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The Parliamentary Finance Committee has sought clarification from the Securities Board of Nepal (Sebon) about the license issuance for a new stock exchange as well as the distribution of licenses to new stock brokerage firms. Lawmaker Santosh Chalise, who chaired the committee meeting on Monday, said that Monday’s meeting decided to call the Sebon for a discussion. “Earlier, the sub-committee under the Finance Committee has studied and given a report about the license issuance for new stock exchange and brokerage firms,” said Chalise. “It has been decided to call the Sebon for a discussion about its implementation status of the report and issues related to new stock exchange and brokerage firms licenses.” The lawmakers during Monday’s meeting demanded that a sub-committee should be formed to investigate the issue of license issuance for a new stock exchange, brokerage firms, and commodity exchanges. Earlier on May 21, the Finance Committee had written to the Sebon, seeking the details of the process for issuing licenses for a new stock exchange and stock brokerage firms, and the situation of the implementation of the suggestion report prepared by the committee. Following this, the Sebon responded to the Committee on May 26. Stating that Sebon was issuing licenses for additional stock brokers although the committee had written to it on the matter, lawmaker Padam Giri demanded investigations into it. “The recommendation by the subcommittee under the Finance Committee about issuing licenses for a new stock exchange has not been heard. License for stock brokers was issued the same day or after the committee wrote to the Sebon. The question of transparency in the issuance of licenses is being raised,” he said. Amid allegations from various quarters that the government was trying to grant licenses for a new stock exchange to certain businesspersons, the licensing was stopped after Prime Minister Pushpa Kamal Dahal directed Sebon to halt the process in the second week of May. Three companies have applied for the new stock exchange, namely the Himalayan Stock Exchange, National Stock Exchange, and Annapurna Stock Exchange. However, Sebon has already issued brokerage licenses to 18 firms.

Though Nepal’s overall exports have slumped, the country’s exports to China have recovered in the current fiscal year 2022/23. According to the latest statistics of the Nepal Rastra Bank (NRB), Nepal’s export to China doubled in the review period compared to total exports during the same period last fiscal year 2021/22. The central bank statistics show Nepal exported goods worth Rs 1.35bn till mid-May of the current fiscal year, a sharp rise from Rs 674m during the same period last fiscal year. The country has witnessed improved exports to China after the northern neighbor reopened the Rasuwagadhi-Kerung border for two-way trade starting in late December last year. The Tatopani border was also reopened for two-way trade in early May this year. Ever since the outbreak of Covid-19 in early 2020, Nepal’s trade with China hit a roadblock with frequent closing and opening of the Rasuwagadhi and Tatopani border points from where the majority of inland trade takes place. Till December end of last year, border points were opened only for one-way traffic of goods from China to Nepal only. Even after the Rasuwagadhi-Kerung border was reopened for two-way traffic of goods, China continued to impose restrictions on the number of vehicles that could pass to its side from Nepal. Only on April 1 this year, China reopened the Rasuwagadhi- Kerung border point fully for the two-way movement of people and goods. Subsequently, the Tatopani border point was also reopened fully for the two-way movement of goods only starting from May 1. “One of the reasons why Nepal’s exports to China have been recovering is the opening of the border points for exports,” said Pashupati Dev Pandey, President of Garment Association of Nepal (GAN). NRB data show that readymade garment is one of the products which saw a resurgence in exports to China. According to the NRB, the exports of readymade garments grew by 284.1 percent to Rs 144.3m in the review period. “Readymade garments meant for tourists are being sold well in the Tibetan region of China,” said Pandey. “Nepal is exporting garments to China both through the land route and air routes.” Given that China itself is one of the largest producers of garments in the world, it is difficult for Nepal to compete with Chinese garments. “But there is room for growth of exports in niche garment products,” said Pandey. According to the NRB, the export of Rudraksha (dried stone fruits) and incense sticks also increased during the 10 months of the current fiscal year. But exports of goods not specified in NRB data have surged sharply which contributed to the overall rise in Nepal’s exports to China. The export of such goods grew by 345.3 percent to Rs 913m. An official at the Department of Customs (DoC) said that Nepal has been sending five containers of goods a day on average in the last 20 days to China through the Rasuwagadhi border point. “Handicrafts, carpet, and utensils are among the goods being exported through this border point,” the official said. "But China is yet to allow the export of food items from Nepal.” Despite being a next-door neighbor, Nepal has failed to boost its export to China. China has also been providing duty-free and quota-free market access to thousands of Nepali products which are available to Nepal for being a least developed country. According to the Nepal Trade Information Portal of the Ministry of Industry, Commerce, and Supplies, China has been providing zero tariff facilities for about 8,000 goods originating in Nepal. These goods make up 95 percent of the total export of Nepal to China. To receive the Chinese zero-tariff facilities, exporters are required to fulfill certain rules of origin conditions for their goods. Despite such a facility, Nepal has been failing to utilize the duty-free facility and boost exports. One of the reasons, according to officials and experts, is the strict documentation requirements to get export clearances from the Chinese authorities. The World Bank in its Nepal Development Update Report in April 2021 pointed out that Nepal has the potential of exporting 12 times higher than its existing annual exports with the highest potential of boosting exports to China. The multilateral agency has termed the untapped export potential as ‘missing exports’. From the perspective of destinations, Nepal’s largest ‘missing exports’ are with China (by $2.2bn), followed by India ($1.2bn), the United States ($800m), and Japan ($700m), according to the report. According to GAN President Pandey, the thin population in the bordering Tibet region also limits Nepal’s export potential to China.

