Biz News October 2014

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Dolma Fund to Invest Rs 4 billion
Dolma Impact Fund has announced to invest up to Rs 4 billion in different companies of Nepal. The fund has been providing organisational investment incentive to different companies in the country. The Fund has planned to invest in the companies related to education, agriculture, financial institutions, health sector and renewable energy: companies which have prospective to increase the income level and the employment opportunities within the country.
 
The fund has informed that it will be selecting those companies which can leave positive impact on environment and society through the fund. The fund has given priority to the local companies which can create sustainable employment. 
 
The Dolma Impact Fund is funded by an international organisation run by the private sector. According to the fund, the minimum capital of the fund will be Rs 2 billion at the beginning. And it has been informed that, the fund will have up to Rs 4 billion. The fund has the investment companies and financial institutions of the countries Netherlands, Finland and Austria. Similarly, the British Embassy and Department for International Development (DFID) are also associated with this fund.
 
These institutions are helping to invest in the companies who are working to increase employment and income level in Nepal. The fund has informed that it is discussing about the investment environment in the country with the Government of Nepal. Tim Gochar, Founder of the company says, “We expect the investment will increase the employment opportunities in Nepal and directly benefit the poor people.” “We aim to decrease the dependency on imports by increasing the consumption of local products, he said.”
 
Gale Marzeti, country head of DFID believes that the fund will contribute to the development of Nepal. “It is an important milestone in the Nepali investment,” he said.
 
Godavari Village Resort to Upgrade
 
Godavari Village Resort located in Lalitpur district is about to upgrade its capacity. The resort which is spread over 100 Ropanis of land is about to expand into 100 rooms within a year. According to Sushil Kumar Aryal, Sales and Marketing Manager at the resort, the resort is currently serving with 69 rooms. The resort which has six halls with the capacity of 10 to 200 people has been organising different national and international conferences. The resort informed that the upgrade is being made targeting the peak tourist season of 2015.
 
It has been informed that the all the upgraded rooms will be of luxurious ‘deluxe’ model. Similarly, the resort is also opening a well equipped health club with different facilities like yoga room, spa room, natural therapy, and tennis very soon. Currently, the facilities like swimming pool and spa are available in the resort. The resort is serving corporate and high profile customers. 
 
Meanwhile, the resort is launching 1month special package for Dashain which will start from Ghatasthapana to Bhaitika (September 25th to October 25th). During the period, it will be providing a room for Rs 3999 for a couple. The resort informed that the package will include facilities like breakfast, and in-house DJ. The package will also be available for foreign customers. 
 
PDA Signed with GMR for Upper Karnali
Nepal Investment Board (NIB) and GMR ITD consortium have signed the Power Development Agreement (PDA) for the developing the 900 MW Upper Karnali Hydropower project. Radhesh Pant, NIB’s chief executive office (CEO and RB Seson, president of Hydro Energy Business Unit of GMR signed the PDA in the presence of Prime Minister Sushil Koirala and Indian Home Minister Rajnath Singh. 
 
Speaking on the occasion, Home Minister Bam Dev Gautam said that the Upper Karnali hydropower project will not only benefit the energy sector but will also contribute in the overall economic development of the nation. “We are bringing in this huge investment for the first time. This will play a vital role in utilizing the resources in the favour of the Nepali people,” Gautam said.
 
Indian Home Minister Rajnath Singh stated that GMR would complete the project within the time period agreed in the PDA. “GMR must complete the project in the stated time as it is concerned with India’s credibility,” he added. 
 
According to the PDA, GMR will have to collect the necessary fund within 2 years. It will invest 25 per cent of the total cost required for the project while the remaining investment will be collected through various international financial institutions, said Seson. 
 
The PDA mentions that the project will have to be completed within 5 years after the total investment is collected. As such, the project will be completed by the year 2021. GMR will also build a 100 km transmission line, which will be handed over to the government of Nepal after 25 years of operation.
 
Furthermore, Nepal will get 27 percent free equity and 12 percent free electricity from the project. The equity is equivalent to Rs 145 billion while 12 percent free energy amounts to 108 MW. The remaining 88per cent can also be sold in Nepal if the need persists, said Seson. If not, India and Bangladesh are the potential market for it, he added.
 
