Chinese entrepreneurs seek investment proposals

Visiting Chinese entrepreneurs asked Nepali counterparts to bring investment proposals that will benefit both countries. Chinese entrepreneurs want to invest in sectors that have competitive advantage, said vice secretary of Guangdong Provincial Council Yao Hengyin in a meeting with senior vice president of Federation of Nepalese Chambers of Commerce and Industry (FNCCI) Bhaskar Raj Rajkarnikar.

"We want security of our investment. Nepal must assure us on it," said Hengyin. Similarly, vice president of China Council for Promotion of International Trade Luo Bingzhi said that Chinese investment in Nepal could reduce the trade deficit between the two countries. Nepal must introduce programmes to reduce the trade deficit. The Chinese private sector is ready to join hands, he added.

Trade deficit between Nepal and China was at around $621 million in 2011. The Chinese team also urged Nepali entrepreneurs to take benefit from duty exemption in exporting Nepali goods to China. The northern neighbour has granted custom duty exemption in over 4,721 goods.

In the meeting, FNCCI handed over an invitation to Chinese entrepreneurs to participate in the second International Trade Fair to be held in Kathmandu, in March next year.

Vayodha hospital starts operations

Lately, the country has seen increasing investments in healthcare and education sectors.
Senior social activist Anuradha Koirala and doctors of Vayodha Hospital, jointly inaugurated the newly opened hospital amidst a special ceremony in Kathmandu on Friday.
Committed to providing high standard healthcare services and expecting creative suggestions from service seekers, Vayodha Hospital has a total capacity of 50 beds comprising of special, VIP and ordinary beds, said chairman of Vayodha Hospitals Dr Shyam Bahadur Pandey.
The hospital also started emergency services, OPD and specialist services from yesterday. "In Sanskrit, Vayodha means good health," he said, expressing the commitment to contribute significantly through excellent treatment.
Vayodha has also made two party contracts with the renowned Fortis Escorts Heart Institute of New Delhi. "In collaboration with Escorts, Vayodha will provide specialist services for cardiac care through its extra intensive care unit, in which there will be a 24-hour presence of a specialist doctor," added Pandey.
The hospital is committed to providing excellent health services, and prioritising the safety and treatment of heart patients as a focal point, which is the most highly sensible organ of the human body, according to the hospital that aims at providing quality health services of international standards.
The hospital has been established in an open area in Balkhu near Ring Road and is easily accessible from all around the valley. "Equipped with well trained, intelligent and sensible health service staff to provide instant services, the hospital has two elevators to easily transfer patients to wards, and two guaranteed generators ensuring essential services, hygiene and water," he said, adding that the team at Vayodha Hospital comprises of experienced and renowned doctors and surgeons, and highly skilled healthcare staff.
The country has witnessed Rs 50.29 billion investment in the hospitals only. In the last fiscal year 2011-12 some 35 hospitals started their operations in the country, whereas a fiscal year ago in 2010-11, only 10 hospitals have started their operations in the country. In the last fiscal years, one each hospital with 200 and 150 bed capacity, seven with 100 bed capacity, one 75 bed capacity, 10 55 bed capacity, two 51 bed capacity, 13 50 bed capacity private and community hospitals came into operations in the last fiscal year.
Currently there are some 381 hospitals in operation in the country.

