Banks revise interest rates on fixed deposits

After the problem of liquidity crunch started being felt in the market, the banks and financial institutions have revised the interest rates offered on fixed deposit of various tenures. According to the available data, all the banks have increased the interest rates on fixed deposit. And the highest increase is as much as 225 basis points. Everest Bank has revised the interest rates on fixed deposits twice within a fortnight, increasing the interest rates on fixed deposit by 200 to 225 basis points.

Standard Chartered Bank’s rates are found to be the lowest on all deposits. Everest Bank has increased the rate the highest. For the fixed deposits of one month to six months, it raised the rate by 200 to 225 basis points making it 5%. Nepal Investment Bank, Sunrise Bank, Siddhartha Bank and Prime Bank have maintained the same rate as earlier on the one month fixed deposits. For the period of three months, Laxmi and Nabil both have increased the rate by 125 basis points. For the tenure of six months, Nabil Bank has increased the rate by 150 basis points.

On one year fixed deposit, Everest Bank, Nepal Investment Bank, Laxmi Bank and Prime Bank offer the highest interest rates. Machhapuchhre Bank and Bank of Kathmandu have both raised the rate on this tenure by 150 basis points while Everest Bank marked the highest increase by 200 basis points.

For the tenure of two years, Everest Bank, Nepal Investment Bank, Prime Bank and Laxmi Bank offer the highest interest rates. Bank of Kathmandu, Himalayan Bank, Laxmi Bank and Nabil Bank have raised the interest rates by 150 basis points for the tenure of 2 years. Kumari Bank, Laxmi Bank, Everest Bank, Nepal Investment Bank and Prime Bank offer the highest interest rates on fixed deposits of three years and above.

Briefs

# CP Khetan, director of Khetan Group, one of the biggest businesses houses of the country, has been appointed Honorary Consul General of Turkey in Nepal. The position had fallen vacant after CP’s father late Mohan Gopal Khetan passed way recently. Among the other major positions held by CP are the Secretary General of Nepal India Chamber of Commerce and Industry (NICCI) and Managing Director of Gorkha Brewery (P) Ltd.

# Nepal Electricity Authority has issued 1.5 million units of debentures with face value Rs. 1000 each to finance development of Marshyangdi, Chamelia, Kulekhani and other hydropower projects. The debentures issued against the security of 4896 thousand units of shares NEA holds in Chilime Hydropower Company Ltd. will mature in five years and carry a 7% annual rate of interest to be paid out every six months. Nepal Merchant Banking and Finance Company is the manager and trustee of the issue.

# The government’s programme to divest 10 percent of the shares of it holds in Nepal Telecom is drawing enthusiastic participation, says Citizens Investment Trust that is managing the sales of these shares. According to the Trust, about 150,000 applications are expected to be filed by February 26, the last day for the submission of the applications.
Nepal Telecom has a paid up capital of Rs. 15 billion out of which 10 percent is being divested.

Clean Energy Devt. Bank gets JV Partner

Clean Energy Development Bank Ltd. (CEDBL) has entered into agreements with FMO (Financierings Maatschappij-voor Ontwikkelingslanden) of The Netherlands as a Foreign Joint Venture Partner and TREDF (Triodos Renewable Energy for Development Fund - a Renewable Energy Fund managed by Triodos Bank of The Netherlands) as a Development Partner.

Under the agreement, FMO is taking 14% as equity investment in CEDBL. They are also financing clean energy projects in Nepal through CEDBL by way of subordinated loan upto US Dollars 5 Million, states a press release by the bank. Besides, they are also providing an initial amount of USD 500 thousands as “Capacity Building Fund” and “Access to Energy Fund” for capacity building of micro finance institutions dedicated to rural financing in Nepal, it adds.

CEDBL is a national level development bank specialized in the development of clean energy and hydropower sector in Nepal. Besides debt financing, the Bank also offers assistance to the clean energy and hydropower projects by way of private equity and advisory and consulting services. CEDBL also has a “Strategic Alliance Agreement” with DFCC Bank and DFCC Consulting (P) Ltd. of Sri Lanka.

Laxmi Bank Offers Stock Option

The recently held AGM of Laxmi Bank Ltd. has approved a proposal of the Board to offer stock option to the employees of the bank when the company issues more shares to raise capital further. If the proposal is approved by the relevant authorities of the government, this will be the first instance of such shares in Nepali corporate history.

The bank plans to set aside shares equivalent to one percent of the existing number of shares for the purpose of employees’ stock option, states a press release from the company. The bank’s employees were provided shares also when it had made the IPO.

The bank is issuing right shares this year at the ratio of 4:1 in a process to raise the paid up capital to Rs. 2 billion by the year 2010. According to the company, after the proposed right issue and employees’ stock option, the paid up capital of the company will reach Rs. 932.32 million.

The bank recorded 85.31 percent increase in its net profit in the fiscal year ended on mid-July 2007. In the six months ended mid-January 2008, the bank made an operating profit of Rs. 98.03 million and a net profit of 60 million recording a 146 percent rise over the net profit of the same period in the previous year. The annual target for the fiscal year ending on mid-July 2008 is to earn an operating profit of Rs. 240 million, states the press release

DRAGONAIR Voted HURUN ‘Best Of The Best’

Dragonair has been voted “Best Asian Airline” at the 2007 annual Hurun Report Best of the Best Awards.
The Hurun Report Best of the Best Awards are selected in a survey of brands preferred by the growing army of multi-millionaires in the Mainland China. Six-hundred and sixty Chinese entrepreneurs worth 10 million RMB or more were interviewed for the awards.

“We are delighted to receive this accolade from Hurun, which is recognition of the quality services we provide to our business passengers,” said Dragonair Chief Executive Officer Kenny Tang.
In December, Dragonair was named Best Airline ( China) by TravelWeeklyChina magazine. Also last year, the carrier was named Best Airline – China in the worldwide Skytrax passenger survey for the sixth consecutive year.

Dragonair, an affiliate member of oneworld, is a Hong Kong-based airline operating a fleet of 31 passenger aircraft and eight freighters serving 34 regional destinations, including 21 cities in Mainland China. Dragonair is part of the Cathay Pacific Group.

Powder Milk Factory at Lalbandi Too

Responding to the announcement made in this year’s government budget, the Central Dairy Cooperative Organisation (CDCO) has approached the Dairy Development Board (DDB) with a proposal to set up a powder milk plant at Lalbandi of Sarlahi district.

In the budget proposals, the government had promised to provide either 25 percent subsidy on equipment cost or 80 percent subsidy on the loan for all the dairy cooperatives if they wanted to set up a powder milk factory. According to the Board, CDCO’s is the only proposal received within the stipulated deadline.

