NEGA 2013

Building on NEGA, 2012 the research efforts of Nepal Economic Growth Agenda (NEGA), 2013 focused on identifying and discussing cross-cutting issues that affected the growth of the above mentioned five sectors. The six different issues studied under NEGA 2013 were industrial relations, contract enforcement, anti-competitive practices, foreign direct investment, public enterprises, and regulatory environment for businesses.

Here is a brief introduction of the research carried out under Nepal Economic Growth Agenda (NEGA), 2013.

‘Competition Watch in Key Growth Sectors of Nepalese Economy’ outlines anti-competitive  activities in its’ various forms and highlights major causes and institutional weaknesses that have led to  such behavior in Nepali markets. While the regulatory burden from government has curbed competition  in hydropower, public transportation sector of Nepal is filled with cartels formed by private companies.  There are both kinds of anti-competitive behavior in education, tourism and agriculture. A new approach  that this paper has taken is to include anti-competitive behavior of the government while analyzing such  behavior from private players. This paper concludes with several broader recommendations to improve  the environment of competition and several sector specific recommendations to improve competition  within each of the sectors analyzed.

‘Contract Enforcement: the practicalities of dealing with commercial disputes in Nepal’ discusses three major problems in contract enforcement. First, Nepal’s government is a known contract defector in itself and members of the government accept bribes and promote favoritism. Second, the courts are cumbersome and crowded and so the monitoring of contracts is both costly and time consuming for the parties to the exchange. Third, informal contract enforcement institutions, such as reputation-based deterrence, are limited in scope. While there are alternative dispute resolution mechanisms that also help enforce contracts, they are not in popular use and are not cost-feasible for low volume transactions. Therefore, this paper focuses on low cost measures like mediation. The paper also discusses some marginal reforms in the existing state based and alternative dispute resolution mechanism that can bring down the cost of legal recourse and help establish trust in these mechanisms for contract enforcement.

‘Doing Business in Nepal: Ground Realities’ analyzes the existing bureaucratic hurdles of doing business in five sectors of the Nepalese economy through a study of a particular product or service viz: agriculture (a review of seed enterprises), education (a review of schools excluding 10 plus 2), energy (a review of licensing process for hydropower), infrastructure (a review of Construction Company) and tourism (a review of travel and tour agencies). The paper identifies various problems faced by enterprises related to above products or services, analyzes the cause of these problems and makes the necessary recommendations that can help alleviate the problems and drive entrepreneurial growth in the country.

‘Industrial Relations: An Institutional Analysis’ delves into various aspects that give rise to tenuous industrial relationships fraught with mistrust on all sides. Lack of accountability mechanisms within the trade union structure including the relative weakness of enterprise level unions in terms of negotiations, lack of grievance handling mechanisms in industrial settings and weak labor institutions created by the government, all contribute to the intense and antagonistic nature of industrial relations in Nepal. Policy alternatives tried and tested by other countries with similar backgrounds have also been briefly explored in the paper. Specifically, Japan’s post– war industrial relations situation and measures adopted, Cambodia’s recent success in building its ‘sweat-shop free’ image and Australia’s transition to creating an independent labor institution have been included to draw out lessons that may be relevant in the Nepali context. While broader labor reform may be on the agenda, this paper also highlights marginal changes that may be more palatable given the current state of the political economy of Nepal.

‘Analysis of the Performance of Public Enterprises’ streamlines several challenges faced by public enterprises from various sectors in Nepal. Those challenges include: striking a balance between its commercial and non-commercial goals, leading to problems with accountability and autonomy. Overall, one of the major challenges is tied to the incentive system that PEs as a whole faces. The study report outlines recommendations that can help overcome these challenges, which include revision of the incentive system, structural reforms for autonomous functioning, and a serious re-evaluation of the significance of some public enterprises.

‘Foreign Direct Investment: Towards Second Generation of Reform’ identifies challenges Nepal faces in terms of attracting foreign direct investment (FDI) and developing a framework for the second generation of reforms. While the first generation of reforms in foreign direct investment took place in the form of Foreign Direct Investment and Technology Transfer Act of 1992, which opened up several sectors previously barred from FDI while maintaining a small negative list. However, it has been more than twenty years since this reform and owing to the growth of FDI in emerging markets especially in Asia; it is time for Nepal to embark on the second generation of reforms. Therefore, the focus of this paper is on reform areas that ensure FDI actually trickles down and helps through creation of jobs and capital formation. It contains historical analysis and also highlights key policy bottlenecks. The paper has attempted to provide a broad framework of guiding principles for the second generation of reforms for FDI.