draft report 2019 - purnima

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Draft Report

2019

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Business Climate Study

Study Team:

Team Leader : Dr. Raj Kumar Bhattarai

Statistician/GESI Expert : Dr. Manjeshwori Singh

Senior Economist : Mr. Kamal Raj Gautam

Research Associate : Mr. Nanda Kumar Maharjan

Submitted to:

Mott MacDonald

Sanepa, Lalitpur

Submitted by:

Nepal Development Research Institute

Shree Durbar Tole, Pulchowk, Nepal

Phone No. 977-1-5537362, 5554975

Website: www.ndri.org.np

And

Nepal Development Research Initiative Pvt. Ltd.

Pulchowk, Lalitpur

Email: [email protected]

http://www.ndri.org.np/

mailto:[email protected]

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CONTENTS

List of tables .......................................................................................................................................... v List of figures ......................................................................................................................................... v List of appendices ............................................................................................................................... vi EXECUTIVE SUMMARY ................................................................................................................... ix ABBREVIATIONS ............................................................................................................................. xvi CHAPTER 1: INTRODUCTION ...................................................................................................... 1

1.1 Background ........................................................................................................................... 1 1.2 Objective of the study .......................................................................................................... 1 1.3 Methodology .......................................................................................................................... 2

1.3.1 Sampling strategy ......................................................................................................... 2

1.3.2 Identification of construction based MSMEs ............................................................ 3

1.3.3 Target Respondents .................................................................................................... 4

1.3.4 Sample size estimation and sampling techniques .................................................. 4

1.3.5 Data Collection ............................................................................................................. 6

1.3.6 Data analysis ................................................................................................................. 7

1.3.7 Approaches: .................................................................................................................. 8

1.4 Study limitations ................................................................................................................... 9 CHAPTER 2: KEY FINDINGS ...................................................................................................... 11

2.1 Enterprise demography ..................................................................................................... 11 2.2 Starting a business ............................................................................................................. 11

2.2.1 Legal commencement and formal operation .......................................................... 12

2.2.2 Informal payment: ....................................................................................................... 14

2.2.3 Harassments ............................................................................................................... 14

2.2.4 Information availability and clarity ............................................................................ 14

2.2.5 Regulatory and policy Constraints ........................................................................... 15

2.2.6 Gender specific limitation .......................................................................................... 15

2.2.7 Odds ratio .................................................................................................................... 16

2.3 Taxation ............................................................................................................................... 16 2.3.1 Types of taxes ............................................................................................................. 17

2.3.2 Tax payment process (time & costs) ....................................................................... 18

2.3.3 Information dissemination ......................................................................................... 19

2.3.4 Informal payments ...................................................................................................... 19

2.3.5 Cases of double taxation ........................................................................................... 20

2.3.6 Harassment ................................................................................................................. 20

2.3.7 Disproportionate impact of taxation ......................................................................... 20

2.4 Business permit/license ..................................................................................................... 21 2.4.1 Procedure of obtaining business permit/license .................................................... 21


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2.4.3 Information availability and clarity ............................................................................ 22

2.4.4 Obstacles and regulatory constraints ...................................................................... 23

2.4.5 Gender specific issues .............................................................................................. 23

2.5 Access to finance ............................................................................................................... 23 2.5.1 Existing policies and products .................................................................................. 24

2.5.2 Average costs of credit .............................................................................................. 25

2.5.3 Challenges ................................................................................................................... 26

2.5.4 Constraints facing the women-led MSMEs ............................................................ 27

2.5.5 Economic and financial implications ........................................................................ 27

2.5.6 Odds Ratio ................................................................................................................... 28

2.6 Getting electricity ................................................................................................................ 28 2.6.1 Connection process and costs ................................................................................. 29

2.6.2 Information availability ............................................................................................... 30

2.6.3 Procedural challenges ............................................................................................... 31

2.6.4 Slowest and longest processes ................................................................................ 31

2.6.5 Load estimate and reliability of supply .................................................................... 32

2.7 Infrastructure and transportation route permit ............................................................... 32 2.7.1 Procedural constraints and costs ............................................................................. 32

2.7.2 Steps taken ................................................................................................................. 33


2.7.4 Information dissemination mechanism .................................................................... 34

2.7.5 Effectiveness of transportation route permit........................................................... 34

2.7.6 Conditions of infrastructure ....................................................................................... 35

2.7.7 Added costs and time bore ....................................................................................... 36

2.7.8 Overlapping or duplication of transportation levies ............................................... 36

2.7.9 Disproportionate impact on women ......................................................................... 36

2.8 Land laws/property ownership.......................................................................................... 36 2.8.1 Steps involved to get land ownership ...................................................................... 37

2.8.2 Land ownership process ........................................................................................... 37

2.8.3 Time taken and costs incurred ................................................................................. 37

2.8.4 Clarity of laws at the local level ................................................................................ 38

2.8.5 Added cost bore by entrepreneurs .......................................................................... 38

2.8.6 Constraints relating to women .................................................................................. 38

2.9 Labor shortage and labor market regulation .................................................................. 38 2.9.1 Availability of skilled, semi-skilled, and unskilled workforce ................................ 39

2.9.2 Key skills gap .............................................................................................................. 40

2.9.3 Economic costs due to workforce shortage ........................................................... 41

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2.9.4 Safety and standard procedures .............................................................................. 41

2.9.5 Labor inspection authorities and their inspections ................................................ 42

2.9.6 Labor laws, rules, and regulations ........................................................................... 42

2.9.7 Labor laws and regulations restricting women....................................................... 42

CHAPTER 3: CONCLUSIONS AND RECOMMENDATIONS ................................................. 44 3.1 General conclusions and recommendations .................................................................. 44 3.2 Specific conclusions and recommendations .................................................................. 45 3.3 Business ethics specific conclusions and recommendations ...................................... 48 3.4 Indicators challenging the business climate ................................................................... 49 3.5 Likely issues for policy dialogues ..................................................................................... 49

REFERENCES ................................................................................................................................... 49 APPENDICES ..................................................................................................................................... 51

List of tables

Table 1.1: Classification of enterprises base on capital .............................................. 4

Table 1.2: Sample distribution in study districts ......................................................... 5

Table 1.3 Total number of sample for different data collection techniques ................ 6

Table 2.1: Odds ratios for challenges in enterprise registration ............................... 16

Table 2.2: Time and cost for paying taxes ................................................................ 18

Table 2.3: Procedure to obtaining business loan form commercial bank ................. 23

Table 2.4: Odds ratios for independent variable for financial challenges ................. 28

Table 2.5: Effectiveness of route permit for materials transportation ....................... 34

Table 2.6: Functional status of roads ....................................................................... 36

Table 2.7: Status of workforce .................................................................................. 39

Table 2.8: Geographic location of the workforce ...................................................... 40

Table 2.9: Average effect of workforce shortage ...................................................... 41

Table 2.10: Odds ratios for challenges in manpower shortage ................................ 42

List of figures

Figure 1.1: Sampling strategy flow chart .................................................................... 2

Figure 1.2: Map of the study area .............................................................................. 5

Figure 2.1: Flow chart for enterprise registration ...................................................... 12

Figure 2.2: Total days required for enterprise registration ........................................ 13

Figure 2.3: Total cost required for business registration ........................................... 13

Figure 2.4: Informal payment in enterprise registration ............................................ 14

Figure 2.5: Reasons for non-availability of required information for registration ....... 15

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Figure 2.6: Types of taxes and fees ......................................................................... 18

Figure 2.7: Feeling of constraints while paying taxes ............................................... 18

Figure 2.8: Mediums of taxation information dissemination ...................................... 19

Figure 2.9: Total days required for obtaining business license/permit ...................... 22

Figure 2.10: Total cost required for obtaining business license/permit ..................... 22

Figure 2.11: Clarity of information for business permit/license ................................. 22

Figure 2.12: Status of formal sources of credit ......................................................... 25

Figure 2.13: Average rate of interest (%) of financial institutions for business loan . 25

Figure 2.14: Implications of shortage of funds .......................................................... 26

Figure 2.15: Procedure for getting electricity ............................................................ 29

Figure 2.16: Time taken to get electricity connection / Figure 2.17: Cost of getting

electricity .................................................................................................................. 30

Figure 2.18: Electricity connection information accessibility ................................................. 31

Figure 2.19: Status of getting required electricity ..................................................... 32

Figure 2.20: Total cost incurred for transportation route permit ................................ 33

Figure 2.21: Time required to obtain route permit .................................................... 33

Figure 2.22: Difficulties due to transportation route permit ....................................... 35

Figure 2.23: Conditions of roads .............................................................................. 35

Figure 2.24: Process of obtaining land ownership .................................................... 37

Figure 2.25: Reasons to the shortage of skilled workforce ....................................... 39

Figure 2.26: Nature of skill gap ................................................................................ 40

Figure 2.27: Knowledge about industrial safety and standard .................................. 41

List of appendices

Appendix 1: Entrepreneurs' demography ................................................................. 51

Appendix 2: Number of responses on choosing business location .......................... 52

Appendix 3: District wise number of registered enterprises ...................................... 52

Appendix 4: Reason for not registering the business ............................................... 53

Appendix 5: Places/authorities for business registration .......................................... 53

Appendix 6: Process map for registration of enterprise ............................................ 54

Appendix 7: Number of responses on reasons for non-availability of required

information ............................................................................................................... 55