Nepal can create more jobs investing in green economy

Nepal is among the countries that the highest ratio of decent jobs per million dollar of investment from green investments.
"Nepal, Indonesia and Ghana have the highest ratio of decent jobs per million dollars of investment with labour intensive economies benefiting from green investments," said the International Trade Union Confederation urging governments to drive investment of at least two per cent of gross domestic product (GDP) in the green economy in the wake of independent economic analysis forecasting the potential for green jobs growth.
The Millennium Institute green investment model shows how new investments of two per cent of GDP in each of the next five years in 12 countries could create up to 48 million new jobs. "Middle income economies including Brazil, Indonesia, South Africa, Bulgaria could create up to 19 million jobs over five years," it said, adding that some 28 million jobs could be created in developed economies in Australia, Germany, Spain and the USA over five years.
For the first time economists have used the number of jobs that can be directly created from investments as the key indicator to analyse the impact of the green economy in 12 countries including Nepal and seven industries; energy, construction, transport, manufacturing, agriculture, forestry and water.
The job creation forecasts refer to direct employment in each country and industry, these new jobs would also generate further employment growth with indirect jobs when taking the multiplier effect into account.
The economists have demonstrated how public and private investment in the green economy can create hundreds of millions of decent green jobs, General Secretary of the International Trade Union Confederation Sharan Burrow said, adding that the governments must set targets for green jobs and provide the legislative and regulatory conditions so workers can have secure jobs, living wages and creating a healthy society and environment.
The International Trade Union Confederation and the Millennium Institute have established the first ‘green job creation benchmark’ providing a guide to the jobs creation potential of selected industries, with the number of jobs per million dollars invested.
“The outlook for transitioning to a greener economy with decent work will benefit workers, business, national economies and future generations,” added Burrow, who is meeting governments, business and workers in Brazil, Bulgaria, Indonesia, Nepal and Germany ahead of the G20 Summit and Rio + 20 Summit in June, where world leaders must make commitments on green growth and decent job creation.
Burrow will be holding meetings with government, business and workers in Nepal on May 12.
The Millennium Institute has analysed Nepal, Germany, Spain, Bulgaria, Brazil, Dominican Republic, USA, South Africa, Ghana, Tunisia, Indonesia, Australia in its report.

PM invites Indian business community to invest in Nepal

Prime Minister Dr Baburam Bhattarai today said liberalised tax system and introduction of various social security schemes in the recent months have made Nepal foreign investment conducive and Indian investors should take advantage of it.
Addressing an interaction organised by FICCI, CII and Assocham in New Delhi, today, he also stressed on new social security schemes and improving labour relations in recent times.
Our tax system remains one of the most liberalised in the South Asia,” he said, adding that it makes foreign investment more conducive. He also said Nepal did not discriminate any foreign companies in the country. “We treat all the companies-foreign and national equally. Nepal is also signing Double Taxation Avoidance Agreement (DTAA) and Bilateral Investment Promotion and Protection Agreement (BIPPA) with India to boost investors’ confidence.
”He maintained that Nepali stakeholders were giving finishing touch to political need of Nepal and at the same time also focusing on economic need of the country. Dr Bhattarai said Nepal’s agriculture, tourism, hydropower and mining hold high potential for both Indian and Nepali investors.
The UCPN-Maoist ideologue also informed that a Board of Investment that has been planned by the government under his leadership would address the issues of foreign investment.Nepal’s trade deficit has reached Rs 218 million and it can be bridged only when the county produces enough goods in its territory and sell them into Indian market, the Prime Minister said.Federation of Nepalese Chambers of Commerce and Industry (FNCCI) president Suraj Baidhya, who is accompanying the Premier on his four-day official tour to India said Indian investors had invested worth $ 44 billion in other foreign countries and “if Nepal could attract a small percentage, the country could benefit a lot.”
Similarly, Confederation of Nepalese Industries (CNI) president Binod Kumar Chaudhary said Nepal failed to take advantage of Indian investment, and cooperation because of politicisation of economic issues. “Now when the PM is visiting India, back home some of the parties are worried that he might sign any major deals,” he said, adding that India also needs to be more liberal vis-à-vis Nepal and should not add tariff and non-tariff barrier to hurt Nepal’s trade with India and other third countries. Indian investors who spoke on the occasion showed concern about industrial strikes and power outages.

