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Date: July 4, 2010

Highlights

Contrary to the GDP growth projection of 5.5 per cent, the Economic Survey -

likely to be presented on July 8 -presents a gloomy scenario. The Survey

doesn't expect GDP to expand beyond 3.5 per cent due to low agriculture

yield, especially for major crops like maize and paddy. Besides, the non-

agriculture sector's output too has been lower than expected. Inflation stands at

10.7 per cent against the projected seven per cent. The Survey maintains that

double digit price hike and slow growth have adversely impacted consumers'

purchasing power, posing a serious threat to financial management.

Governor of Nepal Rastra Bank (NRB) Dr Yuba Raj Khatiwada has said, there

will no shortage of currency notes this year during the festival season like last

year. Addressing a symposium on financial liquidity and changing interest

rates on credit in Damauli Saturday Dr Khatiwada said, NRB had printed and

kept in stock enough notes for next three years.

Nepal Rastra Bank (NRB) has frozen bank accounts 20 firms for evading tax,

Kantipur daily reported. NRB directed concerned banks and financial

institutions to freeze the accounts of the firms from Thursday on the

recommendation of Inland Revenue Department (IRD).

Nepal has been selected among six countries in the world to undertake pilot

programme on scaling up renewable energy in low income countries (SREP)

for the first time under multi-lateral development banks’ Climate Investment

Funds (CIF). Through Strategic Climate Fund (SCF) under the CIF, Nepal will

get funding worth US$50 million (Rs. 3.71 billion approx.) from the CIF

Strategic Climate Fund (SCF) to undertake a transformational programme for

renewable energy development in the country. The decision was made at a

meeting of the multilateral CIF governing bodies last week in Washington

D.C.

The caretaker government is planning to bring a vote on accounts bill worth

around Rs 110 billion, out of the which biggest chunk of around Rs 53 billion

will be earmarked for recurrent expenditure.

The new budget should focus on import-substitution to deal with the balance

of payments deficit as export promotion would require a longer period.

Terming balance of payment deficit the biggest problem, Rameshwor Khanal,

Secretary, Ministry of Finance, said at an interaction programme, ―The

coming budget has focused on the programmes that will increase the

production capacity.

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The government will take import substitute measures to protect the domestic

industry in the areas of meat, vegetables and fruits, cements and dairy. With

the trade deficit as high as 52 percent and Balance of Payment deficit at Rs.

17.36 billion, the government is seeking to reduce imports.

Overlay works on over 100 km major roads inside Kathmandu Valley have

become uncertain due to delay in the approval of budget by the Ministry of

Finance (MoF) and National Planning Commission (NPC).

The Ministry of Energy has sold license of three hydro-electric projects to

private sector, Nagarik daily reported. The ministry handed over the license of

5 MW Maya Khola project, 6.4 MW Singati Khola project and 15.24 MW

Mathillo Solu project to private sector through competition on Friday.

Nepal Tourism Infrastructure Development Council (NTIDC) is preparing

tourism profile of all 75 districts of the country. According to Baikuntha Nath

Pradhan, NTIDC chairman, the organization has already prepared tourism

profile of Dolakha district. The profiles will be prepared in coordination with

the concerned VDCs, District Development Committees and the Federation of

Nepalese Chambers of Commerce and Industry (FNCCI), Pradhan said.

The government has opened a letter of credit (LC) to import 12,500 tonnes of

sugar from Brazil with an eye on the festive season of Dashain and Tihar.

Under this consignment, National Trading Limited (NTL) and Salt Trading

Corporation (STC) will import 6,250 kg of sugar each.

The Gold price fell hard alongside the dollar on Friday dropping to $ 1,207 per

ounce in the international market with its domestic trading price falling to Rs

35,400 per tola on Friday. In the domestic market, gold opened on Sunday at

Rs 36,200 per tola.

The capital market responded positively to the resignation of Prime Minister

Madhav Kumar Nepal with the Nepal Stock Exchange Index (NEPSE)

witnessing a double digit growth last week. NEPSE witnessed a gain of 11.39

points. The benchmark index that had opened at 459.52 points on Monday

settled at 470.91 points on Thursday.

Financial experts are advising the rookies to invest in Initial Public Offering

(IPO) and mutual funds before engaging in the secondary market, which is

more risky and investment-intensive. ―Nepse’s current problem is that shares

are in oversupply while the demand is low. This pulls the index down,‖ said

Shurbir Paudyal, SEBON Chairman, at an interaction programme about

women investors or lack of it in the capital market.

The three major parties -- UCPN (Maoist), Nepali Congress and CPN-UML -

on Saturday held bilateral negotiations in a bid to form a national consensus

government. But they failed to make any substantive progress as the NC and

UML asked the Maoists to agree on concluding the remaining tasks of the

peace process.

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Nepali Congress leaders have made it clear to the Maoist leadership that their

party is not going to support the Maoist bid to form new government under its

leadership.

CPN-UML Chairman Jhala Nath Khanal on Saturday informed UML

parliamentarians that the party is again in a position to lead the next

government and he has already taken initiatives toward that end.

