No Rules Rules tells the story of how Netflix’s creator, Reed Hastings, founded a business that questioned the status quo. As Netflix’s popularity increased, Hastings gave his workers more independence rather than imposing more laws. At Netflix, good performance is rewarded with a generous severance package, and hard work is overlooked. You don’t aspire to satisfy your boss at Netflix; instead, you exercise radical candor.

Dream Teams Consist of Stunning Colleagues
The authors argue your first priority should be to build a workplace that consists of stunning colleagues. A stunning colleague is creative, passionate, and productive. Once most of your team is built on stunning colleagues, you can safely call your team a dream team. As well as dream teams performing effectively, individual stunning colleagues will feel valued and satisfied when they are part of a dream team. As a result, the authors agree that an optimal environment for Netflix is one in which the team works together to accomplish ambitious shared goals.

How Netflix Builds Dream Teams
Furthermore, there are no guidelines on what is and is not suitable conversation with managers at Netflix. Instead, team members are free to discuss any subject with their superiors without fear of retaliation. Furthermore, they are free to make errors as long as they aim to change after doing so.

Hard work does not create successful dream teams. Instead, being effective is the secret to success. A stunning colleague is judged on their contributions to the team rather than how hard they work. When you find stunning colleagues who are also productive, you must reward them at the top of their market.

The Four As
The 4As are recommended by the writers as a way to boost your team’s feedback.

Aim to Assist: Your feedback should always have a positive purpose. Frustration or hatred should never be used as a justification for giving feedback. By being cautious with your words, you can still turn a typically negative statement into a constructive one.

Actionable: Always include a call to action in your feedback. It’s pointless to give feedback if there’s no way to act on it.

Appreciate: In addition to giving effective input, you must also learn how to embrace it. When offering feedback, instead of searching for an excuse, try to relax and appreciate that the feedback is coming from a positive place.

Accept or Discard: While you should embrace positive feedback, you will sometimes receive non-constructive feedback. Feedback that isn’t positive can be ignored.

Remove Controls
Employees are often exposed to a number of controls in the workplace. The authors argue, however, that Netflix’s growth has led to a reduction in the number of controls and rules in place as the business has expanded. Travel and cost approvals are one of the best safeguards you can eliminate. Set the context for spending money upfront and checking employee claims at the back end while withdrawing travel and expense policies. Set more context if people end up overspending. Encourage the finance department to perform routine audits of a portion of your receipts.

The Keeper Test
Netflix implemented a particular test after the dot-com bubble exploded, allowing them to assess which workers to retain in their team. They wanted to encourage leaders to ask themselves, “Which of my people would I fight hard to keep if they told me they were leaving for a similar job at another company?” ‘Do not waste money on some kind of PIP (Performance Improvement Plan) when you need to let someone go. Give this money to the employee in the form of a generous severance payment. Finally, when someone is shot, tell them the truth about what happened and honestly answer their questions.

Having a culture of freedom and responsibility seems to be working for Netflix. Maybe it will work for you as well ? 

--BY TAMISH GIRI

Nepal and Ecuador established bilateral relations almost 15 years ago, on 21 June 2006. The two countries have enjoyed friendly relations and cooperation since then, exchanging cooperation at various multilateral forums while holding common positions on many international issues such as climate change and women empowerment. Similarly, both countries are members of the Non-Aligned Movement and the Group of 77 (G77), a coalition of 134 developing countries in the United Nations, and support multilateralism.

However, despite the cordial relationship, Nepal and Ecuador have yet to develop any form of economic cooperation and make noticeable progress in the areas of bilateral trade. “It is basically due to the distance between the two countries which has hindered any real progress in this respect. Still, there are areas for mutual cooperation which both nations can work on,” says Shashi Kant Agarwal, the honorary consul general of Ecuador to Nepal. After Agarwal’s appointment in 2019, the two nations situated at opposite poles of the world started to gradually engage with each other.  

According to him, there were no formal exchanges between the two governments and private sector delegations, besides the appointment of ambassadors prior to 2019. “Even Ecuador’s Ambassador to Nepal, who works from New Delhi, India, had hardly visited Nepal. Now after the appointment as Ecuador’s consul general for Nepal, I have been working to engage both countries in the area of economic cooperation,” shares Agarwal who is the vice chairman of MS Group.  

At present, the volume of trade between Nepal and the South American nation is tiny. Nepal imports raw materials like essence oils and machinery parts from Ecuador while it exports textile and felt items. Official statistics show that the bilateral trade between Nepal and Ecuador only started in 2016, a decade after the establishment of the bilateral relationship. According to the Trade and Export Promotion Centre, Nepal exported commodities worth Rs 749,959 to Ecuador from 2016 to 2019 and imported goods worth Rs 44.61 million during the period. In terms of foreign direct investment, Nepal so far has received negligible investment from Ecuador. As of July 2020, Nepal only has the record of a company operating with investment from Ecuador amounting to Rs 2.5 million.  

Like Nepal, Ecuador is a developing nation and doesn’t have a strong base for production. Ecuadorians are considered good in agriculture, particularly in the production of banana, coffee, sugar, palm oil, rice and rose. The South American nation is the largest producer of roses in the world. “But these are perishable items and it is unfeasible for both countries to engage in trade of such products due to the higher shipping costs and distance,” suggests Agarwal, adding, “The areas that we can focus on are tourism promotion, exports of handicrafts and sports.”

Before the outbreak of coronavirus, Agarwal had imported some dry roses from Ecuador to display in a trade exhibition organised in Kathmandu. He still has the roses exhibited at his hotel (Kathmandu Marriott) in Naxal. Likewise, Agarwal and his team had sent some samples of handicraft items and garments to the Ecuadorian embassy in New Delhi.

He says that Nepal has the potential to expand production of handicraft products. He sees Ecuador as a potential market for those products and has plans to promote Nepali handicraft items there. “We are planning to organise a handicraft exhibition in Ecuador after the Covid-19 situation is over. The exhibition will be held at the Ecuador Trade Centre in Quito in coordination with the Ecuadorian Embassy in New Delhi,” he informs.

According to him, the embassy had already forwarded the items to some of the potential importers in Ecuador. But his plans to kickstart Nepal’s trade with the South American nation were hampered by the Covid-19 pandemic.

Ecuador is known as the ‘Switzerland of Latin America’, and Agrawal thinks that both countries can develop good relationship through tourism activities. He talks about his plans to promote the tourism and culture of Ecuador in Nepal and vice versa. “We are planning a trip for Nepali and Asian travel agents to Ecuador and will invite some tourism entrepreneurs from there once the situation becomes normal. This will help both sides to understand each other better and explore avenues for investment and mutual cooperation,” he says.

Sports is another area where the two countries can engage in since Ecuador has one of the strongest football teams in Latin America. According to Agarwal, Nepal has not been able to do much to develop football in the country despite it being a hugely popular sport. “As a Latin American country where football is worshipped and is a lifestyle for many people, Ecuador has a solid footing in this sport,” he says, adding, “Football is an enormous business globally, and I think we can learn many things about the tricks of the trade from Ecuadorians as they are very good at it.” He suggests that Nepal can hire coaches from Ecuador to train players and also conduct athlete exchange programmes.

Agrawal is also a member of the Honorary Consul Corps - Nepal (HCC-N), an association of Nepali businesspersons representing different countries in Nepal as honorary consuls and consul generals who aim to contribute to country's development through economic diplomacy. Talking about the activities of HCC-N and his engagement with it, he shares that he is new in the fraternity and has only attended a few events. “So far I have attended two meetings with the Dean, and at HCCN, we work collectively on promoting the goodwill of the country that we represent here,” he says. According to him, HCC-N is a platform which helps its members to learn about the conducts required to play their roles effectively as economic diplomats of Nepal.

He views that HCC-N has a major obligation to promote bilateral relationship between Nepal and other countries. Agarwal thinks that the Nepali consulate and embassies abroad have done little in terms in expanding Nepal’s economic diplomacy. “The poor execution of the government’s decisions to boost bilateral economic ties across the world poses a major challenge for HCC-N when it comes to realising its objectives,” he expresses.

--BY TAMISH GIRI

On March 6, 2021, Tiger Palace Resort, situated in Taulihawa, Kapilvastu, opened its doors again almost after a year. Similarly, Hotel Ichchha in Simara, Hotel Barahi in Pokhara, Soaltee Westend Premier in Nepalgunj, and Chitwan Forest Resort in Sauraha also returned to operation. In the meantime, Hotel Annapurna in Kathmandu closed entirely, while Hotel Mechi Crown, the first deluxe category five-star hotel in Nepal, has recently opened its doors officially to guests.

With the threat of coronavirus outbreaks receding in Nepal in the last few months, hotels across the country are slowly resuming their operation. Hoteliers say that they can’t continue to close their businesses any longer due to economic hardship. Even with a meagre inflow of guests at the moment and the business outlook remaining grim leading to a situation where hotels are struggling to meet daily expenses, hoteliers are desperate to recoup the losses and avoid further risks to their investments.

Despite reopening, Tiger Palace Resort has hardly received any business; on March 9, the resort only had four rooms out of 102 occupied by guests. Likewise, Soaltee Westend Premier has hardly registered 20 percent occupancy rate after resuming operations six months ago. Similarly, the occupancy rate in star hotels in Kathmandu is also marginal at the moment.  

However, hotels and resorts in some popular destinations are seeing an uptick in tourism activities, thanks to domestic tourists. The Chitwan Forest Resort in Sauraha, for instance, has been registering 80 occupancy rate during the weekends, while it fluctuates between 30-40 percent in other days. Meanwhile, Hotel Mechi Crown situated in Dhulabari, Jhapa, which commenced its operations in August last year, is also seeing gradual increase in the number of guests.

According to Binayak Shah, 1st vice-president of Hotel Association of Nepal (HAN), the occupancy rate of all star hotels across Nepal currently is far too low making it hard for the companies to sustain their businesses. “Since January, room occupancy has improved but marginally, and hotels are struggling to make their ends meet,” he says.

Most of the hoteliers who talked to New Business Age said that they cannot even meet their operation costs in the current condition. Rajiv Thakur, resident manager of Hotel Ichchha, informs that the four-star hotel property situated in Simara, currently has an occupancy rate of 25 percent. The hotel resumed its operations in January as Covid-19 cases began to decline throughout the country. “Though the business is growing slowly, sales are not satisfactory at the moment. We are still struggling to meet our operation costs,” he says.

The situation has forced the hotel to offer heavy discounts on services to attract guests. According to Thakur, they are offering discounts of upto 40 percent on accommodation and 20 percent on food. “In the current state of business, we can only carry on for a year,” says Thakur.

The Soaltee Westend Premier, a five-star property owned by Soaltee Group, is also facing similar challenges. According to Nises Dhital, assistant front manager of Soaltee Westend, the hotel is struggling to meet the overhead expenses. “We need an occupancy rate of at least 50 percent to pay all our 120 staff and meet the operating expenses,” he says, adding, “Despite introducing packages like ‘stay 4-nights and pay for 3-nights’, the revenue has remained very low.”  

Hoteliers say that they need a room occupancy rate of 60 percent to meet their operational costs, and staff salary comprises a major portion of such expenses.

According to Shah, costs related to human resource of most of the old hotels in Nepal make up 40 percent of their total operating expenses. “This comprises of staff salaries, allowance, gratuity and social security contributions making the cost of human resource in the Nepali hotel sector the highest costing one in the Asia Pacific region. If we see the global hotel sector practices, staff salary should only be 15 percent of the total operating expenses,” he says.   

To cope with the difficulties created by marginal revenue and high expenses, most hotels have been forced to run their operations with a reduced staff size. Before the coronavirus outbreak, the Tiger Palace Resort, a water-themed resort in Taulihawa, used to operate with 275 regular and 75 casual staff; the number has been reduced to 90 at the moment.

The five-star resort, which is spread across 22 acres of land, has staff salaries along with electric and water bills as major expenses. “As we are in the primary stage of resuming services, we are operating with fewer staff, and the number will increase as the room occupancy grows. 60 percent occupancy is a must for us to meet our operating and overhead expenses including staff salary,” says Laxman Thapa, general manager of Tiger Palace Resort.

The Covid-19 pandemic has unleashed a colossal disaster for travel and hospitality sector globally. With the coronavirus outbreak still happening in many parts of the world including Europe, the United States and India, the major tourist source markets for Nepal, the outlook is bleak with the clouds of uncertainty continuing to surround recovery efforts. Hoteliers predict that it will take at least two years for the business to bounce back completely.

Tourist category hotels and resorts in places like Kathmandu, Pokhara, Chitwan, and many mountainous districts primarily rely on visitors from the western hemisphere along with Chinese guests.

However, for hotels and resorts in the Terai plains, Indian tourists are the main guests who come basically for religious tours, recreation in casinos, MICE (meetings, incentives, conferences and exhibition) and business-related visits.  The closure of the Nepal-India border has had a massive impact on the business of the Terai-based hotels. The major border points between Nepal and India remained closed for the most of 2020 and vehicular movement from the points are yet to resume.

According to Hari Pant, president of Hotel and Tourism Entrepreneurs Association Parsa, the indefinite ban on vehicular movement between the two countries has created a huge risk to the hotel sector in Birjung and other parts of the Parsa district. “Around Rs 6 billion has been invested in the hotels of Parsa with 2,500 people employed in Birgunj-based hotels alone,” he says.

Given the current Covid-19 situation in many parts of the world, hoteliers don’t expect international visitors in large numbers any time soon. To improve the business, some have introduced discounted packages targeting domestic visitors, while others have focused on promotional campaigns to attract premium tourists.

Soaltee Westend Premier, which has introduced the ‘stay 4-nights and pay for 3-nights’ package, is working to launch another package for domestic tourists. “We will be offering a three-night stay at our hotel in Nepalgunj, jungle resort at Bardiya and Pokhara,” mentions Dhital. According to him, Soaltee Westend is mostly receiving religious tourists at the moment. He says that if the government initiates inter-provincial flights, it will take domestic tourism to new heights. Currently, the Bharatpur-Pokhara flight is the only inter-provincial flight operating in the country.

In the meantime, hotels and resorts in Suaraha that have seen some sort of a rebound in their business in the last few months thanks to the increasing number of Nepali visitors, are also working on promotional campaigns to boost domestic tourism.

Deepak Bhattarai, president of the Chitwan chapter of Hotel Association Nepal and owner of Chitwan Forest Resort, informs that they are currently working on a video campaign to promote Sauraha. “So far, we have guests mostly from provinces 1, 2, and Bagmati,” he says, adding, “This upcoming campaign is aimed at attracting domestic tourists from all seven provinces.” According to Bhattarai, they will collaborate with provincial governments and local bodies to make the campaign a big success.

