> </div> <div> Regarding the determinants of gold price, various scholars have conducted scientific studies with well researched econometric models and attempted to draw conclusions about the determinants of the gold price. Traditionally, most of the empirical studies closes down to three major findings, which emerge with respect to the analysis of long-run determinants of gold price.</div> <div> •<span class="Apple-tab-span" style="white-space: pre;"> </span>First, there is a long-term relationship between the price of gold and the US inflation indicated by the consumer price index.</div> <div> •<span class="Apple-tab-span" style="white-space: pre;"> </span>Second, the global inflation and gold price move together in a statistically significant long-run relationship. This evidence substantiates the belief that gold is a long-term hedge against inflation.</div> <div> •<span class="Apple-tab-span" style="white-space: pre;"> </span>Third, an external shocks that causes a deviation from this long-term relationship and there is a slow reversion back towards it.</div> <div> </div> <div> This means, although there is a possibility of seasonal variation as well as cyclical movement in the gold price in short and medium term, in the long run it will be guided by the global inflation in general and US inflation in particular.</div> <div> </div> <div> In effect, the consequences of external shocks, there may be the deviation from the long-term relationship between the price of gold and the US inflation. This attracted the scholars and analyst to think beyond the long-run determinants and that the US economy as well as the USD is only the counterpart of the gold in international market. They attempted to analyze the short-run determinants of gold price taking other factors than US inflation and USD into consideration. Accordingly, the short-run analysis found that there is a positive relationship between gold price movements and changes in global interest rate along with major macroeconomic variables, US inflation volatility and credit as well as operation risk in the major financial markets of the world. </div> <div> </div> <div> <img alt="" src="/userfiles/images/ep7%20(Copy).jpg" style="width: 500px; height: 284px; margin-left: 20px; margin-right: 20px;" /></div> <div> </div> <div> Some other studies have revealed that there is a negative relationship between changes in the gold price and changes in the US dollar trade-weighted exchange rate against the major currencies, which are included in the basket of global reserve currencies. However, the findings reveal that the significant negative parameter on the “error correction mechanism” reflects the slow return of the gold price to its long-run relationship. These findings are in accordance with the theoretical framework put forward that the gold is safe haven for the versatile investors and one of the assets class for government and the central banks. Besides, there are some fundamentals of demand and of supply, which can influence the price of gold as in case of other commodities in perfect competition market.</div> <div> </div> <div> However, some of the empirical studies reveal that there was no significant relationship between changes in gold price and its physical demand. Rather the price of gold has been driving by the virtual demand generated from the derivatives markets since there are hundreds times higher demand than that of the actual gold production across the world. Such artificial demand has especially been created by the speculators who want to mint money over the fluctuating price of any assets including gold. Every time they were trying to catch changes in gold price citing the change in world inflation, interest rate volatility, world income and the unproved rumors like central bank X is planning to sell this much of gold or huge gold reserve is identified in Y country etc.</div> <div> </div> <div> Against these theoretical as well as hardnosed backgrounds, there is a major unresolved issue that gold is the most attractive as well as the most risky asset worldwide. The crucial question one may ask include — Is gold the long-run hedge of US inflation? If so, is that matters for countries other than the US? Was there positive relationship between the price of gold and the US inflation during the recent financial crisis when the US inflation was almost zero or negative in some quarters but gold price was breaking record high successively? These are the crucial questions that no study or school of thought can answer correctly.</div> <div> </div> <div> But the fact is this is the glitter of gold and will remain same in the future as well. </div> <div> </div> <div> <em>(Writer is Deputy Director at Confederation of Nepalese Industries (CNI) )</em></div>', 'published' => true, 'created' => '2013-09-25', 'modified' => '0000-00-00', 'keywords' => 'new business age economy & policy news & articles, economy & policy news & articles from new business age nepal, economy & policy headlines from nepal, current and latest economy & policy news from nepal, economic news from nepal, nepali economy & policy economic news and events, ongoing economy', 'description' => 'The price of yellow metal (gold) has fallen sharply by more than 25 per cent in the international market during last four consecutive business months.', 'sortorder' => '1730', 'image' => null, 'article_date' => '0000-00-00 00:00:00', 'homepage' => false, 'breaking_news' => false, 'main_news' => false, 'in_scroller' => false, 'user_id' => '0' ) ), (int) 11 => array( 'Article' => array( 'id' => '1680', 'article_category_id' => '37', 'title' => 'Gold And So-Called Regulated Gold Market In Nepal!', 'sub_title' => '', 'summary' => null, 'content' => '<div> </div> <div> <strong>--By Chittaranjan Pandey</strong></div> <div> </div> <div> Gold is a very important component of the human lives on the earth today. Gold not only has the metallic value but also has been used as a hedge against several risks in the human life. Today gold is used from medicines to luxury. The use of gold carries lots of historical and mythological values beyond the regular usage we talked about. </div> <div> </div> <div> <div> अग्नेः प्रजातं परि यत् हिरण्यम्</div> <div> अमृतं दघे अधिमत्र्येषु</div> <div> यएनव्देद स इदेनमर्हति</div> <div> जरार्मृत्युर्भवति यो बिभर्ति ।।</div> <div> – अथर्व वेद, काण्ड १९, सूक्त २६, ऋचा १</div> </div> <div> </div> <div> The above lines from Atharvaveda mean “I adorn gold created or originated from fire which bestows eternity. One who adorns it is liberated from the fear of untimely death.” This signifies how gold has gained so much of significance for us. To go deep with the importance of gold, the yellow metal is believed to be the most sattvik, meaning holy, divine or serene. It is also believed that gold destroys most of the harmful germs in our body and using gold enhances the absorption of divine energy to greater extent. Specifically, in case of women, it is believed that when women put on gold ornaments, the shakti-roop is activated and the whole family is protected. </div> <div> </div> <div> The above mentioned reasons only signify why gold has received so much of mythological importance. Coming to these days, when people have started to take themselves above the cultural and traditional barriers, most of the things do not have the same shape. Yet, gold is successful enough to declare its commercial importance and has been luring people almost every corner of the world. </div> <div> </div> <div> When I talk about gold, how can I miss out talking about its importance in the currency management worldwide? Gold has played an important role in backing up the currency worldwide for long but these days, the scenario is different. We usually hear about the inverse relation of gold and US dollar. To explore the same, we need to dig back further. It was long back during the World War I when the warring nations shifted their money to a miniscule gold standard, thus bloating their own currencies to finance the war. Gold backed currency system thus lasted for long but the problem it invited was that all the countries wanted to deposit more gold to strengthen their currency which resulted major economic shocks. Coming to the era of Second World War also, the world was still tangled with the hard power and humanitarian crisis. But after the Second World War, Bretton Woods conference was organized and International Bank for Reconstruction and Development (IBRD-present World Bank) and International Monetary Fund (IMF) - called Bretton Woods Institutions were formed. Gold standard and the direct convertibility of the currencies were eradicated. Because United States was the most dominant power after the war, US Dollar was backed by gold and almost all other currencies in the world accepted US dollar to back up their currencies. Besides that, gold is held by many in various forms as a hedge against inflation and other economic disruptions. One of the most common forms of usage of gold in our society is the jewelry. Gold itself is very inert so gold salts are used for various medicinal purposes also. Gold salts are used for the treatment of arthritis; gold based injections heal and minimize the pain and swelling of rheumatoid arthritis and tuberculosis. Gold is also important in dentistry helping for restorations. Other very important use of the gold is for electroplating of gold onto base metals. </div> <div> </div> <div> After we go through the various usage forms of the precious yellow metal, we can explore why this stands as a luring metal in the market to earn maximum profit in various ways. The news heating the market these days is that the gold price is decreasing rampantly but domestic price of the gold in Nepal is not responding to it well. When there is a price hike, gold traders in our country do not wait a second to raise the price but when it is falling, the traders do not want to sell any gold to the people. Isn’t this pathetic regulation? More frustratingly, the strike of the gold traders broke with an interesting end- “Not penalizing the guilty”. The gold traders would start selling gold only when the government assures that the thug is not penalized. </div> <div> </div> <div> Please have a look at table to know how the price of gold is derived and how much of profit our gold traders earn: </div> <div> </div> <div> For instance, I have taken the price of gold on 26th June, 2013, the moment when price was US$1223.20 per ounce. </div> <div> </div> <div> Through various newspaper articles, people must be aware that the market demand for gold remains around 40 kg per day whereas traders believe that the daily consumption of gold in the market remains around 30 kg on an average. On the contrary, Nepal Rastra Bank sells only 15 kg of gold daily in the market through various assigned commercial banks. On an average, there is a deficit supply of almost 15 kg. We all know gold market is REGULATED in Nepal. So let’s not focus much on where the remaining gold to meet the market demand comes from. Rather I would like to explore with the economic benefit from the gold trading only. Even if we deduct Rs. 1000 per 10 grams as the additional costs, insurance cost- which is too much in itself and usually comes to almost half of that amount, the profit of the traders is Rs. 1085.23 per 10 grams. This means in one kilogram of gold, the traders earn Rs. 1,08,523.00 on an average. Similarly, for the official 15 kg of gold, the total earning of the traders become Rs. 16,27,845.00 on an average. These numbers will keep on growing if we intend to show their weekly and monthly income. </div> <div> </div> <table align="center" bgcolor="#E5E4E2" border="0" cellpadding="10" cellspacing="0" style="width: 500px;" td=""> <caption> <strong><span style="font-size: 14px;">Gold Price Calculation</span></strong></caption> <tbody> <tr> </tr> <tr> <td> <strong>Particulars</strong></td> <td> <strong>Price (NRs.)</strong></td> <td> <strong>Remarks</strong></td> </tr> <tr> <td> <strong><span style="font-size: 11px;">Per Ounce (As per Reuters)</span></strong></td> <td> <strong><span style="font-size: 11px;">1223.20 (USD)</span></strong></td> <td> </td> </tr> <tr> <td> <strong><span style="font-size: 11px;">NPR/USD Selling Rate (As per NRB)</span></strong></td> <td> <strong><span style="font-size: 11px;">95.51</span></strong></td> <td> </td> </tr> <tr> <td> <strong><span style="font-size: 11px;">Gold Rate in USD (Per 10 Grams)</span></strong></td> <td> <strong><span style="font-size: 11px;">391.35</span></strong></td> <td> <strong><span style="font-size: 11px;">(((1223.20*0.995))/31.1)*10</span></strong></td> </tr> <tr> <td> <strong><span style="font-size: 11px;">In NPR (Per 10 Grams)</span></strong></td> <td> <strong><span style="font-size: 11px;">37,224.77</span></strong></td> <td> <strong><span style="font-size: 11px;">(392.24*95.51)</span></strong></td> </tr> <tr> <td> <div> <strong><span style="font-size: 11px;">Add Customs</span></strong></div> <div> <strong><span style="font-size: 11px;">(As per Republica Article)</span></strong></div> </td> <td> <strong><span style="font-size: 11px;">3000</span></strong></td> <td> </td> </tr> <tr> <td> <strong><span style="font-size: 11px;">Total (Per 10 Grams)</span></strong></td> <td> <strong><span style="font-size: 11px;">40,224.77</span></strong></td> <td> <div> <strong><span style="font-size: 11px;">(Adding Price in NPR</span></strong></div> <div> <strong><span style="font-size: 11px;">and Customs)</span></strong></div> </td> </tr> <tr> <td> <strong><span style="font-size: 11px;">Market Price (NEGOSIDA)</span></strong></td> <td> <strong><span style="font-size: 11px;">42,310.00</span></strong></td> <td> </td> </tr> <tr> <td> <strong><span style="font-size: 11px;">Difference in Price (Per 10 Grams)</span></strong></td> <td> <strong><span style="font-size: 11px;">2085.23</span></strong></td> <td> <div> <strong><span style="font-size: 11px;">(Additional Cost, Insurance</span></strong></div> <div> <strong><span style="font-size: 11px;">and Profi t)</span></strong></div> </td> </tr> </tbody> </table> <div> </div> <div> The story does not end here. When we look into the real scenario, if jewelry is made out of 10 gram gold, 1 gram of other metal, besides gold,is used on an average for the bonding and many other purposes. This means that when a customer buys 10 gram of gold, s/he actually purchases only 9 grams of gold on an average. Besides that, when the price of gold increases internationally, the increment in price is implemented so promptly but when the price of gold decreases internationally, the case is different. It takes a long time for the authorized traders’ association to adjust the decreased price of gold. This clearly shows that the ethics is slumping in the REGULATED gold market of the country. Moreover, the traders go on strike, the shops are closed when price goes down as if there is no gold supply in the market which is totally against the economic theory. Other things remaining the same, the price of a commodity goes down only when the supply of the commodity increases. Unethical cartel is rampant in the gold market here. </div> <div> </div> <div> Is there no option to this? Globally, the option to this is the authorized commodity exchange which can deliver gold to the public cheaper than the other sellers. People can buy gold from the exchange and ask the jewelry shops to make the jewelry as per their requirement or they can also trade back the gold on their will. A remarkable benefit from the exchange is that people do not have to wait for hours or days for the gold price adjustments, the adjustments happen promptly in the software of exchange. Quality of the gold is not compromised; it is the same that the Nepal Rastra Bank authenticates, because the exchange will buy gold from the banks only. On the same price level given in the example above, the exchange can deliver gold at price below Rs. 41,200 per 10 grams. Isn’t this profitable to customers? This will exactly be the WIN-WIN situation for both the counterparties. </div> <div> </div> <div> What the country is lacking is the regulatory framework and the market is lacking the business ethics on the whole, thus losing the customers’ faith and confidence from the market. Isn’t it high time government starts taking commodity exchange as an alternative to maintain market equilibrium?</div> <div> </div> <div> <span style="font-size: 11px;"><em>(Pandey is Assistant Manager, Research & Development Department at MEX Nepal Ltd.)</em></span></div> <div> </div> <div> <em>Disclaimer: The views and expressions expressed in the article are entirely personal and my employer has nothing to do with it. This is an informational piece of writing and has no intention to provoke any individual, group or entity.</em></div> <div> </div>', 'published' => true, 'created' => '2013-08-23', 'modified' => '0000-00-00', 'keywords' => 'new business age economy & policy news & articles, economy & policy news & articles from new business age nepal, economy & policy headlines from nepal, current and latest economy & policy news from nepal, economic news from nepal, nepali economy & policy economic news and events, ongoing economy', 'description' => 'Gold is a very important component of the human lives on the earth today. Gold not only has the metallic value but also has been used as a hedge against several risks in the human life.', 'sortorder' => '1541', 'image' => null, 'article_date' => '0000-00-00 00:00:00', 'homepage' => false, 'breaking_news' => false, 'main_news' => false, 'in_scroller' => false, 'user_id' => '0' ) ), (int) 12 => array( 'Article' => array( 'id' => '1012', 'article_category_id' => '37', 'title' => 'Can Nepal Achieve 7 Per Cent Economic Growth Rate?', 'sub_title' => '', 'summary' => null, 'content' => '<p> <span style="font-size: 12px;">The Nepali economy has not been doing well for the past many years. According to Nepal Rastra Bank (NRB), the country’s economic growth rate has remained sluggish for the past many years, mainly because of the decade-long conflict and political instability. In the period from FY 2001/02 to 2011/12, Nepal’s GDP growth rate has crossed the five percent mark only once (in FY 2007/08 when the growth rate was 6.10 per cent), according to the Central Department of Statistics. However, Nepal’s highest GDP growth rate so far was recorded in FY 1994/95, a year before the Maoist insurgency started in Nepal. Almost all economists and development experts agree that Nepal’s economic performance will not improve unless there is political stability. </span></p> <p> We find that the economic growth rate increases when the agricultural growth rate is high (agriculture contributes to more than one-third of Nepal’s GDP). However, the growth in agriculture is dependent on monsoon rains; it is high when the country receives a good rainfall and low when the rainfall is low. The projected economic growth rate for the current fiscal year 2012/13 has already been revised twice – first from 5 per cent to 4.1 and then to 3.5 most recently. This means Nepal will have to double its current economic growth rate if it is to achieve a healthy growth rate of 7 per cent. That is clearly a tall order. </p> <p> However, is that an impossible target for Nepal? Or can the country really achieve this target? If it can, how and through what measures? We asked these questions to a number of economists and development experts. Their responses are given below: </p> <p> <a href="http://newbusinessage.com/Economy%20&%20Policy/1011">‘Focus on agriculture and industrialisation’</a></p> <p> <a href="http://newbusinessage.com/Economy%20&%20Policy/1010" style="font-size: 12px;">‘Political stability <span style="font-size: 12px;">is a must’ </span></a></p> <p> <a href="http://newbusinessage.com/Economy%20&%20Policy/1009">‘Seven percent growth rate possible’</a></p> <p> <a href="http://newbusinessage.com/Economy%20&%20Policy/1008">‘Need for political consensus on fundamental issues of development’</a></p> <p> <a href="http://newbusinessage.com/Economy%20&%20Policy/1007">‘Nepal has the potential to achieve 7% growth rate’</a></p> <p> <a href="http://newbusinessage.com/Economy%20&%20Policy/1006">‘Focus on tourism, productivity and exports’</a></p> <p> <strong style="font-size: 12px;"><br /> </strong></p> <p> <strong style="font-size: 12px;">Economic Prospects</strong></p> <p> <span style="font-size: 12px;">The economic outlook for Nepal hinges on how political uncertainties are resolved, the weather, and remittance inflows. Investor confidence is depressed by concerns over the political transition, now in its fifth year, following the dissolution in May 2012 of the Constituent Assembly, which failed to agree on a constitution. Recently, the political parties agreed to form a caretaker government led by the Chief Justice, which is expected to hold a Constituent Assembly election by 21 June 2013.</span></p> <p> In view of the unfavorable monsoon, the shortage of fertilizers during the peak paddy planting season, low business confidence, the lack of a parliamentary-approved full budget, and subdued growth in India, GDP is projected to slow to 3.5% in FY2013. Production of paddy is projected to fall by 11.3%, maize by 8%, and millet by 2%. The lack of a full budget is causing funding shortages for ongoing development activities. While the industry sector performance is expected to remain weak, services growth is expected to continue to grow at around 5.4%. With a favorable monsoon, adequate fertilizer supplies, the timely adoption of a budget, and moderate expansion of remittances, GDP growth would rebound to 4.2% in FY2014.</p> <p> <img alt="Annual GDP growth rate" height="319" src="http://www.newbusinessage.com/ckfinder/userfiles/Images/economy_and_policy_may2013_annual_gdp.jpg" style="margin:0 10px 0 0;" width="595" /></p> <p> (Source: Asian Development Outlook 2013)</p>', 'published' => true, 'created' => '2013-05-23', 'modified' => '2013-06-08', 'keywords' => 'Can Nepal Achieve 7 Per Cent Economic Growth Rate?', 'description' => 'The Nepali economy has not been doing well for the past many years. According to Nepal Rastra Bank (NRB), the country’s economic growth rate has remained sluggish for the past many years, mainly because of the decade-long conflict and political instability.', 'sortorder' => '887', 'image' => null, 'article_date' => '0000-00-00 00:00:00', 'homepage' => false, 'breaking_news' => false, 'main_news' => false, 'in_scroller' => false, 'user_id' => '0' ) ), (int) 13 => array( 'Article' => array( 'id' => '1011', 'article_category_id' => '37', 'title' => '‘Focus On Agriculture And Industrialisation’', 'sub_title' => '', 'summary' => null, 'content' => '<p> <strong style="font-size: 12px;">Can Nepal Achieve 7 per cent <span style="font-size: 12px;">Economic Growth Rate?</span></strong></p> <p> ‘Focus on agriculture and industrialisation’</p> <p> Nepal cannot achieve a healthy economic growth rate so long as there are political instability, labour problems and low production in the country. Nepal witnessed economic stability in FY 1994-95 and that was for very short period of time. The agriculture sector could help to increase the country’s economic growth rate but the government has not been able to make enough investment in this sector. We must be able to commercialise our agricultural sector by introducing modern technologies in our traditional farming system. Simultaneously, we should also focus on industrial development which is the backbone for the development of any country in this age. </p> <address> <strong>Himalaya Shamsher JBR</strong></address> <address> <strong>First NRB Governor </strong></address>', 'published' => true, 'created' => '2013-05-23', 'modified' => '2013-05-23', 'keywords' => 'Focus on agriculture and industrialisation', 'description' => 'Nepal cannot achieve a healthy economic growth rate so long as there are political instability, labour problems and low production in the country. Nepal witnessed economic stability in FY 1994-95 and that was for very short period of time.', 'sortorder' => '886', 'image' => null, 'article_date' => '0000-00-00 00:00:00', 'homepage' => false, 'breaking_news' => false, 'main_news' => false, 'in_scroller' => false, 'user_id' => '0' ) ), (int) 14 => array( 'Article' => array( 'id' => '1010', 'article_category_id' => '37', 'title' => '‘Political Stability Is A Must’', 'sub_title' => '', 'summary' => null, 'content' => '<p> <strong style="font-size: 12px;">Can Nepal Achieve 7 per cent <span style="font-size: 12px;">Economic Growth Rate?</span></strong></p> <p> <span style="font-size: 12px;">‘Political stability is a must’</span></p> <p> For a rapid economic growth, we need proper plans, policies and programmes. However, we cannot expect a robust economic growth rate unless we have political stability in the country. Political stability is a must. Similarly, we need to substantially increase the investment in the agriculture sector and make concerted efforts to modernize it. The services sector in Nepal has good prospects. A sustained growth in this sector, too, can help Nepal achieve a healthy economic growth rate. So, we must focus on agro-processing industries and on the development of new software technologies. Similarly, we must be able to use the ever increasing remittance inflows in a more productive manner if we are to achieve a growth rate of seven percent or more. </p> <address> <strong>Dr Narayan Khadka</strong></address> <address> <strong>Former Vice-chairman</strong></address> <address> <strong>National Planning Commission</strong></address>', 'published' => true, 'created' => '2013-05-23', 'modified' => '2013-05-23', 'keywords' => 'Political stability is a must', 'description' => 'For a rapid economic growth, we need proper plans, policies and programmes. However, we cannot expect a robust economic growth rate unless we have political stability in the country.', 'sortorder' => '885', 'image' => null, 'article_date' => '0000-00-00 00:00:00', 'homepage' => false, 'breaking_news' => false, 'main_news' => false, 'in_scroller' => false, 'user_id' => '0' ) ) ) $current_user = null $logged_in = falsesimplexml_load_file - [internal], line ?? include - APP/View/Elements/side_bar.ctp, line 60 View::_evaluate() - CORE/Cake/View/View.php, line 971 View::_render() - CORE/Cake/View/View.php, line 933 View::_renderElement() - CORE/Cake/View/View.php, line 1224 View::element() - CORE/Cake/View/View.php, line 418 include - APP/View/Articles/index.ctp, line 157 View::_evaluate() - CORE/Cake/View/View.php, line 971 View::_render() - CORE/Cake/View/View.php, line 933 View::render() - CORE/Cake/View/View.php, line 473 Controller::render() - CORE/Cake/Controller/Controller.php, line 968 Dispatcher::_invoke() - CORE/Cake/Routing/Dispatcher.php, line 200 Dispatcher::dispatch() - CORE/Cake/Routing/Dispatcher.php, line 167 [main] - APP/webroot/index.php, line 117
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The expo offers huge potential for appointing distributors, bulk deals, joint ventures, franchising, networking, meeting government officials, marketing alliances and overall branding, reads a statement issued by Sentinel Exhibitions Asia Pvt Ltd, the organiser.</p> <p>With 70+ exhibitors from seven countries including government pavilions and anticipated 4000+ trade visitors from across the world, companies participating at WTCE 2018 can expand their foothold in the market or enter newer markets, according to the organiser.</p> <p>“The show has become the ideal launch pad for new products especially for SMEs who don’t have large budgets,” the statement said.</p> <p>The 2018 edition shall feature tea and coffee brands/products, machineries, innovative technologies, flavours, ingredients, sugar/sweeteners, vending solutions, packaging, certifications, boards etc from Indonesia, Japan, Sri Lanka, Vietnam, Australia, Nepal and India.</p> ', 'published' => true, 'created' => '2018-11-16', 'modified' => '2018-11-16', 'keywords' => '', 'description' => '', 'sortorder' => '9214', 'image' => '20181116014039_pre.jpg', 'article_date' => '2018-11-16 00:00:00', 'homepage' => false, 'breaking_news' => false, 'main_news' => true, 'in_scroller' => false, 'user_id' => '20' ) ), (int) 1 => array( 'Article' => array( 'id' => '2842', 'article_category_id' => '37', 'title' => 'Remittance reaches close to 30 pc of GDP', 'sub_title' => '', 'summary' => 'Remittance inflow during FY 2014/15 reached an amount equivalent to around 30 per cent of Nepal’s GDP, annual data from the central bank shows.', 'content' => '<p>August 31: Remittance inflow during FY 2014/15 reached an amount equivalent to around 30 per cent of Nepal’s GDP, annual data from the central bank shows.</p> <p>According to Nepal Rastra Bank, Nepal received remittance worth Rs 600.17 billion through the formal banking channel during 2014/15. This is equivalent to around 29 per cent of the country’s GDP (which according to the central bank was around Rs 2.12 trillion). Like in the past, the amount of remittance Nepal received is roughly equivalent to the size of the government’s annual budget. </p> <p><iframe frameborder="no" height="300" scrolling="no" src="https://www.google.com/fusiontables/embedviz?viz=GVIZ&t=BAR&containerId=googft-gviz-canvas&q=select+col0%2C+col1%2C+col2+from+1P3sq89DtK_xa9iSGnS8gE70O6fjB0MNnlwtEJJbs&qrs=+where+col0+%3E%3D+&qre=+and+col0+%3C%3D+&qe=+limit+5&width=500&height=300" width="500"></iframe></p> <address><em>(Figures in Rs trillion)</em></address> <p><br /> The growth rate of remittance inflow was 25 per cent during FY 2013/14, but it has slowed down to 13.6 per cent in 2014/15.</p> <p>Central bank authorities were projecting a sharper decline in the growth of remittance as the number of workers going abroad had also registered a decline. But after the earthquake, the inflow has improved considerably, mainly due to money coming from abroad for post-earthquake reconstruction. According to government figures, the number of Nepali workers going abroad registered a decline of 2.8 per cent in FY 2014/15, compared to the same period last year.</p> <p><br /> According to the central bank, remittance inflow has been increasing faster than the country’s GDP for the last few years. In 2014/15 remittance was equivalent to 29 per cent of GDP, in 2013/14 it was 28 percent, 2012/13 25.5 percent, 2011/12 23.5 percent and in 2010/11 18.5 percent.</p> <p> </p> ', 'published' => true, 'created' => '2015-08-31', 'modified' => '2015-08-31', 'keywords' => '', 'description' => '', 'sortorder' => '2684', 'image' => null, 'article_date' => '2015-08-31 00:00:00', 'homepage' => false, 'breaking_news' => false, 'main_news' => true, 'in_scroller' => false, 'user_id' => '14' ) ), (int) 2 => array( 'Article' => array( 'id' => '2804', 'article_category_id' => '37', 'title' => 'Need For Green Banking', 'sub_title' => '', 'summary' => null, 'content' => '<div> <img alt="" src="/userfiles/images/ep1(6).jpg" style="width: 550px; height: 247px; margin-left: 10px; margin-right: 10px;" /></div> <div> </div> <div> <strong>--By Dwaipayan Regmi</strong></div> <div> </div> <div> The attack of human beings on nature is the cause of environmental deterioration. This deterioration is leading to global warming and climate change. It has been noticed that the temperature has risen up by 1 degree Fahrenheit in comparison to the previous century, leading to melting of Himalayan glaciers, bursting of lakes and rise of the sea level. Along with this, climatic changes have been causing natural disasters like cyclones, floods, landslides, and droughts. </div> <div> </div> <div> Combined efforts of governments, corporate sector and individuals can help in minimizing these various forms of environmental deterioration. For this, governments have to come up with strong policies; corporate houses should follow environmental protection guidelines more strictly; and individuals have to be self-aware to protect the environment around them. </div> <div> </div> <div> As part of the role to be played by the corporate sector, banks and financial institutions should embrace green banking — adopting process and strategies that promote environment-friendly practices to help in reducing carbon emission. Green banking helps in reducing internal carbon footprint as well as external carbon emission. </div> <div> Banks have been using lighting, air conditioning, electronic equipments, IT, high paper wastage in massive proportion. The resultant internal carbon footprint can be reduced through the use of renewable energy, automation and other measures. On the other hand, banks can reduce external carbon emission by financing projects and companies that are working for pollution reduction and adopting green technologies. Providing loans to firms that have concern for environment would ensure proper utilization of natural resources.</div> <div> </div> <div> Green banking avoids paper work and contributes to lower the cutting of trees. It makes the corporate world aware about environmental and social responsibility and thereby contributes to handing over a good environment to the upcoming generation. Adopting green banking policies are directly beneficial for the banks as well. </div> <div> </div> <div> Providing loans to firms and companies that abide by environment protection principles and regulations ensures that such clients do not become victims of natural calamities. Reputation and goodwill is very important for banks, and being a green bank provides them a distinct identity and reputation in the society. This also minimizes bad goodwill risk. Along with that, adopting such policies helps the banks avoid the risk of being left with securities like contaminated land as collateral. </div> <div> </div> <div> However, green banking is not a piece of cake; there are various challenges in making it a reality. It’s not only about reducing paper use and getting digital; there are strategies that a bank should follow.</div> <div> </div> <div> The most important step towards this objective is while providing loans. Any entrepreneur would think of green environment only when banks will restrict loans to businesses which might cause environmental degradation. Banks can deny loans to businesses that aim high profits by degrading the environment. The nature of business and its impact on the environment should be carefully considered before approving business loans. On the other hand, banks can offer low-interest loans to businesses that are environment friendly. In this way, banks can play a key role in promoting secondary source of energy like solar energy or bio gas energy.</div> <div> </div> <div> Next, banks can provide preference to green properties like homes equipped with solar energy, rain water harvesting facility, and properties with better environmental surroundings, for collaterals. And they should give secondary preferences, if at all, to properties such as polluting factory, or buildings emitting harmful waste in </div> <div> the environment.</div> <div> </div> <div> In terms of internal contribution, banks should embrace environment-friendly architectural design. Such designs help in reducing use of air conditioners and lights. Along with that, restricting use of carbon emitting machines, fans, energy inefficient bulbs, should be discouraged. Also, minimizing paper usage and promoting use of electronic transactions through rapid use of ATM cards, debit cards or other vending machines can help in being a green bank. </div> <div> </div> <div> Another area, where banks can contribute to green environment is the use of vehicles. Instead of providing sole vehicles to employees, banks should provide pick-and-drop services. This will not only help in reducing carbon emission but would also help in easing city traffic. This will also help in reducing the space needed for parking at banks. The space which would otherwise be used for parking could be used to build gardens and fountains. This will not only help the banks go green at the policy level but will also make it a green bank, literally too. </div> <div> </div> <div> As part of their corporate social responsibility (CSR), banks can invest in building and maintaining parks, gardens and forests in and around cities. They can adopt tree plantation as a means to mark their important achievements. This would help in inspiring other business ventures to adopt similar strategies. </div> <div> </div> <div> Banks have been providing many services to their customers such as free ATMs, Internet Banking and Any Branch Banking Service (ABBS). They could set up a basket ‘Disaster Emergency Fund’, for their client, in case the latter are victimized. The customers should be given a choice to opt for the fund by agreeing to provide certain amount of their interest to the fund on an annual basis. This would make such customers more secure from the impact of natural disasters on their finance. </div> <div> </div> <div> Banking has been a charming job in Nepal, and is regarded a prestigious job. To retain this image, it is necessary for banks to go green. Some of the recommendations made in this article might sound impractical considering the nature of their business and the stiff competition in the market to get better clients, still these measures are for banks which believe in ethical business.</div> <div> </div> <div> <em>The writer is pursuing his MBA at Jawaharlal Nehru Technical University, Andhra Pradesh, India.</em></div>', 'published' => true, 'created' => '2014-11-21', 'modified' => '2015-06-07', 'keywords' => 'new business age economy & policy news & articles, economy & policy news & articles from new business age nepal, economy & policy headlines from nepal, current and latest economy & policy news from nepal, economic news from nepal, nepali economy & policy economic news and events, ongoing economy', 'description' => 'The attack of human beings on nature is the cause of environmental deterioration. This deterioration is leading to global warming and climate change. It has been noticed that the temperature has risen up by 1 degree Fahrenheit in comparison to the previous century, leading to melting of Himalayan glaciers, bursting of lakes and rise of the sea level. Along with this, climatic changes have been causing natural disasters like cyclones, floods, landslides, and droughts.', 'sortorder' => '2660', 'image' => null, 'article_date' => '0000-00-00 00:00:00', 'homepage' => false, 'breaking_news' => false, 'main_news' => false, 'in_scroller' => false, 'user_id' => '0' ) ), (int) 3 => array( 'Article' => array( 'id' => '2788', 'article_category_id' => '37', 'title' => 'Policy For Inclusive Growth', 'sub_title' => '', 'summary' => null, 'content' => '<div> </div> <div> <strong>--By Hom Nath Gaire</strong></div> <div> </div> <div> The phrase 'Inclusive Growth' is quite popular in recent days not only among academia but also with policy makers, development partners and media as well. It seems that there is paradigm shift in development strategies among the stakeholders. The concept of inclusive growth refers to both the pace and distribution of economic growth. In order for growth to be sustainable and effective in reducing poverty, it needs to be inclusive. </div> <div> </div> <div> Traditionally, poverty (or inequality) and economic growth analyses have been done separately. However, recent works indicate that there may not be a trade-off between equity and efficiency as suggested by Okun (1975) and that it would be a big mistake to separate analyses of growth and income distribution. Inclusive growth has commonly been explained as about raising the pace of growth and enlarging the size of the economy by providing a level playing field for investment and increasing productive employment opportunities. The definition of inclusive growth implies direct links between the macro and micro determinants of the economy and economic growth. The microeconomic dimension captures the importance of structural transformation for economic diversification and competition, while the macro dimension refers to periodic changes in economic aggregates such as the country’s gross national product (GNP) or gross domestic product (GDP). </div> <div> </div> <div> Sustainable economic growth requires inclusive growth. Maintaining this is sometimes difficult because economic growth may give rise to negative externalities, such as a rise in corruption, which is a major problem in developing nations. However, inclusiveness lays emphasis on equality of opportunity in terms of access to markets, resources, and unbiased regulatory environment for businesses and individuals. The inclusive growth approach takes a longer-term perspective, as the focus is on productive employment as a means of increasing the incomes of poor and excluded groups and raising their standards of living. </div> <div> </div> <div> <strong>Determinants of Inclusive Growth</strong></div> <div> Different countries, especially developing countries, may have very different institutional as well as policy arrangements for promoting inclusive growth. Similarly, there may be a number of distortions preventing the allocation of limited resources in such a way that productivity in different sectors is equalized. The shift of resources from one sector to another may have an important effect on the overall level of output and growth. </div> <div> </div> <div> In this context, although growth theories have contributed to our understanding of how growth is determined and how it might be influenced, it has in many ways missed some of the crucial issues for developing countries. It may be possible to model the role of management and organization, the improvement of infrastructure, and sectoral transfer in developing economies to measure real determinants of growth and to the design of policy. </div> <div> </div> <div> They are directly concerned with the long-run growth in the sense of the steady-states as well as important for a medium term of some considerable duration. Government macroeconomic policies--- both fiscal policy and monetary policy--- are considered to be instrumental in promoting inclusive growth in the respective economy. </div> <div> </div> <div> <strong>Fiscal Policy and Inclusive Growth </strong></div> <div> Fiscal policy involves the use of government spending, taxation and borrowing to affect the level and growth of aggregate demand, output and jobs. It is also a means by which a redistribution of income and wealth can be achieved as an instrument of intervention to correct the market failures. Thus fiscal policy is considered more effective in encouraging both pace and size of economic economy. </div> <div> </div> <div> Based on this belief, Asian Development Bank (ADB) has recently urged the Asian governments to use their fiscal policy more adeptly to combat the widening income gaps in the region. “As the inequalities rising almost everywhere in Asia, governments need to urgently expand and improve their public investments in inclusive growth,” President Takehiko Nakao told in seminar titled, Leveraging Fiscal Policy for Inclusive Growth on the occasion of bank's 47th AGM. </div> <div> </div> <div> More than 80 percent of Asia’s population live in countries where inequality is worsening, meaning that many are being left behind even as globalization, technological progress, and market reform have led to strong economic growth. The bank emphasized on a range of issues including taxation to boost social and other spending, existing government programmes to promote equality, and the best balance spending to help the poorest without compromising fiscal sustainability.