Nov 6, 2013

Doing Business in Nepal : Ground Realities

Since the economic reforms started in 1980s under the Structural Adjustment Program of IMF and World Bank, Nepal has endeavoured to follow an open and export-oriented economic model. Many restrictions on imports have been removed and custom duties have been reduced, the controls on foreign exchange also have been relaxed. Industrial licensing system has been reformed and foreign investment has been allowed in the country. Private sector has been recognized as one of the major pillars of the Nepalese economy. 

One of the major characteristics of a market economy is the freedom to enterprise which requires that there are no excessive regulations from the government. Studies have found that poor countries regulate their business the most and heavier regulations usually result in more inefficiency in public institutions with longer delays and higher costs along with higher unemployment, higher rates of corruption and less investment and productivity (World Bank, 2004). Nepal is not an exception despite adopting market friendly economic regime in the framework of economic liberalization with the objective of improving the competition and doing business scenario.

In the  Doing Business 2014: Understanding Regulations for Small and Medium-Size Enterprises report, Nepal has been ranked 105th out 189 countries with regards to ease of doing business. Nepalese enterprises seem to face additional problems and hurdles that are not covered in the report. Under the guidance of Dr. Dileep K. Adhikary, I have co-written a paper titled "Doing Business in Nepal: Ground Realities" with my colleague at Samriddhi, The Prosperity Foundation. I have tried to find out what kind of additional hurdles do business enterprises in Nepal face and what can be done about it. I would love your comments and feedback on the paper.