R&D_NewsBrief_19thAug

R&D

Economic Research & Business Development

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Date: August 19, 2009

Highlights

• Nepal's prime minister arrived in India Tuesday at the start of a five-day trip, his first official visit to the country since his appointment in May. India has long been Nepal's closest ally and main trading partner and aides to Prime Minister Madhav Kumar Nepal said he would brief New Delhi on recent political developments and seek closer trade ties.

• Prime Minister Nepal busied himself with several meetings soon after landing in New Delhi. Nepal first attended a program organized by the Nepal Democracy Solidarity Group and then met senior leader of the Communist Party of India (Marxist), Sitaram Yechuri. In the evening, he attended an interaction program with the Nepali community organized by the Embassy of Nepal.

• The Chairman of the Nepal Communist Party- Unified Maoist Pushpa Kamal Dahal alias Prachanda has pointed out that the five day trip of Nepal’s Prime Minister Madhav Kumar Nepal to New Delhi will turn out to be a disgraceful event for Nepal.

• Prime Minister Madhav Kumar Nepal has said the demand of the Unified CPN (Maoist) to discuss the President's step of blocking the dismissal of former army chief Rookmangud Katawal is ill-intentioned.

• Prime Minister Madhav Kumar Nepal was to expand the cabinet before flying to New Delhi for a five-day goodwill visit, inducting at least one minister and some state and assistant ministers, but he had to defer the expansion plan as some ruling partners failed to finalise the names of their ministers.

• Foreign Minister Sujata Koirala took an eleventh hour decision not to accompany Prime Minister Madhav Kumar Nepal on the India visit, in a fit of anger over his refusal to appoint her deputy prime minister.

• One of the committees of the Constituent Assembly was witness to a rare scene on Tuesday. Nepali Congress (NC) lawmakers boycotted the meeting of the Committee to Determine Judicial System, accusing the Committee Chairman of opting for the wrong method to take decision in favour of the provision of reappointment of judges after the new constitution is introduced.

• Vice-President Paramananda Jha has decided not to take fresh oath in Nepali despite the Cabinet decision, which was passed yesterday. “Neither he will take fresh oath in Nepali nor will he resign. He is ready to face the consequences,” Mithilesh Kumar Singh, legal advisor to Jha told The Himalayan Times today.

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• Constituent Assembly (CA) Chairman Subash Nembang on Tuesday said the souring relationship among political parties has adversely affected the constitution-drafting process. He also urged the parties to form a high-level political mechanism to expedite the constitution-drafting process.

• The Nepal Sadbhavana Party (NSP) expelled Sarita Giri from the post of party chairman. Issuing a press statement on Tuesday, the party said that Giri worked against the mandate of the party’s general convention in October last year, during which she was elected the chairman.

• Maoist chairman Pushpa Kamal Dahal returned to Nepal wrapping up his nine-day trip to the UK, Russia and Belarus Tuesday. Dahal had gone to the UK on August 9 at the invitation of Samyukta Nepali Morcha to train his party supporters on the latest strategy adopted by the party after the central committee meeting.

• The Parliamentary Special Hearing Committee has approved the nomination of Sushil Chandra Amatya as the Nepali ambassador to Sri Lanka. The hearing committee unanimously endorsed Amatya's nomination Tuesday as no complaints were registered against him.

• Three years after it emerged from a decade-long civil war, Nepal is hamstrung by ineffective government and frustrated former combatants and needs lasting peace to develop, a United Nations report said.

• The last fiscal year has been a good year for Nepali commercial banks with their profits surging by 33.2 percent. The net profit of 26 commercial banks reached Rs. 14.16 billion in the fiscal year 2008/09 from Rs. 10.63 billion in the previous fiscal year.

• Aditya Birla owned Idea cellular India’s 3rd largest GSM service provider is now with the partnership with Nepal’s Mero Mobile to provide bilateral GPRS Roaming service w.e.f.14th August 2009.

• The talks between petrol pump workers and the petroleum dealers held in labour ministry Tuesday has ended in an agreement. Petrol pump workers, who had been disrupting distribution of petroleum products from all private pumps across the country since Saturday, have agreed to resume distribution from Wednesday after the petroleum dealers agreed to fulfill some of their demands.

• The government is mulling over measures to better regulate the cable television market by making it mandatory for foreign television channels to register their businesses here. If this proposal translates into law, international channels like Star, Sony and CNN will have to get ´downlink´ licenses to broadcast their contents in Nepal.

• Skyrocketing price of sugar has forced the government to intervene in the market and the market has started selling sugar at a lower price through Salt

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Trading Corporation (STC) from Monday. However, consumers are not satisfied with the distribution channel applied by STC and they are not really sure that this action will reduce the price.

• The government is formally requesting India to lift ban on export of rice and wheat to Nepal during Prime Minister Madhav Kumar Nepal´s India visit in a bid to fight looming food shortage and rein in the galloping food prices in the market.

• Federation of Nepalese Chambers of Commerce and Industry (FNCCI) president Kush Kumar Joshi along with 20 representatives of FNCCI today left for Delhi. According to a press statement, the team visiting Delhi comprises representatives of hydropower, contractors, engineers, readymade garments, pashmina, tea, transport, hotel and restaurant, tourism, information and technology, medicine, herbs, banking and insurance sectors.

• The Nepal Stock Exchange (NEPSE) Tuesday fell by 0.66 point. All the sub-indices suffered a loss except for the development bank sector. The hydropower sector lost the most dropping 12.88 points followed by finance, banking and insurance.

• Nepal Army (NA) is preparing to bring two of its grounded MI-17 helicopters into full operation within three months. The overhauling cost will be sanctioned in the new budget to be finalized within this month. The 11 Number Brigade has sought US$700,000 overhauling cost for each of the aircraft.

POLITICS:

Nepal PM makes first trip to India

NEW DELHI — Nepal's prime minister arrived in India Tuesday at the start of a five-day trip, his first official visit to the country since his appointment in May.

India has long been Nepal's closest ally and main trading partner and aides to Prime Minister Madhav Kumar Nepal said he would brief New Delhi on recent political developments and seek closer trade ties.

Relations were strained last year when the Maoists, who fought a decade-long civil war with Nepal's army before a 2006 peace agreement, formed a government following a surprise election win.

Their leader, Pushpa Kamal Dahal, broke with tradition by visiting China before India, and the ultra-leftists have since accused New Delhi of interfering in Nepal's affairs and bringing about the fall of their government.

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"We don't have to play the Chinese card against India and the Indian cards against China. Why do that?" the new Nepali PM told The Hindu newspaper in an interview published Tuesday.

