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Market Analysis
Government disregard for economic issues reflects on NEPSE

By R.K.Regmee

Shanker Man SinghInvestors in Nepal feel highly neglected as the new leftist-alliance government of CPN UML and UCPN-Maoist seeks to pursue policies that are neither appropriate for national economy nor friendly for entrepreneurs. Nepal Stock Exchange expressed displeasure over it through dismal performance in the past week when it lost 12.3 points declining by 3.15 %.

As Prime Minister Khanal took over the responsibility of government and as he got success in engaging Maoists in government, people had hoped that the political stability would be ensured and the economic issues would be addressed properly. But the economic policies it is preparing indicate trends against values of private investment, production and market.

Some examples of how lightly economic issues are being handled at the moment in Nepal could be found in the government's attempt to introduce mixed economy, negligence in finalizing the Three Year Plan and mis-managing the issue of discontinuing the use of currency notes having ex-royal portraits on them. They shed light on the careless manner in which the top policy makers including economists and politicos take decisions on matters having serious impact on the country's economy and the public.

Against economic liberalization

In seeking to amend the Banks and Financial Institution Act (BAFIA) an attempt has been made to get the phrase - economic liberalization – replaced with self-reliant mixed economy. Another measure in this regard aims at limiting promoters' shares in banks and financial institutions to five percent. Both provisions could adversely affect the investment, entrepreneurship and production sector, as explained by the Federation of Nepali Chambers and Industries FNCCI in its comment on the amendment.

Entrepreneurs get the sense that the amendment is the culmination of efforts being made in the country for the past few years against the cause of private sector in various modalities of actions or stoppages in business and industry premises. It is, they fear, an indicator of re-activating state in economy, re- introducing centralized planning and re-launching nationalization of firms and industries. All such measures, they warn, would simply not be compatible with the present day public aspiration of Nepal. Moreover, Nepal has learnt a bitter lesson of controlled economy for long in the past with no significantly positive result.

Actually, the amendment goes against the policy of the economic liberalization adopted in Nepal for over two decades in accordance with the spirit of democratic freedom brought about through the 1990 - People's Movement I. The economic liberalization has never been opposed by the People's Movement II although some political parties participating in it have their own reservations on it. Bringing about sweeping change in the country's economic policy without having public debate cannot be termed democratic.

The Three Year Plan (2010-13) which should have been implemented for nine months this time remains orphaned today. The new UML-Maoist coalition government is re-writing it thoroughly with emphasis on centralized command of economy ignoring the demand for freedom essential for private entrepreneurship. New planners might expedite the job as per the leftist dictates of the government.

Nepal Rastra Bank demonstrated its immaturity in handling as simple a job as replacing old currency notes with new ones. Economists attached to it forgot the first lesson of money in circulation: it could have accomplished its objective quietly over time simply through market, banks and financial institutions without getting the people in general panicked. The way it had to revoke its decision shows how distant its policy makers are from the temperament of the real economic situation of Nepal.

In the meanwhile, how to match the policy of self-reliant mixed economy with the vision of Nepal Peace and Development Strategy 2010 -15, the package donors have developed for aiding Nepal, is the problem facing Deputy Prime Minister and Finance Minister Bharat Mohan Adhikary. Will he be able to convince donors about policies adverse to economic liberalization?

Weekly performance

Expecting NEPSE to perform well in an atmosphere of confused economic thinking would be a tall demand. All the sub-indices of the secondary market went negative in the past week. The mid-week improvement in the share market proved no more than a bubble. The oversupply of shares and low level of investors' confidence in the market did not allow it sustain.

The writer can be reached at [email protected]. Nepalnews.com March 20, 2011

(Editor’s Note: Nepalis, wherever they live, as well as friends of Nepal around the globe are requested to contribute their views/opinions/recollections etc. on issues concerning present day Nepal to the Guest Column of Nepalnews. Length of the article should not be more than 1,000 words and may be edited for the purpose of clarity and space. Relevant photos as well as photo of the author may also be sent along with the article. Please send your write-ups to [email protected] This e-mail address is being protected from spambots. You need JavaScript enabled to view it This e-mail address is being protected from spambots. You need JavaScript enabled to view it)

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