Meanwhile, Tiger Palace Resort is focusing on the premium tourist segment. “As we are a premium resort, we don’t want to compromise in terms of pricing. We have a huge customer base in India and are currently into digital marketing and promotional campaigns to attract high-end guests,” says Thapa.  According to him, business will bounce back once the Nepal-India border is opened and casinos are allowed to operate.  

Hoteliers are optimistic that sooner or later, they will start to welcome tourists. However, they want the government to provide the Covid-19 vaccine to all hotel workers to boost the morale of arriving tourists and ensure that Nepali hotels are safe to stay in.

--BY MANISHA BALAMI

In 2014, Pratima Thapa Karki was working with the High Powered Committee for Integrated Development of the Bagmati Civilization and was also engaged in the Bagmati River cleaning campaign which is held on every Saturday. While collecting waste, her team noticed sanitary pads on the banks and in the river in large numbers. “People were hesitant to pick up such rubbish, but it is also one of the most important and necessary things to do,” recalls Thapa who is the founder of Free Wheel Pvt Ltd. She then felt a sense of urgency to find an alternative to the use of disposable sanitary pads available in the market to tackle the problems related to environmental pollution while also keeping up with the menstrual hygiene needs of women. As a result, Karki came up with the idea of producing eco-friendly sanitary pads.

Growing up in a family with an enterprising environment, she was interested in doing something on her own from an early age. Her father started a trading business in Kathmandu and expanded it to international market.  As a kid, she showed eagerness to learn new things which led her to get ideas about business from her father.  

According to Thapa, she was brought up in a liberal environment. “My parents let me do things on my own. They never forced me to study a certain course or wanted me to work in areas of their choice,” she says. She adds, “My mother has always been my inspiration, someone who taught me to be capable and independent.”  

After completing her high school from V.S Niketan Higher Secondary School, she joined Tri-Chandra Campus to study for a B.Sc in Environmental Science. In 2014, she completed her post-graduate degree in Environmental Science from the College of Applied Science.

Being a student of environment science, Thapa wanted to do something which suited her academic background. Before starting anything of her own, she decided to work and gain some experience. Hence, she worked as an environment consultant and researcher on a contract basis in government agencies, UN agencies, World Wildlife Fund, and other I/NGOs as well.

As soon as Thapa completed her master’s degree, she got married in 2015. Her husband, who is also her school friend, supported her idea of starting a business and the duo established Free Wheel Pvt Ltd as an import/export venture. The company commenced its operations by importing cosmetic products, seafood and gadgets. “The company is also the sole authorised distributor of renowned Thai cosmetic and pharmaceutical skincare brands such as KA, Explor and Polka Healthy," shares Thapa. The company also started exporting handicraft goods such as wool products, jewelries made of glass beads, pet food items to the United States and Thailand.

Everything was going well as per her expectations. But the Covid-19 pandemic impacted her company as import/export and other trading activities got severely disrupted for many months in 2020. “Our business got completely halted at the time,” she expresses.

However, taking the situation as a challenge, Thapa decided to realise the idea of venturing into the commercial production of environment friendly eco-pads which she had deemed as being viable and important years earlier.

Thapa is among the very few producers of such types of sanitary napkins that are made of pure cotton, are reusable and decay quickly when disposed. According to her, eco-pads are cost effective and much more comfortable than the sanitary napkins available in the market. “While buying our sanitary napkins, customers might feel it to be a bit costlier than the ones available in the market. But the important thing to consider here is that our napkins are cost efficient in the long run,” she says.

To start her company Free Wheel Pvt Ltd, Karki had received financial support from her family members. As there were good returns from the business later on, she was able to start production of eco-pads on her own investment. Initially, she invested Rs 200,000 which has now reached around Rs 1.5 million for her sanitary napkin business.

During the lockdown period last year, she produced around 100 sample pieces by herself and sold the eco-pads to her family members, friends and neighbours and requested feedback about the products. “At first, many of them were hesitant to use the sanitary napkins. But I convinced them to try them once,” she shares.

The feedback she received from the users of the sanitary napkins was positive. Many did not bother to reuse the pads, but they told her how comfortable and easy-to-use product the napkins were compared to those found in the market.  

Thapa then outsourced the work of sewing the eco-pads to the local tailoring shops operated by women located at Jadibuti, Chabahil, Balkot, and Babar Mahal. She is currently working to install a production plant to fulfill high demand of the pads. According to Thapa, more than 5,000 customers are using the sanitary napkins. She also says that a big order of around USD 10,000 is in the pipeline.

She started selling and promoting her products online. Now the sanitary pads are available at online marketplaces such as UG Bazaar, Thulo.com, Daraz, Dhuku Store alongside some local physical stores. She has also been selling the products using Facebook and Instagram. “We are also working to promote our products through the global e-commerce platform Amazon as well,” she adds. At present, she has customers from Kathmandu, Lalitpur, Bhaktapur and Chitwan. Soon, her products will be available in Pokhara.

Monthly, she gets orders for around 30 pieces of eco-pads from a store. Moreover, different organisations working for awareness related to menstrual health management are also buying eco-pads in bulk.

According to Thapa, the sanitary napkins are available in different sizes and women can choose them according to their needs. Likewise, customers can also purchase packs which are enough for a one-month cycle and can be reused after washing. A pack of eco-pads costs Rs 1,000 to Rs 1,500 whereas a single cloth pad costs a minimum of Rs 240.

Besides this business, Thapa also runs another company called Pratibimba Industries which produces sun dried vegetable and fruits such as dried spring onions, dried tomatoes, dried apple, Gundruk (dried fermented leaf), Masyaura (dried lentil nuggets), Cauli ko Sukuti (dried cauliflower) and Mula ko Sukuti (dried radish pieces) etc.

The company also sells local products like Jimbu (a dried aromatic perennial herb), Timur (Sichuan Pepper) Bay leaf, turmeric powder, Bhang (Hemp Seed), lemon grass, and Lapsi (Nepali hog plum) powder collected from different places of the country including Salyan, Bhaktapur, Chitwan, Dolpa, Baglung and Jumla. According to Thapa, Pratibimba Team is working to launch a special type of sweet that is prepared from solar dried fruits.

A member of the Federation of Women Entrepreneurs Association of Nepal (FWEAN) since 2015, Thapa says that being part of the organisation has benefitted her on a personal and professional level. “This platform has not only helped me expand my business network, but I have also gained business knowledge through different trainings and workshops organised by FWEAN,” she mentions.

In August last year, she was selected for online business promotion under the ‘MA-UDHYAMI’ campaign, a part of the project called ‘Revitalising Women’s Businesses Amidst COVID-19 Pandemic’ implemented by FWEAN, together with EMERGE and Thulo.com and funded by USAID, which has further helped her in promoting and marketing her products.

Thapa says that balancing both the personal and the business side is the greatest challenge for woman entrepreneurs. However, she feels fortunate to have a inspiring husband and supportive family and does not have to face such a challenging situation. “I appreciate my husband for standing with me in my good and bad days as a motivation to move forward,” she says.

According to Thapa, the difficult government rules in business create challenges for women entrepreneurs. “From registering a company to applying for bank loans, there are so many things during documentation that are very difficult to comprehend even for educated people. I can imagine how difficult it becomes for rural women,” she expresses. Also, the existing arrangements related to concessional loans are not so effective and friendly to women entrepreneurs.

As people now-a-days are attracted towards using environment-friendly products, Thapa plans to expand the business of eco-pads and export the napkins to foreign markets. Besides sanitary napkins, she is also looking to produce other eco-friendly products and launch more food items in the market.

In November 2019, a Russian citizen Monika Kruse suffered a knee injury while descending the Thorung La Pass, the world’s highest mountain pass situated in Manang district. She returned to Kathmandu and visited a hospital where an x-ray scan revealed she had a joint injury and the doctor recommended surgery.

However, Kruse, reluctant to undergo surgery, searched for an alternative and discovered ayurvedic treatment at the Ayurveda Health Home (AHH) situated at Dhapasi, Kathmandu, where Dr Rishi Ram Koirala performed the treatment to heal Kruse’s knee injury. After going through cycles of treatment, Kruse began to recover and began to walk with crutches.  After recovering from her injury, she then returned to Russia.

Established in 1995, many foreigners and Nepalis have benefitted from AHH for treatments of different ailments over the years. “So far, foreigners of 122 nations including high-ranking officials have visited us. We have also provided services to Nobel laureates from Russia and the Middle East,” says Dr Koirala who is the Medical Director of the health centre.   

AHH has been providing a range of treatments for multiple ailments related to skin, digestion, joints and lungs problems. However, the Ayurvedic healthcare institution does not provide treatment for patients of communicable and infectious diseases, emergency/ambulatory cases, and individuals who need continuous medical attention.

“We are the pioneering Panchakarma centre in Nepal operating since 1995. Our centre is one of a kind in the whole of South Asia, providing quality service delivered by experienced professionals and practitioners,” says Dr Koirala, who has been an ayurvedic medical practitioner for over three decades.

Panchakarma is considered to be the essence of ayurveda. It is a holistic process designed for maintaining and supporting inner harmony to get more in-tune with the life process. It mostly consists of cleansing, detoxifying, and immune-enhancing, rejuvenating, and also taking curative measures against diseases. According to Dr Koirala, the main objective of Panchakarma is to restore harmony and balance to the mind, emotions and senses through treatment programmes that include imparting the subtle knowledge of the benefits of Panchakarma, natural products and traditional healing techniques.

AHH began to rise in fame after 2001 when it became a Nepal-German joint venture in healthcare.  

“In 1993 when I was doing some research on the use of medicinal plants in treatments related to mental health issues, I realised the importance of Ayurvedic treatment. During that time there were hardly any Ayurvedic clinics in Kathmandu,” recalls Dr Koirala. According to him, foreigners had started to come to Nepal seeking Panchakarma treatment at that time. In the meantime, his brother Badri Koirala, who now heads AHH as the Managing Director, had returned to Nepal from the UK and was looking to start an ayurvedic clinic. Soon they started an ayurvedic treatment centre in Thamel in 1995.

In 2000, Dr Koirala was in Germany for a seminar where he met Marlies Foster, a retired German nurse and a graduate in hospital management. After attending Dr Koirala's presentation session, she approached him to join his team. “To ensure that our services meet international standards, I requested her to visit our centre and she stayed with us for six months and thus agreed to join the team. This way we registered AHH in 2001,” informs Dr Koirala. Foster is working as Director of Quality Management at AHH.

All the centre’s treatments are designed by Dr Koirala. A specialist in Panchakarma therapy and a skilled diagnostician, he is widely consulted for ayurvedic based treatment and healing in Nepal and abroad. He has also served as Chairman of National Ayurveda Research and Training Center, Executive Vice-chairman of Nepal Health Research Council and Member of the High Level Health Policy Advisor Committee formed by the Ministry of Health.

“The primary requisites of living an ayurveda-inspired healthy life include wholesome food, meditation, and yoga; if you are indulging in these three, you can prevent a lot of diseases, lead a happy life and perform optimally every day,” says Dr Koirala, adding, “With the ayurvedic way of life, we can beat stress, which is one of the underlying causes of an array of health troubles that people suffer from in this modern world.”

Dr. Koirala and his team of 12 doctors and 33 therapists offer treatments for imbalances caused by stress, muscles, joints, ligaments, and vertebral disorders caused by traumas, degenerations, or autoimmune reactions, respiratory disorders, gastrointestinal disorders, liver disorders, skin disorders, endocrine & metabolic disorders, gynecological disorders, neurological and immunological disorders, urogenital disorders, psychosexual disorders, anorectal disorders, pediatric disorder, eye disorder. AHH also treats these disorders using Abhyanga technique.

Abhyanga is a healing practice in ayurveda which, according to Dr Koirala, includes oil massage for complete treatment for the mind, senses and body. AHH offers various Abhyanga packages, including whole body cleansing and whole body synchronised cleansing. Likewise, AHH also provides Anorectal OPD service for various problems like hemorrhoids, anal fissures, Anal Fistula, Pilonidal Sinus and Perianal Abscess. “We have been providing treatment to patients of such ailments for the last 25 years,” informs Dr Koirla.

Many people also visit AHH for Ayurveda Consultation. According to Dr Koirala, this consultation offers the most profound insights into all aspects of life that impact the health and well-being of people. “In this, our emphasis is on the behavioural, sensorial, psycho-emotional and spiritual dimensions of holistic health,” he shares.

Besides, consultation for prevention of disorders, health improvement and Yoga sessions are also available at AHH. “We also offer therapies related to cellular cleansing, body detoxification and reduction of mental stress and boosting of sensory organs,” shares Dr Koirala.

Before the Covid-19 pandemic, AHH used to operate two centres, one in Kathmandu and another in Pokhara. The Pokhara centre was closed following the outbreak of coronavirus in July 2020. Soon, AHH is coming up with a new centre at Nagarjuna hills amidst the lush green forest. It will probably be the biggest private sector operated Ayurveda institution in the country. According to Dr Koirala, it will be a state-of-the-art Ayurvedic health resort located just 10 kms from Thamel.

Already Rs 150 million has been invested in the construction of the centre which will open from around mid-March. “We will provide several treatments such as Kayakalpa, Jalauka Karma (leech therapy), Agni Karma (burn therapy), Marma Chikitsa (pressure therapy), Mantra Chikitsa (mantra therapy), sand, mud, soil and grass walking therapies, Uttar Basti, crystal, colour and stone healing and healing with potent medicinal herbs,” informs Dr Koirala. There will be ample space (huts and caves) for yoga and meditation, a medicinal plant garden, an organic vegetable farm, a vocational training centre and an ayurvedic medicine factory.

In the future, AHH plans to focus on diversifying their services with improved quality and standards. They also aim to develop a multidisciplinary approach for the treatment of new and emerging diseases. “Besides, we will also extend our counselling services and introduce special packages for pregnant single mothers,” says Dr Koirala.

--BY MANISHA BALAMI  

One of the biggest problems for owners of micro enterprises in Nepal has been access to finance. Mostly, these are people from weaker financial backgrounds who find it difficult to avail modern banking services. For many, it is difficult even to get loans and other financial services from microfinance institutions (MFIs) due to the lengthy documentation process. Also, such financial institutions find it hard to track and monitor the activities of the borrowers to see if the borrowings have been used for the intended purpose.

 “The problems in lending are not because of lack of skills of microfinance institutions and their debtors. Basically, there exists a deficit of trust between the two sides,” says Sonika Manandhar, co-founder of Aeloi Technologies. According to her, one of the reasons for the trust deficit is that many microenterprises are operating informally without registering at government agencies which creates difficulties for financial institutions to do transactions with such businesses. “This lack of trust is a big challenge for microenterprise owners to scale up their business,” she says.  

In order to narrow the trust deficit between financial institutions and micro entrepreneurs, Manandhar and her friend Tiffany Tong established the company Aeloi Technologies that works as a connector between financial institutions and their borrowers. The startup helps microfinance institutions to bring the costs related to debt monitoring.

