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Pragya Ratna Shakya, 39, is the Chief Operating Officer (COO) at NIC Asia Capital Limited. He has over 14 years of experience in realty, stock brokering, management consulting, and investment management. Before his current role, he spent seven years at Siddhartha Capital Limited, overseeing business development, marketing, and operations. He is an expert in mutual fund management, portfolio management, and corporate advisory. Shakya talked to Babita Shrestha from ApEx about how one can achieve financial freedom.

What is the key factor you should consider to maximize financial growth? 

Saving and investing are important. Saving money involves storing it securely for future needs, with a low risk of losing its value. On the other hand, investing comes with risks but also the potential for higher returns. Investments generally have long-term goals, such as for a child’s education, planning for one’s retirement, or future unforeseeable needs. So, if you’re aiming to maximize financial growth, you should prioritize financial education and learn about savings and investments.

Could you brief us about the available saving and investment options in Nepal?

In Nepal, the most common options for savings and investments often involve utilizing Banks and Financial Institutions (BFIs) through fixed deposits or savings accounts. Though they offer modest returns, these might not provide returns that effectively combat inflation. Besides that, investment in stocks and mutual funds can be another viable option. Yet, compared to developed nations, Nepal currently lacks innovative financial instruments. To curb purchasing power loss, you may consider alternative investment areas available such as public equities, private equity/venture capital, debt instruments, private real estate, mutual funds, endowment insurance, and bullions.

What are some financial challenges that youngsters face and how can they be addressed?

In Nepal, approximately two-thirds of the population are in school, or college, or are planning to enter the workforce, which means they might not have disposable income for investments. The fundamental challenge is financial literacy and awareness. Another significant challenge is finding and selecting beneficial investment areas due to limited investment avenues as well as a lack of idea of diversification. To address these challenges, it’s important to prioritize budgeting, establish an emergency fund for financial security, adopt a diverse investment approach, stay informed about financial trends, and seek professional advice for better financial decision-making.

In the context of Nepal, what are the accessible and beginner-friendly stock market investment options that youth can consider for their initial financial ventures?

If you want to start your investment journey, Initial Public Offering (IPO) and Mutual Funds investments could be the safest options. Both investments can be started at as low as Rs 1000. All you need are a bank account, a demat account, and a Meroshare account.

If you want long-term financial growth, you need to understand the significance of mutual funds. These funds represent a collective investment from numerous investors, guided by strict regulations from the Securities Board of Nepal (SEBON) and the fund’s specific mandate. Investing in mutual funds offers benefits like high liquidity, diversification, tax exemptions in mutual fund income, stable dividend income, risk management, professional management, transparent investments, and independent audits of each scheme.

Could you give us an example of one potential scheme youngsters can invest in?

Many banks provide different services. For instance, NIC Asia Capital has recently introduced fund management schemes like NIC Asia Growth Fund-2 (NICGF-2) with the theme of ‘Ahile Lagani Nagarey, Kahile Garnrey?’ where you can apply with amounts ranging from as low as Rs 1000. Your fund will be managed by best-in-class professionals with experiences in both national and international capital markets. It’s safe to say that young investors can just start their investment journey from such mutual fund investments.

Is there any financial advice you would like to give? 

For young individuals in Nepal, a balanced approach to investment and saving is crucial. Always have a proper budget and plan for your funds from an early age. If you don’t have a big sum of money to invest, you can always start small. But start early, invest regularly, and for the long term. Know your risks and return objectives while implementing a diversification strategy in your investment portfolio, and periodically review and rebalance it. Since fluctuations in the market are part of the investment journey, you need to maintain a long-term perspective.

The government on Thursday formed a high-level probe panel under former auditor-general Tanka Mani Sharma to investigate the suspicious Ncell share purchase deal. 

Phanindra Gautam, Baburam Bhandari, Hrydesh Shakya and Sujan Kumar Kafle are members of the panel. According to government spokesperson and Minister for Communication and Information Technology Rekha Sharma, the panel has been instructed to submit its report within a month after a thorough study of the matter. 

Amid reports about the controversial transaction came to the fore, the finance committee of the parliament on Wednesday urged the government to take measures to intervene in the ongoing share purchase deal. The government’s decision follows a series of meetings among the top leaders of the ruling coalition.  

Meanwhile, Ncell has said that the pricing and structure of the transaction was determined through a willing buyer and seller basis. As per the agreed deal structure, Axiata is set to receive a base payment, along with additional benefits in the form of profit-sharing for the next five years, extending until 2029, Ncell said in a statement.