Appendix 8: Socio-cultural limitations for women entrepreneurs while the starting .. 56

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Appendix 9: Different types of taxes paid by entrepreneurs ..................................... 56

Appendix 10: Cost, time and distance travelled by entrepreneurs for tax payment .. 57

Appendix 11: Number of responses on constraints faced while paying taxes .......... 59

Appendix 12: Number of responses on reasons for unclear information about

taxation ..................................................................................................................... 59

Appendix 13: Number of responses on incident and reasons of harassments faced

by entrepreneurs ...................................................................................................... 60

Appendix 14: Procedure, time and costs of obtaining business permit/license ........ 61

Appendix 15: Information availability and clarity on obtaining permit/license ........... 62

Appendix 16: Obstacles and regulatory constraints faced by entrepreneurs for

obtaining business permit/license ............................................................................ 62

Appendix 17: Major reasons for inaccessibility of subsidized loans ......................... 63

Appendix 18: Average rate of interest for different banks......................................... 63

Appendix 19: Major hindrance while obtaining credit from formal financial sources . 64

Appendix 20: Source of finance for entrepreneurs ................................................... 65

Appendix 21: Connection process and cost in getting electricity .............................. 65

Appendix 22: Process map for getting electricity for enterprise ................................ 66

Appendix 23: Total cost and time for obtaining route permit .................................... 66

Appendix 24: Process map for obtaining transportation route permit ....................... 67

Appendix 25: Citizen Charter of land revenue office (both Nepali and English) ....... 68

Appendix 26: Total cost and time for obtaining land ownership ............................... 72

Appendix 27: Key skill gaps in the enterprises ......................................................... 73

Appendix 28: Reasons for noncompliance with safety and standard procedure ...... 73

Appendix 29: List of documents and time required to register industries according to

Enterprise registration Act, 2049 .............................................................................. 74

Appendix 30: Documents required for registration of enterprises in Cottage and

Small Industries. ....................................................................................................... 75

Appendix 31: Citizen Charter obtained from electricity authority, Gorkha ................ 76

Appendix 32: Documents required for registration of transportation enterprise ........ 78

Appendix 33: Documents required for registration of furniture enterprise ................ 79

Appendix 34: Documents required for registration as contractor .............................. 80

Appendix 35: List of key informants at national level ................................................ 81

Appendix 36: List of key informant at district level .................................................... 81

Appendix 37: List of participants during Focus Group Discussion at Nilkanth

Municipality, Dhading ............................................................................................... 82

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Appendix 38: List of participants during FGD at Gajuri Rural Municipality, Dhading 82

Appendix 39: List of participants during FGD in Bishauni Hotel, Gorkha Municipality

................................................................................................................................. 83

Appendix 40: List of participants during Focus Group Discussion in Palungtar

Municipality, Gorkha ................................................................................................. 84

Appendix 41: List of participants for FGD in Bidur, Nuwakot District ........................ 84

Appendix 42: List of Participants for Focus Group Discussion at Likhu Rural

Municipality, Nuwakot ............................................................................................... 85

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EXECUTIVE SUMMARY

Construction sector, with a contribution of 12% in GDP and using around 35% of annual

budget, is one of the fastest growing industries in Nepal. This growth has almost doubled as

the reconstruction and rebuilding efforts post-earthquake of 2015 accelerated. While the

mega earthquake brought catastrophic impact, it also brought an incremental opportunity to

the overall construction sector countrywide. However, the growth and expansion rate of

construction based micro, small and medium enterprises (MSMEs) is below par. Through this

study we aim to identify constraints impeding their growth and support in creating an

enabling business environment for MSME.

In all of the study districts, there was a genuine interest among individuals to become an

entrepreneur. Many of them were engaged in one or more businesses as per resource

availability, ease of market accessibility, support from the government, and so on. However,

constraints relating to enterprise registration, expectation of informal payment, lack of

proper information dissemination mechanisms were hindering the growth and expansion of

entrepreneurs, especially at the local level. The constraints were far deep rooted for MSMEs

like furniture manufacturers, stone crushing and sand washing plants as they had to abide by

environmental regulations.

Summary of actual time and cost of MSMEs in three districts are given in the figure below.

0

2000

4000

6000

8000

10000

12000

14000Starting a Business

Tax Regulaion

obtaining business Permit /licence

Getting Electricity

Micro Enterprise - Actual Time (days)

Dhading Gorkha Nuwakot

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0

5000

10000


Tax Regulaion

obtaining business Permit / licence

Getting Electricity

Micro Enterprise - Actual CostDhading Gorkha Nuwakot

0

5

10

15

20

25

30

35


Tax Regulaion


Getting Electricity

Transportation Route Permit

Small Enterpise - Actual Time


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0

10000

20000

30000

40000

50000

60000

70000


Tax Regulaion


Getting Electricity

Transportation Route Permit

Small Enterprise - Actual Cost


0

10

20

30

40

50

60


Tax Regulaionobtaining business Permit /

licence

Medium Enterprise - Actual Time

Dhading Gorkha

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Business Registration

Based on study observation, while registering a business, the actual days incurred by MSMEs

were far higher than standards set by the government in all three study districts- Dhading,

Nuwakot and Gorkha. The enterprises subjected to Environment Impact Assessment like

stone crushing and sand washing plants underwent special scrutiny while registering as they

required stringent documentation and verification. This resulted in additional no. of days for

their registration in comparison to other construction MSMEs. Increased no. of days for

registration meant increased economic- documentation and travel- as well as opportunity

cost for the MSMEs. Even though the government’s stated cost of registration is minimal,

unclear information on specific requirements forced the entrepreneurs to hire

consultants/intermediaries while registering. Cost of hiring a consultant/intermediary ranged

from approx. Rs. 2,600- 68,000 depending on the scale and nature of the enterprise. This

involuntary hire of consultants was a major reason behind discrepancy in the actual cost

incurred by MSMEs and standard cost set by the government.

Obtaining permit/license

In addition to business registration, some of the construction MSMEs like transporters,

contractors, crushers and sand extractors need to obtain business permit/license for their

formal operation. Even though the procedure, time and cost of obtaining permits/license are

similar to registration, over 50% of the sample MSMEs reported unavailability of sufficient

information. While there was negligible difference between estimated and actual time while

obtaining permit/license for small enterprises, there was three fold discrepancies for micro

0

20000

40000

60000

80000

100000

120000

140000


Tax Regulaionobtaining business Permit /

licence

Medium Enterprise - Actual Cost

Dhading Gorkha

https://www.mope.gov.np/download/national%20environmental%20impact%20assessment%20guidelines_1993.pdf.5c279708fcab326b6cb9289b4d551b0d

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enterprises. Similarly, the cost discrepancy between actual and standard was low for micro

and medium enterprises. However, there was up to 91% discrepancy in actual and standard

cost of obtaining permits/licenses. A key contributor to the higher cost in reality was due to

striking prevalence of informal payments during the process. Similar to registration, the

provisions relating to Environment Protection Rule made it additionally difficult for furniture

manufacturers, sand washers and crushing plants to obtain permits/licenses.

Taxation

The study found that registered businesses were paying taxes at three- central, provincial and

local levels of government. This multiple layered taxes levied were allegedly creating

additional burden for entrepreneurs. Study showed that over 50% of entrepreneurs relied on

face-to-face inquiry with tax officials for information relating to taxation. Therefore, upon

asking for justification and clarification on payment procedures, the entrepreneurs, reported,

were often greeted with harassments from tax officials. Likewise, there were some

discrepancies in actual and standard cost of taxation. One of the key reasons was due to the

distance between an enterprise’s location and tax collection office. It was reported that some

of the entrepreneurs travelled all the way to Kathmandu or Pokhara just to pay the tax

amount from the study districts.

Access to Finance

Micro and small enterprises are considered to be heavily reliant upon informal source of

credit. The study however, revealed about 43% of construction MSEMs had access to formal

sources of finance. As the size of a business increased, it’s financial needs increased too. In

order to meet those needs, the MSMEs were found to be using loans from different financial

institutions. Meaning, their cost of finance varied as per the type of financial institution they

went to. For instance, the interest rates for micro-finances and cooperatives were much

higher than the interest rates charged by commercial and development banks. One of the

biggest dilemmas of the entrepreneurs while accessing finance was whether to go for hassle

free yet higher cost loans offered by cooperatives or lower cost but stringent documentation

required loans by commercial banks. . Almost 60% of sample entrepreneurs were inclined

towards obtaining loans from commercial banks.

Recently GoN introduced a subsidized loan targeting to different categories of which one was

women. But due to poor information dissemination mechanism, unfair processes and lack of

referral/bhansoon, only three female entrepreneurs in Dhading district had benefited from

such loan. Even though there were subsidies for female entrepreneurs, the systemic

requirements like necessity to have a male witness while obtaining loan made it more

complicate for female to obtain loans from formal sources.

Getting Electricity

Even though study showed supply of electricity for household consumption mainly used by

micro and small enterprises was not an issue, getting it connected within the government’s

allocated time and cost was not realistic. The variation in standard and actual time and cost

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was highest in Dhading among the three districts with the actual time and cost being twice as

high as the standard set by the government. On one hand, longer duration/time in getting the

connection was due to factors like demanded electricity power, household vs. three-phase

power supply, availability of resources at concerned offices and distance of the enterprise

from market areas. While on the other hand, a key contributor to higher cost than the

standard rates was due to requirements of informal payments. Similarly, connecting to the

three-phase electricity for small and medium enterprises like crossers, concrete blocks and

furniture with high voltage plants faced difficulties in getting the connection. One of the key

reasons behind the difficulty is lack high capacity transformers installed by Nepal Electricity

Authority at the local level.

