The business environment and manufacturing performance in Nepal

This report on the survey of private manufacturing enterprises in Nepal presents the private sector's assessment of the prevailing business environment, and other matters related to efficient business operation. As such, it is one-sided. It is a synthesis of the private sector's point of view, and does not include the opinion of the Government. The survey was designed to examine a number of basic issues, including constraints in the policy environment, the structure of the manufacturing sector, sources of growth, major impediments to growth, factors determining enterprise productivity, composition of the labor force and accessibility to finance, among others. Recommendations suggest the need to develop a more effective, regular and on-going dialogue mechanism on issues pertaining to the business environment in Nepal, between the Government and the private sector. To this end, implementation of the One Window Service needs to be improved, by sharpening its focus to deal initially with a limited group such as exporters - and by extending it outside of Kathmandu. An important implementation issue is to foster coordination between all ministries to make the one window service operate effectively. But, there is a need for more and better training of tax officials, and in addition, steps must be taken to make the duty drawback and VAT refund system much more efficient. Tariff rates and currency regulations must be stable so that firms can plan effectively, while customs infrastructure must be improved to handle the volume of traffic and secure shipments. Most importantly, the Labor Law should be revised to uphold core labor standards - but not to raise the costs and increase the inability to retrench workers.