Nepal took charge of the world's youngest republic in May after Maoist leader Dahal resigned as prime minister in a row over the head of the army, plunging the nation into political chaos.

"(My visit) will focus on strengthening bilateral ties and cooperation between the two countries," the premier said ahead of his departure.

The Hindu newspaper also questioned him about a perceived imbalance in the bilateral relationship, pointing out that Nepali PMs regularly visit New Delhi but that the last Indian PM to travel to Kathmandu was I.K. Gujral in 1997.

"The political instability here may be one of the reasons. And we may not have tried hard enough to invite friendly-country prime ministers to come," Nepal replied.

He will hold talks with his Indian counterpart Manmohan Singh and Sonia Gandhi, leader of India's ruling Congress party, in New Delhi before heading on to the country's trade hub, Mumbai, on Friday.

India provides a vital lifeline to the landlocked Himalayan nation as its sole supplier of fuel. The two sides share an open border and besides the economic ties also share close cultural and religious links.

The coalition government that took over Nepal in May is widely seen as weak because it does not include the Maoists, the biggest party in parliament.

Source: www.google.com/hostednews

PM arrives in Delhi with multiple agenda

Bilateral negotiations to begin Wednesday

Prime Minister Madhav Kumar Nepal arrived here this afternoon on his five-day visit to India.

Prime Minister Nepal busied himself with several meetings soon after landing in New Delhi. Nepal first attended a program organized by the Nepal Democracy Solidarity Group and then met senior leader of the Communist Party of India (Marxist), Sitaram Yechuri. In the evening, he attended an interaction program with the Nepali community organized by the Embassy of Nepal.

The prime minister is scheduled to begin official bilateral negotiations with Indian leaders Wednesday morning and will attend a banquet hosted by Prime Minister of India, Dr Manmohan Singh, in the evening.

Though Prime Minister Nepal himself has termed his India trip a "goodwill visit", there are several issues on the table for negotiations. The two sides are expected to

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finalize and sign three treaties -- on trade, investment protection and avoidance of double taxation.

The Trade Treaty, which will basically upgrade the existing treaty, is expected to exempt Nepali exports from all sorts of non-tariff barriers and other additional duties and thus provide an impetus to the sluggish Nepali export to the Indian market. Nepal currently suffers a huge trade imbalance with India that has doubled in the last five years to over Rs 108 billion—a whopping 16 percent of the Gross Domestic Product.

Among the development projects up for negotiations, Prime Minister Nepal is hoping that India would agree to take on a high-profile project to clean the Bagmati River and its 26 tributaries in Kathmandu Valley. The prime minister had requested his Indian counterpart Dr Singh to consider the project when the two met on the sidelines of the NAM summit in Egypt last month and had secured a positive response from the Indian premier. Immediately after the NAM summit a team of Indian experts flew to Kathmandu and studied the feasibility of the project. "The team has estimated the cost of the project at Rs 19 billion and we are optimistic India will agree to take it up," said a top aide to Mr Nepal.

India and Nepal are also likely to push forward the DPR process of the Pancheshwar Project, but they are unlikely to put anything concrete on paper because of lack of political consensus in Nepal over the project.

Though Prime Minister Nepal looked a little miffed over Foreign Minister Sujata Koirala opting out of his delegation at the last-minute, his top aides said he was confident about the success of the India visit and the future of his government. However, there is some concern in New Delhi about how Prime Minister Nepal’s rejection of NC President Girija Prasad Koirala’s request to upgrade his daughter to the post of deputy prime minister plays out in the future.

Earlier, before flying to New Delhi, the prime minister told reporters at Kathmandu airport that he will not sign any "unequal" treaty with India. The prime minister said he would sign two treaties -- Trade Treaty and Treaty to Control Unauthorized Trade -- with India only if both the countries agree on the provisions of the treaties.

Source: www.myrepublica.com

Date: 08/19/2009

I met V.I. Lenin in Moscow: Nepal Maoist Chief Prachanda

The Chairman of the Nepal Communist Party- Unified Maoist Pushpa Kamal Dahal alias Prachanda has pointed out that the five day trip of Nepal’s Prime Minister Madhav Kumar Nepal to New Delhi will turn out to be a disgraceful event for Nepal.

Completing a week long pleasure trip to Europe, talking to journalists at the Tribhuwan International Airport, August 18, 2009, the former Prime Minister of the country commenting on the goodwill trip of the PM to India said that the trip will be a disgraceful and pathetic drama ultimately for the Nepali nation and its people.

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He also said that the Foreign Minister’s last minute cancellation of her trip to India accompanying the prime ministerial delegation was also a shameful event for the country on the diplomatic plane.

“Foreign Minister’s presence at the official trip was mandatory however her (Sujata Koirala) absence reveals the intensified feud among the government coalition partners”, Dahal speculated.

“The event is a proof of the fact that this government has no peoples’ mandate”, he declared.

The former rebel leader had participated in a cadre training program in London and rumor had it that he had participated in the meeting of the Revolutionary Left Wing- the global body for revolutionary communists.

After the London event Dahal along with his consort Sita and son Prakash had left for Moscow, Russia.

“I met Lenin in Moscow”, said Dahal.

“I was shown his body in a huge screen”, Prachanda said.

“A lot of people visit the Lenin mausoleum”, said an energized Dahal, “I was also informed that people visit the mausoleum in great numbers which continues to increase each year.”

Source: www.telegraphnepal.com

Maoist demand ill-intentioned: PM Nepal

Prime Minister Madhav Kumar Nepal has said the demand of the Unified CPN (Maoist) to discuss the President's step of blocking the dismissal of former army chief Rookmangud Katawal is ill-intentioned.

In an exclusive interview with the Indian broadsheet daily, Hindu, on the eve of his India visit, Monday, PM Nepal said, we don't see any good intention of the Maoists on this (the Maoist demand).

"They still have an insurgent mindset, extreme left ideological remnants in their minds. Until and unless they get rid of all these ideological dogmas and all kinds of non-democratic and undemocratic thinking, it will be very difficult to address their concerns," said PM Nepal.

Saying the interim constitution prohibits any debate on the President's decision at the parliament as demanded by the Maoists, PM Nepal said, the Maoists could move an impeachment motion against the President if they want to discuss his decision.

Despite this, Nepal claimed the he had adopted utmost flexibility in fulfilling the Maoist demands.

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Whatever is needed to assure the Maoists can be done. They were asking to see General Katawal retire smoothly. That was done. There were these rumours about him extending his term, keeping him as adviser to president, etc. But he is not there anymore. So we have taken positively their concerns and addressed them, Nepal said.

However, Nepal clarified not all demands of the Maoists could be addressed saying their intention was not clear.

