CIAA move sends ripples to revenue offices

---------------------------Analysis--------------------------

PRABHAKAR GHIMIRE KATHMANDU, Aug 29: A senior official who was recently transferred from the Ministry of Finance (MoF) to a “lucrative” revenue office has been frequenting the ministry seeking a transfer away from that office. The official had used his best possible personal influence to get transferred a couple of month back to the ´coveted´ office in term of financial gain. Things have turned around now. The official is using his clout now to get transferred to any ´low-profile´ office available from his current ‘attractive posting’. He is only a representative character of officials who in the past had gotten themselves posted to notorious and financially ´lucrative´ posts and are now frequenting the power centers to be transferred to anywhere else. An ongoing sweep operation by the Commission for Investigation of Abuse of Authority (CIAA) against corrupt officials has stirred panic amongst officials who are working in such economically attractive offices. And, they are seeking safer places to shelter under during this storm and avoid prosecution by the anti-graft constitutional body. “Beside regular work, we are not in a position to carry out any investigation against tax evaders, who can turn against us any time seeking revenge by filing complaint against us at the CIAA,” a revenue official, who was frequenting MoF seeking his transfer, said. Key tax offices for revenue collection under the Inland Revenue Department (IRD), transport management offices, Department of Foreign Employment (DoFE), Land Revenue Offices, customs offices and other major places notorious for bribe-taking and other forms of financial irregularities are under the CIAA scanner. Immediately following his appointment as the chief of CIAA, Lok Man Singh Karki had hinted that offices notorious as hotspots for kickbacks, corruption and other unethical activities, will be the first targets of the government´s anti-corruption watch dog. “I will show zero tolerance to those officials who are encouraging revenue evasion and leakage. I am ready to extend any support to you if you need any support from me in the course of investigation into the cases of revenue fraud,” Karki had told senior revenue officials a few days after taking office. Ripples of the recently initiated actions against more than six dozen officials of Nepal Electricity Authority (NEA), the immigration office at Tribhuwan International Airport, the Department of Foreign Employment (DoFE), BP Koirala Health Institute and Nobel Medical College, has struck fear among revenue officers across the country. “It will be natural to initiate CIAA action against those against whom complaints have been registered. But, such moves should not weaken the morale of the officials to carry out their duties in good faith. We have reports that revenue offices have stopped conducting new investigations on revenue frauds fearing retaliation by evaders who may file cases against the investigating officials to dissuade them from further investigating,” a senior official at the MoF told Republica. The official also said the number of revenue officials frequenting the ministry for transfer has increased in last few days. The official also warned that weakening the morale of revenue officials fearing possible reprisals from tax frauds will have a negative impact in revenue mobilization. However, Karki, at a recent meeting with senior revenue officials, had urged them to use their professional authority without any fear. About three months after his appointment, Karki had, however, expressed dissatisfaction with senior revenue officials stating that they had failed to exercise their already vested authority. “Exercising the authority beyond the legally provisioned limit and with prejudice is unforgivable. But it will be counted as an abuse of authority if anyone fails to exercise it when needed,” Karki had said while instructing senior revenue officials two weeks ago. The strong instruction from the CIAA chief on the back of operations in few government offices has also had revenue officials fearful that they may be victimized in the name of investigations by the CIAA. Tanka Mani Sharma, the director general of IRD, denied of any problems in carrying out new revenue investigations after the recent actions taken against some government employees by the CIAA. “There is no need to fear the CIAA´s action if any official carries out his/her duty with good intentions. Only those who have a corrupt mentality are panicking,” Sharma told Republica. Coincidently, the government failed to meet a target in crucial sources of revenue during the first month (mid-July to mid-August) of the current fiscal. During the month, the government had mobilized revenue worth Rs 23.28 billion, which is 105.96 percent of the target set for the first month of the current fiscal year -- mid-July to mid-August -- though the targets set for VAT, excise duty and customs duty were missed. The government reported collection of revenue from customs reached Rs 4.69 billion against a target of Rs 5.03 billion for the month. Similarly, the mobilization of VAT during the month reached Rs 9.29 billion, which is 3.5 percent less than the target. The collection of excise duty also fell short by 8 percent against a target of Rs 2.98 billion. Sharma said there was no question of slowing investigations on revenue evasion cases. “I will take immediate action against those who deliberately fail to meet the target of revenue collection and revenue investigation for any excuse,” Sharma.
Published on 2013-08-30 04:50:22

Is peg to Indian currency still relevant?

