Biz News November 2014

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New Star Hotels Opening up within 2016
Nepal’s hospitality industry is expecting more than half dozen of new star hotels to open up for its guests within 2016. Hotel Association of Nepal (HAN) confirmed the reports and claimed that investment commitments made by various Nepali business houses and organizations on various occasions during the said period amount more than Rs 15 billion investment that will add 1,500 to 2,000 rooms of 4 star and 5 star standards.
 
Elaborating on the high amount of investment commitment, it said that such a huge investment in the sector might have been triggered by the fact that the investment in the sector is secure. Investment in hospitality sector is supposed to be similar to that of the real estate. 
 
“Investors have realized that Nepali tourism and entire economy’s future depends upon hotel business and that’s why they are investing in the hospitality sector,” said Binayak Shah, general secretary of HAN. He claimed that if the government fulfils its commitment of bringing in 2 million tourists by 2020, Nepali hotels would be able to accommodate them easily.
 
Stating that the investment is in the hands of Nepali people, he claimed the sector would receive more investments in the days ahead if there is political stability. The investors include non-resident Nepalis as well as some of the big Nepali business houses.
 
Choudhary Group informed that it has been constructing a resort named ‘Zinc Journey Chitwan’ in Chitwan and claimed that it has plans to bring it into operation by 2015. Similarly, the MS Group that is associated with the American luxury hotel chain, The Hotel Marriott, said it is investing around Rs six billions in three of its hotels. Of these it has already started the construction a four star hotel in Thamel and a 235-room five star hotel in Naxal with plan up its sleeves to establish a five star hotel in Bhaktapur very soon.
 
Likewise, Muktishree, Silver Heritage and Chhayadevi business groups are also planning to bring their hotels into operation by 2016. Silver Heritage has plans to construct a five star named Tiger Palace Resort in Bhairahawa with an in-house advanced casino. Chhayadevi is constructing its ‘Chhaya Complex’ in Thamel. Similarly, the Laxmi Group is also constructing a four star hotel in Pokhara.
 
Surplus Liquidity Under Control
Surplus liquidity in Nepali financial system has been brought under control. A source at the Nepal Rastra Bank (NRB) confirmed the reports adding that the liquidity excess has been lowered down to Rs 12 to 13 billion from Rs 100 billion recorded at the end of the previous fiscal year.
 
Dr. Gopal Bhatta, director at the NRB said that the recent steps taken by the NRB to decrease the excess liquidity have been proven effective and claimed that management of excess liquidity has been pushing up interest rates.
 
Likewise, discount rate of the Treasury bill and interbank rate has also started to increase. During the previous fiscal year, interest rate of the Treasury bill and the interbank rate had remained below one percent. With the measures taken by NRB, this climbed above one percent from the last week of September. Experts opine that it indicates the decreasing liquidity situation in the market.
 
A source at NRB informed that the interest rate of the reverse repo was fixed at 1.29 per cent on October 8. The weighted average of interbank rate among commercial banks was 1.45 percent until the same day. Likewise, along with the interbank rate, transaction amount has also increased.
 
Decrease in excess liquidity have fuelled speculations that banks and financial institutions might increase interest rates. Though interest rates on deposits have not been increased, reliable sources have claimed that preparations are afoot to do so.
 
As part of its new strategy to manage excess liquidity in the market, NRB has been using various instruments like the reverse repo. It has absorbed Rs 40 billion using deposit collection instruments during the three months prior to Dashain.
 
The Open Market Transaction Bylaws 2071 had paved the way for the central bank to use various instruments including the regular open market transaction, emergency open market transaction, and structural open market transaction for liquidity management.
 
Seeing is Believing Reaches USD 75mn
Standard Chartered Bank‘s (SCB) Seeing is Believing programme targeted at offering affordable eye-care services has reached a fundraising milestone ofUSD75 million. According to the press release issued by the bank on the occasion of World Sight Day, the bank is progressing towards its target to raise USD100 million by 2020.
 
Seeing is Believing is SCB’s global charitable initiative to tackle avoidable blindness run in partnership with the International Agency for Prevention of Blindness (IAPB).  The programme has reached 53 million people across Asia, Africa, the Middle East and Latin America.
 
