Govt planning to bring in slew of new laws to bolster investment climate

The government is preparing to revise, replace and formulate around half a dozen laws including Industrial Enterprise Act (IEA) to make them in compliance with the Industrial Policy 2010 and offer new favorable legal framework to investors in the Investment Year 2012/13.
The Ministry of Industry (MoI) is working on amendment in IEA 1992 and Company Act 2006, and replacement of Nepal Standard (Certification) Act 1980, tuning them in line with the new Industrial Policy.
Likewise, it is formulating a new Nepal Accreditation Board Act, which will pave the way for establishment of an accreditation authority that will certify quality and standards of Nepali goods and services for exports.
“The existing Acts related to enterprises, establishment of companies and standards were formulated long before the new Industrial Policy. Hence, amendments are being worked out to make them in sync with the new policy,” Joint Secretary at MoI, Yam Kumari Khatiwada, told Republica on Monday.
The new Act on Nepal Accreditation Board, meanwhile, is being formulated as per the long time demand of the private sector.
So far, the ministry has prepared a draft of the revised IEA and circulated it among the stakeholders for consultation. “We will submit it to the Council of Ministers for endorsement once we incorporate the feedbacks received from all concerned,” she said.
Unlike the past, when a new would focus solely to serve the policy, the new amendments would also take into account government´s latest drive to lure more foreign investments, particularly in the upcoming investment year, and incorporate special provisions to make it more investment friendly.
Nepal Standard (Certification) Act would be completely replaced because it was formulated way back in 1980 and has turned obsolete amid changes in the way standards have been defined across the globe. “The new Nepal Standard Act 2012 that will replace the existing Act will help to accelerate promotion of Nepali products in the international market,” Khatiwada stated.
The Ministry has already initiated the process to draft the Act, but it is yet to give it a final shape.
New amendments in the Nepal Company Act 2006 are expected to make the Industrial Policy more functional.
Once new laws are put in place, MoI hopes the country to have a better investment climate. However, they will still not be able to address labor and security related problems that have been driving away the investors.
Moreover, the government will soon set up a new office to deal with Intellectual Property Right (IPR) issues. “A process for this has already begun,” said Khatiwada, elaborating that the office is being set up as per the new IPR policy. The ministry is also leveraging efforts to make effective the policy provision of single-window service for all business activities.

TIFA meeting rescheduled to Sept

The meeting of Nepal-US Council on Trade and Investment (NUSCTI) under the Trade and Investment Framework Agreement (TIFA) has been postponed to Sept.
The meeting was scheduled to be held in Kathmandu in March.
The Nepalese Embassy in US, which notified the Ministry of Commerce and Supplies about the fresh development on Sunday, has, however, not mentioned why the meeting has been rescheduled.
Both the countries had intensified preparations for finalizing the possible agendas for the meeting that is crucial for creating environment for bi-lateral trade and investment.
Lal Mani Joshi, secretary at the Ministry of Commerce and Supplies (MoCS), said the Office of the United States Trade Representative (USTR) communicated with the MoCS through the Nepalese Embassy in this regard.
“Our embassy in the US has informed us about the postponement of NUSCTI meeting,” Joshi told Republica on Sunday. He said the letter undersigned by Nepali ambassador to US, Dr Shankar Sharma, only stated that the meeting was rescheduled as USTR preferred to hold the meeting in the last week of Sept.
The TIFA agreement signed in April, 2011 stipulates that the NUSCTI meeting -- a forum to discuss bi-lateral trade issues -- can be held once a year.
Nepali business people are anticipating bilateral Free Trade Agreement (FTA) at the upcoming meeting in a bid to boost exports of garment and pashmina products to US that has been falling gradually since 2000.
Uday Raj Pandey, president of Garment Association Nepal (GAN), said they would push for Generalized System of Preference (GSP) facility on Nepali Readymade Garment (RMG) and pashmina products from the US in the upcoming meeting.
“Attempt to reclaim market for RMG and pashmina products will be one of the key agendas from of Nepali exporters in the meeting,” added Pandey.

Nepal’s Economic Growth Around 4 Percent

Nepal’s economic growth rate is going to be slightly up in 2012 and 2013 compared to the last year 2011 as per one UN report. The report World Economic Situation and Prospects 2012 has estimated that Nepal will maintain 4.3 percentage of economic growth in 2012 and 4.4 in 2013. This is higher than 0.7 percentage compared to the last year 2011. 