</div> <div> </div> <div> <strong>Monetary Policy and Inclusive growth</strong></div> <div> It is well accepted that macroeconomic stability and low inflation rates, inter alia, have positive effects on growth and on reducing inequality. In this connection, well-managed monetary policy is critical in achieving stable and inclusive economic growth. Similarly, monetary policy is mandated to achieve and maintain price stability in the interest of inclusive and sustainable economic growth along with maintaining financial stability. </div> <div> </div> <div> Price stability reduces uncertainty in the economy and provides a favourable environment for inclusive growth and cumulative employment creation over the longer term. Low inflation, on the other hand, helps to protect the purchasing power and living standards of all classes of people. Although low inflation may not necessarily in itself reduce income inequality, it does ensure the protection of income, which is particularly important for poor people who generally do not have the means to adjust their nominal incomes to take account of rapid price increases. </div> <div> </div> <div> <strong>PPP and Inclusive Growth </strong></div> <div> The Public Private Partnership (PPP) is a governance tool to bring together resources as well as strengths and share experiences of the public and private sector for the purpose of provisioning of public assets or services for public benefit. In order to achieve inclusive growth, developing countries should create more PPP opportunities to address their infrastructure gap and steer private money and skills into much-needed infrastructure projects. </div> <div> </div> <div> The infrastructure deficit in the developing countries like Nepal is so enormous that we can’t expect either private investors or the public sector to fill up it alone. It needs collaboration between the private and public players to make things work, and to bring critical services to the community. Good infrastructure is critical to inclusive growth, allowing communities to access essential social services, markets, and jobs, and making cities cleaner and easier to navigate. PPPs can help developing countries address critical infrastructure needs, from roads to hospitals to water supply systems. </div> <div> </div> <div> The PPP investment model with various structures is effective in helping centrally planned countries transition to private sector-oriented market economies. PPPs can be promoted through fully assessed and appropriate risk sharing and performance-based arrangements between the parties. The aim is to deliver “value-for-money” projects to provide a full set of benefits for investors, the public, and the economy.</div> <div> </div> <div> <strong>Knowledge Economy and Inclusive Growth</strong></div> <div> The development of the knowledge economy and inclusiveness has been seen as closely related. Global firms have built integrated international production chains, with innovation creating new products with added value in “knowledge” areas such as design and marketing and providing associated services. </div> <div> </div> <div> The growth of the knowledge economy is seen as part of the growth strategy to import jobs from low wage economies such as China and India investing heavily in knowledge. Shifting from low-cost manufacturing to economies based on knowledge, innovation, and high-end services is imperative for developing countries to achieve and sustain broad based inclusive growth. Emerging economies can reach and go beyond middle-income levels by becoming knowledge-based economies like Japan, the Republic of Korea, and Singapore. </div> <div> </div> <div> Similarly, least developed countries like Nepal can upgrade themselves to developing one through systematic investment in new information and communication, manufacturing and other technologies to promote knowledge economy. For this, they have to spend time and resources to move up the value chain by drawing on best practices and latest technologies, for example, shifting to smart energy grids, cloud computing, 3D manufacturing, and mobile rather than fixed-line communications.</div> <div> </div> <div> <strong>Rational </strong></div> <div> According to the World Bank’s Commission on Growth and Development, a persistent, determined focus on inclusive long-term growth by governments is a key ingredient of all successful growth strategies. Policies that encourage inclusive growth tend to emphasize removing constraints to growth, creating opportunity, and creating a level playing field for investment.</div> <div> </div> <div> To that end, developing countries need to increase investment in infrastructures as well as research and development to create knowledge based, innovative and competitive industries. For this, public funding may be needed to help companies start up. Public spending on education and health services improve the well-being of the poor and augment their productive capacity. </div> <div> </div> <div> Targeted subsidies and transfer payments protect the most vulnerable and deprived segments of society while better public infrastructure can make it easier for the entrepreneurs to create more jobs and additional value for the economy. Higher education and training need to be significantly improved to generate the skills and critical thinking processes vital to a modern competitive economy. </div> <div> </div> <div> In addition, governments need to put in place mechanisms and adopt policies that enable innovation and creativity to flourish. This includes protecting intellectual property rights, providing adequate financing options, and nurturing more flexible labour markets.</div> <div> </div> <div> <strong>Finally</strong></div> <div> Policies on both monetary and revenue front such as non-inflationary monetary and progressive taxation can promote inclusive growth. But among policy tools, fiscal policy with productive government expenditure and progressive taxation has a tangible effect on boosting equality and promoting inclusive growth.</div> <div> </div> <div> <div> <em><span style="font-size: 14px;"><strong>What is Inclusive Growth?</strong></span></em></div> <div> An IMF Commission on Growth and Development (2008) notes that inclusiveness—a concept that encompasses equity, equality of opportunity, and protection in market and employment transitions—is an essential ingredient of a successful growth strategy.</div> </div> <div> </div>', 'published' => true, 'created' => '2014-07-30', 'modified' => '2014-11-21', 'keywords' => '', 'description' => 'The phrase 'Inclusive Growth' is quite popular in recent days not only among academia but also with policy makers, development partners and media as well. It seems that there is paradigm shift in development strategies among the stakeholders. The concept of inclusive growth refers to both the pace and distribution of economic growth.', 'sortorder' => '2641', 'image' => null, 'article_date' => '0000-00-00 00:00:00', 'homepage' => false, 'breaking_news' => false, 'main_news' => false, 'in_scroller' => false, 'user_id' => '0' ) ), (int) 4 => array( 'Article' => array( 'id' => '2763', 'article_category_id' => '37', 'title' => 'Investment Issues In Nepali Insurers', 'sub_title' => '', 'summary' => null, 'content' => '<div> </div> <div> <div> <strong>--By Ujjwal Chand & Suraj Bansal</strong></div> <div> </div> <div> Currently, there are 25 insurance companies in Nepal -16 of them provide non-life insurance services and eight provide life insurance services while one provides both of these services. Insurance companies use their funds consisting of capital, reserves, premiums and loans to finance claim payments and other expenses. The remaining fund is invested as per the Investment Directives from the regulatory body, i.e. Insurance Board (Beema Samiti). As of FY 2011-12, these companies had investments to the tune of Rs. 60 billion out of which Rs. 52 billion was from life insurance companies and the rest was from non-life insurance companies.</div> <div> </div> <div> The insurance companies can put their investment funds in the sectors specified in the investment guidelines which specify that Life insurance companies must invest a minimum of 75% and non-life insurance companies minimum of 65% of their investment funds in combination of government securities, fixed deposits of commercial banks and development banks, and mutual fund/Citizen Investment Trust Schemes. They can put a maximum of 5% of their total investment fund in ordinary shares of public limited companies. Other areas for investment are secured debentures of Banks and Financial Institutions (BFI)s and Fixed Deposits (FDs) in finance companies. Non-life insurance companies can additionally invest in shares of real estate development or public limited housing company. </div> <div> </div> <div> <span style="font-size: 16px;"><strong>Importance of Returns from Investment </strong></span></div> <div> The operations of life and non-life insurance companies are different. Non-life insurance companies generate profit through both returns from investment and from regular insurance business. Life insurance companies, however, are suffering loss in the regular insurance business. Therefore, it is only due to the returns from investment that they are able to report positive bottom lines. Ganesh Dahal, deputy manager of Sagarmatha Insurance puts that “the contribution of investment returns to the company’s bottom line is at 40%”and in similar vein Suraj Rajbahak, CA of Shikhar Insurance, shared that “about 30% of the company’s returns are from investment returns”. Life insurance companies are far heavily reliant on the investment returns. Dip Bahadur BC, chief financial officer at Prime Life Insurance says, “Investment returns not only sustain the company’s expenses but also contribute to the bottom line”. Bigyan Shrestha, finance chief at National Life Insurance, seconds this and states that “the investment returns have been sufficient to sustain normal operations” for the company. </div> <div> </div> <div> <img alt="Returns from Investment" src="/userfiles/images/ep1%20(Copy)(6).jpg" style="width: 550px; height: 227px; margin-left: 10px; margin-right: 10px;" /></div> <div> </div> <div> <span style="font-size: 16px;"><strong>Investment returns of insurance companies </strong></span></div> <div> Of the twenty-five insurance companies, only twenty had published their annual report for FY 2011-12 by September 2013. An analysis of the same shows that 15 of the 20 companies posted returns from 8.5% to 10.5% from investments. This was primarily due to the high interest rates on the fixed deposits of the BFIs. </div> <div> </div> <div> But, the returns from their investment in ordinary share was relatively weak during this period - ranging from 0% to 5.42%. However, during the same period, Nepse increased by 14.7%. This shows that the insurance companies underperformed Nepse in terms of returns from ordinary shares investments.</div> <div> </div> <div> <span style="font-size: 16px;"><strong>Issues with current ordinary shares investment </strong></span></div> <div> There are few internal issues of the insurance companies themselves behind poor returns from ordinary shares investment. Additionally, there are some issues with the current ordinary shares investment practices that could damage these returns in the long run of the insurance companies. These internal issues are:</div> <div> </div> <div> <span style="font-size: 14px;"><strong>Passive investment – Over-reliance on dividends </strong></span></div> <div> Of the 20 insurance companies analyzed, four hadn’t invested in ordinary shares at all in FY 2011-12. In the remaining sixteen insurance companies, dividends contributed about 99.97% of the overall return from this avenue in 2011-12. This means only 0.03% of the returns came from capital gains. Thus passive investing, thereby over reliance on dividends for income from ordinary shares investments remained as the most important reason for poor performance in ordinary shares investments by insurance companies.</div> <div> </div> <div> <span style="font-size: 14px;"><strong>Lack of experts, research-based decision making</strong></span></div> <div> Further, the insurance companies did not follow research based decision making approach while selecting ordinary shares for investment. This is despite the fact that the insurance companies accept the high importance of investment decisions to the bottom-line. Moreover, investment team in these companies is made of up of generalists, i.e. overseeing all aspects of finance in the company, rather than specialists with specific field expertise. </div> <div> </div> <div> <span style="font-size: 14px;"><strong>Lack of Diversification</strong></span></div> <div> Investment gurus advocating diversification of fund always caution that “putting all your eggs in one basket is very dangerous”. These insurance companies lack proper diversification in ordinary shares investments, which could damage the returns from this avenue in the long term. The ordinary shares investments were heavily concentrated in stocks of major BFIs, constituting 96% of total ordinary shares investments. In terms of diversification at company level, they fare even worse. Although they had invested in 67 securities, they heavily concentrated on six companies, constituting 67% of the total ordinary shares investments. </div> <div> </div> <div> <span style="font-size: 16px;"><strong>Issues with overall current investments </strong></span></div> <div> High interest rate exposure is found to be triggering volatility on the overall investment returns. This exposure was also due to the conservative guidelines that made it mandatory for the insurance companies to park their fund in interest-rate volatile investment avenues like fixed deposits. The conservative investment guidelines are curtailing the diversification of investments, and thereby introducing concentration risk on the investments.</div> <div> </div> <div> <span style="font-size: 16px;"><strong>High interest risk exposure</strong></span></div> <div> Due to regulatory constraints, large portion of the investment fund is parked in BFIs as fixed deposit. This brings about high interest rate risk in the investments returns of the insurance companies. Sushil Kumar Luniya, manager at Gurans Life Insurance, sees “the decrease in interest rates of fixed deposits hampering insurance company returns for the current fiscal year”. Manoj Shrestha, head of finance department at NLG Insurance, too regards “the volatile bank interest rates as major factor deciding the investment returns”. </div> <div> </div> <div> Due to high interest rates prevalent during the sample period (average of 8.125% for commercial banks in FY 2011-12 as per the central bank’s Monetary Policy document), most of the insurance companies had fair returns on the investments. Imagine the effect of decrease in the rates to 5.2%, as predicted by NRB Monetary Policy for 2013-14, on the investment returns ! </div> <div> </div> <div> Now lets simulate this Simulating such scenario by decreasing the FY 2011-12 returns from fixed deposits of BFIs by the same proportion as the decrease in interest rate, i.e. from 8.125% to 5.2%. In FY 2011-12, it was found that only one insurance company was making loss. If the interest rates during this period were only 5.2, four insurance companies would have been at loss. </div> <div> </div> <div> <span style="font-size: 16px;"><strong>Lack of diversification options</strong></span></div> <div> The conservative investment guidelines put by the regulatory board give little room for diversification to insurance companies. Majority of the fund is to be parked in government bonds, and fixed deposit of commercial and development banks. Even in ordinary shares investments, insurance companies are finding hard to diversify from a stock market with over 76% concentration in BFIs. Thus there is huge concentration risk. If one bank or finance institution goes bust, the whole insurance industry would suffocate. One such event in Gurkha Development Bank has already occurred. Few insurance companies are still provisioning the losses from this bank’s tragedy.</div> <div> </div> <div> But, investment guideline isn’t the only sore finger. There is also lack of innovativeness among insurance companies in terms of diversifying their investments. As Dr. Fatta Bahadur KC, chairman of Insurance Board, claims, “The investment guidelines clearly indicate flexibility of alternative investment avenues for the insurance companies”. Upon request by insurance companies, the Board is ready to look into alternative investment proposals. But as this includes some hassles and would put the insurance company management under scrutiny if the innovation backfires, the insurance companies are reluctant to tread on this way.</div> <div> </div> <div> <span style="font-size: 16px;"><strong>Asset-liability mismatch</strong></span></div> <div> Asset-Liability mismatch is a major issue with life insurance companies. Safer investment assets with longer maturity are hard to find in Nepali market, where bonds and debentures have minimal presence. Debentures of commercial banks bring concentration risk with them for the insurance companies, which already have major portion of their investment fund in the banks as fixed deposits and their ordinary shares. Dr. KC, sees “Asset-Liability mismatch for life insurance companies as they issue policy for long term whereas they can invest for short term only”. Dip Bahadur BC, CFO of Prime Life, also considers “asset-liability maturity mismatch as a prevalent issue in all life insurance companies”.</div> <div> </div> <div> <span style="font-size: 18px;"><strong>The Way Ahead</strong></span></div> <div> </div> <div> <span style="font-size: 16px;"><strong>Resolving Internal Issues</strong></span></div> <div> Internal issues - lack of research based decision making, diversification and active investing - can be resolved through robust internal research systems. To boost their ordinary shares investment performance through research backed investments, the insurance companies could build their own internal system and processes but at a huge cost. It would also mean taking two diverse businesses in parallel, i.e. insurance business and investment business. Outsourcing of ordinary shares investment management by availing the customized portfolio management service given by several financial intermediaries like Kriti Capital, Nabil Invest and Beed Management, seems more beneficial. Such outsourcing will not only enable insurance companies to focus on their core business, but also get better returns from their investments via expert handling of their funds at a relatively lower cost.</div> <div> </div> <div> <img alt="Isues with Investment" src="/userfiles/images/ep2%20(Copy)(2).jpg" style="margin-left: 10px; margin-right: 10px; width: 550px; height: 400px;" /></div> <div> </div> <div> <span style="font-size: 16px;"><strong>Resolving external issues</strong></span></div> <div> There are limitations faced by insurance companies while investing their fund as per current investment guidelines. Fixed deposits have inbuilt interest rate risks. The life insurance companies face an additional issue of asset-liability maturity mismatch, with investments maturing in about 1-1.5 years and liabilities remaining active for about 10-13 years. There is need for long term investment alternative. </div> <div> </div> <div> Further, diversification of fund is hard in a secondary market with heavy concentration of BFI stocks. With the investment fund increasing rapidly (CAGR of 21.35% from 2004-05 to 2011-12), there is a need to look for additional investment avenue to resolve these issues. This is not just voiced by the insurance company professionals but also by the insurance regulatory board.</div> <div> </div> <div> Dr. KC feels that “although the investment guidelines give flexibility to insurance companies to come up with alternative investment proposals, the time has come to review the overall investment guidelines”.</div> <div> </div> <div> A suitable avenue to be added in the investment guidelines could be private placements in infrastructure companies. This will not just help the insurance companies to resolve the issues of diversification and the infrastructure companies in getting easier financing, but also help the overall economy of the nation. Dr. KC says that the Board is “positive on investment made by insurance companies in hydropower and other infrastructure companies, and these avenues could be opened for investments”. Most of the insurance companies also state that they are willing to invest in hydropower and other infrastructure companies, if allowed by investment board.</div> <div> </div> <div> Insurance Board should allow investments by the insurance companies via private placements, as the secondary market doesn’t have appropriate diversification opportunities. Further, the insurance companies would be able to invest at a bargain in the infrastructure companies due to their sheer investment fund size. Also, if SEBON comes up with more liberal rules on the issuance of shares at premium, the infrastructure companies could benefit hugely from private placements. Even if the insurance companies decide on being risk averse and just invest in debentures, they could do so in infrastructure debentures. As there isn’t presence of these instruments in secondary market, private placement would be ideal way for diversification of by insurance companies. On the other hand, the infrastructure companies would have lower issue costs and lesser regulatory hassles than going public for raising finance. Also, in case of debentures, these companies would be avoiding interest rate exposure. Similarly, the promoters of infrastructure companies would be able to delay issuing the shares to public, thereby being in position with better financial statements before going public. This would help get better response on public issuance of shares at premium. </div> <div> </div> <div> Thus the insurance companies should initiate this by coming up with effective proposal and lobbying with the Insurance Board for liberal investment guidelines.</div> <div> </div> <div> But, investment in private placements of the infrastructure companies (if allowed by the Board) requires expert knowledge on these companies and regular monitoring. Also, the entry and exit strategies must be taken into account as these investments are relatively less liquid as compared to secondary market investments. There will be need of diversification as well as policy and strategy development for the insurance companies vying to invest via private placements. So, to benefit from this additional investment avenue, insurance companies will have to develop in-house expertise or outsource private placements management services for financial intermediaries.</div> <div> </div> <div> <em>(The article is based on a joint research conducted by Ujjwal Chand and Suraj Bansal as part of their academic requirement at KUSOM. The researchers can be contacted at: chandujjwal@gmail.com)</em></div> </div> <p> </p>', 'published' => true, 'created' => '2014-03-24', 'modified' => '2014-03-24', 'keywords' => 'new business age economy & policy news & articles, economy & policy news & articles from new business age nepal, economy & policy headlines from nepal, current and latest economy & policy news from nepal, economic news from nepal, nepali economy & policy economic news and events, ongoing economy', 'description' => 'Insurance companies use their funds consisting of capital, reserves, premiums and loans to fi nance claim payments and other expenses.', 'sortorder' => '2608', 'image' => null, 'article_date' => '0000-00-00 00:00:00', 'homepage' => false, 'breaking_news' => false, 'main_news' => false, 'in_scroller' => false, 'user_id' => '0' ) ), (int) 5 => array( 'Article' => array( 'id' => '2641', 'article_category_id' => '37', 'title' => 'Financial Inclusion Must For Inclusive Growth', 'sub_title' => '', 'summary' => null, 'content' => '<div> <strong>--By Hom Nath Gaire</strong></div> <div> </div> <div> Finance has come a long way since the time when it wasn't recognized as a factor for growth and development. It is now attributed as the life blood of an economic system and most economies strive to make their financial systems more efficient. It also keeps policymakers on their jobs as any problem in this sector could freeze the entire economy and even lead to a contagion. </div> <div> </div> <div> The financial services include the entire range - savings, loans, insurance, credit, payments etc. The financial system has to provide its function of transferring resources from surplus to deficit units but both deficit and surplus units are those with low incomes, poor background etc. By providing these services, the aim is to help them come out of poverty. So far, the focus has only been on delivering credit such as microcredit and has been quite successful in some countries. However, similar success has to be seen in other aspect of finance as well.</div> <div> </div> <div> In this context, financial inclusion is the most for efficient financial system and to exert positive impact in the economic growth as well as development. Financial inclusion could expediteeconomic activities and promote entrepreneurship with the maximum use of information, communication and technology-enabled services supported by an extensive Financial Literacy mission. </div> <div> </div> <div> <span style="font-size: 16px;"><strong>What is Financial Inclusion?</strong></span></div> <div> Authorities and policymakers worldwide including advanced economies like the United Stateshave set up specific task force/committees to understand what financial inclusion is and how it can be achieved. </div> <div> </div> <div> Former UN Secretary-General Kofi Annan said: "The stark reality is that most poorpeople in the world still lack access to sustainable financial services, whether it issavings, credit or insurance. The great challenge before us is to address the constraints that exclude people from full participation in the financial sector. Together, we can and must build inclusive financial sectors that help people improve their lives.” </div> <div> </div> <div> Similarly, according to the UK Financial Inclusion Taskforce, there are three main concerns in financial inclusion; access to banking, access to affordable credit and access to freeface-to-face financial advice. Therefore, the term 'Financial Inclusion' is defined as an extension ofbanking and financial services at an affordable cost to unbanked people of thecommunity. </div> <div> </div> <div> India also set up a committee under the chairmanship of Dr. C. Rangarajan, the then Governor of Reserve Bank of India (RBI) to suggest measures to increase financial inclusion in 2007. The Rangarajan committee defines financial inclusion as: "the process of ensuring access to financial services and timely and adequate credit where needed by vulnerable groups such as weaker sections and low income groups at an affordable cost." </div> <div> </div> <div> Therefore, financial inclusion means easy and affordable access of financial services by the economically poor and unbanked people of society at appropriate, low-cost, fairand safe financial products and services. Constraints of Financial Inclusion </div> <div> </div> <div> Financial Inclusion is especially needed for rural and underprivileged masses that may be the future growth engine of the economy. From the recent initiatives undertaken by the world governments to foster financial inclusion, one cannot undermine the need to include the economically underprivileged in the mainstream banking sector. However, many people across the globe are now excluded from mainstream banking. Theserange from people with low income to people with low information and accessibility to peoplewith no social security or insurance cover. The main reasons behind the financial exclusion are: </div> <div> </div> <div> <span style="font-size: 14px;"><strong>Lack of information:</strong></span> Lack of information about the role and function of banks, banking services and products, interest rates, etc. stop people from including themselves in mainstream banking. </div> <div> </div> <div> <span style="font-size: 14px;"><strong>Insufficient documentation:</strong></span> Many unbanked people (even in municipalities and urban areas) areunable to show their self identification documents during the opening of a bank accountor during taking a loan. </div> <div> </div> <div> <span style="font-size: 14px;"><strong>Lack of awareness:</strong></span> Many people are unaware of the banking terms andconditions laiddown by banks and regulators from time to time. </div> <div> </div> <div> <span style="font-size: 14px;"><strong>High transaction costs: </strong></span>Various commercial banks across the globe levytransaction charges on credit or debit transactions, on over usage of banking services, on chequebook issuance etc. </div> <div> </div> <div> <span style="font-size: 14px;"><strong>Lack of access:</strong></span> Accessibility is a problem to all those people who live ingeopolitically isolated regions. Moreover, as most of the commercial banks are locatedin the cities and surrounding area, people in rural areas mainly in least developed countries like ours have a geographical barrier in accessing banks. </div> <div> </div> <div> <span style="font-size: 14px;"><strong>Illiteracy:</strong></span> Because of illiteracy, a substantial number of people are unable to takerecourse to banking services. </div> <div> </div> <div> <span style="font-size: 14px;"><strong>Stringent regulations:</strong></span> Stringent regulations such as Know your Customer (KYC) and Anti-Money Laundering and Counter Terrorist Finance (AML-CTF) norms are also considered as hindrances for financial inclusion. Financial Inclusionin Nepal </div> <div> </div> <div> <img alt="Economy and Policy" src="/userfiles/images/ep1%20(Copy)(5).jpg" style="width: 550px; height: 286px; margin-left: 10px; margin-right: 10px;" /></div> <div> </div> <div> Nepal is one of the LDCs with economically challenged huge rural population. Financial Inclusion is indispensible in its case for the sustainable growth of its economy. However, even in such scenarios, many businesses have been successful in showing consistent as well as continued development. One of the most important sectors of this kind is the financial services sector. With just 2 commercial banks in the early days, the country has actually managed to expand this sector, which at present includes 31 commercial banks. Similarly in the past 30 years, different development banks, co-operatives, finance companies, insurance companies have grown by more than 10 fold.</div> <div> </div> <div> <img alt="Economy and Policy" src="/userfiles/images/ep%20(Copy)(3).jpg" style="float: left; margin: 0px 10px; width: 250px; height: 263px;" />In the mean time, branches of commercial banks, development banks and finance companies totalling at 2483 in mid of march of 2013. Of the total branches, commercial banks have occupied 1472 followed by development banks 713 and finance companies 298. Similarly, from the side of regional distribution, the majority branches of BFIs are situated in the Central Development Region totalling 1168, followed by Western Development Region 606 and Eastern Development Region 401. The minimum branches of BFIs are in the Far-Western Development Region totalling 111 followed by Mid-Western Development Region 197. </div> <div> </div> <div> Increase in number of branches of BFIs is considered as one of the indicators of financial inclusion. Banking Industry, normally, occupies a bigger chunk in the financial system. However, a larger chunk of banking services is still concentrated in urban areas. More especially, the banking services still seem to be concentrated in capital city. The districts with highest number of bank branches are Kathmandu, Lalitpur and Rupandehi with 335, 77 and 67 branches respectively. This level of reach and penetration also means that the financial inclusion is yet to strengthen to follow economic progress in the country. </div> <div> </div> <div> This sector has always been driven by a keen need of growth as well as is being pushed by various regulations. Over a period of time, this sector has deeply gone to the roots of urban, semi-urban as well as to the rural Nepal. This penetration level, in particular, has benefitted millions of people living in the country who fall below the poverty line in both the rural as well as semi-urban areas of the country.</div> <div> </div> <div> The latest figures indicate that the financial services are used only by a section of the population (around 40%) in Nepal.There is demand for these services but it has not been provided. The excluded regionsare rural, poor regions and also those living in harsh climatic conditions where it is difficult to provide these financial services. The excluded population then has to rely on informal sector for availing finance that is usually at exorbitant rates. </div> <div> </div> <div> This leads to a vicious cycle. First, high cost of finance implies that first poor person has to earn much more than someone who has access to lower cost finance. Second, the major portion of the earnings is paid to the money lender and the person can never come out of the poverty. </div> <div> </div> <div> <span style="font-size: 16px;"><strong>Factors Forcing People to be Informal </strong></span></div> <div> <span style="font-size: 14px;"><strong>High cost:</strong></span> It has also been seen that poor living in urban areas don't utilize the financial services as they find financial services are costly and thus are unaffordable. Hence, even if financial services are available, the high costs deterthe poor from accessing them.</div> <div> </div> <div> <span style="font-size: 14px;"><strong>Non-price barriers: </strong></span>Access to formal financial services also requires documents of proof regarding a persons' identity, income etc. The poor people do not have these documents and thus are excluded from these services. They may also subscribe to the services initially but may not use them as actively as others because of various non-price barriers. </div> <div> </div> <div> <span style="font-size: 14px;"><strong>Behavioural aspects:</strong></span> Research in behavioural economics has shown that many people are not comfortable using formal financial services. The reasons are difficulty in understanding language, various documents and conditions that come with financial services etc. </div> <div> </div> <div> <span style="font-size: 16px;"><strong>Externalities of Financial Inclusion</strong></span></div> <div> There are a number of positive externalities of financial inclusion. </div> <div> •<span class="Apple-tab-span" style="white-space: pre;"> </span>One of theimportant effects is people able to reap the advantages of network externality of financial inclusionas the value of the entire national financial system increases.</div> <div> •<span class="Apple-tab-span" style="white-space: pre;"> </span>Another reason as financial inclusion is a quasi-public good the consequent fuller participation by all in the financial system makes monetary policy more effective and thus enhances the prospects of noninflationary growth.</div> <div> •<span class="Apple-tab-span" style="white-space: pre;"> </span>One important point that is essential for financial inclusion in rural and agriculture based LDCs like ours is to ensure the growth of banking system to meet the needs of a modern economy, expansion in geographic terms and improve access to banking services. </div> <div> </div> <div> <span style="font-size: 16px;"><strong>Way Forward </strong></span></div> <div> In order to strengthen the financial inclusion in the country, NRB as the monetary authority of country, has been adopting some promotional measures so far such as providing additional incentives to BFIs to go to the remote as well as underprivileged areas. Similarly, it has been encouraging the microfinance institutions to be more inclusive while directing the commercial banks to lent a given portion of their loan portfolio to the deprived sectors. </div> <div> </div> <div> However, the indicators of financial inclusion are yet to improve. In this context, the following measures should be adopted under the existing infrastructure framework to speed up the financial inclusion in Nepal. </div> <div> </div> <div> <span style="font-size: 14px;"><strong>Postal Network:</strong></span> The government should consider tying up with BFIs to deliver financial solutions to the un-banked, using its extensive postal network. The synergistic outreach of the existing postal system supplemented by banking functions is the answer to the challenges posed by rural markets. As Nepal has the largest postal network in the remotest areas, the excluded masses can graduallyconnect with the full-fledged banking services. </div> <div> </div> <div> <span style="font-size: 14px;"><strong>Mobile Banking:</strong></span> The transaction costs can be radically reduced even in remote locations through mobile banking. The costs, which ease of access for the consumers and the profitability of provider will ultimately opt the level of wireless services. </div> <div> </div> <div> <span style="font-size: 14px;"><strong>Use of Technology:</strong></span> Rural banking can be expanded in an easy and user friendly way through universal technology with innovative applications. The role of various ICT tools and associated technologies in providing financial solutions to the unbanked is also substantial. Rural ATMs, plastic cards like smart cards, biometric cards including mobile payment (branchless banking) technologies do have the ability to engage the unbanked sections. </div> <div> </div> <div> <span style="font-size: 14px;"><strong>Financial Literacy: </strong></span>Steps have to be taken by the government for the expansion of banking services and linking of opportunities among various segments of financial sector like capital markets, insurance, etc. To achieve this aim the government should come up with an extensive campaign of financial literacy. </div>', 'published' => true, 'created' => '2014-02-20', 'modified' => '2014-02-20', 'keywords' => 'new business age economy & policy news & articles, economy & policy news & articles from new business age nepal, economy & policy headlines from nepal, current and latest economy & policy news from nepal, economic news from nepal, nepali economy & policy economic news and events, ongoing economy', 'description' => 'The financial system has to provide its function of transferring resources from surplus to deficit units but both deficit and surplus units are those with low incomes and poor background etc.', 'sortorder' => '2481', 'image' => null, 'article_date' => '0000-00-00 00:00:00', 'homepage' => false, 'breaking_news' => false, 'main_news' => false, 'in_scroller' => false, 'user_id' => '0' ) ), (int) 6 => array( 'Article' => array( 'id' => '2496', 'article_category_id' => '37', 'title' => 'Nepal’s Macroeconomic Challenges In 2014', 'sub_title' => '', 'summary' => null, 'content' => '<div> </div> <div> </div> <div> <strong>--Dr Rewat Bahadur Karki</strong></div> <div> </div> <div> After the second democratic movement in FY 2007/08, Nepali economy recorded rosy picture including higher GDP growth of 5.8 percent. However, after the constituent assembly (CA) election in 2009 macroeconomic situation went on declining with low growth mainly due to uncertainty of economic policy and deteriorating investment environment. But pre-last year -2011/12 was exceptional i.e. better along with moderate growth of 4.5 percent, the highest in the last five years primarily because of windfall (exogenous) gain caused by weather and remittance, while last year (2012/13)’s performance is poor with the lowest growth 3.5 percent according to the estimates of Central Bureau of Statistics (CBS), and double digit inflation. </div> <div> </div> <div> Analyzing last year’s situation in brief, efforts have been made to estimate and analyze this fiscal year’ macroeconomic scenario mainly comprising of real sector and price, monetary, fiscal and external sectors based on realistic approach. In FY 2013/14, following six strong bases/assumptions indicate rosy macro economic situation.