Links of Interest (2012-04-03)

Nepal clears China plan for $1.6 bn hydroelectric dam

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A parliamentary panel cleared the way for a Chinese company to build a $1.6 billion hydroelectric plant in Nepal, the Himalayan republic's biggest foreign investment programme, Nepali officials said on Monday. Nepal's Maoist-led government signed an agreement with China's Three Gorges International Corp in February allowing the firm to construct the 750-megawatt West Seti dam in the northwest.The project, set to be completed in 2019, is expected to ease the crippling power shortage in Nepal whose economy is still emerging from a decade-long civil war - conflict that scared away investors and slowed infrastructure projects.

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China boosts trade with Nepal

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China will provide Nepal with technology and assistance to build a border land port that will boost trade and serve as a transit point on a proposed railway line, Chinese officials have said. […] Last year, China also opened a port of entry at Gyirong in TAR to make it a major passage for land trade with Nepal. China plans to make Gyirong a 44.5-sq.km. “cross-border free trade zone” with Nepal, according to Chinese media reports, with 1.2 billion yuan ($190 million) spent to upgrade its infrastructure. A five-year plan for TAR's development announced in January detailed measures to build highways and rail links to boost connectivity to border regions. Part of the plan is upgrade the 318 National Highway, also known as the “friendship highway”, that runs to Gyirong and to Zhangmu, a border town where much of the trade between China and Nepal takes place. […]Trade between China and Nepal grew by 61 per cent last year to $1.2 billion. Chinese officials say they see potential for supporting infrastructure and hydropower projects in Nepal with the country facing deficits in both areas.

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Transport syndicates rule the roads in Nepal

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Though the government has scrapped syndicate in transportation, Prithvi Highway Bus Entrepreneurs Committee (PHEBC) -- a syndicate of transporters operating along the Prithvi Highway -- on Monday foiled attempt to start direct tourist coach services between Pokhara and Chitwan. The Pokhara Chapter of Nepal Association of Tours and Travels Agents (NATTA) and Regional Hotel Association, Chitwan had announced the service to facilitate tourists traveling between the two tourist destinations. The service was scheduled to begin from Monday itself. Shankar Koirala, president of PHEBC, said they protested because the green-plated buses are meant to carry foreigners only. “Who will travel in our buses if green-plated buses started carrying Nepalis in the name of domestic tourists?” questioned Koirala. “As the green-plated vehicles enjoy tax exemption, they should carry only the foreigners.”

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Another sad result on aid effectiveness: Herzer and Nunnenakamp argue that “foreign aid could help improve economic conditions of the poorest population segments and narrow income gaps. However, the data seems to indicate aid has actually widened the gap between the rich and the poor.”

Do sanctions work? van Bergeijk argue that “the sanction cases reveals that the probability of a sanction succeeding against a democracy is two times as high as that against an autocracy.” Three reasons why sanctions might work now:

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First, globalisation has increased the importance of undisturbed international trade and investment for potential targets of economic sanctions: countries that three decades ago were more or less self-reliant can now be hit much harder by economic sanctions.

Second, the decision-making processes, especially in the United Nations, have been streamlined, increasing the speed of implementation.

Third, the world is much more democratic than during the Cold War.

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Why is Haiti so poor?

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Haiti was one of the most extractive colonies Europeans set up, with the majority of its population working as slaves in plantations for their French masters.

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Low tax rates and economic growth

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I believe this issue is of the utmost importance given the urgency with which many legislators and economists in various countries advocate tax cuts. This advocacy is regrettable because neither the theoretical nor the empirical grounds for it are sound. It may even be the case that low tax rates have unwanted harmful consequences instead of the assumed beneficial ones.

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Cost of economic non-cooperation in South Asia

Here is a presentation from an event held in Kathmandu yesterday. It is basically a summary of this report prepared by CUTS International. Here is the draft report.

Note: I did not do the data analysis. So, the figures quoted in the presentation are not mine. Attribute them to CUTS International. Read the full paper here.

A development bank of the BRICS

In the latest BRICS summit head in New Delhi, Prime Minister Manmohan Singh, Chinese President Hu Jintao, Russian President Dmitry Medvedev, Brazilian President Dilma Rousseff and South African President Jacob Zuma decided to move on setting up a development bank to mobilize "resources for infrastructure and sustainable development projects in BRICS and other emerging economies and developing countries, to supplement the existing efforts of multilateral and regional financial institutions for global growth and development".

