State of Real Estate
The real estate business seems to have slowed down a lot after the boom in the last couple of years as evidenced by the figures for loan advanced by different banks for this sector (see tables). The explanations are many. Some market observers say it has reached its saturation point. Some say it’s in temporary stagnation and will regain the momentum soon.
“We’re in a wait and watch mode because it is a capital intensive business and we can’t take such a huge risk when the country itself is unsure regarding the future,” says Siddhant Raj Pandey of Ace Finance which has a special arm called Ace Apartment to develop housing complexes. Jenish Shrestha of Development Credit Bank says, the borrowers are holding their plan to buy house with the expectation for the prices to go down.
But Tanka Bahadur Shrestha of Euro Housing has a different opinion. “Housing industry is here to stay and we are busy on our second project,” he says and informs that his company is planning to invest in the next project in Harisiddhi on an area of 50 ropanis where sixty or seventy buildings will be constructed each occupying six annas to one ropani of area. His company is already implementing two projects at present and has sold about 400 individual dwelling units.
Shrestha theory is that housing business is not so much affected by the macroeconomic and political situation within the country. Every Nepali dreams of owing a house in the capital or in major towns and this is not going to change in the near future. With the increasing inflow of remittance and easy consumer lending by the commercial banks, the people have just started feeling that this dream can indeed be realized.
D.R. Agrawal, Director of Ansal Chaudhary Developers that pioneered this business in Nepal , says the housing business is in temporary slump and therefore, his company is not planning to invest in real estate at present.
A closer scrutiny will help to understand the trend better.
If we accept that the basic reasons behind the surge in real estate business were the ease of finance and the increased flow of remittance, these two are not going to change in the near future. Rather they should increase as more Nepalis have gone abroad for work in the recent years and the banks are still not getting new areas to invest or park the excess liquidity they are being swamped with as a result of, again, the remittance inflow. In this situation, investing in housing sector is the best strategy for the banks. The conclusion is that the stagnation in housing business is not due to the unavailability of finance.
The main culprit therefore are elsewhere and the search rests on a number of interesting reasons.
First, the people fear that the government may lower the ceiling on land ownership. This fear was fuelled by the announcement by the communist minister of land reforms about the plan to impose such ceiling. Though he later rectified it saying that it was the view of his party, not of the government, the damage was already made. With one foot of the Maoists already in the government, the people went to speculate ceiling on total wealth as well.
Kumari bank
Share of housing/real estate loan in total loan portfolio: |
Fiscal year end 2061/62 |
All amount in ‘000’
(accumulated) |
Qtr I |
421,625 |
Qtr II |
498,140 |
Qtr III |
530,258 |
Qtr IV |
602,542 |
Fiscal year end 2062/63 |
Qtr I |
680,256 |
Qtr II |
862,147 |
Qtr III |
963,697 |
Qtr IV |
1005,239 |
Proportionate share of these three categories in total housing loan portfolio |
|
Fiscal year 2061/62 |
Fiscal year 2062/63 |
|
Qtr I |
Qtr II |
Qtr III |
Qtr IV |
Qtr I |
Qtr II |
Qtr III |
Qtr IV |
Housing companies (%) |
56% |
65% |
68% |
69% |
70% |
72% |
73% |
73% |
Individuals willing to buy or build their house on their own (%) |
40% |
32% |
29% |
28% |
26% |
23% |
22% |
22% |
Business complex, Malls (%) |
4% |
3% |
3% |
3% |
4% |
5% |
5% |
5% |
The data provided above reveal that the amount of loan provided by the bank has decreased substantially compared that to last year. Kumari Bank is lending mainly to housing companies than to individuals. The loan advanced to both types of clients -housing companies and individuals – is somewhat stagnant.
Standard Chartered Bank Nepal
Share of housing loan in total loan portfolio |
Fiscal year end 2061-02 |
(in percentage) |
Qtr 1 |
10.54 |
Qtr 2 |
12.01 |
Qtr 3 |
11.45 |
Qtr 4 |
12.08 |
Fiscal year end 2062-63 |
Qtr 1 |
13.82 |
Qtr 2 |
15.90 |
Qtr 3 |
16.14 |
Qtr 4 |
15.53 |
The proportionate share of these three categories in total housing loan portfolio |
|
Fiscal year 2061-62 |
Fiscal year 2062-63 |
|
Qtr 1 |
Qtr 2 |
Qtr 3 |
Qtr 4 |
Qtr 1 |
Qtr 2 |
Qtr 3 |
Qtr 4 |
Housing Companies (%) |
1.30 |
1.17 |
1.59 |
1.97 |
1.94 |
1.84 |
1.90 |
1.82 |
Individuals willing to buy or build their house on their own (%) |
98.70 |
98.83 |
98.41 |
98.03 |
98.06 |
98.16 |
98.10 |
98.18 |
Business Complex Malls (%) |
- |
- |
- |
- |
- |
- |
- |
- |
On the contrary, the lion’s share of housing loan in total loan portfolio of Standard Chartered Bank Nepal goes to individuals. More interestingly, StanChart is not lending for construction of business complexes and malls.
