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			'title' => 'Private Sector Will Not Come Merely On Verbal Assurances',
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			'content' => '<p>
	<strong>Purusottam Man Shrestha is the National Project Manager of Public-Private Partnership for Urban Environment (PPPUE). An MBA in Marketing and Small Business Management from University of Delhi, he had earlier worked as Enterprise Development Advisor for Rural Urban Partnership Programme.</strong></p>
<p>
	<strong><img align="left" alt="cover stoey" border="1" height="357" hspace="10" src="http://newbusinessage.com/ckfinder/userfiles/Images/cove3.jpg" style="margin:10px; padding:10px;" vspace="10" width="375" />How do you rate the success of PPP model of development?</strong></p>
<p>
	The PPP model in Nepal has not achieved the same level of success that is witnessed in Bihar of India even though they have adopted it only recently. However, this does not mean that works have not been done on our initiatives. Minimum requirements and environment is created for enabling PPP but we donate have projects like in the developed countries that are expected to be under the PPP model. It's only the concept that is seeded while there is very little work to write home about.</p>
<p>
	<strong>What are the reasons for PPP model not being successful in Nepal?</strong></p>
<p>
	Political stability is PPP's fundamental base for success but due to the current national scenario, large investments are not coming. The private sector is sceptical about making investments though they are convinced about the importance of investing in development projects. We have failed to build the confidence of the private sector and it is extremely challenging to invite private financing from the international market. To make matters worse, the minimum arrangement for FDI is also missing. Investment risks must be minimised where possible and laws must be prepared for funds management based on international rules and regulations. There is a special procedure for private partner procurement which we are still unable to formulate.</p>
<p>
	We are still forced to follow the traditional method of inviting tenders through existing public procurement act. The current procedure is marred by a long procedural delay and the private sector cannot wait that long. This is one aspect that de-motivates the private sector. Political intervention and local groups are among other challenges for developing large scale projects. Besides, there is a lack of skilled manpower that is vital for formulating and procuring PPP projects.</p>
<p>
	A core workforce required for PPP needs to be developed in Nepal itself. We have to initiate projects that are attractive to the private sector and market them to the banking fraternity otherwise; the private sector will not come merely on verbal assurances. Even today, people are simply talking about large PPP projects without doing adequate homework and just looking at the success in other countries as examples.</p>
<p>
	<strong>How suitable is the PPP model for the development of physical infrastructure in Nepal?</strong></p>
<p>
	The PPP model in Nepal caters to basic infrastructure and services whereas it is needed more for large scale infrastructure projects. We must look at roads, tunnels, bridges, transmission lines, large hospitals, airport construction and management that can be done under the PPP model. For example, Apollo Hospital of India, in partnership with the public sector, is expanding its accessibility to a larger area to serve the general public. Similar projects can be developed in Nepal too.</p>
<p>
	<strong>Is it only the issue of investment and political environment behind the private sector's disinterest to invest in the infrastructure sector? How big a role does the issue of profi tability play in this scenario?</strong></p>
<p>
	It is incorrect to say that the private sector is not interested. As a matter of fact, they have also understood that there is profit in such endeavours. However, they are not convinced about the system that runs these projects, to see a chance of materialising profits. They are suspicious about the future because of the way policies and regulations change in Nepal on a frequent basis. We may have the policies and the projects in place, but we don't have the required financing for big projects available in our domestic market. Even all the commercial banks, put together, can barely finance one or two large projects. It essentially means that foreign private financing must be brought in and for that to happen, we don't have a necessary arrangement in place.</p>
<p>
	<strong>The government has taken a regressive step on the Fast Track project, which was said as being developed in partnership with the private sector. What kind of impact will it leave on the private investors?</strong></p>
<p>
	The project had reached a certain level, to begin with. Meanwhile, it was realised that the private sector participation would be better. However, at a later stage, there were voices being raised within the government bodies for its rectification. As a result, the project is getting delayed now. This delay certainly does not convey a positive message as a decision once made is being corrected again. Withdrawing the earlier made decision will contribute towards diminishing credibility. A couple of companies had applied in connection with the project but unfortunately, the entire process was cancelled leading to reduced confidence level of the private sector.</p>
<p>
	<strong>By when can we expect large projects getting developed under the PPP model in Nepal? <br />
	</strong></p>
<p>
	There are a lot of prospects indeed. For example, a small though important project such as developing a multi-storeyed parking space in the heart of the city like New Road can happen on an immediate basis. That can be a good yet simple PPP project which the government can realise by allowing a private operator to build the parking lot on a public space. This can be profitable and, at the same time, the private sector will happily invest in a project of this nature. We have proposed it along with a feasibility study but it is being delayed for various reasons. And let me tell you that there are a lot of similar projects that are still awaiting approval. Officials frequently get changed in the concerned local bodies and such things cannot create an environment for long term project commitments. There can be sizeable PPP projects which the domestic financial market can support.</p>
<p>
	<strong>What are your expectations from the government for making private participation successful in the development sector?</strong></p>
<p>
	The government should follow a special practice for PPP procurement. Minimum required laws and regulations must be formed first for private financing, without which money won't come. Even in the domestic financial market, there must be a specific arrangement for PPP financing apart from the existing provision of financing by banks and financial institutions. The government must identify the sectors that need PPP model and plan for at least five to 10 years in advance. The private sector must be invited only after formulating the projects ascertaining the financial scenario and benefits of PPP arrangements. For example, it is largely felt that inadequate study and preparations have gone into the waste management project catering to the Kathmandu valley.</p>
<p>
	The PPP model remedies the weaknesses of developing projects independently by either the private sector or the government. By definition, the private sector tends to maximise profit so it may neglect the larger mass and benefits for the society. For a drinking water project, for example, private developers may target a higher income group only where it sees a higher rate of return. So, a larger mass and the general public may get neglected.</p>
<p>
	If the same project is run under the PPP model, the government can intervene and enforce the supply of quality drinking water to the general public as well. To minimise the loss while doing so, the government may guarantee the profit by handing over the management to a private entity. On the other hand, when such projects are done entirely by the public sector, we have seen a lot of problems in management, leakages etc. Hence, the PPP model reduces the deficiencies of the public sector and best uses the efficiencies of the private sector. &nbsp;</p>',
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			'id' => '639',
			'article_category_id' => '40',
			'title' => 'Private Sector Cannot Be Expected To Develop Infrastructure',
			'sub_title' => '',
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			'content' => '<p>
	<strong>R B Rauniar, the Managing Director of Interstate Multi-Modal Transport Pvt Ltd is involved in the transport and transit industry for more than 40 years. He advises the Ministry of Labour and Transport Management time to time and has also worked with the Federation of Nepalese Chambers of Commerce and Industry (FNCCI).</strong></p>
<p>
	<strong><img align="left" alt="cover story" border="1" height="361" hspace="10" src="http://newbusinessage.com/ckfinder/userfiles/Images/cove2.jpg" style="margin:10px; padding:10px;" vspace="10" width="350" />How do you view the possibility of private sector involvement for the development of the transportation sector in Nepal?</strong></p>
<p>
	The southern part of Nepal is completely linked by roads while the northern part remains largely disconnected. This means that the required infrastructure is lacking. The infrastructure for north-south linkage is crucial for the fast development of this country. You must understand that developing roads is a huge investment. The domestic transportation sector does not get spared due to the increasing fuel prices quite frequently. Electric railway transportation is the only cheap alternative in the long run; however it requires a huge investment. Few surveys have been initiated by the government in the last couple of financial years. This must be developed as a master plan because railways is shorter than roadways distance wise and also facilitates both human and goods movement.</p>
<p>
	Developing such a huge project is not possible solely with our internal resources and needs international investment or soft loan funding. As for the private sector, nobody will come forward to invest in infrastructure entirely by themselves. They won’t even come as part of joint ventures because there is no market, as such, to make huge investments and get lucrative returns on it. Therefore, the long term investments are the responsibility of the public sector. However, if we can bring in the management of the private sector for such endeavours, that will be efficient. This kind of an arrangement will be economical as well as revenue generating. It has to develop as a part of the broader national agenda and treated as an economic priority.</p>
<p>
	<strong>What should the government do to encourage the private sector for investing in infrastructure?</strong></p>
<p>
	At present, it is very difficult for the private sector to get involved into infrastructure development due to many reasons. For example, the trucking business is still not organised and trucks are individually owned and leased to companies. A single trucking company has not been developed in an organised manner till now. There are only 283 registered companies in the business and nobody knows how many of them are in existence.</p>
<p>
	Transportation is getting more difficult in places where cities are developing. The private sector will be more interested in facility management rather than investing in infrastructure. If we look at Kathmandu, transporters will drop goods and go back for more if proper parking spaces and warehouses can be set up. But there is not a single warehouse that can serve on a long term basis. This is where the private sector can come in and invest in such projects</p>
<p>
	<strong>Why isn’t the private sector interested to get involved if there are prospects? <br />
	</strong></p>
<p>
	When the interest rate is tremendously high (14 per cent), the rate of return correspondingly becomes very low. For example, the cost of a project can’t be predicted for say, five years down the line, adjusting with the interest rate of borrowing. Given such uncertainty, the private sector cannot be expected to take initiatives in situations like these.</p>
<p>
	<strong>Do you see the possibilities of building roads by the private sector in Nepal similar to that in other countries?</strong></p>
<p>
	We don’t have the level of traffic in Nepal that will lure the private sector to invest in toll roads. The private sector will invest automatically where there is an opportunity for profit. If we had the level of traffic that could yield profits, the tunnel to link Birgunj with Kathmandu would have been constructed by now. The FNCCI is ready to lead and the business community in Hetauda is showing interest but there are elements that have contributed towards slowing down the entire process. Goods and passenger movement is not high as of now but on a positive note, there is an increase in internal population as well as growing international linkages. Toll road development needs huge investment so the government must come forward for constructing infrastructure because it gets soft loan. Debt recovery needs prudent management which can be done by the private sector. If PPP can be fully implemented, a lot of projects could be developed in the foreseeable future.</p>
<p>
	<strong>So you mean to say that it is better to let the private sector manage infrastructure instead of asking them to develop so.</strong></p>
<p>
	Yes, because they don’t have the required capacity given the insufficient domestic resources. The private sector must be allowed to bring in foreign capital as there are foreign banks that trust the Nepali private sector. If such soft loan is allowed to bring in, hydroelectricity can be rapidly developed. Nobody is willing to invest with the domestic rate of interest that is higher than 10 per cent. A single bank cannot finance a project larger than 100 MW; large scale projects need consortium efforts as they need billions of rupees. So, the government must finance development efforts but let the private sector manage them. The government cannot manage projects efficiently and the result is that every public sector enterprise is making losses. Therefore, the government should not conduct business; it should instead allow the private sector to manage. The private sector will then make money and earn revenue for the government.</p>
<p>
	<strong>What should the government do to make the transport sector effi cient and effective?</strong></p>
<p>
	First and foremost, there has to be a right policy. Efficiency will only increase when the transit time can be lowered and turnover can be made faster, this will also lower the cost of transportation as it lowers the overhead cost. The existing transportation facilities can be developed given the available resources but the policy makers must have the political will with a common national agenda for this to happen. &nbsp;</p>',
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		'Article' => array(
			'id' => '638',
			'article_category_id' => '40',
			'title' => 'Investment In Infrastructure Is A Costly Proposition',
			'sub_title' => '',
			'summary' => null,
			'content' => '<p>
	<strong>Sanju Koirala is the Corporate Communication Manager of Ncell, the largest private sector telecom operator in Nepal. She has been working as Ncell’s Corporate Communication Manager since 2009. Ncell has made a large contribution on developing communication infrastructure all over Nepal. It has increased the base stations by more than six times in the last three years. In an interview with New Business Age, Koirala shared her ideas on the prospects and challenges of developing communication infrastructure in Nepal.</strong></p>
<p>
	<strong><br />
	</strong></p>
<p>
	<strong><img align="left" alt="cover story" border="1" height="384" hspace="10" src="http://newbusinessage.com/ckfinder/userfiles/Images/cove.jpg" style="margin:10px; padding:10px;" vspace="10" width="300" />Ncell has expanded quite fast in a very short period of time in Nepal’s telecom business. How big is the prospect of a further expansion in terms of demand and possible supply of services?</strong></p>
<p>
	When the decision to enter Nepali market was made, one of the top priorities was to develop the mobile telecom market and to become number one within two to three years’ time. Although, the goal was reached way before, that is, by the end of November 2011, Ncell will continue with the same endeavour. We will continue investing in network expansion and new services. In fact, Ncell is at a growing stage and we will continue improving our network quality and capacity. By achieving one target, we have set another one in front of us which is even more challenging. We strive to reach quality to be aligned with TeliaSonera global standards and have an excellence in customer satisfaction. For future investment plans, it means increasing capacity and quality in the existing network, be selective to cover new geographical areas, increase data usage by enhancing data speed, implement new end user services and improve network reliability and robustness. Customers have started to feel the difference among various Nepali telecom operators. They have started to value what it means to have a good voice quality and network coverage, no matter wherever they are. It surprised the customers in 2011 and it will continue to surpass their expectations in 2012. Our actions and work will always pleasantly surprise the customers with excellent quality and new services.</p>
<p>
	<strong>How can the contribution of private sector players be compared to that of government sector in communication infrastructure development?</strong> <strong>There are allegations of unfair play coming up quite often.</strong></p>
<p>
	When a private company invests, it always keeps the desirable rate of return in mind. Besides commercial targets, we also have social responsibility targets. Among all possible mobile technologies, Ncell makes the decision as to which technology to trust the most. The return of investment and long term technology sustainability are the main decision making factors. By having set clear rules and regulations regarding usage and fee of frequency spectrum, the government can avoid unfair play. And these rules and regulations shall be applicable for every existing and potential operator in Nepal. Every player expects and should have an equal level playing field in an open and liberal economy.<strong><br />
	</strong></p>
<p>
	<strong>The cost of building infrastructure is very high. How satisfactory are the rate and time-window of return?</strong></p>
<p>
	Geographical terrain, lack of transportation, power outage and shortage of skilled manpower makes investment in infrastructure a costly proposition. We are also aware of the people’s spending power, with low level income; gestation period is bound to increase. It is now at an acceptable level taking into account the revenue from voice and value added services. In my opinion, the market is still developing. When we look from mid and long term perspectives, it’s important not to start a price war among operators and avoid regulatory imposed tariffs. Both of these are short term strategies and if wrongly applied, can impact severely on future investment and quality. It does not necessarily mean that the tariffs on services will not decrease but it will be based on the economy of scale and in a planned way. Everyone has to remember that an operator’s ultimate goal is long term sustainable profitability and every wrong decision has an adverse affect on investment and services.</p>
<p>
	<strong>Do you see the possibility of sharing the same infrastructure by other companies of the same nature? Do you think this will reduce the cost of service expansion? </strong></p>
<p>
	It is possible, but cost sharing and cost bearing business dealing should not be dictated by the government. It should be a business to business decision to have a positive impact as well as in expansion and cost of service.</p>
<p>
	<strong>The NTA has not given permission to share certain resources between telecom operators?And, particularly optical fi bre that is being used by NTC is not shared with other companies. How do you view this?</strong></p>
<p>
	This is one of the most challenging issues because pricing scheme has to be defined and NTA has no information about real and specific costs that are different among various operators. In fact, Ncell is leasing the required bandwidth from NTC and NEA. However, it’s not easy to get into an agreement with government-owned companies. First of all, there should be a display of interest by the first operator to share it based on their interest to get opportunity to share similar bandwidth in other directions where they don’t have it yet. Thus, it should be based on mutual interest rather than forced and imposed regulations.</p>
<p>
	<strong>What are the challenges and problems in developing infrastructure?</strong></p>
<p>
	Getting required permission from different government bodies is a difficult task. And it does get worse when people demand for road, electricity supply and many other things. Besides that, in network rollout, one of the most challenging factors is availability of power. If the rest can be agreed and aligned by changing regulations, making clear and understandable rules and fees, shortage in power will remain for years. This is also related to the government plans to provide sufficient electricity even for households in the cities and remote areas. We are not sure if NTA has any plans on the level of energy requirements for the next five to 10 years. No one has really asked us about expected energy requirements for the Ncell network in the coming years. Therefore, we need to rely only on a backup solution based on diesel generators. That, for sure, has an adverse effect on network running costs and ecology.</p>
<p>
	<strong>What are your expectations from the government about supporting the development of communication infrastructure? Has the government done enough to develop the basic infrastructures?</strong></p>
<p>
	A concise general plan for developing the mobile, fixed and broadband services in Nepal is required. If we look around the Asia Pacific region, every country has imposed different principles. And here, challenges come from the fact that there are no less common principles even within the region. Thus, it brings complexity for the NTA and requires assessment of existing status, plans and changes as required. It also requires expertise and consultancy from GSMA (GSM Association) as well as bringing the local operators together in one working group. RTDF (Rural Telecom Development Fund) could be used for optical fibre and for other facilities. For example, equipments and construction material for infrastructure customs and other taxes can be reduced, failing which, it will increase the investment resulting in costlier airtime for mobile phone users. &nbsp;</p>',
			'published' => true,
			'created' => '2012-02-24',
			'modified' => '2012-08-23',
			'keywords' => '',
			'description' => 'Sanju Koirala is the Corporate
Communication Manager of
Ncell, the largest private sector
telecom operator in Nepal. She
has been working as Ncell’s
Corporate Communication Manager
since 2009. Ncell has made a
large contribution on developing
communication infrastructure all
over Nepal. It has increased the
base stations by more than six
times in the last three years. In
an interview with New Business
Age, Koirala shared her ideas on
the prospects and challenges
of developing communication
infrastructure in Nepal.',
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			'article_category_id' => '40',
			'title' => 'We Are Very Keen To Move The SAARC Free Trade Process Forward',
			'sub_title' => '',
			'summary' => null,
			'content' => '<p>
	<img alt="Jaideep Mazumdar" border="1" height="175" hspace="10" src="http://www.newbusinessage.com/ckfinder/userfiles/Images/coverstory-VI dec2012.jpg" vspace="10" width="300" /><br />
	<br />
	<strong>Jaideep Mazumdar <br />
	Minister and Deputy <br />
	Chief of Mission Embassy of India, Kathmandu </strong><br />
	<br />
	<br />
	<strong><br />
	How do you look at the overall regional trade in South Asia? </strong><br />
	<br />
	As everybody will say, it is not up to potential and a lot more can be done. Intra-regional trade within South Asia is only 5 per cent of the trade that the region has with the world. There is, of course, a potential and a huge opportunity for the countries within the region to improve on this figure. <br />
	<br />
	<br />
	<strong>How can connectivity be improved between India and Nepal to negotiate better transit? </strong><br />
	<br />
	In Nepal’s context, as you would be aware that we are building four integrated customs check posts along the border. The objective is that whenever there is a traffic movement between India and Nepal, there is a scientific borderly single place where everything is done – customs check, inspection of goods, clearing of consignments etc. We are also building five cross border railway lines wherein we are harmonising different gauges on both sides of the border as well as building new lines so that goods can come straight to Nepal and vice versa. <br />
	<br />
	To encourage third country trade with Bangladesh, we are building a railway line which will provide an exit from Bangladesh straight into Nepal. We have agreed to allow Vishakhapatnam as an alternative port for Nepal to trade with the rest of the world. We are also building 1,400 kms of roads which will open Nepal inter-land for trading with northern Bihar and northern UP in India along the Terai belt so the movement of goods will become easier. These kinds of connections and inter-linkages are being built to improve transit. <br />
	<br />
	<strong><br />
	How do you view economic diplomacy in the context of enhanced regional trade among SAARC nations? </strong><br />
	<br />
	I can speak for our foreign service that is the Indian Foreign Service, which puts a tremendous amount of importance on economic diplomacy which encompasses trade diplomacy. In all our embassies, we have designated officers who look after harmonising, increasing the trade and helping the private sector of the countries they are posted at. For trade diplomacy, we have an entire division in the Ministry of External Affairs in India which deals with such matters. <br />
	<br />
	<br />
	<strong>There seems to be a sheer lack of trust among nations on different issues. How big a deterrent is this for intra-regional trade? </strong><br />
	<br />
	Historically, there has been a problem between India and Pakistan that was a hindrance for intra SAARC trade. We now hope that things will move much faster and we have been very keen to move the SAARC free trade process forward. We have been doing our bit to ensure that free trade develops in the region. <br />
	<br />
	<br />
	<strong>India, being the centre of regional trade among the SAARC nations, could have played a more vital role in making the SAARC trade bloc effective. What are the reasons for India not being able to do so?</strong><br />
	<br />
	Of course, everybody could have done more. As I said earlier, the potential of intraregional trade in the SAARC region is too large and there is so much opportunity. It naturally means that the potential has not been achieved but it’s due to many factors. I think there is a realisation now among the countries in the region that we need to increase those linkages and move SAARC into a more integrated regional cooperation model. All the leaders have talked about it at the Maldives Summit and our Prime Minister has also spoken very strongly in favour of integrating SAARC. <br />
	<br />
	<br />
	<strong>Why is the trade in this region more oriented towards international trade rather than trading within the region itself? </strong><br />
	<br />
	You cannot generalise this. There may be some products which will have a market in the SAARC region while there may be some other which can find more lucrative markets outside the region. The very fact that intra SAARC trade is only 5 per cent does not mean that the objective should be to make it 100 per cent. For example, oil is always imported so it goes both ways – exports as well as imports. Even Bangladesh which produces so much of garments cannot look only at the South Asian market. People have very high buying power in Europe and North American countries so there are commodities which will find a market in that part of the world and not necessarily in South Asia. <br />
	<br />
	<strong><br />
	How do you view recent development such as BIPPA in the context of intra-regional trade? </strong><br />
	<br />
	BIPPA is an agreement which is just that – an agreement that was to encourage the investors of both countries to invest in each other. We have signed such agreements with more than 75 countries so having agreements with them does not mean that all those countries have invested in India. Therefore, the final decision on investment depends on many factors such as policy stability, security etc. BIPPA itself is only a facilitative document. <br />
	<br />
	<strong><br />
	What are the potentials of Nepal’s trade with countries in the SAARC region, especially India? </strong><br />
	<br />
	You can only export what you can produce. For most of the countries in the region, the exportable products are not adequate therefore countries like Nepal and Bangladesh have big trade deficits with India. Import wise too, if Nepal does not buy goods from India, it has to buy them from somewhere else simply because it does not produce those goods. For example, petroleum products have to be bought from India or some other country and if you buy it from a third country, you still have to transport it through India. If you don’t produce a certain commodity, you cannot trade that.  <br />
	<br />
	<br />
	Â&nbsp;</p>',
			'published' => true,
			'created' => '2012-01-27',
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			'keywords' => '',
			'description' => 'As everybody will say, it is not up to potential and a lot more can be done. Intra-regional trade within South Asia is only 5 per cent of the trade that the region has with the world. There is, of course, a potential and a huge opportunity for the countries within the region to improve on this figure.',
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	(int) 4 => array(
		'Article' => array(
			'id' => '532',
			'article_category_id' => '40',
			'title' => 'Intra-industry Trade Potential In South Asia Is Underutilised',
			'sub_title' => '',
			'summary' => null,
			'content' => '<p>
	<img alt="Ratnakar Adhikari" border="1" height="433" hspace="10" src="http://www.newbusinessage.com/ckfinder/userfiles/Images/coverstory-Vdec2012.jpg" vspace="10" width="300" /><br />
	<br />
	<strong>Ratnakar Adhikari <br />
	General Secretary <br />
	South Asia Watch on Trade, Economics and Environment (SAWTEE) <br />
	</strong><br />
	<br />
	<strong><br />
	What is the current status of Intra SAARC trade? </strong><br />
	<br />
	The intra-regional trade among the SAARC countries stands at 5 per cent of the blocks worldwide trade which has been the case for some time now. Intra SAARC trade has certainly increased over the years, however, there has been an increase in SAARC’s world trade too. Hence, the share of intraregional trade has remained constant. When compared to intra-regional trade in other trade blocs like ASEAN and EU, intra SAARC trade does look small. <br />
	<br />
	<strong><br />
	Why has SAFTA not been able to gainmomentum since its inception in 2004? </strong><br />
	<br />
	SAFTA has not been able to take off because of political as well as economic reasons. It was also affected due to the political tensions between India and Pakistan. Among the economic reasons, it’s the sensitive list that has affected SAFTA most wherein it was decided to have such a list but the types of commodities under the sensitive list was not ascertained. A mammoth 53 per cent of tradable commodities had figured in the sensitive lists of different countries in the region. <br />
	<br />
	<br />
	<strong>How can regional connectivity be improved to negotiate better transit and transhipment?<br />
	</strong> <br />
	There are a number of issues related to regional connectivity that can certainly be looked at if there is a proper intent to do that. For example, India is suffering from Bangladesh’s denial to allow transit through its territory which could have made it easier to reach the north-eastern part of India. Even Nepal can export tea to Pakistan but it will not be profitable sending tea via air cargo. If Nepal can export tea by using the Mahendranagar border to Pakistan via Wagah in Punjab, surface transport can deliver goods in 12 hours flat. But there has been no concrete talk with India on this matter. <br />
	<br />
	<strong><br />
	India, being the centre of regional trade among the SAARC nations, could have played a more vital role in making the SAARC trade bloc effective. What are the reasons for India not being able to do so? </strong><br />
	<br />
	It’s probably because they have analysed the cost and benefits and realised that it is better for them to look outside the region rather than concentrating their negotiating and political capital as well as resources in South Asia. India is not making any pro-active efforts to strengthen regional economic cooperation in South Asia whereas it should be actually promoting regional stability in South Asia which is eventually going to be in its own interest. <br />
	<br />
	<strong><br />
	Why is the trade in this region more oriented towards international trade rather than trading within the region itself? </strong><br />
	<br />
	Historically, most of the developing countries while talking about exporting manufactured products, always have the European, North American, Japanese and Australian markets in their minds. This has been happening for over a century now. Another problem in South Asia region is that most of the countries compete for the same market internationally. <br />
	<br />
	<strong><br />
	Can South Asia region be the production house as well as the market and be self suffi cient for trade? </strong><br />
	<br />
	Why not? I had actually proposed in one of my writings earlier that South Asia can become the textile and clothing production hub. I feel that intra-industry trade potential is not being utilised in South Asia to the extent possible. For example, Pakistan and India are among the best cotton producers in the world and we have state-of-the-art industries in the region that could process cotton into textile fabric. In Bangladesh, we also have one of the lowest cost manufacturers of garment in the world. The manufactured garments can then be sent to Colombo and utilising the shipping industry potential of Sri Lanka, they can be fast processed and shipped to markets abroad. This kind of modality can work in the region’s interest. <br />
	<br />
	<br />
	As for consumption of goods produced within the region, we can take the example of India already importing textile and clothing products from countries like Bangladesh and Nepal. And it should import even more from within the region rather than importing from countries like Thailand and China. There should be an attempt to create an incentive for the partner countries in the region to be able to export to a country like India. However, bureaucratic hassles, nontariff barriers, rules of origin as well as 4 per cent special additional duty imposed on an arbitrary basis have created problems. <br />
	<br />
	<strong><br />
	What are the differences in provisions of WTO and RTA? How does it affect the intra-regional trade? </strong><br />
	<br />
	Regional Trade Agreements (RTA) are meant to provide a platform for deeper level of integration when compared to WTO. You have to understand the fact that WTO actually does not actively discourage RTAs. By virtue of a legal provision within the WTO, it condones regional economic arrangements. In that sense, since SAFTA is deeper, trade within SAFTA should be higher than trade outside the region. By the same token, 67 per cent trade takes place within the region for EU while the figure is 60 per cent for NAFTA. It’s because they have deeper regional integration so there is no reason why SAFTA should not be able to replicate such successes. The regional economic arrangements are actually WTO plus. <br />
	<br />
	The only thing RTAs like SAFTA should learn from the WTO is that it should have a dispute settlement system that is fair, effective and credible. Due to the twotier (Panel and Appellate Body) system of dispute settlement in the WTO, any error of judgment by the panel can be corrected through appeal and actually, more than twothird of cases in the WTO are appealed.</p>
<p>
	As for effectiveness, the verdict of the dispute settlement body is almost invariably adopted because of the reverse consensus rules, which means that the verdict of the dispute settlement body would not be adopted only if there is a consensus not to adopt the report. The credibility factor comes into play because the threat of sanction imposed by the winning party through the decision of the dispute settlement body is plausible. There have been instances where sanctions have actually been imposed thereby forcing the losing party to bring its measures in conformity with the WTO rules. While advanced RTAs such as EU or NAFTA have very effective dispute settlement systems in the form of European Court of Justice and NAFTA Court, SAFTA does not have such a mechanism. This is one of the reasons why countries acting against the spirit of SAFTA also go scot free. <br />
	<br />
	 </p>',
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			'description' => 'The intra-regional trade among the SAARC countries stands at 5 per cent of the blocks worldwide trade which has been the case for some time now. Intra SAARC trade has certainly increased over the years, however, there has been an increase in SAARC’s world trade too. Hence, the share of intraregional trade has remained constant. When compared to intra-regional trade in other trade blocs like ASEAN and EU, intra SAARC trade does look small.',
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		'Article' => array(
			'id' => '531',
			'article_category_id' => '40',
			'title' => 'Economic Diplomacy Is The Present World Order',
			'sub_title' => '',
			'summary' => null,
			'content' => '<p>
	<img alt="Chandra Kumar Ghimire" border="1" height="330" hspace="10" src="http://www.newbusinessage.com/ckfinder/userfiles/Images/coverstory-IV dec2012.jpg" vspace="10" width="300" /><br />
	<br />
	<strong><br />
	Chandra Kumar Ghimire <br />
	Joint Secretary <br />
	Ministry of Commerce and Supplies (now Consulate General of Nepal to Kolkata) </strong><br />
	<br />
	<br />
	<br />
	<strong>What are the major differences in WTO and RTA provisions? How do they affect intraregional trade? </strong><br />
	<br />
	<br />
	WTO is a broader frame which is the legal basis for global trade arrangements and provides framework for the rule-based trading system of which RTA is an option. RTA's jurisdiction is area specific and has the involvement of likeminded countries which are similar in geographical, political or socio-economic aspects and enjoy certain proximity. The WTO's role is to provide the basis for legal framework and permit for RTAs. <br />
	<br />
	RTAs are WTO plus meaning a regional economic arrangement is expected to commit more. The commitment is for the intent of opening the market more for increasing trade volume through freer, broader, deeper and wider trade.</p>
<p>
	 </p>
<p>
	<strong>How is WTO treating RTAs? </strong><br />
	<br />
	There are already 400 RTAs that have come into being and there are more being developed. There are two dimensions and arguments to it. On a scholastic level, the argument is whether RTAs complement or contradict the WTO. The ones who advocate that RTAs complement the WTO say that regional economic arrangements help freer, wider and deeper trade. But the people believing in the philosophy of the other extreme say that RTAs are fragmenting global markets. However, broadly speaking, WTO has allowed regional economic arrangements under its legal frame and I believe the WTO has treated the RTAs in a positive way.</p>
<p>
	<br />
	<br />
	<strong>There are a host of RTAs such as SAFTA, BIMSTEC, ASEAN, NAFTA etc and an RTA is supposed to supersede WTO provisions. If WTO is to dominate all other agreements, what is its relevance at the end of the day? </strong><br />
	<br />
	<br />
	Let me first clarify that all RTAs are not effective, they are there as global ideas but not fully actualised. On a global level, WTO is supreme but it does not dominate other agreements by any means. RTAs do not have the mechanism for dispute settlements like the WTO does. The WTO is a mechanism which even drags a global power like the US to its tribunal and allows least developed countries (LDC) to have their say. Under WTO, the developing countries can also indulge in issue-based bargains with powerful countries which were not possible with RTAs without WTO's existence. <br />
	<br />
	If RTAs were to exist in all parts of the globe, the idea of regional economic arrangements will truly complement the WTO. Otherwise, the idea will not really hold much ground. The RTAs must be able to bring themselves into complete effect so that they can fulfill the ultimate aims of WTO rather than challenging its dominance.</p>
<p>
	<br />
	<strong><br />
	How do you view economic diplomacy in the context of enhanced trade relations between countries? </strong><br />
	<br />
	<br />
	Ever since the world came into being in its present unipolar form, there has been a change in the way diplomacy is being practiced. Today's power struggle is for trade and to become a winner in the âgain and loss scenario, which has resulted in a shift from conventional political diplomacy to economic diplomacy. This big transformation has brought about changes in the bureaucracy of many countries. In Nepalâ's context, we have been talking about economic diplomacy since the early 1990s but we have not been able to practice it at the real level. <br />
	<br />
	We do need political diplomacy with other countries, our immediate neighbour India for example, which is fundamental but the aim has to be for economic gains. In the present world order, we have to strive to gain by putting economic diplomacy into practice. The other countries in the region like Bangladesh and Sri Lanka have expanded their number of missions in different parts of the world exactly with this idea. <br />
	<br />
	They have been marching ahead with economic diplomacy by looking at the markets in different countries of the world. Even though we have the same agenda in Nepal, we lack a comprehensive outlook and have not been able to identify our potential markets worldwide. Accordingly, we could have expanded our missions whereas we are still stuck with the same missions that we had established in the 1950s and 1960s. <br />
	<br />
	We do not have a clear agenda even though of late, we have been able to identify countries where we could find a labour market. However, that's not sufficient because we need to tap opportunity and be able to pursue capital coordination. For this, we have to work in close coordination with ministries of economic content, the private sector and think tank institutions. India and China, our doorstep markets, are countries that are attractive for the entire world. On our part, we are leaving these arm-reach markets and looking elsewhere and therefore, ending up with virtually nothing. All the global powerhouses are targeting India and China for economic reasons and we should do the same. We should be able to shed the diplomatic legacy of the yore and start afresh.</p>
<p>
	<br />
	<strong><br />
	Why is the trade in SAARC region more oriented towards international trade rather than trading within the region itself? </strong><br />
	<br />
	<br />
	This is precisely the reason why we have not been able to gain from SAFTA. The idea that we had envisioned for the RTA a couple of decades ago has not materialised and that's why we see a country like India establishing relations with other RTAs, for example, <br />
	<br />
	ASEAN. The potential in SAARC region has not been able to take shape and India is not ready to bide time in this age of fast-paced globalisation. We do generate and agree on good ideas in this region time and again but fail to give them shape because of our many conflicts as there is a serious lack of trust among SAARC countries. Besides, we have adopted policies in the past not to bring our internal disputes to the table which is another deterrent.</p>
<p>
	<strong><br />
	<br />
	Is Nepal's bureaucratic level effort viable enough for trade enhancement without taking the private sector on board? </strong><br />
	<br />
	Trade enhancement is definitely not possible without the active participation of the private sector. The intensified level of interaction that should have been there between the private and the public sectors is seriously missing. Both the parties are responsible for this; they donate trust each other and often indulge in a blame game. We, the public sector, like to keep ourselves away from the private sector whereas we should be able to take them along. It is because we donate have a business friendly culture which has prevented us from partnering with the private sector in a substantial manner. <br />
	<br />
	On the other hand, the private sector has not been able to develop the appetite that is required to gain competitiveness. The private sector is still busy looking for quotas and concessional rates on tariff etc and create a playing field for itself. Besides, there are times when we expect the private sector to raise its voice or advice but they convey political messages instead of giving technical details or feedback. In the bargain, we miss their indepth expertise that we so desire. <br />
	<br />
	The private sector also lacks the preparedness that is required for public-private partnership (PPP). We do talk about PPP all the time, but it requires a certain level of discipline and pace which is definitely missing. Let me conclude by saying that we do have businessmen of high calibre in Nepal's private sector and one only hopes that the number of such businessmen is on the rise. <br />
	 </p>',
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	(int) 6 => array(
		'Article' => array(
			'id' => '530',
			'article_category_id' => '40',
			'title' => 'The Promises Of SAFTA Are Much Better',
			'sub_title' => '',
			'summary' => null,
			'content' => '<p>
	<img alt="sridharkkhatri" border="1" height="477" hspace="10" src="http://www.newbusinessage.com/ckfinder/userfiles/Images/coverstory-III _dec2012.jpg" vspace="10" width="300" /> <br />
	<br />
	<br />
	<strong>Prof Sridhar K Khatri <br />
	Executive Director <br />
	South Asia Centre for Policy Studies (SACEPS) </strong><br />
	<br />
	<br />
	<br />
	<strong>The Promises of SAFTA are Much Better<br />
	</strong><br />
	<br />
	<strong>How do you look at the volume of regional trade in the South Asia? </strong><br />
	<br />
	Intra-regional trade between South Asia is very limited at this point of time. Despite the fact that SAARC has been in existence for the last 26 years, regional trade has not increased much. When SAARC started, it was around three to four per cent and today, it is still less than five per cent. The intra-regional volume of trade is something that has not increased for a variety of reasons. <br />
	<br />
	<br />
	<strong>What are the possible reasons for low trade in this region? </strong><br />
	<br />
	The truth is that SAARC as a regional organisation has not completely taken off. There are a lot of constraints that has contributed to this. There is asymmetry in sizes of countries involved in the region with India being the most dominant one. The second reason is that we also have conflict between India and Pakistan, which has in a way, obstructed the SAARC process. There have been opportunities at times when SAARC has shown promise. However, bilateral differences between India and Pakistan have held it back. We have had SAPTA (South Asian Preferential Trading Agreement) for a long time but that has not increased trade either because its structure was fundamentally limited in terms of offering opportunities to increase trade. That is something ASEAN used for a long time and did not have any significant impact. We made the same mistake in South Asia by going through preferential trading arrangement. SAFTA (South Asia Free Trade Agreement) was signed in 2004 but despite the agreement, it has not been implemented basically due to concerns between India and Pakistan. <br />
	<br />
	<strong><br />
	How do you view Pakistan granting MFN status to India in the context of intraregional trade? </strong><br />
	<br />
	The MFN status Pakistan has offered to India will change the nature of the game in South Asia provided there aren’t any other terrorist attacks on India or political impasses at certain points. I have been looking at South Asia for a long time now and my worry is that these hiccups tend to hold back the little progress that has been made. <br />
	<br />
	<strong><br />
	Why is the trade in this region more oriented towards international trade rather than trading within the region? </strong><br />
	<br />
	Trade beyond regions becomes more lucrative. For instance, India’s export to South Asia is around five per cent and the imports are less than three per cent. But its trade with South East Asia is nearly 25 per cent. Pakistan also has the same kind of figure because it is also looking at trade with South East Asia. Even Bangladesh’s largest trading partner right now is China and not India. Trade with European Union is also very substantial. Countries tend to export and have relations with regions where there is growth. However, if there is potential within South Asia, there will be investment and subsequently, trade. For that to happen, political barriers have to come down and their trust deficit problems have to be resolved. But again, there is no time frame for it because there are so many bilateral problems which countries need to overcome. And, in a way, South Asia also needs to be little more confident of the region by itself. There is a serious leadership deficit in South Asia where no country or leader has become an advocate of regional integration to help us overcome difficulties and ensure development. <br />
	<br />
	<br />
	<strong>How best can economic integration be used among SAARC countries to reduce poverty and move towards prosperity? </strong><br />
	<br />
	Integration in a way offers countries the chance to develop their economies in a very systematic manner. This means that if the countries are well developed and if they can progress by cooperating with each other, goods will be cheaper for the people to purchase. There is a programme in the SAARC process to eradicate poverty in the region and two commissions have already been formed on poverty eradication. These commissions have come up with significant measures and have talked about meeting the MDG (Millennium Development Goals). SAARC too has developed its own SAARC Development Goals where the focus has been on the people, however, SAARC has not been able to implement some of its programmes. <br />
	<br />
	<strong><br />
	How can regional connectivity be improved for better trade facilitation in the region? </strong><br />
	<br />
	There are significant measures that must be taken care of in terms of trade facilitation, implementing agreements on trade and reducing non tariff barriers (NTB). You can have an excellent agreement but if you have NTBs, it will make trade a difficult proposition. The possibility in South Asia is in infrastructure development which is very important. SAARC has already talked about connectivity in the region and has a SAARC Multimodal Transport Agreement in place. It has not moved very far but there are some positive signs already. In the just concluded summit in Maldives, an agreement on railways has been signed. There is also an agreement on movement of motorcars within South Asia which should have been signed at least a year ago. Movement of goods and people will be very important for the growth of the region. The trust deficit in South Asia has to be overcome to implement some of these programmes. <br />
	<br />
	<br />
	<strong>India is at the centre of regional trade among the SAARC nations. What roles, do you think, India is expected to play? </strong><br />
	<br />
	India has not only a prominent role but also a key role to play for the growth of SAARC and the benefit of the people in the region. Being a large country that is growing at an exponential rate economically, India can offer advantages to other member states of SAARC including Nepal. I do think that India is ready to move in this direction and we see signs of that but it wants to solve some of its bilateral problems with Pakistan first. I think SAFTA will take off now as Pakistan has promised MFN treatment to India. I believe that if there is substantial growth in trade between these two countries and within the SAARC members, India will be more forthcoming in the future. <br />
	<br />
	<strong><br />
	How do you rate the success of SAFTA and SAPTA? </strong><br />
	<br />
	SAPTA was pretty much an abysmal exercise that did not go far ahead. If we had looked at the ASEAN experience, we should not even have gone through the preferential trading arrangement. The promises of SAFTA are much better but the important element is to put it into practice. We had an exercise many years ago in Nepal and worked together with intellectuals, politicians and businessmen to see what they thought of free trade and if it stands to benefit Nepal. We concluded SAFTA will not benefit Nepal in the short run as free trade usually benefits the larger countries more. For a least developed landlocked country like Nepal, it is much harder to derive benefits. However, Nepal can benefit in the long run if we can have link trade with investment and other related benefits. If trade infrastructure can be developed, Nepal has the opportunity to benefit in the long run. <br />
	<br />
	<br />
	<strong>Do you see the possibility of India cannibalising its neighbours? </strong><br />
	<br />
	For India to grow, it does not need to ‘cannibalise’ small countries. India already has the potential to grow and is a major player in the world today. We have seen South East Asia and East Asia grow very fast. The next phase could be South Asia that can grow at a promising rate. India needs to be more generous towards smaller countries, offer opportunities and feel confident that the growth of smaller neighbours can be beneficial for India. I think that change in thinking is happening in India and will continue to happen in the years to come. <br />
	<br />
	<strong><br />
	What are the differences in provisions of WTO and RTA? How does it affect intra-regional trade? </strong><br />
	<br />
	WTO recognises regional trade agreements (RTA) and encourages them in a way to promote growth not only within countries but also in terms of facilitating trade among the regions in the world. So, it is compatible framework within the WTO framework. It does not obstruct RTAs and vice versa. In the last 15-20 years, a number of regional organisations have evolved at a phenomenal rate. We have seen the growth in Latin America, Africa and even in Asia. But what types of regional organisations have happened needs to be clearly looked at. Nepal is part of both SAARC and BIMSTEC where some of the activities overlap one another.</p>',
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			'description' => 'The truth is that SAARC as a regional organisation has not completely taken off. There are a lot of constraints that has contributed to this. There is asymmetry in sizes of countries involved in the region with India being the most dominant one. The second reason is that we also have conflict between India and Pakistan, which has in a way, obstructed the SAARC process.',
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	(int) 7 => array(
		'Article' => array(
			'id' => '529',
			'article_category_id' => '40',
			'title' => 'Economic Diplomacy Is Getting Sidelined By Political Diplomacy In The Regional',
			'sub_title' => '',
			'summary' => null,
			'content' => '<p>
	<span style="font-weight: bold;"><img alt="Pradeep Kumar Shrestha" border="1" height="261" hspace="10" src="http://www.newbusinessage.com/ckfinder/userfiles/Images/coverstory-II_dec2012.jpg" vspace="10" width="400" /><br />
	</span></p>
<p>
	<strong><br />
	Pradeep Kumar Shrestha <br />
	Vice President <br />
	SAARC Chamber of Commerce and Industry </strong><br />
	<br />
	<strong><br />
	Economic Diplomacy is getting Sidelined by Political Diplomacy in the Regional <br />
	</strong><br />
	<strong><br />
	How do you look at the regional trade in South Asia region?</strong><br />
	<br />
	In the context of South Asian trade, trade movement is very low despite it being home to one fifth of the world's population. Intra-regional trade is less than five per cent which is something the business community of the region must take into account. Other regional bodies like EU and NAFTA have more than 50 per cent of the trade within their respective regions. Even though the countries in the SAARC region claim to be close, there exist a lot of hiccups. The mindset and attitude of the politicians and bureaucrats are not to the level expected in the 21st century. Besides political reasons, infrastructure connectivity, high cost of business, bureaucratic hassles plague the prospects of intra-regional trade. <br />
	<br />
	<strong><br />
	Do you see the possibility of India cannibalising all its neighbours? </strong><br />
	<br />
	India is growing at a fast pace. There is a saying, ˜If you have to grow, you cannot grow alone. You have to grow with the neighbours India is a big trading partner for all the countries in the SAARC region. India is big in each and every aspect compared to other SAARC countries. Considering the present scenario, if India really wants to be a superpower, it has to take its neighbouring countries into confidence. <br />
	<br />
	<br />
	<strong>Why has SAFTA not been able to gain momentum since its inception in 2004? </strong><br />
	<br />
	It is raised in every forum each year but the implementation aspect has been very slow. This is more due to political mindset and crisis of confidence than anything else. However, the fact is that we have to grow together and be interdependent rather than being dependent. SAFTA should have moved much ahead by now. Within the SAARC region, we have to look at increasing the trade volume. The attitude of building confidence, helping and sharing with each other is the way to go about it. <br />
	<br />
	<strong><br />
	Regional trade is being prioritised in other trade blocs such as ASEAN, BIMSTEC and EU. Why has the same not received equal priority within the SAARC trade bloc? </strong><br />
	<br />
	This is very unfortunate. The real fact of trade not really taking off in the region is because the two big countries- India and Pakistan having their own problems to deal with. These two countries should sit together and help us have a prospering regional bloc like EU, ASEAN, NAFTA etc. Unfortunately, what is happening is that we are talking of a region but in terms of sub-regions like Eastern India-Bangladesh, Nepal-Bhutan or India- Pakistan. Each country has its own strength so we have to be able to nurture and benefit from areas of comparative advantages. We, the business community, are seriously advocating for it but without the two big countries getting together and understanding the benefits for the region, the SAARC would not move the way we dream of. <br />
	<br />
	<br />
	<strong>By this, do you mean, economic and trade diplomacy is seriously missing among SAARC member countries? </strong><br />
	<br />
	I think economic diplomacy is getting sidelined and political diplomacy is taking over. However, it is a fact that without political understanding, the economy cannot take off. There could be other ways of bringing things closer like people to people contact. We have to understand each other and feel that we are part of the same region and accordingly, we can synergise the strength. But that is not happening and every country wants to move ahead on an individual level. <br />
	<br />
	<br />
	<strong>Why is the trade in this region more oriented towards international trade rather than trading within the region? </strong><br />
	<br />
	Most of the countries in the region are import based economies though we do have exportable items like garments, carpets and others. Nepal, India, Sri Lanka and Pakistan export same kind of products and end up competing in the same market. The level of purchasing power in the region compared to other regions of the world is less even though the middle class is coming up very fast. When we want to do something, we always look at the west. In regional trade, the cost of connectivity and transportation is very high. Bureaucratic hassles like procedural delays and documentations etc also play their respective roles. All these hassles are so grave that we prefer to go for countries outside the region without realising the availability and quality of products available within the region. We, the business community, have to change that and identify our areas, strengths, products, competitive advantages etc. There must be a feeling of ‘together we grow’ to begin with. <br />
	<br />
	<br />
	<strong>In the context of intra-regional trade, how do you view Pakistan granting MFN status to India? </strong><br />
	<br />
	This is a very positive development for both the countries. To tell you the truth, SAARC has not been able to move ahead because of these two big countries not able to understand each other. The MFN status will fuel reciprocity and can move on to other countries as well. For example, China and Taiwan had similar political problems once, however, their relations have improved considerably in the last few years. If political conditions and hiccups can be taken care of, investment and trade will get a boost. At the same time, other neighbouring countries too will be benefitted when relations between these two countries get better. <br />
	<br />
	<br />
	<strong>Can South Asia region prove to be a substantially big market to consume the production generated in the region and become self suffi cient on trade? </strong><br />
	<br />
	Yes, very much so. A big market is lying out there because of the size of the population. The size of human resources, natural resources, potentials and eagerness of the people doing business in the region can certainly make this region self sufficient. This region has everything but still we have not been able to do anything remarkable. In this context, if the countries in this region join hands with each other without any biased sentiment and mentality, it can definitely prosper. <br />
	<br />
	<br />
	<strong>What are the activities of SAARC Chamber of Commerce and Industry (SCCI)? </strong><br />
	<br />
	Since its inception, the business community has wished to see that business related problems are addressed and economic agendas are taken to a much bigger level. Unfortunately, that has not happened and the community is not very happy about it. We have not been invited to the summits in Male and Thimpu despite being an important part of the SAARC. Though, of course, we understand it was not because of their unwillingness to invite us but it was because of their logistics problems in Male and Thimpu. As for our activities, we have tried to increase the number of SAARC sticker visa to improve people to people contact in the region. We have asked for 200 to 500 visas for each country. If a businessman wants to travel, he cannot wait for a month to get a visa. We are advocating that the paper work has to be reduced and the existing bureaucracy hassles should be nominal. Every country has its own area of strength such as hydroelectricity, agriculture or tourism. There are a number of councils for such sectors under the SAARC CCI, chaired by a specific country for each council. <br />
	<br />
	<br />
	<strong>Have there been enough researches conducted on regional trading? What is SAARC CCI doing towards it? </strong><br />
	<br />
	Research and Development is talked about every time especially in the context of South Asia. I believe that more than 350 scholars in different agencies like World Bank, ADB, and UNCTAD are studying and seeing why South Asia has not been able to grow despite its potentials. Even in our chamber, we try to find out facts and figures as to why things are not happening in the region. I believe such findings will lead us towards making good decisions. <br />
	<br />
	<br />
	<strong>Has it been able to go beyond the concept of bilateral chamber in the true sense of regional level trade cooperation? </strong><br />
	<br />
	We are talking about sub-regional level which is more than bilateral. We understand that because of proximity reasons, Nepal being linked to Pakistan, Sri Lanka or Maldives is not possible. But linking Nepal with Bangladesh, Bhutan, India or BIMSTEC is a different phenomenon altogether. We are only talking about the eastern part of South Asia, for example, Bangladesh, Nepal and Bhutan. Efforts toward regional level trade cooperation is certainly moving but at a very slow pace. <br />
	 </p>',
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			'description' => 'In the context of South Asian trade, trade movement is very low despite it being home to one fifth of the world's population. Intra-regional trade is less than five per cent which is something the business community of the region must take into account. Other regional bodies like EU and NAFTA have more than 50 per cent of the trade within their respective regions.',
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			'id' => '528',
			'article_category_id' => '40',
			'title' => 'SAARC Countries Should Work Towards Regional Cooperation To Achieve Growth',
			'sub_title' => '',
			'summary' => null,
			'content' => '<p>
	<img alt="Thosapala Hewage" border="1" height="251" hspace="10" src="http://www.newbusinessage.com/ckfinder/userfiles/Images/coverstory_dec2011.jpg" vspace="10" width="400" /><br />
	<br />
	<strong>Thosapala Hawaga <br />
	Ambassador <br />
	Embassy of Sri Lanka in Nepal</strong><br />
	<br />
	<br />
	<strong><br />
	SAARC Countries Should Work Towards Regional Cooperation to Achieve Growth</strong><br />
	<br />
	<strong><br />
	How do you look at the regional trade in the South Asia region?</strong><br />
	<br />
	The regional trade in South Asia seems to be improving over the years but it is not up to the expectation. Compared to the past, the South Asian economy is more open today. The tariff rates have come down from 80-90 per cent in the 1990s to 20-25 per cent today and exports and imports together are equivalent to about 20 per cent of the regional GDP. SAFTA was expected to include all products, manufacturers and commodities. It is commonly accepted that negotiations under SAPTA will not be very effective in terms of inventing intra-regional trade in SAARC which is unfortunate. There are various possibilities of further improving regional trade within South Asia if countries can overcome the existing barriers. Remedies like substantial tariff cuts, removal of non tariff barriers, adequate trade related capacity building, and connectivity between the countries etc have to be implemented. The regional trade arrangements are in an interim state towards more efficient levels of globalisation. <br />
	<br />
	<br />
	<strong>Is there a possibility of India cannibalising all its neighbours? </strong></p>
<p>
	<br />
	It is difficult to say that India is cannibalising its neighbours. But, with the size of India and its economy, you can’t compare India with any of its neighbours. It is a vast and fast developing country and also the largest country in the region. Their contribution in terms of trade, tourism and economic growth is very high. It is extremely difficult for other countries to talk about balance of trade with India. However, India is having enough problems itself that needs to be resolved first such as regional disparity, low human development index (HDI), poor connectivity etc. India is by far the largest economy in the region and the second largest fast growing economy in the world. South Asia region needs India for its economic prosperity as much as India needs the region for its continuing prosperity. <br />
	<br />
	<br />
	<strong>How do you view trade diplomacy in the context of enhanced regional trade among SAARC nations? </strong><br />
	<br />
	When people talk about diplomacy, they talk about trade diplomacy because that is especially needed by countries in the region. Trade diplomacy in the context of regional trade among SAARC nation is positive and can be further improved. The member countries of the SAARC, I believe, should work towards regional cooperation in order to achieve growth. When there is regional growth, regional trade will definitely go up. If the member countries can develop a regional cooperation and agree upon certain things, a particular country can then focus on its available resources within its territory. <br />
	<br />
	<br />
	<strong>India, being the centre of regional trade among the SAARC nations, could have played a more vital role in making the SAARC trade bloc effective. What are the reasons for India not being able to do so? </strong><br />
	<br />
	As far as I know, India, being the centre of regional trade among the SAARC nations, is playing a vital role in making the SAARC trade bloc effective. However, there are issues among the SAARC nations that need to be resolved in order to make it more effective. India too has its own problems that it needs to resolve. But I believe India can play a major role with regard to development of regional trade in the region. <br />
	<br />
	<strong><br />
	Why is the trade in this region more oriented towards international market than trading within the region? </strong><br />
	<br />
	The trade in the SAARC region is more oriented towards international market probably due to the trade relations that have been developed with countries outside the region over a long period of time. There is also this attraction to trade with countries outside the region because of the high market price for products in the international market. The international destinations have far more secure markets and offer good prices and hard currency. I do agree that trading within the region is not up to the expectations, however, I believe this can be resolved through agencies like SAARC. Actually, SAARC can play a proactive role in the development of trade within the region. They are doing it already but my feeling is that they can do more. Regional cooperation and agreements like SAFTA, SAPTA etc need to be beneficial to all the countries. In order to do that, we have to identify proper people, train them and realise their services, so that we can request them to negotiate for the benefit of their respective countries. <br />
	<br />
	<br />
	<strong>Do you think that tariff and non tariff barriers contribute towards low intra-regional trade? </strong><br />
	<br />
	When the tariff is high, the prices of the goods also go up. Therefore, the countries must look at removing non tariff barriers. We can come up with some kind of consensus within the region so that tariff and non tariff barriers are removed. This, of course, needs to be done in consultation with the member countries of the region. <br />
	<br />
	<br />
	<strong>Can South Asia region prove to be a substantially big market to consume the production generated in the region and become self suffi cient on trade? </strong><br />
	<br />
	I think the South Asian region produces various products that are required for the region and it can certainly prove to be a market big enough to consume them. But the point is that one country has to produce products which the other country doesn’t produce so that you will have an assured market. Basically, what I can see is that most countries in the region produce similar goods and that’s where the problem lies. For example, Sri Lanka produces garments and at the same time, countries such as India, Bangladesh, Nepal and Pakistan also produce garments. Invariably, they have to go outside the region in search of a market for the same product. Hence, you have to have a common agreement with the countries in the region to address this issue. But this is not an easy task unless the countries in the region are committed to do so because each country is concerned about its own benefits. You can have a win-win situation only if there is a give and take policy in place. <br />
	<br />
	<br />
	<strong>What are the problems in expanding regional trade? What are the potentials of trade development? </strong><br />
	<br />
	Trade barriers such as high tariff, double taxation, lack of connectivity among the countries are some of the problems apart from what we have already discussed earlier. The countries have to look into their infrastructure and ways of connectivity in order to increase regional trade. The size of the economy is another issue that you need to look into, for example, India is a huge economy when compared to its neighbours.<br />
	<br />
	There is also the issue of underutilisation of resources which is a cause of concern. If we can resolve these issues, we will certainly be able to expand our regional trade. <br />
	<br />
	The potential for trade development is immense because all these challenges can be turned into opportunities. But we must make sure that we look at tapping the untapped resources. The barriers too need to be taken care of. I believe we will be able to prosper if we think of the entire region rather than only be bothered about our respective countries. <br />
	<br />
	<br />
	<strong>How would Sri Lanka like to represent itself as a brand in the region? What are the prospects of trade for your indigenous products in the region so that you donâte have to look beyond? <br />
	</strong><br />
	If you look at certain products like garments, gems and jewellery and herbal products, we do have the advantages. The market for these products is within the region as well as outside of it. Some of the products have already been accepted and valued by the region. If we produce in accordance with the region’s requirement, we can definitely carve a niche for ourselves. For example, we can design gems and jewellery in a way that caters to the tastes of people of other countries. I am positive that Sri Lanka can definitely expand its trade in the region as time passes.</p>
<p>
	 </p>',
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			'description' => 'The regional trade in South Asia seems to be improving over the years but it is not up to the expectation. Compared to the past, the South Asian economy is more open today. The tariff rates have come down from 80-90 per cent in the 1990s to 20-25 per cent today and exports and imports together are equivalent to about 20 per cent of the regional GDP. SAFTA was expected to include all products, manufacturers and commodities.',
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			'id' => '527',
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			'title' => 'Trade Of Hopes In South Asia',
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			'content' => '<p>
	<img alt="trade hopes" height="274" src="http://www.newbusinessage.com/ckfinder/userfiles/Images/tradeofhopes.jpg" width="300" /><br />
	<br />
	<br />
	<strong>Trade of Hopes in South Asia <br />
	<br />
	<br />
	New Business Age Bureau </strong><br />
	<br />
	<br />
	The 17th Summit of South Asian Association for Regional Cooperation (SAARC) held on 10-11 November this year adopted the Addu Declaration which lays emphasis on effective implementation of the SAFTA (South Asian Free Trade Area) accord among its member states. The heads of the eight member countries&nbsp; Afghanistan, Bangladesh, Bhutan, India, Maldives, Nepal, Pakistan and Sri Lanka at Addu city in Maldives discussed regional issues in an effort to take SAFTA forward. I think there is a realization now among the countries in the region to move SAARC into a more integrated regional cooperation model, says Jaideep Mazumdar, Minister and Deputy Chief of Mission at the Embassy of India in Kathmandu. <br />
	<br />
	<br />