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We have considered the possibility of setting up a new Development Bank for mobilizing resources for infrastructure and sustainable development projects in BRICS and other emerging economies and developing countries, to supplement the existing efforts of multilateral and regional financial institutions for global growth and development. We direct our Finance Ministers to examine the feasibility and viability of such an initiative, set up a joint working group for further study, and report back to us by the next Summit.

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On trade:

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We will continue our efforts for the successful conclusion of the Doha Round, based on the progress made and in keeping with its mandate. Towards this end, we will explore outcomes in specific areas where progress is possible while preserving the centrality of development and within the overall framework of the single undertaking. We do not support plurilateral initiatives that go against the fundamental principles of transparency, inclusiveness and multilateralism. We believe that such initiatives not only distract members from striving for a collective outcome but also fail to address the development deficit inherited from previous negotiating rounds. Once the ratification process is completed, Russia intends to participate in an active and constructive manner for a balanced outcome of the Doha Round that will help strengthen and develop the multilateral trade system.

We agree to build upon our synergies and to work together to intensify trade and investment flows among our countries to advance our respective industrial development and employment objectives.We welcome the outcomes of the second Meeting of BRICS Trade Ministers held in New Delhi on 28 March 2012. We support the regular consultations amongst our Trade Ministers and consider taking suitable measures to facilitate further consolidation of our trade and economic ties. We welcome the conclusion of the Master Agreement on Extending Credit Facility in Local Currency under BRICS Interbank Cooperation Mechanism and the Multilateral Letter of Credit Confirmation Facility Agreement between our EXIM/Development Banks. We believe that these Agreements will serve as useful enabling instruments for enhancing intra-BRICS trade in coming years.

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Also this excerpt from The Economic Times:

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The development banks of the five countries signed a master agreement on extending credit facilities in the local currency and the BRICS multilateral letter of credit confirmation facility agreement in the presence of their leaders at the Taj Palace Hotel here.

The participating banks include the Export Import Bank of India, Banco Nacional de Desenvolimento Economico e Social (BNDES) of Brazil, State Corporation Bank for Development and Foreign Economic Affairs of Russia, China Development Bank and Development Bank of South Africa.

The master agreement is aimed at reducing the demand for fully convertible currencies for transactions among BRICS nations, and thereby help reducing the transaction costs of intra-BRICS trade.

The confirmation facility pact envisages confirmation of lines of credit on receipt of a request from the exporter, the exporter's bank or the importer's bank.

The pacts are expected to scale up intra-BRICS trade which has been growing at the rate of 28 per cent over the last few years, but at $230 billion, it remains much below the potential of the five economic powerhouses. BRICS has set a target of $500 billion by 2015.

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Reasons why Nepal should not ban Gurkha recruitment in foreign armies

It was published in Republica, March 28, 2012, p.6.

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Un-feathered cap

Due to the dearth of job opportunities and low wages, thousands of people, mostly youths, seek employment abroad each year. Historically, people sought employment in the Indian and British armies and the Indian states close to the border. Lately, the government is trying to ban Nepalis from joining foreign armies. Their reason for doing so is as ludicrous as it can get and it reeks of a populist agenda trying to capitalize on the fluidity of the current popular sentiment and political and institutional foundation.

Without a credible backup plan, banning recruitment of Gurkhas in foreign armies on baseless grounds will hurt the economy, foster discontent among particular ethic groups, and erode one of the widely known and admired identities of Nepal. Apart from the Mount Everest, Gautam Buddha and mystic mountains, the Gurkhas have been one of the major entities giving Nepalis a reason to hold their heads high even though time and again the corrupt and whimsical acts of political leaders have tarnished that very identity.

Recently, the Office of Prime Minister and Council of Ministers directed the Ministry of Foreign Affairs and other line ministries to implement recommendations of Nepal’s Foreign Policy in Changed Context: 2068, which among others argued for the eventual ban on recruitment in foreign armies. On December 26, 2011, the Parliamentary Committee on International Relations and Human Rights (PCIRHR) had unanimously endorsed the report. The reason for this nonsensical recommendation is that the political leaders think employment in foreign armies has barred the country from holding its head high.

