Kumari Bank financially sound

After serving seven years in Bank of Kathmandu as managing director, Radhesh Pant has joined Kumari Bank as chief executive officer. He had a crucial hand in reviving BoK in the past. In an interview with The Kathmandu Post, Pant, who is also the immediate past president of Nepal Bankers' Association, talks about challenges ahead of him at Kumari Bank and the banking sector of the country.

Why did you move to Kumari Bank leaving the Bank of Kathmandu (BoK) where you are also a promoter?

First off all, I consider myself a professional rather than a promoter of a bank. I worked as a professional in BoK and revived the bank from a bad situation. A situation had arisen right after my sacking from BoK without justification; that has now settled completely with the new board elected in the bank. I am now free from that mess. In recognition of my performance in BoK, Kumari Bank approached me to lead it. After negotiations with the directors, I have finally joined the new bank.

As you are still a promoter of BoK, how do you cope with the possible complication that may arise due to this potential conflict of interest?

Being a professional, my first job is to ensure that Kumari does better. Given the number of banks in the market, the fierce competition among them is natural. I am in favour of healthy competition among them.

What are the challenges you see in Kumari? How do you tackle them?

I am yet to study the bank's situation thoroughly to find out the challenges it faces. I will start my job officially from Monday. Kumari is already a good bank with good profitability and low non-performing loans. As a chief executive officer, I will have to motivate and mobilise bank employees to deliver better services. I am going to work closely with the board and fulfill the responsibility I have been given. Another major task is to ensure that Kumari leads other banks in technology that enables us to serve customer better and faster.

You have moved to a bank with a history of similar problems among the directors to the ones you faced at BoK. How independently will you be able to work at Kumari?

The problems among the directors [at Kumari] have already been solved. The board has committed me total support in driving the bank ahead. The board has also committed that there will not be any interference over the rights of the CEO. The intervention of Nepal Rastra Bank in some banks has also made directors realise the fact that unnecessary interference is detrimental for them.

What are your future plans for Kumari?

My job will be to strengthen Kumari's performance in terms of financial status and professionalism. I will also focus on increasing the bank's reach across the country. Branches will be expanded. Small and medium enterprises will be given more focus. We are also seriously looking into going into new areas including microfinance, mutual fund and deposit insurance. The banks can open micro-finance companies as subsidiary of the bank.

How have you taken the recent intervention of NRB in financial institutions?

As a regulator, the central bank's approach is very good. Compared to the performance of other central banks, I find the NRB quite ahead in addressing malpractices in the banking system. The central bank must take appropriate action to serve the interests of depositors because depositors basically own the financial institutions. The promoters have very limited contribution in the bank's liquidity situation.

The provision of new monetary policy regarding Statutory Liquidity Ratio (SLR) is expected to increase the interest rates of banks. Do you think this policy will affect the lending of the banks?

The government's policy regarding SLR is good in terms of safety of the banks. The older banks have been investing in treasury bills to a higher extent than what the central bank fixed this year. Therefore I think it will not affect the overall banking system much. It will not have much effect in the lending too.

How have you taken the monetary policy provision that Nepali banks can open branch abroad?

It is a very good idea. If any bank opens branch in Gulf countries, they can deposit their money there. This also helps in streamlining the remittance in banking system. However, it is expensive to open branches abroad.

Source: eKantipur
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Budget should be practical, target oriented

The count down for Nepalese budget for the fiscal year 2066/67 has begun. The 22-party interim coalition government is going to present the budget under the CPN-UML leadership in the second week of July 2009.

Nepalese Government has planned to achieve rapid economic growth by increasing agriculture activity putting a full emphasis to the business and economic sector and ensuring a business-investment friendly atmospheres to the private sector.

However, there are various hitches and obstacles hindering to speed up the economic growth, generating employment opportunities and improving the living standards of the Nepalese people.

At the crucial time, when Nepal’s Gross Domestic Product (GDP) growth rate is sliding downwards and the country is facing extreme power shortage, wide trade deficits, insecurity and many emerging problems the business community have come up with a common consensus that the government should focus on arresting further economic deceleration and offer favorable fiscal and monetary policy to revitalise and confidence build up of the private sector.

Corresponding with The Rising Nepal three private sector heads, Kush Kumar Joshi, president of Federation of Nepalese Chamber of Commerce and Industry (FNCCI), an umbrella organisation of the business communities along with Surendra Bir Malakar, president of Nepal Chamber of Commerce (NCC), Binod Chaudhary, president of Confederation of Nepalese Industries (CNI) voiced for improving investment climate, security situation, rule of law, good governance, ending bureaucratic hassles and providing relief and concessions in the duty structures for the reconstruction of Nepalese economy. Excerpts

The government is in the process of announcing a new budget. What are the expectations of the private sector?

Joshi: Private sector these days are seriously unsecured due to the political instability, which really encouraging the culture of strikes, the mass effect of this culture is making people completely unproductive and country is heading towards negative GDP growth rate. On top of that energy crisis, labour unrest are adding to negative growth. The government should focus on arresting further economic deceleration and offer favorable fiscal and monetary policy to revitalise and confidence build up of the private sector.

Coming budget should focus on improving investment climate in the country. Commitment for improving security situation, rule of law, good governance and bureaucratic hassles are the issue of high priority of private sector at the moment. Promulgation of new Industrial Policy, Foreign investment promotion policy, Commercial policy and Labour policy compatible with the regional and WTO agreement need to be addressed as soon as possible including the corresponding Act and rules.

