RampD Economic Research amp Business

Development

1

Date June 24 2009

Highlights

bull Prime Minister Madhav Kumar Nepal today held discussions with 16 fringe parties which have extended their support to the ruling coalition on how they could be included in the government

bull The cabinet is likely to get full shape on Wednesday after Madhesi Peopleacutes Rights Forum (MPRF) finally picked two names to join the cabinet and Tarai-Madhes Democratic Party (TMDP) is set to forward names of its ministers

bull The Nepali Congress party has expressed its anger over the secret allotment of 360 Million rupees by Finance Minister Mr Surendra Pandey in a unilateral manner on development activities

bull China has announced restriction on imports of religious handicraft items from July 1 2009 a move that exporters said could badly hit Nepalacutes handicraft exports to the northern market

bull The Supreme Court today gave Nepal Rastra Bank the green signal to take action against the Nepal Development Bank

bull A day after Nepal Rastra Bank (NRB) decided to liquidate Nepal Development Bank another financial institution has landed in trouble for trying to cook up its balance sheets

bull For the third successive day Nepal Stock Exchange (NEPSE) witnessed a downfall NEPSE index declined by 705 points on Tuesday to close at 67147 points

bull Inflation continues to rage at 119 percent with commodity prices increasing by up to 95 percent in recent months

bull Japan will provide grant assistance of $45038000 for the construction of the Khurkot-Nepalthok section of Sindhulirsquos road

bull Liquefied Petroleum Gas (LPG) companies and Nepal Oil Corporation (NOC) are in dispute over the latteracutes move to regulate the companiesacute operations and monitor the cooking gas market by enforcing LPG bylaw

bull The government on Sunday set up a Project Steering Committee (PSC) and a Project Task Force (PTF) to monitor and accelerate construction of the 750 MW West Seti Hydroelectric Project (WSHEP)

bull A team from the Independent Power Producers Association Nepal (IPPAN) on Tuesday met with Minister for Energy Prakash Sharan Mahat to put forward their demands regarding accelerating hydropower development in the country

bull As many as 15 persons including four policemen were injured when the cadres of the Unified CPN-Maoist and the police personnel clashed at Tikapur in Kailali today

RampD Economic Research amp Business

Development

2

POLITICS PM to expand cabinet Prime Minister Madhav Kumar Nepal today held discussions with 16 fringe parties which have extended their support to the ruling coalition on how they could be included in the government

After the meeting the fringe parties handed over the responsibility of finalising the procedure to include them in the government to CPN-ML general secretary CP Mainali He will hold a meeting with the parties tomorrow morning

ldquoThe PM wants to expand the cabinet tomorrow We also discussed the issue of civilian supremacy We have agreed to support the Presidentrsquos step to reinstate the army chiefrdquo Thakur Chandra Gahatraj leader of the Dalit Janajati Party said after the meeting

Gahatraj also said the PM told the leaders that he had directed the Armed Police Force officials to set up camps at Susta and Dang for border security ldquoThe PM also expressed concern about the House disruption and asked us to suggest ways to resolve the crisis and resume the House businessrdquo he added

Meanwhile a leader of the Madhesi Janaadhikar Forum Mrigendra Kumar Singh Yadav today submitted two names of ministers from the party to the PM According to him the party has recommended Sharat Singh Bhandari for Tourism and Civil Aviation Ministry and himself for Agriculture and Cooperatives Ministry

ldquoThe party is yet to finalise names for the other portfoliosrdquo Yadav added However Mahanta Thakur chairman of the Tarai Madhes Democratic Party who met the PM after the meeting with 16 fringe parties said the party would finalise the names by tomorrow Raghuji Pant political advisor to the PM claimed that the TMDP would finalise the names of its leaders to be inducted in the cabinet by tomorrow morning

ldquoThe PM today called Unified CPN-Maoist chairman Pushpa Kamal Dahal over phone to iron out differences between the two parties Leaders of other parties are also holding talks with the Maoist leadersrdquo Pant added

The PM has not been able to give complete shape to his one-month-old cabinet because of the internal disputes in the Madhes-based parties

Source The Himalayan Times Date 06242009 MPRF submits names TMDP to decide Wednesday The cabinet is likely to get full shape on Wednesday after Madhesi Peopleacutes Rights Forum (MPRF) finally picked two names to join the cabinet and Tarai-Madhes Democratic Party (TMDP) is set to forward names of its ministers to the prime minister by Wednesday morning

RampD Economic Research amp Business

Development

3

On Tuesday MPRF recommended Sarat Singh Bhandari and Mrigendra Kumar Singh for appointment as ministers to the prime minister Bhandari is set to assume Tourism and Civil Aviation portfolio while Singh will be Minister for Agriculture and Cooperatives

MPRF sources said the party did not forward the names of all nine ministers in its quota fearing that those not getting ministerial portfolios might join the faction led by Upendra Yadav

TMDP Chairman Mahanta Thakur said his party is set to forward the names of its ministerial candidates on Wednesday morning

But another Madhesi party Sadbhavana Party (SP) remains undecided over joining the government due to its internal conflict over who should be minister The party has been demanding two ministries -- one for its Chairman Rajendra Mahato and another for its leader Anil Jha But the prime minister has told the party that it would be difficult for him to give two ministries

But Mahato said his party would not join the government until the prime minister creates a respectful environment for his party to join the government He meant that the prime minister should demonstrate a culture of coalition while making decisions With this development the government is likely to be expanded for a fourth time Wednesday There is a possibility of cabinet expansion said Raghuji Panta the prime ministeracutes political advisor

Source wwwmyrepublicacom Date 06242009 Nepali Congress unhappy threats to quit Nepal Govt The Nepali Congress party has expressed its anger over the secret allotment of 360 Million rupees by Finance Minister Mr Surendra Pandey in a unilateral manner on development activities

The Nepali Congress CA delegation meeting held on Tuesday June 23 2009 also decided to draw the attention of the Prime Minister Madhav Kumar Nepal over the issue

The newly elected NCrsquos leader of the CA Delegation Mr Ram Chandra Poudel has been given the duty to meet the prime minister and convey the NCrsquos dissatisfaction