</div> <div> </div> <div> 1. <span class="Apple-tab-span" style="white-space: pre;"> </span>The current non political government has announced next three year plan (starting from this FY-2013/14) with a growth of 6 percent by fixing the target of upgrading Nepal to developing country from low income country within 10 years as against the UN target of 18 years. The government has announced an ambitious budget in this line too.</div> <div> </div> <div> 2. <span class="Apple-tab-span" style="white-space: pre;"> </span>The government has made its efforts to present the pro-productive and investment-friendly budget instead of loading it populist programmes.</div> <div> </div> <div> 3. <span class="Apple-tab-span" style="white-space: pre;"> </span>The full budget, despite being an election budget, which has come without any disturbance since the first CA election in 2008 AD, has exerted some positive impact in the economy</div> <div> </div> <div> 4. <span class="Apple-tab-span" style="white-space: pre;"> </span>There will be positive impacts in the Nepali economy from the slight improvement (from 3 percent to 3.2 percent in 2013) in world economy and also in neighbouring countries –India and China as forecast by IMF.</div> <div> </div> <div> 5. <span class="Apple-tab-span" style="white-space: pre;"> </span>The last budget as brought by this non-party government in early 2013 gave a clear-cut direction regarding adoption of liberal economic policy and important role of private sector in the economy and thus, has exerted a positive impact.</div> <div> </div> <div> 6. <span class="Apple-tab-span" style="white-space: pre;"> </span>Weather so far is favourable, which will have a positive impact on the economy.</div> <div> </div> <div> Nonetheless, there are following weak bases or assumptions, which will make the economic scenario weak.</div> <div> </div> <div> 1. <span class="Apple-tab-span" style="white-space: pre;"> </span>Although the election government brought an ambitious election budget it will have minimum impact on economic growth and will instead accelerate inflation</div> <div> </div> <div> 2. <span class="Apple-tab-span" style="white-space: pre;"> </span>IMF has forecast that Nepal’s macroeconomic situation would not improve significantly for the coming five years.</div> <div> </div> <div> 3. <span class="Apple-tab-span" style="white-space: pre;"> </span>Since the first CA election, highest growth of 4.5 percent was recorded last year whereas average growth of last three-year plan is less than four percent as against 5.5 per annual average target. </div> <div> </div> <div> 4. <span class="Apple-tab-span" style="white-space: pre;"> </span>Absorptive capacity for capital expenditure is very poor in Nepal.</div> <div> </div> <div> 5. <span class="Apple-tab-span" style="white-space: pre;"> </span>Unfavourable investment climate due to some extremist political parties and their affiliate organizations (which are against investment), and acute problems relating to load shedding, rigid labour laws, infrastructures etc.</div> <div> </div> <div> 6. <span class="Apple-tab-span" style="white-space: pre;"> </span>Results of the second CA election, held peacefully in Marga 2070, has brought in Nepali Congress, credited for introducing liberal economic policy in the 90s, as the largest party. This is expected to bring a positive effect on the economy.</div> <div> </div> <div> Based on the above mentioned strong and weak aspect for the estimate, a midway analysis/estimate, which gives the realistic picture, has been made in this article. During 2013/14, some macroeconomic indicators will remain better than that of last year. GDP is estimated to increase from 4.5 percent to a maximum of 5 percent as agricultural sector, the mainstay of the economy, is estimated to grow 3-3.5 percent due to favourable weather condition. Situation of summer crops, mainly paddy and maize, seems better this year. Production of paddy is estimated to have increased by more than 10 percent, compared to the sharp decline of 14 percent, last year. </div> <div> </div> <div> With regard to non agricultural sector, it will record around 5.5 percent growth, higher than last year’s 5 percent. The manufacturing sector will move up from 1.6 percent to 3 percent as investment climate is expected to improve slightly despite election year. Similarly, trade sector’s growth will shoot up due to the sharp import growth, while other sub-sectors of this sector will remain normal. This growth is supported by high ratio of fixed investment (fixed capital formation) to GDP, which is estimated to rise to 24 percent due to higher capital expenditure as a result of full-fledged budget presented by this non-party government.</div> <div> </div> <div> <img alt="Economy and Policy" src="/userfiles/images/ep2%20(Copy)(1).jpg" style="width: 550px; height: 321px; margin-left: 10px; margin-right: 10px;" /></div> <div> </div> <div> The inflation, which rose almost by two digit i.e. 9.9 percent last year and has increased at the rate of 10percent during the first four months of this fiscal year (2013/14), is estimated go up annually to 12 percent, which will be very close to the level reached in 2008/09 (13 percent). Being an election year, current expenditure has shot up with remarkable rise in election budget along with sharp rise in private and informal expenditure. The sharp rise in salary (18 percent) and provision of Rs. 1000allowance to the government employees, coupled with sharp appreciation of the American Dollar against Rupee, will lead to high inflationary pressure. Despite higher estimated GDP growth this year, higher money supply caused by above factors will lead to high inflation of 12 percent this fiscal year. Containing the inflationary pressure this year is a big challenge to the authorities. </div> <div> </div> <div> In terms of government finance, the non-political government has been able to bring the budget on track despite late in the third quarter of last fiscal year-2012/13. Last year, total revised budget was around Rs.370 billion but due to substantial election expenditure as well as full-fledged budget, this year’s total budget estimate is Rs. 517 billion. Government estimates forecast capital expenditure to rise from around Rs. 55 billion level to Rs. 85 billion this year, while Rs. 78.7 billion has been set aside for financial provision. </div> <div> </div> <div> Although government has given priority to enhance capital expenditure, such expenditure is just 9 percent of the budgeted total capital expenditure in the first five months of this fiscal year (2013/14), while regular expenditure is almost 30 percent in this period. This trend shows that though the capital expenditure will be far below the target, the regular expenditure can cross the target. With the sharp rise in import, the import-based total revenue is estimated to rise by more than 20 percent this year. Thus, in the fiscal sector, increasing the capital expenditure and containing the regular expenditure will remain, as usual, the major challenge for the government. </div> <div> </div> <div> The election will have an expansionary effect on monetary sector. Both money supply (M1 and M2) will rise sharply than last year. Private sector’s credit growth level would be higher this year than the last year. Similarly, full budget will push the deposit growth and the broad money liquidity (M3). The financial sector has been facing instability, as more than a dozen of BFIs have been declared problematic and some even dissolved. Thus, stabilising and making this sector strong by strengthening the supervisory capacity of the central bank and by enhancing good governance in both the BFIs and the regulator, is a major challenge. </div> <div> </div> <div> The depressed share market has improved especially after the CA election’s result positioned Nepali Congress, known for its liberal economic policies, as the lead party in the CA. The share market on the whole will record bullish trend this year compared to last year. </div> <div> </div> <div> External sector in 2013/14 is estimated to register a weak scenario instead of registering any structural improvements. Rise in demand for consumer as well as capital goods, triggered by full-fledged budget and the election expenses, is likely to increase money supply as well as imports. As a result, imports will register sharp growth of 30 percent, and reach about one third of the GDP. Export is estimated to rise by 10-12 percent higher than the last year due to the sharp appreciation of US Dollar and the expected reforms in the export incentive. Due to high import and low export, export-import ratio will go down from current 14 percent to 11 percent, and the trade deficit to one-third of the GDP next year. Consequently, the steady rise in trade deficit will continue. High import growth will make large current account deficit this year. However, increased remittance, which is due to sharp Dollar appreciation, will ultimately lead to BOP surplus in 2013/14 but not in a significant manner. Thus strengthening the external sector, by decelerating the trade deficit through import management and export enhancement, will remain a major challenge. </div> <div> </div> <div> <img alt="Economy and Policy" src="/userfiles/images/ep3%20(Copy)(1).jpg" style="width: 550px; height: 413px; margin-left: 10px; margin-right: 10px;" /></div> <div> </div> <div> Considering the overall macroeconomic scenario and challenges, the new government, which is expected to form soon, should concentrate on economic agenda and in addressing major issues and challenges that Nepal’s economyis confronting. The elected government first of all has to pursuade all major political parties to form common economic agenda, and in setting future direction for the economy. Along with that the government should take initiatives to reform policies for addressing immediate economic concerns. In this regard, priority should be given to creating conducive environment for investment, reducing poverty, unemployment and bad governance. Along with that the government should provide special incentive to exports, energy and agriculture sector. It should focus on capacity enhancement of capital expenditure, containing double-digit inflation and decelerating trade deficit along with strengthening banking system. Nonetheless, along with the government, the private sector and other sections of societies should make collective efforts to strengthen the national economy.</div> <div> </div> <div> <em>(Writer is Expert Member at Securities Board of Nepal.)</em></div>', 'published' => true, 'created' => '2014-01-24', 'modified' => '2014-01-26', 'keywords' => 'new business age economy & policy news & articles, economy & policy news & articles from new business age nepal, economy & policy headlines from nepal, current and latest economy & policy news from nepal, economic news from nepal, nepali economy & policy economic news and events, ongoing economy', 'description' => 'After the second democratic movement in FY 2007/08, Nepali economy recorded rosy picture including higher GDP growth of 5.8 percent. However, after the constituent assembly (CA) election in 2009 macroeconomic situation went on declining with low growth mainly due to uncertainty of economic policy and deteriorating investment environment. But pre-last year -2011/12 was exceptional i.e. better along with moderate growth of 4.5 percent, the highest in the last five years primarily because of windfall (exogenous) gain caused by weather and remittance, while last year (2012/13)’s performance is poor with the lowest growth 3.5 percent according to the estimates of Central Bureau of Statistics (CBS), and double digit inflation.', 'sortorder' => '2343', 'image' => null, 'article_date' => '0000-00-00 00:00:00', 'homepage' => false, 'breaking_news' => false, 'main_news' => false, 'in_scroller' => false, 'user_id' => '0' ) ), (int) 7 => array( 'Article' => array( 'id' => '2180', 'article_category_id' => '37', 'title' => 'Current Road Expansion: A Four Lane Road To Unsustainability', 'sub_title' => '', 'summary' => null, 'content' => '<div> </div> <div> </div> <div> <strong>--By Bimal Rijal</strong></div> <div> </div> <div> G<span style="font-size: 12px;">overnment authorities often throw around the word “development” while describing the recent trend inside Kathmandu. With the mushrooming high-rise apartment buildings, and of course, the ongoing road expansion project in the various parts of the city, the so called development seems to be rampant all of a sudden. However, before submitting to these claims and letting the government carry on with its “development” plans for Kathmandu, it is imperative that we as inhabitants of Kathmandu understand what it means to live in a more developed city.</span></div> <div> </div> <div> In old school development studies, the word “development” was referred to an elevated level of economic activity. Tall buildings and wider roads most definitely spark an increase in the level of economic activity, but they do not define development. Yes, infrastructures such as wider roads that facilitate better mobility inside the city and high-rise buildings that provide crucial commercial and retail space are important to the process of development. But they alone cannot define development. </div> <div> </div> <div> When improved infrastructures such as wider roads and taller buildings contribute in improving people’s living standard, we can then say that they are contributing to the development of the city. The key here is not to emphasize only on developing physical infrastructure but also increasing their contribution in bringing positive effect in the lives of the people. </div> <div> </div> <div> In other words, development projects are the ones which ameliorate people’s living standard; not deteriorate existing one. This is why even the international community is increasingly accepting the Human Development Index (HDI) as a metric to measure development. To move up in the Human Development Index, a country not only needs to pay heed to economic growth (a component to which construction of new infrastructures such as roads, factories, etc., contribute to) but also genuinely improves people’s living standard by ensuring quality health, education and environment for </div> <div> its citizens. </div> <div> </div> <div> Kathmandu’s development should not be evaluated on the basis of whether or not we have four lane roads. More important questions like are these roads going to increase traffic mobility by reducing jams, how beneficial will the wider roads be to pedestrian, what air quality will the people get to breath, and so on should be primarily asked and evaluated. The present implementation of the road widening projects and the way the notion of development is attached to it makes me skeptical about the understanding of the term among politicians and city planners. </div> <div> </div> <div> From development’s perspective, the current road expansion is particularly concerning for a couple of reasons. Needless to say, in a few years time, much of Kathmandu’s two lane roads will be transformed into four-lane. But does this justify its labeling as a ‘development project’? Is it really going to help the ailing transportation system inside Kathmandu on a sustainable scale? My answer is a resounding no.</div> <div> </div> <div> <img alt="Road Expansion in Nepal" src="/userfiles/images/ep1%20(Copy)(3).jpg" style="width: 550px; height: 391px; margin-left: 10px; margin-right: 10px;" /></div> <div> </div> <div> The current road expansion project undertaken by the government of Nepal to “rescue” Kathmandu’s populace from the blight of traffic congestion is assuredly going to prove counterproductive in the future. Having wider roads is only a temporary solution for Kathmandu because wider roads invite more cars and eventually the roads are going to be even more congested leading to even more intense traffic jams. Much of the current expansion of roads for gas consuming vehicles has been at the expense of pedestrian footpath. By norm, sidewalks alongside the roads need to be at least 2 meters wide. The new pedestrian sidewalks are barely half of it. Additionally, availability of lesser space has nullified the possibility to carry out plantations alongside the roads. </div> <div> </div> <div> To sum up the consequences of the road expansion: firstly, there are going to be more vehicles on the road emitting more harmful gases than ever and thereby further degrading air quality. Secondly, with no plans to improve mass transit in place, influx of more cars in the days ahead will reduce the mobility of vehicles further. Thirdly, lack of modest pedestrian sidewalk will affect mainly the working class, the senior citizens, and children walking back and forth from school. This will force the pedestrians to walk on the roads and presumably increase road accident frequency. Therefore, let alone the amelioration of living standard, wider roads are only going to degrade an average man’s living standard in the next five years. So, can such a project that increases pollution, worsens traffic problem, and puts the lives of senior citizens, small children and the working class at risk be called a development project? The answer is for the planners and the politicians to think of.</div> <div> </div> <div> Personally, even the economic prospect from this project does not make sense. I do not understand why we are so much inclined towards widening our roads when we already know that the new vehicles, that are going to fill them up, and the fuel that will consume, will be imported from foreign countries. A bicycle ride doesn’t require importing or burning of fuels nor does a walk, for those who prefer it. In such a scenario, why don’t we have pedestrian sidewalks and cycling tracks in our list of priorities? These would not only help in retaining currency from flowing out but also improve living and health standards of the general public as more and more people will take to cycling and walking. </div> <div> </div> <div> Current road expansion seems to be worthy of pursuing to some extent only if the government personally takes the responsibility of managing the operation of public transport within the city, of planting trees on the sidewalks, and </div> <div> of ensuring that public health won’t be affected due to the project. Without these commitments and corresponding plans to implement them, the current endeavor is going to prove a wet blanket for the citizens.</div> <div> </div> <div> Kathmandu is remarkably Nepal’s administrative and the financial capital. Legacy of centralized development, focused intensely within ring road, is at the heart of this city’s problem of traffic congestion. The government confronted it’s inadequacies in foreseeing the long term impacts of centralizing development, when severe traffic jams and immobility posited itself as a serious concern. In such a context, it could either reverse the trend of centralized development, opting to not expand the road, or it could carry on with the age old legacy of centralized development and expand the road eventually inviting more vehicles and people inside Kathmandu. </div> <div> </div> <div> A much better alternative to the current expansion would have been to ocus on developing more efficient express highways that link Kathmandu with its peripheral hubs like Banepa, Dhulikhel and others, and simply pay heed to the maintenance of roads inside Kathmandu. Such an effort would not only create new financial centers and commercial hubs outside Kathmandu but also relieve Kathmandu from its population pressure and pressures on its roads and physical infrastructures. With an increase in the level of economic activity, the people living outside Kathmandu and its periphery would be better off; and with lesser cars, lesser congestion, lesser pollution and lesser people, Kathmandu would be better off. In the long run, people living inside and outside Kathmandu would both benefit leading to genuine realization of development rather the current unsustainable growth.</div> <div> </div> <div> While other nations across the world are stressing on promoting sustainability, we seem to be moving in the opposite direction. While governments in other nations stress on preserving and promoting greenery through green roofing or through the protection of public parks, our government at home chops off three hundred trees to construct a landmark dedicated to “Ganatantra”. While other nations stress on constructing artificial flood control systems to protect its citizenry from unexpected flooding. In Kathmandu, the government instead destroys natural flood control systems like Manohara, Dhobokhola, Tukucha and other stream systems to develop riverside road network. </div> <div> </div> <div> Kathmandu - once tagged as naturally air-conditioned city by tourists - has now turned into a concrete jungle that experiences extreme temperatures. Ongoing unmanaged and disproportional road expansion has tarnished the image of this city even further. Adding to it, reluctance of the government to resort to sustainable development initiatives brings into question the fate of the city itself. If the government is not planning a sustainable future for it, than who will? </div> <div> </div> <div> <em>(Senior urban planner Rijal is chief of Urban Development Department and also chief at city planning commission.)</em></div>', 'published' => true, 'created' => '2013-11-28', 'modified' => '2013-12-02', 'keywords' => 'new business age economy & policy news & articles, economy & policy news & articles from new business age nepal, economy & policy headlines from nepal, current and latest economy & policy news from nepal, economic news from nepal, nepali economy & policy economic news and events, ongoing economy', 'description' => 'Government authorities often throw around the word “development” while describing the recent trend inside Kathmandu. With the mushrooming high-rise apartment buildings, and of course, the ongoing road expansion project in the various parts of the city, the so called development seems to be rampant all of a sudden.', 'sortorder' => '2040', 'image' => null, 'article_date' => '0000-00-00 00:00:00', 'homepage' => false, 'breaking_news' => false, 'main_news' => false, 'in_scroller' => false, 'user_id' => '0' ) ), (int) 8 => array( 'Article' => array( 'id' => '2065', 'article_category_id' => '37', 'title' => 'Nepali Federalism From Economic Perspective In Nepal', 'sub_title' => '', 'summary' => null, 'content' => '<div> </div> <div> </div> <div> <strong>--By Dr Chandra Mani Adhikari</strong></div> <div> </div> <div> There is lot of hue and cry for a new constitution that will have highly suitable federal structure. But, it does not look conducive enough for a successful election followed by good governance.</div> <div> </div> <div> A better Nepal is still a distant dream. Being optimistic, one can say things can be brought back on right track but that is possible only with a strong determination and attitude backed by a rigt thought. It requires quality leaders with logical, inclusive and judicious representation as well as balanced executive 9or administrative structure.</div> <div> </div> <div> The date of election has been set and the Election Commission is working within a given framework. But issue and essence require more debate while it is also urgent to have constitution.</div> <div> </div> <div> In this regard, some observations on the basis of the international experience and national reality are pertinent. The state’s structure can be divided into three systems. One is related to formation of the government. The second is defined power of the government whereas the third is the mechanism to serve the grassroots. The federal system has been developed since 17th century.</div> <div> </div> <div> The unitary form of governance was implemented after the First World War which didn’t work properly in practice. Regarding the forms, the main question regarding the federal or unitary system is motive of separation of rights for balancing different levels of the government.</div> <div> </div> <div> In some federal countries, the center seems more powerful in others the states are more powerful. In principle, federalism is the system of self-governance by the state based on rule-of-law. Thus, federal system would not be meaningful in undemocratic environment.</div> <div> </div> <div> Nepal is already a federal republic, if we go only by the Interim Constitution of Nepal. But in practice, it is still to be federal. Many questions such as those related to the structure of the state, basis of restructuring, methodology of building the federal nation, the form of government, election system and judicial system are still unanswered. Moreover, there is still no consensus on the issues of culture, geography, economic resources, population, infrastructure, level of social understanding and nature resources that a state needs to have to qualify to be a federal state.</div> <div> </div> <div> Other hot topics for discussion are the number of federal states, their geographical border and authorities of the legislative and executive bodies of the federal states.</div> <div> </div> <div> <img alt="" src="/userfiles/images/epn1%20(Copy).jpg" style="width: 550px; height: 252px; margin-left: 10px; margin-right: 10px;" /></div> <div> </div> <div> Two best examples of successful federalism are Switzerland and USA where many smaller nations tied up into the confederation. However, in USA the confederation was not working properly in the beginning. So, in 1781, USA declared the Federal Constitution with relatively more power to the center.</div> <div> </div> <div> After 50 years of experience with its own style of federalism, Switzerland too issued American model constitution in 1848 that aimed to enhance cooperation among the states. Germany introduced cooperative base federal constitution in 1871 and Belgium, France, Spain and South Africa followed it. Some countries like Bosnia and Herzegovina, Ethiopia, Congo and Iraq entered into federal system with background of conflict and other historical accords.</div> <div> </div> <div> On some instances, economic disparity, religious differences and geographical differences too have led to federalism. Canada is one such example.</div> <div> </div> <div> Nepal declared itself a federal state after people’s movement. And there are various reasons and logic behind the Nepali federalism. These include safety to the local community from encroachment of outsiders, institutionalization of democracy and making the state more inclusive. But what is happening (and has happened) in Nepal is different than the global experience.</div> <div> </div> <div> Nepal’s need is to end all sort of social and economic disparities by ensuring a conducing economic and political infrastructure through a political and constitutional consensus, using federalism as an instrument. In this context, it’s irrelevant to ask whether the state should be restructured on ethnic lines. Lengthy debate on the question whether the states should be based on single ethnicity or multi-ethnicity identification has proved futile.</div> <div> </div> <div> To make federalism successful in its objectives, we should scrutinize the real challenges and potentials, which are directly related to state restructuring. These include Nepali ethnicity management (with a goal of transforming current Nepali society into socially-economically and politically prosperous future) geographical balance and finding an optimum in terms of types, name, levels, numbers and size of federal and state governments. Also challenging is the question of whether optimization can be achieved with identification of appropriate determinants like population, geography and some other context.</div> <div> </div> <div> Among such contexts, the distribution of resources plays a prominent role. This is related with the need divide and assign the economic and revenue rights — PROPERLY — between the governments where resources can be mobilised in right proportion through (double, united or moderate) mechanism. This may require establishing a new set of institutions to run the system. The total size of the national budget will grow as each state will have its own government-legislature, chief minister and ministers and so on. We need consensus to determine a manageable size for all these. </div> <div> </div> <div> While determining the size and number of the provinces, presently available physical and economic resources, density of population, geographical area, level of technology, means of transportation etc should be considered. Another prominent reality to be accepted is the beauty of diversity. The Mountains, hills and the plains — these three geographical regions are interdependent; however all aspects of such dependencies are not measurable economically.</div> <div> </div> <div> The strength of the Hills is water as well as some other natural resources and high possibility of tourism industry. Whereas the strength of the Terai lie in the vast fertile land, urbanization, dense population and more economic activities.</div> <div> </div> <div> However, these factors may change in the future for example; migration may change the demographic structure. In this context, all the political parties and the policy makers need to be careful while allocating the economic resources and political rights between the states and the centre.</div> <div> </div> <div> In conclusion, striking a balance between the economy, politics and social aspirations of people is needed to design an optimum form of federalism. It is really the responsibility of present leadership to work for the next generation for a better and prosperous Nepal.</div> <div> </div> <div> <em>(Writer is an economist and also chairman of National Council for Economic and Development Research (NAREC Nepal)</em></div>', 'published' => true, 'created' => '2013-10-29', 'modified' => '2013-10-29', 'keywords' => 'new business age economy & policy news & articles, economy & policy news & articles from new business age nepal, economy & policy headlines from nepal, current and latest economy & policy news from nepal, economic news from nepal, nepali economy & policy economic news and events, ongoing economy', 'description' => 'There is lot of hue and cry for a new constitution that will have highly suitable federal structure. But, it does not look conducive enough for a successful election followed by good governance. A better Nepal is still a distant dream. Being optimistic, one can say things can be brought back on right track but that is possible only with a strong determination and attitude backed by a rigt thought. It requires quality leaders with logical, inclusive and judicious representation as well as balanced executive 9or administrative structure.', 'sortorder' => '1913', 'image' => null, 'article_date' => '0000-00-00 00:00:00', 'homepage' => false, 'breaking_news' => false, 'main_news' => false, 'in_scroller' => false, 'user_id' => '0' ) ), (int) 9 => array( 'Article' => array( 'id' => '1970', 'article_category_id' => '37', 'title' => 'Commercial Bench In Nepali Courts Prospects And Challenges', 'sub_title' => '', 'summary' => null, 'content' => '<div> <strong>--By Rudra Sharma</strong></div> <div> </div> <div> The Word ‘commercial’ is not easy to define and thereby making it further difficult to define what is commercial case and what a commercial bench is supposed to address. However, there were demands of a commercial court/bench for the last 20 years or so. People in seminars organized by Nepal Rastra Bank in association with the World Bank and International Monetary Fund identified the need of a commercial court/bench in Nepal for appropriate and speedy dispensation of justice in commercial case.</div> <div> </div> <div> In 2063 BS, the Supreme Court has set up a task force on this regard. The task force reviewed several exercises together with some international practices for establishment of Commercial Bench. The Task Force studied the reports of Court Management Committee, 2055 Court Strengthening Committee, 2058 and the Five Year Strategic Planning of the Court (2061- 2066). The Ministry of Law and the Ministry of Industry had also carried out some consultation with the Supreme Court in the year 2059 for the establishment of Commercial Court.</div> <div> </div> <div> A project carried out under the loan assistance of Asian Development Bank namely Improving Legal Enforcement Mechanism and Judicial Capacity had a component called Establishment of Commercial Bench under its package 2 activity. From Manshir 2059, this project carried out activities on establishment of Commercial Bench. This project had hired an expert Hon. C.</div> <div> </div> <div> W. Pincus QC who submitted a report recommending a number of things on establishment of commercial bench. Nepal Judicial Academy (NJA) also worked very closely with this project on the Commercial Bench component. This project had also worked with private sectors like Federation of Nepalese Chambers and Commerce and Industry (FNCCI) and others in this course.</div> <div> </div> <div> According the report of the Task Force, Commercial Cases Baseline Survey, 2003 carried out by Nepal Law campus presents 17 different kinds of cases as commercial cases tried and tested in several courts all over the country. The 17 different kinds of cases are - Company, Secured Transaction, Contract, Insolvency, Banking and Negotiable Instruments, Arbitration, Intellectual Property, Finance, Foreign Investment, Insurance, Security Transaction, Agency, Partnership, Construction, Leasing/Rent, Transportation and any others.</div> <div> </div> <div> Analysing the evolution of concept of Commercial Bench and a comparative study on commercial dispute settlement of some other countries like United Kingdom, United States, India and China, the Task Force has finally put forth 26 suggestions.</div> <div> </div> <div> <span style="font-size: 14px;"><strong>Establishment of Commercial Bench </strong></span></div> <div> On 2065 Magh 1, the government of Nepal established a Commercial Bench in four Appellate Courts namely Biratnagar, Patan, Butwal and Nepalgunj and later added Hetauda Appellate Court also through a notification on 2067 Baisakh 1. These Commercial Benches are provided with jurisdiction to look after cases of Secured Transaction Act, 2063, Competition Promotion and Market Promotion Act, 2063, Company Act, 2063 and Insolvency Act, 2063.</div> <div> </div> <div> Later, the government of Nepal, through a notification published on 2065 Shrwan 5, extended the jurisdiction of the Commercial Benches for the disputes under Banking Offence and Punishment Act, 2066. Most of the cases going to Commercial Bench were filed in the Commercial Bench of Patan Appellate Court. Some 99 commercial cases were filed in the Patan Appellate Court up to the fiscal year 2067, some 154 cases were filed in the fiscal year 2067/068, some 237 cases were filed in the fiscal year 2068/069 and some 263 cases were filed before the completion of the fiscal year 2069/070.</div> <div> </div> <div> After the establishment of the Commercial Bench, a procedure for the same was supposed to be made. In fact, a procedure is also drafted. However, the procedure has not come into force. Company Act, 2063 and Competition & Market Promotion Act, 2063 have provided that lawsuits under these Acts should follow summary proceeding. The Insolvency Act provides for a procedure within itself and that procedure is being followed now generally.</div> <div> </div> <div> No special procedure is prescribed for Secured Transaction Act and Banking Offence Act. These two Acts seem to follow general procedure. Despite the lack of a specific procedure for the Commercial Bench, Chief Judge of the Appellate Court where the Commercial Benches reside have provided for necessary procedural matters as and when required. For example, cases of Commercial Bench are heard by a division bench, other cases related to the case filed in the Commercial Bench are also heard in Commercial Bench, so on and so forth.</div> <div> </div> <div> <span style="font-size: 14px;"><strong>Commercial Bench & Expectations</strong></span></div> <div> The primary expectation with the Commercial Bench was that it would look after all the commercial cases gradually. It was a good beginning that the Commercial Bench was assigned to hear cases under three categories and later under five categories. However, it was very unfortunate that the jurisdiction of the commercial bench was not extended to other cases under other Acts.</div> <div> </div> <div> The basic benchmark to evaluate the function of the Commercial Bench is its comparative worth and value, i.e. what and how it contributed compared to previous court system where there were not Commercial Benches. There are hardly any evidences that the Commercial Bench could prove its worth. This is because, we already have had a regular court system and the Commercial Bench was brought to existence for a better performance and better dispensation of justice with respect to commercial cases. But, unfortunately it did not happen.</div> <div> </div> <div> The Task Force report mentions that the erstwhile judiciary of Nepal was looking after some ten kinds of commercial cases even if there were no such commercial benches. The cases were - dispute related to loan or credit, dispute about security or pledge, dispute related to buying and selling of property, dispute related to trademark, dispute related to commercial loan, dispute related to liquidation of company, dispute related to shareholders of company, Torts related trade and commerce and other economic cases.</div> <div> </div> <div> According to primary expectations and the decade long preparations, the scope of the Commercial Court was supposed to be extended to other commercial cases too and subsequent legal reform as well as administrative reform were also supposed to be made in order to pave a way for the same.</div> <div> </div> <div> It did not happen unfortunately, and this proved to be a major setback for creating condusive environment for invitation of foreign investment in Nepal and also for maintaining as well as retaining investment in Nepal. The exact expectation of about the Commercial Bench was to develop it as a real center for commercial dispute settlement.</div> <div> </div> <div> The Task Force report states that the concept of commercial bench was evolved in an endeavour to create sufficient legal and judicial environment for business as well as economic activities. But we can hardly find evidences to understand how the commercial bench contributed to create such environment. However, it does not mean that the commercial bench did not do anything. But, it should be judged in comparison to the contribution of the regular court system before establishment of commercial bench. According to the Task Force report, the regular court system was looking after 10 different kinds of commercial cases. As the commercial benches took up only cases under five categories, it gave a kind of impression that commercial cases are related to those five cases only.</div> <div> </div> <div> <span style="font-size: 14px;"><strong>Major Challenges</strong></span></div> <div> The major challenge of the Commercial Bench is the mindset of the judicial leadership. The judicial leadership probably thinks that the regular Appellate Courts would be less important if all commercial cases would go to the Commercial Bench. I wish to be wrong at this point. But, it would be very dangerous if the judicial leadership continues to be influenced by such thinking.</div> <div> </div> <div> Another challenge is the lack of competent human resources required for the Commercial Bench. This challenge can be overcome with appropriate will power and leadership of the judicial administration. We cannot import or invent such competent human resources. However, there would be no additional cost for managing the resources already available in the market.