Malakar: Nepal Chamber of Commerce expects the budget to be more practical and target oriented. We hope that the budget will incorporate more long-term projects and programmes which have lasting positive effect in economy rather than short-term benefits. Similarly, we believe this budget will focus on the development of rural areas and rural economy thereafter focusing on the creation of employment by private sector/industrial development so that younger generation does not have to migrate for better job opportunity.

Peace is requisite for economic development. Without sustainable peace, no business can flourish and without business, economic development is a distant dream.

The government has shown positive reaction to abolish the syndicate system and scrap ‘scrap tax’. So, we believe that this budget will finally announce the abolishment of these two systems and tax and provide relief to the citizens from spiraling prices and hindrances of supply of necessary commodities.

Chaudhary: In order to achieve a high growth rate we need external investments and our key sectors must perform well. Therefore, we expect the budget to facilitate the establishment of an investment friendly climate and focus on making the manufacturing, export, tourism, forest and agro based industry; hydropower, mines and mineral based industry sectors more vibrant.

Do you think that the upcoming budget will give priority to industrial and infrastructure development?

Joshi: We have been advocating higher public capital expenditure in developing basic infrastructure which facilitates development and investment climate in the country.

We have also greatly suffered from poor infrastructure in roads, airports, energy and irrigation. We are facing 16 hours load shedding a day, and we will face the same situation after the rainy season.

Industrial development is primarily concerned with employment opportunity, economic growth, and economic activities. At present, general export is declining, industries are closing down and real estate sector is in very critical condition. Thus, upcoming budget should give special focus to industrial sector’s rehabilitation and refurbishment by providing special package.

Malakar: Well, it has to. If the government wants the economic revolution in the country, then it should give priority to industrial and infrastructure development. And, we believe that the government will give its priority. In many fora and discussions, the government has expressed their commitments to work with the private sector in economic development, and we believe that government will stand on their vows and words.

Chaudhary: Keeping in mind the fact that creation of jobs on a large scale should be our priority and these are the sectors that can create more jobs. I am sure that these sectors will receive priority.

The business community has recommended for a multiple VAT system. How will this VAT system be more effective for the government to generate more revenues?

Joshi: Different surveys have indicated more than 50 per cent illegal trade is taking in the country mainly due to open border with India which causes loss in revenue not only in VAT but also in custom duty, excise, and income taxes. This situation has been encouraging unauthorised practices and discouraged healthy trade.

India imposes 4 per cent VAT in some items and Nepal imposing 13 VAT in the same items, has also encouraged unauthorised trade with India. There are also many items in Nepal which are exempted from VAT, therefore we recommended Multiple VAT system to bring equal level of playing field so that healthy tax system shall prevail. Our study and analysis shows that the multiple VAT system will result in increased revenue to the government.

Malakar: The flat VAT system has not been that much effective and has become one of the most contentious taxes in Nepal. Hence, the private sector has lobbied for the implementation of multiple VAT rates, so that it becomes the sole source of revenue and generates more revenue for the government.

Due to major complications in this flat VAT system, private sectors are not able to provide VAT invoices during each transaction. We believe, after the simplification in the VAT system and implementation of multiple VAT rates of 0, 1, 4 and 13, it would be much easier to issue invoices and the issuance of VAT invoices will also rise in numbers.

Chaudhary: The multiple VAT system will increase tax compliance and discourage informal trade which will ultimately result in greater revenue earnings for the Government in the long run. For the private sector, it will mean that their products will be a little bit more cost competitive.

It is said that economic scenario of Nepal has improved at the present. What is your view on this? Do you see any important role of the private sector in such an achievement?

Joshi: We have been hearing the revenue target have been achieved but other economic indicators are not in satisfactory situation. Till this date, government is not in a position to spend more than 33 per cent of total capital expenditure.

There is less than one percent inflation rate in India but in Nepal it is in two digits. Export is declining, real estate sector performance is going down, and no improvement in investment, economic activities and economic growth is seen. Private sector has been very worried and eager to improve the current meltdown situation. To improve the current scenario only private sector can not cope, hence, government should step in to act in a timely manner to reduce power crises, labour unrest and should facilitate and provide measures to create confidence in the private sector.

Malakar: I don’t think the overall economic scenario has improved in Nepal. Yes, certain aspects of the economy have certainly improved. In this regard, we can take the example of revenue collection. In the last nine months of this fiscal year the revenue collection increased by 39.3 per cent from the last year’s 25.1 per cent. Similarly, the export has also increased.

But what we have forgotten is that the business environment has been deteriorating every seconds and the confidence of business has been decreasing day by day. Whenever you leaf through the daily papers you will find the news of extortion, kidnappings, and attacks on the private sector as well as news of chakka jams, bandas and strikes. In this background, how can one say that the economic scenario has improved in Nepal?

Just recently, we heard that the rate of capital flight has increased by many fold and the amount of deposit in the international bank by Nepalese people has also increased. If, the economic scenario has been sound enough in Nepal, then how can more and more people deposit their wealth in other countries? Is this the sign of economic improvement?

Similarly, you can judge the economic condition of the country by the number of oversubscriptions that the IPOs have received. In every IPOs, there is always an oversubscription of more than 8-10 times. This shows that there is no investment environment in Nepal and that’s why people prefer low risk, low return investment.

Chaudhary: The increase in revenue collection, export growth, increase in Foreign Exchange reserves and a healthier Balance of Payment (BoP) are definitely encouraging indicators. The aviation, hospitality and other tourism related sectors are really doing well. We understand the housing sector is booming. The robust health of the banking sector and the increase in Stock Market Capitalisation are also encouraging.

