If we want to get ahead, we need economic reform that makes business easier. So says Doing Business 2007, the fourth report in the World Bank series, which places Nepal in 100th place out of the 175 economies surveyed, down ten places from last year. The report says the increased GDP of top reforming countries such as Georgia, Romania, Mexico, and China is the direct result of just making business easier.
The survey factors 'ease' of doing business in terms of the time and money it takes to start a business, acquire licenses, employ workers, register property, get credit, protect investors, pay taxes, trade across borders, enforce contracts, and close a business. Sure, Nepal ranks ahead of other countries in South Asia on a number of counts, but it still stands at a dismal 150th in employing workers effectively, and is one of the ten worst countries in the world for regulating licenses, which takes an average of 424 days.
Some reforms might not seem earth-shattering, but they can both increase efficiency and bring more enterprises under the tax net. For instance, in Zimbabwe the average cost of firing workers is 446 weeks of salary, which means owners flee the country if their business goes bust. In Chad or India it takes about 10 years to close a business, compared with under three months in Ireland.
As often happens in Nepal, while we managed to draft legislation a year ago about liquidating business, we do not yet have the institutions needed to undertake this.
The fastest and easiest way to promote growth is to cut down on paperwork and introduce administrative reforms that don't need legislative changes. A good example from Nepal is the move to allow institutions other than government departments to issue Certificates of Origin. Using the internet reduces interface with bureaucrats-and the frustrations of businesspeople. Simple things like being able to read the budget speech on the internet and downloading tax forms right at home without having to hike to an office and pay someone tea money add up to a considerably more pleasant business experience. In El Salvador, over the last two years little efforts like these have brought down the time to start a business from 115 days to 26.
What really resonated with the Beed is of course labour, and how we deal with it. If labour laws are tough, then just a handful will dare formalise labour contracts, leading to messy situations bad for both employer and employee. Malawi has a population of 12 million and draconian labour laws-and a mere 50,000 registered workers. The harder you make it to fire workers, the more likely it is that owners and managers will find it tough to close business in time or expand and diversify.
In a globalising world, if the labour environment is uncompetitive, people will move to a different country.
The Beed recommends that all involved in policymaking read this report and take it on board. Yes, that means you too, Dahal, Bhattarai and Co. Those charting the vision of a New Nepal will surely agree that it must believe in reforms to create successful businesses that will generate enough employment and taxes.
