R&D_NewsBrief_4thJun

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Economic Research & Business Development

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Date: June 4, 2009

Highlights

• The rift over who should lead the Nepali Congress (NC) in the Cabinet has widened within the party after NC president Girija Prasad Koirala unilaterally proposed the name of his daughter, Sujata Koirala, to lead the party in the government as the Foreign Minister.

• Nepali Congress has nominated its president G P Koirala's daughter Sujata to lead the team of party nominees in the new government.

• Twenty-two political parties and two independent members of the Constituent Assembly on Wednesday gave their final shape to the Common Minimum Programme (CMP) of the UML-led coalition government, high-level Political Coordination Committee (PCC), the general procedures of running the new dispensation and the code of conduct for the Council of Ministers

• Unified CPN-Maoist's politburo member Devendra Poudel 'Sunil' on Wednesday said land of all landlords would be seized and distributed to landless people, if President Dr Ram Baran Yadav does not correct his decision to reinstate the army chief sacked by the elected government.

• The UCPN (Maoist) on Wednesday called for an all-party meeting to protest encroachment of Nepali territory.

• Nepal Rastra Bank (NRB) on Wednesday sent a letter to Nepal Development Bank (NDB) asking it to explain why it should not be liquidated.

• Worried depositors and share holders of Nepal Development Bank (NDB).

• The Nepal Stock Exchange (NEPSE) on Wednesday fell by 3.39 points.

• The market traded in the green for most part of last week. The broader index, NEPSE, advanced by 6.20% as compared to the week’s opening value. Almost all other indices followed suit except for Finance group.

• Global Bank on Wednesday announced the launch of Global Remittance which has been introduced in order to facilitate the Nepali workers earning in Qatar.

• Without immediate action, the transport sectors of developing countries will account for the overwhelming share of increased carbon dioxide emissions by 2030, according to a new declaration signed by the Asian Development Bank.

• The price of wheat, potato, musuro (broken lentil), soyabean oil and rice has increased, with staple food prices across Nepal remaining significantly higher in comparison to the same period last year.

• Krishna Prasad Ghimire of New Baneshwar had rosy dreams when he purchased 980 shares of Nepal Development Bank (NDB) from the secondary market a year ago. But he lost more than Rs 414,000 overnight on Wednesday after Nepal Rastra Bank decided to liquidate the troubled NDB.

• Protest against President Dr Ram Baran Yadav's decision to reinstate the army chief who was sacked by the then Maoist-led government.

• The government hopes that most of the 16,884 civil servants eligible for voluntary retirement scheme (VRS).

• Chief Election Commissioner Bhoj Raj Pokharel tendered his resignation.

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• The food supply situation improved across the country in May as the bandhs in the Tarai have stopped.

• Yarchagumba hunters in Mugu have refused to pay the entry fee to the forest.

• Is China playing games? China is the one country that actually has influence over North Korea.

• Sailesh Bhattarai, a businessman who does not consider himself an avid shopper, recently chose to accompany his mother to the Asri Jewelry store in New Road. He was there to help his mother choose a sparkling diamond for his bride-to-be, to find something that she would treasure forever.

• Western union Money Transfer, announced the winners of its lucky draw.

BANKING:

NRB seizes NDB liquid assets

Nepal Rastra Bank (NRB) on Wednesday sent a letter to Nepal Development Bank (NDB) asking it to explain why it should not be liquidated.

Under clause 74 of the Banks and Financial Institutions Act, NRB must file a case to begin of liquidation of a financial institution whose damages are beyond repair. Before filing the case NRB must seek justification from the bank.

An NRB team led by deputy director Prakash Chandra Bhattarai went to NDB and seized all cash, cheques and securities. NRB has not yet decided about the staff. NDB manager Purna Prasad Sharma said, “They said we could come to office tomorrow.” Depositors gheraoed NDB, accusing it of cheating.

A board meeting of the central bank yesterday evening had decided to freeze all the transactions of the bank including its accounts in various financial institutions and sent it for liquidation.

Nepal’s first development bank that started its operation in 1998 has a paid-up capital worth Rs Rs 320 million but its accumulated loss is more than double the paid up capital — at Rs 678.6 million by the end of mid-March. Its non-performing loan is also at almost 30 per cent.

The bank had also signed an agreement with Strategic Partners led by Deepak Narsingh Shrestha on December 4, 2007 for taking over the responsibility of managing the bank and injecting additional capital required. Strategic Partner nominee Sunanda Bahadur Shrestha was appointed CEO from December 8, 2007. But Shrestha and his group knocked on the NRB door after they were not given any decisive role and power even after injecting Rs 70 million in NDB.

“To increase the capital, the bank has issued rights shares. But board members themselves have not applied for rights shares,” an NDB official said citing it as an

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instance of the board’s bad intentions. Nepal Stock Exchange (Nepse) has suspended the trading of NDB shares. Till yesterday, NDB shares were traded at Rs 126 per unit.

NRB’s first-ever bold decision to push a financial institution into liquidation has pulled the development bank sub-group’s index down by 5.06 points to 770.9 points. As a result, Nepse went down by 3.39 points to 699.62 points.

NRB had repeatedly warned NDB and declared it ‘problematic’ in 2007. It had also issued a gamut of directives in a bid to revive NDB, but the bank led by Uttam Pun, at times, even threatened the central bank instead of improving its own corporate management and internal governance.

Source: The Himalayan Times Date: 06/04/2009

Depositors beware!

KATHMANDU: Depositors of NDB will not be able to withdraw their money after NRB’s move. Public shareholders might also lose, contrary to popular belief that the financial institutions’ share will not be in loss and that the central bank will rescue the financial institutions. “NRB has taken the decision to discourage malpractices in financial institutions, and depositors — both institutional and individual — should think twice before depositing money in any financial institution,” said an NRB official. The bank has a total deposit of Rs 720 million as at mid-March 2009. Of the total deposit, the bank has not been able to return Rs 330 million worth of institutional deposits even after expiry of maturity date. The Employment Provident Fund (EPF) and Nepal Army´s Welfare Fund had deposited Rs 330 million and Rs 200 million, around 45 per cent and 27 per cent respectivley of the deposits. — HNS


Worried clients throng NDB

Krishna Prasad Ghimire of New Baneshwar had rosy dreams when he purchased 980 shares of Nepal Development Bank (NDB) from the secondary market a year ago. But he lost more than Rs 414,000 overnight on Wednesday after Nepal Rastra Bank decided to liquidate the troubled NDB.

