NRB may reject proposal to stop auctioning of six ailing firms

The Nepal Rastra Bank (NRB), central monetary authority, can reject a proposal from the Ministry of Industry (MoI) to stop bank and financial institutions (BFIs) from auctioning the properties of six ailing industries that have long been defaulting loan.
The central bank source clarified that it was not in a position to prevent banks and financial institutions (BFIs) from auctioning the assets of the industries that have failed to make timely repayment of loan and stated that it would be against the existing laws.
NRB source stated that existing Bank and Financial Institution Act (BAFIA) doesn´t allow the monetary regulator to stop BFIs from auctioning the properties of those ailing industries until the government take decision for the special treatment of those industries regarding loan payment.
“NRB can´t direct any BFIs not to go ahead with auctioning the properties of debtors industries that have long been defaulting loan. Protection of industries from getting their properties auctioned is not possible unless government make special arrangement for those industries for their relief,” NRB source told Republica.
TheThe Ministry of Industry (MoI) had recently written to the NRB requesting to protect six struggling industries- Birat Leather Industries, Birat Shoes Company, Everest Floriculture, Nepal Boards- producers of wooden goods, Siris Herbal Company and Dolphin Manor Wildlife Resort. The letter had requested NRB to stop the auctioning of the assets of six industries for the next six months.
“NRB can prevent the auctioning of their properties only in the case if the government issues gazette provisioning that sick industries get such privilege,” the source added.
The government had formed a 8-member Sick-Industries Rehabilitation High-Level Task Force (SIRHLTF) led by Dipendra Bahadur Kshetry, vice-chairman of National Planning Commission (NPC) in a bid to seek measures to the ailing industries. However, the ministry, which has been assigned to identify actual sick industries in the country, has just started the study.
The government has already formed around a dozen committees over a decade to study the situation of the ailing industries and recommend measures to rejuvenate them. Though each of the panel suggested different measures, they never came up with a specific criteria to define sick industries.

Lack of full budget hit bridges, SEZ projects

Lack of full-fledged budget for 2012/13 has affected multiple high priority programs such as constructions of strategic bridges and feasibility study of special economic zones (SEZ) in different districts as concerned ministries are facing difficulties in starting the tender process.
"Owing to the limit of one-third budget, we could not invite bid for the development of strategic bridges," said Tulasi Prasad Sitaula, secretary at Ministry of Physical Planning, Works and Transport Management (MoPPWTM).
That is not all. He said the absence of full-fledged budget has also hit its periodic maintenance of roads. "This is certain to slow the maintenance works," he told Republica.
Technically, provisions under existing one-third budget do not restrict ministries from inviting tenders. However, such effort turns futile because in the absence of predicatbility of the continuity of the program and clear budget allocations, contractors simply cold shoulder the bid calls.
"We will have to wait till the full-fledged budget for starting those programs," said Sitaula.
The government was scheduled to implement the strategic bridge project from this year with financial support of US$ 60 million received from the World Bank. Under the project, agreement on which was signed in the last fiscal year, the government aims to develop 100 strategic bridges in different parts of the country.
But leave apart the construction of new bridges, Sitaula indicated that regular programs such as periodic maintenance of roads too could be postponed to the last quarter of the fiscal year owing to delay in tender call.
Similarly, officials at the Ministry of Industry (MoI) said they have faced a problem in awarding the tender for the feasibility study of the SEZ in three districts due to lack of full-fledged budget for the fiscal year.
The ministry had selected three contractors to carry out the feasibility study of the SEZ in the three districts -- Dhanusha, Siraha and Rauthat -- at the end of last fiscal year. But it had failed to strike agreements with them then.
"We requested the finance ministry officials to understand the situation and arrange budget so that we could seal the deals with the selected contractors," a high-ranking official at the MoI said. "Sadly, MoF refused to do so."
The source said the lack of full-fledged budget has also affected the construction of SEZ in other places such as Bharatpur, Jumla and Kapilbastu where feasibility study is going on.
"We just have Rs 10 million under the heading of SEZ and this is simply insufficient to complete constructions in Simara and Bhairahawa," the official said.