Development Credit Bank
Share in total loan portfolio |
|
FY 2062-63 |
FY 2063-64 |
Individual customers willing buy or build house |
16% |
15% |
Housing Companies |
2% |
2% |
Buying complex malls |
3% |
3% |
Development Credit Bank’s portfolio pattern resembles a lot to Standard Chartered – most of the loan to individuals, not to housing companies. However, the share of individuals has decreased marginally.
ACE FINANCE COMPANY
Fiscal Year 2062/63 |
Quarter |
Increased/Decreased (%) compared to previous quarter |
1 |
10.46 |
2 |
-9.16 |
3 |
5.15 |
4 |
10.79 |
Shrawan-Bhadra 2063 |
2.60 |
Overall, Ace Finance’s housing loan is diminishing quarter after quarter.
Second is the change in the British rule allowing permanent settlement of ex-soldiers of British army and their family in the UK . These ex-British Gurkhas were the major customers of the housing companies. Many of these ex-British Gurkhas, who would otherwise have stayed in Nepal and would have bought a bungalow, are already in UK now. According to one estimate, after the new rule came into implementation on October 2004, nearly 230 ex-soldiers with 800 dependents are moving to United Kingdom each year.
Third is the strong hope for permanent settlement of the conflict and restoration of lasting peace so that the people displaced by the Maoist insurgency would go back to their village homes. One cannot forget that one strong reason for the increased demand for housing in Kathmandu and the other towns was coming from this group of people.
While these reasons explain the stagnant demand, the supply too is not increasing due to the apprehension about the ceiling on land and property.
Still the bankers and developers both feel that once the people perceive that peace is permanently restored in the country, the boom period will come back in the housing sector. While the people returning to the villages will create a demand for modern housing in the rural areas, thus expanding this business outside the cities, the Kathmandu-centric model of governance will maintain a healthy growth rate in the demand for houses in Kathmandu, hopes Kalyan Bikram Pande of Kumari Bank, who rather fears that once it happens, there will be intense competition because of the scarcity of land in good locations.
Therefore, the recommendation of the housing companies and banks is for the government to do its homework now to refine the housing policy so that the growth would be healthy, not haphazard, when it starts again. One such policy reform suggested is in terms of the speed of granting permissions. For example, Dilip Kumar Neupane of Civil Towers, says that his company’s project could have come into operation one year back had the government taken faster steps in providing the permissions. Similar is the view of IR Tamang, executive chairman of Civil Homes. However, he hopes the things would improve after the parliament approves the housing law that is pending with it.
(Bibek Subedi & Manish Bikram Shah)
Should Nepal Go For Bancassurance?
BY Dr. J Ghosh
“…by 2006, Bancassurance could potentially account for 13% of total premiums collected in Asia’s life insurance sector and 6% in the non-life sector”
Swiss Re Sigma report -02
Too many cooks spoil the broth, goes an old adage. However, in the changing scenario of financial product development, a large number of caterers have to be dealt with. The 'always connected' generation is upon us - forward thinking banks are experimenting with various distribution channels to reach them. So multi-channel is the name of the game.
"Bancassurance is a business strategy. Its raison d'etre is to increase the sale of financial services and products to your bank's client," says Rakesh Maini, Country Manager-India ReMark Asia Pacific. Variji Pujara, Head - Bancassurance Birla Sun Life Insurance defines Bancassurance as a 'process of distribution of insurance products by a bank through its channels'. T K Sengupta, DGM National Insurance opines 'Bancassurance is a bank focused sales process, radically different than traditional Agency concept, effectively bringing together two different business cultures of insurer and banker. Bancassurance is more service than business'. So Bancassurance is not simply a method of distributing insurance products through financial institutions. It is a global movement that is gradually breaking down the traditional barriers between the various businesses of supplying financial products and services.