The NC CA members also made it clear that if the UML continues to take decisions in a unilateral manner the NC should quit the government

Similarly Khum Bahadur Khadka Nar Hari Acharya Mahesh Acharya and Chakra Prasad Bastola speaking at the NC Central meeting held on Monday had advised the party top-leadership to quit the government and get involved in reestablishing links with the grass roots

The CC meeting on Monday had urged the government to open diplomatic channels to solve the issue of Border dispute with India

RampD Economic Research amp Business

Development

2

POLITICS PM to expand cabinet Prime Minister Madhav Kumar Nepal today held discussions with 16 fringe parties which have extended their support to the ruling coalition on how they could be included in the government

After the meeting the fringe parties handed over the responsibility of finalising the procedure to include them in the government to CPN-ML general secretary CP Mainali He will hold a meeting with the parties tomorrow morning

ldquoThe PM wants to expand the cabinet tomorrow We also discussed the issue of civilian supremacy We have agreed to support the Presidentrsquos step to reinstate the army chiefrdquo Thakur Chandra Gahatraj leader of the Dalit Janajati Party said after the meeting

Gahatraj also said the PM told the leaders that he had directed the Armed Police Force officials to set up camps at Susta and Dang for border security ldquoThe PM also expressed concern about the House disruption and asked us to suggest ways to resolve the crisis and resume the House businessrdquo he added

Meanwhile a leader of the Madhesi Janaadhikar Forum Mrigendra Kumar Singh Yadav today submitted two names of ministers from the party to the PM According to him the party has recommended Sharat Singh Bhandari for Tourism and Civil Aviation Ministry and himself for Agriculture and Cooperatives Ministry

ldquoThe party is yet to finalise names for the other portfoliosrdquo Yadav added However Mahanta Thakur chairman of the Tarai Madhes Democratic Party who met the PM after the meeting with 16 fringe parties said the party would finalise the names by tomorrow Raghuji Pant political advisor to the PM claimed that the TMDP would finalise the names of its leaders to be inducted in the cabinet by tomorrow morning

ldquoThe PM today called Unified CPN-Maoist chairman Pushpa Kamal Dahal over phone to iron out differences between the two parties Leaders of other parties are also holding talks with the Maoist leadersrdquo Pant added

The PM has not been able to give complete shape to his one-month-old cabinet because of the internal disputes in the Madhes-based parties

Source The Himalayan Times Date 06242009 MPRF submits names TMDP to decide Wednesday The cabinet is likely to get full shape on Wednesday after Madhesi Peopleacutes Rights Forum (MPRF) finally picked two names to join the cabinet and Tarai-Madhes Democratic Party (TMDP) is set to forward names of its ministers to the prime minister by Wednesday morning

RampD Economic Research amp Business

Development

3

On Tuesday MPRF recommended Sarat Singh Bhandari and Mrigendra Kumar Singh for appointment as ministers to the prime minister Bhandari is set to assume Tourism and Civil Aviation portfolio while Singh will be Minister for Agriculture and Cooperatives

MPRF sources said the party did not forward the names of all nine ministers in its quota fearing that those not getting ministerial portfolios might join the faction led by Upendra Yadav

TMDP Chairman Mahanta Thakur said his party is set to forward the names of its ministerial candidates on Wednesday morning

But another Madhesi party Sadbhavana Party (SP) remains undecided over joining the government due to its internal conflict over who should be minister The party has been demanding two ministries -- one for its Chairman Rajendra Mahato and another for its leader Anil Jha But the prime minister has told the party that it would be difficult for him to give two ministries

But Mahato said his party would not join the government until the prime minister creates a respectful environment for his party to join the government He meant that the prime minister should demonstrate a culture of coalition while making decisions With this development the government is likely to be expanded for a fourth time Wednesday There is a possibility of cabinet expansion said Raghuji Panta the prime ministeracutes political advisor

Source wwwmyrepublicacom Date 06242009 Nepali Congress unhappy threats to quit Nepal Govt The Nepali Congress party has expressed its anger over the secret allotment of 360 Million rupees by Finance Minister Mr Surendra Pandey in a unilateral manner on development activities

The Nepali Congress CA delegation meeting held on Tuesday June 23 2009 also decided to draw the attention of the Prime Minister Madhav Kumar Nepal over the issue

The newly elected NCrsquos leader of the CA Delegation Mr Ram Chandra Poudel has been given the duty to meet the prime minister and convey the NCrsquos dissatisfaction

The NC CA members also made it clear that if the UML continues to take decisions in a unilateral manner the NC should quit the government

Similarly Khum Bahadur Khadka Nar Hari Acharya Mahesh Acharya and Chakra Prasad Bastola speaking at the NC Central meeting held on Monday had advised the party top-leadership to quit the government and get involved in reestablishing links with the grass roots

The CC meeting on Monday had urged the government to open diplomatic channels to solve the issue of Border dispute with India

RampD Economic Research amp Business

Development

3

On Tuesday MPRF recommended Sarat Singh Bhandari and Mrigendra Kumar Singh for appointment as ministers to the prime minister Bhandari is set to assume Tourism and Civil Aviation portfolio while Singh will be Minister for Agriculture and Cooperatives

MPRF sources said the party did not forward the names of all nine ministers in its quota fearing that those not getting ministerial portfolios might join the faction led by Upendra Yadav

TMDP Chairman Mahanta Thakur said his party is set to forward the names of its ministerial candidates on Wednesday morning

But another Madhesi party Sadbhavana Party (SP) remains undecided over joining the government due to its internal conflict over who should be minister The party has been demanding two ministries -- one for its Chairman Rajendra Mahato and another for its leader Anil Jha But the prime minister has told the party that it would be difficult for him to give two ministries

But Mahato said his party would not join the government until the prime minister creates a respectful environment for his party to join the government He meant that the prime minister should demonstrate a culture of coalition while making decisions With this development the government is likely to be expanded for a fourth time Wednesday There is a possibility of cabinet expansion said Raghuji Panta the prime ministeracutes political advisor