</div> <div> </div> <div> On the one hand, commercial cases are not coming to the Commercial Bench due to lack of proper legal arrangements on jurisdiction and on the other hand, there are competing and repeating jurisdictions for the dispensation justice through commercial cases. Several cases are put in arbitration process. Almost all of them are commercial cases. But, the appeal on arbitration settlement goes to the Appellate court but not to the Commercial Bench. The Debt Recovery Tribunal hears cases relating to debt recovery of the banking institutions. Revenue Tribunals look after cases related to taxes. Labour Court hears the cases related to labour issues.</div> <div> </div> <div> The money laundering related cases are handled by the money laundering department. Corruption cases are handled by Commission for the Investigation on Abuse of Authority (CIAA). Criminal Investigation Bureau of Nepal police also carries out investigation in some commercial cases.</div> <div> </div> <div> Thus, the commercial cases are scattered and thereby losing the scope of making the Commercial Bench a hub for settlement of commercial disputes.</div> <div> </div> <div> The Commercial Bench has jurisdiction over the Banking Offense Statute, but it does not have jurisdiction over Banking and Financial Institutions Act (BAFIA). It has been ridiculous practically. Such examples are there in other sectors too.</div> <div> </div> <div> Some of the practices of Appellate Court where the Commercial Bench resides have defeated the very purpose of the Commercial Bench. A case demanding for interim relief does not go to the Commercial Bench. Regular Bench hears it. Once a party receives interim order, it keeps on postponing the hearing date, pending the interim order. Sometimes, such cases are postponed for many times even from the weekly calendar putting a trouble to the opposite party to even to identify whether the hearing date was postponed or not.</div> <div> </div> <div> Such practices are serious fraud on the administration of justice and responsible persons must be punished.</div> <div> </div> <div> In most of the times, dispute on contract cases that happen to be commercial cases do not go to Commercial Bench. The prevailing contract law has provided interim relief in the form of appropriate order. In such situation, the existence of Commercial Bench happens to be a great irony.</div> <div> </div> <div> Great difficulty is experienced in Nepal for administration of contract, especially international contract. The courts generally provide stay order depriving the aggrieved party from carrying out the necessary activities according to the contract. Such a situation causes great mockery of the existence of the Commercial Bench.</div> <div> </div> <div> Due to the above reasons, the expectation that Commercial Bench would establish a minimum predictable legal environment on doing business in Nepal remains a distant dream. This has put a great threat for the invitation of foreign investment in Nepal. The Commercial Bench should overcome all these challenges in the time to come.</div> <div> </div> <div> <span style="font-size: 14px;"><strong>Experiences of India on Commercial Bench</strong></span></div> <div> In the year 2009, the Lok Shaba of India passed the Commercial Division of High Court Bill, 2009. But, the Bill is yet to be passed by the Rajya Saba.</div> <div> </div> <div> The Bill envisages separate divisions in each high courts to handle commercial disputes above certain value along with a procedure for the same. In the same year 2009, the Delhi high court established arbitration center and gave a message that the Indian judiciary was not anti-arbitration. In the same year 2009, London Court of International Arbitration set up a center in India. These two institutions paved way for institutional arbitration in India as an effective tool for settlement of commercial disputes.</div> <div> </div> <div> The Indian courts have made controversial interpretations of the Indian Arbitration & Conciliation Act, 1996. In the case of SBP & Co versus Patel engineering the Indian Supreme Court upheld the role of courts in appointment of arbitrator if one of the parties fails to nominate an arbitrator. This decision has been criticized as it put a great hurdle to separate arbitration from court. But in the year 2012 September, the Indian Supreme Court in the case of Bharat Aluminum Company Ltd. ( BALCO) versus Kaiser Aluminum Technical Service ruled that the Indian Arbitration Act will not apply if the arbitration proceeding are held outside India. This ruling of the Indian Supreme Court has been praised from many quarters as it has helped to separate domestic and international arbitration as well as separating arbitration from the courts.</div> <div> </div> <div> It seems that the establishment of arbitration center at the Delhi high court demonstrates the willingness of Indian judiciary to make the high court as hub of settling commercial dispute and the Supreme Court ruling of</div> <div> </div> <div> 2012 in the case of BALCO shows the willingness of Indian judiciary to separate arbitration from judiciary. It seems that these all issues will be categorically addressed by the pending Bill called the Commercial Division of High Court Bill, 2009. The underlined aim of all these schemes would be making India a preferred investment destination as the courts will provide a minimum predictability on legal environment.</div> <div> </div> <div> <span style="font-size: 14px;"><strong>International Dimensions</strong></span></div> <div> Nepal became member of World Trade Organization (WTO) nine years ago making several commitments for harmonization as well as standardization of administration of trade law in accordance with the provisions of the United Nations Commission on International Trade Law (UNCITRAL). Section 34 of the Arbitration Act, 2055 provides for enforcement of foreign arbitral awards.</div> <div> </div> <div> But, there are some cases where the Appellate Court has refused for enforcement of some foreign arbitral awards and the appeal on such decisions of the Appellate court are pending at the Supreme Court. Our legal ecosystem should be clear at this point and the commercial bench should take lead on this.</div> <div> </div> <div> <span style="font-size: 14px;"><strong>How Commercial Bench should be </strong></span></div> <div> Therefore, the commercial bench in future should be able to be a hub and ultimate resort for the settlement of disputes related to commercial laws.</div> <div> </div> <div> Further, it should be established as a center of trust among the investors as well as among the public that the commercial bench ensures settlement of commercial disputes in tune of time. It will not be necessary that the commercial bench itself hears all disputes. But it should be the ultimate resort for settlement of such disputes. For this purpose, we need to make legal as well as administrative mechanisms that all commercial law related cases can ultimately reach to the commercial bench.</div> <div> </div> <div> We can continue separate arrangements of hearing commercial law related cases at the court of first instances like Labour Court, Revenue Court or Tribunal, Debut Recovery Tribunal. Besides, we also need to encourage to settle commercial law related cases through the means of alternative dispute settlement like arbitration, mediation, conciliation etc. However, commercial law disputes settled in all these court of first instances and cases settled through alternative dispute settlement mechanism should ultimately find their way to the commercial bench. Such arrangements should be all over the country not only in Kathmandu. We can make an arrangement that disputes involving certain amount or above should go directly to the commercial bench instead of the court of first instances.</div> <div> </div> <div> The commercial bench should also take over the newly emerging commercial cases. Cases related to banking institutions are prominent example, such as cases related to bounced, dishonoured of cheques, debt recovery and banking offence. There is a need of legal as well as administrative provisions on asset management. Lack of this has hampered expected functioning of banking system.</div> <div> </div> <div> The commercial bench in future should look after comparatively complex cases on banking law. There is a room to argue that the Banking Offenses Act seems to be draconian, providing scope for being misused. This Act is disproportionate since this gives higher hand to the regulating body Nepal Rastra Bank to take such action that may kill the institution instead of correcting it and functioning it again after action from Nepal Rastra Bank.</div> <div> </div> <div> Nepal Rastra Bank may feel the need of such law since the court system is not effective as mentioned above. However, a draconian law would not be an answer for non-effective court system. So, we need to improve the court system rather than practicing draconian laws. We need such legal system where the central bank can take action against the banking institutions for corrective measures, put them in the legal process and the banking institutions again functions after the central bank takes action. Taking action by central bank against banking institution should be a regular process rather than a fateful disaster.</div> <div> </div> <div> Other newly emerging cases on commercial law are related to money laundering, insolvency and trans-border commercial cases. Money laundering is a part of criminal law. But since it is a matter of financial crime but still it can be seen within the parameter of commercial law. International commitments as well as domestic needs have compelled to make the legal as well as administrative regimes on money laundering more stringent. It is said that this regime in the offing will compel to change over 40 prevailing laws on administration of criminal justice. The future commercial bench should be a center for hope and trust for the settlement of cases related to these all emerging commercial laws.</div> <div> </div> <div> The commercial bench should have a proper reporting system. The cases settled by commercial bench should be discussed publicly in the Bars and among the academics.</div> <div> </div> <div> <span style="font-size: 14px;"><strong>Conclusion and Recommendations </strong></span></div> <div> Though Commercial bench could not prove its expected significance as we need to appreciate the initiations made and need to continue efforts to update and standardise it in accordance with need of the day.</div> <div> </div> <div> <span style="font-size: 14px;"><strong>Recommendations</strong></span></div> <div> 1. We need to seriously review the efforts made till date for establishment of Commercial Bench together with mapping the expectations made during such endeavours.</div> <div> 2. We need to extend the scope as well as jurisdiction of the commercial bench ensuring that all commercial cases either directly go to the commercial bench or go to other courts or tribunals that are supervised by the commercial bench.</div> <div> 3. There should be commercial benches covering all jurisdictions of Nepal.</div> <div> 4. Some cases having commercial issues may not go to commercial bench if such cases have monetary value in the disputes less than prescribed. Principally, it should be determined that commercial bench is to serve the purpose of establishing a preferred destination for investment, and therefore, it serves the creating conducive atmosphere for investment rather than establishing judicial principles. Prolonged judicial process and lengthy interpretations of statues can be done in regular courts not by commercial benches.</div> <div> 5. Among the commercial bench all over the country, there should be one commercial bench at the center Kathmandu with fast tract procedure. Commercial cases with certain threshold of investment and some other special circumstances should only go to this Fast Track Commercial Bench. Such arrangement would boost up confidence of investors.</div> <div> 6. There should be proper reporting system of the cases decided by the commercial benches so that the legal community as well as business community can provide feedback on the decisions by carrying out discussion on them.</div> <div> 7. There should be special efforts for legal reforms in order to accomplish the task of transforming the present commercial bench so that it can carry out all above mentioned matters.</div> <div> 8. Administration of commercial cases and legal reform should be carried out considering the international commitments of Nepal under WTO, UNCITRAL and other similar mechanisms.</div> <div> </div> <div> 9. Success stories of some countries like Singapore should be considered and we need to make analysis why Singapore scores over India on settlement of corporate conflict.</div> <div> </div> <div> <em><span style="background-color: rgb(240, 255, 240);">(Based on a paper prepared under an assignment of Commercial Law Committee of Supreme Court Bar Association. The writer is associated with Transactional Law House, an international law firm based in Kathmandu. He can be reached at rudralawyer@gmail.com. Cell- 9851057087.)</span></em></div> <div> </div> <div> <hr /> <div style="text-align: center;"> <span style="font-size: 16px;"><strong>“Lacunae in the legal system need to be minimised to attract foreign investors”</strong></span></div> <p> </p> <div> <strong style="font-size: 14px;"><img alt="Shreekant Poudel, the spokesperson of the Supreme Court" src="/userfiles/images/ep1.jpg" style="float: left; margin: 0px 10px 0px 0px; width: 200px; height: 246px;" />Shreekant Poudel</strong><span style="font-size: 14px;">, the spokesperson of the Supreme Court, in an interview with Britant Khanal of New Business Age he shed light on the introduction of commercial bench and its need.</span><strong style="font-size: 14px;"> Exceprts:</strong></div> <div> </div> <div> <span style="font-size: 14px;"><strong>Could you highlight the reason behind establishing the commercial bench?</strong></span></div> <div> The first and foremost reason behind the establishment of this bench is the need for speedy justice, easy access and quick legal remedies for the commercial sector. Even more important is the demand made by the law in many acts after the Second Jana Andolan. It is clearly mentioned that such and such cases will be dealt by the commercial bench like for instance in Section Z8 of the Company Act. After 2006, the World Bank had also suggested the requirement of such a bench. The Company Act, the Secured Transaction Act and other acts related to safe competition have mentioned the requirement of this bench. Was this issue initiated by ADB? I don’t think so but the ADB had some general interest and it had recommended on bringing such a bench too.</div> <div> </div> <div> <span style="font-size: 14px;"><strong>What new prospects will the bench bring? Will it have the same old practices disguised as new?</strong></span></div> <div> In the process of establishing this bench we had to train judges, judicial staffs and even lawyers. The training lasts from one to one-and-a-half months as it required. The judges who attend the training are only sent to the bench for hearing commercial cases. The new commercial bench will therefore slowly shed some old ways.</div> <div> </div> <div> <span style="font-size: 14px;"><strong>There seems to be a paradox in the bench being established for the benefit of the commercial sector while the jurisdiction seems a bit scattered, vague and ambiguous. Could you talk a little about this? </strong></span></div> <div> We are still in the initial phase of establishing the bench. As I know, the initial requirement was to set up a separate commercial court, which came down to establishing a commercial bench in appellate courts. This was required because cases related to the commercial sector are heard in a scattered manner. For example, cases of contract are first heard by the district court, patents are heard by the department of industry, and many other cases are addressed by the Nepal Rastriya Bank (NRB) too. Therefore, a common institution to streamline all commercial cases and bring them under one umbrella seemed to be necessary.</div> <div> </div> <div> Home work is yet to be completed. It was rightly questioned whether or not offences in banking will be dealt by the commercial bench. The issue is still subject to research and analysis. There are other issues including intellectual property and cases of revenue tribunal. We are striving to bring all of these cases under the commercial bench.</div> <div> </div> <div> <img alt="Fiscal Year 2069/70 Cases Regarding Commercial Bench." src="/userfiles/images/ep2.jpg" style="width: 500px; height: 187px; margin-left: 20px; margin-right: 20px;" /></div> <div> <span style="font-size: 14px;"><strong> </strong></span></div> <div> <span style="font-size: 14px;"><strong>Has the bench been established in all appellate courts in the country?</strong></span></div> <div> No, we have not established commercial benches in all appellate courts as they are established in a need-based manner. The previous chief justice had recommended the bench to be established in six places including Pokhara but later it was only established in four places. We therefore have established this bench in five places including one in Hetauda which was established in 2011 and rest four at Biratnagar, Butwal, Nepalgunj and Patan.</div> <div> </div> <div> <span style="font-size: 14px;"><strong>Because this is a new and western practice, will we require a foreign consultation for the bench?</strong></span></div> <div> For now our resources have being doing a very good job but like you suggested, if there is a situation that demands foreign consultation, we can higher or send our resources for foreign education and exchange programmes but again, that will require the demand of the context.</div> <div> </div> </div> <hr /> <div style="text-align: center;"> <strong><span style="font-size: 16px;">“Judges need training”</span></strong></div> <p> </p> <div> <span style="font-size: 14px;"><img alt="Gandhi Pandit" src="/userfiles/images/ep3.jpg" style="float: left; margin: 0px 10px 0px 0px; width: 200px; height: 246px;" />A well known advocate <strong>Gandhi Pandit</strong>, in an interview with Britant Khanal of New Business Age highlighted a pragmatic approach to commercial bench. <strong>Exceprts:</strong></span></div> <div> </div> <div> <span style="font-size: 14px;"><strong>What is your opinion on the newly established commercial benches?</strong></span></div> <div> The judges must be competent to deal with all kinds of cases, but honestly, that is not possible all the time because of growing trade issues in the domestic and global markets. Some of the cases are so sophisticated that they require experts, which is not available in the country. Smooth functioning of the economy will require a better legal system, which will support rapid growth and development. Therefore, current situation demands a specialised commercial bench. </div> <div> </div> <div> <span style="font-size: 14px;"><strong>Where can we trace the footprints of this system?</strong></span></div> <div> This system can be traced to the continental legal system, commonly understood as the French and German legal system. In these systems, we can see the trends of a commercial tribunal, a labour tribunal, an industrial tribunal, among others. In these kinds of tribunals, the specialised skills of various sectors are brought together for the better understanding of the case. And this system was later followed by Britain and the US. This pragmatic approach has led to speedy justice and quick legal remedies in these nations. But in our context, we are still lagging behind. Our judges are still traditional and are only specialised in traditional issues such as cases of land dispute, writ petition, etc. We don’t have expertise on cases like letter of credit, IT law, intellectual property law, cases of trademark and so on. Even if they want to learn it, they have not been able to acquire such knowledge due to lack of infrastructure.</div> <div> </div> <div> <span style="font-size: 14px;"><strong>What could be the possible solution to such lacunae?</strong></span></div> <div> Only establishing the bench will not do the justice. Establishing the bench is one thing and effectiveness is another. The benefit expected has not yet been reaped due to inexperienced people in the field and it is not unwillingness on their part - they don’t have that access to knowledge. As judges are frequently transferred to places without access to such knowledge, they will require a proper training, and attending the training only once will not make an impact as there has to be periodic training which we are lacking. The national judicial academy has been training judges but in the same traditional cases only. Not enough training has been provided in the field of modern commercial issues. Another major problem is procedural delay. Our legal system has a very lengthy procedure before the cases reach the final hearing. These kinds of hurdles will further delay justice and so they will have to be reduced to a minimum. Such deficiencies in the system will give a very wrong message to foreign investors.</div>', 'published' => true, 'created' => '2013-10-09', 'modified' => '2013-10-17', 'keywords' => 'new business age economy & policy news & articles, economy & policy news & articles from new business age nepal, economy & policy headlines from nepal, current and latest economy & policy news from nepal, economic news from nepal, nepali economy & policy economic news and events, ongoing economy', 'description' => 'The Word ‘commercial’ is not easy to define and thereby making it further difficult to define what is commercial case and what a commercial bench is supposed to address.', 'sortorder' => '1821', 'image' => null, 'article_date' => '0000-00-00 00:00:00', 'homepage' => false, 'breaking_news' => false, 'main_news' => false, 'in_scroller' => false, 'user_id' => '0' ) ), (int) 10 => array( 'Article' => array( 'id' => '1869', 'article_category_id' => '37', 'title' => 'The Gold Price Paradox', 'sub_title' => '', 'summary' => null, 'content' => '<div> </div> <div> </div> <div> The price of yellow metal (gold) has fallen sharply by more than 25 per cent in the international market during last four consecutive business months.</div> <div> And to be more precise it is the biggest drop in the last 35 years. Market study revealed that it has fallen approximately 30 per cent per ounce in 2013 only.</div> <div> </div> <div> The steep fall in the gold price drew mixed reactions and different opinions among bullion experts, economists, buyers, central bankers as well as the bullion traders.</div> <div> </div> <div> Some of them fear that the gold price will further go down in the near future citing the Cyprus crises, which is planning to sell off a huge gold reserve worth 400m Euros.</div> <div> </div> <div> Not the least, the unanticipated slowdown in the Chinese economic growth, continuous improvements in the US markets and decline in demand from India drove the yellow metal to fall further to the worry.</div> <div> </div> <div> A section of market experts have argued that the recent fall in gold price is not supported by the fundamentals rather it is the result of speculation in derivatives markets following the untested rumors and sparked declines across commodities. Hence they believed that the gold price will go up after the biggest plunge.</div> <div> </div> <div> According them, the price of gold will be backed by good demand from physical investors, arbitrators and jewelers.</div> <div> </div> <div> In June 15 analysts surveyed by Bloomberg expected that the gold prices will increase in near future. They have also researched experts view and analysts about the movement of gold price.</div> <div> </div> <div> According to the Bombay Bullion Association (BBA) the gold price will go up as the Asian buyers have stepped up their purchase following its fall in terms of price, imports by India, which is the world’s biggest consumer. BBA expected that the demand for gold in India is likely to jump by 36 percent in the 2013.</div> <div> </div> <div> However, Goldman Sachs Group, an American multinational investment banking firm that engages in global investment banking, securities, investment management, and other financial services primarily with institutional clients, predicted that the gold price may drop below USD 1000 per ounce within this year as the biggest hedge funds have reduced bets on gold at higher prices. Similarly, another school of thought argued that the investment on exchange-traded funds (ETFs) linked to gold have dropped by USD 37.2 billion in the first half of 2013, the fastest fall in last five years. In this back drop, they expected that the price of gold will further drop.</div> <div> </div> <div> At the same time, central banks that hold large gold reserves are also divided in to two fractions fueling the controversy on gold price movement. The central bankers are also being the part of paradox whether gold is cheap enough to increase investment as the price is USD 750 cheaper per ounce since the record high in November, 2011.</div> <div> </div> <div> The central bank of Sri Lanka and Scotland already said that the falling prices are an opportunity for nations to raise gold reserves. But the central banks of Korea and Australia said the plunge in gold price is not a big concern because gold has no intrinsic value and holding the yellow metal is part of a long-term strategy for diversifying currency reserves.</div> <div> </div> <div> Likewise, Deutsche Bank said that the gold has entered a new reality and may reach as low as USD 1050 an ounce to bring its valuation back to the historical averages. The trend line draw from the USD 435 an ounce, average of 2005, also indicates that the inflation adjusted price of gold should now be hanging around the psychological level of USD 1000 per ounce. </div> <div> </div> <div> Regarding the determinants of gold price, various scholars have conducted scientific studies with well researched econometric models and attempted to draw conclusions about the determinants of the gold price. Traditionally, most of the empirical studies closes down to three major findings, which emerge with respect to the analysis of long-run determinants of gold price.</div> <div> •<span class="Apple-tab-span" style="white-space: pre;"> </span>First, there is a long-term relationship between the price of gold and the US inflation indicated by the consumer price index.</div> <div> •<span class="Apple-tab-span" style="white-space: pre;"> </span>Second, the global inflation and gold price move together in a statistically significant long-run relationship. This evidence substantiates the belief that gold is a long-term hedge against inflation.</div> <div> •<span class="Apple-tab-span" style="white-space: pre;"> </span>Third, an external shocks that causes a deviation from this long-term relationship and there is a slow reversion back towards it.</div> <div> </div> <div> This means, although there is a possibility of seasonal variation as well as cyclical movement in the gold price in short and medium term, in the long run it will be guided by the global inflation in general and US inflation in particular.</div> <div> </div> <div> In effect, the consequences of external shocks, there may be the deviation from the long-term relationship between the price of gold and the US inflation. This attracted the scholars and analyst to think beyond the long-run determinants and that the US economy as well as the USD is only the counterpart of the gold in international market. They attempted to analyze the short-run determinants of gold price taking other factors than US inflation and USD into consideration. Accordingly, the short-run analysis found that there is a positive relationship between gold price movements and changes in global interest rate along with major macroeconomic variables, US inflation volatility and credit as well as operation risk in the major financial markets of the world. </div> <div> </div> <div> <img alt="" src="/userfiles/images/ep7%20(Copy).jpg" style="width: 500px; height: 284px; margin-left: 20px; margin-right: 20px;" /></div> <div> </div> <div> Some other studies have revealed that there is a negative relationship between changes in the gold price and changes in the US dollar trade-weighted exchange rate against the major currencies, which are included in the basket of global reserve currencies. However, the findings reveal that the significant negative parameter on the “error correction mechanism” reflects the slow return of the gold price to its long-run relationship. These findings are in accordance with the theoretical framework put forward that the gold is safe haven for the versatile investors and one of the assets class for government and the central banks. Besides, there are some fundamentals of demand and of supply, which can influence the price of gold as in case of other commodities in perfect competition market.</div> <div> </div> <div> However, some of the empirical studies reveal that there was no significant relationship between changes in gold price and its physical demand. Rather the price of gold has been driving by the virtual demand generated from the derivatives markets since there are hundreds times higher demand than that of the actual gold production across the world. Such artificial demand has especially been created by the speculators who want to mint money over the fluctuating price of any assets including gold. Every time they were trying to catch changes in gold price citing the change in world inflation, interest rate volatility, world income and the unproved rumors like central bank X is planning to sell this much of gold or huge gold reserve is identified in Y country etc.</div> <div> </div> <div> Against these theoretical as well as hardnosed backgrounds, there is a major unresolved issue that gold is the most attractive as well as the most risky asset worldwide. The crucial question one may ask include — Is gold the long-run hedge of US inflation? If so, is that matters for countries other than the US? Was there positive relationship between the price of gold and the US inflation during the recent financial crisis when the US inflation was almost zero or negative in some quarters but gold price was breaking record high successively? These are the crucial questions that no study or school of thought can answer correctly.</div> <div> </div> <div> But the fact is this is the glitter of gold and will remain same in the future as well. </div> <div> </div> <div> <em>(Writer is Deputy Director at Confederation of Nepalese Industries (CNI) )</em></div>', 'published' => true, 'created' => '2013-09-25', 'modified' => '0000-00-00', 'keywords' => 'new business age economy & policy news & articles, economy & policy news & articles from new business age nepal, economy & policy headlines from nepal, current and latest economy & policy news from nepal, economic news from nepal, nepali economy & policy economic news and events, ongoing economy', 'description' => 'The price of yellow metal (gold) has fallen sharply by more than 25 per cent in the international market during last four consecutive business months.', 'sortorder' => '1730', 'image' => null, 'article_date' => '0000-00-00 00:00:00', 'homepage' => false, 'breaking_news' => false, 'main_news' => false, 'in_scroller' => false, 'user_id' => '0' ) ), (int) 11 => array( 'Article' => array( 'id' => '1680', 'article_category_id' => '37', 'title' => 'Gold And So-Called Regulated Gold Market In Nepal!', 'sub_title' => '', 'summary' => null, 'content' => '<div> </div> <div> <strong>--By Chittaranjan Pandey</strong></div> <div> </div> <div> Gold is a very important component of the human lives on the earth today. Gold not only has the metallic value but also has been used as a hedge against several risks in the human life. Today gold is used from medicines to luxury. The use of gold carries lots of historical and mythological values beyond the regular usage we talked about. </div> <div> </div> <div> <div> अग्नेः प्रजातं परि यत् हिरण्यम्</div> <div> अमृतं दघे अधिमत्र्येषु</div> <div> यएनव्देद स इदेनमर्हति</div> <div> जरार्मृत्युर्भवति यो बिभर्ति ।।</div> <div> – अथर्व वेद, काण्ड १९, सूक्त २६, ऋचा १</div> </div> <div> </div> <div> The above lines from Atharvaveda mean “I adorn gold created or originated from fire which bestows eternity. One who adorns it is liberated from the fear of untimely death.” This signifies how gold has gained so much of significance for us. To go deep with the importance of gold, the yellow metal is believed to be the most sattvik, meaning holy, divine or serene. It is also believed that gold destroys most of the harmful germs in our body and using gold enhances the absorption of divine energy to greater extent. Specifically, in case of women, it is believed that when women put on gold ornaments, the shakti-roop is activated and the whole family is protected. </div> <div> </div> <div> The above mentioned reasons only signify why gold has received so much of mythological importance. Coming to these days, when people have started to take themselves above the cultural and traditional barriers, most of the things do not have the same shape. Yet, gold is successful enough to declare its commercial importance and has been luring people almost every corner of the world. </div> <div> </div> <div> When I talk about gold, how can I miss out talking about its importance in the currency management worldwide? Gold has played an important role in backing up the currency worldwide for long but these days, the scenario is different. We usually hear about the inverse relation of gold and US dollar. To explore the same, we need to dig back further. It was long back during the World War I when the warring nations shifted their money to a miniscule gold standard, thus bloating their own currencies to finance the war. Gold backed currency system thus lasted for long but the problem it invited was that all the countries wanted to deposit more gold to strengthen their currency which resulted major economic shocks. Coming to the era of Second World War also, the world was still tangled with the hard power and humanitarian crisis. But after the Second World War, Bretton Woods conference was organized and International Bank for Reconstruction and Development (IBRD-present World Bank) and International Monetary Fund (IMF) - called Bretton Woods Institutions were formed. Gold standard and the direct convertibility of the currencies were eradicated. Because United States was the most dominant power after the war, US Dollar was backed by gold and almost all other currencies in the world accepted US dollar to back up their currencies. Besides that, gold is held by many in various forms as a hedge against inflation and other economic disruptions. One of the most common forms of usage of gold in our society is the jewelry. Gold itself is very inert so gold salts are used for various medicinal purposes also. Gold salts are used for the treatment of arthritis; gold based injections heal and minimize the pain and swelling of rheumatoid arthritis and tuberculosis. Gold is also important in dentistry helping for restorations. Other very important use of the gold is for electroplating of gold onto base metals. </div> <div> </div> <div> After we go through the various usage forms of the precious yellow metal, we can explore why this stands as a luring metal in the market to earn maximum profit in various ways. The news heating the market these days is that the gold price is decreasing rampantly but domestic price of the gold in Nepal is not responding to it well. When there is a price hike, gold traders in our country do not wait a second to raise the price but when it is falling, the traders do not want to sell any gold to the people. Isn’t this pathetic regulation? More frustratingly, the strike of the gold traders broke with an interesting end- “Not penalizing the guilty”. The gold traders would start selling gold only when the government assures that the thug is not penalized. </div> <div> </div> <div> Please have a look at table to know how the price of gold is derived and how much of profit our gold traders earn: </div> <div> </div> <div> For instance, I have taken the price of gold on 26th June, 2013, the moment when price was US$1223.20 per ounce. </div> <div> </div> <div> Through various newspaper articles, people must be aware that the market demand for gold remains around 40 kg per day whereas traders believe that the daily consumption of gold in the market remains around 30 kg on an average. On the contrary, Nepal Rastra Bank sells only 15 kg of gold daily in the market through various assigned commercial banks. On an average, there is a deficit supply of almost 15 kg. We all know gold market is REGULATED in Nepal. So let’s not focus much on where the remaining gold to meet the market demand comes from. Rather I would like to explore with the economic benefit from the gold trading only. Even if we deduct Rs. 1000 per 10 grams as the additional costs, insurance cost- which is too much in itself and usually comes to almost half of that amount, the profit of the traders is Rs. 1085.23 per 10 grams. This means in one kilogram of gold, the traders earn Rs. 1,08,523.00 on an average. Similarly, for the official 15 kg of gold, the total earning of the traders become Rs. 16,27,845.00 on an average. These numbers will keep on growing if we intend to show their weekly and monthly income. </div> <div> </div> <table align="center" bgcolor="#E5E4E2" border="0" cellpadding="10" cellspacing="0" style="width: 500px;" td=""> <caption> <strong><span style="font-size: 14px;">Gold Price Calculation</span></strong></caption> <tbody> <tr> </tr> <tr> <td> <strong>Particulars</strong></td> <td> <strong>Price (NRs.)</strong></td> <td> <strong>Remarks</strong></td> </tr> <tr> <td> <strong><span style="font-size: 11px;">Per Ounce (As per Reuters)</span></strong></td> <td> <strong><span style="font-size: 11px;">1223.20 (USD)</span></strong></td> <td> </td> </tr> <tr> <td> <strong><span style="font-size: 11px;">NPR/USD Selling Rate (As per NRB)</span></strong></td> <td> <strong><span style="font-size: 11px;">95.51</span></strong></td> <td> </td> </tr> <tr> <td> <strong><span style="font-size: 11px;">Gold Rate in USD (Per 10 Grams)</span></strong></td> <td> <strong><span style="font-size: 11px;">391.35</span></strong></td> <td> <strong><span style="font-size: 11px;">(((1223.20*0.995))/31.1)*10</span></strong></td> </tr> <tr> <td> <strong><span style="font-size: 11px;">In NPR (Per 10 Grams)</span></strong></td> <td> <strong><span style="font-size: 11px;">37,224.77</span></strong></td> <td> <strong><span style="font-size: 11px;">(392.24*95.51)</span></strong></td> </tr> <tr> <td> <div> <strong><span style="font-size: 11px;">Add Customs</span></strong></div> <div> <strong><span style="font-size: 11px;">(As per Republica Article)</span></strong></div> </td> <td> <strong><span style="font-size: 11px;">3000</span></strong></td> <td> </td> </tr> <tr> <td> <strong><span style="font-size: 11px;">Total (Per 10 Grams)</span></strong></td> <td> <strong><span style="font-size: 11px;">40,224.77</span></strong></td> <td> <div> <strong><span style="font-size: 11px;">(Adding Price in NPR</span></strong></div> <div> <strong><span style="font-size: 11px;">and Customs)</span></strong></div> </td> </tr> <tr> <td> <strong><span style="font-size: 11px;">Market Price (NEGOSIDA)</span></strong></td> <td> <strong><span style="font-size: 11px;">42,310.00</span></strong></td> <td> </td> </tr> <tr> <td> <strong><span style="font-size: 11px;">Difference in Price (Per 10 Grams)</span></strong></td> <td> <strong><span style="font-size: 11px;">2085.23</span></strong></td> <td> <div> <strong><span style="font-size: 11px;">(Additional Cost, Insurance</span></strong></div> <div> <strong><span style="font-size: 11px;">and Profi t)</span></strong></div> </td> </tr> </tbody> </table> <div> </div> <div> The story does not end here. When we look into the real scenario, if jewelry is made out of 10 gram gold, 1 gram of other metal, besides gold,is used on an average for the bonding and many other purposes. This means that when a customer buys 10 gram of gold, s/he actually purchases only 9 grams of gold on an average. Besides that, when the price of gold increases internationally, the increment in price is implemented so promptly but when the price of gold decreases internationally, the case is different. It takes a long time for the authorized traders’ association to adjust the decreased price of gold. This clearly shows that the ethics is slumping in the REGULATED gold market of the country. Moreover, the traders go on strike, the shops are closed when price goes down as if there is no gold supply in the market which is totally against the economic theory. Other things remaining the same, the price of a commodity goes down only when the supply of the commodity increases. Unethical cartel is rampant in the gold market here. </div> <div> </div> <div> Is there no option to this? Globally, the option to this is the authorized commodity exchange which can deliver gold to the public cheaper than the other sellers. People can buy gold from the exchange and ask the jewelry shops to make the jewelry as per their requirement or they can also trade back the gold on their will. A remarkable benefit from the exchange is that people do not have to wait for hours or days for the gold price adjustments, the adjustments happen promptly in the software of exchange. Quality of the gold is not compromised; it is the same that the Nepal Rastra Bank authenticates, because the exchange will buy gold from the banks only. On the same price level given in the example above, the exchange can deliver gold at price below Rs. 41,200 per 10 grams. Isn’t this profitable to customers? This will exactly be the WIN-WIN situation for both the counterparties. </div> <div> </div> <div> What the country is lacking is the regulatory framework and the market is lacking the business ethics on the whole, thus losing the customers’ faith and confidence from the market. Isn’t it high time government starts taking commodity exchange as an alternative to maintain market equilibrium?