"This is an unexpected blow. NDB shares have turned into scrap and are going to fetch no money," said the former bureaucrat. As Nepal Stock Exchange delisted the NDB shares, barring transactions in them, Ghimire related to myrepublica.com that he had purchased shares using his pension money.

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Ghimire had purchased 490 shares at Rs 475 each and another 490 units at Rs 370 each.

Jaya Ranjit of Dallu, another purchaser of NDB shares from the secondary market, related a similar story. "I was actually planning to dispose of the shares, but as the price dipped consistently, I waited for a few more days. Unfortunately, that decision has cost me Rs 120,000," said Ranjit.

NDB´s shares were selling for Rs 126 per unit on Tuesday.

Not only Ghimire and Ranjit, thousands of shareholders of the bank have lost their hard-earned money with the winding up of the bank. Ordinary-share investors had invested more than Rs 100 million - 30 percent of total shares - in the bank.

If the fate that befell shareholders was bad, that of depositors, who had put money in the bank for safe-keeping, was worse.

Subsequent to its Tuesday-night decision, the central bank on Wednesday seized all fixed and liquid assets of the troubled bank including its accounts maintained at other financial institutions and froze all transactions by it. That prevented depositors from withdrawing their own money.

Uddhav Ghimire, a trader from Ramechhap, said he is worried about Rs 240,000 he deposited in the bank, in bits and pieces from the earnings of his small clothing business. "My plans to expand my business have been shattered with the liquidation of the bank," he said.

Like Ghimire, thousands of small depositors faced the unprecedented misfortune in the history of Nepali banking. So much so, institutional depositors such as the Employees´ Provident Fund and the Nepal Army Welfare Fund also doubt they will get their money back.

The bank had deposits of more than Rs 720 million as of mid-March 2009.

Plagued by poor financial health for years, the bank´s accumulated loss stands at Rs 678.6 million, which is higher than the promoters´ share in the bank. The central bank has said that it would be able to say who (among the depositors and shareholders) will get how much back only after the liquidator assesses the bank´s assets and liability.

Following news about the action by NRB, hundreds of worried depositors and shareholders thronged NDB´s head office at Heritage Plaza to inquire about their money and investments. NDB had put up a notice at its main gate stating that all transactions have been put on hold as NRB had taken control over its fixed and movable assets.

The bank depositors, meanwhile, have formed a ´Nepal Development Bank Victims Association´ to press NRB to take the initiative for protecting their deposits. They have announced a sit-in at NRB on Thursday.

Likewise, our correspondent in Pokhara reports that the NRB regional office there has seized cash totaling Rs 10 million from NDB´s branch located at Sabhagriha Chowk. The cash included Indian currency worth Rs 737,000. However, NRB officials said

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there is no need for depositors to worry about their deposits as the loans issued by the bank in Pokhara are double the deposits.

Yan Singh Rai, manager at NRB, said NDB has deposits of Rs 30.7 million and loans of Rs 77.26 million. "So, the depositors need not worry about their money, as recovery of the loans will easily enable the bank to return money to depositors," Rai said.

NDB has about 500 depositors in Pokhara. NRB also closed NDB´s ATM located at Amarsingh Chowk

Source: www.myrepublica.com Date: 06/04/2009

ECONOMY:

Prices putting food out of people’s reach

The price of wheat, potato, musuro (broken lentil), soyabean oil and rice has increased, with staple food prices across Nepal remaining significantly higher in comparison to the same period last year.

“Commodity prices, however, have begun stabilising,” said a report published by World Food Programme (WFP) - Food Security Monitoring and Analysis System, Ministry of Agriculture and Cooperatives (MoAC) - Department of Agriculture, Agribusiness Promotion and Marketing Development Directorate (ABPMDD), Federation of Nepalese Chambers of Commerce and Industries and Consumer Interest Protection Forum.

The price of wheat — which normally decreases during this period of the year — has risen over the last month because of the winter drought. Potato price is also very high, having increased by 28 per cent. Compared to 18 months ago, the price of musuro (broken lentil) has increased by nearly 50 per cent, soybean oil by 32 per cent and rice by 25 per cent. However, the supply situation has improved across the country due to the lifting of bandhs in the Tarai.

The recent joint MoAC, WFP and FAO winter drought assessment confirmed that production of major winter crops like wheat and barley decreased nationally in 2009 by 14.5 per cent and 17.3 per cent, respectively, in comparison to last year.

According to the year-on-year (y-o-y) consumer price inflation data released by Nepal Rastra Bank, the price hike rose to 11.9 per cent in mid-April 2009 from 8.9 per cent in the same period last year.

Because of the poor winter crop harvest, price of winter crops did not decline as usual — it remained largely unchanged and even increased slightly in May, said the report. For instance, black gram price increased by three per cent and wheat flour and rice price increased by one per cent.

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Lentil price also increased by 11 per cent but this is likely due to rising regional prices as opposed to a poor harvest.

In May, heavy rainfall hindered food deliveries to Doti. It is likely that heavy rainfall will continue to cause supply constraints in mountain and hill markets across Nepal until the end of the monsoon


Food supply better in May

KATHMANDU, June 3 - The food supply situation improved across the country in May as the bandhs in the Tarai have stopped and the winter harvest is being brought to market, a market monitoring report said Wednesday.

"There are adequate rice stocks in 78 percent of the markets and sufficient wheat flour in 81 percent of the markets," said Market Watch, a monitoring report prepared each month by the government, the World Food Programme and the Federation of Nepalese Chambers of Commerce and Industry. However, only 20 percent of the markets had adequate stocks of potato.

"Prices of winter crops did not decline as usual because of the poor winter harvest," the report added. Prices remained largely unchanged or increased slightly during May. The greatest price rise was seen in potato, up by 28 percent. The price rise was caused by reduced supplies due to poor harvests in the hill and mountain districts.

"Food price inflation in Nepal remains a significant concern," said the report. Compared to 18 months ago, the price of musuro (broken lentil) has increased by nearly 50 percent, soybean oil by 32 percent and rice by 25 percent.

