Sectoral

IFC Builds Farming Capacity In Nepal

Nov 30, -0001 0 5 minutes 14 seconds to read

…

The Changing Beer Market Dynamics

Nov 30, -0001 1 8 minutes 10 seconds to read

…

Do Nepali Banks Require Additional Capital Injection?

Nov 30, -0001 0 6 minutes 5 seconds to read

…

A Walk Through Central Depository System

Nov 30, -0001 0 9 minutes 52 seconds to read

…

Social Media Adoption By TELECOM Giants In Nepal - NCELL And NTC

Nov 30, -0001 0 10 minutes 19 seconds to read

…

Credibility Question In Accounting Profession

Nov 30, -0001 0 13 minutes 7 seconds to read

…

We Are Long Term Players In Nepal

Nov 30, -0001 0 20 minutes 23 seconds to read

…

Business And State: Nepali Capitalist Classes And Their Interests

Nov 30, -0001 0 7 minutes 55 seconds to read

…

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NEPSE

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<p>
	<strong>By Oliver Ryan &amp; Anupa Pant</strong></p>
<p>
	The poultry sector in Nepal carries a value tag of USD 180 million and contributes 3.3 per cent to the country's GDP. Despite its significant contribution to the Nepali economy it bears a subdued profile; write Oliver Ryan and Anupa Pant.Nepal has some 50 feedmills producing 450000 tonnes of feed per annum for a production of around 50 million broilers per annum from 5000 broiler per annum from 5000 farms. Cobb 500 is the dominant breed.</p>
<p>
	The country is considered to be selfsufficient in poultry products and in poultry feeds although a significant proportion of the feed ingredients e.g. grains and protein meals are imported from India.The total direct employment in the organized commercial sector is estimated to be 70,000, and provides a livelihood to thousands of households. The poultry sector has been growing at a rate of 10 per cent per annum over the last decade.The Nepalese broiler industry is divided into three distinct sectors, namely feed, DOC supply and broiler grow-out as distinct to an integrated model common internationally. There is limited processing with 99 per cent of the birds sold live.</p>
<p>
	In May 2010, the International Finance Corporation (IFC), a member of the World Bank Group, reviewed the poultry industry in Nepal including a lead firm diagnostic, farmer/supplier diagnostic, benchmarking and institutional mapping. The results of the diagnostic highlighted that the current waste (inefficiency) in the industry is calculated to be USD 32 million, if Nepal's performance is compared to an achievable international benchmark performance. It is recognized that the largest inefficiencies in the industry exist in the broiler growout sector, due to its structure and size, dominated by small in-efficient farmers. Grower farms are typically 1,000 birds with the largest at 150,000 birds. It is assumed that there are effectively 5,000 commercial farms in Nepal supplying 80 per cent of the birds</p>
<p>
	&nbsp;IFC identified the key barriers to improving the commercial broiler sector in Nepal as follows: while maize is available locally, protein meals, fishmeal, vitamins, minerals and addictives are imported from India. Adequate quantities of feed ingredients of acceptable quality (particularly dry maize) are often not available in local markets resulting in variable quality feeds, despite Nepal having some modern feedmills. Productivity of parent stock is generally poor and variable per flock.</p>
<p>
	Day old chick (DOC) prices are often high due to large cycles in broiler meat prices and DOC supply. DOC quality is regarded as the main problem by broiler growers and much of that is due to dehydration of DOC due to long delivery times of up to 48 hours. Boiler farmers do not understand the importance of bio-security and all-in, allout systems are often compromised. The lack of integration exacerbates this as farmers (wrongly) think multi-age flocks will improve cash flows.</p>
<p>
	There is a lack of access to technical knowledge and services. About 95 per cent of the poultry farmers do not have any formal training of farm management (biosecurity, housing and ventilation, feed and water management, livestock management and disease) and the service function from PS farms and feed mills is only now being developed. Oliver Ryan, an ex IFC Poultry Specialist, who undertook the industry diagnostic for IFC, stated that IFC's global knowledge of the poultry industry enabled it to identify key issues that needed addressing but more importantly could quantify and prioritise the benefits from the implementation of a corrective action plan and could assist the industry identify suitable specialists to assist with this. IFC strengthens sector To address the issues that are impacting the industry, IFC has launched a threeyear poultry supply chain strengthening project in Nepal. This project will assist three lead firms (covering two PS operations and two feedmills) and 3,000 poultry farmers.</p>
<p>
	The lead firms will have the capacity for supplying more than 40 per cent of Nepal's feed and some 30 per cent of the DOC demand. These lead firms have direct business relationships with feed/DOC agents nationwide. This relationship will be used to disseminate technical skills and services. Technical specialists in feed production, nutrition, livestock and disease have been contracted to assist the lead firms in improving their production efficiencies. The first two lead firms to join the project were Avinash Hatcheries, producers of Cobb 500 broilers and Hyline layer DOC's and ProbioTech Industries Limited (Nimbus), a major feedmiller. About 95 per cent of small-scale poultry entrepreneurs do not have any formal training on farm management. Sustaining profitably after two/three batches is a recurring challenge. We are happy to join hands with IFC to build a pool of trainers to provide services to poultry entrepreneurs, says Anand Bagaria, Managing Director, ProbioTech Industries Pvt Ltd. The project will train broiler growers in all aspects of broiler production through the employment and training of 12 local veterinarians. These veterinarians will then train 3,000broiler farmers over a period of three years, with the aim of directly impacting the management of 40 per cent of Nepal's broiler production. Lead firms will be used to arrange broiler farmer training sessions. </p>
<p>
	<br />
	There will be a gender specific outreach component of the project, as well as a dealer/retailer component (with focus on bird handling, waste management and food safety). The aim is to improve feed, DOC chick quality and grower performance to reduce mortality by two per cent and reduce FCR by 0.2:1 over the term of the project. The project performance will be measured by the improvement in liveability and FCR over a baseline performance that is being carefully established on a sample of farms and will be monitored by an independent assessor. It is recognised that the largest inefficiencies in the industry exist in the broiler grow-out sector, due to its structure and size, dominated by small farmers, said Brad Roberts, Operations Officer, IFC. IFC is providing support to enhance productivity and efficiency improvements for about 3,000 broiler farms. He said that the IFC's role in increasing industry capability was hopefully a forerunner to IFC assisting with project finance to a growing industry. ï</p>
<p>
	<br />
	<strong>(This article was published in Asian Poultry Magazine November/December 2011.)&nbsp; <br />
	</strong></p>
<p>
	<strong><br />
	</strong></p>',
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per annum over the last decade.Current waste (ineffi ciency) in
the industry is calculated to be USD 32 million, if Nepal's
performance is compared to an achievable international benchmark performance.',
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			'content' => '<p style="text-align: justify;">
	<span style="font-size:12px;">From premium and international beer brands to locally brewed Nepali strong beer brands Nepal's beer market has seen a tremendous shift in the last couple of years. Industry insiders opine that varied tastes, numerous choices and price factor are among the overriding reasons for this shift. Consumers are spoilt for choices in today's market scenario and hence, they have started to prefer indigenous beer brands, asserts K P Rizal, Deputy General Manager at Sungold Brewery (Nepal) Pvt Ltd. <br />
	</span></p>
<p style="text-align: justify;">
	<span style="font-size:12px;">This change in consumption trend has ensured that Gorkha Brewery Pvt Ltd, the market leader, has turned out to be the biggest loser in the bargain. It enjoyed an absolute monopoly in the market with over 80 per cent market share not too long ago with established and popular brands namely Carlsberg, Tuborg and San Miguel ruling the marketplace. Over the last couple of years, however, the brewery has seen a turnaround in fortunes primarily due to the change in consumers tastes and sense of pride attached with local brands. A market estimate suggests that Gorkha Brewery has seen its market share plummet sharply during this period. <br />
	</span></p>
<p style="text-align: justify;">
	<span style="font-size:12px;">"The market has shifted to lesser priced brands and it has led to the leading brewery losing market share considerably," confirms Kishor Bhattarai Chief of Sales &amp; Marketing at Himalayan Brewery Ltd. Experts allege that international brands took the market for granted and hence, created room for local brands to find a stronger foothold in the market. More consumers are increasingly opting for strong beer brands that cost less as well as promise faster intoxication. <br />
	</span></p>
<p style="text-align: justify;">
	<span style="font-size:12px;">The price of a beer is what is truly driving the market at this point of time. "The mindset of the consumers is to buy a beer with high alcohol content at cheap price," agrees Thomas Schlau Technical Director and Master Brewer at Sthapit &amp; Schlau Pvt Ltd. He says people must enjoy beer and there is a need for a culture to develop around beer drinking. Sensing the shift from the premium and international beer brands to indigenous Nepali brands, market leader Gorkha Brewery has indulged in severe price slashing in a bid to regain lost territory, reiterate competitors. So much so that its flagship brand Gorkha is now the cheapest beer brand available in the market. <br />
	</span></p>
<p style="text-align: justify;">
	<span style="font-size:12px;">Though, of course, the brewery continues to be the market leader due to its strong show in the premium segment which it monopolises with no competition in sight by a long way. Sthapit &amp; Schlau that began production in May 2010 by using the production facility at United Breweries Nepal Pvt Ltd in Hetauda Industrial district, started with a modest 2,500 cases a month. Within a year-and-a-half, it has registered a 100 per cent growth, claims Schlau, and produces 5,000 cases a month during the 'beer season' between March and October. We have been promoting both our brands Coblenzer Pilsener and Coblenzer Marzen as natural beer and it took us some convincing to sell initially but our hard work is beginning to pay off, he says. <br />
	</span></p>
<p style="text-align: justify;">
	<span style="font-size:12px;">It started off with distributing in cities such as Kathmandu, Dharan and Biratnagar and has moved on to cover Pokhara, Narayanghat and Gorkha under its distribution network this year. The brewery, buoyed by overwhelming response from several sections of the market, plans to aggressively expand its network in the coming years. Sungold Brewery that uses up, on an average, 60-70 per cent of its 140,000 cases-a-month-capacity brewery at Damkauli in Nawalparasi is currently growing at 25 per cent per annum. About two years ago, we were growing at 100 per cent annually but due to the declining growth of the industry, our growth too has been affected to an extent,â€ admits Rizal. <br />
	</span></p>
<p style="text-align: justify;">
	<span style="font-size:12px;">The brewery currently enjoys 20 per cent market share, he claims. It is now focusing mainly on two brands Nepal Ice (started in 2007) and Real Gold (started in 2008). While Rizal concedes that a brand name is something to reckon when it comes to international brands, he is confident that his brands will hold their own in the market as time progresses. The brewery has a strong distribution mechanism in place with 200 distributors across Nepal. He elaborates, "Distribution and market expansion is a continuous process and market growth and access dictate our distribution strategy." Not content with its impressive domestic show, it is also in the process of developing Nepal Ice as an international brand by exporting it to destinations far and wide such as Japan, USA, UK, Hong Kong, Korea and Dubai. Himalayan Brewery, which is going through a transition phase currently with a new management having taken over operations about a year ago, is already doing decently with about 9 percent of the market share, claims Bhattarai. <br />
	</span></p>
<p style="text-align: justify;">
	<span style="font-size:12px;">"It was immensely satisfying for us to discover that our flagship brand Iceberg enjoys incredible brand recall in the market and it makes our job that much easier," Bhattarai states excitedly. With its brewery at Godavari in Lalitpur, it has around 100 distributors across Nepal and counting. Iceberg also awaits a brand line extension few months down the line. "We are looking at extending the brand to premium segment. <br />
	</span></p>
<p style="text-align: justify;">
	<span style="font-size:12px;">There is every reason for a domestic beer to provide quality at par with international brands and compete on equal terms," reveals Bhattarai. Brewers rue the fact that advertising wise, they don't have the option of gaining mileage through the electronic media as promotion of alcoholic beverages is banned on this medium in Nepal as per a government directive. "From a marketer's perspective, it is sad indeed that we cannot avail the benefit of advertising through the electronic media," says Rizal. He is, therefore, limited to mainly use BTL (below the line) activities which includes branding of glasses, openers and signage etc, consumer sampling, sponsoring sporting events and musical concerts and, of course, print advertising. Schlau, while choosing 'Coblenzer' (the name is based on Schlau's hometown Coblenz in Germany) as a brand name, hoped that it will go down well with the consumers. <br />
	</span></p>
<p style="text-align: justify;">
	<span style="font-size:12px;">However, as he says, "My calculation was wrong that a foreign (read German) name will get us immense mileage, it took me a little time to realise that people here have an affinity towards Nepali-ism." He too primarily depends on print advertising to promote his beers and occasionally supports events. At Moksh Bar last month, he celebrated 'Oktoberfest', modeled after the famous German beer festival in Munich. On the other hand, Himalayan Brewery, after beginning to function under a new management, started its branding exercise from scratch including developing POP (point of purchase) displays like posters and danglers, says Dhiraj Tuladhar, Brand &amp; Business Development Officer at the Brewery. <br />
	</span></p>
<p style="text-align: justify;">
	<span style="font-size:12px;">It has made an attempt to relate Kathmandu beer with cultural heritage by promoting occasions such as Nhu Dan (Newari New Year). "We are trying to cash in on the culture aspect and hope it works for us," adds Tuladhar. While it may appear that Nepali breweries make huge profit margins, they have a different story to tell altogether. Brewers allege that heavily levied taxes including excise duties and VAT are so high that beer drinking in Nepal has become a very expensive proposition for the end consumer. A case (12 bottles of 650 ml each) of Coblenzer Beer invites an excise duty of Rs 624 which translates to Rs 52 per bottle. It is extremely high. Can you imagine that a bottle of beer actually costs more than a full meal at a reasonable eatery? asks Schlau. <br />
	</span></p>
<p style="text-align: justify;">
	<span style="font-size:12px;">He elaborates, While a plate of daal-bhaat may cost you Rs 150 at a regular food joint, you will have to pay Rs 162 and Rs 167 respectively for a bottle of Coblenzer Pilsener and Coblenzer Marzen. Even though the beer industry in Nepal hasn't suffered as much as some of the other sectors in the economy, there has been a considerable decline in its annual growth rate. Enjoying a 40 per cent growth per annum about two years ago, it is now growing at a modest 12-13 per cent annually. Brewers blame this on the economic downturn the country has been facing over the last few years. Rizal blames it on poor financial activity, a result of the economy being on the slow side.</span></p>
<p style="text-align: justify;">
	<span style="font-size:12px;">He says, "The real estate business was booming a couple of years ago. Today, restaurant visits have minimised and people are gradually shifting towards strong beer brands due to economic reasons." The slowdown in the economy has taken its toll and impacted the industry to a certain extent with restaurants and pubs registering less than expected footfall in recent times. <br />
	</span></p>
<p style="text-align: justify;">
	<span style="font-size:12px;">A lot of people for whom spending lavishly weren't a problem at all; income disposal has begun to matter a great deal. A 500,000 cases a month market, the annual revenue of the beer industry hovers around Rs 10 billion mark presently. Beer professionals believe that the industry holds great potential and in the future, with signs of recovery in the economy, it can look forward to better days ahead.<br />
	<br />
	<br />
	</span></p>',
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			'title' => 'Do Nepali Banks Require Additional Capital Injection?',
			'sub_title' => '',
			'summary' => null,
			'content' => '<p style="text-align: justify;">
	<span style="font-size:12px;"><img align="right" alt="" height="196" hspace="5" src="http://newbusinessage.com/ckfinder/userfiles/Images/sujit mundal.jpg" vspace="5" width="150" />On a recent trip to Chennai, I met an American lady seated next to me. It was a flight of about two hours and hence a fairly long time to converse. She introduced herself as Gene Turnbull, a senior research scholar at Stanford University; currently working on the financial sectors of emerging markets, mainly focusing on South Asia. What a coincidence? <br />
	</span></p>
<p style="text-align: justify;">
	<span style="font-size:12px;">I asked her, What is your opinion of the financial markets in this subcontinent? She looked at me for a while and then said, I may need to start from a few not too old past events that plagued the entire global financial system.That's fine with me, I quipped. <br />
	</span></p>
<p style="text-align: justify;">
	<span style="font-size:12px;">She started. <br />
	</span></p>
<p style="text-align: justify;">
	<span style="font-size:12px;">We need to look back at the global financial crisis which erupted in 2007 and severely damaged the western, mainly the advanced economies; the US was worst affected. That point in time, Asian economies, which are mostly emerging market economies, viz China, India, Indonesia etc were doing fine. They did not immediately feel the heat of the virtual collapse in the western markets, mainly the US and advanced West European Countries. China's dependence on exports was quite substantial and hence some fears loomed large about the sustainability of high rate of growth of the Chinese economy and the valuation of the currency. India was marginally better placed in the sense that the domestic demand continued to be firm and that supported the Indian growth. She further explained that the Asian economies were far more prepared in managing themselves. The governments and regulators also remained alert post Asian crisis of the late nineties. <br />
	</span></p>
<p style="text-align: justify;">
	<span style="font-size:12px;">I asked her, What do you feel about the financial markets particularly in South Asia? I'm interested to know about Nepal. She continued . Perhaps this is not a good time for the banks, mainly in the west. They are besieged with low growth and erosion in capital stemming from sovereign debt exposures and stricter regulatory pressure. As a result, they are suffering from low return on capital. It looks like that would continue to be the case thanks to enhanced capital requirement under BASEL III. She, however, maintained that the banks in India, China and other emerging markets are more likely to sustain their returns on capital despite increased capital requirements under BASEL III. This will probably create a catalytic effect in attracting more capital in the emerging markets that are experiencing a broader economic landscape. <br />
	</span></p>
<p style="text-align: justify;">
	<span style="font-size:12px;">As a sequel to the financial crisis of 2007, BASEL III did set forth revised rules for capital requirements for the banks. The minimum equity requirement, that is, Tier I capital will now be 7 per cent; a sharp increase from the present level of 2 per cent. Total capital requirement ( inclusive of Tier II) will increase from 8 per cent to 10.5 per cent. In addition, there will be a counter- cyclical buffer. To be precise, the banks may be required to operate with a capital in the range of 15-17 per cent in the years to come. You may know that the leading banks in Europe and the US already have capital adequacy of more than 14-15 per cent as mentioned. <br />
	</span></p>
<p style="text-align: justify;">
	<span style="font-size:12px;">The additional requirements under Basel III would necessitate capital injection of significant amount for the large banks in the west. The estimated amount of capital to be raised for meeting Basel III would be to the tune of 475 billion euros. The western banks would have to encounter at least three main challenges in the process of implementation of BASEL III viz firstly, the enormity of Euro Zone crisis, secondly, the slowdown in lending and contraction of balance sheets, and thirdly, stricter regulatory requirements emanating from the respective central banks. <br />
	</span></p>
<p style="text-align: justify;">
	<span style="font-size:12px;">To tell you honestly, I was enjoying the analysis. She continued. You may well guess that the investors would think twice before putting their money in the western banks as the ROI would shrink, though the safety around their investments might be better than before. So, there would be an inclination for the investors to look towards the east. I asked her, What is your opinion about the banks in India? <br />
	</span></p>
<p style="text-align: justify;">
	<span style="font-size:12px;">She replied that although the Indian Banks are passing through a stressful period resulting from falling net margin in interest, higher incidence of nonperforming loans and more restrictions imposed by the central bank in respect of sectoral lending, these banks are better positioned to maintain a good return on equity in the long term. The growing domestic demand in the EME's (emerging market economies) and their conducive macroeconomic policies would help boost bottom lines of the banks in these countries including India. I then categorically asked her a question about the smaller economies in South Asia viz Nepal. I explained my interest in knowing about Nepal. She remained quiet for some time as if she was drowned in deep thought and then quipped, What is your specific question?</span></p>
<p style="text-align: justify;">
	<span style="font-size:12px;">I replied, What do you think about the banking system in this country? She was of the opinion that the country was in the early stage of development and the accompanying financial system needed higher level of governance and stronger foundation in the form of stricter implementation of regulations and transparency. She felt that the supervision system of the central bank needed further strengthening and more professional approach in the sense that they should not see wood for the tree.</span></p>
<p style="text-align: justify;">
	<span style="font-size:12px;">I could not agree more that her observations were interesting. Against the back drop of a looming financial crisis in the Euro Zone and the very slow recovery in the US, it is quite likely that contagion effect can hit the emerging market economies including Nepal and this may lead to the crisis of confidence. Banks will experience falling returns, lesser ability to support credit off take and higher incidents of NPA. Considering all this, I asked her my final question on Nepali financial system, Do you think Nepali Banks require further injection of capital in order to maintain capital adequacy and create a cushion against possible erosion? She thought for a while and responded mildly, Yes, but it needs a lot of debate and political consideration . She was absolutely right. I think this is a serious subject for discussion and the sooner it is done, it's better for the country. </span></p>
<p style="text-align: justify;">
	<span style="font-size:12px;"><span><em><br />
	</em></span></span></p>
<p style="text-align: justify;">
	<strong><span style="font-size:12px;"><em>(Mundul is a Director with Standard Chartered Bank Nepal Ltd)<br />
	<br />
	<br />
	</em></span></strong></p>',
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			'article_category_id' => '41',
			'title' => 'A Walk Through Central Depository System',
			'sub_title' => '',
			'summary' => null,
			'content' => '<div>
	<div style="text-align: justify;">
		<span style="font-size:12px;"><img align="left" alt="sectorial" border="1" height="128" hspace="5" src="http://newbusinessage.com/ckfinder/userfiles/Images/homnath gaire.jpg" style="margin:10px;padding:10px;" vspace="5" width="100" />By <strong><u>Homnath Gaire<br />
		<br />
		</u></strong></span></div>
</div>
<div style="text-align: justify;">
	<span style="font-size:12px;">In a nut shell, Central Depository System (CDS) is an electronic book entry system to record and maintain securities and to register their transfer. In CDS, ownership will be changed without physical movements of securities or execution of transfer deeds. The ownership will be transferred as soon as securities move from one account to another. CDS is purely a settlement vehicle and will not affect the trading in any manner whatsoever. It is expected that the CDS will bring tremendous efficiency and growth in the capital market of Nepal. It will also enhance the image of Nepal's capital market globally. </span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;"><br />
	</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;"><strong>Participants of CDS:Account Holders<br />
	<br />
	</strong></span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;">Account holders are divided into two categories - account holders and participants. Both account holders and participants will have direct access to the CDS. Account holders will be allowed to have a main account and a house account for their beneficially owned securities. Participants, however, will be entitled to have client accounting facilities within the CDS. In addition to main account and house account, participants will be allowed to have sub accounts and group client accounts. In short, the participants can provide custody services to their clients whereas account holders can keep only their beneficially owned securities in CDS.</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;"><br />
	</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;"><img align="right" alt="sectoral" border="1" height="350" hspace="5" src="http://newbusinessage.com/ckfinder/userfiles/Images/img(7).jpg" style="margin:10px;padding:10px;" vspace="5" width="252" />"Beneficial Owner" means the person who have opened their Beneficial Owner Account with Central Depository Company for depositing their securities or instruments and who have held the securities and instruments which are capable of being deposited in de-mat form.</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;"><br />
	</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;">All the members of stock exchanges, banks (both commercial and investment), and development financial institutions (DFIs) are allowed to open their account as participants whereas corporate bodies such as leasing companies, investment companies and insurance companies can open their account as account holders.</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;"><br />
	</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;"><strong>Issuers/Registrars<br />
	<br />
	</strong></span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;">The issuers of capital whose securities are converted from physical to electronic book entry system play a significant role in CDS. They will also have direct access to the CDS. After a security is declared eligible for the purpose of CDS, necessary software is provided to that particular issuer upon signing the issuer's agreement with central depository company (CDC). The shares are entered into CDS only after proper verification by these issuers or their registrar. This process eliminates the problem of fake/duplicate/lost/stolen share certificates as issuers thoroughly check them before approving for CDS.</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;"><br />
	</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;"><strong>Eligible Pledge<br />
	<br />
	</strong></span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;">Financial institutions that lend against securities will have their account with CDS in the capacity of eligible pledges. These institutions will also have direct access to CDS and will be provided with necessary connection in this regard upon signing the pledge agreement with CDC. Their clients will be able to pledge their electronic book based securities in CDS. Once the securities are pledged in the CDS, the control over those securities is transferred to the eligible pledgee in the form of pledge release/call. Nevertheless, the beneficial owner will continue to get the benefits of corporate action on pledged securities.</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;"><br />
	</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;"><strong><img align="left" alt="sectoral" border="1" height="228" hspace="5" src="http://newbusinessage.com/ckfinder/userfiles/Images/img1(4).jpg" style="margin:10px;padding:10px;" vspace="5" width="350" />CDS Account Structure:<br />
	<br />
	</strong></span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;">The account holders of CDC will be able to settle their transactions within the CDS through five types of accounts, namely:<br />
	<br />
	</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;"><b>Main Account:</b> Each account holder in the system will be allocated a main account by virtue of being an account holder in the CDS. This account will mainly be used as a transit account for movement of securities. Any security coming in or moving out of an account holder's family of accounts will pass through this account.</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;"><br />
	</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;"><b>House Account:</b> Used for securities owned beneficially by account holders. "Beneficial Owner Account" means De-mat Account (electronic account) opened with Central Depository Company through Depository Participant in order to deposit securities by the Beneficial Owner and which is distinguished by a unique account number.</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;"><br />
	</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;"><b>Sub-account (Client Account):</b> This account is used for keeping securities belonging individually to each of the clients of an account holder. An account holder may open and maintain any number of sub-accounts he requires on behalf of his clients.</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;"><br />
	</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;"><b>Group Client Account:</b> This account is used for keeping securities which are beneficially owned by the account holder's client. It will be used for clients who are not willing to utilize the facility of opening separate sub-accounts. The account holder will group all such clients in his/her group account. The detailed break-up of the securities held by each client of a group account will be held by the account holder and no such record will be maintained by CDC. </span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;"><br />
	</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;"><b>Cash Account: </b>Each account holder in the system who opts to avail the Delivery vs Payment (DVP) facility will be required to deposit relevant amount to be used for the settlement of DVP obligations.<br />
	<br />
	</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;">CDS-Operation<br />
	<br />
	</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;"><b><img align="right" alt="" border="2" height="335" hspace="5" src="http://newbusinessage.com/ckfinder/userfiles/Images/img2(4).jpg" vspace="5" width="350" />The main operations performed in the CDS are as follows:<br />
	<br />
	</b></span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;">Deposit of existing and new securities in the CDS. Once a security is declared eligible by CDC, the physical certificates of that security will be deposited in the CDS for conversion after which they will be available for further transfers within the system. Following is the procedure to deposit securities in the CDS:</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;"><br />
	</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;">To begin with account holder will initiate the deposit request by entering the details of share certificates into the system, and securities deposit form (SDF). CDS will generate computer printouts of the transaction. Transfer deed will be executed in favor of CDC. Account holder will then send the relevant share certificates, transfer deeds, SDF and the computer printouts to the relevant registrar. The registrar after verification will either approve or reject the transaction within five days from the receipt of the documents. Registrar will update CDC nominee share holding in the member's register, cancel share certificates and transfer deeds, and return the relevant documents (other then canceled share certificates and transfer deeds) to applicant account holder.</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;"><br />
	</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;">Withdrawal of securities <br />
	from the CDS:<br />
	<br />
	</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;">The account holder will initiate the withdrawal request by entering the relevant details into the system, and securities withdrawal form (SWF). CDS will generate computer printouts of the transaction. Account holder will then send the SWF and the computer printouts to the relevant registrar.</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;"><br />
	</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;">The registrar after verification of the balance will either approve or reject the transaction within five days from the receipt of the documents and update CDC nominee share holding in the member's register. Registrar will return the relevant documents and share certificates to the applicant.</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;"><br />
	</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;">Prepare share certificate (Jumbo certificate): <br />
	<br />
	</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;"><b>Free Transfer -</b> Book entry transfer of securities without any associated cash movement. This is a unilateral transaction in which an account holder can deliver securities to any other account holder in CDS. Although the beneficial ownership of securities changes as securities move from one account to another, there is no stamp duty involved and the transfer is on the spot.</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;"><br />
	</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;"><b>Pledge/Release/Call -</b> Pledging securities in favor of a lender which can only be released or called by the lender. This function will greatly benefit the financial institutions by reducing risk of fake share certificates and paperwork to a great extent. </span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;"><br />
	</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;">Stock Borrowing or Lending through the CDS: <br />
	<br />
	</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;"><b>Corporate Action - </b>In case of bonus issues, rights issues, sub-division, consolidation and any other action that changes the number of securities held in a participant's account or involves the determination of entitlement to beneficial owners, CDC shall provide relevant details of account holders and sub-account holders to the issuer. The CDC will also provide details for the purpose of notice of general meetings and other notices/communications.</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;"><br />
	</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;"><b>Delivery Versus Payment (DVP) - </b>DVP is a bilateral transaction or book entry transfer of ownership of a security in exchange for payment to settle a transaction. The deliverer of the securities will initiate the DVP request on CDS specifying the details of securities and payment.&nbsp;</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;"><br />
	</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;">Upon acceptance of the receiver, CDS will debit deliverer's securities account and credit receiver's securities account. Likewise, CDS will debit receiver's cash account and credit deliverer's cash account. Cash only moves from one account to another without any associated securities movement. </span></div>',
			'published' => true,
			'created' => '2011-10-11',
			'modified' => '2012-09-17',
			'keywords' => '',
			'description' => 'In a nut shell, Central Depository System (CDS) is an electronic book entry system to record and maintain securities and to register their transfer. In CDS, ownership......',
			'sortorder' => '393',
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			'article_date' => '0000-00-00 00:00:00',
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	),
	(int) 4 => array(
		'Article' => array(
			'id' => '453',
			'article_category_id' => '41',
			'title' => 'Social Media Adoption By TELECOM Giants In Nepal - NCELL And NTC',
			'sub_title' => '',
			'summary' => null,
			'content' => '<div>
	<div style="text-align: justify;">
		<span style="font-size:12px;">By <strong>Deep Sherchan<br />
		<br />
		</strong></span></div>
</div>
<div style="text-align: justify;">
	<span style="font-size:12px;">As we are moving into the age of online economy, communication channels will play a major role in development of nation's economy. So, it is very important to understand where Nepal is, in terms of the whole online revolution. South-East Asian Countries like Malaysia, Singapore, and Indonesia are rapidly evolving with the online revolution and giving them important space into the overall growth of the nation.</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;"><br />
	</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;">As per the US Census Bureau, Nepal has a population of 28,951,852 as of 2010 and accordingly to ITU Nepal has 625,800 Internet users as of June, 2010, which is like 2.2 per cent of the population, according to ITU. Now, if we compare this with Malaysia, it has 28,728,607 population (2011) and 16,902,600 Internet users as of June 2009, which is 64.6 per cent penetration, as per ITU. More interestingly, it had around 9,998,440 Facebook (FB) users on March 31/11, which is 34.8 per cent penetration. As per Facebook, Nepal had 811,780 Facebook users on March 31/11, 2.8 per cent penetration. The difference in the penetration of Internet is interesting to observe. The numbers can be a bit contradictory, but FB's user count is very approximate based on the location which cannot be verified. But even then, this does give some amount of insights into the population.</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;"><br />
	</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;">Now, Social Media is already a leading phenomenon in the world, it's a cultural shift between the mainstream media and the free and open community conversation that takes place at the online community forums and platforms such as Facebook. One of the major role social media plays is in the leveraging small and medium businesses, where businesses have direct access to communicate with the customers. So, it is interesting to see how the telecom giants of Nepal are handling this, as they provide the main backbones for the whole revolution.</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;"><br />
	</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;">The picture is quite interesting as it shows that the two major players of telecom in Nepal (NTC and NCELL) have been going in different directions all together. Now, which one is on the right track is not very difficult to figure out. When we talk about online revolution, there is one important thing to consider and that is - how social media friendly is the company. Now, unless telecom companies understand the effect of social media, there is no way that they will be able to drive the required innovation in the field.</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;"><br />
	</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;">In the evolving business models, every company is required to have an online presence and online communication channels, for people to connect with the service. Nepal surely has lots of hurdles to pass through before the Nepali people and companies can leverage the benefits of IT and social media. If you compare NCELL and NTC, you will immediately notice where each one is. NCELL has been heavily adopting latest technology and business models to gain users base, whereas NTC is still in rudimentary stages.</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;"><br />
	</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;">Just to give you an idea on why this is so important for NTC and NCELL, let me explain the basic business models both employ. Both companies earn by sales of SIM cards, the call charges and nowadays even through bandwidth usages. The concept of value added services for mobile devices has still not matured and the same can be said about caller-tunes and other entertainment services. In addition to this, the emerging popularity of Smartphone has provided opportunity to give a variety of services to the end-users. In a competitive market, consumer research report shows that the adoption rate of telecom services is heavily influenced by the service satisfaction, which means a continuous to and fro communication between customer and business. This means a constant presence -- physically and virtually. This is why, online presence is so important. People are continuously looking for information and support.</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;"><br />
	</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;">May be this is why NTC is losing the battle with NCELL. NCELL has been officially declared as the winner the country's first private GSM mobile operator”as the Number 1 player in the GSM mobile segment. The massive branding and investment NCELL has done for last one year is commendable. IT has&nbsp;been aggressive in terms of promoting and coming up with new business models.</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;"><br />
	</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;">Reports say that until last fiscal year, difference between the subscriber base of the two operators NCELL and NT was around 1 million. However, since last fiscal year, NCELL aggressively started introducing new services and handsets targeting both low-end and high-end customers.</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;"><br />
	</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;">Let us just concentrate on how NCELL has been making its presence felt in the online space through social media. The social media presence is all about wearing an attitude to support customers through providing timely information. The websites of NCELL and NTC are both rich in content but NCELL seems to have been communicating with more grace than NTC. The engagement in NCELL is much higher than in NTC. Similarly, NTC doesn't have any online profiles in Facebook, which is where most people are spending their time on. </span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;"><br />
	</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;">Beside the contradictory argument that Nepal is still emerging in terms of Online Community, NCELL seems to be doing great with its promotion whereas NTC is still lagging behind the adoption. Being TELECOM companies, NTC and NCELL both must be forerunner into adopting new technology and encouraging new services.</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;"><br />
	</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;">Other interesting examples are Nepal Unites Campaign and Creative Political Activism which are on at Facebook. These activities show the vibes of Nepalese Online Community which if leveraged correctly would benefit companies as well as the nation.</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;"><br />
	<br />
	</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;"><strong>NTC Online Profiles:<br />
	<br />
	</strong></span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;">Telecommunication was introduced with the installation of open wire trunk telephone line between Kathmandu and Birgunj (a border town in southern Nepal) for the first time in Nepal around 1914, beginning of the First&nbsp; World War.</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;"><br />
	</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;">Nepal Telecom has been actively involved in the business of physical market place. Its presence in the electronic market space is very minimal while major projects are under planning. Nepal Telecom is highly equipped with country-wide telecom infrastructure which is the competitive advantage for it over the rivals in the industry. Nepal Telecom has implemented IT in customer service rather than in core business. The company has been implementing information technology in customer billing payment. The other IT focuses are on Internal integration of the functional units and managerial planning process. The company has centralized the billing payment and revenue collection.</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;"><br />
	<br />
	</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;"><strong>NCELL Online Profiles:<br />
	<br />