</div> <div> </div> <div> <span style="font-size: 11px;"><em>(Pandey is Assistant Manager, Research & Development Department at MEX Nepal Ltd.)</em></span></div> <div> </div> <div> <em>Disclaimer: The views and expressions expressed in the article are entirely personal and my employer has nothing to do with it. This is an informational piece of writing and has no intention to provoke any individual, group or entity.</em></div> <div> </div>', 'published' => true, 'created' => '2013-08-23', 'modified' => '0000-00-00', 'keywords' => 'new business age economy & policy news & articles, economy & policy news & articles from new business age nepal, economy & policy headlines from nepal, current and latest economy & policy news from nepal, economic news from nepal, nepali economy & policy economic news and events, ongoing economy', 'description' => 'Gold is a very important component of the human lives on the earth today. Gold not only has the metallic value but also has been used as a hedge against several risks in the human life.', 'sortorder' => '1541', 'image' => null, 'article_date' => '0000-00-00 00:00:00', 'homepage' => false, 'breaking_news' => false, 'main_news' => false, 'in_scroller' => false, 'user_id' => '0' ) ), (int) 12 => array( 'Article' => array( 'id' => '1012', 'article_category_id' => '37', 'title' => 'Can Nepal Achieve 7 Per Cent Economic Growth Rate?', 'sub_title' => '', 'summary' => null, 'content' => '<p> <span style="font-size: 12px;">The Nepali economy has not been doing well for the past many years. According to Nepal Rastra Bank (NRB), the country’s economic growth rate has remained sluggish for the past many years, mainly because of the decade-long conflict and political instability. In the period from FY 2001/02 to 2011/12, Nepal’s GDP growth rate has crossed the five percent mark only once (in FY 2007/08 when the growth rate was 6.10 per cent), according to the Central Department of Statistics. However, Nepal’s highest GDP growth rate so far was recorded in FY 1994/95, a year before the Maoist insurgency started in Nepal. Almost all economists and development experts agree that Nepal’s economic performance will not improve unless there is political stability. </span></p> <p> We find that the economic growth rate increases when the agricultural growth rate is high (agriculture contributes to more than one-third of Nepal’s GDP). However, the growth in agriculture is dependent on monsoon rains; it is high when the country receives a good rainfall and low when the rainfall is low. The projected economic growth rate for the current fiscal year 2012/13 has already been revised twice – first from 5 per cent to 4.1 and then to 3.5 most recently. This means Nepal will have to double its current economic growth rate if it is to achieve a healthy growth rate of 7 per cent. That is clearly a tall order. </p> <p> However, is that an impossible target for Nepal? Or can the country really achieve this target? If it can, how and through what measures? We asked these questions to a number of economists and development experts. Their responses are given below: </p> <p> <a href="http://newbusinessage.com/Economy%20&%20Policy/1011">‘Focus on agriculture and industrialisation’</a></p> <p> <a href="http://newbusinessage.com/Economy%20&%20Policy/1010" style="font-size: 12px;">‘Political stability <span style="font-size: 12px;">is a must’ </span></a></p> <p> <a href="http://newbusinessage.com/Economy%20&%20Policy/1009">‘Seven percent growth rate possible’</a></p> <p> <a href="http://newbusinessage.com/Economy%20&%20Policy/1008">‘Need for political consensus on fundamental issues of development’</a></p> <p> <a href="http://newbusinessage.com/Economy%20&%20Policy/1007">‘Nepal has the potential to achieve 7% growth rate’</a></p> <p> <a href="http://newbusinessage.com/Economy%20&%20Policy/1006">‘Focus on tourism, productivity and exports’</a></p> <p> <strong style="font-size: 12px;"><br /> </strong></p> <p> <strong style="font-size: 12px;">Economic Prospects</strong></p> <p> <span style="font-size: 12px;">The economic outlook for Nepal hinges on how political uncertainties are resolved, the weather, and remittance inflows. Investor confidence is depressed by concerns over the political transition, now in its fifth year, following the dissolution in May 2012 of the Constituent Assembly, which failed to agree on a constitution. Recently, the political parties agreed to form a caretaker government led by the Chief Justice, which is expected to hold a Constituent Assembly election by 21 June 2013.</span></p> <p> In view of the unfavorable monsoon, the shortage of fertilizers during the peak paddy planting season, low business confidence, the lack of a parliamentary-approved full budget, and subdued growth in India, GDP is projected to slow to 3.5% in FY2013. Production of paddy is projected to fall by 11.3%, maize by 8%, and millet by 2%. The lack of a full budget is causing funding shortages for ongoing development activities. While the industry sector performance is expected to remain weak, services growth is expected to continue to grow at around 5.4%. With a favorable monsoon, adequate fertilizer supplies, the timely adoption of a budget, and moderate expansion of remittances, GDP growth would rebound to 4.2% in FY2014.</p> <p> <img alt="Annual GDP growth rate" height="319" src="http://www.newbusinessage.com/ckfinder/userfiles/Images/economy_and_policy_may2013_annual_gdp.jpg" style="margin:0 10px 0 0;" width="595" /></p> <p> (Source: Asian Development Outlook 2013)</p>', 'published' => true, 'created' => '2013-05-23', 'modified' => '2013-06-08', 'keywords' => 'Can Nepal Achieve 7 Per Cent Economic Growth Rate?', 'description' => 'The Nepali economy has not been doing well for the past many years. According to Nepal Rastra Bank (NRB), the country’s economic growth rate has remained sluggish for the past many years, mainly because of the decade-long conflict and political instability.', 'sortorder' => '887', 'image' => null, 'article_date' => '0000-00-00 00:00:00', 'homepage' => false, 'breaking_news' => false, 'main_news' => false, 'in_scroller' => false, 'user_id' => '0' ) ), (int) 13 => array( 'Article' => array( 'id' => '1011', 'article_category_id' => '37', 'title' => '‘Focus On Agriculture And Industrialisation’', 'sub_title' => '', 'summary' => null, 'content' => '<p> <strong style="font-size: 12px;">Can Nepal Achieve 7 per cent <span style="font-size: 12px;">Economic Growth Rate?</span></strong></p> <p> ‘Focus on agriculture and industrialisation’</p> <p> Nepal cannot achieve a healthy economic growth rate so long as there are political instability, labour problems and low production in the country. Nepal witnessed economic stability in FY 1994-95 and that was for very short period of time. The agriculture sector could help to increase the country’s economic growth rate but the government has not been able to make enough investment in this sector. We must be able to commercialise our agricultural sector by introducing modern technologies in our traditional farming system. Simultaneously, we should also focus on industrial development which is the backbone for the development of any country in this age. </p> <address> <strong>Himalaya Shamsher JBR</strong></address> <address> <strong>First NRB Governor </strong></address>', 'published' => true, 'created' => '2013-05-23', 'modified' => '2013-05-23', 'keywords' => 'Focus on agriculture and industrialisation', 'description' => 'Nepal cannot achieve a healthy economic growth rate so long as there are political instability, labour problems and low production in the country. Nepal witnessed economic stability in FY 1994-95 and that was for very short period of time.', 'sortorder' => '886', 'image' => null, 'article_date' => '0000-00-00 00:00:00', 'homepage' => false, 'breaking_news' => false, 'main_news' => false, 'in_scroller' => false, 'user_id' => '0' ) ), (int) 14 => array( 'Article' => array( 'id' => '1010', 'article_category_id' => '37', 'title' => '‘Political Stability Is A Must’', 'sub_title' => '', 'summary' => null, 'content' => '<p> <strong style="font-size: 12px;">Can Nepal Achieve 7 per cent <span style="font-size: 12px;">Economic Growth Rate?</span></strong></p> <p> <span style="font-size: 12px;">‘Political stability is a must’</span></p> <p> For a rapid economic growth, we need proper plans, policies and programmes. However, we cannot expect a robust economic growth rate unless we have political stability in the country. Political stability is a must. Similarly, we need to substantially increase the investment in the agriculture sector and make concerted efforts to modernize it. The services sector in Nepal has good prospects. A sustained growth in this sector, too, can help Nepal achieve a healthy economic growth rate. So, we must focus on agro-processing industries and on the development of new software technologies. Similarly, we must be able to use the ever increasing remittance inflows in a more productive manner if we are to achieve a growth rate of seven percent or more. </p> <address> <strong>Dr Narayan Khadka</strong></address> <address> <strong>Former Vice-chairman</strong></address> <address> <strong>National Planning Commission</strong></address>', 'published' => true, 'created' => '2013-05-23', 'modified' => '2013-05-23', 'keywords' => 'Political stability is a must', 'description' => 'For a rapid economic growth, we need proper plans, policies and programmes. However, we cannot expect a robust economic growth rate unless we have political stability in the country.', 'sortorder' => '885', 'image' => null, 'article_date' => '0000-00-00 00:00:00', 'homepage' => false, 'breaking_news' => false, 'main_news' => false, 'in_scroller' => false, 'user_id' => '0' ) ) ) $current_user = null $logged_in = false $xml = falseinclude - APP/View/Elements/side_bar.ctp, line 133 View::_evaluate() - CORE/Cake/View/View.php, line 971 View::_render() - CORE/Cake/View/View.php, line 933 View::_renderElement() - CORE/Cake/View/View.php, line 1224 View::element() - CORE/Cake/View/View.php, line 418 include - APP/View/Articles/index.ctp, line 157 View::_evaluate() - CORE/Cake/View/View.php, line 971 View::_render() - CORE/Cake/View/View.php, line 933 View::render() - CORE/Cake/View/View.php, line 473 Controller::render() - CORE/Cake/Controller/Controller.php, line 968 Dispatcher::_invoke() - CORE/Cake/Routing/Dispatcher.php, line 200 Dispatcher::dispatch() - CORE/Cake/Routing/Dispatcher.php, line 167 [main] - APP/webroot/index.php, line 117
Warning (2): simplexml_load_file() [<a href='http://php.net/function.simplexml-load-file'>function.simplexml-load-file</a>]: I/O warning : failed to load external entity "" [APP/View/Elements/side_bar.ctp, line 133]file not found!Code Context// $file = 'http://aabhiyan:QUVLg8Wzs2F7G9N7@nepalstock.com.np/api/subindexdata.xml';if(!$xml = simplexml_load_file($file)){$viewFile = '/var/www/html/newbusinessage.com/app/View/Elements/side_bar.ctp' $dataForView = array( 'articles' => array( (int) 0 => array( 'Article' => array( [maximum depth reached] ) ), (int) 1 => array( 'Article' => array( [maximum depth reached] ) ), (int) 2 => array( 'Article' => array( [maximum depth reached] ) ), (int) 3 => array( 'Article' => array( [maximum depth reached] ) ), (int) 4 => array( 'Article' => array( [maximum depth reached] ) ), (int) 5 => array( 'Article' => array( [maximum depth reached] ) ), (int) 6 => array( 'Article' => array( [maximum depth reached] ) ), (int) 7 => array( 'Article' => array( [maximum depth reached] ) ), (int) 8 => array( 'Article' => array( [maximum depth reached] ) ), (int) 9 => array( 'Article' => array( [maximum depth reached] ) ), (int) 10 => array( 'Article' => array( [maximum depth reached] ) ), (int) 11 => array( 'Article' => array( [maximum depth reached] ) ), (int) 12 => array( 'Article' => array( [maximum depth reached] ) ), (int) 13 => array( 'Article' => array( [maximum depth reached] ) ), (int) 14 => array( 'Article' => array( [maximum depth reached] ) ) ), 'current_user' => null, 'logged_in' => false ) $articles = array( (int) 0 => array( 'Article' => array( 'id' => '9434', 'article_category_id' => '37', 'title' => 'Nepal to participate in Tea and Coffee Expo in India', 'sub_title' => '', 'summary' => 'November 16: Nepali tea manufacturers are all set to participate in the 6th Mumbai World Tea Coffee Expo 2018 to be held in Mumbai, India from November 29 to December 1.', 'content' => '<p>November 16: Nepali tea manufacturers are all set to participate in the 6th Mumbai World Tea Coffee Expo 2018 to be held in Mumbai, India from November 29 to December 1.</p> <p>The organisers claimed that global companies are converging for the expo with India growing leaps and bounds in the tea and coffee sector – both in terms of production and consumption as well as innovation.</p> <p>According to the organisers, WTCE marks South Asia’s largest dedicated annual business gathering of the tea, coffee and related segments. The expo offers huge potential for appointing distributors, bulk deals, joint ventures, franchising, networking, meeting government officials, marketing alliances and overall branding, reads a statement issued by Sentinel Exhibitions Asia Pvt Ltd, the organiser.</p> <p>With 70+ exhibitors from seven countries including government pavilions and anticipated 4000+ trade visitors from across the world, companies participating at WTCE 2018 can expand their foothold in the market or enter newer markets, according to the organiser.</p> <p>“The show has become the ideal launch pad for new products especially for SMEs who don’t have large budgets,” the statement said.</p> <p>The 2018 edition shall feature tea and coffee brands/products, machineries, innovative technologies, flavours, ingredients, sugar/sweeteners, vending solutions, packaging, certifications, boards etc from Indonesia, Japan, Sri Lanka, Vietnam, Australia, Nepal and India.</p> ', 'published' => true, 'created' => '2018-11-16', 'modified' => '2018-11-16', 'keywords' => '', 'description' => '', 'sortorder' => '9214', 'image' => '20181116014039_pre.jpg', 'article_date' => '2018-11-16 00:00:00', 'homepage' => false, 'breaking_news' => false, 'main_news' => true, 'in_scroller' => false, 'user_id' => '20' ) ), (int) 1 => array( 'Article' => array( 'id' => '2842', 'article_category_id' => '37', 'title' => 'Remittance reaches close to 30 pc of GDP', 'sub_title' => '', 'summary' => 'Remittance inflow during FY 2014/15 reached an amount equivalent to around 30 per cent of Nepal’s GDP, annual data from the central bank shows.', 'content' => '<p>August 31: Remittance inflow during FY 2014/15 reached an amount equivalent to around 30 per cent of Nepal’s GDP, annual data from the central bank shows.</p> <p>According to Nepal Rastra Bank, Nepal received remittance worth Rs 600.17 billion through the formal banking channel during 2014/15. This is equivalent to around 29 per cent of the country’s GDP (which according to the central bank was around Rs 2.12 trillion). Like in the past, the amount of remittance Nepal received is roughly equivalent to the size of the government’s annual budget. </p> <p><iframe frameborder="no" height="300" scrolling="no" src="https://www.google.com/fusiontables/embedviz?viz=GVIZ&t=BAR&containerId=googft-gviz-canvas&q=select+col0%2C+col1%2C+col2+from+1P3sq89DtK_xa9iSGnS8gE70O6fjB0MNnlwtEJJbs&qrs=+where+col0+%3E%3D+&qre=+and+col0+%3C%3D+&qe=+limit+5&width=500&height=300" width="500"></iframe></p> <address><em>(Figures in Rs trillion)</em></address> <p><br /> The growth rate of remittance inflow was 25 per cent during FY 2013/14, but it has slowed down to 13.6 per cent in 2014/15.</p> <p>Central bank authorities were projecting a sharper decline in the growth of remittance as the number of workers going abroad had also registered a decline. But after the earthquake, the inflow has improved considerably, mainly due to money coming from abroad for post-earthquake reconstruction. According to government figures, the number of Nepali workers going abroad registered a decline of 2.8 per cent in FY 2014/15, compared to the same period last year.</p> <p><br /> According to the central bank, remittance inflow has been increasing faster than the country’s GDP for the last few years. In 2014/15 remittance was equivalent to 29 per cent of GDP, in 2013/14 it was 28 percent, 2012/13 25.5 percent, 2011/12 23.5 percent and in 2010/11 18.5 percent.</p> <p> </p> ', 'published' => true, 'created' => '2015-08-31', 'modified' => '2015-08-31', 'keywords' => '', 'description' => '', 'sortorder' => '2684', 'image' => null, 'article_date' => '2015-08-31 00:00:00', 'homepage' => false, 'breaking_news' => false, 'main_news' => true, 'in_scroller' => false, 'user_id' => '14' ) ), (int) 2 => array( 'Article' => array( 'id' => '2804', 'article_category_id' => '37', 'title' => 'Need For Green Banking', 'sub_title' => '', 'summary' => null, 'content' => '<div> <img alt="" src="/userfiles/images/ep1(6).jpg" style="width: 550px; height: 247px; margin-left: 10px; margin-right: 10px;" /></div> <div> </div> <div> <strong>--By Dwaipayan Regmi</strong></div> <div> </div> <div> The attack of human beings on nature is the cause of environmental deterioration. This deterioration is leading to global warming and climate change. It has been noticed that the temperature has risen up by 1 degree Fahrenheit in comparison to the previous century, leading to melting of Himalayan glaciers, bursting of lakes and rise of the sea level. Along with this, climatic changes have been causing natural disasters like cyclones, floods, landslides, and droughts. </div> <div> </div> <div> Combined efforts of governments, corporate sector and individuals can help in minimizing these various forms of environmental deterioration. For this, governments have to come up with strong policies; corporate houses should follow environmental protection guidelines more strictly; and individuals have to be self-aware to protect the environment around them. </div> <div> </div> <div> As part of the role to be played by the corporate sector, banks and financial institutions should embrace green banking — adopting process and strategies that promote environment-friendly practices to help in reducing carbon emission. Green banking helps in reducing internal carbon footprint as well as external carbon emission. </div> <div> Banks have been using lighting, air conditioning, electronic equipments, IT, high paper wastage in massive proportion. The resultant internal carbon footprint can be reduced through the use of renewable energy, automation and other measures. On the other hand, banks can reduce external carbon emission by financing projects and companies that are working for pollution reduction and adopting green technologies. Providing loans to firms that have concern for environment would ensure proper utilization of natural resources.</div> <div> </div> <div> Green banking avoids paper work and contributes to lower the cutting of trees. It makes the corporate world aware about environmental and social responsibility and thereby contributes to handing over a good environment to the upcoming generation. Adopting green banking policies are directly beneficial for the banks as well. </div> <div> </div> <div> Providing loans to firms and companies that abide by environment protection principles and regulations ensures that such clients do not become victims of natural calamities. Reputation and goodwill is very important for banks, and being a green bank provides them a distinct identity and reputation in the society. This also minimizes bad goodwill risk. Along with that, adopting such policies helps the banks avoid the risk of being left with securities like contaminated land as collateral. </div> <div> </div> <div> However, green banking is not a piece of cake; there are various challenges in making it a reality. It’s not only about reducing paper use and getting digital; there are strategies that a bank should follow.</div> <div> </div> <div> The most important step towards this objective is while providing loans. Any entrepreneur would think of green environment only when banks will restrict loans to businesses which might cause environmental degradation. Banks can deny loans to businesses that aim high profits by degrading the environment. The nature of business and its impact on the environment should be carefully considered before approving business loans. On the other hand, banks can offer low-interest loans to businesses that are environment friendly. In this way, banks can play a key role in promoting secondary source of energy like solar energy or bio gas energy.</div> <div> </div> <div> Next, banks can provide preference to green properties like homes equipped with solar energy, rain water harvesting facility, and properties with better environmental surroundings, for collaterals. And they should give secondary preferences, if at all, to properties such as polluting factory, or buildings emitting harmful waste in </div> <div> the environment.</div> <div> </div> <div> In terms of internal contribution, banks should embrace environment-friendly architectural design. Such designs help in reducing use of air conditioners and lights. Along with that, restricting use of carbon emitting machines, fans, energy inefficient bulbs, should be discouraged. Also, minimizing paper usage and promoting use of electronic transactions through rapid use of ATM cards, debit cards or other vending machines can help in being a green bank. </div> <div> </div> <div> Another area, where banks can contribute to green environment is the use of vehicles. Instead of providing sole vehicles to employees, banks should provide pick-and-drop services. This will not only help in reducing carbon emission but would also help in easing city traffic. This will also help in reducing the space needed for parking at banks. The space which would otherwise be used for parking could be used to build gardens and fountains. This will not only help the banks go green at the policy level but will also make it a green bank, literally too. </div> <div> </div> <div> As part of their corporate social responsibility (CSR), banks can invest in building and maintaining parks, gardens and forests in and around cities. They can adopt tree plantation as a means to mark their important achievements. This would help in inspiring other business ventures to adopt similar strategies. </div> <div> </div> <div> Banks have been providing many services to their customers such as free ATMs, Internet Banking and Any Branch Banking Service (ABBS). They could set up a basket ‘Disaster Emergency Fund’, for their client, in case the latter are victimized. The customers should be given a choice to opt for the fund by agreeing to provide certain amount of their interest to the fund on an annual basis. This would make such customers more secure from the impact of natural disasters on their finance. </div> <div> </div> <div> Banking has been a charming job in Nepal, and is regarded a prestigious job. To retain this image, it is necessary for banks to go green. Some of the recommendations made in this article might sound impractical considering the nature of their business and the stiff competition in the market to get better clients, still these measures are for banks which believe in ethical business.</div> <div> </div> <div> <em>The writer is pursuing his MBA at Jawaharlal Nehru Technical University, Andhra Pradesh, India.</em></div>', 'published' => true, 'created' => '2014-11-21', 'modified' => '2015-06-07', 'keywords' => 'new business age economy & policy news & articles, economy & policy news & articles from new business age nepal, economy & policy headlines from nepal, current and latest economy & policy news from nepal, economic news from nepal, nepali economy & policy economic news and events, ongoing economy', 'description' => 'The attack of human beings on nature is the cause of environmental deterioration. This deterioration is leading to global warming and climate change. It has been noticed that the temperature has risen up by 1 degree Fahrenheit in comparison to the previous century, leading to melting of Himalayan glaciers, bursting of lakes and rise of the sea level. Along with this, climatic changes have been causing natural disasters like cyclones, floods, landslides, and droughts.', 'sortorder' => '2660', 'image' => null, 'article_date' => '0000-00-00 00:00:00', 'homepage' => false, 'breaking_news' => false, 'main_news' => false, 'in_scroller' => false, 'user_id' => '0' ) ), (int) 3 => array( 'Article' => array( 'id' => '2788', 'article_category_id' => '37', 'title' => 'Policy For Inclusive Growth', 'sub_title' => '', 'summary' => null, 'content' => '<div> </div> <div> <strong>--By Hom Nath Gaire</strong></div> <div> </div> <div> The phrase 'Inclusive Growth' is quite popular in recent days not only among academia but also with policy makers, development partners and media as well. It seems that there is paradigm shift in development strategies among the stakeholders. The concept of inclusive growth refers to both the pace and distribution of economic growth. In order for growth to be sustainable and effective in reducing poverty, it needs to be inclusive. </div> <div> </div> <div> Traditionally, poverty (or inequality) and economic growth analyses have been done separately. However, recent works indicate that there may not be a trade-off between equity and efficiency as suggested by Okun (1975) and that it would be a big mistake to separate analyses of growth and income distribution. Inclusive growth has commonly been explained as about raising the pace of growth and enlarging the size of the economy by providing a level playing field for investment and increasing productive employment opportunities. The definition of inclusive growth implies direct links between the macro and micro determinants of the economy and economic growth. The microeconomic dimension captures the importance of structural transformation for economic diversification and competition, while the macro dimension refers to periodic changes in economic aggregates such as the country’s gross national product (GNP) or gross domestic product (GDP). </div> <div> </div> <div> Sustainable economic growth requires inclusive growth. Maintaining this is sometimes difficult because economic growth may give rise to negative externalities, such as a rise in corruption, which is a major problem in developing nations. However, inclusiveness lays emphasis on equality of opportunity in terms of access to markets, resources, and unbiased regulatory environment for businesses and individuals. The inclusive growth approach takes a longer-term perspective, as the focus is on productive employment as a means of increasing the incomes of poor and excluded groups and raising their standards of living. </div> <div> </div> <div> <strong>Determinants of Inclusive Growth</strong></div> <div> Different countries, especially developing countries, may have very different institutional as well as policy arrangements for promoting inclusive growth. Similarly, there may be a number of distortions preventing the allocation of limited resources in such a way that productivity in different sectors is equalized. The shift of resources from one sector to another may have an important effect on the overall level of output and growth. </div> <div> </div> <div> In this context, although growth theories have contributed to our understanding of how growth is determined and how it might be influenced, it has in many ways missed some of the crucial issues for developing countries. It may be possible to model the role of management and organization, the improvement of infrastructure, and sectoral transfer in developing economies to measure real determinants of growth and to the design of policy. </div> <div> </div> <div> They are directly concerned with the long-run growth in the sense of the steady-states as well as important for a medium term of some considerable duration. Government macroeconomic policies--- both fiscal policy and monetary policy--- are considered to be instrumental in promoting inclusive growth in the respective economy. </div> <div> </div> <div> <strong>Fiscal Policy and Inclusive Growth </strong></div> <div> Fiscal policy involves the use of government spending, taxation and borrowing to affect the level and growth of aggregate demand, output and jobs. It is also a means by which a redistribution of income and wealth can be achieved as an instrument of intervention to correct the market failures. Thus fiscal policy is considered more effective in encouraging both pace and size of economic economy. </div> <div> </div> <div> Based on this belief, Asian Development Bank (ADB) has recently urged the Asian governments to use their fiscal policy more adeptly to combat the widening income gaps in the region. “As the inequalities rising almost everywhere in Asia, governments need to urgently expand and improve their public investments in inclusive growth,” President Takehiko Nakao told in seminar titled, Leveraging Fiscal Policy for Inclusive Growth on the occasion of bank's 47th AGM. </div> <div> </div> <div> More than 80 percent of Asia’s population live in countries where inequality is worsening, meaning that many are being left behind even as globalization, technological progress, and market reform have led to strong economic growth. The bank emphasized on a range of issues including taxation to boost social and other spending, existing government programmes to promote equality, and the best balance spending to help the poorest without compromising fiscal sustainability.</div> <div> </div> <div> <strong>Monetary Policy and Inclusive growth</strong></div> <div> It is well accepted that macroeconomic stability and low inflation rates, inter alia, have positive effects on growth and on reducing inequality. In this connection, well-managed monetary policy is critical in achieving stable and inclusive economic growth. Similarly, monetary policy is mandated to achieve and maintain price stability in the interest of inclusive and sustainable economic growth along with maintaining financial stability. </div> <div> </div> <div> Price stability reduces uncertainty in the economy and provides a favourable environment for inclusive growth and cumulative employment creation over the longer term. Low inflation, on the other hand, helps to protect the purchasing power and living standards of all classes of people. Although low inflation may not necessarily in itself reduce income inequality, it does ensure the protection of income, which is particularly important for poor people who generally do not have the means to adjust their nominal incomes to take account of rapid price increases. </div> <div> </div> <div> <strong>PPP and Inclusive Growth </strong></div> <div> The Public Private Partnership (PPP) is a governance tool to bring together resources as well as strengths and share experiences of the public and private sector for the purpose of provisioning of public assets or services for public benefit. In order to achieve inclusive growth, developing countries should create more PPP opportunities to address their infrastructure gap and steer private money and skills into much-needed infrastructure projects. </div> <div> </div> <div> The infrastructure deficit in the developing countries like Nepal is so enormous that we can’t expect either private investors or the public sector to fill up it alone. It needs collaboration between the private and public players to make things work, and to bring critical services to the community. Good infrastructure is critical to inclusive growth, allowing communities to access essential social services, markets, and jobs, and making cities cleaner and easier to navigate. PPPs can help developing countries address critical infrastructure needs, from roads to hospitals to water supply systems. </div> <div> </div> <div> The PPP investment model with various structures is effective in helping centrally planned countries transition to private sector-oriented market economies. PPPs can be promoted through fully assessed and appropriate risk sharing and performance-based arrangements between the parties. The aim is to deliver “value-for-money” projects to provide a full set of benefits for investors, the public, and the economy.</div> <div> </div> <div> <strong>Knowledge Economy and Inclusive Growth</strong></div> <div> The development of the knowledge economy and inclusiveness has been seen as closely related. Global firms have built integrated international production chains, with innovation creating new products with added value in “knowledge” areas such as design and marketing and providing associated services. </div> <div> </div> <div> The growth of the knowledge economy is seen as part of the growth strategy to import jobs from low wage economies such as China and India investing heavily in knowledge. Shifting from low-cost manufacturing to economies based on knowledge, innovation, and high-end services is imperative for developing countries to achieve and sustain broad based inclusive growth. Emerging economies can reach and go beyond middle-income levels by becoming knowledge-based economies like Japan, the Republic of Korea, and Singapore. </div> <div> </div> <div> Similarly, least developed countries like Nepal can upgrade themselves to developing one through systematic investment in new information and communication, manufacturing and other technologies to promote knowledge economy. For this, they have to spend time and resources to move up the value chain by drawing on best practices and latest technologies, for example, shifting to smart energy grids, cloud computing, 3D manufacturing, and mobile rather than fixed-line communications.</div> <div> </div> <div> <strong>Rational </strong></div> <div> According to the World Bank’s Commission on Growth and Development, a persistent, determined focus on inclusive long-term growth by governments is a key ingredient of all successful growth strategies. Policies that encourage inclusive growth tend to emphasize removing constraints to growth, creating opportunity, and creating a level playing field for investment.</div> <div> </div> <div> To that end, developing countries need to increase investment in infrastructures as well as research and development to create knowledge based, innovative and competitive industries. For this, public funding may be needed to help companies start up. Public spending on education and health services improve the well-being of the poor and augment their productive capacity. </div> <div> </div> <div> Targeted subsidies and transfer payments protect the most vulnerable and deprived segments of society while better public infrastructure can make it easier for the entrepreneurs to create more jobs and additional value for the economy. Higher education and training need to be significantly improved to generate the skills and critical thinking processes vital to a modern competitive economy. </div> <div> </div> <div> In addition, governments need to put in place mechanisms and adopt policies that enable innovation and creativity to flourish. This includes protecting intellectual property rights, providing adequate financing options, and nurturing more flexible labour markets.</div> <div> </div> <div> <strong>Finally</strong></div> <div> Policies on both monetary and revenue front such as non-inflationary monetary and progressive taxation can promote inclusive growth. But among policy tools, fiscal policy with productive government expenditure and progressive taxation has a tangible effect on boosting equality and promoting inclusive growth.</div> <div> </div> <div> <div> <em><span style="font-size: 14px;"><strong>What is Inclusive Growth?</strong></span></em></div> <div> An IMF Commission on Growth and Development (2008) notes that inclusiveness—a concept that encompasses equity, equality of opportunity, and protection in market and employment transitions—is an essential ingredient of a successful growth strategy.</div> </div> <div> </div>', 'published' => true, 'created' => '2014-07-30', 'modified' => '2014-11-21', 'keywords' => '', 'description' => 'The phrase 'Inclusive Growth' is quite popular in recent days not only among academia but also with policy makers, development partners and media as well. It seems that there is paradigm shift in development strategies among the stakeholders. The concept of inclusive growth refers to both the pace and distribution of economic growth.', 'sortorder' => '2641', 'image' => null, 'article_date' => '0000-00-00 00:00:00', 'homepage' => false, 'breaking_news' => false, 'main_news' => false, 'in_scroller' => false, 'user_id' => '0' ) ), (int) 4 => array( 'Article' => array( 'id' => '2763', 'article_category_id' => '37', 'title' => 'Investment Issues In Nepali Insurers', 'sub_title' => '', 'summary' => null, 'content' => '<div> </div> <div> <div> <strong>--By Ujjwal Chand & Suraj Bansal</strong></div> <div> </div> <div> Currently, there are 25 insurance companies in Nepal -16 of them provide non-life insurance services and eight provide life insurance services while one provides both of these services. Insurance companies use their funds consisting of capital, reserves, premiums and loans to finance claim payments and other expenses. The remaining fund is invested as per the Investment Directives from the regulatory body, i.e. Insurance Board (Beema Samiti). As of FY 2011-12, these companies had investments to the tune of Rs. 60 billion out of which Rs. 52 billion was from life insurance companies and the rest was from non-life insurance companies.</div> <div> </div> <div> The insurance companies can put their investment funds in the sectors specified in the investment guidelines which specify that Life insurance companies must invest a minimum of 75% and non-life insurance companies minimum of 65% of their investment funds in combination of government securities, fixed deposits of commercial banks and development banks, and mutual fund/Citizen Investment Trust Schemes. They can put a maximum of 5% of their total investment fund in ordinary shares of public limited companies. Other areas for investment are secured debentures of Banks and Financial Institutions (BFI)s and Fixed Deposits (FDs) in finance companies. Non-life insurance companies can additionally invest in shares of real estate development or public limited housing company. </div> <div> </div> <div> <span style="font-size: 16px;"><strong>Importance of Returns from Investment </strong></span></div> <div> The operations of life and non-life insurance companies are different. Non-life insurance companies generate profit through both returns from investment and from regular insurance business. Life insurance companies, however, are suffering loss in the regular insurance business. Therefore, it is only due to the returns from investment that they are able to report positive bottom lines. Ganesh Dahal, deputy manager of Sagarmatha Insurance puts that “the contribution of investment returns to the company’s bottom line is at 40%”and in similar vein Suraj Rajbahak, CA of Shikhar Insurance, shared that “about 30% of the company’s returns are from investment returns”. Life insurance companies are far heavily reliant on the investment returns. Dip Bahadur BC, chief financial officer at Prime Life Insurance says, “Investment returns not only sustain the company’s expenses but also contribute to the bottom line”. Bigyan Shrestha, finance chief at National Life Insurance, seconds this and states that “the investment returns have been sufficient to sustain normal operations” for the company. </div> <div> </div> <div> <img alt="Returns from Investment" src="/userfiles/images/ep1%20(Copy)(6).jpg" style="width: 550px; height: 227px; margin-left: 10px; margin-right: 10px;" /></div> <div> </div> <div> <span style="font-size: 16px;"><strong>Investment returns of insurance companies </strong></span></div> <div> Of the twenty-five insurance companies, only twenty had published their annual report for FY 2011-12 by September 2013. An analysis of the same shows that 15 of the 20 companies posted returns from 8.5% to 10.5% from investments. This was primarily due to the high interest rates on the fixed deposits of the BFIs. </div> <div> </div> <div> But, the returns from their investment in ordinary share was relatively weak during this period - ranging from 0% to 5.42%. However, during the same period, Nepse increased by 14.7%. This shows that the insurance companies underperformed Nepse in terms of returns from ordinary shares investments.