Furthermore, the report states that the recent decision of the British government to provide citizenship to Gurkha soldiers has put the country at a loss. Note that following a popular campaign led by Gurkhas and actress Joanna Lumley, the British government agreed to let Gurkha veterans who retired before 1997 settle in the UK. Earlier, the High Court in London delivered a verdict in favor of providing an automatic right of residency in the UK for Gurkhas who left the army before 1997. Nepalis have served (and are still serving in some of them) in armed forces of India, Hong Kong, Brunei, Singapore, Malaysia and the US, among other countries. They are also employed as private security personnel of renowned personalities in the world. For the record, there are around 3,800 Gurkhas in the British force and 30,000 in the Indian Army.

Trying to halt recruitment of unemployed Nepali citizens in foreign armies defies a sound understanding of historical and economic foundations of why such things happen in the first place. Impressed by the valor of Nepali fighters against the invading forces of British East India Company, the British government signed a peace pact with the Rana rulers and opened up avenues for recruitment of Nepali citizens in the British army in 1816. Since then the Gurkhas have earned an unparalleled prestige for Nepal. They have been honored with the best awards, including the coveted Victoria Cross, for their bravery in battlefield. Recently, Sargent Dip Prasad Pun of the Royal Gurkha Rifles was presented with Conspicuous Gallantry Cross for his outstanding bravery for single-handedly fighting off up to 30 Taliban insurgents in Afghanistan. As stories of Pun’s bravery were covered all over the world by mainstream and social media, Nepal’s name followed automatically. Isn’t that a reason to hold our heads high?

Furthermore, if the political leaders find it embarrassing that our unemployed citizens are getting gainful employment and stable source of high income by joining foreign armies, then why are they not feeling the same when a large number of Nepalis are flocking to the Gulf for employment under harsh conditions? Around two million migrants are currently working in foreign countries and over 20,000 legally leave the country each month for employment. They are working in horrendous condition and at much lower prices. Their plight, rights, and work conditions and work have been the subject of multiple media stories and documentaries. Aspiring migrants are forced to pay high fees to manpower agents here, and after reaching their work destination their passports are confiscated by employers, restricting their mobility and barring them from joining another company that would pay higher wages. Some of the Nepalis workers in the Gulf languish in prisons waiting for their country’s representative to show up to assist them in returning to their country. At times, relatives are seen crying their eyes out while waiting for delivery of dead bodies in coffins at Tribhuvan International Airport. Doesn’t this actually bar us from holding our heads high? We have never heard of such stories about the Gurkhas.

Economically, the income earned by Nepalis working in foreign armies has been a major source of foreign exchange income. Nepal gets around Rs10 billion each year in payment related to the British Gurkhas. The income received by Nepal related to Gurkhas in the Indian security forces is substantially higher. In comparison to the income from tourism and interest on investment abroad received by Nepal, the forex contribution by Gurkhas weighed substantially higher up until 1996, when migrants started going en masse to the Gulf as a result of the bloody Maoist insurgency. Since then though the direct contribution of remittances related to migrants in the Gulf and other employment destinations has been skyrocketing, the income contribution of Gurkhas is not insignificant. First, almost all the income and pension of Gurkhas come through formal channel, which is something the government is tirelessly trying to promote with respect to money sent from foreign employment destinations. Second, the indirect benefits received by districts from where most of the Gurkhas hail are tremendous.

The British and Indian governments have been investing a huge sum of money in social welfare of the relatives of Gurkhas and their hometown. They have invested in agriculture, healthcare, education, and infrastructure, among others. Additionally, the foreign policy and development assistance of the countries where Gurkhas are serving are one way or the other tied to the very fact that we have our men contributing towards the defense of their countries.

The government has recently prioritized foreign employment and has taken a slew of measures to both control illegal workers and promote legal workers heading to the Gulf. In terms of prestige, working condition, and income earned, the Gurkhas fare far better than the workers in the Gulf. If the government cannot promote employment in foreign armies as it is doing for employment in the Gulf, then it should not at least crush dreams of youths who want to become soldiers in foreign armies that guarantee a stable income and attractive facilities. Let the people choose what they want to do legally, i.e. non-promoted employment in foreign armies or promoted employment in the Gulf. Don’t get me wrong here. For the economy, the money sent by both Gurkhas and those working in the Gulf and India is equally important given our precarious macroeconomic situation. Any decline in growth of remittances will derail our economy as it nearly did in 2008/09 when the decline in growth of remittances put balance of payments in the red, busted the real estate and housing bubble, and triggered a liquidity crisis.