Meanwhile, Appellate Court Patan has issued an interim order to halt the purchase of Ncell shares. A single bench of justice Purushttom Dhakal has also instructed the government to submit all details, including the shared details.

Tax collection was encouraging in the past two decades after the government adopted the Tax Reforms Policy in the 1990s.  In recent years, however, revenue has consistently fallen short of the set targets. Deviations in tax administration, economic sector challenges, and changes in the leadership of revenue administration are some of the factors that have contributed to the decline in tax collection.

According to the Financial Comptroller General's Office, the government has only achieved 22 percent progress in revenue mobilization in the first five and a half months of the current fiscal year. The government has set a target to raise Rs 1,472bn in the fiscal year 2023/24. The slow pace of revenue collection indicates that the government is likely to miss its targets for the current fiscal year. In the fiscal year 2022/23, the government achieved only 68.21 percent progress in revenue collection, raising only Rs 957bn out of the targeted Rs 1,403bn. This is the lowest collection in the past five years in terms of revenue targets.

In previous years, the government consistently raised revenue equivalent to 20 percent of its GDP. This rate, however, plummeted drastically in the previous fiscal year.

The Covid-19 pandemic, coupled with import restrictions and the Ukraine war, significantly slowed revenue growth. As a result, revenue collection is now well below the level of recurrent expenditure. This has had adverse effects on revenue and resulted in excessive dependence on imports. Economist Dr. Dilliraj Khanal commented that there has been a lack of concrete efforts to control recurrent expenses or expand the revenue base.

 "Apart from some initiatives to bring about changes in tax policy at the global level, no such measures have been taken in Nepal so far," he said. Dr. Khanal added that the tax revisions in the current budget have given negative protection to vital industries. “As a result, it is estimated that there has been some impact on the revenue.” 

In 2021, the World Bank said that Nepal had the highest tax-to-GDP ratio in South Asia. During the year, Nepal’s tax-to-GDP ratio was 17.5 percent, compared to 13 percent of Bhutan, 12 percent of  India, 9.1 percent each of the Maldives and Pakistan, and 7.6 percent of Bangladesh—the lowest in South Asia.

The tax-to-GDP ratio reflects a country's ability to provide public services, infrastructure, and meet mandatory obligations. A high tax-to-GDP ratio indicates a heavier burden on taxpayers and suggests adequate public infrastructure in the country. Tax-to-GDP ratio is lower in countries relying on their own income.

In its recent Nepal Development Update, the World Bank has proposed various measures to increase revenue in Nepal. These measures include expanding the scope of taxation, plugging loopholes, and reducing special exemptions and concessional rates of existing taxes. The World Bank also recommended prioritizing businesses in the formal sector, stating that revenue is adversely affected by large informal economies.

During a panel discussion organized during the launch of the update, Dr. Ramesh Chandra Paudel, a member of the National Planning Commission, highlighted that Nepal has failed to align its school education with productivity. He emphasized the need to remodel the education system, giving emphasis to technical and vocational education, stating, "We are preparing manpower only for Europe and the Gulf countries."

The impact of structural changes in the global tax system has also affected Nepal's revenue system, as outlined in a report submitted by the Revenue Advisory Committee last year. According to the report, there is a gradual shift from tax revenue based on imports to internal revenue. The share of customs duty in total revenue was 31 percent in the fiscal year 2002/03, but it declined to 23 percent in the fiscal year 2020/21. In the fiscal year 2020/21, income tax, customs duty, and excise duty have emerged as the primary sources of revenue after VAT, the report states.

While Value Added Tax (VAT) has become the largest source of revenue, its share in total revenue has not experienced a significant increase. Following the implementation of federalism in Nepal, the collection of vehicle tax, real estate registration tax, and house rent tax has been decentralized to subnational governments. This has also brought some changes in the overall tax structure.

The committee also recommended the introduction of a revenue policy so that Nepal, an import-oriented and revenue-dependent economy, can promote domestic industry, ensure productive investment, and encourage exports.

Economist Dr. Khanal  said major reforms are needed in the tax system to concurrently mobilize resources at all three levels and address the expanding resource gap. He argued that such reforms would broaden the scope of taxation, curtail tax leakage and evasion, and augment the proportion of direct taxes, introducing progressivity to the tax system.

