Doing business in Nepal
Perhaps the only consolation Nepal can derive from this year’s World Bank Doing Business index is that it is apparently easier to do business in Nepal—with its legion of problems, both political and economic—than in Narenda Modi’s business-minded India whose economy is galloping along at around seven percent a year. But according to every other indicator, Nepal has a lot to worry about. For the country’s rank on the annual index has been on a continuous decline, slipping from 94th (out of 190 countries) in 2015, to 99th in 2016 and to 107th in the most recently released ranking for 2017. Out of the 11 indicators that make up the composite index, Nepal’s performs the worst when it comes to ‘Enforcing Contracts’. This basically measures the time and cost for resolving a commercial dispute through the court system. “Is there a court or division of a court dedicated solely to hearing commercial cases?” the first question under ‘Enforcing Contracts’ headline asks. No, there are no such specially-designated courts in Nepal. The index also notes how Nepali courts fail to meet set time standards in more than 50 percent of the cases. It’s clear that Nepal will be a poor place to do business in so long as we don’t have a mechanism to quickly and reliably settle commercial disputes.
Nepal also does poorly in another measure of doing business, ‘Paying Taxes’, which suggests that Nepal’s tax regime is complex and its corporate taxes high. Very few of businesses in Nepal actually pay taxes because of the complexity of the tax system. If our tax codes could be simplified, not only would the country’s tax intake increase, it will also help make Nepal a more investment-friendly destination. Predictably, with nearly all our businesses running under-capacity because of power shortage, the country also does rather poorly in the indicator ‘Getting Electricity’. The other area of concern for Nepal is ‘Getting Credit’ which measures credit reporting system and the strength of collateral and bankruptcy laws. On the upside, Nepal is deemed relatively successful in ‘Protecting Minority Investors’ and ‘Registering Property’. But it is clear that unless the country takes some drastic measures it will continue to struggle to attract quality investment, the kind that will boost economic growth and create jobs.
It is natural for would-be investors to look to guarantee a healthy return on their investment. Why would they invest anywhere otherwise? But Nepal is doing a poor job of attracting them. One of the big reasons for this is that our political leadership continues to be almost exclusively focused on political issues, as the disputes over the new constitution continue to rumble on. The even more important task of improving the state of our economy so that there is a meaningful change in the lives of common Nepalis seems to have been forgotten, even when it is clear that sustained economic growth of above five percent a year is our only way out of poverty. Measures like Doing Business index help put things into perspective. But it’s no good if our planners and policymakers continue to ignore the writing on the wall.
Tastiest Curry