Bank Investment in the Service Industry up by 22%
Investment in the service industry has increased by 22 per cent in comparison to the previous fiscal year. Last year, the investment of banks and financial institutions had risen by 20 per cent in this sector within the same period. Bankers believe that the increment in the service sector is due to the slowing down of investment growth in other sectors.  As per Nepal Rastra Bank’s financial report, the investment of banks and financial institutions in the service sector of the last fiscal year (2012/13) that ended on mid July 2013 was Rs. 71.8 billion. There has been some improvement in the figures in fiscal year 2013/14,  which shows the investment of Rs 87.56 billion. 
 
The improvement is a result of the increase in the flow of tourists which has also increased investment in hotel, transport, trekking agencies and other similar tourism related industries. Recently, the growth rate of tertiary sector has attracted banks and financial sector to increase investment in this sector. The tertiary sector is composed of wholesale and retail business, hotel and restaurants, transport, communication, financial intermediaries, real estate, security, education, health and other community, social and personal services. In recent circumstance when the business of the tertiary sector is expanding more in comparison to the primary (agriculture and forestry, fishery, mines and excavation) and secondary (construction, industries, electricity, gas and water) sectors, banks are investing more in the service sector, says Prof. Dr. Navaraj Kadel. “Banks investment is based on the demand and the service sector is demanding for more investment in the current scenario”, he adds. 
 
In comparison to last fiscal year, it was initially predicted that the GDP of the service sector would increase by 4.71 per cent in this fiscal year. Similarly, the GDP of the primary sector has increased by 2.69 per cent and in the secondary sector, the production has increased by 6.13 per cent. By mid July this year, investment in hotel sector has the highest investment of 39.4 per cent and advertising agencies investment is of 32.2 per cent. 
 
Likewise, according to NRB’s statistics, investment in tourism by banks and financial institutions has increased by 21 per cent in the same period. On the other hand, investment in Motorcycle repairing and hospitals have fallen by 19.6 per cent and 18.9 per cent respectively.
 
Swiss Government Joins MDTF
The Government of the Swiss Confederation, acting through the State Secretariat for Economic Affairs, joined the Multi-Donor Trust Fund (MDTF) for Public Financial Management (PFM) on September 12, 2014. The Administrative Agreement was signed by World Bank Country Director for Nepal, Johannes Zutt and Urs Herren from the Swiss Government for the amount of CHF 3000,000 which is equivalent to USD $3.19 million.
 
The contribution will be used to finance the activities under the MDTF, which is administered by the World Bank and jointly funded by five donors namely the European Union (EU), UK Department for International Development (DFID), the Governments of Norway and Denmark, and the Australian Government Department of Foreign Affairs and Trade (DFAT). 
 
Established in December 2010, the objective of the MDTF has been working to strengthen the performance, transparency, and accountability of Public Financial Management in Nepal.  According to the press statement, MDTF has rolled out the treasury single account (TSA) system to all 75 districts. It will also pilot the newly designed Revenue Management Information Systems (RMIS) module, preparation of financial statements for two pilot ministries following the International Public Sector Accounting Standards (IPSAS). The MDTF has also continued the support to the Office of the Auditor General (OAG). The MDTF also works on strengthening the use of social accountability to improve PFM through awareness-raising on local budgeting, pro-poor and gender budgeting. 
 
PTA with India, Attracts More Investors
Sealing the power trade agreement (PTA) with India has attracted many foreign investorstowards Nepal’s hydropower sector. Minister for Energy Minister Radha Kumari Gyawali while informing that representatives from China, Malaysia, Saudi Arabia, Norway and many other countries have escalated discussions with her, claimed that some of these are very much interested to invest in Nepal’s hydropower sector. “It is a positive sign that countries are showing interest in Nepali hydropower projects that require huge investment,” she said. 
 
The Energy Minister said that the PTA has been submitted to the Prime Minister during a recent cabinet meeting and informed that the cabinet will decide the implementation process. While informing that the PTA wont have to be endorsed by the parliament, as it’s a energy business deal, she informed that PTA’s implementation make any headway only after the PM’s return from USA. Prime Minister Sushil Koirala is scheduled to visit USA in the third week of September for medical treatment. 
 