US duo win Economics Nobel for macroeconomic work

STOCKHOLM: US researchers Thomas Sargent and Christopher Sims won the 2011 Nobel Economics Prize on Monday for their work on macro-economics and government economic policymaking, the Nobel jury said.
This year's laureates "have developed methods for answering ... questions regarding the causal relationship between economic policy and different macro-economic variables, such as GDP, inflation, employment and investments," the jury said.
Sargent worked on structural macro-economics, which can be used to analyse permanent changes in economic policy. "This method can be applied to study macro-economic relations when households and firms adjust their expectations concurrently with economic developments," the jury said.
Sims' method is meanwhile based on "vector autoregression, and shows how the economy is affected by temporary changes in economic policy and other factors," such as a central bank rate hike.While the pair worked separately, their work is complementary and "has been adopted by researchers and policymakers around the world (and their methods) are essential tools in macro-economic analysis," it said.
Sargent, born in 1943, is professor of economics and business at New York University, while Sims, 68, is professor of economics and banking and Princeton University. One of the 2011 Nobel Economics Prize winners said on Monday his work tries to 'untangle' the relationship between central bank actions and the rate of inflation.
Princeton University economist Christopher Sims, co-winner with New York University's Thomas Sargent, said he has developed statistical tools that have been useful in unraveling the effect of monetary policy on the economy. "These methods have been used in many countries, and one of the things that have given them credibility is they tend to give consistent results," he said, adding that the main contribution of this work is to provide a way to untangle the relationship between interest rates and inflation, so we can see what the effect of interest-rate policy changes are on the price level and inflation, and separate that from the reverse causality that makes central banks react to inflation by changing interest rates.
"I was very surprised," Sims said of receiving the notification of the award. "We jumped right out of bed, because we imagined it would be a very busy morning," he said, adding that at first his wife couldn't find the talk button on the phone when the Nobel representatives contacted him 'so they called back 10 minutes later'.
Sims, who also has a PhD from Harvard, is Princeton's Harold H Helm '20 Professor of Economics and Banking, and has been a faculty member at the New Jersey university since 1999.Sargent is the William R Berkley Professor of Economics and Business at New York University and the Donald L Lucas Professor in Economics, Emeritus, at Stanford University. He is also a senior fellow at the Hoover Institution at Stanford. -- AFP

Prize in Economic Sciences
KATHMANDU: The economics prize is not among the original awards established by Swedish industrialist Alfred Nobel in his 1895 will, but was created later. In 1968, Sveriges Riksbank (Sweden's central bank) established the Prize in Economic Sciences in Memory of Alfred Nobel, founder of the Nobel Prize. The Prize is based on a donation received by the Foundation in 1968 from Sveriges Riksbank on the occasion of the Bank's 300th anniversary. The first Prize in Economic Sciences was awarded to Ragnar Frisch and Jan Tinbergen in 1969. The Prize in Economic Sciences in Memory of Alfred Nobel is awarded by the Royal Swedish Academy of Sciences, Stockholm, Sweden, according to the same principles as for the Nobel Prizes that have been awarded since 1901.

The past winners
2011: Thomas Sargent and Christopher Sims (US)
2010: Peter Diamond and Dale Mortensen (US) and Christopher Pissarides (Cyprus-Britain)2009: Elinor Ostrom and Oliver Williamson (US)
2008: Paul Krugman (US)
2007: Leonid Hurwicz, Eric Maskin and Roger Myerson (US)
2006: Edmund S. Phelps (US)
2005: Thomas C Schelling (US), Robert J Aumann (US-Israel)
2004: Finn Kydland (Norway), Edward Prescott (US)
2003: Robert F Engle (US), Clive WJ Granger (Britain)
2002: Daniel Kahneman (Israel-US) and Vernon L Smith (US)
2001: George Akerlof (US), A Michael Spence (US), Joseph Stiglitz (US)
2000: James Heckman (US), Daniel McFadden (US)
1999: Robert Mundell (Canada)
1998: Amartya Sen (India)
1997: Robert Merton (US), Myron Scholes (US)
1996: James Mirrlees (Britain), William Vickrey (US)
1995: Robert Lucas Jr (US)
1994: John Harsanyi (US), John Nash (US), Reinhard Selten (Germany)
1993: Robert Fogel (US), Douglass North (US)
1992: Gary Becker (US)
1991: Ronald Coase (Britain)
1990: Harry Markowitz (US), Merton Miller (US), William Sharpe (US)
1989: Trygve Haavelmo (Norway)
1988: Maurice Allais (France)
1987: Robert Solow (US)
1986: James Buchanan (US)
1985: Franco Modigliani (US)
1984: Richard Stone (Britain)
1983: Gerard Debreu (US)
1982: George Stigler (US)
1981: James Tobin (US)
1980: Lawrence Klein (US)
1979: Theodore Schultz (US), Arthur Lewis (Britain)
1978: Herbert Simon (US)
1977: Bertil Ohlin (Sweden), James Meade (Britain)
1976: Milton Friedman (US)
1975: Leonid Kantorovich (Soviet Union), Tjalling Koopmans (US)
1974: Gunnar Myrdal (Sweden), Friedrich von Hayek (Britain)
1973: Vassily Leontief (US)
1972: John Hicks (Britain), Kenneth Arrow (US)
1971: Simon Kuznets (US)
1970: Paul Samuelson (US)
1969: Ragnar Frisch (Norway), Jan Tinbergen (Netherlands)