******* ANALYSIS******

-----------------Rupee freefall against US dollar--------------------

PRABHAKAR GHIMIRE

KATHMANDU, Aug 20: The Nepali rupee has been pegged to the Indian rupee at Nepali Rs 160 to Indian Rs 100 since March 1, 1992, when one US dollar exchanged for Rs 49.

Over the last two decades, the exchange value of the greenback has more than doubled, but the exchange rate of the Nepali rupee with the Indian rupee is still the same.

At a time when the Nepali rupee has been hitting one new low after another in recent days on the back of pessimism over the Indian economy, the relevance of continuing to peg the Nepali currency to the Indian rupee has been questioned.

The currency peg benefitted Nepal in the past as the southern neighbor saw high economic growth and robust foreign currency reserves.
“But the time has come to rethink the peg system. With the Indian currency losing strength sharply against the US dollar, we have to prepare gradually to end the pegging by consolidating our own economy,” said economist Keshav Acharya, former chief of Research Department at Nepal Rastra Bank.

However, Nepali officials dare not question the continued relevance of the peg to Indian currency at a time when Nepal´s economy is marred by double digit inflation, slowing growth, a ballooning trade deficit and declining industrial growth, among other woes.

The currency peg has made Nepal highly dependent on Indian imports as other foreign currencies have surged over the period, causing the cost of overseas imports to surge way past imports from India.

“With the country fully embracing an open market economy, it will not be wise to prolong the currency peg indefinitely. The peg meant suffering the adverse impact of a weakening Indian economy,” added Acharya, also a former chief economic advisor at the Ministry of Finance.

The Indian rupee hit another low of 64.04 against the dollar on Tuesday, in early trading at the inter-bank currency market here. Responding to the value of the Indian currency, the Nepali rupees plunged to Rs 102.05 per dollar, breaking Monday´s record of Rs 100.6.

Acharya claimed that the Nepali currency would not have dropped that much had Nepal adopted an open market valuation system. Instead of the peg, Nepal can level the value of its currency through reviews at certain intervals. However, Acharya thinks terminating the existing system of currency valuation would be hard to execute.
“We can´t end the pegging system overnight but we can review the exchange rate of both currencies at certain intervals,” Acharya said.

Nepal has to undergo massive market management to contain the spiraling inflation -- upsetting the informal economy which hovers around 40 percent of total economic activity, establish a sound banking system, and maintain good governance. In view of all this, the government, which had mulled ending the peg to the Indian currency a few years back, eventually balked at the idea.

Dr Bishwombher Pyakuryal, another economist, has flatly denied the viability of ending the currency peg, given Nepal´s weak economic performance. In the face of skyrocketing imports and slowing exports, Nepal has seen its current account surplus drop to around Rs 57 billion from Rs 76 billion last year. Similarly, the balance of payments tumbled to Rs 69 billion from around Rs 132 billion over the year.

“It is not easy to end the peg as floating the exchange rate of the Nepali rupees in the open market will destabilize the Nepali economy which is already in various difficulties,” he said.

Meanwhile, the Nepali rupee weakening against the dollar means more reasons to be upset than than to be upbeat.
The government can mobilize more customs duty, VAT and excise duty with the rise of the import bill jacked up by the rising value of the dollar. But the stronger dollar has driven up the import price of raw materials for manufacture, spawned double digit inflation, and worsened the trade deficit.

With the whopping rise in civil servant salaries and industrial worker wages as well as hike in petroleum prices pushing up inflation, a rising import bill will further worsen the situation.