According to the report, sugar prices across Nepal continued to increase throughout May and were up by an average of 7 percent. This was largely due to reduced sugar production in Nepal.

Source: www.Kantipuronline.com

MARKET:

NEPSE into swing mode

KATHMANDU, June 3 - The Nepal Stock Exchange (NEPSE) on Wednesday fell by 3.39 points to end the day's trading at 699.62 points. The sensitive index, meanwhile, witnessed an increase of 0.39 point.

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Wednesday's total turnover amounted to Rs. 84.755 million while the total number of shares traded stood at 154,059 units. About 64 scripts were traded.

Shares of 19 commercial banks were traded on Wednesday with the stock prices of four banks showing an increase. Standard Chartered Bank led the pack with an increase of 124 points in its share price while Nepal SBI Bank lost the most on the floor with a 44-point decline.

Among the 16 development banks whose shares were traded on NEPSE, six saw their share prices go up. Central Bank's decision to liquidate the Nepal Development Bank had negative impacts on the share price of development Banks. Development bank sub-indices went down by 5.06 points. The top gainer among development banks was Malika Bikas Bank whose stock rose 37 points while Clean Energy Development Bank was the biggest loser with its stock shedding 28 points.

Likewise, shares of about 24 finance companies changed hands on Wednesday. Annapurna Finance Company came out tops with a gain of 25 points while Standard Finance and Kaski Finance saw a drop of 32 points each.

The top gainers on NEPSE were Siddhartha Insurance Company Shikhar Bittiya Sanstha, Chhimek Bikas Bank, Malika Bikas Bank and Annapurna Finance Company. Meanwhile, the top losers on Wednesday were Standard Finance Nepal Bangladesh Bank, Siddhartha Bank, Pashupati Development Bank and Kaski Finance.

In terms of total turnover, Standard Chartered Bank stood on top with a turnover of Rs. 14.850 million.

Meanwhile, NEPSE on Wednesday suspended the trading of Nepal Development Bank (NDB) shares. NEPSE's action came after Central Bank announced the liquidation of NDB.


Week in Review (May-24-09 to May-30-09)

The market traded in the green for most part of last week. The broader index, NEPSE, advanced by 6.20% as compared to the week’s opening value. Almost all other indices followed suit except for Finance group. But on the final day of trading, market felt sharply from 739.89 to 718.62 points. The swearing in of new Prime Minister brought back the investors’ interest in the market.

Last week two IPOs, which received massive response from investors, closed. The initial screening of the IPO shows the following results:

Key Stats Madhyamanchal Grameen Bikas

Bank

Prime Commercial

Bank

IPO Worth Rs 30 million Rs 300 million

No. of shares offered 0.3 million 3 million

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Total Collection Rs 430 million Rs 7,000 million

Oversubscribed by 14.33 x 23.33 x

% Oversubscription 1333% 2233%

Issue Period 22-May to 26 May 24-May to 27-May

Application Range 50 to 15,000 50 to 100,000

The following is a summary of how the listed companies performed up to 3rd Quarter of this FY in comparison with corresponding previous year quarter.

1. Net profit of Commercial Banks has increased by 232% on an average 2. Net profit of Development Banks has increased by 597% on an average 3. Net profit of Finance Companies has increased by 439 % on an average 4. Net profit of Hydro Power Companies has increased by 1 % on an average

BUSINESS:

Western union declares winners

KATHMANDU, June 3 - Western union Money Transfer on Wednesday announced the winners of its lucky draw of 'Barshai Bhari Sandar Upahar'. Kusum Nembang of Birtamode, Jhapa was the lucky winner to win a Maruti 800 under the bumper prize of this scheme. Chandra Kumar Rai and Indra Bahadur Khatri won Television set each. Similarly Chandra Bahadur Tamang from Itahari won a motorbike, says a statement issued by Western Union Money Transfer. Source: www.Kantipuronline.com

Glittering assets

Sailesh Bhattarai, a businessman who does not consider himself an avid shopper, recently chose to accompany his mother to the Asri Jewelry store in New Road. He was there to help his mother choose a sparkling diamond for his bride-to-be, to find something that she would treasure forever. There´s something to diamond shopping that seems to be bringing out this instinct in shoppers: the instinct that one is buying not just another accessory--given the price that a diamond can command, and given that the recipient will possibly possess the precious stone for life--but making an investment. Small wonder then that Bhattarai examined with eagle-eyed focus every diamond that was shown to him. The usually lackadaisical shopper grilled the diamond seller, asking him everything from questions related to color and the size to the cut of the

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stones. What Sailesh did was nothing bizarre; after all, unlike, say gold, whose value is determined by fewer factors, the value of diamonds is determined by a whole host of arcane variables. The easier variables to understand, first: most engagement rings that are available here are called "solitaire," or "single-piece" diamonds. These diamonds are the bigger ones, whose sizes are such that they can steal center-stage on a piece of jewelry without needing other, smaller stones to accompany them to enhance the value of the piece. But their bigger size also means that they are heavier, and thus of higher carats, and ultimately, more expensive. Indeed, solitaire diamonds between a half carat and three can cost as much as Rs 20 lakhs. Next, the cut. The cut is one of the most essential determiners of both the cost and the beauty, or the brilliance, of a diamond. Basically, a well-cut diamond is cut in such a way that the facets bounce around among themselves the light that enters a diamond, and when the light is reflected back to the outside, it comes off as a brilliant ray. The most expensive diamonds, on the basis of how they´ve been cut, are called "ideal cut" diamonds and the gradation downwards from that peak is "premium," "very good," "good," "fair" and "poor." No enterprising jeweler would probably tag his diamonds a "poor" one, and since people can´t say for sure how brilliant a diamond is, prospective buyers would probably be better off making their purchases from the trusted jewelers in town. Before moving on to the next variables, color and clarity, it would perhaps be pertinent to disabuse prospective diamond buyers of a common erroneous idea regarding cut. A diamond´s cut does not mean its shape. A diamond may be shaped such that the finished product looks oval, round, triangular, heart-shaped, pear-like, lily-shaped, or may even look like a baguette. The many shapes that diamonds come in may confuse even more the already confused buyer, so one would be wise to revert to homing in on brilliance once again: high-quality diamonds are a symphony born of cut and shape, wherein the cuts and the shape work together to produce brilliance. A diamond´s worth is also determined by its color. According to Ravi Shrestha, the executive director of Asri Jewelry, if you are looking to buy the best, then pick the colorless diamonds. These diamonds are rated "D." The "E" and "F" rated diamonds are slightly less valuable, and as the rating-letters move further down the English alphabet list, the less valuable they become. For buyers who because of financial constraints are forced to choose between size and color, Shrestha suggest buying a larger diamond of a lower color grade, instead of a smaller diamond of a higher color grade. Most laymen can´t tell the difference between a "D" and an "F," but everyone can differentiate size. Finally, clarity. When it comes to clarity, the abbreviation "FL," which stands for flawless, is the tag that marks out diamonds that are not speckled with any naturally occurring imperfection. The obvious ones to avoid are the diamond rings that have slapped on them the "SI1" and the "SI2" tags, for those tags scream "defects."Once again, since these defects cannot be spotted by the layman, buyers would do

