Indian decision to operate major ports 24/7 elates Nepali traders

India has decided to operate its customs at leading airports and sea ports, including Kolkata, round the clock throughout the week. The move is expected to speed up clearance of goods in transit to Nepal.
The decision, if truly implemented, is expected to speed up customs clearance, thereby lowering detention and demurrage charges for Nepali traders. Thus lowering of the transit cost can impact the final pricing as well, ultimately bringing some respite to general consumers who have been bearing the brunt of high transit and transportation costs.
“This is really a good decision for us,” said Rajan Sharma, president of Nepal Freight Forwarders´ Association (NEFFA). “It will ease our day-to-day business and made trading cost effective.” He also said decrease in detention and demurrage charges will benefit Nepali consumers.
The Prime Minister´s Office of India had decided to facilitate round the clock customs operation at major seaports and airports on Tuesday in a bid to remove the constraints for international trade. It has instructed the customs and other authority to implement the decision within 15 days.
“In order to remove this customs-related bottleneck, it has been agreed that customs clearances will now be available at seaports such as Kolkata, Chennai, Kandla and Mumbai and airports such as New Delhi, Bangalore, Chennai and Mumbai round the clock in order to facilitate trade services,” reads a press release that the Indian PMO issued on Tuesday.
So far, the cargos dispatched to and send out of Nepal were required to wait for days at Kolkata port and airports in India due to the lack of prompt and round the clock clearance facilities.
“Hopefully, the decision will significantly cut those detentions now,” Nikhir Jaisani, a Biratnagar-based trader told Republica over phone. “We hope our consignments, once this decision is implemented, will not be forced to be parked in the port by paying everyday demurrage and detention charges.”
Along with the customs, the Indian PMO has also asked other agencies such as port and airport authority, drug controller office, Food Safety and Standards Authority of India, quarantine and private players such as custodians to operate round the clock to facilitate international trade.
Once the new arrangement comes into force, the customs house agents, banks and transporters also will need to work round the clock to synchronize with the extended work hours.
As Nepal uses only Kolkata port to carry out its imports and exports, the goods that are imported won´t be piled up due to closure of customs clearance during the weekend. “We have to wait for two days to get the customs clearance if it comes on Friday,” Sharma said. “We won´t have to waste time and money after customs offices at ports started operating round the clock.”

Political instability, labor unrest pull down FDI by 30 percent

The deepening political instability and frequent labor unrest has dragged down the inflows of foreign direct investment (FDI) to Nepal by around 30 percent during the fiscal year 2011/12 compared to the figure a year earlier.
The whopping decline in FDI inflows has resulted in 17 percent fall in employment generation with creation of only 9,050 new jobs in the country.
The decline in FDI inflows was witnessed in crucial sectors of the national economy such as manufacturing and agriculture.
The statistics compiled by the Department of Industry (DoI) showed the number of new jobs created in the market had fallen despite a rise in the number of industries approved under FDI across the country.
The number of firms approved by the DoI increased to 227, up by 18 compared to the figure recorded earlier year. However, the flow of investment fell to Rs 7.14 billion, down from Rs 10.05 billion a year ago.
“We didn´t get much investment in areas such as manufacturing and agriculture which took away a significant chunk of FDI inflows in to the country,” Bipin Rajbhandari, director at the DoI told Republica on Sunday.
Statistics further showed that agro-based industries saw a decline in FDI by staggering 56 percent falling to just Rs 162 million and creating 840 fewer jobs in the market compared to earlier year.
Likewise, the FDI inflow in the manufacturing sector also dropped by 84 percent to Rs 988 million. The fall in FDI in this sector also led to fewer job creation.
The FDI, however, in the sectors such as energy and service industries went up during the fiscal year 2011/12. “However, these areas do not create more jobs in the market,” Rajbhandari added. The country could see zero investment in the construction sector during the year. The construction sector had received Rs 150 million as the FDI during the fiscal year 2010/11 generating 90 new job opportunities in the market.
On the back of slowing FDI, the government is stepping up the process to endorse the new Special Economic Zone (SEZs) bill, Industrial Enterprises Act (IEA), Foreign Direct Investment and One Window Policy to lure more investment from foreign as well as domestic investors.
The government is establishing SEZs in 10 different places including Bhairawa, Biratnagar, Bara and Siraha in a bid to create conducive industrial environment.
Despite the increase in the number of industries registered during the year, the number of large and medium scale industries - key generator of jobs opportunities - fell in the fiscal year 2011/12.
According to the statistics, 10 large scale industries were approved by the DoI during the review year. The figure was 15 during the previous fiscal year. Likewise, the number of medium scale industries has fallen from 17 to 14. Large scale industries comprise more than two-third of total FDI inflow in to the country.
However, the number of small scale industries increased marginally from 177 to 203 in the fiscal year 2011/12.