Among various other projects, two big projects have been allocated to Nepal under this initiative. Eastern Region Eye Care Program (EREC-P), the first big project for Nepal received a financial support of USD 100,000 (approximately NRs 95 million) under this initiative for the construction of Biratnagar Eye Hospital.
 
Similarly, a Memorandum of Understanding has been exchanged between the SCB and Tilganga Institute of Ophthalmology (TIO) to fund a major expansion project of TIO.  The bank has agreed to grant USD 1,000,000 to fund the TIO’s project that aims to reduce avoidable blindness by developing surgical facilities in rural and semi-urban areas.
 
David Fein, Chairman of Seeing is Believing and Group General Counsel of SCB, said, “started in 2003 as a staff-driven initiative, it has grown to an international campaign which has supported 96 eye health projects in 26 countries worldwide.”
 
GSP Remains Far-fetched Dream for Nepali Products
Generalised system of preferences (GSP), a facility earlier provided to Nepal by the United States of America and which has been stopped for the past nine months, has failed to resume. 
 
GSP is a programme designed to promote economic growth in developing countries by providing preferential duty-free entry for up to 5,000 products imported from one of the 122 countries. The GSP facility is provided by the USA to the least developed countries like Nepal. 
 
The GSP facility that was expected to resume from January2014 has been delayed, as the American congress has not endorsed the working procedure yet. In 2013, the office of the United States Trade Representatives (USTR) had prepared working procedures and was expected to come into effect from January 2014.
 
The delay has deprived more than 5,000 Nepali products from the GSP facility. Products such as medicinal herbs, agro-based products, Nepali paper, accessories, textile and pashmina used to get the GSP facility. Traders opine that this has affected the export business.
 
Ishwari Prasad Ghimire, executive director at Trade and Export Promotion Centre (TECP) says that once the American congress passes the bill, the products will get the GSP facility also for the nine months . TECP claims that products worth Rs 7.59 billion were exported to the USA in the fiscal year 2013\14, which is second largest export volume after India.
 
The second Trade and Investment Framework Agreement (TIFA) meeting which is expected to address these issues is in limbo though it has been already three months since USTR representatives held discussions with Nepali trade experts, government officials and private sector actors to finalize TIFA meeting agenda. A date for the meeting is yet to be fixed. 
 
The meeting is expected to address the issues on GSP facility, increase in investment, service trade, government and private sector’s capacity upgrade, lab construction for the promotion of agro products. First TIFA meeting was held on 2012. 
 
Upscale Hotel at Kohalpur, Near Banke Natrional Park
Hotel Pop Life with 32 rooms has started business in Kohalpur of Banke district, near the Banke National park. This venture of Pop Life Pvt Ltd., is started with a total investment of Rs 60 million, Pradip Bhattarai, founder of the company said. 
 
Banke national Park was established in 2010 as the 10th National Park of the country. 
 
The hotel is also targeted at the local government and non-government agencies that were forced till now to go all the way to Nepalgunj for organizing different seminars and meetings. Bhattarai said, the hotel therefore has seminar halls, a jungle restaurant and ample parking facility as well as a separate hall to cater to the needs of the local people for social events such as weddings. The hotel provides pick-up facility from the Nepalgunj based Raja Airport and has plans to roll out special packages for domestic and foreign tourists. 
 
“There is a huge potential for hotel business in Kohalpur as the environment here is very peaceful and beautiful along with its proximity to the Banke National Park,” Bhattarai said adding that there is huge potential for investment in well-equipped hotels in the area to boost up tourism activities in the national park. 
 
45 Goods to be Mandatory at Government Bodies
Ministry of Industry (MoI) is planning to increase the number of mandatory domestic products to be used in government bodies to 45. So far the directive on the purchase of domestic products by government bodies issued on 2069 has made use of 14 domestic products mandatory. A research sub-committee under the chairmanship of Bishnu Dhakal, deputy spokesperson at MoI, had put up such recommendations in its report. MoI is planning to present the report in the cabinet soon.
 
