Proceedings Report: Doing Business In Federated Nepal- Towards Making It Happen

PROCEEDINGS REPORT

DOING BUSINESS IN FEDERATED NEPAL: TOWARDS MAKING IT HAPPEN 29 November 2018 Retracting unsavory political and economic episodes, Nepal is entering into a new era of economic reform by institutionalizing federalism. Currently, there are three tiers of government—Federal, Provincial and Local, coherently adapting the transition. There is no denying to the hurdles for doing business in this phase of changeover. But as the saying goes, ‘Every problem is an opportunity in disguise’, the 37th neftalk focused on the issues mentioned below:  Observing problems with the lens of opportunities in federated Nepal,  Role of public sector in developing a conducive environment for private sector, and  Precondition to increasing foreign direct investment to Nepal for achieving middle income status.

This session of neftalk was also a special one because Nepal Economic Forum along with beed management launched its flagship publication – Doing Business in Federated Nepal. The publication is an attempt to provide insights on business climate in Nepal under the new federated structure. It maps the economic landscape of the provinces that shall help investors compute and compare the prospects of business opportunities across the provinces.

Speakers:  Baikuntha Aryal, Secretary, National Natural Resources and Fiscal Commission of Nepal  Faris H. Hadad-Zervos, Country Manager, World Bank  Lei Lei Song, Regional Economic Advisor of the South Asia Department in the Asian Development Bank  Shankar Prasad Sharma, leads the Economic Policy Incubator The session was moderated by Sujeev Shakya Chairperson, Nepal Economic Forum.

BAIKUNTHA ARYAL With ample opportunities already in the country, tourism is the locus for investment. The success in tourism can only be achieved through proper connectivity, which calls for adequate investment in infrastructural development. Infrastructural development, of any form, has significant economic ramifications as it makes the market easily and readily accessible. In order to sustain tourists in a location for extended period of time, touristic products and services should also be marketed well.

With the newly implemented fiscal federalism, the major concern of development partners is to help amend the plans and capacitate them by identifying the needs. Development partners working at the grassroots can be the best way to improve and levitate the local and provincial economy. This will ultimately create some economic patience in the country with eased regulations and fewer government interventions.

Taking these factors into consideration, TEA which stands for Tourism, Energy, and Agriculture can be a competitive value-based market chain over a period of few years. By utilizing the various sources of energy through a proper delivery mechanism, the problem of connectivity can be solved and capitalized to attract more tourists.

FARIS HADAD-ZERVOS Nepal has a lot of potential while discerning it from a broader perspective. With federalism, Nepal has become a new country with an array of opportunities to reset the economic line. The introduction of federal system has led Nepal to cogitate about bringing long-term investment with long payback period. In order to meet the criteria of MICs (Middle-Income Countries) by 2030, Nepal needs to achieve the Gross Domestic Product growth of 10% from the current level of 6%. Likewise, the focus of the government should move from consumption-led economy to investment-led growth.

One of the three basic premises where government can work together with private sectors is by promoting: 

FDI (Foreign Direct Investment): identifying the crucial area for foreign investors to invest and expand their business.

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PPP (Policies, Procedures, and Precedence): supports the upright execution of achieving the target set by the local government and state.

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Transactions: helps foreign investors conjecture that Nepal is ready to take high level business projects.

LEI LEI SONG Fiscal capacity is essential in the federal structure of Nepal. It is the responsibility of the state to prioritize on peace, easy taxes and accountability of the jurisdiction to promote prosperity in the nation. As market and state play vital role in shaping the economic wavelength, it is crucial to nurture the fiscal policy. Thereby, the government needs to capacitate the available human resources to accelerate state efficiency.

It is a matter of fact that the developed nations look ahead to invest in capacity enhancement. The thriving economies of the world are growing for they share a common political interest and decide to invest in capacity enhancement. Nepal needs to replicate a similar approach through the guidelines of the new constitution.

The government should bear the responsibility to provide physical infrastructure in order to promote the business climate in Nepal. The law and order, property rights should also be protected to expedite the legal capacity of the nation. The new framework of the nation symbolizes common interest and shows that Nepal is on the path to reformation.

SHANKAR PRASAD SHARMA Economy should institutionalize public-private partnership model to exploit the resources of the nation. In other words, integration between public and private sector is considered the most influential framework in nurturing the economy. Private sector participation is also needed to promote the objective of effective governance and management.

Besides, investment in human capital is pivotal for the growth of the economy. Thus, central government must mobilize adequate officials in the provinces to address the demand and supply situation of human resource. However, the central government should not act unilaterally. Amiable relationship with all the related stakeholders including province and local government must be forged by providing adequate human resources for smooth regulation of the services.

The Constitution provides required authority to the central government to transfer human resources to provinces and local bodies for effective delivery of services. However, the government is struggling to institutionalize the staff structure throughout the nation. Therefore, it is a challenge for the government to strengthen the business domain in the nation by considering all ambiguities.

CONCLUDING REMARKS Sujeev Shakya, summed up the talk by emphasizing on the role of public sector in boosting the entrepreneurial ecosystem. Certainly, the private sector is the engine of the economy, but in the absence of public sector building a supportive ecosystem, private sector cannot thrive. For Nepal to achieve the middle-income status, coordination between state and businesses is crucial. The government must be accountable to its laws and take measures to implement them well in order to develop proper accord and trust with the private sector.

The event also saw the release of Doing Business in Federated Nepal– a flagship publication of Nepal Economic Forum and beed management pvt.ltd. The publication is an attempt to provide insights on business climate in Nepal under the new federated structure. It maps the economic landscape of the provinces that shall help investors compute and compare the prospects of business opportunities across the provinces.

Nepal Economic Forum is a not-for-profit organization initiated by beed and aimed at becoming Nepal’s premier private sector led economic policy and research institution. neftalk is a platform for policy discourse and discussion on pertinent economic issues

For more information visit our website: http://nepaleconomicforum.org/

ABOUT THE SPEAKERS BAIKUNTHA ARYAL Baikuntha Aryal is Secretary at the National Natural Resources and Fiscal Commission, Nepal. He has served in the capacity of Program Director in the National Planning Commission of Nepal and at the Office of the Prime Minister and Council of Minister as the division chief of the Economic and Infrastructure Development Division. During his tenure in the Ministry of Finance, he has initiated several reforms in public fiFARIS HADAD– ZERVOS Faris Hadad-Zervos is the World Bank Country Manager for Nepal. Prior to this, he was the Country Manager for Malaysia. He joined the World Bank in 1996 with the Private Sector Development Department. He served as Head of Mission for Iraq (2003-2005), Operations Manager for the West Bank and Gaza (2005-2008), and Country Manager for Bo-

LEI LEI SONG Lei Lei Song is the Regional Economic Advisor of the South Asia Department in the Asian Development Bank. As a Regional Economic Advisor, he is responsible for providing leadership and coordination of economic work and development research in ADB’s South Asia Department, and identify opportunities for policy dialogue on substantive economic,

SHANKAR PRASAD SHARMA Shankar P. Sharma leads the Economic Policy Incubator and is the advisory board member to Nepal Economic Forum. Prior to working as a consultant to constitution committee, Dr. Sharma was appointed as the Ambassador of Nepal to US. He has also served as a vice chairperson of the National Planning Commission, Nepal. Dr. Sharma has extensively worked in the areas of policy dialogue, foreign aid, peace building and development of the country.