However, equally worrying is the fact that some critical sectors like Carpet, Garment and Pashmina sectors are in bad shape. Due to the energy crisis as well as the regular bandhs, strikes, chakka jams and labour disputes manufacturing sector is not in a good shape as some of the industries are on the verge of closure.

Even during the height conflict period, we had a GDP growth rate of around 3 per cent. It is my belief that the private sector contribution was a major factor for this. Therefore, the role of the private sector will always be important in economic growth and development.

What do you think are the major economic challenges for the government and the private sector in the coming days? How could the Public Private Partnership (PPP) be more effective for higher economic growth?

Joshi: To repeat it again, security situation and absence of rule of law are a major challenge at present. Similarly, low economic activities, phenomenal power crisis, labour unrest, limited infrastructure facilities and investment climate are also major challenges.

Private sector are interested to expand investment in health, education sector and are ready to invest in infrastructure such as hydropower, highways and fast track roads, rope ways, airports. In such a situation, the government should by all means encourage the private sector investment with the PPP models which needs to look upon revision on government policy.

Malakar: The major economic challenges for government and private sector in the coming days will be the political stability in the country. Even though 22 political parties are in the government, the leading and one of the major party, UNCP (Maoist), is still in the opposition bench. Unless the national, consensus and unified government are formed, we doubt there will ever be a political stability in this country.

Similarly, the other economic challenge, I personally feel, is going to be the climate change. We have already faced some of the effects of climate change in agriculture sector and environment. Unless the government of Nepal does some thing to tackle this now, climate change is going to be the major headache for government as well as the private sector.

For a country like Nepal, PPP is the best model for economic growth and infrastructure development. But this model should be used effectively in order to reap more benefits; otherwise it will create lot of problems. I believe that the role and responsibility of both partners should be clearly and articulately defined before implementing it.

Chaudhary: Generating jobs and economic opportunities to meet the enhanced level of expectation of the common man, uplifting the rural economy in order to achieve an inclusive growth, tackling inflation and surging prices of essential commodities, managing fiscal deficits, directing remittances towards the productive sectors, attracting external investments needed to support high growth rate and funding of the much needed large development infrastructure projects.

PPP could be an effective model for growth in Nepal, provided the Government play the role of a facilitator and the private sector take the responsibility of good partnership.

Political transition, insecurity, power crisis and widening trade deficits have been the major obstacles to the business community. In such a situation, what sort of commitment does the business community expect from the government?

Joshi: All political parties should reach common consensus to formulate constitution as soon as possible to transform to a stable state from present lingering transition period and political uncertainty. I am of the opinion that all party should think and give thrust to national issues first rather than to petty issues. In order to reduce power crisis, we have been suggesting to the government to review licensing system, PPA process and provide state of art facilitation and environment to attract foreign investment which is highly needed to implement mega power projects.

On the front of reducing trade deficits, government needs to bring improvement in the indigenous industrial production climate and encourage export oriented and high value adding industries. Mechanism to implement and facilitate the operation of the long talked about Special Economic Zone (SEZ), Export Processing Zone (EPZ) and Private Export Houses (PEH) should be initiated in the upcoming budget.

Malakar: You are very right to note that political transition, insecurity, power crisis and widening trade deficits have been the major obstacles to the business community. And, to tell you, Nepalese private sectors have shown their resilience to work even in the worst situation. So, I think, business community will overcome such obstacles in the future also. But, what we expect from our government is to secure our rights to do business smoothly and in peace of mind.

We want to do business and don’t want to engage our time and mind in labour disputes because of the rigid labour policy; close our business because of some strikes, bandhs and road blockades; and take our investment away from here due to insecurity of ourselves and our investment. So, we expect the government to commit to end all these problems.

Chaudhary: The Government together with all the major political parties should come up with a common economic agenda and all should make a commitment to adhere to it and keep it in the centre stage at all times.

The government should take the initiative to convince all the political Parties to make a commitment to keep politics out of economic activities and the workplace. Government must strictly enforce the rule of law and keep the supply chain free of all obstacles and it should make a commitment to encourage the private sector to take the lead in the areas of economic growth and development.

How could Nepal’s economy be self driven by its own resources? Do you have any suggestions?

Joshi: Due to climatic and geo physical diversities, we are endowed with rich and perennial natural resources. Our serene valleys, mountains, plain areas, rivers, forests, horticulture, livestock and agricultural products command a large spectrum of opportunity and potentiality. Our economic development strategy and industrial sector development paradigm should be charted on the basis of our resources and competitiveness. High value agriculture products, herbal and non-timber forest products, tourism, hydro power generation, service sectors including medical education, hospitals, ICT etc., can be our forte. Consistent policies and longer term perspective should be the guiding road map to focus on development of these Nepalese niche products with competitive advantages.

Malakar: Nepal is very rich in natural resources like water, forests and minerals. But unfortunately, we have not been able to explore the possibilities and get benefit from these resources. Similarly, Nepal is rich in varied bio-diversity and we have deposits of mineral resources that can be economically exploited.

If Nepal wants to drive its economy by its own resources, then we need a long-term vision/programme and the commitment from all factors of the society. The government and the private sector cannot explore the possibilities of these resources on their own. Government and private sector need to work together to reap benefits out of these resources.

Chaudhary: Fully self driven may be a bit too optimistic. However, if we were to develop 10,000 MW hydropower within the next 10 years and develop at least 2,000 MW every year thereafter would be sufficient for driving our domestic economic growth as well as meeting export opportunities.

Similarly, we have to encourage and incentives to cement factories. We have enough Limestone, herbs and medicinal plants, mines and mineral in Nepal to make it self sufficient in cement.

We have to encourage people to utilise unused land for fruit plantations and orchards in the plains as well as mid – hills.