Transportation

Of the 35,000 transport trucks across Nepal, less than 30% were formally registered as

transporter. The study found that a normal duration of route permit is four months which

means, the transporters had to make frequent visits to concerned authorities. Since there

were no offices issuing permits at the local level, the long travel required further increased

the total cost. The Citizen’s Charter mentions one day to obtain route permit however, the

long distance added on to the time. Likewise, there also were cases where it took over a

month to obtain the route permit mainly due to lack of clear procedural information both on

registering the vehicles and obtaining permits for operation.

A detailed mapping of time and process showed that obtaining route permit in Gorkha took

five times more time and 26% more cost than the standard. The variation was due to

documentation, application fees, consultation charges, route permit fees and other

miscellaneous expenses.

Land Ownership

As majority of the sample entrepreneurs were running their businesses on rent or lease, they

were oblivious to the steps and procedures involved in land ownership transfer. Their

arrangements were based on mutual understanding between the land owner and the

entrepreneur. For the few entrepreneurs who have had land ownership transferred recalled

getting it done via land broker or legal service provider. While the time and cost variation for

micro enterprises were negligible, there were variation of around 33% for smaller enterprises

in all three districts.

Since there already is few female entrepreneurs in construction sector and the ones involved

use land on lease, none reported any difference to their business when the land on their name

or someone else’s.

Labor

As migration of Nepalese youth for employment continues apace, it has created a dearth of

labor across the country including earthquake affected districts. And the few youth remaining

in the district opted from doing low wage labor work as they sought benefits way above their

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competency. Hence, majority of enterprises in target districts were sustained by an influx of

labor from the Terai belts of Nepal and India. While availability of both skilled and unskilled

labor was a key constraint in all three districts, Gorkha was an exception with an abundance

of unskilled local labor. The scarcity of workforce adversely affected timely completion and

quality of work in addition to added overhead costs.

While on one hand the workforce demanded for improved benefits and pay scale. On the

other hand, the enterprises neglected even basic safety standard at their enterprises as they

considered it as an added cost.

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ABBREVIATIONS

BIS Business Information System

CNI Confederation of Nepalese Industries

CSIDB Cottage and Small Industries Development Board

DCSI Department of Cottage and Small Industries

DDS Decision Support System

DFID Department for International Development

FGDs Focus Group Discussions

FNCCI Chamber of Commerce and Industries

FNCSI Federation of Nepalese Cottage and Small industries

FWEAN Federation of Women Entrepreneurs’ Association of Nepal

GoN Government of Nepal

INGOs International Non-governmental Organizations

KII Key Informant Interview

MEDEP Micro Enterprise Development Programme

MSMEs Micro, Small and Medium Enterprises

NDRI Nepal Development Research Institute

NGOs Non-governmental Organizations

Rs. Rupees

SPSS Statistical Package for Social Science

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CHAPTER 1: INTRODUCTION

1.1 Background

The earthquakes of April and May 2015 killed approximately 9000 people and injured

22, 000 in Nepal (National Planning Commission, 2015). The cost of the damage to

homes and infrastructure, and the associated economic losses were estimated at $7

billion in the post disaster needs assessment. However, the devastating earthquake

has catalyzed a spark in the construction sector that has paved ways for Micro, Small

and Medium Enterprises (MSMEs) to flourish with spiking demand for construction

materials in earthquake affected districts.

In the post-earthquake context, Government of Nepal (GoN) along with I/NGOs has

made significant investment in reconstruction activities which have helped to revitalize

the construction-based MSMEs in the districts. However, limited access to finance,

lack of innovation, asymmetric market information, shortage of skilled human

resource, and unfavorable policies are some predicaments to flourish the construction

industries. In this context, this study targets to dive into specific business climate

constraints and analyze and evaluate their impact on the growth of the construction

sector MSMEs in selected earthquake-affected districts viz. Dhading, Gorkha and

Nuwakot.

This study is a part of Department for International Development (DFID) funded Post-

earthquake recovery project (named as Purnima) and commissioned by Mott

MacDonald. Confederation of Nepalese Industries (CNI) is the downstream partner for

the delivery of the project outputs. This study is an exploration of prevailing business

environmental constraints restraining the development of MSMEs in the study districts

and to recommend necessary interventions thereof.

1.2 Objective of the study

The main objective of this study is to support creation of an enabling environment for

the growth of MSMEs in the construction sector. The specific objective is to provide

evidence of the prevailing business climate and its implication on the MSMEs and their

business environment. The study activities regarding the MSMEs aim to:

determine the influencing factors while starting a business;

assess the tax regulations and practices;

evaluate the process of business licensing/operating permits;

examine the challenges facing by the enterprises while getting assess to

finance;

find the technical challenges in getting electricity;

analyze the procedural constraints of obtaining transportation route permits;

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assess the implications of existing land laws/property ownership practices on

construction business;

evaluate the effects of labor shortage and labor market regulations in the

construction industry.

1.3 Methodology

1.3.1 Sampling strategy

The business climate study was administered in three earthquake affected districts –

Gorkha, Dhading and Nuwakot of the mid hilly region to fulfill the given objectives of

the study. The overall sampling strategy adopted for the study is shown in Figure 1.1.

Samples were drawn from different types of markets of the three districts that were

roughly categorized—in absence of concrete basis for the districts’ construction

markets categorization—as major market, minor market and local market. The

samples were purposively selected for the representation of concerns MSMEs

consisting of producers, suppliers and other service providers in the construction

sector. Both formal (registered) and informal (unregistered) enterprises were

considered for this study.

Sample Districts: Gorkha, Dhading, Nuwakot

Stratification

Local Markets Major Markets Minor Markets

Representation of Producers, Suppliers and Services Providers

Qualitative Tools

FGD KII

Approaches:

Appreciative Inquiry

Feedback Survey

Gender & Social Inclusion

Selection of Target Respondents

(207 Entrepreneurs:

micro, small & medium)

Both Formal and Informal enterprises

Quantitative Tool Questionnaire Survey

Approaches:

Appreciatory

Participatory

Gender & Social Inclusion

Figure 1.1: Sampling strategy flow chart

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1.3.2 Identification of construction based MSMEs

The markets located in the district headquarters were considered as major markets.

The markets which are connected with the major markets and involved in the business

of construction materials within the district were considered as minor markets.

Local markets were identified as the market where the transaction of construction

materials is limited in a particular locality or area. During the preliminary visit, rapid

assessment, and key informant interview in all the study districts was conducted to

identify the major, minor and local markets/bazars (From each district, two

municipalities and three rural municipalities were purposively selected on the basis of

density of existing enterprises, connection with other local and national market and

volume of trade yielding 15 strata.

The selected municipalities and rural municipalities served as primary sampling units

(PSUs). In the lack of basic information about the number of enterprises in the study

districts, probability sampling technique was not feasible. Hence, 21 enterprises from

each municipality and 9 enterprises from each rural municipalities were randomly

Crushers and Sand

extractor

Brick kilns

Hallow Concrete block

producers and compressed

stabilized earth blocks

producers

Timber treatment

enterprises

Producers

Hardware enterprises

Metal enterprises

Stone cutting enterprises

Suppliers

Transport companies and

Individual transporters

Transporters

Contractor Mini contractors

Micro contractors

Nepal Rastra Bank

Cottage and Small Industries

Development Board (CSIDB)

Banks and finance companies

Microfinances

Cooperatives

Tax/revenue offices

Municipalities/village municipalities

Chamber of commerce and

Industries (FNCCI)

Federation of Nepalese Cottage

and Small industries (FNCSI)

Contractors’ Association

Transporters’ Association

Federation of Women

Entrepreneurs’ Association of

Nepal (FWEAN)

Quantitative

survey

Qualitative survey

Figure 1.2: Target respondents for qualitative survey and quantitative survey

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selected from each PSU covering all the geographical region so as to represent

producers, suppliers and service sector MSMEs. The selected entrepreneurs were

then categorized into micro, small and medium for interpretation.

Table 1.2). The major markets were prevalent in municipalities whereas minor and

local markets were operating in both the municipalities but more common in rural

municipalities.

1.3.3 Target Respondents

After identification of construction based MSMEs, further classification into micro,

small and medium was carried out according to the criteria defined by the Industrial

Enterprise Act 2073 (Table 1.1). The information regarding the existing MSMEs were

collected from local level government Department of Cottage and Small Industries at

district level.

Table 1.1: Classification of enterprises base on capital

Micro Enterprise Small Enterprise Medium Enterprise

The fix capital used in the business enterprise will be up to NRs. 500,000 excluding the land and buildings.

The enterprise which is other than micro and small enterprises and has fixed assets up to NRs. 100 million (10 Crore) of fixed capital.

The enterprise which has of fixed assets of amount from NRs. 100 million (10 Crore) up to NRs. 250 million (25 Crore).

