Views of a Nepali Economist

.
The BIG NEWS: Baburam Bhattarai becomes the 35th (and the most educated) Prime Minister of Nepal. Here is his short profile.

1. Half of households have one member abroad

...52.8 per cent of the total households have at least one member away from home...indicating the startling rise in loss of human capital in the country

...32 per cent families have members away in foreign countries...55 per cent of the total households receive remittance from the members abroad

...Over 354,000 Nepalis left the country last fiscal year to work in foreign destinations...and...that has created dearth in agricultural and industrial labour back home

...Nepal earns about Rs 210 billion from remittance coming in from abroad annually...but...79 per cent of total remittance is spent on daily consumption...and...only a meagre 2.4 per cent of the remittance contributes to capital formation

Although there are people in Nepal that praise remittance for its role in reducing poverty and inequality (both of which have NOT been proven empirically by any studies), there are some aspects of this heavy role of remittance that do not bode well for the country in the long run, especially because:

...empirical evidences also show that the development process of the economy that is dependent on remittance is relatively slower by about 1.5 percent

2.Banks deposit growth rate slows down

...average deposit growth rate slowed down by more than two times compared to a fiscal year ago

Deposits in the commercial banks grew by:
32.25 percent in 2008/09
12.9 percent in 2009/10
10 percent in 2010/11

Deposits with Janata Bank saw surging by 300 percent...Rastriya Banijya Bank has the largest deposit base with Rs 74 billion...Nepal Investment Bank has Rs 50 billion deposits

...saving and credit cooperatives were found to be mobilising deposits worth Rs 122 billion

3. Strike cripples life in 9 eastern districts

...the demand is to make Taplejung, Panchthar, Ilam, Jhapa, Morang, Sunsari, Dhankuta, Sankhuwasabha and Terhathum districts...into the Federal autonomous Limbuwan state

4. Protesting Mustang folks warn of barring tourist entry

...unless the government allocates 60 percent of the tourist royalty for the development of the region

Upper Mustang has not received its share as provisioned by the Local Self Governance Act for the last 16 years...despite the government of Nepal collecting...Rs 770 million in revenue annually through tourism from Upper Mustang since 1993...The government only provides ...a nominal Rs 70 million to the district. As a result, the region still lacks electricity, roads, schools and hospitals. Food shortage is a perennial problem as the topography of Upper Mustang is unfavourable for crops.

2,162 tourists visited Upper Mustang in 2010, up by 30.3 percent compared to the previous year

5. Preparation for Dashain; NRB ups note circulation by 40pc

...Last Dashain saw use of notes worth Rs 20 billion...According to NRB, it is sending clean notes worth around Rs 28 billion for this year’s Dashain

6. Only 10 companies hold 56 percent of Nepal stock exchange's total market capitalization

Company// Share in total market capitalization(%)

Nepal Telecom// 19.43
Standard Chartered Bank// 8.95
Nabil Bank// 7.85
Nepal Investment Bank // 3.83
Himalayan Bank// 3.56
Nepal SBI Bank// 3.26
Everest Bank// 2.81
Bank of Kathmandu// 2.40
Butwal Power// 2.32
Chilime Hydropower// 1.85

7. NOC hikes diesel, kerosene price by Rs. 1.50 per litre

The price of the diesel and kerosene has now reached Rs. 75 per litre from Rs. 73.50 per litre....the price of petrol is constant at Rs. 102 per litre which was increased from Rs. 97 some two months ago

8. Buddha Air tops domestic carrier operations

...in the first half of 2011 with a market share of more than 40 percent

The airline recorded an increment of 21.73 percent in passenger carriage. Except for Buddha Air and Sita Air, all the domestic carriers posted a negative growth in their passenger movement in the first six months.

Buddha’s nearest competitor Yeti Airlines saw its passenger movement dip by 1.55 percent. However, the airline is still the second largest carrier in domestic aviation with 224,062 passengers flying it in the first half of 2011.

...domestic airlines carried 761,043 passengers in the first six months, up 36,160 from last year...

Rate of Growth in Passenger Movement in first-half of the year:
32.05 percent in 2009
19.82 percent in 2010
4.98 percent in 2011

9. Nepalese Internet ...some numbers

*65,000 subscribers at the end of 2009/10
*52,527 subscribers at the end of 2010/11
*Between 2009/10 and 2010/11, number of dial-up users lowered by 33 percent
*Between 2009/10 and 2010/11, number of wireless users increased by more than 70 percent
*Between 2009/10 and 2010/11, wireless users increased by 10,000

*Worldlink is the leading internet provider with 19,858 subscribers
*Broadlink is second with 11,792 subscribers
*Mercantile Communication has 9,445 users
*Subisu Cablenet has 5,276 users
*Web Surfer has 958 users

*Internet penetration of the country has reached 10. 89 percent as of mid-June 2011
*But, nearly 98 percent the total users are GPRS users

Labels: airlines, banks, cooperatives, dashain, internet, migration, mustang, NRB, petroleum, remittance, share market, shutdown

.
1. Government to expand micro-enterprise programs

Cottage Industry Development Committee (CIDC) will implement the programs in Tanahun, Baglung, Syangja, Solukhumbu, Illam, Taplejung, Rukum, Dhankuta, Darchula and Bajhang.

Federation of Nepal Cottage and Small Industries (FNCSI) will execute it in Morang, Siraha, Saptari, Dhanusha, Bara, Makawanpur, Palpa, Kailali, Nawalparasi and Kanchanpur.