Instability, corruption continue to eat away competitiveness

Nepal continued to remain one of the least competitive countries in the globe, as frequent changes in government, burgeoning corruption and inefficient bureaucracy, among others, continued to add huge cost on businesses, says a latest report of World Economic Forum (WEF).
The Global Competitiveness Report 2012-13 that the WEF released on Wednesday has ranked Nepal at the 125th position out of total 144 countries wherein the competitiveness survey was carried out. Nepal had ranked in the same position last year as well.
“Instable government, corruption, inefficient bureaucracy, policy instability, restrictive labor regulations, inadequate supply of infrastructures, access to financing, poor work ethic in national labor force and inflation are the top most problematic factors for doing business in Nepal,” states the report.
The report that assesses the competitiveness landscapes of countries across the world has taken indices such as institutions, infrastructure, macroeconomic situation, health and primary education, higher education and training, goods market efficiency, labor market efficiency, financial market development among others for measuring the competitiveness.
Likewise, according to the report, technological readiness, market size, business sophistication and innovation has been used for measurement of the global competitiveness.
“Bangladesh, Pakistan and Nepal are lagging further and further behind in the Asia Pacific region as well,” reads the report.
According to the report, Bangladesh is ranked in 118th and Pakistan is in 124th. The report that has taken institution as the first index of the competitiveness highlights it as “the institutional environment is determined by the legal and administrative framework which individuals, firms and governments interact to generate wealth”.
However, Nepal has performed well in areas such as women in labor force ratio to men (13th rank), gross national saving (18th rank), and total tax rate (41th rank).

High-rise apartments vulnerable, lack risk-mitigation measures

Although country’s housing sector has gradually evolved into an organized business sector over the years, urban development experts and planners raised concerns over various housing products, particularly high-rise buildings, referring to them as prone to risks.
Speaking at an interaction on ‘High-Rise Apartments: Its Feasibility and Contextual Reality’, they raised concern over unplanned development of high-rise buildings and poor regulation and monitoring by the government, saying that such a laxness by the regulator has enabled the companies to escape even as they hand over risk prone products to the customers.
“High-rise apartments in Kathmandu are simply not feasible. The Valley can support only mid- and low-rise apartments,” Arun Dev Pant, architect at Design Cell, a private consultancy firm, said.
Pant disagreed with the views of developers and planners who have been saying that development of high-rises was one of the most reliable ways to manage limitations of land availability and population in the Kathmandu valley.
“Our present approach toward housing sector is wrong because we have not even made apartments affordable for middle-income groups,” Pant said, referring to the prices the developers are charging for the apartments.
Developers like Om Rajbhandary, the chairman and CEO of The Comfort Housing, and senior government officials agreed.
Rajbhandary said it was high time for the government and the private developers to examine whether the high-rise apartments are feasible in Kathmandu. “Everyone is developing high-rise apartments in Kathmandu. But we need to do a serious homework before jumping into it,” Rajbhandary said.
Tulsi Prasad Sitaula, secretary at the Ministry of Physical Planning, Works and Transport Management (MoPPWTM) echoed experts’ concern over safety of the apartments built in the recent years.
“During an inspection of some apartments last year, we discovered negligence by developers on several fronts, including safety measures like lack of fire exits and other arrangements,” he stated.
He admitted weakness on the part of the regulator. “The government actually started monitoring the sector only recently. But that should not have been a reason for the developers to skip the basic safety measures that affect customers lives directly,” he said.
Sitaula attributed weak coordination among different government agencies responsible for regulation of housing for the problems in the sector. He, however, committed to set up mechanism to beef up coordination among different government agencies.

'Excise duty on liquor unfairly high'

Liquor manufactuers have said the government decision to increase excise duty on liquors every year has directly affected the country´s liquor industry.
“The liquor industry is in a difficult situation due to the government´s haphazard way of slapping excise duty. Such is the situation that the manufacturers even don´t get excise duty sticker as per their demand,” Ravi KC, president of the Nepal Liquor Manufacturers´ Association (NELMA), said at a press meet organized on Friday.
Highlighting the contribution of liquor industry in revenue collection, KC said that the government should be supportive to make the industry respected and well managed. “The excise duty act, regulation and liquor act along with other laws are not supportive to the liquor industry,” KC said.
According to the association, there are 42 liquor industries and 5 breweries in the country and that the government collected Rs12 billion as revenue from the liquor industry in the previous fiscal year.
Liquor manufactures have urged the government to ban export of molasses from the country. “Molasses is being exported to India at a very low cost, whereas we have to import spirit from India at a high cost,” KC said.