	The declaration also includes measures to be taken to promote free flow of capital and investment and improve connectivity within the region. This year's Summit has decided to consider reducing non-tariff barriers (NTBs) and ad valorem (Latin for according to value) duties to promote freer trade. The SAFTA Ministerial Council has been directed to work on reducing sensitive lists, early resolution of NTBs and expediting the process of harmonising standards and customs procedures. Economic cooperation within the region is often viewed as a key tool for deeper integration within the region.] <br />
	<br />
	<br />
	Having recognised this, SAARC had initiated the SAARC Preferential Trading Agreement (SAPTA) as early as 1993, which later evolved into the SAFTA in 2004 and came into effect in 2006. there has been an increase in SAARC's world trade too. Hence, the share of intraregional trade has remained constant. In comparison, intra-regional trade under the Association of South East Asian Nations (ASEAN) is 32 percent, while it is 52 percent in the EU bloc and 68 percent in the USA and Canadian bloc. These trade blocs have also proved to be a tool for development for the participating countries within their respective regions. <br />
	<br />
	<br />
	<strong>Intra SAARC Trade </strong><br />
	<br />
	<br />
	While there have been several initiatives to promote trade among the region, a host of tariff and NTBs maintained by the member countries, the exhaustive negative list and the smallish trade basket have curtailed the growth of trade and investments in South Asia for long. According to an estimate, intraregional trade among the SAARC member nations (excluding Afghanistan which ratified the SAFTA protocol only in May this year) stood at $ 14.35 billion in 2010-11, an increase of 43.4 per cent vis-a-vis the same period in the previous fiscal. <br />
	<br />
	<br />
	The figure is approximately 5 percent of their total overseas trade in a year which is one of the lowest intra-regional trade volumes for any particular trade bloc. Ratnakar Adhikari, General Secretary of South Asia Watch on Trade, Economics and Environment (SAWTEE) says, “Intra SAARC trade has certainly increased over the years, however, <br />
	<br />
	<br />
	<strong>Unfulfilled Potential <br />
	</strong><br />
	<br />
	Staying true to the theme of Building Bridges, this year's SAARC Summit focused on connectivity by going ahead on a regional railways agreement and a motor vehicle pact besides inking a series of pacts on regional cooperation. Despite its high population and common culture, South Asia, is one of the most poorly connected regions in the world. While better connectivity promises to promote trade within the region, stronger trade relations can go a long way in promoting food security, poverty alleviation and improving socio-economic growth of the South Asian population. Prof Sridhar K Khatri, Executive Director of South Asia Centre for Policy Studies (SACEPS) says, The promises of SAFTA are much better but the important element is to put it into practice.<br />
	<br />
	<br />
	The share of South Asia in world economy is less than 2 percent with all eight nations of the region collectively contributing only 1.7 percent towards global trade. A number of regional trade issues largely remain unaddressed among the SAARC nations which are yet to tap the trade potential because of various problems. Different trade barriers like tariff, non-tariff and para-tariff, visa problems, political barriers, bilateral transit issues, negative list issues and testing issues are apparently acting as trade deterrents among the SAARC countries. Pradeep Kumar Shrestha, Vice President, SAARC Chamber of Commerce and Industry agrees, “Besides political reasons, infrastructure connectivity, high cost of business and bureaucratic hassles plague the prospects of intra-regional trade in South Asia.” <br />
	<br />
	<br />
	According to a paper published by the Reserve Bank of India (RBI) assessing intraregional trade in ten regional blocs, intraregional trade in SAARC was the lowest at 4.8 percent in 2008. The RBI report quoted, The reasons for the low level of trade include protectionist trade regimes, which discriminated against trade among larger neighbours; continued conflict between India and Pakistan; and transport and trade facilitation constraints.” Thick ice of contentious competition between regional peers has always been an overriding problem in the SAARC region. <br />
	<br />
	<strong><br />
	The Bottlenecks </strong><br />
	<br />
	<br />
	A lack of trust and political goodwill, and underperformance in leadership by the dominant economies has been mainly responsible for not turning SAARC into a successful regional trade bloc. For example, there is a lack of trust on several issues among nations such as India, Pakistan and Bangladesh. Mazumdar raises a case in point, “Historically, there has been a problem between India and Pakistan that was a hindrance for intra SAARC trade.<br />
	<br />
	<br />
	As a result, the major players have not participated actively in making SAARC an effective trade bloc. For too long, member nations of the SAARC have deprived themselves of the benefits of regional economic integration. The region homes one fourth of the world's population and possesses unlimited potential but has stayed least integrated. <br />
	<br />
	<br />
	The region is home to two-fifths of the world's poor and accounts for only 3 per cent of global output. Intra-regional trade has stagnated at around 5 per cent of its total trade for some time now compared to around 20 per cent in Latin America. Even Sub-Saharan Africa, with poor transport and telecommunication infrastructure, scores over South Asia, with over 10 per cent of its trade being intra-regional. The SAARC members have retained a plethora of tariff and NTBs, which greatly inhibits trade and investments in the region. With a large list of negative items, the trade basket remains very narrow, with little value addition. Thosapala HÃwag, Sri Lanka's Ambassador to Nepal recommends, We should be able to come up with some kind of consensus within the region so that tariff and non-tariff barriers are removed.<br />
	<br />
	<br />
	The major cross-border structural rigidities include behind-the-border barriers in customs procedures, poor transport links, weak networking of private sectors, and administrative issues such as visas. Foreign direct investment (FDI) too is minimal, due to regulatory issues and a non-facilitative business environment. We do generate and agree on good ideas in this region time and again but fail to give them shape because of our many conflicts as there is a serious lack of trust among SAARC countries,says Chandra Kumar Ghimire, Joint Secretary at the Ministry of Commerce and Supplies (now Consulate General of Nepal to Kolkata). <br />
	<br />
	<br />
	To make the SAARC regional trade bloc effective, the progress in duty-concession by the nations is not adequate. The participating countries were supposed to reduce the number of products from the negative list year-on-year for nations to enjoy a zero-duty facility under the SAARC umbrella after a certain period. But the progress in this regard has not been on expected grounds. Business leaders representing different trade bodies among the SAARC nations have been urging their governments to further liberalise their respective economies to help augment intraregional trade, consequently effecting the region's development. There is a serious leadership deficit in South Asia where no country or leader has become an advocate of regional integration to help us overcome difficulties and ensure development, Prof Khatri observes. <br />
	<br />
	<br />
	India, by virtue of being the largest economy in the region and its geographic position, is viewed as the member that bears additional responsibility towards intraregional economic integration. While India's trade with South Asian countries has increased considerably over the years, it is still below the potential trade levels. India, a connecting land mass, has a special responsibility in increasing intra-regional economic integration and facilitating access to its large markets for SAARC members. The idea that we had envisioned for SAFTA around a couple of decades ago has not materialised and that’s why we see a country like India establishing relations with other RTAs, for example, ASEAN,” Ghimire laments. <br />
	<br />
	<br />
	Its above-average growth, expanding middle-class population, and demand for global goods can prove to be an engine of growth for the region. India's trade with South Asian countries has increased encouragingly, in the last half-a-decade or so, but much trade is below the official radar. Further, India's trade with countries such as Nepal, Bangladesh, Sri Lanka and Afghanistan remains heavily skewed in its own favour. The services trade further adds to the trade imbalance, leading to concerns among other South Asian countries about trade sustainability. <br />
	<br />
	<br />
	<strong>The Way Forward </strong><br />
	<br />
	<br />
	The SAARC region has an immense potential for using economic integration to reduce poverty and move towards prosperity. Three areas offer large potential for economic cooperation the services trade, energy cooperation and logistical connectivity. The development of logistical hubs that facilitate the flow of trade across the region can greatly reduce the costs of doing business. These logistical hubs can help connect critical regional corridors, especially with countries having no common borders. The countries in the region will have to look into their infrastructure and ways of connectivity in order to increase regional trade, says HÃwag.</p>
<p>
	 </p>
<p>
	Tourism, a major growth opportunity for countries like Afghanistan and Nepal, remains constrained by security problems. Allowing intra-regional trade in services can enable South-Asian economies to become more globally competitive. Energy and electricity cooperation are non-traditional areas of trade relationship development. For example, Bhutan has managed to balance its trade with India with large exports of hydroelectric power, and similar potential exists for Bangladesh and Nepal. <br />
	<br />
	<br />
	An integration of electricity grids across South Asia can reduce power costs and enhance manufacturing competitiveness for all members. Huge hydro-electric potential exists in Nepal, Bhutan, Afghanistan and India, which could be tapped for intra-regional power trade. Each country has its own strength so we have to be able to nurture and benefit from areas of comparative advantages,feels Shrestha. Just days ahead of the SAARC Summit in Maldives, Pakistanâ's initiative to grant Most Favoured Nation (MFN) status to India was considered a major breakthrough. As far as trade goes, the move promises to help the economies of both the countries over a longer period of time. <br />
	<br />
	<br />
	Experts and analysts observe the major initiative can also prove to be an important step to help stabilise the region, struggling to combat poverty and achieve economic reliability in the wake of US and Eurozone debt crises. It would also pave the way for economic integration of SAARC countries and the prospects of the region thriving seem brighter than ever before. At the Maldives Summit, Indian Prime Minister Dr Manmohan Singh announced Indiaâ's decision to slash the sensitive list for least developed countries within SAFTA, reducing it from 480 tariff lines to just 25.</p>
<p>
	 </p>
<p>
	India has stated that zero basic customs duty access would be given for all the items removed, with immediate effect. There should be an attempt to create an incentive for the partner countries in the region to be able to export to a country like India,” Adhikari recommends. As things stand, SAARC as a regional bloc leaves a lot to be desired. However, SAARC has a good trade potential as the economies of a number of SAARC nations are growing fast, observers opine. The countries seem to be on the path towards eliminating tariff barriers and reducing NTBs against each other. It's time for the South Asian countries to think collectively in order to cash in the opportunity of emerging as a regional force to reckon with. <br />
	 </p>',
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			'id' => '494',
			'article_category_id' => '40',
			'title' => 'Manufacruting Prospect Unharnessed',
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	<img alt="" src="http://newbusinessage.com/ckfinder/userfiles/Images/Manufacturing.jpg" style="width: 524px; height: 585px;" /></p>
<p>
	A long-term vision for the Nepali Manufacturing Sector, known as vision 2020, prepared jointly by Nepal government, UNDP and UNIDO in 2002 had proposed to pursue a two-pronged industrialization strategy aimed at rural, agro-based industrialization, and formal urban-based industrial development. But a decade down the lane, nothing seems to be moving to the vision encapsulated then. The strategy proposed then as prioritising export-oriented labour-intensive manufacturing industries and tourism-related exotic products, where Nepal already enjoys considerable comparative advantage, still sounds equally relevant (see box for 2020 goals). But its proposal of raising the contribution of the sector to GDP from 10 to 20 per cent by 2020 appears highly unrealistic given its contribution of just about 7 per cent of GDP in FY 2010/11. From national economic standpoint, manufacturing has universally accepted double-edged goals -- consumption and/or exports. As Nepal is way below in meeting her consumers demand on virtually all sorts of items, and has equally good potential for export of various products, Nepalâ's manufacturing prospects, at least in theory, are truly bright.</p>
<p>
	It is because Nepali productions can replace the import in the domestic market and also have scope of export to rapidly growing neighbouring markets of India and, also China. Although the import to export trade ratio of Nepal in terms of value stands at 7:1, some of the Nepali produce like iron and steel products, acrylic yarn, hand-made woolen carpets, readymade garments and tea and coffee are faring well in international markets.</p>
<p>
	<img alt="" src="http://newbusinessage.com/ckfinder/userfiles/Images/goals for 2020.jpg" style="width: 468px; height: 400px;" /></p>
<p>
	The history of manufacturing in Nepal is not very long. The Nepal Companies Act, 1936 provided basis for incorporation of industrial enterprises which in fact had provisions for joint-ventures and public sector industries. The most tangible outcome of this Act was establishment of Biratnagar Jute Mills, a collaborative venture of Indian and Nepalese entrepreneurs. The Mill is considered first manufacturing unit of industrial scale in Nepal. But the said Act had no provision for private limited companies until it was reformed in 1951.</p>
<p>
	This new act encouraged the establishment of ninety-two new private joint stock companies between 1952 and 1964. The Industrial Enterprises Act of 1974 enacted in the heydays of panchayat polity also recognized role of the private sector in the industrial growth. But the panchayat regime continued the policy of protecting the public sector production over the private one, which in fact constricted the desired growth of the sector. Establishment of about a dozen industrial estates including at Patan, Balaju, Hetauda, Pokhara, Dharan, Butawal, and Nepalganj in the 1980s certainly contributed to create an organized industrial atmosphere. Several modern industries with large manufacturing plants to produce jute, sugar, cigarettes, beer, matches, shoes, chemicals, cement, and bricks were installed. The garment and carpet production units in much diffused fashion spread in the Kathmandu valley and surrounding areas, targeted at export production. By the end of last fiscal year, number of manufacturing units registered under the Department of Industries has crossed well above 2,000. This not only shows that investment and industrialization has expanded but also that the internal market of Nepali products has grown substantially. Of late, private sector investment in manufacturing of cement, sugar and items of daily use has increased significantly. Western district of Dang is developing as the ‘cement city’ as at least a half-dozen large cement companies are all set to begin production pretty soon. Many would like to categorize the hydropower units also as manufacturing. In that case, it can be claimed that Nepal’s manufacturing sector has been able to attract quite large amount of investment, mainly from the private sector. Still, very weak positioning of Nepali exports --due to lack of diversification, market research and identification</p>
<p>
	and, choice of low-value high-volume products -- has not been helpful for both manufacturing and trade balance. The share of main Nepali export in the global market has been limited in quantity and value, and thus been unable to create their own sectoral economies of scale. The policy conundrum is still a major bottleneck. In many sectors, public enterprises continue to play dominant role which is very often than not inviting unfair market play by government intervention. Price distortion is the major resultant effect that in turn is discouraging the private sector investment, at least in the sectors where the government is directly involved. Recent successive governments with mainly socialist tilts have made the situation even more confusing, as their policies lacked clarity in private property, entrepreneurship and profit making.</p>
<p>
	Even beyond political spectrum, challenges of facilitating the growth of manufacturing sector are many. On the supply side, Nepal’s physical infrastructure, especially electricity supply, roads and use of up-to-date technology are inadequate to support a modern manufacturing sector so that it becomes capable of quickly responding to trends in world market demands for manufactured products. As the newest problem, lack of manpower is another bottleneck due to labour migration to foreign countries. Departing from a conventional thinking, identifying afresh new niche and competitive products is also a striking need of the day. Strategies for trade, policies and investment can follow.</p>',
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			'description' => 'A long-term vision for the Nepali Manufacturing Sector, known as vision 2020, prepared jointly by Nepal government, UNDP and UNIDO in 2002 had proposed to pursue a two-pronged industrialization strategy aimed at rural, agro-based industrialization, and formal urban-based industrial development. But a decade down the lane, nothing seems to be moving to the vision encapsulated then.',
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		'Article' => array(
			'id' => '496',
			'article_category_id' => '40',
			'title' => 'Manufacturers Are Treated As Criminals In This Country',
			'sub_title' => '',
			'summary' => null,
			'content' => '<p>
	<strong>BIPPA should have been signed with India a couple of years ago because it is our nearest neighbour and the largest foreign investor in the country. BIPPA will be a milestone agreement as it promises added security to the Indian investors.<br />
	<br />
	<br />
	</strong></p>
<p>
	<strong><img align="left" alt="coverstory" border="1" height="225" hspace="10" src="http://newbusinessage.com/ckfinder/userfiles/Images/diwakar golchha.jpg" style="margin:10px; padding:10px;" vspace="10" width="200" /></strong></p>
<p style="text-align: justify;">
	<strong>How will the recent BIPPA agreement help in promoting the manufacturing sector? </strong></p>
<p style="text-align: justify;">
	BIPPA should have been signed with India a couple of years ago because it is our nearest neighbour and the largest foreign investor in the country. BIPPA will be a milestone agreement as it promises added security to the Indian investors. Manufacturing sector today has the biggest setback because of electricity problem. In this context, Indian investors have committed around 3,500 MW power generation in this country. In the second round of power summit going to be held in Kathmandu, we expect another 4-5,000 MW of electricity production commitment. Today, India is one of the largest international investors in the region and last year, Indian investors invested US $ 43 billion outside India. So, there is every reason for them to invest in Nepal as we are their nearest country where they will produce electricity and take to India. BIPPA, along with other agreements, shows a long term commitment of India towards Nepal.</p>
<p style="text-align: justify;">
	<strong>How do you analyse the Nepali manufacturing sector and its growth trend?</strong></p>
<p style="text-align: justify;">
	In recent years, the manufacturing sector has been neglected because of various reasons. It was neither in the priority of the government nor was there a concern to protect the domestic investments. So, many industries have shut down in the past seven to eight years. Our industries that had significant annual achievements are registering negative growth for a couple of years now. That is because of the wrong attitude of the bureaucracy and of course, none of the politicians are concerned. For the first time in the last 15 years, Nepali Industrialists have revived the hope they had lost after Dr Baburam Bhattarai became the Prime Minister. Manufacturers are treated as criminals in this country, which is why the entire investment climate is in dire straits. Even the facilities committed by the act of 1990 were denied and later withdrawn which is a betrayal to this sector.</p>
<p style="text-align: justify;">
	<strong>Which is the most appropriate sector for manufacturing for Nepal? Why do you think this specific sector is not much developed as expected?</strong></p>
<p style="text-align: justify;">
	There are so many products necessary to be manufactured in Nepal. Unless the climate for manufacturing and attitude of bureaucrats do not change and unless there is a strong body that can understand the multiplier effects of investment and language of economy, one cannot think of industrialisation. We have discussed the issues and problems we faced after 2000, with Dr Bhattarai. We are hopeful that the industrial revolution will take off after 2012-2013. Many sectors may revive provided there is lowered cost of production and cheaper cost of doing business transactions. There are numerous harassments like high finance cost, no electricity, and so many other reasons due to which industries do not come up. Unless there is power, nobody is going to put money into industry. I will not recommend anybody, at least in my family, to go for manufacturing at this point in time.&nbsp;</p>
<p style="text-align: justify;">
	 </p>
<p style="text-align: justify;">
	<strong>Everybody is complaining that Nepal does not have a suitable industrial environment. Golchha Organisation is one of the most successful corporate houses focused on manufacturing. How are you managing it?</strong> <img align="right" alt="" hspace="5" src="http://newbusinessage.com/ckfinder/userfiles/Images/golchha2.jpg" style="text-align: justify; width: 153px; height: 239px;" vspace="5" /></p>
<p style="text-align: justify;">
	Successes and failures are always part of one’s life. If we are suffering because of the wrong attitude of the government, we might want to close down some industries so that it can give a message. We had to close down Sri Bhrikuti Pulp and Paper Nepal Limited because of the wrong attitude of the government. We are going to close down another important industry, Sri Nepal Boards Ltd due to the same reason. The successive governments thought that importing goods gets them more revenue which they can spend on regular expenses. However, that will leave the country’s development in lurch. There is no desire in the government for development of this country, the only desire is to garner more revenue and enjoy it. At this moment, Golchha Organisation is doing very well with its trading businesses. Trading involves more than 50 per cent of our total turnover while the service sector has around five per cent share and the remaining makes up for our manufacturing concerns.</p>
<p style="text-align: justify;">
	<strong>How long do you think such a situation will persist in the country?</strong></p>
<p style="text-align: justify;">
	It requires visionary leaders like Lee Kuan Yew of Singapore and Mahathir Mohamad of Malaysia to build successful economies. We have our hopes pinned on Dr Bhattarai and we do see similar capabilities in him. If he could remain the Prime Minister of Nepal for the next 10 years, we believe that he can transform this country. But first and foremost, he should begin with a total transformation of the bureaucracy in Nepal.</p>
<p style="text-align: justify;">
	<strong>Large corporate houses are shifting to the service sector. What is the reason behind it ? <br />
	</strong></p>
<p style="text-align: justify;">
	The Nepali people have enhanced their buying power today by virtue of remittance. They want better services and can spend money for that. Service is a sector where you have the possibility of a quick return without making a heavy investment like in an industry. Though are small hurdles like power shortage, strikes and blockades that are affecting this sector as well, it can still manage on its own. That is why the service sector is bound to develop and people are flocking for this sector.</p>
<p style="text-align: justify;">
	<strong>Can a country sustain based on imported goods only as corporate houses and industries are shifting to service sector from manufacturing?</strong></p>
<p style="text-align: justify;">
	There is always a phase like this and ultimately, the nation will have no alternative. Unless you have a manufacturing sector, how much service can you possibly sell? Everything has a limitation so the service sector too will reach a saturation point. Ultimately, when there is a possibility of easy investment and return, competition to make a mark in the manufacturing sector will intensify. There has to be balance in everything because nothing can grow imbalanced. You cannot say that one sector will grow and another sector is not required.</p>
<p style="text-align: justify;">
	<strong>Why are there very little measures to promote goods that have comparative and competitive advantages?</strong></p>
<p style="text-align: justify;">
	At the moment, Nepal has no comparative advantage whatsoever. Once we have sufficient power, labourers more inclined towards working rather than politics, banking sector more favourable for investment, a favourable government and its economy-friendly policies, we will have comparative advantages. Unless these logistics are there, one cannot compete. Today, in India, there are industries that are 20 times bigger than what we have in our country. Given India’s automation and advancement, it is difficult for us to compete with our older and manual technology. So, it is almost impossible to achieve higher cost advantage and efficiency in Nepal. If the policies are correct and the sizes of operation are reasonable, we will definitely compete.</p>
<p style="text-align: justify;">
	<strong>There are duplications even with the limited size of the Nepali manufacturing sector. How sustainable is it and what are your suggestions to control such duplications?</strong> Duplication has been the phenomenon of the entire world. Nepal is not the only country which faces this problem. There are some industries who lead with original ideas and some others who follow. Only time can tell whether such practices will succeed or not. The capable ones will sustain and the incapable ones will take their own path. Investors have to think which sector they have to go, you can’t push your product. Once there is a pull factor, you will produce more because if you try to push things, you will never get the desired results. The market is the best judge to accept or not to accept such practices.&nbsp;</p>',
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			'id' => '495',
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			'title' => 'Industrial Development Is Impossible Without Basic Infrastructure',
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			'summary' => null,
			'content' => '<p style="text-align: justify;">
	<span style="font-size: 14px;"><strong>What is the present status of the manufacturing sector in Nepal?</strong> <br />
	</span></p>
<p style="text-align: justify;">
	<span style="font-size: 14px;">The market for both consumable goods and durables has been growing and expanding in the international arena. Growth of manufacturing sector ensures overall economic growth. As a result, demand for both consumable goods and capital goods increases. Demand of consumable and capital goods has been growing globally. That is why we can say that the manufacturing sector has been growing the world over. But the problem is that though the demand for these goods is rising globally, production of these goods has centred around booming economies like China and India. As far as Nepal is concerned, we are in a very sorry state in manufacturing sector. Leave alone the possibility of expansion; even the goods that we used to manufacture in our own country have been displaced. For example, we used to produce fabrics in our country but Chinese readymade clothing available at cheaper prices has now replaced them. There were about 35 factories owned by the government but most of these public sector industries have shut down. We were the third largest jute producers in the world at one point of time. The health of our oldest factory, Biratnagar Jute Mill, has been deteriorating with the production and profit of this factory nosediving. The carpet industry used to contribute 20-22 per cent towards our national income but this percentage has been witnessing a downward trend. The contribution of the private sector is not very satisfactory. <br />
	</span></p>
<p style="text-align: justify;">
	<span style="font-size: 14px;"><img align="left" alt="cover story" border="1" height="308" hspace="10" src="http://newbusinessage.com/ckfinder/userfiles/Images/bholanath pokheral.jpg" style="margin:10px; padding:10px;" vspace="10" width="250" /><br />
	</span></p>
<p style="text-align: justify;">
	<span style="font-size: 14px;"><strong>How do you analyse the growth of the manufacturing sector in Nepal? </strong><br />
	</span></p>
<p style="text-align: justify;">
	<span style="font-size: 14px;">Had our factories used our own resources or inputs, it would have yielded high value. But our manufacturing industry has been providing more of an assembling facility to intermediary products that we bring from international market rather than producing goods by ourselves. If we analyse the history of the growth of manufacturing sector in Nepal, the industrial development that began from the 1980s started to expand from 1990's revolution with the radical shift in power and the country adopting the path of democracy and liberalism. We had significant growth in the manufacturing sector from 1995 to 2002. The growth was up to 20 per cent. But after 2002, the contribution of manufacturing sector has been even lesser than the contribution of agriculture. Nepal hasn’t been able to exploit its position between the two economic giants. <br />
	</span></p>
<p style="text-align: justify;">
	<span style="font-size: 14px;"><strong>What are the impediments for investing in the manufacturing sector? </strong><br />
	</span></p>
<p style="text-align: justify;">
	<span style="font-size: 14px;">Like water, capital flows to a place where there is favourable investment environment. The movement of capital can neither be controlled nor stopped. We have been witnessing that the factories that were opened in our country have now shifted to places like Himachal Pradesh in India because the environment of Nepal is not investment-friendly. A number of causes are responsible for this local market, international market, labour issues, tax policy, political instability, insecurity, lack of basic infrastructure etc. The private sector claims that labour issues and government bureaucracy are the key hurdles for industrial growth. Nepal's labour productivity is one of the lowest in the world and lack of skilled manpower has been the greatest challenge for industries. The labour situation is so bad that they are hiring Indian nationals to run their industries. Besides, there are labour unions to worsen the situation. Energy crisis is another major problem for us as we have to face 18 to 20 hours power outage a day. This goes to prove that we donâte have consistent policies and the policies change with every new government that takes charge. Cartels and syndicates are some other problems that plague the sector. Lack of basic infrastructures like roads, water, etc is something that we all know about. Industrial development is impossible without these basic infrastructures. <br />
	</span></p>
<p style="text-align: justify;">
	<span style="font-size: 14px;"><strong>A lot of corporate houses previously involved in manufacturing have been shifting to the service sector. Can an economy sustain based on the service sector and imported goods?</strong> <br />
	</span></p>
<p style="text-align: justify;">
	<span style="font-size: 14px;">According to economic theories, the growth in the size of an economy results in the expansion of its service sector. Investment moves from one sector to another on the basis of two factors: risk and profit. At present, investment in the manufacturing sector involves very high risk as there are number of impediments involved. Most of our industries are located in the three industrial corridors of Nepal first, from Itahari to Rani, the second from Hetauda to Birgunj and the third from Butwal to Sunauli because these places have better arrangement of infrastructures like roads, water and electricity connection. So, even though an economy cannot sustain with a growth in the service sector alone, capital has moved to this sector in Nepal as it involves less risk and high rate of return. Until the impediments are cleared, investment in manufacturing sector will not materialise.</span></p>
<p style="text-align: justify;">
	<span style="font-size: 14px;">Why can’t agriculture be developed as an important industry in our country? Our agriculture sector has not been able to create demand because it is not vibrant enough. The greatest challenge in the agriculture sector is the labour problem. Youths have left their villages for opportunities in the cities or outside the country and fertile lands have either turned barren or have shifted to permanent cropping. The consumption demand is growing in the villages due to remittance inflow and not because of the contribution of agriculture. <br />
	</span></p>
<p style="text-align: justify;">
	<span style="font-size: 14px;"><strong>How can we reach the level of sustainability or even export Nepal's manufactured goods to the international market?</strong> <br />
	</span></p>
<p>
	<span style="font-size: 14px;">There are a few aspects to consider before we think about expanding the market of our products to the international level. The first is the quality of our products. Can our products stand on the same level compared to similar products available in the international market? Can we sell our products at a competitive price? For this, the cost of production should be low. High labour and management efficiency in addition to cheap capital can decrease the production cost. But, the scenario in our country is just the opposite and hence, there are a very few products with this possibility. Take the example of honey which we used to export to Europe not too long ago. But Europe no longer accepts our honey as they found traces of insecticides in it. We don’t have a facility to test it and certify that our honey is pure. Similarly, Nepalis in general do not show strong trait of entrepreneurship. One of the economics theories states that a refugee has a greater possibility of becoming a good entrepreneur than any other person. Even the history shows that people who have left their countries with a determination to go through hardships have become successful entrepreneurs. Second, the theory claims that certain caste or creed have better entrepreneurial skills than others. Nepali entrepreneurs belonging to Thakali and Newar castes have not been able to groom themselves as international businessmen like the Marwaris have. Most of the countries in the world have China Towns that are famous for Chinese food. In the same manner, Thakalis too can promote their authentic dishes in the international market. The Nepalis in general should also use their natural skills and groom themselves to earn respect in the international arena. <br />
	</span></p>
<p>
	<span style="font-size: 14px;"><strong>Despite all these barriers, do you see possibilities that can take Nepal on the way to prosperity?</strong><br />
	</span></p>
<p>
	<span style="font-size: 14px;">One sector with tremendous possibility is limestone as we are very rich in this resource. If we can use limestone and subsitute the import of cement, we can save a considerable amount of foreign currency. However, this sector hasn't developed the way it should have. Besides limestone, hydropower, tourism, medicinal herbs etc are other possibilities that we can explore. <br />
	</span></p>
<p>
	<span style="font-size: 14px;"><strong>When will we actually have favourable industrial and investment environment?</strong></span></p>
<p>
	<span style="font-size: 14px;">Political stability only can ensure favourable industrial and investment environment because it will ensure stable economic policies. But that is not enough. Investment will get attracted only when we have consistent policies and programmes and when the government is clear about private investments. The risk factor is high during political instability so let's hope that we achieve the same through constitution, an election and formation of a stable government. Though the country is following this path, the progress has been very slow. Similarly, labourers should be clear about both their rights and responsibilities. They are presently acting more like the political parties wings rather than institutions that must fight for the rights of labours. Similarly, quality people living abroad must return to build their own country. The government can take an initiative in this regard by guaranteeing employment, security and welfare to them in Nepal. It's certainly going to take some time to sort out these issues but we must not lose hope and remain optimistic. <br />
	</span></p>
<p>
	<span style="font-size: 14px;"><strong>What is the prospect of Nepalâ's manufacturing sector? What are the remedial measures you would like to recommend? </strong><br />
	</span></p>
<p>
	<span style="font-size:14px;">There is no way out other than utilising our competitive advantage. The greatest competitive advantage of Nepal is its location between the two emerging economic giants. We can certainly facilitate trade between China and India and at the same time, expand our economy by participating in theirs. We donâte have vast natural resources and the only resource we can take pride in is water, however, it is not a secured resource as it is in the grip of climate change. Tourism can be developed as a big industry while specialisation in agriculture can be another possibility. If we can process our medicinal herbs in our own country, it can contribute significantly to our national economy. The trend so far is that we sell our raw-materials at very low prices while buying processed items very expensively. The practice of herding and limping is another hitch because it hurts specialisation. If these aspects could be corrected, we can imagine a prosperous economy in our country in the foreseeable future.</span></p>',
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			'article_category_id' => '40',
			'title' => ''NRB Will Take Every Possible Measure To Bring Liquidity Problem Under Control'(October 2011)',
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			'content' => '<div style="text-align: justify;">
	<span style="color:#(color);"><span style="font-size: 14px;"><strong>Gopal Prasad Kaphle </strong>is Deputy Governor of Nepal Rastra Bank (NRB), the central bank of <img align="right" alt="" border="2" height="356" hspace="10" src="http://newbusinessage.com/ckfinder/userfiles/Images/gopal prasad kaphle.jpg" vspace="10" width="250" />Nepal. He was appointed to the post on December 26, 2010. He started his career in banking in 1955 and is devoted to this sector for more than 29 years. During this period, he worked in banking operation, branch operation, development finance, micro finance, public debt, training, and banking inspection and supervision department. He completed Master’s Degree in Economics from Tribhuvan University in 1979. He also has a Master’s Degree in Economics from the University of New England, Australia. In an interview with <i>New Business Age</i>, Kaphle speaks about the current situation in the banking sector and NRB’s regulatory plans for the future. Excerpts:<br />
	<br />
	</span></span></div>
<div style="text-align: justify;">
	<span style="color:#(color);"><span style="font-size: 14px;"><br />
	</span></span></div>
<div style="text-align: justify;">
	<span style="color:#(color);"><strong><span style="font-size: 14px;">Total net profit of commercial banks has increased by 2.28 per cent compared to that of last year. Why is the growth so low?<br />
	<br />
	</span></strong></span></div>
<div style="text-align: justify;">
	<span style="color:#(color);"><span style="font-size: 14px;">The growth rate compared to a few years ago is quite low. However, there is no reason to be unhappy about the profit earned by financial institutions. There are some factors that have caused the liquidity problem such as absence of investment area and environment, turmoil in real estate, margin lending, and until last year delayed government budget. Despite these all, BFIs (bank and financial institutions) are successful in making profit and provide relief to shareholders and promoters. In the coming years, if the things change for the better like a timely budget, investment friendly environment and good corporate governance, we can be more optimistic about the high growth in profit.<br />
	<br />
	</span></span></div>
<div style="text-align: justify;">
	<span style="color:#(color);"><span style="font-size: 14px;"><br />
	</span></span></div>
<div style="text-align: justify;">
	<span style="color:#(color);"><strong><span style="font-size: 14px;">Problem of liquidity is still not solved. What is the real scenario at present? How long will it take to overcome this crisis?<br />
	<br />
	</span></strong></span></div>
<div style="text-align: justify;">
	<span style="color:#(color);"><span style="font-size: 14px;">If we look at the liquidity inside financial system, there are not many reasons to worry about. A couple of months ago, commercial banks had Rs 22 billion surplus liquidity in the market. Prior to that, more than Rs 30 billion surplus liquidity was observed in commercial banks. Most of the commercial banks except only a few are in surplus. Among B and C class financial institutions, some have surplus while others are in deficit. Moreover, commercial banks are at ease while development banks and finance companies are not completely out of the woods. If we look at inter-bank lending rate, till date, only some finance companies are still borrowing at 15 or 16 per cent. Commercial banks were borrowing at one per cent some time back but at present they are borrowing at around 1.5 per cent. This shows, there is ease in the system but at the individual level, some bank and finance companies are still in problem. But, the liquidity problem is not completely resolved.</span></span></div>
<div style="text-align: justify;">
	<span style="color:#(color);"><span style="font-size: 14px;"><br />
	</span></span></div>
<div style="text-align: justify;">
	<span style="color:#(color);"><span style="font-size: 14px;">This time of the year is normally the period of ease. During this period, the government budget has been passed by the parliament. There have been fewer investments. Loan and interests repayment rate in the commercial banks is good. That makes the liquidity problem to look relieved. We are also in a wait and watch mode to see what the situation is after Dashain and Tihar. I believe there won’t be big problems like in previous years. At such times, we cannot deny the possibility of problems. However, we are alert because of the lessons we have learnt. Public trust has developed in the banking sector. In the coming days, NRB will take every possible measure to bring this problem under control. The government has also assured that. NRB, if required, will use any instruments like refinancing to LOR (Lender of Last Resort) to bring the situation in control. To make sure that liquidity does not remain idle, we are issuing development bonds and treating B and C class institutions can participate in such instruments. We are putting them in a separate basket. I am trying to ensure the environment to cash in on instruments whenever there is any problem of liquidity. Problem is psychological too. And, commercial banks are also optimistic that the problem will ease. I believe the problems of the past will not repeat.<br />
	<br />
	</span></span></div>
<div style="text-align: justify;">
	<span style="color:#(color);"><span style="font-size: 14px;"><br />
	</span></span></div>
<div style="text-align: justify;">
	<span style="color:#(color);"><strong><span style="font-size: 14px;">The average non-performing loan out of total loans has increased to 2.41 per cent from 1.92 per cent of previous year. What is your take on this?<br />
	<br />
	</span></strong></span></div>
<div style="text-align: justify;">
	<span style="color:#(color);"><span style="font-size: 14px;">This may be realistic too because the biggest problem currently is real estate loans. The financial sector is not mobile. Economic activities are missing; industries are not moving on the right track, there are problems of labour and import-export. Due to unstable government, policies are not implemented. We also realise that NRB has become quite aggressive and taken tough policy measures. We tried to address the problem of good governance that has been left unaddressed over the years at once instead of treating it in a step-by-step manner. Due to the absence of investment environment to tap such opportunities, lending in industries have problems of recovery. Industries may not be running, some might have been closed down, there are labour issues. So, loans are not being paid back. Some banks and finance companies were in problem. So, we decided to liquidate some companies, and because of that, their non-performing loans must have been added. Real estate loans had the largest market share. We put a cap on lending to the real estate. The sales of real state also faltered. As developers cannot sell, they could not repay the loan. We have tried to ease it. However, market and economy as a whole has effects on business and non-performing loans increased.</span></span></div>
<div style="text-align: justify;">
	<span style="color:#(color);"><span style="font-size: 14px;"><br />
	</span></span></div>
<div style="text-align: justify;">
	<span style="color:#(color);"><span style="font-size: 14px;">On NRB’s inspection and supervision part, we have managed it. Compared to the past, we have improved our vision and efforts to solve problems, monitoring and inspections. After our effective inspection, institutions are not able to turn bad loans into good. That has also led to increase the volume of such loans. Increase in such loans does not mean banking system’s status has deteriorated than earlier. This is another side of NRB’s inspection, supervision’s smoothness and effectiveness.<br />
	<br />
	</span></span></div>
<div style="text-align: justify;">
	<span style="color:#(color);"><span style="font-size: 14px;"><br />
	</span></span></div>
<div style="text-align: justify;">
	<span style="color:#(color);"><strong><span style="font-size: 14px;">NRB is planning to adopt a risk based supervision system. What will be the modality of such a system? And, how soon could this be implemented?<br />
	<br />
	</span></strong></span></div>
<div style="text-align: justify;">
	<span style="color:#(color);"><span style="font-size: 14px;">We have various modalities in this risk-based supervision system. There are numerous risks like subjective, managerial and operational among others. Our inspection department categorises specific risks from every sector. Based on that, we define our observation. There may be risks in one sector while others may be safe. This modality tries to take a multidimensional approach to maintaining discipline. It is a change from traditional supervision mechanism. The mechanism is envisioned to ensure that banks and financial institutions should not be in trouble because of any sector or cause. It considers not only good governance, capital base but also operation, investment portfolio among others. This modality aims to calculate and mitigate risks from any sectors. It is based on our belief that a bank must be healthy, strong and create a separate identity in the market.<br />
	<br />
	</span></span></div>
<div style="text-align: justify;">
	<span style="color:#(color);"><span style="font-size: 14px;">Risk-based supervision is applied within NRB too. We are applying it in our departmental operations. It is already under application. We believe risks must be mitigated. We now have to take it forward effectively and give continuity to it. We have to calculate risks that may arise in the future.<br />
	<br />
	</span></span></div>
<div style="text-align: justify;">
	<span style="color:#(color);"><span style="font-size: 14px;"><br />
	</span></span></div>
<div style="text-align: justify;">
	<span style="color:#(color);"><strong><span style="font-size: 14px;">IMF had suggested NRB to exercise more power. What are the new steps NRB is planning to take?<br />
	<br />
	</span></strong><span style="font-size: 14px;">Exercise of power must be viewed considering a couple of elements. NRB exercises power based on NRB Act and BAFIA. BAFIA is in the house and discussions are going on to amend it. It must be strong. The government sector also has a role to make NRB active. We have focused on a few things like taking prompt action on the problems witnessed in financial institutions. NRB must be given right to take prompt action against any issues of good governance. For now, it takes a long time to take action against any person who is proved guilty. The process requires informing the Ministry of Finance then the Ministry of Home and finally the police. If we had power, we could have taken action against some financial criminals. So, NRB must be powerful and the government intervention should be less. NRB should be guaranteed a strong autonomous identity. For that, the status of Governor and Deputy Governor of NRB must be raised which would lead to more power. There must be such provisions that police can make arrests and take actions based on our letter. Time lag that is in existence is encouraging culprits to flee. We are demanding to increase our rights and that will help maintain discipline in banks and financial institutions.</span></span></div>
<div style="text-align: justify;">
	<span style="color:#(color);"><span style="font-size: 14px;"><br />
	<br />
	</span></span></div>
<div style="text-align: justify;">
	<span style="color:#(color);"><strong><span style="font-size: 14px;">What is NRB doing to restore public confidence in financial institutions that is said to be at a low ebb?<br />
	<br />
	</span></strong></span></div>
<div style="text-align: justify;">
	<span style="color:#(color);"><span style="font-size: 14px;">I don’t fully agree with it. At present, public confidence is improving. The confidence started declining when there was crisis of new notes during Dashain around two-three years back. Then, slowly public belief diminished in the entire banking system. And, it heightened with the liquidity crunch. At the same time, some companies were in problem and as a result, trust in the entire financial system eroded. If NRB had not been able to take action and correct its policies, the confidence would have fallen more. We tried hard and deposits have increased, profit has grown though a little and the people are returning to banks for deposits. People kept their money with themselves as some banks could not give loans, or even return deposits. We have moved on from this situation. The increased deposit and surplus liquidity is all because of increasing public confidence. I don’t think commercial banks should worry but this is not a siesta time. Public is so sensitive that if it does not get good service there will be shift in belief and trust. Public confidence must be won with good service, good governance and transparency.<br />
	<br />
	</span></span></div>
<div style="text-align: justify;">
	<span style="color:#(color);"><span style="font-size: 14px;"><br />
	</span></span></div>
<div style="text-align: justify;">
	<span style="color:#(color);"><strong><span style="font-size: 14px;">A demand to stop issuing license to financial institution is heard. Is NRB planning to take such action?<br />
	<br />
	</span></strong></span></div>
<div style="text-align: justify;">
	<span style="color:#(color);"><span style="font-size: 14px;">A couple of things must be taken into consideration. Firstly, the number of financial institutions needed for Nepal with respect to our scale of economy must be clear. Another, there must be clear demarcations of public status like deprived groups, remote areas, hilly and mountainous areas and developed areas. We have already faced the consequences of rampant establishment of banks and finance companies. So, we are going for merger. One policy was formulated, companies came meeting the requirements and licence was issued. We have seen its consequences. NRB’s capacity for inspection and supervision was witnessed along with banks and finance companies’ capacity and implementation of good governance. Often question is raised whether a company can be established or not just with a certain amount of capital. The number is one question, while deepening access of service in certain geographical region and population can be another. Access and inclusion of financial and banking service to all regions must be analysed. The measures to cater to that group or region deprived of service must be pointed out. Similarly, unhealthy competition arises from increased number. The cake is shared by all institutions even as their number increases. Eventually, the size of activities will also diminish. Considering it, a suitable policy and environment must be created. It does not mean we should not issue any licenses. We had prioritised microfinance and its number has also exceeded. There are a lot of duplications. It must be analysed whether a particular area requires more companies or service. Whether to go for branch expansion or number of institutions are two options. So, whichever is feasible we must concentrate on that. Every region and every group of people must be able to access the services and share the cake of national economic development. We must devise our licensing policy accordingly so that there is no duplications and quality facilities are evenly distributed. We are making such policy. We are forming a five-year strategic plan in which we have planned to review the licensing policy. After formulation of that outline, we will have suitable licensing policy and we will bring in merger to control excess institutions and expand in areas with scarcity. That will be either by motivation, giving additional services or accelerating, we will take banking services to those areas.<br />
	<br />
	</span></span></div>
<div style="text-align: justify;">
	<span style="color:#(color);"><span style="font-size: 14px;"><br />
	</span></span></div>
<div style="text-align: justify;">
	<span style="color:#(color);"><strong><span style="font-size: 14px;">Till date, a merger between two commercial banks has not happened. Do you think the mergers that are happening are satisfactory and meet the expectation of NRB?<br />
	<br />
	</span></strong></span></div>
<div style="text-align: justify;">
	<span style="color:#(color);"><span style="font-size: 14px;">The expectation of NRB on merger is not met. For the coming days, NRB is offering two options: merge and get incentive or be ready for forceful merger. If motivational measures do not work, we will have to go for forceful mergers. IMF and other world bodies have suggested that the number of financial institutions is exceeding the national capacity and need. Our only target is to merge the financial institutions, increase their capital base and ensure good governance. It is our continued effort. There are policy complications and we are relaxing them. We are inviting them to come for merger as soon as possible. It is obvious that some practical problems come during mergers. Nobody wants to lose anything. There can’t be two CEOs, chairmen or GMs. Problems in managerial aspects are visible. Someone must compromise something. NRB is determined and it will make mergers anyhow.</span></span></div>
<div style="text-align: justify;">
	<span style="color:#(color);"><span style="font-size: 14px;"><br />
	<br />
	</span></span></div>
<div style="text-align: justify;">
	<span style="color:#(color);"><strong><span style="font-size: 14px;">NRB is trying to correct several of its mistakes of the past like cap on CEO salary, margin lending and real estate? Why does NRB take ad-hoc decisions in the first place?<br />
	<br />
	</span></strong></span></div>
<div style="text-align: justify;">
	<span style="color:#(color);"><span style="font-size: 14px;">I don’t think so. While trying to manage something in an open system, ripples like in a pond hit by a stone are visible. We did not compromise even while deciding CEO’s salary. It is implemented now. We had some policy difficulties regarding B and C class institutions. There would be large variations if similar policy is applied in all financial institutions. It is difficult to manage as there are institutions confined to a district and also large national institutions. Now, we have addressed it through a new policy. We have let them decide independently on salary but based on certain backdrops.<br />
	<br />
	</span></span></div>
<div style="text-align: justify;">
	<span style="color:#(color);"><span style="font-size: 14px;"><br />
	</span></span></div>
<div style="text-align: justify;">
	<span style="color:#(color);"><strong><span style="font-size: 14px;">How long will it take to improve the BoP situation to a comfortable level?<br />
	<br />
	</span></strong></span></div>
<div style="text-align: justify;">
	<span style="color:#(color);"><span style="font-size: 14px;">BOP has improved lately and it was in surplus in June/July. It will continue to improve in coming months too. I don’t think we will go into deficit this year but having said that we should not stay idle. It is getting positive and we are optimistic. There are countries which have deficit balance of payment and are still considered developed. In countries like ours, where there is small source of income and imports are big, some discipline must be maintained like increasing our productivity in sectors like agriculture and increased credit flow to the productive sectors. Internal production immediately helps BoP. We have requested financial institutions to invest in such areas. When the government budget flows to those areas, production increases and jobs are created. That will have multiplier effect and export will also increase. Import of luxurious goods must be discouraged while development oriented activities must continue. Other options than remittance also need to be sought to remain in safe position.</span></span></div>',
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			'description' => 'Gopal Prasad Kaphle is Deputy Governor of Nepal Rastra Bank (NRB), the central bank of Nepal. He was appointed to the post on December 26, 2010. He started his career in banking in 1955 and is devoted to this sector for more than 29 years. During this period, he worked in banking operation, branch operation, development finance, micro finance, public debt, training, and banking inspection and supervision department.',
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			'id' => '474',
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			'title' => 'We Are Sailing Easy For Now (October 2011)',
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			'content' => '<div style="text-align: justify;">
	<span style="color:#000;"><span style="font-size: 14px;"><strong>Sashin Joshi </strong>is the Chief Executive Officer of Nepal Industrial &amp; Commercial (NIC) Bank Limited. <img align="right" alt="" border="2" height="378" hspace="10" src="http://newbusinessage.com/ckfinder/userfiles/Images/sashin%20joshi.jpg" vspace="10" width="250" />He is also the Chairman of National Banking Training Institute (NBTI) besides being the Immediate Past President of Nepal Bankers Association. He holds an MBA in Finance, a Post-graduate Diploma in Marketing and is Credit-Accredited by international banks. Having started his banking career in 1986 with Nabil Bank, Joshi has also worked in Australia and New Zealand Banking Group, Melbourne, and ANZ Grindlays Bank, Kolkata. He was a Director of the Board and Head of Corporate &amp; Institutional Banking at Standard Chartered Bank Nepal before moving to NIC Bank. Also a Founding Director of Rural Micro-finance Development Centre (RMDC), he aspires to contribute in scaling-up reform in Nepalâ's financial sector by working closely with the government, the central bank and the private sector. In an interview with Pinaki Roy of <i>New Business Age</i>, Joshi analyses the performance of Nepal's commercil banks over the past year and recommends remedial measures on issues that plague the sector. Excerpts:</span></span></div>
<div style="text-align: justify;">
	<span style="color:#000;"><span style="font-size: 14px;"><br />
	</span></span></div>
<div style="text-align: justify;">
	<span style="color:#000;"><strong><span style="font-size: 14px;">What is your analysis of the performance of Nepal's commercial banks over the past year?</span></strong></span></div>
<div style="text-align: justify;">
	<span style="color:#000;"><span style="font-size: 14px;">It's not very good. But honestly speaking, I was expecting it to be even worse. Banks were helped to a certain extent by some relief measures given by the central bank at the last minute. I had predicted that the aggregate profit of all the commercial banks put together would be negative. However, we have managed aggregate increase in profit by about two-and-a-half per cent compared to that of last year. My analysis is that the Nepal Rastra Bank’s (NRB) relief measures in the eleventh hour helped us avert negative growth.</span></span></div>
<div style="text-align: justify;">
	<span style="color:#000;"><span style="font-size: 14px;"><br />
	</span></span></div>
<div style="text-align: justify;">
	<span style="color:#000;"><strong><span style="font-size: 14px;">Total net profit of commercial banks in Nepal has increased by a mere 2.28 per cent compared to that of last year. What is the reason for this slow growth?</span></strong></span></div>
<div style="text-align: justify;">
	<span style="color:#000;"><span style="font-size: 14px;">The commercial banks’ profitability was impacted for a number of reasons. As a result of extremely tight liquidity, banks started competing fiercely for deposits by going one-up on interest rates. The deposit rates increased significantly but the banks were not able to pass on all the increase to the borrowers. This resulted in the banks’ average margin getting reduced. Many banks had to take on additional costs on account of personnel, utility, security, stationery supply etc among others. And of course, there is no business growth for reasons of political instability.&nbsp;</span></span></div>
<div style="text-align: justify;">
	<span style="color:#000;"><span style="font-size: 14px;"><br />
	</span></span></div>
<div style="text-align: justify;">
	<span style="color:#000;"><strong><span style="font-size: 14px;">Liquidity crunch continues to persist. What is the severity of the crunch at this point of time and how long will it take us to overcome this?</span></strong></span></div>
<div style="text-align: justify;">
	<span style="color:#000;"><span style="font-size: 14px;">I would like to contradict you here. The liquidity situation has improved significantly over the past couple of months. It improved primarily due to two reasons: one is that there was massive government expenditure that happened towards the end of the last fiscal year. Besides, the budget this year came out on time and therefore, there was no gap between budget approval and government expenditure. On the external account, there have been a lot of reimbursements that have happened for projects which were undergoing or completed. Another reason is that due to very tight liquidity crunch and lack of favourable market conditions, banks were putting brakes on new lending. These two reasons together helped preserve liquidity. However, the real test will be when a lot of withdrawals will take place during Dashain and Tihar. Also, if the capital expenditure of the government does not coincide with the festival season, we could have another tight situation. For that, we will have to wait and see but for now, we are <br />
	sailing easy.&nbsp;</span></span></div>
<div style="text-align: justify;">
	<span style="color:#000;"><span style="font-size: 14px;"><br />
	</span></span></div>
<div style="text-align: justify;">
	<span style="color:#000;"><strong><span style="font-size: 14px;">The total non-performing loan has increased by close to 26 per cent as against last year. What could be the possible remedial measures?</span></strong></span></div>
<div style="text-align: justify;">
	<span style="color:#000;"><span style="font-size: 14px;">To tell you the truth, I had expected higher increase in non-performing loans. The relief given by the central bank especially to the real estate sector towards the end of last fiscal year provided respite because the borrowers were allowed to pay a month after the year end without attracting any provisioning. I believe there is still some under provisioning by banks.</span></span></div>
<div style="text-align: justify;">
	<span style="color:#000;"><span style="font-size: 14px;"><br />
	</span></span></div>
<div style="text-align: justify;">
	<span style="color:#000;"><span style="font-size: 14px;">If there is a problem, you have to bite the bullet. Postponing a problem is not going to make the problem go away. If you have a problem loan, you have to recognise it as one and make appropriate provisioning for that. However, if a business can be revived through re-organisation or re-scheduling, then we should also make every effort to make that happen.&nbsp;&nbsp;&nbsp; </span></span></div>
<div style="text-align: justify;">
	<span style="color:#000;"><span style="font-size: 14px;"><br />
	</span></span></div>
<div style="text-align: justify;">
	<span style="color:#000;"><strong><span style="font-size: 14px;">How can public confidence in financial institutions be restored at a time when the banking industry has been troubled with lower deposit mobilisation?</span></strong></span></div>
<div style="text-align: justify;">
	<span style="color: rgb(0, 0, 0);"><span style="font-size: 14px;">I think the financial system in Nepal is relatively sound, more so when it comes to </span></span><span style="color:#000;"><span style="font-size: 14px;">"A" </span></span><span style="color:#000;"><span style="font-size: 14px;">class commercial banks which account for 80 per cent of the market both in deposits and lending. Most of these institutions are well supervised, have reasonably large capital base and on the whole, well managed. The problem lies basically with "A"&nbsp; class institutions where quite a few corporate governance-related issues have surfaced. There is also a lack of regular and effective supervision by the central bank. If visible measures are taken in these two areas by the central bank and boards of these institutions, I think it will help in restoring public confidence.</span></span></div>
<div style="text-align: justify;">
	<span style="color:#000;"><span style="font-size: 14px;"><br />
	</span></span></div>
<div style="text-align: justify;">
	<span style="color:#000;"><strong><span style="font-size: 14px;">What is your stance on granting banking licenses to practically everybody who applies for it? Aren't we overcrowded with banks in the urban centres while 70 per cent of the country still has no access to formal banking?</span></strong></span></div>
<div style="text-align: justify;">
	<span style="color:#000;"><span style="font-size: 14px;">That was the biggest problem. NRB effectively had just one criterion capital, so anyone who had the money could virtually open a bank here. That was a very wrong policy because banking is such a sensitive industry. Unlike other industries, banks are the custodian of public money where people put their trust. While allowing bank licenses, NRB should have a very prudent and strict criterion to ensure the right intentions of the promoters and the management.</span></span></div>
<div style="text-align: justify;">
	<span style="color:#000;"><span style="font-size: 14px;"><br />
	</span></span></div>
<div style="text-align: justify;">
	<span style="color:#000;"><span style="font-size: 14px;">It's not a numbers issue. It's more about the quality of the banks and the effectiveness of the central bank's supervision. Banks are spreading out and more than a 1,000 branches have been opened in the last one year by all the banks put together. And most of these branches are located outside Kathmandu.</span></span></div>
<div style="text-align: justify;">
	<span style="color:#000;"><span style="font-size: 14px;"><br />
	</span></span></div>
<div style="text-align: justify;">
	<span style="color:#000;"><strong><span style="font-size: 14px;">We are being inundated with merger rhetoric for as long as one can remember, however, we haven't seen one till now. How serious are the stakeholders about this and how will it impact the industry?</span></strong></span></div>
<div style="text-align: justify;">
	<span style="color:#000;"><span style="font-size: 14px;">For any merger to happen, the basis is the potential value addition. Merger for the sake of merger is nonsense. If you look at the international experience on mergers, more than 50 per cent have usually failed. A merger is welcome provided there is value addition taking place between merging institutions by way of bringing in synergies, business, cost, reach, network etc. In Nepal's context, the cultural angle also comes into play. Factors such as multiple promoters with their own personal interests and their respective egos taking precedence etc override the fundamental business deal. That's why I believe that it's very difficult for mergers to happen here.</span></span></div>
<div style="text-align: justify;">
	<span style="color:#000;"><span style="font-size: 14px;"><br />
	</span></span></div>
<div style="text-align: justify;">
	<span style="color:#000;"><span style="font-size: 14px;">However, if mergers do happen, it will definitely be good for the industry. Some degree of consolidation is required because there are too many small players in the market. Size does matter and provided there is a requisition from managements, better efficiency can be brought in.</span></span></div>
<div style="text-align: justify;">
	<span style="color:#000;"><span style="font-size: 14px;"><br />
	</span></span></div>
<div style="text-align: justify;">
	<span style="color:#000;"><strong><span style="font-size: 14px;">How long will it take to improve the BoP situation for us to get slightly more comfortable than we at present are?</span></strong></span></div>
<div style="text-align: justify;">
	<span style="color:#000;"><span style="font-size: 14px;">We have a huge trade imbalance and if we are going to depend solely on trade, it is going to take us a very long time. The export-import imbalance is quite severe which we can deal with it by building more manufacturing establishments and having a better industrial base. Even if we want to promote hydropower, the gestation period again is going to consume a lot of time. Therefore, purely based on trade prospects, it is going to take us a long time to improve the BoP situation. We have of course, been helped by the remittances brought in by Nepali Diaspora and also the aid coming through bilateral and multilateral donors that ensures capital inflow. Even if we have financial and political stability and the policies are conducive, we cannot expect wonders. To even expect that we will have a trade surplus will take us at least 10 years if we start now.&nbsp;</span></span></div>
<div style="text-align: justify;">
	<span style="color:#000;"><span style="font-size: 14px;"><br />
	</span></span></div>
<div style="text-align: justify;">
	<span style="color:#000;"><strong><span style="font-size: 14px;">Why is it becoming more difficult to control inflation? What are your recommendations to successfully control inflation?</span></strong></span></div>
<div style="text-align: justify;">
	<span style="color:#000;"><span style="font-size: 14px;">In Nepal, inflation is primarily on account of two factors. One is the imported inflation which we can do nothing much about. Within this imported inflation, India plays a big role as two-third of our trade is with India which is just the formal trade. If you also take into account the informal trade, my guess is that it would be as much as 80 per cent. So, a lot of inflation is imported from India. The other factor is the supply side where there are no internal control mechanisms. The distribution cost is very high because of the transportation cartels and syndicates. Cost of power is very high in Nepal while the labour costs are ever rising. We still donâte have very good access in terms of roads which again makes it a bottleneck to get goods from one place to another thus adding up costs. We can do a lot on the internal side if the government becomes more effective in its functioning. Besides, the government must allow some subsidy to the agricultural sector otherwise our farmers just cannot compete with the farmers in India where you have subsidies for fertilizers, irrigation, power etc.</span></span></div>
<div style="text-align: justify;">
	<span style="color:#000;"><span style="font-size: 14px;"><br />
	</span></span></div>
<div style="text-align: justify;">
	<span style="color:#000;"><strong><span style="font-size: 14px;">What are your expectations from NRB given the prevailing scenario where the banking industry has registered an excruciatingly slow growth?</span></strong></span></div>
<div style="text-align: justify;">
	<span style="color:#000;"><span style="font-size: 14px;">One expectation I have is that whenever NRB brings out any new policies, directives or circulars, they do it through a consultative process where stakeholders are involved and there is a dialogue. It's not necessary that NRB has to agree to everything that the stakeholders say but at least there is a two-way process when you take everybody into confidence. If a consultative process brings forth any new policies and directives, there will be ownership from the stakeholders themselves. It means that enforcement will be that much more easier because then it becomes voluntary.</span></span></div>
<div style="text-align: justify;">
	<span style="color:#000;"><span style="font-size: 14px;"><br />
	</span></span></div>
<div style="text-align: justify;">
	<span style="color:#000;"><span style="font-size: 14px;">My second expectation is that while bringing out any new directives or policies, they should also try to emulate some of the best practices in the world and think it through before implementing them. We have seen in the past that in quite a few instances, they have come out with half-baked directives which they had to amend a number of times. That shows some kind of shallow thinking within the central bank when they come out with directives.</span></span></div>
<div style="text-align: justify;">
	<span style="color:#000;"><span style="font-size: 14px;"><br />
	</span></span></div>
<div style="text-align: justify;">
	<span style="color:#000;"><span style="font-size: 14px;">Third one is that when they come out with any policies, they should not look only at the bad practices followed by one or two institutions and then paint everyone with the same brush. They must not generalise. If there are some bad apples, they should handle them individually and not treat everybody with suspicion.</span></span></div>',
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			'description' => 'Sashin Joshi is the Chief Executive Officer of Nepal Industrial & Commercial (NIC) Bank Limited. He is also the Chairman of National Banking Training Institute (NBTI)..........',
