The government, which has been
inefficient to address the supply side barriers in the manufacturing
sector such as labor problems and power-shortage has also been dragging
its feet to hold bilateral trade talks with around half a dozen of
countries to fix the problems that Nepali businesses are facing.
For instance, bilateral trade talks with the United States, Bangladesh,
Bhutan and China among others, have not been held in time. “Technically,
some of the bilateral trade talks have been postponed by respective
countries,” an official at the Ministry of Commerce and Supply (MoCS)
said preferring anonymity, “But, in reality all this is happening due to
our weak communication, coordination and logistical arrangements.”
The bilateral agreement between Nepal and Bangladesh on Operating
Modalities for Transit Cargos (OMTC), which is crucial to ease the
transportation hassles between Nepal and Bangladesh, is in the action
plan of the MoCS but it has not happened. “We have plans, and it takes
time to hold bilateral talks as conducive environment is a prerequisite
for that to happen” said Naindra Prasad Upadhya, joint secretary of the
MoCS.
Similarly, annual meeting between Nepal and USA, which had to happen in
April as per the agreement between the two countries, has been postponed
to September. Technically, the meeting was postponed by USA. However,
government has failed to seek a reason behind the postponement. “The
Trade and Investment Framework Agreement (TIFA) will provide a forum for
bilateral talks to enhance trade and investment, discuss specific trade
issues, and promote comprehensive trade agreements,” reads the
statement made by US government after signing the TIFA in 2011.
Additionally, the third meeting of Nepal-Tibet Trade Facilitation
Committee (NTTFC) which had to happen in May has not taken place. MoCS
couldn´t participate in the meeting in the last week of May citing
political uncertainty in the country.
“We have proposed first week of July as the new date for meeting, but it
is yet to be finalized” joint secretary Upadhaya said. The preferential
treatment agreement between Nepal and Bhutan is also long pending even
though the Bhutan government itself has been showing interest to ink an
agreement for some eight years.
“All this is due to political instability in the country,” Lal Mani
Joshi, secretary of the MoCS said, “Unfortunately, some of the countries
cite security as a reason for postponement.”
Trade statistics show that the countries such as China, Bhutan,
Bangladesh and the USA are Nepal´s major trade partners. “We have failed
to capitalize the resources and opportunities we have due to
government´s slackness to handle the bilateral negotiation,” one of the
businessmen said in the condition of anonymity.
The government has expressed confidence on achieving the target of revenue collection in the current fiscal year 2011/12.
According to a press release issued from Ministry of Finance (MoF),
Krishna Hari Baskota, secretary of the Ministry said that the country
was successful in collecting Rs 190.8 billion in the first ten months of
the current fiscal year. “We have successfully collected 98.7 percent
of the total target of revenue collection,” reads the release.
Baskota, who collected statistics from the major customs point of the
country over the phone, claimed those points had performed well to meet
the target. “Excise duty, VAT and income tax are the major contributors
to achieve the target,” press release said.
The ministry projects that the contribution of revenue will be 16
percent in the gross domestic product (GDP) this fiscal year, up 0.7
percent point from last year. “We have set a target to make this 20
percent of the GDP within 3 to 5 years,” said secretary Baskota.
Nepal has proposed holding bilateral trade talks with China in the first
week of July to hammer out all outstanding issues on tariff and
transit-related barriers.
"Preparations are under way to hold the third meeting of Nepal-Tibet
Trade Facilitation Committee (NTTFC) in the first week of July," Naindra
Prasad Upadhyaya, joint secretary at the Ministry of Commerce and
Supplies (MoCS) told Republica on Thursday.
The talks, scheduled for last week, were postponed after uncertainty
loomed due to series of bandas called by various groups prior to the May
27 dissolution of the Constituent Assembly.
The joint-secretary level meeting, which will be held in China this
year, is an annual function. MoCS is looking forward to discussing
problems faced by the Nepali business sector during the meeting.
However, Nepali businessmen are not optimistic about the talks yielding positive results.
"The trade talks between the two countries have not been able to address
our problems," Rajesh Kaji Shrestha, president of the Nepal-China
Chamber of Commerce (NCC), said.
