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Daily Archives: May 21, 2014

Doing Business in Nepal: Ins and Outs of the Company Registration Process in Nepal

In an attempt to increase the ease of doing business in Nepal, the Office of Company Registrar (OCR) made online company registration process mandatory in October 2013. Since then, Nepal has gone up three spots in the Doing Business Index (2014) ranking 105th among 189 global economies.

But does it mean that it is much easier to register a company now? Not Really! My research shows that although corruption and bureaucratic hassles were among the major reasons for the change to an online system, they still remain intact. People still have to go through all the old processes and additionally provide documentation online. Moreover, the decade long problem of people outside the valley, who have to come to Kathmandu to register their companies and incur expensive travel and lodging expenses still exist.

The process map reflects the long bureaucratic procedures and the paragraphs below explain some prominent problems.

©Samriddhi, The Prosperity Foundation

©Samriddhi, The Prosperity Foundation

Corruption remains unscathed

In theory: According to the OCR IT personnel, an email regarding approval of the proposed name of the company or reasons for denial is sent to the applicants within 15 days. Following the approval, producing originals of required documents, paying the registration fee and collecting a signature is enough to get a registration certificate.
In practice: Mostly, applications do not get forwarded for approval unless there is some kind of under-the-table settlement. While the registration process is stuck even after 15 days if bribes aren’t given, the whole process can be completed within 2-3 days with proper connections and handsome payoffs.
Causes

  • OCR officials attributed low government salaries as well as the willingness of the business community to bribe as factors fueling corruption in the company registrar’s office. They also mentioned that performance-based-incentive-systems have been proposed, however if and when the system will be approved is uncertain.
  •  A lawyer mentioned in an interview that even if there was a situation where under-the-table settlements wasn’t necessary to get the registration certificate in 15 days, he would still resort to bribing to remain competitive as other lawyers would be finishing the job in 2-3 days through unofficial settlements.
  • Some applicants try to avoid providing necessary documentation and use shortcuts (settle unofficially) to complete their processes.

With both parties willing, corruption has become a norm in the OCR.

Too early to change?

Some employees within OCR, lawyers, and business people (who have to go through the additional online process) have shown some resistance to the change.
Also, for people who are not acquainted with using a computer (esp. people living in remote areas), finding a service center is a problem. When they do find one, the monopoly provider charges exorbitant fees. FNCCI and CAN have opened up service centers in 11 districts and plan to expand to all 75 districts, but due to lack of awareness among people these service centers do not seem to be very popular.

Technical Problems:

Although generators are set up in the OCR for the long and frequent power outages, they do not always work thus halting the registration process during times of power cuts.
Similarly, people also miss deadlines when server crashes occur due to high volumes of online activity close to the deadline date. The system does not recognize certain Nepali characters and thus spelling the correct company names become a problem. There have also been multiple complaints of the user–friendliness aspect of the system and even tech-savvy people have found it difficult to navigate it. OCR is aware of this fact and they are working on making the system more user-friendly and approachable. The software has been evolving and feedback are welcome at support@ocr.gov.np or info@ocr.gov.np.

Going online has increased costs!

cost of company registration infographics

So does it mean going online is a bad idea?

Absolutely not! The problem is not in going online but in the inability to go fully online. With a fully automated process, people don’t have to spend time or money to travel to the offices and consider office hours to view their documents or submit their applications. Going online makes document access and company existence verification easier, which helps while applying for loans. Transparency is increased when people are able to see information about registration fee, fines and application status online.  Issuing PAN numbers directly not only make it easier for the applicants but also help increase tax nets.

The online system allows applicants to reserve a name until 35 days and this opens up opportunities for people to approach potential clients or investors with the guarantee that their business will have that name. Complete automation would also significantly help remove corruption in the OCR.

Ideal deal

The ideal situation would be complete automation of the company registration process and efficient service centers. Since that will take time, the online system could be made optional until all OCR staffs are well-trained and reliable service centers with reasonable prices are established all over the country. It is also important that people get all the post-online registration work done in one place and a real ‘one-window’ is established. Additionally, provisions should be made to make registration possible in each district for the time being.
Ensuring electricity supply during office hours and making the online system more user-friendly and error-free through a constant feedback system is important.  Also, 15 days is a very long time period just to verify the name of a company and that should be reduced. Moreover, the Government of Nepal and Nepal Rastriya Bank need to find agencies and come up with policies that will recognize digital signatures as well as make e-payment possible so that complete automation can be realized as soon as possible.

What do you recommend to make the company registration process better? Please leave a comment below.

Sneha Pradhan

About Sneha Pradhan

Sneha Pradhan is a Researcher at Samriddhi Foundation with an interest in good governance. She is a graduate student at Heinz College, Carnegie Mellon University in Pittsburgh, Pennsylvania, pursuing a Master of Science degree in Public Policy and Management. She also has a Bachelor of Arts Degree in Economics and Statistics with a minor in Complex Organizations from Mount Holyoke College, South Hadley, Massachusetts.

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