Economic Freedom of the World 2013 launched in Nepal

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Econ-ity Events

In the first episode of Econ-ity, Economic Freedom of the World Report 2013 was released in Nepal and discussed upon on September 18, 2013.  The annual peer-reviewed Economic Freedom of the World report is produced by the Fraser Institute, Canada’s leading public policy think-tank, in cooperation with independent institutes in 80 nations and territories, including Samriddhi, The Prosperity Foundation from Nepal. The report is prepared by economists James Gwartney, Robert Lawson, & Joshua Hall for the institute and measures the degree of economic freedom citizens of different countries around the world enjoy. The report measures 42 different components of economic freedom to determine the overall economic freedom scenario of an economy. Economic freedom is measured in five different areas: (1) size of government, (2) legal structure and security of property rights, (3) access to sound money, (4) freedom to trade internationally, and (5) regulation of credit, labor, and business.


According to the report, this year Nepal ranks 125th out of 152 nations in economic freedom with a score of 6.19 out of ten. Nepal had ranked 110th out of 144 countries last year with a score of 6.33 out of 10. Following the performance of Nepal in different components of the economic freedom:

Size of government:
Worsened from 8.34 to 7.6 (31st in the world)

Legal structures and security of property rights:
Improved from 3.85 to 4.2 (126th in the world)

Access to sound money:
Slightly improved from 6.26 to 6.3 (136th in the world)

Freedom to trade internationally:
Worsened from 6.74 to 6.4 (118th in the world)

Regulation of credit, labor and business:
Slightly improved from 6.47 to 6.5 (109th in the world)

Dr. Bholanath Chalise, Dr. Chiranjibi Nepal, Mr. Baburam Nepal, Dr. Bishambhar Pyakurel and Dr. Hemant Dabadi spoke about Nepal’s performance in the five components of the index.

Speaking about size of government, Dr. Bholanath Chalise focused on the need to have a limited but effective and efficient role of the government unlike the case of Nepal where government is found of have unlimited size and negligible effectiveness. He further added that the government’s role should be limited to curtailing monopoly, safeguarding rights and providing security, and implementation and enforceability of contracts.  He drew comparisons from around the world to show how the limited size of government had helped countries like Hong Kong, Singapore achieve a greater level of economic freedom. He criticized the context of Nepal where much was left to the domains of government and how the dependency had brought about more evils than good in terms of economic freedom.

Dr. Nepal provided his insights on “legal structure and security of property rights”. He shed light that Nepal ranked 125th in this regard in the report, which was not at all a sign of free economy. He shared how he found property rights to be the dividing element between whether people prosper or fall under poverty. He constantly focused on the need to respect individual property rights and how the legal system in any country should be responsible in catering to that right of its citizens. He criticized the way property rights in Nepal were being encroached upon in reference to the road expansion programme in the Kathmandu valley. If hinted that if the country’s legal system continues to overlook the importance of individual property rights the consequences will be dire.

Mr. Babu Ram Nepal said that “freedom to trade internationally” is the primary factor of economic freedom. He shared that trade was the way to bring about positive economic changes and that poor became poor not because of the market but because of lack of access to market. He shared example on how other nations that are open to international trade have prospered and the policy makers in Nepal need to learn from these stories. Protectionism provided to local industries will, in the longer run, hamper the domestic economic.

Dr. Pyakuryal explained the concept of sound money and why the status of “access to sound money” is a vital element in determining the level of economic freedom in any economy. He stated that the rules and directives imposed by the government of Nepal do not favor the access to sound money. The current regulations encourage the private sector to evade the taxes. He added that unless a thorough reform in the financial policies is made, Nepal cannot progress in the ranking nor can prosper.

Dr. Dabadi shared his insights on “regulation of credit, labor, and business”.  Credit, labor and business, he shared were important elements of economy and there was a need to regulate these elements or else cartels, black-markets, politicized trade unions and corrupt market practices would take town the possibilities of economic freedom. He shared that the business environment in Nepal was characterized by lack accountability and transparency and practices ranging from corruption to monopolization were way too evident from economic growth to sustain and hence there was a need to foster good governance.

Surath Giri

About Surath Giri

Surath Giri is a student of Economics and works as Research & Publications Coordinator at Samriddhi, The Prosperity Foundation. He also writes for Khabar South Asia, a south Asian online news portal.