“If this continues, inflation will increased by at least 6 percentage points as against the government´s target of containing it at 7.5 percent this year,” added Acharya.
Apart from overseas goods, Nepal been importing some seven dozen items from India with payment in US dollars.
Pyakuryal also estimated that inflation will hit double digit this year.

Freezing industrial relations

                                                          ---------Analysis------------
-Industrial Unrest-

PRABHAKAR GHIMIRE

KATHMANDU, Aug 8: “We have been experiencing better industrial relations for a few months which has made us optimistic about the possibility of a favorable business environment. Political parties also have to walk the talk about shunning strikes and bandas to press their demands,” was what Suraj Vaidya, the president of

Nepali private sector’s umbrella body -- the Federation of Nepalese Chambers of Commerce and Industry (FNCCI), said at an interaction with Nepali Congress leaders recently in the capital.


The central-level trade union leaders also have been echoing similar feeling as expressed by employers saying that labor relations in business enterprises has moved in the positive direction with the number of worker-enforced strikes going down significantly this year.

On the contrary to the expressions from employers and trade union leaders, big industries located in the Pathlaiya-Birgunj industrial corridor and Hetauda Industrial Estate have been closed for few days.Ongoing labor unrest in industrial firms along the corridor over remuneration hike has challenged the perceptions of both trade union leaders and employers that industrial environment has improved.

Local trade union leaders in the industrial cluster have enforced a strike for the last few days demanding a hike in remuneration of those whose pay-scale was already higher than the freshly increased minimum remuneration. Industrialists in the areas have been resisted bowing to the demands from the workers for increasing the remuneration of such workers in line with a pay-rise of blue-color workers.

“Though industrial relations have impressively improved over the year across the country, some firms operating in the Pathlaiya-Birgunj corridor and Hetauda have challenged the existing system of collective bargaining by refusing to increase the pay of those whose remunerations is higher than the freshly-announced minimum wage,” Umesh Upadhyaya, the general secretary of the General Federation of Nepalese Trade Unions (GFONT), told Republica.

Trade unions affiliated to different political parties are staging protests in over a dozen factories putting forth a demand for salary hike for all employees in proportion to the pay hike for minimum remuneration earners.

Though central-level trade unions and employer leaders have been gradually narrowing their differences and solving contentious issues in industrial relations with increasing engagement, industrial unrests are frequently disrupting business operation in local level.

“Employers and trade union leaders are able to create better industrial environment at top level but we have still problems in some enterprises at the local level due to the dishonesty of the employers who are not willing to follow existing laws,” Upadhyaya added.

The existing Labor Law stipulates that a Minimum Remuneration Fixation Committee (MRFC) comprising of representatives of the government, trade unions and employers can fix the minimum remuneration for labors where as the remuneration of higher-skilled workers should be fixed through collective bargaining.
“Delay in elections of the authorized trade unions in a number of business firms has created problems in fixing remuneration as the government is apathetic about it. Business people are taking the benefit out of the absence of authorized trade unions to delay the process of hiking remuneration of workers with higher pay-scale,” said Upadhyaya.

The Labor and Employment Conference held last year had decided to hold the elections of authorized trade unions in all business enterprises across the country before last January. However, the government has failed to get the elections held so far which has created problems in negotiations with employers to press for demands.

But employer leaders blamed the trade unions in the corridor area for not following due process for collective bargaining to demand a hike in remunerations. “Unlike in other industries, trade unions in the Pathlaiya-Birgunj corridor and Hetauda are not showing maturity by placing demands against the spirit of collective bargaining. Industries operating there are ready to pay minimum remuneration as fixed by remuneration fixation committee. But, if they (trade unions) want to get remuneration hiked for other staffs they have to follow the collective bargaining system,” said Pashupati Murarka, a vice-president of FNCCI.

Responding to the closure of industry by workers to put pressure on the management to fulfill their demands, FNCCI has already sought government intervention in the dispute invoking Section 80 of the Labor Act, so as to restore industrial environment in the country.

