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KATHMANDU, June 12: Nepal´s entrepreneurs, who have been exposed to an unprecedented level of obstructions in running their businesses in recent months, have ranked strikes and political instability as the top two constraints in the development of entrepreneurship in the country.
A year-long study conducted jointly by the Asian Development Bank (ADB), the Department for International Development (DfID) and the International Labor Organization (ILO) has reckoned that poor industrial relations that result in the erosion of competitiveness, have also greatly discouraged potential investors.
Furthermore, shortcomings in labor law and lack of motivation in the workforce were also identified as major constraints, ranking forth and sixth respectively, according to the report titled ´Nepal: Critical Development Constraints´.
The report underlined the fact that unstable political environment, infrastructure shortcomings, labor market rigidities, industrial relations problems and inequitable access to opportunities have undermined growth and poverty-reduction efforts.
Likewise, the report unveiled on Thursday stressed that weak governance and slow recovery from the civil war, which is resulting in policy instability, criminal extortion, strikes and road blocks, also limited the viability of business ventures.
The most immediate and urgent constraint is a cluster of interrelated governance factors that are directly political in nature, said the report. Despite, all those weaknesses, intact macro-economic stability and impressive growth seen in the financial sector are some of the achievements of past economic reform, said Ehsan Khan, ADB´s senior economist and the report´s main author.
The report highlighted that lack of affordable and reliable electricity supply and a poor transport network have also constrained growth. Of about 120 entrepreneurs responding to the ILO-ADB-FNCCI survey done last year, 82 percent identified unavailability of electricity and transport as constraints to entrepreneurship, the report said. "Nepal ranked lowest in electricity and road transport, but was more comparable with other South Asian countries in communications," said the report.
The report found that expensive power tariff in Nepal, mainly due to inefficiencies in the power sector, has also slimmed Nepal´s development prospects. A 2004 study noted that consumers in Nepal were paying $0.093 per kilowatt-hour, about 115 percent higher than tariffs in Bangladesh and India, said the report.
The report noted that lower expenditure on social protection, which was about 2.3 percent of the GDP in 2002/03 or about $ 5.5 per capita, was also hindering inclusive growth.
In its recommendation, the report has stressed the need to pay due attention to strengthening governance and proposed short and medium to long-term actions to improve governance in Nepal.
Likewise, the report has urged the government to accelerate infrastructure development, particularly road transport and irrigation, and stressed the need to improve industrial relations and make the labor market more flexible.
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