Himalayan river basins in China, Bangladesh, India and Nepal will face

massive water depletion in the next 20 years, leading to mass exodus and

decline in food, according to a report. During the Singapore International

Water Week (SIWW) 2010 held from June 28 to July 2, a report published by

Strategic Foresight Group of India stated that due to natural causes like glacial

melting, the four countries including Nepal would lose almost 275 billion

cubic meters of annual renewable water in the next two decades, more than the

total amount of available water in Nepal at present.

In a ―no-stone-left-unturned‖ approach, the Ministry of Foreign Affairs

(MoFA) is determined to complete the awarding of the bid concerning supply

of Machine Readable Passports (MRP) contract before the new government

takes charge.

Nearly two years after acquiring membership of the International Atomic

Energy Agency (IAEA), the government has now begun preparations to

legitimize the membership.

BANKING:

ECONOMIC SUR VEY Paints bleak picture; GDP growth down

Economic freedom hurt on five out of ten fronts

Contrary to the GDP growth projection of 5.5 per cent, the Economic Survey -likely

to be presented on July 8 -presents a gloomy scenario.

The Survey doesn't expect GDP to expand beyond 3.5 per cent due to low agriculture

yield, especially for major crops like maize and paddy. Besides, the non-agriculture

sector's output too has been lower than expected. Inflation stands at 10.7 per cent

against the projected seven per cent.

The Survey maintains that double digit price hike and slow growth have adversely

impacted consumers' purchasing power, posing a serious threat to financial

management.

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Traditionally, the Survey is presented a day ahead of the budget for the fiscal year.

However, this year, with the possibility of new government formation still distant, the

Madhav Kumar Nepal-led caretaker government is preparing to present the Finance

Bill on July 9, a day after the Economic Survey is presented.

"We are planning to present the Economic Survey on July 8," said Keshav Acharya,

senior economic advisor at the Finance Ministry. Finance minister Surendra Pandey is

likely to present the Financial Bill on July 9 so as to give the government the right to

spend a quarter of this fiscal year's expenditure. Delay in the budget will also not hit

revenue collection as Income Tax Act 2012 BS has given the government the right to

collect revenue not exceeding this fiscal year's rates.

Since the last three years, successive governments have failed to present a full-fledged

budget on time due to political instability that has also brought down Nepal's

economic freedom ranking.

According to the 2010 Index published by Heritage Foundation and Wall Street

Journal, Nepal ranked 130th scoring 0.5 point lower than last year, reflecting decline

in five of the 10 economic freedoms, due to political instability.

It has hampered development as successive governments have not been able to spend

properly on development activities.

Due to ballooning trade deficit and slowdown in remittance growth rate -hovering

around 10 per cent -Balance of Payment (BoP) has also registered deficit.

THT

July 04, 2010

There will be no shortage of currency notes this year: NRB governor

Governor of Nepal Rastra Bank (NRB) Dr Yuba Raj Khatiwada has said, there will

no shortage of currency notes this year during the festival season like last year.

Addressing a symposium on financial liquidity and changing interest rates on credit

in Damauli Saturday Dr Khatiwada said, NRB had printed and kept in stock enough

notes for next three years.

Last year, during the festival seasons people had faced acute shortage of currency

notes as NRB could not supply enough notes to the banks. Customers were unable to

withdraw enough money from the banks due to the shortage of notes.

Dr Khatiwada attributed the shortage of notes last year to the delay in appointing the

governor.

He claimed the banks and the financial institutions this year were safe and urged

people to deposit money in the banks without apprehension.

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People have been stocking notes in their homes and even in bank lockers instead of

depositing in bank accounts due to the reduced credibility of banking system in the

recent months. nepalnews.com

03 July 2010

NRB freezes bank accounts of 20 firms for evading tax

Nepal Rastra Bank (NRB) has frozen bank accounts 20 firms for evading tax,

Kantipur daily reported.

NRB directed concerned banks and financial institutions to freeze the accounts of the

firms from Thursday on the recommendation of Inland Revenue Department (IRD).

Chief Tax Officer Krishna Bahadur Bohara said, the accounts of the firms were frozen

as the firms refused to pay taxes even after several verbal and written

reminders. nepalnews.com

3 July 2010

Int’l aid to tackle climate change

JUL 03 - Nepal has been selected among six countries in the world to undertake pilot

programme on scaling up renewable energy in low income countries (SREP) for the

first time under multi-lateral development banks’ Climate Investment Funds (CIF).

Through Strategic Climate Fund (SCF) under the CIF, Nepal will get funding worth

US$50 million (Rs. 3.71 billion approx.) from the CIF Strategic Climate Fund (SCF)

to undertake a transformational programme for renewable energy development in the

country. The decision was made at a meeting of the multilateral CIF governing bodies

last week in Washington D.C.

A unique programme, SREP was launched at the UN Climate Change Conference in

Copenhagen last December to support low-carbon and climate resilience development

through scaled-up financing from the developed nations, which are responsible for

global warming and climate change.

As part of the Copenhagen Accord, there is a proposal to raise $30 billion for fast-

start finance until 2012, with $100 billion to be mobilised annually by 2020. A total of

$6.1 billion has been committed by the developed nations till date under the long-term

funding mechanisms. Prior to Copenhagen, pledged contributions to the SREP

(equivalent in dollars in million) from the UK (82.4), Netherlands (81.8), Norway

(26.5) and Switzerland (20) totalled $210.7 million where US Energy Secretary

Steven Chu announced a financial support of $50 million.