Aeloi Technologies was started in March 19, 2019 by Manandhar and Tong who is a Canadian national. Currently, Tong and Manandhar are CEO chief technical officer (CTO) of the company, respectively.  

A computer engineer and impact entrepreneur, Manandhar had worked in the tech industry for seven years before starting the company. After working in various organisations in the capacities of programmer and project manager, and organising tech events and programmes such as hackathons, she went to the Santa Clara (California) based Singularity University for Global Solutions Programs (GSP) in 2017 where she met Tong. After returning to Nepal in 2018, she worked as a CEO of a savings cooperative institution for a year. Working at the cooperative, she learned about the existing deficiencies in the digital financial services of cooperatives and other financial institutions that deal with small depositors and lenders. She then thought of bringing inclusive fintech products for users regardless of their literacy levels.

“Mostly women entrepreneurs in the informal sector face difficulties in gaining access to finance which ultimately leads them to get trapped in debt spiral or they quit the business,” says Manandhar, adding, “This is where we saw an opportunity to promote affordable financing for last-mile micro-entrepreneurs.”

Modus Operandi
The company mostly works with women micro-entrepreneurs in the agriculture and transportation sectors in Nepal. She gives the example of safa tempos (electric three-wheelers) transport which had a significant involvement of women for the past 25 years and yet the business never grew and is dying a slow death with lots of tempos currently rusting in the garages. Manandhar says that there is a need to channel investment into grassroots local innovation such as the safa tempo transport business which can also help to tackle the issue of air pollution.

Keeping micro entrepreneurs like the safa tempo owners in mind, Aeloi Technologies came up with digital tokens that are backed up by the funds from financial institutions. The tokens are transferable through SMS to the borrower’s mobile number. The SMS platform does not require smartphone or internet connectivity thus, it helps entrepreneurs to access to the services easily.

According to Manandhar, digital tokens are used within an ecosystem which is comprised of microfinance institutions that issue microloans to borrowers in the form of digital tokens and accredited vendors from whom the entrepreneurs can get goods and services. The entrepreneurs can get the tokens from partner financial institutions. “Similar to mobile money, digital tokens help users to purchase goods or services without the direct use of cash,” says Manandhar, adding, “The vendors redeem the received tokens into cash from our partner microfinance institutions once the goods and services are delivered.”

So far, Aleoi Technologies works with one battery and four garage vendors in Kathmandu from whom owners of safa tempos can purchase necessary goods and services.

The company has been observing growing participation of people from the agriculture sector.  By the end of 2019, the company had 40 vendors in the agriculture sector. “We are also working for the participation of insurance companies in our system,” she says.

Services
Part of the borrowing ecosystem is a loan insight system developed by the Aeloi Technologies which enables financial institutions to track the credit and its impact in real-time. Currently, the company has two products for digital lending; Regrow and Green Energy Mobility (GEM).

Regrow is an agriculture sector-focused product which is designed for first time users of digital financial services. It is a pilot project which the company has been running in Nuwakot district and has been working to expand it in Kavre. The company has partnered with the Mahila Shayatra Laghubitta Bittiya Sanstha and Laxmi Mahila Savings and Credit Cooperative for the purpose. Similarly, GEM is for entrepreneurs of electric transport.

Moreover, the company has launched a separate web platform called BijuliPower.com to help safa tempo owners to earn additional income. Under this, people can hire the electric three-wheelers for various purposes including events, day trips, tourism and deliveries.

Aeloi Technologies, which provides its services in the software-as-a-service (SAAS) modality, generates revenue through three main streams – financial institution subscription, vendor commission and commission for channeling funds through their platform.

Challenges
According to Manandhar, convincing people about the business concept of Aeloi was difficult in the beginning as social entrepreneurship is not common in Nepal. Many people thought the company was an NGO. However, they keep on working to make people understand the company’s objectives and its vision to empower self-employed women.

Over time, they received national and international recognition for their work. In 2019, Manandhar won the Young Champions of the Earth Prize for Asia-Pacific for her work in big data to make electric transport more efficient and accessible and women empowerment.
Aeloi Technologies was also the national winner of She Loves Tech, the world’s largest startup competition for women and technology in the same year.

Manandhar says that their services are often mistaken as digital wallets or vouchers. But unlike the transaction-focused wallets, the system developed by Aeloi Technologies is mostly about easy access to funds for borrowers and ease of tracing of credit to the borrowers. “Meanwhile, our platform also offers more flexibility to the customers by making sure there are many choices of vendors allowing the customers to negotiate to get better goods and services at right price points,” mentions Manandhar.

Investment
The company was started with an initial capital of Rs 500,000. According to Manandhar, they started their first pilot project with the funds provided by a German INGO in 2019. In the first batch of projects, there was 18 borrowers and 40 vendors for chicken and cauliflower farming.

Currently, Aeloi Technologies is receiving support from different UN organisations such as United Nations Capital Development Fund (UNCDF), UN Economic and Social Commission for Asia and the Pacific (UNESCAP), UN Environment Programme (UNEP), GIZ, German INGO Welthungerhilfe, Standard Chartered Bank, Civil Society Academy, One Young World and National Geographic Society.

Chilime Hydropower Company is considered to be a leading company in the energy sector in Nepal.

With a 51 percent stake, Nepal Electricity Authority (NEA) has majority ownership in Chilime. Similarly, NEA and Chilime employees own 25.5 percent shares of the company while the general public holds 14 percent shares. The remaining 10.5 percent shares are owned by the locals of Rasuwa district where the project lies. Chilime Hydropower Company Ltd has also helped establish the hydropower sector as an investment avenue for the general public.

The floating of shares to the locals of project affected areas has not only made thousands of locals in Rasuwa the owners of the hydropower company but also introduced the concept that locals can also receive the benefits of hydropower projects as owners.

Chilime Hydropower Company is also known as a company that can give attractive dividends to its shareholders. The company distributed a 10 percent dividend in the first year the project came into operation. Since then, it has been offering returns to its shareholders almost every year.  The hydropower company had offered 75 percent dividends in the Fiscal Year 2010/11. Such a return was 25 percent in the fiscal year 2018/19.

Chilime Hydropower Company Ltd was conceived with the objective to utilise domestic technicians, contractors and banking institutions and to develop the hydropower sector. It was expected that developing hydropower projects by utilising domestic technicians, workers and contractors, among other things, would be cheaper and lower electricity tariffs for consumers in the market. Chilime Hydropower Project built its 22-MW hydropower project in Chilime River in 2003 at a cost of Rs 2.5 billion. This project, which has been connected to the national grid via a 38km 66 KV transmission line, aims to generate approximately 133 million units of electricity annually.

Following the success of Chilime Hydropower Project, the company started four other projects with a combined capacity of 300 MW. Some of these projects are expected to generate electricity from the current fiscal year while others have a production target for the next fiscal year. Similarly, the company is also looking into developing three other projects with a combined capacity of 650 MW.

Chilime Hydropower Company was the first subsidiary that NEA set up to develop and operate hydropower projects. Following the success of its Chilime Hydropower Company model, NEA has formed other subsidiaries to develop hydropower projects.

Rather than building hydropower projects on its own, NEA has found the subsidiary model to be more effective and successful. NEA officials say that the state power utility’s subsidiaries have become successful because they are run by professional directors appointed by the NEA, whereas, in other cases, there is a risk of political appointments or projects being managed by directors appointed from other ministries.

Upper Tamakoshi (456 MW) and Tanahu (140 MW) are some of the big projects that NEA is building through its subsidiaries.

One of the factors that determine the success of any hydropower project is the price of which it can sell the electricity. Chilime Hydropower Company is receiving Rs 8 per unit on average for the electricity that it sells to the NEA. This is the highest rate that the NEA has provided to any hydropower project.

Many small hydropower projects are compelled to sell their electricity at as low as Rs 4 per unit to the NEA. Some of the projects that are selling electricity to NEA at lower rates are Upper Tamakoshi and Trishuli 3 ‘A’. This has reduced their profit margin making them unable to distribute the same level of dividends as Chilime Hydropower.

NEA has to own up to the discrimination that it has perpetuated between Chilime Hydropower Project and other small hydropower projects when it comes to the electricity purchase rates. However, the success of this project could also inspire other developers. Less than 15 years after building a 22-MW hydropower project, it is operating other projects with a combined capacity of 300 MW.
Building new projects not only helps to mobilise domestic capital and resources, but it also enables Nepali investors, banking institutions and customers to reap maximum benefits from the development of the hydropower sector.

Dish Media Network Limited (DMNL), the operator of the direct-to-home (DTH) brand DishHome, is all set issue 2.38 million units of shares in initial public offering (IPO) by the end of April. With the IPO, Nepal’s first Direct-to-Home (DTH) service provider, which also owns the fibre-to-the-home (FTTH) service SIM TV, will be the first broadcast company to get listed in the Nepali stock market. “This will be a historic moment for us. If all goes as planned, we will issue shares to the general public by April,” says Sudeep Acharya, managing director of DMNL. The company made its IPO plan public in mid-2017 but it was delayed due to various reasons including the Covid-19 pandemic last year.

DishHome was formed in 2010 after the merger of two companies-- Dish Nepal and Home TV. The merger gave a new lease of life to both the companies as they were facing huge losses and it had become difficult for them to survive due to the high operating costs associated with the running of satellite TV services. “We had entered into this business with little knowledge of operating satellite RV services which created difficulties for us to sustain the business,” recalls Acharya.

Both companies found it a challenge to manage their finances, human resource, technology, and also lacked other expertise needed to run digital TV services. After the merger, the company was able to bring in foreign investment which became a turning point for the company. In 2012, Sandmartin International Holding Ltd, a Taiwan and Hong Kong-based satellite TV company, became the major stakeholder in Dish Media Network. With this, the company not only got the much-needed funds, but was also able to use the latest technology to work towards digital innovation in satellite TV broadcasting.

Another turning point for DMNL came in 2015, when the company migrated its broadcast to a new satellite to provide a wider range of services to more customers. “Prior to that move, we had limited space and weren’t able to broadcast many channels. But with the migration, we were able to reach out to a high number of customers with new and broader services,” says Acharya.

An agent of change in TV watching culture
Prior to 2014, there were no HD channels broadcasting in Nepal. As the cable operators were providing services in analogue format, viewers had no option other than to watch TV channels in lower picture quality. It was DishHome which started broadcasting HD channels in the country bringing massive changes in the TV viewing experience of people in Nepal. Acharya claims that customers of DishHome can experience quality services, both in terms of audio as well as video, at affordable prices. “No other digital TV service provider in Nepal has been able to offer quality on-par with our services,” he says.

Dish Media Network is also viewed as a company which helped the government to lay the foundation for regulatory reforms in domestic TV broadcast services. In the past, the cable TV business in Nepal was largely unregulated which was one of the reasons for the low picture quality of television channels.  “A decade ago, there were about 700 cable operators in the country, but the government didn’t have any data on distribution, payment, and number of subscribers. After digital TV services were started, things began to become transparent,” says Acharya, adding, “We can feel that the work of TV services providers has become prestigious now.”

Priority to innovation
Being a technology-based company, innovation has been a priority for DishHome. Since the beginning, the investors and management of Dish Media have focused on the need to be dynamic as much as possible to thrive and gain that extra mile. Thus, the company has been continuously trying to develop new services, TV channels, contents and bringing the latest technology to the Nepali market. In this respect, Dish Media Network has started to provide internet service to its customers along with TV services. In February 2020, the company launched a high-speed internet service called DishHome Fibernet. Though the Covid-19 pandemic and lockdown imposed by the government last year obstructed their distribution plans to some extent, the company has been able to expand the internet service to half of Kathmandu valley. Although Kathmandu centric at the moment, the company is planning to expand internet services towards the eastern parts and some big cities by 2021.

Similarly, the company has started Pay-per-view (PPV), a pay television service in which subscribers can purchase selected contents to view as private telecasts. Currently, the company has DishHome Cinemaghar as PPV. The service allows subscribers to watch new movies from their homes at the same time the movies are released in cinema halls.

The company has also started broadcasting popular Korean series dubbed in Nepali language via its channel DishHome Reality TV. “We are receiving great response for our Korean series,” shares Acharya.

Similarly, the company has introduced the DishHome Go application which allows subscribers to watch television programmes on their mobile phones and personal computers. Currently, 70 TV channels are available for viewing via the app.

Recently, the company launched XVOD, a streaming video-on-demand service for its customers. Acharya informs that this service is available to all DishHome users who connect their set-top box to the internet. Users will be able to stream videos of their choice in four segments including Nepali movies, English movies, TV series and contents for kids.

Besides, a separate entity named Digital Home International (DHI), which has investment from investors and promoters of Dish Media Network, has been manufacturing set-top boxes in Nepal since 2019. Acharya says that the demand for set-top boxes is growing in the country with the rapid expansion of digital TV and internet services. Till now, the company has distributed some 300,000-350,000 set-top boxes.

Network and market presence
Dish Media Network has expanded DTH services all across the country and plans to expand its internet service to the eastern part of the country and major cities by 2021. Currently, the company has 1.5 million subscribers throughout the country.

According to Acharya, DishHome commands 45 to 50 percent of the share in the Nepali DTH market. It has more than 20,000 recharge cards selling and fund transfer outlets and a network of about 3,500 data distribution centres. Additionally, the company has service centres in all seven provinces.

Dish Media Network has been providing employment to 600 to 700 people directly, whereas an additional 200 are working for the company at its call centres and other areas through outsourcing means.

Lack of support from government
Acharya says that it has become difficult for DTH and FTTH services providers like Dish Media, especially after the implementation of the Clean Feed policy last year, to broadcast foreign TV channels in the country.

“But foreign DTH services are being distributed illegally in different parts of the country. During a recent visit to Biratnagar, I found that some stores in the Main Road area are openly selling antennas and peripherals of Indian DTH services like Airtel and Tata Sky. The government needs to control such activities,” he urges.  

According to Acharya, such problems were prevalent during the company’s formative years which they addressed later on using different strategies such as offering customers DishHome services for free in exchange of the Indian DTHs. “Indian DTHs were massively used in the Terai region back then. I think, of the estimated one million Indian DTH subscribers in the country, we helped 250,000 to subscribe to Nepali DTH at that time,” he claims.

Acharya expresses his dissatisfaction that the same problem still persists despite the efforts of companies like Dish Media and that the government hasn’t done much even though they have held discussions with the authorities concerned to address the issues.

According to him, Clean Feed has erected a huge challenge in front of Nepali TV service providers. The growth in the number of subscribers is dwindling as most TV operators in Nepal are dependent on foreign content providers and many TV channels have not appeared in the country after the implementation of the policy.

In order to increase viewership, the television content should be good. But due to the lack of investment, is difficult for Nepali TV channels to develop content that can attract subscribers. “Clean Feed would not be a problem to us if subscriptions are increased for domestic content. However, the lack of investment in Nepali content is not allowing the viewership to increase,” opines Acharya. He estimates that the number of Nepali DTH operators has gone down by 600,000 - 700,000 after the implementation of the Clean Feed policy.

