Liberal economic policy challenged

Though Nepal adopted liberal economic policy back in 1990, current licensing regime or regulatory environment still is quasi-restrictive in nature, according to a study.
"More than half -- 67 out of 125 -- of the business licenses are pre-operational licenses, which indicates that current licensing regime is quasi-restrictive," said economist Dr Pitambar Chhetri, who was involved in 'Business License Study in Nepal' along with International Finance Corporation consultant Taneem Ahad.
The regime has discouraged the businesses to expand as motivation of remaining small is higher as scaling up businesses only means, they need to deal with multiple licenses and multiple agencies, the study revealed, adding that it takes more than a year -- 390 days -- to acquire a license, according to a conservative estimation. "Obtaining a license takes longer than written in Act or Charter."
The report has attributed delay to inadequate resources, lack of inter-agency coordination and discretionary authority and lack of clear guidelines to the licensing officers.
Business licenses are defined broadly as any ex-ante authorisations required for any business activity to commence and operate, according to the International Finance Corporation that has included all licenses, authorisations, certificates, permits, levies, fee and others taxes imposed on business activities by any regulatory authority. "Licences typically impose on businesses a range of conditions, obligations and rights, often in form of specific license, permit or concession."
"Compared to business and tax registrations, processing time for other business licenses, on an average, take around three times more and is a cumbersome process," he added.
Though licenses and registrations are centralised, private sector also have authority to issue license like certificate of origin, according to the report that also has blamed authority for using discretionary power due to people's lack of adequate information.
Licenses with short validity periods encouraged frequent interface between departments and businesses creating burden to both promoting opportunities to process through 'unofficial fast track,' it revealed.
Over 40 institutions from Ministry of Industry are involved to line agencies in issuance of business licenses, it said, adding that telecommunication, communication/broadcasting, and agriculture/forestry comprise the bulk of business licenses accounted for over four to 10 types of licenses, whereas nine different agencies are involved in issuing business licenses for export and imports, Chhetri said, suggesting that there are possibilities for simplification and consolidation of licenses to decrease the processing delays.