Pokhara locals call off strike after minister's assurance

Tourism Minister Posta Bahadur Bogati on Thursday promised to take a concrete decision regarding the development of Pokhara regional international airport (PRIA) within two weeks, following which the local pressure group called off the strike.
The local stakeholders had announced two-day closure of Pokhara airport for Friday and Saturday in a bid to press the government to promptly move ahead the PRIA project, which remains uncertain after opposition by four different trade unions at Civil Aviation Authority of Nepal (CAAN), which termed the project as financially unsustainable after the cost mentioned by the lowest bidder was nearly double the CAAN estimate.
Although the Pokhara locals have welcomed the minister´s assurance, Republica has learnt that confusion over the project still exists between the Ministry of Culture, Tourism and Civil Aviation (MoCTCA) and CAAN.
The ministry is positive about implementing the project but CAAN is unhappy with the Engineering Procurement and Construction (EPC) under which the project is being developed. Under EPC model, the contractor needs to carry out the entire development process of the project from designing to construction.
Tri Ratna Manandhar, director general of the CAAN said the problem with the project surfaced mainly as CAAN had no experience of developing projects under EPC model and did not anticipate huge variation in cost that China´s CAMC - the lowest bidder - quoted and CAAN estimated. CAMC had quoted US$ 305.13 million against CAAN estimate of US$ 305.13 million.
According to him, such variation arose mainly because CAMC proposed to develop a different sort of airport than what CAAN was looking for in the Pokhara. "The kind of airport that the Chinese company has proposed to develop in Pokhara is not economically viable. Otherwise we have no difference over the development of PRIA," Manandhar stated.
Contrary to CAAN´s version, a high-ranking official at MoCTCA, said, "We have to develop documents synchronizing them with the laws in order to develop this project since it is also significant for our bilateral relationship with China, northern neighbor - rapidly establishing itself in the global economy."
"PRIA is a project of national interest. The government will execute it at any cost," the official told Republica requesting anonymity. "The bidding process has been completed and we are at a point of no return. The government will ink an agreement with the Chinese government complying with all the pertinent national laws soon."
CAAN, which will be responsible to operate the airport after its completion, however, is not quite positive on the development of project through the EPC model.

MoI stops verification of 'sick' industries

The Ministry of Industry (MoI), which is entrusted to carry out a technical study of self-declared ´sick industries´, has shelved its fact-finding field study of those industries after Ministry of Finance (MoF) denied it necessary budget.
"The technical committee can´t go in the field to cross check the information provided by the industrialists," Ek Narayan Bhandari, section officer at the MoI, who is also a member of the technical committee, told Republica. "The committee has already completed off-site study of those industries. To assess their actual status, we were required to visit their sites."
The MoI had sought Rs 2.6 million to conduct the study for verifying claims made by 27 ´sick industries´. But the finance ministry, citing legal provisions of one-third budget, refused to provide the fund.
Though the government had incorporated a program to provide relief to the sick industries in 2011/12, it had not made any allocations under the heading. The government has no authority to allocate budget to any new program since the budget for this fiscal year is just one-third of the actual expenditure of the previous fiscal year, said Durgesh Pradhan, under secretary at the finance ministry.
The MoI officials, however, said they have a pressure to finish the field study and come up with the final list of sick industries as the prime minister has continued to push for the early implementation of the relief packages.
The government has prepared a report that suggests what sorts of relief packages should be provided to the sick industries to breathe new life into them. But it has not yet identified parameters to judge whether or not a given industry is sick.
Owing to the lack of such parameters and also the lack of budget, the MoI officials said they won´t be able to finalize the list of actual sick industries soon.