Source: Industrial Enterprises Act, 2073, Government of Nepal

1.3.4 Sample size estimation and sampling techniques

For the quantitative survey, the total number of purposive samples were 207 MSMEs

for this study. The MSMEs in all the markets were not equally distributed since there

is high prevalence of MSMEs in major markets. Hence, 60 percent of the total sample

weight (124 MSMEs) was given to the MSMEs of the major markets while 40 percent

of the total MSMEs (83 MSMEs) were selected from the minor and local markets. The

details of sample distribution in all three districts are shown in From each district, two

municipalities and three rural municipalities were purposively selected on the basis of

density of existing enterprises, connection with other local and national market and

volume of trade yielding 15 strata.








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Table 1.2 and Figure 1.2.

Figure 1.2: Map of the study area

From each district, two municipalities and three rural municipalities were purposively

selected on the basis of density of existing enterprises, connection with other local and

national market and volume of trade yielding 15 strata.








Table 1.2: Sample distribution in study districts

District Market Local Unit (%) No. of MSME

s

No. of MSME

s

Gorkha

Gorkha Bazar Gorkha Municipality (Major Market)

20 42 21

Palungtar Bazar Palungtar Municipality (Major Market)

21

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Sulikot Bazar Sulikot Rural Municipality

13.33 27

9

Ajirkot Bazar Ajirkot Rural Municipality

9

Gandaki Bazar Gandaki Rural Municipality

9

Dhading

Dhading Besi Bazar

Nilakantha Municipality (Major Market)

20 42 21

Dhunibesi Dhunibesi Municipality (Major Market)

21

Gajuri Bazar Gajuri Rural Municipality

13.33 27

9

Khaniyabash Bazar

Khaniyabash Rural Municipality

9

Gangajamuna Bazar

Gangajamuna Rural Municipality

9

Nuwakot

Bidur Bidur Municipality (Major Market)

20 42

21

Belkotgadhi Bazar

Belkotgadhi Municipality (Major Market)

21

Tadi Bazar Tadi Rural Municipality

13.33 27

9

Dupcheshwor Bazar

Dupcheshwor Rural Municipality

9

Meghang Bazar Meghang Rural Municipality

9

Total 100 207 207

Table 1.3 Total number of sample for different data collection techniques

District Questionnaire

Survey KII (District) FGD

KII (National level)

Gorkha 70 5 2

Dhading 68 5 2

Nuwakot 67 5 2

Total 207 15 6 10

1.3.5 Data Collection

Both qualitative and quantitative techniques were employed for primary data

collection. KoBo Toolbox was used for collecting quantitative data. Following tools and

approaches were followed to gather both qualitative and quantitative information:

Desk research: The available documents, information and publications relevant to

this study (eg. different acts, regulations and directives, previous study reports,

literatures, etc.) were reviewed to get updated information regarding the business

climate of the country.

7 | P a g e

Preliminary visit: A preliminary visit was carried out by the team of experts along with

a representative from CNI in Dhading, Gorkha and Nuwakot districts. The expert team

interacted with entrepreneurs, Mott MacDonald staffs at the district level and other

major stakeholders during the visit. The team also observed the operation and

promotion activities of existing MSMEs and the information gathered from the

interaction with the stakeholders benefited in mapping out the existing MSMEs in the

study districts. After the preliminary visit, an inception report was drafted and submitted

to CNI.

Questionnaire Survey: The structured questionnaire survey tool was employed in

three study districts for collecting qualitative information of the stakeholders. The

information gathered from the preliminary visit was taken into account while

developing the questionnaire for the study. The questionnaire was developed with the

active participation of a representative from CNI. The questionnaire tool was employed

for the survey on a common understanding with the Mott MacDonald and CNI team.

The data were reflecting the perception of the respondents. The estimate of costs and

time was the estimate of the respondents. The estimate, sometime known as standard,

of the respondents was not already available with them but they were estimating at

the time of questionnaire surveys.

Focus Group Discussion and Key Informant Interview: The checklist for Focus

Group Discussion (FGD) and Key Informant Interview (KII) were drafted during the

tools development phase with participation from CNI representative. Then, the

checklists were employed on common understanding with Mott MacDonald and CNI

team. Two Focus Group Discussions (FGDs) and five Key Informant Interviews (KIIs)

in each district and 10 KIIs at central level were conducted to gather qualitative

information on the existing business environment (Table 1.3).

The key stakeholders including representatives from the local government were

mapped as potential participants for FGD. Selection of participants was done in

coordination with Mott MacDonald, district office. The participants recommended by

the Mott and CNI were given top priority in the selection process. The selected

participants were informed two days prior to FGD. The FGDs in all the districts were

moderated by team leader. Note taking in written form and audio recording was

exercised during FGDs. The key informants were the representatives from various

agencies and associations relevant to construction-based business, representatives

from government employees and dynamic entrepreneurs. The factors affecting the

business environment were discussed in-depth during the process to generate,

assess and validate data/information and finding of the study.

1.3.6 Data analysis

Data Cleaning and processing: Data obtained from the questionnaire survey were

extracted from KoBo Toolbox server and prepared master sheet in excel for analysis.

8 | P a g e

Then, data were feed to SPSS version 23 for analysis purpose. The data were

checked for inconsistency and outlier data were validated from the respective

enumerators. All the blank cells were assigned ‘NA’ in each cells. The spelling for

‘Other’ option in questionnaire was checked and upper case and lower case was

adjusted according for consistency in font formatting. After cleaning of data, frequency

and percentage table according to districts and category of enterprises were extracted

using SPSS software. R programming software was used for binary logistic regression

model.

Binary logistic regression was used to examine the challenging factors while doing

construction-based business after controlling for possible confounding variables as

shown in the equation below:

In [Y

1 − Y] = a + 𝑏1𝑋1 + 𝑏2𝑋2 + 𝑏3𝑋3. . . + e

Where Y = probability of challenges faced while doing business by entrepreneurs, a

represents intercept term, bs are estimated by the maximum likelihood estimator

approach, X’s are combination of explanatory variables for challenges faced and e is

a error term. The study then used R programming software to perform binary logistic

regression on the surveyed dataset of all three districts.

Odds ratio was calculated for the above equation to quantify the strength of

association between different challenges faced while doing business with independent

variables. When odds ratio equals to 1, then two events are independent. But, odds

ratio greater than 1 depicts positive association between two variables. Conversely,

odds ratio less than 1 shows negative association.

1.3.7 Approaches:

The key approaches employed for primary data collection is discussed as follow.

Appreciative inquiry and feedback survey: Appreciative inquiry and feedback

survey tool were employed for KII and FGDs for accessing information mainly about

informal payments in different sectors of MSMEs, harassment and gender sensitive

issues. Similarly, feedback survey was conducted to identify obstacles and gaps

between the current status quo and the desired situations which were not be directly

apparent such as to evaluate gender specific issues on obtaining license and permit,

implications of the existing attempts of the governmental and non-governmental

organizations on the perception of the respondents about their business climate.

Respect to interviewee were taken into account while taking an interview with them.

Participatory: The participatory approaches and methodologies were adopted during

the interactions with different respondents. The informal entrepreneurs were also

consulted in order to map out the perception toward the business climate of the

9 | P a g e

construction sector. The obtained information from questionnaire was triangulated

through KII and FGD.

Gender and social inclusion: The gender equality and social inclusion in terms of

women and men and the poorest class within socially excluded communities was

taken into account while carrying out the study with the construction sector

entrepreneurs focusing on the issues such as normal gender roles (division of work

and access to and control over resources, access to finance, access to properties) in

the community.

1.4 Study limitations

The limitations of the study are as follows:

The study was limited to three earthquake-affected districts- Gorkha, Dhading

and Nuwakot. Hence appropriate caution should be taken while drawing

inferences for other earthquake-affected districts.

The information and statements in this report were based on KII and FGD. The

information carrying by the tables and figures were based on the questionnaire

survey. All the sections, tables and figures are reflection of the respondents’

opinion and there is no personal opinion of the researchers in any part of this

report except the recommendations.

The sample size for this study was limited to 207 entrepreneurs for all three

districts due to limited financial and time resources. Hence, the number of

representatives of producers, suppliers, transporter and contractors was limited

which restricted the representative interpretations of all the service providers.

Majority of the male entrepreneurs have poor knowledge about gender issues.

Hence, detailed information regarding gender issues was difficult to access for

gender-based analysis.

This study is strictly limited to the indicators specified by the Terms of

Reference.

The list of the existing enterprises and name of the entrepreneurs in the

municipality level is not updated. Hence, women entrepreneurs were identified

with snowball sampling techniques. Further, low number of women operating

and managing enterprises was observed. In this context, extreme caution

should be taken while drawing definitive conclusions on gender-related

constraints.

The qualitative data in this study were perceptions/opinions/feelings of the

respondents. The participants from FGDs and KII could be associated with one

or more federations or political organizations. Hence, there were some

tendencies to exaggerate and distort the information in their favor.

10 | P a g e

In the context of business registration, majority of the entrepreneurs hired

consultants to facilitate registration and other processes. Hence, majority of the

respondents were unaware of detailed time and cost incurred during different

stages of the process.

11 | P a g e

CHAPTER 2: KEY FINDINGS

2.1 Enterprise demography

In the pursuit of exploring business climate in Dhading, Gorkha, and Nuwakot districts,

the study found diversified entrepreneurs engaged in complex business of

construction industry. Involvement of both male and female entrepreneurs from

various age groups, caste and ethnicity having academic qualifications ranging from

simply literate to doctorate level in the industry was exemplary (see Appendix 1).