We need to address the serious concerns and sensitivities of the Maoists but we cannot fulfill all their demands and aspirations, he said.

We are not fully convinced that they have only one demand before us, they might raise another demand once the present demands are met, he added.

"We had an agreement that they would cooperate in the budget session but they have gone back on it. This shows the extremist line is dominating in the Maoist party. And we should not just bow down before that extreme left opinion," PM Nepal said.

On the army integration, PM Nepal said, the cantonments should be closed before the constitution is launched. He did not elaborate how the combatants would be integrated in the army or security agencies.

PM Nepal said he deserved to chair the Army Integration Special Committee (AISC) as he was the PM and that it would not be proper for the UCPN-M to chair the committee as it was the party whose combatants had to be managed.

"It will smooth the way to do all things properly if I am there, if a third person takes charge of running the committee. This will help the Maoists," Nepal said.

Nepal also claimed the present government was the national government as it had a comfortable majority in the parliament and a support of 22 parties in the Constituent Assembly.

He said, the Maoists were welcome to join the government, but he would not step down for the sake of so-called national government.

Nepal reiterated his India visit would only be a goodwill visit. He said, agreements on development projects could not be signed due to lack of consensus back home.

The PM said, Nepal should adopt a pragmatic strategy in its relation with Nepal and China. Playing a China card or an India card would only be a short-term strategy, and not too good to Nepal, he added.

Source: www.nepalnews.com


Cabinet expansion deferred; FM Koirala expecting promotion to DPM

The sixth expansion of the UML-led coalition cabinet was deferred on Tuesday due to "internal differences" in some ruling parties.

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Prime Minister Madhav Kumar Nepal was to expand the cabinet before flying to New Delhi for a five-day goodwill visit, inducting at least one minister and some state and assistant ministers, but he had to defer the expansion plan as some ruling partners failed to finalise the names of their ministers.

The new ministers will be from Madhesi Janadhikar Forum (Loktantrik), Terai Madhesh Loktantrik Party and Sadbhawana Party.

Sources said Foreign Minister Sujata Koirala, who leads the Nepali Congress team in the government, is expecting promotion to Deputy Prime Minister and that Prime Minister Nepal has given his word to NC president Girija Prasad Koirala for her promotion.

FM Koirala was to accompany the Prime Minister during his Delhi trip, but she cancelled her visit at the eleventh hour. Foreign Ministry officials cited health problem behind the cancellation of her visit, but sources described it as an expression of discontent at the decision to put off the cabinet expansion.



Denied DPM, Sujata opts out of India trip

Foreign Minister Sujata Koirala took an eleventh hour decision not to accompany Prime Minister Madhav Kumar Nepal on the India visit, in a fit of anger over his refusal to appoint her deputy prime minister.

Foreign Minister Koirala struck her name off the prime minister´s delegation list saying she was unwell with ´vomiting´ and ´diarrhea,´ according to sources close to her. However, Nepali Congress (NC) sources said the ´real´ reason behind the foreign minister´s last-minute withdrawal from the visit was the prime minister´s refusal to appoint her deputy prime minister as demanded by Girija Prasad Koirala.

The sources said NC President Koirala had asked Nepal during their meeting Monday to appoint Sujata deputy prime minister before leaving for India.

Nepal along with his political advisor Raghuji Pant and Home Minister Bhim Rawal had reached Koirala´s residence at Maharajgunj on a courtesy call before the India visit. NC leader Krishna Sitaula was also present during the meeting.

“Even the third largest party has been given a deputy prime ministership, but the largest party in government has been denied that post. Nepali Congress is dissatisfied,” a source quoted Koirala as telling Nepal. “Do address the issue before your visit to India.”

Nepal then gave a diplomatic answer saying he would decide after holding discussions with his party and collation partners.

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Sources said Prime Minister Nepal refused to appoint Koirala deputy prime minister as UML Chairman Jhala Nath Khanal told him they cannot give in to NC President Koirala´s demand.

Meanwhile, NC Central Committee members have taken Sujata´s last minute decision not to accompany the prime minister to India seriously.

NC Vice President Gopalman Shrestha, CC members Gobinda Raj Joshi and Arjun Nara Singh KC and others, raised the issue during the CC meeting Tuesday.

The CC members vented anger, asking whom the party´s ministers were answerable to -- Parliamentary Party, Central Working Committee or someone else.

As all CC members present in the meeting expressed ignorance about this development, Parliamentary Party leader Ram Chandra Poudel was asked to furnish a reply about Sujata´s decision.

The CC members have asked party Acting President Sushil Koirala and PP leader Poudel to furnish a reply at the CC meeting scheduled Wednesday after establishing if party president Koirala had made such a demand of the prime minister.


Date: 08/19/2009

Nepal invites Yechury, asks him to talk to Maoists

NEW DELHI: Nepalese PM Madhav Kumar Nepal on Tuesday sought the help of CPM leader Sitaram Yechury in solving the current imbroglio in the Himalayan country.

In his meeting with Yechury, Nepal invited the CPM leader to his country and asked him to speak to the Maoist leadership. After the meeting, Yechury said he was likely to go to Nepal after former PM Pushpa Kamal Dahal ‘Prachanda’ returned from Europe. Prachanda had resigned after his attempt to remove the army chief was blocked by the president.

Yechury, accompanied by Rahul Baruah of South Asia Foundation, told Nepal that the first priority for the country should be to meet the May 2010 deadline to finalise the constitution. “Every political party including Maoists should be involved in the country’s transition to republic. Once the constitution is made, then political parties should fight for political space,” Yechury said.

Source: timesofindia.indiatimes.com

Serious fissure surfaces in CA judiciary committee

One of the committees of the Constituent Assembly was witness to a rare scene on Tuesday. Nepali Congress (NC) lawmakers boycotted the meeting of the Committee

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to Determine Judicial System, accusing the Committee Chairman of opting for the wrong method to take decision in favour of the provision of reappointment of judges after the new constitution is introduced.

NC lawmakers boycotted the meeting after committee Chairman Prabhu Sah, a UCPN (Maoist) lawmaker, announced that the provision for reappointing judges had been endorsed by the committee as majority of CA members had spoken in its favour. The CPN-UML attempt at mediation went in vain after Sah conducted voting in the committee despite the absence of NC members.

Among its 43 members, 32 were present in Tuesday’s meeting. Twenty one lawmakers put their signatures supporting the reappointment of judges after NC boycotted the meeting. Among them, 17 lawmakers belong to Maoists and two belong to UML. CA members are not obliged to respect the party whip in the CA. Maoists are in favour of reappointment of judges while NC and UML support the provision of fresh oath of office and secrecy for judges after the promulgation of the new constitution.