Overall, the recommendation by PCIRHR to restrict Gurkha—probably the earliest Non-Resident Nepalis (NRNs)—recruitment is wrongheaded, which also exhibits their ignorance and poor understanding of our history and economy. There is no doubt that Gurkhas have helped and are helping us to hold our heads high. Importantly, without ample job opportunities at home that can match income and other facilities that foreign jobs provide, people will always prefer the latter one. The parliamentary committee and the government should not try to restrict people’s choice of safe and gainful employment abroad if they cannot ensure one here.

[Published in Republica, March 28, 2012, p.6]

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Bangladesh is the next hot spot in RMG sourcing. What about Nepal?

Due to declining profit margins and capacity constraints in China, investors are looking at other lower costs countries for ready-made garments (RMG) investment, production and sourcing. A recent survey by McKinsey found that 86 percent of the chief purchasing officers (CPOs) in leading apparel companies in Europe and the United States planned to decrease levels of sourcing in China over the next five years. McKinsey surveyed 28 European and US chief purchasing officers at leading apparel companies from September to November 2011. They account for US$46 billion in total apparel-sourcing value and 66 percent of all apparel exports from Bangladesh to Europe and the United States. McKinsey also conducted a telephone survey of more than 100 local suppliers.

CPOs identified Bangladesh as the next hotspot because the “country’s ready-made-garment industry identified solid apparel-sourcing opportunities there”. The top hotspots indicated by CPOs are Bangladesh, Vietnam, Indonesia and Cambodia. RMG exports of Bangladesh accounted for 13% of GDP and 75% of total exports (of US$15 billion) in 2010. McKinsey forecasts export-value growth of 7 to 9 percent annually within the next ten years, suggesting that the market will double by 2015 and nearly triple by 2020.

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Our survey of chief purchasing officers found that European and US companies that focus on the apparel market’s value segment plan to expand the share of their sourcing from Bangladesh to 25 to 30 percent by 2020, from an average of 20 percent now. Midmarket brands, which generate about 13 percent of their sourcing value in Bangladesh, plan to increase that share to 20 to 25 percent over the same period. While growth in current product categories will drive some of the increase, 63 percent of the chief purchasing officers said that they want to expand into more fashionable or sophisticated items, such as formal wear and outerwear.

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What is so attractive in Bangladesh?

• Attractive prices
• Competitive price levels due to increase in efficiency to offset rising wage costs (labor cost is expected to rise by 30% in the next three years. Wages were raised for the first time in 2010 after revision in 2006)
• Supply capacity to produce RMG. The McKinsey study notes that “with 5,000 factories employing about 3.6 million workers (of a total workforce of 74.0 million), Bangladesh is clearly ahead of other Southeast Asian suppliers in this respect.” Indonesia has about 2450 factories, Vietnam 2000, and Cambodia 260 factories. Bangladesh’s exporters are known for supplying good quality and large order sizes for the value and lower mid-market. They are now expanding into more value-added services.
• Favorable trade agreements: EU-GSP rules on duty-free imports of garments to include products with two-stage processing made sourcing from Bangladesh more attractive.

However, challenges remain in Bangladesh for apparel companies seeking to investment in Bangladesh.

• Infrastructure: Transportation bottlenecks leading to inefficient lead times for garments and delay deliveries to customers. Energy supply is also a concern, but the government has prioritized improvement in this area. Lead time for sea freight is increased by about ten days due to the lack of a deep-sea harbor. Productivity at Chittagong port suffers from inefficient processes (such as manual processing), limited crane capacity and strikes.
• Compliance: labor and social-compliance issues; environmental compliance being also looked upon by purchasing officers
• Supplier’s performance and skilled workforce: Suppliers’ productivity must improve to mitigate the impact of rising wages (and also to close gaps with other sourcing countries); lack of investment in new machinery and technologies; insufficient size of skilled workforce (middle management)
• Raw materials: Lacks a noteworthy supply of natural or artificial fibers; dependence on imports creates sourcing risks and lengthens lead times
• Economic and political stability: Political unrest, strikes, and the ease of doing business are major concerns for investors. In the survey, about half of the chief purchasing officers interviewed stated that they would reduce levels of sourcing in Bangladesh if its political stability decreased.
• Realizing the potential: Government, suppliers, and buyers need to work together to realize the potential of Bangladesh’s ready-made-garment market.