	</strong></span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;">Until last fiscal year, difference between the subscriber base of the two operators NCELL and NT was around 1 million. However, since last fiscal year, NCELL aggressively started introducing new services and handsets targeting both low-end and high-end customers.<br />
	<br />
	</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;"><br />
	</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;"><i>(Sherchan is Chief Marketing Officer at InRev Systems in Bangalore, India. He can be contacted via email at deep@in-rev.com or @bexdeep on Twitter.)<br />
	<br />
	<br />
	</i></span></div>
<table border="2" cellpadding="0" cellspacing="0">
	<tbody>
		<tr>
			<td valign="top" width="91">
				<div style="text-align: justify;">
					<span style="font-size:12px;"><br />
					</span></div>
			</td>
			<td valign="top" width="269">
				<div style="text-align: justify;">
					<span style="font-size:12px;">NCELL</span></div>
			</td>
			<td valign="top" width="269">
				<div style="text-align: justify;">
					<span style="font-size:12px;">NTC</span></div>
			</td>
		</tr>
		<tr>
			<td valign="top" width="91">
				<div style="text-align: justify;">
					<span style="font-size:12px;">Website</span></div>
			</td>
			<td valign="top" width="269">
				<div style="text-align: justify;">
					<span style="font-size:12px;">http://ncell.com.np/</span></div>
			</td>
			<td valign="top" width="269">
				<div style="text-align: justify;">
					<span style="font-size:12px;">http://www.ntc.net.np/</span></div>
			</td>
		</tr>
		<tr>
			<td valign="top" width="91">
				<div style="text-align: justify;">
					<span style="font-size:12px;">Wikipedia</span></div>
			</td>
			<td valign="top" width="269">
				<div style="text-align: justify;">
					<span style="font-size:12px;">http://en.wikipedia.org/wiki/Ncell</span></div>
			</td>
			<td valign="top" width="269">
				<div style="text-align: justify;">
					<span style="font-size:12px;">http://en.wikipedia.org/wiki/Nepal_Telecom</span></div>
			</td>
		</tr>
		<tr>
			<td valign="top" width="91">
				<div style="text-align: justify;">
					<span style="font-size:12px;">Facebook Wiki</span></div>
			</td>
			<td valign="top" width="269">
				<div style="text-align: justify;">
					<span style="font-size:12px;">http://www.facebook.com/pages/Ncell/134092903305342</span></div>
			</td>
			<td valign="top" width="269">
				<div style="text-align: justify;">
					<span style="font-size:12px;">http://www.facebook.com/pages/Nepal-Telecom/104071036295574?sk=wall</span></div>
			</td>
		</tr>
		<tr>
			<td valign="top" width="91">
				<div style="text-align: justify;">
					<span style="font-size:12px;">LinkedIn</span></div>
			</td>
			<td valign="top" width="269">
				<div style="text-align: justify;">
					<span style="font-size:12px;">http://www.linkedin.com/company/ncell</span></div>
			</td>
			<td valign="top" width="269">
				<div style="text-align: justify;">
					<span style="font-size:12px;">http://www.linkedin.com/company/nepal-telecom/statistics</span></div>
			</td>
		</tr>
		<tr>
			<td valign="top" width="91">
				<div style="text-align: justify;">
					<span style="font-size:12px;">Facebook Page</span></div>
			</td>
			<td valign="top" width="269">
				<div style="text-align: justify;">
					<span style="font-size:12px;">https://www.facebook.com/ncell.com.np</span></div>
				<div style="text-align: justify;">
					<span style="font-size:12px;">(65,569 fans)</span></div>
			</td>
			<td valign="top" width="269">
				<div style="text-align: justify;">
					<span style="font-size:12px;">No official page, but lots of hatred community present unofficially.</span></div>
			</td>
		</tr>
		<tr>
			<td valign="top" width="91">
				<div style="text-align: justify;">
					<span style="font-size:12px;">Twitter Profile</span></div>
			</td>
			<td valign="top" width="269">
				<div style="text-align: justify;">
					<span style="font-size:12px;">None</span></div>
			</td>
			<td valign="top" width="269">
				<div style="text-align: justify;">
					<span style="font-size:12px;">None</span></div>
			</td>
		</tr>
		<tr>
			<td valign="top" width="91">
				<div style="text-align: justify;">
					<span style="font-size:12px;">Twitter Conversation</span></div>
			</td>
			<td colspan="2" valign="top" width="538">
				<div style="text-align: justify;">
					<span style="font-size:12px;">Though Twitter has vibrant Nepalese community, the scale is pretty low compared to Facebook and the conversation is low for NTC and NCELL.</span></div>
			</td>
		</tr>
		<tr>
			<td valign="top" width="91">
				<div style="text-align: justify;">
					<span style="font-size:12px;">Blogs</span></div>
			</td>
			<td valign="top" width="269">
				<div style="text-align: justify;">
					<span style="font-size:12px;">http://blog.ncell.com.np/</span></div>
			</td>
			<td valign="top" width="269">
				<div style="text-align: justify;">
					<span style="font-size:12px;">&nbsp;-</span></div>
			</td>
		</tr>
		<tr>
			<td valign="top" width="91">
				<div style="text-align: justify;">
					<span style="font-size:12px;">Engagement</span></div>
			</td>
			<td valign="top" width="269">
				<div style="text-align: justify;">
					<span style="font-size:12px;">Contest and Campaigns</span></div>
			</td>
			<td valign="top" width="269">
				<div style="text-align: justify;">
					<span style="font-size:12px;">None</span></div>
			</td>
		</tr>
	</tbody>
</table>
<p style="text-align: justify;">
	<span style="font-size:12px;"><br />
	</span></p>',
			'published' => true,
			'created' => '2011-10-11',
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			'title' => 'Credibility Question In Accounting Profession',
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	<div style="text-align: justify;">
		<span style="font-size:12px;"><strong><br />
		By Paramananda Adhikari, FCA <br />
		<br />
		</strong></span></div>
</div>
<div style="text-align: justify;">
	<span style="font-size:12px;">Over the past decade, increased litigation as well as criticism of auditors has left little room for doubt that auditors are facing a liability and credibility crisis in their profession. The reputation of accountancy profession comes under question for the reliability of their services. This issue in auditing profession is termed audit expectation gap which denotes the difference between the public's and auditors perceptions of the role of an audit function. The gap is critical to the auditing profession because the greater the unfulfilled expectations from the public, the lower is the credibility associated with the function of the auditor. The increase in litigation and criticism against the auditors can be attributed to the expectation gap. The gap arises from the misconceptions on the part of users, the nature and objective of audit, unreasonable expectations from public and performance below standard of profession by the auditors too. The accountancy profession, like other professions, exists only through wide public acceptance. The perceived need in auditing is an independent reporting function. Once the auditor has examined the entity's books of accounts and financial statements, the public understands that there are no problems. </span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;"><br />
	</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;"><strong>Independence: Fundamental in Auditing Profession<br />
	<br />
	</strong></span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;">What is independence? Why is it necessary for Professional Accountants? How is it maintained? These are some of the issues raised with respect to auditors. The term independence has no concrete meaning. However, integrity, objectivity and trustworthiness are the key elements in independence. The concept of auditors independence has been accepted from the very beginning when the accounting came into being as a profession. During the late 19th and early 20th centuries, the perception of independence in accounting profession changed due to modern capitalist economy, a system of economy designed to allocate resources using market mechanism. Independence is fundamental to the reliability of auditors reports. Investors, creditors and public would have little confidence in auditor's report, if they were not independent from the management in both fact and appearance.</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;"><br />
	</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;">Without independence, an auditor's opinion is suspect and the users of financial statements believe that there is no need for external auditors, if independence has not been maintained. Third parties acceptance implies that the role of external auditors is an independent financial control within the corporate entity. Auditor must be conscious to maintain independence on audit planning execution and reporting. He must strive to ensure that the audit quality is not compromised under any circumstances.</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;"><br />
	<br />
	</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;"><strong>Public Expectations<br />
	<br />
	</strong></span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;">Over a decade, audit is at the center of a heated debate. How and why for audit were the questions.. People were of the view that the responsibility of any wrongdoing in any entity is on the auditors among others. There has been disparity in the people's expectations from auditors, especially with regard to their duties, responsibilities and objectives of audit. There are misconceptions that it is the auditor's role to prepare financial statements in compliance with accounting standards and statutory requirements. However, the auditor's responsibility is to express an opinion whether the financial statements generated from the books of accounts give a true and fair picture in accordance with the financial reporting framework. </span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;"><br />
	</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;">People may have expectations from auditors that go beyond the professional responsibility such as audits would provide absolute assurance on the accuracy of the company's financial statements. The users of financial statements may question why the auditors did not detect material irregularities and disclose them in their report. </span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;"><br />
	<br />
	</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;"><strong>Audit at the Crossroad <br />
	<br />
	</strong></span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;">Given the growing list of financial reporting scandals, audit is once again at a crossroad. The significant number of big corporate failures/scandals over the past decade all over the world creates an audit crisis in the marketplace. The large payouts resulting from audit litigation in the developed countries have adversely affected the quality of audit services. Some of the big corporate failures/scandals over the past decade were, Enron (USA), WorldCom (USA), Lehman Brothers (USA), Merrill Lynch (USA), Fannie Mae (USA), Parmalat (Italy), Maxwell (UK), Flowtex (Germany), Vivendi (France), Baan (Netherlands), Satyam (India). These failures/scandals came one after another. After the widely publicised auditing failures in USA and later in Europe, the users have started losing confidence in auditing profession and raised the voice where were the auditors? What was the role of watchdog? These cases clearly map out people's expectations with respect to the duties and responsibilities of auditors. Regulating and oversight agencies have been investigating the performance status of the accounting profession worldwide.</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;"><br />
	</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;">Over the days, in Nepal too, people have witnessed and become victims of companies going bust due to poor corporate governance by the management. In such a situation, effective corporate governance structures that should have detected any unlawful or unethical behavior by the dominant party may have been missing. Due to the cases of unethical conduct of management, inappropriate accounting system, disparity in maturity pattern of assets and liabilities, over-valuation of collateral that may be running amuck and pitch in some of the cases like Nepal Development Bank (Liquidation), Samjhana Finance Ltd, Nepal Share Markets and Finance Ltd, Gurkha Development Bank, United Development Bank, Vibor Bikas Bank, Peoples Finance Ltd, World Merchant Banking and Finance Ltd, CMB Finance Ltd. From these few instances, we are also witnessing corporate failures, scandals, or liquidity crunch in recent days that may raise questions about credibility on the auditors report and sustainability of businesses. Now is the time for the audit profession to be more proactive to lead the debate.</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;"><br />
	<br />
	</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;"><strong>Questionable Role of Auditor<br />
	<br />
	</strong></span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;">There are many reasons for reducing the independence of the auditor. Among others, these are economic dependence on the client, market competition in audit, other non-audit services, close relationship with client's executives, acceptances of goods and services from clients in concessional rate or free of cost, worry about their re-appointment etc.&nbsp;Due to these factors, auditors may be unable to produce fair and reliable reports in certain cases and the independence, of course, is curtailed. If auditors are perceived not independent, the report would be below the standards of the profession and would damage overall image of the accounting profession. </span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;"><br />
	</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;">Auditors may be found guilty of gross negligence in examining the financial and other records. Gross negligence means failure to exercise minimum due care when material errors or irregularities that should have been detected by the application of professional standards go unnoticed. Material amount of fictitious sales recorded at the year-end to inflate income and failure to detect this intentional mis-statement is one of the examples. A similar mis-statement by understating several expenses by a small amount or charging expenses in capital account and failure to detect them by the auditor is also considered as gross negligence. </span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;"><br />
	</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;">Cases finding fault with auditors about the application of professional standards, practices and inadequate disclosure have occurred over time, raising questions over auditors' performance. Some of the cases of non-compliance of standards are revenue recognition, fictitious receivables, failure to disclose related party transactions, verification of cash/bank balances and, failure to obtain third-party confirmation, inadequate collateral of loan, non-accounting of major transactions, failure to assess the clientâ€™s business risk etc. The standard also requires auditors to indicate any substantial doubt about the entityâ€™s existence as a going concern, In such a case, the auditor must add an explanatory paragraph following the opinion paragraph to his report. </span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;"><br />
	<br />
	</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;"><strong>The Expectation Gap<br />
	<br />
	</strong></span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;">Expectation gap in audit is the difference between what the public/users of financial statement perceive about auditors responsibilities to be, and what exactly the auditors responsibilities are. Therefore, it is a gap between what is required by regulation and what market/public need is. The auditor's responsibility for detecting fraud is one of the major areas contributing to the expectation gap. The users of the financial statements believe that unqualified audit report means, the auditor has detected all material errors/irregularities. However, this perception is not in line with the professional standards, which hold the auditor responsible only for exercising due care in the conduct of examination.</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;"><br />
	</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;">Another area for difference overrides the control structure and conceals the facts, perhaps at the behest of management. In such a case, auditor's exercise of due care fails to detect irregularities in the error-free financial statements produced by the management. This will result in significant misrepresentations in financial statement not detected by the auditor and further widen the expectation gap. </span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;"><br />
	</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;">The next area of difference is perception about the entity's ability to continue as a going concern. The users believe that an unqualified audit report is a guarantee that the entity is a healthy one. However, immediately or some time later, the entity is found either in a financial crisis to sustain or in the liquidation process. In such a situation, people may not be trust unqualified audit reports and many corporations either collapsed or were bailed out within a short period of receiving unqualified audit reports. These facts may attract substantial doubt that the auditors lack the expertise to render an independent opinion on financial statements and corporate affairs.</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;"><br />
	<br />
	</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;"><strong>Bridging the Expectation Gap<br />
	<br />
	</strong></span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;">Preparation and presentation of financial statements is the prerogative of the management. Audit is performed on test basis from the sample drawn on the population of a class of transactions. Due to inherent limitation of internal control system adopted by the management, auditors can not detect all the irregularities. The auditor examines the financial statements and provides reasonable assurance that the financial statements are free from material mis-statements. As a result, the expectation gap continues to exist in audit including fraud, internal controls, illegal acts and other non-compliances. Here we analyse the possible remedial actions that may narrow expectation gap and improve the audit effectiveness. </span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;"><br />
	</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;">Firstly, the auditor shall report the cases of mis-representations, non-compliance of rules, regulations and professional standards to bridge the gap to some extent. If the auditors are found grossly negligent to discharge their duties, they may be liable to action under various Acts and Regulations, such as Nepal Chartered Accountants Act 1997, Companies Act 2006, Bank and Financial Institutions Act 2006.</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;"><br />
	</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;">Secondly, compliance of Nepal Standard on Quality Control (NSQC) and implementation of Peer Review System, i.e. auditing the auditors helps narrow the expectation gap.</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;"><br />
	</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;">Thirdly, educating the public about the objectives of audit, auditor's duties and responsibilities are important elements to bridge the expectation gap. Reducing unreasonable expectations requires creating awareness about the objective and limitations of audit and the auditor's work. </span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;"><br />
	</span></div>
<div>
	<span style="font-size:12px;"><strong>Reporting <br />
	<br />
	</strong></span></div>
<div>
	<span style="font-size:12px;">The auditor has the duty to report, after careful scrutiny of all the documentary evidences and information, every item of importance. He must demonstrate to the public that it is independent from the management and will provide high quality of audit and assurance services. Auditor, as a "public watchdog" reports the effectiveness of internal control, non-compliance of professional standards, mis-statements contained in financial statements, mis-statements resulting from management/employee fraud and illegal activities/operations, if any. Further, the auditor has to report about the entity's ability to continue as a going concern for a reasonable period from the date of audited financial statements. </span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;"><br />
	<br />
	</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;"><strong>To Conclude<br />
	<br />
	</strong></span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;">Users of financial statements are of the opinion that the auditor should not only provide an opinion but also interpret the financial statements in such a manner that it evaluates the overall performance of the entity. The users expect from auditors to report in-depth information of the companyâ€™s affairs, watching the management surveillance and detecting illegal acts/frauds on the part of management. These are the high expectations on the part of users of financial statements that create gap between auditors and users expectations from auditing. There has been considerable debate about the nature and scope of audit and the audit expectation gap. The differences between what auditors actually do and what third parties think auditors do or should do remain. The expectation gap may never be eliminated. However, it may be reduced to a standard of profession. </span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;"><br />
	</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;">In recent years, the regulatory framework for professional accountants has changed. At present, we have peer review concept, quality control standards and the disciplinary mechanism. Failing in compliance or departures from the set conduct by the members may make them liable to disciplinary action. All this has been done with a view to gaining public confidence and to enhancing credibility of the accounting profession. </span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;"><br />
	<br />
	</span></div>
<div style="text-align: justify;">
	<strong><span style="font-size:12px;">(Adhikari is Technical Director at the Institute of Chartered Accountants of Nepal (ICAN)&nbsp;and General Secretary of the Association of Chartered Accountants of Nepal)<br />
	<br />
	<br />
	</span></strong></div>',
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<p class="ANSWER" style="text-align: justify;">
	<span class="MyriadPro"><span calibri="" lang="EN-GB" letter-spacing:="" sans-serif="">Sujit Mundul, CEO and Director, Standard Chartered Bank (SCB) Nepal, started his career as a lecturer in Organic Chemistry but switched over to banking as he joined SCB as a junior officer in the seventies. Mundul moved on through various relationship roles in Corporate/Institutional Banking including Credit and Audit functions.&nbsp; He also worked in SCB - London in Credit Management for about a year on secondment. He became Head - Corporate Banking, South India and Regional Head - Sales, for Eastern India before joining SCB Nepal as the CEO and Director. Mundul spoke to <i>Nubiz</i> on a wide range of issues on banking and finance. Excerpts:</span></span></p>
<p class="ANSWER" style="text-align: justify;">
	 </p>
<p class="questionsforinterview" style="text-align: justify;">
	<span style="font-size:12px;"><strong><span class="MyriadPro"><span lang="EN-GB" style="letter-spacing: 0pt;">You have substantially increased the interest on savings, from 2-5% a few years back to 6.5% now. Is there still cash crunch? <br />
	</span></span></strong></span></p>
<p class="ANSWER" style="text-align: justify;">
	<span style="font-size:12px;"><span class="MyriadPro">To answer this question, we need to set the perspective right why SCB Nepal has increased its interest rate. Till one year back, the market never experienced that kind of interest rate because of many reasons. One of the major reasons is that remittance was less. That is coming in abundance now. But for good reason or bad, the market started feeling the tightness. As a result, some stress in liquidity was felt. To be very honest, SCB Nepal never faced a liquidity strain, we have always been adequately liquid.&nbsp; In fact, we had been the lenders in the inter-bank throughout the crisis period. Now, in order to build the deposit base, we decided to increase our interest rates because the market dynamics have changed. The market has slightly shifted gears from low to high interest rate environment. As we are also one of the key players in the market, we need to keep up with the market rates. That's the reason why we have increased the interest rate. Though the increase in interest rate is not that significant; we have already started seeing good positive response from the market.</span></span></p>
<p class="ANSWER" style="text-align: justify;">
	<span style="font-size:12px;"><span><span class="MyriadPro"><br />
	</span></span></span></p>
<p class="questionsforinterview">
	<span style="font-size:12px;"><strong><span class="MyriadPro"><span lang="EN-GB" style="letter-spacing: 0pt;">SCB Nepal is known for quality banking. But competition actually has become tough. How do you view the growth of Nepali financial sector?</span></span></strong></span></p>
<p class="ANSWER" style="text-align: justify;">
	<span style="font-size:12px;"><span class="MyriadPro"><span style="letter-spacing: 0.1pt;">It is a difficult market now. The market of Nepal has become overcrowded. It cannot accommodate so many players; that's why, the competition is a bit uneven. Customers or the depositors would love to see that wherever they put their money it should remain safe and they should get high quality service. The depositors are becoming much wiser compared to what they used to be few years back. They read papers, they also follow the economy and they can make their own judgments. That is why there is the competition and, I believe, we have been able to tackle the competition successfully.</span></span><strong><br />
	<span class="MyriadPro"> </span></strong></span></p>
<p class="ANSWER" style="text-align: justify;">
	<span style="font-size:12px;"><strong><span><span class="MyriadPro"><br />
	</span></span></strong></span></p>
<p class="questionsforinterview" style="text-align: justify;">
	<span style="font-size:12px;"><strong><span class="MyriadPro"><span lang="EN-GB" style="letter-spacing: 0pt;">You are of the few banks that also offer insurance products. How do these two products work along?</span></span></strong></span></p>
<p class="ANSWER" style="text-align: justify;">
	<span style="font-size:12px;"><span class="MyriadPro">e do not have insurance products of our own but we are co-branded with insurance. We call it bancassurance. It is very complementary with banking services. Basically, it could be used for retail banking sector. It can go very well with mortgage products. Similarly, it can go with other lending products. And it is used as one of the major products in wealth management. So we use it as a part of wealth management package. The corporate sector has also been covered by insurance. Instead of going to an ordinary agent, they can come to the bank to get their assets insured. So, these products are actually complimentary to each other.</span></span></p>
<p class="ANSWER" style="text-align: justify;">
	<span style="font-size:12px;"><span><span class="MyriadPro"><br />
	</span></span></span></p>
<p class="questionsforinterview" style="text-align: justify;">
	<span style="font-size:12px;"><strong><span class="MyriadPro"><span lang="EN-GB" style="letter-spacing: 0pt;">Securities Exchange Board of Nepal (SEBON) has recently got the Mutual Fund Regulations ratified. Your bank had shown some interest in this business in the past. How is the plan now?</span></span></strong></span></p>
<p class="ANSWER" style="text-align: justify;">
	<span style="font-size:12px;"><span class="MyriadPro"><span style="letter-spacing: 0.1pt;">To run a successful mutual fund, you need to have volume. I don't think Nepali market has yet got that volume. It will take maybe a few years to create that. For a successful mutual fund, we need to see also to the stock market. Is it equipped to handle the flow? Nepal is working with India to equip the Nepali stock market with some modern tools such as Central Depository System (CDS). Mutual Fund would be very helpful to make this market more perfect. It will not then be driven by the brokers; it will be driven by the market on its own forces. The investors can come and directly play in the market. <br />
	</span></span></span></p>
<p class="ANSWER" style="text-align: justify;">
	<span style="font-size:12px;"><span class="MyriadPro">We have a mutual fund in India under Standard Chartered. So we have the experience and I don't think there will be a problem in terms of experience or expertise.&nbsp; But we need to actually have that volume.</span></span></p>
<p class="ANSWER" style="text-align: justify;">
	<span style="font-size:12px;"><span><span class="MyriadPro"><br />
	</span></span></span></p>
<p class="questionsforinterview" style="text-align: justify;">
	<span style="font-size:12px;"><strong><span class="MyriadPro"><span lang="EN-GB" style="letter-spacing: 0pt;">How do you evaluate the current financial system of Nepal? Is it heading towards robustness?</span></span></strong></span></p>
<p class="ANSWER" style="text-align: justify;">
	<span style="font-size:12px;"><span class="MyriadPro">It is going through transformation I can say. At this stage, it is difficult to say whether it is robust or stagnant but I think the transformation is happening in the right direction. But it takes time; there are a lot of things that need to be corrected. Fundamental corrections are required. The only point here is that there are too many players so this market would definitely require consolidation. But I don't know when the momentum will come in terms of consolidation.&nbsp;</span></span></p>
<p class="ANSWER" style="text-align: justify;">
	<span style="font-size:12px;"><span><span class="MyriadPro"><br />
	</span></span></span></p>
<p class="questionsforinterview" style="text-align: justify;">
	<span style="font-size:12px;"><strong><span class="MyriadPro"><span lang="EN-GB" style="letter-spacing: 0pt;">Many banks are now trying to form a subsidiary to channel the mandatory deprived-sector lending. Do you subscribe the idea? Any plan from SCBNL along this line?</span></span></strong></span></p>
<p class="ANSWER" style="text-align: justify;">
	<span style="font-size:12px;"><span class="MyriadPro">We do not have any plan at this moment and I can't comment about other banks. However, I can tell you that this deprived-sector lending (micro finance) is definitely SCB Groups major focus area globally. And also here we are working on that.</span></span></p>
<p class="ANSWER" style="text-align: justify;">
	<span style="font-size:12px;"><span><span class="MyriadPro"><br />
	</span></span></span></p>
<p class="ANSWER" style="text-align: justify;">
	<span style="font-size:12px;"><strong><span class="MyriadPro"><span lang="EN-GB">What do you suggest to improve the financial services market in Nepal?</span></span></strong></span></p>
<p class="ANSWER" style="text-align: justify;">
	<span style="font-size:12px;"><span class="MyriadPro">The problem is uneven competition. There are many things that need to be done to make the market stronger. Firstly, we need to have tighter corporate governance; there is enough room for improvement. It is not only the regulator's responsibility; it is the responsibility of the individual players to ensure that a robust governance framework is in place. Secondly, this market needs more reforms in the sense of widening of the market and more integration with the international market. I think players should be allowed to directly interact with the international market. Thirdly, I would love to see a universally acceptable risk management model which would compensate the short-term losses caused by fundamental imbalances in the long term. Fourth, it is necessary to develop the capital market of Nepal. It helps in the long-term management of liquidity and also makes resources available to people to make short-term investments in the productive sector.</span></span></p>
<p class="ANSWER" style="text-align: justify;">
	<span style="font-size:12px;"><span><span class="MyriadPro"><br />
	</span></span></span></p>
<p class="questionsforinterview" style="text-align: justify;">
	<span style="font-size:12px;"><strong><span class="MyriadPro"><span lang="EN-GB" style="letter-spacing: 0pt;">What are the challenges and problems faced by your bank in particular and by the overall banking sector in general?</span></span></strong></span></p>
<p class="ANSWER" style="text-align: justify;">
	<span style="font-size:12px;"><span class="MyriadPro"><span style="letter-spacing: 0.2pt;">As far as our bank is concerned, we visualize the plans for next seven to ten years. I think we are well equipped to handle the challenges when they come. During crisis, we set up a very good example in the market as the only bank that lent to the market. That shows how careful we are. Our portfolio is very carefully managed. We run cautiously, we don't want to block our books and then suffer. There is problem now in the sense that the productive sector needs more credit but a lot of money is stuck in the real estate sector.</span></span><strong><br />
	<span class="MyriadPro"> </span></strong></span></p>
<p class="ANSWER" style="text-align: justify;">
	<span style="font-size:12px;"><strong><span><span class="MyriadPro"><br />
	</span></span></strong></span></p>
<p class="questionsforinterview" style="text-align: justify;">
	<span style="font-size:12px;"><strong><span class="MyriadPro"><span lang="EN-GB" style="letter-spacing: 0pt;">What is your future mission and vision for Nepal?</span></span></strong></span></p>
<p class="ANSWER" style="text-align: justify;">
	<span style="font-size:12px;"><span class="MyriadPro">We are long-term players and we would continue to be here. We'll be expanding our ventures. We have in mind some acquisition also, when the time is right. That's not completely out of the window.&nbsp; It's very much part of the game plan. <br />
	</span></span></p>
<p class="ANSWER" style="text-align: justify;">
	<span style="font-size:12px;"><span><span class="MyriadPro"><br />
	</span></span></span></p>
<p class="questionsforinterview" style="text-align: justify;">
	<span style="font-size:12px;"><strong><span class="MyriadPro"><span lang="EN-GB" style="letter-spacing: 0pt;">It is said that in Nepal, merger and acquisition will remain only in talks not in practice. What do you say?</span></span></strong></span></p>
<p class="ANSWER" style="text-align: justify;">
	<span style="font-size:12px;"><span class="MyriadPro">Unless foreign players and foreign direct investment flow into Nepal, I don't see any possibility of merger and acquisition. Its pre-requirements are political stability and supplementing policies. It is not only the matter of tax. No investor would like to buy problem paying money. Therefore, there must be a suitable labour policy in Nepal. I don't mean the facility of hire and fire. It means keeping human resource in right size and mobilizing it. After meeting all these requirements, I think we can then talk about merger and acquisition. <br />
	<br />
	</span></span></p>
<p class="ANSWER" style="text-align: justify;">
	<span style="font-size:12px;"><strong><span class="MyriadPro"><span lang="EN-GB" style="letter-spacing: 0pt;">What are your bank's recent activities on Corporate Social Responsibility?<br />
	<br />
	</span></span></strong><span class="MyriadPro"><span style="letter-spacing: 0.2pt;">We continue to focus on accseeing is believing keeping avoidable blindness in the centre point. We are very much into helping the poor schools inside and outside the valley by providing computers and creating computer laboratory and also by providing scholarships. We have helped few deserving schools in uplifting their infrastructural facilities. We are very much into the HIV-AIDS awareness and environment protection programs. As a part of our ongoing agenda, we are planting trees to maintain greenery around and are also looking at reducing the carbon requirement of our own uses. </span></span><span style="font-family: Wingdings; color: rgb(237, 28, 36); letter-spacing: 0.15pt;">&nbsp;</span></span></p>
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			'title' => 'Business And State: Nepali Capitalist Classes And Their Interests',
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				<strong>Before Nepal was declared a republic, there were three major actors in the economic affairs of Nepal: the political parties, the monarchy and the traditional capitalist classes. We won't be doing any justice to two traditional capitalist classes&nbsp; the Newars and the Marwaris&nbsp; if we say that these communities favored the former king during his direct rule.</strong></div>
		</div>
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</div>
<p>
	 </p>
<div style="width: 595px;">
	<div justify="" style="width: 595px;">
		<div>
			<div style="border: 1px solid rgb(204, 204, 204); padding: 5px;">
				<strong>After the declaration of the Republic Nepal, the state is represented by the political parties. So it is natural that the capitalist class siding with the political parties has better ground to grow, again with the blessings of the state. For the time being, we have to accept that the capitalist class close to the former king doesn't enjoy such blessings at par. But they have the experience of doing business with all other capitalist classes.</strong></div>
		</div>
	</div>
</div>
<p>
	 </p>
<div style="width: 595px;">
	<div justify="" style="width: 595px;">
		<div>
			<div style="border: 1px solid rgb(204, 204, 204); padding: 5px;">
				Traditional Newar capitalist class means a group of certain castes in the Newari community that are engaged in transit trade between India and Tibet (the autonomous region of the People's Republic of China) since the ancient time. This capitalist class is often referred to as the Caravan Traders because of their admirable mobility for business. The economic history of Newars is as old as Medieval Nepal. Marwaris are the traditional capitalist class of India who later migrated to Nepal in course of business. It has often been argued that the business history of Marwaris is as old as the economic history of India.</div>
		</div>
	</div>
</div>
<p>
	<br />
	 </p>
<div style="width: 595px;">
	<div style="border: 1px solid rgb(204, 204, 204); padding: 5px; width: 47%; float: left;">
		<div>
			<strong>By Mohan Das Manandhar &amp; Rojan Bajracharya</strong><br />
			It is undisputed that a number of important developments that occurred in the political sphere of Nepal in the past few years have affected the national economy and businesses alike. Particularly, after the declaration of Republic Nepal, it has become necessary to understand the customs, ethos and ways of doing business in the new political setup. It is natural that the business communities are and should be dynamic to readjust themselves with regime change otherwise an economy like Nepal would stall for once and for all.<br />
			<br />
			It will take some time for this dynamism to take pace and develop new commercial culture and statebusiness relationship. However, it is important to recognize at the outset how the business communities pledge their common interest to the state in view of their common interest guiding the future commercial culture and state-business relationship. One of the important components of market dynamism and competitiveness is the business communities ability to bring forward their collective interest and the state's readiness to address these interests.<br />
			<br />
			Before Nepal was declared a republic, there were three major actors in the economic affairs of Nepal: the political parties, the monarchy and the traditional capitalist classes. We won't be doing any justice to two traditional capitalist classes&nbsp; the Newars and the Marwaris&nbsp; if we say that these communities favoured the former king during his direct rule. However, we can't deny the fact that the rulers and their kin who represented the state during the former king's direct rule are another traditional capitalist class of the country; and that these three capitalist classes needed to join hands for their common interest. <br />
			<br />
			This article doesn't intend to explore what issues held them together and what separated them. We presume that all these three capitalist classes did share a common business interest, but the Newars and the Marwaris were always aware that it would be useless to have a conflicting interest as the third capitalist class (the royals) had the blessings of the state. So, the Newars and the Marwaris felt the need to build strategic ties with the political parties to defend their interests that were different from the common interest. The political parties, in turn, needed these traditional capitalists to support their movement for republicanism. <br />
			<br />
			However, the problem was that some skeptics inside the political parties thought the Newars and the Marwaris had stronger ties with the royals, and were therefore on the king's side. The king and the royalties on the other hand conceived that they could not operate the entire business and commercial activities of the country by themselves. The two traditional capitalists enjoyed an established commercial network which was the important pillar of the country's economy at that point of time. The triangular relationship between these three actors during the King's direct rule was intricate. The king and the political parties provided patronage to the traditional capitalists for their own political interests and harmonized relationship with the other two actors.<br />
			<br />
			Going further back in history, after the 1990 political transformation, the country entered into an era of democratic electoral practice. The absolute monarch was brought under the constitution and the political parties were handed the executive powers of the state. Now the state was represented by two distinct political forces the king and the political parties. Soon, these two forces were confronting with each other. An opposition political force, the Maoists, even launched an armed uprising against the constitutional monarchical dispensation.</div>
	</div>
	<div style="border: 1px solid rgb(204, 204, 204); padding: 5px; width: 47%; float: right;">
		<div>
			Later, former king Gyanendra seized the executive powers on February 1, 2005. It showed that though the political parties were assigned the executive role, the king could still afford to become authoritarian. Interestingly, it was also the period of a change in the economic regime from a closed, import-substitution economy to a liberal economy.<br />
			<br />
			In this article, what we have presumed is that the state during the former king's direct rule had conceived the need of economic liberalization in the country. It got continued with time. With economic liberalization, new business opportunities emerged in the country and so did the new capitalist classes. Gradually, a new breed of aspiring capitalists also started to get engaged in trade and commercial activities giving birth to new capitalist classes in the country. It is certain that, with the latest political change, business ventures of the former king's relatives became more transparent. They have the benefit of being tagged as general public in theory but are enjoying the blessings of the state in practice. The capitalist classes also started to tag political affiliations for their mutual benefit which is but natural.<br />
			<br />
			However, the relationships of the capitalist classes with the former king and the political parties still remain harmonized in nature. Further, few new capitalists also emerged due to nurturing by political parties or by virtue of being the relatives of the leaders of these political parties. It was but natural in any new democratic country, at least in South Asia. It is not unusual that the relationship of this capitalist class with the political parties is similar to that of the king and his relatives' capitalist class. So the capitalist class close to the political parties and the one close to the king became competitors in the market and both had had the state's blessings to further their business.<br />
			<br />
			The common interests of both the traditional and the new capitalist classes are the same. This has resulted into business associations in various capacities and the strengthening of the institutional capacity of old associations : This developed formal channels to liaison the common interests of the business communities with the state. On the other hand, the traditional Newar and Marwari capitalist classes are blessed with its own strong, wellestablished conventional network. It is important to note here that this traditional network still guides the commercial culture and the way of doing business informally. So we must presume that there must have been a timely adjustment in the conventional network of the Newars and the Marwaris. <br />
			<br />
			After the declaration of the Republic Nepal, the state is represented by the political parties. So it is natural that the capitalist class siding with the political parties has better ground to grow, again with the blessings of the state. For the time being, we have to accept that the capitalist class close to the former king doesn't enjoy such blessings at par. But they have the experience of doing business with all other capitalist classes. There are traditional Newar and Marwari capitalist classes blessed with well established conventional network and commercial culture. And the fourth capitalist class is the one which has evolved in the last one decade due to new market opportunities. <br />
			<br />
			Obviously, all these capitalist classes would stand together for their common business interests but each of them has its own self-interest and are, therefore, skeptic about each other at times. It is certain that business associations are working together as building blocks to get united for their common interests and distinct identity. However, the challenge is to build unity with diversity.<br />
			<br />
			<em>(Manandharm and Bajracharya are freelance researchers.) <br />
			<br />
			<br />
			</em></div>
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			'title' => 'IFC Builds Farming Capacity In Nepal',
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	<strong><img align="top" alt="sectorial" border="1" height="141" hspace="1" src="http://newbusinessage.com/ckfinder/userfiles/Images/sectorial1.jpg" vspace="1" width="200" /></strong></p>
<p>
	<strong>By Oliver Ryan &amp; Anupa Pant</strong></p>