He further proposed the implementation of a nationwide equity funding formula explicitly designed to combat discrimination and fortify the equity dimension in development, presenting a viable option for enhancing resource allocation decisions. “The huge socio-economic development gap in the provinces also justifies the need for such a formula,” he added.

In 2015, the High-Level Tax System Review Commission underlined the need to modernize Nepal's taxation system, making it practical and aligned with international standards. Based on principles and international good practice, it suggested that the federal government collect customs duties, value-added tax, excise duty, corporate income tax, personal income tax, natural resource tax, social security tax, forest production fee, and carbon tax. It proposed granting provincial and local governments the authority to collect taxes under 29 different headings. The recommendations of the commission have yet to come into implementation.

The verdict delivered by the Rukum West District Court in the Navaraj BK murder case has rekindled public faith in the judiciary. The esteemed court handed down life sentences to 24 individuals involved in the lynching of six youths, including Navaraj BK, in Chaurjahari Municipality-8, Rukum West three years ago.

Why were Navaraj and his friends killed?

The root cause of this tragic incident was caste, as confirmed by the district court’s verdict. Navaraj, a young man from Ranagaon in Bheri Municipality-4 of Jajarkot, was in a relationship with a non-Dalit Malla girl from Rukum West. Both were happy in their relationship and wanted to get married.

 On May 23, 2020, Navaraj and his friends reached the girl’s village in Soti to escort her to his home for the marriage ceremony. Despite the shared happiness of the involved couples and their desire for marriage, the caste divide shattered their dreams. 

A mob from the non-Dalit community in Soti village violently attacked Navaraj and his friends, resulting in six deaths and injuring 12 others. The bodies were discovered along the banks of the Bheri River after a long search. Along with Navaraj, his friends Sandeep Bishwakarma, Tikaram Sunar, Ganesh Budha, Lokendra Sunar and Govinda Shahi were killed in the incident.

Caste discrimination remains a pressing issue in Nepal, with Dalits enduring centuries of oppression and violence solely based on their caste. Navaraj’s case is just a representative case. Sayte Damai of Dailekh was murdered by non-Dalit people just because he married a non-Dalit girl. There are many such incidents of discrimination against Dalits. Many reports of INGOs, NGOs and even government offices show Dalits face discrimination in various aspects of life, including access to public spaces, places of worship, and relationships.

 A few Dalits muster the courage to pursue legal action in cases of caste discrimination, while the majority remain unheard and suppressed. Local leaders and influential figures often try to settle caste discrimination cases locally.

 Non-Dalits caution victims against speaking out, creating an environment of intimidation. Instead of aiding the marginalized majority, whether educated or not, there is a tendency to threaten those who attempt to raise their voice against discrimination. In such a challenging context and prevailing social norms, how can a Dalit hope to attain justice in a case of caste discrimination?

The caste system has persistently denied justice to Dalits throughout history, manifesting in loss of life, property, and enduring inhumane treatment. Despite constitutional provisions such as Articles 17, 18, 24, and 40 explicitly advocating for equality, human rights, and freedom, the prevalence of caste conflicts persists among non-Dalits who disregard these laws.

While there are ongoing caste discrimination cases in the courts, Dalits rarely find justice in such matters. Deepa Nepali’s case in Kailali, where she faced eviction from a rented room based on her caste, exemplifies the challenges encountered by those seeking legal redress. Despite initial threats, Deepa, a university student, courageously pursued legal action. Unfortunately, the verdicts from the Kathmandu District Court and Patan High Court were not in her favor. There are many examples of systemic challenges faced by Dalits in securing justice.

Landmark verdict

The history of Dalit justice has not been favorable, with the caste system often overshadowing legal proceedings. In this instance, however, the Rukum West District Court has demonstrated a commitment to breaking this pattern. This landmark verdict is not only a victory for the grieving families of the victims but also a triumph for the entire Dalit community. This groundbreaking decision sets a legal precedent that may pave the way for justice in future caste-related cases. The court's acknowledgment of the caste-based motivations behind the violence sends a powerful message that justice can prevail even in the face of deeply entrenched discrimination.

The caste system, inherently discriminatory and illegal, stands against the principles of humanity and the law. It perpetuates division, imposing arbitrary rules and restrictions. It is imperative for Nepali society to reconsider its stance on this inhumane system. Without a collective effort to eradicate caste-based discrimination, incidents like the Rukum massacre may continue to plague our society. Authorities, civil society, and the public must unite to eliminate this systemic injustice from our midst.