Biz News February 2015

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Deurali-Janta Celebrates 24 Years
Deurali-Janta Pharmaceuticals Pvt Ltd (DJPL) has completed 24 years of its presence in Nepali drugs market. Established in 1991, the company has been a pioneer in Nepali drugs industry. The leading Nepali pharmaceuticals company is the first Nepali drug maker to receive World Health Organization - Good Manufacturing Practice (WHO-GMP) along with ISO 14001 and ISO 9001 certifications.  DJPL has a portfolio of 210 products that include medications for cardiac diseases, neurological diseases, diabetes, skin diseases and almost all types of communicable diseases seen in Nepal. DJPL, which has been using 60 per cent of the installed capacity of its production facility, aims to use the remaining 40 per cent in producing various necessary drugs alongside medications for neurological and mental disorders. The company has made a total investment of Rs 1.01 billion till date. 
 
"We believe that rapid industrialization is essential for being free from the poverty and unemployment resulting from the critical political situation," Hari Bhakta Sharma, Executive Director of DJPL said in a press statement issued on the occasion of the company's 24th anniversary. Sharma mentioned that the government has not been able to create an environment to spur the investment and raise confidence of Nepali industrialists who have been hoping for rapid industrial development. "To reduce the country's drugs import and encourage the investment in the domestic pharmaceuticals sector, the government has to introduce policies to buy drugs through the tender process from Nepali pharmaceuticals that have been producing high quality medications," reads the statement. Sharma also said in the statement that the government needs to stop importing 50 types of drugs on which Nepal is self-reliant to create a sound investment environment.
 
Insurance Companies Directed to Open Agricultural Branch by Feb 7
Non-life insurance companies are now required to open agricultural branch by the first week of February 7. Issuing a directive on January 8, the Insurance Board (IB) asked all non-life insurance companies to establish at least one separate agricultural branch within 30 days. IB authorities have claimed that the directive has been issued with the intent of increasing agricultural insurance policies and enhancing farmers’ access to agricultural insurance. 
 
As per IB’s directive, insurance companies are required to establish agricultural branches only in the districts categorized by the state as remote or extremely remote. Each such branch is required to have an agricultural technician. The cost of opening such branches can be exempted while calculating the company’s management cost for regulatory purpose, according to the directive. IB officials have said that this incentive has been offered in order to encourage the establishment of such branches.
 
From the current fiscal year, the government has made provisions to provide 75 per cent grant in the agricultural insurance premium. However, as the insurance companies are city-centered, agricultural insurance has not grown as expected. Chief executive officer of one insurance company said that this directive of IB is aimed at promoting agricultural insurance in the country. 
 
Tata Zest Outruns Honda Amaze in Sales
Tata Zest launched in India only recently, has successfully overtaken the Honda Amaze this October-November season. A total of 3,835 units of Tata Zest were sold in November 2014 whereas the Honda Amaze sold 3,310 units. While Tata Zest has seen an increase of nine percent in sales, the entry-level Honda sedan Amaze has seen a decrease of five percent in the same time period.
 
According to the latest company communiqué, Tata Zest outsold Honda Amaze by 42 units in October and by 525 units in November. Tata has claimed that the Hyundai Accent, the second highest-selling sub-compact sedan in India, outsold the Zest by a mere 64 units. Although the Accent sold 3,899 units in November, its sales have decreased by 16 per cent compared to the previous year. 
 
CAAN Working with ICAO to Remove EU Ban 
The Civil Aviation Authority of Nepal (CAAN) is co-operating with the International Civil Aviation Organization (ICAO) to remove the ban imposed by the European Union on Nepal-registered airlines. According to CAAN Director General Ratish Chandra Lal Suman, CAAN is preparing to bring in international experts in association with ICAO to assess the safety of aviation services in Nepal. Also, the two bodies are making preparations for signing an agreement to set up a ‘Safe Fund’ and carry out a detailed study of aviation safety in Nepal.  
 