(By Sangam Prasain)
Source: Gorkhapatra
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Insurance market lacks innovative products

Sunil Devkota, the general manager of United Insurance Co (UIC) Nepal, holds a Master of Business Administration degree from Kathmandu University. Devkota, 31, is also a chartered accountant and has already worked in a committee constituted to draft an on-site inspection manual for the supervision of insurance companies. He recently talked in details with Prabhakar Ghimire of The Kathamandu Post about the prospects and problems of the Non-life Insurance sector of Nepal.


Excerpts:

Tell us about the performance of UIC Nepal over the years.

We performed very well during the initial years after UIC started operation in 1993 due mainly to a low level of competition as there were very few players at that time. However, we had to face a tough time afterwards for a few years. Nevertheless, we have been able to perform satisfactorily in the last two fiscal years. UIC earned a profit of Rs. 5.8 million during Fiscal Year 2006/07 while the profit volume increased by almost three folds to Rs. 16 million in Fiscal Year 2007/08. Turnover also shot up to Rs. 189.2 million during Fiscal Year 2007/08 from Rs. 151.4 recorded a year earlier. We are planning to increase our paid up capital to Rs. 100 million from the existing Rs. 60 million by distributing bonus shares and rights issues.

Over the period of a year, we have added branches in Birgunj and Hetauda bringing the total number of branches to five. We are planning to open five more branches, in Damak, Birtamod, Narayanghat, Nepalgunj and Dhangadhi.


How is the Non-life Insurance business growing in Nepal?

There are currently 18 Non-life Insurance companies in the market. Annual growth of this sector stands at about 20 to 30 percent in terms of insured amount. However, only a small section of the insurance market's potential has been explored due to lack of awareness among people about the importance of insurance. Insurance companies are also not smart enough to bring innovative products. We (Non-life Insurance companies) are unnecessarily concentrated in certain markets thereby breeding unfair competition there. Fighting for a piece of this small pie has kept us so busy that we have not been introducing new innovative products that can contribute to the expansion of the existing market. Huge chunk of potential market is untapped as a majority of the population is still unaware of insurance products.

Do you see any prospect of expansion?

Definitely, there is a good prospect for insurance companies in Nepal. We can see a 100 percent annual growth rate in insurance business if the government comes up with concrete policies that encourage people toward insurance products. We also need to explore new markets in addition to expanding the existing ones in urban areas with innovative products.


What do you think should be done to widen people's access to insurance services?

The government should instruct insurance companies to expand their services to rural areas to ensure access for the larger chunk of people to insurance services. Insurance companies themselves should explore new markets and introduce new products as per the changing market trend. For example, Household Insurance in Kathmandu Valley is at a very low scale, even though this area falls under the seismic zone. Consumers are not aware of this nor have insurance companies been able to boost up this policy among the Valley's residents. Likewise, health insurance, cattle insurance and crop insurance are also areas that can be expanded by raising awareness among people. For this, the Insurance Board should grant permissions without hassle.

What are the major problems seen in this sectors?

It is difficult to convince reinsurers about the viability of new insurance products due to lack of convincing data about the insurance market. On the other hand, insurance companies have to go through a lengthy process to get permission from Insurance Board to introduce new products. Disobeying directives from the board is becoming a trend among insurance companies. If Non-life Insurance is to be expanded among the poor masses, VAT should be waived like in life insurance policies.

The trend of business houses opening insurance companies to insure their own businesses has proved detrimental, as it has discouraged the growth of the insurance sector. We need a strong regulation to bar insurance companies from insuring clients who are directly related to the promoters' companies.

Do you have any plans for introducing new products for UIC?

On the back of the growing number of shopping malls in urban areas including Kathmandu Valley, we are coming up with Parking Insurance Policy which will cover cases of accidents and thefts inside underground parking areas.

Customers of such malls are in need of insurance of their vehicles and properties kept in such parking areas, as concerned parking service contractors and malls refuse to own the responsibility of theft or damage of vehicles and compensate the customers.
Source: eKantipur
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Give security top priority : Kush Kumar Joshi

Kush Kumar Joshi, 49, is president of the Federation of Nepalese Chambers of Commerce and Industry (FNCCI), the apex business body of Nepal. A diploma holder in electrical engineering from the UK, he is also managing director of Nepal Ekarat Engineering Company -- the country's first joint venture company -- and director of Nepal Wood Preservatives Industries and Shara Global Trade Pvt Ltd. A trained manager and skillful businessman, he is also a genuine leader who has taken charge of the FNCCI promising reforms and giving new impetus to the private sector. Prem Khanal of The Kathmandu Post caught up with Joshi to talk about the FNCCI's latest undertakings and his views on the ways the economic agenda should be treated as Nepal goes through a political transition. Excerpts:

What major activities has the FNCCI undertaken recently?

Following the major changes on the political front, the whole focus of the country has now shifted to the economic agenda. So our push at this juncture has been to put the economy on a priority footing during the constitution making process itself. We have urged the government to end the confusion in the current policies and come up with a common minimum economic program with clear insight on how the state should drive the economy in the medium- and long-term. Industrial and physical insecurity has hindered the private sector. We have called upon the government to end that immediately. Unfair practices like syndicates and cartels, and disruptions like labor stirs and highway bandas should be ended forever. We are presently giving inputs for the formulation of the new budget. For a longer term, we are also formulating the private sector's 20-year economic vision and development plan.

What's in the FNCCI's 20-year vision document?

