T H E H I M A L AYA N T I M E S

SUNDAY , AU G U S T 1 8 , 2 0 1 3

06 PERSPECTIVES

ECONOMICS

legaleagle

Curbing
expenses for
social practices
CIAA MOVE CREATES
POSITIVE ENVIRONMENT
FOR SOCIAL DISCIPLINE
Ananta Raj Luitel
Kathmandu

he recent intervention of the Commission

for the Investigation of Abuse of Authority (CIAA) to bring social practices under
the net of the Social Practice Act has
created a serious debate about maintaining
discipline in society.
Soon after the call from the
anti-graft body to all people,
Senior Advocate and former
Lawmaker, Agni Kharel cancelled the wedding reception
of his son and daughter-in-law
who tied the knot recently. Citing the provisions in the
Social Practices Act, 1976, the
anti-graft body asked all to follow legal
provisions for marriages, Teej and other occasions as people have been accepting dowry
and other kind of offerings at marriages.
Organising a feast for more than 51 people
and inviting for marriage processions are
prohibited by the Act. Section 8 (1) of the Act
states: No more than 51 persons including
neighbours and relatives other than close
relatives shall be invited to marriage feast
organised by the bridegroom and brides side.
If the provision is violated, a fine of up to Rs
20,000 or imprisonment not exceeding 15 days
or both shall be imposed on the violators.
People have been making unnecessary
expenses for many other occasions too. Bratabandha a solemn Hindu ceremony in which
boy wears a sacred thread (janai) on his body,
Chudakarma Hindu practice of cutting the
hair of the boy for the first time after his birth
leaving a scuff of hair uncut, Pasni the
practice of feeding rice to a child for the first
time after birth, Nwaran practices to be observed normally after 11 days from the date of
birth of a child in which the child is given a
formal name, birthdays, Chhaiti the Hindu
practice to be observed on the sixth day of the
birth of a child, Bhudo-Pasni the practice to
be observed at 84 years of age of a man or
woman and Pitri-Kaarya practice to be
performed in honour of ones deceased ancestors are the major practices being marked.
Even though the CIAA intervention in such
practices is not sufficient for maintaining
good governance and discipline in society, this
can help discourage the unnecessary expenditure and unnecessary competition in society.
But since the CIAA has begun its campaign
against such expenses, a positive environment
has been created in implementing the Act
almost three decades later.
We got a positive feedback as people began
abiding by the law, Shreedhar Sapkota,
spokesperson, CIAA told THT Perspectives.
We have been getting feedback in regard to
Teej, marriages and other occasions as we
have also directed the security to keep vigil
about such matters so we are confident that
this process will definitely bring a positive
impact in society, Sapkota added.

Indian capital outflow controls

hurting overseas drive

Reuters
Mumbai

ndias new restrictions on

capital outflows are likely to
delay overseas acquisitions
and investment plans by India
Inc at a time when many
companies are scouting markets
abroad to beat the domestic
economic slowdown, bankers
and companies said.
In its latest move to curb dollar outflows and stem the Indian
rupees slide, the Reserve Bank
of India (RBI) on Wednesday cut
the overseas investment limit
for companies to 100 per cent
of their net worth from 400
per cent, and further curbed
gold imports.
Any foreign investment more
than 100 per cent of a companys
value would require central
bank approval. Large state
companies were exempted from
the rules, which came into effect

immediately. It definitely will

have a serious impact on M&A,
said Harish HV, head of corporate finance practice at advisory
Grant Thornton in India. These
sort of sudden measures will
derail a lot of strategies people
have put in place for their
businesses, he added.
The Indian rupee fell to a
record low on Friday on fears
the latest curbs, brought in by
policymakers struggling to
defend the currency in a slowing
economy and a toughening
global investment, could spook
foreign investors. Bankers and
companies slammed the restrictions on firms, some of whom
have been looking to expand
beyond India where the economy is growing at its slowest
pace in a decade, hitting demand
for products ranging from cars
to steel.
Ironic that we have controls
on capital on Independence Day.

INDIAN RUPEE FELL TO A RECORD LOW

ON FEARS THE LATEST CURBS COULD
SPOOK FOREIGN INVESTORS

Feels like the 1980s, Anand

Mahindra, chairman of Indias
diversified Mahindra & Mahindra Ltd, said in a Twitter post.
Faced with a balance of payment crisis, India opened the
economy in 1991.

REVERSE GEAR
Chandrajit Banerjee, the director general of the Confederation of Indian Industry, said the
restrictions would dampen
Indias global aspirations and
said he hoped the measures
would soon be reversed. Backed

Hybrid markets: ushering a novel concept

Narendra Pd Bhatt
Kathmandu

he market fundamentals
keep on changing by leaps
and bounds, and coupled
with the passage of time, the
ardent investor is required to inculcate ample knowledge about
trading strategies along with the
type of market in which he or
she is trading. Evidently, the nature of the corresponding market itself holds the key to change
trading strategies too. Basically,
there exist two types of markets
order-driven and quote-driven
with their own merits and de-