<p>
	The poultry sector in Nepal carries a value tag of USD 180 million and contributes 3.3 per cent to the country's GDP. Despite its significant contribution to the Nepali economy it bears a subdued profile; write Oliver Ryan and Anupa Pant.Nepal has some 50 feedmills producing 450000 tonnes of feed per annum for a production of around 50 million broilers per annum from 5000 broiler per annum from 5000 farms. Cobb 500 is the dominant breed.</p>
<p>
	The country is considered to be selfsufficient in poultry products and in poultry feeds although a significant proportion of the feed ingredients e.g. grains and protein meals are imported from India.The total direct employment in the organized commercial sector is estimated to be 70,000, and provides a livelihood to thousands of households. The poultry sector has been growing at a rate of 10 per cent per annum over the last decade.The Nepalese broiler industry is divided into three distinct sectors, namely feed, DOC supply and broiler grow-out as distinct to an integrated model common internationally. There is limited processing with 99 per cent of the birds sold live.</p>
<p>
	In May 2010, the International Finance Corporation (IFC), a member of the World Bank Group, reviewed the poultry industry in Nepal including a lead firm diagnostic, farmer/supplier diagnostic, benchmarking and institutional mapping. The results of the diagnostic highlighted that the current waste (inefficiency) in the industry is calculated to be USD 32 million, if Nepal's performance is compared to an achievable international benchmark performance. It is recognized that the largest inefficiencies in the industry exist in the broiler growout sector, due to its structure and size, dominated by small in-efficient farmers. Grower farms are typically 1,000 birds with the largest at 150,000 birds. It is assumed that there are effectively 5,000 commercial farms in Nepal supplying 80 per cent of the birds</p>
<p>
	&nbsp;IFC identified the key barriers to improving the commercial broiler sector in Nepal as follows: while maize is available locally, protein meals, fishmeal, vitamins, minerals and addictives are imported from India. Adequate quantities of feed ingredients of acceptable quality (particularly dry maize) are often not available in local markets resulting in variable quality feeds, despite Nepal having some modern feedmills. Productivity of parent stock is generally poor and variable per flock.</p>
<p>
	Day old chick (DOC) prices are often high due to large cycles in broiler meat prices and DOC supply. DOC quality is regarded as the main problem by broiler growers and much of that is due to dehydration of DOC due to long delivery times of up to 48 hours. Boiler farmers do not understand the importance of bio-security and all-in, allout systems are often compromised. The lack of integration exacerbates this as farmers (wrongly) think multi-age flocks will improve cash flows.</p>
<p>
	There is a lack of access to technical knowledge and services. About 95 per cent of the poultry farmers do not have any formal training of farm management (biosecurity, housing and ventilation, feed and water management, livestock management and disease) and the service function from PS farms and feed mills is only now being developed. Oliver Ryan, an ex IFC Poultry Specialist, who undertook the industry diagnostic for IFC, stated that IFC's global knowledge of the poultry industry enabled it to identify key issues that needed addressing but more importantly could quantify and prioritise the benefits from the implementation of a corrective action plan and could assist the industry identify suitable specialists to assist with this. IFC strengthens sector To address the issues that are impacting the industry, IFC has launched a threeyear poultry supply chain strengthening project in Nepal. This project will assist three lead firms (covering two PS operations and two feedmills) and 3,000 poultry farmers.</p>
<p>
	The lead firms will have the capacity for supplying more than 40 per cent of Nepal's feed and some 30 per cent of the DOC demand. These lead firms have direct business relationships with feed/DOC agents nationwide. This relationship will be used to disseminate technical skills and services. Technical specialists in feed production, nutrition, livestock and disease have been contracted to assist the lead firms in improving their production efficiencies. The first two lead firms to join the project were Avinash Hatcheries, producers of Cobb 500 broilers and Hyline layer DOC's and ProbioTech Industries Limited (Nimbus), a major feedmiller. About 95 per cent of small-scale poultry entrepreneurs do not have any formal training on farm management. Sustaining profitably after two/three batches is a recurring challenge. We are happy to join hands with IFC to build a pool of trainers to provide services to poultry entrepreneurs, says Anand Bagaria, Managing Director, ProbioTech Industries Pvt Ltd. The project will train broiler growers in all aspects of broiler production through the employment and training of 12 local veterinarians. These veterinarians will then train 3,000broiler farmers over a period of three years, with the aim of directly impacting the management of 40 per cent of Nepal's broiler production. Lead firms will be used to arrange broiler farmer training sessions. </p>
<p>
	<br />
	There will be a gender specific outreach component of the project, as well as a dealer/retailer component (with focus on bird handling, waste management and food safety). The aim is to improve feed, DOC chick quality and grower performance to reduce mortality by two per cent and reduce FCR by 0.2:1 over the term of the project. The project performance will be measured by the improvement in liveability and FCR over a baseline performance that is being carefully established on a sample of farms and will be monitored by an independent assessor. It is recognised that the largest inefficiencies in the industry exist in the broiler grow-out sector, due to its structure and size, dominated by small farmers, said Brad Roberts, Operations Officer, IFC. IFC is providing support to enhance productivity and efficiency improvements for about 3,000 broiler farms. He said that the IFC's role in increasing industry capability was hopefully a forerunner to IFC assisting with project finance to a growing industry. ï</p>
<p>
	<br />
	<strong>(This article was published in Asian Poultry Magazine November/December 2011.)&nbsp; <br />
	</strong></p>
<p>
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per annum over the last decade.Current waste (ineffi ciency) in
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			'title' => 'The Changing Beer Market Dynamics',
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			'content' => '<p style="text-align: justify;">
	<span style="font-size:12px;">From premium and international beer brands to locally brewed Nepali strong beer brands Nepal's beer market has seen a tremendous shift in the last couple of years. Industry insiders opine that varied tastes, numerous choices and price factor are among the overriding reasons for this shift. Consumers are spoilt for choices in today's market scenario and hence, they have started to prefer indigenous beer brands, asserts K P Rizal, Deputy General Manager at Sungold Brewery (Nepal) Pvt Ltd. <br />
	</span></p>
<p style="text-align: justify;">
	<span style="font-size:12px;">This change in consumption trend has ensured that Gorkha Brewery Pvt Ltd, the market leader, has turned out to be the biggest loser in the bargain. It enjoyed an absolute monopoly in the market with over 80 per cent market share not too long ago with established and popular brands namely Carlsberg, Tuborg and San Miguel ruling the marketplace. Over the last couple of years, however, the brewery has seen a turnaround in fortunes primarily due to the change in consumers tastes and sense of pride attached with local brands. A market estimate suggests that Gorkha Brewery has seen its market share plummet sharply during this period. <br />
	</span></p>
<p style="text-align: justify;">
	<span style="font-size:12px;">"The market has shifted to lesser priced brands and it has led to the leading brewery losing market share considerably," confirms Kishor Bhattarai Chief of Sales &amp; Marketing at Himalayan Brewery Ltd. Experts allege that international brands took the market for granted and hence, created room for local brands to find a stronger foothold in the market. More consumers are increasingly opting for strong beer brands that cost less as well as promise faster intoxication. <br />
	</span></p>
<p style="text-align: justify;">
	<span style="font-size:12px;">The price of a beer is what is truly driving the market at this point of time. "The mindset of the consumers is to buy a beer with high alcohol content at cheap price," agrees Thomas Schlau Technical Director and Master Brewer at Sthapit &amp; Schlau Pvt Ltd. He says people must enjoy beer and there is a need for a culture to develop around beer drinking. Sensing the shift from the premium and international beer brands to indigenous Nepali brands, market leader Gorkha Brewery has indulged in severe price slashing in a bid to regain lost territory, reiterate competitors. So much so that its flagship brand Gorkha is now the cheapest beer brand available in the market. <br />
	</span></p>
<p style="text-align: justify;">
	<span style="font-size:12px;">Though, of course, the brewery continues to be the market leader due to its strong show in the premium segment which it monopolises with no competition in sight by a long way. Sthapit &amp; Schlau that began production in May 2010 by using the production facility at United Breweries Nepal Pvt Ltd in Hetauda Industrial district, started with a modest 2,500 cases a month. Within a year-and-a-half, it has registered a 100 per cent growth, claims Schlau, and produces 5,000 cases a month during the 'beer season' between March and October. We have been promoting both our brands Coblenzer Pilsener and Coblenzer Marzen as natural beer and it took us some convincing to sell initially but our hard work is beginning to pay off, he says. <br />
	</span></p>
<p style="text-align: justify;">
	<span style="font-size:12px;">It started off with distributing in cities such as Kathmandu, Dharan and Biratnagar and has moved on to cover Pokhara, Narayanghat and Gorkha under its distribution network this year. The brewery, buoyed by overwhelming response from several sections of the market, plans to aggressively expand its network in the coming years. Sungold Brewery that uses up, on an average, 60-70 per cent of its 140,000 cases-a-month-capacity brewery at Damkauli in Nawalparasi is currently growing at 25 per cent per annum. About two years ago, we were growing at 100 per cent annually but due to the declining growth of the industry, our growth too has been affected to an extent,â€ admits Rizal. <br />
	</span></p>
<p style="text-align: justify;">
	<span style="font-size:12px;">The brewery currently enjoys 20 per cent market share, he claims. It is now focusing mainly on two brands Nepal Ice (started in 2007) and Real Gold (started in 2008). While Rizal concedes that a brand name is something to reckon when it comes to international brands, he is confident that his brands will hold their own in the market as time progresses. The brewery has a strong distribution mechanism in place with 200 distributors across Nepal. He elaborates, "Distribution and market expansion is a continuous process and market growth and access dictate our distribution strategy." Not content with its impressive domestic show, it is also in the process of developing Nepal Ice as an international brand by exporting it to destinations far and wide such as Japan, USA, UK, Hong Kong, Korea and Dubai. Himalayan Brewery, which is going through a transition phase currently with a new management having taken over operations about a year ago, is already doing decently with about 9 percent of the market share, claims Bhattarai. <br />
	</span></p>
<p style="text-align: justify;">
	<span style="font-size:12px;">"It was immensely satisfying for us to discover that our flagship brand Iceberg enjoys incredible brand recall in the market and it makes our job that much easier," Bhattarai states excitedly. With its brewery at Godavari in Lalitpur, it has around 100 distributors across Nepal and counting. Iceberg also awaits a brand line extension few months down the line. "We are looking at extending the brand to premium segment. <br />
	</span></p>
<p style="text-align: justify;">
	<span style="font-size:12px;">There is every reason for a domestic beer to provide quality at par with international brands and compete on equal terms," reveals Bhattarai. Brewers rue the fact that advertising wise, they don't have the option of gaining mileage through the electronic media as promotion of alcoholic beverages is banned on this medium in Nepal as per a government directive. "From a marketer's perspective, it is sad indeed that we cannot avail the benefit of advertising through the electronic media," says Rizal. He is, therefore, limited to mainly use BTL (below the line) activities which includes branding of glasses, openers and signage etc, consumer sampling, sponsoring sporting events and musical concerts and, of course, print advertising. Schlau, while choosing 'Coblenzer' (the name is based on Schlau's hometown Coblenz in Germany) as a brand name, hoped that it will go down well with the consumers. <br />
	</span></p>
<p style="text-align: justify;">
	<span style="font-size:12px;">However, as he says, "My calculation was wrong that a foreign (read German) name will get us immense mileage, it took me a little time to realise that people here have an affinity towards Nepali-ism." He too primarily depends on print advertising to promote his beers and occasionally supports events. At Moksh Bar last month, he celebrated 'Oktoberfest', modeled after the famous German beer festival in Munich. On the other hand, Himalayan Brewery, after beginning to function under a new management, started its branding exercise from scratch including developing POP (point of purchase) displays like posters and danglers, says Dhiraj Tuladhar, Brand &amp; Business Development Officer at the Brewery. <br />
	</span></p>
<p style="text-align: justify;">
	<span style="font-size:12px;">It has made an attempt to relate Kathmandu beer with cultural heritage by promoting occasions such as Nhu Dan (Newari New Year). "We are trying to cash in on the culture aspect and hope it works for us," adds Tuladhar. While it may appear that Nepali breweries make huge profit margins, they have a different story to tell altogether. Brewers allege that heavily levied taxes including excise duties and VAT are so high that beer drinking in Nepal has become a very expensive proposition for the end consumer. A case (12 bottles of 650 ml each) of Coblenzer Beer invites an excise duty of Rs 624 which translates to Rs 52 per bottle. It is extremely high. Can you imagine that a bottle of beer actually costs more than a full meal at a reasonable eatery? asks Schlau. <br />
	</span></p>
<p style="text-align: justify;">
	<span style="font-size:12px;">He elaborates, While a plate of daal-bhaat may cost you Rs 150 at a regular food joint, you will have to pay Rs 162 and Rs 167 respectively for a bottle of Coblenzer Pilsener and Coblenzer Marzen. Even though the beer industry in Nepal hasn't suffered as much as some of the other sectors in the economy, there has been a considerable decline in its annual growth rate. Enjoying a 40 per cent growth per annum about two years ago, it is now growing at a modest 12-13 per cent annually. Brewers blame this on the economic downturn the country has been facing over the last few years. Rizal blames it on poor financial activity, a result of the economy being on the slow side.</span></p>
<p style="text-align: justify;">
	<span style="font-size:12px;">He says, "The real estate business was booming a couple of years ago. Today, restaurant visits have minimised and people are gradually shifting towards strong beer brands due to economic reasons." The slowdown in the economy has taken its toll and impacted the industry to a certain extent with restaurants and pubs registering less than expected footfall in recent times. <br />
	</span></p>
<p style="text-align: justify;">
	<span style="font-size:12px;">A lot of people for whom spending lavishly weren't a problem at all; income disposal has begun to matter a great deal. A 500,000 cases a month market, the annual revenue of the beer industry hovers around Rs 10 billion mark presently. Beer professionals believe that the industry holds great potential and in the future, with signs of recovery in the economy, it can look forward to better days ahead.<br />
	<br />
	<br />
	</span></p>',
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			'description' => 'From premium and international beer brands to locally brewed Nepali strong beer brands Nepal’s beer market has seen a tremendous shift in the last couple of years. Industry insiders opine that varied tastes, numerous choices',
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			'title' => 'Do Nepali Banks Require Additional Capital Injection?',
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			'content' => '<p style="text-align: justify;">
	<span style="font-size:12px;"><img align="right" alt="" height="196" hspace="5" src="http://newbusinessage.com/ckfinder/userfiles/Images/sujit mundal.jpg" vspace="5" width="150" />On a recent trip to Chennai, I met an American lady seated next to me. It was a flight of about two hours and hence a fairly long time to converse. She introduced herself as Gene Turnbull, a senior research scholar at Stanford University; currently working on the financial sectors of emerging markets, mainly focusing on South Asia. What a coincidence? <br />
	</span></p>
<p style="text-align: justify;">
	<span style="font-size:12px;">I asked her, What is your opinion of the financial markets in this subcontinent? She looked at me for a while and then said, I may need to start from a few not too old past events that plagued the entire global financial system.That's fine with me, I quipped. <br />
	</span></p>
<p style="text-align: justify;">
	<span style="font-size:12px;">She started. <br />
	</span></p>
<p style="text-align: justify;">
	<span style="font-size:12px;">We need to look back at the global financial crisis which erupted in 2007 and severely damaged the western, mainly the advanced economies; the US was worst affected. That point in time, Asian economies, which are mostly emerging market economies, viz China, India, Indonesia etc were doing fine. They did not immediately feel the heat of the virtual collapse in the western markets, mainly the US and advanced West European Countries. China's dependence on exports was quite substantial and hence some fears loomed large about the sustainability of high rate of growth of the Chinese economy and the valuation of the currency. India was marginally better placed in the sense that the domestic demand continued to be firm and that supported the Indian growth. She further explained that the Asian economies were far more prepared in managing themselves. The governments and regulators also remained alert post Asian crisis of the late nineties. <br />
	</span></p>
<p style="text-align: justify;">
	<span style="font-size:12px;">I asked her, What do you feel about the financial markets particularly in South Asia? I'm interested to know about Nepal. She continued . Perhaps this is not a good time for the banks, mainly in the west. They are besieged with low growth and erosion in capital stemming from sovereign debt exposures and stricter regulatory pressure. As a result, they are suffering from low return on capital. It looks like that would continue to be the case thanks to enhanced capital requirement under BASEL III. She, however, maintained that the banks in India, China and other emerging markets are more likely to sustain their returns on capital despite increased capital requirements under BASEL III. This will probably create a catalytic effect in attracting more capital in the emerging markets that are experiencing a broader economic landscape. <br />
	</span></p>
<p style="text-align: justify;">
	<span style="font-size:12px;">As a sequel to the financial crisis of 2007, BASEL III did set forth revised rules for capital requirements for the banks. The minimum equity requirement, that is, Tier I capital will now be 7 per cent; a sharp increase from the present level of 2 per cent. Total capital requirement ( inclusive of Tier II) will increase from 8 per cent to 10.5 per cent. In addition, there will be a counter- cyclical buffer. To be precise, the banks may be required to operate with a capital in the range of 15-17 per cent in the years to come. You may know that the leading banks in Europe and the US already have capital adequacy of more than 14-15 per cent as mentioned. <br />
	</span></p>
<p style="text-align: justify;">
	<span style="font-size:12px;">The additional requirements under Basel III would necessitate capital injection of significant amount for the large banks in the west. The estimated amount of capital to be raised for meeting Basel III would be to the tune of 475 billion euros. The western banks would have to encounter at least three main challenges in the process of implementation of BASEL III viz firstly, the enormity of Euro Zone crisis, secondly, the slowdown in lending and contraction of balance sheets, and thirdly, stricter regulatory requirements emanating from the respective central banks. <br />
	</span></p>
<p style="text-align: justify;">
	<span style="font-size:12px;">To tell you honestly, I was enjoying the analysis. She continued. You may well guess that the investors would think twice before putting their money in the western banks as the ROI would shrink, though the safety around their investments might be better than before. So, there would be an inclination for the investors to look towards the east. I asked her, What is your opinion about the banks in India? <br />
	</span></p>
<p style="text-align: justify;">
	<span style="font-size:12px;">She replied that although the Indian Banks are passing through a stressful period resulting from falling net margin in interest, higher incidence of nonperforming loans and more restrictions imposed by the central bank in respect of sectoral lending, these banks are better positioned to maintain a good return on equity in the long term. The growing domestic demand in the EME's (emerging market economies) and their conducive macroeconomic policies would help boost bottom lines of the banks in these countries including India. I then categorically asked her a question about the smaller economies in South Asia viz Nepal. I explained my interest in knowing about Nepal. She remained quiet for some time as if she was drowned in deep thought and then quipped, What is your specific question?</span></p>
<p style="text-align: justify;">
	<span style="font-size:12px;">I replied, What do you think about the banking system in this country? She was of the opinion that the country was in the early stage of development and the accompanying financial system needed higher level of governance and stronger foundation in the form of stricter implementation of regulations and transparency. She felt that the supervision system of the central bank needed further strengthening and more professional approach in the sense that they should not see wood for the tree.</span></p>
<p style="text-align: justify;">
	<span style="font-size:12px;">I could not agree more that her observations were interesting. Against the back drop of a looming financial crisis in the Euro Zone and the very slow recovery in the US, it is quite likely that contagion effect can hit the emerging market economies including Nepal and this may lead to the crisis of confidence. Banks will experience falling returns, lesser ability to support credit off take and higher incidents of NPA. Considering all this, I asked her my final question on Nepali financial system, Do you think Nepali Banks require further injection of capital in order to maintain capital adequacy and create a cushion against possible erosion? She thought for a while and responded mildly, Yes, but it needs a lot of debate and political consideration . She was absolutely right. I think this is a serious subject for discussion and the sooner it is done, it's better for the country. </span></p>
<p style="text-align: justify;">
	<span style="font-size:12px;"><span><em><br />
	</em></span></span></p>
<p style="text-align: justify;">
	<strong><span style="font-size:12px;"><em>(Mundul is a Director with Standard Chartered Bank Nepal Ltd)<br />
	<br />
	<br />
	</em></span></strong></p>',
			'published' => true,
			'created' => '2011-11-16',
			'modified' => '2012-09-17',
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			'description' => 'On a recent trip to Chennai, I met an American lady seated next to me. It was a flight of about two hours and hence a',
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	(int) 3 => array(
		'Article' => array(
			'id' => '483',
			'article_category_id' => '41',
			'title' => 'A Walk Through Central Depository System',
			'sub_title' => '',
			'summary' => null,
			'content' => '<div>
	<div style="text-align: justify;">
		<span style="font-size:12px;"><img align="left" alt="sectorial" border="1" height="128" hspace="5" src="http://newbusinessage.com/ckfinder/userfiles/Images/homnath gaire.jpg" style="margin:10px;padding:10px;" vspace="5" width="100" />By <strong><u>Homnath Gaire<br />
		<br />
		</u></strong></span></div>
</div>
<div style="text-align: justify;">
	<span style="font-size:12px;">In a nut shell, Central Depository System (CDS) is an electronic book entry system to record and maintain securities and to register their transfer. In CDS, ownership will be changed without physical movements of securities or execution of transfer deeds. The ownership will be transferred as soon as securities move from one account to another. CDS is purely a settlement vehicle and will not affect the trading in any manner whatsoever. It is expected that the CDS will bring tremendous efficiency and growth in the capital market of Nepal. It will also enhance the image of Nepal's capital market globally. </span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;"><br />
	</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;"><strong>Participants of CDS:Account Holders<br />
	<br />
	</strong></span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;">Account holders are divided into two categories - account holders and participants. Both account holders and participants will have direct access to the CDS. Account holders will be allowed to have a main account and a house account for their beneficially owned securities. Participants, however, will be entitled to have client accounting facilities within the CDS. In addition to main account and house account, participants will be allowed to have sub accounts and group client accounts. In short, the participants can provide custody services to their clients whereas account holders can keep only their beneficially owned securities in CDS.</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;"><br />
	</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;"><img align="right" alt="sectoral" border="1" height="350" hspace="5" src="http://newbusinessage.com/ckfinder/userfiles/Images/img(7).jpg" style="margin:10px;padding:10px;" vspace="5" width="252" />"Beneficial Owner" means the person who have opened their Beneficial Owner Account with Central Depository Company for depositing their securities or instruments and who have held the securities and instruments which are capable of being deposited in de-mat form.</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;"><br />
	</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;">All the members of stock exchanges, banks (both commercial and investment), and development financial institutions (DFIs) are allowed to open their account as participants whereas corporate bodies such as leasing companies, investment companies and insurance companies can open their account as account holders.</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;"><br />
	</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;"><strong>Issuers/Registrars<br />
	<br />
	</strong></span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;">The issuers of capital whose securities are converted from physical to electronic book entry system play a significant role in CDS. They will also have direct access to the CDS. After a security is declared eligible for the purpose of CDS, necessary software is provided to that particular issuer upon signing the issuer's agreement with central depository company (CDC). The shares are entered into CDS only after proper verification by these issuers or their registrar. This process eliminates the problem of fake/duplicate/lost/stolen share certificates as issuers thoroughly check them before approving for CDS.</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;"><br />
	</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;"><strong>Eligible Pledge<br />
	<br />
	</strong></span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;">Financial institutions that lend against securities will have their account with CDS in the capacity of eligible pledges. These institutions will also have direct access to CDS and will be provided with necessary connection in this regard upon signing the pledge agreement with CDC. Their clients will be able to pledge their electronic book based securities in CDS. Once the securities are pledged in the CDS, the control over those securities is transferred to the eligible pledgee in the form of pledge release/call. Nevertheless, the beneficial owner will continue to get the benefits of corporate action on pledged securities.</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;"><br />
	</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;"><strong><img align="left" alt="sectoral" border="1" height="228" hspace="5" src="http://newbusinessage.com/ckfinder/userfiles/Images/img1(4).jpg" style="margin:10px;padding:10px;" vspace="5" width="350" />CDS Account Structure:<br />
	<br />
	</strong></span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;">The account holders of CDC will be able to settle their transactions within the CDS through five types of accounts, namely:<br />
	<br />
	</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;"><b>Main Account:</b> Each account holder in the system will be allocated a main account by virtue of being an account holder in the CDS. This account will mainly be used as a transit account for movement of securities. Any security coming in or moving out of an account holder's family of accounts will pass through this account.</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;"><br />
	</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;"><b>House Account:</b> Used for securities owned beneficially by account holders. "Beneficial Owner Account" means De-mat Account (electronic account) opened with Central Depository Company through Depository Participant in order to deposit securities by the Beneficial Owner and which is distinguished by a unique account number.</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;"><br />
	</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;"><b>Sub-account (Client Account):</b> This account is used for keeping securities belonging individually to each of the clients of an account holder. An account holder may open and maintain any number of sub-accounts he requires on behalf of his clients.</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;"><br />
	</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;"><b>Group Client Account:</b> This account is used for keeping securities which are beneficially owned by the account holder's client. It will be used for clients who are not willing to utilize the facility of opening separate sub-accounts. The account holder will group all such clients in his/her group account. The detailed break-up of the securities held by each client of a group account will be held by the account holder and no such record will be maintained by CDC. </span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;"><br />
	</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;"><b>Cash Account: </b>Each account holder in the system who opts to avail the Delivery vs Payment (DVP) facility will be required to deposit relevant amount to be used for the settlement of DVP obligations.<br />
	<br />
	</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;">CDS-Operation<br />
	<br />
	</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;"><b><img align="right" alt="" border="2" height="335" hspace="5" src="http://newbusinessage.com/ckfinder/userfiles/Images/img2(4).jpg" vspace="5" width="350" />The main operations performed in the CDS are as follows:<br />
	<br />
	</b></span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;">Deposit of existing and new securities in the CDS. Once a security is declared eligible by CDC, the physical certificates of that security will be deposited in the CDS for conversion after which they will be available for further transfers within the system. Following is the procedure to deposit securities in the CDS:</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;"><br />
	</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;">To begin with account holder will initiate the deposit request by entering the details of share certificates into the system, and securities deposit form (SDF). CDS will generate computer printouts of the transaction. Transfer deed will be executed in favor of CDC. Account holder will then send the relevant share certificates, transfer deeds, SDF and the computer printouts to the relevant registrar. The registrar after verification will either approve or reject the transaction within five days from the receipt of the documents. Registrar will update CDC nominee share holding in the member's register, cancel share certificates and transfer deeds, and return the relevant documents (other then canceled share certificates and transfer deeds) to applicant account holder.</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;"><br />
	</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;">Withdrawal of securities <br />
	from the CDS:<br />
	<br />
	</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;">The account holder will initiate the withdrawal request by entering the relevant details into the system, and securities withdrawal form (SWF). CDS will generate computer printouts of the transaction. Account holder will then send the SWF and the computer printouts to the relevant registrar.</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;"><br />
	</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;">The registrar after verification of the balance will either approve or reject the transaction within five days from the receipt of the documents and update CDC nominee share holding in the member's register. Registrar will return the relevant documents and share certificates to the applicant.</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;"><br />
	</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;">Prepare share certificate (Jumbo certificate): <br />
	<br />
	</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;"><b>Free Transfer -</b> Book entry transfer of securities without any associated cash movement. This is a unilateral transaction in which an account holder can deliver securities to any other account holder in CDS. Although the beneficial ownership of securities changes as securities move from one account to another, there is no stamp duty involved and the transfer is on the spot.</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;"><br />
	</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;"><b>Pledge/Release/Call -</b> Pledging securities in favor of a lender which can only be released or called by the lender. This function will greatly benefit the financial institutions by reducing risk of fake share certificates and paperwork to a great extent. </span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;"><br />
	</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;">Stock Borrowing or Lending through the CDS: <br />
	<br />
	</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;"><b>Corporate Action - </b>In case of bonus issues, rights issues, sub-division, consolidation and any other action that changes the number of securities held in a participant's account or involves the determination of entitlement to beneficial owners, CDC shall provide relevant details of account holders and sub-account holders to the issuer. The CDC will also provide details for the purpose of notice of general meetings and other notices/communications.</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;"><br />
	</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;"><b>Delivery Versus Payment (DVP) - </b>DVP is a bilateral transaction or book entry transfer of ownership of a security in exchange for payment to settle a transaction. The deliverer of the securities will initiate the DVP request on CDS specifying the details of securities and payment.&nbsp;</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;"><br />
	</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;">Upon acceptance of the receiver, CDS will debit deliverer's securities account and credit receiver's securities account. Likewise, CDS will debit receiver's cash account and credit deliverer's cash account. Cash only moves from one account to another without any associated securities movement. </span></div>',
			'published' => true,
			'created' => '2011-10-11',
			'modified' => '2012-09-17',
			'keywords' => '',
			'description' => 'In a nut shell, Central Depository System (CDS) is an electronic book entry system to record and maintain securities and to register their transfer. In CDS, ownership......',
			'sortorder' => '393',
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	(int) 4 => array(
		'Article' => array(
			'id' => '453',
			'article_category_id' => '41',
			'title' => 'Social Media Adoption By TELECOM Giants In Nepal - NCELL And NTC',
			'sub_title' => '',
			'summary' => null,
			'content' => '<div>
	<div style="text-align: justify;">
		<span style="font-size:12px;">By <strong>Deep Sherchan<br />
		<br />
		</strong></span></div>
</div>
<div style="text-align: justify;">
	<span style="font-size:12px;">As we are moving into the age of online economy, communication channels will play a major role in development of nation's economy. So, it is very important to understand where Nepal is, in terms of the whole online revolution. South-East Asian Countries like Malaysia, Singapore, and Indonesia are rapidly evolving with the online revolution and giving them important space into the overall growth of the nation.</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;"><br />
	</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;">As per the US Census Bureau, Nepal has a population of 28,951,852 as of 2010 and accordingly to ITU Nepal has 625,800 Internet users as of June, 2010, which is like 2.2 per cent of the population, according to ITU. Now, if we compare this with Malaysia, it has 28,728,607 population (2011) and 16,902,600 Internet users as of June 2009, which is 64.6 per cent penetration, as per ITU. More interestingly, it had around 9,998,440 Facebook (FB) users on March 31/11, which is 34.8 per cent penetration. As per Facebook, Nepal had 811,780 Facebook users on March 31/11, 2.8 per cent penetration. The difference in the penetration of Internet is interesting to observe. The numbers can be a bit contradictory, but FB's user count is very approximate based on the location which cannot be verified. But even then, this does give some amount of insights into the population.</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;"><br />
	</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;">Now, Social Media is already a leading phenomenon in the world, it's a cultural shift between the mainstream media and the free and open community conversation that takes place at the online community forums and platforms such as Facebook. One of the major role social media plays is in the leveraging small and medium businesses, where businesses have direct access to communicate with the customers. So, it is interesting to see how the telecom giants of Nepal are handling this, as they provide the main backbones for the whole revolution.</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;"><br />
	</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;">The picture is quite interesting as it shows that the two major players of telecom in Nepal (NTC and NCELL) have been going in different directions all together. Now, which one is on the right track is not very difficult to figure out. When we talk about online revolution, there is one important thing to consider and that is - how social media friendly is the company. Now, unless telecom companies understand the effect of social media, there is no way that they will be able to drive the required innovation in the field.</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;"><br />
	</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;">In the evolving business models, every company is required to have an online presence and online communication channels, for people to connect with the service. Nepal surely has lots of hurdles to pass through before the Nepali people and companies can leverage the benefits of IT and social media. If you compare NCELL and NTC, you will immediately notice where each one is. NCELL has been heavily adopting latest technology and business models to gain users base, whereas NTC is still in rudimentary stages.</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;"><br />
	</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;">Just to give you an idea on why this is so important for NTC and NCELL, let me explain the basic business models both employ. Both companies earn by sales of SIM cards, the call charges and nowadays even through bandwidth usages. The concept of value added services for mobile devices has still not matured and the same can be said about caller-tunes and other entertainment services. In addition to this, the emerging popularity of Smartphone has provided opportunity to give a variety of services to the end-users. In a competitive market, consumer research report shows that the adoption rate of telecom services is heavily influenced by the service satisfaction, which means a continuous to and fro communication between customer and business. This means a constant presence -- physically and virtually. This is why, online presence is so important. People are continuously looking for information and support.</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;"><br />
	</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;">May be this is why NTC is losing the battle with NCELL. NCELL has been officially declared as the winner the country's first private GSM mobile operator”as the Number 1 player in the GSM mobile segment. The massive branding and investment NCELL has done for last one year is commendable. IT has&nbsp;been aggressive in terms of promoting and coming up with new business models.</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;"><br />
	</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;">Reports say that until last fiscal year, difference between the subscriber base of the two operators NCELL and NT was around 1 million. However, since last fiscal year, NCELL aggressively started introducing new services and handsets targeting both low-end and high-end customers.</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;"><br />
	</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;">Let us just concentrate on how NCELL has been making its presence felt in the online space through social media. The social media presence is all about wearing an attitude to support customers through providing timely information. The websites of NCELL and NTC are both rich in content but NCELL seems to have been communicating with more grace than NTC. The engagement in NCELL is much higher than in NTC. Similarly, NTC doesn't have any online profiles in Facebook, which is where most people are spending their time on. </span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;"><br />
	</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;">Beside the contradictory argument that Nepal is still emerging in terms of Online Community, NCELL seems to be doing great with its promotion whereas NTC is still lagging behind the adoption. Being TELECOM companies, NTC and NCELL both must be forerunner into adopting new technology and encouraging new services.</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;"><br />
	</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;">Other interesting examples are Nepal Unites Campaign and Creative Political Activism which are on at Facebook. These activities show the vibes of Nepalese Online Community which if leveraged correctly would benefit companies as well as the nation.</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;"><br />
	<br />
	</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;"><strong>NTC Online Profiles:<br />
	<br />
	</strong></span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;">Telecommunication was introduced with the installation of open wire trunk telephone line between Kathmandu and Birgunj (a border town in southern Nepal) for the first time in Nepal around 1914, beginning of the First&nbsp; World War.</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;"><br />
	</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;">Nepal Telecom has been actively involved in the business of physical market place. Its presence in the electronic market space is very minimal while major projects are under planning. Nepal Telecom is highly equipped with country-wide telecom infrastructure which is the competitive advantage for it over the rivals in the industry. Nepal Telecom has implemented IT in customer service rather than in core business. The company has been implementing information technology in customer billing payment. The other IT focuses are on Internal integration of the functional units and managerial planning process. The company has centralized the billing payment and revenue collection.</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;"><br />
	<br />
	</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;"><strong>NCELL Online Profiles:<br />
	<br />
	</strong></span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;">Until last fiscal year, difference between the subscriber base of the two operators NCELL and NT was around 1 million. However, since last fiscal year, NCELL aggressively started introducing new services and handsets targeting both low-end and high-end customers.<br />
	<br />
	</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;"><br />
	</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;"><i>(Sherchan is Chief Marketing Officer at InRev Systems in Bangalore, India. He can be contacted via email at deep@in-rev.com or @bexdeep on Twitter.)<br />
