Doing Business in Federated Nepal Docking Nepal’S Economic Analysis
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NEPAL ECONOMIC FORUM NEPAL ECONOMIC FORUM ISSUE 32 | MARCH 2018 P.O.Box 7025, Krishna Galli, Lalitpur - 3, Nepal Phone: +977 1 5548400 [email protected] www.nepaleconomicforum.org DOING BUSINESS IN FEDERATED NEPAL DOCKING NEPAL’S ECONOMIC ANALYSIS DOCKING NEPAL’S ECONOMIC ANALYSIS ISSUE 32 | MARCH 2018 NEF PROFILENEF PROFILE Nepal Economic Forum (NEF) is a premier private-sector led economic policy and research organisation that seeks to re- define the economic development discourse in Nepal. Established in 2009 as a not-for-profit organisation under the beed (www.beed.com.np) umbrella, NEF is a thought center that is working to create positive transformations in policy reforms. One of the big updates for NEF this year was its feature in the list of Top Think Tanks in Southeast Asia and the Pacific in the 2017 Global Go To Think Tank Index. The report was released by the Think Tanks and Civil Societies Program under University of Pennsylvania. NEF stands out in being able to make significant strides to bring the private sector perspective and engage with both the public and private sectors in the development discourse. NEF is currently a recipient of the Open Society Foundations’ Think Tank Fund. NEF works in partnership with many Nepali and international institutions in its quest to mainstream the discourse on the Nepali economy, which has NEPAL not been given the necessary space it deserves. ECONOMIC NEF has partnered with the Himalayan Consensus Institute (HCI) to FORUM facilitate the development of alternative development paradigms and successfully held the second Himalayan Consensus Summit 2017 in March 2 01 7. NEF BROADLY WORKS UNDER THREE AREAS: The Business Policy Research Center (BPRC) engages in research, dialogue and dissemination relating to pertinent economic policy issues. BPRC has been producing nefport, a quarterly economic analysis BPRC publication, nefsearch, a periodic research publication and conducting neftalk, a platform for policy discourse. Through the Center for Public, Private and Community Partnerships (PPCP), the partnerships discourse is further elaborated through addition of the community dimension to existing models of public private partnerships. PPCP Apart from standalone interventions, the PPCP perspective is integrated in the work that NEF and beed initiate. NEF operates in the domain of Development Consulting through its devCon division in conjunction with beed management.. It works with a variety of bilateral, multilateral, national and international NGOs in the areas of policy research, economic analysis, value chain analysis, enterprise development, sectoral studies and public private dialogue. We are striving to ensure financial sustainability for NEF to complement the support it currently receives from beed management and the Open Society Foundations. If you are interested to support NEF, please do get in touch with [email protected] or [email protected] CONTENTS March 2018 | ISSUE 32 CONTENTS NEPAL FACTSHEET 4 EDITORIAL 5 1 GENERAL OVERVIEW 7 Political Overview 8 International Economy 13 2 MACROECONOMIC OVERVIEW 15 3 SECTORAL REVIEW 23 Agriculture 24 Energy 27 Infrastructure 30 Information and Communication Technology 32 Real Estate 34 Education 36 Health 38 Tourism 40 Trade and Debt 43 Foreign Aid 47 Remittance 49 4 MARKET REVIEW 53 Financial Market 54 Capital Market 58 5 DOING BUSINESS IN FEDERATED NEPAL 61 6 Endnotes 85 7 NEF Profile 89 FACTSHEETNEPAL FACTSHEET KEY ECONOMIC INDICATORS GDP USD 23.31 billion GDP Growth rate 6.9% Rank 105 (%) GNI per capita (Atlas) USD 730 Inflation 3.2% Rank 196 (annual %) GNI (PPP) USD 2,520 Agricultural growth rate 5.3% Rank 187 (annual %) Gross Capital Formation (% Industrial growth rate 28% 11.0% of GDP (annual %) HDI 0.558 Service Sector growth rate 6.9% Rank 144 (annual %) Sources: Left Table – Statistics time; The World Bank; HDI figure from Human Development Reports of the UNDP, Right Table - Budget 2017/18- Ministry of Finance, May 2017 EDITORIAL This quarter has been a historic one for Nepal. Following years of transient governments, we finally have a government in place that has been sworn Issue 32: March 2018 in for five years and will hopefully serve their entire tenure. As such, this Publisher: Nepal Economic Forum quarter marks the end of the political transition that began in April 2006. Website: www.nepaleconomicforum.org The people of Nepal have high expectations for the new government. P.O Box 7025, Krishna Galli, Lalitpur — 3, Nepal Some positive developments have added to the optimism. A seasoned Phone: +977 1 554-8400 technocrat, Dr. Yuvraj Khatiwada, has been appointed Finance Minister. Email: [email protected] Dr. Khatiwada brings in experience from being the Vice Chairman of National Planning Commission (NPC) and the Governor of Nepal Contributors: Rastra Bank (NRB). Apart from that, he also bringsin international Arya Awale Evleen Shakya exposure and experience that can benefit Nepal. Niraj K.C Nischal