What is changing in China?

• Labor shortages: Workers in costal regions are moving on to more attractive industries and better jobs, creating shortage of labor for RMG sector.
• Increase in wages: Wages in coastal areas are rising amidst tight labor supply market.
• Capacity limit for western buyers: Chinese producers are switching to serving the rapidly growing and more profitable domestic market. The government is supporting more value-added industries to rebalance the economy. It means Western buyers are reaching their limits in sourcing RMG from China.

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Nepal versus Bangladesh

Now, this presents a problem for the already troubled RMG sector in Nepal. Nepal’s RMG export was Rs 11.12 billion in 1999/00. In 2010/11, it reduced to Rs 4.08 billion (total export was Rs 64 billion). The average annual growth of RMG exports over 1999/00-2010/11 was –1.89%. The growth rate of RMG exports declined for five consecutive years beginning 2003/04. Looking at the numbers in the table below and the choice of investors (i.e. Bangladesh), Nepal’s RMG industry’s prospect look gloomy. Unless we fix the supply-side and structural constraints, our RMG industry is further doomed. See an earlier post for the reasons for the downfall of Nepal’s RMG industry.

Nepal's export of RMG
Fiscal year	Rs billion	Growth rate
1998/99	8.15
1999/00	11.12	36.44
2000/01	11.62	4.50
2001/02	7.96	-31.50
2002/03	12.02	51.01
2003/04	10.22	-14.98
2004/05	6.72	-34.25
2005/06	6.58	-2.08
2006/07	4.71	-28.42
2007/08	3.32	-29.51
2008/09	4.35	31.02
2009/10	3.76	-13.61
2010/11	4.08	8.67

Nepal sends RMG to mainly USA (19.58% of total RMG export in 2010/11), France (16.59%), UK (14.93%), India (10.64%), Germany (8.80%), Japan (4.98%), Canada (4.42%), Italy (3.95%)and Spain (3.28%). With slowdown of import demand in almost all of these countries (save India), there is a high possibility that our RMG exports will further suffer, if corrective measures to boost factor cost and retail price competitiveness are not taken immediately. Meanwhile, Bangladeshi exporters see China, India, Australia, Brazil and South Africa (along with traditional destinations such as Germany, US, Japan, UK, and Canada) as new destination markets. Looks like Nepal is competing in similar product range (with Bangladesh enjoying more efficiency and productivity) in similar destination markets. Nepal is bound to lose to Bangladesh.

Our RMG businessmen are hoping that investors will come to Nepal to exploit the expanding opportunities in India and China. However, most of the CPOs feel that Bangladesh is the next hot spot sourcing country. Even Pakistani investors are flocking in to Bangladesh to set up RMG factories. Bangladesh borders India and has better transportation and transit links than Nepal has with India. It could use both ground transport as well as sea transport. Bangladesh’s bilateral trade with India is also increasing rapidly. So, the optimism regarding increase in investment in RMG industry as booming India is close to Nepal, which is shared by businessmen and policymakers alike, might be a little bit more exaggerated.

Furthermore, it has dedicated export processing zones (EPZs) and SEZs—something Nepal lacks. Bangladesh has less labor problems than Nepal. Power shortage is not as acute as it is here. Bangladesh’s overhead wages is two times lower than in Nepal (and still the stupid Maoist-affiliated trade unions go on repeated strikes demanding more perks and facilities, which might result in the closure of the few remaining MNCs!). Bangladeshi producers are more innovative than Nepali producers.

Now, here is a ray of hope. Though the CPOs favor Bangladesh in the region, they are also thinking of shifting a large share of their sourcing value away from China in the next five years to Pakistan, Nepal, Bhutan and Southeast Asia as well. If Nepal could address the above mentioned constraints on time, then may be we could draw in the attention of some of the CPOs to our economy.

Indian investment in Nepal

Here is a fairly detailed reporting on Indian investment in Nepal and troubles faced by Indian investors. The post below is adopted from an article in The Economic Times.

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India Inc in Nepal: Has the political will to woo Indian investment come back?

Last month, Hindustan Lever subsidiary Unilever Nepal remained shut for two weeks after its workers put up demands related to pay hikes and more perks. The trade union, affiliated to the Maoists, had locked the factory gates to press for their demands.