	<br />
	<br />
	</i></span></div>
<table border="2" cellpadding="0" cellspacing="0">
	<tbody>
		<tr>
			<td valign="top" width="91">
				<div style="text-align: justify;">
					<span style="font-size:12px;"><br />
					</span></div>
			</td>
			<td valign="top" width="269">
				<div style="text-align: justify;">
					<span style="font-size:12px;">NCELL</span></div>
			</td>
			<td valign="top" width="269">
				<div style="text-align: justify;">
					<span style="font-size:12px;">NTC</span></div>
			</td>
		</tr>
		<tr>
			<td valign="top" width="91">
				<div style="text-align: justify;">
					<span style="font-size:12px;">Website</span></div>
			</td>
			<td valign="top" width="269">
				<div style="text-align: justify;">
					<span style="font-size:12px;">http://ncell.com.np/</span></div>
			</td>
			<td valign="top" width="269">
				<div style="text-align: justify;">
					<span style="font-size:12px;">http://www.ntc.net.np/</span></div>
			</td>
		</tr>
		<tr>
			<td valign="top" width="91">
				<div style="text-align: justify;">
					<span style="font-size:12px;">Wikipedia</span></div>
			</td>
			<td valign="top" width="269">
				<div style="text-align: justify;">
					<span style="font-size:12px;">http://en.wikipedia.org/wiki/Ncell</span></div>
			</td>
			<td valign="top" width="269">
				<div style="text-align: justify;">
					<span style="font-size:12px;">http://en.wikipedia.org/wiki/Nepal_Telecom</span></div>
			</td>
		</tr>
		<tr>
			<td valign="top" width="91">
				<div style="text-align: justify;">
					<span style="font-size:12px;">Facebook Wiki</span></div>
			</td>
			<td valign="top" width="269">
				<div style="text-align: justify;">
					<span style="font-size:12px;">http://www.facebook.com/pages/Ncell/134092903305342</span></div>
			</td>
			<td valign="top" width="269">
				<div style="text-align: justify;">
					<span style="font-size:12px;">http://www.facebook.com/pages/Nepal-Telecom/104071036295574?sk=wall</span></div>
			</td>
		</tr>
		<tr>
			<td valign="top" width="91">
				<div style="text-align: justify;">
					<span style="font-size:12px;">LinkedIn</span></div>
			</td>
			<td valign="top" width="269">
				<div style="text-align: justify;">
					<span style="font-size:12px;">http://www.linkedin.com/company/ncell</span></div>
			</td>
			<td valign="top" width="269">
				<div style="text-align: justify;">
					<span style="font-size:12px;">http://www.linkedin.com/company/nepal-telecom/statistics</span></div>
			</td>
		</tr>
		<tr>
			<td valign="top" width="91">
				<div style="text-align: justify;">
					<span style="font-size:12px;">Facebook Page</span></div>
			</td>
			<td valign="top" width="269">
				<div style="text-align: justify;">
					<span style="font-size:12px;">https://www.facebook.com/ncell.com.np</span></div>
				<div style="text-align: justify;">
					<span style="font-size:12px;">(65,569 fans)</span></div>
			</td>
			<td valign="top" width="269">
				<div style="text-align: justify;">
					<span style="font-size:12px;">No official page, but lots of hatred community present unofficially.</span></div>
			</td>
		</tr>
		<tr>
			<td valign="top" width="91">
				<div style="text-align: justify;">
					<span style="font-size:12px;">Twitter Profile</span></div>
			</td>
			<td valign="top" width="269">
				<div style="text-align: justify;">
					<span style="font-size:12px;">None</span></div>
			</td>
			<td valign="top" width="269">
				<div style="text-align: justify;">
					<span style="font-size:12px;">None</span></div>
			</td>
		</tr>
		<tr>
			<td valign="top" width="91">
				<div style="text-align: justify;">
					<span style="font-size:12px;">Twitter Conversation</span></div>
			</td>
			<td colspan="2" valign="top" width="538">
				<div style="text-align: justify;">
					<span style="font-size:12px;">Though Twitter has vibrant Nepalese community, the scale is pretty low compared to Facebook and the conversation is low for NTC and NCELL.</span></div>
			</td>
		</tr>
		<tr>
			<td valign="top" width="91">
				<div style="text-align: justify;">
					<span style="font-size:12px;">Blogs</span></div>
			</td>
			<td valign="top" width="269">
				<div style="text-align: justify;">
					<span style="font-size:12px;">http://blog.ncell.com.np/</span></div>
			</td>
			<td valign="top" width="269">
				<div style="text-align: justify;">
					<span style="font-size:12px;">&nbsp;-</span></div>
			</td>
		</tr>
		<tr>
			<td valign="top" width="91">
				<div style="text-align: justify;">
					<span style="font-size:12px;">Engagement</span></div>
			</td>
			<td valign="top" width="269">
				<div style="text-align: justify;">
					<span style="font-size:12px;">Contest and Campaigns</span></div>
			</td>
			<td valign="top" width="269">
				<div style="text-align: justify;">
					<span style="font-size:12px;">None</span></div>
			</td>
		</tr>
	</tbody>
</table>
<p style="text-align: justify;">
	<span style="font-size:12px;"><br />
	</span></p>',
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			'keywords' => '',
			'description' => 'As we are moving into the age of online economy, communication channels will play a major role in development of nation’s economy. So, it is very important to understand where......',
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			'id' => '452',
			'article_category_id' => '41',
			'title' => 'Credibility Question In Accounting Profession',
			'sub_title' => '',
			'summary' => null,
			'content' => '<div>
	<div style="text-align: justify;">
		<span style="font-size:12px;"><strong><br />
		By Paramananda Adhikari, FCA <br />
		<br />
		</strong></span></div>
</div>
<div style="text-align: justify;">
	<span style="font-size:12px;">Over the past decade, increased litigation as well as criticism of auditors has left little room for doubt that auditors are facing a liability and credibility crisis in their profession. The reputation of accountancy profession comes under question for the reliability of their services. This issue in auditing profession is termed audit expectation gap which denotes the difference between the public's and auditors perceptions of the role of an audit function. The gap is critical to the auditing profession because the greater the unfulfilled expectations from the public, the lower is the credibility associated with the function of the auditor. The increase in litigation and criticism against the auditors can be attributed to the expectation gap. The gap arises from the misconceptions on the part of users, the nature and objective of audit, unreasonable expectations from public and performance below standard of profession by the auditors too. The accountancy profession, like other professions, exists only through wide public acceptance. The perceived need in auditing is an independent reporting function. Once the auditor has examined the entity's books of accounts and financial statements, the public understands that there are no problems. </span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;"><br />
	</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;"><strong>Independence: Fundamental in Auditing Profession<br />
	<br />
	</strong></span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;">What is independence? Why is it necessary for Professional Accountants? How is it maintained? These are some of the issues raised with respect to auditors. The term independence has no concrete meaning. However, integrity, objectivity and trustworthiness are the key elements in independence. The concept of auditors independence has been accepted from the very beginning when the accounting came into being as a profession. During the late 19th and early 20th centuries, the perception of independence in accounting profession changed due to modern capitalist economy, a system of economy designed to allocate resources using market mechanism. Independence is fundamental to the reliability of auditors reports. Investors, creditors and public would have little confidence in auditor's report, if they were not independent from the management in both fact and appearance.</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;"><br />
	</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;">Without independence, an auditor's opinion is suspect and the users of financial statements believe that there is no need for external auditors, if independence has not been maintained. Third parties acceptance implies that the role of external auditors is an independent financial control within the corporate entity. Auditor must be conscious to maintain independence on audit planning execution and reporting. He must strive to ensure that the audit quality is not compromised under any circumstances.</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;"><br />
	<br />
	</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;"><strong>Public Expectations<br />
	<br />
	</strong></span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;">Over a decade, audit is at the center of a heated debate. How and why for audit were the questions.. People were of the view that the responsibility of any wrongdoing in any entity is on the auditors among others. There has been disparity in the people's expectations from auditors, especially with regard to their duties, responsibilities and objectives of audit. There are misconceptions that it is the auditor's role to prepare financial statements in compliance with accounting standards and statutory requirements. However, the auditor's responsibility is to express an opinion whether the financial statements generated from the books of accounts give a true and fair picture in accordance with the financial reporting framework. </span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;"><br />
	</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;">People may have expectations from auditors that go beyond the professional responsibility such as audits would provide absolute assurance on the accuracy of the company's financial statements. The users of financial statements may question why the auditors did not detect material irregularities and disclose them in their report. </span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;"><br />
	<br />
	</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;"><strong>Audit at the Crossroad <br />
	<br />
	</strong></span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;">Given the growing list of financial reporting scandals, audit is once again at a crossroad. The significant number of big corporate failures/scandals over the past decade all over the world creates an audit crisis in the marketplace. The large payouts resulting from audit litigation in the developed countries have adversely affected the quality of audit services. Some of the big corporate failures/scandals over the past decade were, Enron (USA), WorldCom (USA), Lehman Brothers (USA), Merrill Lynch (USA), Fannie Mae (USA), Parmalat (Italy), Maxwell (UK), Flowtex (Germany), Vivendi (France), Baan (Netherlands), Satyam (India). These failures/scandals came one after another. After the widely publicised auditing failures in USA and later in Europe, the users have started losing confidence in auditing profession and raised the voice where were the auditors? What was the role of watchdog? These cases clearly map out people's expectations with respect to the duties and responsibilities of auditors. Regulating and oversight agencies have been investigating the performance status of the accounting profession worldwide.</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;"><br />
	</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;">Over the days, in Nepal too, people have witnessed and become victims of companies going bust due to poor corporate governance by the management. In such a situation, effective corporate governance structures that should have detected any unlawful or unethical behavior by the dominant party may have been missing. Due to the cases of unethical conduct of management, inappropriate accounting system, disparity in maturity pattern of assets and liabilities, over-valuation of collateral that may be running amuck and pitch in some of the cases like Nepal Development Bank (Liquidation), Samjhana Finance Ltd, Nepal Share Markets and Finance Ltd, Gurkha Development Bank, United Development Bank, Vibor Bikas Bank, Peoples Finance Ltd, World Merchant Banking and Finance Ltd, CMB Finance Ltd. From these few instances, we are also witnessing corporate failures, scandals, or liquidity crunch in recent days that may raise questions about credibility on the auditors report and sustainability of businesses. Now is the time for the audit profession to be more proactive to lead the debate.</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;"><br />
	<br />
	</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;"><strong>Questionable Role of Auditor<br />
	<br />
	</strong></span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;">There are many reasons for reducing the independence of the auditor. Among others, these are economic dependence on the client, market competition in audit, other non-audit services, close relationship with client's executives, acceptances of goods and services from clients in concessional rate or free of cost, worry about their re-appointment etc.&nbsp;Due to these factors, auditors may be unable to produce fair and reliable reports in certain cases and the independence, of course, is curtailed. If auditors are perceived not independent, the report would be below the standards of the profession and would damage overall image of the accounting profession. </span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;"><br />
	</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;">Auditors may be found guilty of gross negligence in examining the financial and other records. Gross negligence means failure to exercise minimum due care when material errors or irregularities that should have been detected by the application of professional standards go unnoticed. Material amount of fictitious sales recorded at the year-end to inflate income and failure to detect this intentional mis-statement is one of the examples. A similar mis-statement by understating several expenses by a small amount or charging expenses in capital account and failure to detect them by the auditor is also considered as gross negligence. </span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;"><br />
	</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;">Cases finding fault with auditors about the application of professional standards, practices and inadequate disclosure have occurred over time, raising questions over auditors' performance. Some of the cases of non-compliance of standards are revenue recognition, fictitious receivables, failure to disclose related party transactions, verification of cash/bank balances and, failure to obtain third-party confirmation, inadequate collateral of loan, non-accounting of major transactions, failure to assess the clientâ€™s business risk etc. The standard also requires auditors to indicate any substantial doubt about the entityâ€™s existence as a going concern, In such a case, the auditor must add an explanatory paragraph following the opinion paragraph to his report. </span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;"><br />
	<br />
	</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;"><strong>The Expectation Gap<br />
	<br />
	</strong></span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;">Expectation gap in audit is the difference between what the public/users of financial statement perceive about auditors responsibilities to be, and what exactly the auditors responsibilities are. Therefore, it is a gap between what is required by regulation and what market/public need is. The auditor's responsibility for detecting fraud is one of the major areas contributing to the expectation gap. The users of the financial statements believe that unqualified audit report means, the auditor has detected all material errors/irregularities. However, this perception is not in line with the professional standards, which hold the auditor responsible only for exercising due care in the conduct of examination.</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;"><br />
	</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;">Another area for difference overrides the control structure and conceals the facts, perhaps at the behest of management. In such a case, auditor's exercise of due care fails to detect irregularities in the error-free financial statements produced by the management. This will result in significant misrepresentations in financial statement not detected by the auditor and further widen the expectation gap. </span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;"><br />
	</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;">The next area of difference is perception about the entity's ability to continue as a going concern. The users believe that an unqualified audit report is a guarantee that the entity is a healthy one. However, immediately or some time later, the entity is found either in a financial crisis to sustain or in the liquidation process. In such a situation, people may not be trust unqualified audit reports and many corporations either collapsed or were bailed out within a short period of receiving unqualified audit reports. These facts may attract substantial doubt that the auditors lack the expertise to render an independent opinion on financial statements and corporate affairs.</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;"><br />
	<br />
	</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;"><strong>Bridging the Expectation Gap<br />
	<br />
	</strong></span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;">Preparation and presentation of financial statements is the prerogative of the management. Audit is performed on test basis from the sample drawn on the population of a class of transactions. Due to inherent limitation of internal control system adopted by the management, auditors can not detect all the irregularities. The auditor examines the financial statements and provides reasonable assurance that the financial statements are free from material mis-statements. As a result, the expectation gap continues to exist in audit including fraud, internal controls, illegal acts and other non-compliances. Here we analyse the possible remedial actions that may narrow expectation gap and improve the audit effectiveness. </span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;"><br />
	</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;">Firstly, the auditor shall report the cases of mis-representations, non-compliance of rules, regulations and professional standards to bridge the gap to some extent. If the auditors are found grossly negligent to discharge their duties, they may be liable to action under various Acts and Regulations, such as Nepal Chartered Accountants Act 1997, Companies Act 2006, Bank and Financial Institutions Act 2006.</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;"><br />
	</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;">Secondly, compliance of Nepal Standard on Quality Control (NSQC) and implementation of Peer Review System, i.e. auditing the auditors helps narrow the expectation gap.</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;"><br />
	</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;">Thirdly, educating the public about the objectives of audit, auditor's duties and responsibilities are important elements to bridge the expectation gap. Reducing unreasonable expectations requires creating awareness about the objective and limitations of audit and the auditor's work. </span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;"><br />
	</span></div>
<div>
	<span style="font-size:12px;"><strong>Reporting <br />
	<br />
	</strong></span></div>
<div>
	<span style="font-size:12px;">The auditor has the duty to report, after careful scrutiny of all the documentary evidences and information, every item of importance. He must demonstrate to the public that it is independent from the management and will provide high quality of audit and assurance services. Auditor, as a "public watchdog" reports the effectiveness of internal control, non-compliance of professional standards, mis-statements contained in financial statements, mis-statements resulting from management/employee fraud and illegal activities/operations, if any. Further, the auditor has to report about the entity's ability to continue as a going concern for a reasonable period from the date of audited financial statements. </span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;"><br />
	<br />
	</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;"><strong>To Conclude<br />
	<br />
	</strong></span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;">Users of financial statements are of the opinion that the auditor should not only provide an opinion but also interpret the financial statements in such a manner that it evaluates the overall performance of the entity. The users expect from auditors to report in-depth information of the companyâ€™s affairs, watching the management surveillance and detecting illegal acts/frauds on the part of management. These are the high expectations on the part of users of financial statements that create gap between auditors and users expectations from auditing. There has been considerable debate about the nature and scope of audit and the audit expectation gap. The differences between what auditors actually do and what third parties think auditors do or should do remain. The expectation gap may never be eliminated. However, it may be reduced to a standard of profession. </span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;"><br />
	</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;">In recent years, the regulatory framework for professional accountants has changed. At present, we have peer review concept, quality control standards and the disciplinary mechanism. Failing in compliance or departures from the set conduct by the members may make them liable to disciplinary action. All this has been done with a view to gaining public confidence and to enhancing credibility of the accounting profession. </span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;"><br />
	<br />
	</span></div>
<div style="text-align: justify;">
	<strong><span style="font-size:12px;">(Adhikari is Technical Director at the Institute of Chartered Accountants of Nepal (ICAN)&nbsp;and General Secretary of the Association of Chartered Accountants of Nepal)<br />
	<br />
	<br />
	</span></strong></div>',
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			'title' => 'We Are Long Term Players In Nepal',
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<p class="ANSWER" style="text-align: justify;">
	<span class="MyriadPro"><span calibri="" lang="EN-GB" letter-spacing:="" sans-serif="">Sujit Mundul, CEO and Director, Standard Chartered Bank (SCB) Nepal, started his career as a lecturer in Organic Chemistry but switched over to banking as he joined SCB as a junior officer in the seventies. Mundul moved on through various relationship roles in Corporate/Institutional Banking including Credit and Audit functions.&nbsp; He also worked in SCB - London in Credit Management for about a year on secondment. He became Head - Corporate Banking, South India and Regional Head - Sales, for Eastern India before joining SCB Nepal as the CEO and Director. Mundul spoke to <i>Nubiz</i> on a wide range of issues on banking and finance. Excerpts:</span></span></p>
<p class="ANSWER" style="text-align: justify;">
	 </p>
<p class="questionsforinterview" style="text-align: justify;">
	<span style="font-size:12px;"><strong><span class="MyriadPro"><span lang="EN-GB" style="letter-spacing: 0pt;">You have substantially increased the interest on savings, from 2-5% a few years back to 6.5% now. Is there still cash crunch? <br />
	</span></span></strong></span></p>
<p class="ANSWER" style="text-align: justify;">
	<span style="font-size:12px;"><span class="MyriadPro">To answer this question, we need to set the perspective right why SCB Nepal has increased its interest rate. Till one year back, the market never experienced that kind of interest rate because of many reasons. One of the major reasons is that remittance was less. That is coming in abundance now. But for good reason or bad, the market started feeling the tightness. As a result, some stress in liquidity was felt. To be very honest, SCB Nepal never faced a liquidity strain, we have always been adequately liquid.&nbsp; In fact, we had been the lenders in the inter-bank throughout the crisis period. Now, in order to build the deposit base, we decided to increase our interest rates because the market dynamics have changed. The market has slightly shifted gears from low to high interest rate environment. As we are also one of the key players in the market, we need to keep up with the market rates. That's the reason why we have increased the interest rate. Though the increase in interest rate is not that significant; we have already started seeing good positive response from the market.</span></span></p>
<p class="ANSWER" style="text-align: justify;">
	<span style="font-size:12px;"><span><span class="MyriadPro"><br />
	</span></span></span></p>
<p class="questionsforinterview">
	<span style="font-size:12px;"><strong><span class="MyriadPro"><span lang="EN-GB" style="letter-spacing: 0pt;">SCB Nepal is known for quality banking. But competition actually has become tough. How do you view the growth of Nepali financial sector?</span></span></strong></span></p>
<p class="ANSWER" style="text-align: justify;">
	<span style="font-size:12px;"><span class="MyriadPro"><span style="letter-spacing: 0.1pt;">It is a difficult market now. The market of Nepal has become overcrowded. It cannot accommodate so many players; that's why, the competition is a bit uneven. Customers or the depositors would love to see that wherever they put their money it should remain safe and they should get high quality service. The depositors are becoming much wiser compared to what they used to be few years back. They read papers, they also follow the economy and they can make their own judgments. That is why there is the competition and, I believe, we have been able to tackle the competition successfully.</span></span><strong><br />
	<span class="MyriadPro"> </span></strong></span></p>
<p class="ANSWER" style="text-align: justify;">
	<span style="font-size:12px;"><strong><span><span class="MyriadPro"><br />
	</span></span></strong></span></p>
<p class="questionsforinterview" style="text-align: justify;">
	<span style="font-size:12px;"><strong><span class="MyriadPro"><span lang="EN-GB" style="letter-spacing: 0pt;">You are of the few banks that also offer insurance products. How do these two products work along?</span></span></strong></span></p>
<p class="ANSWER" style="text-align: justify;">
	<span style="font-size:12px;"><span class="MyriadPro">e do not have insurance products of our own but we are co-branded with insurance. We call it bancassurance. It is very complementary with banking services. Basically, it could be used for retail banking sector. It can go very well with mortgage products. Similarly, it can go with other lending products. And it is used as one of the major products in wealth management. So we use it as a part of wealth management package. The corporate sector has also been covered by insurance. Instead of going to an ordinary agent, they can come to the bank to get their assets insured. So, these products are actually complimentary to each other.</span></span></p>
<p class="ANSWER" style="text-align: justify;">
	<span style="font-size:12px;"><span><span class="MyriadPro"><br />
	</span></span></span></p>
<p class="questionsforinterview" style="text-align: justify;">
	<span style="font-size:12px;"><strong><span class="MyriadPro"><span lang="EN-GB" style="letter-spacing: 0pt;">Securities Exchange Board of Nepal (SEBON) has recently got the Mutual Fund Regulations ratified. Your bank had shown some interest in this business in the past. How is the plan now?</span></span></strong></span></p>
<p class="ANSWER" style="text-align: justify;">
	<span style="font-size:12px;"><span class="MyriadPro"><span style="letter-spacing: 0.1pt;">To run a successful mutual fund, you need to have volume. I don't think Nepali market has yet got that volume. It will take maybe a few years to create that. For a successful mutual fund, we need to see also to the stock market. Is it equipped to handle the flow? Nepal is working with India to equip the Nepali stock market with some modern tools such as Central Depository System (CDS). Mutual Fund would be very helpful to make this market more perfect. It will not then be driven by the brokers; it will be driven by the market on its own forces. The investors can come and directly play in the market. <br />
	</span></span></span></p>
<p class="ANSWER" style="text-align: justify;">
	<span style="font-size:12px;"><span class="MyriadPro">We have a mutual fund in India under Standard Chartered. So we have the experience and I don't think there will be a problem in terms of experience or expertise.&nbsp; But we need to actually have that volume.</span></span></p>
<p class="ANSWER" style="text-align: justify;">
	<span style="font-size:12px;"><span><span class="MyriadPro"><br />
	</span></span></span></p>
<p class="questionsforinterview" style="text-align: justify;">
	<span style="font-size:12px;"><strong><span class="MyriadPro"><span lang="EN-GB" style="letter-spacing: 0pt;">How do you evaluate the current financial system of Nepal? Is it heading towards robustness?</span></span></strong></span></p>
<p class="ANSWER" style="text-align: justify;">
	<span style="font-size:12px;"><span class="MyriadPro">It is going through transformation I can say. At this stage, it is difficult to say whether it is robust or stagnant but I think the transformation is happening in the right direction. But it takes time; there are a lot of things that need to be corrected. Fundamental corrections are required. The only point here is that there are too many players so this market would definitely require consolidation. But I don't know when the momentum will come in terms of consolidation.&nbsp;</span></span></p>
<p class="ANSWER" style="text-align: justify;">
	<span style="font-size:12px;"><span><span class="MyriadPro"><br />
	</span></span></span></p>
<p class="questionsforinterview" style="text-align: justify;">
	<span style="font-size:12px;"><strong><span class="MyriadPro"><span lang="EN-GB" style="letter-spacing: 0pt;">Many banks are now trying to form a subsidiary to channel the mandatory deprived-sector lending. Do you subscribe the idea? Any plan from SCBNL along this line?</span></span></strong></span></p>
<p class="ANSWER" style="text-align: justify;">
	<span style="font-size:12px;"><span class="MyriadPro">We do not have any plan at this moment and I can't comment about other banks. However, I can tell you that this deprived-sector lending (micro finance) is definitely SCB Groups major focus area globally. And also here we are working on that.</span></span></p>
<p class="ANSWER" style="text-align: justify;">
	<span style="font-size:12px;"><span><span class="MyriadPro"><br />
	</span></span></span></p>
<p class="ANSWER" style="text-align: justify;">
	<span style="font-size:12px;"><strong><span class="MyriadPro"><span lang="EN-GB">What do you suggest to improve the financial services market in Nepal?</span></span></strong></span></p>
<p class="ANSWER" style="text-align: justify;">
	<span style="font-size:12px;"><span class="MyriadPro">The problem is uneven competition. There are many things that need to be done to make the market stronger. Firstly, we need to have tighter corporate governance; there is enough room for improvement. It is not only the regulator's responsibility; it is the responsibility of the individual players to ensure that a robust governance framework is in place. Secondly, this market needs more reforms in the sense of widening of the market and more integration with the international market. I think players should be allowed to directly interact with the international market. Thirdly, I would love to see a universally acceptable risk management model which would compensate the short-term losses caused by fundamental imbalances in the long term. Fourth, it is necessary to develop the capital market of Nepal. It helps in the long-term management of liquidity and also makes resources available to people to make short-term investments in the productive sector.</span></span></p>
<p class="ANSWER" style="text-align: justify;">
	<span style="font-size:12px;"><span><span class="MyriadPro"><br />
	</span></span></span></p>
<p class="questionsforinterview" style="text-align: justify;">
	<span style="font-size:12px;"><strong><span class="MyriadPro"><span lang="EN-GB" style="letter-spacing: 0pt;">What are the challenges and problems faced by your bank in particular and by the overall banking sector in general?</span></span></strong></span></p>
<p class="ANSWER" style="text-align: justify;">
	<span style="font-size:12px;"><span class="MyriadPro"><span style="letter-spacing: 0.2pt;">As far as our bank is concerned, we visualize the plans for next seven to ten years. I think we are well equipped to handle the challenges when they come. During crisis, we set up a very good example in the market as the only bank that lent to the market. That shows how careful we are. Our portfolio is very carefully managed. We run cautiously, we don't want to block our books and then suffer. There is problem now in the sense that the productive sector needs more credit but a lot of money is stuck in the real estate sector.</span></span><strong><br />
	<span class="MyriadPro"> </span></strong></span></p>
<p class="ANSWER" style="text-align: justify;">
	<span style="font-size:12px;"><strong><span><span class="MyriadPro"><br />
	</span></span></strong></span></p>
<p class="questionsforinterview" style="text-align: justify;">
	<span style="font-size:12px;"><strong><span class="MyriadPro"><span lang="EN-GB" style="letter-spacing: 0pt;">What is your future mission and vision for Nepal?</span></span></strong></span></p>
<p class="ANSWER" style="text-align: justify;">
	<span style="font-size:12px;"><span class="MyriadPro">We are long-term players and we would continue to be here. We'll be expanding our ventures. We have in mind some acquisition also, when the time is right. That's not completely out of the window.&nbsp; It's very much part of the game plan. <br />
	</span></span></p>
<p class="ANSWER" style="text-align: justify;">
	<span style="font-size:12px;"><span><span class="MyriadPro"><br />
	</span></span></span></p>
<p class="questionsforinterview" style="text-align: justify;">
	<span style="font-size:12px;"><strong><span class="MyriadPro"><span lang="EN-GB" style="letter-spacing: 0pt;">It is said that in Nepal, merger and acquisition will remain only in talks not in practice. What do you say?</span></span></strong></span></p>
<p class="ANSWER" style="text-align: justify;">
	<span style="font-size:12px;"><span class="MyriadPro">Unless foreign players and foreign direct investment flow into Nepal, I don't see any possibility of merger and acquisition. Its pre-requirements are political stability and supplementing policies. It is not only the matter of tax. No investor would like to buy problem paying money. Therefore, there must be a suitable labour policy in Nepal. I don't mean the facility of hire and fire. It means keeping human resource in right size and mobilizing it. After meeting all these requirements, I think we can then talk about merger and acquisition. <br />
	<br />
	</span></span></p>
<p class="ANSWER" style="text-align: justify;">
	<span style="font-size:12px;"><strong><span class="MyriadPro"><span lang="EN-GB" style="letter-spacing: 0pt;">What are your bank's recent activities on Corporate Social Responsibility?<br />
	<br />
	</span></span></strong><span class="MyriadPro"><span style="letter-spacing: 0.2pt;">We continue to focus on accseeing is believing keeping avoidable blindness in the centre point. We are very much into helping the poor schools inside and outside the valley by providing computers and creating computer laboratory and also by providing scholarships. We have helped few deserving schools in uplifting their infrastructural facilities. We are very much into the HIV-AIDS awareness and environment protection programs. As a part of our ongoing agenda, we are planting trees to maintain greenery around and are also looking at reducing the carbon requirement of our own uses. </span></span><span style="font-family: Wingdings; color: rgb(237, 28, 36); letter-spacing: 0.15pt;">&nbsp;</span></span></p>
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			'title' => 'Business And State: Nepali Capitalist Classes And Their Interests',
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				<strong>Before Nepal was declared a republic, there were three major actors in the economic affairs of Nepal: the political parties, the monarchy and the traditional capitalist classes. We won't be doing any justice to two traditional capitalist classes&nbsp; the Newars and the Marwaris&nbsp; if we say that these communities favored the former king during his direct rule.</strong></div>
		</div>
	</div>
</div>
<p>
	 </p>
<div style="width: 595px;">
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			<div style="border: 1px solid rgb(204, 204, 204); padding: 5px;">
				<strong>After the declaration of the Republic Nepal, the state is represented by the political parties. So it is natural that the capitalist class siding with the political parties has better ground to grow, again with the blessings of the state. For the time being, we have to accept that the capitalist class close to the former king doesn't enjoy such blessings at par. But they have the experience of doing business with all other capitalist classes.</strong></div>
		</div>
	</div>
</div>
<p>
	 </p>
<div style="width: 595px;">
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			<div style="border: 1px solid rgb(204, 204, 204); padding: 5px;">
				Traditional Newar capitalist class means a group of certain castes in the Newari community that are engaged in transit trade between India and Tibet (the autonomous region of the People's Republic of China) since the ancient time. This capitalist class is often referred to as the Caravan Traders because of their admirable mobility for business. The economic history of Newars is as old as Medieval Nepal. Marwaris are the traditional capitalist class of India who later migrated to Nepal in course of business. It has often been argued that the business history of Marwaris is as old as the economic history of India.</div>
		</div>
	</div>
</div>
<p>
	<br />
	 </p>
<div style="width: 595px;">
	<div style="border: 1px solid rgb(204, 204, 204); padding: 5px; width: 47%; float: left;">
		<div>
			<strong>By Mohan Das Manandhar &amp; Rojan Bajracharya</strong><br />
			It is undisputed that a number of important developments that occurred in the political sphere of Nepal in the past few years have affected the national economy and businesses alike. Particularly, after the declaration of Republic Nepal, it has become necessary to understand the customs, ethos and ways of doing business in the new political setup. It is natural that the business communities are and should be dynamic to readjust themselves with regime change otherwise an economy like Nepal would stall for once and for all.<br />
			<br />
			It will take some time for this dynamism to take pace and develop new commercial culture and statebusiness relationship. However, it is important to recognize at the outset how the business communities pledge their common interest to the state in view of their common interest guiding the future commercial culture and state-business relationship. One of the important components of market dynamism and competitiveness is the business communities ability to bring forward their collective interest and the state's readiness to address these interests.<br />
			<br />
			Before Nepal was declared a republic, there were three major actors in the economic affairs of Nepal: the political parties, the monarchy and the traditional capitalist classes. We won't be doing any justice to two traditional capitalist classes&nbsp; the Newars and the Marwaris&nbsp; if we say that these communities favoured the former king during his direct rule. However, we can't deny the fact that the rulers and their kin who represented the state during the former king's direct rule are another traditional capitalist class of the country; and that these three capitalist classes needed to join hands for their common interest. <br />
			<br />
			This article doesn't intend to explore what issues held them together and what separated them. We presume that all these three capitalist classes did share a common business interest, but the Newars and the Marwaris were always aware that it would be useless to have a conflicting interest as the third capitalist class (the royals) had the blessings of the state. So, the Newars and the Marwaris felt the need to build strategic ties with the political parties to defend their interests that were different from the common interest. The political parties, in turn, needed these traditional capitalists to support their movement for republicanism. <br />
			<br />
			However, the problem was that some skeptics inside the political parties thought the Newars and the Marwaris had stronger ties with the royals, and were therefore on the king's side. The king and the royalties on the other hand conceived that they could not operate the entire business and commercial activities of the country by themselves. The two traditional capitalists enjoyed an established commercial network which was the important pillar of the country's economy at that point of time. The triangular relationship between these three actors during the King's direct rule was intricate. The king and the political parties provided patronage to the traditional capitalists for their own political interests and harmonized relationship with the other two actors.<br />
			<br />
			Going further back in history, after the 1990 political transformation, the country entered into an era of democratic electoral practice. The absolute monarch was brought under the constitution and the political parties were handed the executive powers of the state. Now the state was represented by two distinct political forces the king and the political parties. Soon, these two forces were confronting with each other. An opposition political force, the Maoists, even launched an armed uprising against the constitutional monarchical dispensation.</div>
	</div>
	<div style="border: 1px solid rgb(204, 204, 204); padding: 5px; width: 47%; float: right;">
		<div>
			Later, former king Gyanendra seized the executive powers on February 1, 2005. It showed that though the political parties were assigned the executive role, the king could still afford to become authoritarian. Interestingly, it was also the period of a change in the economic regime from a closed, import-substitution economy to a liberal economy.<br />
			<br />
			In this article, what we have presumed is that the state during the former king's direct rule had conceived the need of economic liberalization in the country. It got continued with time. With economic liberalization, new business opportunities emerged in the country and so did the new capitalist classes. Gradually, a new breed of aspiring capitalists also started to get engaged in trade and commercial activities giving birth to new capitalist classes in the country. It is certain that, with the latest political change, business ventures of the former king's relatives became more transparent. They have the benefit of being tagged as general public in theory but are enjoying the blessings of the state in practice. The capitalist classes also started to tag political affiliations for their mutual benefit which is but natural.<br />
			<br />
			However, the relationships of the capitalist classes with the former king and the political parties still remain harmonized in nature. Further, few new capitalists also emerged due to nurturing by political parties or by virtue of being the relatives of the leaders of these political parties. It was but natural in any new democratic country, at least in South Asia. It is not unusual that the relationship of this capitalist class with the political parties is similar to that of the king and his relatives' capitalist class. So the capitalist class close to the political parties and the one close to the king became competitors in the market and both had had the state's blessings to further their business.<br />
			<br />
			The common interests of both the traditional and the new capitalist classes are the same. This has resulted into business associations in various capacities and the strengthening of the institutional capacity of old associations : This developed formal channels to liaison the common interests of the business communities with the state. On the other hand, the traditional Newar and Marwari capitalist classes are blessed with its own strong, wellestablished conventional network. It is important to note here that this traditional network still guides the commercial culture and the way of doing business informally. So we must presume that there must have been a timely adjustment in the conventional network of the Newars and the Marwaris. <br />
			<br />
			After the declaration of the Republic Nepal, the state is represented by the political parties. So it is natural that the capitalist class siding with the political parties has better ground to grow, again with the blessings of the state. For the time being, we have to accept that the capitalist class close to the former king doesn't enjoy such blessings at par. But they have the experience of doing business with all other capitalist classes. There are traditional Newar and Marwari capitalist classes blessed with well established conventional network and commercial culture. And the fourth capitalist class is the one which has evolved in the last one decade due to new market opportunities. <br />
			<br />
			Obviously, all these capitalist classes would stand together for their common business interests but each of them has its own self-interest and are, therefore, skeptic about each other at times. It is certain that business associations are working together as building blocks to get united for their common interests and distinct identity. However, the challenge is to build unity with diversity.<br />
			<br />
			<em>(Manandharm and Bajracharya are freelance researchers.) <br />
			<br />
			<br />
			</em></div>
	</div>
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			'title' => 'IFC Builds Farming Capacity In Nepal',
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	<strong><img align="top" alt="sectorial" border="1" height="141" hspace="1" src="http://newbusinessage.com/ckfinder/userfiles/Images/sectorial1.jpg" vspace="1" width="200" /></strong></p>
<p>
	<strong>By Oliver Ryan &amp; Anupa Pant</strong></p>
<p>