In order to cope with the situation, the company is working to bring back popular TV channels that have ceased broadcasting in Nepal in recent months and to broadcast new channels. The Indian news channel NDTV, which stopped its broadcast after the implementation of Clean Feed, began to air again from DishHome in late January. Similarly, the company has also started broadcasting 10 European channels.

Offers and packages
Over the years, Dish Media Network has introduced numerous schemes and packages that have helped the company to propel its subscriber base. Recently, they have started offering a bundled package consisting of television and internet to customers. The company has been offering attractive discounts in yearly subscription packages so that the customers do not have to keep recharging their set-top boxes. Also, they are providing a hefty discount of almost 30 percent in DishHome recharge.

--BY REBATI ADHIKARI

Globally, the automotive market is shifting towards electric vehicles with governments announcing stringent measures to control CO2 emission. However, Nepal is still an emerging auto market where there is huge potential for internal combustion engine (ICE) vehicles thereby making the South Asian nation a lucrative market for lubricants.

Official data related to the import of engine oil shows the growth of demand for lubricants in the last five years.

While the commercial and passenger four-wheelers, heavy vehicles and two-wheelers are the major segments with the highest lubricant consumption, the demand for industrial lubricants is also growing slowly, according to distributors.

The Growth of Nepali Lubricant Brands
Home-grown brands such as PLO, Control, MB Lube and Superb have also come up as players in the market. Purbanchal Lube Oil has been producing PLO lubricants whereas Control, MB Lube and Superb are produced by Fujima Oil Company, MB Petrolube Industries and Superb Lube, respectively. Similarly, Nepal Lube Oil Limited (NLOL), a Chaudhary Group company, has been producing and distributing Gulf lubricants in Nepal for the last three decades.

“The presence of home-grown brands in the market is growing which has helped to reduce the dependence on imported lubricants,” says Krishna Prasad Dulal, managing director of Purbanchal Lube Oil. According to Dulal, who is also the president of NADA Automobiles Association of Nepal, domestic brands collectively hold around a 35 percent share of the Nepali lubricant market. The domestic industries that began their operations by simply bottling and packaging lubricants have now expanded their activities. For instance, Purbanchal Lube Oil, which has PLO, Star, Mega and Prime as its major brands, has started production of packaging materials such as bottles, cartons and labelling stickers on its own.

Dulal argues that the time has come for the government to recognise domestic lubricant producing companies as industry. “When an industry producing products with 10 percent of value addition can be called a ‘national industry’, why can’t we get the recognition? Our products are value added,” he claims. According to Dulal, PLO currently commands a 10 percent share of the market, sells 3 million litres of lubricants annually and provides employment to 500 people. Dulal says that Nepal is on its way to become self-reliant on grease as domestically produced grease fulfills over 90 percent of market demand. “For PLO, grease is the highest selling product at present,” he informs.

A licensee of the American lubricant brand Gulf, NLOL is another major lubricant manufacturer in Nepal. According to the company’s General Manager Ganga Raj Bhattarai, NLOL produces 2,200 kilolitres of lubricants while also importing 1,200 kilolitres from India and UAE. The company is currently planning to double its production capacity from the existing 5,000 kilolitres and plans to increase the filling capacity by three-fold. “NLOL is also preparing to produce synthetic engine oil. We are in the process of installing the required machines which is expected to be completed in the next two months,” he informs. Synthetic engine oil is a high-grade lubricant used in high performance vehicles with technically advanced internal combustion engines.   

 Meanwhile, PLO is seeking to export its products to international markets. According to Dulal, the company’s plan is in the initial stages of conceptualisation and will require time and government support to materialise. “To be able to export products, we need subsidies. As there are chances that customs duty waiver on import of raw materials can be misused, there should be a waiver in income tax for exporters of lubricants,” he suggests.

To facilitate the growth of the domestic lubricant industry, the government has provided incentives for producers in the Federal Budget for FY2020/21. As per the arrangements in the budget, domestic Industries enjoy a customs duty difference of 10 percent in import of raw materials and imports of finished goods; there is a 15 percent customs duty on import of raw materials while a 25 percent customs duty is levied on import of foreign lubricants. “Similarly, there is a mandatory provision for industries to purchase domestically produced industrial lubricants. We are discussing with various organisations for the implementation of this provision,” mentions Dulal.

Presence of International Brands
For the last several decades, foreign brands have dominated the Nepali lubricants market. Castrol, Total, MAK, HP, Servo, Mobil, Gulf, GS Caltex, Motul and Veedol are among the major international brands offering different types of engine oils, coolants and other lubricants for four wheelers and two wheelers.

Castrol is among the international brands with longest presence (of over two decades) and commands a market share of around 15 percent. The brand of the UK-based petrochemical giant BP is distributed in Nepal by Nepal Overseas Trading Concern (NOTC) from its 30 distribution channels across the country. “Currently, we are distributing 90 percent mineral-based and 10 percent synthetic-based engine oil in the market,” says Amar Jyoti Ranjit, marketing manager of NOTC. According to him, the company has been selling popular Castrol brands including Activo, GTX and Vecton, respectively, for two-wheeler, car and heavy vehicles. Ranjit says that synthetic lubricants are becoming popular in the car segment and NOTC has recently launched Castrol Power 1 engine oil targeting this segment.

Indian lubricants also have a strong presence in Nepal. MAK, HP and Servo are the biggest Indian brands competing in the Nepali market at present.  “MAK holds a 15 prcent share of the market,” claims Roshan Malla, assistant marketing manager of Sipradi Trading, the authorised distributor of MAK lubricants in Nepal. According to him, 4T Stallion, 4T Scotech and 4T Blaze are the highest selling products of MAK in Nepal. “All of our engine oils, greases and coolants have good sales. Last year we sold around 2,850 kilolitres of lubricants across the country,” says Malla.

Growing Sales of Industrial Lubricants
As automotive lubricants account for the major portion of the Nepali lubricant market, industrial lubricant is rather an untapped segment. But with growing industrial activities, the demand for such lubricants has grown.  Manufacturing activities require a lot of lubricants and coolants as machines and equipment operate under high pressure and temperature. “As per the rules, only API license holders are eligible to enter in the industrial lubricants business. As we got in lately, we are taking a steady step in this segment with satisfying sales of lubricants to cement factories,” says Malla.

According to NLOL General Manager Bhattrari, there is a huge growth potential for producers of industrial lubricants. According to Bhattarai, NLOL has increased its industrial lubricants sales from 5 percent to 30 percent in the last five years.

Concerns of Producers and Distributors
Nepal is predominantly a price sensitive market where low-priced products account for huge sales in every segment. According to dealers, the lubricant market is flooded with cheaper products as many vehicle distributors import these lubricants and recommend them to the buyers of their vehicles. “Cheaper and low-quality products affect the business of genuine products. So only those brands having a presence in two or three international markets should be allowed to enter the Nepali market. This will give a lift to home-grown brands and customers will also not be cheated,” says Dulal. He thinks that the government should allow lubricant imports only through the registration of agents or companies that have ISO and API certificates. 

Nepal’s import of base metal and articles thereof shows the booming construction industry which has grown by an average annual rate of 14.8 percent in the past 10 years. And, the rapid growth in activities related to housing and infrastructure development is expected to further boost the import of metal commodities in the coming days.

In 2019, the global import of metals stood at USD 1.1 trillion. The composition of import was 63 percent iron and steel, 28 percent copper and 16 percent aluminum. Considering this global scenario, Nepal need to take necessary steps in import management of such articles. 

Hydroelectric projects are being built rapidly in Nepal as efficiency of developers has gone up. Soon, supply of electricity will exceed demand. But Nepal will need several more years to enhance its power consumption capacity. This has raised the spectre of energy going to waste if it is not exported. But exporting electricity is easier said than done, as generation costs are rising, making Nepali energy more expensive.

--BY RUPAK D SHARMA

Chameliya Hydroelectric Project. The name conjures up images of a long-delayed hydropower project with huge cost overruns. The 30-megawatt project built by state-owned Nepal Electricity Authority (NEA) started construction in January 2008 and was originally scheduled to come online by May 2011. The project located in Darchula was highly prioritised as it was supposed to play a vital role in fostering economic growth by bridging the huge energy deficit of Nepal’s far-western region, one of the least developed parts of the country. But the project formally started operating in February 2018 due to project development delays and contractor’s disputes with NEA and the government. When the project was finally completed its cost had almost doubled from the initial estimate of Rs 8.3 billion to Rs 15 billion, making it the most expensive hydroelectric project of the time.

In those days, the cost of building hydroelectric projects hovered around Rs 150 million per megawatt (MW). But investment in Chameliya stood at Rs 500 million per MW. The major reason for the surge in costs was project construction delays: It took over a decade to complete the construction of the 30MW project.

Things have changed now. Today, hydroelectric projects with installed capacity of 40 to 50 MW are being built in three to four years. The efficiency in hydroelectric project construction has gone up largely because of the experience of developers.

Until several years ago, Nepali investors would not dare build a project of over 10 MW without roping in a foreign investor, as they were inexperienced and lacked confidence. That is not the case today. Some of the domestic developers have already built multiple projects. This experience has made them aware of pitfalls that they might run into while building a project, enabling them to take precautions beforehand. This has shortened project completion time.

Of course, bureaucratic red tape is still there. Project developers have to run from one government ministry or department to the other, and make umpteen rounds of NEA, the sole buyer of electricity in Nepal, to obtain various permits. This consumes a lot of time in the pre-construction phase. But as officials are learning the ropes of the trade, they are taking less time than before to complete these tasks, according to project developers.

Over the years, banks have also enhanced their efficiency in processing loans required for hydroelectric projects, shortening the period of time to sanction credit. This is the result of tremendous growth in the lending capacity of banks.

In the past, up to six banks used to form a consortium to finance a 25MW project. Today, four to five banks can pool enough resources to fund a 50 to 60MW project. At present, banks can individually finance up to a 10MW project, while consortium finances are available for the construction of projects that reach up to 100 MW. Banks are now planning to raise their consortium financing capacity to 150 MW.

Commercial banks started showing greater interest in the hydropower sector after the banking sector regulator made it mandatory to raise the paid-up capital from Rs 2 billion to Rs 8 billion in 2015. The four-fold jump in capital base has prompted them to look for bigger projects to finance. And hydropower is one of the safest bets for now, as loans are only approved after NEA agrees to buy electricity from projects that have applied for the credit. Once banks get this assurance, they finance up to 70 percent of the project cost.

Surge in number of hydro projects
The changes that have taken place over the years have led to a proliferation of hydroelectric projects. A total of 15 new projects built by the private sector added 135.39 MW of electricity to the national grid in the last fiscal year. Two projects of NEA, 60MW Upper Trisuli 3A Hydroelectric Project and 14MW Kulekhani III Hydroelectric Project, also came into operation that year. The energy sector is expected to see an addition of over 800 MW of electricity in this fiscal year alone if the 456MW Upper Tamakoshi Hydroelectric Project comes online. What’s more, 131 additional private sector-led projects with a combined capacity of 3,157.19 MW are under construction. And another 112 private sector-led projects with a combined capacity of 2,124.77 MW are in different stages of development, according to NEA’s latest annual report.

Development of such a large number of projects is a sea change in a country which still meets most of its energy needs through biomass. Use of biomass, especially in the form of firewood, crop residue and animal dung, is widespread, especially in rural areas. Nepal is highly dependent on this traditional energy source, which is not health and environment friendly, despite being rich in water resources.

Nepal is home to over 6,000 rivers and rivulets. These hydro resources have the potential to generate 83,000 MW of electricity, of which 42,000 MW is commercially exploitable. Yet the country witnessed power cuts of up to 16 hours per day between 2006 and 2017, as it could not even generate 1,000 MW of electricity. In those days, industries used to meet most of their energy needs through diesel-powered generators, which used to generate electricity at a cost as high as Rs 32 per unit, almost three times the cost of grid electricity. The economic loss from power cuts was projected to be as high as USD 1.6 billion per year (in 2016 prices) during 2008–2016, which prevented the economy from expanding at a desirable pace. Nepal faced this situation largely because of inadequate planning and investment in generation, transmission, and distribution of electricity; poor financial health of NEA which cast doubts on its ability to pay developers that supplied electricity; delays in project development; and power leakage of as much as 26 percent.

Nepal expressed a will to tackle the energy crisis after India imposed an economic blockade from September 2015 to February 2016 halting supplies of, among other things, petroleum products, which was powering most of the vehicles and enterprises at the time. This prompted the government to introduce a concept paper titled ‘National Energy Crisis Prevention and the Electricity Development Decade’ in February 2016. The concept paper contained a plan to increase electricity generation by ten-fold to 10 GW in 10 years. That plan has now been replaced with the White Paper of the Ministry of Energy, Water Resources and Irrigation published in 2018. The white paper outlines strategies to augment the installed capacity to 5,000 MW in five years and to 15,000 MW in 10 years, from existing 1,360 MW. It also incorporates strategies to expand access to electricity and clean cooking to the entire population in five years, and raise per capita consumption of electricity to 1,500 kilowatts per hour (kWh) in 10 years from the existing 260 KWh.

Rising power generation cost
Nepal needs a greater supply of electricity to revive the industrial sector, whose contribution to the economy has been falling, restricting GDP growth and job creation. The economy of Bangladesh, once an impoverished nation, is on a higher growth trajectory largely because of rapid industrialisation. The industrial sector is projected to have made a contribution of 35.36 percent to Bangladesh’s GDP in fiscal year 2019-20 and its main component manufacturing is estimated to have a share of 24.18 percent in the entire economy, according to a Bangladesh’s central bank report. In Nepal, the share of the industrial sector in the gross domestic product fell to 13.2 percent in the last fiscal year from 14.2 percent in fiscal year 2010-11 whereas the contribution of manufacturing has dropped from 6.09 percent to 5.10 percent in the 10-year period. The services sector has grown massively over the years but most of the jobs it creates are low-paying. This has prevented the economy from expanding at higher rates. Nepal’s economy grew at an average of 7.75 percent per year in the three-year period before the Covid-19 pandemic hit the country. The growth rate slipped into negative territory in the last fiscal year, as the pandemic ravaged economic activities. The economy is projected to return to positive growth in the current fiscal year as the impact of the pandemic fades. But it has the potential to grow at a faster pace than in the pre-pandemic period if there is rapid growth in the industrial sector, for which adequate supply of power is a must.

But there is a catch: Nepal’s energy generation cost has significantly gone up over the years due to a hike in project development cost. A few years ago, the cost of building a hydroelectric project used to hover around Rs 150 million per MW. The cost has now surged by 33 percent to Rs 200 million per MW. This has made electricity expensive, raising the spectre of restricting domestic consumption and making energy generated in Nepal uncompetitive in the foreign market.