―It is a big opportunity for a developing country like Nepal to be a part of funding

mechanisms under the CIF that would help the country in development and poverty

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reduction,‖ says Govinda Raj Pokharel, former executive director of Alternative

Energy Promotion Center and a member of an independent expert group involved in

selecting the countries. Out of the nine countries recommended by the expert group,

six were selected for the SCF. Other five low-income countries are Ethiopia,

Honduras, Kenya, Maldives and Mali, he said. There are 67 low-income countries

listed under the UN’s Framework Convention on Climate Change.

Pokharel said Nepal was selected for demonstrating that it has an established policy

and regulatory background, long-term private sector involvement in renewable energy

such as micro-hydro, solar energy and bio-gas. Meanwhile, extensive opportunities

with small- and medium-scale hydro projects to provide power in rural areas with

community-owned installations helped the country to be a recipient of the fund, he

said.

http://www.ekantipur.com/2010/07/03/capital/intl-aid-to-tackle-climate-

change/317738/

Rs 110b vote on accounts bill in offing

July 3: The caretaker government is planning to bring a vote on accounts bill worth

around Rs 110 billion, out of the which biggest chunk of around Rs 53 billion will be

earmarked for recurrent expenditure.

Briefing the parliamentary committee of the CPN-UML about the fiscal budget that

the Ministry of Finance is planning to bring in the wake of confusion that has

emerged after the sudden resignation of the government, Finance Minister in the

caretaker government, Surendra Pandey, said that the ministry is planning to table the

bill on July 9.

Of the total expenditure planned for the next fiscal year, the ministry will earmark the

entire fiscal year´s budget for expenditure heads that fall under chargeable items --

expenditure allocations that are not discussed in parliament, said a government

official.

Expenditures for repayment of domestic as well as foreign loans and interest,

expenses for the president, parliament and the judiciary are earmarked under the

chargeable items in the budget.

However, MOF is working to bring one-third of the annual expenditure for

appropriate items -- expenditure heads needing parliamentary approval.

As per the Article 96 (A) of the Interim Constitution, the government is authorized to

bring one-third of the actual expenditure of the current fiscal year for expenditure

heads falling under the appropriate items category.

Government officials told myrepublica.com that the Ministry of Finance is planning

to earmark Rs 20 billion for financing capital expenditure, Rs 31 billion for repaying

principal and interest of internal as well as external loans.

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Finance Minister Pandey also was quoted as saying that the government is planning to

allocate enough budget for major ongoing development projects.

As per the Interim Constitution, the government however, will also have the authority

to mobilize revenues as per the Finance Act of the current fiscal year, though the

government can´t bring changes to the present tax structure or introduce new taxes.

Then finance minister Dr Ram Sharan Mahat announced a similar budget in 2008/09

when the government led by late Girija Prasad Koirala was rendered a caretaker

government immediately after the Constituent Assembly election.

http://www.myrepublica.com/portal/index.php?action=news_details&news_id=20629

Experts brainstorm for new budget

The new budget should focus on import-substitution to deal with the balance of

payments deficit as export promotion would require a longer period.

Terming balance of payment deficit the biggest problem, Rameshwor Khanal,

Secretary, Ministry of Finance, said at an interaction programme, ―The coming budget

has focused on the programmes that will increase the production capacity. We are

aiming to be self-reliant in the production of vegetables, fruits and meat in two years.‖

―if everything goes as planned, we will be self-reliant in cement production in five

years,‖ he added. He also opposed government regulation in petroleum and electricity

prices. ―The prices of these items should be left to be decided by the forces of demand

and supply,‖ he said.

He pointed out that industrial sector is faced with many problems such as power

shortage, difficult labour relations, political instability and security issues. Due to

more credit flowing to non-productive sectors and interest rate being high, the

industrial sectors need incentives, he said.

―The forthcoming budget should deal with issues such as poor investment climate,

inflation, performance of public enterprises, balance of payment deficit, climate

change and so on,‖ said Badri Pokharel, Joint Secretary, National Planning

Commission.

―The delaying of budget will create difficulty in expenditure, especially on

development,‖ he said. ―It is unfortunate that the recurrent expenditure goes

overboard but, of the entire allocated capital budget for the financial year 2009-10,

only about 60 per cent has been spent so far,‖ he said.

―Being a land-locked country, the Nepali economy is cost-intensive and too much

dependent on India,‖ said economist Dr Madan Kumar Dahal. It is a necessity to

deviate from agriculture-based economy to an industrial economy, he said.

―Our economy is in crisis as the imports are increasing and exports are disappearing.

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At the same time, we are becoming more dependent on India, resulting in more severe

shortage of Indian currency, which in turn is causing liquidity crunch in the banking

sector in Nepal,‖ he said.

―On the other hand, when development expenditure is not spent, it restricts nation’s

growth,‖ he said.

He said that the only silver lining is that the revenue collection in the past few years

has shown a growth but unfortunately these are diverted towards recurrent budget,

and not to the development expenditures.

He suggested, ―For an export-led growth, we need zero-tariff policy with India and

China. China has been kind to allow about 200 commodities as tariff-free.‖

―Public enterprises have been bleeding our economy. The next budget should decide

the fate of these enterprises,‖ he said.