	The poultry sector in Nepal carries a value tag of USD 180 million and contributes 3.3 per cent to the country's GDP. Despite its significant contribution to the Nepali economy it bears a subdued profile; write Oliver Ryan and Anupa Pant.Nepal has some 50 feedmills producing 450000 tonnes of feed per annum for a production of around 50 million broilers per annum from 5000 broiler per annum from 5000 farms. Cobb 500 is the dominant breed.</p>
<p>
	The country is considered to be selfsufficient in poultry products and in poultry feeds although a significant proportion of the feed ingredients e.g. grains and protein meals are imported from India.The total direct employment in the organized commercial sector is estimated to be 70,000, and provides a livelihood to thousands of households. The poultry sector has been growing at a rate of 10 per cent per annum over the last decade.The Nepalese broiler industry is divided into three distinct sectors, namely feed, DOC supply and broiler grow-out as distinct to an integrated model common internationally. There is limited processing with 99 per cent of the birds sold live.</p>
<p>
	In May 2010, the International Finance Corporation (IFC), a member of the World Bank Group, reviewed the poultry industry in Nepal including a lead firm diagnostic, farmer/supplier diagnostic, benchmarking and institutional mapping. The results of the diagnostic highlighted that the current waste (inefficiency) in the industry is calculated to be USD 32 million, if Nepal's performance is compared to an achievable international benchmark performance. It is recognized that the largest inefficiencies in the industry exist in the broiler growout sector, due to its structure and size, dominated by small in-efficient farmers. Grower farms are typically 1,000 birds with the largest at 150,000 birds. It is assumed that there are effectively 5,000 commercial farms in Nepal supplying 80 per cent of the birds</p>
<p>
	&nbsp;IFC identified the key barriers to improving the commercial broiler sector in Nepal as follows: while maize is available locally, protein meals, fishmeal, vitamins, minerals and addictives are imported from India. Adequate quantities of feed ingredients of acceptable quality (particularly dry maize) are often not available in local markets resulting in variable quality feeds, despite Nepal having some modern feedmills. Productivity of parent stock is generally poor and variable per flock.</p>
<p>
	Day old chick (DOC) prices are often high due to large cycles in broiler meat prices and DOC supply. DOC quality is regarded as the main problem by broiler growers and much of that is due to dehydration of DOC due to long delivery times of up to 48 hours. Boiler farmers do not understand the importance of bio-security and all-in, allout systems are often compromised. The lack of integration exacerbates this as farmers (wrongly) think multi-age flocks will improve cash flows.</p>
<p>
	There is a lack of access to technical knowledge and services. About 95 per cent of the poultry farmers do not have any formal training of farm management (biosecurity, housing and ventilation, feed and water management, livestock management and disease) and the service function from PS farms and feed mills is only now being developed. Oliver Ryan, an ex IFC Poultry Specialist, who undertook the industry diagnostic for IFC, stated that IFC's global knowledge of the poultry industry enabled it to identify key issues that needed addressing but more importantly could quantify and prioritise the benefits from the implementation of a corrective action plan and could assist the industry identify suitable specialists to assist with this. IFC strengthens sector To address the issues that are impacting the industry, IFC has launched a threeyear poultry supply chain strengthening project in Nepal. This project will assist three lead firms (covering two PS operations and two feedmills) and 3,000 poultry farmers.</p>
<p>
	The lead firms will have the capacity for supplying more than 40 per cent of Nepal's feed and some 30 per cent of the DOC demand. These lead firms have direct business relationships with feed/DOC agents nationwide. This relationship will be used to disseminate technical skills and services. Technical specialists in feed production, nutrition, livestock and disease have been contracted to assist the lead firms in improving their production efficiencies. The first two lead firms to join the project were Avinash Hatcheries, producers of Cobb 500 broilers and Hyline layer DOC's and ProbioTech Industries Limited (Nimbus), a major feedmiller. About 95 per cent of small-scale poultry entrepreneurs do not have any formal training on farm management. Sustaining profitably after two/three batches is a recurring challenge. We are happy to join hands with IFC to build a pool of trainers to provide services to poultry entrepreneurs, says Anand Bagaria, Managing Director, ProbioTech Industries Pvt Ltd. The project will train broiler growers in all aspects of broiler production through the employment and training of 12 local veterinarians. These veterinarians will then train 3,000broiler farmers over a period of three years, with the aim of directly impacting the management of 40 per cent of Nepal's broiler production. Lead firms will be used to arrange broiler farmer training sessions. </p>
<p>
	<br />
	There will be a gender specific outreach component of the project, as well as a dealer/retailer component (with focus on bird handling, waste management and food safety). The aim is to improve feed, DOC chick quality and grower performance to reduce mortality by two per cent and reduce FCR by 0.2:1 over the term of the project. The project performance will be measured by the improvement in liveability and FCR over a baseline performance that is being carefully established on a sample of farms and will be monitored by an independent assessor. It is recognised that the largest inefficiencies in the industry exist in the broiler grow-out sector, due to its structure and size, dominated by small farmers, said Brad Roberts, Operations Officer, IFC. IFC is providing support to enhance productivity and efficiency improvements for about 3,000 broiler farms. He said that the IFC's role in increasing industry capability was hopefully a forerunner to IFC assisting with project finance to a growing industry. ï</p>
<p>
	<br />
	<strong>(This article was published in Asian Poultry Magazine November/December 2011.)&nbsp; <br />
	</strong></p>
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	<strong><br />
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			'content' => '<p style="text-align: justify;">
	<span style="font-size:12px;">From premium and international beer brands to locally brewed Nepali strong beer brands Nepal's beer market has seen a tremendous shift in the last couple of years. Industry insiders opine that varied tastes, numerous choices and price factor are among the overriding reasons for this shift. Consumers are spoilt for choices in today's market scenario and hence, they have started to prefer indigenous beer brands, asserts K P Rizal, Deputy General Manager at Sungold Brewery (Nepal) Pvt Ltd. <br />
	</span></p>
<p style="text-align: justify;">
	<span style="font-size:12px;">This change in consumption trend has ensured that Gorkha Brewery Pvt Ltd, the market leader, has turned out to be the biggest loser in the bargain. It enjoyed an absolute monopoly in the market with over 80 per cent market share not too long ago with established and popular brands namely Carlsberg, Tuborg and San Miguel ruling the marketplace. Over the last couple of years, however, the brewery has seen a turnaround in fortunes primarily due to the change in consumers tastes and sense of pride attached with local brands. A market estimate suggests that Gorkha Brewery has seen its market share plummet sharply during this period. <br />
	</span></p>
<p style="text-align: justify;">
	<span style="font-size:12px;">"The market has shifted to lesser priced brands and it has led to the leading brewery losing market share considerably," confirms Kishor Bhattarai Chief of Sales &amp; Marketing at Himalayan Brewery Ltd. Experts allege that international brands took the market for granted and hence, created room for local brands to find a stronger foothold in the market. More consumers are increasingly opting for strong beer brands that cost less as well as promise faster intoxication. <br />
	</span></p>
<p style="text-align: justify;">
	<span style="font-size:12px;">The price of a beer is what is truly driving the market at this point of time. "The mindset of the consumers is to buy a beer with high alcohol content at cheap price," agrees Thomas Schlau Technical Director and Master Brewer at Sthapit &amp; Schlau Pvt Ltd. He says people must enjoy beer and there is a need for a culture to develop around beer drinking. Sensing the shift from the premium and international beer brands to indigenous Nepali brands, market leader Gorkha Brewery has indulged in severe price slashing in a bid to regain lost territory, reiterate competitors. So much so that its flagship brand Gorkha is now the cheapest beer brand available in the market. <br />
	</span></p>
<p style="text-align: justify;">
	<span style="font-size:12px;">Though, of course, the brewery continues to be the market leader due to its strong show in the premium segment which it monopolises with no competition in sight by a long way. Sthapit &amp; Schlau that began production in May 2010 by using the production facility at United Breweries Nepal Pvt Ltd in Hetauda Industrial district, started with a modest 2,500 cases a month. Within a year-and-a-half, it has registered a 100 per cent growth, claims Schlau, and produces 5,000 cases a month during the 'beer season' between March and October. We have been promoting both our brands Coblenzer Pilsener and Coblenzer Marzen as natural beer and it took us some convincing to sell initially but our hard work is beginning to pay off, he says. <br />
	</span></p>
<p style="text-align: justify;">
	<span style="font-size:12px;">It started off with distributing in cities such as Kathmandu, Dharan and Biratnagar and has moved on to cover Pokhara, Narayanghat and Gorkha under its distribution network this year. The brewery, buoyed by overwhelming response from several sections of the market, plans to aggressively expand its network in the coming years. Sungold Brewery that uses up, on an average, 60-70 per cent of its 140,000 cases-a-month-capacity brewery at Damkauli in Nawalparasi is currently growing at 25 per cent per annum. About two years ago, we were growing at 100 per cent annually but due to the declining growth of the industry, our growth too has been affected to an extent,â€ admits Rizal. <br />
	</span></p>
<p style="text-align: justify;">
	<span style="font-size:12px;">The brewery currently enjoys 20 per cent market share, he claims. It is now focusing mainly on two brands Nepal Ice (started in 2007) and Real Gold (started in 2008). While Rizal concedes that a brand name is something to reckon when it comes to international brands, he is confident that his brands will hold their own in the market as time progresses. The brewery has a strong distribution mechanism in place with 200 distributors across Nepal. He elaborates, "Distribution and market expansion is a continuous process and market growth and access dictate our distribution strategy." Not content with its impressive domestic show, it is also in the process of developing Nepal Ice as an international brand by exporting it to destinations far and wide such as Japan, USA, UK, Hong Kong, Korea and Dubai. Himalayan Brewery, which is going through a transition phase currently with a new management having taken over operations about a year ago, is already doing decently with about 9 percent of the market share, claims Bhattarai. <br />
	</span></p>
<p style="text-align: justify;">
	<span style="font-size:12px;">"It was immensely satisfying for us to discover that our flagship brand Iceberg enjoys incredible brand recall in the market and it makes our job that much easier," Bhattarai states excitedly. With its brewery at Godavari in Lalitpur, it has around 100 distributors across Nepal and counting. Iceberg also awaits a brand line extension few months down the line. "We are looking at extending the brand to premium segment. <br />
	</span></p>
<p style="text-align: justify;">
	<span style="font-size:12px;">There is every reason for a domestic beer to provide quality at par with international brands and compete on equal terms," reveals Bhattarai. Brewers rue the fact that advertising wise, they don't have the option of gaining mileage through the electronic media as promotion of alcoholic beverages is banned on this medium in Nepal as per a government directive. "From a marketer's perspective, it is sad indeed that we cannot avail the benefit of advertising through the electronic media," says Rizal. He is, therefore, limited to mainly use BTL (below the line) activities which includes branding of glasses, openers and signage etc, consumer sampling, sponsoring sporting events and musical concerts and, of course, print advertising. Schlau, while choosing 'Coblenzer' (the name is based on Schlau's hometown Coblenz in Germany) as a brand name, hoped that it will go down well with the consumers. <br />
	</span></p>
<p style="text-align: justify;">
	<span style="font-size:12px;">However, as he says, "My calculation was wrong that a foreign (read German) name will get us immense mileage, it took me a little time to realise that people here have an affinity towards Nepali-ism." He too primarily depends on print advertising to promote his beers and occasionally supports events. At Moksh Bar last month, he celebrated 'Oktoberfest', modeled after the famous German beer festival in Munich. On the other hand, Himalayan Brewery, after beginning to function under a new management, started its branding exercise from scratch including developing POP (point of purchase) displays like posters and danglers, says Dhiraj Tuladhar, Brand &amp; Business Development Officer at the Brewery. <br />
	</span></p>
<p style="text-align: justify;">
	<span style="font-size:12px;">It has made an attempt to relate Kathmandu beer with cultural heritage by promoting occasions such as Nhu Dan (Newari New Year). "We are trying to cash in on the culture aspect and hope it works for us," adds Tuladhar. While it may appear that Nepali breweries make huge profit margins, they have a different story to tell altogether. Brewers allege that heavily levied taxes including excise duties and VAT are so high that beer drinking in Nepal has become a very expensive proposition for the end consumer. A case (12 bottles of 650 ml each) of Coblenzer Beer invites an excise duty of Rs 624 which translates to Rs 52 per bottle. It is extremely high. Can you imagine that a bottle of beer actually costs more than a full meal at a reasonable eatery? asks Schlau. <br />
	</span></p>
<p style="text-align: justify;">
	<span style="font-size:12px;">He elaborates, While a plate of daal-bhaat may cost you Rs 150 at a regular food joint, you will have to pay Rs 162 and Rs 167 respectively for a bottle of Coblenzer Pilsener and Coblenzer Marzen. Even though the beer industry in Nepal hasn't suffered as much as some of the other sectors in the economy, there has been a considerable decline in its annual growth rate. Enjoying a 40 per cent growth per annum about two years ago, it is now growing at a modest 12-13 per cent annually. Brewers blame this on the economic downturn the country has been facing over the last few years. Rizal blames it on poor financial activity, a result of the economy being on the slow side.</span></p>
<p style="text-align: justify;">
	<span style="font-size:12px;">He says, "The real estate business was booming a couple of years ago. Today, restaurant visits have minimised and people are gradually shifting towards strong beer brands due to economic reasons." The slowdown in the economy has taken its toll and impacted the industry to a certain extent with restaurants and pubs registering less than expected footfall in recent times. <br />
	</span></p>
<p style="text-align: justify;">
	<span style="font-size:12px;">A lot of people for whom spending lavishly weren't a problem at all; income disposal has begun to matter a great deal. A 500,000 cases a month market, the annual revenue of the beer industry hovers around Rs 10 billion mark presently. Beer professionals believe that the industry holds great potential and in the future, with signs of recovery in the economy, it can look forward to better days ahead.<br />
	<br />
	<br />
	</span></p>',
			'published' => true,
			'created' => '2011-11-16',
			'modified' => '2012-09-17',
			'keywords' => '',
			'description' => 'From premium and international beer brands to locally brewed Nepali strong beer brands Nepal’s beer market has seen a tremendous shift in the last couple of years. Industry insiders opine that varied tastes, numerous choices',
			'sortorder' => '425',
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	(int) 2 => array(
		'Article' => array(
			'id' => '519',
			'article_category_id' => '41',
			'title' => 'Do Nepali Banks Require Additional Capital Injection?',
			'sub_title' => '',
			'summary' => null,
			'content' => '<p style="text-align: justify;">
	<span style="font-size:12px;"><img align="right" alt="" height="196" hspace="5" src="http://newbusinessage.com/ckfinder/userfiles/Images/sujit mundal.jpg" vspace="5" width="150" />On a recent trip to Chennai, I met an American lady seated next to me. It was a flight of about two hours and hence a fairly long time to converse. She introduced herself as Gene Turnbull, a senior research scholar at Stanford University; currently working on the financial sectors of emerging markets, mainly focusing on South Asia. What a coincidence? <br />
	</span></p>
<p style="text-align: justify;">
	<span style="font-size:12px;">I asked her, What is your opinion of the financial markets in this subcontinent? She looked at me for a while and then said, I may need to start from a few not too old past events that plagued the entire global financial system.That's fine with me, I quipped. <br />
	</span></p>
<p style="text-align: justify;">
	<span style="font-size:12px;">She started. <br />
	</span></p>
<p style="text-align: justify;">
	<span style="font-size:12px;">We need to look back at the global financial crisis which erupted in 2007 and severely damaged the western, mainly the advanced economies; the US was worst affected. That point in time, Asian economies, which are mostly emerging market economies, viz China, India, Indonesia etc were doing fine. They did not immediately feel the heat of the virtual collapse in the western markets, mainly the US and advanced West European Countries. China's dependence on exports was quite substantial and hence some fears loomed large about the sustainability of high rate of growth of the Chinese economy and the valuation of the currency. India was marginally better placed in the sense that the domestic demand continued to be firm and that supported the Indian growth. She further explained that the Asian economies were far more prepared in managing themselves. The governments and regulators also remained alert post Asian crisis of the late nineties. <br />
	</span></p>
<p style="text-align: justify;">
	<span style="font-size:12px;">I asked her, What do you feel about the financial markets particularly in South Asia? I'm interested to know about Nepal. She continued . Perhaps this is not a good time for the banks, mainly in the west. They are besieged with low growth and erosion in capital stemming from sovereign debt exposures and stricter regulatory pressure. As a result, they are suffering from low return on capital. It looks like that would continue to be the case thanks to enhanced capital requirement under BASEL III. She, however, maintained that the banks in India, China and other emerging markets are more likely to sustain their returns on capital despite increased capital requirements under BASEL III. This will probably create a catalytic effect in attracting more capital in the emerging markets that are experiencing a broader economic landscape. <br />
	</span></p>
<p style="text-align: justify;">
	<span style="font-size:12px;">As a sequel to the financial crisis of 2007, BASEL III did set forth revised rules for capital requirements for the banks. The minimum equity requirement, that is, Tier I capital will now be 7 per cent; a sharp increase from the present level of 2 per cent. Total capital requirement ( inclusive of Tier II) will increase from 8 per cent to 10.5 per cent. In addition, there will be a counter- cyclical buffer. To be precise, the banks may be required to operate with a capital in the range of 15-17 per cent in the years to come. You may know that the leading banks in Europe and the US already have capital adequacy of more than 14-15 per cent as mentioned. <br />
	</span></p>
<p style="text-align: justify;">
	<span style="font-size:12px;">The additional requirements under Basel III would necessitate capital injection of significant amount for the large banks in the west. The estimated amount of capital to be raised for meeting Basel III would be to the tune of 475 billion euros. The western banks would have to encounter at least three main challenges in the process of implementation of BASEL III viz firstly, the enormity of Euro Zone crisis, secondly, the slowdown in lending and contraction of balance sheets, and thirdly, stricter regulatory requirements emanating from the respective central banks. <br />
	</span></p>
<p style="text-align: justify;">
	<span style="font-size:12px;">To tell you honestly, I was enjoying the analysis. She continued. You may well guess that the investors would think twice before putting their money in the western banks as the ROI would shrink, though the safety around their investments might be better than before. So, there would be an inclination for the investors to look towards the east. I asked her, What is your opinion about the banks in India? <br />
	</span></p>
<p style="text-align: justify;">
	<span style="font-size:12px;">She replied that although the Indian Banks are passing through a stressful period resulting from falling net margin in interest, higher incidence of nonperforming loans and more restrictions imposed by the central bank in respect of sectoral lending, these banks are better positioned to maintain a good return on equity in the long term. The growing domestic demand in the EME's (emerging market economies) and their conducive macroeconomic policies would help boost bottom lines of the banks in these countries including India. I then categorically asked her a question about the smaller economies in South Asia viz Nepal. I explained my interest in knowing about Nepal. She remained quiet for some time as if she was drowned in deep thought and then quipped, What is your specific question?</span></p>
<p style="text-align: justify;">
	<span style="font-size:12px;">I replied, What do you think about the banking system in this country? She was of the opinion that the country was in the early stage of development and the accompanying financial system needed higher level of governance and stronger foundation in the form of stricter implementation of regulations and transparency. She felt that the supervision system of the central bank needed further strengthening and more professional approach in the sense that they should not see wood for the tree.</span></p>
<p style="text-align: justify;">
	<span style="font-size:12px;">I could not agree more that her observations were interesting. Against the back drop of a looming financial crisis in the Euro Zone and the very slow recovery in the US, it is quite likely that contagion effect can hit the emerging market economies including Nepal and this may lead to the crisis of confidence. Banks will experience falling returns, lesser ability to support credit off take and higher incidents of NPA. Considering all this, I asked her my final question on Nepali financial system, Do you think Nepali Banks require further injection of capital in order to maintain capital adequacy and create a cushion against possible erosion? She thought for a while and responded mildly, Yes, but it needs a lot of debate and political consideration . She was absolutely right. I think this is a serious subject for discussion and the sooner it is done, it's better for the country. </span></p>
<p style="text-align: justify;">
	<span style="font-size:12px;"><span><em><br />
	</em></span></span></p>
<p style="text-align: justify;">
	<strong><span style="font-size:12px;"><em>(Mundul is a Director with Standard Chartered Bank Nepal Ltd)<br />
	<br />
	<br />
	</em></span></strong></p>',
			'published' => true,
			'created' => '2011-11-16',
			'modified' => '2012-09-17',
			'keywords' => '',
			'description' => 'On a recent trip to Chennai, I met an American lady seated next to me. It was a flight of about two hours and hence a',
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	(int) 3 => array(
		'Article' => array(
			'id' => '483',
			'article_category_id' => '41',
			'title' => 'A Walk Through Central Depository System',
			'sub_title' => '',
			'summary' => null,
			'content' => '<div>
	<div style="text-align: justify;">
		<span style="font-size:12px;"><img align="left" alt="sectorial" border="1" height="128" hspace="5" src="http://newbusinessage.com/ckfinder/userfiles/Images/homnath gaire.jpg" style="margin:10px;padding:10px;" vspace="5" width="100" />By <strong><u>Homnath Gaire<br />
		<br />
		</u></strong></span></div>
</div>
<div style="text-align: justify;">
	<span style="font-size:12px;">In a nut shell, Central Depository System (CDS) is an electronic book entry system to record and maintain securities and to register their transfer. In CDS, ownership will be changed without physical movements of securities or execution of transfer deeds. The ownership will be transferred as soon as securities move from one account to another. CDS is purely a settlement vehicle and will not affect the trading in any manner whatsoever. It is expected that the CDS will bring tremendous efficiency and growth in the capital market of Nepal. It will also enhance the image of Nepal's capital market globally. </span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;"><br />
	</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;"><strong>Participants of CDS:Account Holders<br />
	<br />
	</strong></span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;">Account holders are divided into two categories - account holders and participants. Both account holders and participants will have direct access to the CDS. Account holders will be allowed to have a main account and a house account for their beneficially owned securities. Participants, however, will be entitled to have client accounting facilities within the CDS. In addition to main account and house account, participants will be allowed to have sub accounts and group client accounts. In short, the participants can provide custody services to their clients whereas account holders can keep only their beneficially owned securities in CDS.</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;"><br />
	</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;"><img align="right" alt="sectoral" border="1" height="350" hspace="5" src="http://newbusinessage.com/ckfinder/userfiles/Images/img(7).jpg" style="margin:10px;padding:10px;" vspace="5" width="252" />"Beneficial Owner" means the person who have opened their Beneficial Owner Account with Central Depository Company for depositing their securities or instruments and who have held the securities and instruments which are capable of being deposited in de-mat form.</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;"><br />
	</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;">All the members of stock exchanges, banks (both commercial and investment), and development financial institutions (DFIs) are allowed to open their account as participants whereas corporate bodies such as leasing companies, investment companies and insurance companies can open their account as account holders.</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;"><br />
	</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;"><strong>Issuers/Registrars<br />
	<br />
	</strong></span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;">The issuers of capital whose securities are converted from physical to electronic book entry system play a significant role in CDS. They will also have direct access to the CDS. After a security is declared eligible for the purpose of CDS, necessary software is provided to that particular issuer upon signing the issuer's agreement with central depository company (CDC). The shares are entered into CDS only after proper verification by these issuers or their registrar. This process eliminates the problem of fake/duplicate/lost/stolen share certificates as issuers thoroughly check them before approving for CDS.</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;"><br />
	</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;"><strong>Eligible Pledge<br />
	<br />
	</strong></span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;">Financial institutions that lend against securities will have their account with CDS in the capacity of eligible pledges. These institutions will also have direct access to CDS and will be provided with necessary connection in this regard upon signing the pledge agreement with CDC. Their clients will be able to pledge their electronic book based securities in CDS. Once the securities are pledged in the CDS, the control over those securities is transferred to the eligible pledgee in the form of pledge release/call. Nevertheless, the beneficial owner will continue to get the benefits of corporate action on pledged securities.</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;"><br />
	</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;"><strong><img align="left" alt="sectoral" border="1" height="228" hspace="5" src="http://newbusinessage.com/ckfinder/userfiles/Images/img1(4).jpg" style="margin:10px;padding:10px;" vspace="5" width="350" />CDS Account Structure:<br />
	<br />
	</strong></span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;">The account holders of CDC will be able to settle their transactions within the CDS through five types of accounts, namely:<br />
	<br />
	</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;"><b>Main Account:</b> Each account holder in the system will be allocated a main account by virtue of being an account holder in the CDS. This account will mainly be used as a transit account for movement of securities. Any security coming in or moving out of an account holder's family of accounts will pass through this account.</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;"><br />
	</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;"><b>House Account:</b> Used for securities owned beneficially by account holders. "Beneficial Owner Account" means De-mat Account (electronic account) opened with Central Depository Company through Depository Participant in order to deposit securities by the Beneficial Owner and which is distinguished by a unique account number.</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;"><br />
	</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;"><b>Sub-account (Client Account):</b> This account is used for keeping securities belonging individually to each of the clients of an account holder. An account holder may open and maintain any number of sub-accounts he requires on behalf of his clients.</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;"><br />
	</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;"><b>Group Client Account:</b> This account is used for keeping securities which are beneficially owned by the account holder's client. It will be used for clients who are not willing to utilize the facility of opening separate sub-accounts. The account holder will group all such clients in his/her group account. The detailed break-up of the securities held by each client of a group account will be held by the account holder and no such record will be maintained by CDC. </span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;"><br />
	</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;"><b>Cash Account: </b>Each account holder in the system who opts to avail the Delivery vs Payment (DVP) facility will be required to deposit relevant amount to be used for the settlement of DVP obligations.<br />
	<br />
	</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;">CDS-Operation<br />
	<br />
	</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;"><b><img align="right" alt="" border="2" height="335" hspace="5" src="http://newbusinessage.com/ckfinder/userfiles/Images/img2(4).jpg" vspace="5" width="350" />The main operations performed in the CDS are as follows:<br />
	<br />
	</b></span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;">Deposit of existing and new securities in the CDS. Once a security is declared eligible by CDC, the physical certificates of that security will be deposited in the CDS for conversion after which they will be available for further transfers within the system. Following is the procedure to deposit securities in the CDS:</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;"><br />
	</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;">To begin with account holder will initiate the deposit request by entering the details of share certificates into the system, and securities deposit form (SDF). CDS will generate computer printouts of the transaction. Transfer deed will be executed in favor of CDC. Account holder will then send the relevant share certificates, transfer deeds, SDF and the computer printouts to the relevant registrar. The registrar after verification will either approve or reject the transaction within five days from the receipt of the documents. Registrar will update CDC nominee share holding in the member's register, cancel share certificates and transfer deeds, and return the relevant documents (other then canceled share certificates and transfer deeds) to applicant account holder.</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;"><br />
	</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;">Withdrawal of securities <br />
	from the CDS:<br />
	<br />
	</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;">The account holder will initiate the withdrawal request by entering the relevant details into the system, and securities withdrawal form (SWF). CDS will generate computer printouts of the transaction. Account holder will then send the SWF and the computer printouts to the relevant registrar.</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;"><br />
	</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;">The registrar after verification of the balance will either approve or reject the transaction within five days from the receipt of the documents and update CDC nominee share holding in the member's register. Registrar will return the relevant documents and share certificates to the applicant.</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;"><br />
	</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;">Prepare share certificate (Jumbo certificate): <br />
	<br />
	</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;"><b>Free Transfer -</b> Book entry transfer of securities without any associated cash movement. This is a unilateral transaction in which an account holder can deliver securities to any other account holder in CDS. Although the beneficial ownership of securities changes as securities move from one account to another, there is no stamp duty involved and the transfer is on the spot.</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;"><br />
	</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;"><b>Pledge/Release/Call -</b> Pledging securities in favor of a lender which can only be released or called by the lender. This function will greatly benefit the financial institutions by reducing risk of fake share certificates and paperwork to a great extent. </span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;"><br />
	</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;">Stock Borrowing or Lending through the CDS: <br />
	<br />
	</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;"><b>Corporate Action - </b>In case of bonus issues, rights issues, sub-division, consolidation and any other action that changes the number of securities held in a participant's account or involves the determination of entitlement to beneficial owners, CDC shall provide relevant details of account holders and sub-account holders to the issuer. The CDC will also provide details for the purpose of notice of general meetings and other notices/communications.</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;"><br />
	</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;"><b>Delivery Versus Payment (DVP) - </b>DVP is a bilateral transaction or book entry transfer of ownership of a security in exchange for payment to settle a transaction. The deliverer of the securities will initiate the DVP request on CDS specifying the details of securities and payment.&nbsp;</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;"><br />
	</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;">Upon acceptance of the receiver, CDS will debit deliverer's securities account and credit receiver's securities account. Likewise, CDS will debit receiver's cash account and credit deliverer's cash account. Cash only moves from one account to another without any associated securities movement. </span></div>',
			'published' => true,
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			'description' => 'In a nut shell, Central Depository System (CDS) is an electronic book entry system to record and maintain securities and to register their transfer. In CDS, ownership......',
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	(int) 4 => array(
		'Article' => array(
			'id' => '453',
			'article_category_id' => '41',
			'title' => 'Social Media Adoption By TELECOM Giants In Nepal - NCELL And NTC',
			'sub_title' => '',
			'summary' => null,
			'content' => '<div>
	<div style="text-align: justify;">
		<span style="font-size:12px;">By <strong>Deep Sherchan<br />
		<br />
		</strong></span></div>
</div>
<div style="text-align: justify;">
	<span style="font-size:12px;">As we are moving into the age of online economy, communication channels will play a major role in development of nation's economy. So, it is very important to understand where Nepal is, in terms of the whole online revolution. South-East Asian Countries like Malaysia, Singapore, and Indonesia are rapidly evolving with the online revolution and giving them important space into the overall growth of the nation.</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;"><br />
	</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;">As per the US Census Bureau, Nepal has a population of 28,951,852 as of 2010 and accordingly to ITU Nepal has 625,800 Internet users as of June, 2010, which is like 2.2 per cent of the population, according to ITU. Now, if we compare this with Malaysia, it has 28,728,607 population (2011) and 16,902,600 Internet users as of June 2009, which is 64.6 per cent penetration, as per ITU. More interestingly, it had around 9,998,440 Facebook (FB) users on March 31/11, which is 34.8 per cent penetration. As per Facebook, Nepal had 811,780 Facebook users on March 31/11, 2.8 per cent penetration. The difference in the penetration of Internet is interesting to observe. The numbers can be a bit contradictory, but FB's user count is very approximate based on the location which cannot be verified. But even then, this does give some amount of insights into the population.</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;"><br />
	</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;">Now, Social Media is already a leading phenomenon in the world, it's a cultural shift between the mainstream media and the free and open community conversation that takes place at the online community forums and platforms such as Facebook. One of the major role social media plays is in the leveraging small and medium businesses, where businesses have direct access to communicate with the customers. So, it is interesting to see how the telecom giants of Nepal are handling this, as they provide the main backbones for the whole revolution.</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;"><br />
	</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;">The picture is quite interesting as it shows that the two major players of telecom in Nepal (NTC and NCELL) have been going in different directions all together. Now, which one is on the right track is not very difficult to figure out. When we talk about online revolution, there is one important thing to consider and that is - how social media friendly is the company. Now, unless telecom companies understand the effect of social media, there is no way that they will be able to drive the required innovation in the field.</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;"><br />
	</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;">In the evolving business models, every company is required to have an online presence and online communication channels, for people to connect with the service. Nepal surely has lots of hurdles to pass through before the Nepali people and companies can leverage the benefits of IT and social media. If you compare NCELL and NTC, you will immediately notice where each one is. NCELL has been heavily adopting latest technology and business models to gain users base, whereas NTC is still in rudimentary stages.</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;"><br />
	</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;">Just to give you an idea on why this is so important for NTC and NCELL, let me explain the basic business models both employ. Both companies earn by sales of SIM cards, the call charges and nowadays even through bandwidth usages. The concept of value added services for mobile devices has still not matured and the same can be said about caller-tunes and other entertainment services. In addition to this, the emerging popularity of Smartphone has provided opportunity to give a variety of services to the end-users. In a competitive market, consumer research report shows that the adoption rate of telecom services is heavily influenced by the service satisfaction, which means a continuous to and fro communication between customer and business. This means a constant presence -- physically and virtually. This is why, online presence is so important. People are continuously looking for information and support.</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;"><br />
	</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;">May be this is why NTC is losing the battle with NCELL. NCELL has been officially declared as the winner the country's first private GSM mobile operator”as the Number 1 player in the GSM mobile segment. The massive branding and investment NCELL has done for last one year is commendable. IT has&nbsp;been aggressive in terms of promoting and coming up with new business models.</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;"><br />
	</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;">Reports say that until last fiscal year, difference between the subscriber base of the two operators NCELL and NT was around 1 million. However, since last fiscal year, NCELL aggressively started introducing new services and handsets targeting both low-end and high-end customers.</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;"><br />
	</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;">Let us just concentrate on how NCELL has been making its presence felt in the online space through social media. The social media presence is all about wearing an attitude to support customers through providing timely information. The websites of NCELL and NTC are both rich in content but NCELL seems to have been communicating with more grace than NTC. The engagement in NCELL is much higher than in NTC. Similarly, NTC doesn't have any online profiles in Facebook, which is where most people are spending their time on. </span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;"><br />
	</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;">Beside the contradictory argument that Nepal is still emerging in terms of Online Community, NCELL seems to be doing great with its promotion whereas NTC is still lagging behind the adoption. Being TELECOM companies, NTC and NCELL both must be forerunner into adopting new technology and encouraging new services.</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;"><br />
	</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;">Other interesting examples are Nepal Unites Campaign and Creative Political Activism which are on at Facebook. These activities show the vibes of Nepalese Online Community which if leveraged correctly would benefit companies as well as the nation.</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;"><br />
	<br />
	</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;"><strong>NTC Online Profiles:<br />
	<br />
	</strong></span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;">Telecommunication was introduced with the installation of open wire trunk telephone line between Kathmandu and Birgunj (a border town in southern Nepal) for the first time in Nepal around 1914, beginning of the First&nbsp; World War.</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;"><br />
	</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;">Nepal Telecom has been actively involved in the business of physical market place. Its presence in the electronic market space is very minimal while major projects are under planning. Nepal Telecom is highly equipped with country-wide telecom infrastructure which is the competitive advantage for it over the rivals in the industry. Nepal Telecom has implemented IT in customer service rather than in core business. The company has been implementing information technology in customer billing payment. The other IT focuses are on Internal integration of the functional units and managerial planning process. The company has centralized the billing payment and revenue collection.</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;"><br />
	<br />
	</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;"><strong>NCELL Online Profiles:<br />
	<br />
	</strong></span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;">Until last fiscal year, difference between the subscriber base of the two operators NCELL and NT was around 1 million. However, since last fiscal year, NCELL aggressively started introducing new services and handsets targeting both low-end and high-end customers.<br />
	<br />
	</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;"><br />
	</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;"><i>(Sherchan is Chief Marketing Officer at InRev Systems in Bangalore, India. He can be contacted via email at deep@in-rev.com or @bexdeep on Twitter.)<br />
	<br />
	<br />
	</i></span></div>
<table border="2" cellpadding="0" cellspacing="0">
	<tbody>
		<tr>
			<td valign="top" width="91">