The CDCO has proposed to set up a factory that will have a capacity to process 125,000 litres of liquid milk per day and needs an investment of Rs. 378 million to set up. CDCO has asked for 25 percent subsidy on the equipment cost.

According to the proposal, the factory will have a share investment of Rs. 302.8 million from milk cooperatives and Rs. 10 million each from the National Cooperatives Development Board and National Cooperative Bank.

The Road to Vegas: $55 and 70 Years

Nelson will preside over a 70th anniversary celebration in Las Vegas this week for Carlson, the travel, lodging, restaurant and marketing business that began as the Gold Bond Stamp Company in 1938.

Peter van Stolk
Ms. Nelson’s father, Curtis L. Carlson, started the company in Minneapolis with a $55 loan, according to the Carlson Web site. In 2006, the company, which is still based in Minnesota, had sales of $37.1 billion; it employs almost 200,000 people under operations that include T.G.I. Friday’s and Radisson Hotels.
In 1998, Ms. Nelson took over the chief executive post from her father, who died the next year. Last month, the company named Hubert Joly, head of Carlson Wagonlit Travel, to succeed Ms. Nelson as chief executive; she will remain chairwoman.
That announcement came after a legal battle began between Ms. Nelson and her son, Curtis Carlson Nelson, former president and chief operating officer. Mr. Nelson left the company in 2006 and contended that he had been led to believe he would become chief executive. The company and a spokesman for Mr. Nelson both said that all legal issues had been resolved. The company would not comment further.
In a phone interview last week, Ms. Nelson, 68, said she was disappointed that a family member would not be running Carlson. She said she expected that over time, the job would be held at various times by “family candidates and external candidates, whoever can best lead what has become a very large company.”
The Las Vegas celebration will include speeches by Peter Brabeck-Letmathe, the departing chief executive of Christine Lagarde, the French finance minister; and Klaus Schwab, founder of the An evening gala will feature entertainment by the appropriately Minnesotan A CHARITY REMEMBERED When chief executives resign, their severance agreements usually reflect a concern for them and only them. But Peter van Stolk, the founder and departing chief executive of , appears to have considered people less fortunate than himself when he negotiated the terms of his departure this month.
Along with $450,000 in severance, Jones agreed to pay $100,000 to Mr. van Stolk to give to Vitamin Angels, a charity focused on the nutritional health of children in underdeveloped countries. He has supported Vitamin Angels through Jones for years.
Last year, the company posted a video on YouTube and pledged to give 25 cents to the charity every time somebody watched the video, up to a limit of one million viewings. PATRICK McGEEHAN
RUSSIAN TYCOONS TANGLE Alisher Usmanov, a Russian billionaire who made a fortune in distressed assets of mines and steel mills, has entered a takeover struggle for Norilsk Nickel, one of the world’s largest producers of nickel and platinum group metals.
It is the most ambitious maneuver yet for Mr. Usmanov, who rose from inside in the 1990s and survived a purge at the company after President came to power in Russia.
Now, Mr. Usmanov’s ties to Gazprom are seen as auspicious in Moscow, where reliable connections to the Kremlin are essential for business survival and success.
Mr. Usmanov’s entry threatens the ambitions of another of Russia’s richest men, the aluminum tycoon Oleg Deripaska, who is trying to gain control of Norilsk.
The two longtime owners of Norilsk, Vladimir Potanin and Mikhail D. Prokhorov (each worth about $21 billion, according to Finans magazine in Russia) said last year that they would divide their assets, setting off the current struggle. Mr. Prokhorov subsequently sold most of his stake to Mr. Deripaska.
Norilsk, which is based in Siberia, began as a gulag slave labor camp. Today it has a market capitalization of $57 billion. ANDREW E. KRAMER
PAY DELAY Many corporations allow their senior executives to defer the receipt of some of their pay and collect it later, plus interest. For Ara K. Hovnanian, the chief executive of , the company’s deferred-compensation program has not been a can’t-lose proposition.
The value of Mr. Hovnanian’s deferred-pay account dropped more than $13 million last year, according to the company’s proxy statement. To some degree, he suffered with the shareholders as the battering of the home-building industry took more than 75 percent off the price of Hovnanian’s stock in 2007. But unlike the rest of them, Mr. Hovnanian was able to cushion the blow with a gain of $4.6 million from exercising options on the company’s stock.

Fear of Insurance Trouble Leads Many to Shun or Hide DNA Tests

Victoria Grove wanted to find out if she was destined to develop the form of emphysema that ran in her family, but she did not want to ask her doctor for the DNA test that would tell her.
She worried that she might not be able to get health insurance, or even a job, if a genetic predisposition showed up in her medical records, especially since treatment for the condition, alpha-1 antitrypsin deficiency, could cost over $100,000 a year. Instead, Ms. Grove sought out a service that sent a test kit to her home and returned the results directly to her.
Nor did she tell her doctor when the test revealed that she was virtually certain to get it. Knowing that she could sustain permanent lung damage without immediate treatment for her bouts of pneumonia, she made sure to visit her clinic at the first sign of infection.
But then came the day when the nurse who listened to her lungs decided she just had a cold. Ms. Grove begged for a chest X-ray. The nurse did not think it was necessary.
“It was just an ongoing battle with myself,” recalled Ms. Grove, of Woodbury, Minn. “Should I tell them now or wait till I’m sicker?”
The first, much-anticipated benefits of personalized medicine are being lost or diluted for many Americans who are too afraid that genetic information may be used against them to take advantage of its growing availability.
In some cases, doctors say, patients who could make more informed health care decisions if they learned whether they had inherited an elevated risk of diseases like breast and colon cancer refuse to do so because of the potentially dire economic consequences.
Others enter a kind of genetic underground, spending hundreds or thousands of dollars of their own money for DNA tests that an insurer would otherwise cover, so as to avoid scrutiny. Those who do find out they are likely or certain to develop a particular genetic condition often beg doctors not to mention it in their records.
Some, like Ms. Grove, try to manage their own care without confiding in medical professionals. And even doctors who recommend DNA testing to their patients warn them that they could face genetic discrimination from employers or insurers.
Such discrimination appears to be rare; even proponents of federal legislation that would outlaw it can cite few examples of it. But thousands of people accustomed to a health insurance system in which known risks carry financial penalties are drawing their own conclusions about how a genetic predisposition to disease is likely to be regarded.
As a result, the ability to more effectively prevent and treat genetic disease is faltering even as the means to identify risks people are born with are improving.
“It’s pretty clear that the public is afraid of taking advantage of genetic testing,” said Dr. Francis S. Collins, director of the National Human Genome Research Institute at the National Institutes of Health. “If that continues, the future of medicine that we would all like to see happen stands the chance of being dead on arrival.”