Investment climate in hydropower worsening

The investment climate in hydropower has worsened in the last one year, according to hydropower specialist.
"The investment environment in 2011 seems to be like it used to be in early 1990s," said Immediate Past President of Independent Power Producers Association, Nepal (IPPAN) Dr Sandip Shah.
The country experienced better investment environment in late 1990s and even after 2006 Constituent Assembly till 2008, the environment was better," he said, hoping that next year, the government will create better investment environment for the hydropower.
He pointed out legal stability, political and bureaucratic will, security, effective 'Single-window', market, cross-border transmission lines and finance - including CDM as absolute conditions for hydropower projects development. "For all this to happen, political stability is a must," Shah, one of the key persons to lobby for foreign investments in Nepal’s hydropower sector, said.
However, he stressed three key drivers -- Power Purchase Agreement (PPA), Power Development Act (PDA) and transmission lines -- for the better investment environment for hydropower development. "Cross-border transmission lines to India is a key to electricity market access," Shah added.
Reducing electricity costs, attracting private investment, maximising public revenues, creating energy security in an environmentally and socially sustainable manner and optimising power plants with possibilities of exports should be the objectives of Nepal’s Power-sector reform programme, according to him, as he has been a strong advocate of private investments in the hydropower sector in Nepal and for promotion of project finance and energy markets.
Nepal has a huge potential of hydropower development but the country is reeling under severe electricity crisis.
"There is a real danger of the whole economy grinding to a halt unless and until some emergency measures are carried out in the power sector to expedite the power projects," according to the IPPAN. "The government has taken some encouraging measures to end electricity crisis but they may not be enough given the gravity of the problem.”

Foreign aid commitment hits record high

Nepal received almost double to around Rs 100 billion foreign aid commitment in the last fiscal year compared with 2008-09.

At a time when the government's absorption capacity is under doubt, the country received Rs 92,288.48 million foreign aid commitment -- including loan and grants from bilateral and multilateral agencies -- in the fiscal year 2009-10, whereas it was Rs 47,975.23 million a fiscal year ago, according to the Foreign Aid Department at the Finance Ministry (MoF).

"Though, it can not be compared, the foreign aid commitment is huge," said Lal Shanker Ghimire, chief of Foreign Aid Department at the Finance Ministry.

However, the experts are seriously concerned over Nepal's capacity to utilise the aid. "Nepal has been unable to utilise foreign aid in the past few years," said former member of the National Planning Commission (NPC) Dr Posh Raj Pandey.

Out of the total commitment, Rs 25,823.24 is loan from multilateral agencies -- World Bank (Rs 13,492.33 million) and ADB (Rs 12,330.91 million), whereas the remaining Rs 66,465.24 million is grant. "Nepal needs to develop absorbing capacity for the maximum utilisation of the aid," he added.

"For the maximum utilisation, foreign aid has to be utilised on the projects Nepal owns," he said adding that this commitment could help government plan resources for the new fiscal year.

However, the foreign aid commitment in the fiscal year 2008-09 has registered a dismal growth of 2.5 per cent compared with 32.9 per cent in its immediate preceding year.

In monetary term, committed foreign aid was limited to Rs 47,975.3 million in 2008-09 from Rs 49,186.2 million in 2007-08. "Of the total foreign aid commitment for 2008-09, bilateral assistance constituted Rs 27,196.5 million, whereas the multilateral assistance totaled to Rs 20,778.8 million," according to the MoF.

Similarly, bilateral assistance constitutes Rs 36,001.41 million, whereas multilateral assistance constitutes Rs 56,287.07 million in the fiscal year 2009-10.

While classifying the foreign aid into grant and loan components for the year, grants amounted to Rs 43,095.7 million and loans to Rs 4,879.5 million in 2008-09. Foreign grants have increased by 4.9 per cent whereas loans have decreased by 39.9 per cent compared with a fiscal year ago.