				<div style="text-align: justify;">
					<span style="font-size:12px;"><br />
					</span></div>
			</td>
			<td valign="top" width="269">
				<div style="text-align: justify;">
					<span style="font-size:12px;">NCELL</span></div>
			</td>
			<td valign="top" width="269">
				<div style="text-align: justify;">
					<span style="font-size:12px;">NTC</span></div>
			</td>
		</tr>
		<tr>
			<td valign="top" width="91">
				<div style="text-align: justify;">
					<span style="font-size:12px;">Website</span></div>
			</td>
			<td valign="top" width="269">
				<div style="text-align: justify;">
					<span style="font-size:12px;">http://ncell.com.np/</span></div>
			</td>
			<td valign="top" width="269">
				<div style="text-align: justify;">
					<span style="font-size:12px;">http://www.ntc.net.np/</span></div>
			</td>
		</tr>
		<tr>
			<td valign="top" width="91">
				<div style="text-align: justify;">
					<span style="font-size:12px;">Wikipedia</span></div>
			</td>
			<td valign="top" width="269">
				<div style="text-align: justify;">
					<span style="font-size:12px;">http://en.wikipedia.org/wiki/Ncell</span></div>
			</td>
			<td valign="top" width="269">
				<div style="text-align: justify;">
					<span style="font-size:12px;">http://en.wikipedia.org/wiki/Nepal_Telecom</span></div>
			</td>
		</tr>
		<tr>
			<td valign="top" width="91">
				<div style="text-align: justify;">
					<span style="font-size:12px;">Facebook Wiki</span></div>
			</td>
			<td valign="top" width="269">
				<div style="text-align: justify;">
					<span style="font-size:12px;">http://www.facebook.com/pages/Ncell/134092903305342</span></div>
			</td>
			<td valign="top" width="269">
				<div style="text-align: justify;">
					<span style="font-size:12px;">http://www.facebook.com/pages/Nepal-Telecom/104071036295574?sk=wall</span></div>
			</td>
		</tr>
		<tr>
			<td valign="top" width="91">
				<div style="text-align: justify;">
					<span style="font-size:12px;">LinkedIn</span></div>
			</td>
			<td valign="top" width="269">
				<div style="text-align: justify;">
					<span style="font-size:12px;">http://www.linkedin.com/company/ncell</span></div>
			</td>
			<td valign="top" width="269">
				<div style="text-align: justify;">
					<span style="font-size:12px;">http://www.linkedin.com/company/nepal-telecom/statistics</span></div>
			</td>
		</tr>
		<tr>
			<td valign="top" width="91">
				<div style="text-align: justify;">
					<span style="font-size:12px;">Facebook Page</span></div>
			</td>
			<td valign="top" width="269">
				<div style="text-align: justify;">
					<span style="font-size:12px;">https://www.facebook.com/ncell.com.np</span></div>
				<div style="text-align: justify;">
					<span style="font-size:12px;">(65,569 fans)</span></div>
			</td>
			<td valign="top" width="269">
				<div style="text-align: justify;">
					<span style="font-size:12px;">No official page, but lots of hatred community present unofficially.</span></div>
			</td>
		</tr>
		<tr>
			<td valign="top" width="91">
				<div style="text-align: justify;">
					<span style="font-size:12px;">Twitter Profile</span></div>
			</td>
			<td valign="top" width="269">
				<div style="text-align: justify;">
					<span style="font-size:12px;">None</span></div>
			</td>
			<td valign="top" width="269">
				<div style="text-align: justify;">
					<span style="font-size:12px;">None</span></div>
			</td>
		</tr>
		<tr>
			<td valign="top" width="91">
				<div style="text-align: justify;">
					<span style="font-size:12px;">Twitter Conversation</span></div>
			</td>
			<td colspan="2" valign="top" width="538">
				<div style="text-align: justify;">
					<span style="font-size:12px;">Though Twitter has vibrant Nepalese community, the scale is pretty low compared to Facebook and the conversation is low for NTC and NCELL.</span></div>
			</td>
		</tr>
		<tr>
			<td valign="top" width="91">
				<div style="text-align: justify;">
					<span style="font-size:12px;">Blogs</span></div>
			</td>
			<td valign="top" width="269">
				<div style="text-align: justify;">
					<span style="font-size:12px;">http://blog.ncell.com.np/</span></div>
			</td>
			<td valign="top" width="269">
				<div style="text-align: justify;">
					<span style="font-size:12px;">&nbsp;-</span></div>
			</td>
		</tr>
		<tr>
			<td valign="top" width="91">
				<div style="text-align: justify;">
					<span style="font-size:12px;">Engagement</span></div>
			</td>
			<td valign="top" width="269">
				<div style="text-align: justify;">
					<span style="font-size:12px;">Contest and Campaigns</span></div>
			</td>
			<td valign="top" width="269">
				<div style="text-align: justify;">
					<span style="font-size:12px;">None</span></div>
			</td>
		</tr>
	</tbody>
</table>
<p style="text-align: justify;">
	<span style="font-size:12px;"><br />
	</span></p>',
			'published' => true,
			'created' => '2011-10-11',
			'modified' => '2012-09-17',
			'keywords' => '',
			'description' => 'As we are moving into the age of online economy, communication channels will play a major role in development of nation’s economy. So, it is very important to understand where......',
			'sortorder' => '363',
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			'article_date' => '0000-00-00 00:00:00',
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	(int) 5 => array(
		'Article' => array(
			'id' => '452',
			'article_category_id' => '41',
			'title' => 'Credibility Question In Accounting Profession',
			'sub_title' => '',
			'summary' => null,
			'content' => '<div>
	<div style="text-align: justify;">
		<span style="font-size:12px;"><strong><br />
		By Paramananda Adhikari, FCA <br />
		<br />
		</strong></span></div>
</div>
<div style="text-align: justify;">
	<span style="font-size:12px;">Over the past decade, increased litigation as well as criticism of auditors has left little room for doubt that auditors are facing a liability and credibility crisis in their profession. The reputation of accountancy profession comes under question for the reliability of their services. This issue in auditing profession is termed audit expectation gap which denotes the difference between the public's and auditors perceptions of the role of an audit function. The gap is critical to the auditing profession because the greater the unfulfilled expectations from the public, the lower is the credibility associated with the function of the auditor. The increase in litigation and criticism against the auditors can be attributed to the expectation gap. The gap arises from the misconceptions on the part of users, the nature and objective of audit, unreasonable expectations from public and performance below standard of profession by the auditors too. The accountancy profession, like other professions, exists only through wide public acceptance. The perceived need in auditing is an independent reporting function. Once the auditor has examined the entity's books of accounts and financial statements, the public understands that there are no problems. </span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;"><br />
	</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;"><strong>Independence: Fundamental in Auditing Profession<br />
	<br />
	</strong></span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;">What is independence? Why is it necessary for Professional Accountants? How is it maintained? These are some of the issues raised with respect to auditors. The term independence has no concrete meaning. However, integrity, objectivity and trustworthiness are the key elements in independence. The concept of auditors independence has been accepted from the very beginning when the accounting came into being as a profession. During the late 19th and early 20th centuries, the perception of independence in accounting profession changed due to modern capitalist economy, a system of economy designed to allocate resources using market mechanism. Independence is fundamental to the reliability of auditors reports. Investors, creditors and public would have little confidence in auditor's report, if they were not independent from the management in both fact and appearance.</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;"><br />
	</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;">Without independence, an auditor's opinion is suspect and the users of financial statements believe that there is no need for external auditors, if independence has not been maintained. Third parties acceptance implies that the role of external auditors is an independent financial control within the corporate entity. Auditor must be conscious to maintain independence on audit planning execution and reporting. He must strive to ensure that the audit quality is not compromised under any circumstances.</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;"><br />
	<br />
	</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;"><strong>Public Expectations<br />
	<br />
	</strong></span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;">Over a decade, audit is at the center of a heated debate. How and why for audit were the questions.. People were of the view that the responsibility of any wrongdoing in any entity is on the auditors among others. There has been disparity in the people's expectations from auditors, especially with regard to their duties, responsibilities and objectives of audit. There are misconceptions that it is the auditor's role to prepare financial statements in compliance with accounting standards and statutory requirements. However, the auditor's responsibility is to express an opinion whether the financial statements generated from the books of accounts give a true and fair picture in accordance with the financial reporting framework. </span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;"><br />
	</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;">People may have expectations from auditors that go beyond the professional responsibility such as audits would provide absolute assurance on the accuracy of the company's financial statements. The users of financial statements may question why the auditors did not detect material irregularities and disclose them in their report. </span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;"><br />
	<br />
	</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;"><strong>Audit at the Crossroad <br />
	<br />
	</strong></span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;">Given the growing list of financial reporting scandals, audit is once again at a crossroad. The significant number of big corporate failures/scandals over the past decade all over the world creates an audit crisis in the marketplace. The large payouts resulting from audit litigation in the developed countries have adversely affected the quality of audit services. Some of the big corporate failures/scandals over the past decade were, Enron (USA), WorldCom (USA), Lehman Brothers (USA), Merrill Lynch (USA), Fannie Mae (USA), Parmalat (Italy), Maxwell (UK), Flowtex (Germany), Vivendi (France), Baan (Netherlands), Satyam (India). These failures/scandals came one after another. After the widely publicised auditing failures in USA and later in Europe, the users have started losing confidence in auditing profession and raised the voice where were the auditors? What was the role of watchdog? These cases clearly map out people's expectations with respect to the duties and responsibilities of auditors. Regulating and oversight agencies have been investigating the performance status of the accounting profession worldwide.</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;"><br />
	</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;">Over the days, in Nepal too, people have witnessed and become victims of companies going bust due to poor corporate governance by the management. In such a situation, effective corporate governance structures that should have detected any unlawful or unethical behavior by the dominant party may have been missing. Due to the cases of unethical conduct of management, inappropriate accounting system, disparity in maturity pattern of assets and liabilities, over-valuation of collateral that may be running amuck and pitch in some of the cases like Nepal Development Bank (Liquidation), Samjhana Finance Ltd, Nepal Share Markets and Finance Ltd, Gurkha Development Bank, United Development Bank, Vibor Bikas Bank, Peoples Finance Ltd, World Merchant Banking and Finance Ltd, CMB Finance Ltd. From these few instances, we are also witnessing corporate failures, scandals, or liquidity crunch in recent days that may raise questions about credibility on the auditors report and sustainability of businesses. Now is the time for the audit profession to be more proactive to lead the debate.</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;"><br />
	<br />
	</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;"><strong>Questionable Role of Auditor<br />
	<br />
	</strong></span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;">There are many reasons for reducing the independence of the auditor. Among others, these are economic dependence on the client, market competition in audit, other non-audit services, close relationship with client's executives, acceptances of goods and services from clients in concessional rate or free of cost, worry about their re-appointment etc.&nbsp;Due to these factors, auditors may be unable to produce fair and reliable reports in certain cases and the independence, of course, is curtailed. If auditors are perceived not independent, the report would be below the standards of the profession and would damage overall image of the accounting profession. </span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;"><br />
	</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;">Auditors may be found guilty of gross negligence in examining the financial and other records. Gross negligence means failure to exercise minimum due care when material errors or irregularities that should have been detected by the application of professional standards go unnoticed. Material amount of fictitious sales recorded at the year-end to inflate income and failure to detect this intentional mis-statement is one of the examples. A similar mis-statement by understating several expenses by a small amount or charging expenses in capital account and failure to detect them by the auditor is also considered as gross negligence. </span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;"><br />
	</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;">Cases finding fault with auditors about the application of professional standards, practices and inadequate disclosure have occurred over time, raising questions over auditors' performance. Some of the cases of non-compliance of standards are revenue recognition, fictitious receivables, failure to disclose related party transactions, verification of cash/bank balances and, failure to obtain third-party confirmation, inadequate collateral of loan, non-accounting of major transactions, failure to assess the clientâ€™s business risk etc. The standard also requires auditors to indicate any substantial doubt about the entityâ€™s existence as a going concern, In such a case, the auditor must add an explanatory paragraph following the opinion paragraph to his report. </span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;"><br />
	<br />
	</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;"><strong>The Expectation Gap<br />
	<br />
	</strong></span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;">Expectation gap in audit is the difference between what the public/users of financial statement perceive about auditors responsibilities to be, and what exactly the auditors responsibilities are. Therefore, it is a gap between what is required by regulation and what market/public need is. The auditor's responsibility for detecting fraud is one of the major areas contributing to the expectation gap. The users of the financial statements believe that unqualified audit report means, the auditor has detected all material errors/irregularities. However, this perception is not in line with the professional standards, which hold the auditor responsible only for exercising due care in the conduct of examination.</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;"><br />
	</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;">Another area for difference overrides the control structure and conceals the facts, perhaps at the behest of management. In such a case, auditor's exercise of due care fails to detect irregularities in the error-free financial statements produced by the management. This will result in significant misrepresentations in financial statement not detected by the auditor and further widen the expectation gap. </span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;"><br />
	</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;">The next area of difference is perception about the entity's ability to continue as a going concern. The users believe that an unqualified audit report is a guarantee that the entity is a healthy one. However, immediately or some time later, the entity is found either in a financial crisis to sustain or in the liquidation process. In such a situation, people may not be trust unqualified audit reports and many corporations either collapsed or were bailed out within a short period of receiving unqualified audit reports. These facts may attract substantial doubt that the auditors lack the expertise to render an independent opinion on financial statements and corporate affairs.</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;"><br />
	<br />
	</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;"><strong>Bridging the Expectation Gap<br />
	<br />
	</strong></span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;">Preparation and presentation of financial statements is the prerogative of the management. Audit is performed on test basis from the sample drawn on the population of a class of transactions. Due to inherent limitation of internal control system adopted by the management, auditors can not detect all the irregularities. The auditor examines the financial statements and provides reasonable assurance that the financial statements are free from material mis-statements. As a result, the expectation gap continues to exist in audit including fraud, internal controls, illegal acts and other non-compliances. Here we analyse the possible remedial actions that may narrow expectation gap and improve the audit effectiveness. </span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;"><br />
	</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;">Firstly, the auditor shall report the cases of mis-representations, non-compliance of rules, regulations and professional standards to bridge the gap to some extent. If the auditors are found grossly negligent to discharge their duties, they may be liable to action under various Acts and Regulations, such as Nepal Chartered Accountants Act 1997, Companies Act 2006, Bank and Financial Institutions Act 2006.</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;"><br />
	</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;">Secondly, compliance of Nepal Standard on Quality Control (NSQC) and implementation of Peer Review System, i.e. auditing the auditors helps narrow the expectation gap.</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;"><br />
	</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;">Thirdly, educating the public about the objectives of audit, auditor's duties and responsibilities are important elements to bridge the expectation gap. Reducing unreasonable expectations requires creating awareness about the objective and limitations of audit and the auditor's work. </span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;"><br />
	</span></div>
<div>
	<span style="font-size:12px;"><strong>Reporting <br />
	<br />
	</strong></span></div>
<div>
	<span style="font-size:12px;">The auditor has the duty to report, after careful scrutiny of all the documentary evidences and information, every item of importance. He must demonstrate to the public that it is independent from the management and will provide high quality of audit and assurance services. Auditor, as a "public watchdog" reports the effectiveness of internal control, non-compliance of professional standards, mis-statements contained in financial statements, mis-statements resulting from management/employee fraud and illegal activities/operations, if any. Further, the auditor has to report about the entity's ability to continue as a going concern for a reasonable period from the date of audited financial statements. </span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;"><br />
	<br />
	</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;"><strong>To Conclude<br />
	<br />
	</strong></span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;">Users of financial statements are of the opinion that the auditor should not only provide an opinion but also interpret the financial statements in such a manner that it evaluates the overall performance of the entity. The users expect from auditors to report in-depth information of the companyâ€™s affairs, watching the management surveillance and detecting illegal acts/frauds on the part of management. These are the high expectations on the part of users of financial statements that create gap between auditors and users expectations from auditing. There has been considerable debate about the nature and scope of audit and the audit expectation gap. The differences between what auditors actually do and what third parties think auditors do or should do remain. The expectation gap may never be eliminated. However, it may be reduced to a standard of profession. </span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;"><br />
	</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;">In recent years, the regulatory framework for professional accountants has changed. At present, we have peer review concept, quality control standards and the disciplinary mechanism. Failing in compliance or departures from the set conduct by the members may make them liable to disciplinary action. All this has been done with a view to gaining public confidence and to enhancing credibility of the accounting profession. </span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;"><br />
	<br />
	</span></div>
<div style="text-align: justify;">
	<strong><span style="font-size:12px;">(Adhikari is Technical Director at the Institute of Chartered Accountants of Nepal (ICAN)&nbsp;and General Secretary of the Association of Chartered Accountants of Nepal)<br />
	<br />
	<br />
	</span></strong></div>',
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			'title' => 'We Are Long Term Players In Nepal',
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<p class="ANSWER" style="text-align: justify;">
	<span class="MyriadPro"><span calibri="" lang="EN-GB" letter-spacing:="" sans-serif="">Sujit Mundul, CEO and Director, Standard Chartered Bank (SCB) Nepal, started his career as a lecturer in Organic Chemistry but switched over to banking as he joined SCB as a junior officer in the seventies. Mundul moved on through various relationship roles in Corporate/Institutional Banking including Credit and Audit functions.&nbsp; He also worked in SCB - London in Credit Management for about a year on secondment. He became Head - Corporate Banking, South India and Regional Head - Sales, for Eastern India before joining SCB Nepal as the CEO and Director. Mundul spoke to <i>Nubiz</i> on a wide range of issues on banking and finance. Excerpts:</span></span></p>
<p class="ANSWER" style="text-align: justify;">
	 </p>
<p class="questionsforinterview" style="text-align: justify;">
	<span style="font-size:12px;"><strong><span class="MyriadPro"><span lang="EN-GB" style="letter-spacing: 0pt;">You have substantially increased the interest on savings, from 2-5% a few years back to 6.5% now. Is there still cash crunch? <br />
	</span></span></strong></span></p>
<p class="ANSWER" style="text-align: justify;">
	<span style="font-size:12px;"><span class="MyriadPro">To answer this question, we need to set the perspective right why SCB Nepal has increased its interest rate. Till one year back, the market never experienced that kind of interest rate because of many reasons. One of the major reasons is that remittance was less. That is coming in abundance now. But for good reason or bad, the market started feeling the tightness. As a result, some stress in liquidity was felt. To be very honest, SCB Nepal never faced a liquidity strain, we have always been adequately liquid.&nbsp; In fact, we had been the lenders in the inter-bank throughout the crisis period. Now, in order to build the deposit base, we decided to increase our interest rates because the market dynamics have changed. The market has slightly shifted gears from low to high interest rate environment. As we are also one of the key players in the market, we need to keep up with the market rates. That's the reason why we have increased the interest rate. Though the increase in interest rate is not that significant; we have already started seeing good positive response from the market.</span></span></p>
<p class="ANSWER" style="text-align: justify;">
	<span style="font-size:12px;"><span><span class="MyriadPro"><br />
	</span></span></span></p>
<p class="questionsforinterview">
	<span style="font-size:12px;"><strong><span class="MyriadPro"><span lang="EN-GB" style="letter-spacing: 0pt;">SCB Nepal is known for quality banking. But competition actually has become tough. How do you view the growth of Nepali financial sector?</span></span></strong></span></p>
<p class="ANSWER" style="text-align: justify;">
	<span style="font-size:12px;"><span class="MyriadPro"><span style="letter-spacing: 0.1pt;">It is a difficult market now. The market of Nepal has become overcrowded. It cannot accommodate so many players; that's why, the competition is a bit uneven. Customers or the depositors would love to see that wherever they put their money it should remain safe and they should get high quality service. The depositors are becoming much wiser compared to what they used to be few years back. They read papers, they also follow the economy and they can make their own judgments. That is why there is the competition and, I believe, we have been able to tackle the competition successfully.</span></span><strong><br />
	<span class="MyriadPro"> </span></strong></span></p>
<p class="ANSWER" style="text-align: justify;">
	<span style="font-size:12px;"><strong><span><span class="MyriadPro"><br />
	</span></span></strong></span></p>
<p class="questionsforinterview" style="text-align: justify;">
	<span style="font-size:12px;"><strong><span class="MyriadPro"><span lang="EN-GB" style="letter-spacing: 0pt;">You are of the few banks that also offer insurance products. How do these two products work along?</span></span></strong></span></p>
<p class="ANSWER" style="text-align: justify;">
	<span style="font-size:12px;"><span class="MyriadPro">e do not have insurance products of our own but we are co-branded with insurance. We call it bancassurance. It is very complementary with banking services. Basically, it could be used for retail banking sector. It can go very well with mortgage products. Similarly, it can go with other lending products. And it is used as one of the major products in wealth management. So we use it as a part of wealth management package. The corporate sector has also been covered by insurance. Instead of going to an ordinary agent, they can come to the bank to get their assets insured. So, these products are actually complimentary to each other.</span></span></p>
<p class="ANSWER" style="text-align: justify;">
	<span style="font-size:12px;"><span><span class="MyriadPro"><br />
	</span></span></span></p>
<p class="questionsforinterview" style="text-align: justify;">
	<span style="font-size:12px;"><strong><span class="MyriadPro"><span lang="EN-GB" style="letter-spacing: 0pt;">Securities Exchange Board of Nepal (SEBON) has recently got the Mutual Fund Regulations ratified. Your bank had shown some interest in this business in the past. How is the plan now?</span></span></strong></span></p>
<p class="ANSWER" style="text-align: justify;">
	<span style="font-size:12px;"><span class="MyriadPro"><span style="letter-spacing: 0.1pt;">To run a successful mutual fund, you need to have volume. I don't think Nepali market has yet got that volume. It will take maybe a few years to create that. For a successful mutual fund, we need to see also to the stock market. Is it equipped to handle the flow? Nepal is working with India to equip the Nepali stock market with some modern tools such as Central Depository System (CDS). Mutual Fund would be very helpful to make this market more perfect. It will not then be driven by the brokers; it will be driven by the market on its own forces. The investors can come and directly play in the market. <br />
	</span></span></span></p>
<p class="ANSWER" style="text-align: justify;">
	<span style="font-size:12px;"><span class="MyriadPro">We have a mutual fund in India under Standard Chartered. So we have the experience and I don't think there will be a problem in terms of experience or expertise.&nbsp; But we need to actually have that volume.</span></span></p>
<p class="ANSWER" style="text-align: justify;">
	<span style="font-size:12px;"><span><span class="MyriadPro"><br />
	</span></span></span></p>
<p class="questionsforinterview" style="text-align: justify;">
	<span style="font-size:12px;"><strong><span class="MyriadPro"><span lang="EN-GB" style="letter-spacing: 0pt;">How do you evaluate the current financial system of Nepal? Is it heading towards robustness?</span></span></strong></span></p>
<p class="ANSWER" style="text-align: justify;">
	<span style="font-size:12px;"><span class="MyriadPro">It is going through transformation I can say. At this stage, it is difficult to say whether it is robust or stagnant but I think the transformation is happening in the right direction. But it takes time; there are a lot of things that need to be corrected. Fundamental corrections are required. The only point here is that there are too many players so this market would definitely require consolidation. But I don't know when the momentum will come in terms of consolidation.&nbsp;</span></span></p>
<p class="ANSWER" style="text-align: justify;">
	<span style="font-size:12px;"><span><span class="MyriadPro"><br />
	</span></span></span></p>
<p class="questionsforinterview" style="text-align: justify;">
	<span style="font-size:12px;"><strong><span class="MyriadPro"><span lang="EN-GB" style="letter-spacing: 0pt;">Many banks are now trying to form a subsidiary to channel the mandatory deprived-sector lending. Do you subscribe the idea? Any plan from SCBNL along this line?</span></span></strong></span></p>
<p class="ANSWER" style="text-align: justify;">
	<span style="font-size:12px;"><span class="MyriadPro">We do not have any plan at this moment and I can't comment about other banks. However, I can tell you that this deprived-sector lending (micro finance) is definitely SCB Groups major focus area globally. And also here we are working on that.</span></span></p>
<p class="ANSWER" style="text-align: justify;">
	<span style="font-size:12px;"><span><span class="MyriadPro"><br />
	</span></span></span></p>
<p class="ANSWER" style="text-align: justify;">
	<span style="font-size:12px;"><strong><span class="MyriadPro"><span lang="EN-GB">What do you suggest to improve the financial services market in Nepal?</span></span></strong></span></p>
<p class="ANSWER" style="text-align: justify;">
	<span style="font-size:12px;"><span class="MyriadPro">The problem is uneven competition. There are many things that need to be done to make the market stronger. Firstly, we need to have tighter corporate governance; there is enough room for improvement. It is not only the regulator's responsibility; it is the responsibility of the individual players to ensure that a robust governance framework is in place. Secondly, this market needs more reforms in the sense of widening of the market and more integration with the international market. I think players should be allowed to directly interact with the international market. Thirdly, I would love to see a universally acceptable risk management model which would compensate the short-term losses caused by fundamental imbalances in the long term. Fourth, it is necessary to develop the capital market of Nepal. It helps in the long-term management of liquidity and also makes resources available to people to make short-term investments in the productive sector.</span></span></p>
<p class="ANSWER" style="text-align: justify;">
	<span style="font-size:12px;"><span><span class="MyriadPro"><br />
	</span></span></span></p>
<p class="questionsforinterview" style="text-align: justify;">
	<span style="font-size:12px;"><strong><span class="MyriadPro"><span lang="EN-GB" style="letter-spacing: 0pt;">What are the challenges and problems faced by your bank in particular and by the overall banking sector in general?</span></span></strong></span></p>
<p class="ANSWER" style="text-align: justify;">
	<span style="font-size:12px;"><span class="MyriadPro"><span style="letter-spacing: 0.2pt;">As far as our bank is concerned, we visualize the plans for next seven to ten years. I think we are well equipped to handle the challenges when they come. During crisis, we set up a very good example in the market as the only bank that lent to the market. That shows how careful we are. Our portfolio is very carefully managed. We run cautiously, we don't want to block our books and then suffer. There is problem now in the sense that the productive sector needs more credit but a lot of money is stuck in the real estate sector.</span></span><strong><br />
	<span class="MyriadPro"> </span></strong></span></p>
<p class="ANSWER" style="text-align: justify;">
	<span style="font-size:12px;"><strong><span><span class="MyriadPro"><br />
	</span></span></strong></span></p>
<p class="questionsforinterview" style="text-align: justify;">
	<span style="font-size:12px;"><strong><span class="MyriadPro"><span lang="EN-GB" style="letter-spacing: 0pt;">What is your future mission and vision for Nepal?</span></span></strong></span></p>
<p class="ANSWER" style="text-align: justify;">
	<span style="font-size:12px;"><span class="MyriadPro">We are long-term players and we would continue to be here. We'll be expanding our ventures. We have in mind some acquisition also, when the time is right. That's not completely out of the window.&nbsp; It's very much part of the game plan. <br />
	</span></span></p>
<p class="ANSWER" style="text-align: justify;">
	<span style="font-size:12px;"><span><span class="MyriadPro"><br />
	</span></span></span></p>
<p class="questionsforinterview" style="text-align: justify;">
	<span style="font-size:12px;"><strong><span class="MyriadPro"><span lang="EN-GB" style="letter-spacing: 0pt;">It is said that in Nepal, merger and acquisition will remain only in talks not in practice. What do you say?</span></span></strong></span></p>
<p class="ANSWER" style="text-align: justify;">
	<span style="font-size:12px;"><span class="MyriadPro">Unless foreign players and foreign direct investment flow into Nepal, I don't see any possibility of merger and acquisition. Its pre-requirements are political stability and supplementing policies. It is not only the matter of tax. No investor would like to buy problem paying money. Therefore, there must be a suitable labour policy in Nepal. I don't mean the facility of hire and fire. It means keeping human resource in right size and mobilizing it. After meeting all these requirements, I think we can then talk about merger and acquisition. <br />
	<br />
	</span></span></p>
<p class="ANSWER" style="text-align: justify;">
	<span style="font-size:12px;"><strong><span class="MyriadPro"><span lang="EN-GB" style="letter-spacing: 0pt;">What are your bank's recent activities on Corporate Social Responsibility?<br />
	<br />
	</span></span></strong><span class="MyriadPro"><span style="letter-spacing: 0.2pt;">We continue to focus on accseeing is believing keeping avoidable blindness in the centre point. We are very much into helping the poor schools inside and outside the valley by providing computers and creating computer laboratory and also by providing scholarships. We have helped few deserving schools in uplifting their infrastructural facilities. We are very much into the HIV-AIDS awareness and environment protection programs. As a part of our ongoing agenda, we are planting trees to maintain greenery around and are also looking at reducing the carbon requirement of our own uses. </span></span><span style="font-family: Wingdings; color: rgb(237, 28, 36); letter-spacing: 0.15pt;">&nbsp;</span></span></p>
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				<strong>Before Nepal was declared a republic, there were three major actors in the economic affairs of Nepal: the political parties, the monarchy and the traditional capitalist classes. We won't be doing any justice to two traditional capitalist classes&nbsp; the Newars and the Marwaris&nbsp; if we say that these communities favored the former king during his direct rule.</strong></div>
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				<strong>After the declaration of the Republic Nepal, the state is represented by the political parties. So it is natural that the capitalist class siding with the political parties has better ground to grow, again with the blessings of the state. For the time being, we have to accept that the capitalist class close to the former king doesn't enjoy such blessings at par. But they have the experience of doing business with all other capitalist classes.</strong></div>
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<p>
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				Traditional Newar capitalist class means a group of certain castes in the Newari community that are engaged in transit trade between India and Tibet (the autonomous region of the People's Republic of China) since the ancient time. This capitalist class is often referred to as the Caravan Traders because of their admirable mobility for business. The economic history of Newars is as old as Medieval Nepal. Marwaris are the traditional capitalist class of India who later migrated to Nepal in course of business. It has often been argued that the business history of Marwaris is as old as the economic history of India.</div>
		</div>
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<p>
	<br />
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		<div>
			<strong>By Mohan Das Manandhar &amp; Rojan Bajracharya</strong><br />
			It is undisputed that a number of important developments that occurred in the political sphere of Nepal in the past few years have affected the national economy and businesses alike. Particularly, after the declaration of Republic Nepal, it has become necessary to understand the customs, ethos and ways of doing business in the new political setup. It is natural that the business communities are and should be dynamic to readjust themselves with regime change otherwise an economy like Nepal would stall for once and for all.<br />
			<br />
			It will take some time for this dynamism to take pace and develop new commercial culture and statebusiness relationship. However, it is important to recognize at the outset how the business communities pledge their common interest to the state in view of their common interest guiding the future commercial culture and state-business relationship. One of the important components of market dynamism and competitiveness is the business communities ability to bring forward their collective interest and the state's readiness to address these interests.<br />
			<br />
			Before Nepal was declared a republic, there were three major actors in the economic affairs of Nepal: the political parties, the monarchy and the traditional capitalist classes. We won't be doing any justice to two traditional capitalist classes&nbsp; the Newars and the Marwaris&nbsp; if we say that these communities favoured the former king during his direct rule. However, we can't deny the fact that the rulers and their kin who represented the state during the former king's direct rule are another traditional capitalist class of the country; and that these three capitalist classes needed to join hands for their common interest. <br />
			<br />
			This article doesn't intend to explore what issues held them together and what separated them. We presume that all these three capitalist classes did share a common business interest, but the Newars and the Marwaris were always aware that it would be useless to have a conflicting interest as the third capitalist class (the royals) had the blessings of the state. So, the Newars and the Marwaris felt the need to build strategic ties with the political parties to defend their interests that were different from the common interest. The political parties, in turn, needed these traditional capitalists to support their movement for republicanism. <br />
			<br />
			However, the problem was that some skeptics inside the political parties thought the Newars and the Marwaris had stronger ties with the royals, and were therefore on the king's side. The king and the royalties on the other hand conceived that they could not operate the entire business and commercial activities of the country by themselves. The two traditional capitalists enjoyed an established commercial network which was the important pillar of the country's economy at that point of time. The triangular relationship between these three actors during the King's direct rule was intricate. The king and the political parties provided patronage to the traditional capitalists for their own political interests and harmonized relationship with the other two actors.<br />
			<br />
			Going further back in history, after the 1990 political transformation, the country entered into an era of democratic electoral practice. The absolute monarch was brought under the constitution and the political parties were handed the executive powers of the state. Now the state was represented by two distinct political forces the king and the political parties. Soon, these two forces were confronting with each other. An opposition political force, the Maoists, even launched an armed uprising against the constitutional monarchical dispensation.</div>
	</div>
	<div style="border: 1px solid rgb(204, 204, 204); padding: 5px; width: 47%; float: right;">
		<div>
			Later, former king Gyanendra seized the executive powers on February 1, 2005. It showed that though the political parties were assigned the executive role, the king could still afford to become authoritarian. Interestingly, it was also the period of a change in the economic regime from a closed, import-substitution economy to a liberal economy.<br />
			<br />
			In this article, what we have presumed is that the state during the former king's direct rule had conceived the need of economic liberalization in the country. It got continued with time. With economic liberalization, new business opportunities emerged in the country and so did the new capitalist classes. Gradually, a new breed of aspiring capitalists also started to get engaged in trade and commercial activities giving birth to new capitalist classes in the country. It is certain that, with the latest political change, business ventures of the former king's relatives became more transparent. They have the benefit of being tagged as general public in theory but are enjoying the blessings of the state in practice. The capitalist classes also started to tag political affiliations for their mutual benefit which is but natural.<br />
			<br />
			However, the relationships of the capitalist classes with the former king and the political parties still remain harmonized in nature. Further, few new capitalists also emerged due to nurturing by political parties or by virtue of being the relatives of the leaders of these political parties. It was but natural in any new democratic country, at least in South Asia. It is not unusual that the relationship of this capitalist class with the political parties is similar to that of the king and his relatives' capitalist class. So the capitalist class close to the political parties and the one close to the king became competitors in the market and both had had the state's blessings to further their business.<br />
			<br />
			The common interests of both the traditional and the new capitalist classes are the same. This has resulted into business associations in various capacities and the strengthening of the institutional capacity of old associations : This developed formal channels to liaison the common interests of the business communities with the state. On the other hand, the traditional Newar and Marwari capitalist classes are blessed with its own strong, wellestablished conventional network. It is important to note here that this traditional network still guides the commercial culture and the way of doing business informally. So we must presume that there must have been a timely adjustment in the conventional network of the Newars and the Marwaris. <br />
			<br />
			After the declaration of the Republic Nepal, the state is represented by the political parties. So it is natural that the capitalist class siding with the political parties has better ground to grow, again with the blessings of the state. For the time being, we have to accept that the capitalist class close to the former king doesn't enjoy such blessings at par. But they have the experience of doing business with all other capitalist classes. There are traditional Newar and Marwari capitalist classes blessed with well established conventional network and commercial culture. And the fourth capitalist class is the one which has evolved in the last one decade due to new market opportunities. <br />
			<br />
			Obviously, all these capitalist classes would stand together for their common business interests but each of them has its own self-interest and are, therefore, skeptic about each other at times. It is certain that business associations are working together as building blocks to get united for their common interests and distinct identity. However, the challenge is to build unity with diversity.<br />
			<br />
			<em>(Manandharm and Bajracharya are freelance researchers.) <br />
			<br />
			<br />
			</em></div>
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	<strong><img align="top" alt="sectorial" border="1" height="141" hspace="1" src="http://newbusinessage.com/ckfinder/userfiles/Images/sectorial1.jpg" vspace="1" width="200" /></strong></p>
<p>
	<strong>By Oliver Ryan &amp; Anupa Pant</strong></p>
<p>
	The poultry sector in Nepal carries a value tag of USD 180 million and contributes 3.3 per cent to the country's GDP. Despite its significant contribution to the Nepali economy it bears a subdued profile; write Oliver Ryan and Anupa Pant.Nepal has some 50 feedmills producing 450000 tonnes of feed per annum for a production of around 50 million broilers per annum from 5000 broiler per annum from 5000 farms. Cobb 500 is the dominant breed.</p>
<p>