Broadly speaking, we have discussed all the prerequisites of doing business in the vision document. We have mentioned the areas where we have a competitive edge and special potential. It also makes specific recommendations for fine-tuning the state's economy policy. While identifying the areas in which the private sector will readily work, we have also suggested the actions the government should take. It lays down areas where the government can make things better by just enforcing the existing laws. It also lists the areas where the government will have to amend the laws and policies besides formulating new ones. The vision document is still in the discussion phase. We will hand it over to the government at an appropriate time.

What major problems is the private sector facing now? What are your suggestions to the government to address them?

Insecurity and closure of highways is the foremost problem that we feel the government must address. Just stepping up security and creating an industrial security force will help attain that. We urge the government to incorporate these measures in the new budget. The government must also express a strong commitment to reform labor laws -- another pressing issue of the present time. The budget must also reaffirm the government's commitment to end unfair practices like syndicates and cartels. This problem can be solved by merely enforcing the existing laws.

We also want the government to enforce multiple VAT rates. There must be an improvement in the tax system as well. All forms of taxes including scrap tax that raise the cost of production must be done away with. The country's export sector is in tatters. We want the government to waive export duties and also establish special economic zones to support the export sector. Also, the government must address the long-running energy crisis. Without energy, we cannot expect the economy to function normally, forget faster growth.

What should be done to reverse the downturn in the export sector?

We cannot promote exports without developing export promotion zones (EPZ). We must first develop export oriented units (EOUs). Only those industries that export at least 70 percent of their production can be termed EOUs. We must shift the EOUs into the EPZ and provide them duty and tax exemptions. The government should form flexible labor laws for the EPZ, and its tax policy should also be different than for other industries. This cannot be done overnight, but we must start working in this direction now if we are to revive our exports.

How confident are you about the new government's policy being private sector-friendly?

It must be. There is no other way. The government's policy and new constitution should reaffirm the right to property. It must support private sector growth and facilitate corporate sector development. When speaking about economic transformation, the political parties, including the CPN-Maoist, have repeatedly mentioned liberal economic policies and have set targets much higher than what we ourselves have aimed at. They have pinned their hopes on hydropower, trade, export, industrialization of agriculture and tourism for establishing a new Nepal. So, based on what they have been saying so far, I am optimistic the new government's economic package will be private sector-friendly.
Source: eKantipur
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SEZ important for export growth

Surendra Bir Malakar, 53, is president of the Nepal Chamber of Commerce. A graduate in humanities, Malakar is also proprietor of Shangrila Handicraft Industries, Alfa Auto Parts Traders and Nepal Vehicles Services Co. He is also a promoter of Alliance Insurance Company besides being vice president of the World Association for Small and Medium Enterprise (WASME) and former general secretary of the International Chamber of Commerce, Nepal Chapter. Winner of Commercially Important Person 2008, Malakar talked to Prem Khanal of The Kathmandu Post about the problems facing the private sector and its role in New Nepal. Excerpts:

How is the private sector doing at present?

Well, the protracted transition has created a lot of difficulty for us. The private sector has not enjoyed much moments of peace. Incidences of abduction, banda and extortion are still prevalent. Highways are being closed now and again, and trade unions are hindering industrial operations. Furthermore, we do not have a government even three months after the CA polls. We don't know what the government's policy is now or what it will be tomorrow. The private sector is confused. Investors do not feel secure about their investment. New investments are coming with ease. Foreign investors are at unease. Our main concern is that the Maoists, the largest party in the CA, says it accepts an open economic policy. But it has not shown that in practice.

What has the NCC been doing to address the private sector's concerns?

We are calling attention to them regularly, and have demanded that the government take necessary action to address the problems time and again. In order to end confusion over the policy, we have also recently drawn up the private sector's priorities and will be handing them over to the new government to be included in the common minimum program and upcoming fiscal policy. For economic advancement, we have mainly asked the government to focus on four major areas: (i) Development of hydropower (ii) Promotion of tourism and special incentives for its development (iii) Strengthening of economic diplomacy and (iv) Human resource development.

How is the NCC prepared to help translate the dream of building a "New Nepal" into reality?

Well, we are prepared to make all possible contributions. We are discussing how the private sector can contribute to designing and implementing the federal structure of the state. The private sector will further contribute by creating employment opportunities, forming wealth and keeping the market vibrant and moving. Actually, it is for attaining these goals that we have set the abovementioned priorities for the government. We request the government to seriously endorse and implement them. The private sector is also ready to work with the government to build much-needed social and economic infrastructure, easy transportation and connectivity facilities and social and human capital. We have always urged the government to provide incentives to farmers, focus on agro and herb processing industries and link farms with the market - both domestic and overseas - in order to develop rural Nepal and help people enjoy the fruits of development. We have also focused on capacity building of commodity associations so that they can better serve the markets.

Nepal's export sector has entered a downward trend in recent years. What does the NCC think should be done to revive it?

Security, better industrial relations, more investment and planned industrial development efforts will be needed to revive exports. Special economic zones (SEZ), a program which has already been endorsed by the government but which has not received adequate commitment and finance, must be developed. We have also requested the Chinese government to help Nepal build an SEZ in Panchkhal. Moreover, I think the financial sector, which is among the few fast growing sectors in Nepal, need to realign their priorities and come forward strongly to support industrial development. The private sector should also work seriously towards applying their skills and know-how to tap the export potential and penetrate overseas markets.

Industrialists cite trade unions as their major problem at present. How have they been creating problems?

They are creating problems by putting forward unhealthy and impractical demands. They are not concerned about how labor productivity can be increased to achieve better production and better returns. Instead, they are working to serve the interests of political parties. This undue labor stir has sharply worsened industrial relations.

What's the status of labor law reform?