Tax Scandal in Germany Fans Complaints of Inequity

FRANKFURT — For wealthy Germans, many of whom have long hidden their money outside the country to avoid its high taxes, this has been a weekend of high anxiety. For their fellow citizens, it has been a riveting spectacle, dominating the public discussion for days.



Klaus Zumwinkel was the first to fall in the tax investigation.
Prosecutors are investigating hundreds of people, including several who are household names in Germany, on suspicion that they evaded taxes by steering money to Liechtenstein, a postage-stamp principality known for its striking Alpine scenery and discreet banks.
The fast-spreading scandal has already brought down one of Germany’s most powerful business figures, Klaus Zumwinkel, who resigned Friday as the chief executive of the German postal service after the police raided his home. He is suspected of evading $1.46 million in taxes.
The scandal bears the hallmarks of a Robert Ludlum novel, with a mysterious informant who was paid by German intelligence to turn over a data disc containing evidence of tax fraud on a vast scale.
The ripples are extending far beyond Germany’s moneyed elite, inflaming the suspicions many ordinary Germans have long felt toward well-paid corporate bosses and the free market in general.
A leftist party that campaigns against the excesses of business has made notable inroads in recent German state elections, raising hurdles for the government of Chancellor Angela Merkel, who is viewed as pro-business but has been sharply critical of the suspected tax evasion.
Evidence that Germany’s rich tucked away their cash in Liechtenstein and other tax havens is creating a new narrative in German politics: the betrayal of the elites, who have spent the last decade calling for a painful reform of the welfare state, even as they apparently avoided paying their fair share.
“The political implications of this are going to be great,” said John C. Kornblum, a former American ambassador to Germany who is a banker here. “In the U.S., we send people off to prison and say ‘good riddance,’ but it doesn’t actually shake people’s belief in the system. Here, it does.”
German authorities say they began unraveling the scandal in 2006, when a person, whose identity has not been disclosed, approached the country’s Federal Intelligence Service, its equivalent of the Central Intelligence Agency, offering a CD-ROM with data on German clients of a bank in Liechtenstein.
After checking out a sample of the information on the CD, the German finance minister, Peer Steinbrück, authorized a payment of about 5 million euros ($7.3 million) for the information.
By late last year, the material had passed through the tax agency in the state of North Rhine-Westphalia, officials said, and landed on the desk of a special financial crimes group in Bochum, a gritty industrial city.
There, the investigators recognized a kind of tax dodge they knew existed but could seldom document.
Liechtenstein, a tiny German-speaking principality wedged between Switzerland and Austria, has strict banking secrecy laws and grants favorable treatment to foundations. Many are filled with cash spirited out of Germany through various means, some as crude as stuffing a suitcase with cash and driving across the border. Smugglers are arrested regularly.
Foundations are taxed in the low single digits and are permitted to disburse money to their founders and to founders’ family members. The foundations are also permitted to open bank accounts in their own names outside the principality, which gives the owners access abroad to their cash.
Any effort to trace the owners of the foundations runs up against Liechtenstein’s tough banking secrecy laws.
Data from the LGT Group, a Liechtenstein bank with a subsidiary that specializes in foundations, appears to have formed the basis of the German investigation. The bank, which is owned by the royal family of Liechtenstein, has said it cannot confirm its part in the investigation.
But on Friday, the bank said that the German scandal might be linked to data stolen by a disgruntled employee in 2002, and it conceded that it was not sure how many clients had been exposed. “The scope of the presumed data transfer cannot be determined,” LGT said.
In Bochum, the prosecutors had enough information to obtain 13 search warrants against three people, Mr. Zumwinkel among them. With television cameras in tow, they arrived at his villa in an affluent suburb of Cologne on the morning of Feb. 14 and carted away boxes of documents.
Prosecutors announced that they had obtained an arrest warrant for Mr. Zumwinkel but did not execute it after he agreed to cooperate with them and posted a large bond

Smugglers Return iPhones to China

SHANGHAI — Factories here churn out iPhones that are exported to the United States and Europe. Then thousands of them are smuggled right back into China.

Ryan Pyle for The New York Times
Deals for the iPhone advertised at a market in Shanghai.
The strange journey of Apple’s popular iPhone, to nearly every corner of the world, shows what happens when the world’s hottest consumer product defies a company’s attempt to slowly introduce it in new markets.
The iPhone has been swept up in a frenzy of global smuggling and word-of-mouth marketing that leads friends to ask friends, “While you’re in the U.S., would you mind picking up an iPhone for me?”
These unofficial distribution networks help explain a mystery that analysts who follow Apple have been pondering: why is there a large gap between the number of iPhones that Apple says it sold last year, about 3.7 million, and the 2.3 million that are actually registered on the networks of its wireless partners in the United States and Europe?
The answer now seems clear. For months, tourists, small entrepreneurs and smugglers of electronic goods have been buying iPhones in the United States and then shipping them overseas.
There the phones’ digital locks are broken so they can work on local cellular networks, and they are outfitted with localized software, essentially undermining Apple’s effort to introduce the phone with exclusive partnership deals, similar to its primary partnership agreement with AT&T in the United States.
“There’s no question many of them are ending up abroad,” said Charles R. Wolf, an analyst who follows Apple for Needham & Company.
For Apple, the booming overseas market for iPhones is both a sign of its marketing prowess and a blow to a business model that could be coming undone, costing the company as much as $1 billion over the next three years, according to some analysts.
But those economic realities do not play into the mind of Daniel Pan, a 22-year-old Web site designer in Shanghai who says a friend recently bought an iPhone for him in the United States.
He and other people here often pay $450 to $600 to get a phone that sells for $400 in the United States. But they are happy.
“This is even better than I thought it would be,” he said, toying with his iPhone at an upscale coffee shop. “This is definitely one of the great inventions of this century.”
Mr. Pan is among the new breed of young professionals in China who can afford to buy the latest gadgets and the coolest Western brands. IPhones are widely available at electronic stores in big cities, and many stores offer unlocking services for imported phones.
Chinese sellers of iPhones say they typically get the phones from suppliers who buy them in the United States, then have them shipped or brought to China by airline passengers.
Often, they say, the phones are given to members of Chinese tourist groups or Chinese airline flight attendants, who are typically paid a commission of about $30 for every phone they deliver.
Although unlocking the phone violates Apple’s purchase agreement, it does not appear to violate any laws here, though many stores may be avoiding import duties.
Considering China’s penchant for smuggling and counterfeiting high-quality goods, the huge number of iPhones being sold here is not surprising, particularly given the popularity of the Apple brand in China.
Indeed, within months of the release of the iPhone in the United States last June, iPhone knockoffs, or iClones as some have called them, were selling here for as little as $125. But most people opt for the real thing.
“A lot of people here want to get an iPhone,” says Conlyn Chan, 31, a lawyer who was born in Taiwan and now lives in Shanghai. “I know a guy who went back to the States and bought 20 iPhones. He even gave one to his driver.”
Negotiations between Apple and China Mobile, the world’s biggest mobile-phone service operator with more than 350 million subscribers, broke down last month, stalling the official release of the iPhone in China. Long before that, however, there was a thriving gray market.
“I love all of Apple’s products,” said a 27-year-old Beijing engineer named Chen Chen who found his iPhone through a bulletin board Web site. “I bought mine for $625 last October, and the seller helped me unlock it. Reading and sending Chinese messages is no problem.”
An iPhone purchased in Shanghai or Beijing typically costs about $555. To unlock the phone and add Chinese language software costs an additional $25.