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themselves well to buy their diamonds from established jewelers, whose rating systems can be trusted. Emerald one piece diamond ring Diamonds: 1.45 carat Gold: 18 karat (8.16 gram) Price: Rs 64,900 Engagement ring for men Diamond: 1piece (0.51 carat) Gold: 18 karat (8.24 gram) Price: Rs 97,000 Engagement ring for women Diamond: 1 piece (0.57 carat) Gold: 2.93 gram Price: Rs 91,200 Fashion diamond ring Diamond: 7 pieces (1.48 carat) Gold: 18 karat (5.50 gram) Price: Rs 1, 24,000 Fashion diamond ring Diamond: 43 pieces (0.46carat) Gold: 18 karat (12.11 Gram) Price: Rs 55,800 Diamond ring for men Diamond: 11 pieces (0.57 carat) Gold: 6.89 gram Price: Rs 35,000 (Available at Asri jewelry; 7-10% discount on the purchase of every item.) Diamond ring with white gold Diamond: 2 karat (57 cents) Price: Rs 1, 68,000 A white gold Ruby studded Diamond ring Diamond: 4 karat (21 cents) Price: Rs 2, 58,000 A fashion diamond ring Diamond: 1 Karat (9 cents) Price: Rs 1, 23,000

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A five piece fashion diamond ring Diamond: 1 karat (80 cents) Price: Rs 1, 18000 A white gold fashion diamond ring Diamond: 2 karat (87 cents) Price: Rs 2, 46,000

Source: www.myrepublica.com Date: 06/04/2009

POLICY:

Voluntary Retirement Scheme: Govt hopeful of success

KATHMANDU, June 3 - The government hopes that most of the 16,884 civil servants eligible for voluntary retirement scheme (VRS) will avail of the facilities even though it will cost the government about Rs. 17 billion.

Under the scheme, civil servants -- other than those in the health services and parliamentary services -- who have completed 20 years of service or crossed 50 years of age can get seven years' pension in lump sum if they apply for VRS.

The deadline for applications to avail of the scheme is 14 June. There are roughly 79,000 civil servants in the country but those working under health services and parliamentary services have not been offered voluntary retirement scheme because they are governed under acts other than the Civil Service Act.

This offer of the previous Maoist-led government under its administrative reforms programme was made to civil servants for a variety of reasons. “These include offering civil servants an honorable exit, making the civil service more inclusive with new entrants and injecting fresh blood with new skills in the administrative structure,” said Chandra Ghimire, spokesman at the Ministry of General Administration.

This is the third in a series of three schemes that have been offered to those in the government payroll. Last year, those who had completed 20 years of service or crossed 50 years of age in the service of the palace were offered VRS and 107 of the 126 eligible palace bureaucrats retired under the scheme.

Earlier this year, a similar offer was made to those civil servants who were promoted because they had been in the same position for long, but only 1,449 of the roughly 13,000 eligible had applied and a decision in this regard is in its final stage.

“One of the reasons for the low response earlier was because various provisions of the scheme like tax were not clear,” Ghimire told a press conference on Wednesday. “All civil servants availing of the scheme and receiving a lump sum amount will get a tax waiver.”

In a statement, the ministry also clarified that all would receive seven years' pension in lump sum irrespective of the number of years they have left before reaching the

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retirement age of 58. He said the government has been generous with the offer because it wants to encourage civil servants to opt for VRS.

Asked if the new government would scrap the programme, Ghimire said he was not aware of any such plan.


ADB Signs Declaration Calling on Transport Sector to Curb Emissions Without immediate action, the transport sectors of developing countries will account for the overwhelming share of increased carbon dioxide emissions by 2030, according to a new declaration signed by the Asian Development Bank (ADB).

While developed countries are still responsible for the largest share of greenhouse gas (GHG) emissions from the transport sector, emissions from developing countries – particularly in Asia – are growing rapidly. Transport-related carbon dioxide emissions are expected to increase 57% from 2005 to 2030, with transport sectors in developing countries expected to contribute about 80% of this increase.

Most GHG emissions in the transport sector and virtually all the expected growth in emissions come from private cars and trucks.

The Bellagio Declaration on Transportation and Climate Change outlines how the transport sectors in developing countries can reduce future GHG emissions. The declaration is the result of a three-day conference in Bellagio, Italy, attended by climate change and transportation experts. The declaration calls on governments and the transport industry to embrace a range of key principles.

These include reducing the need for travel through better integration of land use and transport; more effective use of carbon finance mechanisms to fund sustainable transport policies; and recognition of the benefits of low-carbon transport in reducing the local air pollution, noise, congestion and road accidents that define many urban areas.

“The Bellagio Meeting will greatly help ADB to develop its Sustainable Transport Initiative, which aims to help Asian countries change their transport investment patterns and secure a low-carbon, sustainable transport future,” said WooChong Um, Director of ADB's Energy, Transport and Water Division.

The 12-16 May Bellagio meeting, organized by ADB and the Clean Air Institute, and supported by the Rockefeller Foundation, also helped build consensus on how transport sector policies must be reflected in the upcoming United Nations Climate Change discussions in Copenhagen in December.