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		'Article' => array(
			'id' => '640',
			'article_category_id' => '40',
			'title' => 'Private Sector Will Not Come Merely On Verbal Assurances',
			'sub_title' => '',
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			'content' => '<p>
	<strong>Purusottam Man Shrestha is the National Project Manager of Public-Private Partnership for Urban Environment (PPPUE). An MBA in Marketing and Small Business Management from University of Delhi, he had earlier worked as Enterprise Development Advisor for Rural Urban Partnership Programme.</strong></p>
<p>
	<strong><img align="left" alt="cover stoey" border="1" height="357" hspace="10" src="http://newbusinessage.com/ckfinder/userfiles/Images/cove3.jpg" style="margin:10px; padding:10px;" vspace="10" width="375" />How do you rate the success of PPP model of development?</strong></p>
<p>
	The PPP model in Nepal has not achieved the same level of success that is witnessed in Bihar of India even though they have adopted it only recently. However, this does not mean that works have not been done on our initiatives. Minimum requirements and environment is created for enabling PPP but we donate have projects like in the developed countries that are expected to be under the PPP model. It's only the concept that is seeded while there is very little work to write home about.</p>
<p>
	<strong>What are the reasons for PPP model not being successful in Nepal?</strong></p>
<p>
	Political stability is PPP's fundamental base for success but due to the current national scenario, large investments are not coming. The private sector is sceptical about making investments though they are convinced about the importance of investing in development projects. We have failed to build the confidence of the private sector and it is extremely challenging to invite private financing from the international market. To make matters worse, the minimum arrangement for FDI is also missing. Investment risks must be minimised where possible and laws must be prepared for funds management based on international rules and regulations. There is a special procedure for private partner procurement which we are still unable to formulate.</p>
<p>
	We are still forced to follow the traditional method of inviting tenders through existing public procurement act. The current procedure is marred by a long procedural delay and the private sector cannot wait that long. This is one aspect that de-motivates the private sector. Political intervention and local groups are among other challenges for developing large scale projects. Besides, there is a lack of skilled manpower that is vital for formulating and procuring PPP projects.</p>
<p>
	A core workforce required for PPP needs to be developed in Nepal itself. We have to initiate projects that are attractive to the private sector and market them to the banking fraternity otherwise; the private sector will not come merely on verbal assurances. Even today, people are simply talking about large PPP projects without doing adequate homework and just looking at the success in other countries as examples.</p>
<p>
	<strong>How suitable is the PPP model for the development of physical infrastructure in Nepal?</strong></p>
<p>
	The PPP model in Nepal caters to basic infrastructure and services whereas it is needed more for large scale infrastructure projects. We must look at roads, tunnels, bridges, transmission lines, large hospitals, airport construction and management that can be done under the PPP model. For example, Apollo Hospital of India, in partnership with the public sector, is expanding its accessibility to a larger area to serve the general public. Similar projects can be developed in Nepal too.</p>
<p>
	<strong>Is it only the issue of investment and political environment behind the private sector's disinterest to invest in the infrastructure sector? How big a role does the issue of profi tability play in this scenario?</strong></p>
<p>
	It is incorrect to say that the private sector is not interested. As a matter of fact, they have also understood that there is profit in such endeavours. However, they are not convinced about the system that runs these projects, to see a chance of materialising profits. They are suspicious about the future because of the way policies and regulations change in Nepal on a frequent basis. We may have the policies and the projects in place, but we don't have the required financing for big projects available in our domestic market. Even all the commercial banks, put together, can barely finance one or two large projects. It essentially means that foreign private financing must be brought in and for that to happen, we don't have a necessary arrangement in place.</p>
<p>
	<strong>The government has taken a regressive step on the Fast Track project, which was said as being developed in partnership with the private sector. What kind of impact will it leave on the private investors?</strong></p>
<p>
	The project had reached a certain level, to begin with. Meanwhile, it was realised that the private sector participation would be better. However, at a later stage, there were voices being raised within the government bodies for its rectification. As a result, the project is getting delayed now. This delay certainly does not convey a positive message as a decision once made is being corrected again. Withdrawing the earlier made decision will contribute towards diminishing credibility. A couple of companies had applied in connection with the project but unfortunately, the entire process was cancelled leading to reduced confidence level of the private sector.</p>
<p>
	<strong>By when can we expect large projects getting developed under the PPP model in Nepal? <br />
	</strong></p>
<p>
	There are a lot of prospects indeed. For example, a small though important project such as developing a multi-storeyed parking space in the heart of the city like New Road can happen on an immediate basis. That can be a good yet simple PPP project which the government can realise by allowing a private operator to build the parking lot on a public space. This can be profitable and, at the same time, the private sector will happily invest in a project of this nature. We have proposed it along with a feasibility study but it is being delayed for various reasons. And let me tell you that there are a lot of similar projects that are still awaiting approval. Officials frequently get changed in the concerned local bodies and such things cannot create an environment for long term project commitments. There can be sizeable PPP projects which the domestic financial market can support.</p>
<p>
	<strong>What are your expectations from the government for making private participation successful in the development sector?</strong></p>
<p>
	The government should follow a special practice for PPP procurement. Minimum required laws and regulations must be formed first for private financing, without which money won't come. Even in the domestic financial market, there must be a specific arrangement for PPP financing apart from the existing provision of financing by banks and financial institutions. The government must identify the sectors that need PPP model and plan for at least five to 10 years in advance. The private sector must be invited only after formulating the projects ascertaining the financial scenario and benefits of PPP arrangements. For example, it is largely felt that inadequate study and preparations have gone into the waste management project catering to the Kathmandu valley.</p>
<p>
	The PPP model remedies the weaknesses of developing projects independently by either the private sector or the government. By definition, the private sector tends to maximise profit so it may neglect the larger mass and benefits for the society. For a drinking water project, for example, private developers may target a higher income group only where it sees a higher rate of return. So, a larger mass and the general public may get neglected.</p>
<p>
	If the same project is run under the PPP model, the government can intervene and enforce the supply of quality drinking water to the general public as well. To minimise the loss while doing so, the government may guarantee the profit by handing over the management to a private entity. On the other hand, when such projects are done entirely by the public sector, we have seen a lot of problems in management, leakages etc. Hence, the PPP model reduces the deficiencies of the public sector and best uses the efficiencies of the private sector. &nbsp;</p>',
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			'description' => 'Purusottam Man Shrestha is the National Project Manager of Public-Private Partnership for Urban Environment (PPPUE). An MBA in Marketing and Small Business Management from University of Delhi, he had earlier worked as Enterprise Development Advisor for Rural Urban Partnership Programme.',
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		'Article' => array(
			'id' => '639',
			'article_category_id' => '40',
			'title' => 'Private Sector Cannot Be Expected To Develop Infrastructure',
			'sub_title' => '',
			'summary' => null,
			'content' => '<p>
	<strong>R B Rauniar, the Managing Director of Interstate Multi-Modal Transport Pvt Ltd is involved in the transport and transit industry for more than 40 years. He advises the Ministry of Labour and Transport Management time to time and has also worked with the Federation of Nepalese Chambers of Commerce and Industry (FNCCI).</strong></p>
<p>
	<strong><img align="left" alt="cover story" border="1" height="361" hspace="10" src="http://newbusinessage.com/ckfinder/userfiles/Images/cove2.jpg" style="margin:10px; padding:10px;" vspace="10" width="350" />How do you view the possibility of private sector involvement for the development of the transportation sector in Nepal?</strong></p>
<p>
	The southern part of Nepal is completely linked by roads while the northern part remains largely disconnected. This means that the required infrastructure is lacking. The infrastructure for north-south linkage is crucial for the fast development of this country. You must understand that developing roads is a huge investment. The domestic transportation sector does not get spared due to the increasing fuel prices quite frequently. Electric railway transportation is the only cheap alternative in the long run; however it requires a huge investment. Few surveys have been initiated by the government in the last couple of financial years. This must be developed as a master plan because railways is shorter than roadways distance wise and also facilitates both human and goods movement.</p>
<p>
	Developing such a huge project is not possible solely with our internal resources and needs international investment or soft loan funding. As for the private sector, nobody will come forward to invest in infrastructure entirely by themselves. They won’t even come as part of joint ventures because there is no market, as such, to make huge investments and get lucrative returns on it. Therefore, the long term investments are the responsibility of the public sector. However, if we can bring in the management of the private sector for such endeavours, that will be efficient. This kind of an arrangement will be economical as well as revenue generating. It has to develop as a part of the broader national agenda and treated as an economic priority.</p>
<p>
	<strong>What should the government do to encourage the private sector for investing in infrastructure?</strong></p>
<p>
	At present, it is very difficult for the private sector to get involved into infrastructure development due to many reasons. For example, the trucking business is still not organised and trucks are individually owned and leased to companies. A single trucking company has not been developed in an organised manner till now. There are only 283 registered companies in the business and nobody knows how many of them are in existence.</p>
<p>
	Transportation is getting more difficult in places where cities are developing. The private sector will be more interested in facility management rather than investing in infrastructure. If we look at Kathmandu, transporters will drop goods and go back for more if proper parking spaces and warehouses can be set up. But there is not a single warehouse that can serve on a long term basis. This is where the private sector can come in and invest in such projects</p>
<p>
	<strong>Why isn’t the private sector interested to get involved if there are prospects? <br />
	</strong></p>
<p>
	When the interest rate is tremendously high (14 per cent), the rate of return correspondingly becomes very low. For example, the cost of a project can’t be predicted for say, five years down the line, adjusting with the interest rate of borrowing. Given such uncertainty, the private sector cannot be expected to take initiatives in situations like these.</p>
<p>
	<strong>Do you see the possibilities of building roads by the private sector in Nepal similar to that in other countries?</strong></p>
<p>
	We don’t have the level of traffic in Nepal that will lure the private sector to invest in toll roads. The private sector will invest automatically where there is an opportunity for profit. If we had the level of traffic that could yield profits, the tunnel to link Birgunj with Kathmandu would have been constructed by now. The FNCCI is ready to lead and the business community in Hetauda is showing interest but there are elements that have contributed towards slowing down the entire process. Goods and passenger movement is not high as of now but on a positive note, there is an increase in internal population as well as growing international linkages. Toll road development needs huge investment so the government must come forward for constructing infrastructure because it gets soft loan. Debt recovery needs prudent management which can be done by the private sector. If PPP can be fully implemented, a lot of projects could be developed in the foreseeable future.</p>
<p>
	<strong>So you mean to say that it is better to let the private sector manage infrastructure instead of asking them to develop so.</strong></p>
<p>
	Yes, because they don’t have the required capacity given the insufficient domestic resources. The private sector must be allowed to bring in foreign capital as there are foreign banks that trust the Nepali private sector. If such soft loan is allowed to bring in, hydroelectricity can be rapidly developed. Nobody is willing to invest with the domestic rate of interest that is higher than 10 per cent. A single bank cannot finance a project larger than 100 MW; large scale projects need consortium efforts as they need billions of rupees. So, the government must finance development efforts but let the private sector manage them. The government cannot manage projects efficiently and the result is that every public sector enterprise is making losses. Therefore, the government should not conduct business; it should instead allow the private sector to manage. The private sector will then make money and earn revenue for the government.</p>
<p>
	<strong>What should the government do to make the transport sector effi cient and effective?</strong></p>
<p>
	First and foremost, there has to be a right policy. Efficiency will only increase when the transit time can be lowered and turnover can be made faster, this will also lower the cost of transportation as it lowers the overhead cost. The existing transportation facilities can be developed given the available resources but the policy makers must have the political will with a common national agenda for this to happen. &nbsp;</p>',
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	(int) 2 => array(
		'Article' => array(
			'id' => '638',
			'article_category_id' => '40',
			'title' => 'Investment In Infrastructure Is A Costly Proposition',
			'sub_title' => '',
			'summary' => null,
			'content' => '<p>
	<strong>Sanju Koirala is the Corporate Communication Manager of Ncell, the largest private sector telecom operator in Nepal. She has been working as Ncell’s Corporate Communication Manager since 2009. Ncell has made a large contribution on developing communication infrastructure all over Nepal. It has increased the base stations by more than six times in the last three years. In an interview with New Business Age, Koirala shared her ideas on the prospects and challenges of developing communication infrastructure in Nepal.</strong></p>
<p>
	<strong><br />
	</strong></p>
<p>
	<strong><img align="left" alt="cover story" border="1" height="384" hspace="10" src="http://newbusinessage.com/ckfinder/userfiles/Images/cove.jpg" style="margin:10px; padding:10px;" vspace="10" width="300" />Ncell has expanded quite fast in a very short period of time in Nepal’s telecom business. How big is the prospect of a further expansion in terms of demand and possible supply of services?</strong></p>
<p>
	When the decision to enter Nepali market was made, one of the top priorities was to develop the mobile telecom market and to become number one within two to three years’ time. Although, the goal was reached way before, that is, by the end of November 2011, Ncell will continue with the same endeavour. We will continue investing in network expansion and new services. In fact, Ncell is at a growing stage and we will continue improving our network quality and capacity. By achieving one target, we have set another one in front of us which is even more challenging. We strive to reach quality to be aligned with TeliaSonera global standards and have an excellence in customer satisfaction. For future investment plans, it means increasing capacity and quality in the existing network, be selective to cover new geographical areas, increase data usage by enhancing data speed, implement new end user services and improve network reliability and robustness. Customers have started to feel the difference among various Nepali telecom operators. They have started to value what it means to have a good voice quality and network coverage, no matter wherever they are. It surprised the customers in 2011 and it will continue to surpass their expectations in 2012. Our actions and work will always pleasantly surprise the customers with excellent quality and new services.</p>
<p>
	<strong>How can the contribution of private sector players be compared to that of government sector in communication infrastructure development?</strong> <strong>There are allegations of unfair play coming up quite often.</strong></p>
<p>
	When a private company invests, it always keeps the desirable rate of return in mind. Besides commercial targets, we also have social responsibility targets. Among all possible mobile technologies, Ncell makes the decision as to which technology to trust the most. The return of investment and long term technology sustainability are the main decision making factors. By having set clear rules and regulations regarding usage and fee of frequency spectrum, the government can avoid unfair play. And these rules and regulations shall be applicable for every existing and potential operator in Nepal. Every player expects and should have an equal level playing field in an open and liberal economy.<strong><br />
	</strong></p>
<p>
	<strong>The cost of building infrastructure is very high. How satisfactory are the rate and time-window of return?</strong></p>
<p>
	Geographical terrain, lack of transportation, power outage and shortage of skilled manpower makes investment in infrastructure a costly proposition. We are also aware of the people’s spending power, with low level income; gestation period is bound to increase. It is now at an acceptable level taking into account the revenue from voice and value added services. In my opinion, the market is still developing. When we look from mid and long term perspectives, it’s important not to start a price war among operators and avoid regulatory imposed tariffs. Both of these are short term strategies and if wrongly applied, can impact severely on future investment and quality. It does not necessarily mean that the tariffs on services will not decrease but it will be based on the economy of scale and in a planned way. Everyone has to remember that an operator’s ultimate goal is long term sustainable profitability and every wrong decision has an adverse affect on investment and services.</p>
<p>
	<strong>Do you see the possibility of sharing the same infrastructure by other companies of the same nature? Do you think this will reduce the cost of service expansion? </strong></p>
<p>
	It is possible, but cost sharing and cost bearing business dealing should not be dictated by the government. It should be a business to business decision to have a positive impact as well as in expansion and cost of service.</p>
<p>
	<strong>The NTA has not given permission to share certain resources between telecom operators?And, particularly optical fi bre that is being used by NTC is not shared with other companies. How do you view this?</strong></p>
<p>
	This is one of the most challenging issues because pricing scheme has to be defined and NTA has no information about real and specific costs that are different among various operators. In fact, Ncell is leasing the required bandwidth from NTC and NEA. However, it’s not easy to get into an agreement with government-owned companies. First of all, there should be a display of interest by the first operator to share it based on their interest to get opportunity to share similar bandwidth in other directions where they don’t have it yet. Thus, it should be based on mutual interest rather than forced and imposed regulations.</p>
<p>
	<strong>What are the challenges and problems in developing infrastructure?</strong></p>
<p>
	Getting required permission from different government bodies is a difficult task. And it does get worse when people demand for road, electricity supply and many other things. Besides that, in network rollout, one of the most challenging factors is availability of power. If the rest can be agreed and aligned by changing regulations, making clear and understandable rules and fees, shortage in power will remain for years. This is also related to the government plans to provide sufficient electricity even for households in the cities and remote areas. We are not sure if NTA has any plans on the level of energy requirements for the next five to 10 years. No one has really asked us about expected energy requirements for the Ncell network in the coming years. Therefore, we need to rely only on a backup solution based on diesel generators. That, for sure, has an adverse effect on network running costs and ecology.</p>
<p>
	<strong>What are your expectations from the government about supporting the development of communication infrastructure? Has the government done enough to develop the basic infrastructures?</strong></p>
<p>
	A concise general plan for developing the mobile, fixed and broadband services in Nepal is required. If we look around the Asia Pacific region, every country has imposed different principles. And here, challenges come from the fact that there are no less common principles even within the region. Thus, it brings complexity for the NTA and requires assessment of existing status, plans and changes as required. It also requires expertise and consultancy from GSMA (GSM Association) as well as bringing the local operators together in one working group. RTDF (Rural Telecom Development Fund) could be used for optical fibre and for other facilities. For example, equipments and construction material for infrastructure customs and other taxes can be reduced, failing which, it will increase the investment resulting in costlier airtime for mobile phone users. &nbsp;</p>',
			'published' => true,
			'created' => '2012-02-24',
			'modified' => '2012-08-23',
			'keywords' => '',
			'description' => 'Sanju Koirala is the Corporate
Communication Manager of
Ncell, the largest private sector
telecom operator in Nepal. She
has been working as Ncell’s
Corporate Communication Manager
since 2009. Ncell has made a
large contribution on developing
communication infrastructure all
over Nepal. It has increased the
base stations by more than six
times in the last three years. In
an interview with New Business
Age, Koirala shared her ideas on
the prospects and challenges
of developing communication
infrastructure in Nepal.',
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			'id' => '533',
			'article_category_id' => '40',
			'title' => 'We Are Very Keen To Move The SAARC Free Trade Process Forward',
			'sub_title' => '',
			'summary' => null,
			'content' => '<p>
	<img alt="Jaideep Mazumdar" border="1" height="175" hspace="10" src="http://www.newbusinessage.com/ckfinder/userfiles/Images/coverstory-VI dec2012.jpg" vspace="10" width="300" /><br />
	<br />
	<strong>Jaideep Mazumdar <br />
	Minister and Deputy <br />
	Chief of Mission Embassy of India, Kathmandu </strong><br />
	<br />
	<br />
	<strong><br />
	How do you look at the overall regional trade in South Asia? </strong><br />
	<br />
	As everybody will say, it is not up to potential and a lot more can be done. Intra-regional trade within South Asia is only 5 per cent of the trade that the region has with the world. There is, of course, a potential and a huge opportunity for the countries within the region to improve on this figure. <br />
	<br />
	<br />
	<strong>How can connectivity be improved between India and Nepal to negotiate better transit? </strong><br />
	<br />
	In Nepal’s context, as you would be aware that we are building four integrated customs check posts along the border. The objective is that whenever there is a traffic movement between India and Nepal, there is a scientific borderly single place where everything is done – customs check, inspection of goods, clearing of consignments etc. We are also building five cross border railway lines wherein we are harmonising different gauges on both sides of the border as well as building new lines so that goods can come straight to Nepal and vice versa. <br />
	<br />
	To encourage third country trade with Bangladesh, we are building a railway line which will provide an exit from Bangladesh straight into Nepal. We have agreed to allow Vishakhapatnam as an alternative port for Nepal to trade with the rest of the world. We are also building 1,400 kms of roads which will open Nepal inter-land for trading with northern Bihar and northern UP in India along the Terai belt so the movement of goods will become easier. These kinds of connections and inter-linkages are being built to improve transit. <br />
	<br />
	<strong><br />
	How do you view economic diplomacy in the context of enhanced regional trade among SAARC nations? </strong><br />
	<br />
	I can speak for our foreign service that is the Indian Foreign Service, which puts a tremendous amount of importance on economic diplomacy which encompasses trade diplomacy. In all our embassies, we have designated officers who look after harmonising, increasing the trade and helping the private sector of the countries they are posted at. For trade diplomacy, we have an entire division in the Ministry of External Affairs in India which deals with such matters. <br />
	<br />
	<br />
	<strong>There seems to be a sheer lack of trust among nations on different issues. How big a deterrent is this for intra-regional trade? </strong><br />
	<br />
	Historically, there has been a problem between India and Pakistan that was a hindrance for intra SAARC trade. We now hope that things will move much faster and we have been very keen to move the SAARC free trade process forward. We have been doing our bit to ensure that free trade develops in the region. <br />
	<br />
	<br />
	<strong>India, being the centre of regional trade among the SAARC nations, could have played a more vital role in making the SAARC trade bloc effective. What are the reasons for India not being able to do so?</strong><br />
	<br />
	Of course, everybody could have done more. As I said earlier, the potential of intraregional trade in the SAARC region is too large and there is so much opportunity. It naturally means that the potential has not been achieved but it’s due to many factors. I think there is a realisation now among the countries in the region that we need to increase those linkages and move SAARC into a more integrated regional cooperation model. All the leaders have talked about it at the Maldives Summit and our Prime Minister has also spoken very strongly in favour of integrating SAARC. <br />
	<br />
	<br />
	<strong>Why is the trade in this region more oriented towards international trade rather than trading within the region itself? </strong><br />
	<br />
	You cannot generalise this. There may be some products which will have a market in the SAARC region while there may be some other which can find more lucrative markets outside the region. The very fact that intra SAARC trade is only 5 per cent does not mean that the objective should be to make it 100 per cent. For example, oil is always imported so it goes both ways – exports as well as imports. Even Bangladesh which produces so much of garments cannot look only at the South Asian market. People have very high buying power in Europe and North American countries so there are commodities which will find a market in that part of the world and not necessarily in South Asia. <br />
	<br />
	<strong><br />
	How do you view recent development such as BIPPA in the context of intra-regional trade? </strong><br />
	<br />
	BIPPA is an agreement which is just that – an agreement that was to encourage the investors of both countries to invest in each other. We have signed such agreements with more than 75 countries so having agreements with them does not mean that all those countries have invested in India. Therefore, the final decision on investment depends on many factors such as policy stability, security etc. BIPPA itself is only a facilitative document. <br />
	<br />
	<strong><br />
	What are the potentials of Nepal’s trade with countries in the SAARC region, especially India? </strong><br />
	<br />
	You can only export what you can produce. For most of the countries in the region, the exportable products are not adequate therefore countries like Nepal and Bangladesh have big trade deficits with India. Import wise too, if Nepal does not buy goods from India, it has to buy them from somewhere else simply because it does not produce those goods. For example, petroleum products have to be bought from India or some other country and if you buy it from a third country, you still have to transport it through India. If you don’t produce a certain commodity, you cannot trade that.  <br />
	<br />
	<br />
	Â&nbsp;</p>',
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			'description' => 'As everybody will say, it is not up to potential and a lot more can be done. Intra-regional trade within South Asia is only 5 per cent of the trade that the region has with the world. There is, of course, a potential and a huge opportunity for the countries within the region to improve on this figure.',
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		'Article' => array(
			'id' => '532',
			'article_category_id' => '40',
			'title' => 'Intra-industry Trade Potential In South Asia Is Underutilised',
			'sub_title' => '',
			'summary' => null,
			'content' => '<p>
	<img alt="Ratnakar Adhikari" border="1" height="433" hspace="10" src="http://www.newbusinessage.com/ckfinder/userfiles/Images/coverstory-Vdec2012.jpg" vspace="10" width="300" /><br />
	<br />
	<strong>Ratnakar Adhikari <br />
	General Secretary <br />
	South Asia Watch on Trade, Economics and Environment (SAWTEE) <br />
	</strong><br />
	<br />
	<strong><br />
	What is the current status of Intra SAARC trade? </strong><br />
	<br />
	The intra-regional trade among the SAARC countries stands at 5 per cent of the blocks worldwide trade which has been the case for some time now. Intra SAARC trade has certainly increased over the years, however, there has been an increase in SAARC’s world trade too. Hence, the share of intraregional trade has remained constant. When compared to intra-regional trade in other trade blocs like ASEAN and EU, intra SAARC trade does look small. <br />
	<br />
	<strong><br />
	Why has SAFTA not been able to gainmomentum since its inception in 2004? </strong><br />
	<br />
	SAFTA has not been able to take off because of political as well as economic reasons. It was also affected due to the political tensions between India and Pakistan. Among the economic reasons, it’s the sensitive list that has affected SAFTA most wherein it was decided to have such a list but the types of commodities under the sensitive list was not ascertained. A mammoth 53 per cent of tradable commodities had figured in the sensitive lists of different countries in the region. <br />
	<br />
	<br />
	<strong>How can regional connectivity be improved to negotiate better transit and transhipment?<br />
	</strong> <br />
	There are a number of issues related to regional connectivity that can certainly be looked at if there is a proper intent to do that. For example, India is suffering from Bangladesh’s denial to allow transit through its territory which could have made it easier to reach the north-eastern part of India. Even Nepal can export tea to Pakistan but it will not be profitable sending tea via air cargo. If Nepal can export tea by using the Mahendranagar border to Pakistan via Wagah in Punjab, surface transport can deliver goods in 12 hours flat. But there has been no concrete talk with India on this matter. <br />
	<br />
	<strong><br />
	India, being the centre of regional trade among the SAARC nations, could have played a more vital role in making the SAARC trade bloc effective. What are the reasons for India not being able to do so? </strong><br />
	<br />
	It’s probably because they have analysed the cost and benefits and realised that it is better for them to look outside the region rather than concentrating their negotiating and political capital as well as resources in South Asia. India is not making any pro-active efforts to strengthen regional economic cooperation in South Asia whereas it should be actually promoting regional stability in South Asia which is eventually going to be in its own interest. <br />
	<br />
	<strong><br />
	Why is the trade in this region more oriented towards international trade rather than trading within the region itself? </strong><br />
	<br />
	Historically, most of the developing countries while talking about exporting manufactured products, always have the European, North American, Japanese and Australian markets in their minds. This has been happening for over a century now. Another problem in South Asia region is that most of the countries compete for the same market internationally. <br />
	<br />
	<strong><br />
	Can South Asia region be the production house as well as the market and be self suffi cient for trade? </strong><br />
	<br />
	Why not? I had actually proposed in one of my writings earlier that South Asia can become the textile and clothing production hub. I feel that intra-industry trade potential is not being utilised in South Asia to the extent possible. For example, Pakistan and India are among the best cotton producers in the world and we have state-of-the-art industries in the region that could process cotton into textile fabric. In Bangladesh, we also have one of the lowest cost manufacturers of garment in the world. The manufactured garments can then be sent to Colombo and utilising the shipping industry potential of Sri Lanka, they can be fast processed and shipped to markets abroad. This kind of modality can work in the region’s interest. <br />
	<br />
	<br />
	As for consumption of goods produced within the region, we can take the example of India already importing textile and clothing products from countries like Bangladesh and Nepal. And it should import even more from within the region rather than importing from countries like Thailand and China. There should be an attempt to create an incentive for the partner countries in the region to be able to export to a country like India. However, bureaucratic hassles, nontariff barriers, rules of origin as well as 4 per cent special additional duty imposed on an arbitrary basis have created problems. <br />
	<br />
	<strong><br />
	What are the differences in provisions of WTO and RTA? How does it affect the intra-regional trade? </strong><br />
	<br />
	Regional Trade Agreements (RTA) are meant to provide a platform for deeper level of integration when compared to WTO. You have to understand the fact that WTO actually does not actively discourage RTAs. By virtue of a legal provision within the WTO, it condones regional economic arrangements. In that sense, since SAFTA is deeper, trade within SAFTA should be higher than trade outside the region. By the same token, 67 per cent trade takes place within the region for EU while the figure is 60 per cent for NAFTA. It’s because they have deeper regional integration so there is no reason why SAFTA should not be able to replicate such successes. The regional economic arrangements are actually WTO plus. <br />
	<br />
	The only thing RTAs like SAFTA should learn from the WTO is that it should have a dispute settlement system that is fair, effective and credible. Due to the twotier (Panel and Appellate Body) system of dispute settlement in the WTO, any error of judgment by the panel can be corrected through appeal and actually, more than twothird of cases in the WTO are appealed.</p>
<p>
	As for effectiveness, the verdict of the dispute settlement body is almost invariably adopted because of the reverse consensus rules, which means that the verdict of the dispute settlement body would not be adopted only if there is a consensus not to adopt the report. The credibility factor comes into play because the threat of sanction imposed by the winning party through the decision of the dispute settlement body is plausible. There have been instances where sanctions have actually been imposed thereby forcing the losing party to bring its measures in conformity with the WTO rules. While advanced RTAs such as EU or NAFTA have very effective dispute settlement systems in the form of European Court of Justice and NAFTA Court, SAFTA does not have such a mechanism. This is one of the reasons why countries acting against the spirit of SAFTA also go scot free. <br />
	<br />
	 </p>',
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			'description' => 'The intra-regional trade among the SAARC countries stands at 5 per cent of the blocks worldwide trade which has been the case for some time now. Intra SAARC trade has certainly increased over the years, however, there has been an increase in SAARC’s world trade too. Hence, the share of intraregional trade has remained constant. When compared to intra-regional trade in other trade blocs like ASEAN and EU, intra SAARC trade does look small.',
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		'Article' => array(
			'id' => '531',
			'article_category_id' => '40',
			'title' => 'Economic Diplomacy Is The Present World Order',
			'sub_title' => '',
			'summary' => null,
			'content' => '<p>
	<img alt="Chandra Kumar Ghimire" border="1" height="330" hspace="10" src="http://www.newbusinessage.com/ckfinder/userfiles/Images/coverstory-IV dec2012.jpg" vspace="10" width="300" /><br />
	<br />
	<strong><br />
	Chandra Kumar Ghimire <br />
	Joint Secretary <br />
	Ministry of Commerce and Supplies (now Consulate General of Nepal to Kolkata) </strong><br />
	<br />
	<br />
	<br />
	<strong>What are the major differences in WTO and RTA provisions? How do they affect intraregional trade? </strong><br />
	<br />
	<br />
	WTO is a broader frame which is the legal basis for global trade arrangements and provides framework for the rule-based trading system of which RTA is an option. RTA's jurisdiction is area specific and has the involvement of likeminded countries which are similar in geographical, political or socio-economic aspects and enjoy certain proximity. The WTO's role is to provide the basis for legal framework and permit for RTAs. <br />
	<br />
	RTAs are WTO plus meaning a regional economic arrangement is expected to commit more. The commitment is for the intent of opening the market more for increasing trade volume through freer, broader, deeper and wider trade.</p>
<p>
	 </p>
<p>
	<strong>How is WTO treating RTAs? </strong><br />
	<br />
	There are already 400 RTAs that have come into being and there are more being developed. There are two dimensions and arguments to it. On a scholastic level, the argument is whether RTAs complement or contradict the WTO. The ones who advocate that RTAs complement the WTO say that regional economic arrangements help freer, wider and deeper trade. But the people believing in the philosophy of the other extreme say that RTAs are fragmenting global markets. However, broadly speaking, WTO has allowed regional economic arrangements under its legal frame and I believe the WTO has treated the RTAs in a positive way.</p>
<p>
	<br />
	<br />
	<strong>There are a host of RTAs such as SAFTA, BIMSTEC, ASEAN, NAFTA etc and an RTA is supposed to supersede WTO provisions. If WTO is to dominate all other agreements, what is its relevance at the end of the day? </strong><br />
	<br />
	<br />
	Let me first clarify that all RTAs are not effective, they are there as global ideas but not fully actualised. On a global level, WTO is supreme but it does not dominate other agreements by any means. RTAs do not have the mechanism for dispute settlements like the WTO does. The WTO is a mechanism which even drags a global power like the US to its tribunal and allows least developed countries (LDC) to have their say. Under WTO, the developing countries can also indulge in issue-based bargains with powerful countries which were not possible with RTAs without WTO's existence. <br />
	<br />
	If RTAs were to exist in all parts of the globe, the idea of regional economic arrangements will truly complement the WTO. Otherwise, the idea will not really hold much ground. The RTAs must be able to bring themselves into complete effect so that they can fulfill the ultimate aims of WTO rather than challenging its dominance.</p>
<p>
	<br />
	<strong><br />
	How do you view economic diplomacy in the context of enhanced trade relations between countries? </strong><br />
	<br />
	<br />
	Ever since the world came into being in its present unipolar form, there has been a change in the way diplomacy is being practiced. Today's power struggle is for trade and to become a winner in the âgain and loss scenario, which has resulted in a shift from conventional political diplomacy to economic diplomacy. This big transformation has brought about changes in the bureaucracy of many countries. In Nepalâ's context, we have been talking about economic diplomacy since the early 1990s but we have not been able to practice it at the real level. <br />
	<br />
	We do need political diplomacy with other countries, our immediate neighbour India for example, which is fundamental but the aim has to be for economic gains. In the present world order, we have to strive to gain by putting economic diplomacy into practice. The other countries in the region like Bangladesh and Sri Lanka have expanded their number of missions in different parts of the world exactly with this idea. <br />
	<br />
	They have been marching ahead with economic diplomacy by looking at the markets in different countries of the world. Even though we have the same agenda in Nepal, we lack a comprehensive outlook and have not been able to identify our potential markets worldwide. Accordingly, we could have expanded our missions whereas we are still stuck with the same missions that we had established in the 1950s and 1960s. <br />
	<br />
	We do not have a clear agenda even though of late, we have been able to identify countries where we could find a labour market. However, that's not sufficient because we need to tap opportunity and be able to pursue capital coordination. For this, we have to work in close coordination with ministries of economic content, the private sector and think tank institutions. India and China, our doorstep markets, are countries that are attractive for the entire world. On our part, we are leaving these arm-reach markets and looking elsewhere and therefore, ending up with virtually nothing. All the global powerhouses are targeting India and China for economic reasons and we should do the same. We should be able to shed the diplomatic legacy of the yore and start afresh.</p>
<p>
	<br />
	<strong><br />
	Why is the trade in SAARC region more oriented towards international trade rather than trading within the region itself? </strong><br />
	<br />
	<br />
	This is precisely the reason why we have not been able to gain from SAFTA. The idea that we had envisioned for the RTA a couple of decades ago has not materialised and that's why we see a country like India establishing relations with other RTAs, for example, <br />
	<br />
	ASEAN. The potential in SAARC region has not been able to take shape and India is not ready to bide time in this age of fast-paced globalisation. We do generate and agree on good ideas in this region time and again but fail to give them shape because of our many conflicts as there is a serious lack of trust among SAARC countries. Besides, we have adopted policies in the past not to bring our internal disputes to the table which is another deterrent.</p>
<p>
	<strong><br />
	<br />
	Is Nepal's bureaucratic level effort viable enough for trade enhancement without taking the private sector on board? </strong><br />
	<br />
	Trade enhancement is definitely not possible without the active participation of the private sector. The intensified level of interaction that should have been there between the private and the public sectors is seriously missing. Both the parties are responsible for this; they donate trust each other and often indulge in a blame game. We, the public sector, like to keep ourselves away from the private sector whereas we should be able to take them along. It is because we donate have a business friendly culture which has prevented us from partnering with the private sector in a substantial manner. <br />
	<br />
	On the other hand, the private sector has not been able to develop the appetite that is required to gain competitiveness. The private sector is still busy looking for quotas and concessional rates on tariff etc and create a playing field for itself. Besides, there are times when we expect the private sector to raise its voice or advice but they convey political messages instead of giving technical details or feedback. In the bargain, we miss their indepth expertise that we so desire. <br />
	<br />
	The private sector also lacks the preparedness that is required for public-private partnership (PPP). We do talk about PPP all the time, but it requires a certain level of discipline and pace which is definitely missing. Let me conclude by saying that we do have businessmen of high calibre in Nepal's private sector and one only hopes that the number of such businessmen is on the rise. <br />
	 </p>',
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	(int) 6 => array(
		'Article' => array(
			'id' => '530',
			'article_category_id' => '40',
			'title' => 'The Promises Of SAFTA Are Much Better',
			'sub_title' => '',
			'summary' => null,
			'content' => '<p>
	<img alt="sridharkkhatri" border="1" height="477" hspace="10" src="http://www.newbusinessage.com/ckfinder/userfiles/Images/coverstory-III _dec2012.jpg" vspace="10" width="300" /> <br />
	<br />
	<br />
	<strong>Prof Sridhar K Khatri <br />
	Executive Director <br />
	South Asia Centre for Policy Studies (SACEPS) </strong><br />
	<br />
	<br />
	<br />
	<strong>The Promises of SAFTA are Much Better<br />
	</strong><br />
	<br />
	<strong>How do you look at the volume of regional trade in the South Asia? </strong><br />
	<br />
	Intra-regional trade between South Asia is very limited at this point of time. Despite the fact that SAARC has been in existence for the last 26 years, regional trade has not increased much. When SAARC started, it was around three to four per cent and today, it is still less than five per cent. The intra-regional volume of trade is something that has not increased for a variety of reasons. <br />
	<br />
	<br />
	<strong>What are the possible reasons for low trade in this region? </strong><br />
	<br />
	The truth is that SAARC as a regional organisation has not completely taken off. There are a lot of constraints that has contributed to this. There is asymmetry in sizes of countries involved in the region with India being the most dominant one. The second reason is that we also have conflict between India and Pakistan, which has in a way, obstructed the SAARC process. There have been opportunities at times when SAARC has shown promise. However, bilateral differences between India and Pakistan have held it back. We have had SAPTA (South Asian Preferential Trading Agreement) for a long time but that has not increased trade either because its structure was fundamentally limited in terms of offering opportunities to increase trade. That is something ASEAN used for a long time and did not have any significant impact. We made the same mistake in South Asia by going through preferential trading arrangement. SAFTA (South Asia Free Trade Agreement) was signed in 2004 but despite the agreement, it has not been implemented basically due to concerns between India and Pakistan. <br />
	<br />
	<strong><br />
	How do you view Pakistan granting MFN status to India in the context of intraregional trade? </strong><br />
	<br />
	The MFN status Pakistan has offered to India will change the nature of the game in South Asia provided there aren’t any other terrorist attacks on India or political impasses at certain points. I have been looking at South Asia for a long time now and my worry is that these hiccups tend to hold back the little progress that has been made. <br />
	<br />
	<strong><br />
	Why is the trade in this region more oriented towards international trade rather than trading within the region? </strong><br />
	<br />
	Trade beyond regions becomes more lucrative. For instance, India’s export to South Asia is around five per cent and the imports are less than three per cent. But its trade with South East Asia is nearly 25 per cent. Pakistan also has the same kind of figure because it is also looking at trade with South East Asia. Even Bangladesh’s largest trading partner right now is China and not India. Trade with European Union is also very substantial. Countries tend to export and have relations with regions where there is growth. However, if there is potential within South Asia, there will be investment and subsequently, trade. For that to happen, political barriers have to come down and their trust deficit problems have to be resolved. But again, there is no time frame for it because there are so many bilateral problems which countries need to overcome. And, in a way, South Asia also needs to be little more confident of the region by itself. There is a serious leadership deficit in South Asia where no country or leader has become an advocate of regional integration to help us overcome difficulties and ensure development. <br />
	<br />
	<br />
	<strong>How best can economic integration be used among SAARC countries to reduce poverty and move towards prosperity? </strong><br />
	<br />
	Integration in a way offers countries the chance to develop their economies in a very systematic manner. This means that if the countries are well developed and if they can progress by cooperating with each other, goods will be cheaper for the people to purchase. There is a programme in the SAARC process to eradicate poverty in the region and two commissions have already been formed on poverty eradication. These commissions have come up with significant measures and have talked about meeting the MDG (Millennium Development Goals). SAARC too has developed its own SAARC Development Goals where the focus has been on the people, however, SAARC has not been able to implement some of its programmes. <br />
	<br />
	<strong><br />
	How can regional connectivity be improved for better trade facilitation in the region? </strong><br />
	<br />
	There are significant measures that must be taken care of in terms of trade facilitation, implementing agreements on trade and reducing non tariff barriers (NTB). You can have an excellent agreement but if you have NTBs, it will make trade a difficult proposition. The possibility in South Asia is in infrastructure development which is very important. SAARC has already talked about connectivity in the region and has a SAARC Multimodal Transport Agreement in place. It has not moved very far but there are some positive signs already. In the just concluded summit in Maldives, an agreement on railways has been signed. There is also an agreement on movement of motorcars within South Asia which should have been signed at least a year ago. Movement of goods and people will be very important for the growth of the region. The trust deficit in South Asia has to be overcome to implement some of these programmes. <br />
	<br />
	<br />
	<strong>India is at the centre of regional trade among the SAARC nations. What roles, do you think, India is expected to play? </strong><br />
	<br />
	India has not only a prominent role but also a key role to play for the growth of SAARC and the benefit of the people in the region. Being a large country that is growing at an exponential rate economically, India can offer advantages to other member states of SAARC including Nepal. I do think that India is ready to move in this direction and we see signs of that but it wants to solve some of its bilateral problems with Pakistan first. I think SAFTA will take off now as Pakistan has promised MFN treatment to India. I believe that if there is substantial growth in trade between these two countries and within the SAARC members, India will be more forthcoming in the future. <br />
	<br />
	<strong><br />
	How do you rate the success of SAFTA and SAPTA? </strong><br />
	<br />
	SAPTA was pretty much an abysmal exercise that did not go far ahead. If we had looked at the ASEAN experience, we should not even have gone through the preferential trading arrangement. The promises of SAFTA are much better but the important element is to put it into practice. We had an exercise many years ago in Nepal and worked together with intellectuals, politicians and businessmen to see what they thought of free trade and if it stands to benefit Nepal. We concluded SAFTA will not benefit Nepal in the short run as free trade usually benefits the larger countries more. For a least developed landlocked country like Nepal, it is much harder to derive benefits. However, Nepal can benefit in the long run if we can have link trade with investment and other related benefits. If trade infrastructure can be developed, Nepal has the opportunity to benefit in the long run. <br />
	<br />
	<br />
	<strong>Do you see the possibility of India cannibalising its neighbours? </strong><br />
	<br />
	For India to grow, it does not need to ‘cannibalise’ small countries. India already has the potential to grow and is a major player in the world today. We have seen South East Asia and East Asia grow very fast. The next phase could be South Asia that can grow at a promising rate. India needs to be more generous towards smaller countries, offer opportunities and feel confident that the growth of smaller neighbours can be beneficial for India. I think that change in thinking is happening in India and will continue to happen in the years to come. <br />
	<br />
	<strong><br />
	What are the differences in provisions of WTO and RTA? How does it affect intra-regional trade? </strong><br />
	<br />
	WTO recognises regional trade agreements (RTA) and encourages them in a way to promote growth not only within countries but also in terms of facilitating trade among the regions in the world. So, it is compatible framework within the WTO framework. It does not obstruct RTAs and vice versa. In the last 15-20 years, a number of regional organisations have evolved at a phenomenal rate. We have seen the growth in Latin America, Africa and even in Asia. But what types of regional organisations have happened needs to be clearly looked at. Nepal is part of both SAARC and BIMSTEC where some of the activities overlap one another.</p>',
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			'description' => 'The truth is that SAARC as a regional organisation has not completely taken off. There are a lot of constraints that has contributed to this. There is asymmetry in sizes of countries involved in the region with India being the most dominant one. The second reason is that we also have conflict between India and Pakistan, which has in a way, obstructed the SAARC process.',
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	(int) 7 => array(
		'Article' => array(
			'id' => '529',
			'article_category_id' => '40',
			'title' => 'Economic Diplomacy Is Getting Sidelined By Political Diplomacy In The Regional',
			'sub_title' => '',
			'summary' => null,
			'content' => '<p>
	<span style="font-weight: bold;"><img alt="Pradeep Kumar Shrestha" border="1" height="261" hspace="10" src="http://www.newbusinessage.com/ckfinder/userfiles/Images/coverstory-II_dec2012.jpg" vspace="10" width="400" /><br />
	</span></p>
<p>
	<strong><br />
	Pradeep Kumar Shrestha <br />
	Vice President <br />
	SAARC Chamber of Commerce and Industry </strong><br />
	<br />
	<strong><br />
	Economic Diplomacy is getting Sidelined by Political Diplomacy in the Regional <br />
	</strong><br />
	<strong><br />
	How do you look at the regional trade in South Asia region?</strong><br />
	<br />
	In the context of South Asian trade, trade movement is very low despite it being home to one fifth of the world's population. Intra-regional trade is less than five per cent which is something the business community of the region must take into account. Other regional bodies like EU and NAFTA have more than 50 per cent of the trade within their respective regions. Even though the countries in the SAARC region claim to be close, there exist a lot of hiccups. The mindset and attitude of the politicians and bureaucrats are not to the level expected in the 21st century. Besides political reasons, infrastructure connectivity, high cost of business, bureaucratic hassles plague the prospects of intra-regional trade. <br />
	<br />
	<strong><br />
	Do you see the possibility of India cannibalising all its neighbours? </strong><br />
	<br />
	India is growing at a fast pace. There is a saying, ˜If you have to grow, you cannot grow alone. You have to grow with the neighbours India is a big trading partner for all the countries in the SAARC region. India is big in each and every aspect compared to other SAARC countries. Considering the present scenario, if India really wants to be a superpower, it has to take its neighbouring countries into confidence. <br />
	<br />
	<br />
	<strong>Why has SAFTA not been able to gain momentum since its inception in 2004? </strong><br />
	<br />
	It is raised in every forum each year but the implementation aspect has been very slow. This is more due to political mindset and crisis of confidence than anything else. However, the fact is that we have to grow together and be interdependent rather than being dependent. SAFTA should have moved much ahead by now. Within the SAARC region, we have to look at increasing the trade volume. The attitude of building confidence, helping and sharing with each other is the way to go about it. <br />
	<br />
	<strong><br />
	Regional trade is being prioritised in other trade blocs such as ASEAN, BIMSTEC and EU. Why has the same not received equal priority within the SAARC trade bloc? </strong><br />
	<br />
	This is very unfortunate. The real fact of trade not really taking off in the region is because the two big countries- India and Pakistan having their own problems to deal with. These two countries should sit together and help us have a prospering regional bloc like EU, ASEAN, NAFTA etc. Unfortunately, what is happening is that we are talking of a region but in terms of sub-regions like Eastern India-Bangladesh, Nepal-Bhutan or India- Pakistan. Each country has its own strength so we have to be able to nurture and benefit from areas of comparative advantages. We, the business community, are seriously advocating for it but without the two big countries getting together and understanding the benefits for the region, the SAARC would not move the way we dream of. <br />
	<br />
	<br />
	<strong>By this, do you mean, economic and trade diplomacy is seriously missing among SAARC member countries? </strong><br />
	<br />
	I think economic diplomacy is getting sidelined and political diplomacy is taking over. However, it is a fact that without political understanding, the economy cannot take off. There could be other ways of bringing things closer like people to people contact. We have to understand each other and feel that we are part of the same region and accordingly, we can synergise the strength. But that is not happening and every country wants to move ahead on an individual level. <br />
	<br />
	<br />
	<strong>Why is the trade in this region more oriented towards international trade rather than trading within the region? </strong><br />
	<br />
	Most of the countries in the region are import based economies though we do have exportable items like garments, carpets and others. Nepal, India, Sri Lanka and Pakistan export same kind of products and end up competing in the same market. The level of purchasing power in the region compared to other regions of the world is less even though the middle class is coming up very fast. When we want to do something, we always look at the west. In regional trade, the cost of connectivity and transportation is very high. Bureaucratic hassles like procedural delays and documentations etc also play their respective roles. All these hassles are so grave that we prefer to go for countries outside the region without realising the availability and quality of products available within the region. We, the business community, have to change that and identify our areas, strengths, products, competitive advantages etc. There must be a feeling of ‘together we grow’ to begin with. <br />
	<br />
	<br />
	<strong>In the context of intra-regional trade, how do you view Pakistan granting MFN status to India? </strong><br />
	<br />
	This is a very positive development for both the countries. To tell you the truth, SAARC has not been able to move ahead because of these two big countries not able to understand each other. The MFN status will fuel reciprocity and can move on to other countries as well. For example, China and Taiwan had similar political problems once, however, their relations have improved considerably in the last few years. If political conditions and hiccups can be taken care of, investment and trade will get a boost. At the same time, other neighbouring countries too will be benefitted when relations between these two countries get better. <br />
	<br />
	<br />
	<strong>Can South Asia region prove to be a substantially big market to consume the production generated in the region and become self suffi cient on trade? </strong><br />
	<br />
	Yes, very much so. A big market is lying out there because of the size of the population. The size of human resources, natural resources, potentials and eagerness of the people doing business in the region can certainly make this region self sufficient. This region has everything but still we have not been able to do anything remarkable. In this context, if the countries in this region join hands with each other without any biased sentiment and mentality, it can definitely prosper. <br />
	<br />
	<br />
	<strong>What are the activities of SAARC Chamber of Commerce and Industry (SCCI)? </strong><br />
	<br />
	Since its inception, the business community has wished to see that business related problems are addressed and economic agendas are taken to a much bigger level. Unfortunately, that has not happened and the community is not very happy about it. We have not been invited to the summits in Male and Thimpu despite being an important part of the SAARC. Though, of course, we understand it was not because of their unwillingness to invite us but it was because of their logistics problems in Male and Thimpu. As for our activities, we have tried to increase the number of SAARC sticker visa to improve people to people contact in the region. We have asked for 200 to 500 visas for each country. If a businessman wants to travel, he cannot wait for a month to get a visa. We are advocating that the paper work has to be reduced and the existing bureaucracy hassles should be nominal. Every country has its own area of strength such as hydroelectricity, agriculture or tourism. There are a number of councils for such sectors under the SAARC CCI, chaired by a specific country for each council. <br />
	<br />
	<br />
	<strong>Have there been enough researches conducted on regional trading? What is SAARC CCI doing towards it? </strong><br />
	<br />
	Research and Development is talked about every time especially in the context of South Asia. I believe that more than 350 scholars in different agencies like World Bank, ADB, and UNCTAD are studying and seeing why South Asia has not been able to grow despite its potentials. Even in our chamber, we try to find out facts and figures as to why things are not happening in the region. I believe such findings will lead us towards making good decisions. <br />
	<br />
	<br />
	<strong>Has it been able to go beyond the concept of bilateral chamber in the true sense of regional level trade cooperation? </strong><br />
	<br />
	We are talking about sub-regional level which is more than bilateral. We understand that because of proximity reasons, Nepal being linked to Pakistan, Sri Lanka or Maldives is not possible. But linking Nepal with Bangladesh, Bhutan, India or BIMSTEC is a different phenomenon altogether. We are only talking about the eastern part of South Asia, for example, Bangladesh, Nepal and Bhutan. Efforts toward regional level trade cooperation is certainly moving but at a very slow pace. <br />
	 </p>',
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			'description' => 'In the context of South Asian trade, trade movement is very low despite it being home to one fifth of the world's population. Intra-regional trade is less than five per cent which is something the business community of the region must take into account. Other regional bodies like EU and NAFTA have more than 50 per cent of the trade within their respective regions.',
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			'article_category_id' => '40',
			'title' => 'SAARC Countries Should Work Towards Regional Cooperation To Achieve Growth',
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			'content' => '<p>
	<img alt="Thosapala Hewage" border="1" height="251" hspace="10" src="http://www.newbusinessage.com/ckfinder/userfiles/Images/coverstory_dec2011.jpg" vspace="10" width="400" /><br />
	<br />
	<strong>Thosapala Hawaga <br />
	Ambassador <br />
	Embassy of Sri Lanka in Nepal</strong><br />
	<br />
	<br />
	<strong><br />
	SAARC Countries Should Work Towards Regional Cooperation to Achieve Growth</strong><br />
	<br />
	<strong><br />
	How do you look at the regional trade in the South Asia region?</strong><br />
	<br />
	The regional trade in South Asia seems to be improving over the years but it is not up to the expectation. Compared to the past, the South Asian economy is more open today. The tariff rates have come down from 80-90 per cent in the 1990s to 20-25 per cent today and exports and imports together are equivalent to about 20 per cent of the regional GDP. SAFTA was expected to include all products, manufacturers and commodities. It is commonly accepted that negotiations under SAPTA will not be very effective in terms of inventing intra-regional trade in SAARC which is unfortunate. There are various possibilities of further improving regional trade within South Asia if countries can overcome the existing barriers. Remedies like substantial tariff cuts, removal of non tariff barriers, adequate trade related capacity building, and connectivity between the countries etc have to be implemented. The regional trade arrangements are in an interim state towards more efficient levels of globalisation. <br />
	<br />
	<br />
	<strong>Is there a possibility of India cannibalising all its neighbours? </strong></p>
<p>
	<br />
	It is difficult to say that India is cannibalising its neighbours. But, with the size of India and its economy, you can’t compare India with any of its neighbours. It is a vast and fast developing country and also the largest country in the region. Their contribution in terms of trade, tourism and economic growth is very high. It is extremely difficult for other countries to talk about balance of trade with India. However, India is having enough problems itself that needs to be resolved first such as regional disparity, low human development index (HDI), poor connectivity etc. India is by far the largest economy in the region and the second largest fast growing economy in the world. South Asia region needs India for its economic prosperity as much as India needs the region for its continuing prosperity. <br />
	<br />
	<br />
	<strong>How do you view trade diplomacy in the context of enhanced regional trade among SAARC nations? </strong><br />
	<br />
	When people talk about diplomacy, they talk about trade diplomacy because that is especially needed by countries in the region. Trade diplomacy in the context of regional trade among SAARC nation is positive and can be further improved. The member countries of the SAARC, I believe, should work towards regional cooperation in order to achieve growth. When there is regional growth, regional trade will definitely go up. If the member countries can develop a regional cooperation and agree upon certain things, a particular country can then focus on its available resources within its territory. <br />
	<br />
	<br />
	<strong>India, being the centre of regional trade among the SAARC nations, could have played a more vital role in making the SAARC trade bloc effective. What are the reasons for India not being able to do so? </strong><br />
	<br />
	As far as I know, India, being the centre of regional trade among the SAARC nations, is playing a vital role in making the SAARC trade bloc effective. However, there are issues among the SAARC nations that need to be resolved in order to make it more effective. India too has its own problems that it needs to resolve. But I believe India can play a major role with regard to development of regional trade in the region. <br />
	<br />
	<strong><br />
	Why is the trade in this region more oriented towards international market than trading within the region? </strong><br />
	<br />
	The trade in the SAARC region is more oriented towards international market probably due to the trade relations that have been developed with countries outside the region over a long period of time. There is also this attraction to trade with countries outside the region because of the high market price for products in the international market. The international destinations have far more secure markets and offer good prices and hard currency. I do agree that trading within the region is not up to the expectations, however, I believe this can be resolved through agencies like SAARC. Actually, SAARC can play a proactive role in the development of trade within the region. They are doing it already but my feeling is that they can do more. Regional cooperation and agreements like SAFTA, SAPTA etc need to be beneficial to all the countries. In order to do that, we have to identify proper people, train them and realise their services, so that we can request them to negotiate for the benefit of their respective countries. <br />
	<br />
	<br />
	<strong>Do you think that tariff and non tariff barriers contribute towards low intra-regional trade? </strong><br />
	<br />
	When the tariff is high, the prices of the goods also go up. Therefore, the countries must look at removing non tariff barriers. We can come up with some kind of consensus within the region so that tariff and non tariff barriers are removed. This, of course, needs to be done in consultation with the member countries of the region. <br />
	<br />
	<br />
	<strong>Can South Asia region prove to be a substantially big market to consume the production generated in the region and become self suffi cient on trade? </strong><br />
	<br />
	I think the South Asian region produces various products that are required for the region and it can certainly prove to be a market big enough to consume them. But the point is that one country has to produce products which the other country doesn’t produce so that you will have an assured market. Basically, what I can see is that most countries in the region produce similar goods and that’s where the problem lies. For example, Sri Lanka produces garments and at the same time, countries such as India, Bangladesh, Nepal and Pakistan also produce garments. Invariably, they have to go outside the region in search of a market for the same product. Hence, you have to have a common agreement with the countries in the region to address this issue. But this is not an easy task unless the countries in the region are committed to do so because each country is concerned about its own benefits. You can have a win-win situation only if there is a give and take policy in place. <br />
	<br />
	<br />
	<strong>What are the problems in expanding regional trade? What are the potentials of trade development? </strong><br />
	<br />
	Trade barriers such as high tariff, double taxation, lack of connectivity among the countries are some of the problems apart from what we have already discussed earlier. The countries have to look into their infrastructure and ways of connectivity in order to increase regional trade. The size of the economy is another issue that you need to look into, for example, India is a huge economy when compared to its neighbours.<br />
	<br />
	There is also the issue of underutilisation of resources which is a cause of concern. If we can resolve these issues, we will certainly be able to expand our regional trade. <br />
	<br />
	The potential for trade development is immense because all these challenges can be turned into opportunities. But we must make sure that we look at tapping the untapped resources. The barriers too need to be taken care of. I believe we will be able to prosper if we think of the entire region rather than only be bothered about our respective countries. <br />
	<br />
	<br />
	<strong>How would Sri Lanka like to represent itself as a brand in the region? What are the prospects of trade for your indigenous products in the region so that you donâte have to look beyond? <br />
	</strong><br />
	If you look at certain products like garments, gems and jewellery and herbal products, we do have the advantages. The market for these products is within the region as well as outside of it. Some of the products have already been accepted and valued by the region. If we produce in accordance with the region’s requirement, we can definitely carve a niche for ourselves. For example, we can design gems and jewellery in a way that caters to the tastes of people of other countries. I am positive that Sri Lanka can definitely expand its trade in the region as time passes.</p>
<p>
	 </p>',
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			'description' => 'The regional trade in South Asia seems to be improving over the years but it is not up to the expectation. Compared to the past, the South Asian economy is more open today. The tariff rates have come down from 80-90 per cent in the 1990s to 20-25 per cent today and exports and imports together are equivalent to about 20 per cent of the regional GDP. SAFTA was expected to include all products, manufacturers and commodities.',
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			'title' => 'Trade Of Hopes In South Asia',
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			'content' => '<p>
	<img alt="trade hopes" height="274" src="http://www.newbusinessage.com/ckfinder/userfiles/Images/tradeofhopes.jpg" width="300" /><br />
	<br />
	<br />
	<strong>Trade of Hopes in South Asia <br />
	<br />
	<br />
	New Business Age Bureau </strong><br />
	<br />
	<br />
	The 17th Summit of South Asian Association for Regional Cooperation (SAARC) held on 10-11 November this year adopted the Addu Declaration which lays emphasis on effective implementation of the SAFTA (South Asian Free Trade Area) accord among its member states. The heads of the eight member countries&nbsp; Afghanistan, Bangladesh, Bhutan, India, Maldives, Nepal, Pakistan and Sri Lanka at Addu city in Maldives discussed regional issues in an effort to take SAFTA forward. I think there is a realization now among the countries in the region to move SAARC into a more integrated regional cooperation model, says Jaideep Mazumdar, Minister and Deputy Chief of Mission at the Embassy of India in Kathmandu. <br />