Nepal and Pakistan are going to have almost same pace of economic growth as per the UN estimation for 2012 and 2013. Pakistan is going to achieve 4.1 and 4.4 percentage of economic growth in 2012 and 2013 respectively.

UN has noted that the long-standing structural problems such as weak implementation of policies, security concerns and less investment on physical and human capital will be holding back the growth rate of Nepal and another Asian country Iran.

The growth rate of India is also going to slowdown in 2012 and 2013 and that will have a negative impact in the region, South Asia.

45th Annual Meeting of ADB

The 45th Annual General Meeting of Asian Development Bank is going to be held in Manila, Philippines from 2 to 5 May this year. ‘Inclusive Growth through better governance and partnership’ is the main theme of this meeting as per the news release that has been issued by ADB.

DONORS NOT ABOVE ACCOUNTABILITY AND TRANSPARENCY

The government is bringing new provision to make development partners accountable

This piece was first published in the The Reporter Weekly.

In a belated exercise, the Ministry of Finance is planning to make it mandatory for the Development partners to submit details of actual aid and their disbursement to the government quarterly.

This provision is being included in the ‘Action Plan for improving portfolio performance-2012’ prepared by the Ministry which is going to be put before the Council of Ministers for adoption shortly, official sources said.

Upon approval, the development partners shall have to submit all details—actual aid amount their disbursement –every three month under the theme of ‘mutual accountability’, a new theme added to the existing themes. The government move follows widely raised complaints about the lack of transparency in aid disbursement. ‘The mutual accountability’ is an obligation under the Paris Declaration 2005 with the objective of making the aid more effective in the Least Developed Countries (LDCs). "This is the local initiation to implement the Paris Declaration- 2005,"  Kailash Raj Pokharel, Under Secretary in the MOF ,  who is also the coordinator of Nepal Portfolio Performance Report and Action Plan formulation team, said.

Official say, the latest move brings the development partners in Nepal  --often critical of the Government and  its machineries for the delay in implementing the projects –into the accountability net.  Nepal receives almost one third of its f total budget and more than 70 per cent of total development expenditure every year from the donors.

As per the new arrangement, the development partners will have to submit their actual aid vs. disbursement amount in every three months and also  the mid-term budget review. "This norm will help us to fasten the development projects which are being delayed by the slow disbursement of budget from development partners," Under-secretary Pokharel said.

Other four themes of the action plan include  Public Financial Management (PFM), Public Procurement, Improving Human Resources Management and Managing for Development Results (MfDR). ‘With the new arrangement, we hope to have an environment of mutual accountability and faster pace of development’, he said.

Under the new scheme, the government will be asking development partners  to submit their planned disbursements for next three fiscal years and the actual disbursement in every three months. "The huge gap between planned and actual disbursement should not exceed 20 per cent by the end of this fiscal year onward," the draft of the action plan says.

The new plan also aims at addressing the issue of lesser predictability of the aid. “It should be more predictable--which can be done only by reducing the gap between planned and actual disbursements." Under-secretary Pokharel said, adding that this action plan is going to bring all the development partners in a national record.

Development partners, mostly some bilateral ones, keep complaining about the government's weak mechanism but do not submit their periodic reports that show their level of transparency. Only 45 per cent of total amount of  money development partners bring in Nepal is spent through the national budget system, and the remaining 55 per cent is spent under their discretion, something that lacks transparency.

WEN’S GIFT

He gave something to every one: DPM Shrestha

This news was first published in the The Reporter Weekly:

Minutes after Chinese Premier took off for Qatar winding up his five hour official visit, Deputy Prime Minister Narayankaji Shrestha declared it was a ‘historically successful’ visit.

“China gave so much touching almost every sector of Nepal and especially its socio-economic and development but asked nothing in return,” Shrestha told media people on Jan 11 at the end of Wen’s visit.

China pledged 750 million RMB (Rs 9.75 billion) grant assistance for the next three years.  It also increased the regular support by 33 percent over last year’s 150 million RMB.  Along with this, Premier Wen Jiabo also announced 20 million USD for the budgetary support to Nepal as the 'one time grant.’

And altogether eight bilateral Agreements, Memoranda of Understanding (MoU) and Letter of Exchange were signed during four hours of hectic diplomatic business.   They include Economic and Technical Cooperation Agreement (ETCA), Agreement on the Ports Management in Nepal-China Border Areas (APMA), Agreement on Trans-frontier Pasturing by Border Inhabitants (ATPBP), Strengthening bilateral Cooperation, Nepal Armed Police Capacity Building, Agreement on Cultural Cooperation (ACC), Nepal Police Equipment Improvement Agreement (NPIA) and Memorandum of Understanding on Operationalization of Loan Mechanism (MoU on OLM).