2. Department of Revenue Investigation (DRI)moves court against three firms for evading income tax, VAT and excise duty.

Bishal Chemical Industries, Samyam Enterprises and Bishal Jarda Factory...together evaded Rs 290 million in VAT, excise duty and income tax.

...as existing laws imposes 200 percent penalty for such evasion, the department has slapped penalty of Rs 580 million for the three firms.

3. Government to ban use of plastics bags from next week

Minister for Environment, Sunil Kumar Manandhar said the government was going to ban the use of plastic bags of less than 20 micron in the country to be effective from the next week.

The offenders will be fined between Rs. 500 to Rs. 50,000

4. Over 45,000 Nepalis left for foreign jobs within a month

...number of Nepalis leaving the country for overseas jobs increased by 52.15 percent, to 45,165 from mid-July to mid-August compared to the figure of the same period last year...A total of 29,685 Nepalis had gone abroad for jobs during that period last year.

Among last month's migrant workers, the number of male and female migrants was 43,163 and 2,002 respectively.

Qatar remained top host for Nepali job seekers, accepting 15,702 workers compared to other countries Malaysia (9671), Saudi Arabia (8538), United Arab Emirate (6873) and Kuwait (2088)

5. Inter-bank lending on the rise

6. Deposits in co-ops more than doubled last fiscal year

Cooperatives are holding deposits of Rs 150 billion as of the last fiscal year, up from Rs 70 billion a year ago, according to the Department of Cooperatives.

Their lending grew to Rs 105 billion last year from Rs 43.46 billion in the previous year.

Saving and credit cooperatives are the biggest receivers of public deposits. As of mid-March, such cooperatives held Rs 97.49 billion, while total deposits in all types of cooperatives stood at Rs 130 billion.

There are a total of 22,646 cooperatives in the country, of which 10,558 are saving and credit, 4,096 multipurpose, 3,144 agriculture, 1,748 dairy and 1,379 consumer. Likewise, there are 371 cooperatives in electricity production, 161 in vegetable and fruits production, 104 in tea production, 67 in coffee production, 61 in health sector, 51 in honey production, 73 in herbal production and 833 in other categories.

DoC statistics show that 2,922 new cooperatives were registered last year.

7. Banks see sharp fall in PE ratios

Price to earning ratio (PE ratio)...one of the major investment indicators of the stock market...is calculated by dividing share price by per share earning.

Stock analysts say an average PE ratio of 15 is justifiable for commercial banks.

...the PE ratio came down sharply over the last year along with the freefall in the stock market.

Currently, Nepal Investment Bank, Agriculture Development Bank, Nepal Bangladesh Bank and Lumbini Bank have PE ratios less than 10.

A majority of the 17 banks that published financial results of the last fiscal year saw their PE ratio standing between 10 and 20. This is a sharp fall compared to the previous year when the ratio was above 20. Last year, Machhapuchhre Bank’s PE ratio was as high as 56.90 followed by Global Bank with 52.48. Now, Global’s ratio has come down to 13.85. The Standard Chartered’s ratio came down to 25.92 from 42.23. Other banks witnessing PE ratio above 20 are DCBL Bank and Citizens Bank International.

8. Reform process in Rastriya Banijya Bank(RBB)and Agriculture Development Bank Limited(ADBL)take back seat

Daily operations of these banks have been affected for the last few weeks due to strikes called by the trade union affiliated to the Nepali Congress (NC)

In both banks, reforms measures have been carried out with foreign aid. RBB is under the reform process as per the World Bank-sponsored Financial Sector Reform Programme, while Asian Development Bank has aided the reforms in ADBL.

Although the financial sector reform programme will end in December, RBB will still remain as a sick bank with negative net worth of billions of rupees.

The central bank has also failed to appoint a CEO in Nepal Bank Limited for the last four years even after five attempts. Currently, NRB’s own management team is running the oldest bank of the country.

9. A bizarre project in Nepal, At Buddha’s birthplace: A Chinese development proposal causes disbelief

Labels: ADBL, cooperatives, evasion, interbank lending, microfinance, migration, RBB, remittance, stock market, VAT

Bihar's development lessons for Nepal

*Notorious for criminal gangs, since 2005, Bihar has put 50,000 criminals behind bars.
*Since 2005, Bihar has added 30,000 kilometers of roads.
*25 percent of total state budget today is allocated to "education".
--------------------------------------------------------------------------

190 cooperatives lose their licenses

*There are 22,646 cooperatives operating in the country.
*Of these, 10,500 are saving and credit cooperatives.
*Of these, 2000 have annual transactions over Rs 500 million.
*The central bank is planning to regulate these cooperatives that have annual transactions over Rs 500 million.
----------------------------------------------------------------------------

The Oxford Poverty Report caused quite a commotion in Nepal when it was released in 2010 because it claimed that 65 percent of Nepalese lived below poverty. The National Planning Commission was quick to counter that by saying that according to NPC estimates only 25 percent of Nepalese live below poverty. Well, the NPC should have looked at the way the Oxford study calculated the poverty index. They called it Multi-dimensional Poverty Index (MPI). The graph below shows the indicators used to calculate the MPI and the weights given to each indicator.

--------------------------------------------------------------------------------------------------------------

SOME OPTIMISTIC NEPALESE DATA:


Real GDP growth rate is starting to climb up



 Per-capita GDP in US$ Purchasing Power Parity



Percentage of Immunized Children between 12 and 23 months



Number of Children per woman

Labels: bihar, central bank of nepal, cooperatives, data