“The chairman declared the proposal endorsed by the committee without presenting the proposal for decision. We left the meeting because we disagreed with the procedure,” said NC member Radhe Shyam Adhikari. He accused Sah of acting hastily on the proposal as Maoist CA members outnumbered those of other parties.

After NC’s boycott, UML CA member Ramnath Dhakal said the issue falls under the theme of transitional period that is under the jurisdiction of the Constitutional Committee (CC) and proposed further discussion with the CC before reaching a decision. However, Maoist CA member Agni Sapkota opposed the proposal demanding immediate vote. Sapkota said he was ready to “debate at the international level that the issue of reappointment of judges was under the jurisdiction of the committee.”

“The chairman called for voting though he had already announced the meeting had concluded for the today. He didn’t even mention it was the new meeting,” said lawmaker Dhakal adding that the decision process should be corrected.

Chairman Sah refuted the allegations and claimed he had adopted correct procedures. “We had previously agreed that the committee could take a decision based on verbal agreement among lawmakers,” he said.

Source: www.kantipuronline.com


VP not to take oath in Nepali

Vice-President Paramananda Jha has decided not to take fresh oath in Nepali despite the Cabinet decision, which was passed yesterday.

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“Neither he will take fresh oath in Nepali nor will he resign. He is ready to face the consequences,” Mithilesh Kumar Singh, legal advisor to Jha told The Himalayan Times today.

According to Singh, the Vice President received the Cabinet decision, urging him to take fresh oath in Nepali as per the order of the Supreme Court that was issued on July 24. “We’ll submit our explanation to the Supreme Court (SC),” he added. The matter comes up for hearing in the apex court on August 23.

The SC had directed President Dr Ram Baran Yadav, Vice President Jha and the government to explain within seven days whether the Veep will take fresh oath in Nepali. “The Vice-President is awaiting the seventh amendment to the Interim Constitution, 2007,” added Singh.

Source: The Himalayan Times

Date: 08/19/2009

‘Speed up statute-making process’

Constituent Assembly (CA) Chairman Subash Nembang on Tuesday said the souring relationship among political parties has adversely affected the constitution-drafting process. He also urged the parties to form a high-level political mechanism to expedite the constitution-drafting process.

Talking to reporters at his office, he said the thematic committees of the CA are taking a long time to finalise their preliminary draft and concept papers because the top leaders of the major political parties are giving less priority to the new constitution. “The relationship between political parties is souring and it appears that they are deviating from their main responsibility,” he said.


Date: 08/18/2009

Sadbhavana gives Sarita boot

The Nepal Sadbhavana Party (NSP) expelled Sarita Giri from the post of party chairman.

Issuing a press statement on Tuesday, the party said that Giri worked against the mandate of the party’s general convention in October last year, during which she was elected the chairman.

The press release--signed by NSP Deputy General Secretary Bikas Tiwari and Treasurer Kumarnath Mishra of national working committee among others--also accused Giri of turning the party into an NGO for her “personal benefits”.

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“We want to appeal to all that we have been running the party following the path of our founder chairman late Gajendra Narayan Singh and leader Baba Ramjanm Tiwari to earn identity, respect, equality, democracy, freedom and federalism,” stated the release.


Date: 08/18/2009

Maoist chairman Dahal returns from Europe

Maoist chairman Pushpa Kamal Dahal returned to Nepal wrapping up his nine-day trip to the UK, Russia and Belarus Tuesday.

Dahal had gone to the UK on August 9 at the invitation of Samyukta Nepali Morcha to train his party supporters on the latest strategy adopted by the party after the central committee meeting.

During his visit, Dahal addressed interaction programmes organised by various Nepali organisations in UK, Belarus and Russia.

Speaking to reporters on his arrival at the Tribhuvan International Airport, Dahal said the Nepali Diaspora in Europe wants a national government under Maoist leadership. "They are of the opinion that peace process cannot reach a logical conclusion without a Maoist-led government," he added.

He was accompanied by his spouse Sita and son Prakash during the trip.

Former Prime Minister Dahal, who returned to Nepal shortly after Prime Minister Madhav Kumar Nepal left for India, said he would strive to form a national government under the leadership of his party.

Stating that there is a possibility of serious political confrontation if the current impasse persisted, Dahal said he would start dialogue with leaders of other parties to find a consensus.

He also argued that the stalemate in the parliament is not because of his party but because of the refusal of the ruling coalition to debate the President's move in the House.



Hearing committee nod to Amatya's appointment as envoy to Sri Lanka

The Parliamentary Special Hearing Committee has approved the nomination of Sushil Chandra Amatya as the Nepali ambassador to Sri Lanka.

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The hearing committee unanimously endorsed Amatya's nomination Tuesday as no complaints were registered against him.

Amatya, a UML leader, had vacated his Constituent Assembly seat for current Prime Minister Madhav Kumar Nepal, who had lost election from his constituencies in Kathmandu and Rautahat.

The previous meeting of the parliamentary panel had refused to conduct hearing on the nomination of former chief secretary Bhoj Raj Ghimire as the ambassador to Canada and decided to seek clarification from the Ministry of Foreign Affairs as to why the ambassadorial nomination was made before establishing the Nepali mission in Canada.



POLICY:

Pakistan-Nepal Relations: Perspectives and Prospects

Developing mutually beneficial relations with Nepal is an important facet of our Foreign Policy. Based upon the principles of peaceful co-existence, the relations between Pakistan and Nepal have continued to grow in various spheres. Pakistan and Nepal live in the shade of the same chain of lofty mountains whose rivers and springs nourish our fertile lands. Common geographical, historical and cultural facets land both countries a promising potential to strengthen their bilateral relations.

Within five years of independence, Pakistan developed strong and friendly relations with Nepal.

Initial contact between the two countries began in 1952 at the Colombo Plan meetings and the Bandung Conference in 1955. Subsequently, Foreign Minister Hamid-ul-Haq Chaudhary participated in the coronation ceremony of King Mahendra in 1956.

Formal diplomatic relations between Pakistan and Nepal were established in March 1960 followed by a state visit to Pakistan by King Mahendra in September 1961. Numerous subsequent state visits made by the top leadership of both countries since then, helped cement friendly ties between the two countries even further.

Pakistan and Nepal share similar views on regional and international issues. Pakistan supported Nepal’s admission to the UN in 1955 and subsequently it’s candidature for the non permanent seat in the UN Security Council in 1968.

Pakistan and Nepal are important members of SAARC. They share the common vision of promoting this regional organization to the benefit of more than a billion people living in South Asia.

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Given the excellent relations and the shared desire to expand mutually beneficial co-operation, several agreements have been signed between Pakistan and Nepal. Pakistan and Nepal have in place the Annual Bilateral Consultations at the level of the Foreign Secretaries which has helped in the smooth functioning of our bilateral relations.