	The country is considered to be selfsufficient in poultry products and in poultry feeds although a significant proportion of the feed ingredients e.g. grains and protein meals are imported from India.The total direct employment in the organized commercial sector is estimated to be 70,000, and provides a livelihood to thousands of households. The poultry sector has been growing at a rate of 10 per cent per annum over the last decade.The Nepalese broiler industry is divided into three distinct sectors, namely feed, DOC supply and broiler grow-out as distinct to an integrated model common internationally. There is limited processing with 99 per cent of the birds sold live.</p>
<p>
	In May 2010, the International Finance Corporation (IFC), a member of the World Bank Group, reviewed the poultry industry in Nepal including a lead firm diagnostic, farmer/supplier diagnostic, benchmarking and institutional mapping. The results of the diagnostic highlighted that the current waste (inefficiency) in the industry is calculated to be USD 32 million, if Nepal's performance is compared to an achievable international benchmark performance. It is recognized that the largest inefficiencies in the industry exist in the broiler growout sector, due to its structure and size, dominated by small in-efficient farmers. Grower farms are typically 1,000 birds with the largest at 150,000 birds. It is assumed that there are effectively 5,000 commercial farms in Nepal supplying 80 per cent of the birds</p>
<p>
	&nbsp;IFC identified the key barriers to improving the commercial broiler sector in Nepal as follows: while maize is available locally, protein meals, fishmeal, vitamins, minerals and addictives are imported from India. Adequate quantities of feed ingredients of acceptable quality (particularly dry maize) are often not available in local markets resulting in variable quality feeds, despite Nepal having some modern feedmills. Productivity of parent stock is generally poor and variable per flock.</p>
<p>
	Day old chick (DOC) prices are often high due to large cycles in broiler meat prices and DOC supply. DOC quality is regarded as the main problem by broiler growers and much of that is due to dehydration of DOC due to long delivery times of up to 48 hours. Boiler farmers do not understand the importance of bio-security and all-in, allout systems are often compromised. The lack of integration exacerbates this as farmers (wrongly) think multi-age flocks will improve cash flows.</p>
<p>
	There is a lack of access to technical knowledge and services. About 95 per cent of the poultry farmers do not have any formal training of farm management (biosecurity, housing and ventilation, feed and water management, livestock management and disease) and the service function from PS farms and feed mills is only now being developed. Oliver Ryan, an ex IFC Poultry Specialist, who undertook the industry diagnostic for IFC, stated that IFC's global knowledge of the poultry industry enabled it to identify key issues that needed addressing but more importantly could quantify and prioritise the benefits from the implementation of a corrective action plan and could assist the industry identify suitable specialists to assist with this. IFC strengthens sector To address the issues that are impacting the industry, IFC has launched a threeyear poultry supply chain strengthening project in Nepal. This project will assist three lead firms (covering two PS operations and two feedmills) and 3,000 poultry farmers.</p>
<p>
	The lead firms will have the capacity for supplying more than 40 per cent of Nepal's feed and some 30 per cent of the DOC demand. These lead firms have direct business relationships with feed/DOC agents nationwide. This relationship will be used to disseminate technical skills and services. Technical specialists in feed production, nutrition, livestock and disease have been contracted to assist the lead firms in improving their production efficiencies. The first two lead firms to join the project were Avinash Hatcheries, producers of Cobb 500 broilers and Hyline layer DOC's and ProbioTech Industries Limited (Nimbus), a major feedmiller. About 95 per cent of small-scale poultry entrepreneurs do not have any formal training on farm management. Sustaining profitably after two/three batches is a recurring challenge. We are happy to join hands with IFC to build a pool of trainers to provide services to poultry entrepreneurs, says Anand Bagaria, Managing Director, ProbioTech Industries Pvt Ltd. The project will train broiler growers in all aspects of broiler production through the employment and training of 12 local veterinarians. These veterinarians will then train 3,000broiler farmers over a period of three years, with the aim of directly impacting the management of 40 per cent of Nepal's broiler production. Lead firms will be used to arrange broiler farmer training sessions. </p>
<p>
	<br />
	There will be a gender specific outreach component of the project, as well as a dealer/retailer component (with focus on bird handling, waste management and food safety). The aim is to improve feed, DOC chick quality and grower performance to reduce mortality by two per cent and reduce FCR by 0.2:1 over the term of the project. The project performance will be measured by the improvement in liveability and FCR over a baseline performance that is being carefully established on a sample of farms and will be monitored by an independent assessor. It is recognised that the largest inefficiencies in the industry exist in the broiler grow-out sector, due to its structure and size, dominated by small farmers, said Brad Roberts, Operations Officer, IFC. IFC is providing support to enhance productivity and efficiency improvements for about 3,000 broiler farms. He said that the IFC's role in increasing industry capability was hopefully a forerunner to IFC assisting with project finance to a growing industry. ï</p>
<p>
	<br />
	<strong>(This article was published in Asian Poultry Magazine November/December 2011.)&nbsp; <br />
	</strong></p>
<p>
	<strong><br />
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			'description' => 'The poultry sector has been growing at a rate of 10 per cent
per annum over the last decade.Current waste (ineffi ciency) in
the industry is calculated to be USD 32 million, if Nepal's
performance is compared to an achievable international benchmark performance.',
			'sortorder' => '482',
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			'article_date' => '0000-00-00 00:00:00',
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			'breaking_news' => false,
			'main_news' => false,
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			'user_id' => '0'
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	(int) 1 => array(
		'Article' => array(
			'id' => '520',
			'article_category_id' => '41',
			'title' => 'The Changing Beer Market Dynamics',
			'sub_title' => '',
			'summary' => null,
			'content' => '<p style="text-align: justify;">
	<span style="font-size:12px;">From premium and international beer brands to locally brewed Nepali strong beer brands Nepal's beer market has seen a tremendous shift in the last couple of years. Industry insiders opine that varied tastes, numerous choices and price factor are among the overriding reasons for this shift. Consumers are spoilt for choices in today's market scenario and hence, they have started to prefer indigenous beer brands, asserts K P Rizal, Deputy General Manager at Sungold Brewery (Nepal) Pvt Ltd. <br />
	</span></p>
<p style="text-align: justify;">
	<span style="font-size:12px;">This change in consumption trend has ensured that Gorkha Brewery Pvt Ltd, the market leader, has turned out to be the biggest loser in the bargain. It enjoyed an absolute monopoly in the market with over 80 per cent market share not too long ago with established and popular brands namely Carlsberg, Tuborg and San Miguel ruling the marketplace. Over the last couple of years, however, the brewery has seen a turnaround in fortunes primarily due to the change in consumers tastes and sense of pride attached with local brands. A market estimate suggests that Gorkha Brewery has seen its market share plummet sharply during this period. <br />
	</span></p>
<p style="text-align: justify;">
	<span style="font-size:12px;">"The market has shifted to lesser priced brands and it has led to the leading brewery losing market share considerably," confirms Kishor Bhattarai Chief of Sales &amp; Marketing at Himalayan Brewery Ltd. Experts allege that international brands took the market for granted and hence, created room for local brands to find a stronger foothold in the market. More consumers are increasingly opting for strong beer brands that cost less as well as promise faster intoxication. <br />
	</span></p>
<p style="text-align: justify;">
	<span style="font-size:12px;">The price of a beer is what is truly driving the market at this point of time. "The mindset of the consumers is to buy a beer with high alcohol content at cheap price," agrees Thomas Schlau Technical Director and Master Brewer at Sthapit &amp; Schlau Pvt Ltd. He says people must enjoy beer and there is a need for a culture to develop around beer drinking. Sensing the shift from the premium and international beer brands to indigenous Nepali brands, market leader Gorkha Brewery has indulged in severe price slashing in a bid to regain lost territory, reiterate competitors. So much so that its flagship brand Gorkha is now the cheapest beer brand available in the market. <br />
	</span></p>
<p style="text-align: justify;">
	<span style="font-size:12px;">Though, of course, the brewery continues to be the market leader due to its strong show in the premium segment which it monopolises with no competition in sight by a long way. Sthapit &amp; Schlau that began production in May 2010 by using the production facility at United Breweries Nepal Pvt Ltd in Hetauda Industrial district, started with a modest 2,500 cases a month. Within a year-and-a-half, it has registered a 100 per cent growth, claims Schlau, and produces 5,000 cases a month during the 'beer season' between March and October. We have been promoting both our brands Coblenzer Pilsener and Coblenzer Marzen as natural beer and it took us some convincing to sell initially but our hard work is beginning to pay off, he says. <br />
	</span></p>
<p style="text-align: justify;">
	<span style="font-size:12px;">It started off with distributing in cities such as Kathmandu, Dharan and Biratnagar and has moved on to cover Pokhara, Narayanghat and Gorkha under its distribution network this year. The brewery, buoyed by overwhelming response from several sections of the market, plans to aggressively expand its network in the coming years. Sungold Brewery that uses up, on an average, 60-70 per cent of its 140,000 cases-a-month-capacity brewery at Damkauli in Nawalparasi is currently growing at 25 per cent per annum. About two years ago, we were growing at 100 per cent annually but due to the declining growth of the industry, our growth too has been affected to an extent,â€ admits Rizal. <br />
	</span></p>
<p style="text-align: justify;">
	<span style="font-size:12px;">The brewery currently enjoys 20 per cent market share, he claims. It is now focusing mainly on two brands Nepal Ice (started in 2007) and Real Gold (started in 2008). While Rizal concedes that a brand name is something to reckon when it comes to international brands, he is confident that his brands will hold their own in the market as time progresses. The brewery has a strong distribution mechanism in place with 200 distributors across Nepal. He elaborates, "Distribution and market expansion is a continuous process and market growth and access dictate our distribution strategy." Not content with its impressive domestic show, it is also in the process of developing Nepal Ice as an international brand by exporting it to destinations far and wide such as Japan, USA, UK, Hong Kong, Korea and Dubai. Himalayan Brewery, which is going through a transition phase currently with a new management having taken over operations about a year ago, is already doing decently with about 9 percent of the market share, claims Bhattarai. <br />
	</span></p>
<p style="text-align: justify;">
	<span style="font-size:12px;">"It was immensely satisfying for us to discover that our flagship brand Iceberg enjoys incredible brand recall in the market and it makes our job that much easier," Bhattarai states excitedly. With its brewery at Godavari in Lalitpur, it has around 100 distributors across Nepal and counting. Iceberg also awaits a brand line extension few months down the line. "We are looking at extending the brand to premium segment. <br />
	</span></p>
<p style="text-align: justify;">
	<span style="font-size:12px;">There is every reason for a domestic beer to provide quality at par with international brands and compete on equal terms," reveals Bhattarai. Brewers rue the fact that advertising wise, they don't have the option of gaining mileage through the electronic media as promotion of alcoholic beverages is banned on this medium in Nepal as per a government directive. "From a marketer's perspective, it is sad indeed that we cannot avail the benefit of advertising through the electronic media," says Rizal. He is, therefore, limited to mainly use BTL (below the line) activities which includes branding of glasses, openers and signage etc, consumer sampling, sponsoring sporting events and musical concerts and, of course, print advertising. Schlau, while choosing 'Coblenzer' (the name is based on Schlau's hometown Coblenz in Germany) as a brand name, hoped that it will go down well with the consumers. <br />
	</span></p>
<p style="text-align: justify;">
	<span style="font-size:12px;">However, as he says, "My calculation was wrong that a foreign (read German) name will get us immense mileage, it took me a little time to realise that people here have an affinity towards Nepali-ism." He too primarily depends on print advertising to promote his beers and occasionally supports events. At Moksh Bar last month, he celebrated 'Oktoberfest', modeled after the famous German beer festival in Munich. On the other hand, Himalayan Brewery, after beginning to function under a new management, started its branding exercise from scratch including developing POP (point of purchase) displays like posters and danglers, says Dhiraj Tuladhar, Brand &amp; Business Development Officer at the Brewery. <br />
	</span></p>
<p style="text-align: justify;">
	<span style="font-size:12px;">It has made an attempt to relate Kathmandu beer with cultural heritage by promoting occasions such as Nhu Dan (Newari New Year). "We are trying to cash in on the culture aspect and hope it works for us," adds Tuladhar. While it may appear that Nepali breweries make huge profit margins, they have a different story to tell altogether. Brewers allege that heavily levied taxes including excise duties and VAT are so high that beer drinking in Nepal has become a very expensive proposition for the end consumer. A case (12 bottles of 650 ml each) of Coblenzer Beer invites an excise duty of Rs 624 which translates to Rs 52 per bottle. It is extremely high. Can you imagine that a bottle of beer actually costs more than a full meal at a reasonable eatery? asks Schlau. <br />
	</span></p>
<p style="text-align: justify;">
	<span style="font-size:12px;">He elaborates, While a plate of daal-bhaat may cost you Rs 150 at a regular food joint, you will have to pay Rs 162 and Rs 167 respectively for a bottle of Coblenzer Pilsener and Coblenzer Marzen. Even though the beer industry in Nepal hasn't suffered as much as some of the other sectors in the economy, there has been a considerable decline in its annual growth rate. Enjoying a 40 per cent growth per annum about two years ago, it is now growing at a modest 12-13 per cent annually. Brewers blame this on the economic downturn the country has been facing over the last few years. Rizal blames it on poor financial activity, a result of the economy being on the slow side.</span></p>
<p style="text-align: justify;">
	<span style="font-size:12px;">He says, "The real estate business was booming a couple of years ago. Today, restaurant visits have minimised and people are gradually shifting towards strong beer brands due to economic reasons." The slowdown in the economy has taken its toll and impacted the industry to a certain extent with restaurants and pubs registering less than expected footfall in recent times. <br />
	</span></p>
<p style="text-align: justify;">
	<span style="font-size:12px;">A lot of people for whom spending lavishly weren't a problem at all; income disposal has begun to matter a great deal. A 500,000 cases a month market, the annual revenue of the beer industry hovers around Rs 10 billion mark presently. Beer professionals believe that the industry holds great potential and in the future, with signs of recovery in the economy, it can look forward to better days ahead.<br />
	<br />
	<br />
	</span></p>',
			'published' => true,
			'created' => '2011-11-16',
			'modified' => '2012-09-17',
			'keywords' => '',
			'description' => 'From premium and international beer brands to locally brewed Nepali strong beer brands Nepal’s beer market has seen a tremendous shift in the last couple of years. Industry insiders opine that varied tastes, numerous choices',
			'sortorder' => '425',
			'image' => null,
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			'homepage' => false,
			'breaking_news' => false,
			'main_news' => false,
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	(int) 2 => array(
		'Article' => array(
			'id' => '519',
			'article_category_id' => '41',
			'title' => 'Do Nepali Banks Require Additional Capital Injection?',
			'sub_title' => '',
			'summary' => null,
			'content' => '<p style="text-align: justify;">
	<span style="font-size:12px;"><img align="right" alt="" height="196" hspace="5" src="http://newbusinessage.com/ckfinder/userfiles/Images/sujit mundal.jpg" vspace="5" width="150" />On a recent trip to Chennai, I met an American lady seated next to me. It was a flight of about two hours and hence a fairly long time to converse. She introduced herself as Gene Turnbull, a senior research scholar at Stanford University; currently working on the financial sectors of emerging markets, mainly focusing on South Asia. What a coincidence? <br />
	</span></p>
<p style="text-align: justify;">
	<span style="font-size:12px;">I asked her, What is your opinion of the financial markets in this subcontinent? She looked at me for a while and then said, I may need to start from a few not too old past events that plagued the entire global financial system.That's fine with me, I quipped. <br />
	</span></p>
<p style="text-align: justify;">
	<span style="font-size:12px;">She started. <br />
	</span></p>
<p style="text-align: justify;">
	<span style="font-size:12px;">We need to look back at the global financial crisis which erupted in 2007 and severely damaged the western, mainly the advanced economies; the US was worst affected. That point in time, Asian economies, which are mostly emerging market economies, viz China, India, Indonesia etc were doing fine. They did not immediately feel the heat of the virtual collapse in the western markets, mainly the US and advanced West European Countries. China's dependence on exports was quite substantial and hence some fears loomed large about the sustainability of high rate of growth of the Chinese economy and the valuation of the currency. India was marginally better placed in the sense that the domestic demand continued to be firm and that supported the Indian growth. She further explained that the Asian economies were far more prepared in managing themselves. The governments and regulators also remained alert post Asian crisis of the late nineties. <br />
	</span></p>
<p style="text-align: justify;">
	<span style="font-size:12px;">I asked her, What do you feel about the financial markets particularly in South Asia? I'm interested to know about Nepal. She continued . Perhaps this is not a good time for the banks, mainly in the west. They are besieged with low growth and erosion in capital stemming from sovereign debt exposures and stricter regulatory pressure. As a result, they are suffering from low return on capital. It looks like that would continue to be the case thanks to enhanced capital requirement under BASEL III. She, however, maintained that the banks in India, China and other emerging markets are more likely to sustain their returns on capital despite increased capital requirements under BASEL III. This will probably create a catalytic effect in attracting more capital in the emerging markets that are experiencing a broader economic landscape. <br />
	</span></p>
<p style="text-align: justify;">
	<span style="font-size:12px;">As a sequel to the financial crisis of 2007, BASEL III did set forth revised rules for capital requirements for the banks. The minimum equity requirement, that is, Tier I capital will now be 7 per cent; a sharp increase from the present level of 2 per cent. Total capital requirement ( inclusive of Tier II) will increase from 8 per cent to 10.5 per cent. In addition, there will be a counter- cyclical buffer. To be precise, the banks may be required to operate with a capital in the range of 15-17 per cent in the years to come. You may know that the leading banks in Europe and the US already have capital adequacy of more than 14-15 per cent as mentioned. <br />
	</span></p>
<p style="text-align: justify;">
	<span style="font-size:12px;">The additional requirements under Basel III would necessitate capital injection of significant amount for the large banks in the west. The estimated amount of capital to be raised for meeting Basel III would be to the tune of 475 billion euros. The western banks would have to encounter at least three main challenges in the process of implementation of BASEL III viz firstly, the enormity of Euro Zone crisis, secondly, the slowdown in lending and contraction of balance sheets, and thirdly, stricter regulatory requirements emanating from the respective central banks. <br />
	</span></p>
<p style="text-align: justify;">
	<span style="font-size:12px;">To tell you honestly, I was enjoying the analysis. She continued. You may well guess that the investors would think twice before putting their money in the western banks as the ROI would shrink, though the safety around their investments might be better than before. So, there would be an inclination for the investors to look towards the east. I asked her, What is your opinion about the banks in India? <br />
	</span></p>
<p style="text-align: justify;">
	<span style="font-size:12px;">She replied that although the Indian Banks are passing through a stressful period resulting from falling net margin in interest, higher incidence of nonperforming loans and more restrictions imposed by the central bank in respect of sectoral lending, these banks are better positioned to maintain a good return on equity in the long term. The growing domestic demand in the EME's (emerging market economies) and their conducive macroeconomic policies would help boost bottom lines of the banks in these countries including India. I then categorically asked her a question about the smaller economies in South Asia viz Nepal. I explained my interest in knowing about Nepal. She remained quiet for some time as if she was drowned in deep thought and then quipped, What is your specific question?</span></p>
<p style="text-align: justify;">
	<span style="font-size:12px;">I replied, What do you think about the banking system in this country? She was of the opinion that the country was in the early stage of development and the accompanying financial system needed higher level of governance and stronger foundation in the form of stricter implementation of regulations and transparency. She felt that the supervision system of the central bank needed further strengthening and more professional approach in the sense that they should not see wood for the tree.</span></p>
<p style="text-align: justify;">
	<span style="font-size:12px;">I could not agree more that her observations were interesting. Against the back drop of a looming financial crisis in the Euro Zone and the very slow recovery in the US, it is quite likely that contagion effect can hit the emerging market economies including Nepal and this may lead to the crisis of confidence. Banks will experience falling returns, lesser ability to support credit off take and higher incidents of NPA. Considering all this, I asked her my final question on Nepali financial system, Do you think Nepali Banks require further injection of capital in order to maintain capital adequacy and create a cushion against possible erosion? She thought for a while and responded mildly, Yes, but it needs a lot of debate and political consideration . She was absolutely right. I think this is a serious subject for discussion and the sooner it is done, it's better for the country. </span></p>
<p style="text-align: justify;">
	<span style="font-size:12px;"><span><em><br />
	</em></span></span></p>
<p style="text-align: justify;">
	<strong><span style="font-size:12px;"><em>(Mundul is a Director with Standard Chartered Bank Nepal Ltd)<br />
	<br />
	<br />
	</em></span></strong></p>',
			'published' => true,
			'created' => '2011-11-16',
			'modified' => '2012-09-17',
			'keywords' => '',
			'description' => 'On a recent trip to Chennai, I met an American lady seated next to me. It was a flight of about two hours and hence a',
			'sortorder' => '424',
			'image' => null,
			'article_date' => '0000-00-00 00:00:00',
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	(int) 3 => array(
		'Article' => array(
			'id' => '483',
			'article_category_id' => '41',
			'title' => 'A Walk Through Central Depository System',
			'sub_title' => '',
			'summary' => null,
			'content' => '<div>
	<div style="text-align: justify;">
		<span style="font-size:12px;"><img align="left" alt="sectorial" border="1" height="128" hspace="5" src="http://newbusinessage.com/ckfinder/userfiles/Images/homnath gaire.jpg" style="margin:10px;padding:10px;" vspace="5" width="100" />By <strong><u>Homnath Gaire<br />
		<br />
		</u></strong></span></div>
</div>
<div style="text-align: justify;">
	<span style="font-size:12px;">In a nut shell, Central Depository System (CDS) is an electronic book entry system to record and maintain securities and to register their transfer. In CDS, ownership will be changed without physical movements of securities or execution of transfer deeds. The ownership will be transferred as soon as securities move from one account to another. CDS is purely a settlement vehicle and will not affect the trading in any manner whatsoever. It is expected that the CDS will bring tremendous efficiency and growth in the capital market of Nepal. It will also enhance the image of Nepal's capital market globally. </span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;"><br />
	</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;"><strong>Participants of CDS:Account Holders<br />
	<br />
	</strong></span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;">Account holders are divided into two categories - account holders and participants. Both account holders and participants will have direct access to the CDS. Account holders will be allowed to have a main account and a house account for their beneficially owned securities. Participants, however, will be entitled to have client accounting facilities within the CDS. In addition to main account and house account, participants will be allowed to have sub accounts and group client accounts. In short, the participants can provide custody services to their clients whereas account holders can keep only their beneficially owned securities in CDS.</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;"><br />
	</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;"><img align="right" alt="sectoral" border="1" height="350" hspace="5" src="http://newbusinessage.com/ckfinder/userfiles/Images/img(7).jpg" style="margin:10px;padding:10px;" vspace="5" width="252" />"Beneficial Owner" means the person who have opened their Beneficial Owner Account with Central Depository Company for depositing their securities or instruments and who have held the securities and instruments which are capable of being deposited in de-mat form.</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;"><br />
	</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;">All the members of stock exchanges, banks (both commercial and investment), and development financial institutions (DFIs) are allowed to open their account as participants whereas corporate bodies such as leasing companies, investment companies and insurance companies can open their account as account holders.</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;"><br />
	</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;"><strong>Issuers/Registrars<br />
	<br />
	</strong></span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;">The issuers of capital whose securities are converted from physical to electronic book entry system play a significant role in CDS. They will also have direct access to the CDS. After a security is declared eligible for the purpose of CDS, necessary software is provided to that particular issuer upon signing the issuer's agreement with central depository company (CDC). The shares are entered into CDS only after proper verification by these issuers or their registrar. This process eliminates the problem of fake/duplicate/lost/stolen share certificates as issuers thoroughly check them before approving for CDS.</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;"><br />
	</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;"><strong>Eligible Pledge<br />
	<br />
	</strong></span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;">Financial institutions that lend against securities will have their account with CDS in the capacity of eligible pledges. These institutions will also have direct access to CDS and will be provided with necessary connection in this regard upon signing the pledge agreement with CDC. Their clients will be able to pledge their electronic book based securities in CDS. Once the securities are pledged in the CDS, the control over those securities is transferred to the eligible pledgee in the form of pledge release/call. Nevertheless, the beneficial owner will continue to get the benefits of corporate action on pledged securities.</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;"><br />
	</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;"><strong><img align="left" alt="sectoral" border="1" height="228" hspace="5" src="http://newbusinessage.com/ckfinder/userfiles/Images/img1(4).jpg" style="margin:10px;padding:10px;" vspace="5" width="350" />CDS Account Structure:<br />
	<br />
	</strong></span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;">The account holders of CDC will be able to settle their transactions within the CDS through five types of accounts, namely:<br />
	<br />
	</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;"><b>Main Account:</b> Each account holder in the system will be allocated a main account by virtue of being an account holder in the CDS. This account will mainly be used as a transit account for movement of securities. Any security coming in or moving out of an account holder's family of accounts will pass through this account.</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;"><br />
	</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;"><b>House Account:</b> Used for securities owned beneficially by account holders. "Beneficial Owner Account" means De-mat Account (electronic account) opened with Central Depository Company through Depository Participant in order to deposit securities by the Beneficial Owner and which is distinguished by a unique account number.</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;"><br />
	</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;"><b>Sub-account (Client Account):</b> This account is used for keeping securities belonging individually to each of the clients of an account holder. An account holder may open and maintain any number of sub-accounts he requires on behalf of his clients.</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;"><br />
	</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;"><b>Group Client Account:</b> This account is used for keeping securities which are beneficially owned by the account holder's client. It will be used for clients who are not willing to utilize the facility of opening separate sub-accounts. The account holder will group all such clients in his/her group account. The detailed break-up of the securities held by each client of a group account will be held by the account holder and no such record will be maintained by CDC. </span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;"><br />
	</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;"><b>Cash Account: </b>Each account holder in the system who opts to avail the Delivery vs Payment (DVP) facility will be required to deposit relevant amount to be used for the settlement of DVP obligations.<br />
	<br />
	</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;">CDS-Operation<br />
	<br />
	</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;"><b><img align="right" alt="" border="2" height="335" hspace="5" src="http://newbusinessage.com/ckfinder/userfiles/Images/img2(4).jpg" vspace="5" width="350" />The main operations performed in the CDS are as follows:<br />
	<br />
	</b></span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;">Deposit of existing and new securities in the CDS. Once a security is declared eligible by CDC, the physical certificates of that security will be deposited in the CDS for conversion after which they will be available for further transfers within the system. Following is the procedure to deposit securities in the CDS:</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;"><br />
	</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;">To begin with account holder will initiate the deposit request by entering the details of share certificates into the system, and securities deposit form (SDF). CDS will generate computer printouts of the transaction. Transfer deed will be executed in favor of CDC. Account holder will then send the relevant share certificates, transfer deeds, SDF and the computer printouts to the relevant registrar. The registrar after verification will either approve or reject the transaction within five days from the receipt of the documents. Registrar will update CDC nominee share holding in the member's register, cancel share certificates and transfer deeds, and return the relevant documents (other then canceled share certificates and transfer deeds) to applicant account holder.</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;"><br />
	</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;">Withdrawal of securities <br />
	from the CDS:<br />
	<br />
	</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;">The account holder will initiate the withdrawal request by entering the relevant details into the system, and securities withdrawal form (SWF). CDS will generate computer printouts of the transaction. Account holder will then send the SWF and the computer printouts to the relevant registrar.</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;"><br />
	</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;">The registrar after verification of the balance will either approve or reject the transaction within five days from the receipt of the documents and update CDC nominee share holding in the member's register. Registrar will return the relevant documents and share certificates to the applicant.</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;"><br />
	</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;">Prepare share certificate (Jumbo certificate): <br />
	<br />
	</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;"><b>Free Transfer -</b> Book entry transfer of securities without any associated cash movement. This is a unilateral transaction in which an account holder can deliver securities to any other account holder in CDS. Although the beneficial ownership of securities changes as securities move from one account to another, there is no stamp duty involved and the transfer is on the spot.</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;"><br />
	</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;"><b>Pledge/Release/Call -</b> Pledging securities in favor of a lender which can only be released or called by the lender. This function will greatly benefit the financial institutions by reducing risk of fake share certificates and paperwork to a great extent. </span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;"><br />
	</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;">Stock Borrowing or Lending through the CDS: <br />
	<br />
	</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;"><b>Corporate Action - </b>In case of bonus issues, rights issues, sub-division, consolidation and any other action that changes the number of securities held in a participant's account or involves the determination of entitlement to beneficial owners, CDC shall provide relevant details of account holders and sub-account holders to the issuer. The CDC will also provide details for the purpose of notice of general meetings and other notices/communications.</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;"><br />
	</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;"><b>Delivery Versus Payment (DVP) - </b>DVP is a bilateral transaction or book entry transfer of ownership of a security in exchange for payment to settle a transaction. The deliverer of the securities will initiate the DVP request on CDS specifying the details of securities and payment.&nbsp;</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;"><br />
	</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;">Upon acceptance of the receiver, CDS will debit deliverer's securities account and credit receiver's securities account. Likewise, CDS will debit receiver's cash account and credit deliverer's cash account. Cash only moves from one account to another without any associated securities movement. </span></div>',
			'published' => true,
			'created' => '2011-10-11',
			'modified' => '2012-09-17',
			'keywords' => '',
			'description' => 'In a nut shell, Central Depository System (CDS) is an electronic book entry system to record and maintain securities and to register their transfer. In CDS, ownership......',
			'sortorder' => '393',
			'image' => null,
			'article_date' => '0000-00-00 00:00:00',
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			'main_news' => false,
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	(int) 4 => array(
		'Article' => array(
			'id' => '453',
			'article_category_id' => '41',
			'title' => 'Social Media Adoption By TELECOM Giants In Nepal - NCELL And NTC',
			'sub_title' => '',
			'summary' => null,
			'content' => '<div>
	<div style="text-align: justify;">
		<span style="font-size:12px;">By <strong>Deep Sherchan<br />
		<br />
		</strong></span></div>
</div>
<div style="text-align: justify;">
	<span style="font-size:12px;">As we are moving into the age of online economy, communication channels will play a major role in development of nation's economy. So, it is very important to understand where Nepal is, in terms of the whole online revolution. South-East Asian Countries like Malaysia, Singapore, and Indonesia are rapidly evolving with the online revolution and giving them important space into the overall growth of the nation.</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;"><br />
	</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;">As per the US Census Bureau, Nepal has a population of 28,951,852 as of 2010 and accordingly to ITU Nepal has 625,800 Internet users as of June, 2010, which is like 2.2 per cent of the population, according to ITU. Now, if we compare this with Malaysia, it has 28,728,607 population (2011) and 16,902,600 Internet users as of June 2009, which is 64.6 per cent penetration, as per ITU. More interestingly, it had around 9,998,440 Facebook (FB) users on March 31/11, which is 34.8 per cent penetration. As per Facebook, Nepal had 811,780 Facebook users on March 31/11, 2.8 per cent penetration. The difference in the penetration of Internet is interesting to observe. The numbers can be a bit contradictory, but FB's user count is very approximate based on the location which cannot be verified. But even then, this does give some amount of insights into the population.</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;"><br />
	</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;">Now, Social Media is already a leading phenomenon in the world, it's a cultural shift between the mainstream media and the free and open community conversation that takes place at the online community forums and platforms such as Facebook. One of the major role social media plays is in the leveraging small and medium businesses, where businesses have direct access to communicate with the customers. So, it is interesting to see how the telecom giants of Nepal are handling this, as they provide the main backbones for the whole revolution.</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;"><br />
	</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;">The picture is quite interesting as it shows that the two major players of telecom in Nepal (NTC and NCELL) have been going in different directions all together. Now, which one is on the right track is not very difficult to figure out. When we talk about online revolution, there is one important thing to consider and that is - how social media friendly is the company. Now, unless telecom companies understand the effect of social media, there is no way that they will be able to drive the required innovation in the field.</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;"><br />
	</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;">In the evolving business models, every company is required to have an online presence and online communication channels, for people to connect with the service. Nepal surely has lots of hurdles to pass through before the Nepali people and companies can leverage the benefits of IT and social media. If you compare NCELL and NTC, you will immediately notice where each one is. NCELL has been heavily adopting latest technology and business models to gain users base, whereas NTC is still in rudimentary stages.</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;"><br />
	</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;">Just to give you an idea on why this is so important for NTC and NCELL, let me explain the basic business models both employ. Both companies earn by sales of SIM cards, the call charges and nowadays even through bandwidth usages. The concept of value added services for mobile devices has still not matured and the same can be said about caller-tunes and other entertainment services. In addition to this, the emerging popularity of Smartphone has provided opportunity to give a variety of services to the end-users. In a competitive market, consumer research report shows that the adoption rate of telecom services is heavily influenced by the service satisfaction, which means a continuous to and fro communication between customer and business. This means a constant presence -- physically and virtually. This is why, online presence is so important. People are continuously looking for information and support.</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;"><br />
	</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;">May be this is why NTC is losing the battle with NCELL. NCELL has been officially declared as the winner the country's first private GSM mobile operator”as the Number 1 player in the GSM mobile segment. The massive branding and investment NCELL has done for last one year is commendable. IT has&nbsp;been aggressive in terms of promoting and coming up with new business models.</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;"><br />
	</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;">Reports say that until last fiscal year, difference between the subscriber base of the two operators NCELL and NT was around 1 million. However, since last fiscal year, NCELL aggressively started introducing new services and handsets targeting both low-end and high-end customers.</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;"><br />
	</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;">Let us just concentrate on how NCELL has been making its presence felt in the online space through social media. The social media presence is all about wearing an attitude to support customers through providing timely information. The websites of NCELL and NTC are both rich in content but NCELL seems to have been communicating with more grace than NTC. The engagement in NCELL is much higher than in NTC. Similarly, NTC doesn't have any online profiles in Facebook, which is where most people are spending their time on. </span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;"><br />
	</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;">Beside the contradictory argument that Nepal is still emerging in terms of Online Community, NCELL seems to be doing great with its promotion whereas NTC is still lagging behind the adoption. Being TELECOM companies, NTC and NCELL both must be forerunner into adopting new technology and encouraging new services.</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;"><br />
	</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;">Other interesting examples are Nepal Unites Campaign and Creative Political Activism which are on at Facebook. These activities show the vibes of Nepalese Online Community which if leveraged correctly would benefit companies as well as the nation.</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;"><br />
	<br />
	</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;"><strong>NTC Online Profiles:<br />
	<br />
	</strong></span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;">Telecommunication was introduced with the installation of open wire trunk telephone line between Kathmandu and Birgunj (a border town in southern Nepal) for the first time in Nepal around 1914, beginning of the First&nbsp; World War.</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;"><br />
	</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;">Nepal Telecom has been actively involved in the business of physical market place. Its presence in the electronic market space is very minimal while major projects are under planning. Nepal Telecom is highly equipped with country-wide telecom infrastructure which is the competitive advantage for it over the rivals in the industry. Nepal Telecom has implemented IT in customer service rather than in core business. The company has been implementing information technology in customer billing payment. The other IT focuses are on Internal integration of the functional units and managerial planning process. The company has centralized the billing payment and revenue collection.</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;"><br />
	<br />
	</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;"><strong>NCELL Online Profiles:<br />
	<br />