According to Suman, though it has been informally agreed that ICAO will contribute 75% to the Fund and CAAN the remaining 25%, the size of the Fund is yet to be fixed. CAAN plans to use this Fund to bring in international experts to study the aviation safety situation in the country. "The experts will minutely find out the problems in civil aviation safety in Nepal. We hope that this initiative will help remove the EU ban,” said Suman. 
 
According to CAAN, the ‘Safe Fund’ agreement is to be signed sometime in February. This CAAN-ICAO partnership aims to resolve the shortcomings in Nepal’s civil aviation as pointed out by the EU. The frequent reports of air crashes and deaths of both passengers and crew members despite CAAN's repeated efforts to improve safety and comply with the standards of both the ICAO and the EU are said to be reason behind the EU ban, according to Suman. He said, 
 
"Despite improvement in other aspects of our services, unless the air disaster rate decreases, there is no possibility of the ban being lifted. Hence, safety has been given top priority."
 
On December 6, 2014, the EU decided to continue the ban on Nepal and many other countries. The crash of a Nepal Airlines Corporation aircraft in February last year contributed to the continuation of the ban, according to Suman. The EU has been raising questions regarding eight various aspects of civil aviation in Nepal. Nepal has not been able to give satisfactory answers to questions related to Civil Aviation Act, Regulations, regulatory body, registration and licensing, service providers, human resource etc.
 
Due to the EU ban, no Nepal-registered airline has been able to operate in Europe. The EU has advised its citizens against travelling in airlines registered in Nepal. This, tourism entrepreneurs worry, has affected the psychology of European tourists planning to visit Nepal.
 
NAC’s New Plane to Arrive on Feb 7
National flag-carrier Nepal Airlines Corporation (NAC) has said that its new plane, an Airbus-A320 aircraft, is set to reach Kathmandu on February 7. According to the Corporation, the aircraft, which is one of two bought after agreements with the Airbus SAS, is set to land at the Tribhuvan International Airport after exactly one month. The new aircraft will be handed over to NAC amidst a programme in Hamburg, Germany on Feb 7. 
 
The plane will take off from Hamburg, pass through Doha in Qatar and then reach TIA in Kathmandu. Both aircraft are to be used for international flights. Both aircraft have a capacity of 158 seats each, of which eight will be business-class seats and the remaining 150 economy-class seats.  
 
Army to Build Karnali Corridor
The government has decided to hand over the responsibility of construction of the much talked-about Karnali Corridor to the Nepal Army. Minister for Physical Infrastructure and Transport, Bimalendra Nidhi has stated that the government has decided to hand over full responsibility of the development of the Karnali Corridor to the army. Accompanied by a team of 12 members, among them 5 Constituent Assembly members representing the Karnali Zone, Nidhi said so while talking to the press in Birendranagar on Jan 13. 
 
Nidhi stated that since the army has shown a genuine interest in the Karnali Corridor, it would be better suited to take up the job than any other entity. "I am hopeful that the army will carry out this project responsibly and fulfill its duties," Nidhi said. "The completion of this project will ensure much-needed economic development in the region." 
 
Nidhi, who had stopped at Surkhet on his way to Dolpa, laid the foundation stone for the Khulalu-Hilsa Bridge on the same day. The bridge will link two important regions of this corridor. He said that its construction will be completed within the next year. "The stepping stone for development is the construction of roads. I have not come here for recreational travel; I have come here to lay the foundation for the development of Karnali. Soon, the Nepal Army will lay the foundation of a brighter future for the local residents."
 
Vice-Chairman of the National Planning Commission, Dr Govind Raj Pokharel stated that there would be no problems regarding the budget for the construction of the Khulalu Bridge. He said, "We are ready to provide all necessary assistance for this project. The bridge is certain to be completed within the allotted time."
 
Secretary at the Ministry of Physical Infrastructure and Transport, Tulasi Prasad Sitaula said that the Karnali Corridor would determine the future of development in Karnali region.
 
PPP Ineffective in Absence of Law
Despite much rhetoric on the importance of Public-Private Partnership (PPP) in national development, the concept is yet to be effectively implemented in Nepal. Although the concept of PPP had been introduced following the implementation of the Electricity Act 2049 BS, experts have criticized the lack of an effective example of PPP even after more than two decades. The reason behind this is said to be the lack of proper policy.
 
