Recent efforts of the government to improve the business and investment climate in the country through legal reforms and process simplification had resulted in its improved position in the international risk survey.
The country has fared well in the Euromoney’s risk survey of the first half of 2019, and become the number-one improver with more than 5 points achievements to move 14 places higher in the global risk rankings since 2018.
It has moved 24 places during the last five years.
“The improvement seems nothing short of phenomenal. It puts Nepal above Maldives, Ethiopia, the Gambia and other nations in the top 10 most improved countries so far this year, according to economists and other risk experts that were polled,” said the Euromoney in its report published on Thursday.
It said that the survey contributors had upgraded all 15 of Nepal’s political economic and structural risk indicators this year, notably raising the score for government stability since the last legislative elections were held in 2017.
“The country’s position is improved primarily due to political stability, high economic growth for three consecutive years, low inflation and improvement in institutionalising federalism,” said Economist Chandan Sapkota, who was one of the survey analyst.
Nepal has achieved above 6 per cent economic growth rate for the last three years and is hopes about 8.5 per cent growth in the Gross Domestic Product (GDP) of the country in the current fiscal year 2019/20.
“The government has rigorously worked in policy reforms in the past couple of years in order to build an investment climate and increase the confidence of the investors,” said Maha Prasad Adhikari, Chief Executive Officer of the Investment Board of Nepal (IBN), a high-level fast track government agency that facilitates large-size foreign and domestic investment.
Enactment of Public Private Partnership and Investment Act, Foreign Investment and Technology Transfer Act, Industrial Enterprise Act, Company Act and Labour Act was an effort to attract more investors to the priority areas like agriculture, information technology, tourism, infrastructure and energy.
“The GDP has shown remarkable real-term strength during the past few years, growing by 7.9 per cent in FY 2016/17 and 6.3 per cent in 2017/18,” noted the report. “It has been bolstered by buoyant domestic demand leaning heavily on infrastructure investment, fuelled by China and India’s weighty foreign direct investment aiding the reconstruction effort after the 2015 Earthquake.
At the same time, the Asian Development Bank and International Monetary Fund are predicting further strength due to high activity in activity in construction, manufacturing and services. “The manufacturing sector will be less hindered since electricity outage have been resolved, enabling more capacity utilisation,” read the report.
However, the Euromoney maintained that the Nepali economy needs further reforms in order to move ahead in the ladder. It is in 135th place of the index and scores 32 in 100 points which is equivalent to junk-status credit rating.
“Downside risks include security disturbances by a fringe communist party, which has attacked private businesses and public assets,” the report quotes Sapkota. Similarly, there are chances of fiduciary risks when it comes to implementing public projects due to deteriorating governance. There is also a need to improve the poorly managed social security schemes at the earliest.
But, the report has concluded that Nepal is this year’s early leader, it is becoming safer and is offering rare new opportunities to invest in higher-yielding assets.