Nepal still among least economically free nations

KATHMANDU:

Nepal continued to remain in the league of least economically free countries in the world this year as well, as it failed to make significant improvement in strengthening its legal structures, ensuring property rights of its citizens, and limiting the size of the government, a latest global report shows.

The Economic Freedom of the World Report 2013 released today in Kathmandu, has put Nepal in the 125th place out of 152 economies surveyed, with a score of 6.19 out of 10. Nepal secured 110th position among 144 countries last year with a total score of 6.33.

Nepal’s neighbours, India ranks 111th with a score of 6.34, while China has secured 123rd position with a score of 6.22. The report, produced by the Fraser Institute of Canada, a public policy think-tank, comes up with scores on economic freedom using 42 variables under five different areas of size of the government, legal structure and security of property rights, access to sound money, freedom to trade internationally and regulations on credit, labour and business.

The report shows Nepal’s performance deteriorating in the area of ‘size of government’, with the score falling from 8.34 in 2012 to 7.6 this year. “Since the report is prepared using two-year old data, a jumbo Cabinet of that time must have put a strain,” said Surath Giri of Samriddhi, The Prosperity Foundation, which launched the report jointly with the FNCCI and Society of Economic Journalists-Nepal.

Nepal, however, did relatively better in the area of legal structures and security of property rights, as the score went up from 3.85 in 2012 to 4.2 this year. Despite the improvement, a very low base failed to make significant contribution to the total score.

“In a country where the government tries to control everything, including advertisement spending, how can we expect a better result? At the same time, no one can guarantee property rights of citizens which is promoting capital flight,” said economist Dr Chiranjibi Nepal, who is also the chief economist at Finance Ministry. “Considering these scenarios, Nepal’s score should have been much lower.”

Another area where country performed relatively better this year was ‘access to sound money’, in which Nepal received a score of 6.3 as against 6.26 of last year. The score was given based on improvements made in money growth, taming inflation and allowing more citizens to own foreign currency bank accounts.

Nepal’s performance also became better in the area of ‘regulations on credit, labour and business’, bagging a score of 6.5 as against 6.47 of last year. However, the country’s score in the area of freedom to trade internationally fell to 6.4 this year from last year’s 6.74.

“Most of the problems are arising in Nepal’s economy due to failure to effectively address structural problems,” economist Dr Bishwambher Pyakurel said.

Some structural bottlenecks in Nepal’s economy, as per the Asian Development Bank, include low quality human resources and deficient skills, weak backward and forward linkages, fragmented value chains, negligible research and development investment, distorted labour market characterised by high minimum wages and low productivity and policy inconsistencies.

Economic freedom

Top five

• Hong Kong

• Singapore

• New Zealand

• Switzerland

• UAE

Bottom five

• Venezuela

• Myanmar

• Republic of Congo

• Zimbabwe

• Chad

Source: THT