Source: http://www.adb.org/Media/Articles May 29, 2009

POLITICS:

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NC nominates GP's daughter as minister, move triggers protest

Kathmandu, Jun 3 (PTI) Nepali Congress has nominated its president G P Koirala's daughter Sujata to lead the team of party nominees in the new government, triggering a rebellion in the party with senior leaders boycotting a meeting called by the Prime Minister to discuss cabinet expansion.

Senior NC leaders Shushil Koirala, Ramchandra Paudyal and Bimalendra Nidhi boycotted a meeting called by Prime Minister Madhav Kumar Nepal this morning to discuss portfolios and other issues related to the coalition.

Sources said they boycotted the meeting to protest against Koirala's decision to nominate his daughter as the leader of the party's team.

Koirala proposed 54-year-old Sujata's name as the leader of the NC team in the cabinet at a meeting with PM Nepal, UML chairman Jhala Nath Khanal and UML general secretary Ishwor Pokhrel, sources said.

It is widely speculated that Sujata will be made deputy Prime Minister with Foreign Affairs portfolio. Sources said Nepal's cabinet is likely to be expanded tomorrow with nominees from coalition partners like NC.

NC sources said Koirala decided to nominate Sujata to the post after more than 50 district presidents proposed her name.

Source: www.ptinews.com/pti%5Cptisite.nsf

Rift widens in NC over GPK’s move

The rift over who should lead the Nepali Congress (NC) in the Cabinet has widened within the party after NC president Girija Prasad Koirala unilaterally proposed the name of his daughter, Sujata Koirala, to lead the party in the government as the Foreign Minister. The party leaders were up in arms against Koirala’s decision, delaying the finalising of other names to represent the party in the government.

Six office-bearers of the party met today and urged president Koirala to withdraw his decision of sending Sujata to the Cabinet. After the meeting, called by acting president Sushil Koirala at NC party office, in Sanepa, he made a formal request to the president over phone to withdraw his decision.

“Sushil Koirala called GP Koirala’s assistant Shekhar Thapa and urged him to ask the veteran leader to do a rethink on his decision to send Sujata as team leader in the Cabinet,” said an NC source. Koirala is yet to react on the request of his party leaders.

Vice presidents Ram Chandra Paudel, Gopal Man Shrestha and Prakash Man Singh and general secretary Bimalendra Nidhi were present during the meeting. Senior leader Sher Bahadur Deuba and general secretary Kul Bahadur Gurung, however, were absent. “The consent of joint general secretary Arjun Narsingh KC was taken over phone before making the joint request to Koirala. KC did not attend the meeting due to his ill-health,” said a source.

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“Senior leaders are of the view that the decision to send Sujata to the Cabinet would damage the party’s image and it was against the party’s welfare,” said an NC leader who attended the meeting. The leaders also expressed regret over the trend of taking unilateral decisions in the party without following due democratic process. Sushil Koirala and Ram Chandra Paudel had also opposed GP Koirala’s decision at a meeting of the party’s office-bearers at the latter’s residence yesterday.

Sher Bahadur Deuba is positive about GP Koirala’s decision as he had been entrusted with the responsibility of finalising other names to represent the party in the Cabinet after holding consultations with other leaders


'Land of landlords will be seized'

Unified CPN-Maoist's politburo member Devendra Poudel 'Sunil' on Wednesday said land of all landlords would be seized and distributed to landless people, if President Dr Ram Baran Yadav does not correct his decision to reinstate the army chief sacked by the elected government.

Addressing a corner meet after the sit-in before the District Administration Office, Nawalparasi, here today, Poudel said, "If the president didn't apologise for his mistake and tender his resignation, we will seize land and distribute it to landless people." Paudel also said his party would continue protest from both House and the street and added that his party happily chose to step down from the government rather than kneeling before foreign forces.

The Maoists today organised sit-ins before the district administration offices throughout the country for two hours, protesting against the President's decision to, what they said, establish civilian supremacy in the country.

In Bhaktapur, the Maoist cadres reached the premises of District Administration Office, Bhaktapur, with a protest rally. They organised a sit-in for two hours and hampered the officials works at the office.

Addressing the gathering, district secretary of the UCPN-M Diwakar warned of continued protest if the President's decision was not corrected and the civilian supremacy not established.

The UCPN-M also organised a sit-in before District Administration Office, Jhapa, to put pressure on the government to maintain civilian supremacy. Throughout their protest, they did not allow any one to enter the DAO premises.


Democratic alliance inks CMP

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Twenty-two political parties and two independent members of the Constituent Assembly on Wednesday gave their final shape to the Common Minimum Programme (CMP) of the UML-led coalition government, high-level Political Coordination Committee (PCC), the general procedures of running the new dispensation and the code of conduct for the Council of Ministers.

Top leaders of the democratic alliance signed the all-important document at a joint meeting — chaired by PM Madhav Kumar Nepal — that was held at Singhadurbar.

A task force of four major parties — the CPN-UML, the Nepali Congress, the Madhesi Janaadhikar Forum (MJF) and the Tarai Madhes Democratic Party (TMDP) — had drafted the CMP. The coalition government’s top priorities include building national consensus among the parties; ending of anarchy, insecurity and impunity and maintaining constitutional supremacy, upholding the rule of law and ensuring good governance, bringing the peace process to a logical conclusion with the implementation of all past agreements, restructuring of the state and adopting the new constitution on time, an improvement in supplies of essential commodities, controlling of spiralling prices of goods, providing relief to the people and creating a conducive environment for the socio-economic transformation.”We’ve been able to give a positive message to the people by reaching an understanding on the CMP, the PCC, Code of Conduct for the Council of Ministers and an effective mechanism to run the coalition government,” said PM Nepal after signing the document. He maintained that the Cabinet would get a complete shape at the earliest.

He also appealed to his allies to cooperate with the government. The CMP stated that the accord, inked between the then government and the United Madhesi Democratic Front on February 28, 2008, would be implemented.

“But, the issues pertaining to the constitution will be settled by the Constituent Assembly,” says the CMP. As far as the formation of the vexed local bodies is concerned, national consensus will be forged. An interim rovision will be worked out till the elections of the local bodies are held that can only take place once the new statute is adopted.