“This is what happens when you silo electricity generation,” says Bkesh Pradhanang, a hydropower expert and managing director of Jade Consult. Earlier, the government focused too much on hydro project development without putting emphasis on development of a robust network to transmit the electricity generated by projects. This later prevented hydro projects that had completed construction from evacuating power. A large number of hydroelectric projects being built in Koshi, Solu and Dordi corridors are either facing problems or are likely to face problems in evacuating power because of delay in construction of transmission lines. Nepal would not have faced this problem had development of transmission lines moved ahead in tandem with hydro project development. “Authorities have made the same mistake again. Project development cost has gone up because they did not think it was necessary to tame certain prices,” says Pradhanang, who is the local partner in the 216MW Upper Trishuli-1 Hydroelectric Project, which is being developed by South Korean investors.

In a typical hydropower project, construction materials, such as cement, steel and aggregates, command a weight of about 40 percent in the total development cost, according to Pradhanang. Labour costs make a contribution of around 20 percent to the total cost, while soft costs, such as engineering design and management, command a weight of 25 percent. The share of the cost of electromechanical items in total project development cost stands at about 15 percent.

Over the years, labour costs have surged as most of the youths have left the country for labour destinations in the Gulf, Malaysia and other countries across the globe, creating a shortage of workers. At the same time, prices of construction materials, such as cement, steel and aggregates, have steadily gone up. Each kg of TMT 500D steel now costs Rs 95, as against Rs 75 two years ago. In India, the same product can be bought for INR 34-47 (Rs 54.4-75.2) per kg in the retail market. Cement is also a lot cheaper in India, where a 50-kg bag of OPC can be fetched for INR 300-350 (Rs 480 to Rs 560). The same quality and quantity of cement costs Rs 700 in Nepal, up from Rs 650 in early 2019.

Many are surprised to see the rapid hike in cement prices despite a massive jump in production in the country. Nepal, which became self-reliant in cement production some three years ago, has the capacity to produce 11 million metric tonnes of cement per year, up from 4.5 million metric tonnes four years ago. Cement production has become a lucrative business lately because of the presence of huge deposits of limestone in the country. Limestone is the key material used in the production of clinker, a major raw material in cement manufacturing. Massive extraction of limestone has raised clinker production in the country. This has reduced Nepal’s reliance on Indian clinker. Nepal’s clinker imports dropped 59 percent from 3.31 billion kg in 2017-18 to 1.35 billion kg in 2018-19, a year before the pandemic hit Nepal, according to the Trade and Export Promotion Centre.

A jump in clinker production, however, has not brought down its prices, as the material produced in Nepal is being sold at rates comparable to the imported material from India, industrialists claim. This indicates clinker producers are making huge profits, but at the cost of making infrastructure projects expensive. Clinker production has become so profitable in Nepal many cement factories that were given licenses to extract limestone from mines to expand cement production are now more engaged in the production and sales of clinker rather than cement. In private conversation hydro sector experts refer to this practice as being akin to a hydropower project developer selling water from the river, rather than generating electricity, after noticing deeper problems in access to drinking water than energy.

This is a grey area and nobody knows what measures need to be taken to curb this practice without discouraging investors, who have already pumped in billions of rupees in the sector. But everyone from developers to those at policymaking levels agrees that the benefits of domestic production should be passed on to others in the value chain. Perhaps, timely construction of access way to the limestone mines and easy access to grid electricity, as pledged by the government to cement producers, may help reduce prices. So, options need to be explored and the ideal one should be implemented. If effective measures are not taken, similar trends could be seen in prices of other commodities, such as steel, whose domestic production is also expected to grow impressively in the coming days, as more and more investors are showing interest to produce billet, a key raw material to produce steel, in Nepal itself.

Need to contain price hike
Inability to tame prices of construction materials used in development of hydropower projects will ultimately raise the production cost of almost everything, as energy is an essential commodity for every enterprise. Higher production cost will make domestic goods and services more expensive, preventing Nepal from meeting its objective of substituting imports with domestic products wherever possible. Nepal’s imports are generally over 10 times more than its exports. This has widened the country’s merchandise trade deficit to around 40 percent of the GDP. This gap can only be bridged by enhancing exports. But so far Nepal has only been exporting its young workers in large quantities, which has reduced the stock of human capital in the country. Large-scale outmigration has increased the flow of remittances, but it has reduced pressure to generate more productive employment opportunities in the country and led to growth of low-productivity services, like retail trade, which are gradually eroding the country’s competitiveness. This calls for the need to diversify exports. And electricity could be one such product, which may find buyers in foreign markets.

NEA will be in a position to export 25 to 30 MW of electricity round the clock in the next three months, according to NEA Managing Director Hitendra Dev Shakya. By the upcoming rainy season, that capacity will rise to 450 MW. The portion of surplus energy will continue to rise in the coming years, as NEA has already signed agreements to purchase 5,978.13 MW of electricity from 341 private developers, which is four times the current installed capacity. Nepal will not be able to consume all this electricity in the short run, as its electricity demand currently stands at around 1,500 MW; and it will take several more years to increase domestic consumption. This indicates lots of energy will go to waste if it is not exported.

For now, the only feasible market to export Nepali electricity is India. Nepal and India signed the Power Trade Agreement in 2014 to ease cross-border flow of electricity. Based on this pact, India introduced Guidelines on Cross Border Trade of Electricity in December 2016. The guideline stirred a lot of controversy as it stated only companies with a majority stake of the Indian government or the domestic private sector can engage in cross-border electricity trade. It was then amended in 2018 after Nepal and Bhutan, another country that exports hydroelectricity to India, complained about its provisions. The revised guideline said imports and exports of electricity between India and neighbouring countries would be on the basis of mutual agreement between Indian entities and those of the neighbouring countries.

Based on this guideline, the Indian government in 2021 issued a procedure for cross-border imports and exports of electricity. The procedure, which has been welcomed by Nepal’s private sector power producers, has finally paved the way for government entities and the domestic private sector to export power to India.

Exports to India and Bangladesh
Nepal may not face many problems in selling electricity in India in the short run, as it has the infrastructure in place. The 400 kV Dhalkebar-Mujaffarpur cross-border transmission line alone can help Nepal export 900 MW of electricity. There are talks of building another 400kV cross-border transmission line from Butwal to Gorakhpur with the funding from the US government’s Millennium Challenge Corporation, but the project has not moved forward due to political wrangling. Nepal is adding circuits to 132kV Raxaul-Parwanipur and Kusaha-Kataiya cross-border transmission lines and is planning to build more cross-border transmission lines in different locations so that electricity generated from river basins across the country could be exported with minimal power loss.

Yet one question that many ask is whether India needs Nepal’s electricity as its supply has exceeded demand for over two decades. India currently has an installed capacity of approximately 375,325 MW whereas its peak electricity demand stands at 184,033 MW. Nonetheless, India may want to buy Nepal’s electricity as it generates over 60 percent of its energy through thermal sources such as coal, which are not clean. Since India is looking to migrate to clean sources of energy, Nepal may find a small market to sell its electricity. Lately, there are also talks of selling Nepal’s electricity in the Indian spot power market, where prices are relatively higher.

But Nepal may not be able to sell all of its electricity in the Indian market. This is because of a provision in the procedure on cross-border electricity trade that India introduced earlier in 2021. The procedure clearly says permission needs to be taken from the Indian Ministry of Power and Ministry of External Affairs if power is produced by a project developed by investors of a third country with which India shares land borders but does not have a bilateral agreement on power sector cooperation. Many see this provision as a way to prevent Nepal-based projects funded by Chinese investors from exporting power to India. This could be the repercussion of skirmishes at India-China borders that have provoked military tensions between the two countries and attempts made by China to gain a strategic foothold in South Asia, which India considers its own backyard.

Nepal currently has three Chinese-funded hydroelectric projects which have come into operation. They are the 25MW Upper Madi, 50MW Upper Marshyangdi ‘A’ and 22MW Bagmati Khola. NEA has signed power purchase agreements with seven other Chinese-funded projects with a cumulative electricity generation capacity of 391 MW. Chinese investors are also funding five other projects with an electricity generation capacity of 1,051.5 MW in Nepal. The procedure on cross-border electricity trade introduced by India will bar these projects from exporting power to India if NEA intends to do so.

What is even more controversial about the procedure is a provision which states that the government of India “reserves the right to import or export electricity from or to neighbouring countries for reason of larger policy interests”. This indicates that India can halt imports and exports of electricity anytime if it is not happy with Nepal. This has prompted many to say that India does not see electricity trade as a trade of commodity but as a tool to influence foreign policy.

This controversial provision will not only endanger Nepal’s electricity trade with India but with other countries as well, as Nepal, a landlocked country, needs to use Indian territory as a transit to supply power to other markets.

In 2017, Bangladesh signed a memorandum of understanding with India’s NTPC Vidyut Vyapar Nigam (NVVN) to use Indian territory to import 500 MW of electricity from Nepal’s 900MW Upper Karnali Hydroelectric Project, which is being built by GMR Energy, an Indian private giant. Bangladesh had to reach this understanding as the Indian law bars private developers from exporting electricity produced in third countries using Indian transmission lines. As per the understanding, NVVN will take a commission of INR 0.04 while exporting Nepali electricity to Bangladesh. But many are sceptical that this arrangement will ensure the smooth flow of Nepali electricity to Bangladesh, as India has always created non-tariff barriers for exports of Nepali merchandise goods to India whenever relations between the two countries turn sour.

If Nepal is able to export electricity to Bangladesh seamlessly, the country will find another major market for its product. Bangladesh is hungry for power, as its industrial sector has been expanding at an impressive pace. It is thus planning to raise its installed capacity of electricity to 40,000 MW by 2030 from around 23,000 MW at present. Bangladesh, which has signed a power sector cooperation agreement with Nepal to facilitate electricity trade, is keen on meeting its growing energy needs through imports from Nepal, as its deposits of natural gas, the main energy source, are on the decline.

Encourage domestic consumption
NEA has reached a conclusion that there is no alternative to exporting power in the short run as the domestic market is not in a position to rapidly enhance its electricity consumption. But in the long run Nepal will have to enhance its energy consumption capacity, as electricity is a raw material and if value is added to it to generate other products the country will be able to generate higher returns.

One area where electricity consumption can increase massively is cooking. Nepal boasts of raising the access of grid electricity to 86 percent of the total households in the country. But still around 70 percent of the energy in the country is generated through traditional biomass, which is not clean. This shows grid electricity is mostly being used for lighting purposes only. If all Nepalis have access to electric heaters to cook food, consumption of grid electricity will jump, leading to a drop in imports of liquefied petroleum gas. Widespread use of electric heaters will also help Nepal meet the Sustainable Development Goal on ensuring access to affordable, reliable, sustainable and modern energy for all by 2030.

Other ways to increase electricity consumption are development of a mass transit system, such as trains for public transport, establishment of fertiliser factories to support agriculture, and gradual migration from fossil fuel-powered cars to electric vehicles. The government has set a target of raising the share of electric vehicles in total vehicles to 50 percent by 2050. But it has recently raised taxes on imports of electric cars, which has worked as a disincentive for automobile buyers.

“The government must incentivise the use of electricity in the country through tax reliefs and other fiscal benefits, and devise measures to export power simultaneously. Otherwise, the surplus energy that we will soon be generating will go to waste,” says Kumar Pandey, former president of the Independent Power Producers of Nepal, an umbrella body of the private sector hydropower developers. “If surplus electricity goes to waste, NEA will stop paying developers, who will then default on loan payments, pushing banks to the verge of collapse.”

Even if NEA defaults on 1,000 MW of payments, Rs 140 billion in bank credit will be at the risk of going sour, considering per MW construction cost of Rs 200 million and 70 percent debt facility that banks provide. This amount is over 2.5 times the net profit of all commercial banks in the last fiscal year. Such a huge scale of credit default will not only hit the banking sector, but the entire stock market and the economy.

--BY SAGAR GHIMIRE

Nepal’s economy has plunged into a recession for the first time in its history as the country’s GDP witnessed negative growth rates for two consecutive quarters.

According to newly released GDP figures by the Central Bureau of Statistics (CBS), the economy shrank by 15.4 percent in the fourth quarter of the last fiscal year 2019/20 followed by a contraction of 4.6 percent in the first quarter of the current fiscal year 2020/21.   

The CBS forecast of declines in GDP growth for two consecutive quarters meet the standard definition for recession, according to economists. This is the first time that the economy has gone into recession since the CBS started to publish the National Accounts report in 1961/62, according to a senior official at the Nepal Rastra Bank (NRB).

“These forecasts of GDP declines show that the economy was in recession during this period. We have not seen such deep contractions in the GDP since CBS started to publish the National Accounts report in 1961/62. There has not been a decline for two consecutive quarters since the CBS started to release quarterly figures in 2004/05,” said the senior official at the NRB, requesting anonymity as he is not authorised to comment on growth figures.

Economists also agree that the contractions represent the recession that Nepal’s economy underwent for at least six months.

“The quarterly data shows that the economy is technically in a recession, but recovery is underway. The extent of the contraction is less in the first quarter of the current fiscal year 2020/21 compared to the fourth quarter of the last fiscal year 2019/20,” Chandan Sapkota, an economist, told New Business Age.

Covid-19 is the main culprit for the contraction in the economy, according to officials and economists.

As the government imposed a nationwide lockdown in March last year for nearly four months to contain the spread of coronavirus, activities in most of the economic sectors came to a grinding halt.

The impact of the lockdown in the economy at the fourth quarter was so significant that it pulled the growth rate of the entire fiscal year into negative territory.

CBS forecasts that Nepal’s economy shrank by 1.88 percent in the last fiscal year, down from its preliminary estimate of a growth of 2.28 percent.

In its preliminary forecast released last April, CBS had painted a somewhat rosy growth prospect for Nepal even when other countries were reporting a sharp contraction in their economies.

CBS officials say that their preliminary forecast was based on an assumption that the lockdown would be short-term and end by June which would lead economic activities to normality.   

“The country was in a complete lockdown until mid July last year which disrupted most of the economic activities longer than we had anticipated in our preliminary forecast,” said Ganesh Prasad Acharya, a director at National Account Section at the CBS.

Rebasing National Accounts
The CBS move to change the base year for National Accounts Statistics is also said to have contributed to the decline of GDP growth to some extent.

Rebasing of the National Accounts Series refers to a process of replacing an old base year with a new and more recent base year for computing constant price estimates.

CBS officials say that the rebasing process can be taken as an opportunity to address the limitations regarding methodology, definitions and data sources. Rebasing helps capture new economic activities and structural changes taking place in an economy.

The base year 2000/01 has now been replaced with 2010/11.  This means that the new National Accounts Statistics are now rebased to 2010/11 from the earlier 2000/01.
Ishwori Prasad Bhandari, a director at the CBS, said that the rebasing does not change the economic facts, but it measures the economic structure and growth in a more reliable way.