	</strong></span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;">Until last fiscal year, difference between the subscriber base of the two operators NCELL and NT was around 1 million. However, since last fiscal year, NCELL aggressively started introducing new services and handsets targeting both low-end and high-end customers.<br />
	<br />
	</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;"><br />
	</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;"><i>(Sherchan is Chief Marketing Officer at InRev Systems in Bangalore, India. He can be contacted via email at deep@in-rev.com or @bexdeep on Twitter.)<br />
	<br />
	<br />
	</i></span></div>
<table border="2" cellpadding="0" cellspacing="0">
	<tbody>
		<tr>
			<td valign="top" width="91">
				<div style="text-align: justify;">
					<span style="font-size:12px;"><br />
					</span></div>
			</td>
			<td valign="top" width="269">
				<div style="text-align: justify;">
					<span style="font-size:12px;">NCELL</span></div>
			</td>
			<td valign="top" width="269">
				<div style="text-align: justify;">
					<span style="font-size:12px;">NTC</span></div>
			</td>
		</tr>
		<tr>
			<td valign="top" width="91">
				<div style="text-align: justify;">
					<span style="font-size:12px;">Website</span></div>
			</td>
			<td valign="top" width="269">
				<div style="text-align: justify;">
					<span style="font-size:12px;">http://ncell.com.np/</span></div>
			</td>
			<td valign="top" width="269">
				<div style="text-align: justify;">
					<span style="font-size:12px;">http://www.ntc.net.np/</span></div>
			</td>
		</tr>
		<tr>
			<td valign="top" width="91">
				<div style="text-align: justify;">
					<span style="font-size:12px;">Wikipedia</span></div>
			</td>
			<td valign="top" width="269">
				<div style="text-align: justify;">
					<span style="font-size:12px;">http://en.wikipedia.org/wiki/Ncell</span></div>
			</td>
			<td valign="top" width="269">
				<div style="text-align: justify;">
					<span style="font-size:12px;">http://en.wikipedia.org/wiki/Nepal_Telecom</span></div>
			</td>
		</tr>
		<tr>
			<td valign="top" width="91">
				<div style="text-align: justify;">
					<span style="font-size:12px;">Facebook Wiki</span></div>
			</td>
			<td valign="top" width="269">
				<div style="text-align: justify;">
					<span style="font-size:12px;">http://www.facebook.com/pages/Ncell/134092903305342</span></div>
			</td>
			<td valign="top" width="269">
				<div style="text-align: justify;">
					<span style="font-size:12px;">http://www.facebook.com/pages/Nepal-Telecom/104071036295574?sk=wall</span></div>
			</td>
		</tr>
		<tr>
			<td valign="top" width="91">
				<div style="text-align: justify;">
					<span style="font-size:12px;">LinkedIn</span></div>
			</td>
			<td valign="top" width="269">
				<div style="text-align: justify;">
					<span style="font-size:12px;">http://www.linkedin.com/company/ncell</span></div>
			</td>
			<td valign="top" width="269">
				<div style="text-align: justify;">
					<span style="font-size:12px;">http://www.linkedin.com/company/nepal-telecom/statistics</span></div>
			</td>
		</tr>
		<tr>
			<td valign="top" width="91">
				<div style="text-align: justify;">
					<span style="font-size:12px;">Facebook Page</span></div>
			</td>
			<td valign="top" width="269">
				<div style="text-align: justify;">
					<span style="font-size:12px;">https://www.facebook.com/ncell.com.np</span></div>
				<div style="text-align: justify;">
					<span style="font-size:12px;">(65,569 fans)</span></div>
			</td>
			<td valign="top" width="269">
				<div style="text-align: justify;">
					<span style="font-size:12px;">No official page, but lots of hatred community present unofficially.</span></div>
			</td>
		</tr>
		<tr>
			<td valign="top" width="91">
				<div style="text-align: justify;">
					<span style="font-size:12px;">Twitter Profile</span></div>
			</td>
			<td valign="top" width="269">
				<div style="text-align: justify;">
					<span style="font-size:12px;">None</span></div>
			</td>
			<td valign="top" width="269">
				<div style="text-align: justify;">
					<span style="font-size:12px;">None</span></div>
			</td>
		</tr>
		<tr>
			<td valign="top" width="91">
				<div style="text-align: justify;">
					<span style="font-size:12px;">Twitter Conversation</span></div>
			</td>
			<td colspan="2" valign="top" width="538">
				<div style="text-align: justify;">
					<span style="font-size:12px;">Though Twitter has vibrant Nepalese community, the scale is pretty low compared to Facebook and the conversation is low for NTC and NCELL.</span></div>
			</td>
		</tr>
		<tr>
			<td valign="top" width="91">
				<div style="text-align: justify;">
					<span style="font-size:12px;">Blogs</span></div>
			</td>
			<td valign="top" width="269">
				<div style="text-align: justify;">
					<span style="font-size:12px;">http://blog.ncell.com.np/</span></div>
			</td>
			<td valign="top" width="269">
				<div style="text-align: justify;">
					<span style="font-size:12px;">&nbsp;-</span></div>
			</td>
		</tr>
		<tr>
			<td valign="top" width="91">
				<div style="text-align: justify;">
					<span style="font-size:12px;">Engagement</span></div>
			</td>
			<td valign="top" width="269">
				<div style="text-align: justify;">
					<span style="font-size:12px;">Contest and Campaigns</span></div>
			</td>
			<td valign="top" width="269">
				<div style="text-align: justify;">
					<span style="font-size:12px;">None</span></div>
			</td>
		</tr>
	</tbody>
</table>
<p style="text-align: justify;">
	<span style="font-size:12px;"><br />
	</span></p>',
			'published' => true,
			'created' => '2011-10-11',
			'modified' => '2012-09-17',
			'keywords' => '',
			'description' => 'As we are moving into the age of online economy, communication channels will play a major role in development of nation’s economy. So, it is very important to understand where......',
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	(int) 5 => array(
		'Article' => array(
			'id' => '452',
			'article_category_id' => '41',
			'title' => 'Credibility Question In Accounting Profession',
			'sub_title' => '',
			'summary' => null,
			'content' => '<div>
	<div style="text-align: justify;">
		<span style="font-size:12px;"><strong><br />
		By Paramananda Adhikari, FCA <br />
		<br />
		</strong></span></div>
</div>
<div style="text-align: justify;">
	<span style="font-size:12px;">Over the past decade, increased litigation as well as criticism of auditors has left little room for doubt that auditors are facing a liability and credibility crisis in their profession. The reputation of accountancy profession comes under question for the reliability of their services. This issue in auditing profession is termed audit expectation gap which denotes the difference between the public's and auditors perceptions of the role of an audit function. The gap is critical to the auditing profession because the greater the unfulfilled expectations from the public, the lower is the credibility associated with the function of the auditor. The increase in litigation and criticism against the auditors can be attributed to the expectation gap. The gap arises from the misconceptions on the part of users, the nature and objective of audit, unreasonable expectations from public and performance below standard of profession by the auditors too. The accountancy profession, like other professions, exists only through wide public acceptance. The perceived need in auditing is an independent reporting function. Once the auditor has examined the entity's books of accounts and financial statements, the public understands that there are no problems. </span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;"><br />
	</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;"><strong>Independence: Fundamental in Auditing Profession<br />
	<br />
	</strong></span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;">What is independence? Why is it necessary for Professional Accountants? How is it maintained? These are some of the issues raised with respect to auditors. The term independence has no concrete meaning. However, integrity, objectivity and trustworthiness are the key elements in independence. The concept of auditors independence has been accepted from the very beginning when the accounting came into being as a profession. During the late 19th and early 20th centuries, the perception of independence in accounting profession changed due to modern capitalist economy, a system of economy designed to allocate resources using market mechanism. Independence is fundamental to the reliability of auditors reports. Investors, creditors and public would have little confidence in auditor's report, if they were not independent from the management in both fact and appearance.</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;"><br />
	</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;">Without independence, an auditor's opinion is suspect and the users of financial statements believe that there is no need for external auditors, if independence has not been maintained. Third parties acceptance implies that the role of external auditors is an independent financial control within the corporate entity. Auditor must be conscious to maintain independence on audit planning execution and reporting. He must strive to ensure that the audit quality is not compromised under any circumstances.</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;"><br />
	<br />
	</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;"><strong>Public Expectations<br />
	<br />
	</strong></span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;">Over a decade, audit is at the center of a heated debate. How and why for audit were the questions.. People were of the view that the responsibility of any wrongdoing in any entity is on the auditors among others. There has been disparity in the people's expectations from auditors, especially with regard to their duties, responsibilities and objectives of audit. There are misconceptions that it is the auditor's role to prepare financial statements in compliance with accounting standards and statutory requirements. However, the auditor's responsibility is to express an opinion whether the financial statements generated from the books of accounts give a true and fair picture in accordance with the financial reporting framework. </span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;"><br />
	</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;">People may have expectations from auditors that go beyond the professional responsibility such as audits would provide absolute assurance on the accuracy of the company's financial statements. The users of financial statements may question why the auditors did not detect material irregularities and disclose them in their report. </span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;"><br />
	<br />
	</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;"><strong>Audit at the Crossroad <br />
	<br />
	</strong></span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;">Given the growing list of financial reporting scandals, audit is once again at a crossroad. The significant number of big corporate failures/scandals over the past decade all over the world creates an audit crisis in the marketplace. The large payouts resulting from audit litigation in the developed countries have adversely affected the quality of audit services. Some of the big corporate failures/scandals over the past decade were, Enron (USA), WorldCom (USA), Lehman Brothers (USA), Merrill Lynch (USA), Fannie Mae (USA), Parmalat (Italy), Maxwell (UK), Flowtex (Germany), Vivendi (France), Baan (Netherlands), Satyam (India). These failures/scandals came one after another. After the widely publicised auditing failures in USA and later in Europe, the users have started losing confidence in auditing profession and raised the voice where were the auditors? What was the role of watchdog? These cases clearly map out people's expectations with respect to the duties and responsibilities of auditors. Regulating and oversight agencies have been investigating the performance status of the accounting profession worldwide.</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;"><br />
	</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;">Over the days, in Nepal too, people have witnessed and become victims of companies going bust due to poor corporate governance by the management. In such a situation, effective corporate governance structures that should have detected any unlawful or unethical behavior by the dominant party may have been missing. Due to the cases of unethical conduct of management, inappropriate accounting system, disparity in maturity pattern of assets and liabilities, over-valuation of collateral that may be running amuck and pitch in some of the cases like Nepal Development Bank (Liquidation), Samjhana Finance Ltd, Nepal Share Markets and Finance Ltd, Gurkha Development Bank, United Development Bank, Vibor Bikas Bank, Peoples Finance Ltd, World Merchant Banking and Finance Ltd, CMB Finance Ltd. From these few instances, we are also witnessing corporate failures, scandals, or liquidity crunch in recent days that may raise questions about credibility on the auditors report and sustainability of businesses. Now is the time for the audit profession to be more proactive to lead the debate.</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;"><br />
	<br />
	</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;"><strong>Questionable Role of Auditor<br />
	<br />
	</strong></span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;">There are many reasons for reducing the independence of the auditor. Among others, these are economic dependence on the client, market competition in audit, other non-audit services, close relationship with client's executives, acceptances of goods and services from clients in concessional rate or free of cost, worry about their re-appointment etc.&nbsp;Due to these factors, auditors may be unable to produce fair and reliable reports in certain cases and the independence, of course, is curtailed. If auditors are perceived not independent, the report would be below the standards of the profession and would damage overall image of the accounting profession. </span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;"><br />
	</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;">Auditors may be found guilty of gross negligence in examining the financial and other records. Gross negligence means failure to exercise minimum due care when material errors or irregularities that should have been detected by the application of professional standards go unnoticed. Material amount of fictitious sales recorded at the year-end to inflate income and failure to detect this intentional mis-statement is one of the examples. A similar mis-statement by understating several expenses by a small amount or charging expenses in capital account and failure to detect them by the auditor is also considered as gross negligence. </span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;"><br />
	</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;">Cases finding fault with auditors about the application of professional standards, practices and inadequate disclosure have occurred over time, raising questions over auditors' performance. Some of the cases of non-compliance of standards are revenue recognition, fictitious receivables, failure to disclose related party transactions, verification of cash/bank balances and, failure to obtain third-party confirmation, inadequate collateral of loan, non-accounting of major transactions, failure to assess the clientâ€™s business risk etc. The standard also requires auditors to indicate any substantial doubt about the entityâ€™s existence as a going concern, In such a case, the auditor must add an explanatory paragraph following the opinion paragraph to his report. </span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;"><br />
	<br />
	</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;"><strong>The Expectation Gap<br />
	<br />
	</strong></span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;">Expectation gap in audit is the difference between what the public/users of financial statement perceive about auditors responsibilities to be, and what exactly the auditors responsibilities are. Therefore, it is a gap between what is required by regulation and what market/public need is. The auditor's responsibility for detecting fraud is one of the major areas contributing to the expectation gap. The users of the financial statements believe that unqualified audit report means, the auditor has detected all material errors/irregularities. However, this perception is not in line with the professional standards, which hold the auditor responsible only for exercising due care in the conduct of examination.</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;"><br />
	</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;">Another area for difference overrides the control structure and conceals the facts, perhaps at the behest of management. In such a case, auditor's exercise of due care fails to detect irregularities in the error-free financial statements produced by the management. This will result in significant misrepresentations in financial statement not detected by the auditor and further widen the expectation gap. </span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;"><br />
	</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;">The next area of difference is perception about the entity's ability to continue as a going concern. The users believe that an unqualified audit report is a guarantee that the entity is a healthy one. However, immediately or some time later, the entity is found either in a financial crisis to sustain or in the liquidation process. In such a situation, people may not be trust unqualified audit reports and many corporations either collapsed or were bailed out within a short period of receiving unqualified audit reports. These facts may attract substantial doubt that the auditors lack the expertise to render an independent opinion on financial statements and corporate affairs.</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;"><br />
	<br />
	</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;"><strong>Bridging the Expectation Gap<br />
	<br />
	</strong></span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;">Preparation and presentation of financial statements is the prerogative of the management. Audit is performed on test basis from the sample drawn on the population of a class of transactions. Due to inherent limitation of internal control system adopted by the management, auditors can not detect all the irregularities. The auditor examines the financial statements and provides reasonable assurance that the financial statements are free from material mis-statements. As a result, the expectation gap continues to exist in audit including fraud, internal controls, illegal acts and other non-compliances. Here we analyse the possible remedial actions that may narrow expectation gap and improve the audit effectiveness. </span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;"><br />
	</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;">Firstly, the auditor shall report the cases of mis-representations, non-compliance of rules, regulations and professional standards to bridge the gap to some extent. If the auditors are found grossly negligent to discharge their duties, they may be liable to action under various Acts and Regulations, such as Nepal Chartered Accountants Act 1997, Companies Act 2006, Bank and Financial Institutions Act 2006.</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;"><br />
	</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;">Secondly, compliance of Nepal Standard on Quality Control (NSQC) and implementation of Peer Review System, i.e. auditing the auditors helps narrow the expectation gap.</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;"><br />
	</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;">Thirdly, educating the public about the objectives of audit, auditor's duties and responsibilities are important elements to bridge the expectation gap. Reducing unreasonable expectations requires creating awareness about the objective and limitations of audit and the auditor's work. </span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;"><br />
	</span></div>
<div>
	<span style="font-size:12px;"><strong>Reporting <br />
	<br />
	</strong></span></div>
<div>
	<span style="font-size:12px;">The auditor has the duty to report, after careful scrutiny of all the documentary evidences and information, every item of importance. He must demonstrate to the public that it is independent from the management and will provide high quality of audit and assurance services. Auditor, as a "public watchdog" reports the effectiveness of internal control, non-compliance of professional standards, mis-statements contained in financial statements, mis-statements resulting from management/employee fraud and illegal activities/operations, if any. Further, the auditor has to report about the entity's ability to continue as a going concern for a reasonable period from the date of audited financial statements. </span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;"><br />
	<br />
	</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;"><strong>To Conclude<br />
	<br />
	</strong></span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;">Users of financial statements are of the opinion that the auditor should not only provide an opinion but also interpret the financial statements in such a manner that it evaluates the overall performance of the entity. The users expect from auditors to report in-depth information of the companyâ€™s affairs, watching the management surveillance and detecting illegal acts/frauds on the part of management. These are the high expectations on the part of users of financial statements that create gap between auditors and users expectations from auditing. There has been considerable debate about the nature and scope of audit and the audit expectation gap. The differences between what auditors actually do and what third parties think auditors do or should do remain. The expectation gap may never be eliminated. However, it may be reduced to a standard of profession. </span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;"><br />
	</span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;">In recent years, the regulatory framework for professional accountants has changed. At present, we have peer review concept, quality control standards and the disciplinary mechanism. Failing in compliance or departures from the set conduct by the members may make them liable to disciplinary action. All this has been done with a view to gaining public confidence and to enhancing credibility of the accounting profession. </span></div>
<div style="text-align: justify;">
	<span style="font-size:12px;"><br />
	<br />
	</span></div>
<div style="text-align: justify;">
	<strong><span style="font-size:12px;">(Adhikari is Technical Director at the Institute of Chartered Accountants of Nepal (ICAN)&nbsp;and General Secretary of the Association of Chartered Accountants of Nepal)<br />
	<br />
	<br />
	</span></strong></div>',
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<p class="ANSWER" style="text-align: justify;">
	<span class="MyriadPro"><span calibri="" lang="EN-GB" letter-spacing:="" sans-serif="">Sujit Mundul, CEO and Director, Standard Chartered Bank (SCB) Nepal, started his career as a lecturer in Organic Chemistry but switched over to banking as he joined SCB as a junior officer in the seventies. Mundul moved on through various relationship roles in Corporate/Institutional Banking including Credit and Audit functions.&nbsp; He also worked in SCB - London in Credit Management for about a year on secondment. He became Head - Corporate Banking, South India and Regional Head - Sales, for Eastern India before joining SCB Nepal as the CEO and Director. Mundul spoke to <i>Nubiz</i> on a wide range of issues on banking and finance. Excerpts:</span></span></p>
<p class="ANSWER" style="text-align: justify;">
	 </p>
<p class="questionsforinterview" style="text-align: justify;">
	<span style="font-size:12px;"><strong><span class="MyriadPro"><span lang="EN-GB" style="letter-spacing: 0pt;">You have substantially increased the interest on savings, from 2-5% a few years back to 6.5% now. Is there still cash crunch? <br />
	</span></span></strong></span></p>
<p class="ANSWER" style="text-align: justify;">
	<span style="font-size:12px;"><span class="MyriadPro">To answer this question, we need to set the perspective right why SCB Nepal has increased its interest rate. Till one year back, the market never experienced that kind of interest rate because of many reasons. One of the major reasons is that remittance was less. That is coming in abundance now. But for good reason or bad, the market started feeling the tightness. As a result, some stress in liquidity was felt. To be very honest, SCB Nepal never faced a liquidity strain, we have always been adequately liquid.&nbsp; In fact, we had been the lenders in the inter-bank throughout the crisis period. Now, in order to build the deposit base, we decided to increase our interest rates because the market dynamics have changed. The market has slightly shifted gears from low to high interest rate environment. As we are also one of the key players in the market, we need to keep up with the market rates. That's the reason why we have increased the interest rate. Though the increase in interest rate is not that significant; we have already started seeing good positive response from the market.</span></span></p>
<p class="ANSWER" style="text-align: justify;">
	<span style="font-size:12px;"><span><span class="MyriadPro"><br />
	</span></span></span></p>
<p class="questionsforinterview">
	<span style="font-size:12px;"><strong><span class="MyriadPro"><span lang="EN-GB" style="letter-spacing: 0pt;">SCB Nepal is known for quality banking. But competition actually has become tough. How do you view the growth of Nepali financial sector?</span></span></strong></span></p>
<p class="ANSWER" style="text-align: justify;">
	<span style="font-size:12px;"><span class="MyriadPro"><span style="letter-spacing: 0.1pt;">It is a difficult market now. The market of Nepal has become overcrowded. It cannot accommodate so many players; that's why, the competition is a bit uneven. Customers or the depositors would love to see that wherever they put their money it should remain safe and they should get high quality service. The depositors are becoming much wiser compared to what they used to be few years back. They read papers, they also follow the economy and they can make their own judgments. That is why there is the competition and, I believe, we have been able to tackle the competition successfully.</span></span><strong><br />
	<span class="MyriadPro"> </span></strong></span></p>
<p class="ANSWER" style="text-align: justify;">
	<span style="font-size:12px;"><strong><span><span class="MyriadPro"><br />
	</span></span></strong></span></p>
<p class="questionsforinterview" style="text-align: justify;">
	<span style="font-size:12px;"><strong><span class="MyriadPro"><span lang="EN-GB" style="letter-spacing: 0pt;">You are of the few banks that also offer insurance products. How do these two products work along?</span></span></strong></span></p>
<p class="ANSWER" style="text-align: justify;">
	<span style="font-size:12px;"><span class="MyriadPro">e do not have insurance products of our own but we are co-branded with insurance. We call it bancassurance. It is very complementary with banking services. Basically, it could be used for retail banking sector. It can go very well with mortgage products. Similarly, it can go with other lending products. And it is used as one of the major products in wealth management. So we use it as a part of wealth management package. The corporate sector has also been covered by insurance. Instead of going to an ordinary agent, they can come to the bank to get their assets insured. So, these products are actually complimentary to each other.</span></span></p>
<p class="ANSWER" style="text-align: justify;">
	<span style="font-size:12px;"><span><span class="MyriadPro"><br />
	</span></span></span></p>
<p class="questionsforinterview" style="text-align: justify;">
	<span style="font-size:12px;"><strong><span class="MyriadPro"><span lang="EN-GB" style="letter-spacing: 0pt;">Securities Exchange Board of Nepal (SEBON) has recently got the Mutual Fund Regulations ratified. Your bank had shown some interest in this business in the past. How is the plan now?</span></span></strong></span></p>
<p class="ANSWER" style="text-align: justify;">
	<span style="font-size:12px;"><span class="MyriadPro"><span style="letter-spacing: 0.1pt;">To run a successful mutual fund, you need to have volume. I don't think Nepali market has yet got that volume. It will take maybe a few years to create that. For a successful mutual fund, we need to see also to the stock market. Is it equipped to handle the flow? Nepal is working with India to equip the Nepali stock market with some modern tools such as Central Depository System (CDS). Mutual Fund would be very helpful to make this market more perfect. It will not then be driven by the brokers; it will be driven by the market on its own forces. The investors can come and directly play in the market. <br />
	</span></span></span></p>
<p class="ANSWER" style="text-align: justify;">
	<span style="font-size:12px;"><span class="MyriadPro">We have a mutual fund in India under Standard Chartered. So we have the experience and I don't think there will be a problem in terms of experience or expertise.&nbsp; But we need to actually have that volume.</span></span></p>
<p class="ANSWER" style="text-align: justify;">
	<span style="font-size:12px;"><span><span class="MyriadPro"><br />
	</span></span></span></p>
<p class="questionsforinterview" style="text-align: justify;">
	<span style="font-size:12px;"><strong><span class="MyriadPro"><span lang="EN-GB" style="letter-spacing: 0pt;">How do you evaluate the current financial system of Nepal? Is it heading towards robustness?</span></span></strong></span></p>
<p class="ANSWER" style="text-align: justify;">
	<span style="font-size:12px;"><span class="MyriadPro">It is going through transformation I can say. At this stage, it is difficult to say whether it is robust or stagnant but I think the transformation is happening in the right direction. But it takes time; there are a lot of things that need to be corrected. Fundamental corrections are required. The only point here is that there are too many players so this market would definitely require consolidation. But I don't know when the momentum will come in terms of consolidation.&nbsp;</span></span></p>
<p class="ANSWER" style="text-align: justify;">
	<span style="font-size:12px;"><span><span class="MyriadPro"><br />
	</span></span></span></p>
<p class="questionsforinterview" style="text-align: justify;">
	<span style="font-size:12px;"><strong><span class="MyriadPro"><span lang="EN-GB" style="letter-spacing: 0pt;">Many banks are now trying to form a subsidiary to channel the mandatory deprived-sector lending. Do you subscribe the idea? Any plan from SCBNL along this line?</span></span></strong></span></p>
<p class="ANSWER" style="text-align: justify;">
	<span style="font-size:12px;"><span class="MyriadPro">We do not have any plan at this moment and I can't comment about other banks. However, I can tell you that this deprived-sector lending (micro finance) is definitely SCB Groups major focus area globally. And also here we are working on that.</span></span></p>
<p class="ANSWER" style="text-align: justify;">
	<span style="font-size:12px;"><span><span class="MyriadPro"><br />
	</span></span></span></p>
<p class="ANSWER" style="text-align: justify;">
	<span style="font-size:12px;"><strong><span class="MyriadPro"><span lang="EN-GB">What do you suggest to improve the financial services market in Nepal?</span></span></strong></span></p>
<p class="ANSWER" style="text-align: justify;">
	<span style="font-size:12px;"><span class="MyriadPro">The problem is uneven competition. There are many things that need to be done to make the market stronger. Firstly, we need to have tighter corporate governance; there is enough room for improvement. It is not only the regulator's responsibility; it is the responsibility of the individual players to ensure that a robust governance framework is in place. Secondly, this market needs more reforms in the sense of widening of the market and more integration with the international market. I think players should be allowed to directly interact with the international market. Thirdly, I would love to see a universally acceptable risk management model which would compensate the short-term losses caused by fundamental imbalances in the long term. Fourth, it is necessary to develop the capital market of Nepal. It helps in the long-term management of liquidity and also makes resources available to people to make short-term investments in the productive sector.</span></span></p>
<p class="ANSWER" style="text-align: justify;">
	<span style="font-size:12px;"><span><span class="MyriadPro"><br />
	</span></span></span></p>
<p class="questionsforinterview" style="text-align: justify;">
	<span style="font-size:12px;"><strong><span class="MyriadPro"><span lang="EN-GB" style="letter-spacing: 0pt;">What are the challenges and problems faced by your bank in particular and by the overall banking sector in general?</span></span></strong></span></p>
<p class="ANSWER" style="text-align: justify;">
	<span style="font-size:12px;"><span class="MyriadPro"><span style="letter-spacing: 0.2pt;">As far as our bank is concerned, we visualize the plans for next seven to ten years. I think we are well equipped to handle the challenges when they come. During crisis, we set up a very good example in the market as the only bank that lent to the market. That shows how careful we are. Our portfolio is very carefully managed. We run cautiously, we don't want to block our books and then suffer. There is problem now in the sense that the productive sector needs more credit but a lot of money is stuck in the real estate sector.</span></span><strong><br />
	<span class="MyriadPro"> </span></strong></span></p>
<p class="ANSWER" style="text-align: justify;">
	<span style="font-size:12px;"><strong><span><span class="MyriadPro"><br />
	</span></span></strong></span></p>
<p class="questionsforinterview" style="text-align: justify;">
	<span style="font-size:12px;"><strong><span class="MyriadPro"><span lang="EN-GB" style="letter-spacing: 0pt;">What is your future mission and vision for Nepal?</span></span></strong></span></p>
<p class="ANSWER" style="text-align: justify;">
	<span style="font-size:12px;"><span class="MyriadPro">We are long-term players and we would continue to be here. We'll be expanding our ventures. We have in mind some acquisition also, when the time is right. That's not completely out of the window.&nbsp; It's very much part of the game plan. <br />
	</span></span></p>
<p class="ANSWER" style="text-align: justify;">
	<span style="font-size:12px;"><span><span class="MyriadPro"><br />
	</span></span></span></p>
<p class="questionsforinterview" style="text-align: justify;">
	<span style="font-size:12px;"><strong><span class="MyriadPro"><span lang="EN-GB" style="letter-spacing: 0pt;">It is said that in Nepal, merger and acquisition will remain only in talks not in practice. What do you say?</span></span></strong></span></p>
<p class="ANSWER" style="text-align: justify;">
	<span style="font-size:12px;"><span class="MyriadPro">Unless foreign players and foreign direct investment flow into Nepal, I don't see any possibility of merger and acquisition. Its pre-requirements are political stability and supplementing policies. It is not only the matter of tax. No investor would like to buy problem paying money. Therefore, there must be a suitable labour policy in Nepal. I don't mean the facility of hire and fire. It means keeping human resource in right size and mobilizing it. After meeting all these requirements, I think we can then talk about merger and acquisition. <br />
	<br />
	</span></span></p>
<p class="ANSWER" style="text-align: justify;">
	<span style="font-size:12px;"><strong><span class="MyriadPro"><span lang="EN-GB" style="letter-spacing: 0pt;">What are your bank's recent activities on Corporate Social Responsibility?<br />
	<br />
	</span></span></strong><span class="MyriadPro"><span style="letter-spacing: 0.2pt;">We continue to focus on accseeing is believing keeping avoidable blindness in the centre point. We are very much into helping the poor schools inside and outside the valley by providing computers and creating computer laboratory and also by providing scholarships. We have helped few deserving schools in uplifting their infrastructural facilities. We are very much into the HIV-AIDS awareness and environment protection programs. As a part of our ongoing agenda, we are planting trees to maintain greenery around and are also looking at reducing the carbon requirement of our own uses. </span></span><span style="font-family: Wingdings; color: rgb(237, 28, 36); letter-spacing: 0.15pt;">&nbsp;</span></span></p>
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				<strong>Before Nepal was declared a republic, there were three major actors in the economic affairs of Nepal: the political parties, the monarchy and the traditional capitalist classes. We won't be doing any justice to two traditional capitalist classes&nbsp; the Newars and the Marwaris&nbsp; if we say that these communities favored the former king during his direct rule.</strong></div>
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				<strong>After the declaration of the Republic Nepal, the state is represented by the political parties. So it is natural that the capitalist class siding with the political parties has better ground to grow, again with the blessings of the state. For the time being, we have to accept that the capitalist class close to the former king doesn't enjoy such blessings at par. But they have the experience of doing business with all other capitalist classes.</strong></div>
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<p>
	 </p>
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			<div style="border: 1px solid rgb(204, 204, 204); padding: 5px;">
				Traditional Newar capitalist class means a group of certain castes in the Newari community that are engaged in transit trade between India and Tibet (the autonomous region of the People's Republic of China) since the ancient time. This capitalist class is often referred to as the Caravan Traders because of their admirable mobility for business. The economic history of Newars is as old as Medieval Nepal. Marwaris are the traditional capitalist class of India who later migrated to Nepal in course of business. It has often been argued that the business history of Marwaris is as old as the economic history of India.</div>
		</div>
	</div>
</div>
<p>
	<br />
	 </p>
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			<strong>By Mohan Das Manandhar &amp; Rojan Bajracharya</strong><br />
			It is undisputed that a number of important developments that occurred in the political sphere of Nepal in the past few years have affected the national economy and businesses alike. Particularly, after the declaration of Republic Nepal, it has become necessary to understand the customs, ethos and ways of doing business in the new political setup. It is natural that the business communities are and should be dynamic to readjust themselves with regime change otherwise an economy like Nepal would stall for once and for all.<br />
			<br />
			It will take some time for this dynamism to take pace and develop new commercial culture and statebusiness relationship. However, it is important to recognize at the outset how the business communities pledge their common interest to the state in view of their common interest guiding the future commercial culture and state-business relationship. One of the important components of market dynamism and competitiveness is the business communities ability to bring forward their collective interest and the state's readiness to address these interests.<br />
			<br />
			Before Nepal was declared a republic, there were three major actors in the economic affairs of Nepal: the political parties, the monarchy and the traditional capitalist classes. We won't be doing any justice to two traditional capitalist classes&nbsp; the Newars and the Marwaris&nbsp; if we say that these communities favoured the former king during his direct rule. However, we can't deny the fact that the rulers and their kin who represented the state during the former king's direct rule are another traditional capitalist class of the country; and that these three capitalist classes needed to join hands for their common interest. <br />
			<br />
			This article doesn't intend to explore what issues held them together and what separated them. We presume that all these three capitalist classes did share a common business interest, but the Newars and the Marwaris were always aware that it would be useless to have a conflicting interest as the third capitalist class (the royals) had the blessings of the state. So, the Newars and the Marwaris felt the need to build strategic ties with the political parties to defend their interests that were different from the common interest. The political parties, in turn, needed these traditional capitalists to support their movement for republicanism. <br />
			<br />
			However, the problem was that some skeptics inside the political parties thought the Newars and the Marwaris had stronger ties with the royals, and were therefore on the king's side. The king and the royalties on the other hand conceived that they could not operate the entire business and commercial activities of the country by themselves. The two traditional capitalists enjoyed an established commercial network which was the important pillar of the country's economy at that point of time. The triangular relationship between these three actors during the King's direct rule was intricate. The king and the political parties provided patronage to the traditional capitalists for their own political interests and harmonized relationship with the other two actors.<br />
			<br />
			Going further back in history, after the 1990 political transformation, the country entered into an era of democratic electoral practice. The absolute monarch was brought under the constitution and the political parties were handed the executive powers of the state. Now the state was represented by two distinct political forces the king and the political parties. Soon, these two forces were confronting with each other. An opposition political force, the Maoists, even launched an armed uprising against the constitutional monarchical dispensation.</div>
	</div>
	<div style="border: 1px solid rgb(204, 204, 204); padding: 5px; width: 47%; float: right;">
		<div>
			Later, former king Gyanendra seized the executive powers on February 1, 2005. It showed that though the political parties were assigned the executive role, the king could still afford to become authoritarian. Interestingly, it was also the period of a change in the economic regime from a closed, import-substitution economy to a liberal economy.<br />
			<br />
			In this article, what we have presumed is that the state during the former king's direct rule had conceived the need of economic liberalization in the country. It got continued with time. With economic liberalization, new business opportunities emerged in the country and so did the new capitalist classes. Gradually, a new breed of aspiring capitalists also started to get engaged in trade and commercial activities giving birth to new capitalist classes in the country. It is certain that, with the latest political change, business ventures of the former king's relatives became more transparent. They have the benefit of being tagged as general public in theory but are enjoying the blessings of the state in practice. The capitalist classes also started to tag political affiliations for their mutual benefit which is but natural.<br />
			<br />
			However, the relationships of the capitalist classes with the former king and the political parties still remain harmonized in nature. Further, few new capitalists also emerged due to nurturing by political parties or by virtue of being the relatives of the leaders of these political parties. It was but natural in any new democratic country, at least in South Asia. It is not unusual that the relationship of this capitalist class with the political parties is similar to that of the king and his relatives' capitalist class. So the capitalist class close to the political parties and the one close to the king became competitors in the market and both had had the state's blessings to further their business.<br />
			<br />
			The common interests of both the traditional and the new capitalist classes are the same. This has resulted into business associations in various capacities and the strengthening of the institutional capacity of old associations : This developed formal channels to liaison the common interests of the business communities with the state. On the other hand, the traditional Newar and Marwari capitalist classes are blessed with its own strong, wellestablished conventional network. It is important to note here that this traditional network still guides the commercial culture and the way of doing business informally. So we must presume that there must have been a timely adjustment in the conventional network of the Newars and the Marwaris. <br />
			<br />
			After the declaration of the Republic Nepal, the state is represented by the political parties. So it is natural that the capitalist class siding with the political parties has better ground to grow, again with the blessings of the state. For the time being, we have to accept that the capitalist class close to the former king doesn't enjoy such blessings at par. But they have the experience of doing business with all other capitalist classes. There are traditional Newar and Marwari capitalist classes blessed with well established conventional network and commercial culture. And the fourth capitalist class is the one which has evolved in the last one decade due to new market opportunities. <br />
			<br />
			Obviously, all these capitalist classes would stand together for their common business interests but each of them has its own self-interest and are, therefore, skeptic about each other at times. It is certain that business associations are working together as building blocks to get united for their common interests and distinct identity. However, the challenge is to build unity with diversity.<br />
			<br />
			<em>(Manandharm and Bajracharya are freelance researchers.) <br />
			<br />
			<br />
			</em></div>
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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)

Bullion

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

Petroleum

Petrol	1 Liter	106.00
Diesel	1 Liter	95.00
Kerosene	1 Liter	95.00
LP Gas	1 Cylinder	1375.00