Fund Managers

Saxo Capital Markets welcomes asset managers and financial professionals to consider a relationship with us. Our trading platform and technology simplifies fund management allowing you to focus on managing the portfolio and client service.
Fund Management through Saxo Capital Markets
Diverse investment product range and advanced trading technology, ideal for establishing many types of Managed Funds
New concept in Managed Funds allows clients to make immediate investments in your fund online
Fund capital automatically block allocated between across your investments
Potential access to thousands of existing clients
How have we done this?
Saxo Capital Markets develops original technology to facilitate investment management and trading. For private bankers, brokers and other financial professionals this means access to a platform that combines both portfolio trading and portfolio management.
This aggregated solution enables your firm to establish a Managed Fund Program investing in a broad set of investment instruments traded on the same platform you, as Fund Manager, would use to establish and manage your fund. The unit-based fund platform simplifies entry cost and profit/loss calculations.
Diverse products and trading technology
Saxo Capital Markets supports a diverse trading product range and advanced trading technology that automates fund administration and distribution to clients. You take care of your investment activities — Saxo Capital Markets technology takes care of the rest.
Exciting new concept in managed funds
Saxo Capital Markets offers an exciting new concept in managed funds where clients can buy and sell managed fund units directly through the SaxoTrader online trading platform. Clients can now open and close investments in funds immediately without administration time, knowing the exact prices they are buying and selling at.
Introduce clients directly to Saxo Capital Markets to earn volume rebates from their trading activities.
Trade on behalf of clients (through Power of Attorney) to lucrative

Creative Clusters

Business news from the West reaches Kathmandu slower than the 'bikase' news and political 'basibinyalo,' but Creative Clusters Conference 2007 that took place in London this month was a modest event worth some pondering by policy makers. Even the political soap opera between the SPA and the Maoists can wait for one more minute before it gears up for yet another climax of farce.
The Creative Clusters Conference had representatives from fourty one countries around the globe and the event took off with somewhat unusual a retrospection that the artist is a generator of economic value. In creativity business, the artist, the historian or the thinker is no longer a peculiar outsider who the State or the rich must protect, but an economic contributor in his own right.
The idea of creativity-based industrialisation might sound strange to many who think of economic growth as something totally distinct from cultural wealth and power. In reality, the rapid globalisation has made the creative sector one of the fastest-growing in the world. The world's biggest companies in 1950 used to be all industrial manufacturers and raw materials suppliers: Ford, Standard Oil, General Electric, Philips, General Motors. Now there are some completely new names: Time Warner, Disney, Bertelsmann, News Corporation - television broadcasters, publishers, entertainers. In fact, these sectors are showing annual growth rates between 5 to 20 percent in the world's advanced economies.
Creative production is more about distinction - be it the distinction of value, taste or style. Even the mass producers like Nike and Coca Cola are edging towards distinction, or what some philosophers call 'semiotics.' Their whole manufacturing process is outsourced; the only thing the Nike and Coca Cola manage are the narratives. For this, their language must be analytic and impersonal but intuitive and aesthetic. It is the language of the artist, the creator.
Because creative products are information-based, they cannot grow until digital technologies, communications networks and means of transportation do not take off. All these are public goods and the State is responsible for building the hard and soft infrastructures so that creative businesses have an enabling environment.
If we think about it, the industries that have worked best in Nepal have less to do with mass production and more to do with creative production. The 2000s have shown us, as clearly as the 1990s did, that American-style mass production model of capitalism is not the game for Nepal . Our geographic and cultural comparative advantages lie elsewhere. Tourism, handicraft and art industries are all creative industries. Let us have yet one more round of stock-taking if we are still unconvinced by what our history reminds us time and again that Nepalis are better artisans, better philosophers and better service-providers than better manufacturers.
Maybe modest events like CCC will allow us a moment to consider distinction and creativity as our industrial strategies than continue on the blind race of homogenisation and mass manufacturing. Let's hope that the rise of creative industries on both sides of the Atlantic and the Pacific will be our eye-opener that smart production easily outweighs large production.

.Further financial market reforms are crucial to expanding the sources of credit to maintain the high rates of economic growth, notwithstanding concer

With a heady economic growth of 9 per cent plus in the first half of the current fiscal, expectations about sustaining the trend have mounted; the Government has reassured investors, both domestic and foreign, about its commitment to economic reforms.

Only recently, the Finance Minister, Mr P. Chidambaram, spoke about the United Progressive Alliance Government's intentions on the pending pieces of legislation pertaining to the Pension Fund Regulatory Development Authority (PFRDA) and the amendment to the Banking Regulations Act in the Budget session scheduled next month. The Minister in the Prime Minister's Office (PMO), Mr Prithviraj Chavan, emphasised the same in Mumbai last week.

The Prime Minister, Dr Manmohan Singh, has hinted at more reforms, particularly in the financial sector. Indeed this is imperative, if the flagship schemes of the UPA's National Common Minimum Programme, seeking inclusive growth, are to be implemented and funds found to overhaul the rickety infrastructure and build new ones.

Moody's report

In its annual report on India, released in New York on January 16, Moody's Investors Service cryptically notes: "India's robust economic momentum seems to defy the constraints posed by its inadequate social and physical infrastructure and an extremely inefficient government sector. Coalition politics have recently hindered the implementation of needed reforms on the labour and capital market and the public sector, which could make it hard to sustain progress on fiscal consolidation."

Moody's Vice-President and one of the report's authors, Ms Kristin Lindow, in response to whether the fiscal consolidation targets of the Fiscal Responsibility and Budget Management Act should be relaxed to meet the infrastructure shortfall, said, "Any such easing would signal undue complacency about the government's large debt and debt service burden, potentially exacerbating the overheating economy and spurring higher inflation and interest rates."

The report has drawn attention to the fact that India's domestic credit growth has outpaced nominal GDP growth by a factor of two for the last three years, reflecting demand that, coupled with crude oil import costs, had driven the trade and current account deficits to high levels.