Dhakal informed that the report has recommended using products that are produced within the country, are available in every district and could be used at easily. “The sub-committee made such recommendations to support in the marketing and promotion of products produced by domestic industries,” he said.
 
In its fiscal budget this year, the government has provisioned that government bodies should purchase domestic products even if they are 15 percent expensive than imported products. Earlier domestic products were given preference even if they were costlier by 10 percent. 
 
The report has recommended forming a committee in every district with the right to decide whether any product being purchased by government office in the district is domestic or imported. 
 
Present directive provisions that government bodies should prioritize use of products that are produced by the listed producersusing local or imported raw materials with at least 30 percent value addition or are locally assembled, listed as domestic products and meet quality standards. 
 
GDP to be calculated from Expenditure Method
Central Department of Statistic (CDS) has decided to calculate GDP through expenditure method.CDS decided so to test the credibility of the statistics and to find out the consumption of the produced goods.
 
So far GDP was calculated only through production method that takes forest and agriculture, industrial production, construction, business sector, transportation, telecommunication and 17 other different sectors including government sector’s activities, as base. Expenditure methodis necessary to find the stock of products in different sectors whose GDP is to be calculated, Dr Jisnu Mohan Bhattarai, director of CDS said. This method considers government and household consumption, capital formation and total export as base. 
 
Bhattarai informed that households and government within the country consume some of the produced goods and services, some are exported to other countries and some are kept in stock.Moreover, some of them are kept in the form of fixed asset. In order to collect the data of the goods instock, a separate survey is necessary. This has not been conducted so far in Nepal. He said that lack of data on the goods in stock is a barrier in the expenditure method to calculate GDP and added huge investment will be required to avail these data. British government’s Department for International Development (DFID) and Japan International Cooperation Agency (JICA) has also shown interest for assisting in the GDP calculation. CDS will be implementing this method by 2017.
 
Althoughannual survey report published by theMinistry of Finance (MoF) presents the calculation in the form of expenditure method, the data is originally produced through production method.“CDS which keeps all the statistics and provides data to the general public has not published any data using expenditure method till date,” Dr Dilli Aryal, Undersecretary (data specialist) at the Economic Policy Analysis Division of MoF, said.
 
Separate Authority Coming for Petroleum Imports
The government has drafted a bill to form a separate authority that will regulate the import of petroleum products. The new billaims to pave way for the inclusion of private sector in the import of gas and petroleum products. Ministry of Commerce and Supplies (MoCS) has finalized the draft of the bill and forwarded it to the Ministry of Law and Justice (MoLJ) for reviewing.
 
Once MoLJ approves it, the draft will be presented in the parliament following endorsement by the cabinet, Deepak Subedi, joint secretary at MoCS, said. “The draft of the bill was prepared on the basis of suggestions provided by the parliamentary committee,” he informed adding that “Following the implementation of the Act, the proposed Authority will look over the regulating gas and petroleum imports in the country and thestate owned Nepal Oil Corporation (NOC) will compete alongside private sector companies as a company.”
 
The parliamentary committee formed under the leadership of Constituent Assembly member Padam Narayan Chaudhary had presented such recommendations for the long-term management of petroleum products supply. “Once the parliament endorses the billand the new Act comes into action, private sector actors will be able to involve in the import of petroleum products within a month,” Sunil Bahadur Thapa, Minister of MoCS, said.
 
Chandi Lumbini to Import Gas from Malaysia
Chandi Lumbini Gas Storage Company (CLGSC) is preparing to start importing liquid petroleum gas (LPG) from Malaysia soon to sell it to commercial users if the tax related issues in India are settled. The company says it has already invested Rs. 300 million and installed LPG storage plants in Sunsari, Hetauda and Dhading.
 
The company will import unrefined gas from Petroliam Nasional Berhad (PETRONAS), Malaysia  and refine it at the Indian Oil Petronas refinery facility at Haldia, India before bringing it into Nepal. Indian Oil Petronas is joint venture of Indian Oil Corporation and Petronas, Malaysia. It is now waiting Indian government’s letter waiving Indian government taxes applicable if the gas is refined in India. Without such approval, the business will suffer double taxation –in India and Nepal. According to the company, the Nepal government has already requested Indian government for exempting the company of such taxes. 
 