―Productivity has to be prioritised, especially for a sustained growth as it leads to the

development of both infrastructure and service sectors. They should be provided with

incentives and subsidies,‖ said economist Dr Dilli Raj Khanal.

The expenditure structure needs a drastic improvement. ―Our growth is decelerating

but at the same time inflation is rising. So, we are dangerously moving towards

stagflation,‖ he said.

http://www.thehimalayantimes.com/fullNews.php?headline=Experts+brainstorm+for

+new+budget+&NewsID=248678

BUSINESS & ECONOMY:

Import substitution a must, says govt

JUL 04 - The government will take import substitute measures to protect the domestic

industry in the areas of meat, vegetables and fruits, cements and dairy. With the trade

deficit as high as 52 percent and Balance of Payment deficit at Rs. 17.36 billion, the

government is seeking to reduce imports.

Finance Secretary Rameshwor Khanal on Saturday said the measure would substitute

imports worth Rs. 25-30 billion. Nepal imports 55,000 tonnes meat annually while

import of other agro products is high and which has triggered BOP deficit to some

extent.

―We have low competitive edge products compared to neighboring countries. In this

situation, substituting import of these products will be viable as we cannot think of

exporting products that reduce the ballooning trade gap immediately,‖ he said.

He said that the government would also take some tough measures on petroleum

products (PoL) and hike electricity tariff in the upcoming budget. ―We have to take

these measures keeping in mind the increasing demand for PoL products as the

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government will not be able to subsidize the products that account for the huge BOP

trade,‖ Khanal said at a pre-budget discussion organised by Society for Economic

Journalists of Nepal (SEJON).

The government will also be harsh on electricity tariff. If the same tariff remains, the

Nepal Electricity Authority (NEA), which is reeling under a huge loss, could go

bankrupt. ―This will affect people for a short time but will be beneficial and

sustainable,‖ he said.

The upcoming budget has also adopted measures to substitute some import based

industrial and agro products by prioritising their production and encouraging them in

the home country. Among the industrial products, import of cement and dairy

products would be substituted by domestic production. Secretary Khanal said that by

mid-January there will be an additional 12,000 tonnes cement production in the

country, which will help substitute import of cement.

―If one more big dairy processing industry is established, it will help import

substitution,‖ Khanal said adding that the government was committed to provide all

facilities regarding roads and electricity in those industries.

The government is planning to bring the advance budget by the next week. ―A full-

fledged budget will be announced by the national consensus government,‖ said

Khanal quoting the Prime Minister who resigned recently.

Khanal said the development budget will take a slow growth path due to lack of

political commitment. Delay in budget will not hamper the monetary policy and other

issues related to it, but it will severely impact the development budget.

http://www.ekantipur.com/2010/07/04/business/import-substitution-a-must-says-

govt/317794/

Setback for Valley roads overlay plan

July 4: Overlay works on over 100 km major roads inside Kathmandu Valley have

become uncertain due to delay in the approval of budget by the Ministry of Finance

(MoF) and National Planning Commission (NPC).

The Ministry of Physical Planning and Works (MoPPW) had forwarded concerned

proposal to MoF and NPC some five months back requesting a budget of Rs 450

million to overlay 35 km in Kathmandu, 35 km in Lalitpur and 30 km of roads in

Bhaktapur in view of the Nepal Tourism Year 2011.

In view of the tourism campaign and in response to the request from the Ministry of

Tourism and Civil Aviation (MoTCA) for improvement of Valley roads, the MoPPW

was working to speed up the overlay process through Roads Division Offices in the

three districts of Valley.

"Our plan to renovate 100 km roads in the valley roads through overlay has passed

through cloud of uncertainty due to delay in approval of the necessary budget. The

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whole overlay process would have been completed within the three months after the

sanction of the budget," Balaram Mishra, chief of Kathmandu Roads Division Office,

told myrepublica.com on Saturday.

The division has already initiated the overlay process in Kathmandu´s major roads

with its available budget during the current fiscal year.

"From our regular budget, we have completed overlay of 25 km roads, out of the 60

km major roads in Kathmandu. However, fate of the remaining 35 km in Kathmandu

district has become uncertain," said Mishra.

Overlay on the Sitapaila-Chabahil section, New Baneshwar-Jorpati section,

Tripureshwar-Teku, Sinamangal-Maitidevi and Kalopul-Durbarmarg sections, and

Singha Durbar, Lazimpat and Balaju areas have completed.

Kathmandu division had demanded about Rs 20 million for the overlay of the

remaining major roads which are facing immense pressure of vehicles.

"We had plan to improve pavement along major roads in the Valley had our plan for

overlaying the roads completed on time before start of the Nepal Tourism Year," said

Mishra.

An official at the MoF said decision on the proposed budget for overlaying Valley

roads couldn´t be taken due to lingering uncertainty regarding passage of budget for

the coming fiscal year.

"We are positive about timely overlay of Valley roads by the start of Nepal Tourism

Year, but this entirely depends upon the endorsement of the demanded budget," the

official added.

http://www.myrepublica.com/portal/index.php?action=news_details&news_id=20626

Energy ministry sells license of three hydel projects to private sector

The Ministry of Energy has sold license of three hydro-electric projects to private

sector, Nagarik daily reported.