Global Trend
Bancassurance strategies have enjoyed considerable success in Europe for some time, where an estimated two-third of life insurance and pensions business is transacted by banks in the leading markets of Spain , Portugal and France .
Globally bancassurers are in a favourable position with the change in consumer attitudes and buying behaviour. The customers in markets as diverse as Singapore , Mexico and Taiwan are comfortable and in some cases prefer bank channels for insurance purchase. In Mexico 59 per cent of customers surveyed prefer to purchase insurance through banks or direct sales force as against 37 per cent who prefer to purchase through agents. In Singapore , the top channel for life insurance is bancassurance with 75 per cent of the customers surveyed indicating that they prefer this channel.
Asian Experience?
Bancassurance in Asia-Pacific is 20 years old this year! Beginning in Australia in 1986 -Westpac Life, now in operating in virtually every country. Bancassurance continues to grab market share from the traditional agency channel with traditional "agency only" companies actively seeking bank relationships to catch up on lost ground. Bancassurance penetration ranges from around 5 per cent to as high as 40 per cent of new business in countries such as Taiwan , South Korea and Hong Kong .
Foreign players are often the most aggressive in bancassurance, particularly when new to the market and seeking to avoid daunting challenges in building an agency channel.
New foreign players have grabbed market share through alternative channels, forcing the established domestic players to change their traditional ways. Two Asian markets of great interest for their potential size are China and India . Although their insurance markets are relatively young, bancassurance is now emerging in both countries.
Bancassurance Temper In India
In a country of one billion people, the sky is the limit for insurance and bank products. The Indian middle market segment is the second largest in the world after China . Picture this scenario: 1 million private motor growing at 20 per cent - out of which 85 per cent are financed, 1.5 million homes added every year of which 80 per cent financed by banks and 6 million people are Credit Card users. Discovery happens from looking at the same thing as everyone else does but seeing some thing differently. A bank's desire to increase fee-income has them looking at insurance and they are forging partnerships.
The entry of private players has given a leg-up to the domestic insurance industry.
In the General Insurance segment Gross premium underwritten were up 16 per cent during the year 2005-06 to Rs 20,378 cr. It was contributed by four state-owned and 10 private insurance companies. Out of 10 private companies six have made strategic alliance with 28 financial institutions and the state-owned insurers have made strategic alliance with 31 banks. G R Singh, DGM National Insurance informs in FY 2006 National Insurance has tied-up with 20 banks procuring Rs. 174.5 cr premium and recorded 30.72 per cent growth in bancassurance segment alone.
Lessons from India
'The current loose form of referral arrangements in bancassurance would need to change to committed forms of distribution relationships' says R Krisnamurthy, MD, W W Insurance Consulting ( India ). He suggests that internalised sales models should target to tap the corporate and business clientele of banking partners through active worksite marketing and direct marketing initiatives. Also emphasises the need for accelerated product innovation. Products to introduce a range of term insurance, payment protection and savings plans suited for the bancassurance platform, with regional variants, consistent with the diversity of client base in Indian banks.
The current practice of shoe-horning general agency products for the banking channel needs to change.
It needs to pay attention to customer servicing issues without limiting to product push initiatives in bancassurance .
Bancassurance & Nepal
The insurance penetration in Nepal is minimal due to the high distribution costs involved in the hilly geophysical condition. Nepal is administratively divided, into 75 districts and 3,915 VDC and 57 municipalities, which are the lower administrative units in the district. Each VDC comprises nine wards and these could range from nine to 35 depending upon the size of the population. At present headquarters of the 66 districts are connected by road. It is a Herculean task to bring these people under the insurance fold through insurance companies as it is an impractical economic proposition. Should they be left uncovered against unforeseen misfortune?
There are 15,000 NGOs registered with the Ministry of Social Welfare. Also the 17 commercial banks and other banking institutions (OBI) which include all deposit taking financial institutions other than commercial banks viz.; 20 development banks, five regional development banks, 59 finance companies, 21 financial co-operatives, 44 financial non-governmental organisations and 116 postal saving banks. In Italy the post office network has proven a dominant and stable channel.
Distribution and servicing are two key areas in developing the rural insurance business. And the twin objectives will be accomplished by forging a relationship with the banking sector.
The scope of growth of bancassurance is immense and it has no restrictive effect on the traditional insurance market. On the contrary it will boost the development of a new insurance market. Economically, it is the most cost efficient medium of distribution of insurance products. In order to expand the marketing base throughout the country, strategic alliances and tie-ups with banks and non-banking financial institutions will be helpful to increase the insurance fold.