	<br />
	<br />
	The declaration also includes measures to be taken to promote free flow of capital and investment and improve connectivity within the region. This year's Summit has decided to consider reducing non-tariff barriers (NTBs) and ad valorem (Latin for according to value) duties to promote freer trade. The SAFTA Ministerial Council has been directed to work on reducing sensitive lists, early resolution of NTBs and expediting the process of harmonising standards and customs procedures. Economic cooperation within the region is often viewed as a key tool for deeper integration within the region.] <br />
	<br />
	<br />
	Having recognised this, SAARC had initiated the SAARC Preferential Trading Agreement (SAPTA) as early as 1993, which later evolved into the SAFTA in 2004 and came into effect in 2006. there has been an increase in SAARC's world trade too. Hence, the share of intraregional trade has remained constant. In comparison, intra-regional trade under the Association of South East Asian Nations (ASEAN) is 32 percent, while it is 52 percent in the EU bloc and 68 percent in the USA and Canadian bloc. These trade blocs have also proved to be a tool for development for the participating countries within their respective regions. <br />
	<br />
	<br />
	<strong>Intra SAARC Trade </strong><br />
	<br />
	<br />
	While there have been several initiatives to promote trade among the region, a host of tariff and NTBs maintained by the member countries, the exhaustive negative list and the smallish trade basket have curtailed the growth of trade and investments in South Asia for long. According to an estimate, intraregional trade among the SAARC member nations (excluding Afghanistan which ratified the SAFTA protocol only in May this year) stood at $ 14.35 billion in 2010-11, an increase of 43.4 per cent vis-a-vis the same period in the previous fiscal. <br />
	<br />
	<br />
	The figure is approximately 5 percent of their total overseas trade in a year which is one of the lowest intra-regional trade volumes for any particular trade bloc. Ratnakar Adhikari, General Secretary of South Asia Watch on Trade, Economics and Environment (SAWTEE) says, “Intra SAARC trade has certainly increased over the years, however, <br />
	<br />
	<br />
	<strong>Unfulfilled Potential <br />
	</strong><br />
	<br />
	Staying true to the theme of Building Bridges, this year's SAARC Summit focused on connectivity by going ahead on a regional railways agreement and a motor vehicle pact besides inking a series of pacts on regional cooperation. Despite its high population and common culture, South Asia, is one of the most poorly connected regions in the world. While better connectivity promises to promote trade within the region, stronger trade relations can go a long way in promoting food security, poverty alleviation and improving socio-economic growth of the South Asian population. Prof Sridhar K Khatri, Executive Director of South Asia Centre for Policy Studies (SACEPS) says, The promises of SAFTA are much better but the important element is to put it into practice.<br />
	<br />
	<br />
	The share of South Asia in world economy is less than 2 percent with all eight nations of the region collectively contributing only 1.7 percent towards global trade. A number of regional trade issues largely remain unaddressed among the SAARC nations which are yet to tap the trade potential because of various problems. Different trade barriers like tariff, non-tariff and para-tariff, visa problems, political barriers, bilateral transit issues, negative list issues and testing issues are apparently acting as trade deterrents among the SAARC countries. Pradeep Kumar Shrestha, Vice President, SAARC Chamber of Commerce and Industry agrees, “Besides political reasons, infrastructure connectivity, high cost of business and bureaucratic hassles plague the prospects of intra-regional trade in South Asia.” <br />
	<br />
	<br />
	According to a paper published by the Reserve Bank of India (RBI) assessing intraregional trade in ten regional blocs, intraregional trade in SAARC was the lowest at 4.8 percent in 2008. The RBI report quoted, The reasons for the low level of trade include protectionist trade regimes, which discriminated against trade among larger neighbours; continued conflict between India and Pakistan; and transport and trade facilitation constraints.” Thick ice of contentious competition between regional peers has always been an overriding problem in the SAARC region. <br />
	<br />
	<strong><br />
	The Bottlenecks </strong><br />
	<br />
	<br />
	A lack of trust and political goodwill, and underperformance in leadership by the dominant economies has been mainly responsible for not turning SAARC into a successful regional trade bloc. For example, there is a lack of trust on several issues among nations such as India, Pakistan and Bangladesh. Mazumdar raises a case in point, “Historically, there has been a problem between India and Pakistan that was a hindrance for intra SAARC trade.<br />
	<br />
	<br />
	As a result, the major players have not participated actively in making SAARC an effective trade bloc. For too long, member nations of the SAARC have deprived themselves of the benefits of regional economic integration. The region homes one fourth of the world's population and possesses unlimited potential but has stayed least integrated. <br />
	<br />
	<br />
	The region is home to two-fifths of the world's poor and accounts for only 3 per cent of global output. Intra-regional trade has stagnated at around 5 per cent of its total trade for some time now compared to around 20 per cent in Latin America. Even Sub-Saharan Africa, with poor transport and telecommunication infrastructure, scores over South Asia, with over 10 per cent of its trade being intra-regional. The SAARC members have retained a plethora of tariff and NTBs, which greatly inhibits trade and investments in the region. With a large list of negative items, the trade basket remains very narrow, with little value addition. Thosapala HÃwag, Sri Lanka's Ambassador to Nepal recommends, We should be able to come up with some kind of consensus within the region so that tariff and non-tariff barriers are removed.<br />
	<br />
	<br />
	The major cross-border structural rigidities include behind-the-border barriers in customs procedures, poor transport links, weak networking of private sectors, and administrative issues such as visas. Foreign direct investment (FDI) too is minimal, due to regulatory issues and a non-facilitative business environment. We do generate and agree on good ideas in this region time and again but fail to give them shape because of our many conflicts as there is a serious lack of trust among SAARC countries,says Chandra Kumar Ghimire, Joint Secretary at the Ministry of Commerce and Supplies (now Consulate General of Nepal to Kolkata). <br />
	<br />
	<br />
	To make the SAARC regional trade bloc effective, the progress in duty-concession by the nations is not adequate. The participating countries were supposed to reduce the number of products from the negative list year-on-year for nations to enjoy a zero-duty facility under the SAARC umbrella after a certain period. But the progress in this regard has not been on expected grounds. Business leaders representing different trade bodies among the SAARC nations have been urging their governments to further liberalise their respective economies to help augment intraregional trade, consequently effecting the region's development. There is a serious leadership deficit in South Asia where no country or leader has become an advocate of regional integration to help us overcome difficulties and ensure development, Prof Khatri observes. <br />
	<br />
	<br />
	India, by virtue of being the largest economy in the region and its geographic position, is viewed as the member that bears additional responsibility towards intraregional economic integration. While India's trade with South Asian countries has increased considerably over the years, it is still below the potential trade levels. India, a connecting land mass, has a special responsibility in increasing intra-regional economic integration and facilitating access to its large markets for SAARC members. The idea that we had envisioned for SAFTA around a couple of decades ago has not materialised and that’s why we see a country like India establishing relations with other RTAs, for example, ASEAN,” Ghimire laments. <br />
	<br />
	<br />
	Its above-average growth, expanding middle-class population, and demand for global goods can prove to be an engine of growth for the region. India's trade with South Asian countries has increased encouragingly, in the last half-a-decade or so, but much trade is below the official radar. Further, India's trade with countries such as Nepal, Bangladesh, Sri Lanka and Afghanistan remains heavily skewed in its own favour. The services trade further adds to the trade imbalance, leading to concerns among other South Asian countries about trade sustainability. <br />
	<br />
	<br />
	<strong>The Way Forward </strong><br />
	<br />
	<br />
	The SAARC region has an immense potential for using economic integration to reduce poverty and move towards prosperity. Three areas offer large potential for economic cooperation the services trade, energy cooperation and logistical connectivity. The development of logistical hubs that facilitate the flow of trade across the region can greatly reduce the costs of doing business. These logistical hubs can help connect critical regional corridors, especially with countries having no common borders. The countries in the region will have to look into their infrastructure and ways of connectivity in order to increase regional trade, says HÃwag.</p>
<p>
	 </p>
<p>
	Tourism, a major growth opportunity for countries like Afghanistan and Nepal, remains constrained by security problems. Allowing intra-regional trade in services can enable South-Asian economies to become more globally competitive. Energy and electricity cooperation are non-traditional areas of trade relationship development. For example, Bhutan has managed to balance its trade with India with large exports of hydroelectric power, and similar potential exists for Bangladesh and Nepal. <br />
	<br />
	<br />
	An integration of electricity grids across South Asia can reduce power costs and enhance manufacturing competitiveness for all members. Huge hydro-electric potential exists in Nepal, Bhutan, Afghanistan and India, which could be tapped for intra-regional power trade. Each country has its own strength so we have to be able to nurture and benefit from areas of comparative advantages,feels Shrestha. Just days ahead of the SAARC Summit in Maldives, Pakistanâ's initiative to grant Most Favoured Nation (MFN) status to India was considered a major breakthrough. As far as trade goes, the move promises to help the economies of both the countries over a longer period of time. <br />
	<br />
	<br />
	Experts and analysts observe the major initiative can also prove to be an important step to help stabilise the region, struggling to combat poverty and achieve economic reliability in the wake of US and Eurozone debt crises. It would also pave the way for economic integration of SAARC countries and the prospects of the region thriving seem brighter than ever before. At the Maldives Summit, Indian Prime Minister Dr Manmohan Singh announced Indiaâ's decision to slash the sensitive list for least developed countries within SAFTA, reducing it from 480 tariff lines to just 25.</p>
<p>
	 </p>
<p>
	India has stated that zero basic customs duty access would be given for all the items removed, with immediate effect. There should be an attempt to create an incentive for the partner countries in the region to be able to export to a country like India,” Adhikari recommends. As things stand, SAARC as a regional bloc leaves a lot to be desired. However, SAARC has a good trade potential as the economies of a number of SAARC nations are growing fast, observers opine. The countries seem to be on the path towards eliminating tariff barriers and reducing NTBs against each other. It's time for the South Asian countries to think collectively in order to cash in the opportunity of emerging as a regional force to reckon with. <br />
	 </p>',
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	<img alt="" src="http://newbusinessage.com/ckfinder/userfiles/Images/Manufacturing.jpg" style="width: 524px; height: 585px;" /></p>
<p>
	A long-term vision for the Nepali Manufacturing Sector, known as vision 2020, prepared jointly by Nepal government, UNDP and UNIDO in 2002 had proposed to pursue a two-pronged industrialization strategy aimed at rural, agro-based industrialization, and formal urban-based industrial development. But a decade down the lane, nothing seems to be moving to the vision encapsulated then. The strategy proposed then as prioritising export-oriented labour-intensive manufacturing industries and tourism-related exotic products, where Nepal already enjoys considerable comparative advantage, still sounds equally relevant (see box for 2020 goals). But its proposal of raising the contribution of the sector to GDP from 10 to 20 per cent by 2020 appears highly unrealistic given its contribution of just about 7 per cent of GDP in FY 2010/11. From national economic standpoint, manufacturing has universally accepted double-edged goals -- consumption and/or exports. As Nepal is way below in meeting her consumers demand on virtually all sorts of items, and has equally good potential for export of various products, Nepalâ's manufacturing prospects, at least in theory, are truly bright.</p>
<p>
	It is because Nepali productions can replace the import in the domestic market and also have scope of export to rapidly growing neighbouring markets of India and, also China. Although the import to export trade ratio of Nepal in terms of value stands at 7:1, some of the Nepali produce like iron and steel products, acrylic yarn, hand-made woolen carpets, readymade garments and tea and coffee are faring well in international markets.</p>
<p>
	<img alt="" src="http://newbusinessage.com/ckfinder/userfiles/Images/goals for 2020.jpg" style="width: 468px; height: 400px;" /></p>
<p>
	The history of manufacturing in Nepal is not very long. The Nepal Companies Act, 1936 provided basis for incorporation of industrial enterprises which in fact had provisions for joint-ventures and public sector industries. The most tangible outcome of this Act was establishment of Biratnagar Jute Mills, a collaborative venture of Indian and Nepalese entrepreneurs. The Mill is considered first manufacturing unit of industrial scale in Nepal. But the said Act had no provision for private limited companies until it was reformed in 1951.</p>
<p>
	This new act encouraged the establishment of ninety-two new private joint stock companies between 1952 and 1964. The Industrial Enterprises Act of 1974 enacted in the heydays of panchayat polity also recognized role of the private sector in the industrial growth. But the panchayat regime continued the policy of protecting the public sector production over the private one, which in fact constricted the desired growth of the sector. Establishment of about a dozen industrial estates including at Patan, Balaju, Hetauda, Pokhara, Dharan, Butawal, and Nepalganj in the 1980s certainly contributed to create an organized industrial atmosphere. Several modern industries with large manufacturing plants to produce jute, sugar, cigarettes, beer, matches, shoes, chemicals, cement, and bricks were installed. The garment and carpet production units in much diffused fashion spread in the Kathmandu valley and surrounding areas, targeted at export production. By the end of last fiscal year, number of manufacturing units registered under the Department of Industries has crossed well above 2,000. This not only shows that investment and industrialization has expanded but also that the internal market of Nepali products has grown substantially. Of late, private sector investment in manufacturing of cement, sugar and items of daily use has increased significantly. Western district of Dang is developing as the ‘cement city’ as at least a half-dozen large cement companies are all set to begin production pretty soon. Many would like to categorize the hydropower units also as manufacturing. In that case, it can be claimed that Nepal’s manufacturing sector has been able to attract quite large amount of investment, mainly from the private sector. Still, very weak positioning of Nepali exports --due to lack of diversification, market research and identification</p>
<p>
	and, choice of low-value high-volume products -- has not been helpful for both manufacturing and trade balance. The share of main Nepali export in the global market has been limited in quantity and value, and thus been unable to create their own sectoral economies of scale. The policy conundrum is still a major bottleneck. In many sectors, public enterprises continue to play dominant role which is very often than not inviting unfair market play by government intervention. Price distortion is the major resultant effect that in turn is discouraging the private sector investment, at least in the sectors where the government is directly involved. Recent successive governments with mainly socialist tilts have made the situation even more confusing, as their policies lacked clarity in private property, entrepreneurship and profit making.</p>
<p>
	Even beyond political spectrum, challenges of facilitating the growth of manufacturing sector are many. On the supply side, Nepal’s physical infrastructure, especially electricity supply, roads and use of up-to-date technology are inadequate to support a modern manufacturing sector so that it becomes capable of quickly responding to trends in world market demands for manufactured products. As the newest problem, lack of manpower is another bottleneck due to labour migration to foreign countries. Departing from a conventional thinking, identifying afresh new niche and competitive products is also a striking need of the day. Strategies for trade, policies and investment can follow.</p>',
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			'description' => 'A long-term vision for the Nepali Manufacturing Sector, known as vision 2020, prepared jointly by Nepal government, UNDP and UNIDO in 2002 had proposed to pursue a two-pronged industrialization strategy aimed at rural, agro-based industrialization, and formal urban-based industrial development. But a decade down the lane, nothing seems to be moving to the vision encapsulated then.',
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		'Article' => array(
			'id' => '496',
			'article_category_id' => '40',
			'title' => 'Manufacturers Are Treated As Criminals In This Country',
			'sub_title' => '',
			'summary' => null,
			'content' => '<p>
	<strong>BIPPA should have been signed with India a couple of years ago because it is our nearest neighbour and the largest foreign investor in the country. BIPPA will be a milestone agreement as it promises added security to the Indian investors.<br />
	<br />
	<br />
	</strong></p>
<p>
	<strong><img align="left" alt="coverstory" border="1" height="225" hspace="10" src="http://newbusinessage.com/ckfinder/userfiles/Images/diwakar golchha.jpg" style="margin:10px; padding:10px;" vspace="10" width="200" /></strong></p>
<p style="text-align: justify;">
	<strong>How will the recent BIPPA agreement help in promoting the manufacturing sector? </strong></p>
<p style="text-align: justify;">
	BIPPA should have been signed with India a couple of years ago because it is our nearest neighbour and the largest foreign investor in the country. BIPPA will be a milestone agreement as it promises added security to the Indian investors. Manufacturing sector today has the biggest setback because of electricity problem. In this context, Indian investors have committed around 3,500 MW power generation in this country. In the second round of power summit going to be held in Kathmandu, we expect another 4-5,000 MW of electricity production commitment. Today, India is one of the largest international investors in the region and last year, Indian investors invested US $ 43 billion outside India. So, there is every reason for them to invest in Nepal as we are their nearest country where they will produce electricity and take to India. BIPPA, along with other agreements, shows a long term commitment of India towards Nepal.</p>
<p style="text-align: justify;">
	<strong>How do you analyse the Nepali manufacturing sector and its growth trend?</strong></p>
<p style="text-align: justify;">
	In recent years, the manufacturing sector has been neglected because of various reasons. It was neither in the priority of the government nor was there a concern to protect the domestic investments. So, many industries have shut down in the past seven to eight years. Our industries that had significant annual achievements are registering negative growth for a couple of years now. That is because of the wrong attitude of the bureaucracy and of course, none of the politicians are concerned. For the first time in the last 15 years, Nepali Industrialists have revived the hope they had lost after Dr Baburam Bhattarai became the Prime Minister. Manufacturers are treated as criminals in this country, which is why the entire investment climate is in dire straits. Even the facilities committed by the act of 1990 were denied and later withdrawn which is a betrayal to this sector.</p>
<p style="text-align: justify;">
	<strong>Which is the most appropriate sector for manufacturing for Nepal? Why do you think this specific sector is not much developed as expected?</strong></p>
<p style="text-align: justify;">
	There are so many products necessary to be manufactured in Nepal. Unless the climate for manufacturing and attitude of bureaucrats do not change and unless there is a strong body that can understand the multiplier effects of investment and language of economy, one cannot think of industrialisation. We have discussed the issues and problems we faced after 2000, with Dr Bhattarai. We are hopeful that the industrial revolution will take off after 2012-2013. Many sectors may revive provided there is lowered cost of production and cheaper cost of doing business transactions. There are numerous harassments like high finance cost, no electricity, and so many other reasons due to which industries do not come up. Unless there is power, nobody is going to put money into industry. I will not recommend anybody, at least in my family, to go for manufacturing at this point in time.&nbsp;</p>
<p style="text-align: justify;">
	 </p>
<p style="text-align: justify;">
	<strong>Everybody is complaining that Nepal does not have a suitable industrial environment. Golchha Organisation is one of the most successful corporate houses focused on manufacturing. How are you managing it?</strong> <img align="right" alt="" hspace="5" src="http://newbusinessage.com/ckfinder/userfiles/Images/golchha2.jpg" style="text-align: justify; width: 153px; height: 239px;" vspace="5" /></p>
<p style="text-align: justify;">
	Successes and failures are always part of one’s life. If we are suffering because of the wrong attitude of the government, we might want to close down some industries so that it can give a message. We had to close down Sri Bhrikuti Pulp and Paper Nepal Limited because of the wrong attitude of the government. We are going to close down another important industry, Sri Nepal Boards Ltd due to the same reason. The successive governments thought that importing goods gets them more revenue which they can spend on regular expenses. However, that will leave the country’s development in lurch. There is no desire in the government for development of this country, the only desire is to garner more revenue and enjoy it. At this moment, Golchha Organisation is doing very well with its trading businesses. Trading involves more than 50 per cent of our total turnover while the service sector has around five per cent share and the remaining makes up for our manufacturing concerns.</p>
<p style="text-align: justify;">
	<strong>How long do you think such a situation will persist in the country?</strong></p>
<p style="text-align: justify;">
	It requires visionary leaders like Lee Kuan Yew of Singapore and Mahathir Mohamad of Malaysia to build successful economies. We have our hopes pinned on Dr Bhattarai and we do see similar capabilities in him. If he could remain the Prime Minister of Nepal for the next 10 years, we believe that he can transform this country. But first and foremost, he should begin with a total transformation of the bureaucracy in Nepal.</p>
<p style="text-align: justify;">
	<strong>Large corporate houses are shifting to the service sector. What is the reason behind it ? <br />
	</strong></p>
<p style="text-align: justify;">
	The Nepali people have enhanced their buying power today by virtue of remittance. They want better services and can spend money for that. Service is a sector where you have the possibility of a quick return without making a heavy investment like in an industry. Though are small hurdles like power shortage, strikes and blockades that are affecting this sector as well, it can still manage on its own. That is why the service sector is bound to develop and people are flocking for this sector.</p>
<p style="text-align: justify;">
	<strong>Can a country sustain based on imported goods only as corporate houses and industries are shifting to service sector from manufacturing?</strong></p>
<p style="text-align: justify;">
	There is always a phase like this and ultimately, the nation will have no alternative. Unless you have a manufacturing sector, how much service can you possibly sell? Everything has a limitation so the service sector too will reach a saturation point. Ultimately, when there is a possibility of easy investment and return, competition to make a mark in the manufacturing sector will intensify. There has to be balance in everything because nothing can grow imbalanced. You cannot say that one sector will grow and another sector is not required.</p>
<p style="text-align: justify;">
	<strong>Why are there very little measures to promote goods that have comparative and competitive advantages?</strong></p>
<p style="text-align: justify;">
	At the moment, Nepal has no comparative advantage whatsoever. Once we have sufficient power, labourers more inclined towards working rather than politics, banking sector more favourable for investment, a favourable government and its economy-friendly policies, we will have comparative advantages. Unless these logistics are there, one cannot compete. Today, in India, there are industries that are 20 times bigger than what we have in our country. Given India’s automation and advancement, it is difficult for us to compete with our older and manual technology. So, it is almost impossible to achieve higher cost advantage and efficiency in Nepal. If the policies are correct and the sizes of operation are reasonable, we will definitely compete.</p>
<p style="text-align: justify;">
	<strong>There are duplications even with the limited size of the Nepali manufacturing sector. How sustainable is it and what are your suggestions to control such duplications?</strong> Duplication has been the phenomenon of the entire world. Nepal is not the only country which faces this problem. There are some industries who lead with original ideas and some others who follow. Only time can tell whether such practices will succeed or not. The capable ones will sustain and the incapable ones will take their own path. Investors have to think which sector they have to go, you can’t push your product. Once there is a pull factor, you will produce more because if you try to push things, you will never get the desired results. The market is the best judge to accept or not to accept such practices.&nbsp;</p>',
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			'title' => 'Industrial Development Is Impossible Without Basic Infrastructure',
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			'content' => '<p style="text-align: justify;">
	<span style="font-size: 14px;"><strong>What is the present status of the manufacturing sector in Nepal?</strong> <br />
	</span></p>
<p style="text-align: justify;">
	<span style="font-size: 14px;">The market for both consumable goods and durables has been growing and expanding in the international arena. Growth of manufacturing sector ensures overall economic growth. As a result, demand for both consumable goods and capital goods increases. Demand of consumable and capital goods has been growing globally. That is why we can say that the manufacturing sector has been growing the world over. But the problem is that though the demand for these goods is rising globally, production of these goods has centred around booming economies like China and India. As far as Nepal is concerned, we are in a very sorry state in manufacturing sector. Leave alone the possibility of expansion; even the goods that we used to manufacture in our own country have been displaced. For example, we used to produce fabrics in our country but Chinese readymade clothing available at cheaper prices has now replaced them. There were about 35 factories owned by the government but most of these public sector industries have shut down. We were the third largest jute producers in the world at one point of time. The health of our oldest factory, Biratnagar Jute Mill, has been deteriorating with the production and profit of this factory nosediving. The carpet industry used to contribute 20-22 per cent towards our national income but this percentage has been witnessing a downward trend. The contribution of the private sector is not very satisfactory. <br />
	</span></p>
<p style="text-align: justify;">
	<span style="font-size: 14px;"><img align="left" alt="cover story" border="1" height="308" hspace="10" src="http://newbusinessage.com/ckfinder/userfiles/Images/bholanath pokheral.jpg" style="margin:10px; padding:10px;" vspace="10" width="250" /><br />
	</span></p>
<p style="text-align: justify;">
	<span style="font-size: 14px;"><strong>How do you analyse the growth of the manufacturing sector in Nepal? </strong><br />
	</span></p>
<p style="text-align: justify;">
	<span style="font-size: 14px;">Had our factories used our own resources or inputs, it would have yielded high value. But our manufacturing industry has been providing more of an assembling facility to intermediary products that we bring from international market rather than producing goods by ourselves. If we analyse the history of the growth of manufacturing sector in Nepal, the industrial development that began from the 1980s started to expand from 1990's revolution with the radical shift in power and the country adopting the path of democracy and liberalism. We had significant growth in the manufacturing sector from 1995 to 2002. The growth was up to 20 per cent. But after 2002, the contribution of manufacturing sector has been even lesser than the contribution of agriculture. Nepal hasn’t been able to exploit its position between the two economic giants. <br />
	</span></p>
<p style="text-align: justify;">
	<span style="font-size: 14px;"><strong>What are the impediments for investing in the manufacturing sector? </strong><br />
	</span></p>
<p style="text-align: justify;">
	<span style="font-size: 14px;">Like water, capital flows to a place where there is favourable investment environment. The movement of capital can neither be controlled nor stopped. We have been witnessing that the factories that were opened in our country have now shifted to places like Himachal Pradesh in India because the environment of Nepal is not investment-friendly. A number of causes are responsible for this local market, international market, labour issues, tax policy, political instability, insecurity, lack of basic infrastructure etc. The private sector claims that labour issues and government bureaucracy are the key hurdles for industrial growth. Nepal's labour productivity is one of the lowest in the world and lack of skilled manpower has been the greatest challenge for industries. The labour situation is so bad that they are hiring Indian nationals to run their industries. Besides, there are labour unions to worsen the situation. Energy crisis is another major problem for us as we have to face 18 to 20 hours power outage a day. This goes to prove that we donâte have consistent policies and the policies change with every new government that takes charge. Cartels and syndicates are some other problems that plague the sector. Lack of basic infrastructures like roads, water, etc is something that we all know about. Industrial development is impossible without these basic infrastructures. <br />
	</span></p>
<p style="text-align: justify;">
	<span style="font-size: 14px;"><strong>A lot of corporate houses previously involved in manufacturing have been shifting to the service sector. Can an economy sustain based on the service sector and imported goods?</strong> <br />
	</span></p>
<p style="text-align: justify;">
	<span style="font-size: 14px;">According to economic theories, the growth in the size of an economy results in the expansion of its service sector. Investment moves from one sector to another on the basis of two factors: risk and profit. At present, investment in the manufacturing sector involves very high risk as there are number of impediments involved. Most of our industries are located in the three industrial corridors of Nepal first, from Itahari to Rani, the second from Hetauda to Birgunj and the third from Butwal to Sunauli because these places have better arrangement of infrastructures like roads, water and electricity connection. So, even though an economy cannot sustain with a growth in the service sector alone, capital has moved to this sector in Nepal as it involves less risk and high rate of return. Until the impediments are cleared, investment in manufacturing sector will not materialise.</span></p>
<p style="text-align: justify;">
	<span style="font-size: 14px;">Why can’t agriculture be developed as an important industry in our country? Our agriculture sector has not been able to create demand because it is not vibrant enough. The greatest challenge in the agriculture sector is the labour problem. Youths have left their villages for opportunities in the cities or outside the country and fertile lands have either turned barren or have shifted to permanent cropping. The consumption demand is growing in the villages due to remittance inflow and not because of the contribution of agriculture. <br />
	</span></p>
<p style="text-align: justify;">
	<span style="font-size: 14px;"><strong>How can we reach the level of sustainability or even export Nepal's manufactured goods to the international market?</strong> <br />
	</span></p>
<p>
	<span style="font-size: 14px;">There are a few aspects to consider before we think about expanding the market of our products to the international level. The first is the quality of our products. Can our products stand on the same level compared to similar products available in the international market? Can we sell our products at a competitive price? For this, the cost of production should be low. High labour and management efficiency in addition to cheap capital can decrease the production cost. But, the scenario in our country is just the opposite and hence, there are a very few products with this possibility. Take the example of honey which we used to export to Europe not too long ago. But Europe no longer accepts our honey as they found traces of insecticides in it. We don’t have a facility to test it and certify that our honey is pure. Similarly, Nepalis in general do not show strong trait of entrepreneurship. One of the economics theories states that a refugee has a greater possibility of becoming a good entrepreneur than any other person. Even the history shows that people who have left their countries with a determination to go through hardships have become successful entrepreneurs. Second, the theory claims that certain caste or creed have better entrepreneurial skills than others. Nepali entrepreneurs belonging to Thakali and Newar castes have not been able to groom themselves as international businessmen like the Marwaris have. Most of the countries in the world have China Towns that are famous for Chinese food. In the same manner, Thakalis too can promote their authentic dishes in the international market. The Nepalis in general should also use their natural skills and groom themselves to earn respect in the international arena. <br />
	</span></p>
<p>
	<span style="font-size: 14px;"><strong>Despite all these barriers, do you see possibilities that can take Nepal on the way to prosperity?</strong><br />
	</span></p>
<p>
	<span style="font-size: 14px;">One sector with tremendous possibility is limestone as we are very rich in this resource. If we can use limestone and subsitute the import of cement, we can save a considerable amount of foreign currency. However, this sector hasn't developed the way it should have. Besides limestone, hydropower, tourism, medicinal herbs etc are other possibilities that we can explore. <br />
	</span></p>
<p>
	<span style="font-size: 14px;"><strong>When will we actually have favourable industrial and investment environment?</strong></span></p>
<p>
	<span style="font-size: 14px;">Political stability only can ensure favourable industrial and investment environment because it will ensure stable economic policies. But that is not enough. Investment will get attracted only when we have consistent policies and programmes and when the government is clear about private investments. The risk factor is high during political instability so let's hope that we achieve the same through constitution, an election and formation of a stable government. Though the country is following this path, the progress has been very slow. Similarly, labourers should be clear about both their rights and responsibilities. They are presently acting more like the political parties wings rather than institutions that must fight for the rights of labours. Similarly, quality people living abroad must return to build their own country. The government can take an initiative in this regard by guaranteeing employment, security and welfare to them in Nepal. It's certainly going to take some time to sort out these issues but we must not lose hope and remain optimistic. <br />
	</span></p>
<p>
	<span style="font-size: 14px;"><strong>What is the prospect of Nepalâ's manufacturing sector? What are the remedial measures you would like to recommend? </strong><br />
	</span></p>
<p>
	<span style="font-size:14px;">There is no way out other than utilising our competitive advantage. The greatest competitive advantage of Nepal is its location between the two emerging economic giants. We can certainly facilitate trade between China and India and at the same time, expand our economy by participating in theirs. We donâte have vast natural resources and the only resource we can take pride in is water, however, it is not a secured resource as it is in the grip of climate change. Tourism can be developed as a big industry while specialisation in agriculture can be another possibility. If we can process our medicinal herbs in our own country, it can contribute significantly to our national economy. The trend so far is that we sell our raw-materials at very low prices while buying processed items very expensively. The practice of herding and limping is another hitch because it hurts specialisation. If these aspects could be corrected, we can imagine a prosperous economy in our country in the foreseeable future.</span></p>',
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			'title' => ''NRB Will Take Every Possible Measure To Bring Liquidity Problem Under Control'(October 2011)',
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			'content' => '<div style="text-align: justify;">
	<span style="color:#(color);"><span style="font-size: 14px;"><strong>Gopal Prasad Kaphle </strong>is Deputy Governor of Nepal Rastra Bank (NRB), the central bank of <img align="right" alt="" border="2" height="356" hspace="10" src="http://newbusinessage.com/ckfinder/userfiles/Images/gopal prasad kaphle.jpg" vspace="10" width="250" />Nepal. He was appointed to the post on December 26, 2010. He started his career in banking in 1955 and is devoted to this sector for more than 29 years. During this period, he worked in banking operation, branch operation, development finance, micro finance, public debt, training, and banking inspection and supervision department. He completed Master’s Degree in Economics from Tribhuvan University in 1979. He also has a Master’s Degree in Economics from the University of New England, Australia. In an interview with <i>New Business Age</i>, Kaphle speaks about the current situation in the banking sector and NRB’s regulatory plans for the future. Excerpts:<br />
	<br />
	</span></span></div>
<div style="text-align: justify;">
	<span style="color:#(color);"><span style="font-size: 14px;"><br />
	</span></span></div>
<div style="text-align: justify;">
	<span style="color:#(color);"><strong><span style="font-size: 14px;">Total net profit of commercial banks has increased by 2.28 per cent compared to that of last year. Why is the growth so low?<br />
	<br />
	</span></strong></span></div>
<div style="text-align: justify;">
	<span style="color:#(color);"><span style="font-size: 14px;">The growth rate compared to a few years ago is quite low. However, there is no reason to be unhappy about the profit earned by financial institutions. There are some factors that have caused the liquidity problem such as absence of investment area and environment, turmoil in real estate, margin lending, and until last year delayed government budget. Despite these all, BFIs (bank and financial institutions) are successful in making profit and provide relief to shareholders and promoters. In the coming years, if the things change for the better like a timely budget, investment friendly environment and good corporate governance, we can be more optimistic about the high growth in profit.<br />
	<br />
	</span></span></div>
<div style="text-align: justify;">
	<span style="color:#(color);"><span style="font-size: 14px;"><br />
	</span></span></div>
<div style="text-align: justify;">
	<span style="color:#(color);"><strong><span style="font-size: 14px;">Problem of liquidity is still not solved. What is the real scenario at present? How long will it take to overcome this crisis?<br />
	<br />
	</span></strong></span></div>
<div style="text-align: justify;">
	<span style="color:#(color);"><span style="font-size: 14px;">If we look at the liquidity inside financial system, there are not many reasons to worry about. A couple of months ago, commercial banks had Rs 22 billion surplus liquidity in the market. Prior to that, more than Rs 30 billion surplus liquidity was observed in commercial banks. Most of the commercial banks except only a few are in surplus. Among B and C class financial institutions, some have surplus while others are in deficit. Moreover, commercial banks are at ease while development banks and finance companies are not completely out of the woods. If we look at inter-bank lending rate, till date, only some finance companies are still borrowing at 15 or 16 per cent. Commercial banks were borrowing at one per cent some time back but at present they are borrowing at around 1.5 per cent. This shows, there is ease in the system but at the individual level, some bank and finance companies are still in problem. But, the liquidity problem is not completely resolved.</span></span></div>
<div style="text-align: justify;">
	<span style="color:#(color);"><span style="font-size: 14px;"><br />
	</span></span></div>
<div style="text-align: justify;">
	<span style="color:#(color);"><span style="font-size: 14px;">This time of the year is normally the period of ease. During this period, the government budget has been passed by the parliament. There have been fewer investments. Loan and interests repayment rate in the commercial banks is good. That makes the liquidity problem to look relieved. We are also in a wait and watch mode to see what the situation is after Dashain and Tihar. I believe there won’t be big problems like in previous years. At such times, we cannot deny the possibility of problems. However, we are alert because of the lessons we have learnt. Public trust has developed in the banking sector. In the coming days, NRB will take every possible measure to bring this problem under control. The government has also assured that. NRB, if required, will use any instruments like refinancing to LOR (Lender of Last Resort) to bring the situation in control. To make sure that liquidity does not remain idle, we are issuing development bonds and treating B and C class institutions can participate in such instruments. We are putting them in a separate basket. I am trying to ensure the environment to cash in on instruments whenever there is any problem of liquidity. Problem is psychological too. And, commercial banks are also optimistic that the problem will ease. I believe the problems of the past will not repeat.<br />
	<br />
	</span></span></div>
<div style="text-align: justify;">
	<span style="color:#(color);"><span style="font-size: 14px;"><br />
	</span></span></div>
<div style="text-align: justify;">
	<span style="color:#(color);"><strong><span style="font-size: 14px;">The average non-performing loan out of total loans has increased to 2.41 per cent from 1.92 per cent of previous year. What is your take on this?<br />
	<br />
	</span></strong></span></div>
<div style="text-align: justify;">
	<span style="color:#(color);"><span style="font-size: 14px;">This may be realistic too because the biggest problem currently is real estate loans. The financial sector is not mobile. Economic activities are missing; industries are not moving on the right track, there are problems of labour and import-export. Due to unstable government, policies are not implemented. We also realise that NRB has become quite aggressive and taken tough policy measures. We tried to address the problem of good governance that has been left unaddressed over the years at once instead of treating it in a step-by-step manner. Due to the absence of investment environment to tap such opportunities, lending in industries have problems of recovery. Industries may not be running, some might have been closed down, there are labour issues. So, loans are not being paid back. Some banks and finance companies were in problem. So, we decided to liquidate some companies, and because of that, their non-performing loans must have been added. Real estate loans had the largest market share. We put a cap on lending to the real estate. The sales of real state also faltered. As developers cannot sell, they could not repay the loan. We have tried to ease it. However, market and economy as a whole has effects on business and non-performing loans increased.</span></span></div>
<div style="text-align: justify;">
	<span style="color:#(color);"><span style="font-size: 14px;"><br />
	</span></span></div>
<div style="text-align: justify;">
	<span style="color:#(color);"><span style="font-size: 14px;">On NRB’s inspection and supervision part, we have managed it. Compared to the past, we have improved our vision and efforts to solve problems, monitoring and inspections. After our effective inspection, institutions are not able to turn bad loans into good. That has also led to increase the volume of such loans. Increase in such loans does not mean banking system’s status has deteriorated than earlier. This is another side of NRB’s inspection, supervision’s smoothness and effectiveness.<br />
	<br />
	</span></span></div>
<div style="text-align: justify;">
	<span style="color:#(color);"><span style="font-size: 14px;"><br />
	</span></span></div>
<div style="text-align: justify;">
	<span style="color:#(color);"><strong><span style="font-size: 14px;">NRB is planning to adopt a risk based supervision system. What will be the modality of such a system? And, how soon could this be implemented?<br />
	<br />
	</span></strong></span></div>
<div style="text-align: justify;">
	<span style="color:#(color);"><span style="font-size: 14px;">We have various modalities in this risk-based supervision system. There are numerous risks like subjective, managerial and operational among others. Our inspection department categorises specific risks from every sector. Based on that, we define our observation. There may be risks in one sector while others may be safe. This modality tries to take a multidimensional approach to maintaining discipline. It is a change from traditional supervision mechanism. The mechanism is envisioned to ensure that banks and financial institutions should not be in trouble because of any sector or cause. It considers not only good governance, capital base but also operation, investment portfolio among others. This modality aims to calculate and mitigate risks from any sectors. It is based on our belief that a bank must be healthy, strong and create a separate identity in the market.<br />
	<br />
	</span></span></div>
<div style="text-align: justify;">
	<span style="color:#(color);"><span style="font-size: 14px;">Risk-based supervision is applied within NRB too. We are applying it in our departmental operations. It is already under application. We believe risks must be mitigated. We now have to take it forward effectively and give continuity to it. We have to calculate risks that may arise in the future.<br />
	<br />
	</span></span></div>
<div style="text-align: justify;">
	<span style="color:#(color);"><span style="font-size: 14px;"><br />
	</span></span></div>
<div style="text-align: justify;">
	<span style="color:#(color);"><strong><span style="font-size: 14px;">IMF had suggested NRB to exercise more power. What are the new steps NRB is planning to take?<br />
	<br />
	</span></strong><span style="font-size: 14px;">Exercise of power must be viewed considering a couple of elements. NRB exercises power based on NRB Act and BAFIA. BAFIA is in the house and discussions are going on to amend it. It must be strong. The government sector also has a role to make NRB active. We have focused on a few things like taking prompt action on the problems witnessed in financial institutions. NRB must be given right to take prompt action against any issues of good governance. For now, it takes a long time to take action against any person who is proved guilty. The process requires informing the Ministry of Finance then the Ministry of Home and finally the police. If we had power, we could have taken action against some financial criminals. So, NRB must be powerful and the government intervention should be less. NRB should be guaranteed a strong autonomous identity. For that, the status of Governor and Deputy Governor of NRB must be raised which would lead to more power. There must be such provisions that police can make arrests and take actions based on our letter. Time lag that is in existence is encouraging culprits to flee. We are demanding to increase our rights and that will help maintain discipline in banks and financial institutions.</span></span></div>
<div style="text-align: justify;">
	<span style="color:#(color);"><span style="font-size: 14px;"><br />
	<br />
	</span></span></div>
<div style="text-align: justify;">
	<span style="color:#(color);"><strong><span style="font-size: 14px;">What is NRB doing to restore public confidence in financial institutions that is said to be at a low ebb?<br />
	<br />
	</span></strong></span></div>
<div style="text-align: justify;">
	<span style="color:#(color);"><span style="font-size: 14px;">I don’t fully agree with it. At present, public confidence is improving. The confidence started declining when there was crisis of new notes during Dashain around two-three years back. Then, slowly public belief diminished in the entire banking system. And, it heightened with the liquidity crunch. At the same time, some companies were in problem and as a result, trust in the entire financial system eroded. If NRB had not been able to take action and correct its policies, the confidence would have fallen more. We tried hard and deposits have increased, profit has grown though a little and the people are returning to banks for deposits. People kept their money with themselves as some banks could not give loans, or even return deposits. We have moved on from this situation. The increased deposit and surplus liquidity is all because of increasing public confidence. I don’t think commercial banks should worry but this is not a siesta time. Public is so sensitive that if it does not get good service there will be shift in belief and trust. Public confidence must be won with good service, good governance and transparency.<br />
	<br />
	</span></span></div>
<div style="text-align: justify;">
	<span style="color:#(color);"><span style="font-size: 14px;"><br />
	</span></span></div>
<div style="text-align: justify;">
	<span style="color:#(color);"><strong><span style="font-size: 14px;">A demand to stop issuing license to financial institution is heard. Is NRB planning to take such action?<br />
	<br />
	</span></strong></span></div>
<div style="text-align: justify;">
	<span style="color:#(color);"><span style="font-size: 14px;">A couple of things must be taken into consideration. Firstly, the number of financial institutions needed for Nepal with respect to our scale of economy must be clear. Another, there must be clear demarcations of public status like deprived groups, remote areas, hilly and mountainous areas and developed areas. We have already faced the consequences of rampant establishment of banks and finance companies. So, we are going for merger. One policy was formulated, companies came meeting the requirements and licence was issued. We have seen its consequences. NRB’s capacity for inspection and supervision was witnessed along with banks and finance companies’ capacity and implementation of good governance. Often question is raised whether a company can be established or not just with a certain amount of capital. The number is one question, while deepening access of service in certain geographical region and population can be another. Access and inclusion of financial and banking service to all regions must be analysed. The measures to cater to that group or region deprived of service must be pointed out. Similarly, unhealthy competition arises from increased number. The cake is shared by all institutions even as their number increases. Eventually, the size of activities will also diminish. Considering it, a suitable policy and environment must be created. It does not mean we should not issue any licenses. We had prioritised microfinance and its number has also exceeded. There are a lot of duplications. It must be analysed whether a particular area requires more companies or service. Whether to go for branch expansion or number of institutions are two options. So, whichever is feasible we must concentrate on that. Every region and every group of people must be able to access the services and share the cake of national economic development. We must devise our licensing policy accordingly so that there is no duplications and quality facilities are evenly distributed. We are making such policy. We are forming a five-year strategic plan in which we have planned to review the licensing policy. After formulation of that outline, we will have suitable licensing policy and we will bring in merger to control excess institutions and expand in areas with scarcity. That will be either by motivation, giving additional services or accelerating, we will take banking services to those areas.<br />
	<br />
	</span></span></div>
<div style="text-align: justify;">
	<span style="color:#(color);"><span style="font-size: 14px;"><br />
	</span></span></div>
<div style="text-align: justify;">
	<span style="color:#(color);"><strong><span style="font-size: 14px;">Till date, a merger between two commercial banks has not happened. Do you think the mergers that are happening are satisfactory and meet the expectation of NRB?<br />
	<br />
	</span></strong></span></div>
<div style="text-align: justify;">
	<span style="color:#(color);"><span style="font-size: 14px;">The expectation of NRB on merger is not met. For the coming days, NRB is offering two options: merge and get incentive or be ready for forceful merger. If motivational measures do not work, we will have to go for forceful mergers. IMF and other world bodies have suggested that the number of financial institutions is exceeding the national capacity and need. Our only target is to merge the financial institutions, increase their capital base and ensure good governance. It is our continued effort. There are policy complications and we are relaxing them. We are inviting them to come for merger as soon as possible. It is obvious that some practical problems come during mergers. Nobody wants to lose anything. There can’t be two CEOs, chairmen or GMs. Problems in managerial aspects are visible. Someone must compromise something. NRB is determined and it will make mergers anyhow.</span></span></div>
<div style="text-align: justify;">
	<span style="color:#(color);"><span style="font-size: 14px;"><br />
	<br />
	</span></span></div>
<div style="text-align: justify;">
	<span style="color:#(color);"><strong><span style="font-size: 14px;">NRB is trying to correct several of its mistakes of the past like cap on CEO salary, margin lending and real estate? Why does NRB take ad-hoc decisions in the first place?<br />
	<br />
	</span></strong></span></div>
<div style="text-align: justify;">
	<span style="color:#(color);"><span style="font-size: 14px;">I don’t think so. While trying to manage something in an open system, ripples like in a pond hit by a stone are visible. We did not compromise even while deciding CEO’s salary. It is implemented now. We had some policy difficulties regarding B and C class institutions. There would be large variations if similar policy is applied in all financial institutions. It is difficult to manage as there are institutions confined to a district and also large national institutions. Now, we have addressed it through a new policy. We have let them decide independently on salary but based on certain backdrops.<br />
	<br />
	</span></span></div>
<div style="text-align: justify;">
	<span style="color:#(color);"><span style="font-size: 14px;"><br />
	</span></span></div>
<div style="text-align: justify;">
	<span style="color:#(color);"><strong><span style="font-size: 14px;">How long will it take to improve the BoP situation to a comfortable level?<br />
	<br />
	</span></strong></span></div>
<div style="text-align: justify;">
	<span style="color:#(color);"><span style="font-size: 14px;">BOP has improved lately and it was in surplus in June/July. It will continue to improve in coming months too. I don’t think we will go into deficit this year but having said that we should not stay idle. It is getting positive and we are optimistic. There are countries which have deficit balance of payment and are still considered developed. In countries like ours, where there is small source of income and imports are big, some discipline must be maintained like increasing our productivity in sectors like agriculture and increased credit flow to the productive sectors. Internal production immediately helps BoP. We have requested financial institutions to invest in such areas. When the government budget flows to those areas, production increases and jobs are created. That will have multiplier effect and export will also increase. Import of luxurious goods must be discouraged while development oriented activities must continue. Other options than remittance also need to be sought to remain in safe position.</span></span></div>',
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			'created' => '2011-10-11',
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			'description' => 'Gopal Prasad Kaphle is Deputy Governor of Nepal Rastra Bank (NRB), the central bank of Nepal. He was appointed to the post on December 26, 2010. He started his career in banking in 1955 and is devoted to this sector for more than 29 years. During this period, he worked in banking operation, branch operation, development finance, micro finance, public debt, training, and banking inspection and supervision department.',
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		'Article' => array(
			'id' => '474',
			'article_category_id' => '40',
			'title' => 'We Are Sailing Easy For Now (October 2011)',
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			'summary' => null,
			'content' => '<div style="text-align: justify;">
	<span style="color:#000;"><span style="font-size: 14px;"><strong>Sashin Joshi </strong>is the Chief Executive Officer of Nepal Industrial &amp; Commercial (NIC) Bank Limited. <img align="right" alt="" border="2" height="378" hspace="10" src="http://newbusinessage.com/ckfinder/userfiles/Images/sashin%20joshi.jpg" vspace="10" width="250" />He is also the Chairman of National Banking Training Institute (NBTI) besides being the Immediate Past President of Nepal Bankers Association. He holds an MBA in Finance, a Post-graduate Diploma in Marketing and is Credit-Accredited by international banks. Having started his banking career in 1986 with Nabil Bank, Joshi has also worked in Australia and New Zealand Banking Group, Melbourne, and ANZ Grindlays Bank, Kolkata. He was a Director of the Board and Head of Corporate &amp; Institutional Banking at Standard Chartered Bank Nepal before moving to NIC Bank. Also a Founding Director of Rural Micro-finance Development Centre (RMDC), he aspires to contribute in scaling-up reform in Nepalâ's financial sector by working closely with the government, the central bank and the private sector. In an interview with Pinaki Roy of <i>New Business Age</i>, Joshi analyses the performance of Nepal's commercil banks over the past year and recommends remedial measures on issues that plague the sector. Excerpts:</span></span></div>
<div style="text-align: justify;">
	<span style="color:#000;"><span style="font-size: 14px;"><br />
	</span></span></div>
<div style="text-align: justify;">
	<span style="color:#000;"><strong><span style="font-size: 14px;">What is your analysis of the performance of Nepal's commercial banks over the past year?</span></strong></span></div>
<div style="text-align: justify;">
	<span style="color:#000;"><span style="font-size: 14px;">It's not very good. But honestly speaking, I was expecting it to be even worse. Banks were helped to a certain extent by some relief measures given by the central bank at the last minute. I had predicted that the aggregate profit of all the commercial banks put together would be negative. However, we have managed aggregate increase in profit by about two-and-a-half per cent compared to that of last year. My analysis is that the Nepal Rastra Bank’s (NRB) relief measures in the eleventh hour helped us avert negative growth.</span></span></div>
<div style="text-align: justify;">
	<span style="color:#000;"><span style="font-size: 14px;"><br />
	</span></span></div>
<div style="text-align: justify;">
	<span style="color:#000;"><strong><span style="font-size: 14px;">Total net profit of commercial banks in Nepal has increased by a mere 2.28 per cent compared to that of last year. What is the reason for this slow growth?</span></strong></span></div>
<div style="text-align: justify;">
	<span style="color:#000;"><span style="font-size: 14px;">The commercial banks’ profitability was impacted for a number of reasons. As a result of extremely tight liquidity, banks started competing fiercely for deposits by going one-up on interest rates. The deposit rates increased significantly but the banks were not able to pass on all the increase to the borrowers. This resulted in the banks’ average margin getting reduced. Many banks had to take on additional costs on account of personnel, utility, security, stationery supply etc among others. And of course, there is no business growth for reasons of political instability.&nbsp;</span></span></div>
<div style="text-align: justify;">
	<span style="color:#000;"><span style="font-size: 14px;"><br />
	</span></span></div>
<div style="text-align: justify;">
	<span style="color:#000;"><strong><span style="font-size: 14px;">Liquidity crunch continues to persist. What is the severity of the crunch at this point of time and how long will it take us to overcome this?</span></strong></span></div>
<div style="text-align: justify;">
	<span style="color:#000;"><span style="font-size: 14px;">I would like to contradict you here. The liquidity situation has improved significantly over the past couple of months. It improved primarily due to two reasons: one is that there was massive government expenditure that happened towards the end of the last fiscal year. Besides, the budget this year came out on time and therefore, there was no gap between budget approval and government expenditure. On the external account, there have been a lot of reimbursements that have happened for projects which were undergoing or completed. Another reason is that due to very tight liquidity crunch and lack of favourable market conditions, banks were putting brakes on new lending. These two reasons together helped preserve liquidity. However, the real test will be when a lot of withdrawals will take place during Dashain and Tihar. Also, if the capital expenditure of the government does not coincide with the festival season, we could have another tight situation. For that, we will have to wait and see but for now, we are <br />
	sailing easy.&nbsp;</span></span></div>
<div style="text-align: justify;">
	<span style="color:#000;"><span style="font-size: 14px;"><br />
	</span></span></div>
<div style="text-align: justify;">
	<span style="color:#000;"><strong><span style="font-size: 14px;">The total non-performing loan has increased by close to 26 per cent as against last year. What could be the possible remedial measures?</span></strong></span></div>
<div style="text-align: justify;">
	<span style="color:#000;"><span style="font-size: 14px;">To tell you the truth, I had expected higher increase in non-performing loans. The relief given by the central bank especially to the real estate sector towards the end of last fiscal year provided respite because the borrowers were allowed to pay a month after the year end without attracting any provisioning. I believe there is still some under provisioning by banks.</span></span></div>
<div style="text-align: justify;">
	<span style="color:#000;"><span style="font-size: 14px;"><br />
	</span></span></div>
<div style="text-align: justify;">
	<span style="color:#000;"><span style="font-size: 14px;">If there is a problem, you have to bite the bullet. Postponing a problem is not going to make the problem go away. If you have a problem loan, you have to recognise it as one and make appropriate provisioning for that. However, if a business can be revived through re-organisation or re-scheduling, then we should also make every effort to make that happen.&nbsp;&nbsp;&nbsp; </span></span></div>
<div style="text-align: justify;">
	<span style="color:#000;"><span style="font-size: 14px;"><br />
	</span></span></div>
<div style="text-align: justify;">
	<span style="color:#000;"><strong><span style="font-size: 14px;">How can public confidence in financial institutions be restored at a time when the banking industry has been troubled with lower deposit mobilisation?</span></strong></span></div>
<div style="text-align: justify;">
	<span style="color: rgb(0, 0, 0);"><span style="font-size: 14px;">I think the financial system in Nepal is relatively sound, more so when it comes to </span></span><span style="color:#000;"><span style="font-size: 14px;">"A" </span></span><span style="color:#000;"><span style="font-size: 14px;">class commercial banks which account for 80 per cent of the market both in deposits and lending. Most of these institutions are well supervised, have reasonably large capital base and on the whole, well managed. The problem lies basically with "A"&nbsp; class institutions where quite a few corporate governance-related issues have surfaced. There is also a lack of regular and effective supervision by the central bank. If visible measures are taken in these two areas by the central bank and boards of these institutions, I think it will help in restoring public confidence.</span></span></div>
<div style="text-align: justify;">
	<span style="color:#000;"><span style="font-size: 14px;"><br />
	</span></span></div>
<div style="text-align: justify;">
	<span style="color:#000;"><strong><span style="font-size: 14px;">What is your stance on granting banking licenses to practically everybody who applies for it? Aren't we overcrowded with banks in the urban centres while 70 per cent of the country still has no access to formal banking?</span></strong></span></div>
<div style="text-align: justify;">
	<span style="color:#000;"><span style="font-size: 14px;">That was the biggest problem. NRB effectively had just one criterion capital, so anyone who had the money could virtually open a bank here. That was a very wrong policy because banking is such a sensitive industry. Unlike other industries, banks are the custodian of public money where people put their trust. While allowing bank licenses, NRB should have a very prudent and strict criterion to ensure the right intentions of the promoters and the management.</span></span></div>
<div style="text-align: justify;">
	<span style="color:#000;"><span style="font-size: 14px;"><br />
	</span></span></div>
<div style="text-align: justify;">
	<span style="color:#000;"><span style="font-size: 14px;">It's not a numbers issue. It's more about the quality of the banks and the effectiveness of the central bank's supervision. Banks are spreading out and more than a 1,000 branches have been opened in the last one year by all the banks put together. And most of these branches are located outside Kathmandu.</span></span></div>
<div style="text-align: justify;">
	<span style="color:#000;"><span style="font-size: 14px;"><br />
	</span></span></div>
<div style="text-align: justify;">
	<span style="color:#000;"><strong><span style="font-size: 14px;">We are being inundated with merger rhetoric for as long as one can remember, however, we haven't seen one till now. How serious are the stakeholders about this and how will it impact the industry?</span></strong></span></div>
<div style="text-align: justify;">
	<span style="color:#000;"><span style="font-size: 14px;">For any merger to happen, the basis is the potential value addition. Merger for the sake of merger is nonsense. If you look at the international experience on mergers, more than 50 per cent have usually failed. A merger is welcome provided there is value addition taking place between merging institutions by way of bringing in synergies, business, cost, reach, network etc. In Nepal's context, the cultural angle also comes into play. Factors such as multiple promoters with their own personal interests and their respective egos taking precedence etc override the fundamental business deal. That's why I believe that it's very difficult for mergers to happen here.</span></span></div>
<div style="text-align: justify;">
	<span style="color:#000;"><span style="font-size: 14px;"><br />
	</span></span></div>
<div style="text-align: justify;">
	<span style="color:#000;"><span style="font-size: 14px;">However, if mergers do happen, it will definitely be good for the industry. Some degree of consolidation is required because there are too many small players in the market. Size does matter and provided there is a requisition from managements, better efficiency can be brought in.</span></span></div>
<div style="text-align: justify;">
	<span style="color:#000;"><span style="font-size: 14px;"><br />
	</span></span></div>
<div style="text-align: justify;">
	<span style="color:#000;"><strong><span style="font-size: 14px;">How long will it take to improve the BoP situation for us to get slightly more comfortable than we at present are?</span></strong></span></div>
<div style="text-align: justify;">
	<span style="color:#000;"><span style="font-size: 14px;">We have a huge trade imbalance and if we are going to depend solely on trade, it is going to take us a very long time. The export-import imbalance is quite severe which we can deal with it by building more manufacturing establishments and having a better industrial base. Even if we want to promote hydropower, the gestation period again is going to consume a lot of time. Therefore, purely based on trade prospects, it is going to take us a long time to improve the BoP situation. We have of course, been helped by the remittances brought in by Nepali Diaspora and also the aid coming through bilateral and multilateral donors that ensures capital inflow. Even if we have financial and political stability and the policies are conducive, we cannot expect wonders. To even expect that we will have a trade surplus will take us at least 10 years if we start now.&nbsp;</span></span></div>
<div style="text-align: justify;">
	<span style="color:#000;"><span style="font-size: 14px;"><br />
	</span></span></div>
<div style="text-align: justify;">
	<span style="color:#000;"><strong><span style="font-size: 14px;">Why is it becoming more difficult to control inflation? What are your recommendations to successfully control inflation?</span></strong></span></div>
<div style="text-align: justify;">
	<span style="color:#000;"><span style="font-size: 14px;">In Nepal, inflation is primarily on account of two factors. One is the imported inflation which we can do nothing much about. Within this imported inflation, India plays a big role as two-third of our trade is with India which is just the formal trade. If you also take into account the informal trade, my guess is that it would be as much as 80 per cent. So, a lot of inflation is imported from India. The other factor is the supply side where there are no internal control mechanisms. The distribution cost is very high because of the transportation cartels and syndicates. Cost of power is very high in Nepal while the labour costs are ever rising. We still donâte have very good access in terms of roads which again makes it a bottleneck to get goods from one place to another thus adding up costs. We can do a lot on the internal side if the government becomes more effective in its functioning. Besides, the government must allow some subsidy to the agricultural sector otherwise our farmers just cannot compete with the farmers in India where you have subsidies for fertilizers, irrigation, power etc.</span></span></div>
<div style="text-align: justify;">
	<span style="color:#000;"><span style="font-size: 14px;"><br />
	</span></span></div>
<div style="text-align: justify;">
	<span style="color:#000;"><strong><span style="font-size: 14px;">What are your expectations from NRB given the prevailing scenario where the banking industry has registered an excruciatingly slow growth?</span></strong></span></div>
<div style="text-align: justify;">
	<span style="color:#000;"><span style="font-size: 14px;">One expectation I have is that whenever NRB brings out any new policies, directives or circulars, they do it through a consultative process where stakeholders are involved and there is a dialogue. It's not necessary that NRB has to agree to everything that the stakeholders say but at least there is a two-way process when you take everybody into confidence. If a consultative process brings forth any new policies and directives, there will be ownership from the stakeholders themselves. It means that enforcement will be that much more easier because then it becomes voluntary.</span></span></div>
<div style="text-align: justify;">
	<span style="color:#000;"><span style="font-size: 14px;"><br />
	</span></span></div>
<div style="text-align: justify;">
	<span style="color:#000;"><span style="font-size: 14px;">My second expectation is that while bringing out any new directives or policies, they should also try to emulate some of the best practices in the world and think it through before implementing them. We have seen in the past that in quite a few instances, they have come out with half-baked directives which they had to amend a number of times. That shows some kind of shallow thinking within the central bank when they come out with directives.</span></span></div>
<div style="text-align: justify;">
	<span style="color:#000;"><span style="font-size: 14px;"><br />
	</span></span></div>
<div style="text-align: justify;">
	<span style="color:#000;"><span style="font-size: 14px;">Third one is that when they come out with any policies, they should not look only at the bad practices followed by one or two institutions and then paint everyone with the same brush. They must not generalise. If there are some bad apples, they should handle them individually and not treat everybody with suspicion.</span></span></div>',
