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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.

फेरि सडक खन्यो बा ! Absence of basic planning and accountability jeopardize road expansion projects in Nepal

Image Source: The Himalayan Times

Image Source: The Himalayan Times

No sooner have you been able to enjoy the newly pitched roads, than someone without fail comes and digs them up again. Ever wondered why these freshly built roads are dug up and left open or patched up in sorry attempts, a few months or even weeks after its construction?  Sometimes water pipes, sometimes sewage, sometimes electricity; whatever the reason may be the end result always the same: you are back to square one driving through potholes all day long.  Annoyed, frustrated and just plain curious I decided to dig into this with the pre-conceived idea that there must be some planning and co-ordination errors. What I did not expect to find was ZERO planning/ co-ordination among any of the concerned departments, none whatsoever.

So what happens? Department of Roads (DOR) builds a certain road and in a few weeks or months some other department comes along and digs up that road for one of their activities. DOR now doesn’t have the money or resources to go back and make that road since its job in that area is already done. What we are left with then are uneven roads, traffic problems, reduced lifespan of our vehicles, increased fuel spending, justification for absurd amounts of vehicle taxes and shamelessly wasted resources. DOR, Department of Water Supply and Sewage, Telecommunications Department, Department of Electricity Development all have their individual plans and work accordingly with no concern over what the other departments might be doing. If that means undermining some other departments’ work, causing discomfort to the citizens or wasting taxpayers’ money, so be it.  It saddens me to see how haphazardly all these departments function and what a mess the system has become. What then is the National Planning Commission doing amidst all this chaos? Anything but putting the plan in planning (at least in this case)! The solution is simple: plan well so that works related to drainage or water pipes and telephone or electricity lines are completed in a certain area before the road is constructed. It isn’t rocket science to figure out that one simple common plan, communication flow or any type of co-ordination between these concerned departments would make a huge difference.

I find it difficult to believe that our bureaucrats didn’t see the blatant need for co-ordination. After all, if it were their own houses they were planning to build, would the execution be as sloppy and wasteful? Be it clashing egos, ignorance, rent-seeking opportunities or just plain indifference; turning a blind-eye to this issue has served their personal interests better and so things have carried on the way they have. Conversation with a DOR official revealed that in Nepal’s 50 years of road building history, no ground research has ever been conducted. Delays occurring due to inefficient contractors are overlooked in the fear that the contractor might have political ties and no one wants to rock the boat. There is no system of quality management and if the roads aren’t built to the required standards no one is penalized or held accountable. Although it is an unacceptable excuse; we cannot discredit the fact that there are problems when it comes to the budget. There is a huge time lag between when the budget is announced and when the money actually reaches the departments for development projects. This coupled with the monsoon season gives departments very less time to execute their intra-department plans (which are usually short term and not very well planned either). Additionally, since the performance of the departments depend on whether or not they have worked to finish their allocated budgets on time; there is additional pressure to finish their targets. This method of performance evaluation is very problematic. Firstly, there is no incentive for the officials to be innovative or effective. Secondly, the major end goal of any government department: serving the citizens and making their lives easier, is widely side lined.

It is high time to make good governance a reality in Nepal. Its absence will inevitably wither any noble project that comes along, as is happening with the road expansion project.  Proper quality management and accountability (both largely lacking in our government agencies) are indispensable factors for the development of any entity, be it an institution or the nation as a whole. Time is now for national heroes to emerge, who can put their self-interests aside for just a while and think in terms of the larger good. As wishful as it might be, I would like to hope that we do have at least some leaders who wish to see not only their prosperous selves, but also a prosperous nation!

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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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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Shopper’s Dilemma

prisoners_dilemma_23“Tapaiko pani haina, mero pani haina, 1000 rupees ma dinus na!” This must sound familiar to a lot of shopaholics out there who are more than familiar with the nuances of bargaining. Be it in the busy markets of Asan Bazaar or the retail hubs of New-Road, negotiating and striking a deal is common phenomena. Being an avid shopper with a passion for good bargains, I believe that these daily market negotiations are true representations of a free market, allocating prices of commodities. Although not all, some of the fixed- price counterparts, might conversely be victims of the prisoner’s dilemma.

For the readers who aren’t familiar with the famous game theory concept developed by RAND Corporation scientists, Merrill Flood and Melvin Dresher and formalized by Princeton mathematician, Albert W. Tucker; Prisoner’s Dilemma is a strategy which attempts to explain the behavioral balance between co-operation and defection in human beings. This classic game model sets out two prisoners who cannot communicate at all with each other. Both of them are given an option either to confess or to remain silent. If both the prisoner’s remain silent, then they both will serve 1 year in prison. However, if Prisoner A confesses, and Prisoner B remains silent; then Prisoner A is set free, while Prisoner B will spend 3 years in prison instead and vice versa. Lastly, if both of them confess, then both will be spending 2 years in prison each. Here, remaining silent and co-operating is clearly the most mutually beneficial strategy. However, betraying makes the most rational sense for each individual prisoner, and hence confessing becomes the dominant strategy. Both prisoners then resort to confessing which makes the prison sentences worse for both of them.