A joint economic Commission was established under an Agreement signed by the Finance Minister of Pakistan and Nepal in 1983. The Commission co-chaired by the Finance Minister held its first meeting at Kathmandu in 1983 and second at Islamabad in 1984. In the last 25 years, the efforts of the Commission have resulted in signing of agreements in the field of agriculture, air services and trade. The Nepalese Finance Minister is expected to lead a delegation to Islamabad in the near future for the next session of the Commission.

Under the Cultural Agreement of 1970, the Government of Pakistan has been providing educational facilities, training and scholarships to Nepalese students in the banking, agriculture, medicine and engineering sectors.

The cordiality and sprit of friendship at the political level is also reflected in our defence ties. Our two militaries enjoy good interaction. Pakistan imparts training to personnel of both arms of the Nepalese Military. To-date 97 Nepalese pilots and aeronautical engineers have received training in Pakistan. Moreover a number of officers of the Nepalese Army are trained every year in the training institutions of the Pakistan Army. During 2008, around 40 officers of Nepalese Army attended training courses in various institutions of Pakistan.

I feel proud to say that General Rookmangud Katwal the outgoing Army Chief of Nepal is also a graduate of our National Defence College.

As a sincere friend, Pakistan has been assisting Nepal in other ways as well. Besides providing ambulances and medical equipment to the hospitals in Nepal, the most important donation from Pakistan was the 50 bed Bharatpur Eye Hospital in Chitwan which was built about 21 years ago and is catering to the needs of about 1.5 million people in Nepal.

Let me now update you on some of the recent developments in Pakistan-Nepal bilateral relations.

Our top leadership has met twice in less than a year. President Zardari and former Prime Minister Prachanda met on the sidelines of the last UN General Assembly Session in September 2008. Recently, Prime Minister Gillani met Prime Minister Madhav Kumar Nepal on 16 July on the sidelines of NAM Summit at Sharm-al-Sheikh.

A Trade Agreement between Pakistan and Nepal was signed in 1962. A fresh Agreement was concluded in 1982 where by both countries accorded Most Favoured Nation (MFN) status to each other. However, bilateral trade remains insignificant at around US$ 2 million and needs to be enhanced.

Our two Foreign Secretaries held the last round of the Annual Bilateral Consultations in June 2009 in Kathmandu. During the meeting, the two Foreign Secretaries

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reviewed the entire gamut of Pakistan-Nepal relations. They decided to comprehensively upgrade the bilateral relationship and in this context agreed on the essential elements of a shared strategy to take Pakistan-Nepal relations to new heights.

The Foreign Secretary during his call on Prime Minister Mr. Madhav Kumar Nepal delivered a message from the Prime Minister of Pakistan with a cordial invitation to visit Pakistan. He also conveyed my invitation to the Foreign Minister of Nepal, to visit Pakistan.

So you can see a solid sense of commitment on part of both the countries to further enhance the bilateral relations.

Let me conclude by stressing the Pakistan-Nepal bilateral relations will get further strengthened in the years to come. The relations between our two countries are based on the principles of non-interference in each other, affairs and respect for each other’s territorial integrity, sovereignty and independence.

These guiding principles have always been our terms of reference with regard to our relations with Nepal and will continue to be so in future, ensuring everlasting bilateral relationship.

Source: telegraphnepal.com

Ineffective govt stifles Nepal growth - UN report

KATHMANDU, Aug 17 (Reuters) - Three years after it emerged from a decade-long civil war, Nepal is hamstrung by ineffective government and frustrated former combatants and needs lasting peace to develop, a United Nations report said.

The mountainous nation emerged in 2006 from a decade-long Maoist insurgency that resulted in the deaths of more than 13,000 people, displaced thousands, ravaged infrastructure and slowed development in sectors such as health and education.

The Nepal Human Development Report 2009 said the underlying causes of conflict -- such as poverty and discrimination on the basis of caste and ethnicity -- remained unresolved.

"Ineffective government, internally displaced people and frustrated combatants are some of the outcomes of conflict and these have yet to be tackled," the UN said in a statement.

"Deepening democracy and strengthening the rule of law are critical in order to give peace a chance of success," it said.

Nepal's peace process has been stalled since May when the Maoists walked out of the government over their plans to fire the country's army chief and disagreements about the future of more than 19,000 Maoist fighters housed in U.N. monitored camps.

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A specially elected assembly is now preparing Nepal's first constitution after the abolition of the monarchy, part of a peace deals that proposes to restructure the state and include marginalized and underprivileged groups in the government.

When it comes to the Human Development Index, Nepal ranks lowest in south Asia with a value of 0.534 on a scale of 1, placing the Himalayan nation 142 out of 176 countries.

Life expectancy in Nepal is 63 years, while the literacy rate is 52 percent. Life expectancy for the dalits, or those at the bottom of the Hindu caste system, and other disadvantaged groups like ethnic minorities, Muslims and women was much lower.

"The message in this report is that the 'absence of war' will alone neither assure a lasting peace nor deliver prosperity," said Robert Piper, UN resident representative in Nepal.

Source: www.reuters.com

BANKING:

Commercial banks post massive profits

The last fiscal year has been a good year for Nepali commercial banks with their profits surging by 33.2 percent.

The net profit of 26 commercial banks reached Rs. 14.16 billion in the fiscal year 2008/09 from Rs. 10.63 billion in the previous fiscal year.

The government-owned and some other private banks, who are suffering from bad loans, succeeded in recovering substantial amount, pushing the overall profits of the commercial banks up.

The unedited fourth quarterly reports of most of the banks show they have made substantial profits in the year 2008/09. It was initially feared that the profitability of the commercial banks might be affected due to the global economic crisis.

The handsome profit the banks have posted in the fourth quarterly report shows that the global economic crisis has not made a serious impact on Nepal's banking sector. "It was a good fiscal year for commercial banks," said Sujit Mundal, CEO of Standard Chartered Bank.

The top names in the Nepali banking sector like Standard Chartered Bank, Nabil Bank, Nepal Investment Bank, Himalayan Bank, Everest

Bank, Nepal Industrial and Commercial (NIC) Bank and others have witnessed a notable growth in profits in the last fiscal year.

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Twenty-three out of 26 commercial banks have registered more profits this time around compared to that of previous year. Only three banks have reported a negative growth. "The net profit has gone up as some of the ailing banks have recovered their bad loans," said Sashin Joshi, CEO of NIC Bank.