There are two different regulators governing bank and insurance. Keeping in view of global trend of bancassurance both the regulators should critically examine its suitability in the perspective of Nepal and accordingly future path of mass protection plan matched with sustained economic growth is to be slated.
Christopher Reeve once said, "So many of our dreams at first seem IMPOSSIBLE, then they seem IMPROBABLE, and then, when we summon the will, they soon become INEVITABLE."
Bancassurance :
A Win-Win-Win Game
For Banker: There are a host of reasons as to why banks prefer to enter the insurance business.
Financial benefits to a bank's performance can flow in a number of ways, as briefly outlined below:
l Increased income generated in the form of commissions and/or profits from the business (depending upon the relationship)
l Reduction of the effect of the bank's fixed costs as they are now also spread over the life insurance relationship
l Opportunity to increase staff productivity, as they now have the chance to offer a wider range of services to clients
n The high operating expenses of bank branches have led many banks to decrease their branch network. The need for more efficient utilisation of branches and bank employees today is as pressing as ever. However, in Italy the number of branches has increased due to the noticeable development in bancassurance. In the future, in view of ongoing consolidation, the bank branch networks will probably decrease as well.
n Banks are used to having long-term relationships with their customers. They have developed skills in deepening the relationship with their customers over time, for example by marketing extra services such as deposit funds or taxation advice.
n Apart from the benefits that can be derived from the possible spread of branches across the country, bancassurers can have a competitive advantage over traditional insurers (non-bancassurers), derived from the provision of customer service through automated teller machines (ATMs). In particular the bancassurer can provide its customers with an ATM card that can be used to gain access to any ATM and request information such as cash values, unit price, policy status, next premium due date, loan accounts, surrender values, etc.
This channel of customer service can easily be extended so that the customer gains access to information regarding his bank accounts and insurance policies through his personal computer.
Finally the Internet can be considered an additional customer service channel since the customer can gain access to information regarding his bank accounts and insurance policies through this network as well.
For Insurer: New Source of Business :: Reaching- previously un-reached clients: the bank's client base may well be "virgin territory" for the insurance company and so a new source of business. Possible reasons:
l Geographic: the bank's clients are in a territory where the insurer has only a limited presence (if any), e.g. because the insurer's agency structure there is limited.
l Demographic: the bank's clients may form a very different group (e.g. by age, sex, purchasing habits) to the one which the insurer has previously courted.
For example, an insurer who previously concentrated on high net worth individuals ("HNWIs") can now gain access to a wider range of customers who will not all be HNWIs.
New Source of Business - wider range of products (including banking products): The insurance company hopes to attract further business, from both existing and new policyholders, because of the fact that it can offer a wider range of services than before, i.e. it can give its customers access to banking as well as to insurance services.
New Source of Business - products not otherwise feasible: the economics of the bancassurance operation may allow the insurer to offer products which are not feasible through the insurer's existing channels. For example, sales costs incurred under existing channels may force premium rates for a product to be uncompetitive, so the product is not sold. The costs via the bancassurance channel may be low enough to make it feasible.
Administration - economies of scale: the insurance company can reduce the product marketing cost ratio, on the other hand the business domain will be wider for more selling. This in turn allows the insurer to improve his profitability and to price future products with narrower margins, which helps to make the insurer's products more competitive.
For Consumers: Bancassurance offers convenient access to a wide range of integrated financial services from a single provider, and more competitively priced insurance products as a result of insurers passing on cost savings arising from lower distribution costs. The more effective use of technology and higher investments in the development of human resource competencies by banks and insurers to support the increased customer focus that is central to an effective bancassurance strategy, is also favourable to consumers. Over time, this is expected to lead to significantly improved services to consumers and thereby, a higher overall level of consumer satisfaction.
How Regulators see Bancassurance?
Regulators support bancassurance, although in some countries, they have slowed down the implementation due to local pressures.
# The Philippines: Regulations requiring minimum equity holding by insurance companies in banks for distribution tie-up
# Malaysia : Restrictions only on foreign insurers to work with local bank.
# Japan : After substantial delay, banks getting clearance to sell more OTC products. Still restrictions on sales to borrower firms and their managers.
# South Korea : Limitations on volume of business with each partner and delays in release of products due to pressure from agency companies
# India : Relevant regulations permit corporate agency to bank without risk participation and allowed to opt agency from one life-insurer and one non-life insurer.
