THE ISSUE

The World Bank Group has published the 17th edition of the institution’s flagship Doing Business Report earlier this month. The Doing Business Report 2020 ranks 190 world economies on the basis of their performance in 294 business regulatory reforms categorized under 12 distinct areas of business activities between May 2018 and May 2019. Overall, 115 economies implemented desired business regulatory reforms to make local business environments more conducive for business activities. Moreover, the top ten economies to make most progress in this year’s report include Saudi Arabia, Jordan, Togo, Bahrain, Tajikistan, Pakistan, Kuwait, China, India, and Nigeria.

OUR OBSERVATIONS

Nepal

Nepal, sandwiched between two of the world’s largest economies – China and India, has made a major shift this year and has been ranked in the 94th position, a jump in 16 position from last year’s report. This is the fourth time that Nepal has been ranked in Doing Business Report in the list of top 100 countries to do business category. Earlier, It was ranked in 55th, 100th and 99th positions in 2006, 2007 and 2016 reports respectively.

The four key factors that improved Nepal’s position this year include – i) Making it easier to deal with the construction permits by reducing fees for building permits and improving the online e-submissions platform, ii) Getting credit became easier as the Government of Nepal made it easy to access credit information by expanding credit bureau’s coverage, iii) Boosting trade across borders by reducing the time and cost to export and the time to import by opening the Integrated Check Post Birgunj at the Nepal–India border, and iv) Making it easy to enforce contracts by adopting a new code of civil procedure that introduces time standards for key court events.

However, despite the major jump in the 2020 Report, Nepal was not considered as one of the key improved nations as, during this period, the country made starting a business process more difficult, first by forcing the company representative him/herself to visit concerned government authority in-person from employee registration for social security purposes. In addition, the country also increased the property transfer registration fee that ultimately made doing business in Nepal more expensive and less convenient.

SAARC Region

There are no SAARC member countries ranked in the list of top 50 countries to do business in this year’s report. The last time a SAARC member country ranked in this category was in 2006 when Maldives was ranked in 31st position. But four of the eight SAARC member countries – Bhutan, India, Nepal and Sri Lanka – are ranked in the top 100 global economies to do business this year.

In 2020 Report, India and Pakistan made it to the list of top 10 most improved global economies in terms of ease of doing business and rank in 77th and 108th positions respectively. While India made cross-border trade easier by reducing time and costs needed for trades across border and required documentation works, Pakistan made property registration works easier and faster and also land administration system more transparent.

Though five of the eight SAARC member countries saw improvements this year – Bangladesh, India, Nepal, Pakistan and Sri Lanka, but only India, Nepal and Pakistan saw major shifts. Rest three member countries namely Afghanistan, Maldives and Bhutan saw decline in their rankings.

ASEAN Region

Overall, the ease of doing business in ASEAN Region has improved this year. This year, four of the ten ASEAN member countries saw improvements in their rankings – Malaysia, Myanmar, Philippines and Thailand. On the contrary, three member countries saw a decline in their rankings – Brunei, Cambodia and Vietnam. The rankings for three member countries – Indonesia, Lao PDR and Singapore – saw no changes.

Three of the ASAEN member countries have been performing very well since the inaugural issue of the Doing Business report. Since 2004 report itself, Singapore has been ranked as one of the best countries to do business and has consistently been ranked in the top positions. Similarly, Malaysia and Thailand have consistently been ranked within the range of top 50 global economies to do business.

China

In terms of ease of doing business, China (Mainland China) has improved a lot over the last decade. Though Hong Kong SAR and Taiwan had always been ranked as two of the most business lucrative places, Mainland China has consistently been improving its position in the rankings. Last year, it was the first time that Mainland China was ranked in the list of top 50 world economies to do business. Continuing the tradition, making a jump by 15 position, China ranks in the 31st position in the 2020 Report.

POTENTIAL IMPLICATIONS

Findings in the annual Doing Business Reports are crucial for governments, policy makers and investors worldwide. The annual reports give the concerned local, regional and global stakeholders an overall idea of a country’s business environment and related regulation procedures. Thus, these reports can affect the amount of business and investment activities that can happen in a particular country each year. In terms of investments, position of an economy in the Doing Business Index can affect the foreign direct investment (FDI) flow to that country.

However, these reports do not incorporate major issues that are crucial for success or failure of a business; for example macroeconomic stability, statuses the financial system, labour force quality, size of the market, business security, and most importantly incidences of bribery and corruption. Thus, it is not necessary that the rankings in the annual reports do get fully translated into actual business and investment activities.