Bhandari said that the rebasing has also led to a change in the composition of the country’s economy. The primary sector's size in the GDP fell to 26.6 percent in the last fiscal year 2019/20 from 37.6 percent in 2000/01 while the secondary sector's weightage went down to 13.2 percent compared to 14.4 percent according to the old base. However, the tertiary sector's size rose to 60.2 percent from 52 percent.

This rebasing of the National Account Statistics has increased the size of the economy to Rs 3,944 billion in 2019/20. The old base had put the size of economy in 2019/20 at Rs 3,767 billion.  

“Rebasing increased the share of the services sector in GDP but reduced that of agri. High contact services sectors such as retail and wholesale, and travel and tourism were battered by COVID-19 and the lockdowns. This contributed to deeper contraction,” said economist Sapkota.

But what are the other impacts of rebasing? According to economist Sapkota, several statistics related to fiscal, monetary and external sectors that are expressed as a share of the GDP could see slight downward revisions as the nominal GDP is now going to be larger than in the previous base series.

Recovery on the way?
Though the government has set a target to achieve 7 percent growth in the current fiscal year, the pace of economic expansion is not going to be as rapid as the government anticipates, according to economists.

The contraction was less severe in the first quarter of the current fiscal year compared to the preceding quarter, indicating that the recovery could have already started.

The recent decline in the number of Covid-19 cases, vaccination drive and gradual resumption of economic activities are reasons that have made the government optimistic about recovery. However, most of the sectors including tourism and hospitality are yet to fully reopen.

Neither the private sector nor the government has been able to increase their spending.  While outbreaks have slowed down, public health experts warn of the risks of a second wave of coronavirus. Considering these factors, economic growth is less likely to rebound to pre-pandemic level.

Sarbottam Cement Limited is all set to issue Initial Public Offering (IPO) through the Book Building method. The company has announced that it will issue six million units of shares to the general public. Of these units, 2.4 million units will be allocated to institutional investors, another 800,000 units will be sold to local residents affected by the cement project and the remaining 2.8 million units will be allocated to the general public and staff of Sarbottam Cement. With this, Sarbottam Cement will become the first company in Nepal to issue shares to the general public through the book building method.

What is Book Building Method?
The book building method is an alternative method of issuing shares publicly through price discovery. The process of price discovery involves generating and recording investor demand for shares before arriving at an issue price that will satisfy both the company launching the initial public offering (IPO) and the market.

In simple terms, it is a process of discovering the price of shares through demand of shares in market, where an underwriter, generally an investment bank, is appointed to build a book by inviting institutional investors (fund managers) to submit bids for the number of shares and the price(s) they would be willing to pay for them.

Currently, organisations in need of capital are collecting funds from the primary market by launching IPO and follow on public offer (FPO). In the case of Nepal, IPOs have been issued at par value of Rs 100 by companies, and investors are obliged to buy the shares at the same price for every company regardless of their financial performance. In some cases, companies set a premium value to the price of the IPO. For instance, RMDC Laghubitta Bittiya Sanstha Limited offered 1.56 million units of primary shares for Rs 180 per unit — at a face value of Rs 100 with an added premium of Rs 80. Hence, the process of price discovery is not efficient in the Nepali primary market.

During its 27th anniversary, the Securities Board of Nepal (SEBON), the securities market regulator, introduced and implemented the book building system and issued the Directive for Book Building 2077, allowing companies to issue IPOs at more than Rs 100 par value.

How it works?
In the Book Building method, a company looking to issue an IPO hires a merchant bank or investment bank to determine a range of prices at which the shares are to be issued instead of a fixed price. The merchant bank, also known as an underwriter or book runner, conducts research on the performance and position of the company and determines a price range for its IPO shares.

The book runner then drafts a prospectus and invites large potential investors such as financial institutions, corporations or high net-worth individuals, along with retail investors to submit bids within the price range, on the number of shares that they are interested in buying and the prices that they would be willing to pay. If the company’s base indicators such as financial statements, credentials, performance appraisals, etc. are good, the demand for shares will be high and vice-versa. The book runner records the demand and price received from potential investors in a book. The book is ‘built’ by listing and evaluating the aggregate demand for the issue from submitted bids. It remains confidential to the book runner and issuing company. However, some countries require the bidding to be transparent.

In the case of Sarbottam Cement, Global IME Capital has been appointed as the book runner, while Prabhu Bank and NIBL Ace Capital have been appointed as secondary book runners. These book runners have set a base price of Rs 750 for each share of Sarbottam Cement up for grabs. As per the SEBON directive, institutional investors can bid for these shares at a range of prices 20 percent above or below the base price. This price range is also known as price band. The minimum price of a price band is called the floor price and the maximum price is known as the cap price. The floor price for each share of Sarbottam is Rs 600, or 20 percent below the base price of Rs 750, and the cap price is Rs 900, or 20 percent above the base price of Rs 750. Institutional investors would have to bid for Sarbottam shares by remaining within this price range.

How cut off rate is derived?
In the last seven months, SEBON has allowed a total of 64 companies to become institutional investors to participate in IPOs through the book building method.

Once the book is opened, investors can submit and revise their offers on the number of shares they are willing to purchase at a price that falls within the band. After a certain period, the book is closed and the final issue price, also known as a cut off price, is determined on the basis of the highest price at which the company will be able to sell its issue, which falls within the price band. Investors bidding at or above the cut off price shall receive the shares.

Let’s assume, 100,000 applicants sought to purchase each share of Sarbottam at Rs 650, another 150,000 applicants submitted their bids expressing interest to purchase each share at Rs 750, another 200,000 applicants applied to purchase each share at Rs 800, and another 100,000 applicants said they’re will to invest Rs 850 in each share. The cut off rate for each share of Sarbottam would be set at Rs 800, as that price has attracted the largest number of investors. This means all investors who have sought to purchase each share at Rs 800 or more would be allotted the shares. Those investors who had sought to purchase shares at less than Rs 800 would not be able to purchase the shares. The money made available by such investors should be returned within three days of share allocation with interest. The bids should be made electronically, according to the SEBON.

After this process is complete, a final prospectus is issued with details of the final issue price and issue size, thus completing the IPO issuance process. In case the shares are undersubscribed or not subscribed, the shares must be bought by the book runner as it has agreed to act as underwriters of the shares.

The SEBON has said the shares should be offered to the general public at 10 percent less than the cut off rate.

A popular method for share issuance
Facebook is one of the companies that used the book building method to issue its shares. Before Facebook’s IPO issuance on May 18, 2012, the book building process was used to determine how much the stock was worth before it was sold to the public. The investment banker appointed for such an issue was Morgan Stanley and the price band fixed was USD 28 to USD 35 a share, however looking at the high demand, the price band changed to USD 34 to USD 38.

The book building method of price discovery mechanism dominates IPO and FPO issuance worldwide. Relative to other IPO issuance mechanisms such as fixed price, tender, auction, public offer method, book building is recommended by major stock exchanges and regulators as it is considered to be the most efficient mechanism to price securities in the market. Several developed countries such as the United States, China and SAARC countries like India, Pakistan and Bangladesh have adopted this method.

The book building method helps companies to gain price relevant information from potential buyers; provides riskier projects an access to the stock market; broadens the functions of institutional investors as it broadens the scope of services before and after IPO issuance; and encourages local and international companies to launch IPOs as it involves a fair process.

The policy announced by the government to attract more manufacturing companies in the stock market has been a failure as most of the manufacturing and technology companies are hesitant to enter the stock market. So, book building might be a helping hand to attain this objective, as companies will not be forced to issue shares at par value.

Types of Book Building method
Accelerated Book Building
An Accelerated book building process can be used by the companies to obtain quick financing from the capital market. This can be the case when a company is unable to finance its short-term project via the debt financing route. So, the issuing company contacts a number of investment banks that can act as underwriters on the evening prior to the intended placement. Under this process, the offer period is open only for a day or two days with no time for marketing for an issue. The underwriter overnight contacts its network and gives details about the current issue to institutional investors. If this investor finds the issue interesting, then the allotment happens overnight.

Partial Book Building
This method itself states that the issue will be built partially, where the investment banker only invites bids from the selected group of investors and based on their bids, they take the weighted average of the prices to finalise the cut-off price. Then other investors, such as retail investors, take this cut-off price as the fixed price. So, under the partial book-building process, the bidding happens with a selected group of investors.

(This article is based on report titled ‘A Detailed Report on Book Building Method of IPO Issuance’ prepared by Bidur Luitel. He is a Chartered Accountant.)

--BY MADAN LAMSAL

This week, too, was chock-full of meetings - intraparty meetings, interparty meetings, all-party meetings, presidential meetings, prime ministerial meetings, opposition meetings etc. If you think all these meetings were held just for the sake of the political chair and good food, then you are terribly wrong. Because all these meetings must have been held to explore the ways to make things less expensive and uplift the poor. After all, the government and the parties belong to the poor. Don’t you believe this?  
 
Truthfully speaking, governments are formed and toppled for the sake of the poor. The rich can survive on their own. The government, on its part, is doing all it can for the poor. For example, it has created the Poverty Alleviation Fund, Poverty Alleviation Programme, Landless Squatters’ Commission etc for the poor. Such commissions are in the dozens and even the government doesn’t know about many of them. The government has identified the poor and made their list public. It has also issued identity cards to the poor households. Has any other government in the world been able to pull off such a feat?

These days the great leaders of our country are greatly worried by the fate of the poor. That’s why they are holding marathon meetings aimed at uplifting the poor. Because it’s only the poor who are available for free in the country and for whom so many policies and programmes are made every year. And it is for the poor that so many ‘isms’ – Marxism, Leninism, Maoism, socialism, communism etc- have come about.

As this is a government of the poor, it depends upon the poor to function. Claiming to be working for the poor, political parties win elections and form governments. But while doing so, the political parties and politicians become rich while nothing changes for the poor. Those in the opposition, too, topple governments, claiming they are doing it for the poor. In any demonstration - whether it is to support the government or to protest against it – the poor are at the forefront. That’s why the poor are the most important beings in our country. Without the poor, in whose name will the politicians do politics?   

Again, without them, in whose huts would the politicians spend their nights while campaigning for elections? Who would they flaunt while seeking votes or asking for bank notes from foreigners? How will they show off the selfies they’ve taken which show them dining with the poor that establish them as friends of the proletariat? Who would they feed meat, rice and beer to for free during elections if there were no poor? Also, it is an old habit of the politicians to eat up the food meant for the poor. The poor won’t be poor if they are not preserved and left hungry!  

The poor are completely unaware of the great efforts the government has been making to alleviate poverty as they are always engrossed in the thoughts of making their ends meet, paying their kids’ school fees and arranging irrigation, seeds and fertilizers if they happen to get a piece of land. Yes, they are totally ignorant about the untiring efforts made for their upliftment by those who determine their destinies, drive air-conditioned cars and drink expensive imported bottled water. So much so that the poor don’t know at all about the free education, health care, drinking water etc mentioned in the political parties’ election manifestos and the government's periodic development plans. The poor know just one thing – that they are poor!     

The poor are such that anyone can initiate a debate or pour their suppressed anger on them anytime, anywhere.  You can organise symposiums, seminars, webinars about them. Similarly, side by side, you can force them to die of hunger or commit suicide or chase them away to foreign lands. You are free to do all this. They are not going to say or do anything.

To end their poverty, politicians pull off a feat from time to time. And in their place, they frame their servants or some of the other poor. However, the same politicians give lofty speeches about ending poverty in parliament, television channels and world forums. That purges them from all their sins and establishes them as the gods of the poor. They say you attain moksha or liberation from the cycle of death and rebirth in your next life, if you can please the gods. But if you can please the poor, you get moksha and get to live a wealthy and luxurious life in this life itself! You don’t have to go too far to find evidence for that – just look at the politicians!    

One important thing to note here is only the people of certain castes can be poor in this country. The people of many other castes do not have the right to be poor. The poor however have the right to live in poverty. They spend most of their lives learning how to avoid death in poverty. On the other hand, politicians and those in the government accumulate massive wealth for themselves more than enough for their next seven generations while talking about feeding the poor two square meals a day.     

We launch agitations if the price of milk rises by even a couple of rupees. Social media is full of outrage in a split second if the lights go out even for an instant. We run out of patience when our internet connection is disconnected even for a few seconds. But the poor are silently enduring everything – lack of food, clothes and shelter. But perhaps we don’t care. That’s why we say nothing.  

But have you ever wondered what will happen if the poor decide to break their silence. I, for one, have been desperately waiting for that day. 

Standard Chartered Bank Nepal Limited (SCBNL) has been in operation in Nepal since 1987. This is the only international bank currently operating in Nepal. In an interview with New Business Age’s Sagar Ghimire, SCBNL’s CEO Anirvan Ghosh Dastidar talks about the impacts of Covid-19, possible shifts that the pandemic could cause and the bank’s priorities, among other issues. Excerpts:

How do you assess the impact of Covid-19 on the overall banking sector?
The impact on the banking sector is not yet over. It's moving because there are fears of second wave of coronavirus transmission hitting the country. This has affected the whole travel industry. After the pandemic hit the country last year, the banking sector had excessive liquidity in the system and the credit growth was subdued. Another thing is about the issue of cyber security because a lot of things went digital. There were a lot of regulatory reliefs including moratorium [on loan repayments]. There were a lot of stressed industries which needed banks to step up to help them with their installment payments.  So, the whole issue is around risk management.

One of the big leaps was beneficiaries’ move towards digital technology. Take ConnectIPS. If you see the flow through ConnectIPS in terms of transactions, it's almost a billion rupees a day. Move towards digital technology, subdued credit growth, a lot of liquidity in the system, awareness and a heightened scrutiny around cyber security. I would raise some of these issues. And, the impact is not yet over even though things are getting back on track.

Don't you think that the quality of loans or non-performing loan (NPL) ratio deteriorated due to the pandemic and lockdown hitting the repayment capacity of borrowers?
Though I am not an expert, I think the quality of loans in Nepal somehow stands out. If you look at Nepal's NPL level, it's comparatively very low even today despite the pandemic. Broadly, the industry’s average NPL is not more than 1.2 percent. This is relatively low. So, the default rate in Nepal is historically low, even lower. The NPL is not an issue in the banking industry yet. Banks have managed that. But, talking about the loan growth, it is. If you look at the CCD [credit to core capital cum deposit] ratio of banks, the average is 78 percent. So, imports are back. The credit flow is back. We feel certain sectors of the economy are getting back to 2019’s level.