The management could reopen the factory only after an assurance from Nepal's prime minister Baburam Bhattarai to a delegation of Unilever representatives and other business leaders of the Federation of Nepalese Chamber of Commerce and Industries (FNCCI).

But the consumer goods giant is not the first company to face a difficult terrain in Nepal. Back in November 2008, Colgate Palmolive India announced its decision to move out of Nepal and transferred its shareholding in the subsidiary to Nepal-based Everest Hygiene Products, for an undisclosed amount.

This followed unrest at the factory, with angry workers attacking the general manager on fears of job losses. The Colgate Palmolive subsidiary, which was set up in 1998, had been facing problems rising out of the decade-long agitation by Maoist insurgents and had discontinued production of toothpaste at its Hetauda factory, way back in 2005.

Troubled History

India Inc's journey in the Himalayan kingdom has, in fact, been a tortuous one. Surya Nepal, the ITC joint venture, which started operations in Nepal in 1986 and is one of the largest private sector enterprises there, shut down its garments factory in eastern Nepal following prolonged labour unrest last year.

Indian infrastructure giant GMR, which is part of a consortium setting up a 900-MW hydroelectric project in Nepal, also faced an attack at its project site by suspected Maoist militants while the Manipal group's medical campus in Pokhara was hit by a junior doctors' strike, last year.

Indian companies are present in various sectors in Nepal including infrastructure, hospitality, FMCG, electronics and education.

According to a survey by Federation of Indian Chambers of Commerce and Industry (Ficci), strikes, extortion and threat to life and property have hit Indian investors and the business community. Industries have also been badly affected by acute shortages of power and raw materials, the study found.

"The difficulties faced by Indian joint ventures in Nepal emanate in a large measure from the turbulent political developments in the country, especially since 1996, when the Maoist insurgency began. Some Indian JVs have had to close their operations," says Jayant Prasad, Indian ambassador to Nepal. Other challenges include poor power infrastructure and connectivity, high fuel costs and in some cases labour union action.

Time to be Upbeat?

But despite militant trade unionism and the onslaught of Maoists, Indian companies in Nepal enjoy big commercial and social advantages. And that is probably the reason why there are efforts within the business community on both sides to leverage these pluses. Indian managers and business leaders who have been in Nepal point out that it feels more like home than a foreign country. "The friendliness and warmth of the Nepalese people makes it feel like home.

A strong political resolve to allocate more priority to industry and use it as an enabler to solve the socio-economic issues is the way ahead," says Udayan Ganguly, Dabur India's business head for Nepal, Bangladesh and Sri Lanka.

For sure, the times are changing for the better. The Nepalese government has accelerated the process to integrate former Maoist guerillas as well as frame a new constitution. Business confidence is likely to pick up on the back of these steps.

Last week, Bhattarai, who is from the Unified Communist Party of Nepal (Maoist) summed up the new sense of confidence by stating at an Indo-Nepal business forum that "democracy plus hydropower equals the new Nepal".

Industry bodies in both the countries such as Confederation of Indian Industry, Ficci, FNCCI and Confederation of Nepalese Industries are taking steps to jointly address many of the problems faced by businesses in Nepal.

"Such partnerships will help domestic industry and MNCs and will also strengthen economic ties between India and Nepal. Often the problems they face are caused because of political reasons and can be addressed through long-term economic solutions," says Binod K Chaudhary, who is member of the constituent assembly and parliament of Nepal. He is a third-generation businessman of Indian origin whose family emigrated to Nepal from Rajasthan.

Still an Uphill Climb

With the governments of both the countries taking small steps towards encouraging cross-border trade and investments, Indian Inc is now more upbeat about Nepal. "The country offers huge potential and opportunity in many sectors including agri and food processing, hydropower, cement, education, travel and tourism," says Sanjiv Keshava, managing director, Surya Nepal.

For him, non-availability of a skilled workforce due to the extremely high migration from Nepal to South Asian countries and West Asia is another problem to be grappled with. Surya Nepal, however, is in the country for the long haul and is investing in a second factory and exploring the possibility of setting up a hotel.

There are signs of an improved business environment. Independent power producers were given survey licences for hydro projects for over 8,000 MW five years ago, following international competitive bidding.

Most of these licences are held by Indian companies. Even if licensing were to be granted to Indian firms for the development of between 1,500 MW and 2,000 MW, it could attract over $2 billion investments within a short span of four to five years.