THE HYBRID SYSTEM HAS BEEN INCORPORATED BY INTERNATIONAL EXCHANGES,

INCLUDING NASDAQ, LONDON STOCK EXCHANGE AND OTHERS
merits. Considering this, a new
market has evolved combining
the merits of both the aforementioned markets.
These two markets can be differentiated by what is displayed
in the market depth in terms of
orders quoted by the designated
market makers or dealers or
clients and the presence of market makers or dealers itself. The
order-driven market displays all

investosansar

Roots of growth

bids and ask prices and quantities as quoted by clients (buyer

or seller),while the quote-driven
market focuses only on the bid
and ask prices and quantities
quoted by the market makers or
other designated parties. Market
makers generate both bid and
ask quotes frequently to provide
liquidity in the market and the
difference of bid and ask is the
spread earning for them.
Individual orders are not seen
in a quote-driven market; the
market maker will either fill
traders order from its own inventory or match traders with
another order. The major benefit
of this type of market is the liquidity in which market makers
are required to give minimum
quotes in the prescribed manner.
But the major drawback of the
quote-driven market is that it
does not showcase adequate
transparency in the market,
which incidentally is the biggest
advantage of the order-driven
market. It clearly displays market orders and at what price

ticipant or as a financier. In
the agribusiness sector in
Nepal, there is a shortage of
quality fertilisers; very poor
access to finance; the unavailability of machines; little to

can view all the limit orders in

the market depth.
In the context of Nepal, Nepal
Stock Exchange (NEPSE), the
only national level stock exchange, is operating based on
the pure order-matching system,
whereas most of the commodity
exchanges are following quotedriven mechanism. Recently,
MEX Nepal has taken one step
further by upgrading its mechanism to the popular hybrid system. And to further accelerate
the development of the capital
market, NEPSE can also opt for
such hybrid system after accomplishment of its ongoing Central
Depository System (CDS) in order to facilitate traders with
both attributes.

(The author is the exchange relationship manager

at Mercantile Exchange Nepal Limited. He can be
contacted through erm@mexnepal.com)

burningbright

address some of the most

pressing concerns.
As such, the importance of
private sector participation
cannot
be
emphasised
enough, either as a direct par-

traders are willing to buy at or

sell for. The drawback is that in
an order-driven market, there is
no guarantee of order execution
(until there is a Clearing House)
but in the quote-driven market,
there is that guarantee.
Considering the merits and demerits of these different natures
of markets, the new hybrid system has evolved, combining the
attributes of both. Such hybrid
system has been experimented
and incorporated by popular international exchanges, including NASDAQ, London Stock Exchange and many others; where
market shows the bid and ask
prices and quantities quoted by
market makers and traders too
so that all market participants

THE GOVERNMENT HAS TO SIMPLIFY THE WHOLE PROCESS

OF REGISTERING AND CONDUCTING A BUSINESS

Siddharth Poddar
Singapore
or a country with about
two-thirds of its population employed in the agriculture sector, the development of Nepals agribusiness industry should be
among the most important
goals of the government. But
while much lip service has
been paid to the making of
Nepal into a hub and a key
player in the agribusiness
space, successive governments have not quite been
able to put Nepal on the
agribusiness map as yet.
The first problem Nepal
faces is that of farm productivity. Only a small percentage of Nepals land area is
arable and hence, it is important for the government to
push for increased productivity in the farming sector. As
with several other areas of
the economy that this column
has referred to in weeks gone
by, here too the government is
short of sufficient finances to

by cheap loans, some of the

companies in the recent past
have acquired companies much
bigger than themselves.
Apollo Tyres in June agreed to
pay USD 2.5 billion for New Yorklisted Cooper Tire & Rubber Co,
a company nearly three times
bigger its size, to help boost overseas revenue. Apollo, whose
acquisition is yet to be completed, said in a statement it had
been advised the latest measures
apply to new overseas investment proposals and would not
affect the Cooper deal.
The deal was done via over-

seas units and papers were

filed with the central bank well
before the restrictions were
announced, Apollo said.
Some drug makers, including
Sun Pharmaceutical Industries
Ltd and auto parts makers have
been looking for overseas
targets much bigger than themselves to become global players,
several investments bankers
told Reuters.
The head of investment banking at a large US bank, who
asked not to be identified, said
the curbs added another layer of
paperwork. Many companies
may just delay their plans
hoping these are short-term
measures, the banker said.
The move could lead to a fall in
India M&A deal volume this
year compared with 2012, said
the banker, adding, The
intention seems to be to stem the
flow of every single discretionary flow of dollar outside
the country.
Completed M&A deals involving India declined 62 per cent to
USD 18.3 billion last year,
compared with 2011, making it
the lowest annual volume since
2005, according to Thomson
Reuters data.

no electricity; and insufficient knowledge. In all of

these areas, the private sector
can play an effective role and
contribute to the development of the industry.

However, once again as has

been explained earlier, there
need to be conditions that are
conducive to private sector
investment in the first place.
Nepal has to encourage the
private sector to invest in the
agribusiness sector. The most
critical aspect at present is to
remove issues pertaining to
the security of private property. Secondly, private players
willing to engage in this
sector should be provided
with tax benefits in the first
few years following their incorporation and these companies should be given incentives to export their products.
They could also receive access to cheaper inputs from
government to make investing in the sector a more palatable proposition for other potential investors
Equally importantly, the
government has to simplify
the whole process of registering and conducting a business. While this is not a problem plaguing the agribusiness sector in isolation, it is

essential that processes are

fast-tracked for at least certain sectors of the economy
and the agribusiness sector
ought to be one of them.
Nepal should focus on tea
and coffee, certain sought after herbs, honey and other
agro-processed goods that
can be sold in the global markets. The private sector is
already involved in manufacture of agro-processed goods
and food in a big way and
the success of a few brands
serves to demonstrate that focusing on this sector is likely
to benefit Nepal in more ways
than one. Investment in the
sector can have wide-reaching benefits such as the creation of jobs, income generation, greater foreign ex-

change income, and eventual

creation of a thriving small
industry space.
Comparatively, promoting
agribusiness will require less
capital investment on the
part of the government, but
that is not to suggest that the
government can go at it
alone. There are several
opportunities for the private
sector in agribusiness and
in peripheral, related sectors,
but it is imperative for the
government to create the
right
environment
that
convinces investors of security of their investments
and also to provide incentives
and benefits.
It is making all the right
noises. Now the next steps
need 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)