Source wwwmyrepublicacom Date 06242009 Nepali Congress unhappy threats to quit Nepal Govt The Nepali Congress party has expressed its anger over the secret allotment of 360 Million rupees by Finance Minister Mr Surendra Pandey in a unilateral manner on development activities

The Nepali Congress CA delegation meeting held on Tuesday June 23 2009 also decided to draw the attention of the Prime Minister Madhav Kumar Nepal over the issue

The newly elected NCrsquos leader of the CA Delegation Mr Ram Chandra Poudel has been given the duty to meet the prime minister and convey the NCrsquos dissatisfaction

The NC CA members also made it clear that if the UML continues to take decisions in a unilateral manner the NC should quit the government

Similarly Khum Bahadur Khadka Nar Hari Acharya Mahesh Acharya and Chakra Prasad Bastola speaking at the NC Central meeting held on Monday had advised the party top-leadership to quit the government and get involved in reestablishing links with the grass roots

The CC meeting on Monday had urged the government to open diplomatic channels to solve the issue of Border dispute with India

RampD Economic Research amp Business

Development

4

Source wwwtelegraphnepalcom Date 20090623 POLICY China restricts religious items import Nepal exports to take beating China has announced restriction on imports of religious handicraft items from July 1 2009 a move that exporters said could badly hit Nepalacutes handicraft exports to the northern market

Handicrafts are among Nepalacutes favorite exports to China The Federation of Handicraft Associations of Nepal (FHAN) has said that the restriction has directly placed handicraft exports to China at risk

Worse it will not only hit the manufacturers and exporters but also further widen the countryacutes already wide trade deficit with China which now stands at over Rs 22 billion

Traders said that the announcement of the restriction reached them through a notice that Chinese officials have posted on the other side of Tatopani customs They also said they do not have details about the items restricted and the notice has left them just about a week to deliver orders already in hand

ldquoThe notification is in Chinese Hence we do not have exact detailsrdquo said Dilip Khanal executive secretary of FHAN He informed myrepublicacom that FHAN has requested the Chinese Embassy to provide the notification in English so that one could be sure about the items that have been put in the restriction list

The federation has also approached the prime minister and the major political parties to request the Chinese government to waive the restriction for Nepal

While FHAN has managed to take these steps officials at the Ministry of Commerce and Supplies (MoCS) said that they only learnt about the notification on Tuesday through the Nepali Consulate in Lahsa We are still to check the details said a senior MoCS official

Traders said that the notification has not cited any reason for imposing the restriction but they surmise that the move could be aimed at discouraging religious feelings and activities among Tibetans

Religious handicraft items made by traditional craftsmen in Nepal are highly valued by Chinese consumers particularly Tibetans

Statistics of FHAN show that Nepal exported over Rs 835 million worth of handicraft goods to China in the first nine months of the current fiscal year Ten percent of that export comprised religious handicraft items such as idols and figurines of gods and goddesses prayer wheels incense sticks thanka paintings and other metal silver and stone items

Moreover traders elaborated that there is a high degree of disparity between official and unofficial figures for religious handicraft items exports to China

RampD Economic Research amp Business

Development

5

Even though records with FHAN suggest that Nepal exports about Rs 800000 worth of religious handicraft items to Tibet traders said their exports in fact exceed Rs 50 million as Tibetan buyers take orders through various delivery points where the presence of the security forces is sparse

ldquoSo the impact of the Chinese decision will be much larger and deeper than appears in the booksrdquo said the trader requesting anonymity

Source wwwmyrepublicacom Date 06242009 BANKING Apex court for action against NDB The Supreme Court today gave Nepal Rastra Bank the green signal to take action against the Nepal Development Bank

A division bench of Justices Kalyan Shrestha and Sushila Karki upheld the decision of the Department of Cooperatives that had suspended NDBrsquos deposits in the Nepal cooperatives Organisation Limited stating that the bank was in the liquidation process The NDB had deposited Rs 90 million in the NCOL while it also owns a share of Rs 10 million in the cooperatives

The Department of Cooperatives is the regulatory body of the cooperatives The Department of Cooperatives had earlier suspended the NDBrsquos deposits in the NCOL mdash which was allegedly running in bad shape mdash acting on the request of the Nepal Rastra Bank The bench stated that the NDBrsquos bank account had been suspended to preserve the depositorsrsquo interest

Prem Prasad Pandey an NRB advocate said ldquoThe SC has protected the depositorsrsquo money as the NDB had secretly deposited public deposits in the NCOLrdquo he said adding that the NDB and NCOL were owned by the same investors

Chandra Bahadur Singh an account holder had moved the Supreme Court seeking its intervention against the action taken by the Department of Cooperatives on June 7

Source The Himalayan Times Date 06242009 Accounts manipulation lands finance company in the soup A day after Nepal Rastra Bank (NRB) decided to liquidate Nepal Development Bank another financial institution has landed in trouble for trying to cook up its balance sheets

World Merchant Banking and Finance Limited a finance company initially thought accounts manipulation would help it hide its bad loans but this immoral act has proved self-defeating and causing a long-term damage on the company

RampD Economic Research amp Business

Development

6

The entire saga began in December 2002 when a company named Eastern Suppliers approached the finance company for a loan of nine million rupees to supply coal to Udaypur Cement Factory The amount was given in two installments of two and seven million rupees of which Rs 183 million has been recovered

But when Eastern Suppliers deferred payment after repaying Rs 183 million the finance company became suspicious and contacted Udaypur Cement Factory To the surprise Udaypur Cement told that the tender for supplying the coal was scrapped after Eastern Suppliers was found delivering inferior quality of coal This meant the money that the finance company had lent to the company was at risk

This sent alarm bells in World Merchant as the finance company established a year ago was on the verge of running in loss in the very first year of its operation Fearing this would tarnish the image of the company the evil bankers formed an unholy alliance with the borrowers and created a new loan portfolio but transferred the same acutetroubledacute loan amount in the account created in another personacutes name In other words the finance companyacutes balance sheet showed that the amount owed by borrowers was paid back and new loans were issued to new applicants But in fact the finance company was only transferring the liability from one person to another without recovering a single penny from the original borrower said a high ranking official of World Merchant requesting anonymity At that time Ranjit Koirala was the CEO of the finance company who currently lives in the US

