Nepal has secured second position in terms of ease of doing business among South Asian economies, after Bhutan, on the World Bank’s Doing Business Report 2017.
Nepal ranks 107th on the Doing Business Index after Bhutan (73rd). However, the country’s position has slipped in comparison to its ranking (99th) last year.
The main reason behind the drop is decline in Nepal’s business regulatory environment and some changes in the methodology of measuring ease in doing business.
High ease of doing business ranking means the regulatory environment is more conducive for setting up and operating a local firm.
On the distance to frontier metric, Nepal’s score went down from 59.36 in Doing Business 2016 to 58.88 in Doing Business 2017, using a comparable methodology.
Under the method, rankings are determined by sorting the aggregate distance to frontier scores in various topics related to conducive business environment as considered by the World Bank, each comprising several indicators, giving equal weightage to each topic.
This indicates widening gap between Nepal’s regulatory environment and global best practices, according to the report.
More specifically, the report has revealed that Nepal made obtaining construction permits more difficult by increasing the cost of acquiring a building permit in fiscal 2015-16.
However, on the positive side, Nepal also made exporting and importing easier by implementing automated system for customs data — an electronic data interchange system.
The country has recently made progress in institutional reforms on several fronts, but that has not been reflected in the report. “It will take some time for the recent reforms to be reflected in international rankings, including in the Doing Business report,” according to the World Bank.
The country’s drop in ranking was partially offset by changes in methodology.
Apart from the regular 11 indicators that are used to rank economies, such as starting a business, dealing with construction permits, supply of electricity, property registration, easy availability of credit, protection for minority investors, paying taxes, trade across the borders, enforcing contracts, resolving insolvency and labour market regulations, the report has for the first time included a gender dimension in three sets of indicators: ‘Starting a Business’, ‘Registering Property’ and ‘Enforcing Contracts’.
The ‘Paying Taxes’ indicator has been expanded to cover post-filing processes, such as tax audits and VAT refund.
South Asian economies have performed best in the Doing Business areas of ‘Protecting Minority Investors’ (with an average rank of 80) and ‘Starting a Business’ (100).
Except for the Maldives, no economy in the South Asia region has a minimum capital requirement for starting a business, the report stated.