			'published' => true,
			'created' => '2011-10-11',
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			'description' => 'Sashin Joshi is the Chief Executive Officer of Nepal Industrial & Commercial (NIC) Bank Limited. He is also the Chairman of National Banking Training Institute (NBTI)..........',
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		'Article' => array(
			'id' => '640',
			'article_category_id' => '40',
			'title' => 'Private Sector Will Not Come Merely On Verbal Assurances',
			'sub_title' => '',
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			'content' => '<p>
	<strong>Purusottam Man Shrestha is the National Project Manager of Public-Private Partnership for Urban Environment (PPPUE). An MBA in Marketing and Small Business Management from University of Delhi, he had earlier worked as Enterprise Development Advisor for Rural Urban Partnership Programme.</strong></p>
<p>
	<strong><img align="left" alt="cover stoey" border="1" height="357" hspace="10" src="http://newbusinessage.com/ckfinder/userfiles/Images/cove3.jpg" style="margin:10px; padding:10px;" vspace="10" width="375" />How do you rate the success of PPP model of development?</strong></p>
<p>
	The PPP model in Nepal has not achieved the same level of success that is witnessed in Bihar of India even though they have adopted it only recently. However, this does not mean that works have not been done on our initiatives. Minimum requirements and environment is created for enabling PPP but we donate have projects like in the developed countries that are expected to be under the PPP model. It's only the concept that is seeded while there is very little work to write home about.</p>
<p>
	<strong>What are the reasons for PPP model not being successful in Nepal?</strong></p>
<p>
	Political stability is PPP's fundamental base for success but due to the current national scenario, large investments are not coming. The private sector is sceptical about making investments though they are convinced about the importance of investing in development projects. We have failed to build the confidence of the private sector and it is extremely challenging to invite private financing from the international market. To make matters worse, the minimum arrangement for FDI is also missing. Investment risks must be minimised where possible and laws must be prepared for funds management based on international rules and regulations. There is a special procedure for private partner procurement which we are still unable to formulate.</p>
<p>
	We are still forced to follow the traditional method of inviting tenders through existing public procurement act. The current procedure is marred by a long procedural delay and the private sector cannot wait that long. This is one aspect that de-motivates the private sector. Political intervention and local groups are among other challenges for developing large scale projects. Besides, there is a lack of skilled manpower that is vital for formulating and procuring PPP projects.</p>
<p>
	A core workforce required for PPP needs to be developed in Nepal itself. We have to initiate projects that are attractive to the private sector and market them to the banking fraternity otherwise; the private sector will not come merely on verbal assurances. Even today, people are simply talking about large PPP projects without doing adequate homework and just looking at the success in other countries as examples.</p>
<p>
	<strong>How suitable is the PPP model for the development of physical infrastructure in Nepal?</strong></p>
<p>
	The PPP model in Nepal caters to basic infrastructure and services whereas it is needed more for large scale infrastructure projects. We must look at roads, tunnels, bridges, transmission lines, large hospitals, airport construction and management that can be done under the PPP model. For example, Apollo Hospital of India, in partnership with the public sector, is expanding its accessibility to a larger area to serve the general public. Similar projects can be developed in Nepal too.</p>
<p>
	<strong>Is it only the issue of investment and political environment behind the private sector's disinterest to invest in the infrastructure sector? How big a role does the issue of profi tability play in this scenario?</strong></p>
<p>
	It is incorrect to say that the private sector is not interested. As a matter of fact, they have also understood that there is profit in such endeavours. However, they are not convinced about the system that runs these projects, to see a chance of materialising profits. They are suspicious about the future because of the way policies and regulations change in Nepal on a frequent basis. We may have the policies and the projects in place, but we don't have the required financing for big projects available in our domestic market. Even all the commercial banks, put together, can barely finance one or two large projects. It essentially means that foreign private financing must be brought in and for that to happen, we don't have a necessary arrangement in place.</p>
<p>
	<strong>The government has taken a regressive step on the Fast Track project, which was said as being developed in partnership with the private sector. What kind of impact will it leave on the private investors?</strong></p>
<p>
	The project had reached a certain level, to begin with. Meanwhile, it was realised that the private sector participation would be better. However, at a later stage, there were voices being raised within the government bodies for its rectification. As a result, the project is getting delayed now. This delay certainly does not convey a positive message as a decision once made is being corrected again. Withdrawing the earlier made decision will contribute towards diminishing credibility. A couple of companies had applied in connection with the project but unfortunately, the entire process was cancelled leading to reduced confidence level of the private sector.</p>
<p>
	<strong>By when can we expect large projects getting developed under the PPP model in Nepal? <br />
	</strong></p>
<p>
	There are a lot of prospects indeed. For example, a small though important project such as developing a multi-storeyed parking space in the heart of the city like New Road can happen on an immediate basis. That can be a good yet simple PPP project which the government can realise by allowing a private operator to build the parking lot on a public space. This can be profitable and, at the same time, the private sector will happily invest in a project of this nature. We have proposed it along with a feasibility study but it is being delayed for various reasons. And let me tell you that there are a lot of similar projects that are still awaiting approval. Officials frequently get changed in the concerned local bodies and such things cannot create an environment for long term project commitments. There can be sizeable PPP projects which the domestic financial market can support.</p>
<p>
	<strong>What are your expectations from the government for making private participation successful in the development sector?</strong></p>
<p>
	The government should follow a special practice for PPP procurement. Minimum required laws and regulations must be formed first for private financing, without which money won't come. Even in the domestic financial market, there must be a specific arrangement for PPP financing apart from the existing provision of financing by banks and financial institutions. The government must identify the sectors that need PPP model and plan for at least five to 10 years in advance. The private sector must be invited only after formulating the projects ascertaining the financial scenario and benefits of PPP arrangements. For example, it is largely felt that inadequate study and preparations have gone into the waste management project catering to the Kathmandu valley.</p>
<p>
	The PPP model remedies the weaknesses of developing projects independently by either the private sector or the government. By definition, the private sector tends to maximise profit so it may neglect the larger mass and benefits for the society. For a drinking water project, for example, private developers may target a higher income group only where it sees a higher rate of return. So, a larger mass and the general public may get neglected.</p>
<p>
	If the same project is run under the PPP model, the government can intervene and enforce the supply of quality drinking water to the general public as well. To minimise the loss while doing so, the government may guarantee the profit by handing over the management to a private entity. On the other hand, when such projects are done entirely by the public sector, we have seen a lot of problems in management, leakages etc. Hence, the PPP model reduces the deficiencies of the public sector and best uses the efficiencies of the private sector. &nbsp;</p>',
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		'Article' => array(
			'id' => '639',
			'article_category_id' => '40',
			'title' => 'Private Sector Cannot Be Expected To Develop Infrastructure',
			'sub_title' => '',
			'summary' => null,
			'content' => '<p>
	<strong>R B Rauniar, the Managing Director of Interstate Multi-Modal Transport Pvt Ltd is involved in the transport and transit industry for more than 40 years. He advises the Ministry of Labour and Transport Management time to time and has also worked with the Federation of Nepalese Chambers of Commerce and Industry (FNCCI).</strong></p>
<p>
	<strong><img align="left" alt="cover story" border="1" height="361" hspace="10" src="http://newbusinessage.com/ckfinder/userfiles/Images/cove2.jpg" style="margin:10px; padding:10px;" vspace="10" width="350" />How do you view the possibility of private sector involvement for the development of the transportation sector in Nepal?</strong></p>
<p>
	The southern part of Nepal is completely linked by roads while the northern part remains largely disconnected. This means that the required infrastructure is lacking. The infrastructure for north-south linkage is crucial for the fast development of this country. You must understand that developing roads is a huge investment. The domestic transportation sector does not get spared due to the increasing fuel prices quite frequently. Electric railway transportation is the only cheap alternative in the long run; however it requires a huge investment. Few surveys have been initiated by the government in the last couple of financial years. This must be developed as a master plan because railways is shorter than roadways distance wise and also facilitates both human and goods movement.</p>
<p>
	Developing such a huge project is not possible solely with our internal resources and needs international investment or soft loan funding. As for the private sector, nobody will come forward to invest in infrastructure entirely by themselves. They won’t even come as part of joint ventures because there is no market, as such, to make huge investments and get lucrative returns on it. Therefore, the long term investments are the responsibility of the public sector. However, if we can bring in the management of the private sector for such endeavours, that will be efficient. This kind of an arrangement will be economical as well as revenue generating. It has to develop as a part of the broader national agenda and treated as an economic priority.</p>
<p>
	<strong>What should the government do to encourage the private sector for investing in infrastructure?</strong></p>
<p>
	At present, it is very difficult for the private sector to get involved into infrastructure development due to many reasons. For example, the trucking business is still not organised and trucks are individually owned and leased to companies. A single trucking company has not been developed in an organised manner till now. There are only 283 registered companies in the business and nobody knows how many of them are in existence.</p>
<p>
	Transportation is getting more difficult in places where cities are developing. The private sector will be more interested in facility management rather than investing in infrastructure. If we look at Kathmandu, transporters will drop goods and go back for more if proper parking spaces and warehouses can be set up. But there is not a single warehouse that can serve on a long term basis. This is where the private sector can come in and invest in such projects</p>
<p>
	<strong>Why isn’t the private sector interested to get involved if there are prospects? <br />
	</strong></p>
<p>
	When the interest rate is tremendously high (14 per cent), the rate of return correspondingly becomes very low. For example, the cost of a project can’t be predicted for say, five years down the line, adjusting with the interest rate of borrowing. Given such uncertainty, the private sector cannot be expected to take initiatives in situations like these.</p>
<p>
	<strong>Do you see the possibilities of building roads by the private sector in Nepal similar to that in other countries?</strong></p>
<p>
	We don’t have the level of traffic in Nepal that will lure the private sector to invest in toll roads. The private sector will invest automatically where there is an opportunity for profit. If we had the level of traffic that could yield profits, the tunnel to link Birgunj with Kathmandu would have been constructed by now. The FNCCI is ready to lead and the business community in Hetauda is showing interest but there are elements that have contributed towards slowing down the entire process. Goods and passenger movement is not high as of now but on a positive note, there is an increase in internal population as well as growing international linkages. Toll road development needs huge investment so the government must come forward for constructing infrastructure because it gets soft loan. Debt recovery needs prudent management which can be done by the private sector. If PPP can be fully implemented, a lot of projects could be developed in the foreseeable future.</p>
<p>
	<strong>So you mean to say that it is better to let the private sector manage infrastructure instead of asking them to develop so.</strong></p>
<p>
	Yes, because they don’t have the required capacity given the insufficient domestic resources. The private sector must be allowed to bring in foreign capital as there are foreign banks that trust the Nepali private sector. If such soft loan is allowed to bring in, hydroelectricity can be rapidly developed. Nobody is willing to invest with the domestic rate of interest that is higher than 10 per cent. A single bank cannot finance a project larger than 100 MW; large scale projects need consortium efforts as they need billions of rupees. So, the government must finance development efforts but let the private sector manage them. The government cannot manage projects efficiently and the result is that every public sector enterprise is making losses. Therefore, the government should not conduct business; it should instead allow the private sector to manage. The private sector will then make money and earn revenue for the government.</p>
<p>
	<strong>What should the government do to make the transport sector effi cient and effective?</strong></p>
<p>
	First and foremost, there has to be a right policy. Efficiency will only increase when the transit time can be lowered and turnover can be made faster, this will also lower the cost of transportation as it lowers the overhead cost. The existing transportation facilities can be developed given the available resources but the policy makers must have the political will with a common national agenda for this to happen. &nbsp;</p>',
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	(int) 2 => array(
		'Article' => array(
			'id' => '638',
			'article_category_id' => '40',
			'title' => 'Investment In Infrastructure Is A Costly Proposition',
			'sub_title' => '',
			'summary' => null,
			'content' => '<p>
	<strong>Sanju Koirala is the Corporate Communication Manager of Ncell, the largest private sector telecom operator in Nepal. She has been working as Ncell’s Corporate Communication Manager since 2009. Ncell has made a large contribution on developing communication infrastructure all over Nepal. It has increased the base stations by more than six times in the last three years. In an interview with New Business Age, Koirala shared her ideas on the prospects and challenges of developing communication infrastructure in Nepal.</strong></p>
<p>
	<strong><br />
	</strong></p>
<p>
	<strong><img align="left" alt="cover story" border="1" height="384" hspace="10" src="http://newbusinessage.com/ckfinder/userfiles/Images/cove.jpg" style="margin:10px; padding:10px;" vspace="10" width="300" />Ncell has expanded quite fast in a very short period of time in Nepal’s telecom business. How big is the prospect of a further expansion in terms of demand and possible supply of services?</strong></p>
<p>
	When the decision to enter Nepali market was made, one of the top priorities was to develop the mobile telecom market and to become number one within two to three years’ time. Although, the goal was reached way before, that is, by the end of November 2011, Ncell will continue with the same endeavour. We will continue investing in network expansion and new services. In fact, Ncell is at a growing stage and we will continue improving our network quality and capacity. By achieving one target, we have set another one in front of us which is even more challenging. We strive to reach quality to be aligned with TeliaSonera global standards and have an excellence in customer satisfaction. For future investment plans, it means increasing capacity and quality in the existing network, be selective to cover new geographical areas, increase data usage by enhancing data speed, implement new end user services and improve network reliability and robustness. Customers have started to feel the difference among various Nepali telecom operators. They have started to value what it means to have a good voice quality and network coverage, no matter wherever they are. It surprised the customers in 2011 and it will continue to surpass their expectations in 2012. Our actions and work will always pleasantly surprise the customers with excellent quality and new services.</p>
<p>
	<strong>How can the contribution of private sector players be compared to that of government sector in communication infrastructure development?</strong> <strong>There are allegations of unfair play coming up quite often.</strong></p>
<p>
	When a private company invests, it always keeps the desirable rate of return in mind. Besides commercial targets, we also have social responsibility targets. Among all possible mobile technologies, Ncell makes the decision as to which technology to trust the most. The return of investment and long term technology sustainability are the main decision making factors. By having set clear rules and regulations regarding usage and fee of frequency spectrum, the government can avoid unfair play. And these rules and regulations shall be applicable for every existing and potential operator in Nepal. Every player expects and should have an equal level playing field in an open and liberal economy.<strong><br />
	</strong></p>
<p>
	<strong>The cost of building infrastructure is very high. How satisfactory are the rate and time-window of return?</strong></p>
<p>
	Geographical terrain, lack of transportation, power outage and shortage of skilled manpower makes investment in infrastructure a costly proposition. We are also aware of the people’s spending power, with low level income; gestation period is bound to increase. It is now at an acceptable level taking into account the revenue from voice and value added services. In my opinion, the market is still developing. When we look from mid and long term perspectives, it’s important not to start a price war among operators and avoid regulatory imposed tariffs. Both of these are short term strategies and if wrongly applied, can impact severely on future investment and quality. It does not necessarily mean that the tariffs on services will not decrease but it will be based on the economy of scale and in a planned way. Everyone has to remember that an operator’s ultimate goal is long term sustainable profitability and every wrong decision has an adverse affect on investment and services.</p>
<p>
	<strong>Do you see the possibility of sharing the same infrastructure by other companies of the same nature? Do you think this will reduce the cost of service expansion? </strong></p>
<p>
	It is possible, but cost sharing and cost bearing business dealing should not be dictated by the government. It should be a business to business decision to have a positive impact as well as in expansion and cost of service.</p>
<p>
	<strong>The NTA has not given permission to share certain resources between telecom operators?And, particularly optical fi bre that is being used by NTC is not shared with other companies. How do you view this?</strong></p>
<p>
	This is one of the most challenging issues because pricing scheme has to be defined and NTA has no information about real and specific costs that are different among various operators. In fact, Ncell is leasing the required bandwidth from NTC and NEA. However, it’s not easy to get into an agreement with government-owned companies. First of all, there should be a display of interest by the first operator to share it based on their interest to get opportunity to share similar bandwidth in other directions where they don’t have it yet. Thus, it should be based on mutual interest rather than forced and imposed regulations.</p>
<p>
	<strong>What are the challenges and problems in developing infrastructure?</strong></p>
<p>
	Getting required permission from different government bodies is a difficult task. And it does get worse when people demand for road, electricity supply and many other things. Besides that, in network rollout, one of the most challenging factors is availability of power. If the rest can be agreed and aligned by changing regulations, making clear and understandable rules and fees, shortage in power will remain for years. This is also related to the government plans to provide sufficient electricity even for households in the cities and remote areas. We are not sure if NTA has any plans on the level of energy requirements for the next five to 10 years. No one has really asked us about expected energy requirements for the Ncell network in the coming years. Therefore, we need to rely only on a backup solution based on diesel generators. That, for sure, has an adverse effect on network running costs and ecology.</p>
<p>
	<strong>What are your expectations from the government about supporting the development of communication infrastructure? Has the government done enough to develop the basic infrastructures?</strong></p>
<p>
	A concise general plan for developing the mobile, fixed and broadband services in Nepal is required. If we look around the Asia Pacific region, every country has imposed different principles. And here, challenges come from the fact that there are no less common principles even within the region. Thus, it brings complexity for the NTA and requires assessment of existing status, plans and changes as required. It also requires expertise and consultancy from GSMA (GSM Association) as well as bringing the local operators together in one working group. RTDF (Rural Telecom Development Fund) could be used for optical fibre and for other facilities. For example, equipments and construction material for infrastructure customs and other taxes can be reduced, failing which, it will increase the investment resulting in costlier airtime for mobile phone users. &nbsp;</p>',
			'published' => true,
			'created' => '2012-02-24',
			'modified' => '2012-08-23',
			'keywords' => '',
			'description' => 'Sanju Koirala is the Corporate
Communication Manager of
Ncell, the largest private sector
telecom operator in Nepal. She
has been working as Ncell’s
Corporate Communication Manager
since 2009. Ncell has made a
large contribution on developing
communication infrastructure all
over Nepal. It has increased the
base stations by more than six
times in the last three years. In
an interview with New Business
Age, Koirala shared her ideas on
the prospects and challenges
of developing communication
infrastructure in Nepal.',
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			'id' => '533',
			'article_category_id' => '40',
			'title' => 'We Are Very Keen To Move The SAARC Free Trade Process Forward',
			'sub_title' => '',
			'summary' => null,
			'content' => '<p>
	<img alt="Jaideep Mazumdar" border="1" height="175" hspace="10" src="http://www.newbusinessage.com/ckfinder/userfiles/Images/coverstory-VI dec2012.jpg" vspace="10" width="300" /><br />
	<br />
	<strong>Jaideep Mazumdar <br />
	Minister and Deputy <br />
	Chief of Mission Embassy of India, Kathmandu </strong><br />
	<br />
	<br />
	<strong><br />
	How do you look at the overall regional trade in South Asia? </strong><br />
	<br />
	As everybody will say, it is not up to potential and a lot more can be done. Intra-regional trade within South Asia is only 5 per cent of the trade that the region has with the world. There is, of course, a potential and a huge opportunity for the countries within the region to improve on this figure. <br />
	<br />
	<br />
	<strong>How can connectivity be improved between India and Nepal to negotiate better transit? </strong><br />
	<br />
	In Nepal’s context, as you would be aware that we are building four integrated customs check posts along the border. The objective is that whenever there is a traffic movement between India and Nepal, there is a scientific borderly single place where everything is done – customs check, inspection of goods, clearing of consignments etc. We are also building five cross border railway lines wherein we are harmonising different gauges on both sides of the border as well as building new lines so that goods can come straight to Nepal and vice versa. <br />
	<br />
	To encourage third country trade with Bangladesh, we are building a railway line which will provide an exit from Bangladesh straight into Nepal. We have agreed to allow Vishakhapatnam as an alternative port for Nepal to trade with the rest of the world. We are also building 1,400 kms of roads which will open Nepal inter-land for trading with northern Bihar and northern UP in India along the Terai belt so the movement of goods will become easier. These kinds of connections and inter-linkages are being built to improve transit. <br />
	<br />
	<strong><br />
	How do you view economic diplomacy in the context of enhanced regional trade among SAARC nations? </strong><br />
	<br />
	I can speak for our foreign service that is the Indian Foreign Service, which puts a tremendous amount of importance on economic diplomacy which encompasses trade diplomacy. In all our embassies, we have designated officers who look after harmonising, increasing the trade and helping the private sector of the countries they are posted at. For trade diplomacy, we have an entire division in the Ministry of External Affairs in India which deals with such matters. <br />
	<br />
	<br />
	<strong>There seems to be a sheer lack of trust among nations on different issues. How big a deterrent is this for intra-regional trade? </strong><br />
	<br />
	Historically, there has been a problem between India and Pakistan that was a hindrance for intra SAARC trade. We now hope that things will move much faster and we have been very keen to move the SAARC free trade process forward. We have been doing our bit to ensure that free trade develops in the region. <br />
	<br />
	<br />
	<strong>India, being the centre of regional trade among the SAARC nations, could have played a more vital role in making the SAARC trade bloc effective. What are the reasons for India not being able to do so?</strong><br />
	<br />
	Of course, everybody could have done more. As I said earlier, the potential of intraregional trade in the SAARC region is too large and there is so much opportunity. It naturally means that the potential has not been achieved but it’s due to many factors. I think there is a realisation now among the countries in the region that we need to increase those linkages and move SAARC into a more integrated regional cooperation model. All the leaders have talked about it at the Maldives Summit and our Prime Minister has also spoken very strongly in favour of integrating SAARC. <br />
	<br />
	<br />
	<strong>Why is the trade in this region more oriented towards international trade rather than trading within the region itself? </strong><br />
	<br />
	You cannot generalise this. There may be some products which will have a market in the SAARC region while there may be some other which can find more lucrative markets outside the region. The very fact that intra SAARC trade is only 5 per cent does not mean that the objective should be to make it 100 per cent. For example, oil is always imported so it goes both ways – exports as well as imports. Even Bangladesh which produces so much of garments cannot look only at the South Asian market. People have very high buying power in Europe and North American countries so there are commodities which will find a market in that part of the world and not necessarily in South Asia. <br />
	<br />
	<strong><br />
	How do you view recent development such as BIPPA in the context of intra-regional trade? </strong><br />
	<br />
	BIPPA is an agreement which is just that – an agreement that was to encourage the investors of both countries to invest in each other. We have signed such agreements with more than 75 countries so having agreements with them does not mean that all those countries have invested in India. Therefore, the final decision on investment depends on many factors such as policy stability, security etc. BIPPA itself is only a facilitative document. <br />
	<br />
	<strong><br />
	What are the potentials of Nepal’s trade with countries in the SAARC region, especially India? </strong><br />
	<br />
	You can only export what you can produce. For most of the countries in the region, the exportable products are not adequate therefore countries like Nepal and Bangladesh have big trade deficits with India. Import wise too, if Nepal does not buy goods from India, it has to buy them from somewhere else simply because it does not produce those goods. For example, petroleum products have to be bought from India or some other country and if you buy it from a third country, you still have to transport it through India. If you don’t produce a certain commodity, you cannot trade that.  <br />
	<br />
	<br />
	Â&nbsp;</p>',
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			'created' => '2012-01-27',
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			'keywords' => '',
			'description' => 'As everybody will say, it is not up to potential and a lot more can be done. Intra-regional trade within South Asia is only 5 per cent of the trade that the region has with the world. There is, of course, a potential and a huge opportunity for the countries within the region to improve on this figure.',
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		'Article' => array(
			'id' => '532',
			'article_category_id' => '40',
			'title' => 'Intra-industry Trade Potential In South Asia Is Underutilised',
			'sub_title' => '',
			'summary' => null,
			'content' => '<p>
	<img alt="Ratnakar Adhikari" border="1" height="433" hspace="10" src="http://www.newbusinessage.com/ckfinder/userfiles/Images/coverstory-Vdec2012.jpg" vspace="10" width="300" /><br />
	<br />
	<strong>Ratnakar Adhikari <br />
	General Secretary <br />
	South Asia Watch on Trade, Economics and Environment (SAWTEE) <br />
	</strong><br />
	<br />
	<strong><br />
	What is the current status of Intra SAARC trade? </strong><br />
	<br />
	The intra-regional trade among the SAARC countries stands at 5 per cent of the blocks worldwide trade which has been the case for some time now. Intra SAARC trade has certainly increased over the years, however, there has been an increase in SAARC’s world trade too. Hence, the share of intraregional trade has remained constant. When compared to intra-regional trade in other trade blocs like ASEAN and EU, intra SAARC trade does look small. <br />
	<br />
	<strong><br />
	Why has SAFTA not been able to gainmomentum since its inception in 2004? </strong><br />
	<br />
	SAFTA has not been able to take off because of political as well as economic reasons. It was also affected due to the political tensions between India and Pakistan. Among the economic reasons, it’s the sensitive list that has affected SAFTA most wherein it was decided to have such a list but the types of commodities under the sensitive list was not ascertained. A mammoth 53 per cent of tradable commodities had figured in the sensitive lists of different countries in the region. <br />
	<br />
	<br />
	<strong>How can regional connectivity be improved to negotiate better transit and transhipment?<br />
	</strong> <br />
	There are a number of issues related to regional connectivity that can certainly be looked at if there is a proper intent to do that. For example, India is suffering from Bangladesh’s denial to allow transit through its territory which could have made it easier to reach the north-eastern part of India. Even Nepal can export tea to Pakistan but it will not be profitable sending tea via air cargo. If Nepal can export tea by using the Mahendranagar border to Pakistan via Wagah in Punjab, surface transport can deliver goods in 12 hours flat. But there has been no concrete talk with India on this matter. <br />
	<br />
	<strong><br />
	India, being the centre of regional trade among the SAARC nations, could have played a more vital role in making the SAARC trade bloc effective. What are the reasons for India not being able to do so? </strong><br />
	<br />
	It’s probably because they have analysed the cost and benefits and realised that it is better for them to look outside the region rather than concentrating their negotiating and political capital as well as resources in South Asia. India is not making any pro-active efforts to strengthen regional economic cooperation in South Asia whereas it should be actually promoting regional stability in South Asia which is eventually going to be in its own interest. <br />
	<br />
	<strong><br />
	Why is the trade in this region more oriented towards international trade rather than trading within the region itself? </strong><br />
	<br />
	Historically, most of the developing countries while talking about exporting manufactured products, always have the European, North American, Japanese and Australian markets in their minds. This has been happening for over a century now. Another problem in South Asia region is that most of the countries compete for the same market internationally. <br />
	<br />
	<strong><br />
	Can South Asia region be the production house as well as the market and be self suffi cient for trade? </strong><br />
	<br />
	Why not? I had actually proposed in one of my writings earlier that South Asia can become the textile and clothing production hub. I feel that intra-industry trade potential is not being utilised in South Asia to the extent possible. For example, Pakistan and India are among the best cotton producers in the world and we have state-of-the-art industries in the region that could process cotton into textile fabric. In Bangladesh, we also have one of the lowest cost manufacturers of garment in the world. The manufactured garments can then be sent to Colombo and utilising the shipping industry potential of Sri Lanka, they can be fast processed and shipped to markets abroad. This kind of modality can work in the region’s interest. <br />
	<br />
	<br />
	As for consumption of goods produced within the region, we can take the example of India already importing textile and clothing products from countries like Bangladesh and Nepal. And it should import even more from within the region rather than importing from countries like Thailand and China. There should be an attempt to create an incentive for the partner countries in the region to be able to export to a country like India. However, bureaucratic hassles, nontariff barriers, rules of origin as well as 4 per cent special additional duty imposed on an arbitrary basis have created problems. <br />
	<br />
	<strong><br />
	What are the differences in provisions of WTO and RTA? How does it affect the intra-regional trade? </strong><br />
	<br />
	Regional Trade Agreements (RTA) are meant to provide a platform for deeper level of integration when compared to WTO. You have to understand the fact that WTO actually does not actively discourage RTAs. By virtue of a legal provision within the WTO, it condones regional economic arrangements. In that sense, since SAFTA is deeper, trade within SAFTA should be higher than trade outside the region. By the same token, 67 per cent trade takes place within the region for EU while the figure is 60 per cent for NAFTA. It’s because they have deeper regional integration so there is no reason why SAFTA should not be able to replicate such successes. The regional economic arrangements are actually WTO plus. <br />
	<br />
	The only thing RTAs like SAFTA should learn from the WTO is that it should have a dispute settlement system that is fair, effective and credible. Due to the twotier (Panel and Appellate Body) system of dispute settlement in the WTO, any error of judgment by the panel can be corrected through appeal and actually, more than twothird of cases in the WTO are appealed.</p>
<p>
	As for effectiveness, the verdict of the dispute settlement body is almost invariably adopted because of the reverse consensus rules, which means that the verdict of the dispute settlement body would not be adopted only if there is a consensus not to adopt the report. The credibility factor comes into play because the threat of sanction imposed by the winning party through the decision of the dispute settlement body is plausible. There have been instances where sanctions have actually been imposed thereby forcing the losing party to bring its measures in conformity with the WTO rules. While advanced RTAs such as EU or NAFTA have very effective dispute settlement systems in the form of European Court of Justice and NAFTA Court, SAFTA does not have such a mechanism. This is one of the reasons why countries acting against the spirit of SAFTA also go scot free. <br />
	<br />
	 </p>',
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			'description' => 'The intra-regional trade among the SAARC countries stands at 5 per cent of the blocks worldwide trade which has been the case for some time now. Intra SAARC trade has certainly increased over the years, however, there has been an increase in SAARC’s world trade too. Hence, the share of intraregional trade has remained constant. When compared to intra-regional trade in other trade blocs like ASEAN and EU, intra SAARC trade does look small.',
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		'Article' => array(
			'id' => '531',
			'article_category_id' => '40',
			'title' => 'Economic Diplomacy Is The Present World Order',
			'sub_title' => '',
			'summary' => null,
			'content' => '<p>
	<img alt="Chandra Kumar Ghimire" border="1" height="330" hspace="10" src="http://www.newbusinessage.com/ckfinder/userfiles/Images/coverstory-IV dec2012.jpg" vspace="10" width="300" /><br />
	<br />
	<strong><br />
	Chandra Kumar Ghimire <br />
	Joint Secretary <br />
	Ministry of Commerce and Supplies (now Consulate General of Nepal to Kolkata) </strong><br />
	<br />
	<br />
	<br />
	<strong>What are the major differences in WTO and RTA provisions? How do they affect intraregional trade? </strong><br />
	<br />
	<br />
	WTO is a broader frame which is the legal basis for global trade arrangements and provides framework for the rule-based trading system of which RTA is an option. RTA's jurisdiction is area specific and has the involvement of likeminded countries which are similar in geographical, political or socio-economic aspects and enjoy certain proximity. The WTO's role is to provide the basis for legal framework and permit for RTAs. <br />
	<br />
	RTAs are WTO plus meaning a regional economic arrangement is expected to commit more. The commitment is for the intent of opening the market more for increasing trade volume through freer, broader, deeper and wider trade.</p>
<p>
	 </p>
<p>
	<strong>How is WTO treating RTAs? </strong><br />
	<br />
	There are already 400 RTAs that have come into being and there are more being developed. There are two dimensions and arguments to it. On a scholastic level, the argument is whether RTAs complement or contradict the WTO. The ones who advocate that RTAs complement the WTO say that regional economic arrangements help freer, wider and deeper trade. But the people believing in the philosophy of the other extreme say that RTAs are fragmenting global markets. However, broadly speaking, WTO has allowed regional economic arrangements under its legal frame and I believe the WTO has treated the RTAs in a positive way.</p>
<p>
	<br />
	<br />
	<strong>There are a host of RTAs such as SAFTA, BIMSTEC, ASEAN, NAFTA etc and an RTA is supposed to supersede WTO provisions. If WTO is to dominate all other agreements, what is its relevance at the end of the day? </strong><br />
	<br />
	<br />
	Let me first clarify that all RTAs are not effective, they are there as global ideas but not fully actualised. On a global level, WTO is supreme but it does not dominate other agreements by any means. RTAs do not have the mechanism for dispute settlements like the WTO does. The WTO is a mechanism which even drags a global power like the US to its tribunal and allows least developed countries (LDC) to have their say. Under WTO, the developing countries can also indulge in issue-based bargains with powerful countries which were not possible with RTAs without WTO's existence. <br />
	<br />
	If RTAs were to exist in all parts of the globe, the idea of regional economic arrangements will truly complement the WTO. Otherwise, the idea will not really hold much ground. The RTAs must be able to bring themselves into complete effect so that they can fulfill the ultimate aims of WTO rather than challenging its dominance.</p>
<p>
	<br />
	<strong><br />
	How do you view economic diplomacy in the context of enhanced trade relations between countries? </strong><br />
	<br />
	<br />
	Ever since the world came into being in its present unipolar form, there has been a change in the way diplomacy is being practiced. Today's power struggle is for trade and to become a winner in the âgain and loss scenario, which has resulted in a shift from conventional political diplomacy to economic diplomacy. This big transformation has brought about changes in the bureaucracy of many countries. In Nepalâ's context, we have been talking about economic diplomacy since the early 1990s but we have not been able to practice it at the real level. <br />
	<br />
	We do need political diplomacy with other countries, our immediate neighbour India for example, which is fundamental but the aim has to be for economic gains. In the present world order, we have to strive to gain by putting economic diplomacy into practice. The other countries in the region like Bangladesh and Sri Lanka have expanded their number of missions in different parts of the world exactly with this idea. <br />
	<br />
	They have been marching ahead with economic diplomacy by looking at the markets in different countries of the world. Even though we have the same agenda in Nepal, we lack a comprehensive outlook and have not been able to identify our potential markets worldwide. Accordingly, we could have expanded our missions whereas we are still stuck with the same missions that we had established in the 1950s and 1960s. <br />
	<br />
	We do not have a clear agenda even though of late, we have been able to identify countries where we could find a labour market. However, that's not sufficient because we need to tap opportunity and be able to pursue capital coordination. For this, we have to work in close coordination with ministries of economic content, the private sector and think tank institutions. India and China, our doorstep markets, are countries that are attractive for the entire world. On our part, we are leaving these arm-reach markets and looking elsewhere and therefore, ending up with virtually nothing. All the global powerhouses are targeting India and China for economic reasons and we should do the same. We should be able to shed the diplomatic legacy of the yore and start afresh.</p>
<p>
	<br />
	<strong><br />
	Why is the trade in SAARC region more oriented towards international trade rather than trading within the region itself? </strong><br />
	<br />
	<br />
	This is precisely the reason why we have not been able to gain from SAFTA. The idea that we had envisioned for the RTA a couple of decades ago has not materialised and that's why we see a country like India establishing relations with other RTAs, for example, <br />
	<br />
	ASEAN. The potential in SAARC region has not been able to take shape and India is not ready to bide time in this age of fast-paced globalisation. We do generate and agree on good ideas in this region time and again but fail to give them shape because of our many conflicts as there is a serious lack of trust among SAARC countries. Besides, we have adopted policies in the past not to bring our internal disputes to the table which is another deterrent.</p>
<p>
	<strong><br />
	<br />
	Is Nepal's bureaucratic level effort viable enough for trade enhancement without taking the private sector on board? </strong><br />
	<br />
	Trade enhancement is definitely not possible without the active participation of the private sector. The intensified level of interaction that should have been there between the private and the public sectors is seriously missing. Both the parties are responsible for this; they donate trust each other and often indulge in a blame game. We, the public sector, like to keep ourselves away from the private sector whereas we should be able to take them along. It is because we donate have a business friendly culture which has prevented us from partnering with the private sector in a substantial manner. <br />
	<br />
	On the other hand, the private sector has not been able to develop the appetite that is required to gain competitiveness. The private sector is still busy looking for quotas and concessional rates on tariff etc and create a playing field for itself. Besides, there are times when we expect the private sector to raise its voice or advice but they convey political messages instead of giving technical details or feedback. In the bargain, we miss their indepth expertise that we so desire. <br />
	<br />
	The private sector also lacks the preparedness that is required for public-private partnership (PPP). We do talk about PPP all the time, but it requires a certain level of discipline and pace which is definitely missing. Let me conclude by saying that we do have businessmen of high calibre in Nepal's private sector and one only hopes that the number of such businessmen is on the rise. <br />
	 </p>',
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	(int) 6 => array(
		'Article' => array(
			'id' => '530',
			'article_category_id' => '40',
			'title' => 'The Promises Of SAFTA Are Much Better',
			'sub_title' => '',
			'summary' => null,
			'content' => '<p>
	<img alt="sridharkkhatri" border="1" height="477" hspace="10" src="http://www.newbusinessage.com/ckfinder/userfiles/Images/coverstory-III _dec2012.jpg" vspace="10" width="300" /> <br />
	<br />
	<br />
	<strong>Prof Sridhar K Khatri <br />
	Executive Director <br />
	South Asia Centre for Policy Studies (SACEPS) </strong><br />
	<br />
	<br />
	<br />
	<strong>The Promises of SAFTA are Much Better<br />
	</strong><br />
	<br />
	<strong>How do you look at the volume of regional trade in the South Asia? </strong><br />
	<br />
	Intra-regional trade between South Asia is very limited at this point of time. Despite the fact that SAARC has been in existence for the last 26 years, regional trade has not increased much. When SAARC started, it was around three to four per cent and today, it is still less than five per cent. The intra-regional volume of trade is something that has not increased for a variety of reasons. <br />
	<br />
	<br />
	<strong>What are the possible reasons for low trade in this region? </strong><br />
	<br />
	The truth is that SAARC as a regional organisation has not completely taken off. There are a lot of constraints that has contributed to this. There is asymmetry in sizes of countries involved in the region with India being the most dominant one. The second reason is that we also have conflict between India and Pakistan, which has in a way, obstructed the SAARC process. There have been opportunities at times when SAARC has shown promise. However, bilateral differences between India and Pakistan have held it back. We have had SAPTA (South Asian Preferential Trading Agreement) for a long time but that has not increased trade either because its structure was fundamentally limited in terms of offering opportunities to increase trade. That is something ASEAN used for a long time and did not have any significant impact. We made the same mistake in South Asia by going through preferential trading arrangement. SAFTA (South Asia Free Trade Agreement) was signed in 2004 but despite the agreement, it has not been implemented basically due to concerns between India and Pakistan. <br />
	<br />
	<strong><br />
	How do you view Pakistan granting MFN status to India in the context of intraregional trade? </strong><br />
	<br />
	The MFN status Pakistan has offered to India will change the nature of the game in South Asia provided there aren’t any other terrorist attacks on India or political impasses at certain points. I have been looking at South Asia for a long time now and my worry is that these hiccups tend to hold back the little progress that has been made. <br />
	<br />
	<strong><br />
	Why is the trade in this region more oriented towards international trade rather than trading within the region? </strong><br />
	<br />
	Trade beyond regions becomes more lucrative. For instance, India’s export to South Asia is around five per cent and the imports are less than three per cent. But its trade with South East Asia is nearly 25 per cent. Pakistan also has the same kind of figure because it is also looking at trade with South East Asia. Even Bangladesh’s largest trading partner right now is China and not India. Trade with European Union is also very substantial. Countries tend to export and have relations with regions where there is growth. However, if there is potential within South Asia, there will be investment and subsequently, trade. For that to happen, political barriers have to come down and their trust deficit problems have to be resolved. But again, there is no time frame for it because there are so many bilateral problems which countries need to overcome. And, in a way, South Asia also needs to be little more confident of the region by itself. There is a serious leadership deficit in South Asia where no country or leader has become an advocate of regional integration to help us overcome difficulties and ensure development. <br />
	<br />
	<br />
	<strong>How best can economic integration be used among SAARC countries to reduce poverty and move towards prosperity? </strong><br />
	<br />
	Integration in a way offers countries the chance to develop their economies in a very systematic manner. This means that if the countries are well developed and if they can progress by cooperating with each other, goods will be cheaper for the people to purchase. There is a programme in the SAARC process to eradicate poverty in the region and two commissions have already been formed on poverty eradication. These commissions have come up with significant measures and have talked about meeting the MDG (Millennium Development Goals). SAARC too has developed its own SAARC Development Goals where the focus has been on the people, however, SAARC has not been able to implement some of its programmes. <br />
	<br />
	<strong><br />
	How can regional connectivity be improved for better trade facilitation in the region? </strong><br />
	<br />
	There are significant measures that must be taken care of in terms of trade facilitation, implementing agreements on trade and reducing non tariff barriers (NTB). You can have an excellent agreement but if you have NTBs, it will make trade a difficult proposition. The possibility in South Asia is in infrastructure development which is very important. SAARC has already talked about connectivity in the region and has a SAARC Multimodal Transport Agreement in place. It has not moved very far but there are some positive signs already. In the just concluded summit in Maldives, an agreement on railways has been signed. There is also an agreement on movement of motorcars within South Asia which should have been signed at least a year ago. Movement of goods and people will be very important for the growth of the region. The trust deficit in South Asia has to be overcome to implement some of these programmes. <br />
	<br />
	<br />
	<strong>India is at the centre of regional trade among the SAARC nations. What roles, do you think, India is expected to play? </strong><br />
	<br />
	India has not only a prominent role but also a key role to play for the growth of SAARC and the benefit of the people in the region. Being a large country that is growing at an exponential rate economically, India can offer advantages to other member states of SAARC including Nepal. I do think that India is ready to move in this direction and we see signs of that but it wants to solve some of its bilateral problems with Pakistan first. I think SAFTA will take off now as Pakistan has promised MFN treatment to India. I believe that if there is substantial growth in trade between these two countries and within the SAARC members, India will be more forthcoming in the future. <br />
	<br />
	<strong><br />
	How do you rate the success of SAFTA and SAPTA? </strong><br />
	<br />
	SAPTA was pretty much an abysmal exercise that did not go far ahead. If we had looked at the ASEAN experience, we should not even have gone through the preferential trading arrangement. The promises of SAFTA are much better but the important element is to put it into practice. We had an exercise many years ago in Nepal and worked together with intellectuals, politicians and businessmen to see what they thought of free trade and if it stands to benefit Nepal. We concluded SAFTA will not benefit Nepal in the short run as free trade usually benefits the larger countries more. For a least developed landlocked country like Nepal, it is much harder to derive benefits. However, Nepal can benefit in the long run if we can have link trade with investment and other related benefits. If trade infrastructure can be developed, Nepal has the opportunity to benefit in the long run. <br />
	<br />
	<br />
	<strong>Do you see the possibility of India cannibalising its neighbours? </strong><br />
	<br />
	For India to grow, it does not need to ‘cannibalise’ small countries. India already has the potential to grow and is a major player in the world today. We have seen South East Asia and East Asia grow very fast. The next phase could be South Asia that can grow at a promising rate. India needs to be more generous towards smaller countries, offer opportunities and feel confident that the growth of smaller neighbours can be beneficial for India. I think that change in thinking is happening in India and will continue to happen in the years to come. <br />
	<br />
	<strong><br />
	What are the differences in provisions of WTO and RTA? How does it affect intra-regional trade? </strong><br />
	<br />
	WTO recognises regional trade agreements (RTA) and encourages them in a way to promote growth not only within countries but also in terms of facilitating trade among the regions in the world. So, it is compatible framework within the WTO framework. It does not obstruct RTAs and vice versa. In the last 15-20 years, a number of regional organisations have evolved at a phenomenal rate. We have seen the growth in Latin America, Africa and even in Asia. But what types of regional organisations have happened needs to be clearly looked at. Nepal is part of both SAARC and BIMSTEC where some of the activities overlap one another.</p>',
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			'description' => 'The truth is that SAARC as a regional organisation has not completely taken off. There are a lot of constraints that has contributed to this. There is asymmetry in sizes of countries involved in the region with India being the most dominant one. The second reason is that we also have conflict between India and Pakistan, which has in a way, obstructed the SAARC process.',
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	(int) 7 => array(
		'Article' => array(
			'id' => '529',
			'article_category_id' => '40',
			'title' => 'Economic Diplomacy Is Getting Sidelined By Political Diplomacy In The Regional',
			'sub_title' => '',
			'summary' => null,
			'content' => '<p>
	<span style="font-weight: bold;"><img alt="Pradeep Kumar Shrestha" border="1" height="261" hspace="10" src="http://www.newbusinessage.com/ckfinder/userfiles/Images/coverstory-II_dec2012.jpg" vspace="10" width="400" /><br />
	</span></p>
<p>
	<strong><br />
	Pradeep Kumar Shrestha <br />
	Vice President <br />
	SAARC Chamber of Commerce and Industry </strong><br />
	<br />
	<strong><br />
	Economic Diplomacy is getting Sidelined by Political Diplomacy in the Regional <br />
	</strong><br />
	<strong><br />
	How do you look at the regional trade in South Asia region?</strong><br />
	<br />
	In the context of South Asian trade, trade movement is very low despite it being home to one fifth of the world's population. Intra-regional trade is less than five per cent which is something the business community of the region must take into account. Other regional bodies like EU and NAFTA have more than 50 per cent of the trade within their respective regions. Even though the countries in the SAARC region claim to be close, there exist a lot of hiccups. The mindset and attitude of the politicians and bureaucrats are not to the level expected in the 21st century. Besides political reasons, infrastructure connectivity, high cost of business, bureaucratic hassles plague the prospects of intra-regional trade. <br />
	<br />
	<strong><br />
	Do you see the possibility of India cannibalising all its neighbours? </strong><br />
	<br />
	India is growing at a fast pace. There is a saying, ˜If you have to grow, you cannot grow alone. You have to grow with the neighbours India is a big trading partner for all the countries in the SAARC region. India is big in each and every aspect compared to other SAARC countries. Considering the present scenario, if India really wants to be a superpower, it has to take its neighbouring countries into confidence. <br />
	<br />
	<br />
	<strong>Why has SAFTA not been able to gain momentum since its inception in 2004? </strong><br />
	<br />
	It is raised in every forum each year but the implementation aspect has been very slow. This is more due to political mindset and crisis of confidence than anything else. However, the fact is that we have to grow together and be interdependent rather than being dependent. SAFTA should have moved much ahead by now. Within the SAARC region, we have to look at increasing the trade volume. The attitude of building confidence, helping and sharing with each other is the way to go about it. <br />
	<br />
	<strong><br />
	Regional trade is being prioritised in other trade blocs such as ASEAN, BIMSTEC and EU. Why has the same not received equal priority within the SAARC trade bloc? </strong><br />
	<br />
	This is very unfortunate. The real fact of trade not really taking off in the region is because the two big countries- India and Pakistan having their own problems to deal with. These two countries should sit together and help us have a prospering regional bloc like EU, ASEAN, NAFTA etc. Unfortunately, what is happening is that we are talking of a region but in terms of sub-regions like Eastern India-Bangladesh, Nepal-Bhutan or India- Pakistan. Each country has its own strength so we have to be able to nurture and benefit from areas of comparative advantages. We, the business community, are seriously advocating for it but without the two big countries getting together and understanding the benefits for the region, the SAARC would not move the way we dream of. <br />
	<br />
	<br />
	<strong>By this, do you mean, economic and trade diplomacy is seriously missing among SAARC member countries? </strong><br />
	<br />
	I think economic diplomacy is getting sidelined and political diplomacy is taking over. However, it is a fact that without political understanding, the economy cannot take off. There could be other ways of bringing things closer like people to people contact. We have to understand each other and feel that we are part of the same region and accordingly, we can synergise the strength. But that is not happening and every country wants to move ahead on an individual level. <br />
	<br />
	<br />
	<strong>Why is the trade in this region more oriented towards international trade rather than trading within the region? </strong><br />
	<br />
	Most of the countries in the region are import based economies though we do have exportable items like garments, carpets and others. Nepal, India, Sri Lanka and Pakistan export same kind of products and end up competing in the same market. The level of purchasing power in the region compared to other regions of the world is less even though the middle class is coming up very fast. When we want to do something, we always look at the west. In regional trade, the cost of connectivity and transportation is very high. Bureaucratic hassles like procedural delays and documentations etc also play their respective roles. All these hassles are so grave that we prefer to go for countries outside the region without realising the availability and quality of products available within the region. We, the business community, have to change that and identify our areas, strengths, products, competitive advantages etc. There must be a feeling of ‘together we grow’ to begin with. <br />
	<br />
	<br />
	<strong>In the context of intra-regional trade, how do you view Pakistan granting MFN status to India? </strong><br />
	<br />
	This is a very positive development for both the countries. To tell you the truth, SAARC has not been able to move ahead because of these two big countries not able to understand each other. The MFN status will fuel reciprocity and can move on to other countries as well. For example, China and Taiwan had similar political problems once, however, their relations have improved considerably in the last few years. If political conditions and hiccups can be taken care of, investment and trade will get a boost. At the same time, other neighbouring countries too will be benefitted when relations between these two countries get better. <br />
	<br />
	<br />
	<strong>Can South Asia region prove to be a substantially big market to consume the production generated in the region and become self suffi cient on trade? </strong><br />
	<br />
	Yes, very much so. A big market is lying out there because of the size of the population. The size of human resources, natural resources, potentials and eagerness of the people doing business in the region can certainly make this region self sufficient. This region has everything but still we have not been able to do anything remarkable. In this context, if the countries in this region join hands with each other without any biased sentiment and mentality, it can definitely prosper. <br />
	<br />
	<br />
	<strong>What are the activities of SAARC Chamber of Commerce and Industry (SCCI)? </strong><br />
	<br />
	Since its inception, the business community has wished to see that business related problems are addressed and economic agendas are taken to a much bigger level. Unfortunately, that has not happened and the community is not very happy about it. We have not been invited to the summits in Male and Thimpu despite being an important part of the SAARC. Though, of course, we understand it was not because of their unwillingness to invite us but it was because of their logistics problems in Male and Thimpu. As for our activities, we have tried to increase the number of SAARC sticker visa to improve people to people contact in the region. We have asked for 200 to 500 visas for each country. If a businessman wants to travel, he cannot wait for a month to get a visa. We are advocating that the paper work has to be reduced and the existing bureaucracy hassles should be nominal. Every country has its own area of strength such as hydroelectricity, agriculture or tourism. There are a number of councils for such sectors under the SAARC CCI, chaired by a specific country for each council. <br />
	<br />
	<br />
	<strong>Have there been enough researches conducted on regional trading? What is SAARC CCI doing towards it? </strong><br />
	<br />
	Research and Development is talked about every time especially in the context of South Asia. I believe that more than 350 scholars in different agencies like World Bank, ADB, and UNCTAD are studying and seeing why South Asia has not been able to grow despite its potentials. Even in our chamber, we try to find out facts and figures as to why things are not happening in the region. I believe such findings will lead us towards making good decisions. <br />
	<br />
	<br />
	<strong>Has it been able to go beyond the concept of bilateral chamber in the true sense of regional level trade cooperation? </strong><br />
	<br />
	We are talking about sub-regional level which is more than bilateral. We understand that because of proximity reasons, Nepal being linked to Pakistan, Sri Lanka or Maldives is not possible. But linking Nepal with Bangladesh, Bhutan, India or BIMSTEC is a different phenomenon altogether. We are only talking about the eastern part of South Asia, for example, Bangladesh, Nepal and Bhutan. Efforts toward regional level trade cooperation is certainly moving but at a very slow pace. <br />
	 </p>',
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			'description' => 'In the context of South Asian trade, trade movement is very low despite it being home to one fifth of the world's population. Intra-regional trade is less than five per cent which is something the business community of the region must take into account. Other regional bodies like EU and NAFTA have more than 50 per cent of the trade within their respective regions.',
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			'article_category_id' => '40',
			'title' => 'SAARC Countries Should Work Towards Regional Cooperation To Achieve Growth',
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			'content' => '<p>
	<img alt="Thosapala Hewage" border="1" height="251" hspace="10" src="http://www.newbusinessage.com/ckfinder/userfiles/Images/coverstory_dec2011.jpg" vspace="10" width="400" /><br />
	<br />
	<strong>Thosapala Hawaga <br />
	Ambassador <br />
	Embassy of Sri Lanka in Nepal</strong><br />
	<br />
	<br />
	<strong><br />
	SAARC Countries Should Work Towards Regional Cooperation to Achieve Growth</strong><br />
	<br />
	<strong><br />
	How do you look at the regional trade in the South Asia region?</strong><br />
	<br />
	The regional trade in South Asia seems to be improving over the years but it is not up to the expectation. Compared to the past, the South Asian economy is more open today. The tariff rates have come down from 80-90 per cent in the 1990s to 20-25 per cent today and exports and imports together are equivalent to about 20 per cent of the regional GDP. SAFTA was expected to include all products, manufacturers and commodities. It is commonly accepted that negotiations under SAPTA will not be very effective in terms of inventing intra-regional trade in SAARC which is unfortunate. There are various possibilities of further improving regional trade within South Asia if countries can overcome the existing barriers. Remedies like substantial tariff cuts, removal of non tariff barriers, adequate trade related capacity building, and connectivity between the countries etc have to be implemented. The regional trade arrangements are in an interim state towards more efficient levels of globalisation. <br />
	<br />
	<br />
	<strong>Is there a possibility of India cannibalising all its neighbours? </strong></p>
<p>
	<br />
	It is difficult to say that India is cannibalising its neighbours. But, with the size of India and its economy, you can’t compare India with any of its neighbours. It is a vast and fast developing country and also the largest country in the region. Their contribution in terms of trade, tourism and economic growth is very high. It is extremely difficult for other countries to talk about balance of trade with India. However, India is having enough problems itself that needs to be resolved first such as regional disparity, low human development index (HDI), poor connectivity etc. India is by far the largest economy in the region and the second largest fast growing economy in the world. South Asia region needs India for its economic prosperity as much as India needs the region for its continuing prosperity. <br />
	<br />
	<br />
	<strong>How do you view trade diplomacy in the context of enhanced regional trade among SAARC nations? </strong><br />
	<br />
	When people talk about diplomacy, they talk about trade diplomacy because that is especially needed by countries in the region. Trade diplomacy in the context of regional trade among SAARC nation is positive and can be further improved. The member countries of the SAARC, I believe, should work towards regional cooperation in order to achieve growth. When there is regional growth, regional trade will definitely go up. If the member countries can develop a regional cooperation and agree upon certain things, a particular country can then focus on its available resources within its territory. <br />
	<br />
	<br />
	<strong>India, being the centre of regional trade among the SAARC nations, could have played a more vital role in making the SAARC trade bloc effective. What are the reasons for India not being able to do so? </strong><br />
	<br />
	As far as I know, India, being the centre of regional trade among the SAARC nations, is playing a vital role in making the SAARC trade bloc effective. However, there are issues among the SAARC nations that need to be resolved in order to make it more effective. India too has its own problems that it needs to resolve. But I believe India can play a major role with regard to development of regional trade in the region. <br />
	<br />
	<strong><br />
	Why is the trade in this region more oriented towards international market than trading within the region? </strong><br />
	<br />
	The trade in the SAARC region is more oriented towards international market probably due to the trade relations that have been developed with countries outside the region over a long period of time. There is also this attraction to trade with countries outside the region because of the high market price for products in the international market. The international destinations have far more secure markets and offer good prices and hard currency. I do agree that trading within the region is not up to the expectations, however, I believe this can be resolved through agencies like SAARC. Actually, SAARC can play a proactive role in the development of trade within the region. They are doing it already but my feeling is that they can do more. Regional cooperation and agreements like SAFTA, SAPTA etc need to be beneficial to all the countries. In order to do that, we have to identify proper people, train them and realise their services, so that we can request them to negotiate for the benefit of their respective countries. <br />
	<br />
	<br />
	<strong>Do you think that tariff and non tariff barriers contribute towards low intra-regional trade? </strong><br />
	<br />
	When the tariff is high, the prices of the goods also go up. Therefore, the countries must look at removing non tariff barriers. We can come up with some kind of consensus within the region so that tariff and non tariff barriers are removed. This, of course, needs to be done in consultation with the member countries of the region. <br />
	<br />
	<br />
	<strong>Can South Asia region prove to be a substantially big market to consume the production generated in the region and become self suffi cient on trade? </strong><br />
	<br />
	I think the South Asian region produces various products that are required for the region and it can certainly prove to be a market big enough to consume them. But the point is that one country has to produce products which the other country doesn’t produce so that you will have an assured market. Basically, what I can see is that most countries in the region produce similar goods and that’s where the problem lies. For example, Sri Lanka produces garments and at the same time, countries such as India, Bangladesh, Nepal and Pakistan also produce garments. Invariably, they have to go outside the region in search of a market for the same product. Hence, you have to have a common agreement with the countries in the region to address this issue. But this is not an easy task unless the countries in the region are committed to do so because each country is concerned about its own benefits. You can have a win-win situation only if there is a give and take policy in place. <br />
	<br />
	<br />
	<strong>What are the problems in expanding regional trade? What are the potentials of trade development? </strong><br />
	<br />
	Trade barriers such as high tariff, double taxation, lack of connectivity among the countries are some of the problems apart from what we have already discussed earlier. The countries have to look into their infrastructure and ways of connectivity in order to increase regional trade. The size of the economy is another issue that you need to look into, for example, India is a huge economy when compared to its neighbours.<br />
	<br />
	There is also the issue of underutilisation of resources which is a cause of concern. If we can resolve these issues, we will certainly be able to expand our regional trade. <br />
	<br />
	The potential for trade development is immense because all these challenges can be turned into opportunities. But we must make sure that we look at tapping the untapped resources. The barriers too need to be taken care of. I believe we will be able to prosper if we think of the entire region rather than only be bothered about our respective countries. <br />
	<br />
	<br />
	<strong>How would Sri Lanka like to represent itself as a brand in the region? What are the prospects of trade for your indigenous products in the region so that you donâte have to look beyond? <br />
	</strong><br />
	If you look at certain products like garments, gems and jewellery and herbal products, we do have the advantages. The market for these products is within the region as well as outside of it. Some of the products have already been accepted and valued by the region. If we produce in accordance with the region’s requirement, we can definitely carve a niche for ourselves. For example, we can design gems and jewellery in a way that caters to the tastes of people of other countries. I am positive that Sri Lanka can definitely expand its trade in the region as time passes.</p>
<p>
	 </p>',
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			'description' => 'The regional trade in South Asia seems to be improving over the years but it is not up to the expectation. Compared to the past, the South Asian economy is more open today. The tariff rates have come down from 80-90 per cent in the 1990s to 20-25 per cent today and exports and imports together are equivalent to about 20 per cent of the regional GDP. SAFTA was expected to include all products, manufacturers and commodities.',
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			'title' => 'Trade Of Hopes In South Asia',
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			'content' => '<p>
	<img alt="trade hopes" height="274" src="http://www.newbusinessage.com/ckfinder/userfiles/Images/tradeofhopes.jpg" width="300" /><br />
	<br />
	<br />
	<strong>Trade of Hopes in South Asia <br />
	<br />
	<br />
	New Business Age Bureau </strong><br />
	<br />
	<br />
	The 17th Summit of South Asian Association for Regional Cooperation (SAARC) held on 10-11 November this year adopted the Addu Declaration which lays emphasis on effective implementation of the SAFTA (South Asian Free Trade Area) accord among its member states. The heads of the eight member countries&nbsp; Afghanistan, Bangladesh, Bhutan, India, Maldives, Nepal, Pakistan and Sri Lanka at Addu city in Maldives discussed regional issues in an effort to take SAFTA forward. I think there is a realization now among the countries in the region to move SAARC into a more integrated regional cooperation model, says Jaideep Mazumdar, Minister and Deputy Chief of Mission at the Embassy of India in Kathmandu. <br />