Source: The Himalayan times Date: 06/04/2009

Boost for coalition mantra

Accent on peace process

The CMP maintained that the supervision, adjustment and rehabilitation of the Maoist-affiliated People’s Liberation Army (PLA) combatants would be completed before the promulgation of the new constitution. Monthly allowances to the PLA members will be made available to the PLAs through individual bank accounts to make the allocation of the funds a transparent exercise. All commissions that were envisaged earlier will be formed or restructured soon. Plans are afoot to form five panels.

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What is PCC?

The PCC, which will have its own secretariat, will consist of top leaders of the democratic alliance or representatives that will be nominated by the respective parties. It will discuss the issues that have been agreed upon by the allies. The primary task of the PCC is to assist the government on the implementation of the CMP. How to run the coalition

The government will adhere to the rule of law. An informal meeting will be held once a week among the members of the Cabinet to discuss national issues. Code of conduct for Cabinet All Ministers are required to make public their property details within a week of their appointment. All of them will be accountable to the PM. The Ministers should not discuss the contentious issues in public. But they can feel free to take them up at the PCC for further deliberations


GENERAL:

CEC puts in papers

KATHMANDU, June 3 - Chief Election Commissioner Bhoj Raj Pokharel tendered his resignation on Wednesday afternoon saying he wanted to retire as the task of conducting Constituent Assembly (CA) elections was over after the by-elections of April 10.

“I have decided to live an independent life in the context of the successful completion of the Constituent Assembly elections,” said Pokharel at a press meet organised at the Election Commission. “There is no hidden agenda or any type of pressure on me to take this decision.”

Before announcing his resignation to the media, Pokharel went to the president’s office in Sheetal Niwas and handed over his resignation to President Dr. Ram Baran Yadav. He also telephoned Prime Minister Madhav Kumar Nepal and told him not to perceive his resignation wrongly as it had nothing to do with formation of the new government.

Pokharel was appointed Chief Election Commissioner by the Girija Prasad Koirala-led government on Oct. 30, 2006. During his tenure, the CA elections were postponed thrice, however they were successfully conducted on April 10, and 2008.The by-elections were conducted in six constituencies on April 10 this year.

Pokharel still had three-and-half-year tenure remaining. Speaking at the press meet, Pokharel hoped the vote cast by the people in the CA elections would be able to fulfill the people’s aspirations for peace, stability and development. He also hoped the new leadership at the EC would continue the five-year strategy the Election Commission had introduced.

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Maoists up Indian encroachment war

KATHMANDU, June 3 - The UCPN (Maoist) on Wednesday called for an all-party meeting to protest encroachment of Nepali territory, even as protests against the encroachment continued all day long.

The Maoist Parliamentary Party (PP) meeting made this appeal in response to reports that India's Seema Surakshya Bal (SSB) personnel have driven out around 2,000 Nepalis out of their homes along the India border in Dang and encroached upon Nepali land.

Party spokesman Dinanath Sharma said all parties should be unitedly protest the SSB excesses. The Maoists have been demanding that Indian government stop encroachment, return the seized land immediately and create an environment to maintain peace and security along the border.

The Matrika Yadav-headed CPN (Maoist) took out a torch rally in the Capital on Wednesday evening against the encroachment and SSB act.

Rastriya Janamorcha and Revolutionary Left Wing submitted a memorandum to the Indian Embassy against the encroachment. The UCPN (Maoist)-affiliated All Nepal National Independent Students' Union (Revolutionary) also organised a rally at Ratnapark against encroachment and act of driving out Nepalis from their homes.


Taxmen flee irate herb collectors

MUGU, June 3 - Yarchagumba hunters in Mugu have refused to pay the entry fee to the forest where the herb grows and sent government tax collectors running for their lives.

Around 7,000 yarchagumba collectors protested and threatened the taxmen who had reached the site with death forcing them to return empty-handed.

District forest officer Shyam Lal Mahat said the district administration lost around Rs. 5.7 million in revenue as a result. The team of 13 revenue collectors had reached Sirani Chaur following an agreement with all the stakeholders to fix the entry fee at Rs. 300 each for local yarchagumba collectors, Rs. 800 for those from neighboring villages and Rs. 1,000 for herb hunters from outside the district.

Jiban Kumar Malla, a member of the team, said they fled for their lives when herb collectors, instigated by local Tamangs, refused to pay the entry fee and started pelting them with stones. Jagat Bahadur Rokaya, secretary of the Mugu VDC, said the dispute arose when the yarchagumba collectors demanded to see the report of the fees collected previously and where they had been invested. He said that locals of Mugu

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and herb collectors had been charging that the taxes raised from yarchagumba were being misused.

Rokaya said that Rs 5.7 million was collected as revenue from yarchagumba collectors last year. He added that the district's sole source of revenue had been halted.

Keshar Bahadur K.C., chief district officer, said that the same problem had arisen last year, and revenue collectors should have coordinated with the locals before going to collect taxes.


Is China playing games?

Let's face it: We don't really know why North Korea decided to test a nuclear weapon last week, why it has suddenly declared the Korean War armistice of 1953 null and void, why it has launched several test missiles and is preparing to launch others. It could be because the North Koreans are dissatisfied with the state of negotiations with Washington and want more concessions or more attention. It could be that the regime -- which is no longer capable of delivering regular food supplies, or even reliable electricity, to its people -- wanted to strengthen its grip on power. It could be something else altogether. Personally, I favor another scenario, equally speculative: Perhaps the North Koreans have stepped up their war rhetoric, and their war preparations, because China wants them to do so. I cannot prove that this is the case -- just as no one else can prove any of their theories about North Korea -- but I can look at the evidence, which is as follows:

China is the one country that actually has influence over North Korea. Not only is China the only country to maintain frequent diplomatic and security contacts with North Korea, but China could, if it wanted to, topple the North Korean regime tomorrow. China could cut off North Korea's oil. China could shut the border to trade. Or China could take the opposite tactic and open the border: Refugees would flee and the regime would crumble, much as East Germany did 20 years ago this summer. To put it differently, China has more influence over the North Korean regime than all of the other U.N. Security Council members put together, but it does not use this influence to stop Pyongyang's nuclear program. Instead, it has maintained trade relations, kept the oil flowing, built up its border fences and paid lip service to the international efforts to block the North Korean nuclear program (the Chinese claimed to have learned about the recent nuclear test an hour in advance, which no one believes), all while hunkering down to watch what happens.