Foreign loan has been playing vital role in the Nepali economy. The net outstanding foreign loan totaled Rs 249,965.4 million in the fiscal year 2007-08, which further increased by 10.8 per cent reaching Rs 277,040.4 million in 2008-09.

The budget for the fiscal year 2009-10 has targetted Rs 78.51 billion in foreign assistance -- including grant and loan. It was 27.45 per cent of the total budget of Rs 285.93 billion.

Last budget's target

Total budget -- Rs 285.93 billion

Foreign assistance -- Rs 78.51 billion

Foreign grant -- Rs 56.95 billion

Foreign loan -- Rs 21.56 billion

Budget may not change income tax ceiling

The government is not going to increase income tax ceiling in the budget for the fiscal year 2010-11 as that will result in a higher gross disposable income further fuelling consumerism and ing the balance of trade.
"The government -- as suggested by entrepreneurs -- is rather encouraging exports," said finance secretary Rameshwor Khanal at a pre-budget interaction organised by the Confederation of Nepalese Industry (CNI) here in the Finance Ministry today.
According to CNI, the country is witnessing a ballooning trade deficit of Rs 238 billion. "If the domestic production could substitute the imports, the growing consumerism could also be beneficial. Increasing the income tax ceiling could harm the national economy by increasing the gross desposable income," he said.
Similarly, the government is also curbing investment abroad. "If the private sector is allowed to invest abroad, it could have an adverse impact on the economy as the country is facing liquidity crunch," he opined. Earlier, the government has relaxed the policy paving way for the the private sector to invest abroad. The government is now planning to persuade these investments back to the country.
CNI while making suggestions for the budget 2010-11 asked the government to introduce multi Value Added Tax (VAT). The finance ministry however made it clear that the government is sticking to the current VAT system for the moment.
"Investment-shy policies have hurt the economy," said CNI president and CA member Binod Chaudhary. "High interest rates, insecurity, electricity problem, labour unrest and lack of infrastructure development have increased business operating costs, creating difficulty in business development," he said. The budget should be effective in implementing the Industrial Policy 2067 that has recently passed, he demanded.
CNI has also insisted on removing demand charge in diesel as the alternative for electricity supply. "If need be, we have to look for an alternative like Infrastructure Development Bank for big infrastructure projects taken up jointly by the private sector and the government," said CNI vice-president Hari Sharma. "Large infrastructure projects that can become the base for economic development is the need of the hour," he added.
CNI has also urged the government for cooperation in making Nepal Tourism Year 2011 a success.
"The government for the success of NTY 2011 should make NTY 2011 period strike-free and grant financial assistance for the development of the tourism sector as a whole," Sharma said. Development of regional airports and renovation of ancient monuments as heritage hotels in participation with the private sector can boost the tourism sector, he said.
CNI has urged the government to make value addition in herbal products, refund duties and VAT to trading companies during re-export, remove export duty on Nepali exportable products, and to minimise fine of 25 per cent to 10 per cent in case exported goods returned among others. Technology transfer and ancillary industries should be encouraged for large, small and micro industries for their forward and backward linkages, CNI said.
The government has been advised to form Industrial Sickness Review Board (ISRB) and develop business corridor like Itahari-Biratnagar, Hetauda-Birgunj, and Butwal-Bhairahawa into Industrial Clusters.
Currently, food deficit has more than doubled to 3,12,000 tonnes from last year's deficit of 1,25,000 tonnes. Similarly, bank's lending to productive sector has also decreased to seven per cent from last year's 14 per cent. "The only sector that seems to achieve the target is revenue but the import-based revenue is also hurting competitiveness of the domestic production," the CNI said.