In another context, Minister Gyawali informed that the dollar based Power Purchase Agreements (PPA) with Himal Power Limited, promoting the 60 MW Khimti Hydropower Project and BhotekoshiPower Limited, promoting the 45 MW Bhotekoshi Hydropower project will be revised. She informed that the revisions have been in the final stage and said that the Ministry has already directed the Nepal Electricity Authority (NEA) to revise these projects with concerned stakeholders at the earliest.
 
Swisscontact's Five-day Event
Swisscontact held its annual Asia Seminar and Market Systems Development Appreciation Workshop recently. Swisscontact organised its five-day internal events from 9 to 14 September 2014 in Lalitpur. The first event titled Asia Seminar held on 9 and 10 September was organised to exchange updates on the organisation's global, South Asia and South-East Asia regional developments amongst its management and personnel. In the seminar various projects, focused on thematic areas such as Skills Development, Tourism and Financial Serevices. 
 
Likewise, Swisscontact organised second event which was an internal workshop that took place from 11 to 14 September. The workshop was held in order crystallise its value proposition, formalise a process of how it designs and implements Market Systems Development (MSD) and Making Markets Work for the Poor (M4P) projects and enhance in-house and partner capacity. 
 
In the seminar the management of Swisscontact, Zurich such as Regional Directors, Project Managers, Team Leaders, MSD/M4P advisors and practitioners were present. Similarly, managers from Bangladesh, Bolivia, Cambodia, Honduras, Indonesia, Kenya, Kosovo, Laos, Mozambique, Myanmar and Nepal participated in the events.  
 
Swisscontact is a Zurich-based independent foundation which works for international development cooperation. It is present in 27 countries with over 800 employees. Swisscontact promotes economic, social and environmental development, since 1959. In Nepal, Swisscontact is registered under the Social Welfare Council (SWC).  
 
Solvency Margin Mandatory for Non-Life Insurance Companies 
The Insurance Board (IB) has made it compulsory for non-life Insurance companies to set solvency margin.IB board of directors approved the directive in the second week of August and will come into effect within this fiscal year, Raju Raman Poudel, director of the board said. “We will issue the directive to insurance companies within some days for immediate implementation,”he said claiming it to be first time that the non-life insurance companies in Nepal were being asked to follow such provision. The life insurance companies were asked to make such provisions last year. 
 
Poudel mentioned that the solvency margin is to be at 1:1.5 ratio.This means that a company with liabilities of Rs 1 should have assets worth Rs 1.5.
 
Assets and liabilities are two components needed to calculate the solvency margin. It is necessary to evaluate assets under different headings. The directive states that zero lead assets, zero lead advance, furniture, postponed expenses etc., of the insurer will be considered as a base.Similarly, the software used by the company, initial expenses of the company and the cash that cannot be collected from the reinsurance company in one year will also be considered as the base.Likewise, the company’s brand willbe also evaluated.
 
Similarly, as per the directive,the risk recommended by the insurance company that has not exceeded the time frame, miscellaneous fund and the liabilities and claim fund included in the company’s financial statement have to be mentioned in the liabilities evaluation.
 
The solvency margin ratio is calculated in two stages. First solvency margin or ‘available’ margin is calculatedby considering the statement of the total consolidated assets and liabilitiesas the base.The ‘required’ solved margin is calculatedin the second stage. Such solvency margin should not be less than the minimum paid up capital (250 million rupees) or 20 per cent of net insurance cost or 40 per cent of unpaid claims in the last three years.The one higher among these is considered as the required solvency margin. Solvency ratio is calculated on the basis of condition and requirement of the solvency margin.
 
The directive has categorized insurance companies broadly into three categories on the basis of their solvency margins and will be regulating them accordingly. In the first stage, companies that fail to meet the solvency ratio will be asked to correct their solvency margin.In the second stage, companies having solvency margin of 1.5 will be given permission to carry on with their regular operations. In the third stage, IB will supervise and monitor companies with solvency margin in between 1 and 1.5. And during this same period, it will also ask companies with solvency ratio less than 1, to increase their paid up capital.
 
 
What is Solvency Ratio?
Solvency Ratio defines the situation of assets and liabilities of a company.Solvency Ratio is calculated by comparing the ratio of assets and liabilities. According to international standards, solvency ratio should be atleast 1:1.5. Companies with less than 1:1.5 solvency ratio are supposed to be in bad financial condition.
 