This illegal practice of transferring the acutetroubledacute loan into a new personacutes name continued for five years till 2007 when borrowers started asking the finance company to release some of the land held as collateral by the finance company To coax the management the borrowers paid back Rs 700000 of the loan amount But we did not agree said the source Then subsequently the borrowers started claiming they did not owe any money to the finance company and it had failed to deduct the installment amount that borrowers had paid over the years which the finance company calls a total lie We challenge the borrowers to show cash receipt if they had truly repaid the loan amount said the source

Then the matter went to the police and in January 2008 it asked the finance company to submit all the documents involved in the loan transaction Then the central bank became wary of malpractices going in the financial institution and in April 2008 it warned World Merchant to discontinue the illegal practice of transferring liability of loan amount to new persons

Soon after this the finance company listed the main borrower Rakesh Raj Sharma Dhungel of Biratnagar and eight other guarantors as willful defaulters According to the finance company the borrowers owe Rs 1456 million including principal and interest of which Rs 1059 million can be recovered through foreclosures

Today the management of the finance company acknowledges that it made a mistake by establishing partnership with people having bad intentions Moreover we made a mistake by not making public statement on what went wrong at the finance company We were worried about losing our reputation the source said But the damage has already been done

RampD Economic Research amp Business

Development

7

On June 14 this year Binit Mani Upadhyaya CEO of the finance company was arrested after borrowers lodged a complaint at the Commission for the Investigation of Abuse of Authority Since then depositors have withdrawn around Rs 400 million from the finance company But we are not facing cash crunch as the central bank is indirectly pumping money into the financial institution the source said

The company is trapped in the mess that it had engineered itself

Source wwwmyrepublicacom Date 06242009 MARKET NEPSE keeps going down For the third successive day Nepal Stock Exchange (NEPSE) witnessed a downfall NEPSE index declined by 705 points on Tuesday to close at 67147 points At one point NEPSE index went below 670 marks but recovered when trading was closed

Banking development bank insurance and finance sector dropped yet again while hydropower had minimal gain of 057 points It was the poor performances of banking development bank finance and insurance that leads the fall in NEPSE index on Tuesday Finance sector was the worst performer at NEPSE with a decline of 4299 points

On Tuesday only six commercial banks posted growth in their stock while the 14 commercial banks suffered a loss Bank of Kathmandu was the highest gainer among the commercial banks with a rise of 10 points in its share price while Everest Bank lost the most on the floor with a 71 point plunge

The performance of development banks stock was much worse with only one dev Bank posting growth Clean Energy Development Bank and Subhechha Bikas Bank were the highest losers at NEPSE

Among the 15 finance companies only three saw their share prices going up on Tuesday Nepal Share Markets was the biggest loser with a loss of whopping 592 points

The top gainers on Wednesday were Nepal Bangladesh Bank with an increase of 208 percent in its share price followed by Machhapuchhre Bank Merchant Finance International Leasing amp Finance and Pashupati Development Bank

Source wwwkantipuronlinecom Date 20090623

RampD Economic Research amp Business

Development

7

On June 14 this year Binit Mani Upadhyaya CEO of the finance company was arrested after borrowers lodged a complaint at the Commission for the Investigation of Abuse of Authority Since then depositors have withdrawn around Rs 400 million from the finance company But we are not facing cash crunch as the central bank is indirectly pumping money into the financial institution the source said

The company is trapped in the mess that it had engineered itself

Source wwwmyrepublicacom Date 06242009 MARKET NEPSE keeps going down For the third successive day Nepal Stock Exchange (NEPSE) witnessed a downfall NEPSE index declined by 705 points on Tuesday to close at 67147 points At one point NEPSE index went below 670 marks but recovered when trading was closed

Banking development bank insurance and finance sector dropped yet again while hydropower had minimal gain of 057 points It was the poor performances of banking development bank finance and insurance that leads the fall in NEPSE index on Tuesday Finance sector was the worst performer at NEPSE with a decline of 4299 points

On Tuesday only six commercial banks posted growth in their stock while the 14 commercial banks suffered a loss Bank of Kathmandu was the highest gainer among the commercial banks with a rise of 10 points in its share price while Everest Bank lost the most on the floor with a 71 point plunge

The performance of development banks stock was much worse with only one dev Bank posting growth Clean Energy Development Bank and Subhechha Bikas Bank were the highest losers at NEPSE

Among the 15 finance companies only three saw their share prices going up on Tuesday Nepal Share Markets was the biggest loser with a loss of whopping 592 points

The top gainers on Wednesday were Nepal Bangladesh Bank with an increase of 208 percent in its share price followed by Machhapuchhre Bank Merchant Finance International Leasing amp Finance and Pashupati Development Bank

Source wwwkantipuronlinecom Date 20090623

RampD Economic Research amp Business

Development

8

Commodity prices hit the roof Inflation continues to rage at 119 percent with commodity prices increasing by up to 95 percent in recent months

Prices of essential goods such as rice oil pulses sugar maize vegetables and fruits have soared with a few goods like vegetable ghee maida and wheat flour becoming cheaper

According to the essential goods price list of the Department of Commerce the price of mansuli rice has jumped by 6449 percent to Rs 43 per kg from mid-May to mid-June It was selling for Rs 26 during the same period last year Likewise the price of masino rice soared by 57 percent during the month against Rs 46 per kg last year

Pulses -- broken lentils rahar and mash -- went up to Rs 98 Rs 102 and Rs 95 from last years Rs 23 Rs 75 and Rs 75 respectively Maize rose to Rs 67 per kg from Rs 35 last year which is an increment of 9559 percent

Prices of mutton chicken and buff have increased by 22 3660 and 7250 percent respectively These meats used to cost Rs 380 Rs 180 and Rs 100 during the same months last year

Kailash Kumar Bajimaya acting director general of the DoC said that lower production drought dependency on imports electricity shortage hoarding curtailing frequent protests strikes and blockages in various parts of the country are the major causes that pushed the prices up