Models of Bancassurance
In Asia , one sees a continuum of operating models of bancassurance. There are three basic approaches to partnership, with the level of integration of the manufacturer and distributor being the main distinguishing feature.
Distribution Agreement: The banks distribute insurance products (standalone or bundled with bank products) in return for fee income. There is little sharing of customer database and also difficult to justify long term Investment.
Strategic Alliances: There is a higher degree of integration in product development service provisions and channel management between banker and insurer. Also has the possible sharing of customer database. Here requires Investment in IT and sales personnel and planned insurance training for bank employees.
Joint Ventures: In this case there remains a clear mutual ownership of products and customers with sharing of customer databases. Also requires strong long term commitment from both sides.
Is There A Preferred Model?
'In our research in excess of 70 per cent of life insurance senior executive interviewed expressed a clear preference for the strategic alliance / joint venture models says Stephen Collins, Partner, Alfinanz Solutions Asia. Collins further added that there are three Macro Drivers of bancassurance that influence the success of (1) public policy, (2) market conditions and (3) enterprise capability.
The Effect of Public Policy: The effect of public policy has pronounced effect on creating a successful environment for bancassurance to develop in.
# Statutory licensing, compliance & reserving controls on banks and insurers determine the availability of models to be employed; India and Singapore vs Japan and Korea
# The legal framework such as the tax advantages / disincentives toward life insurance savings and investments can radically affect the direction the industry takes.
# Demographic trends forcing the creation of government mandated compulsory retirement savings vehicles - a major force in the success of bancassurance in markets such as Australia ; underpinning Korea , Japan .
# Highly prescriptive regulations directing what products are sold, how they are sold and at what price they may be sold -e.g. product filing.
The Effect of the Market: All partners are not equal! Some banking partners are clearly more committed than others. In any market there is a finite choice of banks to partner with. Ideally your choice of partner would depend upon:
# Partnership alignment - Who has the bank already partnered with;
# Branch network -What coverage of your market does the bank have.
# Brand value -How strong is the value of the brand -trust, integrity, longevity.
# Customer base -What kinds of customers does the bank concentrate on; cards, retail, and commercial.
# Management team commitment -How seriously is insurance looked upon.
# Financial model -How fee income driven -What are the bank's income expectations; yr -yr commission, long term value creation and sharing.
The Effect of the Enterprise : It is at the enterprise level that we can have more of an effect on our success, regardless of the model.
Even allowing for the impact of policy and market conditions the successful players tended to have the following things in common -to some degree regardless of model e.g. management commitment, strong product capability, and effective distribution channel.
As in all business situations, a proper strategic plan drafted according to the company's internal and external environmental analysis and the organisation's objectives is necessary before any decision is taken.
If insurers and banks choose to go all the way down to integrate their missions, operations and systems to serve the customers, if both partners talk and listen to each other, together they become formidable.
(Dr. Ghosh is CEO, National Insurance Company Ltd. and this article was prepared on return from 7th Asian Bancassurance Conference held in Mumbai.)
Why only big borrowers?
By Bipin Hada & Santosh Pandey
Going through the schedule of interest rates applicable on loans and advances published by commercial banks, we observe that different categories of borrowers -- Corporate, Multinational, Prime, Others and so forth -- in the series of columns along different loan product lines. It can be seen that the applicable interest rate on the same type of loan heading but in a different category is different. The difference in applicable interest rate value varies between 0.25 basis point and 1.0 basis point or even more from one category to another.
The criteria for categorising borrowers are up to the discretion of the commercial bank concerned and such criteria differ from one bank to another. In general, such categorisation of borrowers is done on the basis of factors such as the tenure of association with the bank, volume of business provided in the past by the party itself and/or by the Group companies, total income generated from the party or the Group, past transaction history, debt service history, security coverage, quality of security available, potential for future business, etc. Some banks use criteria based on the borrower's financial strength reflected by various financial indicators such as sales turnover, cash flow, current ratio, profitability, net profitability etc., derived from the financial statements.
Due to these criteria, more often than not, small and medium borrowers fall in categories with higher rates of interest. Similarly, new borrowers are also bound to pay a higher rate of interest because of the lack of financial history irrespective of the feasibility of projects and quality of the proposed security. The cost of funding for small and medium level borrowers and new borrowers automatically goes up and as a result, these very borrowers will find it difficult to compete with big business houses. Similarly, new entrepreneurs show the lack of conducive atmosphere for growth and development of small and medium level business enterprises in the country.
