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#446 10 - 16 April 2009 16 pages Rs 30 RUNNING OUT OF TIME: Prime Minister Pushpa Kamal Weekly Internet Poll # 446 Dahal at the Khula Manch on Q. How would you describe the prime Sunday before delivering a minister’s visit to Europe? speech in which he lashed out Total votes: 4,245 at the political parties for slowing him down. Weekly Internet Poll # 447. To vote go to: www.nepalitimes.com Q. Should the army have pulled out of the National Games? MIN RATNA BAJRACHARYA Prime Minister Pushpa Kamal democracy and the free press, he Dahal appears to be increasingly lashed out publicly using frustrated with the delays and abusive language at his has been trying to use his deft colleagues in the NC and UML. Hurry up negotiating skills to try to The next day, he turned his aim convince the leaders of the UML at the media, accusing and NC to smooth things along. publishers of being “smugglers” hen the results of the killing of its supporter in Analysts say that a lot is riding and under the control of Friday’s by-elections Butwal last month. Time is also on the outcome of the by- “feudalists, capitalists and W in six constituencies running out on integrating the elections, and the results reactionary forces”. come out next week, they will armies before UNMIN’s mandate will determine whether EDITORIAL p2 The Nepal Media offer an indication of the support expires in June, and in writing or not the coalition Voice of the violent Society, Television base for the Maoists, who the new constitution by April remains intact, and if Broadcasters Nepal, themselves admit that after eight next year. the NC will join the government. Community Radio Broadcasters months in power they haven’t The run-up to the by- The prime minister has been Association, Broadcasting been able show tangible progress. elections have been marred by barely able to hide his Association of Nepal and The current session of violence with even a gun battle frustration. A day after returning Kathmandu Valley Broadcasting parliament has been disrupted for breaking out between supporters from a week-long visit to Norway Association deplored the prime two weeks in a row after the UML, of the Maoists and a break-away and Finland during which he minister’s remarks, calling partners with the Maoists in the faction led by Matrika Yadav in assured leaders there that he was them “uncalled for and coalition, demanded action over Biratnagar on Thursday. serious about protecting irresponsible”. 2 EDITORIAL 10 - 16 APRIL 2009 #446 Published by Himalmedia Pvt Ltd, Editor: Kunda Dixit CEO: Ashutosh Tiwari Design: Kiran Maharjan DGM Sales and Marketing: Sambhu Guragain [email protected] Marketing Manager: Subhash Kumar Asst. Manager: Arjun Karki Subscriptions: 5542535/5542525 Hatiban, Godavari Road, Lalitpur GPO Box 7251, Kathmandu 5250333/845 Fax: 5251013 Banking on real estate [email protected] Printed at Jagadamba Press 5250017-19 www.nepalitimes.com When the real estate bubble bursts, it shouldn’t take banks down with it VOICE OF THE VIOLENT anks in Nepal seem to be approved for loans they were not and the public, is very small. Maoist ideologue Baburam Bhattarai supposedly heads the thriving. According to capable of paying and many Unlike most other countries, cleanest and most efficient ministry. Which is why his recent BNepal Rastra Bank, Nepali jumped on the bandwagon there is no established deposit tantrums are so unbecoming. commercial banks hold close to assuming that real estate prices insurance program in Nepal and But for the dubious distinction of worst managed ministries, Rs 470 billion in deposits, but could only go up. it is questionable that Nepal competition is keen between Home, Water Resources and Local for banks to be profitable they What initially started as a Rastra Bank has the ability to Development—all headed by the UML. That says more about the have to put this deposit to work. problem in the subprime loans manage a run on the banks. politics of Messrs Madhav, Jhalnath and Oli than all their Given the poor business or loans made to risky borrowers, Outstanding loans of grandstanding since the recent killing of a Youth Force member climate and soaring property has spread to prime loans as commercial banks to the real in Butwal. Despite their threats of quitting the government, the decreasing real estate prices and estate sector grew at a staggering truth is that the UML needs the Maoists more than the Maoists increasing unemployment rate rate to Rs 17.9 billion in February need the UML. GUEST COLUMN are putting even credit worthy from Rs 6.6 billion just a year The results of the by-elections in Morang, Dhanusa, Kaski, Raju Sitaula Rolpa and Kanchanpur this