	<br />
	<br />
	The declaration also includes measures to be taken to promote free flow of capital and investment and improve connectivity within the region. This year's Summit has decided to consider reducing non-tariff barriers (NTBs) and ad valorem (Latin for according to value) duties to promote freer trade. The SAFTA Ministerial Council has been directed to work on reducing sensitive lists, early resolution of NTBs and expediting the process of harmonising standards and customs procedures. Economic cooperation within the region is often viewed as a key tool for deeper integration within the region.] <br />
	<br />
	<br />
	Having recognised this, SAARC had initiated the SAARC Preferential Trading Agreement (SAPTA) as early as 1993, which later evolved into the SAFTA in 2004 and came into effect in 2006. there has been an increase in SAARC's world trade too. Hence, the share of intraregional trade has remained constant. In comparison, intra-regional trade under the Association of South East Asian Nations (ASEAN) is 32 percent, while it is 52 percent in the EU bloc and 68 percent in the USA and Canadian bloc. These trade blocs have also proved to be a tool for development for the participating countries within their respective regions. <br />
	<br />
	<br />
	<strong>Intra SAARC Trade </strong><br />
	<br />
	<br />
	While there have been several initiatives to promote trade among the region, a host of tariff and NTBs maintained by the member countries, the exhaustive negative list and the smallish trade basket have curtailed the growth of trade and investments in South Asia for long. According to an estimate, intraregional trade among the SAARC member nations (excluding Afghanistan which ratified the SAFTA protocol only in May this year) stood at $ 14.35 billion in 2010-11, an increase of 43.4 per cent vis-a-vis the same period in the previous fiscal. <br />
	<br />
	<br />
	The figure is approximately 5 percent of their total overseas trade in a year which is one of the lowest intra-regional trade volumes for any particular trade bloc. Ratnakar Adhikari, General Secretary of South Asia Watch on Trade, Economics and Environment (SAWTEE) says, “Intra SAARC trade has certainly increased over the years, however, <br />
	<br />
	<br />
	<strong>Unfulfilled Potential <br />
	</strong><br />
	<br />
	Staying true to the theme of Building Bridges, this year's SAARC Summit focused on connectivity by going ahead on a regional railways agreement and a motor vehicle pact besides inking a series of pacts on regional cooperation. Despite its high population and common culture, South Asia, is one of the most poorly connected regions in the world. While better connectivity promises to promote trade within the region, stronger trade relations can go a long way in promoting food security, poverty alleviation and improving socio-economic growth of the South Asian population. Prof Sridhar K Khatri, Executive Director of South Asia Centre for Policy Studies (SACEPS) says, The promises of SAFTA are much better but the important element is to put it into practice.<br />
	<br />
	<br />
	The share of South Asia in world economy is less than 2 percent with all eight nations of the region collectively contributing only 1.7 percent towards global trade. A number of regional trade issues largely remain unaddressed among the SAARC nations which are yet to tap the trade potential because of various problems. Different trade barriers like tariff, non-tariff and para-tariff, visa problems, political barriers, bilateral transit issues, negative list issues and testing issues are apparently acting as trade deterrents among the SAARC countries. Pradeep Kumar Shrestha, Vice President, SAARC Chamber of Commerce and Industry agrees, “Besides political reasons, infrastructure connectivity, high cost of business and bureaucratic hassles plague the prospects of intra-regional trade in South Asia.” <br />
	<br />
	<br />
	According to a paper published by the Reserve Bank of India (RBI) assessing intraregional trade in ten regional blocs, intraregional trade in SAARC was the lowest at 4.8 percent in 2008. The RBI report quoted, The reasons for the low level of trade include protectionist trade regimes, which discriminated against trade among larger neighbours; continued conflict between India and Pakistan; and transport and trade facilitation constraints.” Thick ice of contentious competition between regional peers has always been an overriding problem in the SAARC region. <br />
	<br />
	<strong><br />
	The Bottlenecks </strong><br />
	<br />
	<br />
	A lack of trust and political goodwill, and underperformance in leadership by the dominant economies has been mainly responsible for not turning SAARC into a successful regional trade bloc. For example, there is a lack of trust on several issues among nations such as India, Pakistan and Bangladesh. Mazumdar raises a case in point, “Historically, there has been a problem between India and Pakistan that was a hindrance for intra SAARC trade.<br />
	<br />
	<br />
	As a result, the major players have not participated actively in making SAARC an effective trade bloc. For too long, member nations of the SAARC have deprived themselves of the benefits of regional economic integration. The region homes one fourth of the world's population and possesses unlimited potential but has stayed least integrated. <br />
	<br />
	<br />
	The region is home to two-fifths of the world's poor and accounts for only 3 per cent of global output. Intra-regional trade has stagnated at around 5 per cent of its total trade for some time now compared to around 20 per cent in Latin America. Even Sub-Saharan Africa, with poor transport and telecommunication infrastructure, scores over South Asia, with over 10 per cent of its trade being intra-regional. The SAARC members have retained a plethora of tariff and NTBs, which greatly inhibits trade and investments in the region. With a large list of negative items, the trade basket remains very narrow, with little value addition. Thosapala HÃwag, Sri Lanka's Ambassador to Nepal recommends, We should be able to come up with some kind of consensus within the region so that tariff and non-tariff barriers are removed.<br />
	<br />
	<br />
	The major cross-border structural rigidities include behind-the-border barriers in customs procedures, poor transport links, weak networking of private sectors, and administrative issues such as visas. Foreign direct investment (FDI) too is minimal, due to regulatory issues and a non-facilitative business environment. We do generate and agree on good ideas in this region time and again but fail to give them shape because of our many conflicts as there is a serious lack of trust among SAARC countries,says Chandra Kumar Ghimire, Joint Secretary at the Ministry of Commerce and Supplies (now Consulate General of Nepal to Kolkata). <br />
	<br />
	<br />
	To make the SAARC regional trade bloc effective, the progress in duty-concession by the nations is not adequate. The participating countries were supposed to reduce the number of products from the negative list year-on-year for nations to enjoy a zero-duty facility under the SAARC umbrella after a certain period. But the progress in this regard has not been on expected grounds. Business leaders representing different trade bodies among the SAARC nations have been urging their governments to further liberalise their respective economies to help augment intraregional trade, consequently effecting the region's development. There is a serious leadership deficit in South Asia where no country or leader has become an advocate of regional integration to help us overcome difficulties and ensure development, Prof Khatri observes. <br />
	<br />
	<br />
	India, by virtue of being the largest economy in the region and its geographic position, is viewed as the member that bears additional responsibility towards intraregional economic integration. While India's trade with South Asian countries has increased considerably over the years, it is still below the potential trade levels. India, a connecting land mass, has a special responsibility in increasing intra-regional economic integration and facilitating access to its large markets for SAARC members. The idea that we had envisioned for SAFTA around a couple of decades ago has not materialised and that’s why we see a country like India establishing relations with other RTAs, for example, ASEAN,” Ghimire laments. <br />
	<br />
	<br />
	Its above-average growth, expanding middle-class population, and demand for global goods can prove to be an engine of growth for the region. India's trade with South Asian countries has increased encouragingly, in the last half-a-decade or so, but much trade is below the official radar. Further, India's trade with countries such as Nepal, Bangladesh, Sri Lanka and Afghanistan remains heavily skewed in its own favour. The services trade further adds to the trade imbalance, leading to concerns among other South Asian countries about trade sustainability. <br />
	<br />
	<br />
	<strong>The Way Forward </strong><br />
	<br />
	<br />
	The SAARC region has an immense potential for using economic integration to reduce poverty and move towards prosperity. Three areas offer large potential for economic cooperation the services trade, energy cooperation and logistical connectivity. The development of logistical hubs that facilitate the flow of trade across the region can greatly reduce the costs of doing business. These logistical hubs can help connect critical regional corridors, especially with countries having no common borders. The countries in the region will have to look into their infrastructure and ways of connectivity in order to increase regional trade, says HÃwag.</p>
<p>
	 </p>
<p>
	Tourism, a major growth opportunity for countries like Afghanistan and Nepal, remains constrained by security problems. Allowing intra-regional trade in services can enable South-Asian economies to become more globally competitive. Energy and electricity cooperation are non-traditional areas of trade relationship development. For example, Bhutan has managed to balance its trade with India with large exports of hydroelectric power, and similar potential exists for Bangladesh and Nepal. <br />
	<br />
	<br />
	An integration of electricity grids across South Asia can reduce power costs and enhance manufacturing competitiveness for all members. Huge hydro-electric potential exists in Nepal, Bhutan, Afghanistan and India, which could be tapped for intra-regional power trade. Each country has its own strength so we have to be able to nurture and benefit from areas of comparative advantages,feels Shrestha. Just days ahead of the SAARC Summit in Maldives, Pakistanâ's initiative to grant Most Favoured Nation (MFN) status to India was considered a major breakthrough. As far as trade goes, the move promises to help the economies of both the countries over a longer period of time. <br />
	<br />
	<br />
	Experts and analysts observe the major initiative can also prove to be an important step to help stabilise the region, struggling to combat poverty and achieve economic reliability in the wake of US and Eurozone debt crises. It would also pave the way for economic integration of SAARC countries and the prospects of the region thriving seem brighter than ever before. At the Maldives Summit, Indian Prime Minister Dr Manmohan Singh announced Indiaâ's decision to slash the sensitive list for least developed countries within SAFTA, reducing it from 480 tariff lines to just 25.</p>
<p>
	 </p>
<p>
	India has stated that zero basic customs duty access would be given for all the items removed, with immediate effect. There should be an attempt to create an incentive for the partner countries in the region to be able to export to a country like India,” Adhikari recommends. As things stand, SAARC as a regional bloc leaves a lot to be desired. However, SAARC has a good trade potential as the economies of a number of SAARC nations are growing fast, observers opine. The countries seem to be on the path towards eliminating tariff barriers and reducing NTBs against each other. It's time for the South Asian countries to think collectively in order to cash in the opportunity of emerging as a regional force to reckon with. <br />
	 </p>',
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	<img alt="" src="http://newbusinessage.com/ckfinder/userfiles/Images/Manufacturing.jpg" style="width: 524px; height: 585px;" /></p>
<p>
	A long-term vision for the Nepali Manufacturing Sector, known as vision 2020, prepared jointly by Nepal government, UNDP and UNIDO in 2002 had proposed to pursue a two-pronged industrialization strategy aimed at rural, agro-based industrialization, and formal urban-based industrial development. But a decade down the lane, nothing seems to be moving to the vision encapsulated then. The strategy proposed then as prioritising export-oriented labour-intensive manufacturing industries and tourism-related exotic products, where Nepal already enjoys considerable comparative advantage, still sounds equally relevant (see box for 2020 goals). But its proposal of raising the contribution of the sector to GDP from 10 to 20 per cent by 2020 appears highly unrealistic given its contribution of just about 7 per cent of GDP in FY 2010/11. From national economic standpoint, manufacturing has universally accepted double-edged goals -- consumption and/or exports. As Nepal is way below in meeting her consumers demand on virtually all sorts of items, and has equally good potential for export of various products, Nepalâ's manufacturing prospects, at least in theory, are truly bright.</p>
<p>
	It is because Nepali productions can replace the import in the domestic market and also have scope of export to rapidly growing neighbouring markets of India and, also China. Although the import to export trade ratio of Nepal in terms of value stands at 7:1, some of the Nepali produce like iron and steel products, acrylic yarn, hand-made woolen carpets, readymade garments and tea and coffee are faring well in international markets.</p>
<p>
	<img alt="" src="http://newbusinessage.com/ckfinder/userfiles/Images/goals for 2020.jpg" style="width: 468px; height: 400px;" /></p>
<p>
	The history of manufacturing in Nepal is not very long. The Nepal Companies Act, 1936 provided basis for incorporation of industrial enterprises which in fact had provisions for joint-ventures and public sector industries. The most tangible outcome of this Act was establishment of Biratnagar Jute Mills, a collaborative venture of Indian and Nepalese entrepreneurs. The Mill is considered first manufacturing unit of industrial scale in Nepal. But the said Act had no provision for private limited companies until it was reformed in 1951.</p>
<p>
	This new act encouraged the establishment of ninety-two new private joint stock companies between 1952 and 1964. The Industrial Enterprises Act of 1974 enacted in the heydays of panchayat polity also recognized role of the private sector in the industrial growth. But the panchayat regime continued the policy of protecting the public sector production over the private one, which in fact constricted the desired growth of the sector. Establishment of about a dozen industrial estates including at Patan, Balaju, Hetauda, Pokhara, Dharan, Butawal, and Nepalganj in the 1980s certainly contributed to create an organized industrial atmosphere. Several modern industries with large manufacturing plants to produce jute, sugar, cigarettes, beer, matches, shoes, chemicals, cement, and bricks were installed. The garment and carpet production units in much diffused fashion spread in the Kathmandu valley and surrounding areas, targeted at export production. By the end of last fiscal year, number of manufacturing units registered under the Department of Industries has crossed well above 2,000. This not only shows that investment and industrialization has expanded but also that the internal market of Nepali products has grown substantially. Of late, private sector investment in manufacturing of cement, sugar and items of daily use has increased significantly. Western district of Dang is developing as the ‘cement city’ as at least a half-dozen large cement companies are all set to begin production pretty soon. Many would like to categorize the hydropower units also as manufacturing. In that case, it can be claimed that Nepal’s manufacturing sector has been able to attract quite large amount of investment, mainly from the private sector. Still, very weak positioning of Nepali exports --due to lack of diversification, market research and identification</p>
<p>
	and, choice of low-value high-volume products -- has not been helpful for both manufacturing and trade balance. The share of main Nepali export in the global market has been limited in quantity and value, and thus been unable to create their own sectoral economies of scale. The policy conundrum is still a major bottleneck. In many sectors, public enterprises continue to play dominant role which is very often than not inviting unfair market play by government intervention. Price distortion is the major resultant effect that in turn is discouraging the private sector investment, at least in the sectors where the government is directly involved. Recent successive governments with mainly socialist tilts have made the situation even more confusing, as their policies lacked clarity in private property, entrepreneurship and profit making.</p>
<p>
	Even beyond political spectrum, challenges of facilitating the growth of manufacturing sector are many. On the supply side, Nepal’s physical infrastructure, especially electricity supply, roads and use of up-to-date technology are inadequate to support a modern manufacturing sector so that it becomes capable of quickly responding to trends in world market demands for manufactured products. As the newest problem, lack of manpower is another bottleneck due to labour migration to foreign countries. Departing from a conventional thinking, identifying afresh new niche and competitive products is also a striking need of the day. Strategies for trade, policies and investment can follow.</p>',
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			'description' => 'A long-term vision for the Nepali Manufacturing Sector, known as vision 2020, prepared jointly by Nepal government, UNDP and UNIDO in 2002 had proposed to pursue a two-pronged industrialization strategy aimed at rural, agro-based industrialization, and formal urban-based industrial development. But a decade down the lane, nothing seems to be moving to the vision encapsulated then.',
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		'Article' => array(
			'id' => '496',
			'article_category_id' => '40',
			'title' => 'Manufacturers Are Treated As Criminals In This Country',
			'sub_title' => '',
			'summary' => null,
			'content' => '<p>
	<strong>BIPPA should have been signed with India a couple of years ago because it is our nearest neighbour and the largest foreign investor in the country. BIPPA will be a milestone agreement as it promises added security to the Indian investors.<br />
	<br />
	<br />
	</strong></p>
<p>
	<strong><img align="left" alt="coverstory" border="1" height="225" hspace="10" src="http://newbusinessage.com/ckfinder/userfiles/Images/diwakar golchha.jpg" style="margin:10px; padding:10px;" vspace="10" width="200" /></strong></p>
<p style="text-align: justify;">
	<strong>How will the recent BIPPA agreement help in promoting the manufacturing sector? </strong></p>
<p style="text-align: justify;">
	BIPPA should have been signed with India a couple of years ago because it is our nearest neighbour and the largest foreign investor in the country. BIPPA will be a milestone agreement as it promises added security to the Indian investors. Manufacturing sector today has the biggest setback because of electricity problem. In this context, Indian investors have committed around 3,500 MW power generation in this country. In the second round of power summit going to be held in Kathmandu, we expect another 4-5,000 MW of electricity production commitment. Today, India is one of the largest international investors in the region and last year, Indian investors invested US $ 43 billion outside India. So, there is every reason for them to invest in Nepal as we are their nearest country where they will produce electricity and take to India. BIPPA, along with other agreements, shows a long term commitment of India towards Nepal.</p>
<p style="text-align: justify;">
	<strong>How do you analyse the Nepali manufacturing sector and its growth trend?</strong></p>
<p style="text-align: justify;">
	In recent years, the manufacturing sector has been neglected because of various reasons. It was neither in the priority of the government nor was there a concern to protect the domestic investments. So, many industries have shut down in the past seven to eight years. Our industries that had significant annual achievements are registering negative growth for a couple of years now. That is because of the wrong attitude of the bureaucracy and of course, none of the politicians are concerned. For the first time in the last 15 years, Nepali Industrialists have revived the hope they had lost after Dr Baburam Bhattarai became the Prime Minister. Manufacturers are treated as criminals in this country, which is why the entire investment climate is in dire straits. Even the facilities committed by the act of 1990 were denied and later withdrawn which is a betrayal to this sector.</p>
<p style="text-align: justify;">
	<strong>Which is the most appropriate sector for manufacturing for Nepal? Why do you think this specific sector is not much developed as expected?</strong></p>
<p style="text-align: justify;">
	There are so many products necessary to be manufactured in Nepal. Unless the climate for manufacturing and attitude of bureaucrats do not change and unless there is a strong body that can understand the multiplier effects of investment and language of economy, one cannot think of industrialisation. We have discussed the issues and problems we faced after 2000, with Dr Bhattarai. We are hopeful that the industrial revolution will take off after 2012-2013. Many sectors may revive provided there is lowered cost of production and cheaper cost of doing business transactions. There are numerous harassments like high finance cost, no electricity, and so many other reasons due to which industries do not come up. Unless there is power, nobody is going to put money into industry. I will not recommend anybody, at least in my family, to go for manufacturing at this point in time.&nbsp;</p>
<p style="text-align: justify;">
	 </p>
<p style="text-align: justify;">
	<strong>Everybody is complaining that Nepal does not have a suitable industrial environment. Golchha Organisation is one of the most successful corporate houses focused on manufacturing. How are you managing it?</strong> <img align="right" alt="" hspace="5" src="http://newbusinessage.com/ckfinder/userfiles/Images/golchha2.jpg" style="text-align: justify; width: 153px; height: 239px;" vspace="5" /></p>
<p style="text-align: justify;">
	Successes and failures are always part of one’s life. If we are suffering because of the wrong attitude of the government, we might want to close down some industries so that it can give a message. We had to close down Sri Bhrikuti Pulp and Paper Nepal Limited because of the wrong attitude of the government. We are going to close down another important industry, Sri Nepal Boards Ltd due to the same reason. The successive governments thought that importing goods gets them more revenue which they can spend on regular expenses. However, that will leave the country’s development in lurch. There is no desire in the government for development of this country, the only desire is to garner more revenue and enjoy it. At this moment, Golchha Organisation is doing very well with its trading businesses. Trading involves more than 50 per cent of our total turnover while the service sector has around five per cent share and the remaining makes up for our manufacturing concerns.</p>
<p style="text-align: justify;">
	<strong>How long do you think such a situation will persist in the country?</strong></p>
<p style="text-align: justify;">
	It requires visionary leaders like Lee Kuan Yew of Singapore and Mahathir Mohamad of Malaysia to build successful economies. We have our hopes pinned on Dr Bhattarai and we do see similar capabilities in him. If he could remain the Prime Minister of Nepal for the next 10 years, we believe that he can transform this country. But first and foremost, he should begin with a total transformation of the bureaucracy in Nepal.</p>
<p style="text-align: justify;">
	<strong>Large corporate houses are shifting to the service sector. What is the reason behind it ? <br />
	</strong></p>
<p style="text-align: justify;">
	The Nepali people have enhanced their buying power today by virtue of remittance. They want better services and can spend money for that. Service is a sector where you have the possibility of a quick return without making a heavy investment like in an industry. Though are small hurdles like power shortage, strikes and blockades that are affecting this sector as well, it can still manage on its own. That is why the service sector is bound to develop and people are flocking for this sector.</p>
<p style="text-align: justify;">
	<strong>Can a country sustain based on imported goods only as corporate houses and industries are shifting to service sector from manufacturing?</strong></p>
<p style="text-align: justify;">
	There is always a phase like this and ultimately, the nation will have no alternative. Unless you have a manufacturing sector, how much service can you possibly sell? Everything has a limitation so the service sector too will reach a saturation point. Ultimately, when there is a possibility of easy investment and return, competition to make a mark in the manufacturing sector will intensify. There has to be balance in everything because nothing can grow imbalanced. You cannot say that one sector will grow and another sector is not required.</p>
<p style="text-align: justify;">
	<strong>Why are there very little measures to promote goods that have comparative and competitive advantages?</strong></p>
<p style="text-align: justify;">
	At the moment, Nepal has no comparative advantage whatsoever. Once we have sufficient power, labourers more inclined towards working rather than politics, banking sector more favourable for investment, a favourable government and its economy-friendly policies, we will have comparative advantages. Unless these logistics are there, one cannot compete. Today, in India, there are industries that are 20 times bigger than what we have in our country. Given India’s automation and advancement, it is difficult for us to compete with our older and manual technology. So, it is almost impossible to achieve higher cost advantage and efficiency in Nepal. If the policies are correct and the sizes of operation are reasonable, we will definitely compete.</p>
<p style="text-align: justify;">
	<strong>There are duplications even with the limited size of the Nepali manufacturing sector. How sustainable is it and what are your suggestions to control such duplications?</strong> Duplication has been the phenomenon of the entire world. Nepal is not the only country which faces this problem. There are some industries who lead with original ideas and some others who follow. Only time can tell whether such practices will succeed or not. The capable ones will sustain and the incapable ones will take their own path. Investors have to think which sector they have to go, you can’t push your product. Once there is a pull factor, you will produce more because if you try to push things, you will never get the desired results. The market is the best judge to accept or not to accept such practices.&nbsp;</p>',
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			'title' => 'Industrial Development Is Impossible Without Basic Infrastructure',
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			'content' => '<p style="text-align: justify;">
	<span style="font-size: 14px;"><strong>What is the present status of the manufacturing sector in Nepal?</strong> <br />
	</span></p>
<p style="text-align: justify;">
	<span style="font-size: 14px;">The market for both consumable goods and durables has been growing and expanding in the international arena. Growth of manufacturing sector ensures overall economic growth. As a result, demand for both consumable goods and capital goods increases. Demand of consumable and capital goods has been growing globally. That is why we can say that the manufacturing sector has been growing the world over. But the problem is that though the demand for these goods is rising globally, production of these goods has centred around booming economies like China and India. As far as Nepal is concerned, we are in a very sorry state in manufacturing sector. Leave alone the possibility of expansion; even the goods that we used to manufacture in our own country have been displaced. For example, we used to produce fabrics in our country but Chinese readymade clothing available at cheaper prices has now replaced them. There were about 35 factories owned by the government but most of these public sector industries have shut down. We were the third largest jute producers in the world at one point of time. The health of our oldest factory, Biratnagar Jute Mill, has been deteriorating with the production and profit of this factory nosediving. The carpet industry used to contribute 20-22 per cent towards our national income but this percentage has been witnessing a downward trend. The contribution of the private sector is not very satisfactory. <br />
	</span></p>
<p style="text-align: justify;">
	<span style="font-size: 14px;"><img align="left" alt="cover story" border="1" height="308" hspace="10" src="http://newbusinessage.com/ckfinder/userfiles/Images/bholanath pokheral.jpg" style="margin:10px; padding:10px;" vspace="10" width="250" /><br />
	</span></p>
<p style="text-align: justify;">
	<span style="font-size: 14px;"><strong>How do you analyse the growth of the manufacturing sector in Nepal? </strong><br />
	</span></p>
<p style="text-align: justify;">
	<span style="font-size: 14px;">Had our factories used our own resources or inputs, it would have yielded high value. But our manufacturing industry has been providing more of an assembling facility to intermediary products that we bring from international market rather than producing goods by ourselves. If we analyse the history of the growth of manufacturing sector in Nepal, the industrial development that began from the 1980s started to expand from 1990's revolution with the radical shift in power and the country adopting the path of democracy and liberalism. We had significant growth in the manufacturing sector from 1995 to 2002. The growth was up to 20 per cent. But after 2002, the contribution of manufacturing sector has been even lesser than the contribution of agriculture. Nepal hasn’t been able to exploit its position between the two economic giants. <br />
	</span></p>
<p style="text-align: justify;">
	<span style="font-size: 14px;"><strong>What are the impediments for investing in the manufacturing sector? </strong><br />
	</span></p>
<p style="text-align: justify;">
	<span style="font-size: 14px;">Like water, capital flows to a place where there is favourable investment environment. The movement of capital can neither be controlled nor stopped. We have been witnessing that the factories that were opened in our country have now shifted to places like Himachal Pradesh in India because the environment of Nepal is not investment-friendly. A number of causes are responsible for this local market, international market, labour issues, tax policy, political instability, insecurity, lack of basic infrastructure etc. The private sector claims that labour issues and government bureaucracy are the key hurdles for industrial growth. Nepal's labour productivity is one of the lowest in the world and lack of skilled manpower has been the greatest challenge for industries. The labour situation is so bad that they are hiring Indian nationals to run their industries. Besides, there are labour unions to worsen the situation. Energy crisis is another major problem for us as we have to face 18 to 20 hours power outage a day. This goes to prove that we donâte have consistent policies and the policies change with every new government that takes charge. Cartels and syndicates are some other problems that plague the sector. Lack of basic infrastructures like roads, water, etc is something that we all know about. Industrial development is impossible without these basic infrastructures. <br />
	</span></p>
<p style="text-align: justify;">
	<span style="font-size: 14px;"><strong>A lot of corporate houses previously involved in manufacturing have been shifting to the service sector. Can an economy sustain based on the service sector and imported goods?</strong> <br />
	</span></p>
<p style="text-align: justify;">
	<span style="font-size: 14px;">According to economic theories, the growth in the size of an economy results in the expansion of its service sector. Investment moves from one sector to another on the basis of two factors: risk and profit. At present, investment in the manufacturing sector involves very high risk as there are number of impediments involved. Most of our industries are located in the three industrial corridors of Nepal first, from Itahari to Rani, the second from Hetauda to Birgunj and the third from Butwal to Sunauli because these places have better arrangement of infrastructures like roads, water and electricity connection. So, even though an economy cannot sustain with a growth in the service sector alone, capital has moved to this sector in Nepal as it involves less risk and high rate of return. Until the impediments are cleared, investment in manufacturing sector will not materialise.</span></p>
<p style="text-align: justify;">
	<span style="font-size: 14px;">Why can’t agriculture be developed as an important industry in our country? Our agriculture sector has not been able to create demand because it is not vibrant enough. The greatest challenge in the agriculture sector is the labour problem. Youths have left their villages for opportunities in the cities or outside the country and fertile lands have either turned barren or have shifted to permanent cropping. The consumption demand is growing in the villages due to remittance inflow and not because of the contribution of agriculture. <br />
	</span></p>
<p style="text-align: justify;">
	<span style="font-size: 14px;"><strong>How can we reach the level of sustainability or even export Nepal's manufactured goods to the international market?</strong> <br />
	</span></p>
<p>
	<span style="font-size: 14px;">There are a few aspects to consider before we think about expanding the market of our products to the international level. The first is the quality of our products. Can our products stand on the same level compared to similar products available in the international market? Can we sell our products at a competitive price? For this, the cost of production should be low. High labour and management efficiency in addition to cheap capital can decrease the production cost. But, the scenario in our country is just the opposite and hence, there are a very few products with this possibility. Take the example of honey which we used to export to Europe not too long ago. But Europe no longer accepts our honey as they found traces of insecticides in it. We don’t have a facility to test it and certify that our honey is pure. Similarly, Nepalis in general do not show strong trait of entrepreneurship. One of the economics theories states that a refugee has a greater possibility of becoming a good entrepreneur than any other person. Even the history shows that people who have left their countries with a determination to go through hardships have become successful entrepreneurs. Second, the theory claims that certain caste or creed have better entrepreneurial skills than others. Nepali entrepreneurs belonging to Thakali and Newar castes have not been able to groom themselves as international businessmen like the Marwaris have. Most of the countries in the world have China Towns that are famous for Chinese food. In the same manner, Thakalis too can promote their authentic dishes in the international market. The Nepalis in general should also use their natural skills and groom themselves to earn respect in the international arena. <br />
	</span></p>
<p>
	<span style="font-size: 14px;"><strong>Despite all these barriers, do you see possibilities that can take Nepal on the way to prosperity?</strong><br />
	</span></p>
<p>
	<span style="font-size: 14px;">One sector with tremendous possibility is limestone as we are very rich in this resource. If we can use limestone and subsitute the import of cement, we can save a considerable amount of foreign currency. However, this sector hasn't developed the way it should have. Besides limestone, hydropower, tourism, medicinal herbs etc are other possibilities that we can explore. <br />
	</span></p>
<p>
	<span style="font-size: 14px;"><strong>When will we actually have favourable industrial and investment environment?</strong></span></p>
<p>
	<span style="font-size: 14px;">Political stability only can ensure favourable industrial and investment environment because it will ensure stable economic policies. But that is not enough. Investment will get attracted only when we have consistent policies and programmes and when the government is clear about private investments. The risk factor is high during political instability so let's hope that we achieve the same through constitution, an election and formation of a stable government. Though the country is following this path, the progress has been very slow. Similarly, labourers should be clear about both their rights and responsibilities. They are presently acting more like the political parties wings rather than institutions that must fight for the rights of labours. Similarly, quality people living abroad must return to build their own country. The government can take an initiative in this regard by guaranteeing employment, security and welfare to them in Nepal. It's certainly going to take some time to sort out these issues but we must not lose hope and remain optimistic. <br />
	</span></p>
<p>
	<span style="font-size: 14px;"><strong>What is the prospect of Nepalâ's manufacturing sector? What are the remedial measures you would like to recommend? </strong><br />
	</span></p>
<p>
	<span style="font-size:14px;">There is no way out other than utilising our competitive advantage. The greatest competitive advantage of Nepal is its location between the two emerging economic giants. We can certainly facilitate trade between China and India and at the same time, expand our economy by participating in theirs. We donâte have vast natural resources and the only resource we can take pride in is water, however, it is not a secured resource as it is in the grip of climate change. Tourism can be developed as a big industry while specialisation in agriculture can be another possibility. If we can process our medicinal herbs in our own country, it can contribute significantly to our national economy. The trend so far is that we sell our raw-materials at very low prices while buying processed items very expensively. The practice of herding and limping is another hitch because it hurts specialisation. If these aspects could be corrected, we can imagine a prosperous economy in our country in the foreseeable future.</span></p>',
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			'title' => ''NRB Will Take Every Possible Measure To Bring Liquidity Problem Under Control'(October 2011)',
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			'content' => '<div style="text-align: justify;">
	<span style="color:#(color);"><span style="font-size: 14px;"><strong>Gopal Prasad Kaphle </strong>is Deputy Governor of Nepal Rastra Bank (NRB), the central bank of <img align="right" alt="" border="2" height="356" hspace="10" src="http://newbusinessage.com/ckfinder/userfiles/Images/gopal prasad kaphle.jpg" vspace="10" width="250" />Nepal. He was appointed to the post on December 26, 2010. He started his career in banking in 1955 and is devoted to this sector for more than 29 years. During this period, he worked in banking operation, branch operation, development finance, micro finance, public debt, training, and banking inspection and supervision department. He completed Master’s Degree in Economics from Tribhuvan University in 1979. He also has a Master’s Degree in Economics from the University of New England, Australia. In an interview with <i>New Business Age</i>, Kaphle speaks about the current situation in the banking sector and NRB’s regulatory plans for the future. Excerpts:<br />
	<br />
	</span></span></div>
<div style="text-align: justify;">
	<span style="color:#(color);"><span style="font-size: 14px;"><br />
	</span></span></div>
<div style="text-align: justify;">
	<span style="color:#(color);"><strong><span style="font-size: 14px;">Total net profit of commercial banks has increased by 2.28 per cent compared to that of last year. Why is the growth so low?<br />
	<br />
	</span></strong></span></div>
<div style="text-align: justify;">
	<span style="color:#(color);"><span style="font-size: 14px;">The growth rate compared to a few years ago is quite low. However, there is no reason to be unhappy about the profit earned by financial institutions. There are some factors that have caused the liquidity problem such as absence of investment area and environment, turmoil in real estate, margin lending, and until last year delayed government budget. Despite these all, BFIs (bank and financial institutions) are successful in making profit and provide relief to shareholders and promoters. In the coming years, if the things change for the better like a timely budget, investment friendly environment and good corporate governance, we can be more optimistic about the high growth in profit.<br />
	<br />
	</span></span></div>
<div style="text-align: justify;">
	<span style="color:#(color);"><span style="font-size: 14px;"><br />
	</span></span></div>
<div style="text-align: justify;">
	<span style="color:#(color);"><strong><span style="font-size: 14px;">Problem of liquidity is still not solved. What is the real scenario at present? How long will it take to overcome this crisis?<br />
	<br />
	</span></strong></span></div>
<div style="text-align: justify;">
	<span style="color:#(color);"><span style="font-size: 14px;">If we look at the liquidity inside financial system, there are not many reasons to worry about. A couple of months ago, commercial banks had Rs 22 billion surplus liquidity in the market. Prior to that, more than Rs 30 billion surplus liquidity was observed in commercial banks. Most of the commercial banks except only a few are in surplus. Among B and C class financial institutions, some have surplus while others are in deficit. Moreover, commercial banks are at ease while development banks and finance companies are not completely out of the woods. If we look at inter-bank lending rate, till date, only some finance companies are still borrowing at 15 or 16 per cent. Commercial banks were borrowing at one per cent some time back but at present they are borrowing at around 1.5 per cent. This shows, there is ease in the system but at the individual level, some bank and finance companies are still in problem. But, the liquidity problem is not completely resolved.</span></span></div>
<div style="text-align: justify;">
	<span style="color:#(color);"><span style="font-size: 14px;"><br />
	</span></span></div>
<div style="text-align: justify;">
	<span style="color:#(color);"><span style="font-size: 14px;">This time of the year is normally the period of ease. During this period, the government budget has been passed by the parliament. There have been fewer investments. Loan and interests repayment rate in the commercial banks is good. That makes the liquidity problem to look relieved. We are also in a wait and watch mode to see what the situation is after Dashain and Tihar. I believe there won’t be big problems like in previous years. At such times, we cannot deny the possibility of problems. However, we are alert because of the lessons we have learnt. Public trust has developed in the banking sector. In the coming days, NRB will take every possible measure to bring this problem under control. The government has also assured that. NRB, if required, will use any instruments like refinancing to LOR (Lender of Last Resort) to bring the situation in control. To make sure that liquidity does not remain idle, we are issuing development bonds and treating B and C class institutions can participate in such instruments. We are putting them in a separate basket. I am trying to ensure the environment to cash in on instruments whenever there is any problem of liquidity. Problem is psychological too. And, commercial banks are also optimistic that the problem will ease. I believe the problems of the past will not repeat.<br />
	<br />
	</span></span></div>
<div style="text-align: justify;">
	<span style="color:#(color);"><span style="font-size: 14px;"><br />
	</span></span></div>
<div style="text-align: justify;">
	<span style="color:#(color);"><strong><span style="font-size: 14px;">The average non-performing loan out of total loans has increased to 2.41 per cent from 1.92 per cent of previous year. What is your take on this?<br />
	<br />
	</span></strong></span></div>
<div style="text-align: justify;">
	<span style="color:#(color);"><span style="font-size: 14px;">This may be realistic too because the biggest problem currently is real estate loans. The financial sector is not mobile. Economic activities are missing; industries are not moving on the right track, there are problems of labour and import-export. Due to unstable government, policies are not implemented. We also realise that NRB has become quite aggressive and taken tough policy measures. We tried to address the problem of good governance that has been left unaddressed over the years at once instead of treating it in a step-by-step manner. Due to the absence of investment environment to tap such opportunities, lending in industries have problems of recovery. Industries may not be running, some might have been closed down, there are labour issues. So, loans are not being paid back. Some banks and finance companies were in problem. So, we decided to liquidate some companies, and because of that, their non-performing loans must have been added. Real estate loans had the largest market share. We put a cap on lending to the real estate. The sales of real state also faltered. As developers cannot sell, they could not repay the loan. We have tried to ease it. However, market and economy as a whole has effects on business and non-performing loans increased.</span></span></div>
<div style="text-align: justify;">
	<span style="color:#(color);"><span style="font-size: 14px;"><br />
	</span></span></div>
<div style="text-align: justify;">
	<span style="color:#(color);"><span style="font-size: 14px;">On NRB’s inspection and supervision part, we have managed it. Compared to the past, we have improved our vision and efforts to solve problems, monitoring and inspections. After our effective inspection, institutions are not able to turn bad loans into good. That has also led to increase the volume of such loans. Increase in such loans does not mean banking system’s status has deteriorated than earlier. This is another side of NRB’s inspection, supervision’s smoothness and effectiveness.<br />
	<br />
	</span></span></div>
<div style="text-align: justify;">
	<span style="color:#(color);"><span style="font-size: 14px;"><br />
	</span></span></div>
<div style="text-align: justify;">
	<span style="color:#(color);"><strong><span style="font-size: 14px;">NRB is planning to adopt a risk based supervision system. What will be the modality of such a system? And, how soon could this be implemented?<br />
	<br />
	</span></strong></span></div>
<div style="text-align: justify;">
	<span style="color:#(color);"><span style="font-size: 14px;">We have various modalities in this risk-based supervision system. There are numerous risks like subjective, managerial and operational among others. Our inspection department categorises specific risks from every sector. Based on that, we define our observation. There may be risks in one sector while others may be safe. This modality tries to take a multidimensional approach to maintaining discipline. It is a change from traditional supervision mechanism. The mechanism is envisioned to ensure that banks and financial institutions should not be in trouble because of any sector or cause. It considers not only good governance, capital base but also operation, investment portfolio among others. This modality aims to calculate and mitigate risks from any sectors. It is based on our belief that a bank must be healthy, strong and create a separate identity in the market.<br />
	<br />
	</span></span></div>
<div style="text-align: justify;">
	<span style="color:#(color);"><span style="font-size: 14px;">Risk-based supervision is applied within NRB too. We are applying it in our departmental operations. It is already under application. We believe risks must be mitigated. We now have to take it forward effectively and give continuity to it. We have to calculate risks that may arise in the future.<br />
	<br />
	</span></span></div>
<div style="text-align: justify;">
	<span style="color:#(color);"><span style="font-size: 14px;"><br />
	</span></span></div>
<div style="text-align: justify;">
	<span style="color:#(color);"><strong><span style="font-size: 14px;">IMF had suggested NRB to exercise more power. What are the new steps NRB is planning to take?<br />
	<br />
	</span></strong><span style="font-size: 14px;">Exercise of power must be viewed considering a couple of elements. NRB exercises power based on NRB Act and BAFIA. BAFIA is in the house and discussions are going on to amend it. It must be strong. The government sector also has a role to make NRB active. We have focused on a few things like taking prompt action on the problems witnessed in financial institutions. NRB must be given right to take prompt action against any issues of good governance. For now, it takes a long time to take action against any person who is proved guilty. The process requires informing the Ministry of Finance then the Ministry of Home and finally the police. If we had power, we could have taken action against some financial criminals. So, NRB must be powerful and the government intervention should be less. NRB should be guaranteed a strong autonomous identity. For that, the status of Governor and Deputy Governor of NRB must be raised which would lead to more power. There must be such provisions that police can make arrests and take actions based on our letter. Time lag that is in existence is encouraging culprits to flee. We are demanding to increase our rights and that will help maintain discipline in banks and financial institutions.</span></span></div>
<div style="text-align: justify;">
	<span style="color:#(color);"><span style="font-size: 14px;"><br />
	<br />
	</span></span></div>
<div style="text-align: justify;">
	<span style="color:#(color);"><strong><span style="font-size: 14px;">What is NRB doing to restore public confidence in financial institutions that is said to be at a low ebb?<br />
	<br />
	</span></strong></span></div>
<div style="text-align: justify;">
	<span style="color:#(color);"><span style="font-size: 14px;">I don’t fully agree with it. At present, public confidence is improving. The confidence started declining when there was crisis of new notes during Dashain around two-three years back. Then, slowly public belief diminished in the entire banking system. And, it heightened with the liquidity crunch. At the same time, some companies were in problem and as a result, trust in the entire financial system eroded. If NRB had not been able to take action and correct its policies, the confidence would have fallen more. We tried hard and deposits have increased, profit has grown though a little and the people are returning to banks for deposits. People kept their money with themselves as some banks could not give loans, or even return deposits. We have moved on from this situation. The increased deposit and surplus liquidity is all because of increasing public confidence. I don’t think commercial banks should worry but this is not a siesta time. Public is so sensitive that if it does not get good service there will be shift in belief and trust. Public confidence must be won with good service, good governance and transparency.<br />
	<br />
	</span></span></div>
<div style="text-align: justify;">
	<span style="color:#(color);"><span style="font-size: 14px;"><br />
	</span></span></div>
<div style="text-align: justify;">
	<span style="color:#(color);"><strong><span style="font-size: 14px;">A demand to stop issuing license to financial institution is heard. Is NRB planning to take such action?<br />
	<br />
	</span></strong></span></div>
<div style="text-align: justify;">
	<span style="color:#(color);"><span style="font-size: 14px;">A couple of things must be taken into consideration. Firstly, the number of financial institutions needed for Nepal with respect to our scale of economy must be clear. Another, there must be clear demarcations of public status like deprived groups, remote areas, hilly and mountainous areas and developed areas. We have already faced the consequences of rampant establishment of banks and finance companies. So, we are going for merger. One policy was formulated, companies came meeting the requirements and licence was issued. We have seen its consequences. NRB’s capacity for inspection and supervision was witnessed along with banks and finance companies’ capacity and implementation of good governance. Often question is raised whether a company can be established or not just with a certain amount of capital. The number is one question, while deepening access of service in certain geographical region and population can be another. Access and inclusion of financial and banking service to all regions must be analysed. The measures to cater to that group or region deprived of service must be pointed out. Similarly, unhealthy competition arises from increased number. The cake is shared by all institutions even as their number increases. Eventually, the size of activities will also diminish. Considering it, a suitable policy and environment must be created. It does not mean we should not issue any licenses. We had prioritised microfinance and its number has also exceeded. There are a lot of duplications. It must be analysed whether a particular area requires more companies or service. Whether to go for branch expansion or number of institutions are two options. So, whichever is feasible we must concentrate on that. Every region and every group of people must be able to access the services and share the cake of national economic development. We must devise our licensing policy accordingly so that there is no duplications and quality facilities are evenly distributed. We are making such policy. We are forming a five-year strategic plan in which we have planned to review the licensing policy. After formulation of that outline, we will have suitable licensing policy and we will bring in merger to control excess institutions and expand in areas with scarcity. That will be either by motivation, giving additional services or accelerating, we will take banking services to those areas.<br />
	<br />
	</span></span></div>
<div style="text-align: justify;">
	<span style="color:#(color);"><span style="font-size: 14px;"><br />
	</span></span></div>
<div style="text-align: justify;">
	<span style="color:#(color);"><strong><span style="font-size: 14px;">Till date, a merger between two commercial banks has not happened. Do you think the mergers that are happening are satisfactory and meet the expectation of NRB?<br />
	<br />
	</span></strong></span></div>
<div style="text-align: justify;">
	<span style="color:#(color);"><span style="font-size: 14px;">The expectation of NRB on merger is not met. For the coming days, NRB is offering two options: merge and get incentive or be ready for forceful merger. If motivational measures do not work, we will have to go for forceful mergers. IMF and other world bodies have suggested that the number of financial institutions is exceeding the national capacity and need. Our only target is to merge the financial institutions, increase their capital base and ensure good governance. It is our continued effort. There are policy complications and we are relaxing them. We are inviting them to come for merger as soon as possible. It is obvious that some practical problems come during mergers. Nobody wants to lose anything. There can’t be two CEOs, chairmen or GMs. Problems in managerial aspects are visible. Someone must compromise something. NRB is determined and it will make mergers anyhow.</span></span></div>
<div style="text-align: justify;">
	<span style="color:#(color);"><span style="font-size: 14px;"><br />
	<br />
	</span></span></div>
<div style="text-align: justify;">
	<span style="color:#(color);"><strong><span style="font-size: 14px;">NRB is trying to correct several of its mistakes of the past like cap on CEO salary, margin lending and real estate? Why does NRB take ad-hoc decisions in the first place?<br />
	<br />
	</span></strong></span></div>
<div style="text-align: justify;">
	<span style="color:#(color);"><span style="font-size: 14px;">I don’t think so. While trying to manage something in an open system, ripples like in a pond hit by a stone are visible. We did not compromise even while deciding CEO’s salary. It is implemented now. We had some policy difficulties regarding B and C class institutions. There would be large variations if similar policy is applied in all financial institutions. It is difficult to manage as there are institutions confined to a district and also large national institutions. Now, we have addressed it through a new policy. We have let them decide independently on salary but based on certain backdrops.<br />
	<br />
	</span></span></div>
<div style="text-align: justify;">
	<span style="color:#(color);"><span style="font-size: 14px;"><br />
	</span></span></div>
<div style="text-align: justify;">
	<span style="color:#(color);"><strong><span style="font-size: 14px;">How long will it take to improve the BoP situation to a comfortable level?<br />
	<br />
	</span></strong></span></div>
<div style="text-align: justify;">
	<span style="color:#(color);"><span style="font-size: 14px;">BOP has improved lately and it was in surplus in June/July. It will continue to improve in coming months too. I don’t think we will go into deficit this year but having said that we should not stay idle. It is getting positive and we are optimistic. There are countries which have deficit balance of payment and are still considered developed. In countries like ours, where there is small source of income and imports are big, some discipline must be maintained like increasing our productivity in sectors like agriculture and increased credit flow to the productive sectors. Internal production immediately helps BoP. We have requested financial institutions to invest in such areas. When the government budget flows to those areas, production increases and jobs are created. That will have multiplier effect and export will also increase. Import of luxurious goods must be discouraged while development oriented activities must continue. Other options than remittance also need to be sought to remain in safe position.</span></span></div>',
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			'created' => '2011-10-11',
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			'description' => 'Gopal Prasad Kaphle is Deputy Governor of Nepal Rastra Bank (NRB), the central bank of Nepal. He was appointed to the post on December 26, 2010. He started his career in banking in 1955 and is devoted to this sector for more than 29 years. During this period, he worked in banking operation, branch operation, development finance, micro finance, public debt, training, and banking inspection and supervision department.',
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		'Article' => array(
			'id' => '474',
			'article_category_id' => '40',
			'title' => 'We Are Sailing Easy For Now (October 2011)',
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			'summary' => null,
			'content' => '<div style="text-align: justify;">
	<span style="color:#000;"><span style="font-size: 14px;"><strong>Sashin Joshi </strong>is the Chief Executive Officer of Nepal Industrial &amp; Commercial (NIC) Bank Limited. <img align="right" alt="" border="2" height="378" hspace="10" src="http://newbusinessage.com/ckfinder/userfiles/Images/sashin%20joshi.jpg" vspace="10" width="250" />He is also the Chairman of National Banking Training Institute (NBTI) besides being the Immediate Past President of Nepal Bankers Association. He holds an MBA in Finance, a Post-graduate Diploma in Marketing and is Credit-Accredited by international banks. Having started his banking career in 1986 with Nabil Bank, Joshi has also worked in Australia and New Zealand Banking Group, Melbourne, and ANZ Grindlays Bank, Kolkata. He was a Director of the Board and Head of Corporate &amp; Institutional Banking at Standard Chartered Bank Nepal before moving to NIC Bank. Also a Founding Director of Rural Micro-finance Development Centre (RMDC), he aspires to contribute in scaling-up reform in Nepalâ's financial sector by working closely with the government, the central bank and the private sector. In an interview with Pinaki Roy of <i>New Business Age</i>, Joshi analyses the performance of Nepal's commercil banks over the past year and recommends remedial measures on issues that plague the sector. Excerpts:</span></span></div>
<div style="text-align: justify;">
	<span style="color:#000;"><span style="font-size: 14px;"><br />
	</span></span></div>
<div style="text-align: justify;">
	<span style="color:#000;"><strong><span style="font-size: 14px;">What is your analysis of the performance of Nepal's commercial banks over the past year?</span></strong></span></div>
<div style="text-align: justify;">
	<span style="color:#000;"><span style="font-size: 14px;">It's not very good. But honestly speaking, I was expecting it to be even worse. Banks were helped to a certain extent by some relief measures given by the central bank at the last minute. I had predicted that the aggregate profit of all the commercial banks put together would be negative. However, we have managed aggregate increase in profit by about two-and-a-half per cent compared to that of last year. My analysis is that the Nepal Rastra Bank’s (NRB) relief measures in the eleventh hour helped us avert negative growth.</span></span></div>
<div style="text-align: justify;">
	<span style="color:#000;"><span style="font-size: 14px;"><br />
	</span></span></div>
<div style="text-align: justify;">
	<span style="color:#000;"><strong><span style="font-size: 14px;">Total net profit of commercial banks in Nepal has increased by a mere 2.28 per cent compared to that of last year. What is the reason for this slow growth?</span></strong></span></div>
<div style="text-align: justify;">
	<span style="color:#000;"><span style="font-size: 14px;">The commercial banks’ profitability was impacted for a number of reasons. As a result of extremely tight liquidity, banks started competing fiercely for deposits by going one-up on interest rates. The deposit rates increased significantly but the banks were not able to pass on all the increase to the borrowers. This resulted in the banks’ average margin getting reduced. Many banks had to take on additional costs on account of personnel, utility, security, stationery supply etc among others. And of course, there is no business growth for reasons of political instability.&nbsp;</span></span></div>
<div style="text-align: justify;">
	<span style="color:#000;"><span style="font-size: 14px;"><br />
	</span></span></div>
<div style="text-align: justify;">
	<span style="color:#000;"><strong><span style="font-size: 14px;">Liquidity crunch continues to persist. What is the severity of the crunch at this point of time and how long will it take us to overcome this?</span></strong></span></div>
<div style="text-align: justify;">
	<span style="color:#000;"><span style="font-size: 14px;">I would like to contradict you here. The liquidity situation has improved significantly over the past couple of months. It improved primarily due to two reasons: one is that there was massive government expenditure that happened towards the end of the last fiscal year. Besides, the budget this year came out on time and therefore, there was no gap between budget approval and government expenditure. On the external account, there have been a lot of reimbursements that have happened for projects which were undergoing or completed. Another reason is that due to very tight liquidity crunch and lack of favourable market conditions, banks were putting brakes on new lending. These two reasons together helped preserve liquidity. However, the real test will be when a lot of withdrawals will take place during Dashain and Tihar. Also, if the capital expenditure of the government does not coincide with the festival season, we could have another tight situation. For that, we will have to wait and see but for now, we are <br />
	sailing easy.&nbsp;</span></span></div>
<div style="text-align: justify;">
	<span style="color:#000;"><span style="font-size: 14px;"><br />
	</span></span></div>
<div style="text-align: justify;">
	<span style="color:#000;"><strong><span style="font-size: 14px;">The total non-performing loan has increased by close to 26 per cent as against last year. What could be the possible remedial measures?</span></strong></span></div>
<div style="text-align: justify;">
	<span style="color:#000;"><span style="font-size: 14px;">To tell you the truth, I had expected higher increase in non-performing loans. The relief given by the central bank especially to the real estate sector towards the end of last fiscal year provided respite because the borrowers were allowed to pay a month after the year end without attracting any provisioning. I believe there is still some under provisioning by banks.</span></span></div>
<div style="text-align: justify;">
	<span style="color:#000;"><span style="font-size: 14px;"><br />
	</span></span></div>
<div style="text-align: justify;">
	<span style="color:#000;"><span style="font-size: 14px;">If there is a problem, you have to bite the bullet. Postponing a problem is not going to make the problem go away. If you have a problem loan, you have to recognise it as one and make appropriate provisioning for that. However, if a business can be revived through re-organisation or re-scheduling, then we should also make every effort to make that happen.&nbsp;&nbsp;&nbsp; </span></span></div>
<div style="text-align: justify;">
	<span style="color:#000;"><span style="font-size: 14px;"><br />
	</span></span></div>
<div style="text-align: justify;">
	<span style="color:#000;"><strong><span style="font-size: 14px;">How can public confidence in financial institutions be restored at a time when the banking industry has been troubled with lower deposit mobilisation?</span></strong></span></div>
<div style="text-align: justify;">
	<span style="color: rgb(0, 0, 0);"><span style="font-size: 14px;">I think the financial system in Nepal is relatively sound, more so when it comes to </span></span><span style="color:#000;"><span style="font-size: 14px;">"A" </span></span><span style="color:#000;"><span style="font-size: 14px;">class commercial banks which account for 80 per cent of the market both in deposits and lending. Most of these institutions are well supervised, have reasonably large capital base and on the whole, well managed. The problem lies basically with "A"&nbsp; class institutions where quite a few corporate governance-related issues have surfaced. There is also a lack of regular and effective supervision by the central bank. If visible measures are taken in these two areas by the central bank and boards of these institutions, I think it will help in restoring public confidence.</span></span></div>
<div style="text-align: justify;">
	<span style="color:#000;"><span style="font-size: 14px;"><br />
	</span></span></div>
<div style="text-align: justify;">
	<span style="color:#000;"><strong><span style="font-size: 14px;">What is your stance on granting banking licenses to practically everybody who applies for it? Aren't we overcrowded with banks in the urban centres while 70 per cent of the country still has no access to formal banking?</span></strong></span></div>
<div style="text-align: justify;">
	<span style="color:#000;"><span style="font-size: 14px;">That was the biggest problem. NRB effectively had just one criterion capital, so anyone who had the money could virtually open a bank here. That was a very wrong policy because banking is such a sensitive industry. Unlike other industries, banks are the custodian of public money where people put their trust. While allowing bank licenses, NRB should have a very prudent and strict criterion to ensure the right intentions of the promoters and the management.</span></span></div>
<div style="text-align: justify;">
	<span style="color:#000;"><span style="font-size: 14px;"><br />
	</span></span></div>
<div style="text-align: justify;">
	<span style="color:#000;"><span style="font-size: 14px;">It's not a numbers issue. It's more about the quality of the banks and the effectiveness of the central bank's supervision. Banks are spreading out and more than a 1,000 branches have been opened in the last one year by all the banks put together. And most of these branches are located outside Kathmandu.</span></span></div>
<div style="text-align: justify;">
	<span style="color:#000;"><span style="font-size: 14px;"><br />
	</span></span></div>
<div style="text-align: justify;">
	<span style="color:#000;"><strong><span style="font-size: 14px;">We are being inundated with merger rhetoric for as long as one can remember, however, we haven't seen one till now. How serious are the stakeholders about this and how will it impact the industry?</span></strong></span></div>
<div style="text-align: justify;">
	<span style="color:#000;"><span style="font-size: 14px;">For any merger to happen, the basis is the potential value addition. Merger for the sake of merger is nonsense. If you look at the international experience on mergers, more than 50 per cent have usually failed. A merger is welcome provided there is value addition taking place between merging institutions by way of bringing in synergies, business, cost, reach, network etc. In Nepal's context, the cultural angle also comes into play. Factors such as multiple promoters with their own personal interests and their respective egos taking precedence etc override the fundamental business deal. That's why I believe that it's very difficult for mergers to happen here.</span></span></div>
<div style="text-align: justify;">
	<span style="color:#000;"><span style="font-size: 14px;"><br />
	</span></span></div>
<div style="text-align: justify;">
	<span style="color:#000;"><span style="font-size: 14px;">However, if mergers do happen, it will definitely be good for the industry. Some degree of consolidation is required because there are too many small players in the market. Size does matter and provided there is a requisition from managements, better efficiency can be brought in.</span></span></div>
<div style="text-align: justify;">
	<span style="color:#000;"><span style="font-size: 14px;"><br />
	</span></span></div>
<div style="text-align: justify;">
	<span style="color:#000;"><strong><span style="font-size: 14px;">How long will it take to improve the BoP situation for us to get slightly more comfortable than we at present are?</span></strong></span></div>
<div style="text-align: justify;">
	<span style="color:#000;"><span style="font-size: 14px;">We have a huge trade imbalance and if we are going to depend solely on trade, it is going to take us a very long time. The export-import imbalance is quite severe which we can deal with it by building more manufacturing establishments and having a better industrial base. Even if we want to promote hydropower, the gestation period again is going to consume a lot of time. Therefore, purely based on trade prospects, it is going to take us a long time to improve the BoP situation. We have of course, been helped by the remittances brought in by Nepali Diaspora and also the aid coming through bilateral and multilateral donors that ensures capital inflow. Even if we have financial and political stability and the policies are conducive, we cannot expect wonders. To even expect that we will have a trade surplus will take us at least 10 years if we start now.&nbsp;</span></span></div>
<div style="text-align: justify;">
	<span style="color:#000;"><span style="font-size: 14px;"><br />
	</span></span></div>
<div style="text-align: justify;">
	<span style="color:#000;"><strong><span style="font-size: 14px;">Why is it becoming more difficult to control inflation? What are your recommendations to successfully control inflation?</span></strong></span></div>
<div style="text-align: justify;">
	<span style="color:#000;"><span style="font-size: 14px;">In Nepal, inflation is primarily on account of two factors. One is the imported inflation which we can do nothing much about. Within this imported inflation, India plays a big role as two-third of our trade is with India which is just the formal trade. If you also take into account the informal trade, my guess is that it would be as much as 80 per cent. So, a lot of inflation is imported from India. The other factor is the supply side where there are no internal control mechanisms. The distribution cost is very high because of the transportation cartels and syndicates. Cost of power is very high in Nepal while the labour costs are ever rising. We still donâte have very good access in terms of roads which again makes it a bottleneck to get goods from one place to another thus adding up costs. We can do a lot on the internal side if the government becomes more effective in its functioning. Besides, the government must allow some subsidy to the agricultural sector otherwise our farmers just cannot compete with the farmers in India where you have subsidies for fertilizers, irrigation, power etc.</span></span></div>
<div style="text-align: justify;">
	<span style="color:#000;"><span style="font-size: 14px;"><br />
	</span></span></div>
<div style="text-align: justify;">
	<span style="color:#000;"><strong><span style="font-size: 14px;">What are your expectations from NRB given the prevailing scenario where the banking industry has registered an excruciatingly slow growth?</span></strong></span></div>
<div style="text-align: justify;">
	<span style="color:#000;"><span style="font-size: 14px;">One expectation I have is that whenever NRB brings out any new policies, directives or circulars, they do it through a consultative process where stakeholders are involved and there is a dialogue. It's not necessary that NRB has to agree to everything that the stakeholders say but at least there is a two-way process when you take everybody into confidence. If a consultative process brings forth any new policies and directives, there will be ownership from the stakeholders themselves. It means that enforcement will be that much more easier because then it becomes voluntary.</span></span></div>
<div style="text-align: justify;">
	<span style="color:#000;"><span style="font-size: 14px;"><br />
	</span></span></div>
<div style="text-align: justify;">
	<span style="color:#000;"><span style="font-size: 14px;">My second expectation is that while bringing out any new directives or policies, they should also try to emulate some of the best practices in the world and think it through before implementing them. We have seen in the past that in quite a few instances, they have come out with half-baked directives which they had to amend a number of times. That shows some kind of shallow thinking within the central bank when they come out with directives.</span></span></div>
<div style="text-align: justify;">
	<span style="color:#000;"><span style="font-size: 14px;"><br />
	</span></span></div>
<div style="text-align: justify;">
	<span style="color:#000;"><span style="font-size: 14px;">Third one is that when they come out with any policies, they should not look only at the bad practices followed by one or two institutions and then paint everyone with the same brush. They must not generalise. If there are some bad apples, they should handle them individually and not treat everybody with suspicion.</span></span></div>',
