With the promulgation of the new Constitution of the Federal Democratic Republic of Nepal in September 2015, Nepal switched from a unitary system of governance to a federal system with three parallel forms of government – the federal, the provincial and the local. The Constitution confers both legislative and executive powers to all three forms of government. Schedule 8 of the Constitution of Nepal particularly confers exclusive power to the Local Governments on 22 matters, including matters relating to public finance (raising taxes, fees, and fines), management of local services, local infrastructures, local statistics and records, and local market. Furthermore, the Constitution also enshrines ‘prosperity’ as a national agenda. Along this end, creating employment through necessary economic policy reforms for an investment-friendly business environment has been widely accepted as Nepal’s mantra of prosperity. Having legislative and executive powers that can be exercised to achieve the goal of prosperity creates space for local governments to forge a shared vision of growth and prosperity together with local stakeholders. Continue reading
Over five decades ago Milton Friedman proposed an alternative to improve public education with school vouchers – separating government financing of education from government administration of schools. Friedman argued, “parents at all income levels would have the freedom to choose the schools their children attend.”
Here at top 5 reason why
1. Making teachers and principles of government schools more responsible and accountable to the parents
2. Giving poor parents a choice on which school to send their kids for education
3. Decreasing inequality in the education by improving the performance of government run schools
4. Promoting entrepreneurship in educational system so that there is more innovation and decrease in cost
5. Empowering the students of government run schools to make the system more accountable and responsible
Read more HERE
Kathmandu, Oct 20, 2014: Micro and Small enterprises in Nepal could do lot better in a more economically free environment, shows the findings of a study conducted by Samriddhi Foundation on Kirana Pasals (small retail stores selling groceries and fast moving consumer goods whose services are used by a vast majority of Nepali people) in Kathmandu Valley. Samriddhi Foundation shared a first of its kind report on how Economic Freedom translates into the day to day lives of micro and small entrepreneurs in Nepal, taking the example of Kirana Pasals. The study (which was conducted from April – September 2013) focused on identifying some key hurdles in the growth of these independent businesses run by entrepreneurial and hardworking people.
Part of the research, two hundred and sixty eight Kirana Pasal owners were interviewed to capture valuable information, insight and stories on the impediments they face to grow their enterprises. The report reveals that regulatory environment pertaining to registration, taxation and standardisation are immediate areas of concern. The report also highlights the fact that laws and regulations that are applicable to KiranaPasal s are scattered across several acts, regulations and rules; and are enforced through several government agencies, which makes it difficult for these entities to be operating in a fully legal manner.
The report shows that taxes are also something which further suppresses the growth of Kirana Pasals, especially those that are registered. Thus the report highlights the need to reform the tax code by reducing tax rates and simplifying it to widen the tax bracket. This would help Kirana Pasals operate legally and consequently access finances and other resources to grow.
The report also recommends rethinking the current standards applicable to Kirana Pasals and fixing practical and acceptable standards in consultation with the Kirana Store owners and consumer groups. Access to finance was another issue of concern for Kirana Pasals wanting to grow. According to the report, capital available from micro finance institutions (which most Kirana Pasals use) are limited and often more expensive than loans from commercial banks and other financial institutions. Since most owners/manager of Kirana Pasals have limited capital and little formal education in business, documents like business plans, balance sheets, rental contract, letter of approval from municipality, tax documents, asset valuation, etc. are hard to produce.
Finally, barriers to exit were also considered as barriers to growth as when entrepreneurs fail, they have to have an opportunity to wipe the slate clean and start again. This is almost not an option for retailers such as Kirana Pasal owners in Nepal as exiting formally is extremely difficult. The report makes recommendations to address the aforementioned impediments to the growth of Kirana Pasals and the recommendations together help increase Economic Freedom in Nepal.Download the full report here. Download the summary of the report here.
Ever noticed how the ubiquitous Kirana Pasals (mom-and-pop stores), always stay put, selling the same things, retaining the same size, same location for years and years, never growing into some mini-marts or the likes? One needs very little capital and the stores can be operated without much expertise in management or technology making it a luring business for the lower and middle class families. But despite toiling for over 14 hours a day, year in and year out, they just don’t seem to grow. Turns out, registration, which is the first step towards gaining a legal status for any enterprise is one of the contributing factors.
In Nepal, Kirana Pasals fall under the purview of fifteen different Acts and six government agencies. These stores need to be registered at four different institutions – municipality or VDC, Ministry of Commerce and Supplies, Ministry of Industry and Ministry of Finance. Ambiguous drafting of laws and regulations complimented by lack of easy access to the information pertaining to these statutory requirements results in huge costs in terms of financial resources, time and energy. Given the volume of business that these stores carry out and the access to information, figuring out the range of approvals and documentations required to operate under full compliance of these central, regional and local laws becomes costly. The related authorities do not share the information on registration of a kirana pasal with each other, therefore requiring an entrepreneur to deal with each institution separately.
When people open up an enterprise, there is a propensity to grow. Some entrepreneurs voluntarily and some without knowing all regulatory compliances, however, end up operating in the informal environment. Growth in kirana pasals means making a transition into a bigger store, preferably a mini-mart, selling imported goods, hiring employees, using modern technologies and so on. To be able to deliver these services, entrepreneurs need to invest additional capital. Therefore, growth in this business means having easy access to finance. The very fact that these entrepreneurs operate informally bars them from accessing finance. As a result, they cannot grow. Growth for informal enterprises also means that they become more visible to monitoring institutions and this provides perfect disincentive to not grow beyond a certain size.
World over, Kirana Pasals have contributed largely to mobilizing human resource, availing several vital goods to local markets, fostering competition and reducing the income and social inequalities. At a time when brain-drain has been popularly viewed as a major hindrance to Nepal’s growth, kirana pasals signify entrepreneurial spirit in people. But operating under informal environment means that these enterprises cannot grow; their property rights cannot be secured by the law; they cannot access finance and can never rise above subsistence. Big informal economy also means that the country loses out on garnering domestic revenue. Something as simple as registering the store poses serious challenges to the formalization and expansion of the business itself.
The best move in favor of these entrepreneurs would be, then, to shorten the registration process. While we have been clamoring for one-window policy for foreign investments, the same could be applied for kirana pasals – go to one office in town, submit your application and you are formalized and good to go. All the institutions whose purview the kirana pasals fall under need to develop a mechanism of sharing information between themselves as they have better understanding of the regulations. Less cumbersome regulatory procedures incentivizes micro and small entrepreneurs to join the formal economy thus opening up an avenue for them to grow.