The National Planning Commission (NPC) had issued a White Paper on PPP four years ago. But in the absence of related laws, the PPP concept has become ineffective in the country, according to Chairman of Nepal Mediation Council, Birendra Bahadur Deuja. An expert on PPP, Deuja said during an interaction on the PPP concept organized by Global Shapers Community (Kathmandu), “It's been 15 years since the concept of BOOT (build, own operate and transfer) was internalized. But we have been unable to achieve the expected progress in terms of PPP."
 
Speaking at the same programme, NPC member Dr. Swarnim Wagle said that it would not be possible to complete development projects without private investment. He said, "In a developing country like Nepal, much investment is required for the development of infrastructure such as energy and transportation. The efforts of the government alone won’t be enough for this." Dr. Wagle also said that while the tradition of viewing the government as corrupt and the private sector as mere profiteers is prominent in Nepal, the misunderstandings between the two sectors are slowly clearing up and an environment of trust is being built. 
 
According to Investment Board CEO Radhesh Pant, the success of PPP depends mainly on a stable policy which in turn is the most important prerequisite for investors. Pant further said that practical implementation of the policy is required and that in this age of profit and technology, investors will not consider Nepal's natural beauty or its hospitable people if they don’t see profit.
 
Similarly, Pradeep Kumar Shrestha, Managing Director of Panchakanya Group, expressed that while PPP is an ideal model for Nepal, absence of policy has rendered it ineffective. He also stressed the need for more involvement of the government in matters of land acquisition for PPP projects. He said, "There are problems, but we must learn to take them positively and identify their sources. The public sector is capable of helping solve such problems."
 
PPP has been ineffective in Nepal due to the lack of political stability, policy and a suitable environment for investors, according to Dr Sandeep Shah, an energy expert and Statkraft Norway’s Country Director for Nepal. "Nepal can attract foreign investors and the private sector towards big projects in the presence of stable policy." He also stated that the establishment of local requirements regarding large-scale projects is important and that Nepal has been unsuccessful in doing so.             
 
Nepal Most Prone to Power Leakage in South Asia
According to recent report by the World Bank, Nepal tops the list of the most power-leakage prone nations in South Asia. The recently published report titled 'Global Economic Prospects 2015' shows a 34% power leakage in Nepal. The list shows India at the second position (24%), followed by Pakistan (18%), Sri Lanka (12%) and Bangladesh (11%). The data used in this report are from 2011.
 
However, according to Nepal Electricity Authority (NEA), the leakage of electricity in Nepal stands at 25% at present.  The majority of power experts, however, are not willing to accept the data supplied by the NEA. And even if the NEA data is to be believed, the leakage is still higher than that of India in 2011.
 
The NEA had set a goal to reduce the leakage rate to 22% by 2071/72 BS and to 21% by 2072/73 BS. But the fact that the leakage rate was stable at 25.4% in 2069/70 B.S. and has only marginally dropped (by 0.76%) in the subsequent year makes it clear that the problem persists and that the NEA has been unsuccessful in realizing its goals.  
 
The power leakage is said to be the cause behind the NEA's increasing loss which stands at Rs 6 billion at present.
 
Fifth Asia Energy Security Summit in Nepal
Independent Power Producers Association of India (IPPAI) has decided to organize the fifth ‘The Asia Energy Security Summit 2015,’ in Nepal. Independent Power Producers Association of Nepal (IPPAN) is the ‘knowledge partner’ of the summit, said Khadga Bahadur Bisht, president of the association. Previously, the summits were conducted in India, Bangladesh, Turkey, among other countries. Bisht claimed that the recent signing of the PTA with India and PDA for some big projects had paved the way for organizing the summit in Nepal to discus issues surrounding Nepali hydropower sector and its development.
 
Stating that energy security is not only about the amount of consumption and production in any particular country, but about ensuring interdependence on energy between countries, he added that the summit will have discussions, debates and activities on the issue of energy security in the Asian region. These discussions, he informed, will include issues like the energy production capacity of countries, energy market, plans and policies and the interdependence among Asian countries.
 