Interestingly, a recent study carried out by the South Asia Watch on
Trade, Economics and Environment (SAWTEE), with the assistance of the
United States Agency for International Development (USAID), has claimed
Nepal´s trade agreement with China has failed to uphold the national
interest.
"The letter of exchange signed between Nepal and China in May 2010 has
turned out to be a barrier for the export growth of Nepal," the study
states.
However, MoCS officials refuted such claims. "Definitely, the agreement
might not have been as supportive, as domestic value addition on goods
exported to China should be at least 40%," one of the officials said on
condition of anonymity, adding, "The report was mostly based on survey
with businessmen."
According to the Trade and Export Promotion Centre (TEPC), trade deficit
with China shot up to Rs 45 billion during the fiscal year 2010/11 from
Rs 11 billion in 2005/06.
In a bid to protect consumers from inflationary pressure and irregular
market price of 12 essential commodities, the government has prepared an
action plan that includes some 16 short-term and another 16 long-term measures.
A nine-member committee, tasked with the job of preparing a concrete
action plan on controlling prices of essential goods and strengthening
market regulations listed rice, maize, wheat, salt, sugar, fruits,
vegetable, milk, pulses, edible oil and petroleum products as essential
commodities.
The action plan envisioned steps to control rising prices. "This is also
to ensure reliable supply of essential goods," read the 43-page-long
action-plan. The team used statistics available from related agencies
and prevailing market price as base to build the action plan and is per
the cabinet decision of mid-April.
The government, under the short-term measures, has planned to provide
incentives in customs duty in some selected essential goods, establish
fair-price shops in all the municipalities and various places of
Katmandu and print maximum retail price in packages of all the essential
goods.
Similarly, the government also plans to effectively implement existing
laws and rules to control price and regulate market. "There will be
effective implementation of Consumers Protection Act 1998," the action
plan said. "All the wholesale and retail shops must demonstrate a price
list of all the essential goods."
In addition, the government will have to publish details of production,
import and wholesale price every three months. Also, permanent bodies
from centre to local levels would be established to regulate the market.
The action plan that was availed to Republica, says "The government
will issue ration cards to support poor people to get essential goods at
reasonable prices within six months."
Similarly, the action plan has also suggested opening up import and sale
of petroleum products to the private sector, doubling the investment in
the agricultural sector, raising food production in rural areas,
establishing consumer courts in all zones, and incentives to fruits and
vegetable transporters among others.
In addition, the report recommends establishing the Supply Board so that
there would be an independent and functional body to strengthen supply
mechanisms.
"There should be market information centres in the districts as well," the action plan said.
Sick industries that were hopeful of finally getting much-touted relief
package, particularly after the cabinet last week approved an action
plan of Ministry of Industry (MoI), will find their hopes shattered
again as there is no parliament to amend the laws necessary for
implementation of the package.
The government, which constantly failed to identify criteria for sick
industries for well over one-and-a-half of decade, was preparing to
amend Industrial Enterprise Act (IEA) incorporating the recommendations
of a high-level task force formed to facilitate rehabilitation of sick
industries.
But the dissolution of Constituent Assembly (CA) has eroded the
possibility of amending IEA. "We can´t provide anything that is not
under the law," Yam Kumari Khatiwada, joint secretary of the MoI said,
"We can offer relief-packages that have been envisioned by IEA - 1992
only after finalizing the criteria for listing sick industries."
The committee has got cabinet approval to work and finalize the list of
sick industries. "The committee will set the criteria for sick
industries," Khatiwada said.
"Enacting the proposed IEA is crucial to industrial development,"
Khatiwada said adding, "We will try to take initiatives to provide as
much as possible relief to the sick-industries."
However, the high level task force led by vice-chairperson of the
National Planning Commission (NPC) Dipendra Bahadur Kshetry has
recommended multiple relief packages to the sick-industries ranging from
bank loan restructuring to tax waiver.
The high-level taskforce has received applications from 26 firms for
relief packages. "Additionally, six of them have put pressure on the
ministry for immediate support," said a MoI source, declining to name
the industries.
The ministry, which was looking forward to getting special economic zone
(SEZ) bill endorsed and foreign direct investment policy revised has
faced a set back following CA dissolution.
Much-touted Investment Year 2012/13 has landed in trouble after the
country´s failure to formulate new constitution badly eroded country´s
prospect as an attractive investment destination.
