8/17/2019 Roots of growth (Himalayan Times)

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ECONOMICS06

THE HIMALAYAN TIMES

S UN Y , AUGUST 18, 2013PERSPECTIVES

Siddharth PoddarSingapore

F

or a country with abouttwo-thirds of its popula-

tion employed in the agri-culture sector, the devel-

opment of Nepal’s agribusi-ness industry should beamong the most importantgoals of the government. Butwhile much lip service hasbeen paid to the making of Nepal into a hub and a keyplayer in the agribusinessspace, successive govern-ments have not quite beenable to put Nepal on theagribusiness map as yet.

The first problem Nepalfaces is that of farm produc-tivity. Only a small percent-age of Nepal’s land area isarable and hence, it is impor-tant for the government topush for increased productiv-ity in the farming sector. Aswith several other areas of the economy that this columnhas referred to in weeks goneby, here too the government isshort of sufficient finances to

address some of the mostpressing concerns.

As such, the importance of private sector participationcannot be emphasisedenough,either as a direct par-

ticipant or as a financier. Inthe agribusiness sector inNepal, there is a shortage of quality fertilisers; very pooraccess to finance;the unavail-ability of machines; little to

no electricity; and insuffi-cient knowledge. In all of these areas, the private sectorcan play an effective role andcontribute to the develop-ment of the industry.

However, once again as hasbeen explained earlier, thereneed to be conditions that areconducive to private sectorinvestment in the first place.

Nepal has to encourage theprivate sector to invest in theagribusiness sector. The mostcritical aspect at present is toremove issues pertaining tothe security of private prop-erty. Secondly, private playerswilling to engage in thissector should be providedwith tax benefits in the firstfew years following their in-corporation and these com-panies should be given incen-tives to export their products.They could also receive ac-cess to cheaper inputs fromgovernment to make invest-ing in the sector a more palat-able proposition for other po-tential investors

Equally importantly, thegovernment has to simplifythe whole process of register-ing and conducting a busi-ness.While this is not a prob-lem plaguing the agribusi-ness sector in isolation, it is

essential that processes arefast-tracked for at least cer-tain sectors of the economyand the agribusiness sectorought to be one of them.

Nepal should focus on teaand coffee, certain sought af-ter herbs, honey and otheragro-processed goods thatcan be sold in the global mar-kets. The private sector isalready involved in manufac-ture of agro-processed goodsand food in a big way andthe success of a few brandsserves to demonstrate that fo-cusing on this sector is likelyto benefit Nepal in more waysthan one. Investment in thesector can have wide-reach-ing benefits such as the cre-ation of jobs, income genera-tion, greater foreign ex-

change income,and eventualcreation of a thriving smallindustry space.

Comparatively, promotingagribusiness will require less

capital investment on thepart of the government, butthat is not to suggest that thegovernment can go at italone. There are severalopportunities for the privatesector in agribusiness andin peripheral,related sectors,but it is imperative for thegovernment to create theright environment thatconvinces investors of secu-rity of their investmentsand also to provide incentivesand benefits.

It is making all the rightnoises. Now the next stepsneed to be taken.

(The author specialises in the

 political economy of South and Southeast 

 Asia and is a co-founder of StoneBench

 Research & Communications.He can be

reached at siddharth@stonebenchasia.com)

Roots of growth THE GOVERNMENT HAS TO SIMPLIFY THE WHOLE PROCESSOF REGISTERING AND CONDUCTING A BUSINESSburningbright

 Ananta Raj LuitelKathmandu

The recent intervention of the Commissionfor the Investigation of Abuse of Author-ity (CIAA) to bring social practices underthe net of the Social Practice Act has

created a serious debate about maintainingdiscipline in society.

Soon after the call from theanti-graft body to all people,Senior Advocate and former

Lawmaker, Agni Kharel can-celled the wedding receptionof his son and daughter-in-lawwho tied the knot recently. Cit-ing the provisions in theSocial Practices Act, 1976, the

anti-graft body asked all to follow legalprovisions for marriages, Teej and other occa-sions as people have been accepting dowryand other kind of offerings at marriages.