It is also interesting to note that in a special comment on the need for more varied debt markets in India, brought out by Moody's Investors Service and ICRA Limited, economists have made out a forceful case for further financial market reforms to expand the sources and availability of credit for the maintenance of high rates of economic growth, notwithstanding current concerns about excessive credit growth, a overheating economy and inflationary pressures.

Development fallout

They point out that the fallout of India's accelerating economic development is its escalating demand for credit. Indian companies are expanding at home and abroad, and a large and growing middle-class is ready to utilise credit for purchases.

Domestic credit has been growing at about 30 per cent per annum ? more than double the rate of growth of nominal GDP ? while the bank deposit growth has been about 20 per cent. The high rate of credit growth has resulted in banks finding some of the funds by liquidating assets.

Besides, the current favourable conditions for global liquidity, including a high appetite for emerging market risk, will not persist indefinitely. Setbacks in the equity market ? for example, the corrections seen in mid-2006 ? could negatively impact the foreign currency convertible bonds (FCCB) markets.

Hence, an alternative would be to prioritise the deepening and broadening of the private sector's access to capital, including debt funding.

However, a constraining factor on the development of the domestic corporate debt market is the government's own financing need, which it implements primarily through local financial institutions. Stating that such an approach potentially prunes the capacity of these institutions for more productive lending, the report says the gross general government debt is equivalent to over 90 per cent of GDP at today's exchange rates.

The government's need to finance its deficit and massive debt-service obligations coupled with its social policy agenda mean restrictions in the local debt market. These include:

Ø Mandating banks to buy government-related securities to fulfil statutory liquidity and cash reserve ratio requirements;

Ø Directed lending, wherein all locally incorporated banks must lend 40 per cent of their total advances to `priority sectors' ? agriculture, exporters, and small businesses;

Ø Restrictions on investment guidelines for insurance companies and pension funds.

Pointing out that the domestic corporate bond market is essentially undeveloped, the report contends that the immature status of debt capital bond market largely reflects the historical crowding-out triggered by the government's gargantuan borrowing needs.

Other factors include robust competition among banks ? in the absence of notable banking sector consolidation or a broad-based risk/return ethos ? to lend to better-rated companies; this has curbed primary market development.

Here, according to the report, the undeveloped status of debt capital market is at odds with the conservatism of Indian retail investors. Notwithstanding publicity on gains in the equity market, much of the household saving is in gold, bank deposits and government savings scheme.

Given the consistent uptrend in the savings rate ? it is now almost 30 per cent of GDP ? the key challenge is to deploy these funds to greater effect within the domestic formal financial system.

Strengthen banking

Hence, the report makes a case for strengthening the banking sector. But neither the government nor the regulators has promoted consolidation. But given the very large amounts required for physical infrastructure projects, the government has little option but to go the whole hog in financial sector reforms.

On the demand front, such reforms, the report says, would include easing investment guidelines for pension funds and insurance companies; current rules hobble them from investing in non-governmental paper and this prevents the emergence of a deeper and broader credit culture through the financial system. On the supply side, reforms could facilitate the domestic corporate bond market as a viable alternative to bank lending.

Additional reforms could encourage development of the structured finance market, which would enhance the capacity of banks to lend; a further easing of restrictions on foreign currency borrowings may be necessary, especially to meet the infrastructure sector's long-term funding needs.

The report rightly highlights the dangers of complacency in not going ahead with the financial sector reforms.

Finance ministry proposes 35-50% export obligations.

Even as the finance ministry today proposed to impose export obligations on industrial units located within Special Economic Zones (SEZs), the government has put the brakes on fresh approval and notification of zones beyond the 63 already notified.

The restriction on approvals will apply to even those SEZ projects for which developers have acquired land. In effect, no fresh land anywhere in the country will be notified as an SEZ, regardless of who has sold or acquired it.

This was the key decision at a meeting of the Empowered Group of Ministers (EGoM), headed by External Affairs Minister Pranab Mukherjee, today. The meeting discussed the export obligation proposal but did not take a final decision.

The finance ministry?s proposal involves imposing export obligation of between 35 per cent and 50 per cent on the annual production of units set up within an SEZ to make them eligible for tax breaks. At present, units only have to be net annual foreign exchange earners to be eligible for tax benefits. It is not clear whether SEZ developers, which only develop zones and offer facilities to various companies, will also face the export obligation.

Sources said the proposal for developers to have an export obligation was opposed by members of the E-GoM on the ground that a developer was like a real estate establishment and could not undertake any export activity of its own. ?In fact, this proposal took a lot of time to discuss,? they said.

A final decision on the issue may be taken when the ministers meet again, possibly in a couple of days. That meeting will also review the decision to not approve any more zones.

There are 237 special economic zones that have been formally approved till date. If the changes are agreed to, the SEZ Act of 2005 and its rules will have to be amended.

Briefing reporters after the meeting, Commerce Minister Kamal Nath described the meeting as ?inconclusive?. ?We just had a general discussion that covered issues of land, rehabilitation of those displaced and the question of a possible misuse of tax incentives that are being given.?

Commerce ministry officials added that while a meeting of the SEZ Board of Approval would be held in the first week of February, it would not take up the 81 proposals that were deferred for consideration. Instead, the meeting is expected to discuss issues relating to the already notified 63 zones.

Nepal should adopt new technology more than others"

Dr. T Pearse Lyons, President of US-headquartered leading animal health company Alltech Inc., was in Kathmandu recently with a team of six experts in the fields of animal science, biofuels, food safety and nutrition, under Asia Pacific Lecture Tour (APLT) that Alltech has been conducting for over last 25 years and is being held this year in 15 countries including Nepal. Dr. Lyons talked to New Business Age on the sidelines of the lecture programme organized in association with Nimbus, the leader in Nepal's animal feed industry. Excerpts:

Alltech is conducting APLT for over last two decades. Why Nepal this year?

We have been conducting the Asia Pacific Lecture Tour for almost 25 years. We try to go to as many countries as we can. As we have already developed Indian market, Pakistani market and Bangladesh market, it seems quite natural to us that we have to develop market here in Nepal as well. To do so, you have to be in touch with what people are doing here. You can't do that by staying in America , England or France . You have to be physically present here.

What are the objectives of APLT?