The ministry handed over the license of 5 MW Maya Khola project, 6.4 MW Singati

Khola project and 15.24 MW Mathillo Solu project to private sector through

competition on Friday.

Electricity Development Board (EDB) had conducted the feasibility study of the

projects.

The government sold the license of the hydel projects for Rs 130

million.nepalnews.com

03 July 2010

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Tourism profile of all 75 districts soon

July 3: Nepal Tourism Infrastructure Development Council (NTIDC) is preparing

tourism profile of all 75 districts of the country.

According to Baikuntha Nath Pradhan, NTIDC chairman, the organization has already

prepared tourism profile of Dolakha district. The profiles will be prepared in

coordination with the concerned VDCs, District Development Committees and the

Federation of Nepalese Chambers of Commerce and Industry (FNCCI), Pradhan said.

The NTIDC is also working to identify the core tourist areas in the districts and the

condition of related infrastructures. I hope this will be much helpful for the success of

the Nepal Tourism Year 2011, he said. NTIDC has deployed teams for profiling

districts since September 2009 and the work is expected to complete within two years.

Nepal can promote thousands of tourist destinations to lure Indian and regional

tourists, he said. After identifying attractive destinations, NTIDC aims to come up

with feasible solutions for improving the infrastructure.

In the city areas and district headquarters hotels with good facilities are essential but

in rural areas and villages home stay system is good. The government has also

promoted home stay system in view of Nepal Tourism Year 2011.

Pradhan said tourism-related cooperative should be set up for investing in home stay

system and other tourism activities at local level. According to him this will provide

employment opportunities, help develop infrastructures and benefit the local

community.

Pradhan pointed at the need for producing efficient tourist guides skilled in English,

Chinese, Japanese and other major foreign languages. According to him, the

government should invest in trainings for producing guides. He stressed immediate

training for rural people about home stay system.

According to him the government budget effectiveness in tourism sector is poor as

mobilization of local bodies for executing tourism plans and programs is less. He said,

I/NGOs and local bodies including business communities should work together for

developing tourism infrastructures.

http://www.myrepublica.com/portal/index.php?action=news_details&news_id=20615

Latin sweetness to lace Nepali mouths this Dashain

JUL 04 - The government has opened a letter of credit (LC) to import 12,500 tonnes

of sugar from Brazil with an eye on the festive season of Dashain and Tihar. Under

this consignment, National Trading Limited (NTL) and Salt Trading Corporation

(STC) will import 6,250 kg of sugar each.

―We have already opened an LC for sugar and it is scheduled to arrive in Nepal within

mid-August,‖ Laxman Agrawal, general manager of the NTL, told the Post on

Saturday. ―The sugar will cost around Rs. 60 to 65 per kg in the local retail market.‖

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This time, the state-owned entities have also made the Brazilian supplier put up a

performance bond of two percent as precaution so that they do not have to face any

monetary losses even if the supplier fails to deliver sugar.

Following the failure in procurement of sugar in the last six months, the government

had to cancel the LC opened for import of 25,000 tonnes from Brazil and 12,500

tonnes from Thailand three months ago.

However, domestic sugar producers said the government process to procure sugar

from Brazil with a view to selling them at Rs. 60 to Rs. 65 a kg in the retail market

was not logical at the time when they, too, were able to make sugar available within

the same price range.

―We have 20,000 to 30,000 tonnes of sugar in stock,‖ said Manish Agrawal,

managing director of Lumbini Sugar Mills and a member of Nepal Sugar Mills

Association. ―If the government invites for tender to supply sugar, domestic producers

can offer the sugar at reasonable prices.‖

NTL and STC have opened the LC at US$ 500 per tonne for 12,500 tonnes and they

are planning to import at least 25,000 tonnes of sugar from Brazilian suppliers for the

festive season.

Currently, STC has a stock of around 3,000 tonnes of sugar and NTL has around 700

tonnes. The three state owned entities NTL, STC and Nepal Food Corporation (NFC)

had procured sugar from domestic producers following the government decision to

buy 5,000 tonnes of sugar to control rising prices and short supplies.

―The government did not buy the sugar as agreed and this time, too, is importing

sugar without giving us priority,‖ Manish Agrawal said. ―If the government aims to

buffer stock, it should bring sugar at a lower price and also provide a level playing

field to domestic mills.‖

NTL had taken delivery of around 1,300 tonnes of sugar from domestic producers

against the government’s directive to obtain 2,000 tonnes. Likewise, STC and NFC

have already acquired 2,000 and 1,000 tonnes as told.

―We did not buy sugar as ordered because the prices had already started to go down,‖

said NTL general manager Agrawal. The government had set the sugar price at Rs. 80

per kg and with the arrival of fresh stock the price started to decline to drop to Rs. 65

from Rs.100 when there was an acute shortage of the sweetener six months back.

Meanwhile, NTL said it would not import sugar under the quota offered by India

citing lack of financial resources. India has offered 2,000 tonnes of sugar to Nepal, of

which STC has already received approval for 5,300 tonnes. ―We are out of cash for

import from India,‖ said Agrawal. He said they had obtained a loan of Rs. 700 million

to import sugar from Brazil.

http://www.ekantipur.com/2010/07/04/business/latin-sweetness-to-lace-nepali-

mouths-this-dashain/317793/

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MARKET:

Euro vs dollar keeps gold prices lower

The Gold price fell hard alongside the dollar on Friday dropping to $ 1,207 per ounce

in the international market with its domestic trading price falling to Rs 35,400 per tola

on Friday. In the domestic market, gold opened on Sunday at Rs 36,200 per tola.