There were, three categories of MSMEs—micro (41%), small (56%), and medium

(3%)—based on their capital, doing business in local, minor, and major markets of the

districts. Ownership pattern of the enterprises was sole proprietorship (85%),

partnership (23%), and private limited (4%). The business was running on rental

(43%), lease (12%), and own (45%) property. Most of the entrepreneurs (85%) were

from the same locality. Some of the entrepreneurs (16%) were returnees from foreign

employment.

The entrepreneurs were employing full-time (83%) and part-time (17%) employees.

Both male and female employees were working for full-time and part-time. Full-time

male and female employees were 66% and 17% and part-time male and female

employees were 15% and 2% respectively. Total number of people engaged in the

enterprises was 2,791 in which a few enterprises like brick factories, sand extractors,

stone crushing plants, and so on were employing many people.

Many enterprises (173) were working with people of single digit and some enterprises

(93) were working with less than 5 number of people. In the total number of people,

the number of managerial/administrative personnel was 353 out of which 50 (14%)

were female and 253 (86%) were male. The number of managerial/administrative

personnel were the owners, family members, and paid persons involved in the

business.

Notwithstanding, construction business was more seasonal business in the region.

There was no more construction works from mid-June to mid-November because of

monsoon and festive seasons.

2.2 Starting a business

Traditionally the small businesses in Nepal run informally, hence, registration of the

business is relatively new phenomenon. Lately, government, including local

government is keen on getting the business registered and bring them into their radar.

However, there are still many enterprises which are running informally. In fact, though

it is very difficult to access exact number of MSMEs running informally in the project

districts, the number may be well above the registered enterprises. One of the reasons

for the lackluster in the business registration is the lack of awareness among the

MSMEs about the importance and benefit of the registration. Many see it as

government’s trap to bring them into its radar and extort tax from them. Moreover,

12 | P a g e

there are administrative, procedural and the policy hurdles, which add cost and time

for the registration and deter many from registration all together. The study accessed

the hurdles and their impact (in terms of time and cost) in starting a business, which

is discussed in the following section.

2.2.1 Legal commencement and formal operation

Enterprise registration can be done at various government institutions such as,

Company Registrar, Municipalities, Ward (local government) and Department of

Enterprise is registered within the day when required documents are submitted

Deposit amount:

Fixed capital up to 5 lakh – Rs 1,000




Fixed capital up to 1 crore - Rs 10,000

Fixed capital more than 1 crore – Rs 20000

B.

Re

gis

tra

tio

n

A.

Do

cu

me

nta

tio

n

Application form for enterprise registration

Enterprise project plan

Entrepreneur’s citizenship photocopy and stamp of Rs 10.

Land ownership certificate with recent receipt of land tax and minimum 6 years contract if leased or rented

Recommendation from local government

The

re is n

o s

tand

ard

co

st

and t

ime fo

r d

ocu

me

nta

tio

n.

The

co

st

and tim

e d

ep

en

d u

po

n t

he n

atu

re o

f e

nte

rprise

If the furniture related enterprise is outside Municipality, the source of timber, blue print map and certification of distance from the nearest forest by District Forest Office

Furniture related

enterprise.

For construction enterprises, requirement of machineries certified by mechanical engineer and his/her bio-data, VAT bill, insurance, technical officers and finance officers bio-data along with the commitment to work in the enterprise

Construction enterprise

For partnership firm, partnership contract need to be submitted.

Partnership

firm

Figure 2.1: Flow chart for enterprise registration

13 | P a g e

Cottage and Small Industries (DCSI). However, registration of micro and small

enterprises at DCSI is higher at 83 percent and 86 percent respectively. The flow chart

for the business/enterprise registration at DCSI presented in Figure 2.1 detailed about

the required documents and cost for registration of the enterprises.

The cost and time required for the registration of the enterprise varies as per the nature

and size of the enterprise. There is no standard or prescribed days for documentations

and the days varies according to the nature of enterprises. For registration of the

crusher, large brick kilns and furniture and timber enterprises, there is need of

Environmental Impact Assessment (EIA) for the governmental authority which

requires more days for registration than other enterprises.

However, as per the government – it should not take more than one day after

submission of required documents while cost for registration varies according to the

capital of the business. Conversely, the actual time and cost bore by entrepreneurs

for the registration was found significantly higher than the government norms.

The following charts Figure 2.2 and Figure 2.3 depict the actual number of days and

cost involved in registering different types of enterprises. On an average, 13 days, 24

days and 52 days was required for micro, small and medium enterprises to get

registered. The increased time was attributed by the requirement of business

proposal, certifications and recommendations, memorandum of association and

articles of associations, description of annual transaction details during registration

process. Likewise, cost for registration has also increased along with the size of the

enterprises in all three districts.

The study team found few entrepreneurs who processed the registration by

themselves. About 20 percent of micro enterprises, 31 percent of small enterprises

and 68 percent of medium enterprises were involving consultants for their enterprise

registration. About one third of the entrepreneurs found the registration process too

0

10

20

30

40

50

60

70

Micro Small Medium

DA

YS


Figure 2.2: Total days required for enterprise registration

0

20000

40000

60000

80000

100000

120000

140000

160000

180000

Micro Small Medium


Figure 2.3: Total cost required for business registration

14 | P a g e

complicated, hence, hired a consultant (intermediaries – which normally have

knowledge about the registration process and have good contacts with the

government officials) for registration of their business.

2.2.2 Informal payment:

About 9 percent of total enterprises (17

enterprises) have made informal payment for

enterprise registration. The share of informal

payment was very high in increasing the cost

of the registration (Figure 2.4). It was as high

as 83 percent of the total cost for the medium

enterprises. For the micro enterprises, the

share of the informal payment to the total cost

was relatively low (16%). The informal

payment is exceptionally high for the

enterprises like crushers, brick kilns and large

scale timber, and timber treatments whereas

lower for enterprises like hardware suppliers,

metal enterprises, and hollow concrete block

producers.

The informal payment includes, bribery (money), political support, jobs to relatives,

lunch, dinner, refreshments, and distinct kinds of personal favors.

2.2.3 Harassments

Though no respondent reported the harassment based on caste ethnicity, social status and gender, however, about 7% respondent reported delays in the registration process because of absence of the personal contacts or referral.

2.2.4 Information availability and clarity

The information on the steps and documents required for enterprise registration are

found in the citizen charter of the concerned authorities. However, 14 percent of the

respondent were unaware about the citizenship charter while 30% respondents were

finding difficulties to understand the terms/words; 22% respondents were not clear

where to go and meet to whom; 18% could not find the information provider at the

concerned authority; and 16% wanted to be more clear about the registration process

but they were not finding right person for further clarification (Figure 2.5 and).

Micro

Small

Medium

Figure 2.4: Informal payment in enterprise

registration

15 | P a g e

Figure 2.5: Reasons for non-availability of required information for registration

The entrepreneurs also have less access and lack of clarity about the registration

information due to low level of education as well. About 66 % of the entrepreneurs

interviewed have low level of education.

2.2.5 Regulatory and policy Constraints

Some policies and regulatory constraints are also contributing in delaying the

registration process and making it expensive for the entrepreneurs. The followings are

some of the constraints highlighted by the respondents (FDG, KII and Survey),

Environment Protection Rule, 2055- the policy is practically impossible to

comply with. It has hugely impact on the crushers, sand refineries, and furniture

(timber enterprises).

Hence, it is promoting the informal practices – as the result – the registration of

the crushers/sands enterprise is very expensive.

The provision of Sarjamin (field/land verification), recommendation and

certification from different agencies (municipality and local level government) –

its not only impractical, is adding extra cost and time to get enterprise

registered.

Many find the provision of having intermediate level pass and /or bearer of a 10

years old driving license to register the transport business is impractical.

The provisions like finding a mechanical engineer with curriculum vitae and

academic certificate of intermediate level pass and his/her commitment of

providing services continuously to the entrepreneurs who was wishing to

register as a construction firm/contractor were making the registration process

more challenging for contractors.

2.2.6 Gender specific limitation

The gender-based limitation regarding the registration of the business were not noted

during the study. In fact, government has subsidized the registration fee for the female

entrepreneurs to encourage to get the enterprise registered in their name. The

provision has encouraged few enterprises registered in female’s name however they

have minimum or limited roles in running and managing the enterprise.

0%

10%

20%

30%

40%

Difficult tounderstandterms andprocess

Unclear aboutperson and

place tocontact

Absence ofinformation

provider

No provisionfor further

clarification

Gap betweenstandard and

actual

Others

16 | P a g e

Followings are the reasons for small number of females in the enterprises

Lack of awareness about the government provisions – more than 50 per of

entrepreneurs are unaware about the various provisions offered to them

The females are primary responsible for taking care of the families (65 %).

Hence, they are unable to balance household chores and business activities.

Acceptance of female entrepreneurs in the society is low (34 %) particularly in

the construction business.

Working the male co-works is also one of the constraints for female

entrepreneurs, especially, while maintaining business relationships and during

long distance travel and mobility for any kind of administrative matters.

2.2.7 Odds ratio

A binary regression model was run to determine the likely impact of the above

constraints on the enterprise registration. The odds ratio presented in Table 2.4

indicates the probability of different determinants in increasing enterprises registration

challenges. Based on the result, the odds of entrepreneurs facing different forms of

harassment have 5.95 times greater change of facing challenge in business

registration than entrepreneurs without facing harassment during registration process.