 
Government calls for investment to materialize ‘Vision 2030’
Government has called on stakeholders to support its long term development goals as outlined in ‘Vision 2030’ by investing in its priority areas. The vision, among others, aims at graduating the nation to the status of developing nation from the present least developed country (LDC) by 2022. 
 
Finance Minister Dr Ram Sharan Mahat stressed on the need to increase investment in the infrastructure sector to ensurethe materialization of the ‘Vision 2030’, while speaking at an interaction program organized by Ministry of Finance recently. “Lack of infrastructure, transport, and hydropower has hindered Nepal’s development. Due to these lacking, development here is costlier than other countries,” he said at the programme participated by major development partners of the country.
 
Stating that the nation needs huge investment for promoting the nation to the status of LDC, he called on partner organizations for investing in Nepal’s prosperity. He urged development partners to invest its priority sectors as defined by the government and informed that 14th periodic plan, presently in pipeline, will compliment the Vision 2030 goals. 
 
Dr Mahat informed that the government has made policy reforms in the industrial, business, energy, banking and financial sector as part of its first round of economic reform programmes, and expressed confidence that the second round willfurther improve investment environment to attract foreign and domestic investment. “The country is becoming favourable for different businesses. With implementation of the second rounds of economic reforms, improvement in various sectors is expected to be visible within this year,” Minister Mahat said on the occasion. He informed that the Commission for the Investigation of Abuse of Authority (CIAA)has been constantly working to curb corruption and to win peoples and investorstrust on public institutions. 
 
Prof Dr Govinda Raj Pokharel, vice chairman of National Planning Commission (NPC) claimed that the nation’s political condition is stabilizing, and urged stakeholders for investing without hesitation. Dr Yuvraj Khatiwada, Governor of Nepal Rastra Bank (NRB), elaborated on the reforms made at the policy level, their positive impact on the nations economy andrequested investors to invest in Nepal.
 
Likewise, Finance Secretary Suman Prasad Sharma stressed on the need to invest in energy, infrastructure and agriculture sector for the economic development of the country. He claimed that such investment would help boost the Nepali economy and also encourage investors.
 
The programme was attended by representatives of major multilateral and bilateral agencies including the United Nations Development Project, World Bank, Asian Development Bank, European Union, Germany, Switzerland, Finland, Denmark, Russia and Norway, USAID, JICA, among others. 
 
PRAN’s Multi-stakeholder Knowledge Forum 
The World Bank Program for Accountability in Nepal (PRAN) brought together government officials, civil society organizations, development partners and relevant stakeholders for a two-day forum starting from 10th September to 11th September at Hotel Yak and Yeti in the capital. 
 
The forum hoped to reflect lessons that have been learnt together and the experiences gathered so far. PRAN has sought to develop the capacity of civil society organizations (CSOs) and government agencies through practical training, action learning and networking to promote citizen engagement in Nepal. 
 
Speaking at the programme, Johannes Zutt, Country Director, World Bank Nepal said, “Nepal has achieved considerable progress in recent years, despite a challenging environment.” He said, “In particular, Nepal is gradually strengthening its institutions and introducing greater openness and transparency.”
 
Following the opening remarks, a high level panel discussion took place on the theme of Opening the Civic Space in Nepal moderated by Dr. Govinda Pokharel, Vice-Chair of National Planning Commission (NPC). The discussants included people like Luiza Nora, Team Task Leader of PRAN/ World Bank, MadhuKumar Marasini, Joint Secretary of Finance Ministry, Tara Nath Dahal, Chairperson of Freedom Forum and alike.
 
“PRAN has been influential in uplifting the lives of the marginalized and vulnerable and it can have a really impactful role in the future as well,” said Madhu Kumar Marasini, Joint Secretary, Ministry of Finance.  “It is good to see that the World Bank, alongside its projects on infrastructure hasn’t forgotten about social accountability,” he added.
 
The event also included a social accountability "Knowledge Fair", highlighting results stories from existing social accountability initiatives in Nepal. 
 
