Nepal improves competitiveness ranking

Though, the lengthening political transition has dampened the hopes of investors, the country has improved its competitive raking.

Nepal has improved its global competitiveness ranking to 117th position – with a score of 3.66 out of seven – out of 148 economies, the according to the Global Competitiveness Index 2013-14 (GCI) published today by World Economic Forum (WEF).

Lat year the country was ranked 125^th among the 144 economies. Compared to the last year’s economies only that 144, Nepal ranks 114 this year, revealed the Global Competitiveness Index (GCI) – also a barometer for the investors to gauge the investment climate of individual countries – that is measured on 12 categories of economic competitiveness.

The ranking calculated on the basis of 12 categories – institutions, infrastructure, macroeconomic environment, health and primary education, higher education and training, goods market efficiency, labour market efficiency, financial market development, technological readiness, market size, business sophistication and innovation – are further divided into 112 sub-indicators to map the competitiveness of a country.

Nepal has improved only in three – macroeconomic environment, health and primary education and financial market development – of the 12 pillars.

The improvement in the three pillars will however not help sustain the competitiveness ranking without visible improvements in key sectors like infrastructure, labour market efficiency, technological readiness and business sophistication and innovation.

Of the 148 economies, Nepal ranks 144^th in infrastructure, whereas it is ranked 146th in cooperation in labour-employer relations under the labour market efficiency pillar.

Likewise, the country ranks 125^th in hiring and firing practices, down from last year’s 105^th as the government-labour organisations and private sector are still not able to agree on hire and fire opposed by the hardliner communists political parties.

The global report has also identified government instability as one of the most problematic factors for doing business in Nepal, followed by corruption and inefficient government bureaucracy.

Similarly, the GCI also revealed that public trust in the politicians is at its lowest as the country ranks 142^nd in public trust of politicians.

The index also revealed government spending as one of the waste as Nepal is in the 105^th position in the wastefulness in government spending.

As always, the private sector still feels legal framework for settling business disputes insufficient and worsened, as the country is positioned at 123^rd in the efficiency of the legal framework in settling disputes from last year’s 113 last year.

The report revealed that India (60), Sri Lanka (65), Bhutan (109) and Bangladesh (110) are more competitive economies – than Nepal – in South Asia, whereas Pakistan (133) trails behind Nepal.

Likewise, Switzerland with 5.67 score is the world's most competitive country, according to WEF Global Competitiveness Report 2013-14, followed by Singapore (5.61), Finland (5.54), Germany (5.51), and US (5.48).

The report also revealed that the US was able to reverse its four-year downward trend, rising by two positions to take fifth place this year overtaking the Netherlands and Sweden.

China is ranked 29th, leading the five BRICS – Brazil, Russia, India China and South Africa – economies, whereas Chad (148), Guinea (147), and Burundi (146) are the least competitive economies among the 148 listed in the index represents a comprehensive tool that measures the micro-economic and macro-economic foundations of national competitiveness.

Intellectual Property Right violation hurts revenue, creators

We do not hesitate to buy cheap CDs, DVDs or software that are pirated, as it has become common practice. But rampant violation of copyright has not only made the government lose millions in taxes but the original creators and publishers are also losing their economic and moral rights.

"One can find pirated CDs, Mp3 and DVDs on sale everywhere in the city," argues lawyer Baburam Aryal, adding that pirated software and unlimited downloads of songs and programmes is a violation of the rights of paternity and rights of integrity, apart from economic rights like royalty for the creative work.

It is not that there is no law in the land but it has become a common practice, he added. "The country also lacks a digital lab to prove violation of the Act."

The Copyright Act 2059 BS has taken the violation of Intellectual Property Right (IPR) as a criminal offence. Yet, the incidence of copyright violation has not come down, according to copyright registrar Bishu Kumar KC.

"The Copyright Registrar's office and Samriddhi Foundation are jointly working on to prepare an action plan to fight against infringement of copyright like plagiarism, piracy and unauthorised download as it cannot be controlled alone with the efforts of the government," he says, adding that people need to be made aware that violation of copyright is a crime.

However, SSP of Metropolitan Police Crime Division Devendra Subedi says that they are not getting complaints from either publishers or authors – the original creators – who are bearing the losses. "Since IPR comes under serious criminal offence, the police needs to receive complaints," he says, asking the publishers or original creators to come forward and complain. "Once the complaint is lodged, we will take action," he commits, citing examples of earlier cases when the police have successfully investigated and penalised Copyright Act violators.