There are five commercial banks who have posted over Rs. 1 billion as net profit in the last fiscal year. Nepal Bangladesh Bank (NBB) had the highest profit of Rs. 2.47 billion up to the last quarter, followed by Rastriya Banijya Bank (RBB) and Agricultural Development Bank (ADBN) which made profits of Rs. 2.03 billion and Rs. 1.23 billion up to the last quarter, respectively. The profits of NBB, RBB and ADBN increased substantially due to write back of their non-performing loans. NB Bank has recovered Rs. 1.3 billion loan from the NB Group, the promoters of the bank over the last fiscal year.

The other two banks who have crossed the billion mark are Nabil Bank and Standard Chartered Bank with a net profit of Rs. 1.03 billion and Rs. 1.02 billion respectively. Nabil Bank has for the first time overtaken Standard Chartered Bank in terms of net profit.

Compared to the period up to the fourth quarter of last year, the profit of Nabil Bank went up by 38.12 percent while Standard Chartered Bank posted an increase of 25.17 percent. Likewise, Nepal Investment Bank, Nepal Industrial and Commercial (NIC) Bank and the Bank of Kathmandu saw their profits go up by 31.26 percent, 30.27 percent and 27.66 percent, respectively.

In terms of percentage growth, Bank of Asia and Prime Bank saw the biggest growth but these being new banks had a much smaller base to start with.

However, bankers believe that the profitability of the commercial banks might decline from next year onwards. Sashin Joshi has a word of caution: "With increasing competition and decreasing margins, the profitability of the banks on their equity will decline in the coming days."

Profit in the last fiscal year

Banks in Rs. millions

Nepal Bangladesh Bank 2472.189

Rastriya Banijya Bank 2032.229

Agriculture Development Bank 1237.990

Nabil Bank 1031.053

Standard Chatered Bank 1025.115

Nepal Investment Bank 914.575

Nepal Bank Limited 794.400

Himalayan Bank 742.425

Everest Bank 624.000

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Bank of Kathmandu 461.507

NCC Bank 410.621

Nepal SBI Bank 334.350

Lumbini Bank 332.207

NIC Bank 316.646

Kumari Bank 258.462

Siddhartha Bank 215.602

Laxmi Bank 186.169

Prime Bank 141.776

DCBL Bank 103.055

Sunrise Bank 102.50

Citizens Bank 95.810

Machhapuchhre Bank 92.935

KIST Bank 88.376

Bank of Asia 61.510

NMB Bank 61.339

Global Bank 30.488


Date: 08/18/2009

BUSINESS & ECONOMY:

Now Roam In Nepal With Idea Cellular

Aditya Birla owned Idea cellular India’s 3rd largest GSM service provider is now with the partnership with Nepal’s Mero Mobile to provide bilateral GPRS Roaming service w.e.f.14th August 2009.

Mero Mobile, owned by Spice Nepal Private Ltd. is the 2nd largest mobile operator of Nepal this agreement enables subscribers of both operators (IDEA Cellular & Mero Mobile) to enjoy continued data services while on roaming in either of the two countries.

At present Mero Mobile has commercial roaming partnership with 147 network operators in 63 countries.

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Mero users can roam on selected circles of IDEA. The circles are: Delhi, Maharashtra, UP West, Gujarat, Madhya Pradesh & Chattisgarh, Kerala, Haryana, Himachal Pradesh, UP East, Rajasthan, Andhra Pradesh, Punjab & Karnataka. While Mumbai, Orissa and Bihar & Jharkhand circles are out of agreement.

Source: http://telecomtalk.info

Petrol pump workers, dealers reach agreement; distribution to resume from

Wednesday

The talks between petrol pump workers and the petroleum dealers held in labour ministry Tuesday has ended in an agreement.

Petrol pump workers, who had been disrupting distribution of petroleum products from all private pumps across the country since Saturday, have agreed to resume distribution from Wednesday after the petroleum dealers agreed to fulfill some of their demands.

Petroleum dealers have agreed to implement the labour act in all petrol pumps of Bagmati zone for now and implement the act gradually in other petrol pumps across the country.

As per the labour act, petrol pump workers will get a salary of at least Rs 4600 per month and an overtime pay if they are employed for more than eight hours a day. They will also get an annual bonus equivalent to months' pay before Dashain.

Likewise, the petroleum dealers have also agreed to set up an accident insurance of Rs 200,000 and a medical insurance of up to Rs 50,000 to each worker.

According to the agreement, petrol pump workers will be given a separate set of dress to be used at work and an employment letter.



Govt to raise license fee for cable businesses

The government is mulling over measures to better regulate the cable television market by making it mandatory for foreign television channels to register their businesses here.

If this proposal translates into law, international channels like Star, Sony and CNN will have to get ´downlink´ licenses to broadcast their contents in Nepal

The draft of new National Broadcasting Regulation states that licenses to air paid channels containing advertisements will be issued upon payment of Rs 50,000. Paid channels sans advertisements will have to furnish a deposit of Rs 25,000 to get license.

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In other words, channels like Star Plus that contain advertisements will have to pay Rs 50,000 to air their programs in Nepal, while paid channels devoid of advertisements, like Star Movies, will have to pay Rs 25,000 to get a license, if the draft regulation is endorsed. Currently, paid international channels are airing their contents for free via distributors, who have exclusive rights to distribute the programs. To bring authorized distributors of paid channels into the legal ambit, the new regulation also aims to make it mandatory for them to get licenses before selling or broadcasting the contents here. If the proposal is endorsed by the Parliament, authorized distributors, which sell programs of international channels, will have to get licenses after paying Rs 25,000 for each channel within six months of enactment of the bylaw. As per the existing bylaw, Rs 25,000 has to be paid by distributors for distributing up to 10 channels, though this provision has not come into practice.

However, no changes have been made in license fee for cable television companies that purchase international channels from distributors to broadcast them here. This means a deposit of Rs 100,00 for cable companies distributing more than 10,000 lines and Rs 5,000 for cable companies distributing up to 500 lines have been kept intact.

But while renewing the license, an annual broadcasting fee equivalent to two percent of the income generated or ten percent of the net profit or saving, whichever is higher, has to be paid by cable companies, if the draft regulation is endorsed. This provision also applies to all broadcasting companies, including domestic television channels, and FM and other radio stations, among others. At present, fee equivalent to four percent of the total income is being collected from broadcasting companies.

The government is also planning to regulate direct-to-home (DTH) satellite broadcasting by making it mandatory for companies providing such service to acquire licenses before distributing their services. The draft regulation has slapped a license fee of Rs 25,000 per channel on DTH satellite service, which provides more entertainment options than cable operators.

The draft regulation also states that companies wishing to broadcast IPTV -- television programs using internet protocol (IP) -- platform can do so upon depositing a license fee of Rs 25,000 per channel.