We are yet to see the second wave in Nepal. The government has lifted the lockdown and started vaccinating people. Do you see any signs of recovery in recent weeks?
If you look at Nepal and go out on the streets, do you feel there is a second wave? Everything is open. People are attending work. We are taking precautions, but gradually people are getting relaxed. I don't know if we will have the second wave in Nepal. But, we are looking at India very closely because it was the porous borders last time which led to the surge in the Covid-19 cases and a lot of our imported cases largely came from across the border. But in terms of where the economy stands, look at the GDP growth that is predicted to be anything between 1 and 2 percent this year and going back to the level of 6 percent in the following year. Compared to our peers in South Asia, Nepal is a happy problem. This is because economic activities are growing, remittances are at an all-time high and foreign exchange reserves are at a record level.

Covid-19 has caused uncertainties, upended many businesses and changed the way people work. What major shifts do you predict in the banking sector?
One is that this uncertainty is going to be a certainty. All of us, whether we are in business or banking, have reconciled to the fact that this is like a dry run. Today it's Covid and tomorrow it could be something else. So, how do you make the uncertainty part of your vulnerability assessment? That's the first thought. Second, you take the range of things: the way you work, the way we interact, the way we come to office, flexible working and work-from-home.

A lot of these things have changed, and our sense is that these things will not go back completely. If you look at us, we don't go to Nepal Rastra Bank anymore. We set up meetings in our laptops. We call our clients virtually. Even today, almost 30 percent of our staff work from home. Hours of working have become flexible. These all are not going to go away. A lot of things have changed. And, the digital adoption. That is a big lesson learnt. It's not that brick and mortar will go away. Human interaction will still be required. But, it still will be a combination.

You said that the NPL is not a big issue for now. But, there are concerns that restructuring and rescheduling have provided a relief for borrowers. Don't you think their repayment capacity will be hit once they are withdrawn?
It will be sectoral. The biggest impact for Nepal is on the travel and tourism sector. There is relief across sectors because every industry is impacted. The regulatory reliefs outlined by the NRB have been well accepted, followed and provided. We don't see any issue. There are a lot of loan restructurings happening. Right now, whatever relief programme is there, it has been already provided and continues to be provided.

You talked about the excessive liquidity in the banking system. But, the central bank in its monetary policy introduced measures including lowering the cash reserve ratio to pump liquidity in the market.  
What I said was during the pandemic. I have already clarified that. As things stand today, credit flow is back. We have a CCD ratio of 78 percent and it is almost going back to the level of 2019. Credit demands have picked up. There could be a crunch later. What happens in the second half of the current fiscal year is yet to be seen.

The banking system sometimes faces an acute crunch of liquidity and sometimes it is a surplus. This has also made interest rates volatile. How do you see this recurring problem?
It's cyclical. It’s always been cyclical, and the industry has managed. This has never been an issue. The only thing it changes is in the margin of the interests. Nepal will have to diversify its financial market. You need a capital market and a bond market. Right now, there is no hedging mechanism for some of our deposits and interest rates. Till we create a parallel financial system in the economy, this cyclical system will continue. I don't think interest rates will rise so quickly as earlier because the net interest spread is anyway capped. Look at the base rates of banks. It will not go back to the levels of 2019. From that point of view, regulatory reliefs have already come to consumers. I don't think we will get back to those kinds of margins and interest rates anymore.

Please briefly share with us the latest financial performance of Standard Chartered Bank Nepal Ltd.
Our second quarter’s publication [financial report] is public. Our performance in the second half of the local financial year will be far better. Obviously, it took us some time to recover from the lockdown and the pandemic. We are one of the highest capitalised and highly liquid banks in Nepal. We are a very efficient bank. We have one of the lowest base rates.

In the second half, you will see our balance sheet being ramped up significantly. We are AAA rated and that is largely because of our capital and liquidity. This year’s performance will obviously be not on par with last year’s. But we are setting a foundation for the next couple of years in terms of the way we are growing our balance sheet.  

Have the bank’s strategic priorities for Nepal changed in the post-Covid scenario?
Our priorities for Nepal have not changed. We are still committed to this market. We are the only international bank operating in Nepal. In fact, if you look at our offices, we have renovated this whole place after Covid. We spent money. We are also committed to complying with the government rules in terms of specified sector lending like in agriculture and energy sectors. In the post-Covid operating model, we are really looking at ramping up our business in sectors like climate change which is a very big agenda to the bank globally.

We have certain commitments in line with the Paris Climate Agreement. For us, energy is big. Bringing in multilaterals, risk participation and sustainable financing is big. Our commitment and our growth aspiration in Nepal will continue.  Maybe it will be more sectoral, more defined. We are also looking at new ways of working digitally and bringing application programming interfaces (API) based banking. So, our plans remain pretty focused.

Do you think the rapid adoption of digital banking spells the end of brick-and-mortar banks?
India has moved rapidly towards the adoption of the technology. Do we have branches there? We do. In Nepal, the payment space is moving rapidly. Do people need branches? Yes. We still are very much a cash-driven market. Look at the parallel economy. Look at the queues in the bank branches. Everybody has got eSewa or a digital wallet on their phones. But, still there are people in all branches. Both will survive. As we have a very young population here in Nepal, we see a lot of enablers in terms of e-commerce and payments like QR code or other methods. But, my belief is that the shape and the nature of brick and mortar will be redefined. No longer will you have bank branches with 10 tellers or counters. You will still have branches with a lot of digital avenues for doing day to day banking. Commercial sector will still need branches for trade, cash and other services.

My view is that digital is a very big word, and has become fashionable. What does digital mean? There are some conveniences you want on the phone. During lockdown, for instance, everybody wanted money, but not the hard cash because people were not going out. But, you needed to make some payments. The convenience was ordering things, getting deliveries and making payments. That was the convenience that clients in Nepal were looking for. That space is changing rapidly. But, it will be a combination of both for sometime

How seriously do you take the risk of banks becoming vulnerable to cyberattacks?
I can say it in one word: very serious. It is always a heightened agenda and high-risk agenda for every bank to be cautious and have a firewall or system to protect against any compromise.

Many domestic banks see SCBNL as a role model for compliance. Do you think compliance cost is high in markets like in Nepal?
The cost is its cost of doing business for banks. For international banks, the cost is even higher. The cost of capital and the cost of compliance are the two biggest costs for banks which are like the cost of doing businesses if you want to be safe. As an international bank, we have a lot of experiences--good and bad-- and having worked with multiple regulators, we are able to bring that expertise. So, we are ahead of the curve in terms of risk management system or practices. We work very closely with Nepal Rastra Bank on bringing in best practices because we also want Nepal to prosper and do well. The issues surrounding bribery, corruption and money laundering are very big for all markets. So, it is a cost that you cannot compromise with it.  

Nepal Rastra Bank (NRB) has been enforcing specified sector lending (SSL) requirements that bankers loathe. How difficult has it been for the SCBNL to implement them?
Firstly, SSL has a lot of sectors including agriculture and energy sectors. The government has aligned these with its national priorities which is good. I don't think that banks are at loggerheads with the regulator. We are in the process of fine-tuning. There are a lot of sectors like infrastructure, travel and tourism. So, SSL can be widened in its scope. Banks should participate because it's the issue of the economy and nation building. I don't think we have a problem in spirit in that we should participate.

I think fine-tuning is required also in terms of target setting. There are demands and supplies where you set a target that may not align with the supply or demand. Then, there will be a gap. Broadly, SSL is an important agenda which we recognise and we are committed to. There needs to be some fine tuning. Otherwise, it's a good agenda for a country and it also helps banks channelise their balance sheet to the sectors which we need the most.

But, there are banks and CEOs who complain that such regulations are indicative of the central bank’s approach to micromanage banking institutions. Do you agree?
No, I don't think so. I have worked in many markets and with many central banks. The intention with which the central bank has brought these regulations is not necessarily what the banks recognise. Nepal Rastra Bank is very collaborative here and very open to discuss any idea. They listen. They engage. They do keep fine tuning and updating the monetary policy every now and then. So, it's a moving agenda. The intent they brought is very genuine. We understand that. It may not suit our purpose always. But, the good thing in Nepal is that the Rastra Bank engages very closely with banks and listens to them. I don't agree that the central bank micromanages banking institutions. It's a very healthy and collaborative way of working together.

It seems that the SCBNL is struggling to meet the central bank’s requirement for a commercial bank to keep its interest spread rate at 4.4 percent. Why is this so?
I do not know why you see us struggling as we have always met the interest rate spread cap. Spread will evolve because banks in Nepal are on the standardised approach which means they are not yet in Basel III. As risk-based pricing comes into Nepal, the spread rate regulation will change eventually. Right now, being an efficient bank, Standard Chartered is, in a way indirectly, getting penalised. But, we understand why it is being done. Hopefully, the regulations will change as the market progresses.

Many foreign investors shy away from making investments in Nepal citing various regulatory hurdles, political and policy instability, high risk and lack of market. As the only international bank that is present here (since 1987), what would be your response to them?
We have been here for 33 years and we are committed to this market. There can't be a better proof than Standard Chartered Bank. Are we shying away from investing in Nepal? No. We have been through this country through an insurgency, earthquakes and all other crises. We have not left Nepal. There are challenges including political instability and changes in the government. One of the roles we play is to tell investors to come and invest in Nepal using us as an example. We will continue to be a flag-bearer for Nepal. Many countries have their own issues. Nepal is still a very good destination for investment. The market is slowly opening up.

Last year, the Bank launched its global programme “Futuremakers by Standard Chartered” in Nepal. Please tells us about this initiative and the progress.
Our theme is around sustainability, financial literacy, livelihood and women entrepreneurship. In different countries, we aligned future-makers with certain parts of the society which is relevant to the country. In Nepal, there are trafficked and rescued girls. How do we give them a livelihood? How do we teach them financial literacy? How do we make them independent? That’s what the future-maker programme is. In India, we have programmes for people living in slums and children for their education. Different countries have different themes. Broadly, the cornerstone of future-maker is sustainability, financial literacy and livelihood. It's not just charity where you give money.

Standard Chartered Bank Nepal says that its diversity is its unique strength. What are your initiatives—both internal and external—to support diversity and inclusion?
Name me one bank besides Standard Chartered Bank Nepal which has a woman as its chairperson. Can you name one? Name the Chief Financial Officer (CFO) of any bank who is a woman. For us, it's not only about gender, colour, creed, background, sexual orientation and physical abilities are equally important aspects of diversity. Diversity is important because it allows a different thought process, not stereotypes. This also helps bring diverse opinions or views to the table.

Last month, the Confederation of Nepalese Industries (CNI) launched the ‘Make in Nepal-Swadeshi’ campaign setting some ambitious targets to boost Nepal's industrial productivity. Also, CNI is in the process of issuing certificates of origin to its members, which the private sector body says will be an important step in terms of export facilitation. However, factors such as the sluggish economic recovery and rising political uncertainty aren’t providing a positive outlook. Satish Kumar More, president of CNI, says that there are signs of improvements and hopes for the situation to become better in the coming days. In an interview with Sanjeev Sharma of New Business Age, More also talks about the CNI’s flagship campaign, post-pandemic opportunities and constraints to economic recovery. Excerpts:

What are the major objectives of ‘Make in Nepal-Swadeshi’ campaign? What support do you expect from the government to realise the objectives?
The main objectives of the ‘Make in Nepal-Swadeshi’ campaign are to ramp up domestic production, increase the demand for Nepali goods and services and raise competitiveness of domestic industries. This campaign aims to help the local industries to become self-reliant by expanding the country's industrial base.

Our aim is to establish 1,000 industries annually, create 1.5 million industrial jobs each year and increase annual exports to USD 3.4 billion in the next five years. Through the campaign, we have targeted to contribute 26 percent to the country’s GDP by 2030.

We envision to improve Nepal’s rank in the Doing Business Index.  We think the country’s rank in the index can go up 30 spots to 64 from the currently 94 in the next five years if we work sincerely. These are the things we are discussing closely at the moment. The objectives of our campaign need to be understood not only by the government and the private sector; an environment should be created so that common citizens of the country will also participate in our campaign which can spur the country’s industrialization process and economic development.

We have put in a lot of effort to start the campaign. We formed a research cell comprising of experts who did extensive research for four months to design this campaign. We have already submitted the research findings and have suggested to the Minister for Finance and the Minister for Industry, Commerce and Supplies and government secretaries ways to boost the industrial productivity. We have suggested the facilitation required in different areas. The response of the ministers and the government secretaries has been very positive, and we are seeing that a consensus is being built that this is the right time to work for boosting our economic productivity.

But given the high cost of production in the country due to several reasons, don’t you think the campaign is overambitious?
Our research team headed by Dr Biswo Paudel has developed a modality for industrial development and modernisation of the service sector. It comprises of pillars of production and consumption in the country. We have also concluded that marketisation of domestically produced goods will boost production; it can be achieved with the participation of the general consumers.

Similarly, the team has found ways to lower the cost of production to increase our business competitiveness after studying the production scenario in countries like India, China, Vietnam and Bangladesh in detail. In the roadmap of the ‘Make in Nepal-Swadeshi’ campaign, we have suggested a number of improvements to be made for removing policy and bureaucratic bottlenecks that adds to the cost of production.

The pandemic-stricken economy seems to be reviving with industrial and business activities resuming across the country and with life quickly returning to normalcy. What do you make of the current pace of the economic recovery?
Except for some hardest hit sectors like tourism, hospitality, aviation, hydropower and education, normalcy has returned to all other sectors. But it is very hard to tell when and how the hardest hit sectors will recover as the government is yet to make a clear pathway for the revival of businesses.

In the last few months, the supply system throughout the country has normalised with industries and businesses putting all their efforts into bringing things to order. Overall, the situation for the private sector has improved over the last couple of months. But health related risks still remain as most of the private sector workforce is yet to get vaccinated. It is unfair that people working in the private sector, which contributes to 70 percent of the government revenue, are still to be proritised for vaccination.  The vaccination of private sector workers and executives is important to add momentum to the country’s economic recovery. The Confederation of Nepalese Industries (CNI) has asked the government to give due priority in this respect. If there are constraints for the government to vaccinate private sector employees in terms of financial resources, certain charges can be levied to carry out the vaccination.  

We need to look how other nations have opened up to recover from the pandemic-induced economic slump. We can take the examples of Maldives, Sri Lanka and the UAE to see how these countries are working to bring their travel, tourism and other sectors back to pre-Covid positions following the health safety protocols.  I visited Dubai a few weeks ago and observed that international travellers are required to stay in quarantine just for a day upon their arrival and wearing face masks is mandatory for all. We can also revive the tourism sector like Dubai by forming and implementing pragmatic health safety protocols.

What sectors do you think should we focus on in the post-pandemic period?
Tourism, hydropower, mining, agriculture and education have the highest potential for investment. With proper plans and strategies, we can excel like many countries which are considered top tourist destinations. The bio, cultural and geographical and climatic diversities existing in our country have largely remained untapped. A few months ago, I visited Rara lake and observed huge potential to develop tourism infrastructure there; there are other numerous locations across the country virgin for tourism investment. People are ready to invest, but the main bottlenecks, such as infrastructure deficiency and land acquisition need to be removed which is up to the government.

