Government instability and corruption coupled with inefficient government bureaucracy and lack of policy stability are the most problematic factors for doing business in the country.
Entrepreneurs perceive restrictive labour regulations and poor work ethics of the national labour force to also be problematic factors in doing business, according to an executive survey of 95 entrepreneurs, including small, medium and large enterprises.
From the 16 factors that featured in the list, respondents were asked to select the five most problematic factors for doing business in the country and to rank them between one (most problematic) and five (least problematic).
Surprisingly, executives found the tax regulation, tax rates and foreign currency regulation less hindering factors for doing business.
"The poor labour-management relation has become one of the key factors, though it has been improving lately," according to former president of Nepal Chamber of Commerce Mahesh Agrawal.
He opined that both the private and public sector need to be blamed for inefficiency, lately, thus hindering the formation of a conducive business environment.
"A stronger and efficient public sector will compel the private sector also to become more efficient," opined Prof Dr Ramesh Chitrakar.
"Nepal is only ahead of Burundi in infrastructure among the 144 economies that the World Economic Forum has ranked in its report," he said, adding that infrastructure — air, road and rail transport besides electricity supply — is a basic need for economic development and will help build the competitiveness of a land-locked country like Nepal.
"It is directly linked to productivity but the government has failed to link domestic as well as foreign markets limiting the scope of entrepreneurs due to its inefficiency and rampant corruption," he added.
Similarly, policy instability is yet another factor that has made entrepreneurs shy away from doing business in the country. "It is not only the frequent change in government but also the change in policies that have taken a toll on the investment climate," according to economist Dr Chiranjivi Nepal. "The government must provide a predictable environment for investors," he said, adding that investors – domestic or foreign – will invest only if the country can provide a predictable policy framework with a guarantee of returns.
Policy stability is a more important factor than stability of the government in a nation like Nepal, he added.
Most problematic factors for doing business
1. Government instability
3. Inefficient government bureaucracy
4. Policy instability
5. Restrictive labour regulations
6. Inadequate supply of infrastructure
7. Access to financing
8. Poor work ethics in national labour force
10. Crime and theft
(Source: Global Competitiveness Report 2012-13, World Economic Forum)