</div> <div> </div> <div> <span style="font-size: 16px;"><strong>Issues with current ordinary shares investment </strong></span></div> <div> There are few internal issues of the insurance companies themselves behind poor returns from ordinary shares investment. Additionally, there are some issues with the current ordinary shares investment practices that could damage these returns in the long run of the insurance companies. These internal issues are:</div> <div> </div> <div> <span style="font-size: 14px;"><strong>Passive investment – Over-reliance on dividends </strong></span></div> <div> Of the 20 insurance companies analyzed, four hadn’t invested in ordinary shares at all in FY 2011-12. In the remaining sixteen insurance companies, dividends contributed about 99.97% of the overall return from this avenue in 2011-12. This means only 0.03% of the returns came from capital gains. Thus passive investing, thereby over reliance on dividends for income from ordinary shares investments remained as the most important reason for poor performance in ordinary shares investments by insurance companies.</div> <div> </div> <div> <span style="font-size: 14px;"><strong>Lack of experts, research-based decision making</strong></span></div> <div> Further, the insurance companies did not follow research based decision making approach while selecting ordinary shares for investment. This is despite the fact that the insurance companies accept the high importance of investment decisions to the bottom-line. Moreover, investment team in these companies is made of up of generalists, i.e. overseeing all aspects of finance in the company, rather than specialists with specific field expertise. </div> <div> </div> <div> <span style="font-size: 14px;"><strong>Lack of Diversification</strong></span></div> <div> Investment gurus advocating diversification of fund always caution that “putting all your eggs in one basket is very dangerous”. These insurance companies lack proper diversification in ordinary shares investments, which could damage the returns from this avenue in the long term. The ordinary shares investments were heavily concentrated in stocks of major BFIs, constituting 96% of total ordinary shares investments. In terms of diversification at company level, they fare even worse. Although they had invested in 67 securities, they heavily concentrated on six companies, constituting 67% of the total ordinary shares investments. </div> <div> </div> <div> <span style="font-size: 16px;"><strong>Issues with overall current investments </strong></span></div> <div> High interest rate exposure is found to be triggering volatility on the overall investment returns. This exposure was also due to the conservative guidelines that made it mandatory for the insurance companies to park their fund in interest-rate volatile investment avenues like fixed deposits. The conservative investment guidelines are curtailing the diversification of investments, and thereby introducing concentration risk on the investments.</div> <div> </div> <div> <span style="font-size: 16px;"><strong>High interest risk exposure</strong></span></div> <div> Due to regulatory constraints, large portion of the investment fund is parked in BFIs as fixed deposit. This brings about high interest rate risk in the investments returns of the insurance companies. Sushil Kumar Luniya, manager at Gurans Life Insurance, sees “the decrease in interest rates of fixed deposits hampering insurance company returns for the current fiscal year”. Manoj Shrestha, head of finance department at NLG Insurance, too regards “the volatile bank interest rates as major factor deciding the investment returns”. </div> <div> </div> <div> Due to high interest rates prevalent during the sample period (average of 8.125% for commercial banks in FY 2011-12 as per the central bank’s Monetary Policy document), most of the insurance companies had fair returns on the investments. Imagine the effect of decrease in the rates to 5.2%, as predicted by NRB Monetary Policy for 2013-14, on the investment returns ! </div> <div> </div> <div> Now lets simulate this Simulating such scenario by decreasing the FY 2011-12 returns from fixed deposits of BFIs by the same proportion as the decrease in interest rate, i.e. from 8.125% to 5.2%. In FY 2011-12, it was found that only one insurance company was making loss. If the interest rates during this period were only 5.2, four insurance companies would have been at loss. </div> <div> </div> <div> <span style="font-size: 16px;"><strong>Lack of diversification options</strong></span></div> <div> The conservative investment guidelines put by the regulatory board give little room for diversification to insurance companies. Majority of the fund is to be parked in government bonds, and fixed deposit of commercial and development banks. Even in ordinary shares investments, insurance companies are finding hard to diversify from a stock market with over 76% concentration in BFIs. Thus there is huge concentration risk. If one bank or finance institution goes bust, the whole insurance industry would suffocate. One such event in Gurkha Development Bank has already occurred. Few insurance companies are still provisioning the losses from this bank’s tragedy.</div> <div> </div> <div> But, investment guideline isn’t the only sore finger. There is also lack of innovativeness among insurance companies in terms of diversifying their investments. As Dr. Fatta Bahadur KC, chairman of Insurance Board, claims, “The investment guidelines clearly indicate flexibility of alternative investment avenues for the insurance companies”. Upon request by insurance companies, the Board is ready to look into alternative investment proposals. But as this includes some hassles and would put the insurance company management under scrutiny if the innovation backfires, the insurance companies are reluctant to tread on this way.</div> <div> </div> <div> <span style="font-size: 16px;"><strong>Asset-liability mismatch</strong></span></div> <div> Asset-Liability mismatch is a major issue with life insurance companies. Safer investment assets with longer maturity are hard to find in Nepali market, where bonds and debentures have minimal presence. Debentures of commercial banks bring concentration risk with them for the insurance companies, which already have major portion of their investment fund in the banks as fixed deposits and their ordinary shares. Dr. KC, sees “Asset-Liability mismatch for life insurance companies as they issue policy for long term whereas they can invest for short term only”. Dip Bahadur BC, CFO of Prime Life, also considers “asset-liability maturity mismatch as a prevalent issue in all life insurance companies”.</div> <div> </div> <div> <span style="font-size: 18px;"><strong>The Way Ahead</strong></span></div> <div> </div> <div> <span style="font-size: 16px;"><strong>Resolving Internal Issues</strong></span></div> <div> Internal issues - lack of research based decision making, diversification and active investing - can be resolved through robust internal research systems. To boost their ordinary shares investment performance through research backed investments, the insurance companies could build their own internal system and processes but at a huge cost. It would also mean taking two diverse businesses in parallel, i.e. insurance business and investment business. Outsourcing of ordinary shares investment management by availing the customized portfolio management service given by several financial intermediaries like Kriti Capital, Nabil Invest and Beed Management, seems more beneficial. Such outsourcing will not only enable insurance companies to focus on their core business, but also get better returns from their investments via expert handling of their funds at a relatively lower cost.</div> <div> </div> <div> <img alt="Isues with Investment" src="/userfiles/images/ep2%20(Copy)(2).jpg" style="margin-left: 10px; margin-right: 10px; width: 550px; height: 400px;" /></div> <div> </div> <div> <span style="font-size: 16px;"><strong>Resolving external issues</strong></span></div> <div> There are limitations faced by insurance companies while investing their fund as per current investment guidelines. Fixed deposits have inbuilt interest rate risks. The life insurance companies face an additional issue of asset-liability maturity mismatch, with investments maturing in about 1-1.5 years and liabilities remaining active for about 10-13 years. There is need for long term investment alternative. </div> <div> </div> <div> Further, diversification of fund is hard in a secondary market with heavy concentration of BFI stocks. With the investment fund increasing rapidly (CAGR of 21.35% from 2004-05 to 2011-12), there is a need to look for additional investment avenue to resolve these issues. This is not just voiced by the insurance company professionals but also by the insurance regulatory board.</div> <div> </div> <div> Dr. KC feels that “although the investment guidelines give flexibility to insurance companies to come up with alternative investment proposals, the time has come to review the overall investment guidelines”.</div> <div> </div> <div> A suitable avenue to be added in the investment guidelines could be private placements in infrastructure companies. This will not just help the insurance companies to resolve the issues of diversification and the infrastructure companies in getting easier financing, but also help the overall economy of the nation. Dr. KC says that the Board is “positive on investment made by insurance companies in hydropower and other infrastructure companies, and these avenues could be opened for investments”. Most of the insurance companies also state that they are willing to invest in hydropower and other infrastructure companies, if allowed by investment board.</div> <div> </div> <div> Insurance Board should allow investments by the insurance companies via private placements, as the secondary market doesn’t have appropriate diversification opportunities. Further, the insurance companies would be able to invest at a bargain in the infrastructure companies due to their sheer investment fund size. Also, if SEBON comes up with more liberal rules on the issuance of shares at premium, the infrastructure companies could benefit hugely from private placements. Even if the insurance companies decide on being risk averse and just invest in debentures, they could do so in infrastructure debentures. As there isn’t presence of these instruments in secondary market, private placement would be ideal way for diversification of by insurance companies. On the other hand, the infrastructure companies would have lower issue costs and lesser regulatory hassles than going public for raising finance. Also, in case of debentures, these companies would be avoiding interest rate exposure. Similarly, the promoters of infrastructure companies would be able to delay issuing the shares to public, thereby being in position with better financial statements before going public. This would help get better response on public issuance of shares at premium. </div> <div> </div> <div> Thus the insurance companies should initiate this by coming up with effective proposal and lobbying with the Insurance Board for liberal investment guidelines.</div> <div> </div> <div> But, investment in private placements of the infrastructure companies (if allowed by the Board) requires expert knowledge on these companies and regular monitoring. Also, the entry and exit strategies must be taken into account as these investments are relatively less liquid as compared to secondary market investments. There will be need of diversification as well as policy and strategy development for the insurance companies vying to invest via private placements. So, to benefit from this additional investment avenue, insurance companies will have to develop in-house expertise or outsource private placements management services for financial intermediaries.</div> <div> </div> <div> <em>(The article is based on a joint research conducted by Ujjwal Chand and Suraj Bansal as part of their academic requirement at KUSOM. The researchers can be contacted at: chandujjwal@gmail.com)</em></div> </div> <p> </p>', 'published' => true, 'created' => '2014-03-24', 'modified' => '2014-03-24', 'keywords' => 'new business age economy & policy news & articles, economy & policy news & articles from new business age nepal, economy & policy headlines from nepal, current and latest economy & policy news from nepal, economic news from nepal, nepali economy & policy economic news and events, ongoing economy', 'description' => 'Insurance companies use their funds consisting of capital, reserves, premiums and loans to fi nance claim payments and other expenses.', 'sortorder' => '2608', 'image' => null, 'article_date' => '0000-00-00 00:00:00', 'homepage' => false, 'breaking_news' => false, 'main_news' => false, 'in_scroller' => false, 'user_id' => '0' ) ), (int) 5 => array( 'Article' => array( 'id' => '2641', 'article_category_id' => '37', 'title' => 'Financial Inclusion Must For Inclusive Growth', 'sub_title' => '', 'summary' => null, 'content' => '<div> <strong>--By Hom Nath Gaire</strong></div> <div> </div> <div> Finance has come a long way since the time when it wasn't recognized as a factor for growth and development. It is now attributed as the life blood of an economic system and most economies strive to make their financial systems more efficient. It also keeps policymakers on their jobs as any problem in this sector could freeze the entire economy and even lead to a contagion. </div> <div> </div> <div> The financial services include the entire range - savings, loans, insurance, credit, payments etc. The financial system has to provide its function of transferring resources from surplus to deficit units but both deficit and surplus units are those with low incomes, poor background etc. By providing these services, the aim is to help them come out of poverty. So far, the focus has only been on delivering credit such as microcredit and has been quite successful in some countries. However, similar success has to be seen in other aspect of finance as well.</div> <div> </div> <div> In this context, financial inclusion is the most for efficient financial system and to exert positive impact in the economic growth as well as development. Financial inclusion could expediteeconomic activities and promote entrepreneurship with the maximum use of information, communication and technology-enabled services supported by an extensive Financial Literacy mission. </div> <div> </div> <div> <span style="font-size: 16px;"><strong>What is Financial Inclusion?</strong></span></div> <div> Authorities and policymakers worldwide including advanced economies like the United Stateshave set up specific task force/committees to understand what financial inclusion is and how it can be achieved. </div> <div> </div> <div> Former UN Secretary-General Kofi Annan said: "The stark reality is that most poorpeople in the world still lack access to sustainable financial services, whether it issavings, credit or insurance. The great challenge before us is to address the constraints that exclude people from full participation in the financial sector. Together, we can and must build inclusive financial sectors that help people improve their lives.” </div> <div> </div> <div> Similarly, according to the UK Financial Inclusion Taskforce, there are three main concerns in financial inclusion; access to banking, access to affordable credit and access to freeface-to-face financial advice. Therefore, the term 'Financial Inclusion' is defined as an extension ofbanking and financial services at an affordable cost to unbanked people of thecommunity. </div> <div> </div> <div> India also set up a committee under the chairmanship of Dr. C. Rangarajan, the then Governor of Reserve Bank of India (RBI) to suggest measures to increase financial inclusion in 2007. The Rangarajan committee defines financial inclusion as: "the process of ensuring access to financial services and timely and adequate credit where needed by vulnerable groups such as weaker sections and low income groups at an affordable cost." </div> <div> </div> <div> Therefore, financial inclusion means easy and affordable access of financial services by the economically poor and unbanked people of society at appropriate, low-cost, fairand safe financial products and services. Constraints of Financial Inclusion </div> <div> </div> <div> Financial Inclusion is especially needed for rural and underprivileged masses that may be the future growth engine of the economy. From the recent initiatives undertaken by the world governments to foster financial inclusion, one cannot undermine the need to include the economically underprivileged in the mainstream banking sector. However, many people across the globe are now excluded from mainstream banking. Theserange from people with low income to people with low information and accessibility to peoplewith no social security or insurance cover. The main reasons behind the financial exclusion are: </div> <div> </div> <div> <span style="font-size: 14px;"><strong>Lack of information:</strong></span> Lack of information about the role and function of banks, banking services and products, interest rates, etc. stop people from including themselves in mainstream banking. </div> <div> </div> <div> <span style="font-size: 14px;"><strong>Insufficient documentation:</strong></span> Many unbanked people (even in municipalities and urban areas) areunable to show their self identification documents during the opening of a bank accountor during taking a loan. </div> <div> </div> <div> <span style="font-size: 14px;"><strong>Lack of awareness:</strong></span> Many people are unaware of the banking terms andconditions laiddown by banks and regulators from time to time. </div> <div> </div> <div> <span style="font-size: 14px;"><strong>High transaction costs: </strong></span>Various commercial banks across the globe levytransaction charges on credit or debit transactions, on over usage of banking services, on chequebook issuance etc. </div> <div> </div> <div> <span style="font-size: 14px;"><strong>Lack of access:</strong></span> Accessibility is a problem to all those people who live ingeopolitically isolated regions. Moreover, as most of the commercial banks are locatedin the cities and surrounding area, people in rural areas mainly in least developed countries like ours have a geographical barrier in accessing banks. </div> <div> </div> <div> <span style="font-size: 14px;"><strong>Illiteracy:</strong></span> Because of illiteracy, a substantial number of people are unable to takerecourse to banking services. </div> <div> </div> <div> <span style="font-size: 14px;"><strong>Stringent regulations:</strong></span> Stringent regulations such as Know your Customer (KYC) and Anti-Money Laundering and Counter Terrorist Finance (AML-CTF) norms are also considered as hindrances for financial inclusion. Financial Inclusionin Nepal </div> <div> </div> <div> <img alt="Economy and Policy" src="/userfiles/images/ep1%20(Copy)(5).jpg" style="width: 550px; height: 286px; margin-left: 10px; margin-right: 10px;" /></div> <div> </div> <div> Nepal is one of the LDCs with economically challenged huge rural population. Financial Inclusion is indispensible in its case for the sustainable growth of its economy. However, even in such scenarios, many businesses have been successful in showing consistent as well as continued development. One of the most important sectors of this kind is the financial services sector. With just 2 commercial banks in the early days, the country has actually managed to expand this sector, which at present includes 31 commercial banks. Similarly in the past 30 years, different development banks, co-operatives, finance companies, insurance companies have grown by more than 10 fold.</div> <div> </div> <div> <img alt="Economy and Policy" src="/userfiles/images/ep%20(Copy)(3).jpg" style="float: left; margin: 0px 10px; width: 250px; height: 263px;" />In the mean time, branches of commercial banks, development banks and finance companies totalling at 2483 in mid of march of 2013. Of the total branches, commercial banks have occupied 1472 followed by development banks 713 and finance companies 298. Similarly, from the side of regional distribution, the majority branches of BFIs are situated in the Central Development Region totalling 1168, followed by Western Development Region 606 and Eastern Development Region 401. The minimum branches of BFIs are in the Far-Western Development Region totalling 111 followed by Mid-Western Development Region 197. </div> <div> </div> <div> Increase in number of branches of BFIs is considered as one of the indicators of financial inclusion. Banking Industry, normally, occupies a bigger chunk in the financial system. However, a larger chunk of banking services is still concentrated in urban areas. More especially, the banking services still seem to be concentrated in capital city. The districts with highest number of bank branches are Kathmandu, Lalitpur and Rupandehi with 335, 77 and 67 branches respectively. This level of reach and penetration also means that the financial inclusion is yet to strengthen to follow economic progress in the country. </div> <div> </div> <div> This sector has always been driven by a keen need of growth as well as is being pushed by various regulations. Over a period of time, this sector has deeply gone to the roots of urban, semi-urban as well as to the rural Nepal. This penetration level, in particular, has benefitted millions of people living in the country who fall below the poverty line in both the rural as well as semi-urban areas of the country.</div> <div> </div> <div> The latest figures indicate that the financial services are used only by a section of the population (around 40%) in Nepal.There is demand for these services but it has not been provided. The excluded regionsare rural, poor regions and also those living in harsh climatic conditions where it is difficult to provide these financial services. The excluded population then has to rely on informal sector for availing finance that is usually at exorbitant rates. </div> <div> </div> <div> This leads to a vicious cycle. First, high cost of finance implies that first poor person has to earn much more than someone who has access to lower cost finance. Second, the major portion of the earnings is paid to the money lender and the person can never come out of the poverty. </div> <div> </div> <div> <span style="font-size: 16px;"><strong>Factors Forcing People to be Informal </strong></span></div> <div> <span style="font-size: 14px;"><strong>High cost:</strong></span> It has also been seen that poor living in urban areas don't utilize the financial services as they find financial services are costly and thus are unaffordable. Hence, even if financial services are available, the high costs deterthe poor from accessing them.</div> <div> </div> <div> <span style="font-size: 14px;"><strong>Non-price barriers: </strong></span>Access to formal financial services also requires documents of proof regarding a persons' identity, income etc. The poor people do not have these documents and thus are excluded from these services. They may also subscribe to the services initially but may not use them as actively as others because of various non-price barriers. </div> <div> </div> <div> <span style="font-size: 14px;"><strong>Behavioural aspects:</strong></span> Research in behavioural economics has shown that many people are not comfortable using formal financial services. The reasons are difficulty in understanding language, various documents and conditions that come with financial services etc. </div> <div> </div> <div> <span style="font-size: 16px;"><strong>Externalities of Financial Inclusion</strong></span></div> <div> There are a number of positive externalities of financial inclusion. </div> <div> •<span class="Apple-tab-span" style="white-space: pre;"> </span>One of theimportant effects is people able to reap the advantages of network externality of financial inclusionas the value of the entire national financial system increases.</div> <div> •<span class="Apple-tab-span" style="white-space: pre;"> </span>Another reason as financial inclusion is a quasi-public good the consequent fuller participation by all in the financial system makes monetary policy more effective and thus enhances the prospects of noninflationary growth.</div> <div> •<span class="Apple-tab-span" style="white-space: pre;"> </span>One important point that is essential for financial inclusion in rural and agriculture based LDCs like ours is to ensure the growth of banking system to meet the needs of a modern economy, expansion in geographic terms and improve access to banking services. </div> <div> </div> <div> <span style="font-size: 16px;"><strong>Way Forward </strong></span></div> <div> In order to strengthen the financial inclusion in the country, NRB as the monetary authority of country, has been adopting some promotional measures so far such as providing additional incentives to BFIs to go to the remote as well as underprivileged areas. Similarly, it has been encouraging the microfinance institutions to be more inclusive while directing the commercial banks to lent a given portion of their loan portfolio to the deprived sectors. </div> <div> </div> <div> However, the indicators of financial inclusion are yet to improve. In this context, the following measures should be adopted under the existing infrastructure framework to speed up the financial inclusion in Nepal. </div> <div> </div> <div> <span style="font-size: 14px;"><strong>Postal Network:</strong></span> The government should consider tying up with BFIs to deliver financial solutions to the un-banked, using its extensive postal network. The synergistic outreach of the existing postal system supplemented by banking functions is the answer to the challenges posed by rural markets. As Nepal has the largest postal network in the remotest areas, the excluded masses can graduallyconnect with the full-fledged banking services. </div> <div> </div> <div> <span style="font-size: 14px;"><strong>Mobile Banking:</strong></span> The transaction costs can be radically reduced even in remote locations through mobile banking. The costs, which ease of access for the consumers and the profitability of provider will ultimately opt the level of wireless services. </div> <div> </div> <div> <span style="font-size: 14px;"><strong>Use of Technology:</strong></span> Rural banking can be expanded in an easy and user friendly way through universal technology with innovative applications. The role of various ICT tools and associated technologies in providing financial solutions to the unbanked is also substantial. Rural ATMs, plastic cards like smart cards, biometric cards including mobile payment (branchless banking) technologies do have the ability to engage the unbanked sections. </div> <div> </div> <div> <span style="font-size: 14px;"><strong>Financial Literacy: </strong></span>Steps have to be taken by the government for the expansion of banking services and linking of opportunities among various segments of financial sector like capital markets, insurance, etc. To achieve this aim the government should come up with an extensive campaign of financial literacy. </div>', 'published' => true, 'created' => '2014-02-20', 'modified' => '2014-02-20', 'keywords' => 'new business age economy & policy news & articles, economy & policy news & articles from new business age nepal, economy & policy headlines from nepal, current and latest economy & policy news from nepal, economic news from nepal, nepali economy & policy economic news and events, ongoing economy', 'description' => 'The financial system has to provide its function of transferring resources from surplus to deficit units but both deficit and surplus units are those with low incomes and poor background etc.', 'sortorder' => '2481', 'image' => null, 'article_date' => '0000-00-00 00:00:00', 'homepage' => false, 'breaking_news' => false, 'main_news' => false, 'in_scroller' => false, 'user_id' => '0' ) ), (int) 6 => array( 'Article' => array( 'id' => '2496', 'article_category_id' => '37', 'title' => 'Nepal’s Macroeconomic Challenges In 2014', 'sub_title' => '', 'summary' => null, 'content' => '<div> </div> <div> </div> <div> <strong>--Dr Rewat Bahadur Karki</strong></div> <div> </div> <div> After the second democratic movement in FY 2007/08, Nepali economy recorded rosy picture including higher GDP growth of 5.8 percent. However, after the constituent assembly (CA) election in 2009 macroeconomic situation went on declining with low growth mainly due to uncertainty of economic policy and deteriorating investment environment. But pre-last year -2011/12 was exceptional i.e. better along with moderate growth of 4.5 percent, the highest in the last five years primarily because of windfall (exogenous) gain caused by weather and remittance, while last year (2012/13)’s performance is poor with the lowest growth 3.5 percent according to the estimates of Central Bureau of Statistics (CBS), and double digit inflation. </div> <div> </div> <div> Analyzing last year’s situation in brief, efforts have been made to estimate and analyze this fiscal year’ macroeconomic scenario mainly comprising of real sector and price, monetary, fiscal and external sectors based on realistic approach. In FY 2013/14, following six strong bases/assumptions indicate rosy macro economic situation.</div> <div> </div> <div> 1. <span class="Apple-tab-span" style="white-space: pre;"> </span>The current non political government has announced next three year plan (starting from this FY-2013/14) with a growth of 6 percent by fixing the target of upgrading Nepal to developing country from low income country within 10 years as against the UN target of 18 years. The government has announced an ambitious budget in this line too.</div> <div> </div> <div> 2. <span class="Apple-tab-span" style="white-space: pre;"> </span>The government has made its efforts to present the pro-productive and investment-friendly budget instead of loading it populist programmes.</div> <div> </div> <div> 3. <span class="Apple-tab-span" style="white-space: pre;"> </span>The full budget, despite being an election budget, which has come without any disturbance since the first CA election in 2008 AD, has exerted some positive impact in the economy</div> <div> </div> <div> 4. <span class="Apple-tab-span" style="white-space: pre;"> </span>There will be positive impacts in the Nepali economy from the slight improvement (from 3 percent to 3.2 percent in 2013) in world economy and also in neighbouring countries –India and China as forecast by IMF.</div> <div> </div> <div> 5. <span class="Apple-tab-span" style="white-space: pre;"> </span>The last budget as brought by this non-party government in early 2013 gave a clear-cut direction regarding adoption of liberal economic policy and important role of private sector in the economy and thus, has exerted a positive impact.</div> <div> </div> <div> 6. <span class="Apple-tab-span" style="white-space: pre;"> </span>Weather so far is favourable, which will have a positive impact on the economy.</div> <div> </div> <div> Nonetheless, there are following weak bases or assumptions, which will make the economic scenario weak.</div> <div> </div> <div> 1. <span class="Apple-tab-span" style="white-space: pre;"> </span>Although the election government brought an ambitious election budget it will have minimum impact on economic growth and will instead accelerate inflation</div> <div> </div> <div> 2. <span class="Apple-tab-span" style="white-space: pre;"> </span>IMF has forecast that Nepal’s macroeconomic situation would not improve significantly for the coming five years.</div> <div> </div> <div> 3. <span class="Apple-tab-span" style="white-space: pre;"> </span>Since the first CA election, highest growth of 4.5 percent was recorded last year whereas average growth of last three-year plan is less than four percent as against 5.5 per annual average target. </div> <div> </div> <div> 4. <span class="Apple-tab-span" style="white-space: pre;"> </span>Absorptive capacity for capital expenditure is very poor in Nepal.</div> <div> </div> <div> 5. <span class="Apple-tab-span" style="white-space: pre;"> </span>Unfavourable investment climate due to some extremist political parties and their affiliate organizations (which are against investment), and acute problems relating to load shedding, rigid labour laws, infrastructures etc.</div> <div> </div> <div> 6. <span class="Apple-tab-span" style="white-space: pre;"> </span>Results of the second CA election, held peacefully in Marga 2070, has brought in Nepali Congress, credited for introducing liberal economic policy in the 90s, as the largest party. This is expected to bring a positive effect on the economy.</div> <div> </div> <div> Based on the above mentioned strong and weak aspect for the estimate, a midway analysis/estimate, which gives the realistic picture, has been made in this article. During 2013/14, some macroeconomic indicators will remain better than that of last year. GDP is estimated to increase from 4.5 percent to a maximum of 5 percent as agricultural sector, the mainstay of the economy, is estimated to grow 3-3.5 percent due to favourable weather condition. Situation of summer crops, mainly paddy and maize, seems better this year. Production of paddy is estimated to have increased by more than 10 percent, compared to the sharp decline of 14 percent, last year. </div> <div> </div> <div> With regard to non agricultural sector, it will record around 5.5 percent growth, higher than last year’s 5 percent. The manufacturing sector will move up from 1.6 percent to 3 percent as investment climate is expected to improve slightly despite election year. Similarly, trade sector’s growth will shoot up due to the sharp import growth, while other sub-sectors of this sector will remain normal. This growth is supported by high ratio of fixed investment (fixed capital formation) to GDP, which is estimated to rise to 24 percent due to higher capital expenditure as a result of full-fledged budget presented by this non-party government.</div> <div> </div> <div> <img alt="Economy and Policy" src="/userfiles/images/ep2%20(Copy)(1).jpg" style="width: 550px; height: 321px; margin-left: 10px; margin-right: 10px;" /></div> <div> </div> <div> The inflation, which rose almost by two digit i.e. 9.9 percent last year and has increased at the rate of 10percent during the first four months of this fiscal year (2013/14), is estimated go up annually to 12 percent, which will be very close to the level reached in 2008/09 (13 percent). Being an election year, current expenditure has shot up with remarkable rise in election budget along with sharp rise in private and informal expenditure. The sharp rise in salary (18 percent) and provision of Rs. 1000allowance to the government employees, coupled with sharp appreciation of the American Dollar against Rupee, will lead to high inflationary pressure. Despite higher estimated GDP growth this year, higher money supply caused by above factors will lead to high inflation of 12 percent this fiscal year. Containing the inflationary pressure this year is a big challenge to the authorities. </div> <div> </div> <div> In terms of government finance, the non-political government has been able to bring the budget on track despite late in the third quarter of last fiscal year-2012/13. Last year, total revised budget was around Rs.370 billion but due to substantial election expenditure as well as full-fledged budget, this year’s total budget estimate is Rs. 517 billion. Government estimates forecast capital expenditure to rise from around Rs. 55 billion level to Rs. 85 billion this year, while Rs. 78.7 billion has been set aside for financial provision. </div> <div> </div> <div> Although government has given priority to enhance capital expenditure, such expenditure is just 9 percent of the budgeted total capital expenditure in the first five months of this fiscal year (2013/14), while regular expenditure is almost 30 percent in this period. This trend shows that though the capital expenditure will be far below the target, the regular expenditure can cross the target. With the sharp rise in import, the import-based total revenue is estimated to rise by more than 20 percent this year. Thus, in the fiscal sector, increasing the capital expenditure and containing the regular expenditure will remain, as usual, the major challenge for the government. </div> <div> </div> <div> The election will have an expansionary effect on monetary sector. Both money supply (M1 and M2) will rise sharply than last year. Private sector’s credit growth level would be higher this year than the last year. Similarly, full budget will push the deposit growth and the broad money liquidity (M3). The financial sector has been facing instability, as more than a dozen of BFIs have been declared problematic and some even dissolved. Thus, stabilising and making this sector strong by strengthening the supervisory capacity of the central bank and by enhancing good governance in both the BFIs and the regulator, is a major challenge. </div> <div> </div> <div> The depressed share market has improved especially after the CA election’s result positioned Nepali Congress, known for its liberal economic policies, as the lead party in the CA. The share market on the whole will record bullish trend this year compared to last year. </div> <div> </div> <div> External sector in 2013/14 is estimated to register a weak scenario instead of registering any structural improvements. Rise in demand for consumer as well as capital goods, triggered by full-fledged budget and the election expenses, is likely to increase money supply as well as imports. As a result, imports will register sharp growth of 30 percent, and reach about one third of the GDP. Export is estimated to rise by 10-12 percent higher than the last year due to the sharp appreciation of US Dollar and the expected reforms in the export incentive. Due to high import and low export, export-import ratio will go down from current 14 percent to 11 percent, and the trade deficit to one-third of the GDP next year. Consequently, the steady rise in trade deficit will continue. High import growth will make large current account deficit this year. However, increased remittance, which is due to sharp Dollar appreciation, will ultimately lead to BOP surplus in 2013/14 but not in a significant manner. Thus strengthening the external sector, by decelerating the trade deficit through import management and export enhancement, will remain a major challenge. </div> <div> </div> <div> <img alt="Economy and Policy" src="/userfiles/images/ep3%20(Copy)(1).jpg" style="width: 550px; height: 413px; margin-left: 10px; margin-right: 10px;" /></div> <div> </div> <div> Considering the overall macroeconomic scenario and challenges, the new government, which is expected to form soon, should concentrate on economic agenda and in addressing major issues and challenges that Nepal’s economyis confronting. The elected government first of all has to pursuade all major political parties to form common economic agenda, and in setting future direction for the economy. Along with that the government should take initiatives to reform policies for addressing immediate economic concerns. In this regard, priority should be given to creating conducive environment for investment, reducing poverty, unemployment and bad governance. Along with that the government should provide special incentive to exports, energy and agriculture sector. It should focus on capacity enhancement of capital expenditure, containing double-digit inflation and decelerating trade deficit along with strengthening banking system. Nonetheless, along with the government, the private sector and other sections of societies should make collective efforts to strengthen the national economy.</div> <div> </div> <div> <em>(Writer is Expert Member at Securities Board of Nepal.)