The report jointly released by the World Bank and the International Finance Cooperation attributed the improvements to monitoring in the legal system to speed up the process for filing of claims by investors, thereby helping to strengthen the enforcement of contracts.
However, there are some sectors in which Nepal’s actual performance deteriorated this year, and the report explicitly pointed to an urgent need for tangible progress in making Nepal a business friendly country. It is worrisome that Nepal’s ranking fell on indicators like starting a business, dealing with construction permits, protecting investors and resolving insolvency. Above all, a five-notch slip in the starting-a-business ranking makes loud and clear the actual reasons behind Nepal’s undeveloped entrepreneurship.
Though Nepal has been notorious since many years for complicated legal requirements, red tape and bribery at different stages of starting a new business, we have not heard about the government initiating any efforts to tackle the situation. Similarly, despite achieving an impressive 21-notch promotion in ranking for dealing with construction permits, Nepal is still at the bottom mainly due to its complicated contract awarding procedures.
Apart from that, an acute power deficit, limited access to finance and a labor militancy that is largely to blame for spoiling the investment environment, continued to be the biggest challenges in luring new investment, domestic as well as foreign. Despite repeated pleas from various sectors, the government seems little interested in exploring alternative sources of energy to lessen the horrendous power shortage that the country will face in summer.
Similarly, despite an exponential increase in the number of financial institutions in recent years, it is disturbing that the global survey reckons getting credit in Nepal has become more difficult than in past years. Continued labor militancy is still badly undermining the investment environment.
We have said many times that massive, result-oriented reforms are the only solution to the problem. We congratulate Sri Lanka, which the report says implemented the most reforms among the eight economies of South Asia. We hope Nepal will learn from Sri Lanka how to deal with the toughest challenges it is facing.
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