Global FDI flows down by 39 per cent

There was a decrease of 39 per cent in global foreign direct investment (FDI) flows in 2009, which impacted on all countries and FDI components, according to the UNCTAD report. Global inflows of FDI fell by 39 per cent from $1.7 trillion in 2008 to a little over $1 trillion in 2009, said the report.
The decline in FDI was widespread across all major groups of economies. After experiencing a severe fall in 2008, FDI flows to developed countries continued their dramatic drop in 2009 - by a further 41 per cent. FDI flows to developing and transition economies, which had risen in 2008, declined in 2009 - by 39 per cent - as the impact of the global financial and economic crisis continued to unfold, it said. All components of FDI - equity capital, reinvested earnings, and other capital flows (mainly intra-company loans) - were affected by the downturn. "However, the decrease was especially marked for equity capital flows, which are most directly related to transnational corporations' longer-term investments strategies," the report said.
"Regarding the mode of entry of the FDI, cross-border mergers and acquisitions were the most affected, with a 66 per cent decrease in 2009 as compared to 2008. The number of international greenfield projects also declined markedly, though to a much lesser degree (-23 per cent). Nevertheless, a number of macroeconomic indicators signal that the overall environment for international investment is slowly improving.
For instance, the IMF's latest World Economic Outlook, released last October, forecasts a 3.1 per cent growth in world GDP for 2010, as against -1.1 per cent in 2009. At the company level, profits of TNCs world-wide have been rising since the second quarter of 2009, thus reversing the sharp drop observed at the end of 2008.
According to Standard and Poors, profits made by the firms that make up the S&P 500 bounced back as early as the second quarter of 2009, to levels equivalent to those of the same period of the previous year. Improving conditions will ultimately encourage companies to revise upward their international investment plans for 2010 onward, which in turn should give rise to growing FDI flows in 2010.
However, as the recovery in economic growth and profits remains fragile, especially because it has been boosted by the potentially transitory impact of special packages, the recovery in FDI is expected to be modest.

Nepal mostly unfree economy: Survey

Nepal has scored 52.7 making its economy the 130th in economic freedom, according to the 2010 Index published by Heritage Foundation and Wall Street Journal.
“Its score is 0.5 point lower than last year, reflecting declines in five of the 10 economic freedoms due to political instability,” said report. Nepal is ranked 28th out of 41 countries in the Asia–Pacific region, and its score is below the world and regional averages.
The county falls in the mostly unfree country as according to its score. If a country scores from 50 to 59.9 it is in the mostly unfree category, whereas those scoring 60 to 69.9 are moderately free, 70 to 79.9 mostly free and 80 to 100 are the freest economy. The countries scoring 0 to 49.9 are repressed. Seven countries fall in the freest category, 23 countries fall in mostly free, 43 countries fall in moderately free category, 55 countries fall in mostly unfree category and 36 countries fall in repressed economies and four countries are not ranked in the total of 188 economies ranked in the list.
“Nepal’s economy is characterised by a combination of rapid population growth and inadequate economic growth that has led to widespread, chronic poverty,” the report said. “The weak reform efforts have failed to stimulate broad-based economic growth,” it added.
The report hails the state’s continuation to hamper private-sector development but it says political instability weakens the country’s ability to implement economic reform or create a stable environment for development.
Although reforms in Nepal’s trade regime are slowly having an effect, the average tariff rate remains high, according to the report. “Foreign investments must be approved or face licensing requirements. A lack of transparency, corruption, and a burdensome approval process impede much-needed private investment growth. Property rights are undermined by the inefficient judicial system, which is subject to substantial corruption and political influence.”
Economic freedom is the fundamental right of every human to control his or her own labour and property. In an economically free society, individuals are free to work, produce, consume, and invest in any way they please, with that freedom both protected by the state and unconstrained by the state. In economically free societies, governments allow labour, capital and goods to move freely, and refrain from coercion or constraint of liberty beyond the extent necessary to protect and maintain liberty itself.
The report measure ten components of economic freedom and their scores are then averaged to give an overall economic freedom score for each country.
In this year’s report, UK, US and China have fallen down the rank and Poland, Turkey and Mexico have improved significantly.
According to the report, Hong Kong remains the world's freest economy, followed by Singapore, Australia, New Zealand and Ireland.
Regionally, in Asia-Pacific region, Nepal ranks 28 out of 41 economies. But in South Asia, Nepal is behind all the country except Bangladesh. Bhutan is the freest economy in the report.