He said that the government was under process to bring Market Competition Act after which the trend of commodities hoarding and curtailing would be monitored strongly and completely discouraged

Pabitra Bajracharya president of the Nepal Retailers Association said that there wasnt any shortage of commodities in the market But still the prices are soaring and there isnt any control mechanism initiated by the government he said

He said that the government should control the monopoly of the traders Prices of commodities controlled by the government have not soared Only the prices of products which are being supplied by traders have been increasing Bajracharya added

Joint secretary at the Ministry of Commerce and Supplies Ganesh Dhakal said that the government was conducting a comparative study regarding the price hike in Nepal compared to India Our report will be completed within a month and measures to control price hikes will be taken accordingly he said

He added that the government would set up a Department of Supply Management under the DoC for addressing various issues related with market consumers

RampD Economic Research amp Business

Development

9

commodities and its smooth supply The department is going to be established as per the upcoming budget he added Currently the government has been distributing sugar rice and oil at cheaper prices with a view to interfering with the unnatural price hike of these commodities

Source wwwkantipuronlinecom Date 20090623 BUSINESS Japan grant aid for link road Japan will provide grant assistance of $45038000 for the construction of the Khurkot-Nepalthok section of Sindhulirsquos road Japans ambassador to Nepal Tatsuo Mizuno and finance secretary Rameshwor Khanal signed an agreement for this today Khurkot-Nepalthok is the final section of the Dhulikhel-Bardibas road which which will fast-link capital Kathmandu to the eastern Tarai It is 160 km from Dhulikhel to Bardibas Japan has been providing financial assistance for the construction of the decade-long project called BP Highway

The 123-km stretch of the Dhulikhel-Bardibas road is complete The road has been divided into four sections mdash Bardibas to Sindhuli Bazar (37 km) Dhulikhel to Nepalthok (50km) Sindhuli Bazar to Khurkot (358 km) and Khurkot-Nepalthok (37 km) The project has got one of the worlds largest grant aids of Japan Once the Khurkot-Nepalthok section is complete it will be open to traffic from eastern Nepal

Source The Himalayan Times Date 06242009 LPG firms NOC in dispute Liquefied Petroleum Gas (LPG) companies and Nepal Oil Corporation (NOC) are in dispute over the latteracutes move to regulate the companiesacute operations and monitor the cooking gas market by enforcing LPG bylaw NOC executive board has already endorsed the bylaw that has for the first time set clear parameters for establishing LPG bottling companies and laid down codes of conduct for gas companies and their dealers However Nepal LPG Industriesacute Association (NLPGIA) has flayed the move saying that the corporation is mere importer of fuel and has no authority to regulate the market It has demanded the corporation scrap the regulation instantly NLPGIA has also forwarded a four-point demand to the corporation and has urged the state-owned petroleum import monopoly to fulfill it by June 28 ldquoIf the corporation does not pay heed we will bring import and retailing of cooking gas to a grinding halt from June 29rdquo said Sita Ram Timilsina official of the association

RampD Economic Research amp Business

Development

9

commodities and its smooth supply The department is going to be established as per the upcoming budget he added Currently the government has been distributing sugar rice and oil at cheaper prices with a view to interfering with the unnatural price hike of these commodities

Source wwwkantipuronlinecom Date 20090623 BUSINESS Japan grant aid for link road Japan will provide grant assistance of $45038000 for the construction of the Khurkot-Nepalthok section of Sindhulirsquos road Japans ambassador to Nepal Tatsuo Mizuno and finance secretary Rameshwor Khanal signed an agreement for this today Khurkot-Nepalthok is the final section of the Dhulikhel-Bardibas road which which will fast-link capital Kathmandu to the eastern Tarai It is 160 km from Dhulikhel to Bardibas Japan has been providing financial assistance for the construction of the decade-long project called BP Highway

The 123-km stretch of the Dhulikhel-Bardibas road is complete The road has been divided into four sections mdash Bardibas to Sindhuli Bazar (37 km) Dhulikhel to Nepalthok (50km) Sindhuli Bazar to Khurkot (358 km) and Khurkot-Nepalthok (37 km) The project has got one of the worlds largest grant aids of Japan Once the Khurkot-Nepalthok section is complete it will be open to traffic from eastern Nepal

Source The Himalayan Times Date 06242009 LPG firms NOC in dispute Liquefied Petroleum Gas (LPG) companies and Nepal Oil Corporation (NOC) are in dispute over the latteracutes move to regulate the companiesacute operations and monitor the cooking gas market by enforcing LPG bylaw NOC executive board has already endorsed the bylaw that has for the first time set clear parameters for establishing LPG bottling companies and laid down codes of conduct for gas companies and their dealers However Nepal LPG Industriesacute Association (NLPGIA) has flayed the move saying that the corporation is mere importer of fuel and has no authority to regulate the market It has demanded the corporation scrap the regulation instantly NLPGIA has also forwarded a four-point demand to the corporation and has urged the state-owned petroleum import monopoly to fulfill it by June 28 ldquoIf the corporation does not pay heed we will bring import and retailing of cooking gas to a grinding halt from June 29rdquo said Sita Ram Timilsina official of the association

RampD Economic Research amp Business

Development

10

Officials at the corporation however said that they are ready to talk with the association if they have problems with the provisions of the bylaw but will not scrap the bylaw Digambhar Jha the chief of NOC told myrepublicacom that until the government makes changes NOC has the authority to monitor the petroleum market ldquoAnd we cannot allow them to continue supplying less gas (than the stipulated 142 kgs) and circulate substandard cylinders that put consumersacute lives at riskrdquo he stated The bylaw has for the first time tagged short-supplying of gas and circulation of substandard cylinder as serious crimes and provisioned action as tough as termination of their operating licenses in case companies are found resorting to such practices The corporation however is open to holding talks on other demands of the association such as acuteno license to new companiesacute adjustment of transportation fares while importing gas from farther off refineries including Haldiya and Mathura Source wwwmyrepublicacom Date 06242009 HYDRO Bid to speed up construction The government on Sunday set up a Project Steering Committee (PSC) and a Project Task Force (PTF) to monitor and accelerate construction of the 750 MW West Seti Hydroelectric Project (WSHEP)