Dhungel In the last quarter, NEF has been engaged in the discourse on doing Raju Tuladhar business in federated Nepal. We have conducted research and held several Rojesh Bhakta Shrestha discussion sessions on the topic where we have collected opinions from Sajal Mani Dhital Samita Shrestha key stakeholders in different fields. Discussions have converged on what Samridhi Pant the new federated structure means to Nepal’s business and economy. We Shikshya Gyawali therefore dedicate this issue to the work that has been done on the topic Shraddha Gautam and is continuing to be done. Supriya Gurung Design & Layout: NEF continues to strive to be a repository of analysis on how Nepal will Ultimate Marketing (P.) Ltd. take shape as an investment destination and how the Nepali economic [email protected] development paradigm will shape up in the days to come. As Secretariat to the Himalayan Consensus Summit, NEF is preparing to host the third This issue of nefport takes into account summit from 23-25 March 2018. In keeping with NEF’s aim to work on news updates from November 22– February 15, 2018. regional platforms, a Himalayan Consensus Think Tank Consortium was successfully held in Delhi in January of this year. The Consortium will The word ‘province/provincial’ and further crystallize in the upcoming summit. ‘state’ has been used interchangeably. NEF was once again featured in the Go to Think Tank list in 2017. We The USD conversion rate for this issue is NPR 103.04 to a dollar, the quarterly continue to be overwhelmed with the support we receive from various average for this issue. quarters to keep the humble work going. Reproduction is authorised provided This edition is a Doing Business in Federated Nepal special, highlighting the source is acknowledged. the forthcoming challenges and opportunities. We would like to thank The views and opinions expressed in all the key contributors especially Mr. Rajeev Malhotra (Professor and the article/publication are those of the Executive Director at Center for Development and Finance, Jindal author(s) and do not necessarily reflect School of Government and Public Policy, India), Mr. PB Jayasundara the official opinion of Nepal Economic (Senior Economist and Former Secretary, Srilanka) and Mr. Jefrrey C. Forum. Neither the organization nor Fine (International Consultant, Canada) for helping us make this issue any person acting on their behalf may be held responsible for the use which an enriching one. may be made of the information con- tained therein. We continue to look forward to your valuable comments and suggestions. NEF Advisory Board: Arnico Panday Basudha Gurung Kul Chandra Gautam Sujeev Shakya Mahendra Krishna Shrestha Chair, Nepal Economic Forum Mallika Shakya Shankar Sharma NEFPORT ISSUE 32 – MARCH 2018 7 GENERAL 1OVERVIEW 8 DOCKING NEPAL’S ECONOMIC ANALYSIS POLITICALPOLITICAL OVERVIEW Elections for the House of Representatives (HoR) were held in two phases on November 26 and December 7, 2017 and the election for the National Assembly (NA) was held on February 7, 2018, thus forming a bicameral legislature system in Nepal. The left alliance secured a majority in both the houses and state assembly meetings were held for the first time. Additionally, Chief of State, Chief Ministers and temporary state capitals were declared. Federal Parliament of Nepal: The were elected through the first past the The elections resulted in a victory for Constitution of Nepal has instated a post (FPTP) electoral system with the left alliance, where a total of 174 bicameral federal legislature system one member being elected from each seats were obtained by the left alliance in Nepal comprising of the HoR and election constituency. The remaining in the HoR, also referred to as the the NA. Elections for the members 110 members were elected via the lower house of the federal parliament. of HoR were held in two phases on proportional representation (PR) November 26 and December 7, 2017 electoral system where voters voted National Assembly elections: In and the election for the NA was held for political parties and the whole the NA, also referred to as the upper on February 7, 2018. country was considered as a single house of the federal parliament, 24 electoral constituency. out of a total of 59 members were House of Representatives elections: elected undisputedly and 32 members The HoR elections were held for a The results of the HoR elections were were elected under the single total of 275 members, 165 of whom as follows: transferable electoral system by an Table 1: Results from House of Representative elections Parties FPTP Seats PR Seats Total Seats CPN UML 80 41 121 CPN MC 36 17 53 NC 23 40 63 RJPN 10 6 16 FSFN 11 6 17 Others 5 0 5 Total 165 110 275 Source: Election Commission Nepal NEFPORT ISSUE 32 – MARCH 2018 9 Figure 1: Composition of House of Representatives RJPN FSFN Others 6% 6% 2% NC CPN UML 23% 44% CPN MC 19% CPN UML CPN MC NC RJPN FSFN Others electoral college that was comprised Under the constitutional provision, State elections: The state elections of a total of 1,669 out of 1,677 voters.