The draft regulation -- which also includes a provision of selling the frequency on auction in case of shortage -- is now being sent to the law ministry. After this, it will be forwarded to the parliament for final approval.


Date: 08/19/2009

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Govt bid to bring down sugar price

STC does not have enough dealers to cover localities in Kathmandu Valley, said New Baneshwor resident Kamala Pokhrel. “If STC wants to give benefits to consumers it should have ample dealers,” she said. STC dealer distribution does not match the number of consumers, she added.

STC has appointed 158 dealers for Kathmandu valley, home to over 3.2 million people. Apart from this, STC has eight mobile shops for inner locales of Kathmandu Metropolitan City and Lalitpur Sub-metropolitan City. “Our targets are low and medium-income families and the response is good,” said Bhagwati Rana, division manager of STC’s Bagamati zonal office in response to The Himalayan Times’ query.

Dealers themselves are satisfied with the distribution channel. “We are 10 dealers in Lalitpur Sub-Metropolitan City which has over 7,00,000 population,” said Buddhidhar Shrestha, a dealer at Mangal Bazaar. STC distribution channel should be increased to facilitate more people, he added. “Patan needs at least 35 dealers — covering 20,000 people each,” he said.

STC’s campaign has some impact in the market. The market price of sugar has reduced from Rs 60/kg to 56/kg within a week. STC has since yesterday been distributing 1kg sugar at Rs 53 through dealers and mobile shops. “We have been successful in controlling the market price,” said Rana. It will reduce the market price to Rs 53 per kg, she hoped.

The Department of Commerce (DoC) echoed Rana. “We have got positive results from the market,” said Dr Khila Nath Bastakoti, director, “Without market intervention we cannot influence price.” DoC is planning to influence market prices in other consumer items like lentils and rice. The price of rice and lentils has increased by 40 and 18 per cent since May this year.


Date: 08/19/2009

Nepal to request India for 450kt food grains

The government is formally requesting India to lift ban on export of rice and wheat to Nepal during Prime Minister Madhav Kumar Nepal´s India visit in a bid to fight looming food shortage and rein in the galloping food prices in the market.

According to a Supplies Ministry official, the high-level Nepali delegation would request the southern neighbor to supply food grains, including rice and wheat, up to around 450,000 tons, which the country is estimate to lose on the back of winter crop failure and loss in maize and paddy production due to long spell of drought.

Under normal circumstances also India used to fulfill around 50 percent of the total food demand in the country. However, India´s decision to ban the export of non-basmati rice and wheat for the last two years to deal with its food shortage has been affecting food availability in Nepal.

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“We will request India to make arrangement for the export of deficit quantity of food grains to Nepal, mainly as the country is likely to face acute food shortage in the coming season,” said the source.

The government estimates that about three dozen districts will suffer food shortage due to shortfall in production. Most of the food deficit districts belong to the mid-western and far-western regions.

According to the Ministry of Agriculture and Cooperatives, production of wheat this year has dropped by 14.5 percent to 1.34 million tons due to long spell of drought and meager snowfall in hill and mountain districts. Similarly, barley production has also dipped by 17 percent. Production of maize is also estimated to go down by 10-15 percent this year.


Date: 08/19/2009

FNCCI team off to India

Federation of Nepalese Chambers of Commerce and Industry (FNCCI) president Kush Kumar Joshi along with 20 representatives of FNCCI today left for Delhi. According to a press statement, the team visiting Delhi comprises representatives of hydropower, contractors, engineers, readymade garments, pashmina, tea, transport, hotel and restaurant, tourism, information and technology, medicine, herbs, banking and insurance sectors.

These representatives will be participating in the programme organised by Indian Industries’ Confederation (CII), Federation of Indian Chambers of Commerce and Industry (FICCI), and Associated Chamber of Commerce on August 19. The representatives will also meet ministers of finance, commerce, tourism and civil aviation of India on August 19 and 20.

The meeting will focus on bilateral relations of the country with India along the development of industries, hydropower, agriculture, transportation, tourism, export and import.


Date: 08/19/2009

MARKET:

NEPSE continues to slide

KATHMANDU, Aug 18 - The Nepal Stock Exchange (NEPSE) Tuesday fell by 0.66 point. All the sub-indices suffered a loss except for the development bank sector. The

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hydropower sector lost the most dropping 12.88 points followed by finance, banking and insurance.

The share market witnessed a total turnover of Rs. 91.39 million with 118,822 units of shares being traded. Shares of 67 companies changed hands on NEPSE.

Among the 22 commercial banks whose shares were traded on NEPSE on Tuesday, Everest Bank posted the biggest growth with its stock rising by 44 points while Standard Chartered Bank lost the most on the trading floor by shedding 73 points.

Similarly, among the 15 development banks, Swabhalambhan Bikas Bank witnessed the highest increase of 40 points.

Among the 25 finance companies, Kaski Finance was the highest loser shedding a whopping 570 points. The top five winners on NEPSE were Swabhalambhan Bikas Bank with a 6.06 percent rise in its stock price followed by World Merchant Bank, Machhapuchhre Bank, Citizens Bank International and National Hydropower Company.


Date: 08/18/2009

GENERAL:

NA seeks $1.4m to overhaul grounded MI-17s

Nepal Army (NA) is preparing to bring two of its grounded MI-17 helicopters into full operation within three months. The overhauling cost will be sanctioned in the new budget to be finalized within this month. The 11 Number Brigade has sought US$700,000 overhauling cost for each of the aircraft.

“We have sought $700,000 per helicopter for overhauling process,” a high-level NA official told myrepublica.com. “Once the budget is sanctioned we will open bidding and complete repair and maintenance work within three months.”

The helicopters have been grounded for over two years now. One of the MI-17 choppers ran aground after it met with an accident in Namche two years ago and the other has been lying idle after completing 1,500 flying hours.

The source added that the MI-17, which crashed in Namche, has to be sent to Russia for overhaul whereas the other would be repaired in Kathmandu itself by the Kazan Company, which manufactures and sells the much-coveted MI-17.

Of the four MI-17 helicopters currently in possession of NA, two choppers were gifted by the British government during insurgency. Of the two functioning ones, one

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chopper is being used only in emergencies as it is about to complete the 1,500 TBO (Time Between Overhaul) hours.

The two choppers were second hand and were purchased at a minimum cost of $0.4 million-0.6 million, the source added.

The cost of the MI-17 has gone up to $7 million due to rising demand for this particular Russian military chopper.

The 23-25 seater MI-17 is a much sought after military aircraft with a load capacity of 4,000 kg. Each helicopter is equipped with a set of spare parts and consumables for technical maintenance for two years or 200 hours of operation, which is what makes the MI-17 highly sought after. It can also be very heavily armed with an extensive array or rockets, missiles and guns.

