Nepali Times
Domestic Brief
Indo-Nepal trade


Business lobbies from Nepal and India met in New Delhi last week and averted a major crisis in bilateral trade. India accuses Nepali companies of misusing provisions in the 1996 preferential trade treaty to export non-Nepali goods. Indifference by Nepali officials over these Indian concerns had taken India to the point of threatening to scrap the treaty which comes up for automatic renewal later this year. The FNCCI and India's CII carried out a review and concluded that trade has benefitted both countries. The recommendations are to be handed in to the two governments by August just before the deadline for either side to can notify the other of any major changes it wants to make. The treaty comes up for renewal in December.

It has been a steady downhill for the economy in the past year, with the royal tragedy just the last straw:

Last June public enterprises, including central bank employees, went on strike

Hotels shut down in December and March, badly affecting tourism in the two peak seasons

Leftist parties called a two-day strike to protest the October oil price hikes, which were called off, but the damage was already done

In December Maoist students attacked schools and a weeklong strike kept 1.5 million children at home

Another student union burnt buses because they wanted to pay only half fares

A proposal to phase out old polluting buses resulted in public transport staying off roads for nearly a week

In end-December the anti-Hritik Roshan riots killed off what was left of the tourism industry

In February UML joined the protests by disrupting parliament and rampaging on the streets after preventing parliament from working for 57 days. Then it enforced a three-day strike

In April Maoists killed 70 policemen in one week forcing the government to spend more to meet increassing costs of security

It has become pointless to assess the accumulated losses in money terms anymore. Investors and businessmen have reached the end of their patience and they were the only ones who openly supported the controversial Public Security Regulations. Says Pradip Kumar Shrestha, FNCCI president: "There is no other way: we need a minimum all-party agreement on the economic agenda. Parliament should be talking economy now, this is now an economic emergency."

The government seems to have belatedly realised that things have got out of hand, but it has been able to do little. "We're cheating ourselves by excessive politicking," finance minister Ram Sharan Mahat told us (see interview). No one would know that better than Mahat, who is now writing next year's spending plan. "Obviously the deficit will widen," Mahat said gloomily. Plugging that would either mean getting grants from donors or borrowing more, to add to the already high debt-servicing obligations.

No one will envy the numbers Mahat has been forced to work with. Over 77 percent of the recurrent expenses budgeted was spent two months ago-mainly on salary and pension payments and security costs, while development spending remained at just 33 percent of what was budgeted. Salaries are expected to overshoot the budgeted Rs21 billion and debt servicing will be over Rs12.7 billion. The government's domestic borrowing is almsot as high as was anticipated.

Two months ago only 17 percent of the foreign aid and loans the government hoped to mobilise had come through. Revenue collection stood at about 70 percent of the target, which nose-dived in May-June as a result of strikes and the shutdown for mourning. The Maoist threats to the alcohol industry and some joint ventures are bound to hurt more. "It has become increasingly difficult to cap the deficit," says Shankar Sharma, a member of the National Planning Commission. "Industries are our main tax payers, and the base remains very small."

Most businessmen and politicians interviewed for this article agreed on a basic checklist for economic revival :

Address the Maoist advance through a carrot-and-stick approach

Forge an all-party consensus to prioritise the economy, and control the Maoists

Launch a drive to spur domestic and foreign investment

Declare a moratorium on strikes and shutdowns to give tourism and the economy a chance


LATEST ISSUE
638
(11 JAN 2013 - 17 JAN 2013)


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