While launching the Investment Year, Prime Minister Dr Baburam Bhattarai
had said the government would bring in foreign investment worth US$ 1
billion within the first six months of 2012/13, and to achieve the
target the government would formulate necessary policies and laws.
“The program is doomed now. Who will put his/her money in a country that
does not have a full-fledged constitution and political uncertainties
loom large,” said Binod Chaudhary, president of Confederation of
Nepalese Industries (CNI).
Under its pledge, the government had said it would provide flexible
labor regime to the investors. It had also promised to introduce laws
like Industrial Enterprise Act, Special Economic Zone Act, formulate a
new Foreign Direct Investment (FDI) policy and enact more
investment-friendly FDI Act, among other things.
“The government can still formulate the policies. But the dissolution of
CA and legislative-parliament has disabled it from enacting much-needed
investment-friendly laws,” said Bhaskar Raj Rajkarnikar, senior vice
president of the Federation of Nepalese Chambers of Commerce and
Industry (FNCCI).
The government had launched the Investment Year after it formed the
Investment Board (IB) and on the basis of calculations that the country
would have concluded the peace process and constitution writing by now.
"But that hope has been shattered,” said Rajkarnikar, adding that as the
new chaos has turned even the domestic investors nervous, forget
foreign investors.
Officials disclosed that foreign investors who were holding talks with
the IB to invest in some of projects have already started showing sign
of ´waning confidence´ after the new political turn of events.
“South Korean investors, who were looking forward to invest in the
hydroelectricity sector, have expressed fear to move forward,” disclosed
a source. "They (Korean investors) were excited, but now they are
saying that they do not feel comfortable to continue with the proposed
projects," said the source.
The announcement of Investment Year had excited both the private and
public sectors, and top business bodies like FNCCI and CNI have been
actively supporting IB to come up with numerous business projects.
The government too had handed over 14 large-scale development projects
such as West Seti (750 MV), Upper Karnali (900 MW), Kathmandu-Tarai Fast
Track and Second International Airport in Nijgad among others to the IB
to award them to the promising investors under fast-track mode.
“Sadly, this sudden political mess has sharply curtailed the chances of
those projects drawing international investors,” said the source.
Radesh Pant, CEO of the IB expressed hope that situation will not be as
bad as the business community and some officials think. "Investors will
still be interested in those projects if we are able to guarantee
protection for their investment," he said.
The government has finally made arrangement for partial budget to
acquire land for the construction of Bijulpura-Jayanagar railway track.
The project had been facing long delays after Ministry of Finance (MoF)
failed to make timely arrangement of funds.
Ministry of Physical Planning and Works and Transport Management
(MoPPWTM), which is supposed to carry out the land acquisition, finally
got Rs 690 million. The government has estimated Rs 1.25 billion for the
acquisition of land.
According to Tulsi Prasad Sitaula, secretary of the MoPPWTM, MoF has
approved budgetary transfer of Rs 500 million and provided additional Rs
150 million. The government had allocated Rs 40 million through the
budget of current fiscal year 2011/12.
“We have formally approached the Indian government to start the bidding
process for the construction of railway track,” Sitaula told Republica
on Sunday. He further added that the MoPPWTM has arranged money from
other projects´ budget that remained unspent.
Acknowledging the delay, the Public Account Committee (PAC) of
parliament had directed the government to arrange the necessary funds.
According to DoR, it needs to acquire 220 hectares of land from Janakpur
to Bijulpura to upgrade the existing track.
Nepal and India agreed to develop Janakpur-Bijulapura railway track in
February 2010, when President Ram Baran Yadav visited India. Under the
project, the Indian government agreed to upgrade the existing 51-km long
railway track to broad gauge and extend it up to Bardibas, a major
junction along the proposed East-West railway. India has allocated Rs
600 million for the project.
However, the project is not likely to start within this fiscal year. “It
takes at least 3 months from the bidding process and it is almost
impossible to start the construction this fiscal year,” Sitaula said.
The MoPPWTM, which will soon start distributing compensation to the
local land owners, will first use the available money to acquire 15 km
stretch of land in the Biratnagar border area to extend railway track.
“And rest of the money will be used in the Janakpur-Jayanagar area,”
Sitaula said.