The private sector has been doing everything it can for the growth of the tourism sector. The attempts of investors like Chandra Dhakal is laudable who worked relentlessly to transform a place like Chandragiri Hill into a top tourism destination in the country in such a short span of time. Another example is the Manakamana area which has developed noticeably after the establishment of the Manakamana Cable Car.  Similarly, the excellent climatic conditions also allow Nepal to become a major education and medical hub in the South Asia region.

Talking about agriculture, the sector will remain underdeveloped unless we change our ways. It is because, exorbitantly high land prices in many parts of the country coupled with continuation of agricultural and farm activities using traditional technologies results in low yield. So, adoption of newer technologies and maximum utilisation of arable land is important for commercialisation of agriculture. If we can bring in agri technologies used in countries like Israel, the yield will increase, and the effects of higher cost of land and manpower can be offset.

In its mid-term review of the Monetary Policy, the central bank has claimed that the measures it introduced have boosted economic activities. Do you agree?
Monetary measures announced by the central bank have played an important role in the economic recovery process. Some important measures like reducing the base rate to lower the lending rate have been implemented as suggested by CNI. Lending rate has now come down to as low as 7 percent which was 13 percent a year ago. This has helped industries to gain access to cheaper money, thereby reducing the cost of funds and production costs. Similarly, the rescheduling of loans, which has been further extended to the end of the current fiscal year in the mid-term review of the Monetary Policy, has also supported the businesses in this time of difficulty.  

However, the arrangements related to refinancing have not been pragmatic. It is because of the maximum refinancing slab of Rs 200 million provisioned in the policy. This amount is too low for many businesses, particularly those in the tourism, hospitality and aviation sectors where large investments were poured prior to the Covid-19 pandemic. For instance, the refinancing of Rs 200 million will be of little to no help to investors who invested Rs 5 billion in a hotel project. It will help them a lot if the refinancing is 20 percent of the invested amount. While the government and the central bank have agreed to our demand in principle in this regard, I don’t know what is stopping them from getting it implemented.

Despite the moratorium measures announced by the central bank, financial institutions are blacklisting borrowers, particularly SMEs, for failing to clear their credit dues causing friction between banks and businesses. How do you think this problem can be resolved?
The pandemic-induced crisis has been really hard for businesses while the banks also have their own obligations to recover debts. I think the problems can be sorted out by analysing specific disputes between banks and their borrowers. CNI also is ready to help resolve such disputes between banks and business owners. We can talk to Nepal Bankers’ Association (NBA) and Confederation of Banks and Financial Institutions Nepal (CBFIN) to find a solution to this problem.

In every forum, finance minister Bishnu Paudel is seen expressing his support for the private sector unlike his predecessor Dr Yubaraj Khatiwada. Is the finance ministry under him really supportive or is the support only in words?  
The situation has improved for the private sector. There have been changes in some policies which have helped economic activities to gather momentum. After a year of crisis, a good environment for investment is being created. The government has commenced establishment of special economic zones (SEZs) and industrial parks in different regions of the country which is an important step. We also launched the ‘Make in Nepal-Swadeshi’ campaign observing the improving situation.  

But formulating policies or announcing implementation of new infrastructure projects only does not bring real changes. It is the implementation of policies and announcements which matters the most. Government agencies need to look at how private sector companies have become successful over the years. They work according to the plans to achieve the business targets. There is a good system of responsibility and accountability in many companies. I think there should be similar practices and systems in the government agencies.  

There are many rooms for improvement. One area is the sluggish capital expenditure which reached just 14.4 percent of the total capita budget in the six months of the current fiscal year. To expedite the capital expenditure, targets should be set for each official of the agencies along with a proper system of monitoring and evaluation of progress on a monthly basis.

In November last year, CNI suggested the government to create a high-level permanent committee to resolve the problems related to ‘sick’ industries. How has the government responded to CNI’s recommendation?
The government has agreed to form such a body in principle. A committee has been formed to take the matter forward. But the meetings of the committee are yet to take place to decide on forming the body proposed by us. We have recommended to classify and categorise ‘sick’ industries according to their conditions.

We need to look into what made the industries ‘sick’. There are two factors for the ‘sickening’ of businesses—external and internal. Mismanagement, wrong business and investment decisions are the internal reasons. Meanwhile, not being able to cope with economic and political uncertainties, among other reasons, are the external reasons. On top of all these, years of delay from the government side to decide on reviving or shutting down such industries add to the problems making the industries more ‘sicker’.

We have been saying this for years which is also true for the businesses hard-hit by the ongoing pandemic. If the government does not decide to support the travel, tourism and hospitality and other businesses highly affected by the pandemic, it is likely that they will become ‘sick’ industries after a few years from now. This is why CNI has argued that the refinancing amount to be 20 percent of the money invested in businesses. It is important that the businesses are rescued before their condition becomes critical. The government needs to support such businesses that have fallen victims to the forces that are beyond their control.

CNI has been authorised by the government to issue a Certificate of Origin to exporters exporting products to India, China and SAFTA countries, which the Confederation has sought for many years. How is CNI planning to rollout the certificates?
We would like to extend our gratitude to the government of Nepal for allowing CNI to issue the certificate of origin. This has ended a compulsion for our members to go to other private sector bodies to get the certificates for exporting goods. Earlier, we were authorised to issue certificates of origin to third countries which has now been extended to India, China and SAFTA countries. It will not only help CNI members to get export-related services easily but will also enable them to identify new exportable items and markets for their products. As boosting exports is one of the key objectives of our ‘Make in Nepal-Swadeshi’ campaign, we are ready to facilitate to resolve the problems faced by Nepali exporters.   

Clouds of political uncertainty have surrounded the country in the last few months. How do you think it will affect the economic recovery?
It is unfortunate that we are facing this situation when we need stability the most. However, the political uncertainty has not gotten to the point where it has a direct impact on the economic recovery. Existing businesses will continue to run, but new domestic and foreign investments will be affected in the coming days as the confidence of investors will become weaker due to the political gridlock. Let’s hope the political parties will be able to overcome this situation and the clouds of uncertainty will go away. 

--BY VISHWASH THAPA

The factional feuding within the CPN-UML has reached new heights following the decision of the party’s central committee to seek clarification from its four senior leaders including former chief of the party Madhav Kumar Nepal, also a former prime minister.

The party on March 22 wrote to Nepal along with Bhim Rawal, Ghanshyam Bhusal and Surendra Pandey asking for a written clarification about their role in tarnishing the image of the party and its leaders. Nepal and CPN (Maoist Centre) Chair Pushpa Kamal Dahal had been campaigning against Prime Minister KP Sharma Oli faction of the then Nepal Communist Party (NCP) before the Supreme Court’s verdict handed over the name of the party to Rishiram Kattel.

The division of the court on March 7 said the NCP formed after a merger between the UML and the Maoist Centre in May 2018 was illegitimate and decided to revive the two parties. The decision came as a respite to Oli and his faction which was in the minority in all the bodies of the NCP. He is relieved because he has the upper hand in UML.

Oli holds an overwhelming majority in the parliamentary party with around 80 of the 120 lawmakers from the House of Representatives supporting him while he also commands a majority in the Central Committee. Though the Nepal-faction has a majority in two bodies, the office bearer and Standing Committee, these two bodies don’t hold a strong significance when making party decisions in comparison to the Central Committee and the Parliamentary Party. As KP Sharma Oli continues to consolidate power within the party, the prospects are grim for the UML faction led by Nepal. Never in his five decades of political life, has Madhav Nepal faced a situation as crushing as today.

When the Nepal Communist Party was still intact the Pushpa Kamal Dahal and Nepal-faction in January sacked Oli as a general member of the party though the Election Commission was yet to validate the decision before the party got divided following the apex court’s verdict. The move to seek clarification from Nepal, along with Rawal, Bhusal and Pandey who were very vocal against Oli, is a step towards taking action which could be as far as sacking them from the party’s general member.

“The action will depend on how the clarifications are furnished and how their activities move ahead,” said Khagaraj Adhikari, a Central Working Committee member of the Oli-faction. “They will be welcomed in their respective capacity to work in the party if they apologise for their mistakes.” The Central Committee of the Oli-faction on March 10 relieved the leaders from the Madhav-Nepal faction of their responsibilities as the office bearers and the in-charge of the provinces. Similarly, it added 23 members in the Central Committee who joined the UML from the Maoist Centre.

The Oli faction has a feeling that the Nepal faction will ultimately defect from the UML and join hands with the Maoist Centre. It believes the dissident faction is consolidating power in the UML. It is sceptical about the parallel organisational activities the dissident Nepal faction is carrying out. The dissident faction has formed parallel committees of its sister organisations including the youth and student wings.

The level of scepticism has increased after the Maoist Centre chief Dahal on the second of March said the Nepal faction has been humiliated in the party, therefore, they won’t stay with Oli for a long time. Some of the questions in the clarification depict scepticism regarding the regular meetings between Nepal and Dahal.  

Currently, Oli’s motive is to weaken the dissident faction to whatever extent he can. The Nepal faction has been trapped as it doesn’t have the numbers to split the party legally. The faction has 38 lawmakers which means the UML will have 82 lawmakers if the faction defects. That will still make it the largest party in the House of Representatives. Currently, the Oli government holds a majority in parliament as the Maoist Centre is yet to withdraw its support. If the party (Maoist Center) with 53 lawmakers withdraws its support and the Nepal faction with 38 lawmakers defects to the UML, the Oli government will be short of 56 lawmakers to keep the government intact. The support of the Nepali Congress which has 62 lawmakers will be a must to ensure Oli continues as an executive head.

This, however, can be instrumental in forming a separate coalition alliance between the Congress, the Maoist Centre, Janata Samajadi Party and the splinter faction of the UML. However, there could be a scenario where the 38 members from the Nepal faction lose their seats because it doesn’t have the strength to form a separate party.

The Political Parties Act-2017 makes it mandatory to have representation of 40 percent both in the Central Committee and the Parliamentary Party to form another party. The faction that detaches itself without ensuring that number can lose its representation in parliament. That means 38 lawmakers who are with the Nepal faction can lose their seats if they leave the UML.  

Clause 32 of the Act authorises the party’s Central Committee to sack its members after allowing them to present their clarification. Sub-clause 5 says if the clarification submitted is not satisfactory, based on the provisions in the party statute, the Central Committee can sack such members.

If the UML sacks its leaders who are in the federal parliament, it needs to inform the Parliament Secretariat in writing. According to Clause 34 of the Act a notice will have to be presented before the Speaker of the Lower House or the National Assembly chair.

The Speaker or the National Assembly chair has to inform the respective houses about the decision of the party within 15 days while the Secretariat, based on Clause 36 (1), publishes a notice saying that the respective lawmakers have lost their posts.

The secretariat has to inform the Election Commission about the decision within 15 days of issuance of the notice. There is a belief within the establishment faction of the UML that some lawmakers from the dissident faction will join it if a situation arises where they have to lose their parliamentary positions.

“We don’t want a split in the party. It is the establishment faction that is humiliating us,” said Ram Kumari Jhankri, a lawmaker from the Nepal faction. “It is creating a situation for defection. However, we will continue to fight against the monopoly in the party without defecting.”

Contrary to her remarks, some leaders from the dissident faction say they might defect if the humiliation continues no matter what happens to their parliamentary seats. “It is increasingly getting harder to stay with the Oli faction,” said a leader on the condition of anonymity. “It seems the party will split. Whether it will split immediately or during the election, however, is hard to say.” The leader said there is a high chance that they will form an alliance with the Maoist Centre during the general elections which will be held in two years maximum.

The month of March saw two leading private sector lobbying bodies launching two ambitious campaigns aimed at giving a much-needed fillip to the country’s economy.

The Confederation of Nepalese Industries (CNI) launched its ‘Make in Nepal-Swadeshi’ campaign. Prime Minister KP Sharma Oli unveiled the campaign on March 8. A few days later, the Federation of Nepalese Chambers of Commerce and Industry (FNCCI) rolled out its vision paper for the National Economic Transformation Roadmap 2030. The FNCCI has said it would formally launch the roadmap by mid-April.

The CNI’s campaign focuses on establishing over 1,000 additional enterprises, generating export income of $5 billion per annum, and raising the industrial sector’s contribution to the gross domestic product to 26 percent by 2030. The FNCCI’s vision paper, on the other hand, includes plans to generate employment opportunities for an additional 2.2 million people, bridge the widening trade deficit, and expand the size of the economy to USD 100 billion by 2030.

The initiatives taken by the private sector bodies to transform the country’s economy are commendable. This is an acknowledgement that the private sector is equally responsible for the country’s development and shirking responsibilities and blaming the government for all the ills would take the country and the economy nowhere. This indicates the private sector, which has always faced the blame of being a rent-seeker, is gradually becoming mature and is now in a position to carry the torch for economic development. It is now the government’s responsibility to work as a facilitator and extend all the support to enable the private sector bodies to meet their objectives.

Although the objectives of the campaigns launched by the two private sector bodies may look different on the surface, they have a common goal: to give impetus to the moribund industrialisation process of the country. Since their end goal is not different it would be prudent for them to work in collaboration so that a synergy could be created. This could help generate even better results. Working in collaboration should not be difficult for the two bodies as they have formed common positions on some of the pressing issues related to the private sector in the past, including minimum wage.

The initiative to revive the industrial sector was long overdue. The share of the industrial sector in gross domestic product has fallen from 14.2 percent in fiscal year 2010-11 to 13.2 percent in the last fiscal year. This data shows that Nepal is currently in the deindustrialisation phase. The contraction of the industrial sector has created a shortage of jobs, which has forced hundreds of thousands of youths to migrate to foreign countries. The industrial sector is considered vital for the economy because it includes sectors such as manufacturing and construction, which can create jobs in massive numbers. Nepal needs to look at Bangladesh to find out what growth of the industrial sector can do to the economy and job creation. The South Asian country, which was once rife with poverty, is expected to surpass India in per capita income in a few years, as its industrial sector has been making a contribution of over 35 percent to the GDP. This has helped the country to create jobs in large numbers. Even developed countries like the US tend to protect their industrial sector as it is considered an engine of job creation.

But the industrial sector cannot grow on its own unless there is infrastructure such as good roads, airports and plants to generate energy. This is where Nepal lags behind. Nepal needs to invest at least 12 percent of its GDP per annum to bridge its infrastructure gap. But the government has been spending funds equivalent to 5.6 percent of the GDP per year in the last one decade. If the government is unable to overcome its inherent weakness of grossly underspending the capital budget, the initiatives taken by the private sector will not bear any fruit. The government thus needs to play its role properly. At the same time, the private sector should also focus on the implementation of programmes included in the campaigns. If programmes remain on paper, it would be tantamount to making empty promises, which Nepalis are tired of. Inability to translate visions into reality would only hit the private sector bodies’ credibility.

Madan Lamsal
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