Organising a feast for more than 51 peopleand inviting for marriage processions areprohibited by the Act. Section 8 (1) of the Actstates: No more than 51 persons includingneighbours and relatives other than closerelatives shall be invited to marriage feastorganised by the bridegroom and bride’s side.If the provision is violated, a fine of up to Rs20,000 or imprisonment not exceeding 15 daysor both shall be imposed on the violators.

People have been making unnecessaryexpenses for many other occasions too. Brata-bandha — a solemn Hindu ceremony in which

boy wears a sacred thread ( janai) on his body,Chudakarma — Hindu practice of cutting thehair of the boy for the first time after his birthleaving a scuff of hair uncut, Pasni  — t hepractice of feeding rice to a child for the firsttime after birth, Nwaran — practices to be ob-served normally after 11 days from the date of birth of a child in which the child is given aformal name, birthdays, Chhaiti — the Hindupractice to be observed on the sixth day of thebirth of a child, Bhudo-Pasni — the practice tobe observed at 84 years of age of a man orwoman and  Pitri-Kaarya  — practice to beperformed in honour of one’s deceased ances-tors are the major practices being marked.

Even though the CIAA intervention in suchpractices is not sufficient for maintaininggood governance and discipline in society,thiscan help discourage the unnecessary expendi-ture and unnecessary competition in society.But since the CIAA has begun its campaignagainst such expenses, a positive environmenthas been created in implementing the Actalmost three decades later.

“We got a positive feedback as people beganabiding by the law,” Shreedhar Sapkota,spokesperson, CIAA told THT Perspectives.“We have been getting feedback in regard toTeej, marriages and other occasions as wehave also directed the security to keep vigilabout such matters so we are confident thatthis process will definitely bring a positiveimpact in society,” Sapkota added.

Curbingexpenses for

social practicesCIAA MOVE CREATESPOSITIVE ENVIRONMENTFOR SOCIAL DISCIPLINE

Narendra Pd BhattKathmandu

The market fundamentalskeep on changing by leapsand bounds, and coupledwith the passage of time,the

ardent investor is required to in-culcate ample knowledge abouttrading strategies along with thetype of market in which he orshe is trading.Evidently, the na-ture of the corresponding mar-ket itself holds the key to changetrading strategies too. Basically,there exist two types of markets

 — order-driven and quote-driven — with their own merits and de-

merits. Considering this, a newmarket has evolved combiningthe merits of both the afore-mentioned markets.

These two markets can be dif-ferentiated by what is displayedin the market depth in terms of orders quoted by the designatedmarket makers or dealers orclients and the presence of mar-ket makers or dealers itself. Theorder-driven market displays all

bids and ask prices and quanti-ties as quoted by clients (buyeror seller),while the quote-drivenmarket focuses only on the bidand ask prices and quantitiesquoted by the market makers orother designated parties. Marketmakers generate both bid andask quotes frequently to provideliquidity in the market and thedifference of bid and ask is thespread earning for them.

Individual orders are not seenin a quote-driven market; themarket maker will either filltraders’ order from its own in-ventory or match traders withanother order. The major benefitof this type of market is the liq-uidity in which market makersare required to give minimumquotes in the prescribed manner.But the major drawback of thequote-driven market is that itdoes not showcase adequatetransparency in the market,which incidentally is the biggestadvantage of the order-drivenmarket. It clearly displays mar-ket orders and at what price

traders are willing to buy at orsell for. The drawback is that inan order-driven market, there isno guarantee of order execution(until there is a Clearing House)but in the quote-driven market,there is that guarantee.

Considering the merits and de-merits of these different naturesof markets, the new hybrid sys-tem has evolved, combining theattributes of both. Such hybridsystem has been experimentedand incorporated by popular in-ternational exchanges, includ-ing NASDAQ, London Stock Ex-change and many others; wheremarket shows the bid and askprices and quantities quoted bymarket makers and traders tooso that all market participants

can view all the limit orders inthe market depth.