Fixed price stores, have set non-negotiable prices of commodities which might distort free market allocation of pricing. Looking at this from a game theory perspective, conforming to a given set price might be looked upon as refusing to co-operate (defecting) to get to a certain price. On the other hand, bargaining and agreeing on a price can be seen as co-operation. Hypothetically speaking in any given month, without bargaining, a seller earns total profit of NRS. 50,000 and a customer can buy 50 things on average with NRS. 50,000. Conversely if both parties bargain, then the shopkeeper can earn total profit of NRS. 70,000 and the customer can buy 70 things with NRS. 50,000. However, if the shopkeeper refuses to bargain and quotes a high price for his products, and a customer walks in and buys the product, then the shopkeeper earns a profit of NRS. 90,000 while the customer can only buy 30 things with NRS. 50,000. Lastly, if the customer refuses to pay more than a certain amount for a product and the shop keeper agrees to their price, then the seller earns only NRS. 35,000 in profits and the customer can buy 90 things with NRS. 50,000. Simplistically looking at this model, both parties benefit by having a fair bargain. However, both sellers and buyers resort to a fixed price shopping system so that they can each individually gain more by not bargaining, thus losing out on greater profits which bargaining offers.

This simplistic model shows that both parties benefit from bargaining. Does this mean that all stores will benefit from being bargain joints? Most definitely not! Real world markets are not isolated and solely confined to one particular factor like the prison sentence in the prisoner’s dilemma example.  Consumer choices are based on a variety of preferential factors like ease of shopping, shoe-leather costs, and prestige in buying rare expensive luxury items. These are the reasons why one-stop-shopping centers like Bhat-Bhateini Supermarket and branded stores in Durbar Marg are profitable. However, fixed price retails still exist between pools of shops open for bargaining. Without specialized commodities that set them apart, and a niche market to cater to, the sellers are definitely foregoing the sales and the potential profits by refusing to negotiate prices. Customers that prefer to shop in those stores are also losing out on better price deals they could get on the same item elsewhere. Additionally, shopping giant Bhat-Bhateini might also do well with a few separate bargain counters for the more thrifty spenders. While maintaining their existing clientele, this strategy of having majority normal checkout lanes with the exception of a couple bargain counters will definitely attract more local customers. The ease of one-stop-shopping experience with the option for a good bargain might be taking traditional departmental store shopping to a whole new level; and might be a potential venture Bhat-Bhateini might want to try out. Lastly, to the shopkeepers and shoppers: If the one and only reason you opt for fixed pricing option is because you don’t want to negotiate, you might be losing out big time. Keep shopping smart, people!

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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Kathmandu Ujyalo Karyakram – A luxury we can’t afford

durbarmarg_20140303085300

Driving by Durbar Marg recently has been a treat for my sore eyes. Amidst the ever present cloud of dust and array of battered railings and lampposts, the new towering handsome silver lights are a real breath of fresh air. When conversations ensued about the lighting and beautification of the street, I for one did not hesitate to praise Kathmandu Metropolitan City’s efforts, which are in-fact truly brilliant.  However, when I read about the Asian Development Bank’s Rs.380 million contribution to this project in a national daily, the million dollar question (literally!) that came to my mind was: Is it worth it?

Firstly, the cost of this project is too high for simply lighting Kathmandu streets relative to the cost of other major infrastructure projects that are in a desperate need for funding. Durbar Marg, already one of the poshest areas in the country, has a plethora of high-end shops and restaurants that attract mostly wealthy youngsters and mid-aged people. Undoubtedly the additional 30 solar lights, pavements and benches will make a pleasant visiting experience of the street. However, spending Rs.11.7 million in installation alone and an additional Rs. 7.3 million in maintenance each year seems simply too extravagant for a country that faces 84 hours of power cuts per week. To make matters worse, KMC plans to install additional 600 lights in major city areas like New Baneshwor, Swayambhu, Basantapur, Singha Durbar, Tripureshwore and Thapathali using the ADB funds.

Secondly, the way this entire project was completed seems extremely dubious and points a big finger towards the financial gain of few special interest groups. At the onset of this project, the original plan was to share the costs between KMC and public and consumer committees. However, that plan failed when the public and consumer committees showed no particular interest in investing in this project. The project commenced anyways. The fact that this project was planned, funded and completed despite little to no interest from key stakeholders raises a major red flag regarding the true intention behind this project. One argument we keep hearing at attempts to justify this project is that, this project will contribute substantial financial benefits to the Durbarmarg area. In a statement by the Durbar Marg Development Board president, he claimed that the Durbar Marg area will be witnessing additional business transactions of over Rs. 100 million per year due to two hours of extended business hours by 150 businesses. These additional operational hours will in turn help the government collect an extra Rs. 20 million VAT. They also plan on raising money by advertising on electric boards operated by these lights. While these facts and figures do look alluring, their accuracy is seriously questionable. Only time will tell.

In conclusion, infrastructure development using sustainable energy sources is a brilliant idea and undoubtedly an indispensable variable in the modern economic growth equation. However, I question the marginal benefit of providing solar powered street lights to a segment of Nepali population that is already well off relative to the rest of the country. At a moment when Nepal lacks the most basic infrastructures and when majority of its population are living in abject poverty, providing solar fueled street lights to people looking to buy TAG Heuer watches after their KFC dinner is plain silly. There are still villages where students are forced to cross rivers using life-threatening ropeways (tuin) just to go to school, and then there are villages where there are no schools. We ourselves face excruciating hours of load shedding every single day, and people have to wake at the crack of dawn just to get a bucket of water. Efficient resource allocation is the key for development, and I believe that the ADB funds would be a lot more valuable in building bridges, schools or hydroelectric plants than installing pretty lights. We have to set our priorities straight. With massive opportunity costs and alternative solutions as cheap as maintaining the existing electric poles and bulbs, the Kathmandu Ujyalo Karyakram is a luxury we can’t afford. Besides, I’m sure everyone would rather have a group of kids get to school safely than make their own strolls in the roads a tad bit easier on the eyes!

P.S. I would like to thank Mr. Sajal Man Shrestha for his invaluable insights and support, as well as for helping me edit this article.

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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