“Ministry of Commerce and Supplies is positive for such import and is sending a special delegation to New Delhi soon to expedite the tax exemption,” said Rajat Krishna Shrestha, general manager of the company. 
 
Nepal-India Secretary Level Inter-Governmental Committee (IGC) meeting held last December had agreed to solve this issue of double taxation. However, the implementation of the decision was delayed due to the Indian General Election that followed soon after the meeting.
 
“By the time gas is put for sale in the market, our company’s investment will go up to Rs. 1 billion,” said Shrestha. CLGSC has received permission to import 24 thousand metric tons of gas. 
 
Rs 2.94 billon Investment by 10 Banks
The financial closure has been completed for the construction of Khare Khola Hydropower Project (KKHP). A consortium of 10 banks agreed to co-finance the 24.1 MW project under the leadership of Machhapuchchhre Bank and co-led by Nabil Bank and the Everest Bank.
 
According to the financial closure, the banks are funding Rs 2.92 billion, which is75 percent of the total investment. Project promoter Consortium Power Developers Pvt Ltd (CPD) will be investing the remaining 25 percent of the total capital required.
 
Other banks in the consortium are Global IME, Nepal SBI, Nepal Credit and Commerce (NCC), Kumari Bank, Bank of Kathmandu, Siddhartha Bank and Nepal Bangladesh Bank.
 
CPD Chairman Lal Krishna KC and Machhapuchchhre Bank CEO Tulasi Ram Gautam signed the agreement in presence ofChief Executive Officers (CEO) of all the investing banks. 
 
Govt Plans to Produce 19 Thousand Industrialists this FY 
As part of its ‘Job Seeker to Job Creator’ plan, the government is planning to take a series of programmes to produce around 19,000 industrialists at the end of the current fiscal year (FY). Department of Cottage and Small Industries (DCSI) under the Ministry of Industry (MoI) claimed that the main objective of the plan is to help those working in small and cottage industries become self-dependent. 
 
Yam Kumari Khatiwada, spokesperson at the MoI informed that the Ministry would provide training to around 5000 promising entrepreneurs, to be picked up through 27 district offices of the Ministry and through its training centres. To ensure that the trainings provided to these potential entrepreneurs is effective, MoI plans to regulate the training programs. 
 
Likewise, this year, 15000 more industrialists will be generated on the basis of registration of industries made at the DCSI. If the ministry’s plan succeeds, 19000 industrialists will be generated under the department this year.This plan, MoI believes, will assist in increasing attraction of entrepreneurs towards small and cottage industries and making industries sustainable.“We are planning on making the industrial sector more sustainable, so that its stakeholders have a continuous source for income inflow,” Khatiwada said. 
 
Last fiscal year, 14.5 thousand industrialists registered at the MoI in various 13,400 industries. Consequently, more than 38,000 people were employed the same year. During this period, the DCSI had collected 232.1 million rupees revenue and this year it plans to collect 250 million rupees revenue.
 
Public Service Offices to Remain Open for 12 Hours
All public offices that provide direct services to people have been proposed to provide 12 hours of services in a day. The Administration Reform Implementation and Monitoring Committee made this suggestion in its first quarter report submitted to Prime Minister Sushil Koirala. 
 
The report has recommended that such offices should provide services in two shifts a day 7:30 am to 1:30 pm in the first shift and 1:30 pm to 7:30 pm  in the second shift. The offices that come under this rule include offices issuing and renewing citizenship, passport, land ownership transfer, company registration, vehicle registration and transfer of ownership, revenue collection, driving license issuing offices and work permit for foreign employment. Other offices are DDCs, Municipality office, VDCs and utility collection centres.
 
Furthermore, the report has recommended that these offices should function even on public holidays and each of such offices should have citizen help desk to assist service seekers throughout the process and prevent brokers/agents from taking undue advantage of the service seekers. The committee led by former Secretary Krishna Hari Baskota was formed on 25th July, 2014.

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