Shrestha said Premier Wen Jiabo was positive towards Nepal’s demand that  railway connectivity from border area of China be extended upto Kathmandu and then to   Lumbini in the future  and called it a ‘meaningful response’.

"The two sides agreed to further intensify cooperation in socio-economic development, promotion of trade and tourism, hydropower, transportation infrastructure development and other fields on the basis of equality and mutual benefit," says a four pages long joint statement between Nepal and China at the end of Wen's Nepal visit. China made it clear that it wanted  its competitive and established companies to expand in Nepal.  Although, the  Bilateral Investment Protection and Promotion Agreement (BIPPA) could not be signed, there were indications that talks would continue in that direction.

"China encourages and supports competent and established companies and enterprises to promote investment and joint ventures in Nepal," the statement says.

There will be a loan mechanism between Nepal and China in the coming days since Nepal is also looking for concessional loan from China for expansion and upgrading of Pokhara airport, Upper Trisuli 3A Hydro Power projects along with many other development projects.

Chinese side also agreed to expedite the implementation of various developing projects, including the  upgrade and expansion of existing Ring Road of Kathmandu and Tatopani Dry Port. Not only has the development of infrastructure, China also wants its neighbor's security being more efficient. What was new and perhaps more significant was Premier Wen’s symbolic support to Nepal’s security sector. China gave 10 million RMB for Nepal Armed Police capacity building and  4 million RMB for Civil Police equipment improvement.

To promote the existing level of understanding and friendship, the year 2012 has been announced as 'Nepal-China Year of Friendly Exchange' by two sides. "The two sides agreed to promote exchange and cooperation in the areas of culture, education and between youths, media, think tank, scholars of two countries," says the statement released at the end of the visit.

"Nepal and China have identical or similar positions on major international issues, such as global financial crisis, energy and food insecurity," the statement said, promising that a new era of ‘support each other's participation in regional cooperation’ will begin.

A MOVE TO RESCUE 'POLITICAL' BROKERS

This piece was first published in the The Reporter Weekly

The government is seeking to bring an 'immediate scheme' to revitalize the endangered real estate sector. The Ministry of Finance (MoF) and Nepal Rastra Bank (NRB) are trying to push commercial banks to reinvest in the sector through some new policy measures, much against their earlier harsh attitude  while they were massively investing. No matter what policy measures are taken, the commercials banks are reluctant to walk along with the government's decision at this juncture.

"I don't think that the commercial banks will invest again in the real estate sector in the coming days," a senior executive from a leading commercial bank told this scribe, adding ‘there is enough skepticism regarding  our future role on the real estate investment.’

Government officials are not confident either over the new policy authored by the MOF and the NRB. “This appears to be a very disparate attempt to get some banks to invest in the real estate  with some political interest in mind”, they say.  "Many of the real estate brokers are the party cadres as well," a senior MOF official said, adding   "I am aware of the political flavor in this issue but there is still some hope of getting the economy better.”

But there seems to be no doubt that the MOF-NRB move in the name of resuscitating the real estate transactions is an outcome of the pressure from the real estate brokers.  "I can’t at this stage disclose details of the conversation  and the peoples involved in it, but the hasty route that the government is travelling  is not influenced by the thoughts to rescue eco9nomy",  he said.

Bankers do invest their money where there is a security of their investment and chance of making profit In this case, the  government is asking bankers not to pressurize borrowers for repayment of loan  distributed in the past. At the same time, M O F is considering to increase  ceiling of an 'individual loan' for the real estate brokers from existing Rs 8 million to Rs. 10 million. "It might fuel to increase the economic activities, but not definitely in a healthy way,” an analyst--who refused to be identified said, "This  is not a visionary step , and simply may work as a  short-term remedy."

Banks and Financial Institutions (BFIs) have already invested Rs 1 trillion in the real estate sector. BFIs are not getting any repayment of this loan. The provision that the NRB is going to establish to postpone the deadline to 2070 B.S. for ceiling of the 25 percent of 'real estate loan' out of total loan of a bank is 'suicidal' in the long term. "This is just a postponement of suicide date,” he said, asserting that it is not going to address the root cause of the economic malaise.

Along with the real estate and share market, the government is also going to take the responsibility of selling the apartments built and owned by the private sector. Many think the  government's step towards subsidizing the apartments to its officials is a way of wasting the money that is collected from revenue.