We have held serious talks and discussions on the subject at the tripartite committee which includes employers, employees and government representatives. The committee had even drafted a new law. But it got nowhere as the government wasn't much enthusiastic about taking the matter to its logical end. As a result, our long-running demands like "no work no pay" and a "hire and fire" provision in the labor law continue to fall on deaf ears. Labor law reform has been shelved for now.

There is a large number of representatives from the private sector in the Constituent Assembly (CA). Have you talked with them to push for restarting the reforms?

Yes, we have. But we must understand that the private sector's representation is not that large. Also, all the members have been nominated to the CA by political parties. Ultimately, it is the party's policy that prevails over an individual's priorities. As individuals, they cannot be expected to do much. Nonetheless, they are trying their best to convince the parties to place the economic agenda at the top.
Source: eKantipur
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‘Tax on life insurance receipts must be scrapped’

Manoj Kumar Bhattarai is general manager of Nepal Life Insurance Company (NLIC), a leading life insurance company of the country. He holds Masters Degree in Business Administration and Commerce from Tribhuvan University and has served Nepali financial sector in different capacities for more than a decade. He has worked in Enabling State Programme (ESP) and also in United Nations Developments Program (UNDP), Malawi as UN Volunteers. He is a life member of Management Association of Nepal (MAN) and holds membership of about a dozen business and social organizations. In a recent interview with Prem Khanal of The Kathmandu Post, Bhattarai highlighted the growth, challenges and prospects of life insurance business in Nepal. Excerpts:

How has NLIC performed over the years?

We have grown steadily at about 24 percent over the seven years of operations. As of 2007/08, we have sold more than 164,000 policies. Our product niche ranges from regular endowment policy to children policy to money back policy. We also sell triple benefit and double benefit policies. We recently launched another product named Jeevan Sarathi, under which life of both husband and wife is covered. Of our total products, endowment policy makes up around 70 percent of the business. We have a sum insured liability of 18 billion rupee and earned a premium income of Rs 3.37 billion. We are presently operating with the strength of 9,000 active agents at the grass root level. Our investments are secured. NLIC City Centre building of the Company, a multiplex under construction at Kamalpokhari is about to get completed for commercial operations. We have successfully delivered a sound returns to our clients.

How has life insurance market grown in the country?

Well, the market has grown rapidly over the last eight years. Before we came into operations, only two companies were catering life insurance services to the people. The level of insurance awareness was very low. We sold mere 1,474 policies in the first fiscal year we operated, whereas in the recently concluded fiscal year we sold 40,000 policies. This shows how fast the market is being expanded. Of course, the awareness is still very low compared to what we would like to have. But today I can confidently say if you have a product and ability to sell, people will readily buy it. Also, the number of life insurance companies has increased to nine. They cover all the cities and are present in economically active towns as well.

How healthy is the competition in the market?

Life insurance is fairly operated business. Still some unhealthy practices have emerged of late. Few companies are competing by giving extra incentives on top of the regular business commissions to the agents rather than coming up with attractive products. This has created an environment wherein agents could be manipulated. It has put undue pressure on companies like us that focus on distributing the benefits to clients rather than siphoning earnings on other areas. It will also adversely affect the new companies. As for the business, I think the companies still need not to compete with each other, as there is a huge untapped market in the country.

What are the major challenges facing life insurance sector?

I think raising the level of insurance awareness among people is still the foremost challenge facing the companies. People's perception is not much positive towards the business, as it is related with death and posthumous social security. Whatever insurance market companies have tapped far, they have created it through their individual efforts. This has not proved enough. The government, regulators and companies must launch joint campaigns to make people realize the real benefits of life insurance. Apart from that, life insurance companies in Nepal have falling short of innovative product designs and good product mix. Our companies are still to develop a strong corporate image and create an environment of trust to start unit link products linked with various capital instruments like bonds, shares and mutual funds. I think attaining this trust and moving to a higher stage of product development is another major challenge of the industry.

How friendly in the insurance regulator and government policies?

Insurance Board, the regulatory authority, has become much more mature than in the past. However, the Insurance Act and Regulations are more focused towards non-life insurance businesses. This must be changed. The government regulations and policies must cater more to the needs of the life insurance business. More so because life insurance fills in the 'social security' gap, in which the government has no presence. The government is presently imposing tax on death claims and final insurance receipts of the clients. This does not match with insurance norms and must be scrapped. The regulator must also think seriously towards widening the investment areas for the companies.

What are your future plans?

Well, our immediate focus is to consolidate the market. For that we have develop our corporate slogan of Sabaiko Lagi Jeevan Beema (life insurance for all) and started 365 days life insurance service. We are also thinking of coming up with a single premium product, under which a client can pay the total premium in one installment. We are also working on a product that caters to the education financing needs of the clients.
Source: eKantipur
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'We will focus on micro-lending'

Armed with 17 years of experience in the banking sector, Anil Shah heads Nabil Bank as chief executive officer. Nabil Bank is Nepal's first joint-venture bank and entered 25 years of operation Saturday. It is focusing on expanding services to rural areas and investing in infrastructure development. Shah says Nabil is working to become the financial solution provider of the first choice from being the bank of the first choice. Excerpts from his conversation with Prem Khanal of the Post:

How would you characterize the bank's performance?

First and foremost, I would like to note that we are the first joint-venture bank in Nepal. Prior to our entry, banking was carried out in a very traditional way. What we contributed to the banking sector was the introduction of international banking. Reflecting on Nabil Bank's 24 years of operation, we see that it has been a pioneer in many areas. Judging by customer response, we are leaders in most consumer products. This is because more and more customers are choosing to bank with us. As a result, both deposits and lending have doubled over the last five years. We have evolved to become a customer-centric bank.