An FNCCI delegation that met Labor Minister Hari Prasad Neupane on Tuesday demanded enforcing of the section of the act that allows the government to issue an order to end strikes that is likely to cause a breach in the law and order situation of the country or would be contrary to the economic interest of the country or strikes commenced in essential services prescribed by the prevailing law.

The government recently increased the minimum monthly remuneration of workers by Rs 1,800 to Rs 8,000 (including Rs 2900 as allowance) and daily wages to Rs 318 from Rs 231 in recommendation of MRFC.

Issuing a statement a couple of days back, the Department of Labor stated that only the minimum remuneration was hiked in recommendation of MRFC indicating that remuneration should be reviewed through collective bargaining for other workers.

Business leaders have also announced that the institutions that are shut down by trade unions would implement the ‘no work, no pay’ system.
Out of the total 14 industries in the Birgunj-Pathlaiya corridor and some Hetauda facing closure, seven are run by the Tribeni Group and two by the Golchha Organization. The strikes have affected operations of Nu Plast, Hanuman Metal, G D Pharmaceuticals, Hama Iron and Kansai Paints along with some industries at Hetauda Industrial Estate.

In May, employers and trade unions in the Birgunj-Pathlaiya industrial corridor had together declared the area a strike free zone, a move which was widely appreciated as the positive development in restoring better industrial relation.

Around 600 small, big and medium sized firms are operating in the area providing employment to over 50,000 people.
Before issuing the declaration, both sides signed a pact that envisages shunning anti-industrial activities such as strikes and other impractical forms of agitations, following due process to settle the industrial dispute and playing constructive role from both sides to restore industrial peace in the areas.

FNCCI seek govt initiative

KATHMANDU (REPUBLICA): The Federation of Nepalese Chambers of Commerce and Industry (FNCCI) has urged the government to take serious initiatives to create an environment to resume operations of industries in Hetauda and the Pathlaiya-Birgunj corridor.

Issuing a joint statement on Thursday, firms shut down by trade unions in the areas said they couldn´t resume work even though a tripartite meeting between government officials, employers and trade union leaders had decided to continue dialogue while suspending the strikes. FNCCI has also drawn the attention of the government that industries operating in the areas will come to the brink of closure forever if the situation perpetuates. In a statement FNCCI urged the agitating trade unions to come to the negotiating table for restoring the industrial peace in the areas.

Will code of conduct work where laws are challenged?