NADA Auto Show 2014 ended Productively
NADA Auto show 2014 was held from September 3 till September 8 in the exhibition hall of Bhrikuti Mandap, Kathmandu. The exhibition was organized jointly by NADA (Nepal Automobile Dealers Association) and Global Exposition and Management Services Private Limited. According to the organizers, due to the arrival of festive season, the exhibition has been successfully able to attract Nepali customers and automobile lovers.
 
Initially, the exhibition was set to be held for Five days. However, it was extended for one more day realizing the demand for visitors as well as participatory organizations. The exhibition was inaugurated by Dr Ram Sharan Mahat, Finance Minister where 63 companies participated and had 100 stalls. 
 
Various famous brands like Daihatsu, Fiat, Ford, Honda, Hyundai, Kia, Nissan, Skoda, Suzuki, TATA, Toyota, Volkswagen, Bajaj, Ducati, Hero, Honda bike, KTM, Mahindra, Overa, Royal Enfield, Suzuki bike, Terra Motors, Tricycle Bull, TVS, UM Bikes, Yamaha were displayed in the exhibition. Similarly, in the exposition various spare parts, Lubricants, Tiers, Generator, Garage Equipments, Battery and other accessories and domestic products were displayed. Likewise, the participation of various financial institutions and new technological inventions was also seen in the event. More than 24 new automobiles were displayed in the exhibition. The distributors also claimed that various attractive offers were launched keeping the festive season in mind. 
 
The organizations who participated in the event also claimed these offers have increased the number of bookings. During six days tenure, 690 two wheelers and 600 four wheelers were booked. The organizers have estimated that NADA Auto Show 2014 has done total business Rs 1.5 billion. Including tickets, Pass and Special guest pass, 55,000 visitors came to see the exhibition. Likewise, different entrepreneurs, artists and politicians also went to the exhibition. 
 
On September 10, the exhibition concluded with a formal programme where various participatory organizations were awarded with token of love. A lucky draw programme was also held where 5 winners were awarded with Samsung Galaxy Duos2. Likewise, as a bumpers door prize, the winners were also awarded with TVS Phoenix 125cc bike. Based upon different criteria, the jury committee of NADA Auto Show 2014 ranked Arun Intercontinental Traders (Suzuki Car) as the winner of best stall decorator. Similarly, Hansraj Hulaschand & Co. Pvt. Ltd. (Bajaj Motorcycle) has stood in the second position and Sipradi Trading Pvt.Ltd (TATA-PCVU) stood in  third position. The winner received a ten tola silver frame printed with NADA’s logo on it. Similarly, the winner of second and third prize received 7 and 8 tola frame. 
 
900 MW Upper Karnali to Complete in 7 Years
Investment Board Nepal and GMR ITD consortium have signed on PDA for the 900 MW Upper Karnali Hydropower project. In a programme organized in Singha durbar, the PDA was signed by the board’s CEO Radhesh Pant and RB Seson, president of Hydro Energy Business Unit of GMR in the presence of Prime Minister Sushil Koirala and Indian Home Minister Rajnath Singh. 
 
In the programme Home Minister Bam Dev Gautam said that the Upper Karnali hydropower project will not only benefit the energy sector but will also contribute in the overall economic development of the nation. “We are bringing in this huge investment for the first time,” he added, “This will play a vital role in utilizing the resources in the favour of Nepali people”. 
 
Likewise, Indian Home Minister Rajnath Singh stated that GMR would complete the project in the time period mentioned in the PDA. “GMR must complete the project in the stated time as it is concerned with India’s credibility”, he added. 
 
According to the PDA, GMR will have to collect the necessary fund within 2 years. GMR will invest 25 per cent of the total cost required for the project while the remaining investment will be collected through various international financial institutions, said Seson, president of Hydro Energy Business Unit of GMR. It is mentioned in the PDA that the project will have to be completed within 5 years after the total investment is collected. As such, the project will be completed by the year 2021. GMR will also build a 100 km transmission line which will be handed over to the government of Nepal after 25 years of operation. As per the PDA, Nepal will get 27 percent free equity and 12 percent free electricity from the project. The equity is equivalent to Rs 145 billion while 12 percent free energy amounts to 108 MW. The remaining 88 per cent can also be sold in Nepal if the need persists, said Seson. If not, India and Bangladesh are the potential market, he added.

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