From the perspective of stakeholders, we are one of the best performing banks in the stock market. Putting money in Nabil stock is a blue-chip investment. This means that they are choosing us. For the regulators, we are the model bank. We are delighted to reveal that we are one of the highest taxpayers in the corporate sector making a tremendous contribution to the state's coffers. The credit goes to our efficient and skilled staff. Today, we are where we are because of them. We take pride in the fact that many of today's leaders in Nepal's banking sector began their careers at Nabil.

How is Nabil Bank planning to deal with the growing competition?

We have long been saying that it is not quantity but quality that matters in banking. What we need today are bigger, more secure and stable banks. Merely expanding the number does not benefit customers. Quite remarkably, the banking system is different from other sectors. If other companies go bust, only the entrepreneurs lose. However, if a bank should get into trouble, the biggest losers will be its depositors and others who put their trust in it. In this context, the time has come for mergers and acquisitions, and to increase the size but not the number of banks. As for us, we are in a fairly comfortable position in terms of competition among the 25 existing banks. But what we have not forgotten is that no matter how big a bank is, there should be continuous efforts to make it bigger, more stable and more secure.

Do you sense that unhealthy competition is slowing entering the banking system?

Yes, there are already some signs of unhealthy competition. Banking is about risk management: analyzing the risk and pricing the risk. Due to heavy competition, many banks are concentrating on increasing lending. No one is looking at the risk, only the volume. Banking is a long-term strategy. We cannot remain happy by just making profits for one year. In the following year, the bank may suffer a loss, and ultimately collapse. It is extremely necessary to re-evaluate the sector as a whole.

Do you have any plans for mergers or acquisitions?

Instead of going for mergers, we want to grow organically. We believe we have the wherewithal to develop ourselves in such a way. In the past year, we opened nine branches which are performing well. This shows that we can expand ourselves. Nepal Bank and Rastriya Banijya Bank are the largest banks in the country on the strength of their vast network of branches. So we also want to move ahead by expanding and restructuring.

What are your future strategies?

We just introduced a five-year strategic plan process. We are working to develop Nabil from being the bank of the first choice to the financial solution provider of the first choice That means we want to provide the entire range of services such as all sorts of financing, mutual funds, brokerage, credit cards and syndicated loans. We want to be more efficient and productive. There will be two key areas where we will focus. We want to be an inclusive financial service provider. To make this happen, we will focus on investing in small and medium enterprises and micro-lending. We will go to the rural areas wherever people live, and not only stay in urban and semi-urban areas. Second, we will be focusing on infrastructure like roads, telecommunications, cement and hydropower. If we have to play a role to create an atmosphere favorable to do business, then we will do it.

What are the current challenges in banking? How do you think the banking system will change after 2010?

We do not have enough experts to run the financial sector. We need banking training institutes to churn out more bankers. In today's era, we need to have banks with vision. And only the best will survive. The question of survival will force them to merge. When 2010 comes, Nepal will open its doors to foreign banks as per its commitment to the global trade regime of the World Trade Organization. I don't think international banks will be interested in Nepal because of the small size of the market and other factors.
Source: eKantipur
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Global Bank offers the best services

Chandra Prasad Dhakal is chairman of Global Bank. A commerce graduate, Dhakal is also chairman of IME Financial Institution Limited and managing director of International Money Express Private Limited. In an interview with Prem Khanal of The Kathmandu Post, Dhakal talked at length about Global Bank and its plans for the future. Excerpts:

Could you please outline the performance of the bank?

Global Bank Ltd started operation about 18 months ago as the country's 19th commercial bank. Its overall performance so far has been excellent. We are on track to achieve the target we set in the beginning. We have so far mobilized deposits worth Rs 5.5 billion and invested over Rs 5 billion. Being experienced in the remittance sector, our overall transaction in foreign currency is comparatively good. We are in a position to make an operating profit of over Rs 100 million by the end of the current fiscal year. We have highly trained and motivated manpower and excellent infrastructure, which have contributed to bringing the bank to its current position.

How are you planning to deal with the growing competition in the banking sector?

Banks have definitely become more innovative and are coming up with varieties of products in both the deposit and lending departments. With the restoration of peace, lots of new investment avenues have opened up. Hydropower is one such sector in which Global Bank is preparing to invest. The bank has excellent human resources, which is the most crucial factor to fend off the growing competition in the marketplace. As a result of continuous training and orientation, our staff is fully aware of the changing market and banking scenarios. This has enabled us to address the changing needs of our customers through various novel products. We have already launched SCT debit cards. Also, we will soon be launching VISA debit and credit cards besides adding around 10 more ATMs in the coming fiscal year.

What special products does Global Bank offer its customers?

In the deposit segment, Global Bank has a number of products to cater to all segments of society. We have Global Future Star deposit scheme for minors below 16 years of age, Global Nari Bachat scheme to attract savings from women and Global Senior Citizens scheme for citizens over 55 years old, which offer attractive returns on deposits. For general depositors, we have Global Shubhalabh Bachat scheme, which offers up to 6 percent interest on daily balance. In the lending segment, we have simplified and efficient lending procedures. We also have very competitive lending rates which are attractive to borrowers.

Given Global Bank's rich experience in handling remittances, do you have any plans to focus on this sector?

Viewing the structure of the Nepalese economy, I don't think it would be wise to concentrate all your efforts on one specific sector. We do have a plan to be the leader in the remittance sector, and we are working in that direction. We have already established a strong network in major cities abroad where Nepali workers have a sizable presence. We already have the largest nationwide distribution network here.