It aims at two things. The number one is to educate the local market and the number two is to educate ourselves as to how far exactly should we be doing in one market relative to the other market. Different markets have different requirements. In the United States , which is very rich in grains, we have different diet for the animals. In Nepal , where lot of grains have to be imported from outside, we have to focus on different kinds of material but at the same time try to achieve the same productivity. In Nepal , as you have scarcity of raw materials, I think, you have to embrace technology faster than anybody else. If I am sitting in the middle of grain, grain and grain, it doesn't matter. If I am sitting in the middle of no grain, no vegetables or fibre, and need to look after the health of the bird, animal and the fish, that brings me to what we call Selplex, a trademarked organoselenium from our company. It is crucial to make sure that an animal’s immune system is right so that it prospers even under difficult conditions. Secondly, in a country like yours where there are different raw materials, you have invariably a lot of problems with mycotoxins. Mycotoxins are every where. They are in hotels. They are in your food. They are particularly challenging to young and reproducing or high producing animals, for example, the layers. When I was in Bangladesh , I tried to convince people to use Sel-plex. But thy were more in favour of our another product Mycosorb. Obviously, they saw that with Mycosorb there was improvement in the animal's performance. But now you also have to see next dimension.

What is the next dimension?

It is that you have to use local raw materials. The price of corn has doubled. More probably it will double again. This challenge is not only in corn. It is in barley and other cereals as well. These are being used for fuel production as well. This is taking away grains from the supply chain. This is going to hurt you. It means we have to learn how to use fibre. The people have to adopt technology fast. You cannot wait for years. There is no way you can wait for seven years when the price of corn and fibre double in one year or 18 months. So you better adopt technology fast, otherwise you are going out of business. So, we are here to educate ourselves and we are here to educate people in Nepal. And remember the education we are bringing is very, very latest. It is not even one or two year old. For example, five years ago, a gene chip did not exist. Now we have a chicken genome, a shrimp genome, all on a chip. I guarantee you not a single professor in your country understands the slightest thing about the genome not because they are not qualified enough but because it is so new. So, we are bringing you new ideas. Yes, it's a small market now but hopefully it will become a bigger one in the future.
What is the current fuel crisis all about? How does Alltech plan to help solve the food, feed and fuel crisis?
We do not. Our business is to keep the farmers’ business. And we will keep the farmers’ business by helping them to use alternative raw materials.
Turning to the fuel crisis, let me say that the world is running out of oil. It has reserves of oil for 32 years, that's all. Not 37, not 30, but exactly 32 years, if we continue to burn 99 million barrels of oil a day like we do now. So, the world will run out of oil. It will need twice the amount of gas in 60 years and twice that amount of coal in 150 years. It means we have finite amount of oil and energy. So, governments around the world are trying to be energy independent. If you look at United States at this moment, its total oil import is far greater than its total agricultural produce. That's despite the US being a huge agricultural powerhouse. So, there is a great requirement or desire to be energy secure, though not energy independent. Therefore, people are looking for other options of fuel like ethanol for which first thing being used is corn. That means our farmers are delighted. The price of their land has doubled, or even tripled. The people selling tractors are delighted. The people selling seeds are delighted. The government is delighted because as the corn prices go up, the need to subsidise the farmers would not be there. So, there is a lot of support for ethanol programme in the United States and to a certain degree, I guess, in Europe as well. But this is causing a crisis as food is being taken away for fuel purpose. What is driving this crisis that we call 'food, feed or fuel' is the quest for energy independence or energy security. The good news, the silver lining, is that this is forcing us all to look at the alternative sources of energy like wind power, hydro power, solar power, nuclear power and the ultimate source - fibre, which, if decomposed for millions of years, produces coal or oil. So, now people are focusing on fibre. In the United States , we produce over one billion tons of fibre waste a year. So do you. You do not produce that much waste here, but you too do produce it. All are the waste grass, waste vegetables and waste wood are in fact waste. If that is processed into ethanol in the United States , we would not import one barrel of oil, to repeat, not one barrel of oil. The problem is that we have not done enough research on that. Now there is a lot of researches going on. I think in Dalian University in China there are 26 PhDs working on renewable fuel. I would like to ask how many PhDs in your country have been working on that issue. The answer is 'none'. Frankly speaking, our country does not have anybody either. However, the good thing now is that with this challenge of oil approaching $100 per barrel, people have started to look at the other technologies which would not have been the case if it was $ 20 per barrel.
Though Nepal has good sugarcane production, no initiative has been taken for extracting ethanol.

How can it be started?

In the US , the government gave the tax break for the ethanol industry. There are two typical forms of supply of the raw material at the moment for ethanol - one is grain and one is sugarcane molasses. Sugarcane is more energy efficient in terms of ethanol yield. So, one way to start this here is may be by giving a break to ethanol producers to get started. Then also ask yourself how you can put something around the distillery industry. With sugarcane, you can also have bio-gas. Similarly, if you are talking about grains, ask yourself how you can add value to the grain business. Can you put dairies? Can you put aquaculture? So, we have to get back to the basics. We can think of all the things that we can put around it. We are going to build what we call bio-refinery in Kentucky . The government has given us an eight million dollars grant and we hope we will get additional 32 million dollars grant from the federal government. A bio-refinery plant is coming up also in Serbia because they also want to be energy secure. They have grain, they have low wages, their government fully supports it and they are smart. So, for Nepal to jump forward, she has to do things differently. Serbia is looking to the Irish model. Maybe that model is suitable for Nepal as well. The model basically says that you have to cluster around it as many businesses as possible so that they complement each other.

How can Nepal go for ethanol and bio-fuel production against the fact that it is already deficient in most of the food grains?

The question is, are you sufficient in sugar? The question is, can you produce more sugar? If you can produce more sugar then you can start to produce ethanol. If you look at the Brazilian model, they are setting an incredible example in this. Is the grain-based distillery in Nepal importing grain? If not, may be you can produce ethanol from grain. However, first of all it has to be rural. Secondly, it has to be community-based. Thirdly, you have to use the local raw materials. That can be sugarcane molasses or grain or whatever it is. And then you can look at what you can cluster around so that you can use the by-product.

Your poultry industry should be driven by your domestic consumption. You have to ask yourself: What would make people buy chicken or eggs to eat? Look at the Chinese model, look at the models from elsewhere. For people to be able to eat more chicken, first it must be affordable and secondly it has got to be safe. The big issues around the world today are not only profit and quality but also branding. You should also look at how individual companies or countries are promoting poultry products. We see, in a smaller way, that egg producers are branding their product. It is not only the question of big or small eggs, but the function of eggs, because it is linked with health and nutrition. So, affordability will drive the efficiency. With the raw material prices increasing, if nothing changes, the cost of producing chicken is going to go up. Using technology will keep the cost down, for example by enzyme application and using more fibre. At the same time, you need to improve efficiency of production. Then you can come to the question of branding and differentiation.
Would you please tell us about the things Altech is doing for HIV sufferers in Africa or elsewhere?
We have a product called Selplex that helps in the health of the animal and we have got the gene chip. With these what we have learnt is that we can switch certain genes on or off. Selplex turns on certain genes that are related to the immune system. When people have HIV, they are affected by a virus. When a bird has a viral challenge, the first effect is that its immune system goes down and Selplex helps in restoring the immune system.