Following a ruling from the International Centre for Settlement of Investment Disputes (ICSID) in favor of Nepal in the dispute over the determination of capital gains tax (CGT), the Malaysian telecom conglomerate Axiata Group Berhad, the parent company of Ncell, has said that it respects the decision of the tribunal and is consulting its legal advisors in relation to the ruling. Issuing a press statement on Monday, Axiata said further announcements will be made upon material developments arising from the matter and it will continue to engage with the Nepal government ‘in a constructive manner.’ In its ruling on Friday, the ICSID issued a verdict in favor of the Nepal government arguing that Axiata failed to establish its claims that Nepal hasn't treated Axiata fairly and denied justice to the company. The Axiata has further said that Axiata UK or Ncell has no dues payable to the Nepal government. “The tribunal has indicated in the award that Nepal should refrain from demanding any further tax, fees, penalties, or interests in relation to the transaction,” reads the press statement. “Arising from Nepal’s non-adherence to tribunal orders during the early stage of the process, Nepal has also been ordered to pay certain sums to Axiata UK and Ncell, being a sum of approximately $1.4m to Axiata and to reimburse Ncell for the cost of a loan taken out by Ncell. No sums are payable by Axiata UK or Ncell under the award.” On 20 May 2019, Axiata filed a case against the Nepal government in the determination of CGT on the purchase and sale of the company's ownership claiming damages worth $420m (Rs 55.54bn). Axiata claimed that Nepal’s conduct in relation to CGT imposed on Ncell goes against the Bilateral Investment Treaty between Nepal and the United Kingdom. The taxation controversy began with the exit of TeliaSonera, a Swedish-Norwegian company, from Nepal, after it sold 80 percent stakes to Axiata, in April 2016 at Rs 144bn. The buyout deal was done abroad as Axiata Investment (UK) purchased the Reynolds Holding company, registered at Saint Kitts and Nevis, a tax haven, which is the owner of Ncell, from TeliaSonera. The 54th annual report of the Office of the Auditor General became the turning point to drag Ncell into controversy related to tax evasion. The Office of the Auditor General (OAG) of the Nepal government in its report stated that the deal was taxable in Nepal as per Clause 57 of the Income Tax Act and stated that the government needs to raise Rs 32 billion as CGT from the buyout deal worth Rs 144bn for an 80 percent stake. Then, the Large Taxpayers Office of the Nepal government determined Rs 60bn in CGT to Ncell. The Malaysian telecom giant went to the Supreme Court to challenge the decision but the court quashed the petition of Axiata before moving to ICSID.

With the contraction in economic activities, high-volume digital payments have seen a steep decline in the current fiscal year. While the growth of retail digital payments is steady, the high-volume digital payments carried out mainly through the Real Time Gross Settlement (RTGS) are in a decreasing trend. The latest statistics of the Nepal Rastra Bank (NRB) statistics show RTGS payments plummeted by 15.35 percent in the 10 months of FY 2022/23. In the review period, the settlements amounted to Rs 28,553.37bn compared to Rs 33,734.28bn during the same period of the last fiscal year. An RTGS is a funds transfer system in which the transfer of funds between one bank and another takes place in ‘real-time’ and on a ‘gross’—transaction by transaction basis. The NRB data shows RTGS transactions increased in the first three months (Shrawan, Bhadra, and Ashoj) of the current fiscal year, then started to decline gradually. In Baisakh (mid-April to mid-May), RTGS transactions declined by 39.21 percent to Rs 2,429.91bn which was Rs 3997.68bn a year ago. According to Guru Prasad Paudel, Head of the Payment Systems Department of the NRB, the slowdown in economic activities affected the RTGS transactions this year. “There has been a decrease in the payment of large sums of money due to contraction in economic activities,” he said, adding, “The downturn has resulted in a decrease in large financial transactions which has been reflected in the RTGS.” As high volume transactions have declined, NRB said that the decline in RTGS has affected the overall digital payments in this fiscal. However, retail payments through wallets, QR codes, mobile banking, and ConnectIPS surged in the current fiscal year, according to NRB. Digital payments were on an increasing trend till the last fiscal year. This trend has reversed in the current fiscal year. Bankers and experts point out the current economic slowdown for this downtrend. According to them, large businesses are reluctant to spend as market demand for several kinds of goods and services has remained sluggish in the current fiscal year. According to NRB, overall digital payment has declined by 11.79 percent in the 10 months of FY 2022/23. Payments through electronic modes have been gradually declining every month since the start of this fiscal year. The NRB data shows digital payments amounted to Rs 42,226.775bn in the review period compared to Rs 47,873.323bn during the same period of FY 2021/22. Digital transactions in Nepal took a giant leap after the start of the Covid-19 pandemic in early 2020 which forced people to stay inside their homes during the lockdowns. Backed by the increasing use of smartphones, consumers were fast to adopt digital modes of payments and online shopping to buy daily essential items with e-commerce and POS transactions gaining prominence. Post-pandemic, digital platforms including connectIPS, e-wallets, mobile banking, internet banking, QR codes, and bank cards are being used widely as customers can use these instruments in self-service mode.