As US investors lost more than the Euro, the single currency jumped on the forex

market effecting fall in the price of gold to $ 1,207 per ounce. According to the

agencies, as a percentage of global financial assets, investible gold has gone from 17

per cent in 1982 to 4 per cent today.

According to agencies, on the currency market today the Euro rose sharply, leaping to

a two-week high, and pushing the gold price in Euros down through Euro-1,000 an

ounce for the first time since June 17.

Gold this week opened at Rs 31,035 per 10 gram ,that is Rs 36,200 per tola and

remained at the same price on Monday. Later on Tuesday, trading price of gold

dropped by Rs 215 and was priced at Rs 30,820 per 10 gram on Tuesday. It however

picked up to Rs 30,975 on Wednesday and again gaining its trading price to Rs

31,035 per 10 gram on Thursday. Gold closed at Rs 30,350 per 10 gram that is Rs

35,400 per tola. Meanwhile, silver opened at Rs 494 per 10 gram and remained at the

same price on Monday too. On Tuesday, the price fell to Rs 487 per 10 gram and was

traded for the same price till Thursday, said NEGOSIDA. Silver closed at Rs 480 per

10 gram .

Tej Ratna Shakya, president of Nepal Gold and Silver Dealers’ Association, said

though the NRB has agreed to extend the import quota till July 14, traders wanted a

higher quota of gold for import than existing 20 kg a day.

http://www.thehimalayantimes.com/fullNews.php?headline=Euro+vs+dollar+keeps+g

old+prices+lower&NewsID=248583

NEPSE smiles at PM ouster

JUL 04 - The capital market responded positively to the resignation of Prime Minister

Madhav Kumar Nepal with the Nepal Stock Exchange Index (NEPSE) witnessing a

double digit growth last week.

NEPSE witnessed a gain of 11.39 points. The benchmark index that had opened at

459.52 points on Monday settled at 470.91 points on Thursday.

The sluggish secondary market since the last few weeks, bounced back with double

digit points last week as the market gained 15.16 points a day after the prime

minister’s resignation on Thursday. Although the latest surge in the market is being

seen as a hope for political stability following the prime minister’s resignation,

experts say economic factors remain equally responsible for the market performance.

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Jagadish Agrawal, a stock market expert told the Post the market’s self-correction

measure from the lowest level to the upward level might have backed Thursday’s

upsurge.

Birendra Raj Kharel, the chief of Pragyan Securities, said, ―The improvement in the

secondary market cannot be ruled out as long as the country heads towards political

consensus.‖ He said the market may see stability in the upcoming days.

Both of them ruled out the possibility of continuation of Thursday’s upswing in the

days ahead, citing ―unfavourable economic situation‖ looming large in the country.

Although the capital market witnessed a surge in the index, the number of shares

traded went down along with market turnover and number of transactions. It may be

due to the closure of the market for a day on the occasion of a public holiday.

Last week, the capital market saw a turnover of a mere Rs. 109.06 million against the

Rs. 143.61 million the previous week; a fall of 24.06 percent. Similarly, the secondary

market witnessed trading of 291,500 shares of 96 companies from 3,699 transactions.

For the second consecutive week, Asian Life Insurance Company saw the highest

number of transactions with it’s shares changing hands for 784 times.

Bank of Kathmandu registered the highest turnover Bhrikuti Vikas Bank led the bank

to a pole position in terms of highest number of shares traded.

http://www.ekantipur.com/2010/07/04/business/nepse-smiles-at-pm-ouster/317792/

POLITICS:

Parties make no headway in bilateral talks

July 3: The three major parties -- UCPN (Maoist), Nepali Congress and CPN-UML -

on Saturday held bilateral negotiations in a bid to form a national consensus

government. But they failed to make any substantive progress as the NC and UML

asked the Maoists to agree on concluding the remaining tasks of the peace process.

During a bilateral meeting with the Maoists Saturday afternoon, the NC asked the

Maoists to come up with a concrete work plan with a timeframe to accomplish the

remaining tasks of the peace process as agreed in the three-point deal, before forming

the new government.

NC leaders argued that since the prime minister has already stepped down as per the

agreement reached on May 28 it is now the turn of the Maoists to come up with a

concrete work plan for concluding the remaining tasks of the peace process including

management of the cantoned combatants, return of seized properties and disbanding

the paramilitary structure of the YCL (Young Communist League).

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According to NC Vice-president Gopal Man Shrestha, the Maoists begged for NC

support to form a national consensus government under their leadership, saying that

both the process of forming a new government and completing the remaining tasks of

the peace process can be taken ahead side by side.

The Maoists argued that they already agreed to passage of one-third of the total

budget and formation of a State Restructuring Commission, following the resignation

of the prime minister. ―Other remaining things can also be taken ahead

simultaneously with the formation of a new government,‖ Shrestha quoted the

Maoists as saying.

During the meeting, the Maoists repeated that that they were not in a position to

determine the number of combatants to be integrated into the security agencies as

demanded by the NC. They asked NC leaders not to land them in trouble by asking

them to determine the numbers without learning about the interests of individual

combatants.