</em></div>', 'published' => true, 'created' => '2014-01-24', 'modified' => '2014-01-26', 'keywords' => 'new business age economy & policy news & articles, economy & policy news & articles from new business age nepal, economy & policy headlines from nepal, current and latest economy & policy news from nepal, economic news from nepal, nepali economy & policy economic news and events, ongoing economy', 'description' => 'After the second democratic movement in FY 2007/08, Nepali economy recorded rosy picture including higher GDP growth of 5.8 percent. However, after the constituent assembly (CA) election in 2009 macroeconomic situation went on declining with low growth mainly due to uncertainty of economic policy and deteriorating investment environment. But pre-last year -2011/12 was exceptional i.e. better along with moderate growth of 4.5 percent, the highest in the last five years primarily because of windfall (exogenous) gain caused by weather and remittance, while last year (2012/13)’s performance is poor with the lowest growth 3.5 percent according to the estimates of Central Bureau of Statistics (CBS), and double digit inflation.', 'sortorder' => '2343', 'image' => null, 'article_date' => '0000-00-00 00:00:00', 'homepage' => false, 'breaking_news' => false, 'main_news' => false, 'in_scroller' => false, 'user_id' => '0' ) ), (int) 7 => array( 'Article' => array( 'id' => '2180', 'article_category_id' => '37', 'title' => 'Current Road Expansion: A Four Lane Road To Unsustainability', 'sub_title' => '', 'summary' => null, 'content' => '<div> </div> <div> </div> <div> <strong>--By Bimal Rijal</strong></div> <div> </div> <div> G<span style="font-size: 12px;">overnment authorities often throw around the word “development” while describing the recent trend inside Kathmandu. With the mushrooming high-rise apartment buildings, and of course, the ongoing road expansion project in the various parts of the city, the so called development seems to be rampant all of a sudden. However, before submitting to these claims and letting the government carry on with its “development” plans for Kathmandu, it is imperative that we as inhabitants of Kathmandu understand what it means to live in a more developed city.</span></div> <div> </div> <div> In old school development studies, the word “development” was referred to an elevated level of economic activity. Tall buildings and wider roads most definitely spark an increase in the level of economic activity, but they do not define development. Yes, infrastructures such as wider roads that facilitate better mobility inside the city and high-rise buildings that provide crucial commercial and retail space are important to the process of development. But they alone cannot define development. </div> <div> </div> <div> When improved infrastructures such as wider roads and taller buildings contribute in improving people’s living standard, we can then say that they are contributing to the development of the city. The key here is not to emphasize only on developing physical infrastructure but also increasing their contribution in bringing positive effect in the lives of the people. </div> <div> </div> <div> In other words, development projects are the ones which ameliorate people’s living standard; not deteriorate existing one. This is why even the international community is increasingly accepting the Human Development Index (HDI) as a metric to measure development. To move up in the Human Development Index, a country not only needs to pay heed to economic growth (a component to which construction of new infrastructures such as roads, factories, etc., contribute to) but also genuinely improves people’s living standard by ensuring quality health, education and environment for </div> <div> its citizens. </div> <div> </div> <div> Kathmandu’s development should not be evaluated on the basis of whether or not we have four lane roads. More important questions like are these roads going to increase traffic mobility by reducing jams, how beneficial will the wider roads be to pedestrian, what air quality will the people get to breath, and so on should be primarily asked and evaluated. The present implementation of the road widening projects and the way the notion of development is attached to it makes me skeptical about the understanding of the term among politicians and city planners. </div> <div> </div> <div> From development’s perspective, the current road expansion is particularly concerning for a couple of reasons. Needless to say, in a few years time, much of Kathmandu’s two lane roads will be transformed into four-lane. But does this justify its labeling as a ‘development project’? Is it really going to help the ailing transportation system inside Kathmandu on a sustainable scale? My answer is a resounding no.</div> <div> </div> <div> <img alt="Road Expansion in Nepal" src="/userfiles/images/ep1%20(Copy)(3).jpg" style="width: 550px; height: 391px; margin-left: 10px; margin-right: 10px;" /></div> <div> </div> <div> The current road expansion project undertaken by the government of Nepal to “rescue” Kathmandu’s populace from the blight of traffic congestion is assuredly going to prove counterproductive in the future. Having wider roads is only a temporary solution for Kathmandu because wider roads invite more cars and eventually the roads are going to be even more congested leading to even more intense traffic jams. Much of the current expansion of roads for gas consuming vehicles has been at the expense of pedestrian footpath. By norm, sidewalks alongside the roads need to be at least 2 meters wide. The new pedestrian sidewalks are barely half of it. Additionally, availability of lesser space has nullified the possibility to carry out plantations alongside the roads. </div> <div> </div> <div> To sum up the consequences of the road expansion: firstly, there are going to be more vehicles on the road emitting more harmful gases than ever and thereby further degrading air quality. Secondly, with no plans to improve mass transit in place, influx of more cars in the days ahead will reduce the mobility of vehicles further. Thirdly, lack of modest pedestrian sidewalk will affect mainly the working class, the senior citizens, and children walking back and forth from school. This will force the pedestrians to walk on the roads and presumably increase road accident frequency. Therefore, let alone the amelioration of living standard, wider roads are only going to degrade an average man’s living standard in the next five years. So, can such a project that increases pollution, worsens traffic problem, and puts the lives of senior citizens, small children and the working class at risk be called a development project? The answer is for the planners and the politicians to think of.</div> <div> </div> <div> Personally, even the economic prospect from this project does not make sense. I do not understand why we are so much inclined towards widening our roads when we already know that the new vehicles, that are going to fill them up, and the fuel that will consume, will be imported from foreign countries. A bicycle ride doesn’t require importing or burning of fuels nor does a walk, for those who prefer it. In such a scenario, why don’t we have pedestrian sidewalks and cycling tracks in our list of priorities? These would not only help in retaining currency from flowing out but also improve living and health standards of the general public as more and more people will take to cycling and walking. </div> <div> </div> <div> Current road expansion seems to be worthy of pursuing to some extent only if the government personally takes the responsibility of managing the operation of public transport within the city, of planting trees on the sidewalks, and </div> <div> of ensuring that public health won’t be affected due to the project. Without these commitments and corresponding plans to implement them, the current endeavor is going to prove a wet blanket for the citizens.</div> <div> </div> <div> Kathmandu is remarkably Nepal’s administrative and the financial capital. Legacy of centralized development, focused intensely within ring road, is at the heart of this city’s problem of traffic congestion. The government confronted it’s inadequacies in foreseeing the long term impacts of centralizing development, when severe traffic jams and immobility posited itself as a serious concern. In such a context, it could either reverse the trend of centralized development, opting to not expand the road, or it could carry on with the age old legacy of centralized development and expand the road eventually inviting more vehicles and people inside Kathmandu. </div> <div> </div> <div> A much better alternative to the current expansion would have been to ocus on developing more efficient express highways that link Kathmandu with its peripheral hubs like Banepa, Dhulikhel and others, and simply pay heed to the maintenance of roads inside Kathmandu. Such an effort would not only create new financial centers and commercial hubs outside Kathmandu but also relieve Kathmandu from its population pressure and pressures on its roads and physical infrastructures. With an increase in the level of economic activity, the people living outside Kathmandu and its periphery would be better off; and with lesser cars, lesser congestion, lesser pollution and lesser people, Kathmandu would be better off. In the long run, people living inside and outside Kathmandu would both benefit leading to genuine realization of development rather the current unsustainable growth.</div> <div> </div> <div> While other nations across the world are stressing on promoting sustainability, we seem to be moving in the opposite direction. While governments in other nations stress on preserving and promoting greenery through green roofing or through the protection of public parks, our government at home chops off three hundred trees to construct a landmark dedicated to “Ganatantra”. While other nations stress on constructing artificial flood control systems to protect its citizenry from unexpected flooding. In Kathmandu, the government instead destroys natural flood control systems like Manohara, Dhobokhola, Tukucha and other stream systems to develop riverside road network. </div> <div> </div> <div> Kathmandu - once tagged as naturally air-conditioned city by tourists - has now turned into a concrete jungle that experiences extreme temperatures. Ongoing unmanaged and disproportional road expansion has tarnished the image of this city even further. Adding to it, reluctance of the government to resort to sustainable development initiatives brings into question the fate of the city itself. If the government is not planning a sustainable future for it, than who will? </div> <div> </div> <div> <em>(Senior urban planner Rijal is chief of Urban Development Department and also chief at city planning commission.)</em></div>', 'published' => true, 'created' => '2013-11-28', 'modified' => '2013-12-02', 'keywords' => 'new business age economy & policy news & articles, economy & policy news & articles from new business age nepal, economy & policy headlines from nepal, current and latest economy & policy news from nepal, economic news from nepal, nepali economy & policy economic news and events, ongoing economy', 'description' => 'Government authorities often throw around the word “development” while describing the recent trend inside Kathmandu. With the mushrooming high-rise apartment buildings, and of course, the ongoing road expansion project in the various parts of the city, the so called development seems to be rampant all of a sudden.', 'sortorder' => '2040', 'image' => null, 'article_date' => '0000-00-00 00:00:00', 'homepage' => false, 'breaking_news' => false, 'main_news' => false, 'in_scroller' => false, 'user_id' => '0' ) ), (int) 8 => array( 'Article' => array( 'id' => '2065', 'article_category_id' => '37', 'title' => 'Nepali Federalism From Economic Perspective In Nepal', 'sub_title' => '', 'summary' => null, 'content' => '<div> </div> <div> </div> <div> <strong>--By Dr Chandra Mani Adhikari</strong></div> <div> </div> <div> There is lot of hue and cry for a new constitution that will have highly suitable federal structure. But, it does not look conducive enough for a successful election followed by good governance.</div> <div> </div> <div> A better Nepal is still a distant dream. Being optimistic, one can say things can be brought back on right track but that is possible only with a strong determination and attitude backed by a rigt thought. It requires quality leaders with logical, inclusive and judicious representation as well as balanced executive 9or administrative structure.</div> <div> </div> <div> The date of election has been set and the Election Commission is working within a given framework. But issue and essence require more debate while it is also urgent to have constitution.</div> <div> </div> <div> In this regard, some observations on the basis of the international experience and national reality are pertinent. The state’s structure can be divided into three systems. One is related to formation of the government. The second is defined power of the government whereas the third is the mechanism to serve the grassroots. The federal system has been developed since 17th century.</div> <div> </div> <div> The unitary form of governance was implemented after the First World War which didn’t work properly in practice. Regarding the forms, the main question regarding the federal or unitary system is motive of separation of rights for balancing different levels of the government.</div> <div> </div> <div> In some federal countries, the center seems more powerful in others the states are more powerful. In principle, federalism is the system of self-governance by the state based on rule-of-law. Thus, federal system would not be meaningful in undemocratic environment.</div> <div> </div> <div> Nepal is already a federal republic, if we go only by the Interim Constitution of Nepal. But in practice, it is still to be federal. Many questions such as those related to the structure of the state, basis of restructuring, methodology of building the federal nation, the form of government, election system and judicial system are still unanswered. Moreover, there is still no consensus on the issues of culture, geography, economic resources, population, infrastructure, level of social understanding and nature resources that a state needs to have to qualify to be a federal state.</div> <div> </div> <div> Other hot topics for discussion are the number of federal states, their geographical border and authorities of the legislative and executive bodies of the federal states.</div> <div> </div> <div> <img alt="" src="/userfiles/images/epn1%20(Copy).jpg" style="width: 550px; height: 252px; margin-left: 10px; margin-right: 10px;" /></div> <div> </div> <div> Two best examples of successful federalism are Switzerland and USA where many smaller nations tied up into the confederation. However, in USA the confederation was not working properly in the beginning. So, in 1781, USA declared the Federal Constitution with relatively more power to the center.</div> <div> </div> <div> After 50 years of experience with its own style of federalism, Switzerland too issued American model constitution in 1848 that aimed to enhance cooperation among the states. Germany introduced cooperative base federal constitution in 1871 and Belgium, France, Spain and South Africa followed it. Some countries like Bosnia and Herzegovina, Ethiopia, Congo and Iraq entered into federal system with background of conflict and other historical accords.</div> <div> </div> <div> On some instances, economic disparity, religious differences and geographical differences too have led to federalism. Canada is one such example.</div> <div> </div> <div> Nepal declared itself a federal state after people’s movement. And there are various reasons and logic behind the Nepali federalism. These include safety to the local community from encroachment of outsiders, institutionalization of democracy and making the state more inclusive. But what is happening (and has happened) in Nepal is different than the global experience.</div> <div> </div> <div> Nepal’s need is to end all sort of social and economic disparities by ensuring a conducing economic and political infrastructure through a political and constitutional consensus, using federalism as an instrument. In this context, it’s irrelevant to ask whether the state should be restructured on ethnic lines. Lengthy debate on the question whether the states should be based on single ethnicity or multi-ethnicity identification has proved futile.</div> <div> </div> <div> To make federalism successful in its objectives, we should scrutinize the real challenges and potentials, which are directly related to state restructuring. These include Nepali ethnicity management (with a goal of transforming current Nepali society into socially-economically and politically prosperous future) geographical balance and finding an optimum in terms of types, name, levels, numbers and size of federal and state governments. Also challenging is the question of whether optimization can be achieved with identification of appropriate determinants like population, geography and some other context.</div> <div> </div> <div> Among such contexts, the distribution of resources plays a prominent role. This is related with the need divide and assign the economic and revenue rights — PROPERLY — between the governments where resources can be mobilised in right proportion through (double, united or moderate) mechanism. This may require establishing a new set of institutions to run the system. The total size of the national budget will grow as each state will have its own government-legislature, chief minister and ministers and so on. We need consensus to determine a manageable size for all these. </div> <div> </div> <div> While determining the size and number of the provinces, presently available physical and economic resources, density of population, geographical area, level of technology, means of transportation etc should be considered. Another prominent reality to be accepted is the beauty of diversity. The Mountains, hills and the plains — these three geographical regions are interdependent; however all aspects of such dependencies are not measurable economically.</div> <div> </div> <div> The strength of the Hills is water as well as some other natural resources and high possibility of tourism industry. Whereas the strength of the Terai lie in the vast fertile land, urbanization, dense population and more economic activities.</div> <div> </div> <div> However, these factors may change in the future for example; migration may change the demographic structure. In this context, all the political parties and the policy makers need to be careful while allocating the economic resources and political rights between the states and the centre.</div> <div> </div> <div> In conclusion, striking a balance between the economy, politics and social aspirations of people is needed to design an optimum form of federalism. It is really the responsibility of present leadership to work for the next generation for a better and prosperous Nepal.</div> <div> </div> <div> <em>(Writer is an economist and also chairman of National Council for Economic and Development Research (NAREC Nepal)</em></div>', 'published' => true, 'created' => '2013-10-29', 'modified' => '2013-10-29', 'keywords' => 'new business age economy & policy news & articles, economy & policy news & articles from new business age nepal, economy & policy headlines from nepal, current and latest economy & policy news from nepal, economic news from nepal, nepali economy & policy economic news and events, ongoing economy', 'description' => 'There is lot of hue and cry for a new constitution that will have highly suitable federal structure. But, it does not look conducive enough for a successful election followed by good governance. A better Nepal is still a distant dream. Being optimistic, one can say things can be brought back on right track but that is possible only with a strong determination and attitude backed by a rigt thought. It requires quality leaders with logical, inclusive and judicious representation as well as balanced executive 9or administrative structure.', 'sortorder' => '1913', 'image' => null, 'article_date' => '0000-00-00 00:00:00', 'homepage' => false, 'breaking_news' => false, 'main_news' => false, 'in_scroller' => false, 'user_id' => '0' ) ), (int) 9 => array( 'Article' => array( 'id' => '1970', 'article_category_id' => '37', 'title' => 'Commercial Bench In Nepali Courts Prospects And Challenges', 'sub_title' => '', 'summary' => null, 'content' => '<div> <strong>--By Rudra Sharma</strong></div> <div> </div> <div> The Word ‘commercial’ is not easy to define and thereby making it further difficult to define what is commercial case and what a commercial bench is supposed to address. However, there were demands of a commercial court/bench for the last 20 years or so. People in seminars organized by Nepal Rastra Bank in association with the World Bank and International Monetary Fund identified the need of a commercial court/bench in Nepal for appropriate and speedy dispensation of justice in commercial case.</div> <div> </div> <div> In 2063 BS, the Supreme Court has set up a task force on this regard. The task force reviewed several exercises together with some international practices for establishment of Commercial Bench. The Task Force studied the reports of Court Management Committee, 2055 Court Strengthening Committee, 2058 and the Five Year Strategic Planning of the Court (2061- 2066). The Ministry of Law and the Ministry of Industry had also carried out some consultation with the Supreme Court in the year 2059 for the establishment of Commercial Court.</div> <div> </div> <div> A project carried out under the loan assistance of Asian Development Bank namely Improving Legal Enforcement Mechanism and Judicial Capacity had a component called Establishment of Commercial Bench under its package 2 activity. From Manshir 2059, this project carried out activities on establishment of Commercial Bench. This project had hired an expert Hon. C.</div> <div> </div> <div> W. Pincus QC who submitted a report recommending a number of things on establishment of commercial bench. Nepal Judicial Academy (NJA) also worked very closely with this project on the Commercial Bench component. This project had also worked with private sectors like Federation of Nepalese Chambers and Commerce and Industry (FNCCI) and others in this course.</div> <div> </div> <div> According the report of the Task Force, Commercial Cases Baseline Survey, 2003 carried out by Nepal Law campus presents 17 different kinds of cases as commercial cases tried and tested in several courts all over the country. The 17 different kinds of cases are - Company, Secured Transaction, Contract, Insolvency, Banking and Negotiable Instruments, Arbitration, Intellectual Property, Finance, Foreign Investment, Insurance, Security Transaction, Agency, Partnership, Construction, Leasing/Rent, Transportation and any others.</div> <div> </div> <div> Analysing the evolution of concept of Commercial Bench and a comparative study on commercial dispute settlement of some other countries like United Kingdom, United States, India and China, the Task Force has finally put forth 26 suggestions.</div> <div> </div> <div> <span style="font-size: 14px;"><strong>Establishment of Commercial Bench </strong></span></div> <div> On 2065 Magh 1, the government of Nepal established a Commercial Bench in four Appellate Courts namely Biratnagar, Patan, Butwal and Nepalgunj and later added Hetauda Appellate Court also through a notification on 2067 Baisakh 1. These Commercial Benches are provided with jurisdiction to look after cases of Secured Transaction Act, 2063, Competition Promotion and Market Promotion Act, 2063, Company Act, 2063 and Insolvency Act, 2063.</div> <div> </div> <div> Later, the government of Nepal, through a notification published on 2065 Shrwan 5, extended the jurisdiction of the Commercial Benches for the disputes under Banking Offence and Punishment Act, 2066. Most of the cases going to Commercial Bench were filed in the Commercial Bench of Patan Appellate Court. Some 99 commercial cases were filed in the Patan Appellate Court up to the fiscal year 2067, some 154 cases were filed in the fiscal year 2067/068, some 237 cases were filed in the fiscal year 2068/069 and some 263 cases were filed before the completion of the fiscal year 2069/070.</div> <div> </div> <div> After the establishment of the Commercial Bench, a procedure for the same was supposed to be made. In fact, a procedure is also drafted. However, the procedure has not come into force. Company Act, 2063 and Competition & Market Promotion Act, 2063 have provided that lawsuits under these Acts should follow summary proceeding. The Insolvency Act provides for a procedure within itself and that procedure is being followed now generally.</div> <div> </div> <div> No special procedure is prescribed for Secured Transaction Act and Banking Offence Act. These two Acts seem to follow general procedure. Despite the lack of a specific procedure for the Commercial Bench, Chief Judge of the Appellate Court where the Commercial Benches reside have provided for necessary procedural matters as and when required. For example, cases of Commercial Bench are heard by a division bench, other cases related to the case filed in the Commercial Bench are also heard in Commercial Bench, so on and so forth.</div> <div> </div> <div> <span style="font-size: 14px;"><strong>Commercial Bench & Expectations</strong></span></div> <div> The primary expectation with the Commercial Bench was that it would look after all the commercial cases gradually. It was a good beginning that the Commercial Bench was assigned to hear cases under three categories and later under five categories. However, it was very unfortunate that the jurisdiction of the commercial bench was not extended to other cases under other Acts.</div> <div> </div> <div> The basic benchmark to evaluate the function of the Commercial Bench is its comparative worth and value, i.e. what and how it contributed compared to previous court system where there were not Commercial Benches. There are hardly any evidences that the Commercial Bench could prove its worth. This is because, we already have had a regular court system and the Commercial Bench was brought to existence for a better performance and better dispensation of justice with respect to commercial cases. But, unfortunately it did not happen.</div> <div> </div> <div> The Task Force report mentions that the erstwhile judiciary of Nepal was looking after some ten kinds of commercial cases even if there were no such commercial benches. The cases were - dispute related to loan or credit, dispute about security or pledge, dispute related to buying and selling of property, dispute related to trademark, dispute related to commercial loan, dispute related to liquidation of company, dispute related to shareholders of company, Torts related trade and commerce and other economic cases.</div> <div> </div> <div> According to primary expectations and the decade long preparations, the scope of the Commercial Court was supposed to be extended to other commercial cases too and subsequent legal reform as well as administrative reform were also supposed to be made in order to pave a way for the same.</div> <div> </div> <div> It did not happen unfortunately, and this proved to be a major setback for creating condusive environment for invitation of foreign investment in Nepal and also for maintaining as well as retaining investment in Nepal. The exact expectation of about the Commercial Bench was to develop it as a real center for commercial dispute settlement.</div> <div> </div> <div> The Task Force report states that the concept of commercial bench was evolved in an endeavour to create sufficient legal and judicial environment for business as well as economic activities. But we can hardly find evidences to understand how the commercial bench contributed to create such environment. However, it does not mean that the commercial bench did not do anything. But, it should be judged in comparison to the contribution of the regular court system before establishment of commercial bench. According to the Task Force report, the regular court system was looking after 10 different kinds of commercial cases. As the commercial benches took up only cases under five categories, it gave a kind of impression that commercial cases are related to those five cases only.</div> <div> </div> <div> <span style="font-size: 14px;"><strong>Major Challenges</strong></span></div> <div> The major challenge of the Commercial Bench is the mindset of the judicial leadership. The judicial leadership probably thinks that the regular Appellate Courts would be less important if all commercial cases would go to the Commercial Bench. I wish to be wrong at this point. But, it would be very dangerous if the judicial leadership continues to be influenced by such thinking.</div> <div> </div> <div> Another challenge is the lack of competent human resources required for the Commercial Bench. This challenge can be overcome with appropriate will power and leadership of the judicial administration. We cannot import or invent such competent human resources. However, there would be no additional cost for managing the resources already available in the market.</div> <div> </div> <div> On the one hand, commercial cases are not coming to the Commercial Bench due to lack of proper legal arrangements on jurisdiction and on the other hand, there are competing and repeating jurisdictions for the dispensation justice through commercial cases. Several cases are put in arbitration process. Almost all of them are commercial cases. But, the appeal on arbitration settlement goes to the Appellate court but not to the Commercial Bench. The Debt Recovery Tribunal hears cases relating to debt recovery of the banking institutions. Revenue Tribunals look after cases related to taxes. Labour Court hears the cases related to labour issues.</div> <div> </div> <div> The money laundering related cases are handled by the money laundering department. Corruption cases are handled by Commission for the Investigation on Abuse of Authority (CIAA). Criminal Investigation Bureau of Nepal police also carries out investigation in some commercial cases.</div> <div> </div> <div> Thus, the commercial cases are scattered and thereby losing the scope of making the Commercial Bench a hub for settlement of commercial disputes.</div> <div> </div> <div> The Commercial Bench has jurisdiction over the Banking Offense Statute, but it does not have jurisdiction over Banking and Financial Institutions Act (BAFIA). It has been ridiculous practically. Such examples are there in other sectors too.</div> <div> </div> <div> Some of the practices of Appellate Court where the Commercial Bench resides have defeated the very purpose of the Commercial Bench. A case demanding for interim relief does not go to the Commercial Bench. Regular Bench hears it. Once a party receives interim order, it keeps on postponing the hearing date, pending the interim order. Sometimes, such cases are postponed for many times even from the weekly calendar putting a trouble to the opposite party to even to identify whether the hearing date was postponed or not.</div> <div> </div> <div> Such practices are serious fraud on the administration of justice and responsible persons must be punished.</div> <div> </div> <div> In most of the times, dispute on contract cases that happen to be commercial cases do not go to Commercial Bench. The prevailing contract law has provided interim relief in the form of appropriate order. In such situation, the existence of Commercial Bench happens to be a great irony.</div> <div> </div> <div> Great difficulty is experienced in Nepal for administration of contract, especially international contract. The courts generally provide stay order depriving the aggrieved party from carrying out the necessary activities according to the contract. Such a situation causes great mockery of the existence of the Commercial Bench.</div> <div> </div> <div> Due to the above reasons, the expectation that Commercial Bench would establish a minimum predictable legal environment on doing business in Nepal remains a distant dream. This has put a great threat for the invitation of foreign investment in Nepal. The Commercial Bench should overcome all these challenges in the time to come.</div> <div> </div> <div> <span style="font-size: 14px;"><strong>Experiences of India on Commercial Bench</strong></span></div> <div> In the year 2009, the Lok Shaba of India passed the Commercial Division of High Court Bill, 2009. But, the Bill is yet to be passed by the Rajya Saba.</div> <div> </div> <div> The Bill envisages separate divisions in each high courts to handle commercial disputes above certain value along with a procedure for the same. In the same year 2009, the Delhi high court established arbitration center and gave a message that the Indian judiciary was not anti-arbitration. In the same year 2009, London Court of International Arbitration set up a center in India. These two institutions paved way for institutional arbitration in India as an effective tool for settlement of commercial disputes.</div> <div> </div> <div> The Indian courts have made controversial interpretations of the Indian Arbitration & Conciliation Act, 1996. In the case of SBP & Co versus Patel engineering the Indian Supreme Court upheld the role of courts in appointment of arbitrator if one of the parties fails to nominate an arbitrator. This decision has been criticized as it put a great hurdle to separate arbitration from court. But in the year 2012 September, the Indian Supreme Court in the case of Bharat Aluminum Company Ltd. ( BALCO) versus Kaiser Aluminum Technical Service ruled that the Indian Arbitration Act will not apply if the arbitration proceeding are held outside India. This ruling of the Indian Supreme Court has been praised from many quarters as it has helped to separate domestic and international arbitration as well as separating arbitration from the courts.</div> <div> </div> <div> It seems that the establishment of arbitration center at the Delhi high court demonstrates the willingness of Indian judiciary to make the high court as hub of settling commercial dispute and the Supreme Court ruling of</div> <div> </div> <div> 2012 in the case of BALCO shows the willingness of Indian judiciary to separate arbitration from judiciary. It seems that these all issues will be categorically addressed by the pending Bill called the Commercial Division of High Court Bill, 2009. The underlined aim of all these schemes would be making India a preferred investment destination as the courts will provide a minimum predictability on legal environment.</div> <div> </div> <div> <span style="font-size: 14px;"><strong>International Dimensions</strong></span></div> <div> Nepal became member of World Trade Organization (WTO) nine years ago making several commitments for harmonization as well as standardization of administration of trade law in accordance with the provisions of the United Nations Commission on International Trade Law (UNCITRAL). Section 34 of the Arbitration Act, 2055 provides for enforcement of foreign arbitral awards.</div> <div> </div> <div> But, there are some cases where the Appellate Court has refused for enforcement of some foreign arbitral awards and the appeal on such decisions of the Appellate court are pending at the Supreme Court. Our legal ecosystem should be clear at this point and the commercial bench should take lead on this.</div> <div> </div> <div> <span style="font-size: 14px;"><strong>How Commercial Bench should be </strong></span></div> <div> Therefore, the commercial bench in future should be able to be a hub and ultimate resort for the settlement of disputes related to commercial laws.</div> <div> </div> <div> Further, it should be established as a center of trust among the investors as well as among the public that the commercial bench ensures settlement of commercial disputes in tune of time. It will not be necessary that the commercial bench itself hears all disputes. But it should be the ultimate resort for settlement of such disputes. For this purpose, we need to make legal as well as administrative mechanisms that all commercial law related cases can ultimately reach to the commercial bench.</div> <div> </div> <div> We can continue separate arrangements of hearing commercial law related cases at the court of first instances like Labour Court, Revenue Court or Tribunal, Debut Recovery Tribunal. Besides, we also need to encourage to settle commercial law related cases through the means of alternative dispute settlement like arbitration, mediation, conciliation etc. However, commercial law disputes settled in all these court of first instances and cases settled through alternative dispute settlement mechanism should ultimately find their way to the commercial bench. Such arrangements should be all over the country not only in Kathmandu. We can make an arrangement that disputes involving certain amount or above should go directly to the commercial bench instead of the court of first instances.</div> <div> </div> <div> The commercial bench should also take over the newly emerging commercial cases. Cases related to banking institutions are prominent example, such as cases related to bounced, dishonoured of cheques, debt recovery and banking offence. There is a need of legal as well as administrative provisions on asset management. Lack of this has hampered expected functioning of banking system.</div> <div> </div> <div> The commercial bench in future should look after comparatively complex cases on banking law. There is a room to argue that the Banking Offenses Act seems to be draconian, providing scope for being misused. This Act is disproportionate since this gives higher hand to the regulating body Nepal Rastra Bank to take such action that may kill the institution instead of correcting it and functioning it again after action from Nepal Rastra Bank.</div> <div> </div> <div> Nepal Rastra Bank may feel the need of such law since the court system is not effective as mentioned above. However, a draconian law would not be an answer for non-effective court system. So, we need to improve the court system rather than practicing draconian laws. We need such legal system where the central bank can take action against the banking institutions for corrective measures, put them in the legal process and the banking institutions again functions after the central bank takes action. Taking action by central bank against banking institution should be a regular process rather than a fateful disaster.</div> <div> </div> <div> Other newly emerging cases on commercial law are related to money laundering, insolvency and trans-border commercial cases. Money laundering is a part of criminal law. But since it is a matter of financial crime but still it can be seen within the parameter of commercial law. International commitments as well as domestic needs have compelled to make the legal as well as administrative regimes on money laundering more stringent. It is said that this regime in the offing will compel to change over 40 prevailing laws on administration of criminal justice. The future commercial bench should be a center for hope and trust for the settlement of cases related to these all emerging commercial laws.</div> <div> </div> <div> The commercial bench should have a proper reporting system. The cases settled by commercial bench should be discussed publicly in the Bars and among the academics.</div> <div> </div> <div> <span style="font-size: 14px;"><strong>Conclusion and Recommendations </strong></span></div> <div> Though Commercial bench could not prove its expected significance as we need to appreciate the initiations made and need to continue efforts to update and standardise it in accordance with need of the day.</div> <div> </div> <div> <span style="font-size: 14px;"><strong>Recommendations</strong></span></div> <div> 1. We need to seriously review the efforts made till date for establishment of Commercial Bench together with mapping the expectations made during such endeavours.</div> <div> 2. We need to extend the scope as well as jurisdiction of the commercial bench ensuring that all commercial cases either directly go to the commercial bench or go to other courts or tribunals that are supervised by the commercial bench.</div> <div> 3. There should be commercial benches covering all jurisdictions of Nepal.</div> <div> 4. Some cases having commercial issues may not go to commercial bench if such cases have monetary value in the disputes less than prescribed. Principally, it should be determined that commercial bench is to serve the purpose of establishing a preferred destination for investment, and therefore, it serves the creating conducive atmosphere for investment rather than establishing judicial principles. Prolonged judicial process and lengthy interpretations of statues can be done in regular courts not by commercial benches.</div> <div> 5. Among the commercial bench all over the country, there should be one commercial bench at the center Kathmandu with fast tract procedure. Commercial cases with certain threshold of investment and some other special circumstances should only go to this Fast Track Commercial Bench. Such arrangement would boost up confidence of investors.</div> <div> 6. There should be proper reporting system of the cases decided by the commercial benches so that the legal community as well as business community can provide feedback on the decisions by carrying out discussion on them.</div> <div> 7. There should be special efforts for legal reforms in order to accomplish the task of transforming the present commercial bench so that it can carry out all above mentioned matters.