The Department of Electricity Development (DoED) under the Ministry of Energy formed a ten-member PSC and a five-member PTF to ensure effective implementation of the WSHEP located in Doti and Baitadi districts in the Far-western region

According to Tuesdayrsquos DoED letter to WSHEP the West Seti Hydro the promoter of the project will coordinate with PSC and PTF to review progress and rectify problems hindering the progress of the project and identify measures to be taken for expediting project work

A member from energy sector under the National Planning Commission will chair the 10-member PSC which has secretaries as members from various ministries including Finance Home Affairs and Ministry of Energy

Likewise the director general of DoED has been appointed chairman of PTF

PSC will review the progress of the project on the basis of periodic reports and submit its report to PTF and respond to measures to be proposed by agencies including the Asian Development Bank (ADB) investors lenders and contractors a WSHEP press statement on Tuesday stated

RampD Economic Research amp Business

Development

11

Meanwhile PSF will be responsible for facilitating communication between PSC and West Seti Hydro and other stakeholders The task force will also coordinate with various district level offices

Two weeks ago as per the agreement between the government and ADB WSHEP had formed an Independent Panel of Experts for successful completion of the much-awaited project

Source Kantipur Online Date 20090623 IPPAN calls for tax reforms A team from the Independent Power Producers Association Nepal (IPPAN) led by its president Sandip Shah on Tuesday met with Minister for Energy Prakash Sharan Mahat to put forward their demands regarding accelerating hydropower development in the country

According to Sandip Shah the meetings was held to discuss the present social political and economic issues faced by a majority of hydropower projects and share the ongoing activities of IPPAN on the overall hydro sector development in the country

Various issues hindering the development of hydropower in the country including tax holiday VAT exemption mortgage tax wheeling tax and supremacy of the electricity acts among others were discussed during the meeting

Likewise reasonable power tariff rates for power producers differential tariffs construction of access roads and transmission lines under the BOOT scheme (buy own operate and transfer) were also discussed

According to Shah the power purchase agreement rates (PPA) offered by the Nepal Electricity Authority (NEA) for hydropower projects are not sufficient to encourage power producers to invest in the power sector

He said the government should implement the new PPA in hydropower projects which is working on the old PPA rate so that investors would get some relief from the increasing prices of construction materials

IPPAN has also urged the government to address its decision to provide income tax exemption for 10 years for all the projects which have started power generation in the new budget of the government

Meanwhile the team also dealt with the amendments being forwarded for the proposed Nepal Electricity Regulatory Commission Act 2066 and the Electricity Act

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Development

12

2066 includes provision of VAT exemption for imported construction equipment construction equipment and income tax

He added that if the issues raised by IPPAN were addressed properly lots of IPPs would make a beeline to generate power

Speaking during the meeting Minister Mahat said There is a need for more interactions between IPPAN and the ministry in order to identify possibilities regarding changes to be made in the power sector

Source wwwkantipuronlinecom Date 20090623 GENERAL Maoists attack ministers car As many as 15 persons including four policemen were injured when the cadres of the Unified CPN-Maoist and the police personnel clashed at Tikapur in Kailali today The clash ensued when the UCPN-M cadres tried to show black flags to Minister of State for Energy Chandra Singh Bhattarai He was in Tikapur to inaugurate the Town Council Meeting of Tikapur Municipality The activists also pelted Bhattarairsquos vehicle with stones

Kailali in-charge of UCPN-M Hari Gyawali lsquoAkhandarsquo said 11 activists of the party were injured in the incident ldquoDistrict member Padam Giri area member Binod Adhikari and cadres Krishna Bahadur Pokhrel Chillu Thakur Kallu Thakur and Dev Krishna Pyakurel were injuredrdquo Gyawali said He added that the clash ensued after the police used force to quell their peaceful demonstration

The injured are undergoing treatment in Tikapur Hospital According to Prem Bahadur Khadka in-charge of Area Police Office Tikapur four cops were injured in the clash ldquoWe took action against the demonstrators after they tried to forcefully enter the programme venuerdquo Khadka added After the incident Bhattarai has been staying at the Ugratara Battalion of the Armed Police Force in Tikapur

Meanwhile in Ilam UCPN-Maoist cadres today threw stones at a rally taken out by a number of political parties while they were protesting yesterdayrsquos vandalism in government offices and manhandling of entrepreneurs by the Maoists

The rallyists were pelted with stones by the Maoists when they reached Nabin Chowk The assault momentarily dispersed the rallyists

Source The Himalayan Times Date 06242009

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Development

13

International Financial and Economical NewBrief Top Stories

sect Fed strives for balance between action spurring inflation

The Federal Reserve which meets this week is expected to send a message that it is poised to take action to spur the US economy while refraining from stirring inflation concerns Some economists expect the Fed to avoid an abrupt end to its purchases of government debt by stretching out the effort The move would likely avert disruptions in the market I think theres a good chance the Fed will exert more flexibility in the timing of purchases to slow them down said Michael Feroli of JPMorgan Economics BusinessWeekThe Associated Press (22 Jun)

sect Obama prepares to press for health care energy initiatives

US President Barack Obama is getting ready to begin a serious push for congressional action on his legislative proposals to reform health care and cap carbon dioxide emissions Obama is expected to argue in favor of the measures at a White House news conference Tuesday Reuters (23 Jun)

sect Americans less confident in Obamas economic stimulus A strong majority of Americans approve of President Barack Obamas performance according to a recent poll but they are less confident that Obamas economic stimulus will put the countrys economy back on track Two months ago 59 of Americans thought the $787 billion stimulus would restore the economy but since then the number has slid to 52 Reuters (22 Jun)

sect Sarkozy rules out tax increases austerity measures

In a speech at the Palace of Versailles French President Nicolas Sarkozy said austerity policies have always failed Instead he plans to continue borrowing to finance investments We cannot keep fixing priorities and not provide the financial means necessary to reach them he said This crisis must be an opportunity for us to catch up our delays in investment and even to get ahead That will require considerable means We cannot satisfy them in the strict context of the annual budget Reuters (22 Jun)

sect India allows anchor investors to buy into IPOs

The Securities and Exchange Board of India started allowing anchor investors to buy as much as 30 of an initial public offering reserved for qualified institutional buyers Companies faced with a volatile market on the eve of issue launch are most likely to make use of this provision said Donald Dsouza head of India InfoLine investment banking SEBI said the effort is meant to offer greater certainty to listings during the financial turmoil FinanceAsiacom (23 Jun)

sect Harvards endowment loses talent as it shies from risk

RampD Economic Research amp Business

Development

12

2066 includes provision of VAT exemption for imported construction equipment construction equipment and income tax