EuromoneyNames SABB Best Private Bank in Saudi Arabia

(SABB) has been recognized as the "Best Private Bank in Saudi Arabia" in the Euromoney Private Banking and Wealth Management Survey 2008 which is regarded as the benchmark for the wealth management sector.Commenting on the survey results, Adel Marzook Al-Nasser, deputy managing director of SABB, said in a statement yesterday that: "This is the reward for the distinguished efforts and excellent performance by SABB's highly skilled private banking and support teams backed by the global expertise of HSBC. Together, they have enabled us to develop and provide distinctive and innovative products and services, which the survey appears to show are meeting our customer's demands and expectations. We are particularly proud of this accolade since the Euromoney awards are considered the most prestigious and important reference for global ." Saudi Arabia is one of the fastest growing wealth management markets in the world. The value of assets under management by the wealth management arms of the Kingdom's banks has been growing at an average of 135 percent over the past 3 years. The survey results ? which began last September ? reflect increasing competition in the Saudi banking sector, and the private banking segment of the market will see some of the fiercest competition over the coming years with both local and international banks playing a prominent role.

BofA to cut 650 jobs from corporate, investment banking ranks

will eliminate 650 jobs in its corporate and investment banking division. The Charlotte, N.C.-based bank also will sell its equity prime-brokerage business, which processes trades for hedge funds.
Officials did not immediately respond to inquiries about any possible impact in the Phoenix area.
"These changes will sharpen the focus of our capabilities and activities on the needs of our clients," says Ken Lewis, chief executive. "We should emerge from this realignment with profitable and more competitive global markets and global investment-banking businesses. We're committed to that, and it is important to our success."
BofA (NYSE:BAC) says the realignment will result in revenue and expense reductions. Additional guidance will be provided Jan. 22, when the company is scheduled to report its fourth-quarter and full-year 2007 financial results.
The job cuts follow BofA's decision in October to eliminate 3,000 jobs, or nearly 2 percent of the company's total employment. Some 500 of those layoffs were in global corporate and investment banking.
The bank made that move after reporting third-quarter earnings of 82 cents per share, a 32 percent decrease from the third quarter of 2006.
Continued disruptions in the credit market hit BofA especially hard in its global corporate and investment banking unit, where third-quarter net income fell to $100 million, a 93 percent drop from $1.43 billion a year ago.
In the aftermath, BofA began shuffling senior executives in a broad reorganization plan. As part of those moves, Brian Moynihan was named president of global corporate investment banking. Moynihan succeeded former GCIB President Gene Taylor, who retired after 38 years.
Along with the layoffs, the reorganization includes reduced activities in certain structured products, including collateralized debt obligations, and an emphasis on core strengths in debt, cash management and trading.

HOW'S THE BUSINESS?

After some big factories closed down and some foreign investors shifted their factories abroad, the message spreading around is that the investment climate in Nepal is worse than in the neighbouring countries. Security situation is cited as the major hurdle. The dismal rate of GDP growth that stood at mere 2.9 percent (in producer's price) in the year ended on mid-July 2007 is offered as the further proof. This rate is far lower than in any other South Asian country.

Now let's look at the composition of these data. Though overall GDP growth rate is 2.29 percent, transport, communication and storage as well as financial intermediation, real estate, renting and business activities have grown over 8 percent while mining and quarrying have grown over 6 percent.

Moreover, if one flips through the newspapers, there are reports of new types of industrial units being set up or the capacity of some others being expanded. Prominent examples include powder milk factories at Pokhara and at Chitwan, pharmaceuticals factories in Kathmandu and cement factories in different parts of the country.

This means the country's business sector is going through period of massive structural change which obviously is natural with the type of transformation going on in political and social structure of the country. Also the Industrial Statistics for the fiscal year 2006-07 indicate such change taking place. In the first nine months alone of that year, 111 new industrial units were registered whereas the total number in the entire year before that was only 120. And it can be noticed that the number of units registered in new sectors like hydropower, cement and pharmaceuticals is impressive. Tourism sector too is quite attractive as shown by the same data.

So what if Nepali vegetable ghee couldn't do as expected in the Indian market? Turmeric has recorded impressive export growth at 1625 percent in the fiscal year 2006-07, up from 300 percent in the previous fiscal year. Similarly, turpentine has also been able to register an impressive growth at 120.7 percent that year. Similar is the case in readymade garments export to India .

What all these data indicate is that our business community has not been able to predict the fast-changing domestic and international market. They have kept pushing traditional goods and services. Those few who have been able to see the signals have been changing fast and reaping the benefits.

And look at the flourishing banking industry. If the business sector isn't promising enough, how come all these banks record impressive growths in profits, lending and deposits? Remittance isn't the sole reason for banking sector growth. So, the economic forest might look dwindling down but there are plenty of new species of trees sprouting and growing tall and sturdy. We just need to find the growth sectors and tap them.

Five important Aspects ofoniline business

Internet is the opportunity. Any one can create new business in Internet if you have ideas and passion. To make your business visible and heard, your website is the first recommendable tool. If you sell products and services, you need to have an e-commerce site.
E-commerce web site design is nothing different than a traditional web design, but requires a few more extra functionalities and components to handle financial transactions. For those additional services, you will have to rely on third parties. Many startups are intimidated by the process and they do not build web sites that are capable of e-commerce transactions. I am trying to give you just a brief idea of what it takes to design e-commerce sites. I will write different aspects of online business in my future posts. Suggest you to study some of the these aspects of e-commerce site development before you start.This will help you understand how e-commerce site development differs from regular web site development, and will also help you to build web sites that accomplish desired purpose.
Transaction Security
One of the most important aspects of e-commerce web site design is security that creates confidence in consumers doing online transactions. You need to make sure that your visitors can safely and securely input their personal details, credit card information and shipping information into your online payment system. To build web sites that are secure, you will need to protect pages with the encryption of Secure Socket Layer (SSL). SSL encrypts the information transferred from Read more…

How to Prepare a Marketing Strategy?