“The MI-17 is highly suitable for Nepal"s terrain. It is robust and has high load capacity. That is why it is a very good military chopper,” another NA source told myrepublica.com. He added that the addition of two MI-17s will expatiate NA"s work pertaining to rescue missions and cargo delivery and will make the remote corners of the country easily accessible for delivery of goods.

However, the source added that the maintenance cost of the MI-17 is very high. “The only drawback is that its (MI-17) parts are very expensive and it has short flying hours,” he said.

After the government announced its recent Special Security Plan Phase II, the Nepal Police is also said to be vying for purchase of two helicopters, including a MI-17.


Date: 08/19/2009

Financial federalism

Bhim Prasad Bhurtel

Federalism is about achieving economic growth and ensuring social justice. After the April 2006 democratic upsurge, political developments in Nepal marked a substantive transformation in terms of the relationship between the state and its citizens. The centralized Nepali state formed over the last two and a half centuries lost its identity built on the unitary Hindu state, Hindu religion, Nepali language, the monarchy and various cultural and religious symbols. The monarchy was abolished by the first meeting of the Constituent Assembly (CA) on May 29, 2008. The state has been declared secular in place of a Hindu kingdom. The Interim Constitution has recognized the multi-religious, multi-ethnic, multi-lingual and multi-cultural character of Nepali society. The Interim Constitution stipulates that an inclusive, secular and modern federal democratic republic be built through the CA. Despite the fact that the task of drafting the constitution is progressing at a tortoise's pace, all those who want a consolidated federal democratic republic are hoping to get a new constitution within the stipulated time.

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In this context, there are many theories, concepts, arguments, claims and stakes in public discourses on the basis and structure of Nepali federalization. The Janajatis and Adibasis are demanding that caste/ethnicity should be the basis for delineating the federal provinces and that there must be ethnic self-rule. Meanwhile, Madhesi are demanding “one Madhes one province” on the basis of region and culture. Similarly, others are demanding that language, culture or region be used as the basis for federal restructuring. All the interest groups and political stakeholders are demanding a federal restructure on the basis of their own vested interests based on subjective value judgment and arguments. However, all these claim holders have undermined fiscal federalism or the public economics aspect of federalism which is the economic counterpart of the political and administrative federalism. The fiscal or public economic base is a more fundamental factor for federalization than others.

Virtually no effort has been made so far to conceptualize, theorize and formulate agendas about the issues of fiscal federalism in public discourse through the fiscal economic perspective. Without a proper assessment of the public economics or fiscal basis, federalism will not be realized in a concise manner. Hence, the central theme of the basis of federalism should be public economic or fiscal federalism, the economic counterpart of political federalism, in public discourse. Some of the issues includes spatial conditions, resources endowment, domestic and international trade and business activities, a gateway to market centres, physical infrastructure or social overhead capital, public revenue, regional contribution to GDP, per capita contribution to taxation at the regional or district level and their role in the political federal structure in the future. The materialization of political federalism depends upon available political economic resources and their justifiable distribution and efficient allocation in the federalized units.

Federalism has been taken as the key instrumental political framework to pursue the developmental goals as the people of Nepal have aspired through the April 2006 historic movement. The main hurdle in accomplishing development, achieving progressive social transformation and ensuring social justices is the political system of the country itself. Without restructuring the political framework of the country, the desired developmental goals cannot be accomplished. It is widely acknowledged that without changing the political structure, the developmental hurdles cannot be removed. Moreover, federalism is not an end, but also the means for acquiring progressive transformation of Nepal's polity, economy and society. Federalism is a way to address the problems in Nepal's polity, economy and society which have started to mount since its inception as a unitary and centralized state almost two and a half centuries ago.

Among these three, the first problem is unequal representation of the various castes and ethnic groups, regions and gender in the political affairs of the country. Some castes and ethnic groups are over-represented, whereas some are under-represented. The disproportionate representation of marginalized and vulnerable groups like ethnic groups, castes and Madhesi and other backward communities in the political and state affairs is the political problem. The second problem is recognition of the identities of all the communities and their cultures. There are many cultures, languages and the inherent sanctity of the ethnic and indigenous communities. However, previously, the

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state has projected a single national identity. The heterogeneity of Nepal's cultures was not recognized. The third problem is fiscal imbalances and economic disparities. Some regions are affluent in terms of resource endowments while many are poor. For balanced and equitable development of all the geographical areas economically, fiscal equalization is an essential precondition. It is an economic paradigm to analyze the problems of Nepal's economy. Federalism is necessary to direct the economy, society and polity on a progressive path to overcome all the three problems of Nepal.

Simply put, federalism refers to a political system whereby the controlling political and fiscal power is divided between the federation and the individual states plus the local government entities that comprise it. It is said that organizing a federal state is about deciding the spheres of shared rule and self-rule and other related responsibilities for public policy making and their execution by different strata of government constituting the federalism. It is also about finding a new direction for broad-based and inclusive development that can justify the shift from a unitary state to federal indulgence. Alternately, the desire for federalization in Nepal is driven by the desire for social transformation ensuring social justice besides political considerations.

In this context, the Nepal South Asia Centre had organized a workshop on "Fiscal Federalism in Nepal" on Aug. 1, 2009 in Kathmandu with the participation of CA members, political party leaders, members of the academia and the civil society. The purpose of the workshop was to deepen the discourses on fiscal federalism in Nepal. More specifically, fiscal federalism in Nepal is not merely to determine the assignment of revenue, expenditure and inter-governmental grants among the federal, sub-national and local strata of the government. Fiscal federalism also means consolidating and deepening democracy at the grassroots level, ensuring social justice and equity in society and achieving the first two goals by reviewing the whole development strategy of the last six decades and bringing a paradigm shift in development discourses.

Federalism should be a vehicle for socio-economic transformation by achieving economic growth and ensuring social justice to overcome Nepal's problems of the economy, society and polity. Assigning particular taxes and internal or external borrowing to particular strata of the government, assigning vertical, horizontal and block grants and expenditure decisions in a mere technocratic manner cannot solve the problem. There must be established linkages between the assignment of taxes, expenditure and intergovernmental grants and consolidation and deepening of democracy at the national and provincial levels to the local level. The general function of fiscal federalism is to maintain fiscal discipline and macro-economic management on the one hand and on the other hand stabilize the desired level of the price level in the country. Similarly, financial federalism is a key issue in fiscal federalism which ensures the smooth development of money and capital markets in a federal setup.

(The author is executive director of the Nepal South Asia Centre.)


R&D_NewsBrief_19thAug

Documents

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