Intellectual Property Right is not only key to protecting economic and moral rights of the creators but also important in increasing the country's competitive strength.

The more stronger the country is in protecting industrial property rights like patents, designs and trademarks, besides creative works like music and literature, the more a country can attract foreign direct investment.

The Global Competitiveness Index 2012 has listed innovation as one of the 12 pillars that measures a country's competitive strength. The 11 pillars — institution, infrastructure, macroeconomic environment, health and primary education, higher education and training, goods market efficiency, labour market efficiency, financial market development, technological readiness, market size, and business sophistication — have diminishing returns but the 12th pillar –– innovation –– is key and a country must invest sufficiently on research and development for innovation that can help strengthen the country's competitive strength.

It is no wonder that Nepal scored poorly in the 12th pillar, among all the indicators in the competitive index and lost its competitive strength, failing to attract foreign investment.

Instability, corruption most problematic for doing business

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

2. Corruption

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

9. Inflation

10. Crime and theft

(Source: Global Competitiveness Report 2012-13, World Economic Forum)

Weak infrastructure hits country's competitiveness, Nepal ranks 125 among 144 economies in Global Competitiveness Report 2012-13

The government's low priority in infrastructure development — that is directly related to productivity — has made the country less competitive.

"Weak infrastructure has made Nepal less competitive among the 144 global economies, and the country ranked 125 with a score of 3.5 in the Global Competitiveness Report 2012-13," according to a report of the World Economic Forum released globally today.

Last year, Nepal ranked 125 among 142 economies, and this year too, it is ranked 125 among 144 economies, said country coordinator of the report Prof Dr Ramesh Chitrakar.

The country scored worst in infrastructure — one among the 12 pillars that gauge the country's competitive strength — with a score of 1.8, ranking at 143, second from the bottom. "Under infrastructure, there are nine components — quality of overall infrastructure, roads, railroad infrastructure, port infrastructure, air transport infrastructure, airlines seat kms/week, electricity supply, mobile telephone subscription, and fixed telephone lines/100 people — and Nepal's score was not satisfactory in any of them," he said, adding its performance was poor in the quality of electricity supply, ranking at 143 position.

Nepal could neither perform well in basic infrastructure nor in the efficiency enhancer as the country is lacking in making the right mix of goods and services for its exports, and availability of financial services is still difficult despite the rising number of banks and financial institutions.

But Nepal fared well in the macroeconomic environment, and health and primary education that has helped the country retain the same rank this year too.

Among the four pillars under 'Basic Requirements', two — institutions (rank 123) and infrastructure (rank 143) — performed poorly and two — macroeconomic environment (rank 56) and health and primary education (rank 109) — are satisfactory.

However, among the six pillars under 'Efficiency Enhancers', all of them — higher education and training, goods market efficiency, labour market efficiency, financial market development, technology readiness and market size — performed poorly.

Similarly, the country could not improve in 'Innovation and Sophistication Factors' that has two pillars –– business sophistication and innovation.

As Nepal falls under the factor driven economy, basic requirements gets 60 per cent, efficiency enhancers gets 35 per cent, and innovation and sophistication factors gets five per cent weightage in the overall scoring, said Chitrakar.

He added that there are three categories — factor driven economy like Nepal, efficiency driven country and innovation driven country — based on their per capital, exports of goods, innovation and market efficiency, according to the Global Competitiveness Report.

The report revealed Switzerland as the most competitive country for the fourth consecutive year, this year too. Singapore remains in the second position, whereas Finland improved to become third overtaking Sweden.

The US continued to decline for the fourth year in a row falling two places to seventh position, though it still remains a strong global innovation powerhouse, and its markets work efficiently.

The study by the World Economic Forum ranked 144 countries by examining 113 indicators culled from official data sources and a poll of 15,000 executives who opined on the country where they do business.

 

South Asian ranking

India — 59

Sri Lanka — 68

Bangladesh — 118

Pakistan — 124

Nepal — 125

Top 10

Switzerland

Singapore

Finland

Sweden

Netherlands

Germany

United States

United Kingdom

Hong Kong SAR

Japan

Bottom 10

Burundi (144)

Sierra Leone (143)

Haiti (142)

Guinea (141)

Yemen (140)

Chad (139)

Mozambique (138)

Lesotho (137)

Timor-Leste (136)

Swaziland (135)