South Asian ranking
103 -- Bhutan: 57
117 -- Pakistan: 55.2
120 -- Sri Lanka: 54.6
124 -- India: 53.8
130 -- Nepal: 52.7
137 -- Bangladesh: 51.1
Maldives: -- N/A
Afghanistan: N/A

Nepal in figures
Population: 28.6 million
GDP: $31.8 billion ($1,112 per capita)
Unemployment rate: 20 per cent
FDI flow: $1 million

---
Overall score: 52.7
Business Freedom: 59.4 (down as average is 64.6)
The overall freedom to start, operate, and close a business is limited under Nepal’s regulatory environment. Starting a business takes an average of 31 days, compared to the world average of 35 days. Obtaining a business license takes almost twice the world average of 218 days. Bankruptcy proceedings are lengthy and complex.

Trade Freedom: 58.8 (down as average is 74.2)
Nepal’s weighted average tariff rate was 13.1 percent in 2007. The government continues to implement reforms, but import bans, services market access barriers, import taxes, import and export licensing, non-transparent regulations, weak enforcement of intellectual property rights, inadequate infrastructure and trade capacity, and customs corruption add to the cost of trade. Fifteen points were deducted from Nepal’s trade freedom score to account for non-tariff barriers.

Fiscal Freedom: 86.6 (up as average 75.4)
Nepal has moderate tax rates. Both the top income tax rate and the top corporate tax rate are 25 percent. Other taxes include a value-added tax (VAT) and a property tax. In the most recent year, overall tax revenue as a percentage of GDP was 9.6 per cent.

Government spending: 92.3 (up as average 65)
Total government expenditures, including consumption and transfer payments, are low. In the most recent year, government spending equaled 16.0 percent of GDP. The state oil company is a drain on the economy.

Monetary Freedom: 77.8 (down as average is 70.6)
Inflation has been moderately high, averaging 7.4 percent between 2006 and 2008. Although most price controls have been eliminated, the government regulates the prices of petroleum products and telecommunications services and subsidizes companies in strategic sectors. Five points were deducted from Nepal’s monetary freedom score to account for policies that distort domestic prices.

Investment Freedom: 15 (down as average is 49)
Nepal is generally open to investment in many sectors, but investments must be approved, and many face licensing requirements. Bureaucracy and regulatory administration are burdensome, non-transparent, inconsistently implemented, and inefficient. Political instability, pervasive corruption, and inadequate infrastructure and administrative capacity also inhibit investment. Residents may hold foreign exchange accounts in specific instances; most non-residents also may hold such accounts. Convertibility is difficult and not guaranteed. Most payments and transfers are subject to prior approval by the government. There are restrictions on most capital transactions, and all real estate transactions are subject to controls. Foreign investors may acquire real estate only for business use.

Financial Freedom: 30 (down as average is 48.5)
Nepal’s fragmented financial system is heavily influenced by the government. Financial supervision is insufficient, and anti-fraud efforts are lacking. Regulations are not transparent and fall short of international standards. The banking sector dominates the financial sector, and there are approximately 20 commercial banks operating in the country. The number of other financial intermediaries has increased in recent years, but the high cost of credit and limited access to financing still deter entrepreneurial activity. Nepal’s government-owned banks represent more than 30 percent of total banking assets and account for more than half of total bank branches. The central bank has gradually phased out “priority sector” financing activities whereby banks must lend a certain amount to government-designated projects.

Property Rights: 35 (
Nepal’s judicial system suffers from corruption and inefficiency. Lower-level courts are vulnerable to political pressure, and bribery of judges and court staff is endemic. Weak protection of intellectual property rights has led to substantial levels of optical media copyright piracy.

Freedom from Corruption: 27
Corruption is perceived as widespread. Nepal ranks 121st out of 179 countries in Transparency International’s Corruption Perceptions Index for 2008. Foreign investors have identified corruption as an obstacle to maintaining and expanding direct investment, and there are frequent allegations of official corruption in the distribution of permits and approvals, the procurement of goods and services, and the awarding of contracts. The governmental Commission for the Investigation of the Abuse of Authority, mandated to investigate official acts of corruption, claimed a 75 per cent success rate concerning corruption cases it filed, but some cases involving politicians were not filed or were defeated in court.

Labour freedom: 44.7 (down as average is 62.1)
Nepal’s labor regulations are restrictive. The non-salary cost of employing a worker is low, but laying off an employee is difficult.