The summit, scheduled for 2nd to 4th of March, will be participated by government officials, energy producers, policy makers, political leaders, energy experts and stakeholders from various countries.
 
Nepal’s Energy Minister will be chairing the meet, which will be attended by Narendra Taneja, National Convener of Energy Cell at the Indian Prime Minister’s Office, GD Bakshi, former Indian ambassador to the UK and SD Muni a Nepal analyst.
 
Silver Import Exceeds Gold Import
The import of silver has increased 1.5 times till December of the current fiscal year compared to the same period last year. The sharp increase in the silver import is alluded to the decline in the legal import of gold. According to the Department of Customs, 224,211 Kgs of silver, worth Rs 10 billion, was imported as of December 2014. This is 64 per cent more than the silver imported during the first five months of the last fiscal year, which was 68,021 Kgs valuing up to Rs 4 billion. 
 
This unprecedented increase in the import of silver has equally surprised the government and the business. Due to the sharp decline witnessed in the import of gold, the government received round 240 million in revenue through gold against the one billion rupees revenue collected through silver. 1,886 Kgs of gold, worth 7.66 billion rupees, were imported in the first five months during the last fiscal year, however during the same period this fiscal year, it dropped down to 463 kilos worth 1.81 billion rupees.
 
The decline in gold import is alluded to the increase in gold smuggling, an issue presently under the Central Investigation Bureau (CIB). 
 
Tej Ratna Shakya, former chairman of Federation of Nepal Gold and Silver Dealers’ Associations, claims that traders have shown more interest in silver after the rise in the price of gold. “People have been showing more interest in silver," he said, “Silver business has been growing in the last few years.”
 
Nepal's Sole Motor Factory Shuts Down 
Citing the lack of required time to comply with the Euro 3 Standard, Hulas Motors, the only automotive manufacturing company in Nepal, has halted production. At a press conference organized on January 11, the company's managing director, Surendra Golchha issued a statement saying that the production of the Mustang V2 and Mustang Max four-wheelers has been shut down. "We were forced to shut down the production as the time given by the government to comply with Euro 3 standard was not enough. We had asked the government authorities for one more year to comply with the said standard but our request was turned down,” he said. 
 
The company started manufacturing four-wheelers in 2054 BS. In 2069 BS the government had given Hulas Motors two years in order to start production in accordance with the Euro 3 standard. The deadline expired in mid-July 2014. Claiming that motor manufacturing companies in other countries were given four years to implement the Euro 3 standard, Golchha said the government in Nepal was unwilling to give even three years. "That is why our company, which has become a symbol of national pride, had to shut down production.”
 
Though the company has stopped manufacturing diesel vehicles, it will continue production of electric rickshaws.
 
Alliance Insurance Becomes Prabhu Insurance
Alliance Insurance Company Limited is changing its name to Prabhu Insurance Limited. The company passed the proposal to change the name during its 19thAnnual General Meeting (AGM) held on 2nd of January. Along with that, the AGM also passed the proposal to distribute 12 per cent of bonus share. 
 
The company had earned net profit of Rs 58.5 million in the last fiscal year. According to the statement released by the company, the company has Rs 293.8 million of paid up capital after distributing the bonus share. The company has earned Rs 632.7 million of insurance premium during the 2014/15fiscal year. The amount is 6.37 per cent greater compared to the last fiscal year.It has already earned Rs 284 million of insurance premium till the mid of December of the current fiscal year. 
 
Alliance Insurance Becomes Prabhu Insurance
Alliance Insurance Company Limited is changing its name to Prabhu Insurance Limited. The company passed the proposal to change the name during its 19thAnnual General Meeting (AGM) held on 2nd of January. Along with that, the AGM also passed the proposal to distribute 12 per cent of bonus share. 
 
The company had earned net profit of Rs 58.5 million in the last fiscal year. According to the statement released by the company, the company has Rs 293.8 million of paid up capital after distributing the bonus share. The company has earned Rs 632.7 million of insurance premium during the 2014/15fiscal year. The amount is 6.37 per cent greater compared to the last fiscal year.It has already earned Rs 284 million of insurance premium till the mid of December of the current fiscal year. 

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