WTO to review Nepal's progress on trade development

Enhanced Integrated Framework (EIF), an initiative of the World Trade Organization (WTO) working to enhance trade capacity of the least developed countries (LDCs), is soon reviewing the progress made by Nepal on exploiting trade potential since the program was implemented in the country in 2010.
Toya Narayan Gyawali, joint secretary at the Ministry of Commerce and Supplies (MoCS), said EIF board has initiated the process for hiring an independent team to review the progress that Nepal has made after institutionally starting the EIF program under MoCS.
“The review will measure the achievements Nepal made after implementation of the EIF program,” Gayawali told Republica. The review would also help policymakers compare the program´s output with other LDCs that have received similar support from WTO to improve trade.
Nepal has received two tiers of support from the EIF. Under which tier-1was implemented eyeing to upgrade the quality of human resources, prepare study reports on trade and development, formulate project supporting country´s supply capacity, whereas under tier-2 package, it has received support on developing trade related infrastructure.
“The EIF is reviewing Nepal´s progress as part of its country review decision. As per the decision, it would gauge output of its support to all the 40 countries that have implemented its program,” Gayawali said.
Under the tier-1 support, Nepal has developed Nepal Trade Integration Strategy (NTIS) 2010, identifying 19 products -- 12 goods and seven services -- in which the country enjoys special competitive edge to boost trade and ultimately achieve the goal of poverty reduction.
The registration of Chyangra Pashmina, a collective trademark of Nepali pashmina products, in more than 40 countries of Europe, America and Asia too was done with support from EIF.
Likewise, recently the government had also successfully received fresh support from EIF to enhance production and improve the value chain of ginger -- one of the niche exportable products included in NTIS. MoCS has also sought EIF assistance for the development of medicinal herbs processing industry in the country.
"The independent review will help us to plug the loopholes that are putting downward pressure on the country´s trade," said Gyawali.
Though traders and farmers are yet to witness tangible results of EIF initiative, officials believe Nepal´s status in the review will be better than other LDCs in terms of formulating policies and designing tools to boost export of the goods and services.

FDI policy, IEA drafts uncertain

Reforming the policies and Acts to create a favorable environment and ultimately lure foreign as well as domestic investors with mega investment in the country has been badly affected due to the prolonging transitional politics and uncertainty of holding next election.
The government´s plan to endorse a new Foreign Direct Investment (FDI) policy replacing the existing FDI and One Window policy, 1992 and to enact new Industrial Enterprises Act (IEA) are unlikely to happen in the absence of parliament and full-fledged government in place.
“We are working on finalizing the draft of the FDI policy and IEA. However, it´s difficult to say what will be the fate of those drafts,” Anil Kumar Thakur, joint secretary at the Ministry of Industry (MoI) told Republica on Friday.
The ministry, which is preparing the drafts with the help of United Stated Agency for International Development (USAID), has circulated them to the stakeholders for further discussion. “Similarly, we have outsourced expertise to develop a draft of a new FDI policy,” Thakur said. “We will try to push for endorsing the IEA through ordinance and FDI policy from the cabinet.”
The government even formed a high-level team under the leadership of Dipendra Bahadur Kshetry, vice-chairperson of the National Planning Commission (NPC), assigning it to study what should be changed in the laws to make them consistent.
The dramatic change in the political situation of the country after May 27 - when the Constituent Assembly (CA) was dissolved - and uncertainty about holding another CA elections has posed a serious constraint on endorsing new laws and policies.
“It is better not to bring new laws and policies without winning the confidence of the opposition,” Semanta Dahal, lawyer specialized in International Economics, said. “Investors´ psychology does not let them to come here with investment when political situation is so chaotic even though the government keeps all the policies consistently.”
Meanwhile, the special economic zone (SEZ) bill, which the government was planning to bring through ordinance, is not in the priority anymore. According to a high-ranking official at the MoI, the SEZ bill has been at the bottom of the government´s to-do list.
“We are trying to push for it since it is important to improve the situation of industrial sector. But it has been sidelined lately,” said the official.

