The Nepal Business Climate Survey 2010, recently published by Interdisciplinary Analysts (IDA), reported deficiencies in governmental coordination and monitoring of small and medium enterprises (SMEs), which employ more than 70 per cent of the country's workforce.
IDA, a Kathmandu-based research and consultancy firm, with support from the Asian Foundation, evaluated 1,023 micro, small and medium enterprises in four districts—Morang, Rupendehi, Kaski and Banke.
Despite the limited sample, the survey's findings reveas a general discontent among SMEs regarding the government's inadequate involvement in the business sector. In the survey findings, 33 per cent of respondents said that government officials never bother to reach out to them. Although a quarter of them responded that the involvement was through business associations, a majority of the small firms in Nepal are not members of any association. This means that SMEs have little opportunity to interact with the government and share
"The government plays a multi-dimensional role in the business sector," says Sudhindra Sharma, who led the survey at IDA. "But it appears that the government has failed in its facilitating and monitoring roles."
Nearly half of the respondents said that no inspections of their businesses on the basis of regulations have ever been conducted. 77.5 per cent said officials seldom come to discuss policies or regulations that may affect their enterprises. More worrisome is that 65 per cent of respondents said they never receive advance notices when changes are made in the central government's rules and regulations that particularly affect their business.
Considering the employment opportunities that small enterprises offer, the government should take an interest in training and guiding entrepreneurs in the area. With such detachment, it is unlikely that the government can improve its policies that will support the growth of SMEs in Nepal. Unsurprisingly, the survey reveals that the public office which interacts most with these companies is the Internal Revenue Department, reiterating the perception of the SMEs that the government is more concerned with the revenue it can earn from such enterprises, than with facilitating its development.
The statistics indicate SMEs' disillusionment with the government and its failure to promote an efficient and cooperative market environment. Only when the government—on all levels—engages with SMEs through clear and direct channels can such an environment be fostered. Such a two-way exchange would facilitate effective policies and training and ultimately, a healthier business climate.