The result also showed that the odds of lack of information availability and clarity of

registration process were 68 times greater in increasing registration challenges than

the entrepreneurs with clarity in registration process. All these determinants were

statistically significantly associated with increasing registration challenge in all three

districts. The model also showed that there is no significant effect in increasing

enterprise registration challenge when the process is initiated by either male or female

in the study districts. This supports the fact that consultants are making the registration

process easy regardless of gender.

Table 2.1: Odds ratios for challenges in enterprise registration

Independent variables Odds Ratio (95% CI)

Male entrepreneurs 0.34 (0.05 , 1.48)

Informal payment for registration 0.95 (0.24 , 3.69)

Harassment faced during registration process 5.95 (1.37 , 42.66)*

Information available and clarity of process for registration 0.32 (0.16 , 0.6)***

2.3 Taxation

After registration of MSMEs, entrepreneurs have to pay several types of taxes

including Value Added Tax (VAT), property tax, income tax, house rent tax at various

levels of government- local, provincial and central. This payment of multiple taxes at

multiple places was more taxing for the entrepreneurs. Nevertheless, the respondents

were paying the taxes, but they were not comfortable with the payment procedure and

behavior of the tax personnel. The tax officers always assumed that

turnover/transactions and incomes of the entrepreneurs increase continuously years

17 | P a g e

by years. The government was also deliberately setting tax collection targets

continuously increasing. In fact, amount of tax to be paid depend on the business

transactions/incomes and the business transaction/income depend on the market

forces.

Tax payers were not getting valid answer to their question—why they should pay taxes

to the governments of three levels? Reporting was no motivation to pay the taxes but

feeling of compulsory burden of it. There was charge of involvement of tax officers in

invading taxes for the sake of their personal benefits.

Next complain was not enough workforce at the tax offices of the region. The auditors

and intermediaries between tax officers and tax payers were also contaminating the

cannons of taxation.

2.3.1 Types of taxes

The entrepreneurs were paying varieties of taxes. Value Added Tax (VAT), income

tax, property tax, house rent tax, toll tax, land tax, and vehicle tax were major category

of the taxes. However, all the entrepreneurs were not under the net of taxation (Figure

2.6). The entrepreneurs were not keeping their books of accounts more accurately to

reflect the exact places and amount of taxes and fees they were paying (see Appendix

9). Thus, the study noticed a common tendency of evading taxes.

65

78

37

18

21

13

3

3

99

51

52

53

32

23

14

14

6

6

3

6

3

1

Renewal fees

Income tax

Land tax

VAT

Property tax

House rent tax

Toll tax

Vehicle tax Micro (N=66) Small (N=108) Medium (N=6)

18 | P a g e

Figure 2.6: Types of taxes and fees

One of the reasons of evading taxes was

feeling of burden of varieties of taxes.

There was no motivation for paying taxes

among the entrepreneurs. The blames

like tendency of the governments and

their officials only of squeezing

entrepreneurs in the name of taxation

was another reason of avoidance.

Along with central and provincial

government, the local governments

(municipalities) were collecting varieties

of taxes from construction MSMEs.

Construction material transporters were

paying taxes and rates in every

municipalities in their transit. The payment

of taxes was not free from confusions and constraints (Figure 2.7). Feeling of

constraints while paying taxes was higher in Dhading when compared with Nuwakot

and Gorkha districts. Some of the constrains like unclear and unpleasing taxation

policy, intentional delay from the tax officials, traditional methods of tax collection, and

multiple agencies (local, provincial, and central) for tax collection were major

constraints facing the entrepreneurs (see Appendix 9).

2.3.2 Tax payment process (time & costs)

The entrepreneurs were paying taxes in distance from their locations. Some were

paying in Kathmandu and some were paying in Pokhara in addition to the payments

at local-level. Unnecessary costs of transportation and accommodation was making

the tax payment process longer and discouraging in absence of locally available tax

receiving authority. However, the time taken, distance travelled, and price paid (beside

the tax) in paying taxes was less than the expectation of the entrepreneurs (Table 2.2;

see Appendix 10).

Table 2.2: Time and cost for paying taxes

Particulars Enterprises

Micro Small Medium

Auditing/documentation/transaction process (hours in average)

Estimated 25 13 12

Actual 22 29 8

Difference 3 -16 4

Auditing/documentation/transaction process (Rs. in average)

Estimated 8161 11473 33750

Actual 8485 11505 35000

Difference -312 -32 -1250

25 %

17 %

10 %

Dhading (N=63) Gorkha (N=58)

Nuwakot (N=59)

Figure 2.7: Feeling of constraints while

paying taxes

19 | P a g e

2.3.3 Information dissemination

There were trying of increasing urgency and awareness about tax payments in the

region. Information dissemination efforts were in effect through website, radio,

television, and print media. However, face to face conversation was more effective in

comparison with other means/mediums of information dissemination (Figure 2.8).

Figure 2.8: Mediums of taxation information dissemination

About 13% of respondents were in favor of the statement ‘availability of tax related

information’. Similarly, about 46% respondents were in favor of the statement that the

available information were clear and sufficient (see Appendix 11).

An assessment on the reasons for unclear information about taxation, 28% responded

as difficulty in understanding the provisions and process of taxation, 25% no provision

for further clarification; 25% as their unawareness about the person and places to

contact (see Appendix 12).

In an inquiry of having information about specific provision of tax relaxation for women

entrepreneurs, 48% respondents responded their unawareness.

2.3.4 Informal payments

There was practice of making informal payment while paying taxes. In an assessment,

micro enterprises were paying Rs. 750, small enterprises were paying Rs. 35,361 and

medium enterprise were paying Rs. 50,000 as informal payment in an average.

A furniture enterprise in the study region said in anonymity that he registered his

enterprise under Company Registration Act during 2068 but it took for about 15 days

to register. The registration fee was about Rs 3,000. Lack of knowledge and tedious

process of registration forced him to hire a middleman by paying an extra amount of

Rs 25,000 as service charge for quick registration. After the registration, he had to pay

a hefty amount to the community forest committee to get timber.

The informal payments, sometime known as Ghoos, was shaping the business climate

differently. There was tendency of appreciating those who were paying and receiving

0

10

20

30

40

50

60

Website ormobile app

Face toface

Publiceducation

Email/text Radio/TV Others

8

59

16

96 8

29

47

23

11

2 04

51

10

0 1

11

Dhading

Gorkha

Nuwakot

20 | P a g e

the informal payments i.e. the receivers were appreciating the payers and the payers

were appreciating the receivers. There was more dispute between law enforcers and

adapters where there were no informal payments.

2.3.5 Cases of double taxation

Most of the entrepreneurs were not clear about the term ‘double taxation’. In most of

the cases, they were considering multiple taxes like VAT, income tax, property tax,

and similar other taxes as double taxation. In fact, there was no double taxes except

some charges imposed at various stages of its supply/value chain.

However, there were complains of various taxes and charges imposed on various

activities of the entrepreneurs for the cause of governments’ revenue. All the services

like certification, recommendation, registration and renew were subject to taxes and

charges. There was blame that the government at every level intends to suck the

entrepreneurs for nothing.

There was still confusion in payment and collection of taxes. For instance, the taxes

like property tax, land revenue tax, vehicle tax and business tax was under the purview

of local level but some of the entrepreneurs were respondent as paying the land tax,

property tax and house rent tax to central government and provincial government as

well (see Appendix 9).

2.3.6 Harassment

There was no more harassment while making tax payments; however, there were few

reporting of it (see

Appendix 13). According to the respondents, 6 micro enterprises, 5 small enterprises

and 1 medium enterprise faced incident of harassment. Two major reasons were

absence of relationship with tax officials and poor social status of the entrepreneurs.

There was reporting of fear and lack of self-respect in running business. Even after

paying taxes and meeting every regulatory requirement, fear of intention of the various

levels of government officials was still there what would be the next. They were

questioning this researcher—“who says there is congenial business climate where

genuine entrepreneurs are always losing their self-respect due to ill-intention of

politicians, unethical business doers, and government officials?” However, the officials

were not ready to accept the charges; instead, they were charging the entrepreneurs

of not meeting their requirement.

2.3.7 Disproportionate impact of taxation

21 | P a g e

The entrepreneurs were exceedingly small and fighting for their survival all the times.

Imposition of taxes in every aspect of their business was pushing them to unnecessary

financial burden, delay in operation, inconvenience, and discouragement.

Following are some of the disproportionate impact of tax regulations:

The incentives and supports extended by the government were not effective to

boost up the confidence of the entrepreneurs. For instance, the government

granted concessions and rebate in registration fees and taxes to female

entrepreneurs. As a consequence, the enterprises are registered in the name

of women but operated and managed by male.

According to Industrial Enterprises Act 2016, there is provision of 20% income

tax relaxation for manufacturing industries. There is a provision of minimum 5

years income tax free for cottage industries. The study districts, Gorkha,

Dhading and Nuwakot, were listed as less developed districts where there was

a provision of 70 percent subsidy in income tax for 10 years from the

commencement of manufacturing industries. Despite such provisions, there

was no more prosperity of entrepreneurs in the region.

2.4 Business permit/license

After commencement of the business, obtaining business permit/license and its

renewal is also necessary for MSMEs. Industries were renewing their business for the

first time in five years. After five years, entrepreneurs had to renew the enterprise

every year. But due to the lack of proper Business Information System (BIS) in the

study districts, this provision was creating confusion among the owners that they

assumed to renew their business in five years.