China has ambitions to replace the United States as the dominant power in East Asia. For proof, look no further than the money the Chinese have spent lately on expanding their navy, which now includes at least 70 submarines, 10 of which are thought to be nuclear. By contrast, the United States has between 70 and 80 submarines deployed at any given moment, but they patrol the whole world, not just Asian waters. The

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Chinese are also now designing aircraft carriers and reportedly now have long-range, anti-ship ballistic missiles -- the better to destroy our aircraft carriers -- as well.

China knows the rest of Asia is watching this test of the Obama administration. And if, as seems likely, the Obama administration does not come up with a way to stop North Korea's nuclear program, what conclusions will the South Koreans draw -- not to mention the Japanese? Or the Taiwanese? Might some of them not conclude that the American security umbrella no longer seems quite as wide and strong as it used to? Might they not conclude that they are better off under Chinese protection? This would, of course, be a somewhat far-fetched and risky game, if the Chinese were indeed playing it: After all, the Japanese are not known to be enthusiastic about the prospect of Chinese domination, and the Taiwanese are not known to be interested in reunification with the mainland. Rather than falling in line, the Japanese might instead conclude that they need their own nuclear deterrent. The South Koreans might follow, the Taiwanese might add to their own mighty naval fleet, and then a deadly Asian arms race would be underway.

Despite the risks, though, there are good reasons for the Chinese to prod Kim Jong Il to keep those missiles coming. By permitting North Korea to rattle its sabers, the Chinese can monitor President Obama's reaction to a military threat -- without having to deploy a threat themselves. They can see how serious the new American administration is about controlling the spread of nuclear weapons -- without having to risk sanctions or international condemnation of their own nuclear industry. They can distract and disturb the new administration -- without harming Chinese American economic relations, which are crucial to their own regime's stability. And if the game goes badly, they can call it off altogether. North Korea is a puppet state, and the Chinese are the puppeteers. They could end this farce tomorrow. If they haven't done so yet, there must be a reason.


Climate change kills 300,000 a year Agencies

Climate change is responsible for the deaths of 300,000 people every year and costs 125 billion dollars (90 billion euros) annually, a new report said Friday.

The study, from the Global Humanitarian Forum, claims to be the first to measure the impact of climate change on people globally -- and says it is 325 million of the poorest who suffer most.

It highlights the plight of people in Bangladesh, where millions face regular flooding and cyclones, Uganda, where farmers are plagued by drought and some Caribbean and Pacific islands facing obliteration due to rising seas.

This is despite the world's 50 least developed countries contributing less than one percent of global carbon emissions.

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Speaking at the report's launch in London, ex UN secretary-general Kofi Annan said it showed the need for a "bold, post-Kyoto agreement to protect the world" at crunch international climate change talks in Copenhagen in December.

"If political leaders cannot assume responsibility for Copenhagen, they choose instead responsibility for failing humanity." Annan described climate change as "the greatest emerging humanitarian challenge of our time" and said the world was "at a crossroads" on how to tackle the issue.

The report projects that by 2030, deaths worldwide due to climate change will rise to nearly half a million a year and the cost will hit 300 billion dollars.

It urges developing countries, which account for 99 percent of climate change casualties, to scale up their efforts to adapt for climate change "by a factor of 100."

Source: http://thehimalayantimes.com May 30, 2009

International Financial and Economical NewsBrief:

Top Stories

� Lending data indicate quantitative easing has little impact

Data show that lending to "private nonfinancial corporations" and households in the U.K. dropped in April. The fall indicates that the Bank of England's quantitative easing has done little. "These figures are the clearest indication yet that the bank's aggressive quantitative-easing policy did not have much immediate impact on broad money and credit growth," said Colin Ellis, economist at Daiwa Securities. The Times (London) (03 Jun.)

� Nowotny says ECB's asset-purchase program could be expanded

Ewald Nowotny, council member of the European Central Bank, said long-term interest rates could be kept low by expanding the bank's asset-purchase program. Interest rates are at historic lows, but "in the future, monetary policy also has the ability to provide support through unconventional methods," Nowotny wrote in a letter to a hotels group. "Through the purchase of bonds or other commercial papers, the yield curve can be flattened, thereby lowering long-term interest rates, which are decisive for investment." Bloomberg (03 Jun.)

� ECB considers mandating loan-by-loan disclosure for ABS

The European Central Bank is looking into requiring loan-by-loan disclosure on asset-backed securities for them to be eligible in the Eurosystem collateral system. "There is a lot to be said for loan-by-loan level information," Francesco Papadia, the ECB's director general of market operations, told delegates at the Global ABS conference. "If there is good availability of this

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information -- structured, user-friendly data -- it will improve surveillance." EuroWeek (02 Jun.)

� U.S. rescue of GM raises questions about protectionism

The U.S. government's massive bailout of General Motors raises the question of whether the subsidies violate President Barack Obama's pledge not to embrace protectionist measures. The intervention "will come back to haunt us in terms of the competitiveness of U.S. corporations and in terms of furthering U.S. public-policy goals," said Claude Barfield, a trade expert at the American Enterprise Institute. Reuters (02 Jun.)

� Chinese company Tengzhong to buy GM's Hummer brand: In a deal that will protect 3,000 U.S. jobs and leave dealerships in business, a Chinese company agreed to buy General Motors' Hummer brand. Sichuan Tengzhong Heavy Industrial Machinery is expected to complete the purchase by the end of the third quarter. After the sale, Tengzhong will continue building Hummers at a plant in Shreveport, La. Bloomberg (03 Jun.) , China Daily (Beijing) (03 Jun.) , The New York Times/DealBook blog (02 Jun.)

Market Activity

� Asian markets gain as Australia posts economic expansion

Most Asian stock markets advanced Wednesday, with automotive shares mixed in Japan and bank shares down in South Korea. Tokyo's Nikkei 225 climbed 0.4%, South Korea's Kospi Composite inched up 0.1% and Australia's S&P/ASX 200 added 1.6%. Hong Kong's Hang Seng Index rose 1%, China's Shanghai Composite jumped 2% and New Zealand's NZX 50 gained 1.2%. Taiwan's Taiex dropped 0.8%, Singapore's Straits Times added 0.5% and India's Sensex lost 0.4%. The Wall Street Journal (03 Jun.)