In the context of Nepal, NepalStock Exchange (NEPSE), theonly national level stock ex-change, is operating based onthe pure order-matching system,whereas most of the commodityexchanges are following quote-driven mechanism. Recently,MEX Nepal has taken one stepfurther by upgrading its mecha-nism to the popular hybrid sys-tem. And to further acceleratethe development of the capitalmarket, NEPSE can also opt forsuch hybrid system after accom-plishment of its ongoing CentralDepository System (CDS) in or-der to facilitate traders withboth attributes.

Hybrid markets: ushering a novel concept

Indian capital outflow controlsReutersMumbai

India’s new restrictions oncapital outflows are likely todelay overseas acquisitionsand investment plans by IndiaInc at a time when many

companies are scouting marketsabroad to beat the domesticeconomic slowdown, bankersand companies said.

In its latest move to curb dol-lar outflows and stem the Indianrupee’s slide, the Reserve Bankof India (RBI) on Wednesday cutthe overseas investment limitfor companies to 100 per centof their net worth from 400per cent, and further curbedgold imports.

Any foreign investment morethan 100 per cent of a company’svalue would require centralbank approval. Large statecompanies were exempted fromthe rules, which came into effect

immediately. “It definitely willhave a serious impact on M&A,”said Harish HV, head of corpo-rate finance practice at advisoryGrant Thornton in India.“Thesesort of sudden measures willderail a lot of strategies peoplehave put in place for theirbusinesses,” he added.

The Indian rupee fell to arecord low on Friday on fearsthe latest curbs, brought in bypolicymakers struggling todefend the currency in a slowingeconomy and a tougheningglobal investment, could spookforeign investors. Bankers andcompanies slammed the restric-tions on firms, some of whomhave been looking to expandbeyond India where the econo-

my is growing at its slowestpace in a decade, hitting demandfor products ranging from carsto steel.

“Ironic that we have controlson capital on Independence Day.

Feels like the 1980s,” AnandMahindra, chairman of India’sdiversified Mahindra & Mahin-

dra Ltd, said in a Twitter post.Faced with a balance of pay-ment crisis, India opened theeconomy in 1991.

REVERSE GEAR

Chandrajit Banerjee, the di-rector general of the Confedera-tion of Indian Industry, said therestrictions would dampenIndia’s global aspirations andsaid he hoped the measureswould soon be reversed. Backed

by cheap loans, some of thecompanies in the recent pasthave acquired companies much

bigger than themselves.Apollo Tyres in June agreed topay USD 2.5 billion for New York-listed Cooper Tire & Rubber Co,a company nearly three timesbigger its size,to help boost over-seas revenue. Apollo, whoseacquisition is yet to be complet-ed, said in a statement it hadbeen advised the latest measuresapply to new overseas invest-ment proposals and would notaffect the Cooper deal.

The deal was done via over-

seas units and papers werefiled with the central bank wellbefore the restrictions wereannounced, Apollo said.

Some drug makers, includingSun Pharmaceutical IndustriesLtd and auto parts makers havebeen looking for overseastargets much bigger than them-selves to become global players,several investments bankerstold Reuters.

The head of investment bank-ing at a large US bank, whoasked not to be identified, saidthe curbs added another layer of paperwork. “Many companiesmay just delay their planshoping these are short-termmeasures,” the banker said.

The move could lead to a fall in

India M&A deal volume thisyear compared with 2012, saidthe banker, add ing, “Theintention seems to be to stem theflow of every single discre-tionary flow of dollar outsidethe country.”

Completed M&A deals involv-ing India declined 62 per cent toUSD 18.3 billion last year,compared with 2011, making itthe lowest annual volume since2005, according to ThomsonReuters data.

hurting overseas drive

(The author is the exchange relationship manager 

at Mercantile Exchange Nepal Limited.He can be

contacted through erm@mexnepal.com)

THE HYBRID SYSTEM HAS BEEN INCORPORATED BY INTERNATIONAL EXCHANGES,

INCLUDING NASDAQ, LONDON STOCK EXCHANGE AND OTHERS

investosansar

INDIAN RUPEE FELL TO A RECORD LOW ON FEARS THE LATEST CURBS COULDSPOOK FOREIGN INVESTORS