ORIGIN OF DOING BUSINESS REPORTS/ INDEX

The World Bank Group, through institution’s 2002 launched Doing Business Project, has been conducting research and publishing annual Doing Business Reports since 2003. The credit for commencement of the idea of Doing Business Project can be attributed to a February 2002 QJE paper by Simeon Djankov, key architect of Doing Business Index, and three other economists.

THE ISSUE

Starting from the very first day of the current Fiscal Year (2019/20), the Government of Nepal made it mandatory for all salaried employees, public and private sectors. In the following months, there has been a surge in the number of registered taxpayers in Nepal. As per the second Economic Bulletin of the Ministry of Finance, as of September 17 (end of the month of Bhadra in Nepal’s Bikram Sambat calendar), there were a total of 2,762,135 registered permanent account numbers (PAN). Of the total registered PAN; 1,256,099 belong to business PAN (BPAN); 1,504,233 belong to personal PAN (PPAN) and 1,803 belong to withholder PAN (WPAN) category. In addition, there are 232,120 and 88,341 registered value added tax (VAT) and excise accounts.

Between August 18 and September 17, 2019 alone; the Inland Revenue Department (IRD) of the Government of Nepal registered new 42,511; 257,383; and 699 BPAN, PPAN and WPAN respectively. These new registrants account for more than three percent, seventeen percent and thirty-eight percent of total BPAN, PPAN and WPAN registered with the IRD. Similarly, this period saw 7,314 (more than three percent of total VAT accounts) and 5,713 (more than six percent of total excise accounts) new VAT and excise registrants.

WHAT THIS MEANS?

1. Larger public revenue base,
2. Increased size of Nepal’s formal economy, and
3. Helping Government of Nepal and key stakeholders to track country’s major growth sectors and their statues over the period.

This year’s World Economic Forum’s Global Competitiveness Report ranks Nepal in 108^th position (out of 141 ranked world economies). Though improved by one position as compared to the 2018 analysis, Nepal is still the second least competitive economy in South Asia. This year as well, Nepal’s performance across 12 Competitiveness Index Pillars is below average as the economy performed poorly in 7 Pillars and struggled to do better in 1 Pillar. The former Pillars include Institutions, ICT Adoption, Skills, Product Market, Labour Market, Market Size, and Innovation Capability and the latter Pillar include Business Dynamism. This year, for Nepal, country’s performance has improved for only 4 Pillars and they include Infrastructure, Macroeconomic Stability, Health, and Financial System.

Between 2010/11 and 2019, in the race for becoming the most competitive economy in South Asia, Nepal and Pakistan have been the major winners while India and Sri Lanka the biggest losers. Bangladesh has been a minor winner as the country’s competitiveness improved by only 2 positions during this period.

Each year, Dashain witnesses largest internal movement of people in Nepal. Kathmandu Valley accounts for most of this movement. According to the data released by Metropolitan Traffic Office, between Ghatasthapana (DAY 1) and Phulpati (DAY 7) this Dashain, a total of 1,695,360 people left Kathmandu Valley while 488,755 people arrived in the Valley.

Dashain is the longest and the biggest festival in the Bikram Sambat Calendar that symbolizes victory of good over evil. Observed for 15 days, it is an important annual occasion for Nepalis (and Nepali speaking people in other South Asian countries) to reunite with their families, friends and relatives. Of Dashain’s 15 days, 6 days are most important – 1, 7, 8, 9, 10 and 15.

As per the World Bank’s 2018 data, urban population (as percentage of total population) in South Asian economies varies a lot. Among the eight South Asian Association for Regional Cooperation (SAARC) member countries, Bhutan has the highest proportion of population living in urban areas (41%) and Sri Lanka has the lowest (18%). SAARC Region’s proportion of urban population (34%) still lags behind by a large margin as compared to that of the global proportion (55.27%).

As per the first monthly Economic Bulletin of the Ministry of Finance, (Government of Nepal), the country has 171 banks and financial institutions (BFIs). So far, they have opened a total of 27,866,505 bank accounts. To better serve their beneficiaries, the BFIs have issued 6,708,521 and 123,146 debit and credit cards respectively. To further boost people’s access to finance, the existing BFIs have 8,686 branch offices and 3,316 ATM outlets spread across 735 out of country’s 753 local levels.

Nepal had 171 banks and financial institutions (BFIs). As of mid-July 2019, they have opened a total of 27,866,505 bank accounts. To better serve the beneficiaries, the BFIs have issued 6,708,521 and 123,146 debit and credit cards respectively. To further boost people’s access to finance, the existing BFIs have 8,686 branch offices and 3,316 ATM outlets spread across 735 out of country’s 753 local levels.