Do you think 25 banks are more than enough for a small economy like ours?

Looking at the level of access the general public has to banking, I don't think 25 banks are very many. A majority of Nepal's people still cannot avail themselves of banking services. Furthermore, we have many sectors like hydropower and infrastructure development that banks have not entered. The Nepali banking industry still doesn't have the capacity to manage the required volume of investments. If the country received four or five major hydro and road projects, the deposit mobilization of the banking sector would fall short of what is required. The current financial potential of the banking sector is still not large enough to tap the country's economic potential.

Can you highlight the capital structure of your bank? What message would you like to give to investors who want to invest in Global Bank's primary shares?

The total paid-up capital of Global Bank is presently Rs 1 billion. Of that, 70 percent has come from its promoters, and this week we are making the Initial Public Offering to mobilize the remaining 30 percent. We have also worked out a detailed capital plan as we have to raise the paid-up capital to Rs 2 billion by 2013. We have a plan to issue right shares in a gradual manner besides distributing the profits we make each year to our investors. As for our message to potential investors, I would like to say, "Your investment in our bank will be completely secure, and we will give the best return possible."
Source: eKantipur

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SCB to play constructive role for New Nepal

Sujit Mundul is CEO of Standard Chartered Bank Nepal, one of the leading private sector banks in Nepal. He brings with him rich experience and knowledge of the banking sector of over 30 years. In an interview with Prem Khanal of The Kathmandu Post, Mundul talked about banking in general and the themed week "Blue & Green", which SCB is celebrating from June 22-27. Excerpts:

Would you please elaborate on the purpose of celebrating "Blue & Green" week and also clarify why SCB's focus is on the use of blue and green colors?

After a series of in-depth analyses, the Standard Chartered Group adopted five core values in 2001: Creative, responsive, international, courageous and trustworthy. Our values remain at the heart of our organization and underpin everything we do. It is interesting to note that when the values were launched in 2001, our global staff strength was around 30,000. Today, the number stands at more than 70,000. Our vision for 2011 is to increase our global strength to 120,000.

The main purpose of celebrating "Blue & Green" week is to reinforce our brand and values. It is not just about the colors; it's about what we stand for, about our people and our culture, about how we treat our customers and how we contribute to our communities. One might be surprised why blue and green. If you look carefully at our brand, you will find that the colors symbolize our logo. The colors are simple and they resonate and have many dimensions, e.g., environment, community, advertising, marathons and our business and behavior. Our vision for the brand is simple: We want to double the value of the brand by 2011. We rely on each and every one of our employees to live the brand everyday no matter what they do, and so reinforce it in the hearts and minds of our customers.

Your ambition is to become the world's best international bank leading the way in Asia, Africa and the Middle East. Could you please elaborate on what plans you have to achieve this goal?

We are focusing on quite a few things to achieve our strategic intent in becoming the world's best international bank leading the way in Asia, Africa and the Middle East. Our brand promise is to be the right partner - leading by example. We have defined commitments to our stakeholders, i.e., our customers, people, communities, investors and regulators. If you look at the Asian markets, we have a very strong presence in most of the countries here. We have been in the continent for more than 150 years. We have similar stories for Africa also. We are more focused on these markets than US and Europe. We want to be trusted, caring and dedicated to making a difference to the communities. We are committed to delivering outstanding performance and superior returns to our investors. We want to exhibit exemplary governance and ethics wherever we are and want to be partners to the regulators.

Talking about the domestic banking sector, do you think it is following healthy competitive rules of the game?

Only healthy competition is in the interest of a country which has a very small economic pie and is in the early stages of development. Nepal is not an exception to this. The pricing mechanism currently being adopted by a few players is neither convincing nor transparent as it does not emulate the risk-based pricing model. The secondary market is yet to develop. There aren't yield curves available for various maturities. Suppose you want to extend a long-term mortgage loan, you don't find a reference rate. If you look at our South Asian counterparts like Bangladesh and Sri Lanka, they have already started developing reference rates.

Banks in Nepal have been fixing interest rates for long-term assets on an ad hoc basis undermining the risk-reward principle. It is now time for the central bank to take the lead in formulating a policy to establish yield curves for various maturities in order to develop a proper market. I fear that the rapid increase in the number of players in the financial market may not be sustainable in the medium to long term. The big challenge for us is to focus on quality rather than quantity.

Could you please highlight some of your future plans and activities?

We are shortly going to open two new branches in Birgunj and Narayanghat. We do have an ambitious plan to grow keeping in mind our own vision for 2011. We will focus on expanding our ATM network and introducing various new products both under consumer and wholesale banking. In line with our global strategy, and if we find the right opportunities, we are prepared to grow inorganically through mergers and acquisitions. We aim at maintaining our status

as the best bank in the country.

What do you think Nepal's economy will be like in the future and which sectors do you think have good prospects?

Given the rapidly materializing peace and political stability, I am not only optimistic but also confident about the future and the growth of Nepal's economy. It might take a little longer than expected though. Apart from hydropower - which has a huge value to add - tourism, agriculture, education and health care related sectors have tremendous potential to make Nepal prosperous.

Even though the manufacturing sector has an important role to play, Nepal first needs to focus on developing a sound infrastructure to realize its full potential. Because of the lack of infrastructure, we have not been able to benefit from the Nepal-India trade treaty, which provides us duty and quota-free market access to India. The need of the hour is to develop a proper policy on capital formation either by attracting FDIs or by recouping the capital that flowed out in the past. SCB Nepal is keen to play a constructive role in accelerating the pace of development and rebuilding the economy towards forming a New Nepal.

Source: eKantipur
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