NC leaders had asked the Maoists not to link the peace process with the formation of

a new government. They said they cannot trust the Maoists as they failed to abide by

past agreements.

Talking to media after the meeting, NC Vice-president Ram Chandra Poudel said they

forcefully raised the issue of completing the remaining tasks in the peace process

including management of Maoist combatants. ―They [Maoists] said they have taken

our demand seriously,‖ he said.

Poudel said they have agreed to hold further negotiations to arrive at a consensus

before the July 7 deadline given by President Dr Ram Baran Yadav for forming a

national consensus government. ―The issue of government leadership is as it was

before,‖ he said. ―We will hold a further round of negotiations.‖

Maoist Vice-chairman Narayan Kaji Shrestha told media that they held serious

negotiations on the issues of forming a national consensus government and

government leadership. ―We have agreed to form a national consensus government by

arriving at consensus on all contentious issues,‖ he said.

According to Shrestha, they told the NC that a majority government would not help

conclude the peace process and promulgate a new constitution.

Maoist-UML meet

Senior leaders of the Maoists and the UML held a separate meeting to arrive at

consensus on forming a new government, but failed to make substantive progress.

UML Chairman Jhalanath Khanal and senior leader Bharat Mohan Adhikari reached

the residence of Maoist Chairman Pushpa Kamal Dahal Saturday morning to hold

talks on government leadership. Maoist leaders Mohan Baidya and Baburam Bhattarai

were present during the meeting.

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Dr Bhattarai argued that the current trend among senior leaders to present themselves

as prime ministerial candidates would complicate the political deadlock. "Reaching a

political consensus would be impossible should each leader eye the post and seek to

make himself the consensus candidate," said Dr Bhattarai.

The Maoist vice-chairman, who is seen as a strong prime ministerial candidate,

argued that his party being the largest in the legislature-parliament should naturally

lead the new consensus government, and that would help the completion of the peace

process and constitution-drafting.

He said only a Maoist-led consensus government would be able to complete the peace

process. "We should attempt till the last hour to form a consensus government," he

said.

After the meeting, Khanal said the parties are having problems with the formation of a

national consensus government due to differences over who should lead it. "But we

will sort out the issues through talks," he said.

The UML chief argued that the disputes would be resolved within the deadline given

by President Yadav. The deadline for formation of a consensus government expires

Wednesday.

Maoist-MPRF meet

The Maoists also held talks with the Madhesi People´s Right Forum (MPRF) at

Singha Durbar on Saturday.

After the meeting MPRF Co-chair Jaya Prakash Gupta said his party would lend

support to a Maoist-led consensus government, but he argued that the Maoists should

also address the issues related to the peace process as demanded by other parties.

On the occasion, the Maoists asked MPRF to support them in forming a new

government. Maoist Vice-chairman Narayan Kaji Shrestha told media that they have

asked MPRF to forge an alliance of progressive forces to not let regressive forces gain

sway.

http://www.myrepublica.com/portal/index.php?action=news_details&news_id=20619

NC leaders turn down Maoist call for support to form govt

Nepali Congress leaders have made it clear to the Maoist leadership that their party is

not going to support the Maoist bid to form new government under its leadership.

During a meeting with Maoist leaders held at NC parliamentary party office in Singha

Durbar Saturday, the Maoist leadership pledged to move ahead with consensus and

urged the NC to support them to form new government. However, the NC leaders

reiterated that the Maoists should first of all implement the May 28 agreement

regarding the peace process, before claiming government leadership.

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NC vice president and parliamentary leader Ram Chandra Poude, who is projected as

one of the prime ministerial candidate, said the Maoists should be ready for the

management of their combatants at the earliest.

"Maoists were positive on the agenda of the PLA integration," Poudel told reporters

after the meeting.

Maoist chairman Pushpa Kamal Dahal represented his party in the meeting along with

Dr Baburam Bhattarai and Mohan Baidya, while acting president Sushil Koirala,

senior leader Sher Bahadur Deuba and Poudel were present from NC.nepalnews.com

03 July 2010

GENERAL:

‘Serious water woes’ in 20 yrs

JUL 03 –

Himalayan river basins in China, Bangladesh, India and Nepal will face massive

water depletion in the next 20 years, leading to mass exodus and decline in food,

according to a report.

During the Singapore International Water Week (SIWW) 2010 held from June 28 to

July 2, a report published by Strategic Foresight Group of India stated that due to

natural causes like glacial melting, the four countries including Nepal would lose

almost 275 billion cubic meters of annual renewable water in the next two decades,

more than the total amount of available water in Nepal at present.

Themed ―Sustainable Cities: Clean and Affordable Water‖, the SIWW focused on the

need for efficiency and cost effective solutions to address water problems in a

constantly changing environment.

Irrigation Minister Bal Krishna Khand was one of the 12,000 participants including

policymakers, industry leaders, experts, and practitioners to address challenges,

showcase technologies, discover opportunities and celebrate achievements in the

water world.

The report states that water scarcity and effects like desertification and soil erosion

would reduce rice and wheat yields in China and India by as much as 50 percent by

2050.

―This will create havoc in the global food market due to soaring prices. Water

depletion in the river basins would displace millions of people in the four countries by

2050,‖ mentioned the report.