2.4.1 Procedure of obtaining business permit/license

Merely registration of business was not enough to run the business. Obtaining

business permit/license and renewal of the same was also necessary. The

government granted renewal holiday for the first five years of business establishment.

Annual renew was necessary for the business for rest of the period of post-holiday.

0

5

10

15

20

25

Micro Small Medium

Day

s


0

5000

10000

15000

20000

25000

30000

35000

40000

Micro Small Medium


22 | P a g e

The term (route) permit was appropriate for transportation business. Transport route

permit was valid for four months.

Figure 2.10: Total cost required for obtaining business license/permit

The procedure, time, and costs of obtaining business permit/license was similar as of

business registration. The cost and time required for entrepreneurs while obtaining

business license and permit is presented in Figure 2.9 and Figure 2.10 respectively.

The days for obtaining permit varied from 8 days for medium enterprise in Gorkha

district to the maximum of 20 days for medium enterprises in Dhading district.

However, the time required to obtain business permit/license for micro and small

enterprises does not show great variation in the study districts. Regarding the cost

required for obtaining business permit/license, micro enterprises showed less variation

while there was great variation among

small and medium enterprises in the

study districts.


Role of informal payment was noteworthy in obtaining business permit/license as of

business registration. Share of informal payment in total costs of obtaining the

permit/license was 4%, 43%, and 73% in case of micro, small, and medium

enterprises. Similarly, the share of informal payment in renewal of the permit/license

was 9%, 11%, and 77% in case of micro, small, and medium enterprises, respectively

(see Appendix 14).

Informal economy was well-established in the region. About 80% of economic

activities were beyond the purview of national accounts. Major places of informal

payments were named as registration, permit and license offices, tax offices, forest

office, district administration office, and municipalities. The activities demanding more

amount of informal payment were associated with the recommendations, verification,

certifications, registration, permit/licenses issuing renewing thereof.

2.4.3 Information availability and clarity

Publicly available list of information and

documents necessary for obtaining business

permit/license and renewal were quite

insufficient. About 58% respondents were

reporting insufficiency of such information.

Similarly, the clarity of publicly available

information was also questionable that 51%

(105) respondents were reporting no clarity of

such information at the districts (Figure 2.11). Figure 2.11: Clarity of information for

business permit/license

3747 42

6353 58

0

20

40

60

80


Yes (%) No (%)

Figure 2.9: Total days required for obtaining business license/permit

23 | P a g e

2.4.4 Obstacles and regulatory constraints

There was reporting of no more obstacles and regulatory constraints while obtaining

business operating permit/license and renewal except some cases of furniture and

crushing plants. About 82% respondents were feeling free of obstacles and

constraints. Procedural delays (13%), inspection difficulties (9%), and documentary

difficulties (8%) were major obstacles and constraints among others (see Appendix

16).

There was reporting that compulsory of route permit for transport vehicles with black

number-plate and absence of such provision for vehicles with red number-plate.

Respondent perceived that free mobility of red-number plate vehicles without route

permit and constrained mobility of black number-plate vehicles with rout permit as

unfair.

The entrepreneurs were asking that why renewal of business was necessary when

one was paying taxes and charges, preparing audit reports annually, and continuing

the business under the laws of the land. Some of the respondents were not convinced

with the provision of periodic firm renewals.

2.4.5 Gender specific issues

There were no reporting of gender specific issues facing the women entrepreneurs

while obtaining business permit/license and renewal of it in the districts.

2.5 Access to finance

Access to finance was easy for richer but difficult for poorer. Financial institutions were

collateral friendly but not idea friendly. There was no more practice of project financing.

Banks and financial institutions were tending to be more secured at the cost of the

borrowers. Referrals and guarantees were instrumental in getting access to finance in

addition to the other documents. Even the banks, in some cases, were meeting their

target of priority sector investment by making false arrangements with their large

customers.

Interest rate was arbitrary i.e. either based on directives of central bank or discretion

of lender itself. There is no relationship between interest rate and expected rate of

risks/return of the borrowers and lenders.

Table 2.3: Procedure to obtaining business loan form commercial bank

SN Procedure Time to

complete

Cost to complete

(NPR)

24 | P a g e

1

Inquiry about Purpose of Loan and general

inspection of file regarding criteria regarding loan

and Collateral (Bank Part).

1 day 0

2

Site Inspection of Business status and Collateral Positioning. (Bank Part)

Loan application form and bank related documents are provided which is to be filled by customer (Bank Part).

2 days 0

3 Internal valuation of collateral is proposed to the

certified valuator. 4 days Size of valued property (up to

Rs 20,000)

4

Required documents like Stock statements,

insurance policy, net worth position of client, multi

banking declaration etc, are obtained from

customers.

1 Day 30,000

5

Audited financial statements and projected reports

are obtained from client to justify the financial

position of business.

3 Days 10,000

6 Documents approval and filling are done 2 days 0

7 Approval of loan based on authority of Branch. 3 days 0

8 If loan amount exceeds the given authority file is

forwarded to regional or central office 7 days 0

8 Stayed Order and Mortgaged deed of proposed

collateral are done.

1 day

30,000(Includes Processing Charge and

other banking expenses )

9 Other legal documents like Internal deeds, Personal Guarantees, Letter of consent etc are made to be filled by client and approved by branch manager.

10 Loan Disbursed from system and offer letter provided to client.

Loan application processing time was taking week(s) due to documentations, field

visits, and loan approval processes in commercial banks (Table 2.3). This process

was comparatively shorter of about a week in case of cooperatives and microfinances.

There was no more effectiveness of subsidized loans as it could be due to

unawareness and perception of cumbersome processes of it.

2.5.1 Existing policies and products

The Government of Nepal has made provision of few subsidized loans scheme to

encourage entrepreneurs, especially women entrepreneurs, in coordination with

commercial banks. Some of these program include Youth and Small Entrepreneur Self

Employment Fund (YSEF), Rural Self Reliance Fund (RSRF), Economic

Rehabilitation Fund (ERF), and Women Entrepreneurship Development Fund

(WEDF), which are being operated under the Ministry of Cooperative and Poverty

Alleviation, to provide unemployed youths and women with subsidized loans to start

small business. In addition, majority of entrepreneurs believed that subsidized loan

would be instrumental in increasing the performance of the business. But, the difficulty

in loan processing, lack of initiatives taken by commercial banks due to fear of bad

25 | P a g e

debts, unclear policy and monitoring mechanism by Central Bank and lack of

information dissemination on the process and procedure had made the subsidized

loan inaccessible to ordinary entrepreneurs. Even though, on an average 68 percent

of entrepreneurs in all three districts were aware of subsidized loans, only 3

entrepreneurs had been benefitted from the subsidized loan. The major reasons for

inaccessibility of subsidized loans were unfair process (25%) and lack of

referral/bhansoon (26%). Majority of entrepreneurs (41%) in all three districts stated

that they do not have access to the subsidized loan (see Appendix 17).

2.5.2 Average costs of credit

The commercial banks were the major sources of finance for entrepreneurs with the

highest share of lending of about 60 percent (Figure 2.12). In comparison, access to

micro finance and cooperatives was easy for the entrepreneurs but those institutions

were charging quite higher rate of interest (microfinance-19% and cooperative-16% in

an average) along with 1.5 percent service charge. However, the average interest rate

of commercial banks was 13% in an average along with 1 percent service charge

(Figure 2.13).

Getting loan from cooperatives and microfinance was easier when compared with

commercial banks but interest rate was too high. In some cases, difference between

disclosed cost of capital including interest and actual cost of capital crosses ten

percentage points.

There were multifold of costs due to the difficult access to finance. Small amount of

capital was enough to get product for their sale if there was no practice of credit sales.

However, the products brought on cash had to sale on credit. When credit sales

increased, there was decrease not only of cash but commodities for sale as well.

3 %

59 %15 %

10 %13 %

Micro finance Commercial Banks

Development cooperatives

Governmental

Figure 2.12: Status of formal sources

of credit

11.5

13

13

14

17.5

0 10 20

Development banks

Government Banks

Commercial banks

Micro finance

Cooperatives

Figure 2.13: Average rate of interest (%) of

financial institutions for business loan

26 | P a g e

Without cash there would be no materials at the shop. If there would be easy access

to finance then the entrepreneurs could be able not only to run smoothly but also to

maintain stock and expand their business. About 18 percent of respondents were

unable to expand their business because of poor access to finance in the region. It

was very difficult to obtain loan and they had a fear of extremely higher amount of

installments if it could be obtained by any means.

2.5.3 Challenges

The construction-based business in earthquake-affected districts had already reached

to the peak of their sales. During the study period the sales was coming down as

completion of most of the reconstruction works and majority of entrepreneurs were

stating the decline of demand for construction materials and services over time.

Consequently, 43% entrepreneurs were reporting of no added capital requirement as

their business had been declining over time.

Nevertheless, there were reporting of specific implications of shortage of funds while

getting materials, keeping stocks of materials, parts, and commodities among others

(Figure 2.14).

Some of the challenges while accessing finance from the financial institutions are as

follows:

Commercial banks were not ready to go to rural/remote areas. Respondents

said that existing practices of granting loans based on transaction was

impractical.