This practice of categorisation with varying interest rates on loans of the same nature was given impetus due to Central Bank's directives on restricting deviation of applicable interest rate on loan and advances at 50 basis points from its publicised schedule of interest rate among the borrowers under same loan heading. Such directives seem to undermine the fact that borrowers are different. Borrowers ideally have to be categorised based on factors such as profitability of relationship with the bank and risks associated with the projects they propose. Therefore it is necessary to differentiate borrowers in terms of associated risks and the interest rates have to be defined as risk premiums to compensate for the risks taken thereon. Differentiation of 50 basis points is both arbitrary and ad hoc on the part of the Central Bank. This is insufficient to differentiate a wide range of borrowers coming from different backgrounds and with varying scale of operations and risks. This led to banks inventing new categories of borrowers under the same nature of loan facilities providing them with the flexibility of levying different interest rates on different borrowers and at the same time complying with the Central Bank's directives. It could be because of this that the Central Bank has now withdrawn the directives. However, Banks have continued the practice of borrower categorisation.
As per the NRB directives, a bank has to allocate reserve fund from its income on account of loan loss provisioning on its exposure covering its entire loan and advances portfolio according to the status of loan portfolio. Such exposures are divided into four different categories as Pass, Doubtful, Substandard and Bad and the provisioning has to be done at the rate of 1, 25, 50 and 100 percentage of the total loan exposure in each category respectively. Besides, a bank is also required to provide additional reserve cushion on account of interest suspense for the total overdue or accrued interest dues to be recovered at the particular cut-off date which is defined as the fiscal year end date. These two fund allocations greatly affect the overall face of the financial statements of the banks. Lower the amount of fund allocated under these reserve headings, better is supposed to be the financial health of the bank.
Therefore, in the backdrop of recent stringent NRB directives on loan loss provisioning and interest suspense where loan loss provisioning and interest suspense is to be made on the basis of cut-off date, it is high time that banks reconsidered their criteria on categorization of borrowers. Borrowers with excellent debt service habit exhibited by promptness in payment of interest dues and principal installment dues are to be placed in the category where maximum benefit of lower interest rate is to be provided. Other borrowers might be put into other different categories considering other factors or they may be categorised according to prevailing practices. This will greatly resolve complaints coming from the general public and the potential new and medium scale borrowers where they claim that banks have only been big borrowers-friendly. This will also be a step forward taken by banks in joining hands in promoting new and small enthusiastic entrepreneurs for growth and development of business which would ultimately help in the development the country's economy.
(Bipin and Santosh are freelance writers)
ICT in Nation Building: 105 Mantras
BY Allen Bailochan Tuladhar
1. Scrap all STD charges on accessing Internet and e-mail, irrespective of the ISP being dialed.
2. Institute a system of sharing the revenue of the service provider and the content provider
3. The present 2+4 per cent taxes on telecom is too high. ICT is one of the highest taxed industries of the country equal to the alcohol, tobacco, gambling and recreation industries. Such tax should be reduced to zero or near zero.
4. NTA, MOIC, Registrar's Office and FDI Cell at Finance Ministry should be time bound (two weeks) to process applications.
5. ISM bands should be public and licence and royalty free.
6. Expand the 1-800 & 1-900 services (Intelligent Network services) throughout the country.
7. Licence fee for ISP should be zero for first five years, and thereafter Rs 1 only like in India .
8. Immediately invest the money collected in Rural Telecom Development Fund. No more promises and excuses -- action is what is required now. This is public money that needs to be invested into the rural areas of Nepal .
9. License 5.2 GHz UniBand not per equipment but per operator.
10. Allow mutual inter-connectivity between different networks.
11. Allow cable TV operators to provide Internet without additional licencing (single licence for all types of services).
12. Allow the service providers the last mile flexibility by using any form desired. Only radio should be required to coordinate with the wireless authority (that too with MOIC only not with MOIC and NTA both).
13. For radio frequency licences, the security agencies should get 30 days to respond to applications, failing which, permit should be automatic.
14. Telecom operators should accord the highest priority to providing telephone lines to those going in for electronic commerce and electronic data interchange (EC/EDI).
15. Concept of Rural Telecentres with all sorts of multimedia and Internet capacity should be encouraged. No licencing should be required for this.
16. Fax over IP and paging services should not require licence.
17. Frequencies of 13.56 MHz, 918-920MHZ, 2.45 GHz should be allocated to RFID and should be licence and royalty free.
18. Hi-Tech Habitat concept should be promoted. Housing and apartment buildings should be given subsidies to use the highest technologies in digital lifestyles: HDTV, interactive surveillance and security systems, WiFi and WiMaxpro hot zones, ubiquitous networks in household appliances, etc.