He added that if the issues raised by IPPAN were addressed properly lots of IPPs would make a beeline to generate power

Speaking during the meeting Minister Mahat said There is a need for more interactions between IPPAN and the ministry in order to identify possibilities regarding changes to be made in the power sector

Source wwwkantipuronlinecom Date 20090623 GENERAL Maoists attack ministers car As many as 15 persons including four policemen were injured when the cadres of the Unified CPN-Maoist and the police personnel clashed at Tikapur in Kailali today The clash ensued when the UCPN-M cadres tried to show black flags to Minister of State for Energy Chandra Singh Bhattarai He was in Tikapur to inaugurate the Town Council Meeting of Tikapur Municipality The activists also pelted Bhattarairsquos vehicle with stones

Kailali in-charge of UCPN-M Hari Gyawali lsquoAkhandarsquo said 11 activists of the party were injured in the incident ldquoDistrict member Padam Giri area member Binod Adhikari and cadres Krishna Bahadur Pokhrel Chillu Thakur Kallu Thakur and Dev Krishna Pyakurel were injuredrdquo Gyawali said He added that the clash ensued after the police used force to quell their peaceful demonstration

The injured are undergoing treatment in Tikapur Hospital According to Prem Bahadur Khadka in-charge of Area Police Office Tikapur four cops were injured in the clash ldquoWe took action against the demonstrators after they tried to forcefully enter the programme venuerdquo Khadka added After the incident Bhattarai has been staying at the Ugratara Battalion of the Armed Police Force in Tikapur

Meanwhile in Ilam UCPN-Maoist cadres today threw stones at a rally taken out by a number of political parties while they were protesting yesterdayrsquos vandalism in government offices and manhandling of entrepreneurs by the Maoists

The rallyists were pelted with stones by the Maoists when they reached Nabin Chowk The assault momentarily dispersed the rallyists

Source The Himalayan Times Date 06242009

RampD Economic Research amp Business

Development

13

International Financial and Economical NewBrief Top Stories

sect Fed strives for balance between action spurring inflation

The Federal Reserve which meets this week is expected to send a message that it is poised to take action to spur the US economy while refraining from stirring inflation concerns Some economists expect the Fed to avoid an abrupt end to its purchases of government debt by stretching out the effort The move would likely avert disruptions in the market I think theres a good chance the Fed will exert more flexibility in the timing of purchases to slow them down said Michael Feroli of JPMorgan Economics BusinessWeekThe Associated Press (22 Jun)

sect Obama prepares to press for health care energy initiatives

US President Barack Obama is getting ready to begin a serious push for congressional action on his legislative proposals to reform health care and cap carbon dioxide emissions Obama is expected to argue in favor of the measures at a White House news conference Tuesday Reuters (23 Jun)

sect Americans less confident in Obamas economic stimulus A strong majority of Americans approve of President Barack Obamas performance according to a recent poll but they are less confident that Obamas economic stimulus will put the countrys economy back on track Two months ago 59 of Americans thought the $787 billion stimulus would restore the economy but since then the number has slid to 52 Reuters (22 Jun)

sect Sarkozy rules out tax increases austerity measures

In a speech at the Palace of Versailles French President Nicolas Sarkozy said austerity policies have always failed Instead he plans to continue borrowing to finance investments We cannot keep fixing priorities and not provide the financial means necessary to reach them he said This crisis must be an opportunity for us to catch up our delays in investment and even to get ahead That will require considerable means We cannot satisfy them in the strict context of the annual budget Reuters (22 Jun)

sect India allows anchor investors to buy into IPOs

The Securities and Exchange Board of India started allowing anchor investors to buy as much as 30 of an initial public offering reserved for qualified institutional buyers Companies faced with a volatile market on the eve of issue launch are most likely to make use of this provision said Donald Dsouza head of India InfoLine investment banking SEBI said the effort is meant to offer greater certainty to listings during the financial turmoil FinanceAsiacom (23 Jun)

sect Harvards endowment loses talent as it shies from risk

RampD Economic Research amp Business

Development

13

International Financial and Economical NewBrief Top Stories

sect Fed strives for balance between action spurring inflation

The Federal Reserve which meets this week is expected to send a message that it is poised to take action to spur the US economy while refraining from stirring inflation concerns Some economists expect the Fed to avoid an abrupt end to its purchases of government debt by stretching out the effort The move would likely avert disruptions in the market I think theres a good chance the Fed will exert more flexibility in the timing of purchases to slow them down said Michael Feroli of JPMorgan Economics BusinessWeekThe Associated Press (22 Jun)

sect Obama prepares to press for health care energy initiatives

US President Barack Obama is getting ready to begin a serious push for congressional action on his legislative proposals to reform health care and cap carbon dioxide emissions Obama is expected to argue in favor of the measures at a White House news conference Tuesday Reuters (23 Jun)

sect Americans less confident in Obamas economic stimulus A strong majority of Americans approve of President Barack Obamas performance according to a recent poll but they are less confident that Obamas economic stimulus will put the countrys economy back on track Two months ago 59 of Americans thought the $787 billion stimulus would restore the economy but since then the number has slid to 52 Reuters (22 Jun)

sect Sarkozy rules out tax increases austerity measures

In a speech at the Palace of Versailles French President Nicolas Sarkozy said austerity policies have always failed Instead he plans to continue borrowing to finance investments We cannot keep fixing priorities and not provide the financial means necessary to reach them he said This crisis must be an opportunity for us to catch up our delays in investment and even to get ahead That will require considerable means We cannot satisfy them in the strict context of the annual budget Reuters (22 Jun)