The basins of the rivers, including Yellow River and the Yangtze in China and the

Ganges in India, are home to 1.3 billion people.

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There is a need of cooperation among the four nations in the management of river

basins, said Khand.

http://www.ekantipur.com/the-kathmandu-post/2010/07/03/nation/serious-water-

woes-in-20-yrs/210077/

MRP deal before new govt: MoFA

JUL 03 –

In a ―no-stone-left-unturned‖ approach, the Ministry of Foreign Affairs (MoFA) is

determined to complete the awarding of the bid concerning supply of Machine

Readable Passports (MRP) contract before the new government takes charge.

Officials say this is because it wants to ward off ―unnecessary political pressure‖ that

crippled the earlier bidding process.

Four international security firms have submitted their papers to supply the MRPs to

Nepal in a competitive global bidding process, a multimillion rupee project which

aims to fulfill Nepal’s international obligation of adopting the smart passport.

―We want to avoid any kind of political pressure and maneuvering regarding the MRP

deal which should also ensure and uphold the credit of the ministry. If we drag our

feet this time, it would be an irreparable injury,‖ said an official. The four

companies—De La Rue (UK), 3M (Singapore), Oberthur (France) and Perum Peruri

of Indonesia—have submitted the bid at MoFA.

The MoFA announced a fresh MRP bid on May 18 with a 45-day deadline, which

expired on Thursday to submit the applications for interested bidders.

―A day after the deadline expires, we will immediately begin evaluating the papers

and if we keep pace, within a week we will finish evaluating the documents,‖ the

official said. There is no doubt that we want to skip political maneuvering to avoid an

untoward situation in order to finish within this transition period, the official said.

Earlier, the bid was cancelled following a dispute that erupted between Foreign

Minister Sujata Koirala and Foreign Secretary Madan Kumar Bhattarai over the

specification issue. The minister wanted to change it but the Secretary opposed it

strongly. ―We will work within the time frame,‖ he said.

MoFA officials believe that the incumbent establishment may not push any agenda or

put political pressure as it is going soon and the coming government would be too

green about the matter. ―Before the new Foreign Minister assumes office, we will

settle the evaluation process and ask him to ratify the decision taken by the evaluation

committee headed by the Chief of Protocol,‖ the official said.

http://www.ekantipur.com/the-kathmandu-post/2010/07/03/top-story/mrp-deal-

before-new-govt-mofa/210070/

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Govt out to correct IAEA membership error

July 4: Nearly two years after acquiring membership of the International Atomic

Energy Agency (IAEA), the government has now begun preparations to legitimize the

membership.

Republica had reported on the illegal IAEA membership on February 7.

The Ministry of Science and Technology (MoST), after realizing that there had been a

blunder while acquiring the membership, has finally decided to follow through with

all the relevant provisions of the Treaty Act and the Constitution.

"There was an error while acquiring the membership two years ago," admitted

Rajendra Thapa, Under Secretary at MoST, adding, "We have already begun the

process of legitimize the membership."

According to him, MoST recently submitted a draft of its decision paper at the bills

committee of the cabinet for the necessary decision. "IAEA has already accepted our

membership and thus the membership cannot be canceled," Thapa said adding, "We

therefore sent the draft to the cabinet for necessary legal endorsement."

The bills committee of the cabinet will table the draft in parliament for its

endorsement.

The government not only failed to obtain parliamentary consent in this regard, it also

refrained from taking mandatory suggestions from the Ministry of Law and Justice

before acquiring the membership on July 8, 2008.

According to the Law and Justice Ministry, the government failed to follow

mandatory legal procedures before acquiring the membership. The ministry has

complained to the Office of the Prime Minister and Council of Ministers (OPMCM)

over the matter.

The Interim Constitution and the Treaty Act 1990 contain provisions relating to

acquiring such membership. ―The government has to take prior consent from

parliament before getting membership of any international agency,‖ reads the

constitutional provision.

Clause 4 of the Treaty Act 1990 also says that the government is required to take prior

consent from parliament.

Additionally, the government also failed to publish a notice in the Nepal Gazette after

acquiring IAEA membership.

―According to the Treaty Act we must meet all the required legal provisions before

acquiring membership," said Phanindra Gautam, co-spokesperson at the Ministry of

Law and Justice, adding, "The initiation of steps by MoST to legitimize the

membership is appreciated."

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The Law Ministry had also warned OPMCM and the Ministry of Foreign Affairs

(MoFA) about the ramifications.

The then Girija Prasad Koirala-led government, under a proposal of MoST, had

applied for IAEA membership without following the correct procedures.

IAEA has already conducted fact-finding research in Nepal and is preparing to launch

atomic and cancer-related projects here.

Interestingly, the government has already paid the required membership fees to IAEA.

According to MoST, the government paid altogether 11,000 euros in 2008 and 2009

as membership charges.

IAEA was set up in 1957 within the United Nations framework. The Agency works

with member states and multiple partners worldwide to promote safe, secure and

peaceful nuclear technology.

Draft prepared

Meanwhile, MoST has readied a draft nuclear bill with the support of the Law and

Development Initiative Nepal. MoST held a discussion on the draft at a program in

Kathmandu, Saturday.

http://www.myrepublica.com/portal/index.php?action=news_details&news_id=20624