19 . Both customs duty and VAT on IT software should be zero.
20. Duty on media of any kind should be levied only on the media, not on the content value.
21. Block grant of Rs. 1 million to the VDCs should be used to provide 100 per cent subsidy to create rural telecenters in each VDC that does not yet have a telecenter.
22. Each government department should have a website and an IT officer to update this website
23 Each government office should entertain queries through telephones and emails as well. For this there should be domestic call centres.
24. As the objective of the IT Policy 2000 to provide computer education to all by 2010 is not likely to be fulfilled, the new objective should be "one house one digital literate".
25. Export shipment time for air cargo should be reduced to less than 24 hours.
26. Income tax exemption should be provided on profits derived from IT exports. This facility should be extended to supporting software and services developers as well.
27. IT software and services should be deemed as manufacturing activity and be provided with all the privileges provided to priority sector industries and export-oriented industries.
28. Bring out policy for direct to home connectivity.
29. Exempt personal income tax on expenditures on IT.
30. Scrap gift tax on IT related gift of upto Rs. 50,000 in value.
31. Allow depreciation at the rate of 50 per cent per year on IT goods and software (100 per cent in two years).
32. Scrap collateral requirement on bank credit for IT. It should instead be based on turnover and contracts in hand (25 per cent of contract value for 18 months, first six months as term loan, without collateral).
33. IT should be treated as priority sector for bank loan for the next five years. Banks should create special cells to handle the IT sector. IT development bank should be set up.
34. Satellite radio policy should allow one way data dump for offline browsing for rural telecentres.
35. Refinancing by NRB for loans to IT should be at low rates, replicating the example of financing for the hydel industry.
36. Banks should be allowed to invest 5 per cent of their equity in shares of IT companies. The banks should also be allowed to invest in IT venture capital investment.
37. Set up four venture capital funds of Rs. 50 crores each for investment in IT. Police and Army Welfare Funds, Employee Provident Fund and Citizen Investment Trust should invest a large percentage of their funds into this Venture Capital Fund.
38. Make provision of 'Sweat Equity' to IT employees in IT companies so as to reduce the problem of employee retention.
39. R&D grants should be instituted so that even micro-funding can foster a research and development culture.
40. A national 5-year ICT plan should be created in sync with the national 5-year development plan and an annual ICT plan in sync with the national budget.
41. Local language content and digital gateways should be encouraged.
42. Local credit/debit cards should be allowed to be used online.
43. National Public Awareness Campaigns should be conducted. National ICT Day should be observed.
44. Duty exemption should be provided for importing capital goods for companies providing IT infrastructure.
45. PC to Phone/VOIP should be decontrolled. Policy should be created for licencing of VOIP.
46. The existing cumbersome system of allowing FDI should be reformed. There should be a one-door-policy in reality.
47. If an organisation has to provide pre-job training, this should be supported by the government and academia.
48. International consultants should be commissioned to assess country's relative IT standing in the world.
49. If an IT company is to own land and/or building, the registration charge should be reduced so as to encourage capital investments for long term sustainability for the company.
50. The country’s trade promotion body should be made more active and IT savvy to facilitate the participation of IT companies in international trade fairs.
51. If any IT company is generating power for its own use, it should be provided the same subsidy that is currently provided on alternative energy.
52. Government websites should be developed in collaboration with the private sector for the promotion of Nepali IT industry internationally. Nepalese websites should be promoted.
53. Human resource export organisations should be created for export of IT manpower.
54. IT enabled services should be classified as IT services.
55. Local software should be encouraged by law in all government and donor agency funded projects even if it is 15 per cent more expensive. Every foreign ICT company should be required to either establish a local office or tie up with a local partner to bid for supply or work in Nepal .
56. Private ICT Parks should be encouraged and facilities provided.
57. Vidyarthi computer scheme, Shikshyak computer scheme and Pathsala computer scheme should be initiated with micro-credit funding in partnership with the banks.
58. Computers and internet should be made available in EVERY school, college and hospital by 2008-end.
59. Distance education should be promoted for IT at ALL higher education institutions.
60. Initiate an ICT national development volunteer service under which the ICT engineers are required to go and volunteer their time in rural telecentres and government schools for a couple of months.
61. For promoting digital literacy, National Council for IT Education should be formed and Teach the Teachers programme should be launched.