But the Nepalese government has to do much more to fast-track steps to improve the investment climate. Foreign investments in Nepal have been low - a meagre $300 million in the past 25 years from India.

And that is 44% of the total foreign investments. Worse for Nepal, prospects for Indian JVs have improved in other neighbouring countries such as Bangladesh and Sri Lanka and Indian industry has a wider choice in the region. Just saying, "Swagatam, daju" may not help.

Business Register

ITC : Surya Nepal Pvt Ltd is an Indo-Nepal-UK joint venture, which started operations in Nepal in 1986. SNPL, a subsidiary of ITC Ltd, India, is among the largest private sector enterprises in Nepal.

SNPL's business includes manufacture and marketing of cigarettes and readymade garments along with garment exports. Their total turnover is over $100 million.

Dabur: Dabur Nepal Pvt Ltd was set up as an independent group company in 1992. The company reported a total turnover of Rs 525.47 cr in 2010-11 In 2010, the company faced raids by the Nepal government on allegations of stocking contaminated juice.

GMR: A consortium comprising GMR Energy Limited, GMR Infrastructure Limited (GIL) and Italian-Thai Development Project Co has signed a MoU with the government of Nepal, for developing the 900 MW Upper Karnali hydro electric project in Nepal. The plant is scheduled to be commissioned by the end of 2016.

In 2011, GMR's project site in Karnali was attacked, looted and a log cabin was torched.

Unilever: HUL has set up a subsidiary in Nepal, Unilever Nepal Limited (UNL), and its factory represents the largest manufacturing investment in the Himalayan kingdom.

The UNL factory manufactures HUL products such as soaps and detergents for the domestic market and exports to India.

Last month, Unilever Nepal remained shut for two weeks after its workers put up various demands.

Asian Paints: Asian Paints (Nepal) Pvt Ltd is the leading paint company in Nepal. The company started operations in 1985 in Nepal and has a manufacturing facility at Hetuada industrial estate with a capacity to manufacture over 8,000 kl of paints annually.

Manipal Group: Manipal College of Medical Sciences (MCOMS), Pokhara, opened in 1994 with an MBBS degree programme. The 700-bed Manipal Teaching Hospital (MTH), Pokhara was inaugurated in 1998 MCOMS is affiliated to Kathmandu University. The college is a collaboration between the Manipal Group and the Nepal government.

In 2011, the college was hit by a strike of junior doctors. The strikers, loyal to the Maoists, alleged pay disparity.

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Tourist arrivals by month in Nepal

So, which month of the year does Nepal welcome the highest number of tourists? Its October, which accounted for 13.18 percent of total visitors in 2011. It is followed by November (11.34 percent), August (9.70), March (9.18 percent), and December (8.16 percent). The total (provisional) tourist arrival in 2010 and 2011 was 602,855 and 735,965 respectively. By the way, the number of tourists has increased in all months in 2011 compared to the months in 2010, thanks to the increasing inflow of Chinese tourists. Here is a related article on Nepal Tourism Year 2011.

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Tourist arrivals by month in 2010 and 2011

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Here is the number of tourist arrivals via the main entry points:

Tourist arrival (entry points), 2011
Entry point	Arrival	Departure
TIA (Air)	544,985	612,845
Bhairahawa	129,427	122,351
Kodari	53,536	35,590
Kakarvitta	5,049	4,265
Kanchanpur	1,628	1,328
Birganj	1,025	1,189
Nepalganj	271	405
Dhangadhi	44	38
Total	735,965	778,011

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Now, where do you think should the government upgrade tourism infrastructure? Undoubtedly, the only international airport and the border points from where a high number of tourists enter Nepal. The infrastructure and services inside and outside of the airport is pretty horribly despite paying premium prices when compared to the cost of using similar infrastructure, services, and security in other developing countries. No wonder Nepal’s tourism industry is uncompetitive and ranked 112 out of 139 economies in the latest Travel & Tourism Competitiveness Index (TTCI). In terms of tourism infrastructure (including hotel rooms) and ground transport, Nepal ranked 130 and 135, respectively, out of 139 economies in TTCI 2011. In terms of safety and security in tourism industry, Nepal ranked 127 out of 139 economies. Meanwhile, with appropriate infrastructure and services industry, the border areas (mainly Bhairahawa for Indian tourists and Kodari for Chinese tourists) can see robust tourism activities and expenditure before the tourists embark on trips to popular tourist destinations in the country.