</div> <div> 8. Administration of commercial cases and legal reform should be carried out considering the international commitments of Nepal under WTO, UNCITRAL and other similar mechanisms.</div> <div> </div> <div> 9. Success stories of some countries like Singapore should be considered and we need to make analysis why Singapore scores over India on settlement of corporate conflict.</div> <div> </div> <div> <em><span style="background-color: rgb(240, 255, 240);">(Based on a paper prepared under an assignment of Commercial Law Committee of Supreme Court Bar Association. The writer is associated with Transactional Law House, an international law firm based in Kathmandu. He can be reached at rudralawyer@gmail.com. Cell- 9851057087.)</span></em></div> <div> </div> <div> <hr /> <div style="text-align: center;"> <span style="font-size: 16px;"><strong>“Lacunae in the legal system need to be minimised to attract foreign investors”</strong></span></div> <p> </p> <div> <strong style="font-size: 14px;"><img alt="Shreekant Poudel, the spokesperson of the Supreme Court" src="/userfiles/images/ep1.jpg" style="float: left; margin: 0px 10px 0px 0px; width: 200px; height: 246px;" />Shreekant Poudel</strong><span style="font-size: 14px;">, the spokesperson of the Supreme Court, in an interview with Britant Khanal of New Business Age he shed light on the introduction of commercial bench and its need.</span><strong style="font-size: 14px;"> Exceprts:</strong></div> <div> </div> <div> <span style="font-size: 14px;"><strong>Could you highlight the reason behind establishing the commercial bench?</strong></span></div> <div> The first and foremost reason behind the establishment of this bench is the need for speedy justice, easy access and quick legal remedies for the commercial sector. Even more important is the demand made by the law in many acts after the Second Jana Andolan. It is clearly mentioned that such and such cases will be dealt by the commercial bench like for instance in Section Z8 of the Company Act. After 2006, the World Bank had also suggested the requirement of such a bench. The Company Act, the Secured Transaction Act and other acts related to safe competition have mentioned the requirement of this bench. Was this issue initiated by ADB? I don’t think so but the ADB had some general interest and it had recommended on bringing such a bench too.</div> <div> </div> <div> <span style="font-size: 14px;"><strong>What new prospects will the bench bring? Will it have the same old practices disguised as new?</strong></span></div> <div> In the process of establishing this bench we had to train judges, judicial staffs and even lawyers. The training lasts from one to one-and-a-half months as it required. The judges who attend the training are only sent to the bench for hearing commercial cases. The new commercial bench will therefore slowly shed some old ways.</div> <div> </div> <div> <span style="font-size: 14px;"><strong>There seems to be a paradox in the bench being established for the benefit of the commercial sector while the jurisdiction seems a bit scattered, vague and ambiguous. Could you talk a little about this? </strong></span></div> <div> We are still in the initial phase of establishing the bench. As I know, the initial requirement was to set up a separate commercial court, which came down to establishing a commercial bench in appellate courts. This was required because cases related to the commercial sector are heard in a scattered manner. For example, cases of contract are first heard by the district court, patents are heard by the department of industry, and many other cases are addressed by the Nepal Rastriya Bank (NRB) too. Therefore, a common institution to streamline all commercial cases and bring them under one umbrella seemed to be necessary.</div> <div> </div> <div> Home work is yet to be completed. It was rightly questioned whether or not offences in banking will be dealt by the commercial bench. The issue is still subject to research and analysis. There are other issues including intellectual property and cases of revenue tribunal. We are striving to bring all of these cases under the commercial bench.</div> <div> </div> <div> <img alt="Fiscal Year 2069/70 Cases Regarding Commercial Bench." src="/userfiles/images/ep2.jpg" style="width: 500px; height: 187px; margin-left: 20px; margin-right: 20px;" /></div> <div> <span style="font-size: 14px;"><strong> </strong></span></div> <div> <span style="font-size: 14px;"><strong>Has the bench been established in all appellate courts in the country?</strong></span></div> <div> No, we have not established commercial benches in all appellate courts as they are established in a need-based manner. The previous chief justice had recommended the bench to be established in six places including Pokhara but later it was only established in four places. We therefore have established this bench in five places including one in Hetauda which was established in 2011 and rest four at Biratnagar, Butwal, Nepalgunj and Patan.</div> <div> </div> <div> <span style="font-size: 14px;"><strong>Because this is a new and western practice, will we require a foreign consultation for the bench?</strong></span></div> <div> For now our resources have being doing a very good job but like you suggested, if there is a situation that demands foreign consultation, we can higher or send our resources for foreign education and exchange programmes but again, that will require the demand of the context.</div> <div> </div> </div> <hr /> <div style="text-align: center;"> <strong><span style="font-size: 16px;">“Judges need training”</span></strong></div> <p> </p> <div> <span style="font-size: 14px;"><img alt="Gandhi Pandit" src="/userfiles/images/ep3.jpg" style="float: left; margin: 0px 10px 0px 0px; width: 200px; height: 246px;" />A well known advocate <strong>Gandhi Pandit</strong>, in an interview with Britant Khanal of New Business Age highlighted a pragmatic approach to commercial bench. <strong>Exceprts:</strong></span></div> <div> </div> <div> <span style="font-size: 14px;"><strong>What is your opinion on the newly established commercial benches?</strong></span></div> <div> The judges must be competent to deal with all kinds of cases, but honestly, that is not possible all the time because of growing trade issues in the domestic and global markets. Some of the cases are so sophisticated that they require experts, which is not available in the country. Smooth functioning of the economy will require a better legal system, which will support rapid growth and development. Therefore, current situation demands a specialised commercial bench. </div> <div> </div> <div> <span style="font-size: 14px;"><strong>Where can we trace the footprints of this system?</strong></span></div> <div> This system can be traced to the continental legal system, commonly understood as the French and German legal system. In these systems, we can see the trends of a commercial tribunal, a labour tribunal, an industrial tribunal, among others. In these kinds of tribunals, the specialised skills of various sectors are brought together for the better understanding of the case. And this system was later followed by Britain and the US. This pragmatic approach has led to speedy justice and quick legal remedies in these nations. But in our context, we are still lagging behind. Our judges are still traditional and are only specialised in traditional issues such as cases of land dispute, writ petition, etc. We don’t have expertise on cases like letter of credit, IT law, intellectual property law, cases of trademark and so on. Even if they want to learn it, they have not been able to acquire such knowledge due to lack of infrastructure.</div> <div> </div> <div> <span style="font-size: 14px;"><strong>What could be the possible solution to such lacunae?</strong></span></div> <div> Only establishing the bench will not do the justice. Establishing the bench is one thing and effectiveness is another. The benefit expected has not yet been reaped due to inexperienced people in the field and it is not unwillingness on their part - they don’t have that access to knowledge. As judges are frequently transferred to places without access to such knowledge, they will require a proper training, and attending the training only once will not make an impact as there has to be periodic training which we are lacking. The national judicial academy has been training judges but in the same traditional cases only. Not enough training has been provided in the field of modern commercial issues. Another major problem is procedural delay. Our legal system has a very lengthy procedure before the cases reach the final hearing. These kinds of hurdles will further delay justice and so they will have to be reduced to a minimum. Such deficiencies in the system will give a very wrong message to foreign investors.</div>', 'published' => true, 'created' => '2013-10-09', 'modified' => '2013-10-17', 'keywords' => 'new business age economy & policy news & articles, economy & policy news & articles from new business age nepal, economy & policy headlines from nepal, current and latest economy & policy news from nepal, economic news from nepal, nepali economy & policy economic news and events, ongoing economy', 'description' => 'The Word ‘commercial’ is not easy to define and thereby making it further difficult to define what is commercial case and what a commercial bench is supposed to address.', 'sortorder' => '1821', 'image' => null, 'article_date' => '0000-00-00 00:00:00', 'homepage' => false, 'breaking_news' => false, 'main_news' => false, 'in_scroller' => false, 'user_id' => '0' ) ), (int) 10 => array( 'Article' => array( 'id' => '1869', 'article_category_id' => '37', 'title' => 'The Gold Price Paradox', 'sub_title' => '', 'summary' => null, 'content' => '<div> </div> <div> </div> <div> The price of yellow metal (gold) has fallen sharply by more than 25 per cent in the international market during last four consecutive business months.</div> <div> And to be more precise it is the biggest drop in the last 35 years. Market study revealed that it has fallen approximately 30 per cent per ounce in 2013 only.</div> <div> </div> <div> The steep fall in the gold price drew mixed reactions and different opinions among bullion experts, economists, buyers, central bankers as well as the bullion traders.</div> <div> </div> <div> Some of them fear that the gold price will further go down in the near future citing the Cyprus crises, which is planning to sell off a huge gold reserve worth 400m Euros.</div> <div> </div> <div> Not the least, the unanticipated slowdown in the Chinese economic growth, continuous improvements in the US markets and decline in demand from India drove the yellow metal to fall further to the worry.</div> <div> </div> <div> A section of market experts have argued that the recent fall in gold price is not supported by the fundamentals rather it is the result of speculation in derivatives markets following the untested rumors and sparked declines across commodities. Hence they believed that the gold price will go up after the biggest plunge.</div> <div> </div> <div> According them, the price of gold will be backed by good demand from physical investors, arbitrators and jewelers.</div> <div> </div> <div> In June 15 analysts surveyed by Bloomberg expected that the gold prices will increase in near future. They have also researched experts view and analysts about the movement of gold price.</div> <div> </div> <div> According to the Bombay Bullion Association (BBA) the gold price will go up as the Asian buyers have stepped up their purchase following its fall in terms of price, imports by India, which is the world’s biggest consumer. BBA expected that the demand for gold in India is likely to jump by 36 percent in the 2013.</div> <div> </div> <div> However, Goldman Sachs Group, an American multinational investment banking firm that engages in global investment banking, securities, investment management, and other financial services primarily with institutional clients, predicted that the gold price may drop below USD 1000 per ounce within this year as the biggest hedge funds have reduced bets on gold at higher prices. Similarly, another school of thought argued that the investment on exchange-traded funds (ETFs) linked to gold have dropped by USD 37.2 billion in the first half of 2013, the fastest fall in last five years. In this back drop, they expected that the price of gold will further drop.</div> <div> </div> <div> At the same time, central banks that hold large gold reserves are also divided in to two fractions fueling the controversy on gold price movement. The central bankers are also being the part of paradox whether gold is cheap enough to increase investment as the price is USD 750 cheaper per ounce since the record high in November, 2011.</div> <div> </div> <div> The central bank of Sri Lanka and Scotland already said that the falling prices are an opportunity for nations to raise gold reserves. But the central banks of Korea and Australia said the plunge in gold price is not a big concern because gold has no intrinsic value and holding the yellow metal is part of a long-term strategy for diversifying currency reserves.</div> <div> </div> <div> Likewise, Deutsche Bank said that the gold has entered a new reality and may reach as low as USD 1050 an ounce to bring its valuation back to the historical averages. The trend line draw from the USD 435 an ounce, average of 2005, also indicates that the inflation adjusted price of gold should now be hanging around the psychological level of USD 1000 per ounce. </div> <div> </div> <div> Regarding the determinants of gold price, various scholars have conducted scientific studies with well researched econometric models and attempted to draw conclusions about the determinants of the gold price. Traditionally, most of the empirical studies closes down to three major findings, which emerge with respect to the analysis of long-run determinants of gold price.</div> <div> •<span class="Apple-tab-span" style="white-space: pre;"> </span>First, there is a long-term relationship between the price of gold and the US inflation indicated by the consumer price index.</div> <div> •<span class="Apple-tab-span" style="white-space: pre;"> </span>Second, the global inflation and gold price move together in a statistically significant long-run relationship. This evidence substantiates the belief that gold is a long-term hedge against inflation.</div> <div> •<span class="Apple-tab-span" style="white-space: pre;"> </span>Third, an external shocks that causes a deviation from this long-term relationship and there is a slow reversion back towards it.</div> <div> </div> <div> This means, although there is a possibility of seasonal variation as well as cyclical movement in the gold price in short and medium term, in the long run it will be guided by the global inflation in general and US inflation in particular.</div> <div> </div> <div> In effect, the consequences of external shocks, there may be the deviation from the long-term relationship between the price of gold and the US inflation. This attracted the scholars and analyst to think beyond the long-run determinants and that the US economy as well as the USD is only the counterpart of the gold in international market. They attempted to analyze the short-run determinants of gold price taking other factors than US inflation and USD into consideration. Accordingly, the short-run analysis found that there is a positive relationship between gold price movements and changes in global interest rate along with major macroeconomic variables, US inflation volatility and credit as well as operation risk in the major financial markets of the world. </div> <div> </div> <div> <img alt="" src="/userfiles/images/ep7%20(Copy).jpg" style="width: 500px; height: 284px; margin-left: 20px; margin-right: 20px;" /></div> <div> </div> <div> Some other studies have revealed that there is a negative relationship between changes in the gold price and changes in the US dollar trade-weighted exchange rate against the major currencies, which are included in the basket of global reserve currencies. However, the findings reveal that the significant negative parameter on the “error correction mechanism” reflects the slow return of the gold price to its long-run relationship. These findings are in accordance with the theoretical framework put forward that the gold is safe haven for the versatile investors and one of the assets class for government and the central banks. Besides, there are some fundamentals of demand and of supply, which can influence the price of gold as in case of other commodities in perfect competition market.</div> <div> </div> <div> However, some of the empirical studies reveal that there was no significant relationship between changes in gold price and its physical demand. Rather the price of gold has been driving by the virtual demand generated from the derivatives markets since there are hundreds times higher demand than that of the actual gold production across the world. Such artificial demand has especially been created by the speculators who want to mint money over the fluctuating price of any assets including gold. Every time they were trying to catch changes in gold price citing the change in world inflation, interest rate volatility, world income and the unproved rumors like central bank X is planning to sell this much of gold or huge gold reserve is identified in Y country etc.</div> <div> </div> <div> Against these theoretical as well as hardnosed backgrounds, there is a major unresolved issue that gold is the most attractive as well as the most risky asset worldwide. The crucial question one may ask include — Is gold the long-run hedge of US inflation? If so, is that matters for countries other than the US? Was there positive relationship between the price of gold and the US inflation during the recent financial crisis when the US inflation was almost zero or negative in some quarters but gold price was breaking record high successively? These are the crucial questions that no study or school of thought can answer correctly.</div> <div> </div> <div> But the fact is this is the glitter of gold and will remain same in the future as well. </div> <div> </div> <div> <em>(Writer is Deputy Director at Confederation of Nepalese Industries (CNI) )</em></div>', 'published' => true, 'created' => '2013-09-25', 'modified' => '0000-00-00', 'keywords' => 'new business age economy & policy news & articles, economy & policy news & articles from new business age nepal, economy & policy headlines from nepal, current and latest economy & policy news from nepal, economic news from nepal, nepali economy & policy economic news and events, ongoing economy', 'description' => 'The price of yellow metal (gold) has fallen sharply by more than 25 per cent in the international market during last four consecutive business months.', 'sortorder' => '1730', 'image' => null, 'article_date' => '0000-00-00 00:00:00', 'homepage' => false, 'breaking_news' => false, 'main_news' => false, 'in_scroller' => false, 'user_id' => '0' ) ), (int) 11 => array( 'Article' => array( 'id' => '1680', 'article_category_id' => '37', 'title' => 'Gold And So-Called Regulated Gold Market In Nepal!', 'sub_title' => '', 'summary' => null, 'content' => '<div> </div> <div> <strong>--By Chittaranjan Pandey</strong></div> <div> </div> <div> Gold is a very important component of the human lives on the earth today. Gold not only has the metallic value but also has been used as a hedge against several risks in the human life. Today gold is used from medicines to luxury. The use of gold carries lots of historical and mythological values beyond the regular usage we talked about. </div> <div> </div> <div> <div> अग्नेः प्रजातं परि यत् हिरण्यम्</div> <div> अमृतं दघे अधिमत्र्येषु</div> <div> यएनव्देद स इदेनमर्हति</div> <div> जरार्मृत्युर्भवति यो बिभर्ति ।।</div> <div> – अथर्व वेद, काण्ड १९, सूक्त २६, ऋचा १</div> </div> <div> </div> <div> The above lines from Atharvaveda mean “I adorn gold created or originated from fire which bestows eternity. One who adorns it is liberated from the fear of untimely death.” This signifies how gold has gained so much of significance for us. To go deep with the importance of gold, the yellow metal is believed to be the most sattvik, meaning holy, divine or serene. It is also believed that gold destroys most of the harmful germs in our body and using gold enhances the absorption of divine energy to greater extent. Specifically, in case of women, it is believed that when women put on gold ornaments, the shakti-roop is activated and the whole family is protected. </div> <div> </div> <div> The above mentioned reasons only signify why gold has received so much of mythological importance. Coming to these days, when people have started to take themselves above the cultural and traditional barriers, most of the things do not have the same shape. Yet, gold is successful enough to declare its commercial importance and has been luring people almost every corner of the world. </div> <div> </div> <div> When I talk about gold, how can I miss out talking about its importance in the currency management worldwide? Gold has played an important role in backing up the currency worldwide for long but these days, the scenario is different. We usually hear about the inverse relation of gold and US dollar. To explore the same, we need to dig back further. It was long back during the World War I when the warring nations shifted their money to a miniscule gold standard, thus bloating their own currencies to finance the war. Gold backed currency system thus lasted for long but the problem it invited was that all the countries wanted to deposit more gold to strengthen their currency which resulted major economic shocks. Coming to the era of Second World War also, the world was still tangled with the hard power and humanitarian crisis. But after the Second World War, Bretton Woods conference was organized and International Bank for Reconstruction and Development (IBRD-present World Bank) and International Monetary Fund (IMF) - called Bretton Woods Institutions were formed. Gold standard and the direct convertibility of the currencies were eradicated. Because United States was the most dominant power after the war, US Dollar was backed by gold and almost all other currencies in the world accepted US dollar to back up their currencies. Besides that, gold is held by many in various forms as a hedge against inflation and other economic disruptions. One of the most common forms of usage of gold in our society is the jewelry. Gold itself is very inert so gold salts are used for various medicinal purposes also. Gold salts are used for the treatment of arthritis; gold based injections heal and minimize the pain and swelling of rheumatoid arthritis and tuberculosis. Gold is also important in dentistry helping for restorations. Other very important use of the gold is for electroplating of gold onto base metals. </div> <div> </div> <div> After we go through the various usage forms of the precious yellow metal, we can explore why this stands as a luring metal in the market to earn maximum profit in various ways. The news heating the market these days is that the gold price is decreasing rampantly but domestic price of the gold in Nepal is not responding to it well. When there is a price hike, gold traders in our country do not wait a second to raise the price but when it is falling, the traders do not want to sell any gold to the people. Isn’t this pathetic regulation? More frustratingly, the strike of the gold traders broke with an interesting end- “Not penalizing the guilty”. The gold traders would start selling gold only when the government assures that the thug is not penalized. </div> <div> </div> <div> Please have a look at table to know how the price of gold is derived and how much of profit our gold traders earn: </div> <div> </div> <div> For instance, I have taken the price of gold on 26th June, 2013, the moment when price was US$1223.20 per ounce. </div> <div> </div> <div> Through various newspaper articles, people must be aware that the market demand for gold remains around 40 kg per day whereas traders believe that the daily consumption of gold in the market remains around 30 kg on an average. On the contrary, Nepal Rastra Bank sells only 15 kg of gold daily in the market through various assigned commercial banks. On an average, there is a deficit supply of almost 15 kg. We all know gold market is REGULATED in Nepal. So let’s not focus much on where the remaining gold to meet the market demand comes from. Rather I would like to explore with the economic benefit from the gold trading only. Even if we deduct Rs. 1000 per 10 grams as the additional costs, insurance cost- which is too much in itself and usually comes to almost half of that amount, the profit of the traders is Rs. 1085.23 per 10 grams. This means in one kilogram of gold, the traders earn Rs. 1,08,523.00 on an average. Similarly, for the official 15 kg of gold, the total earning of the traders become Rs. 16,27,845.00 on an average. These numbers will keep on growing if we intend to show their weekly and monthly income. </div> <div> </div> <table align="center" bgcolor="#E5E4E2" border="0" cellpadding="10" cellspacing="0" style="width: 500px;" td=""> <caption> <strong><span style="font-size: 14px;">Gold Price Calculation</span></strong></caption> <tbody> <tr> </tr> <tr> <td> <strong>Particulars</strong></td> <td> <strong>Price (NRs.)</strong></td> <td> <strong>Remarks</strong></td> </tr> <tr> <td> <strong><span style="font-size: 11px;">Per Ounce (As per Reuters)</span></strong></td> <td> <strong><span style="font-size: 11px;">1223.20 (USD)</span></strong></td> <td> </td> </tr> <tr> <td> <strong><span style="font-size: 11px;">NPR/USD Selling Rate (As per NRB)</span></strong></td> <td> <strong><span style="font-size: 11px;">95.51</span></strong></td> <td> </td> </tr> <tr> <td> <strong><span style="font-size: 11px;">Gold Rate in USD (Per 10 Grams)</span></strong></td> <td> <strong><span style="font-size: 11px;">391.35</span></strong></td> <td> <strong><span style="font-size: 11px;">(((1223.20*0.995))/31.1)*10</span></strong></td> </tr> <tr> <td> <strong><span style="font-size: 11px;">In NPR (Per 10 Grams)</span></strong></td> <td> <strong><span style="font-size: 11px;">37,224.77</span></strong></td> <td> <strong><span style="font-size: 11px;">(392.24*95.51)</span></strong></td> </tr> <tr> <td> <div> <strong><span style="font-size: 11px;">Add Customs</span></strong></div> <div> <strong><span style="font-size: 11px;">(As per Republica Article)</span></strong></div> </td> <td> <strong><span style="font-size: 11px;">3000</span></strong></td> <td> </td> </tr> <tr> <td> <strong><span style="font-size: 11px;">Total (Per 10 Grams)</span></strong></td> <td> <strong><span style="font-size: 11px;">40,224.77</span></strong></td> <td> <div> <strong><span style="font-size: 11px;">(Adding Price in NPR</span></strong></div> <div> <strong><span style="font-size: 11px;">and Customs)</span></strong></div> </td> </tr> <tr> <td> <strong><span style="font-size: 11px;">Market Price (NEGOSIDA)</span></strong></td> <td> <strong><span style="font-size: 11px;">42,310.00</span></strong></td> <td> </td> </tr> <tr> <td> <strong><span style="font-size: 11px;">Difference in Price (Per 10 Grams)</span></strong></td> <td> <strong><span style="font-size: 11px;">2085.23</span></strong></td> <td> <div> <strong><span style="font-size: 11px;">(Additional Cost, Insurance</span></strong></div> <div> <strong><span style="font-size: 11px;">and Profi t)</span></strong></div> </td> </tr> </tbody> </table> <div> </div> <div> The story does not end here. When we look into the real scenario, if jewelry is made out of 10 gram gold, 1 gram of other metal, besides gold,is used on an average for the bonding and many other purposes. This means that when a customer buys 10 gram of gold, s/he actually purchases only 9 grams of gold on an average. Besides that, when the price of gold increases internationally, the increment in price is implemented so promptly but when the price of gold decreases internationally, the case is different. It takes a long time for the authorized traders’ association to adjust the decreased price of gold. This clearly shows that the ethics is slumping in the REGULATED gold market of the country. Moreover, the traders go on strike, the shops are closed when price goes down as if there is no gold supply in the market which is totally against the economic theory. Other things remaining the same, the price of a commodity goes down only when the supply of the commodity increases. Unethical cartel is rampant in the gold market here. </div> <div> </div> <div> Is there no option to this? Globally, the option to this is the authorized commodity exchange which can deliver gold to the public cheaper than the other sellers. People can buy gold from the exchange and ask the jewelry shops to make the jewelry as per their requirement or they can also trade back the gold on their will. A remarkable benefit from the exchange is that people do not have to wait for hours or days for the gold price adjustments, the adjustments happen promptly in the software of exchange. Quality of the gold is not compromised; it is the same that the Nepal Rastra Bank authenticates, because the exchange will buy gold from the banks only. On the same price level given in the example above, the exchange can deliver gold at price below Rs. 41,200 per 10 grams. Isn’t this profitable to customers? This will exactly be the WIN-WIN situation for both the counterparties. </div> <div> </div> <div> What the country is lacking is the regulatory framework and the market is lacking the business ethics on the whole, thus losing the customers’ faith and confidence from the market. Isn’t it high time government starts taking commodity exchange as an alternative to maintain market equilibrium?</div> <div> </div> <div> <span style="font-size: 11px;"><em>(Pandey is Assistant Manager, Research & Development Department at MEX Nepal Ltd.)</em></span></div> <div> </div> <div> <em>Disclaimer: The views and expressions expressed in the article are entirely personal and my employer has nothing to do with it. This is an informational piece of writing and has no intention to provoke any individual, group or entity.</em></div> <div> </div>', 'published' => true, 'created' => '2013-08-23', 'modified' => '0000-00-00', 'keywords' => 'new business age economy & policy news & articles, economy & policy news & articles from new business age nepal, economy & policy headlines from nepal, current and latest economy & policy news from nepal, economic news from nepal, nepali economy & policy economic news and events, ongoing economy', 'description' => 'Gold is a very important component of the human lives on the earth today. Gold not only has the metallic value but also has been used as a hedge against several risks in the human life.', 'sortorder' => '1541', 'image' => null, 'article_date' => '0000-00-00 00:00:00', 'homepage' => false, 'breaking_news' => false, 'main_news' => false, 'in_scroller' => false, 'user_id' => '0' ) ), (int) 12 => array( 'Article' => array( 'id' => '1012', 'article_category_id' => '37', 'title' => 'Can Nepal Achieve 7 Per Cent Economic Growth Rate?', 'sub_title' => '', 'summary' => null, 'content' => '<p> <span style="font-size: 12px;">The Nepali economy has not been doing well for the past many years. According to Nepal Rastra Bank (NRB), the country’s economic growth rate has remained sluggish for the past many years, mainly because of the decade-long conflict and political instability. In the period from FY 2001/02 to 2011/12, Nepal’s GDP growth rate has crossed the five percent mark only once (in FY 2007/08 when the growth rate was 6.10 per cent), according to the Central Department of Statistics. However, Nepal’s highest GDP growth rate so far was recorded in FY 1994/95, a year before the Maoist insurgency started in Nepal. Almost all economists and development experts agree that Nepal’s economic performance will not improve unless there is political stability. </span></p> <p> We find that the economic growth rate increases when the agricultural growth rate is high (agriculture contributes to more than one-third of Nepal’s GDP). However, the growth in agriculture is dependent on monsoon rains; it is high when the country receives a good rainfall and low when the rainfall is low. The projected economic growth rate for the current fiscal year 2012/13 has already been revised twice – first from 5 per cent to 4.1 and then to 3.5 most recently. This means Nepal will have to double its current economic growth rate if it is to achieve a healthy growth rate of 7 per cent. That is clearly a tall order. </p> <p> However, is that an impossible target for Nepal? Or can the country really achieve this target? If it can, how and through what measures? We asked these questions to a number of economists and development experts. Their responses are given below: </p> <p> <a href="http://newbusinessage.com/Economy%20&%20Policy/1011">‘Focus on agriculture and industrialisation’</a></p> <p> <a href="http://newbusinessage.com/Economy%20&%20Policy/1010" style="font-size: 12px;">‘Political stability <span style="font-size: 12px;">is a must’ </span></a></p> <p> <a href="http://newbusinessage.com/Economy%20&%20Policy/1009">‘Seven percent growth rate possible’</a></p> <p> <a href="http://newbusinessage.com/Economy%20&%20Policy/1008">‘Need for political consensus on fundamental issues of development’</a></p> <p> <a href="http://newbusinessage.com/Economy%20&%20Policy/1007">‘Nepal has the potential to achieve 7% growth rate’</a></p> <p> <a href="http://newbusinessage.com/Economy%20&%20Policy/1006">‘Focus on tourism, productivity and exports’</a></p> <p> <strong style="font-size: 12px;"><br /> </strong></p> <p> <strong style="font-size: 12px;">Economic Prospects</strong></p> <p> <span style="font-size: 12px;">The economic outlook for Nepal hinges on how political uncertainties are resolved, the weather, and remittance inflows. Investor confidence is depressed by concerns over the political transition, now in its fifth year, following the dissolution in May 2012 of the Constituent Assembly, which failed to agree on a constitution. Recently, the political parties agreed to form a caretaker government led by the Chief Justice, which is expected to hold a Constituent Assembly election by 21 June 2013.</span></p> <p> In view of the unfavorable monsoon, the shortage of fertilizers during the peak paddy planting season, low business confidence, the lack of a parliamentary-approved full budget, and subdued growth in India, GDP is projected to slow to 3.5% in FY2013. Production of paddy is projected to fall by 11.3%, maize by 8%, and millet by 2%. The lack of a full budget is causing funding shortages for ongoing development activities. While the industry sector performance is expected to remain weak, services growth is expected to continue to grow at around 5.4%. With a favorable monsoon, adequate fertilizer supplies, the timely adoption of a budget, and moderate expansion of remittances, GDP growth would rebound to 4.2% in FY2014.</p> <p> <img alt="Annual GDP growth rate" height="319" src="http://www.newbusinessage.com/ckfinder/userfiles/Images/economy_and_policy_may2013_annual_gdp.jpg" style="margin:0 10px 0 0;" width="595" /></p> <p> (Source: Asian Development Outlook 2013)</p>', 'published' => true, 'created' => '2013-05-23', 'modified' => '2013-06-08', 'keywords' => 'Can Nepal Achieve 7 Per Cent Economic Growth Rate?', 'description' => 'The Nepali economy has not been doing well for the past many years. According to Nepal Rastra Bank (NRB), the country’s economic growth rate has remained sluggish for the past many years, mainly because of the decade-long conflict and political instability.', 'sortorder' => '887', 'image' => null, 'article_date' => '0000-00-00 00:00:00', 'homepage' => false, 'breaking_news' => false, 'main_news' => false, 'in_scroller' => false, 'user_id' => '0' ) ), (int) 13 => array( 'Article' => array( 'id' => '1011', 'article_category_id' => '37', 'title' => '‘Focus On Agriculture And Industrialisation’', 'sub_title' => '', 'summary' => null, 'content' => '<p> <strong style="font-size: 12px;">Can Nepal Achieve 7 per cent <span style="font-size: 12px;">Economic Growth Rate?</span></strong></p> <p> ‘Focus on agriculture and industrialisation’</p> <p> Nepal cannot achieve a healthy economic growth rate so long as there are political instability, labour problems and low production in the country. Nepal witnessed economic stability in FY 1994-95 and that was for very short period of time. The agriculture sector could help to increase the country’s economic growth rate but the government has not been able to make enough investment in this sector. We must be able to commercialise our agricultural sector by introducing modern technologies in our traditional farming system. Simultaneously, we should also focus on industrial development which is the backbone for the development of any country in this age. </p> <address> <strong>Himalaya Shamsher JBR</strong></address> <address> <strong>First NRB Governor </strong></address>', 'published' => true, 'created' => '2013-05-23', 'modified' => '2013-05-23', 'keywords' => 'Focus on agriculture and industrialisation', 'description' => 'Nepal cannot achieve a healthy economic growth rate so long as there are political instability, labour problems and low production in the country. Nepal witnessed economic stability in FY 1994-95 and that was for very short period of time.', 'sortorder' => '886', 'image' => null, 'article_date' => '0000-00-00 00:00:00', 'homepage' => false, 'breaking_news' => false, 'main_news' => false, 'in_scroller' => false, 'user_id' => '0' ) ), (int) 14 => array( 'Article' => array( 'id' => '1010', 'article_category_id' => '37', 'title' => '‘Political Stability Is A Must’', 'sub_title' => '', 'summary' => null, 'content' => '<p> <strong style="font-size: 12px;">Can Nepal Achieve 7 per cent <span style="font-size: 12px;">Economic Growth Rate?</span></strong></p> <p> <span style="font-size: 12px;">‘Political stability is a must’</span></p> <p> For a rapid economic growth, we need proper plans, policies and programmes. However, we cannot expect a robust economic growth rate unless we have political stability in the country. Political stability is a must. Similarly, we need to substantially increase the investment in the agriculture sector and make concerted efforts to modernize it. The services sector in Nepal has good prospects. A sustained growth in this sector, too, can help Nepal achieve a healthy economic growth rate. So, we must focus on agro-processing industries and on the development of new software technologies. Similarly, we must be able to use the ever increasing remittance inflows in a more productive manner if we are to achieve a growth rate of seven percent or more. </p> <address> <strong>Dr Narayan Khadka</strong></address> <address> <strong>Former Vice-chairman</strong></address> <address> <strong>National Planning Commission</strong></address>', 'published' => true, 'created' => '2013-05-23', 'modified' => '2013-05-23', 'keywords' => 'Political stability is a must', 'description' => 'For a rapid economic growth, we need proper plans, policies and programmes. However, we cannot expect a robust economic growth rate unless we have political stability in the country.', 'sortorder' => '885', 'image' => null, 'article_date' => '0000-00-00 00:00:00', 'homepage' => false, 'breaking_news' => false, 'main_news' => false, 'in_scroller' => false, 'user_id' => '0' ) ) ) $current_user = null $logged_in = false $xml = falsesimplexml_load_file - [internal], line ?? include - APP/View/Elements/side_bar.ctp, line 133 View::_evaluate() - CORE/Cake/View/View.php, line 971 View::_render() - CORE/Cake/View/View.php, line 933 View::_renderElement() - CORE/Cake/View/View.php, line 1224 View::element() - CORE/Cake/View/View.php, line 418 include - APP/View/Articles/index.ctp, line 157 View::_evaluate() - CORE/Cake/View/View.php, line 971 View::_render() - CORE/Cake/View/View.php, line 933 View::render() - CORE/Cake/View/View.php, line 473 Controller::render() - CORE/Cake/Controller/Controller.php, line 968 Dispatcher::_invoke() - CORE/Cake/Routing/Dispatcher.php, line 200 Dispatcher::dispatch() - CORE/Cake/Routing/Dispatcher.php, line 167 [main] - APP/webroot/index.php, line 117
| Currency | Unit |
Buy | Sell |
| U.S. Dollar | 1 | 121.23 | 121.83 |
| European Euro | 1 | 131.65 | 132.31 |
| UK Pound Sterling | 1 | 142.47 | 143.18 |
| Swiss Franc | 1 | 124.29 | 124.90 |
| Australian Dollar | 1 | 71.69 | 72.05 |
| Canadian Dollar | 1 | 83.90 | 84.32 |
| Japanese Yen | 10 | 10.94 | 11.00 |
| Chinese Yuan | 1 | 17.17 | 17.26 |
| Saudi Arabian Riyal | 1 | 32.27 | 32.43 |
| UAE Dirham | 1 | 33.01 | 33.17 |
| Malaysian Ringgit | 1 | 27.36 | 27.50 |
| South Korean Won | 100 | 9.77 | 9.82 |
Update: 2020-03-25 | Source: Nepal Rastra Bank (NRB)
| Fine Gold | 1 tola | 77000.00 |
| Tejabi Gold | 1 tola | 76700.00 |
| Silver | 1 tola | 720.00 |
Update : 2020-03-25
Source: Federation of Nepal Gold and Silver Dealers' Association
| Petrol | 1 Liter | 106.00 |
| Diesel | 1 Liter | 95.00 |
| Kerosene | 1 Liter | 95.00 |
| LP Gas | 1 Cylinder | 1375.00 |
Update : 2020-03-25