62. IT course module should be made COMPULSORY in all degree level courses.
63. Nepali IT universities should establish sister IT relationship with foreign universities.
64. Specific courses should be launched to upgrade capacity within the country for Project Management and Software Marketing.
65. SMART school concept should be introduced on a pilot basis.
66. Institute of Computer Professionals should be set up to accredit IT training institutes if CTEVT is not willing to take on this responsibility.
67. Security knowledge in Armed and Police Forces should be IT upgraded. Knowledge on IPR issues should to be made more rampant in local police stations.
68. Virtual institutes should be encouraged for distance education.
69. Upon retirement, the government personnel should be re-used to propagate ICT in rural sectors.
70. Set up National Qualification Framework and an Educational Credit Bank. Double check fake certifications and verify all kinds of certificates being issued at the moment.
71. Digital Libraries Project should be started. Digitise all the knowledge that we have so that it can be made accessible to a wider audience online.
72. Those districts which have achieved high literacy should now target to achieve computer literacy.
73. Special focus should be on developing IT in previously under-developed areas --- primary focus to Far Western Region.
74. Encourage value added services e.g. ATM, kiosks, smart cards -- One stop non-stop concept.
75. A system for registration of rural telecentres should be developed so that coordination of the same can be achieved.
76. Launch a campaign for IT in the local language. (Ninety+ national languages recognised in the proposed interim constitution.) Skills need to be taught to each community to create solutions for their own language in ICT.
77. Launch demonstration projects to highlight use of IT in agriculture and integrated rural development. Go for wired village concept.
78. Target to propagate IT in rural areas through backbone expansion. Use existing cable TV network for Internet especially for peri-urban areas.
79. Follow a time bound programme in imports and exports (especially at he Tribhuvan International Airport ) to use EDI and electronic commerce.
80. Make bar coding of each and every item sold in the country COMPULSORY within five years. (VAT collection could go up substantially !)
81. Every government information should be made automatically available to the public, for transparency.
82. Make available online all the information of all government data collecting agencies (such as, in case of municipalities, birth, marriage, death certification, passport, citizenship, land ownership document, drivers license, etc.)
83. Citizen's charter for transparent government should be framed and initiated for every government department and office and it should be made available online.
84. There should be 5-year IT Plan by each and every development region in sync with the national 5-year ICT plans, which in turn should be in sync with the 5-year plan of each and every government department.
85. Five percent of each ministry's budget should be compulsorily spent on IT products and services, skills, etc.
86. Bulk contracts should be awarded for IT so as to lower costs. Concepts like bolpatra.com to be better utilised to ensure higher usage and transparency in tender bidding processes.
87. IT Park should be handed over to a private sector company on long-term lease.
88. Amend the labour law making it more ICT friendly (i.e. non union and non strikeable).
89. All government data should be made available over intranet between government departments and through Internet to the public.
90. Arrange for IT intervention in all eight of United Nation's Millennium Development Goals.
91. Create computerised national inventory of training and best practices for electronic access.
92. Create computerised national inventory of all the job descriptions of ICT industry for electronic access to enable employees to gain better insights on their career in ICT.
93. IT literacy should be made ESSENTIAL for future employment in the government.
94. National Institute of Smart Government should be set up and all senior government officials should be trained in it for capacity building if the Staff College is not willing to take this responsibility.
95. ICT should be factored into all departments of Public Administration.
96. Government floor space and ICT infrastructure un-utilised during non-office hours should be allowed to be used by private sector IT trainers in return for free seats for government personnel.
97. Interconnectivity gateways should be set up in all the five development regions and they should be interconnected with NPIX in Kathmandu .
98. IT ambassadors should be appointed in most of the big customer countries of ICT.
99. Special awards and recognitions should be provided to ICT companies that make an IPO and those with offices outside the country.
100. Annual ITIP (IT Important Person) recognition should be instituted in line with the Commercially Important Person to be given to the highest foreign currency earning company in ICT exports.
101. Nepal government's seal of approval (purely accreditation and not quality) should be provided to any Nepali IT packaged solutions.
102. Paper records should be kept for a MAXIMUM of TWO months only after which only electronic records should be kept.
103. Adopt the concept of tele-everything: banking, medicine, education, library, documents, transfer, e-commerce, tele-centre.
104. Create national standards on ICT and harmonise these with international standards at the same time to promote and police national standards usage and abuse when required.
105. Give a three-month time limit for follow-up measures on above to all government institutions.
(Tuladhar is CEO of Unlimited NuMedia)
