Doing Business in Federated Nepal: Global Experience and Lesson to Nepal

With the completion of local, provincial and federal elections, Nepal has moved into a new political realm of federal structure. While much of the discussion to date has been focused on the political process, Nepal Economic Forum (NEF) along with Adam Smith International and Jindal School of Government and Public Policy held a neftalk about what federalism means from economics perspective. NEF brought together experts in economics and public finance to discuss the models that have worked and those that have not from countries that have tried and, in some cases, succeeded in moving to a decentralized model. Key issues on budgeting, delivery of public services, taxation and what they mean for businesses and households across the country were discussed in the event.
The neftalk ‘Doing Business in Federated Nepal: Global Experience and Lesson to Nepal’ was a moderated panel discussion, bringing together a diverse panel of speakers.
Lejla Catic, Public Finance and Governance Expert who has also been advisor to Government of Bosnia Herzegovina, on the occasion, noted that having a strong accountability framework in place ensures effective fiscal decentralisation and pointed out that the balance between expenditure and revenues will be a key challenge in the federated structure. She emphasised the need to ensure flexibility and transparency in the system to tackle the tradeoffs as per the functional competencies of the sectors.
Rajeev Malhotra, Professor, Jindal School of Government and Public Policy, India highlighted that there should be a clear division of roles and responsibilities between the three tiers of government in terms of functions, funding and functionaries for the federal set up to work effectively. He stressed the importance of decentralizing law and order and administrative justice for federalism to deliver on its potential.
Likewise, Shankar Sharma, Former Vice Chair of National Planning Commission (NPC) stressed that Nepal is in its initial stage of unbundling of the federal structure. He emphasised that the Constitution of Nepal is consistent with international standards on fiscal decentralization. While he noted that challenges on functionaries exist, he underscored that federal restructuring has a lot of opportunities for provincial and local governments.
Sujeev Shakya, Chairperson, NEF closed the discussions by marking that competition between the provinces and local governments will be the way forward to making the federated structure work for Nepal.