� Investors pour money into inflation-protected Treasuries

Investors are concerned that stimulus efforts might spark a rise in prices, prompting them to flock to inflation-protected U.S. Treasuries. The yield gap between 10-year nominal notes and 10-year Treasury inflation-protected securities exceeded 2 percentage points for the first time since Lehman Brothers collapsed in September. The developments suggest investors expect annualized inflation to surpass 2% during the next 10 years. The Wall Street Journal (03 Jun.)

� Analysis: Investment boom continues in European corporate bonds

Investors are pouring money into corporate bonds in Europe, and the trend is expected to continue because there is nothing in the outlook that is expected to change their minds. The situation is sparking concerns about the possibility that a bubble is brewing, but it seems unlikely that the bubble will burst, causing a financial meltdown. "Corporate bonds are the new equity," said one senior credit analyst. "Spreads are still extremely attractive when viewed on a

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historical basis. So far, the names are strong and defensive. It's a no-brainer for these investors." EuroWeek (02 Jun.)

Economics

� Eurozone's recovery hopes shaken as unemployment hits 9.2%

Joblessness in the eurozone climbed from 8.9% in March to 9.2% in April, dampening optimism about a speedy economic recovery. "Sharply higher, rising unemployment will weigh down on eurozone consumer spending, especially as it will be liable to lead to slowing wage growth," said Howard Archer, an economist at IHS Global Insight. The New York Times/Reuters (02 Jun.)

� U.S. set for "very slow" recovery, Fed's Fisher says

Growing consumer confidence and other positive indicators do not alter the fact that the U.S. economy is headed for a "very slow" recovery, said Richard Fisher, president of the Federal Reserve Bank of Dallas. The Fed needs to back away from its expansive credit initiatives to avoid accelerating the government's debt load, he said. Reuters (02 Jun.)

� BoJ board member says Japanese economy poised for recovery

Hidetoshi Kamezaki, a board member of the Bank of Japan, said the Japanese economy is not free-falling any longer. "Until now, the economy was sliding down a steep hill," Kamezaki said. "We can expect the economy to head for a recovery in the near future as the pace of production cuts by companies eases and stimulus measures take effect." Bloomberg (03 Jun.)

� Russia presses for alternatives to dollar as reserve currencies

Because of changes the economic crisis has brought to the U.S., the world needs to be able to use a range of reserve currencies rather than being locked into the U.S. dollar, Russian President Dmitry Medvedev said. "The current situation demands a bigger number of currencies which could be used for investing money and by banks, citizens and states," he said. Forbes/Reuters (02 Jun.)

� TD Bank: Canada's deficit is double government's estimate

Canada is headed for a $172 billion deficit, twice the $85 billion the government claimed in its latest budget, according to a report by TD Bank. The country will need at least six years to dig out from under that burden, not the four projected by the government, the bank said. "I think you have to believe in the tooth fairy to believe the government will be out of deficit in four years," said Liberal Party member John McCallum, a former chief economist at Royal Bank of Canada. The Toronto Star/The Canadian Press (02 Jun.)

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� Australia posts surprise GDP growth of 0.4%

Australia's economy shifted back into growth during the first quarter, expanding 0.4% and avoiding a technical recession, the Australian Bureau of Statistics said. The nation's economy contracted by 0.6% in the fourth quarter of 2008. The Australian (03 Jun.)

Geopolitical/Regulatory

� EU finance ministers to support financial-regulation overhaul

Last week, the European Commission proposed an overhaul of the financial regulatory system that includes establishing two supervisory agencies. EU finance ministers are poised to endorse the changes. "The aim should be to have the new European Financial Supervision system, comprising both macro-prudential and micro-prudential components, fully in place in the course of 2010," according to a draft document from the ministers. Reuters (02 Jun.)

� Merkel slams central banks over financial-crisis efforts

In a rare public criticism of central banks, German Chancellor Angela Merkel indicated that the European Central Bank, the Bank of England and the Federal Reserve are setting up their economies for another financial meltdown. "I view with great skepticism the powers of the Fed, for example, and also how, within Europe, the Bank of England has carved out its own small line," Merkel said. "We must return together to an independent central bank policy and to a policy of reason, otherwise we will be in exactly the same situation in 10 years' time." The Wall Street Journal (03 Jun.)

� Merkel's criticism of ECB a big departure from tradition: German Chancellor Angela Merkel's open criticism of the European Central Bank's expansionist monetary policy indicates Berlin might be much more concerned than other European policymakers had thought. Officials in Germany are customarily discreet with their comments on monetary policy. Merkel has urged Europe's leaders to get to work on "exit strategies" for their government-funded stimulus programs. Financial Times (free registration) (02 Jun.)

� Banks persuaded Congress to rein in mark-to-market rule

Meltdown of the financial market prompted the financial-services industry to lobby for changes to the controversial mark-to-market accounting rule. Industry participants argued that the regulation did not take into account the kind of turmoil markets were experiencing and that changes were necessary to prevent a further downward spiral. Investor advocates opposed the changes. "This is political interference on a major issue, and it raises questions about whether accounting standards going forward will have the quality and integrity that the market needs," said Patrick Finnegan of the CFA Institute Centre for Financial Market Integrity. The Wall Street Journal (03 Jun.)

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� Assessing Paulson's, Geithner's investment returns

An assessment of investments made by former U.S. Treasury Secretary Henry Paulson and current Treasury Secretary Timothy Geithner shows positive returns but raises a number of questions. No matter how a final assessment of the programs and their investments plays out, questions will remain about whether the government charged the country's largest financial institutions enough for their aid. The Wall Street Journal (03 Jun.)

Financial Products

� Bond giant Pimco makes first move into ETF market

An exchange-traded fund tracking short-term U.S. Treasuries is the first step by Pimco into the fast-growing ETF market. The Pimco 1-3 Year U.S. Treasury Index Fund trades on the NYSE Arca exchange. Pimco has six additional ETFs in the regulatory pipeline. MarketWatch (02 Jun.)

Documents

R&D_NewsBrief_4thJun