			'published' => true,
			'created' => '2011-10-11',
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			'description' => 'Sashin Joshi is the Chief Executive Officer of Nepal Industrial & Commercial (NIC) Bank Limited. He is also the Chairman of National Banking Training Institute (NBTI)..........',
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		'Article' => array(
			'id' => '640',
			'article_category_id' => '40',
			'title' => 'Private Sector Will Not Come Merely On Verbal Assurances',
			'sub_title' => '',
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			'content' => '<p>
	<strong>Purusottam Man Shrestha is the National Project Manager of Public-Private Partnership for Urban Environment (PPPUE). An MBA in Marketing and Small Business Management from University of Delhi, he had earlier worked as Enterprise Development Advisor for Rural Urban Partnership Programme.</strong></p>
<p>
	<strong><img align="left" alt="cover stoey" border="1" height="357" hspace="10" src="http://newbusinessage.com/ckfinder/userfiles/Images/cove3.jpg" style="margin:10px; padding:10px;" vspace="10" width="375" />How do you rate the success of PPP model of development?</strong></p>
<p>
	The PPP model in Nepal has not achieved the same level of success that is witnessed in Bihar of India even though they have adopted it only recently. However, this does not mean that works have not been done on our initiatives. Minimum requirements and environment is created for enabling PPP but we donate have projects like in the developed countries that are expected to be under the PPP model. It's only the concept that is seeded while there is very little work to write home about.</p>
<p>
	<strong>What are the reasons for PPP model not being successful in Nepal?</strong></p>
<p>
	Political stability is PPP's fundamental base for success but due to the current national scenario, large investments are not coming. The private sector is sceptical about making investments though they are convinced about the importance of investing in development projects. We have failed to build the confidence of the private sector and it is extremely challenging to invite private financing from the international market. To make matters worse, the minimum arrangement for FDI is also missing. Investment risks must be minimised where possible and laws must be prepared for funds management based on international rules and regulations. There is a special procedure for private partner procurement which we are still unable to formulate.</p>
<p>
	We are still forced to follow the traditional method of inviting tenders through existing public procurement act. The current procedure is marred by a long procedural delay and the private sector cannot wait that long. This is one aspect that de-motivates the private sector. Political intervention and local groups are among other challenges for developing large scale projects. Besides, there is a lack of skilled manpower that is vital for formulating and procuring PPP projects.</p>
<p>
	A core workforce required for PPP needs to be developed in Nepal itself. We have to initiate projects that are attractive to the private sector and market them to the banking fraternity otherwise; the private sector will not come merely on verbal assurances. Even today, people are simply talking about large PPP projects without doing adequate homework and just looking at the success in other countries as examples.</p>
<p>
	<strong>How suitable is the PPP model for the development of physical infrastructure in Nepal?</strong></p>
<p>
	The PPP model in Nepal caters to basic infrastructure and services whereas it is needed more for large scale infrastructure projects. We must look at roads, tunnels, bridges, transmission lines, large hospitals, airport construction and management that can be done under the PPP model. For example, Apollo Hospital of India, in partnership with the public sector, is expanding its accessibility to a larger area to serve the general public. Similar projects can be developed in Nepal too.</p>
<p>
	<strong>Is it only the issue of investment and political environment behind the private sector's disinterest to invest in the infrastructure sector? How big a role does the issue of profi tability play in this scenario?</strong></p>
<p>
	It is incorrect to say that the private sector is not interested. As a matter of fact, they have also understood that there is profit in such endeavours. However, they are not convinced about the system that runs these projects, to see a chance of materialising profits. They are suspicious about the future because of the way policies and regulations change in Nepal on a frequent basis. We may have the policies and the projects in place, but we don't have the required financing for big projects available in our domestic market. Even all the commercial banks, put together, can barely finance one or two large projects. It essentially means that foreign private financing must be brought in and for that to happen, we don't have a necessary arrangement in place.</p>
<p>
	<strong>The government has taken a regressive step on the Fast Track project, which was said as being developed in partnership with the private sector. What kind of impact will it leave on the private investors?</strong></p>
<p>
	The project had reached a certain level, to begin with. Meanwhile, it was realised that the private sector participation would be better. However, at a later stage, there were voices being raised within the government bodies for its rectification. As a result, the project is getting delayed now. This delay certainly does not convey a positive message as a decision once made is being corrected again. Withdrawing the earlier made decision will contribute towards diminishing credibility. A couple of companies had applied in connection with the project but unfortunately, the entire process was cancelled leading to reduced confidence level of the private sector.</p>
<p>
	<strong>By when can we expect large projects getting developed under the PPP model in Nepal? <br />
	</strong></p>
<p>
	There are a lot of prospects indeed. For example, a small though important project such as developing a multi-storeyed parking space in the heart of the city like New Road can happen on an immediate basis. That can be a good yet simple PPP project which the government can realise by allowing a private operator to build the parking lot on a public space. This can be profitable and, at the same time, the private sector will happily invest in a project of this nature. We have proposed it along with a feasibility study but it is being delayed for various reasons. And let me tell you that there are a lot of similar projects that are still awaiting approval. Officials frequently get changed in the concerned local bodies and such things cannot create an environment for long term project commitments. There can be sizeable PPP projects which the domestic financial market can support.</p>
<p>
	<strong>What are your expectations from the government for making private participation successful in the development sector?</strong></p>
<p>
	The government should follow a special practice for PPP procurement. Minimum required laws and regulations must be formed first for private financing, without which money won't come. Even in the domestic financial market, there must be a specific arrangement for PPP financing apart from the existing provision of financing by banks and financial institutions. The government must identify the sectors that need PPP model and plan for at least five to 10 years in advance. The private sector must be invited only after formulating the projects ascertaining the financial scenario and benefits of PPP arrangements. For example, it is largely felt that inadequate study and preparations have gone into the waste management project catering to the Kathmandu valley.</p>
<p>
	The PPP model remedies the weaknesses of developing projects independently by either the private sector or the government. By definition, the private sector tends to maximise profit so it may neglect the larger mass and benefits for the society. For a drinking water project, for example, private developers may target a higher income group only where it sees a higher rate of return. So, a larger mass and the general public may get neglected.</p>
<p>
	If the same project is run under the PPP model, the government can intervene and enforce the supply of quality drinking water to the general public as well. To minimise the loss while doing so, the government may guarantee the profit by handing over the management to a private entity. On the other hand, when such projects are done entirely by the public sector, we have seen a lot of problems in management, leakages etc. Hence, the PPP model reduces the deficiencies of the public sector and best uses the efficiencies of the private sector. &nbsp;</p>',
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		'Article' => array(
			'id' => '639',
			'article_category_id' => '40',
			'title' => 'Private Sector Cannot Be Expected To Develop Infrastructure',
			'sub_title' => '',
			'summary' => null,
			'content' => '<p>
	<strong>R B Rauniar, the Managing Director of Interstate Multi-Modal Transport Pvt Ltd is involved in the transport and transit industry for more than 40 years. He advises the Ministry of Labour and Transport Management time to time and has also worked with the Federation of Nepalese Chambers of Commerce and Industry (FNCCI).</strong></p>
<p>
	<strong><img align="left" alt="cover story" border="1" height="361" hspace="10" src="http://newbusinessage.com/ckfinder/userfiles/Images/cove2.jpg" style="margin:10px; padding:10px;" vspace="10" width="350" />How do you view the possibility of private sector involvement for the development of the transportation sector in Nepal?</strong></p>
<p>
	The southern part of Nepal is completely linked by roads while the northern part remains largely disconnected. This means that the required infrastructure is lacking. The infrastructure for north-south linkage is crucial for the fast development of this country. You must understand that developing roads is a huge investment. The domestic transportation sector does not get spared due to the increasing fuel prices quite frequently. Electric railway transportation is the only cheap alternative in the long run; however it requires a huge investment. Few surveys have been initiated by the government in the last couple of financial years. This must be developed as a master plan because railways is shorter than roadways distance wise and also facilitates both human and goods movement.</p>
<p>
	Developing such a huge project is not possible solely with our internal resources and needs international investment or soft loan funding. As for the private sector, nobody will come forward to invest in infrastructure entirely by themselves. They won’t even come as part of joint ventures because there is no market, as such, to make huge investments and get lucrative returns on it. Therefore, the long term investments are the responsibility of the public sector. However, if we can bring in the management of the private sector for such endeavours, that will be efficient. This kind of an arrangement will be economical as well as revenue generating. It has to develop as a part of the broader national agenda and treated as an economic priority.</p>
<p>
	<strong>What should the government do to encourage the private sector for investing in infrastructure?</strong></p>
<p>
	At present, it is very difficult for the private sector to get involved into infrastructure development due to many reasons. For example, the trucking business is still not organised and trucks are individually owned and leased to companies. A single trucking company has not been developed in an organised manner till now. There are only 283 registered companies in the business and nobody knows how many of them are in existence.</p>
<p>
	Transportation is getting more difficult in places where cities are developing. The private sector will be more interested in facility management rather than investing in infrastructure. If we look at Kathmandu, transporters will drop goods and go back for more if proper parking spaces and warehouses can be set up. But there is not a single warehouse that can serve on a long term basis. This is where the private sector can come in and invest in such projects</p>
<p>
	<strong>Why isn’t the private sector interested to get involved if there are prospects? <br />
	</strong></p>
<p>
	When the interest rate is tremendously high (14 per cent), the rate of return correspondingly becomes very low. For example, the cost of a project can’t be predicted for say, five years down the line, adjusting with the interest rate of borrowing. Given such uncertainty, the private sector cannot be expected to take initiatives in situations like these.</p>
<p>
	<strong>Do you see the possibilities of building roads by the private sector in Nepal similar to that in other countries?</strong></p>
<p>
	We don’t have the level of traffic in Nepal that will lure the private sector to invest in toll roads. The private sector will invest automatically where there is an opportunity for profit. If we had the level of traffic that could yield profits, the tunnel to link Birgunj with Kathmandu would have been constructed by now. The FNCCI is ready to lead and the business community in Hetauda is showing interest but there are elements that have contributed towards slowing down the entire process. Goods and passenger movement is not high as of now but on a positive note, there is an increase in internal population as well as growing international linkages. Toll road development needs huge investment so the government must come forward for constructing infrastructure because it gets soft loan. Debt recovery needs prudent management which can be done by the private sector. If PPP can be fully implemented, a lot of projects could be developed in the foreseeable future.</p>
<p>
	<strong>So you mean to say that it is better to let the private sector manage infrastructure instead of asking them to develop so.</strong></p>
<p>
	Yes, because they don’t have the required capacity given the insufficient domestic resources. The private sector must be allowed to bring in foreign capital as there are foreign banks that trust the Nepali private sector. If such soft loan is allowed to bring in, hydroelectricity can be rapidly developed. Nobody is willing to invest with the domestic rate of interest that is higher than 10 per cent. A single bank cannot finance a project larger than 100 MW; large scale projects need consortium efforts as they need billions of rupees. So, the government must finance development efforts but let the private sector manage them. The government cannot manage projects efficiently and the result is that every public sector enterprise is making losses. Therefore, the government should not conduct business; it should instead allow the private sector to manage. The private sector will then make money and earn revenue for the government.</p>
<p>
	<strong>What should the government do to make the transport sector effi cient and effective?</strong></p>
<p>
	First and foremost, there has to be a right policy. Efficiency will only increase when the transit time can be lowered and turnover can be made faster, this will also lower the cost of transportation as it lowers the overhead cost. The existing transportation facilities can be developed given the available resources but the policy makers must have the political will with a common national agenda for this to happen. &nbsp;</p>',
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		'Article' => array(
			'id' => '638',
			'article_category_id' => '40',
			'title' => 'Investment In Infrastructure Is A Costly Proposition',
			'sub_title' => '',
			'summary' => null,
			'content' => '<p>
	<strong>Sanju Koirala is the Corporate Communication Manager of Ncell, the largest private sector telecom operator in Nepal. She has been working as Ncell’s Corporate Communication Manager since 2009. Ncell has made a large contribution on developing communication infrastructure all over Nepal. It has increased the base stations by more than six times in the last three years. In an interview with New Business Age, Koirala shared her ideas on the prospects and challenges of developing communication infrastructure in Nepal.</strong></p>
<p>
	<strong><br />
	</strong></p>
<p>
	<strong><img align="left" alt="cover story" border="1" height="384" hspace="10" src="http://newbusinessage.com/ckfinder/userfiles/Images/cove.jpg" style="margin:10px; padding:10px;" vspace="10" width="300" />Ncell has expanded quite fast in a very short period of time in Nepal’s telecom business. How big is the prospect of a further expansion in terms of demand and possible supply of services?</strong></p>
<p>
	When the decision to enter Nepali market was made, one of the top priorities was to develop the mobile telecom market and to become number one within two to three years’ time. Although, the goal was reached way before, that is, by the end of November 2011, Ncell will continue with the same endeavour. We will continue investing in network expansion and new services. In fact, Ncell is at a growing stage and we will continue improving our network quality and capacity. By achieving one target, we have set another one in front of us which is even more challenging. We strive to reach quality to be aligned with TeliaSonera global standards and have an excellence in customer satisfaction. For future investment plans, it means increasing capacity and quality in the existing network, be selective to cover new geographical areas, increase data usage by enhancing data speed, implement new end user services and improve network reliability and robustness. Customers have started to feel the difference among various Nepali telecom operators. They have started to value what it means to have a good voice quality and network coverage, no matter wherever they are. It surprised the customers in 2011 and it will continue to surpass their expectations in 2012. Our actions and work will always pleasantly surprise the customers with excellent quality and new services.</p>
<p>
	<strong>How can the contribution of private sector players be compared to that of government sector in communication infrastructure development?</strong> <strong>There are allegations of unfair play coming up quite often.</strong></p>
<p>
	When a private company invests, it always keeps the desirable rate of return in mind. Besides commercial targets, we also have social responsibility targets. Among all possible mobile technologies, Ncell makes the decision as to which technology to trust the most. The return of investment and long term technology sustainability are the main decision making factors. By having set clear rules and regulations regarding usage and fee of frequency spectrum, the government can avoid unfair play. And these rules and regulations shall be applicable for every existing and potential operator in Nepal. Every player expects and should have an equal level playing field in an open and liberal economy.<strong><br />
	</strong></p>
<p>
	<strong>The cost of building infrastructure is very high. How satisfactory are the rate and time-window of return?</strong></p>
<p>
	Geographical terrain, lack of transportation, power outage and shortage of skilled manpower makes investment in infrastructure a costly proposition. We are also aware of the people’s spending power, with low level income; gestation period is bound to increase. It is now at an acceptable level taking into account the revenue from voice and value added services. In my opinion, the market is still developing. When we look from mid and long term perspectives, it’s important not to start a price war among operators and avoid regulatory imposed tariffs. Both of these are short term strategies and if wrongly applied, can impact severely on future investment and quality. It does not necessarily mean that the tariffs on services will not decrease but it will be based on the economy of scale and in a planned way. Everyone has to remember that an operator’s ultimate goal is long term sustainable profitability and every wrong decision has an adverse affect on investment and services.</p>
<p>
	<strong>Do you see the possibility of sharing the same infrastructure by other companies of the same nature? Do you think this will reduce the cost of service expansion? </strong></p>
<p>
	It is possible, but cost sharing and cost bearing business dealing should not be dictated by the government. It should be a business to business decision to have a positive impact as well as in expansion and cost of service.</p>
<p>
	<strong>The NTA has not given permission to share certain resources between telecom operators?And, particularly optical fi bre that is being used by NTC is not shared with other companies. How do you view this?</strong></p>
<p>
	This is one of the most challenging issues because pricing scheme has to be defined and NTA has no information about real and specific costs that are different among various operators. In fact, Ncell is leasing the required bandwidth from NTC and NEA. However, it’s not easy to get into an agreement with government-owned companies. First of all, there should be a display of interest by the first operator to share it based on their interest to get opportunity to share similar bandwidth in other directions where they don’t have it yet. Thus, it should be based on mutual interest rather than forced and imposed regulations.</p>
<p>
	<strong>What are the challenges and problems in developing infrastructure?</strong></p>
<p>
	Getting required permission from different government bodies is a difficult task. And it does get worse when people demand for road, electricity supply and many other things. Besides that, in network rollout, one of the most challenging factors is availability of power. If the rest can be agreed and aligned by changing regulations, making clear and understandable rules and fees, shortage in power will remain for years. This is also related to the government plans to provide sufficient electricity even for households in the cities and remote areas. We are not sure if NTA has any plans on the level of energy requirements for the next five to 10 years. No one has really asked us about expected energy requirements for the Ncell network in the coming years. Therefore, we need to rely only on a backup solution based on diesel generators. That, for sure, has an adverse effect on network running costs and ecology.</p>
<p>
	<strong>What are your expectations from the government about supporting the development of communication infrastructure? Has the government done enough to develop the basic infrastructures?</strong></p>
<p>
	A concise general plan for developing the mobile, fixed and broadband services in Nepal is required. If we look around the Asia Pacific region, every country has imposed different principles. And here, challenges come from the fact that there are no less common principles even within the region. Thus, it brings complexity for the NTA and requires assessment of existing status, plans and changes as required. It also requires expertise and consultancy from GSMA (GSM Association) as well as bringing the local operators together in one working group. RTDF (Rural Telecom Development Fund) could be used for optical fibre and for other facilities. For example, equipments and construction material for infrastructure customs and other taxes can be reduced, failing which, it will increase the investment resulting in costlier airtime for mobile phone users. &nbsp;</p>',
			'published' => true,
			'created' => '2012-02-24',
			'modified' => '2012-08-23',
			'keywords' => '',
			'description' => 'Sanju Koirala is the Corporate
Communication Manager of
Ncell, the largest private sector
telecom operator in Nepal. She
has been working as Ncell’s
Corporate Communication Manager
since 2009. Ncell has made a
large contribution on developing
communication infrastructure all
over Nepal. It has increased the
base stations by more than six
times in the last three years. In
an interview with New Business
Age, Koirala shared her ideas on
the prospects and challenges
of developing communication
infrastructure in Nepal.',
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			'title' => 'We Are Very Keen To Move The SAARC Free Trade Process Forward',
			'sub_title' => '',
			'summary' => null,
			'content' => '<p>
	<img alt="Jaideep Mazumdar" border="1" height="175" hspace="10" src="http://www.newbusinessage.com/ckfinder/userfiles/Images/coverstory-VI dec2012.jpg" vspace="10" width="300" /><br />
	<br />
	<strong>Jaideep Mazumdar <br />
	Minister and Deputy <br />
	Chief of Mission Embassy of India, Kathmandu </strong><br />
	<br />
	<br />
	<strong><br />
	How do you look at the overall regional trade in South Asia? </strong><br />
	<br />
	As everybody will say, it is not up to potential and a lot more can be done. Intra-regional trade within South Asia is only 5 per cent of the trade that the region has with the world. There is, of course, a potential and a huge opportunity for the countries within the region to improve on this figure. <br />
	<br />
	<br />
	<strong>How can connectivity be improved between India and Nepal to negotiate better transit? </strong><br />
	<br />
	In Nepal’s context, as you would be aware that we are building four integrated customs check posts along the border. The objective is that whenever there is a traffic movement between India and Nepal, there is a scientific borderly single place where everything is done – customs check, inspection of goods, clearing of consignments etc. We are also building five cross border railway lines wherein we are harmonising different gauges on both sides of the border as well as building new lines so that goods can come straight to Nepal and vice versa. <br />
	<br />
	To encourage third country trade with Bangladesh, we are building a railway line which will provide an exit from Bangladesh straight into Nepal. We have agreed to allow Vishakhapatnam as an alternative port for Nepal to trade with the rest of the world. We are also building 1,400 kms of roads which will open Nepal inter-land for trading with northern Bihar and northern UP in India along the Terai belt so the movement of goods will become easier. These kinds of connections and inter-linkages are being built to improve transit. <br />
	<br />
	<strong><br />
	How do you view economic diplomacy in the context of enhanced regional trade among SAARC nations? </strong><br />
	<br />
	I can speak for our foreign service that is the Indian Foreign Service, which puts a tremendous amount of importance on economic diplomacy which encompasses trade diplomacy. In all our embassies, we have designated officers who look after harmonising, increasing the trade and helping the private sector of the countries they are posted at. For trade diplomacy, we have an entire division in the Ministry of External Affairs in India which deals with such matters. <br />
	<br />
	<br />
	<strong>There seems to be a sheer lack of trust among nations on different issues. How big a deterrent is this for intra-regional trade? </strong><br />
	<br />
	Historically, there has been a problem between India and Pakistan that was a hindrance for intra SAARC trade. We now hope that things will move much faster and we have been very keen to move the SAARC free trade process forward. We have been doing our bit to ensure that free trade develops in the region. <br />
	<br />
	<br />
	<strong>India, being the centre of regional trade among the SAARC nations, could have played a more vital role in making the SAARC trade bloc effective. What are the reasons for India not being able to do so?</strong><br />
	<br />
	Of course, everybody could have done more. As I said earlier, the potential of intraregional trade in the SAARC region is too large and there is so much opportunity. It naturally means that the potential has not been achieved but it’s due to many factors. I think there is a realisation now among the countries in the region that we need to increase those linkages and move SAARC into a more integrated regional cooperation model. All the leaders have talked about it at the Maldives Summit and our Prime Minister has also spoken very strongly in favour of integrating SAARC. <br />
	<br />
	<br />
	<strong>Why is the trade in this region more oriented towards international trade rather than trading within the region itself? </strong><br />
	<br />
	You cannot generalise this. There may be some products which will have a market in the SAARC region while there may be some other which can find more lucrative markets outside the region. The very fact that intra SAARC trade is only 5 per cent does not mean that the objective should be to make it 100 per cent. For example, oil is always imported so it goes both ways – exports as well as imports. Even Bangladesh which produces so much of garments cannot look only at the South Asian market. People have very high buying power in Europe and North American countries so there are commodities which will find a market in that part of the world and not necessarily in South Asia. <br />
	<br />
	<strong><br />
	How do you view recent development such as BIPPA in the context of intra-regional trade? </strong><br />
	<br />
	BIPPA is an agreement which is just that – an agreement that was to encourage the investors of both countries to invest in each other. We have signed such agreements with more than 75 countries so having agreements with them does not mean that all those countries have invested in India. Therefore, the final decision on investment depends on many factors such as policy stability, security etc. BIPPA itself is only a facilitative document. <br />
	<br />
	<strong><br />
	What are the potentials of Nepal’s trade with countries in the SAARC region, especially India? </strong><br />
	<br />
	You can only export what you can produce. For most of the countries in the region, the exportable products are not adequate therefore countries like Nepal and Bangladesh have big trade deficits with India. Import wise too, if Nepal does not buy goods from India, it has to buy them from somewhere else simply because it does not produce those goods. For example, petroleum products have to be bought from India or some other country and if you buy it from a third country, you still have to transport it through India. If you don’t produce a certain commodity, you cannot trade that.  <br />
	<br />
	<br />
	Â&nbsp;</p>',
			'published' => true,
			'created' => '2012-01-27',
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			'description' => 'As everybody will say, it is not up to potential and a lot more can be done. Intra-regional trade within South Asia is only 5 per cent of the trade that the region has with the world. There is, of course, a potential and a huge opportunity for the countries within the region to improve on this figure.',
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		'Article' => array(
			'id' => '532',
			'article_category_id' => '40',
			'title' => 'Intra-industry Trade Potential In South Asia Is Underutilised',
			'sub_title' => '',
			'summary' => null,
			'content' => '<p>
	<img alt="Ratnakar Adhikari" border="1" height="433" hspace="10" src="http://www.newbusinessage.com/ckfinder/userfiles/Images/coverstory-Vdec2012.jpg" vspace="10" width="300" /><br />
	<br />
	<strong>Ratnakar Adhikari <br />
	General Secretary <br />
	South Asia Watch on Trade, Economics and Environment (SAWTEE) <br />
	</strong><br />
	<br />
	<strong><br />
	What is the current status of Intra SAARC trade? </strong><br />
	<br />
	The intra-regional trade among the SAARC countries stands at 5 per cent of the blocks worldwide trade which has been the case for some time now. Intra SAARC trade has certainly increased over the years, however, there has been an increase in SAARC’s world trade too. Hence, the share of intraregional trade has remained constant. When compared to intra-regional trade in other trade blocs like ASEAN and EU, intra SAARC trade does look small. <br />
	<br />
	<strong><br />
	Why has SAFTA not been able to gainmomentum since its inception in 2004? </strong><br />
	<br />
	SAFTA has not been able to take off because of political as well as economic reasons. It was also affected due to the political tensions between India and Pakistan. Among the economic reasons, it’s the sensitive list that has affected SAFTA most wherein it was decided to have such a list but the types of commodities under the sensitive list was not ascertained. A mammoth 53 per cent of tradable commodities had figured in the sensitive lists of different countries in the region. <br />
	<br />
	<br />
	<strong>How can regional connectivity be improved to negotiate better transit and transhipment?<br />
	</strong> <br />
	There are a number of issues related to regional connectivity that can certainly be looked at if there is a proper intent to do that. For example, India is suffering from Bangladesh’s denial to allow transit through its territory which could have made it easier to reach the north-eastern part of India. Even Nepal can export tea to Pakistan but it will not be profitable sending tea via air cargo. If Nepal can export tea by using the Mahendranagar border to Pakistan via Wagah in Punjab, surface transport can deliver goods in 12 hours flat. But there has been no concrete talk with India on this matter. <br />
	<br />
	<strong><br />
	India, being the centre of regional trade among the SAARC nations, could have played a more vital role in making the SAARC trade bloc effective. What are the reasons for India not being able to do so? </strong><br />
	<br />
	It’s probably because they have analysed the cost and benefits and realised that it is better for them to look outside the region rather than concentrating their negotiating and political capital as well as resources in South Asia. India is not making any pro-active efforts to strengthen regional economic cooperation in South Asia whereas it should be actually promoting regional stability in South Asia which is eventually going to be in its own interest. <br />
	<br />
	<strong><br />
	Why is the trade in this region more oriented towards international trade rather than trading within the region itself? </strong><br />
	<br />
	Historically, most of the developing countries while talking about exporting manufactured products, always have the European, North American, Japanese and Australian markets in their minds. This has been happening for over a century now. Another problem in South Asia region is that most of the countries compete for the same market internationally. <br />
	<br />
	<strong><br />
	Can South Asia region be the production house as well as the market and be self suffi cient for trade? </strong><br />
	<br />
	Why not? I had actually proposed in one of my writings earlier that South Asia can become the textile and clothing production hub. I feel that intra-industry trade potential is not being utilised in South Asia to the extent possible. For example, Pakistan and India are among the best cotton producers in the world and we have state-of-the-art industries in the region that could process cotton into textile fabric. In Bangladesh, we also have one of the lowest cost manufacturers of garment in the world. The manufactured garments can then be sent to Colombo and utilising the shipping industry potential of Sri Lanka, they can be fast processed and shipped to markets abroad. This kind of modality can work in the region’s interest. <br />
	<br />
	<br />
	As for consumption of goods produced within the region, we can take the example of India already importing textile and clothing products from countries like Bangladesh and Nepal. And it should import even more from within the region rather than importing from countries like Thailand and China. There should be an attempt to create an incentive for the partner countries in the region to be able to export to a country like India. However, bureaucratic hassles, nontariff barriers, rules of origin as well as 4 per cent special additional duty imposed on an arbitrary basis have created problems. <br />
	<br />
	<strong><br />
	What are the differences in provisions of WTO and RTA? How does it affect the intra-regional trade? </strong><br />
	<br />
	Regional Trade Agreements (RTA) are meant to provide a platform for deeper level of integration when compared to WTO. You have to understand the fact that WTO actually does not actively discourage RTAs. By virtue of a legal provision within the WTO, it condones regional economic arrangements. In that sense, since SAFTA is deeper, trade within SAFTA should be higher than trade outside the region. By the same token, 67 per cent trade takes place within the region for EU while the figure is 60 per cent for NAFTA. It’s because they have deeper regional integration so there is no reason why SAFTA should not be able to replicate such successes. The regional economic arrangements are actually WTO plus. <br />
	<br />
	The only thing RTAs like SAFTA should learn from the WTO is that it should have a dispute settlement system that is fair, effective and credible. Due to the twotier (Panel and Appellate Body) system of dispute settlement in the WTO, any error of judgment by the panel can be corrected through appeal and actually, more than twothird of cases in the WTO are appealed.</p>
<p>
	As for effectiveness, the verdict of the dispute settlement body is almost invariably adopted because of the reverse consensus rules, which means that the verdict of the dispute settlement body would not be adopted only if there is a consensus not to adopt the report. The credibility factor comes into play because the threat of sanction imposed by the winning party through the decision of the dispute settlement body is plausible. There have been instances where sanctions have actually been imposed thereby forcing the losing party to bring its measures in conformity with the WTO rules. While advanced RTAs such as EU or NAFTA have very effective dispute settlement systems in the form of European Court of Justice and NAFTA Court, SAFTA does not have such a mechanism. This is one of the reasons why countries acting against the spirit of SAFTA also go scot free. <br />
	<br />
	 </p>',
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			'description' => 'The intra-regional trade among the SAARC countries stands at 5 per cent of the blocks worldwide trade which has been the case for some time now. Intra SAARC trade has certainly increased over the years, however, there has been an increase in SAARC’s world trade too. Hence, the share of intraregional trade has remained constant. When compared to intra-regional trade in other trade blocs like ASEAN and EU, intra SAARC trade does look small.',
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		'Article' => array(
			'id' => '531',
			'article_category_id' => '40',
			'title' => 'Economic Diplomacy Is The Present World Order',
			'sub_title' => '',
			'summary' => null,
			'content' => '<p>
	<img alt="Chandra Kumar Ghimire" border="1" height="330" hspace="10" src="http://www.newbusinessage.com/ckfinder/userfiles/Images/coverstory-IV dec2012.jpg" vspace="10" width="300" /><br />
	<br />
	<strong><br />
	Chandra Kumar Ghimire <br />
	Joint Secretary <br />
	Ministry of Commerce and Supplies (now Consulate General of Nepal to Kolkata) </strong><br />
	<br />
	<br />
	<br />
	<strong>What are the major differences in WTO and RTA provisions? How do they affect intraregional trade? </strong><br />
	<br />
	<br />
	WTO is a broader frame which is the legal basis for global trade arrangements and provides framework for the rule-based trading system of which RTA is an option. RTA's jurisdiction is area specific and has the involvement of likeminded countries which are similar in geographical, political or socio-economic aspects and enjoy certain proximity. The WTO's role is to provide the basis for legal framework and permit for RTAs. <br />
	<br />
	RTAs are WTO plus meaning a regional economic arrangement is expected to commit more. The commitment is for the intent of opening the market more for increasing trade volume through freer, broader, deeper and wider trade.</p>
<p>
	 </p>
<p>
	<strong>How is WTO treating RTAs? </strong><br />
	<br />
	There are already 400 RTAs that have come into being and there are more being developed. There are two dimensions and arguments to it. On a scholastic level, the argument is whether RTAs complement or contradict the WTO. The ones who advocate that RTAs complement the WTO say that regional economic arrangements help freer, wider and deeper trade. But the people believing in the philosophy of the other extreme say that RTAs are fragmenting global markets. However, broadly speaking, WTO has allowed regional economic arrangements under its legal frame and I believe the WTO has treated the RTAs in a positive way.</p>
<p>
	<br />
	<br />
	<strong>There are a host of RTAs such as SAFTA, BIMSTEC, ASEAN, NAFTA etc and an RTA is supposed to supersede WTO provisions. If WTO is to dominate all other agreements, what is its relevance at the end of the day? </strong><br />
	<br />
	<br />
	Let me first clarify that all RTAs are not effective, they are there as global ideas but not fully actualised. On a global level, WTO is supreme but it does not dominate other agreements by any means. RTAs do not have the mechanism for dispute settlements like the WTO does. The WTO is a mechanism which even drags a global power like the US to its tribunal and allows least developed countries (LDC) to have their say. Under WTO, the developing countries can also indulge in issue-based bargains with powerful countries which were not possible with RTAs without WTO's existence. <br />
	<br />
	If RTAs were to exist in all parts of the globe, the idea of regional economic arrangements will truly complement the WTO. Otherwise, the idea will not really hold much ground. The RTAs must be able to bring themselves into complete effect so that they can fulfill the ultimate aims of WTO rather than challenging its dominance.</p>
<p>
	<br />
	<strong><br />
	How do you view economic diplomacy in the context of enhanced trade relations between countries? </strong><br />
	<br />
	<br />
	Ever since the world came into being in its present unipolar form, there has been a change in the way diplomacy is being practiced. Today's power struggle is for trade and to become a winner in the âgain and loss scenario, which has resulted in a shift from conventional political diplomacy to economic diplomacy. This big transformation has brought about changes in the bureaucracy of many countries. In Nepalâ's context, we have been talking about economic diplomacy since the early 1990s but we have not been able to practice it at the real level. <br />
	<br />
	We do need political diplomacy with other countries, our immediate neighbour India for example, which is fundamental but the aim has to be for economic gains. In the present world order, we have to strive to gain by putting economic diplomacy into practice. The other countries in the region like Bangladesh and Sri Lanka have expanded their number of missions in different parts of the world exactly with this idea. <br />
	<br />
	They have been marching ahead with economic diplomacy by looking at the markets in different countries of the world. Even though we have the same agenda in Nepal, we lack a comprehensive outlook and have not been able to identify our potential markets worldwide. Accordingly, we could have expanded our missions whereas we are still stuck with the same missions that we had established in the 1950s and 1960s. <br />
	<br />
	We do not have a clear agenda even though of late, we have been able to identify countries where we could find a labour market. However, that's not sufficient because we need to tap opportunity and be able to pursue capital coordination. For this, we have to work in close coordination with ministries of economic content, the private sector and think tank institutions. India and China, our doorstep markets, are countries that are attractive for the entire world. On our part, we are leaving these arm-reach markets and looking elsewhere and therefore, ending up with virtually nothing. All the global powerhouses are targeting India and China for economic reasons and we should do the same. We should be able to shed the diplomatic legacy of the yore and start afresh.</p>
<p>
	<br />
	<strong><br />
	Why is the trade in SAARC region more oriented towards international trade rather than trading within the region itself? </strong><br />
	<br />
	<br />
	This is precisely the reason why we have not been able to gain from SAFTA. The idea that we had envisioned for the RTA a couple of decades ago has not materialised and that's why we see a country like India establishing relations with other RTAs, for example, <br />
	<br />
	ASEAN. The potential in SAARC region has not been able to take shape and India is not ready to bide time in this age of fast-paced globalisation. We do generate and agree on good ideas in this region time and again but fail to give them shape because of our many conflicts as there is a serious lack of trust among SAARC countries. Besides, we have adopted policies in the past not to bring our internal disputes to the table which is another deterrent.</p>
<p>
	<strong><br />
	<br />
	Is Nepal's bureaucratic level effort viable enough for trade enhancement without taking the private sector on board? </strong><br />
	<br />
	Trade enhancement is definitely not possible without the active participation of the private sector. The intensified level of interaction that should have been there between the private and the public sectors is seriously missing. Both the parties are responsible for this; they donate trust each other and often indulge in a blame game. We, the public sector, like to keep ourselves away from the private sector whereas we should be able to take them along. It is because we donate have a business friendly culture which has prevented us from partnering with the private sector in a substantial manner. <br />
	<br />
	On the other hand, the private sector has not been able to develop the appetite that is required to gain competitiveness. The private sector is still busy looking for quotas and concessional rates on tariff etc and create a playing field for itself. Besides, there are times when we expect the private sector to raise its voice or advice but they convey political messages instead of giving technical details or feedback. In the bargain, we miss their indepth expertise that we so desire. <br />
	<br />
	The private sector also lacks the preparedness that is required for public-private partnership (PPP). We do talk about PPP all the time, but it requires a certain level of discipline and pace which is definitely missing. Let me conclude by saying that we do have businessmen of high calibre in Nepal's private sector and one only hopes that the number of such businessmen is on the rise. <br />
	 </p>',
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	(int) 6 => array(
		'Article' => array(
			'id' => '530',
			'article_category_id' => '40',
			'title' => 'The Promises Of SAFTA Are Much Better',
			'sub_title' => '',
			'summary' => null,
			'content' => '<p>
	<img alt="sridharkkhatri" border="1" height="477" hspace="10" src="http://www.newbusinessage.com/ckfinder/userfiles/Images/coverstory-III _dec2012.jpg" vspace="10" width="300" /> <br />
	<br />
	<br />
	<strong>Prof Sridhar K Khatri <br />
	Executive Director <br />
	South Asia Centre for Policy Studies (SACEPS) </strong><br />
	<br />
	<br />
	<br />
	<strong>The Promises of SAFTA are Much Better<br />
	</strong><br />
	<br />
	<strong>How do you look at the volume of regional trade in the South Asia? </strong><br />
	<br />
	Intra-regional trade between South Asia is very limited at this point of time. Despite the fact that SAARC has been in existence for the last 26 years, regional trade has not increased much. When SAARC started, it was around three to four per cent and today, it is still less than five per cent. The intra-regional volume of trade is something that has not increased for a variety of reasons. <br />
	<br />
	<br />
	<strong>What are the possible reasons for low trade in this region? </strong><br />
	<br />
	The truth is that SAARC as a regional organisation has not completely taken off. There are a lot of constraints that has contributed to this. There is asymmetry in sizes of countries involved in the region with India being the most dominant one. The second reason is that we also have conflict between India and Pakistan, which has in a way, obstructed the SAARC process. There have been opportunities at times when SAARC has shown promise. However, bilateral differences between India and Pakistan have held it back. We have had SAPTA (South Asian Preferential Trading Agreement) for a long time but that has not increased trade either because its structure was fundamentally limited in terms of offering opportunities to increase trade. That is something ASEAN used for a long time and did not have any significant impact. We made the same mistake in South Asia by going through preferential trading arrangement. SAFTA (South Asia Free Trade Agreement) was signed in 2004 but despite the agreement, it has not been implemented basically due to concerns between India and Pakistan. <br />
	<br />
	<strong><br />
	How do you view Pakistan granting MFN status to India in the context of intraregional trade? </strong><br />
	<br />
	The MFN status Pakistan has offered to India will change the nature of the game in South Asia provided there aren’t any other terrorist attacks on India or political impasses at certain points. I have been looking at South Asia for a long time now and my worry is that these hiccups tend to hold back the little progress that has been made. <br />
	<br />
	<strong><br />
	Why is the trade in this region more oriented towards international trade rather than trading within the region? </strong><br />
	<br />
	Trade beyond regions becomes more lucrative. For instance, India’s export to South Asia is around five per cent and the imports are less than three per cent. But its trade with South East Asia is nearly 25 per cent. Pakistan also has the same kind of figure because it is also looking at trade with South East Asia. Even Bangladesh’s largest trading partner right now is China and not India. Trade with European Union is also very substantial. Countries tend to export and have relations with regions where there is growth. However, if there is potential within South Asia, there will be investment and subsequently, trade. For that to happen, political barriers have to come down and their trust deficit problems have to be resolved. But again, there is no time frame for it because there are so many bilateral problems which countries need to overcome. And, in a way, South Asia also needs to be little more confident of the region by itself. There is a serious leadership deficit in South Asia where no country or leader has become an advocate of regional integration to help us overcome difficulties and ensure development. <br />
	<br />
	<br />
	<strong>How best can economic integration be used among SAARC countries to reduce poverty and move towards prosperity? </strong><br />
	<br />
	Integration in a way offers countries the chance to develop their economies in a very systematic manner. This means that if the countries are well developed and if they can progress by cooperating with each other, goods will be cheaper for the people to purchase. There is a programme in the SAARC process to eradicate poverty in the region and two commissions have already been formed on poverty eradication. These commissions have come up with significant measures and have talked about meeting the MDG (Millennium Development Goals). SAARC too has developed its own SAARC Development Goals where the focus has been on the people, however, SAARC has not been able to implement some of its programmes. <br />
	<br />
	<strong><br />
	How can regional connectivity be improved for better trade facilitation in the region? </strong><br />
	<br />
	There are significant measures that must be taken care of in terms of trade facilitation, implementing agreements on trade and reducing non tariff barriers (NTB). You can have an excellent agreement but if you have NTBs, it will make trade a difficult proposition. The possibility in South Asia is in infrastructure development which is very important. SAARC has already talked about connectivity in the region and has a SAARC Multimodal Transport Agreement in place. It has not moved very far but there are some positive signs already. In the just concluded summit in Maldives, an agreement on railways has been signed. There is also an agreement on movement of motorcars within South Asia which should have been signed at least a year ago. Movement of goods and people will be very important for the growth of the region. The trust deficit in South Asia has to be overcome to implement some of these programmes. <br />
	<br />
	<br />
	<strong>India is at the centre of regional trade among the SAARC nations. What roles, do you think, India is expected to play? </strong><br />
	<br />
	India has not only a prominent role but also a key role to play for the growth of SAARC and the benefit of the people in the region. Being a large country that is growing at an exponential rate economically, India can offer advantages to other member states of SAARC including Nepal. I do think that India is ready to move in this direction and we see signs of that but it wants to solve some of its bilateral problems with Pakistan first. I think SAFTA will take off now as Pakistan has promised MFN treatment to India. I believe that if there is substantial growth in trade between these two countries and within the SAARC members, India will be more forthcoming in the future. <br />
	<br />
	<strong><br />
	How do you rate the success of SAFTA and SAPTA? </strong><br />
	<br />
	SAPTA was pretty much an abysmal exercise that did not go far ahead. If we had looked at the ASEAN experience, we should not even have gone through the preferential trading arrangement. The promises of SAFTA are much better but the important element is to put it into practice. We had an exercise many years ago in Nepal and worked together with intellectuals, politicians and businessmen to see what they thought of free trade and if it stands to benefit Nepal. We concluded SAFTA will not benefit Nepal in the short run as free trade usually benefits the larger countries more. For a least developed landlocked country like Nepal, it is much harder to derive benefits. However, Nepal can benefit in the long run if we can have link trade with investment and other related benefits. If trade infrastructure can be developed, Nepal has the opportunity to benefit in the long run. <br />
	<br />
	<br />
	<strong>Do you see the possibility of India cannibalising its neighbours? </strong><br />
	<br />
	For India to grow, it does not need to ‘cannibalise’ small countries. India already has the potential to grow and is a major player in the world today. We have seen South East Asia and East Asia grow very fast. The next phase could be South Asia that can grow at a promising rate. India needs to be more generous towards smaller countries, offer opportunities and feel confident that the growth of smaller neighbours can be beneficial for India. I think that change in thinking is happening in India and will continue to happen in the years to come. <br />
	<br />
	<strong><br />
	What are the differences in provisions of WTO and RTA? How does it affect intra-regional trade? </strong><br />
	<br />
	WTO recognises regional trade agreements (RTA) and encourages them in a way to promote growth not only within countries but also in terms of facilitating trade among the regions in the world. So, it is compatible framework within the WTO framework. It does not obstruct RTAs and vice versa. In the last 15-20 years, a number of regional organisations have evolved at a phenomenal rate. We have seen the growth in Latin America, Africa and even in Asia. But what types of regional organisations have happened needs to be clearly looked at. Nepal is part of both SAARC and BIMSTEC where some of the activities overlap one another.</p>',
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			'description' => 'The truth is that SAARC as a regional organisation has not completely taken off. There are a lot of constraints that has contributed to this. There is asymmetry in sizes of countries involved in the region with India being the most dominant one. The second reason is that we also have conflict between India and Pakistan, which has in a way, obstructed the SAARC process.',
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	(int) 7 => array(
		'Article' => array(
			'id' => '529',
			'article_category_id' => '40',
			'title' => 'Economic Diplomacy Is Getting Sidelined By Political Diplomacy In The Regional',
			'sub_title' => '',
			'summary' => null,
			'content' => '<p>
	<span style="font-weight: bold;"><img alt="Pradeep Kumar Shrestha" border="1" height="261" hspace="10" src="http://www.newbusinessage.com/ckfinder/userfiles/Images/coverstory-II_dec2012.jpg" vspace="10" width="400" /><br />
	</span></p>
<p>
	<strong><br />
	Pradeep Kumar Shrestha <br />
	Vice President <br />
	SAARC Chamber of Commerce and Industry </strong><br />
	<br />
	<strong><br />
	Economic Diplomacy is getting Sidelined by Political Diplomacy in the Regional <br />
	</strong><br />
	<strong><br />
	How do you look at the regional trade in South Asia region?</strong><br />
	<br />
	In the context of South Asian trade, trade movement is very low despite it being home to one fifth of the world's population. Intra-regional trade is less than five per cent which is something the business community of the region must take into account. Other regional bodies like EU and NAFTA have more than 50 per cent of the trade within their respective regions. Even though the countries in the SAARC region claim to be close, there exist a lot of hiccups. The mindset and attitude of the politicians and bureaucrats are not to the level expected in the 21st century. Besides political reasons, infrastructure connectivity, high cost of business, bureaucratic hassles plague the prospects of intra-regional trade. <br />
	<br />
	<strong><br />
	Do you see the possibility of India cannibalising all its neighbours? </strong><br />
	<br />
	India is growing at a fast pace. There is a saying, ˜If you have to grow, you cannot grow alone. You have to grow with the neighbours India is a big trading partner for all the countries in the SAARC region. India is big in each and every aspect compared to other SAARC countries. Considering the present scenario, if India really wants to be a superpower, it has to take its neighbouring countries into confidence. <br />
	<br />
	<br />
	<strong>Why has SAFTA not been able to gain momentum since its inception in 2004? </strong><br />
	<br />
	It is raised in every forum each year but the implementation aspect has been very slow. This is more due to political mindset and crisis of confidence than anything else. However, the fact is that we have to grow together and be interdependent rather than being dependent. SAFTA should have moved much ahead by now. Within the SAARC region, we have to look at increasing the trade volume. The attitude of building confidence, helping and sharing with each other is the way to go about it. <br />
	<br />
	<strong><br />
	Regional trade is being prioritised in other trade blocs such as ASEAN, BIMSTEC and EU. Why has the same not received equal priority within the SAARC trade bloc? </strong><br />
	<br />
	This is very unfortunate. The real fact of trade not really taking off in the region is because the two big countries- India and Pakistan having their own problems to deal with. These two countries should sit together and help us have a prospering regional bloc like EU, ASEAN, NAFTA etc. Unfortunately, what is happening is that we are talking of a region but in terms of sub-regions like Eastern India-Bangladesh, Nepal-Bhutan or India- Pakistan. Each country has its own strength so we have to be able to nurture and benefit from areas of comparative advantages. We, the business community, are seriously advocating for it but without the two big countries getting together and understanding the benefits for the region, the SAARC would not move the way we dream of. <br />
	<br />
	<br />
	<strong>By this, do you mean, economic and trade diplomacy is seriously missing among SAARC member countries? </strong><br />
	<br />
	I think economic diplomacy is getting sidelined and political diplomacy is taking over. However, it is a fact that without political understanding, the economy cannot take off. There could be other ways of bringing things closer like people to people contact. We have to understand each other and feel that we are part of the same region and accordingly, we can synergise the strength. But that is not happening and every country wants to move ahead on an individual level. <br />
	<br />
	<br />
	<strong>Why is the trade in this region more oriented towards international trade rather than trading within the region? </strong><br />
	<br />
	Most of the countries in the region are import based economies though we do have exportable items like garments, carpets and others. Nepal, India, Sri Lanka and Pakistan export same kind of products and end up competing in the same market. The level of purchasing power in the region compared to other regions of the world is less even though the middle class is coming up very fast. When we want to do something, we always look at the west. In regional trade, the cost of connectivity and transportation is very high. Bureaucratic hassles like procedural delays and documentations etc also play their respective roles. All these hassles are so grave that we prefer to go for countries outside the region without realising the availability and quality of products available within the region. We, the business community, have to change that and identify our areas, strengths, products, competitive advantages etc. There must be a feeling of ‘together we grow’ to begin with. <br />
	<br />
	<br />
	<strong>In the context of intra-regional trade, how do you view Pakistan granting MFN status to India? </strong><br />
	<br />
	This is a very positive development for both the countries. To tell you the truth, SAARC has not been able to move ahead because of these two big countries not able to understand each other. The MFN status will fuel reciprocity and can move on to other countries as well. For example, China and Taiwan had similar political problems once, however, their relations have improved considerably in the last few years. If political conditions and hiccups can be taken care of, investment and trade will get a boost. At the same time, other neighbouring countries too will be benefitted when relations between these two countries get better. <br />
	<br />
	<br />
	<strong>Can South Asia region prove to be a substantially big market to consume the production generated in the region and become self suffi cient on trade? </strong><br />
	<br />
	Yes, very much so. A big market is lying out there because of the size of the population. The size of human resources, natural resources, potentials and eagerness of the people doing business in the region can certainly make this region self sufficient. This region has everything but still we have not been able to do anything remarkable. In this context, if the countries in this region join hands with each other without any biased sentiment and mentality, it can definitely prosper. <br />
	<br />
	<br />
	<strong>What are the activities of SAARC Chamber of Commerce and Industry (SCCI)? </strong><br />
	<br />
	Since its inception, the business community has wished to see that business related problems are addressed and economic agendas are taken to a much bigger level. Unfortunately, that has not happened and the community is not very happy about it. We have not been invited to the summits in Male and Thimpu despite being an important part of the SAARC. Though, of course, we understand it was not because of their unwillingness to invite us but it was because of their logistics problems in Male and Thimpu. As for our activities, we have tried to increase the number of SAARC sticker visa to improve people to people contact in the region. We have asked for 200 to 500 visas for each country. If a businessman wants to travel, he cannot wait for a month to get a visa. We are advocating that the paper work has to be reduced and the existing bureaucracy hassles should be nominal. Every country has its own area of strength such as hydroelectricity, agriculture or tourism. There are a number of councils for such sectors under the SAARC CCI, chaired by a specific country for each council. <br />
	<br />
	<br />
	<strong>Have there been enough researches conducted on regional trading? What is SAARC CCI doing towards it? </strong><br />
	<br />
	Research and Development is talked about every time especially in the context of South Asia. I believe that more than 350 scholars in different agencies like World Bank, ADB, and UNCTAD are studying and seeing why South Asia has not been able to grow despite its potentials. Even in our chamber, we try to find out facts and figures as to why things are not happening in the region. I believe such findings will lead us towards making good decisions. <br />
	<br />
	<br />
	<strong>Has it been able to go beyond the concept of bilateral chamber in the true sense of regional level trade cooperation? </strong><br />
	<br />
	We are talking about sub-regional level which is more than bilateral. We understand that because of proximity reasons, Nepal being linked to Pakistan, Sri Lanka or Maldives is not possible. But linking Nepal with Bangladesh, Bhutan, India or BIMSTEC is a different phenomenon altogether. We are only talking about the eastern part of South Asia, for example, Bangladesh, Nepal and Bhutan. Efforts toward regional level trade cooperation is certainly moving but at a very slow pace. <br />
	 </p>',
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			'description' => 'In the context of South Asian trade, trade movement is very low despite it being home to one fifth of the world's population. Intra-regional trade is less than five per cent which is something the business community of the region must take into account. Other regional bodies like EU and NAFTA have more than 50 per cent of the trade within their respective regions.',
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			'article_category_id' => '40',
			'title' => 'SAARC Countries Should Work Towards Regional Cooperation To Achieve Growth',
			'sub_title' => '',
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	<img alt="Thosapala Hewage" border="1" height="251" hspace="10" src="http://www.newbusinessage.com/ckfinder/userfiles/Images/coverstory_dec2011.jpg" vspace="10" width="400" /><br />
	<br />
	<strong>Thosapala Hawaga <br />
	Ambassador <br />
	Embassy of Sri Lanka in Nepal</strong><br />
	<br />
	<br />
	<strong><br />
	SAARC Countries Should Work Towards Regional Cooperation to Achieve Growth</strong><br />
	<br />
	<strong><br />
	How do you look at the regional trade in the South Asia region?</strong><br />
	<br />
	The regional trade in South Asia seems to be improving over the years but it is not up to the expectation. Compared to the past, the South Asian economy is more open today. The tariff rates have come down from 80-90 per cent in the 1990s to 20-25 per cent today and exports and imports together are equivalent to about 20 per cent of the regional GDP. SAFTA was expected to include all products, manufacturers and commodities. It is commonly accepted that negotiations under SAPTA will not be very effective in terms of inventing intra-regional trade in SAARC which is unfortunate. There are various possibilities of further improving regional trade within South Asia if countries can overcome the existing barriers. Remedies like substantial tariff cuts, removal of non tariff barriers, adequate trade related capacity building, and connectivity between the countries etc have to be implemented. The regional trade arrangements are in an interim state towards more efficient levels of globalisation. <br />
	<br />
	<br />
	<strong>Is there a possibility of India cannibalising all its neighbours? </strong></p>
<p>
	<br />
	It is difficult to say that India is cannibalising its neighbours. But, with the size of India and its economy, you can’t compare India with any of its neighbours. It is a vast and fast developing country and also the largest country in the region. Their contribution in terms of trade, tourism and economic growth is very high. It is extremely difficult for other countries to talk about balance of trade with India. However, India is having enough problems itself that needs to be resolved first such as regional disparity, low human development index (HDI), poor connectivity etc. India is by far the largest economy in the region and the second largest fast growing economy in the world. South Asia region needs India for its economic prosperity as much as India needs the region for its continuing prosperity. <br />
	<br />
	<br />
	<strong>How do you view trade diplomacy in the context of enhanced regional trade among SAARC nations? </strong><br />
	<br />
	When people talk about diplomacy, they talk about trade diplomacy because that is especially needed by countries in the region. Trade diplomacy in the context of regional trade among SAARC nation is positive and can be further improved. The member countries of the SAARC, I believe, should work towards regional cooperation in order to achieve growth. When there is regional growth, regional trade will definitely go up. If the member countries can develop a regional cooperation and agree upon certain things, a particular country can then focus on its available resources within its territory. <br />
	<br />
	<br />
	<strong>India, being the centre of regional trade among the SAARC nations, could have played a more vital role in making the SAARC trade bloc effective. What are the reasons for India not being able to do so? </strong><br />
	<br />
	As far as I know, India, being the centre of regional trade among the SAARC nations, is playing a vital role in making the SAARC trade bloc effective. However, there are issues among the SAARC nations that need to be resolved in order to make it more effective. India too has its own problems that it needs to resolve. But I believe India can play a major role with regard to development of regional trade in the region. <br />
	<br />
	<strong><br />
	Why is the trade in this region more oriented towards international market than trading within the region? </strong><br />
	<br />
	The trade in the SAARC region is more oriented towards international market probably due to the trade relations that have been developed with countries outside the region over a long period of time. There is also this attraction to trade with countries outside the region because of the high market price for products in the international market. The international destinations have far more secure markets and offer good prices and hard currency. I do agree that trading within the region is not up to the expectations, however, I believe this can be resolved through agencies like SAARC. Actually, SAARC can play a proactive role in the development of trade within the region. They are doing it already but my feeling is that they can do more. Regional cooperation and agreements like SAFTA, SAPTA etc need to be beneficial to all the countries. In order to do that, we have to identify proper people, train them and realise their services, so that we can request them to negotiate for the benefit of their respective countries. <br />
	<br />
	<br />
	<strong>Do you think that tariff and non tariff barriers contribute towards low intra-regional trade? </strong><br />
	<br />
	When the tariff is high, the prices of the goods also go up. Therefore, the countries must look at removing non tariff barriers. We can come up with some kind of consensus within the region so that tariff and non tariff barriers are removed. This, of course, needs to be done in consultation with the member countries of the region. <br />
	<br />
	<br />
	<strong>Can South Asia region prove to be a substantially big market to consume the production generated in the region and become self suffi cient on trade? </strong><br />
	<br />
	I think the South Asian region produces various products that are required for the region and it can certainly prove to be a market big enough to consume them. But the point is that one country has to produce products which the other country doesn’t produce so that you will have an assured market. Basically, what I can see is that most countries in the region produce similar goods and that’s where the problem lies. For example, Sri Lanka produces garments and at the same time, countries such as India, Bangladesh, Nepal and Pakistan also produce garments. Invariably, they have to go outside the region in search of a market for the same product. Hence, you have to have a common agreement with the countries in the region to address this issue. But this is not an easy task unless the countries in the region are committed to do so because each country is concerned about its own benefits. You can have a win-win situation only if there is a give and take policy in place. <br />
	<br />
	<br />
	<strong>What are the problems in expanding regional trade? What are the potentials of trade development? </strong><br />
	<br />
	Trade barriers such as high tariff, double taxation, lack of connectivity among the countries are some of the problems apart from what we have already discussed earlier. The countries have to look into their infrastructure and ways of connectivity in order to increase regional trade. The size of the economy is another issue that you need to look into, for example, India is a huge economy when compared to its neighbours.<br />
	<br />
	There is also the issue of underutilisation of resources which is a cause of concern. If we can resolve these issues, we will certainly be able to expand our regional trade. <br />
	<br />
	The potential for trade development is immense because all these challenges can be turned into opportunities. But we must make sure that we look at tapping the untapped resources. The barriers too need to be taken care of. I believe we will be able to prosper if we think of the entire region rather than only be bothered about our respective countries. <br />
	<br />
	<br />
	<strong>How would Sri Lanka like to represent itself as a brand in the region? What are the prospects of trade for your indigenous products in the region so that you donâte have to look beyond? <br />
	</strong><br />
	If you look at certain products like garments, gems and jewellery and herbal products, we do have the advantages. The market for these products is within the region as well as outside of it. Some of the products have already been accepted and valued by the region. If we produce in accordance with the region’s requirement, we can definitely carve a niche for ourselves. For example, we can design gems and jewellery in a way that caters to the tastes of people of other countries. I am positive that Sri Lanka can definitely expand its trade in the region as time passes.</p>
<p>
	 </p>',
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			'title' => 'Trade Of Hopes In South Asia',
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			'content' => '<p>
	<img alt="trade hopes" height="274" src="http://www.newbusinessage.com/ckfinder/userfiles/Images/tradeofhopes.jpg" width="300" /><br />
	<br />
	<br />
	<strong>Trade of Hopes in South Asia <br />
	<br />
	<br />
	New Business Age Bureau </strong><br />
	<br />
	<br />
	The 17th Summit of South Asian Association for Regional Cooperation (SAARC) held on 10-11 November this year adopted the Addu Declaration which lays emphasis on effective implementation of the SAFTA (South Asian Free Trade Area) accord among its member states. The heads of the eight member countries&nbsp; Afghanistan, Bangladesh, Bhutan, India, Maldives, Nepal, Pakistan and Sri Lanka at Addu city in Maldives discussed regional issues in an effort to take SAFTA forward. I think there is a realization now among the countries in the region to move SAARC into a more integrated regional cooperation model, says Jaideep Mazumdar, Minister and Deputy Chief of Mission at the Embassy of India in Kathmandu. <br />
	<br />
	<br />