An entrepreneur reflects not only the attitude of person as an enthusiast taking every risk as an opportunity, but also a balanced personality who really strive with perseverance to take forward the challenges and make that successful. One of the many essential activities must be taken by the entrepreneurs from the very first day of business venture concepts is the preparation of marketing strategy.
The key to a successful marketing strategy is to balance how you will get your customers and how much internal resources should be mobilized to achieve your goal. You will have to consider your available human resources, capital investment and available time slots to fit with the market demand. Marketing strategy differs from nature of business to business, consumer mass, prospective target market, consumer behavior and context of your business, product/service demands.
Harvesting prospective customers is the first priority in market strategy development. Your effort should be focused to identify the channels of acquiring prospects. Channel may be any - Google, directory or catalog services, user databases, online forums, chat rooms, social networking sites, daily papers, journals, business events, cold callings, billboards and anything… this will prepare you to find your prospective customers. Decide which channels are suitable for you and promising. It will take you to your mass of prospects, where you can apply your marketing plans.
While preparing marketing strategy, the first thing you should do is feel yourself as your prospective customer. Then you will prepare few guiding lists. First, prepare a list of reasons why a stranger should come to you for your product or service and not to others. List all possible crazy reasons. Now make another list of channels that you have opened or you are planning to create through which your target customers will find you. Prepare another list, how you will respond to the customers coming from different channels. And also visualize how you will convert the prospects to your consumers. Prepare few short term and long term customer retention and loyalty customer plans. And now it’s your time to go into the market and follow the guidelines that you prepared as part of your total marketing strategy. Believe in what you do.
Always remember your resource limits and try to get best output applying minimum. Which sounds absurd, but taken thoughtful measures it can be achieved. If you try, you will know how to use your resources. You must know the market dynamics and should be smart enough to adjust your marketing tactics based on the context. Don’t expect cosmic returns on the very first effort itself. This approach applies for both product and service marketing strategies

Public, private, partnership Still Infant

The Public Private Partnership model (PPP) model, recognized the world over as an effective management solution for social development, has just started its baby-crawl in Nepal . The Public Private Partnership for Urban Environment (PPPUE) is the sole official organisation engaged in tiresome research activities to discover areas where this model can be feasible. Though this organisation has bumped onto potential PPP projects in ten partner municipalities, development efforts have been almost halted as the government seems too occupied in the never-ending political imbroglio.

Visible Efforts

The government has recognised PPP as an effective vehicle for development and poverty alleviation and it was included in the 10th Five Year Plan in 2003. Till then, small efforts had been taken by the civil society, government and the private sector, which were made possible with consistent support coming from United Nations Development Program (UNDP). The result was setting up some institutions including Public Private Partnerships for Urban Environment (PPPUE), which endeavoured, among other things, to: (a) maintain the social engagement of the population in the local governance; (b) facilitate private sector involvement in the delivery of urban services to the poor and; (c) meet the essential needs of the country's poor, marginalised and vulnerable groups.
GTZ/Urban Development through Local Efforts (UDLE) is another donor funded institution that has had an extended presence in the urban sector. As infrastructure funding support for municipalities, the Town Development Fund (TDF) supported by German development bank KFW, has been shoving millions into infrastructure development projects and the municipalities themselves have arranged some foreign loans. Some of these facilities are now being managed more effectively and efficiently by private operators under PPP arrangements, the examples being Lumbini Bus Terminal in Butwal and public toilets in Hetauda. PPPUE operates in ten partner municipalities at present.
The driving concepts of PPP have been successfully integrated into the national development agenda. The government, in its 34-point policies and programs for the FY 2006/07 has committed to adopt the principles of partnership and collaboration between the government, the citizens, and the private and non-government sectors in the implementation of development programs. The budget speech for the current fiscal year has also mentioned PPP as one of the main principles. Central stakeholders like FNCCI and Municipal Association of Nepal have also been entrusted to undertake the PPP projects on their own. But these policies have been proved just as lip services from the government as it is busy more in breaking the political juggernaut than in implementing of development plans and polices.
Regarding the tangible projects undertaken to date, it may be noted that overall the projects under PPP are small in size and the involvement of the private sector in those projects is only in operation stage. In other words, they are short-term projects without major investment from private sector. So far, PPPUE has been successful in spreading ideas, creating conducive environment and backing commitments in addition to bringing to operation 17 public-private partnership projects. By supporting pro-poor PPPs in providing urban services and infrastructure development, PPPUE aims to contribute to the Millennium Development Goals (MDGs) with its eco-friendly projects. It further strives to generate employment opportunities for its target groups. The project also strives to ensure improved access to safe drinking water and sanitation through PPP lessons and knowledge, which can further help to promote good governance, sustainable development and poverty reduction. However, all the operational PPP projects are in municipalities only and part of the reasons, as offered, are the volatile security situation in the villages and the lack of political representatives in local government bodies

Persistent Problems

Much of the problems associated with initiating PPP projects lay in the lack of knowledge and expertise among the private sector players. Though PPPUE has been organising workshops, seminars and meetings to impart required knowledge on PPP, the outcome has been far from satisfactory, which can be attributed to government apathy and private sector hesitation to consider big investments.
Although there was a thrust for devolution of power from the central government to the district level bodies within the framework of "decentralisation", the concept has remained dormant since 2001, though some initiatives were taken to transfer many sectoral programs and activities to the district level. The effective implementation of the Local Self Governance Act of 1999 is yet to be realised. The Ministry of Physical Planning and Works (MPPPW) and the Ministry of Local Development (MLD) are responsible for urban sector development but the lack of coordination between these ministries and district level line agencies has been posing hurdles in this.
However, while analysing the lack of implementation of PPP, it has also to be acknowledged that during the period since 2001, the state of local governance remained poor due to the absence of political bodies. The armed conflict took its heavy toll on resource mobilisation and participatory planning by the municipalities was just limited to their day-to-day administrative affairs. Many municipalities could not prepare plans to meet their development needs and the situation got worse due to the shortfall in the transfer of resources to municipalities, which stood at just 0.12 percent in 2006/07. A considerable portion of the resources has been diverted to meet the security expenditures in the last five years. Again, this is only half of the problem. The past experiences also suggest that municipal bodies lack knowledge, capacity and institutional support to undertake a proactive role.
This also reveals lack of PPP project financing expertise and experience within the commercial banking sector of the country. Banks are generally reluctant to finance big projects since the pay back period is longer and the risk factor is significant. The case of Melamchi can be taken as an example in this connection, which is still in its construction stage for years now. However, the reason behind PPP not proving so feasible can be blamed to political muddling as private sector players look reluctant to invest in big ventures in the current turbulent times.

Possible Solutions

Looking at the experience so far in PPP, there is an urgent need for the government to come up with a new set of policies and guidelines for PPP undertakings. Those involved in PPP exercise feel that the existing policies are very fragile. "We need to have a comprehensive government guideline on how to get ahead. If you want to do it through partnership, what kind of partnership will you need and how can you go for it? Development is a product of the government and it needs to sell the idea to the public," said a senior manager of a private sector organisation who has been active in this field.
For the effective implementation of PPP, the governmental structure needs to go through a complete makeover. And for that, PPP cell must be placed within the Ministry of Finance, just like in Singapore , New Zealand , Canada , Ireland and other countries. In these nations, PPP blossoms under the direct supervision of the finance ministry.