IB seeks proposal on feasibility study of Kathmandu Metro from NMPL

The Investment Board (IB), entrusted with the task of immediately executing works on 14 mega projects including West Seti Hydro Project and Nijgadh International Airport, has written to Nepal Metro Private Ltd (NMPL) asking it to submit a detailed proposal on conducting feasibility study and the construction of Kathmandu Metro Railway (KMR).
Previously, NMPL had expressed interest to conduct the feasibility study and carry out the construction of KMR, but on condition that the metro project is handed over to it forgoing the bidding process.
According to a government official privy with the KMR project, the IB had established contact with NMPL based on the offer made by the company. “The Investment Board will take a decision on whether to hand over the project to NMPL after going through its proposal,” said the official.
A high-ranking official who has the knowledge of the issue said the IB had accepted the offer of NMPL as it lacks human resources for preparing the bidding documents for projects like KMR.
The Ministry of Physical Planning, Works and Transport Management (MoPPWTM), which is currently conducting the feasibility study of the KMR, has raised no objection to the IB´s homework of extending construction license to the NMPL.
“We are currently holding discussions with the company (NMPL), though it´s in preliminary stage,” MoPPWTM Secretary Tulsi Prasad Sitaula told Republica on Thursday. “The company has said that it would bring in international investors mostly from Korea and Singapore.”
The government has currently outsourced the task of conducting KMR feasibility study to Korea Transport Institution, Chungsuk Engineering Company, Kunwa Consulting and Engineering Company, Korea Rail Network Authority and two local companies BDA Nepal Private Limited and EMRC Private Limited. Satisfied with the inception report prepared by the companies, the government paid Rs 60.5 million to the firms asking them to conduct a complete feasibility study.
Meanwhile, NMPL has said it would compensate the expenses incurred during feasibility study of the KMR if it secures the project.
But differences persist between the IB and MoPPWTM officials on whether to allow NMPL to conduct complete feasibility study of KMR.
“It´s better to let the companies that are currently working to finish the feasibility study,” Sitaula said. “We can negotiate with NMPL after getting the complete feasibility study report.”
IB CEO Radesh Pant refused to divulge details when asked about the negotiations.

Above 60 firms apply for rice export to China

More than 60 firms have registered expression of interest to export rice to China via Rasuwa and Tatopani customs after the government lifted ban on rice exports, allowing traders to export up to 5,000 tons from each customs points to the northern neighbor.
“The number of applicants is much higher than what we had expected,” said Narayan Prasad Bidari, director general of the Department of Commerce and Supply Management (DoCSM).
The cabinet meeting held a couple of weeks ago lifted ban on rice export. The government had banned rice exports in 2008. The government lifted the ban after the country started enjoying surplus of rice in the domestic market.
According to the Ministry of Agricultural Development, the country enjoyed food surplus of 443,000 tons in fiscal year 2010/11. It had forecast a food surplus of about 800,000 tons for previous 2011/12, of which 300,000 tons will comprise rice, the statistics show.
The preliminary estimation of crops production shows total paddy production was recorded at 9.45 million tons in 2011/12, up 9.8 percent compared to the previous fiscal year and 21.8 percent compared to 2009/10.
The DoCSM, which is entrusted to regulate the market and manage supply, has decided to give permission to all the applicants. According to Bidari, first 10 firms will get permission to export up to 200 tons. Similarly, another 20 firms will get permission for up to 100 tons and rest of the 6,000 tons will be divided among all the applicants.
“At present, we are screening the firms to ascertain whether they are eligible for cross border trade,” Bidari told Republica on Wednesday. According to him, the department will issue export permissions to firms by August 5.
Though the Ministry of Commerce and Supply (MoCS) had recommended allowing export up to 50,000 tons of rice, the cabinet has allowed exports of just 10,000 tons.

Govt to protect property of six firms from auctioning

The government has decided not to auction properties of six industries that have applied to be treated as sick industries for another six months as they are under-study to ascertain if they are actually sick.
According to Surya Kant Jha, under secretary at the Ministry of Industry (MoI), the government has proceeded to stop auctioning the property of Birat Leather Industries Limited, Birat Shoes Company Limited, Everest Floriculture Private Limited, Nepal Boards Limited and Siris Herbal Company Limited.
“These companies have applied to be treated as sick industries and we have requested NRB not to auction their property,” Jha told Republica on Tuesday.
Meanwhile, the ministry is processing forward a request to the NRB not to auction property of the Dolphin Manor Wildlife Resort. “In last two weeks, 28 different firms have applied to be treated as sick industries,” Jha said. “However, only six firms out of total 28 have requested for protection from bank´s action.”
The ministry, which is entrusted to provide ´relief package to the sick industries´ has formed a technical team a couple weeks ago to study the actual situation of the industries which have applied to be treated as sick.
“It will take around six months to complete the whole process of study,” Jha said. “Till then we have decided not to auction the property of those firms.” The government, however, has not finalized the criteria to identify the industries which are actually sick. “We have asked for certain information of the firms. The first phase of study will be based on that information. Only then we will go for field study of the industries,” Jha disclosed.
The ministry has asked for Rs 2.6 million from the Ministry of Finance (MoF) to conduct the field study of the industries. “The technical team that has been formed in the ministry has the ultimate right to decide whether the industry is sick or not,” Jha said.
However, the ministry has not received any response from the NRB and MoF regarding its request. “I think the NRB and MoF will be positive about it since both of them were in the high level 8-member Sick-Industries Rehabilitation High-Level Task Force (SIRHLTF) under the leadership of Dipendra Bahadur Kshetry, vice-chairman of National Planning Commission (NPC), which prepared a report with recommendation to revive the sick industries.
Interestingly the government, formed around a dozen of different committees , in last 10 years to study and uplift the situation of sick-industries in the country. All of them recommended what should be done but none of them precisely defined the criteria for sick-industries. The situation of sick industries is same now as it was in 1994 -- when the first committee was formed to restore the situation of sick industries.