sect India allows anchor investors to buy into IPOs

The Securities and Exchange Board of India started allowing anchor investors to buy as much as 30 of an initial public offering reserved for qualified institutional buyers Companies faced with a volatile market on the eve of issue launch are most likely to make use of this provision said Donald Dsouza head of India InfoLine investment banking SEBI said the effort is meant to offer greater certainty to listings during the financial turmoil FinanceAsiacom (23 Jun)

sect Harvards endowment loses talent as it shies from risk

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Development

14

Marc Seidner and Michael Llodra bond managers for Harvard Management are leaving after the endowment shunned an investment strategy they advocated The strategy involves purchasing distressed assets including mortgage-backed bonds Harvard is actively managing its mix of cash and investments with an eye toward the future said Jane Mendillo investment chief at the endowment We see some enticing investment opportunities today and have put money back into several of our target markets but we are holding some cash for even better opportunities down the road The Wall Street Journal (23 Jun)

sect US lawmakers work to overhaul 401(k) plans

US Reps George Miller D-Calif and Rob Andrews D-NJ are set to introduce the 401(k) Fair Disclosure and Pension Security Act this week The legislation is expected to address conflicted investment advice and fee disclosure and incorporate pieces of existing legislation into a broader more comprehensive bill InvestmentNews (22 Jun)

sect Nobel economist US might need 15 years to recover losses

Households in the US need to rebuild their balance sheets to recover from losses they suffered during this recession and that process could take as long as 15 years said Edmund Phelps the 2006 recipient of the Nobel Prize in Economics He predicted that for the next three to five years unemployment will hold at about 7 Bloomberg (22 Jun)

sect Emissions plan would cost average $175 a year CBO says

The carbon-emissions proposal being considered by the US Congress would have an average cost of $175 per year per household by 2020 based on an analysis by the Congressional Budget Office The wealthiest 20 of households would pay about $245 each year while the measure would deliver a $40 annual benefit to the poorest 20 of households according to the analysis The Washington Post (23 Jun)

Market Activity

Renewed economic concerns drag down Asian share markets

Investor fears that markets have risen more quickly than they should resulted in share markets across Asia falling Tuesday Tokyos Nikkei 225 dropped 28 Australias SampPASX 200 lost 31 and Hong Kongs Hang Seng Index gave up 29 South Koreas Kospi Composite was down 28 Singapores Straits Times Index fell 1 and New Zealands NZX 50 slid 12 Taiwans Taiex dropped 23 shares in the Philippines were down 17 and Indonesian shares slid 25 The Wall Street Journal (23 Jun)

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Development

15

Economics

sect White House expects 10 unemployment in next few months

With joblessness at 94 in the US the Obama administration is looking for unemployment to reach 10 before the year is over a White House spokesman said I think the president has said this and I would certainly say this I think youre likely to see unemployment at 10 within the next couple of months White House spokesman Robert Gibbs said Reuters (22 Jun)

sect Spain leads developed world with 181 unemployment

The country-to-country variation in how the global economys slump has impacted employment is quite spectacular With 181 joblessness Spains rate is the highest in the developed world while Russia faces serious unemployment as well Increases have been minimal in Germany and Argentina The Economist (22 Jun)

sect ECBs Trichet warns of possibility of turmoil ahead

Jean-Claude Trichet president of the European Central Bank said the economic recovery could be hindered by renewed turmoil in financial markets We are in uncharted waters and there are still risks of a sudden emergence of unexpected financial turbulence Trichet said While there are first signs that the pace of economic weakening is decelerating we must remain alert Bloomberg (22 Jun)

sect ECB ready to launch huge liquidity-boosting program The European Central Bank is preparing its first offering of one-year funds to banks in unlimited amounts an injection of capital that could run into the hundreds of billions of euros depending on demand This could be a big final easing by stealth said Erik Nielsen an economist on Europe at Goldman Sachs Financial Times (tiered subscription model) (23 Jun)

sect World to enter period of slow growth World Bank says

The global economy starved of capital by lingering effects of the credit meltdown is slipping into slower growth that will persist even after the recession ends the World Bank said The economy will return to growth in this years second half but the expansion will be much more subdued than might normally be the case the bank said The Washington Post (23 Jun)

GeopoliticalRegulatory

sect Schapiro outlines her plan for regulatory jurisdiction

Mary Schapiro chairwoman of the US Securities and Exchange Commission said the SEC should oversee some nonbanking derivatives dealers that offer over-the-counter financial products related to securities as well as supervise security-based

RampD Economic Research amp Business

Development

16

swaps The Commodity Futures Trading Commission Schapiro said should oversee foreign exchange commodity and interest-rate swaps The Federal Reserve and other banking regulators should supervise banks that deal in derivatives she said The Wall Street Journal (22 Jun) The Washington Post (23 Jun)

sect European Commission to review trading in dark pools

After a warning from the US Securities and Exchange Commission on dark pools transparency the European Commission plans to review the share-trading facilities The Committee of European Securities Regulators also started scrutinizing dark pools as part of a review of the MiFID directive This is a space whose development regulators may wish to monitor to better understand the impact dark pools may have on the market the CESR said Financial Times (tiered subscription model) (22 Jun)

sect Europe adopts conventions for trading credit default swaps

As the credit default swaps market faces ongoing standardization Europe has updated conventions for trading in the market The consensus is that the switch to the new trading conventions went smoothly in the US and it was business as usual said John Cortese head of European high-yield trading at Barclays Capital In Europe we already have seen requests from clients to trade using the standard coupons [before Monday] so they are not left with off market trades The Wall Street Journal (23 Jun)

Financial Products

sect Mutual fund focuses on firms working on sustainability

Switzerlands Sustainable Asset Management a unit of Rabobank launched a mutual fund that invests in companies that successfully manage sustainability issues The SAM Sustainable Global Active Fund is targeted principally to US investors and is managed by the firms US division Potential investments are evaluated based on environmental economic and social factors The Wall Street JournalDow Jones Newswires (22 Jun) PlanAdvisercom (22 Jun)