-------------Analysis-------------------------------------------- PRABHAKAR GHIMIRE KATHMANDU, Aug 1: Cartels adulteration, black marketeering, tax evasion, bribery and ‘donations’ to political parties to secure favors have long been associated with Nepali business people. The supplies of even highly essential goods such as Liquefied Petroleum Gas (LPG), water and petroleum have been frequently disrupted by business people to fulfill their interest even when it means paralyzing the daily life of the general populace. Reports of wide-spread contamination in essential food items and even revelations of rampant adulteration in gold as well as manipulation of weighing machines sent shockwaves through the country raising questions about the sincerity of the business people and business ethics. With people’s trust of business people reaching big lows, the business community came up with a code of conduct earlier this week as an attempt to mend negative perceptions about them. The code of conduct seeks to make business people more responsible by upholding the interest of the consumers, society and nation. The attitude shown by some sections of business community by challenging the law of the land in fulfilling business interest at the cost of consumers’ interests have made people and consumers´ rights groups express doubts about possibility of sincere implementation of the code of conduct. “In a country like ours where business people are frequently violating even the sovereign laws, it would be quick to be optimistic that they will abide by the newly released business code of conduct, which is not a law but something they would follow on their own free will only on ethical grounds,” said Jyoti Baniya, the general secretary of Consumers´ Rights Protection Forum. Different business organizations have already individually said they will use the code of conduct to self-regulate themselves but the implementation part was very weak. “In contradiction to their commitment to respect consumers´ rights, business people are not even putting price lists in shops. If business people maintain double standards, we can´t expect this code of conduct will ensure the rights of consumers,” added Baniya. The National Business Initiative (NBI) had supported the process of formulating the code of conduct which has been taken ownership by more than three dozen business associations representing Nepal´s private sector. After all, the spontaneous initiation by business people to improve the business modus operandi is a welcome step. It has raised the hopes among the people that ethical values will be restored in the country at a time when the government mechanism has failed to safeguard the interest of the people as some unscrupulous businessmen are ruling the roost. Commitments in cooperating with the government by timely payment of taxes, considering the environmental impact, responsibility toward consumers, upholding the spirit of market competition, maintaining good labor relations and playing a role in reducing corruption in the country no doubt would help in the self-purification process among business people -- if implemented. It is an umbrella code of conduct ever being unveiled in the country even though different business associations have already put in place their individual codes of conduct. Business people are more optimistic about implementing the code of conduct. As it has been owned by representative bodies of business people including the Federation of Nepalese Chambers of Commerce and Industry, implementation of it is expected to be easier. “To end the negative perception against the business community associating them with black marketeering, bribery and unethical business activities, a common code of conduct has been issued to mend the behavior by the business people themselves,” said Surendra Bir Malakar, NBI general secretary. NBI has also made arrangements for effective implementation of the code of conduct, mechanisms have also been set up. “We will go as far as recommending revoking operating licenses of those business outlets that violate the code of conduct and draw increasing complaints from consumers,” Malakar added. As the past record has it, bringing out a code of conduct is not the end task. Sincerity of the business community and a business-friendly environment in the country can play a critical role for effective implementation of the code of conduct. Saroj Pandey, the coordinator of the code of conduct campaign, said the newly-formulated code of conduct could not be implemented without the support of political parties and the government. “Political parties should shun the politics of strike and extortion, and the government should improve transparency in revenue collection to pave the way for a cleaner business environment,” said Pandey. Rampant extortion and forced ‘donation’ demands from political parties as well as other different groups, and the opaque system of revenue collection have discourage business people from believing in fair practices. The dominance of the informal economy in the country has been hampering fair business practices too. The code of conduct has put consumers at high priority recognizing their rights and concept of open and liberal economic principles. Sincerity, transparency and responsible business practices are the key areas which are highly emphasized by the code of conduct. The code has also made attempts to make government and political parties more responsible and denounced influencing of government officials and political leaders by giving them under-the-table ‘donations’. "We will not provide any kind of donation, gift or do any form of favor for any political leader or party to secure gains from them,” says the code of conduct. The business code of conduct has set ethics in six different areas such as consumer protection, tax and financial accountability, labor, environment, anti-corruption, and competition and market protection. Similarly, the code of conduct also states that the business community would not support monopoly and unhealthy business practices. "We will be mindful of ´the sovereignty of consumers´," reads the code of conduct. Bhaskar Raj Rajkarnikar, a vice-president of the Federation of Nepalese Chambers of Commerce and Industry (FNCCI), said the entire business community is ready to follow the code of conduct for fair and good practices in the business sector. “The time has come for us to change the way we operate our business. For long-term success, there is no alternative than fair practice in our business,” Rajkarnikar said. Recognizing the ‘sovereignty of consumers’ the code of conduct has expressed commitment to uphold the rights of consumers which includes the rights of consumers´ safety and consumer education and facility of multiple choices in the market through competition among suppliers. At a time when cartels, syndicate and unfair dealings are rife in the market this code will support in making the business people more responsible. “We uphold the business norms that we must not bribe, give gifts, donations and presents directly or indirectly for our advantage,” says the code of conduct. However, the high dependence of political parties on the business people for their party and individual funds and the nexus of government officials with some entrepreneurs are still big challenges. “Code of conduct or even laws can do nothing to bring business people into adopting fair practices if their intention is wrong,” said Baniya.
Published on 2013-08-02 02:22:34