	The declaration also includes measures to be taken to promote free flow of capital and investment and improve connectivity within the region. This year's Summit has decided to consider reducing non-tariff barriers (NTBs) and ad valorem (Latin for according to value) duties to promote freer trade. The SAFTA Ministerial Council has been directed to work on reducing sensitive lists, early resolution of NTBs and expediting the process of harmonising standards and customs procedures. Economic cooperation within the region is often viewed as a key tool for deeper integration within the region.] <br />
	<br />
	<br />
	Having recognised this, SAARC had initiated the SAARC Preferential Trading Agreement (SAPTA) as early as 1993, which later evolved into the SAFTA in 2004 and came into effect in 2006. there has been an increase in SAARC's world trade too. Hence, the share of intraregional trade has remained constant. In comparison, intra-regional trade under the Association of South East Asian Nations (ASEAN) is 32 percent, while it is 52 percent in the EU bloc and 68 percent in the USA and Canadian bloc. These trade blocs have also proved to be a tool for development for the participating countries within their respective regions. <br />
	<br />
	<br />
	<strong>Intra SAARC Trade </strong><br />
	<br />
	<br />
	While there have been several initiatives to promote trade among the region, a host of tariff and NTBs maintained by the member countries, the exhaustive negative list and the smallish trade basket have curtailed the growth of trade and investments in South Asia for long. According to an estimate, intraregional trade among the SAARC member nations (excluding Afghanistan which ratified the SAFTA protocol only in May this year) stood at $ 14.35 billion in 2010-11, an increase of 43.4 per cent vis-a-vis the same period in the previous fiscal. <br />
	<br />
	<br />
	The figure is approximately 5 percent of their total overseas trade in a year which is one of the lowest intra-regional trade volumes for any particular trade bloc. Ratnakar Adhikari, General Secretary of South Asia Watch on Trade, Economics and Environment (SAWTEE) says, “Intra SAARC trade has certainly increased over the years, however, <br />
	<br />
	<br />
	<strong>Unfulfilled Potential <br />
	</strong><br />
	<br />
	Staying true to the theme of Building Bridges, this year's SAARC Summit focused on connectivity by going ahead on a regional railways agreement and a motor vehicle pact besides inking a series of pacts on regional cooperation. Despite its high population and common culture, South Asia, is one of the most poorly connected regions in the world. While better connectivity promises to promote trade within the region, stronger trade relations can go a long way in promoting food security, poverty alleviation and improving socio-economic growth of the South Asian population. Prof Sridhar K Khatri, Executive Director of South Asia Centre for Policy Studies (SACEPS) says, The promises of SAFTA are much better but the important element is to put it into practice.<br />
	<br />
	<br />
	The share of South Asia in world economy is less than 2 percent with all eight nations of the region collectively contributing only 1.7 percent towards global trade. A number of regional trade issues largely remain unaddressed among the SAARC nations which are yet to tap the trade potential because of various problems. Different trade barriers like tariff, non-tariff and para-tariff, visa problems, political barriers, bilateral transit issues, negative list issues and testing issues are apparently acting as trade deterrents among the SAARC countries. Pradeep Kumar Shrestha, Vice President, SAARC Chamber of Commerce and Industry agrees, “Besides political reasons, infrastructure connectivity, high cost of business and bureaucratic hassles plague the prospects of intra-regional trade in South Asia.” <br />
	<br />
	<br />
	According to a paper published by the Reserve Bank of India (RBI) assessing intraregional trade in ten regional blocs, intraregional trade in SAARC was the lowest at 4.8 percent in 2008. The RBI report quoted, The reasons for the low level of trade include protectionist trade regimes, which discriminated against trade among larger neighbours; continued conflict between India and Pakistan; and transport and trade facilitation constraints.” Thick ice of contentious competition between regional peers has always been an overriding problem in the SAARC region. <br />
	<br />
	<strong><br />
	The Bottlenecks </strong><br />
	<br />
	<br />
	A lack of trust and political goodwill, and underperformance in leadership by the dominant economies has been mainly responsible for not turning SAARC into a successful regional trade bloc. For example, there is a lack of trust on several issues among nations such as India, Pakistan and Bangladesh. Mazumdar raises a case in point, “Historically, there has been a problem between India and Pakistan that was a hindrance for intra SAARC trade.<br />
	<br />
	<br />
	As a result, the major players have not participated actively in making SAARC an effective trade bloc. For too long, member nations of the SAARC have deprived themselves of the benefits of regional economic integration. The region homes one fourth of the world's population and possesses unlimited potential but has stayed least integrated. <br />
	<br />
	<br />
	The region is home to two-fifths of the world's poor and accounts for only 3 per cent of global output. Intra-regional trade has stagnated at around 5 per cent of its total trade for some time now compared to around 20 per cent in Latin America. Even Sub-Saharan Africa, with poor transport and telecommunication infrastructure, scores over South Asia, with over 10 per cent of its trade being intra-regional. The SAARC members have retained a plethora of tariff and NTBs, which greatly inhibits trade and investments in the region. With a large list of negative items, the trade basket remains very narrow, with little value addition. Thosapala HÃwag, Sri Lanka's Ambassador to Nepal recommends, We should be able to come up with some kind of consensus within the region so that tariff and non-tariff barriers are removed.<br />
	<br />
	<br />
	The major cross-border structural rigidities include behind-the-border barriers in customs procedures, poor transport links, weak networking of private sectors, and administrative issues such as visas. Foreign direct investment (FDI) too is minimal, due to regulatory issues and a non-facilitative business environment. We do generate and agree on good ideas in this region time and again but fail to give them shape because of our many conflicts as there is a serious lack of trust among SAARC countries,says Chandra Kumar Ghimire, Joint Secretary at the Ministry of Commerce and Supplies (now Consulate General of Nepal to Kolkata). <br />
	<br />
	<br />
	To make the SAARC regional trade bloc effective, the progress in duty-concession by the nations is not adequate. The participating countries were supposed to reduce the number of products from the negative list year-on-year for nations to enjoy a zero-duty facility under the SAARC umbrella after a certain period. But the progress in this regard has not been on expected grounds. Business leaders representing different trade bodies among the SAARC nations have been urging their governments to further liberalise their respective economies to help augment intraregional trade, consequently effecting the region's development. There is a serious leadership deficit in South Asia where no country or leader has become an advocate of regional integration to help us overcome difficulties and ensure development, Prof Khatri observes. <br />
	<br />
	<br />
	India, by virtue of being the largest economy in the region and its geographic position, is viewed as the member that bears additional responsibility towards intraregional economic integration. While India's trade with South Asian countries has increased considerably over the years, it is still below the potential trade levels. India, a connecting land mass, has a special responsibility in increasing intra-regional economic integration and facilitating access to its large markets for SAARC members. The idea that we had envisioned for SAFTA around a couple of decades ago has not materialised and that’s why we see a country like India establishing relations with other RTAs, for example, ASEAN,” Ghimire laments. <br />
	<br />
	<br />
	Its above-average growth, expanding middle-class population, and demand for global goods can prove to be an engine of growth for the region. India's trade with South Asian countries has increased encouragingly, in the last half-a-decade or so, but much trade is below the official radar. Further, India's trade with countries such as Nepal, Bangladesh, Sri Lanka and Afghanistan remains heavily skewed in its own favour. The services trade further adds to the trade imbalance, leading to concerns among other South Asian countries about trade sustainability. <br />
	<br />
	<br />
	<strong>The Way Forward </strong><br />
	<br />
	<br />
	The SAARC region has an immense potential for using economic integration to reduce poverty and move towards prosperity. Three areas offer large potential for economic cooperation the services trade, energy cooperation and logistical connectivity. The development of logistical hubs that facilitate the flow of trade across the region can greatly reduce the costs of doing business. These logistical hubs can help connect critical regional corridors, especially with countries having no common borders. The countries in the region will have to look into their infrastructure and ways of connectivity in order to increase regional trade, says HÃwag.</p>
<p>
	 </p>
<p>
	Tourism, a major growth opportunity for countries like Afghanistan and Nepal, remains constrained by security problems. Allowing intra-regional trade in services can enable South-Asian economies to become more globally competitive. Energy and electricity cooperation are non-traditional areas of trade relationship development. For example, Bhutan has managed to balance its trade with India with large exports of hydroelectric power, and similar potential exists for Bangladesh and Nepal. <br />
	<br />
	<br />
	An integration of electricity grids across South Asia can reduce power costs and enhance manufacturing competitiveness for all members. Huge hydro-electric potential exists in Nepal, Bhutan, Afghanistan and India, which could be tapped for intra-regional power trade. Each country has its own strength so we have to be able to nurture and benefit from areas of comparative advantages,feels Shrestha. Just days ahead of the SAARC Summit in Maldives, Pakistanâ's initiative to grant Most Favoured Nation (MFN) status to India was considered a major breakthrough. As far as trade goes, the move promises to help the economies of both the countries over a longer period of time. <br />
	<br />
	<br />
	Experts and analysts observe the major initiative can also prove to be an important step to help stabilise the region, struggling to combat poverty and achieve economic reliability in the wake of US and Eurozone debt crises. It would also pave the way for economic integration of SAARC countries and the prospects of the region thriving seem brighter than ever before. At the Maldives Summit, Indian Prime Minister Dr Manmohan Singh announced Indiaâ's decision to slash the sensitive list for least developed countries within SAFTA, reducing it from 480 tariff lines to just 25.</p>
<p>
	 </p>
<p>
	India has stated that zero basic customs duty access would be given for all the items removed, with immediate effect. There should be an attempt to create an incentive for the partner countries in the region to be able to export to a country like India,” Adhikari recommends. As things stand, SAARC as a regional bloc leaves a lot to be desired. However, SAARC has a good trade potential as the economies of a number of SAARC nations are growing fast, observers opine. The countries seem to be on the path towards eliminating tariff barriers and reducing NTBs against each other. It's time for the South Asian countries to think collectively in order to cash in the opportunity of emerging as a regional force to reckon with. <br />
	 </p>',
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	<img alt="" src="http://newbusinessage.com/ckfinder/userfiles/Images/Manufacturing.jpg" style="width: 524px; height: 585px;" /></p>
<p>
	A long-term vision for the Nepali Manufacturing Sector, known as vision 2020, prepared jointly by Nepal government, UNDP and UNIDO in 2002 had proposed to pursue a two-pronged industrialization strategy aimed at rural, agro-based industrialization, and formal urban-based industrial development. But a decade down the lane, nothing seems to be moving to the vision encapsulated then. The strategy proposed then as prioritising export-oriented labour-intensive manufacturing industries and tourism-related exotic products, where Nepal already enjoys considerable comparative advantage, still sounds equally relevant (see box for 2020 goals). But its proposal of raising the contribution of the sector to GDP from 10 to 20 per cent by 2020 appears highly unrealistic given its contribution of just about 7 per cent of GDP in FY 2010/11. From national economic standpoint, manufacturing has universally accepted double-edged goals -- consumption and/or exports. As Nepal is way below in meeting her consumers demand on virtually all sorts of items, and has equally good potential for export of various products, Nepalâ's manufacturing prospects, at least in theory, are truly bright.</p>
<p>
	It is because Nepali productions can replace the import in the domestic market and also have scope of export to rapidly growing neighbouring markets of India and, also China. Although the import to export trade ratio of Nepal in terms of value stands at 7:1, some of the Nepali produce like iron and steel products, acrylic yarn, hand-made woolen carpets, readymade garments and tea and coffee are faring well in international markets.</p>
<p>
	<img alt="" src="http://newbusinessage.com/ckfinder/userfiles/Images/goals for 2020.jpg" style="width: 468px; height: 400px;" /></p>
<p>
	The history of manufacturing in Nepal is not very long. The Nepal Companies Act, 1936 provided basis for incorporation of industrial enterprises which in fact had provisions for joint-ventures and public sector industries. The most tangible outcome of this Act was establishment of Biratnagar Jute Mills, a collaborative venture of Indian and Nepalese entrepreneurs. The Mill is considered first manufacturing unit of industrial scale in Nepal. But the said Act had no provision for private limited companies until it was reformed in 1951.</p>
<p>
	This new act encouraged the establishment of ninety-two new private joint stock companies between 1952 and 1964. The Industrial Enterprises Act of 1974 enacted in the heydays of panchayat polity also recognized role of the private sector in the industrial growth. But the panchayat regime continued the policy of protecting the public sector production over the private one, which in fact constricted the desired growth of the sector. Establishment of about a dozen industrial estates including at Patan, Balaju, Hetauda, Pokhara, Dharan, Butawal, and Nepalganj in the 1980s certainly contributed to create an organized industrial atmosphere. Several modern industries with large manufacturing plants to produce jute, sugar, cigarettes, beer, matches, shoes, chemicals, cement, and bricks were installed. The garment and carpet production units in much diffused fashion spread in the Kathmandu valley and surrounding areas, targeted at export production. By the end of last fiscal year, number of manufacturing units registered under the Department of Industries has crossed well above 2,000. This not only shows that investment and industrialization has expanded but also that the internal market of Nepali products has grown substantially. Of late, private sector investment in manufacturing of cement, sugar and items of daily use has increased significantly. Western district of Dang is developing as the ‘cement city’ as at least a half-dozen large cement companies are all set to begin production pretty soon. Many would like to categorize the hydropower units also as manufacturing. In that case, it can be claimed that Nepal’s manufacturing sector has been able to attract quite large amount of investment, mainly from the private sector. Still, very weak positioning of Nepali exports --due to lack of diversification, market research and identification</p>
<p>
	and, choice of low-value high-volume products -- has not been helpful for both manufacturing and trade balance. The share of main Nepali export in the global market has been limited in quantity and value, and thus been unable to create their own sectoral economies of scale. The policy conundrum is still a major bottleneck. In many sectors, public enterprises continue to play dominant role which is very often than not inviting unfair market play by government intervention. Price distortion is the major resultant effect that in turn is discouraging the private sector investment, at least in the sectors where the government is directly involved. Recent successive governments with mainly socialist tilts have made the situation even more confusing, as their policies lacked clarity in private property, entrepreneurship and profit making.</p>
<p>
	Even beyond political spectrum, challenges of facilitating the growth of manufacturing sector are many. On the supply side, Nepal’s physical infrastructure, especially electricity supply, roads and use of up-to-date technology are inadequate to support a modern manufacturing sector so that it becomes capable of quickly responding to trends in world market demands for manufactured products. As the newest problem, lack of manpower is another bottleneck due to labour migration to foreign countries. Departing from a conventional thinking, identifying afresh new niche and competitive products is also a striking need of the day. Strategies for trade, policies and investment can follow.</p>',
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			'description' => 'A long-term vision for the Nepali Manufacturing Sector, known as vision 2020, prepared jointly by Nepal government, UNDP and UNIDO in 2002 had proposed to pursue a two-pronged industrialization strategy aimed at rural, agro-based industrialization, and formal urban-based industrial development. But a decade down the lane, nothing seems to be moving to the vision encapsulated then.',
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		'Article' => array(
			'id' => '496',
			'article_category_id' => '40',
			'title' => 'Manufacturers Are Treated As Criminals In This Country',
			'sub_title' => '',
			'summary' => null,
			'content' => '<p>
	<strong>BIPPA should have been signed with India a couple of years ago because it is our nearest neighbour and the largest foreign investor in the country. BIPPA will be a milestone agreement as it promises added security to the Indian investors.<br />
	<br />
	<br />
	</strong></p>
<p>
	<strong><img align="left" alt="coverstory" border="1" height="225" hspace="10" src="http://newbusinessage.com/ckfinder/userfiles/Images/diwakar golchha.jpg" style="margin:10px; padding:10px;" vspace="10" width="200" /></strong></p>
<p style="text-align: justify;">
	<strong>How will the recent BIPPA agreement help in promoting the manufacturing sector? </strong></p>
<p style="text-align: justify;">
	BIPPA should have been signed with India a couple of years ago because it is our nearest neighbour and the largest foreign investor in the country. BIPPA will be a milestone agreement as it promises added security to the Indian investors. Manufacturing sector today has the biggest setback because of electricity problem. In this context, Indian investors have committed around 3,500 MW power generation in this country. In the second round of power summit going to be held in Kathmandu, we expect another 4-5,000 MW of electricity production commitment. Today, India is one of the largest international investors in the region and last year, Indian investors invested US $ 43 billion outside India. So, there is every reason for them to invest in Nepal as we are their nearest country where they will produce electricity and take to India. BIPPA, along with other agreements, shows a long term commitment of India towards Nepal.</p>
<p style="text-align: justify;">
	<strong>How do you analyse the Nepali manufacturing sector and its growth trend?</strong></p>
<p style="text-align: justify;">
	In recent years, the manufacturing sector has been neglected because of various reasons. It was neither in the priority of the government nor was there a concern to protect the domestic investments. So, many industries have shut down in the past seven to eight years. Our industries that had significant annual achievements are registering negative growth for a couple of years now. That is because of the wrong attitude of the bureaucracy and of course, none of the politicians are concerned. For the first time in the last 15 years, Nepali Industrialists have revived the hope they had lost after Dr Baburam Bhattarai became the Prime Minister. Manufacturers are treated as criminals in this country, which is why the entire investment climate is in dire straits. Even the facilities committed by the act of 1990 were denied and later withdrawn which is a betrayal to this sector.</p>
<p style="text-align: justify;">
	<strong>Which is the most appropriate sector for manufacturing for Nepal? Why do you think this specific sector is not much developed as expected?</strong></p>
<p style="text-align: justify;">
	There are so many products necessary to be manufactured in Nepal. Unless the climate for manufacturing and attitude of bureaucrats do not change and unless there is a strong body that can understand the multiplier effects of investment and language of economy, one cannot think of industrialisation. We have discussed the issues and problems we faced after 2000, with Dr Bhattarai. We are hopeful that the industrial revolution will take off after 2012-2013. Many sectors may revive provided there is lowered cost of production and cheaper cost of doing business transactions. There are numerous harassments like high finance cost, no electricity, and so many other reasons due to which industries do not come up. Unless there is power, nobody is going to put money into industry. I will not recommend anybody, at least in my family, to go for manufacturing at this point in time.&nbsp;</p>
<p style="text-align: justify;">
	 </p>
<p style="text-align: justify;">
	<strong>Everybody is complaining that Nepal does not have a suitable industrial environment. Golchha Organisation is one of the most successful corporate houses focused on manufacturing. How are you managing it?</strong> <img align="right" alt="" hspace="5" src="http://newbusinessage.com/ckfinder/userfiles/Images/golchha2.jpg" style="text-align: justify; width: 153px; height: 239px;" vspace="5" /></p>
<p style="text-align: justify;">
	Successes and failures are always part of one’s life. If we are suffering because of the wrong attitude of the government, we might want to close down some industries so that it can give a message. We had to close down Sri Bhrikuti Pulp and Paper Nepal Limited because of the wrong attitude of the government. We are going to close down another important industry, Sri Nepal Boards Ltd due to the same reason. The successive governments thought that importing goods gets them more revenue which they can spend on regular expenses. However, that will leave the country’s development in lurch. There is no desire in the government for development of this country, the only desire is to garner more revenue and enjoy it. At this moment, Golchha Organisation is doing very well with its trading businesses. Trading involves more than 50 per cent of our total turnover while the service sector has around five per cent share and the remaining makes up for our manufacturing concerns.</p>
<p style="text-align: justify;">
	<strong>How long do you think such a situation will persist in the country?</strong></p>
<p style="text-align: justify;">
	It requires visionary leaders like Lee Kuan Yew of Singapore and Mahathir Mohamad of Malaysia to build successful economies. We have our hopes pinned on Dr Bhattarai and we do see similar capabilities in him. If he could remain the Prime Minister of Nepal for the next 10 years, we believe that he can transform this country. But first and foremost, he should begin with a total transformation of the bureaucracy in Nepal.</p>
<p style="text-align: justify;">
	<strong>Large corporate houses are shifting to the service sector. What is the reason behind it ? <br />
	</strong></p>
<p style="text-align: justify;">
	The Nepali people have enhanced their buying power today by virtue of remittance. They want better services and can spend money for that. Service is a sector where you have the possibility of a quick return without making a heavy investment like in an industry. Though are small hurdles like power shortage, strikes and blockades that are affecting this sector as well, it can still manage on its own. That is why the service sector is bound to develop and people are flocking for this sector.</p>
<p style="text-align: justify;">
	<strong>Can a country sustain based on imported goods only as corporate houses and industries are shifting to service sector from manufacturing?</strong></p>
<p style="text-align: justify;">
	There is always a phase like this and ultimately, the nation will have no alternative. Unless you have a manufacturing sector, how much service can you possibly sell? Everything has a limitation so the service sector too will reach a saturation point. Ultimately, when there is a possibility of easy investment and return, competition to make a mark in the manufacturing sector will intensify. There has to be balance in everything because nothing can grow imbalanced. You cannot say that one sector will grow and another sector is not required.</p>
<p style="text-align: justify;">
	<strong>Why are there very little measures to promote goods that have comparative and competitive advantages?</strong></p>
<p style="text-align: justify;">
	At the moment, Nepal has no comparative advantage whatsoever. Once we have sufficient power, labourers more inclined towards working rather than politics, banking sector more favourable for investment, a favourable government and its economy-friendly policies, we will have comparative advantages. Unless these logistics are there, one cannot compete. Today, in India, there are industries that are 20 times bigger than what we have in our country. Given India’s automation and advancement, it is difficult for us to compete with our older and manual technology. So, it is almost impossible to achieve higher cost advantage and efficiency in Nepal. If the policies are correct and the sizes of operation are reasonable, we will definitely compete.</p>
<p style="text-align: justify;">
	<strong>There are duplications even with the limited size of the Nepali manufacturing sector. How sustainable is it and what are your suggestions to control such duplications?</strong> Duplication has been the phenomenon of the entire world. Nepal is not the only country which faces this problem. There are some industries who lead with original ideas and some others who follow. Only time can tell whether such practices will succeed or not. The capable ones will sustain and the incapable ones will take their own path. Investors have to think which sector they have to go, you can’t push your product. Once there is a pull factor, you will produce more because if you try to push things, you will never get the desired results. The market is the best judge to accept or not to accept such practices.&nbsp;</p>',
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			'id' => '495',
			'article_category_id' => '40',
			'title' => 'Industrial Development Is Impossible Without Basic Infrastructure',
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			'summary' => null,
			'content' => '<p style="text-align: justify;">
	<span style="font-size: 14px;"><strong>What is the present status of the manufacturing sector in Nepal?</strong> <br />
	</span></p>
<p style="text-align: justify;">
	<span style="font-size: 14px;">The market for both consumable goods and durables has been growing and expanding in the international arena. Growth of manufacturing sector ensures overall economic growth. As a result, demand for both consumable goods and capital goods increases. Demand of consumable and capital goods has been growing globally. That is why we can say that the manufacturing sector has been growing the world over. But the problem is that though the demand for these goods is rising globally, production of these goods has centred around booming economies like China and India. As far as Nepal is concerned, we are in a very sorry state in manufacturing sector. Leave alone the possibility of expansion; even the goods that we used to manufacture in our own country have been displaced. For example, we used to produce fabrics in our country but Chinese readymade clothing available at cheaper prices has now replaced them. There were about 35 factories owned by the government but most of these public sector industries have shut down. We were the third largest jute producers in the world at one point of time. The health of our oldest factory, Biratnagar Jute Mill, has been deteriorating with the production and profit of this factory nosediving. The carpet industry used to contribute 20-22 per cent towards our national income but this percentage has been witnessing a downward trend. The contribution of the private sector is not very satisfactory. <br />
	</span></p>
<p style="text-align: justify;">
	<span style="font-size: 14px;"><img align="left" alt="cover story" border="1" height="308" hspace="10" src="http://newbusinessage.com/ckfinder/userfiles/Images/bholanath pokheral.jpg" style="margin:10px; padding:10px;" vspace="10" width="250" /><br />
	</span></p>
<p style="text-align: justify;">
	<span style="font-size: 14px;"><strong>How do you analyse the growth of the manufacturing sector in Nepal? </strong><br />
	</span></p>
<p style="text-align: justify;">
	<span style="font-size: 14px;">Had our factories used our own resources or inputs, it would have yielded high value. But our manufacturing industry has been providing more of an assembling facility to intermediary products that we bring from international market rather than producing goods by ourselves. If we analyse the history of the growth of manufacturing sector in Nepal, the industrial development that began from the 1980s started to expand from 1990's revolution with the radical shift in power and the country adopting the path of democracy and liberalism. We had significant growth in the manufacturing sector from 1995 to 2002. The growth was up to 20 per cent. But after 2002, the contribution of manufacturing sector has been even lesser than the contribution of agriculture. Nepal hasn’t been able to exploit its position between the two economic giants. <br />
	</span></p>
<p style="text-align: justify;">
	<span style="font-size: 14px;"><strong>What are the impediments for investing in the manufacturing sector? </strong><br />
	</span></p>
<p style="text-align: justify;">
	<span style="font-size: 14px;">Like water, capital flows to a place where there is favourable investment environment. The movement of capital can neither be controlled nor stopped. We have been witnessing that the factories that were opened in our country have now shifted to places like Himachal Pradesh in India because the environment of Nepal is not investment-friendly. A number of causes are responsible for this local market, international market, labour issues, tax policy, political instability, insecurity, lack of basic infrastructure etc. The private sector claims that labour issues and government bureaucracy are the key hurdles for industrial growth. Nepal's labour productivity is one of the lowest in the world and lack of skilled manpower has been the greatest challenge for industries. The labour situation is so bad that they are hiring Indian nationals to run their industries. Besides, there are labour unions to worsen the situation. Energy crisis is another major problem for us as we have to face 18 to 20 hours power outage a day. This goes to prove that we donâte have consistent policies and the policies change with every new government that takes charge. Cartels and syndicates are some other problems that plague the sector. Lack of basic infrastructures like roads, water, etc is something that we all know about. Industrial development is impossible without these basic infrastructures. <br />
	</span></p>
<p style="text-align: justify;">
	<span style="font-size: 14px;"><strong>A lot of corporate houses previously involved in manufacturing have been shifting to the service sector. Can an economy sustain based on the service sector and imported goods?</strong> <br />
	</span></p>
<p style="text-align: justify;">
	<span style="font-size: 14px;">According to economic theories, the growth in the size of an economy results in the expansion of its service sector. Investment moves from one sector to another on the basis of two factors: risk and profit. At present, investment in the manufacturing sector involves very high risk as there are number of impediments involved. Most of our industries are located in the three industrial corridors of Nepal first, from Itahari to Rani, the second from Hetauda to Birgunj and the third from Butwal to Sunauli because these places have better arrangement of infrastructures like roads, water and electricity connection. So, even though an economy cannot sustain with a growth in the service sector alone, capital has moved to this sector in Nepal as it involves less risk and high rate of return. Until the impediments are cleared, investment in manufacturing sector will not materialise.</span></p>
<p style="text-align: justify;">
	<span style="font-size: 14px;">Why can’t agriculture be developed as an important industry in our country? Our agriculture sector has not been able to create demand because it is not vibrant enough. The greatest challenge in the agriculture sector is the labour problem. Youths have left their villages for opportunities in the cities or outside the country and fertile lands have either turned barren or have shifted to permanent cropping. The consumption demand is growing in the villages due to remittance inflow and not because of the contribution of agriculture. <br />
	</span></p>
<p style="text-align: justify;">
	<span style="font-size: 14px;"><strong>How can we reach the level of sustainability or even export Nepal's manufactured goods to the international market?</strong> <br />
	</span></p>
<p>
	<span style="font-size: 14px;">There are a few aspects to consider before we think about expanding the market of our products to the international level. The first is the quality of our products. Can our products stand on the same level compared to similar products available in the international market? Can we sell our products at a competitive price? For this, the cost of production should be low. High labour and management efficiency in addition to cheap capital can decrease the production cost. But, the scenario in our country is just the opposite and hence, there are a very few products with this possibility. Take the example of honey which we used to export to Europe not too long ago. But Europe no longer accepts our honey as they found traces of insecticides in it. We don’t have a facility to test it and certify that our honey is pure. Similarly, Nepalis in general do not show strong trait of entrepreneurship. One of the economics theories states that a refugee has a greater possibility of becoming a good entrepreneur than any other person. Even the history shows that people who have left their countries with a determination to go through hardships have become successful entrepreneurs. Second, the theory claims that certain caste or creed have better entrepreneurial skills than others. Nepali entrepreneurs belonging to Thakali and Newar castes have not been able to groom themselves as international businessmen like the Marwaris have. Most of the countries in the world have China Towns that are famous for Chinese food. In the same manner, Thakalis too can promote their authentic dishes in the international market. The Nepalis in general should also use their natural skills and groom themselves to earn respect in the international arena. <br />
	</span></p>
<p>
	<span style="font-size: 14px;"><strong>Despite all these barriers, do you see possibilities that can take Nepal on the way to prosperity?</strong><br />
	</span></p>
<p>
	<span style="font-size: 14px;">One sector with tremendous possibility is limestone as we are very rich in this resource. If we can use limestone and subsitute the import of cement, we can save a considerable amount of foreign currency. However, this sector hasn't developed the way it should have. Besides limestone, hydropower, tourism, medicinal herbs etc are other possibilities that we can explore. <br />
	</span></p>
<p>
	<span style="font-size: 14px;"><strong>When will we actually have favourable industrial and investment environment?</strong></span></p>
<p>
	<span style="font-size: 14px;">Political stability only can ensure favourable industrial and investment environment because it will ensure stable economic policies. But that is not enough. Investment will get attracted only when we have consistent policies and programmes and when the government is clear about private investments. The risk factor is high during political instability so let's hope that we achieve the same through constitution, an election and formation of a stable government. Though the country is following this path, the progress has been very slow. Similarly, labourers should be clear about both their rights and responsibilities. They are presently acting more like the political parties wings rather than institutions that must fight for the rights of labours. Similarly, quality people living abroad must return to build their own country. The government can take an initiative in this regard by guaranteeing employment, security and welfare to them in Nepal. It's certainly going to take some time to sort out these issues but we must not lose hope and remain optimistic. <br />
	</span></p>
<p>
	<span style="font-size: 14px;"><strong>What is the prospect of Nepalâ's manufacturing sector? What are the remedial measures you would like to recommend? </strong><br />
	</span></p>
<p>
	<span style="font-size:14px;">There is no way out other than utilising our competitive advantage. The greatest competitive advantage of Nepal is its location between the two emerging economic giants. We can certainly facilitate trade between China and India and at the same time, expand our economy by participating in theirs. We donâte have vast natural resources and the only resource we can take pride in is water, however, it is not a secured resource as it is in the grip of climate change. Tourism can be developed as a big industry while specialisation in agriculture can be another possibility. If we can process our medicinal herbs in our own country, it can contribute significantly to our national economy. The trend so far is that we sell our raw-materials at very low prices while buying processed items very expensively. The practice of herding and limping is another hitch because it hurts specialisation. If these aspects could be corrected, we can imagine a prosperous economy in our country in the foreseeable future.</span></p>',
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			'article_category_id' => '40',
			'title' => ''NRB Will Take Every Possible Measure To Bring Liquidity Problem Under Control'(October 2011)',
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			'summary' => null,
			'content' => '<div style="text-align: justify;">
	<span style="color:#(color);"><span style="font-size: 14px;"><strong>Gopal Prasad Kaphle </strong>is Deputy Governor of Nepal Rastra Bank (NRB), the central bank of <img align="right" alt="" border="2" height="356" hspace="10" src="http://newbusinessage.com/ckfinder/userfiles/Images/gopal prasad kaphle.jpg" vspace="10" width="250" />Nepal. He was appointed to the post on December 26, 2010. He started his career in banking in 1955 and is devoted to this sector for more than 29 years. During this period, he worked in banking operation, branch operation, development finance, micro finance, public debt, training, and banking inspection and supervision department. He completed Master’s Degree in Economics from Tribhuvan University in 1979. He also has a Master’s Degree in Economics from the University of New England, Australia. In an interview with <i>New Business Age</i>, Kaphle speaks about the current situation in the banking sector and NRB’s regulatory plans for the future. Excerpts:<br />
	<br />
	</span></span></div>
<div style="text-align: justify;">
	<span style="color:#(color);"><span style="font-size: 14px;"><br />
	</span></span></div>
<div style="text-align: justify;">
	<span style="color:#(color);"><strong><span style="font-size: 14px;">Total net profit of commercial banks has increased by 2.28 per cent compared to that of last year. Why is the growth so low?<br />
	<br />
	</span></strong></span></div>
<div style="text-align: justify;">
	<span style="color:#(color);"><span style="font-size: 14px;">The growth rate compared to a few years ago is quite low. However, there is no reason to be unhappy about the profit earned by financial institutions. There are some factors that have caused the liquidity problem such as absence of investment area and environment, turmoil in real estate, margin lending, and until last year delayed government budget. Despite these all, BFIs (bank and financial institutions) are successful in making profit and provide relief to shareholders and promoters. In the coming years, if the things change for the better like a timely budget, investment friendly environment and good corporate governance, we can be more optimistic about the high growth in profit.<br />
	<br />
	</span></span></div>
<div style="text-align: justify;">
	<span style="color:#(color);"><span style="font-size: 14px;"><br />
	</span></span></div>
<div style="text-align: justify;">
	<span style="color:#(color);"><strong><span style="font-size: 14px;">Problem of liquidity is still not solved. What is the real scenario at present? How long will it take to overcome this crisis?<br />
	<br />
	</span></strong></span></div>
<div style="text-align: justify;">
	<span style="color:#(color);"><span style="font-size: 14px;">If we look at the liquidity inside financial system, there are not many reasons to worry about. A couple of months ago, commercial banks had Rs 22 billion surplus liquidity in the market. Prior to that, more than Rs 30 billion surplus liquidity was observed in commercial banks. Most of the commercial banks except only a few are in surplus. Among B and C class financial institutions, some have surplus while others are in deficit. Moreover, commercial banks are at ease while development banks and finance companies are not completely out of the woods. If we look at inter-bank lending rate, till date, only some finance companies are still borrowing at 15 or 16 per cent. Commercial banks were borrowing at one per cent some time back but at present they are borrowing at around 1.5 per cent. This shows, there is ease in the system but at the individual level, some bank and finance companies are still in problem. But, the liquidity problem is not completely resolved.</span></span></div>
<div style="text-align: justify;">
	<span style="color:#(color);"><span style="font-size: 14px;"><br />
	</span></span></div>
<div style="text-align: justify;">
	<span style="color:#(color);"><span style="font-size: 14px;">This time of the year is normally the period of ease. During this period, the government budget has been passed by the parliament. There have been fewer investments. Loan and interests repayment rate in the commercial banks is good. That makes the liquidity problem to look relieved. We are also in a wait and watch mode to see what the situation is after Dashain and Tihar. I believe there won’t be big problems like in previous years. At such times, we cannot deny the possibility of problems. However, we are alert because of the lessons we have learnt. Public trust has developed in the banking sector. In the coming days, NRB will take every possible measure to bring this problem under control. The government has also assured that. NRB, if required, will use any instruments like refinancing to LOR (Lender of Last Resort) to bring the situation in control. To make sure that liquidity does not remain idle, we are issuing development bonds and treating B and C class institutions can participate in such instruments. We are putting them in a separate basket. I am trying to ensure the environment to cash in on instruments whenever there is any problem of liquidity. Problem is psychological too. And, commercial banks are also optimistic that the problem will ease. I believe the problems of the past will not repeat.<br />
	<br />
	</span></span></div>
<div style="text-align: justify;">
	<span style="color:#(color);"><span style="font-size: 14px;"><br />
	</span></span></div>
<div style="text-align: justify;">
	<span style="color:#(color);"><strong><span style="font-size: 14px;">The average non-performing loan out of total loans has increased to 2.41 per cent from 1.92 per cent of previous year. What is your take on this?<br />
	<br />
	</span></strong></span></div>
<div style="text-align: justify;">
	<span style="color:#(color);"><span style="font-size: 14px;">This may be realistic too because the biggest problem currently is real estate loans. The financial sector is not mobile. Economic activities are missing; industries are not moving on the right track, there are problems of labour and import-export. Due to unstable government, policies are not implemented. We also realise that NRB has become quite aggressive and taken tough policy measures. We tried to address the problem of good governance that has been left unaddressed over the years at once instead of treating it in a step-by-step manner. Due to the absence of investment environment to tap such opportunities, lending in industries have problems of recovery. Industries may not be running, some might have been closed down, there are labour issues. So, loans are not being paid back. Some banks and finance companies were in problem. So, we decided to liquidate some companies, and because of that, their non-performing loans must have been added. Real estate loans had the largest market share. We put a cap on lending to the real estate. The sales of real state also faltered. As developers cannot sell, they could not repay the loan. We have tried to ease it. However, market and economy as a whole has effects on business and non-performing loans increased.</span></span></div>
<div style="text-align: justify;">
	<span style="color:#(color);"><span style="font-size: 14px;"><br />
	</span></span></div>
<div style="text-align: justify;">
	<span style="color:#(color);"><span style="font-size: 14px;">On NRB’s inspection and supervision part, we have managed it. Compared to the past, we have improved our vision and efforts to solve problems, monitoring and inspections. After our effective inspection, institutions are not able to turn bad loans into good. That has also led to increase the volume of such loans. Increase in such loans does not mean banking system’s status has deteriorated than earlier. This is another side of NRB’s inspection, supervision’s smoothness and effectiveness.<br />
	<br />
	</span></span></div>
<div style="text-align: justify;">
	<span style="color:#(color);"><span style="font-size: 14px;"><br />
	</span></span></div>
<div style="text-align: justify;">
	<span style="color:#(color);"><strong><span style="font-size: 14px;">NRB is planning to adopt a risk based supervision system. What will be the modality of such a system? And, how soon could this be implemented?<br />
	<br />
	</span></strong></span></div>
<div style="text-align: justify;">
	<span style="color:#(color);"><span style="font-size: 14px;">We have various modalities in this risk-based supervision system. There are numerous risks like subjective, managerial and operational among others. Our inspection department categorises specific risks from every sector. Based on that, we define our observation. There may be risks in one sector while others may be safe. This modality tries to take a multidimensional approach to maintaining discipline. It is a change from traditional supervision mechanism. The mechanism is envisioned to ensure that banks and financial institutions should not be in trouble because of any sector or cause. It considers not only good governance, capital base but also operation, investment portfolio among others. This modality aims to calculate and mitigate risks from any sectors. It is based on our belief that a bank must be healthy, strong and create a separate identity in the market.<br />
	<br />
	</span></span></div>
<div style="text-align: justify;">
	<span style="color:#(color);"><span style="font-size: 14px;">Risk-based supervision is applied within NRB too. We are applying it in our departmental operations. It is already under application. We believe risks must be mitigated. We now have to take it forward effectively and give continuity to it. We have to calculate risks that may arise in the future.<br />
	<br />
	</span></span></div>
<div style="text-align: justify;">
	<span style="color:#(color);"><span style="font-size: 14px;"><br />
	</span></span></div>
<div style="text-align: justify;">
	<span style="color:#(color);"><strong><span style="font-size: 14px;">IMF had suggested NRB to exercise more power. What are the new steps NRB is planning to take?<br />
	<br />
	</span></strong><span style="font-size: 14px;">Exercise of power must be viewed considering a couple of elements. NRB exercises power based on NRB Act and BAFIA. BAFIA is in the house and discussions are going on to amend it. It must be strong. The government sector also has a role to make NRB active. We have focused on a few things like taking prompt action on the problems witnessed in financial institutions. NRB must be given right to take prompt action against any issues of good governance. For now, it takes a long time to take action against any person who is proved guilty. The process requires informing the Ministry of Finance then the Ministry of Home and finally the police. If we had power, we could have taken action against some financial criminals. So, NRB must be powerful and the government intervention should be less. NRB should be guaranteed a strong autonomous identity. For that, the status of Governor and Deputy Governor of NRB must be raised which would lead to more power. There must be such provisions that police can make arrests and take actions based on our letter. Time lag that is in existence is encouraging culprits to flee. We are demanding to increase our rights and that will help maintain discipline in banks and financial institutions.</span></span></div>
<div style="text-align: justify;">
	<span style="color:#(color);"><span style="font-size: 14px;"><br />
	<br />
	</span></span></div>
<div style="text-align: justify;">
	<span style="color:#(color);"><strong><span style="font-size: 14px;">What is NRB doing to restore public confidence in financial institutions that is said to be at a low ebb?<br />
	<br />
	</span></strong></span></div>
<div style="text-align: justify;">
	<span style="color:#(color);"><span style="font-size: 14px;">I don’t fully agree with it. At present, public confidence is improving. The confidence started declining when there was crisis of new notes during Dashain around two-three years back. Then, slowly public belief diminished in the entire banking system. And, it heightened with the liquidity crunch. At the same time, some companies were in problem and as a result, trust in the entire financial system eroded. If NRB had not been able to take action and correct its policies, the confidence would have fallen more. We tried hard and deposits have increased, profit has grown though a little and the people are returning to banks for deposits. People kept their money with themselves as some banks could not give loans, or even return deposits. We have moved on from this situation. The increased deposit and surplus liquidity is all because of increasing public confidence. I don’t think commercial banks should worry but this is not a siesta time. Public is so sensitive that if it does not get good service there will be shift in belief and trust. Public confidence must be won with good service, good governance and transparency.<br />
	<br />
	</span></span></div>
<div style="text-align: justify;">
	<span style="color:#(color);"><span style="font-size: 14px;"><br />
	</span></span></div>
<div style="text-align: justify;">
	<span style="color:#(color);"><strong><span style="font-size: 14px;">A demand to stop issuing license to financial institution is heard. Is NRB planning to take such action?<br />
	<br />
	</span></strong></span></div>
<div style="text-align: justify;">
	<span style="color:#(color);"><span style="font-size: 14px;">A couple of things must be taken into consideration. Firstly, the number of financial institutions needed for Nepal with respect to our scale of economy must be clear. Another, there must be clear demarcations of public status like deprived groups, remote areas, hilly and mountainous areas and developed areas. We have already faced the consequences of rampant establishment of banks and finance companies. So, we are going for merger. One policy was formulated, companies came meeting the requirements and licence was issued. We have seen its consequences. NRB’s capacity for inspection and supervision was witnessed along with banks and finance companies’ capacity and implementation of good governance. Often question is raised whether a company can be established or not just with a certain amount of capital. The number is one question, while deepening access of service in certain geographical region and population can be another. Access and inclusion of financial and banking service to all regions must be analysed. The measures to cater to that group or region deprived of service must be pointed out. Similarly, unhealthy competition arises from increased number. The cake is shared by all institutions even as their number increases. Eventually, the size of activities will also diminish. Considering it, a suitable policy and environment must be created. It does not mean we should not issue any licenses. We had prioritised microfinance and its number has also exceeded. There are a lot of duplications. It must be analysed whether a particular area requires more companies or service. Whether to go for branch expansion or number of institutions are two options. So, whichever is feasible we must concentrate on that. Every region and every group of people must be able to access the services and share the cake of national economic development. We must devise our licensing policy accordingly so that there is no duplications and quality facilities are evenly distributed. We are making such policy. We are forming a five-year strategic plan in which we have planned to review the licensing policy. After formulation of that outline, we will have suitable licensing policy and we will bring in merger to control excess institutions and expand in areas with scarcity. That will be either by motivation, giving additional services or accelerating, we will take banking services to those areas.<br />
	<br />
	</span></span></div>
<div style="text-align: justify;">
	<span style="color:#(color);"><span style="font-size: 14px;"><br />
	</span></span></div>
<div style="text-align: justify;">
	<span style="color:#(color);"><strong><span style="font-size: 14px;">Till date, a merger between two commercial banks has not happened. Do you think the mergers that are happening are satisfactory and meet the expectation of NRB?<br />
	<br />
	</span></strong></span></div>
<div style="text-align: justify;">
	<span style="color:#(color);"><span style="font-size: 14px;">The expectation of NRB on merger is not met. For the coming days, NRB is offering two options: merge and get incentive or be ready for forceful merger. If motivational measures do not work, we will have to go for forceful mergers. IMF and other world bodies have suggested that the number of financial institutions is exceeding the national capacity and need. Our only target is to merge the financial institutions, increase their capital base and ensure good governance. It is our continued effort. There are policy complications and we are relaxing them. We are inviting them to come for merger as soon as possible. It is obvious that some practical problems come during mergers. Nobody wants to lose anything. There can’t be two CEOs, chairmen or GMs. Problems in managerial aspects are visible. Someone must compromise something. NRB is determined and it will make mergers anyhow.</span></span></div>
<div style="text-align: justify;">
	<span style="color:#(color);"><span style="font-size: 14px;"><br />
	<br />
	</span></span></div>
<div style="text-align: justify;">
	<span style="color:#(color);"><strong><span style="font-size: 14px;">NRB is trying to correct several of its mistakes of the past like cap on CEO salary, margin lending and real estate? Why does NRB take ad-hoc decisions in the first place?<br />
	<br />
	</span></strong></span></div>
<div style="text-align: justify;">
	<span style="color:#(color);"><span style="font-size: 14px;">I don’t think so. While trying to manage something in an open system, ripples like in a pond hit by a stone are visible. We did not compromise even while deciding CEO’s salary. It is implemented now. We had some policy difficulties regarding B and C class institutions. There would be large variations if similar policy is applied in all financial institutions. It is difficult to manage as there are institutions confined to a district and also large national institutions. Now, we have addressed it through a new policy. We have let them decide independently on salary but based on certain backdrops.<br />
	<br />
	</span></span></div>
<div style="text-align: justify;">
	<span style="color:#(color);"><span style="font-size: 14px;"><br />
	</span></span></div>
<div style="text-align: justify;">
	<span style="color:#(color);"><strong><span style="font-size: 14px;">How long will it take to improve the BoP situation to a comfortable level?<br />
	<br />
	</span></strong></span></div>
<div style="text-align: justify;">
	<span style="color:#(color);"><span style="font-size: 14px;">BOP has improved lately and it was in surplus in June/July. It will continue to improve in coming months too. I don’t think we will go into deficit this year but having said that we should not stay idle. It is getting positive and we are optimistic. There are countries which have deficit balance of payment and are still considered developed. In countries like ours, where there is small source of income and imports are big, some discipline must be maintained like increasing our productivity in sectors like agriculture and increased credit flow to the productive sectors. Internal production immediately helps BoP. We have requested financial institutions to invest in such areas. When the government budget flows to those areas, production increases and jobs are created. That will have multiplier effect and export will also increase. Import of luxurious goods must be discouraged while development oriented activities must continue. Other options than remittance also need to be sought to remain in safe position.</span></span></div>',
			'published' => true,
			'created' => '2011-10-11',
			'modified' => '2012-08-23',
			'keywords' => '',
			'description' => 'Gopal Prasad Kaphle is Deputy Governor of Nepal Rastra Bank (NRB), the central bank of Nepal. He was appointed to the post on December 26, 2010. He started his career in banking in 1955 and is devoted to this sector for more than 29 years. During this period, he worked in banking operation, branch operation, development finance, micro finance, public debt, training, and banking inspection and supervision department.',
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	(int) 14 => array(
		'Article' => array(
			'id' => '474',
			'article_category_id' => '40',
			'title' => 'We Are Sailing Easy For Now (October 2011)',
			'sub_title' => '',
			'summary' => null,
			'content' => '<div style="text-align: justify;">
	<span style="color:#000;"><span style="font-size: 14px;"><strong>Sashin Joshi </strong>is the Chief Executive Officer of Nepal Industrial &amp; Commercial (NIC) Bank Limited. <img align="right" alt="" border="2" height="378" hspace="10" src="http://newbusinessage.com/ckfinder/userfiles/Images/sashin%20joshi.jpg" vspace="10" width="250" />He is also the Chairman of National Banking Training Institute (NBTI) besides being the Immediate Past President of Nepal Bankers Association. He holds an MBA in Finance, a Post-graduate Diploma in Marketing and is Credit-Accredited by international banks. Having started his banking career in 1986 with Nabil Bank, Joshi has also worked in Australia and New Zealand Banking Group, Melbourne, and ANZ Grindlays Bank, Kolkata. He was a Director of the Board and Head of Corporate &amp; Institutional Banking at Standard Chartered Bank Nepal before moving to NIC Bank. Also a Founding Director of Rural Micro-finance Development Centre (RMDC), he aspires to contribute in scaling-up reform in Nepalâ's financial sector by working closely with the government, the central bank and the private sector. In an interview with Pinaki Roy of <i>New Business Age</i>, Joshi analyses the performance of Nepal's commercil banks over the past year and recommends remedial measures on issues that plague the sector. Excerpts:</span></span></div>
<div style="text-align: justify;">
	<span style="color:#000;"><span style="font-size: 14px;"><br />
	</span></span></div>
<div style="text-align: justify;">
	<span style="color:#000;"><strong><span style="font-size: 14px;">What is your analysis of the performance of Nepal's commercial banks over the past year?</span></strong></span></div>
<div style="text-align: justify;">
	<span style="color:#000;"><span style="font-size: 14px;">It's not very good. But honestly speaking, I was expecting it to be even worse. Banks were helped to a certain extent by some relief measures given by the central bank at the last minute. I had predicted that the aggregate profit of all the commercial banks put together would be negative. However, we have managed aggregate increase in profit by about two-and-a-half per cent compared to that of last year. My analysis is that the Nepal Rastra Bank’s (NRB) relief measures in the eleventh hour helped us avert negative growth.</span></span></div>
<div style="text-align: justify;">
	<span style="color:#000;"><span style="font-size: 14px;"><br />
	</span></span></div>
<div style="text-align: justify;">
	<span style="color:#000;"><strong><span style="font-size: 14px;">Total net profit of commercial banks in Nepal has increased by a mere 2.28 per cent compared to that of last year. What is the reason for this slow growth?</span></strong></span></div>
<div style="text-align: justify;">
	<span style="color:#000;"><span style="font-size: 14px;">The commercial banks’ profitability was impacted for a number of reasons. As a result of extremely tight liquidity, banks started competing fiercely for deposits by going one-up on interest rates. The deposit rates increased significantly but the banks were not able to pass on all the increase to the borrowers. This resulted in the banks’ average margin getting reduced. Many banks had to take on additional costs on account of personnel, utility, security, stationery supply etc among others. And of course, there is no business growth for reasons of political instability.&nbsp;</span></span></div>
<div style="text-align: justify;">
	<span style="color:#000;"><span style="font-size: 14px;"><br />
	</span></span></div>
<div style="text-align: justify;">
	<span style="color:#000;"><strong><span style="font-size: 14px;">Liquidity crunch continues to persist. What is the severity of the crunch at this point of time and how long will it take us to overcome this?</span></strong></span></div>
<div style="text-align: justify;">
	<span style="color:#000;"><span style="font-size: 14px;">I would like to contradict you here. The liquidity situation has improved significantly over the past couple of months. It improved primarily due to two reasons: one is that there was massive government expenditure that happened towards the end of the last fiscal year. Besides, the budget this year came out on time and therefore, there was no gap between budget approval and government expenditure. On the external account, there have been a lot of reimbursements that have happened for projects which were undergoing or completed. Another reason is that due to very tight liquidity crunch and lack of favourable market conditions, banks were putting brakes on new lending. These two reasons together helped preserve liquidity. However, the real test will be when a lot of withdrawals will take place during Dashain and Tihar. Also, if the capital expenditure of the government does not coincide with the festival season, we could have another tight situation. For that, we will have to wait and see but for now, we are <br />
	sailing easy.&nbsp;</span></span></div>
<div style="text-align: justify;">
	<span style="color:#000;"><span style="font-size: 14px;"><br />
	</span></span></div>
<div style="text-align: justify;">
	<span style="color:#000;"><strong><span style="font-size: 14px;">The total non-performing loan has increased by close to 26 per cent as against last year. What could be the possible remedial measures?</span></strong></span></div>
<div style="text-align: justify;">
	<span style="color:#000;"><span style="font-size: 14px;">To tell you the truth, I had expected higher increase in non-performing loans. The relief given by the central bank especially to the real estate sector towards the end of last fiscal year provided respite because the borrowers were allowed to pay a month after the year end without attracting any provisioning. I believe there is still some under provisioning by banks.</span></span></div>
<div style="text-align: justify;">
	<span style="color:#000;"><span style="font-size: 14px;"><br />
	</span></span></div>
<div style="text-align: justify;">
	<span style="color:#000;"><span style="font-size: 14px;">If there is a problem, you have to bite the bullet. Postponing a problem is not going to make the problem go away. If you have a problem loan, you have to recognise it as one and make appropriate provisioning for that. However, if a business can be revived through re-organisation or re-scheduling, then we should also make every effort to make that happen.&nbsp;&nbsp;&nbsp; </span></span></div>
<div style="text-align: justify;">
	<span style="color:#000;"><span style="font-size: 14px;"><br />
	</span></span></div>
<div style="text-align: justify;">
	<span style="color:#000;"><strong><span style="font-size: 14px;">How can public confidence in financial institutions be restored at a time when the banking industry has been troubled with lower deposit mobilisation?</span></strong></span></div>
<div style="text-align: justify;">
	<span style="color: rgb(0, 0, 0);"><span style="font-size: 14px;">I think the financial system in Nepal is relatively sound, more so when it comes to </span></span><span style="color:#000;"><span style="font-size: 14px;">"A" </span></span><span style="color:#000;"><span style="font-size: 14px;">class commercial banks which account for 80 per cent of the market both in deposits and lending. Most of these institutions are well supervised, have reasonably large capital base and on the whole, well managed. The problem lies basically with "A"&nbsp; class institutions where quite a few corporate governance-related issues have surfaced. There is also a lack of regular and effective supervision by the central bank. If visible measures are taken in these two areas by the central bank and boards of these institutions, I think it will help in restoring public confidence.</span></span></div>
<div style="text-align: justify;">
	<span style="color:#000;"><span style="font-size: 14px;"><br />
	</span></span></div>
<div style="text-align: justify;">
	<span style="color:#000;"><strong><span style="font-size: 14px;">What is your stance on granting banking licenses to practically everybody who applies for it? Aren't we overcrowded with banks in the urban centres while 70 per cent of the country still has no access to formal banking?</span></strong></span></div>
<div style="text-align: justify;">
	<span style="color:#000;"><span style="font-size: 14px;">That was the biggest problem. NRB effectively had just one criterion capital, so anyone who had the money could virtually open a bank here. That was a very wrong policy because banking is such a sensitive industry. Unlike other industries, banks are the custodian of public money where people put their trust. While allowing bank licenses, NRB should have a very prudent and strict criterion to ensure the right intentions of the promoters and the management.</span></span></div>
<div style="text-align: justify;">
	<span style="color:#000;"><span style="font-size: 14px;"><br />
	</span></span></div>
<div style="text-align: justify;">
	<span style="color:#000;"><span style="font-size: 14px;">It's not a numbers issue. It's more about the quality of the banks and the effectiveness of the central bank's supervision. Banks are spreading out and more than a 1,000 branches have been opened in the last one year by all the banks put together. And most of these branches are located outside Kathmandu.</span></span></div>
<div style="text-align: justify;">
	<span style="color:#000;"><span style="font-size: 14px;"><br />
	</span></span></div>
<div style="text-align: justify;">
	<span style="color:#000;"><strong><span style="font-size: 14px;">We are being inundated with merger rhetoric for as long as one can remember, however, we haven't seen one till now. How serious are the stakeholders about this and how will it impact the industry?</span></strong></span></div>
<div style="text-align: justify;">
	<span style="color:#000;"><span style="font-size: 14px;">For any merger to happen, the basis is the potential value addition. Merger for the sake of merger is nonsense. If you look at the international experience on mergers, more than 50 per cent have usually failed. A merger is welcome provided there is value addition taking place between merging institutions by way of bringing in synergies, business, cost, reach, network etc. In Nepal's context, the cultural angle also comes into play. Factors such as multiple promoters with their own personal interests and their respective egos taking precedence etc override the fundamental business deal. That's why I believe that it's very difficult for mergers to happen here.</span></span></div>
<div style="text-align: justify;">
	<span style="color:#000;"><span style="font-size: 14px;"><br />
	</span></span></div>
<div style="text-align: justify;">
	<span style="color:#000;"><span style="font-size: 14px;">However, if mergers do happen, it will definitely be good for the industry. Some degree of consolidation is required because there are too many small players in the market. Size does matter and provided there is a requisition from managements, better efficiency can be brought in.</span></span></div>
<div style="text-align: justify;">
	<span style="color:#000;"><span style="font-size: 14px;"><br />
	</span></span></div>
<div style="text-align: justify;">
	<span style="color:#000;"><strong><span style="font-size: 14px;">How long will it take to improve the BoP situation for us to get slightly more comfortable than we at present are?</span></strong></span></div>
<div style="text-align: justify;">
	<span style="color:#000;"><span style="font-size: 14px;">We have a huge trade imbalance and if we are going to depend solely on trade, it is going to take us a very long time. The export-import imbalance is quite severe which we can deal with it by building more manufacturing establishments and having a better industrial base. Even if we want to promote hydropower, the gestation period again is going to consume a lot of time. Therefore, purely based on trade prospects, it is going to take us a long time to improve the BoP situation. We have of course, been helped by the remittances brought in by Nepali Diaspora and also the aid coming through bilateral and multilateral donors that ensures capital inflow. Even if we have financial and political stability and the policies are conducive, we cannot expect wonders. To even expect that we will have a trade surplus will take us at least 10 years if we start now.&nbsp;</span></span></div>
<div style="text-align: justify;">
	<span style="color:#000;"><span style="font-size: 14px;"><br />
	</span></span></div>
<div style="text-align: justify;">
	<span style="color:#000;"><strong><span style="font-size: 14px;">Why is it becoming more difficult to control inflation? What are your recommendations to successfully control inflation?</span></strong></span></div>
<div style="text-align: justify;">
	<span style="color:#000;"><span style="font-size: 14px;">In Nepal, inflation is primarily on account of two factors. One is the imported inflation which we can do nothing much about. Within this imported inflation, India plays a big role as two-third of our trade is with India which is just the formal trade. If you also take into account the informal trade, my guess is that it would be as much as 80 per cent. So, a lot of inflation is imported from India. The other factor is the supply side where there are no internal control mechanisms. The distribution cost is very high because of the transportation cartels and syndicates. Cost of power is very high in Nepal while the labour costs are ever rising. We still donâte have very good access in terms of roads which again makes it a bottleneck to get goods from one place to another thus adding up costs. We can do a lot on the internal side if the government becomes more effective in its functioning. Besides, the government must allow some subsidy to the agricultural sector otherwise our farmers just cannot compete with the farmers in India where you have subsidies for fertilizers, irrigation, power etc.</span></span></div>
<div style="text-align: justify;">
	<span style="color:#000;"><span style="font-size: 14px;"><br />
	</span></span></div>
<div style="text-align: justify;">
	<span style="color:#000;"><strong><span style="font-size: 14px;">What are your expectations from NRB given the prevailing scenario where the banking industry has registered an excruciatingly slow growth?</span></strong></span></div>
<div style="text-align: justify;">
	<span style="color:#000;"><span style="font-size: 14px;">One expectation I have is that whenever NRB brings out any new policies, directives or circulars, they do it through a consultative process where stakeholders are involved and there is a dialogue. It's not necessary that NRB has to agree to everything that the stakeholders say but at least there is a two-way process when you take everybody into confidence. If a consultative process brings forth any new policies and directives, there will be ownership from the stakeholders themselves. It means that enforcement will be that much more easier because then it becomes voluntary.</span></span></div>
<div style="text-align: justify;">
	<span style="color:#000;"><span style="font-size: 14px;"><br />
	</span></span></div>
<div style="text-align: justify;">
	<span style="color:#000;"><span style="font-size: 14px;">My second expectation is that while bringing out any new directives or policies, they should also try to emulate some of the best practices in the world and think it through before implementing them. We have seen in the past that in quite a few instances, they have come out with half-baked directives which they had to amend a number of times. That shows some kind of shallow thinking within the central bank when they come out with directives.</span></span></div>
<div style="text-align: justify;">
	<span style="color:#000;"><span style="font-size: 14px;"><br />
	</span></span></div>
<div style="text-align: justify;">
	<span style="color:#000;"><span style="font-size: 14px;">Third one is that when they come out with any policies, they should not look only at the bad practices followed by one or two institutions and then paint everyone with the same brush. They must not generalise. If there are some bad apples, they should handle them individually and not treat everybody with suspicion.</span></span></div>',
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			'description' => 'Sashin Joshi is the Chief Executive Officer of Nepal Industrial & Commercial (NIC) Bank Limited. He is also the Chairman of National Banking Training Institute (NBTI)..........',
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