Wednesday, September 19, 2012

Country fails to protect property rights

Nepal has not been able to improve its legal structure and property rights as it has not only scored the least but its score has also decreased in the 'Legal structure and security of property rights' in this year's Economic Freedom of the World Report 2012 released here today by Samriddhi, The Prosperity Foundation.
Weak property rights and legal structure were the reasons why the country could not attract foreign direct investment too, said economist Dr Chiranjivi Nepal, at an interaction on Nepal's performance in economic freedom here today.
Right to personal property is the key to prosperity, he said, adding that property rights come in between poverty and prosperity.
However, the government has failed to protect property rights in the country, Nepal added.
The annual peer-reviewed Economic Freedom of the World report is published by the Fraser Institute — Canada’s leading public policy think-tank — in cooperation with independent institutes in 80 nations and territories — with the help of data dating back two years. This year's report depends on 2010's data. "Nepal's score in property rights will further go down in the next two years as the current government is against the protection of property rights," he added.
Nepal's score in 'Legal structure and security of property rights' — one of the five components of the measurement of economic freedom — has decreased to 3.85 from last year's 3.9 out of 10.
However, the country has improved its score in 'Size of government' to 8.34 from last year's 6.10, "But instead of having a limited but effective role, the incumbent government is expanding its role and is ineffective," said former secretary Dr Bholanath Chalise.
The government's basic role is to maintain law and order and respect contracts, but the government has failed in its basic responsibility, he added.
Similarly, the country has also improved in the 'Freedom to trade internationally' with a 6.74 score, which was at 5.40 last year. "The freedom to trade and market ensures prosperity, unlike what is being misinterpreted in Nepal," said director general of Federation of Nepalese Chambers of Commerce and Industry Dr Hemant Dawadi. "However, the market should also play fair as freedom is not enough," he added.
"The government and private sector both are promoting cartel and syndicate in the market," said former secretary Purushottam Ojha, speaking on 'Regulation of credit, labour and business,' another component — where the score increased to 6.47 from last years' six — of the economic freedom.
"The anti-competitive behaviour of the private sector and lack of rule of law is the failure of the regulation," he said, adding that cartel of interest rates by the banks, problems in export financing, low investment in agriculture and higher spread rates are due to weak credit regulation despite improved scoring. "Similarly, shortage of manpower in agriculture, politicisation of trade unions in industries, and decreasing labour productivity are due to weaker regulations in the labour market," he added.
The government is moving towards the controlled economy, FNCCI vice president Bhaskar Raj Rajkarnikar said, citing the current government move of fixing MRP as an example.
Despite improved scoring, Nepal continues to be one of the least economically free countries in the world, according to the report that revealed that the overall levels of economic freedom around the globe has increased.
Nepal ranks 110 among 144 countries this year with a score of 6.33 with mixed performance with regards to all the five components of economic freedom.
Though its ranking and scores in some of the areas have improved, the overall performance in terms of economic freedom continues to be low, the report added.
The Economic Freedom of the World Report uses 42 different measures to create an index, ranking countries around the world based on policies that encourage economic freedom. The cornerstones of economic freedom are personal choice, voluntary exchange, freedom to compete, and security of private property. This year’s publication ranks 144 nations, using data from 2010.
The report revealed that individuals living in countries with high levels of economic freedom enjoy higher levels of prosperity, greater individual freedoms, and longer life spans.
The report which ranks 144 countries representing 95 per cent of the world’s population according to the extent to which they permit their citizens to be economically free and a collaboration of institutes in 85 nations and territories, ranked Hong Kong as the freest economy with a score of 8.90 out of 10, followed by Singapore (8.69), New Zealand (8.36), Switzerland (8.24), Australia (7.97), Canada (7.97), Bahrain (7.94), Mauritius (7.90), Finland (7.88) and Chile (7.84).
Similarly, Venezuela (4.07) is the least free economy among the 144 economies this year. Myanmar, Zimbabwe, Democratic Republic of Congo and Angola are among the other least free economies in the world.
Economic freedom is important because economic rights are fundamental rights in the sense that without them there can be no political freedom or civil freedoms, a prerequisite for growth and development and a prerequisite for broader human development.
Nepal’s overall score: 6.33, Rank: 110
Nepal’s score and rank in five key areas of economic freedom (from 1 to 10, where a higher value indicates a higher level of economic freedom and a higher ranking) are:
• Size of government: improved from 6.10 to 8.34
• Legal structures & security of property rights: down from 3.9 to 3.85                  
• Access to sound money: improved from 6.10 to 6.26
• Freedom to trade internationally: improved from 5.40 to 6.74
• Regulation of credit, labour and business: increased from 6.0 to 6.47

What is economic freedom
Individuals have economic freedom when property they acquire without the use of force, fraud, or theft is protected from physical invasions by others and they are free to use, exchange, or give their property as long as their actions do not violate the identical rights of others. An index of economic freedom should measure the extent to which rightly acquired property is protected and individuals are engaged in voluntary transactions. — James Gwartney et al. 1996


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