weekend will probably lead to a borrowers at risk. As a result, earlier. The questions to ask the reassessment of the UML-Maoist coalition. The arrangement has banks are now stuck with banks are: what percentage of certainly helped UML recruit, train and expand its militant Youth prices, it is a fair guess– this cash hundreds of billions of dollars outstanding loans is real estate Force under the benign neglect of the home ministry that it is feeding the real estate bubble. in real estate loans, some of related, including both direct and controls. But by copying the Maoist YCL, the UML has fallen into Such a bubble driven by excess which are practically worthless, indirect loans where real estate the same trap of unleashing a criminalised militant force that is credit fueled liquidity is exactly and are thus forced to book asset is kept as collateral? How going out of control. what brought many US banks to billions of dollars in losses. The will the real estate price In all the confusion of name-calling in Nepal’s day-to-day their knees, and there is a good massive loans are threatening the reduction affect the performance politics, it helps to divide political forces into two types: those lesson there for us. solvency of some US banks. The and recovery of these loans? Have that believe in legitimate non-violent politics and those that use As property prices went up, FDIC has seized more than the banks done a sensitivity test violence and intimidation as a political tool. By not renouncing banks in the US found increasing 21 failing banks so far in for the worst case scenario and are violence and behaving like bullies even though they were elected their real estate loan portfolio an to power, the Maoists have undermined themselves. By 2009 alone. they adequately capitalised if unleashing the YF, the UML has lost the moral authority to lecture easy way to boost earnings. They We are inside a real estate that scenario materialises? about non-violence. not only kept loans in their own bubble in Nepal, and this bubble The government and Nepal It would be naïve to assume that prolonged power cuts, the balance sheet, but packaged them could burst. Among other things, Rastra Bank should also look into complete collapse of local governance and a worsening law and into securities which were sold the excess cash available to drive the feasibility of instituting a order situation will only harm the prime minister and his party. to investors worldwide, further prices higher may not be there in deposit insurance program up to The UML will also be tainted by eight months of governmental increasing the demand for the future. The global economic a certain threshold. Such a paralysis. mortgage loans. Borrowers were slowdown is already impacting program can be funded from the The UML wants it both ways: benefit from being a ruling party on the remittance flow into premium paid by the deposit- and criticise the Nepal which will reduce the taking institutions and the government as if it is the liquidity in the banking sector premium should be based on the opposition. But there is no free lunch in the universe, and the money chasing real risk assessment of each and this is an illusory estate assets. participating institution. advantage. The UML When the bubble bursts, not It is not too late for Nepal, but needs to decide whether it only will many Nepalis feel it is time to ask tough questions wants to be an appendage much poorer from reduced to the banks and the regulator of the Maoists or chart its property prices, but their and focus on risk management own course as a party that deposits in banks could also be so that when this real estate stands for non-violence at risk if banks that are bubble ultimately bursts, it and democracy. overexposed to real estate doesn’t take the banking sector The rest is easy: if lending face defaults, threatening down with it. z you can’t stand the heat, their ability to meet obligations get out of the kitchen. to depositors. The margin of error Raju Sitaula is a banking for Nepali financial institutions, professional based in New York. KIRAN PANDAY LLL ETTERS romanticise Kathmandu’s central 30 YEARS Gyanendra and his senile cronies who were in? The international importance to square (‘Basantapur by night’, CK Lal says that the NSU has ‘lost the running the show. What about the revelation communism may have been there 50 years #445) but there can be no doubt will to compete’ in student elections that the People’s Movement Part II was ago, but it is totally obsolete now. Mr that this once pristine place has (State of the State, ‘Thirty years of funded externally? Paras is definitely not a Objective is completely subjective and out turned into a hideous neighbourhood.