The financial institutions were doing their business with conventional products

with minor modification. They were not accepting land/building as collateral,

which was not accessible by road. Their policy required at least one side of the

7

23

47

47

43

15

26

41

52

57

33

33

67

67

33

0 10 20 30 40 50 60 70

Cannot maintain plants and machineries

No sale promotion activities

Could not develop physical facilities

Cannot maintain sufficient stock

Not getting materials of my choice

Medium (%) Small (%) Micro (%)

Figure 2.14: Implications of shortage of funds

27 | P a g e

land/building linked to motorable road to consider for collateral property.

Moreover, there was complain of low valuation of collateral property by the

banks; and the property of 25 meter far from the highway was not suitable for

such collateral too.

Higher rate of interest and lack of good collateral property were major

hindrances and cost drivers while obtaining loan from the formal sources, more

specifically for micro and small enterprises. In addition, the low valuation of the

property by banks has further curve down the credit threshold of entrepreneurs.

Additionally, the entrepreneurs reported that complicated administrative

process was one of the major hindrances and cost drivers of their capital (see

Appendix 19).

2.5.4 Constraints facing the women-led MSMEs

Selling products on credit was common practices and it was amazingly easy job but

collection of money from the debtors was more challenging for women entrepreneurs

then their male counterparts. In fact, the compulsion of buying the materials and items

on cash and selling the same on credit is leading to the shortage of working capital.

Moreover, going to the field/site was common practices but it was difficult for women

entrepreneurs to go to the field and deal with the male. Moreover, male were unable

to understand the problems of female. Male were not hesitating to go for drink heavily

during the evening for business deal but it was not comfortable for female. In some

cases, it was difficult to work with the workers coming from distance with different

culture, language, and tradition; therefore, the female entrepreneurs were unable to

assign the job of credit collection to such workers.

2.5.5 Economic and financial implications

Cooperatives were reaching door to door of their customers. Their presence was also

in rural villages. The cooperatives were more female friendly. Their services were

comparatively easier than the services of commercial banks. However, their interest

rate was higher. Female borrowers were more disciplined than male borrowers.

There was reporting of unhealthy competition like negotiation on interest rates,

relaxation on documentations, and use of informal relationships among the financial

institutions. The institutions were trying to meet their targets at any means. Some of

the borrowers were borrowing money not for their own use but for others’ use. One

borrower was moving around different lenders and borrows from one institution and

pays already taken loan from other institutions. There was no matching of the purpose

of borrowing and lending in most of the cases.

The borrowers were reporting higher amount of borrowing costs due to informal

payments in relation to property valuation, documentation and borrowing process.

However, the borrowers and lenders were not telling the exact amount of their informal

payments.

28 | P a g e

There was reporting of exhibited superiority from bankers that they had to extend their

pity to the entrepreneurs who were begging for money from them.

Micro and Small enterprises were heavily relying on informal sources of finance.

During the study, about 43 percent of entrepreneurs had access to formal sources of

finance. Similarly, 43 percent of entrepreneurs (61 % for micro enterprises, 29 % small

enterprises and 33 % medium enterprises) did not require finance either from informal

or formal sources. However, 34 percent of micro enterprises, 56 percent of small

enterprises and 66 percent of medium enterprises had access to formal sources of

finance (see Appendix 20). This showed that as size of enterprises increased as

increased in access to the formal sources of finance.

2.5.6 Odds Ratio

A binary regression model was run to derive a model using independent variables for

determining the challenges faced by entrepreneurs while accessing finance from

formal sources. The odds ratios were tabulated for independent variables to determine

the odds or chance of independent variables in determining challenges to obtain

finance for running the enterprise.

Table 2.4: Odds ratios for independent variable for financial challenges


Male 0.15 (0.00 , 21.70)***

Age 1.04 (1.00, 1.11)

Local resident 0.71 (0.14 , 1.93)***

Registered enterprises 0.73 (0.10 , 2.24)***

Faced financial obstacles 1.93 (0.95 , 7.57)

Subsidized loan increase business 0.28 (0.02 , 0.54)

*** denotes level of significant at 1 percent

The odds ratio presented in Table 2.4 depicted the determinants in increasing

challenges while accessing the finance for the entrepreneurs in study districts. The

table depicted that there is a greater chance of increasing challenge while obtaining

finance for the female entrepreneur (85 % higher as compared to male), migrant

entrepreneurs (29% higher as compared with local entrepreneurs) and unregistered

entrepreneurs (27% higher as compared to registered entrepreneurs). All the

constraints while accessing finance are significant at 1 percent level.

2.6 Getting electricity

The formalities of getting electricity connection and the costs of it were acceptable to

the respondents. However, there was quite difficulty in getting electricity connection in

chosen areas with capable transformer installed and three-phase electric meter.

29 | P a g e

2.6.1 Connection process and costs

Figure 2.15: Procedure for getting electricity

Process of getting electricity

Documentation Cost Time

Application form

Copy of citizen and land

ownership documents

If land is rented, approval from

the land owner

PAN or VAT certificate

Recent passport size photo one

copy

For enterprise/industries,

certification of registration.

Construction Completion

Certificate or recommendation

from local government

Consumers = Rs 50

Others = Rs 100

For electricity connection without connection material

a) Consumer (5 to 15 Amp) : Rs 100

b) Consumer (to 30 Amp): Rs 200

c) Up to 60 Amp: Rs 300

d) 3 phase: Rs 500

Other consumers

a) Up to 10 KVA: Rs 700

b) More than 10 KVA: Rs 1000

c) T.O.D Meter: Rs 1000

For pole connection a) Single phase per

pole: Rs 200 b) Three Phase per

pole: Rs 300

Consumers: 7

days

Others: 35

days

Electricity line should be in appropriate distance

No prior incident of illegal electricity leakage or disrupt of electricity due to illegal reason

All the wiring work should be completed

If the transformer is overload, the line would be provided after capacity enhancement of it.

30 | P a g e

There were 15% respondents getting electricity connection in recent times and rest of

85% had connection of it since along. The process and costs of electricity connection

for micro, small, and medium enterprises were similar (Figure 2.15). However, the

districts were different in terms of time and costs of electricity connection.

The variation between expected and actual time of electricity connection was

extremely higher (1.83 times) in Dhading while the same variation was 60% in Gorkha

and 12% in Nuwakot. Total costs variation was 55% higher in Dhading, 3% higher in

Gorkha, and 0.08% higher in Nuwakot. The share of informal payment in total costs

incurred was about 42% in Dhading, 8% Gorkha, and 35% in Nuwakot (see Appendix

21 and Appendix 22).

Connection process and costs were dependent on electricity requirement of the

entrepreneurs. About a week was necessary for 15 ampere meter connection, and

costs was about Rs. 3,000. Three phase connection was needing more time

depending the capacity of transformer installed in the region and availability of meter

for such connection. Minimum cost of such transformer was about Rs. 300,000.

Figure 2.16: Time taken to get electricity connection Figure 2.17: Cost of getting electricity

2.6.2 Information availability

Information about electricity connection were available at the offices of the electricity

authority. Access to information was easy for about 67% entrepreneurs in Gorkha,

64% in Dhading, and 40% in Nuwakot (Figure 2.18). The information were available

in various format at different locations including the organization’s websites, citizen

charter, and notice board. Some of the entrepreneurs were not proficient to surf

internet to get access to the information and some others were not paying attention to

the citizen charter and notice board. They were directly going to ask the people who

were sitting at the front desk of the electricity office.

0

5

10

15

20

25

30


Require Days Micro Require Days small

0

10000

20000

30000

40000

50000

60000

70000

80000


Require Cost Micro Require Cost small

31 | P a g e

2.6.3 Procedural challenges

There were no more challenges as such in getting electricity connection except some

of the procedural delays, field visits and estimation. More specifically, longer process

and necessity of multiple documents (6%), absence of personal relationship and

referral (6%), absence of enough materials and manpower at the electricity offices

(4%), and other miscellaneous factors (6%) were the challenges. However, three

phase electric meter was not available locally; therefore, getting it from central office

was quite challenging.

2.6.4 Slowest and longest processes

The process of getting electricity connection for normal use and getting 3-phase

electricity connection for heavy use was distinctly different. There were different

criteria, steps, and procedure for getting 3 phase electricity in the study districts. The

days and time of getting three phase electricity connection depended on the availability

of required load in the area. There was necessity of survey and test for the feasibility

of the load. Similarly, if there was availability of transformer and meter suitable for 3

phase connection, then there was possibility of connection with public transformer and

the steps and procedure could be quite simple and shorter. If not the case, the

entrepreneurs had to buy oneself the transformer, necessary poles, and accessories

for connection. This process was taking weeks and months for it.

40 %

67 %

64 %


Figure 2.18: Electricity connection information accessibility

32 | P a g e

2.6.5 Load estimate and reliability of supply

Getting electricity continuously

was not a major problem in the

districts. During the study period,

there was continuity in electricity

supply. However, due to technical

reason, a few irregularities were

obvious. Such irregularities were

not affecting the entrepreneurs

adversely except some

exception. Such irregularity was

affecting the crushing plants and

washers more when compared

with other MSMEs. However, the

irregularities were manageable

for the firm as well. In fact, there

was no problem about electricity

in Nuwakot district but problems

like three phase connectivity and irregularity in electricity supply were more in Dhading

than Gorkha (Figure 2.19). After all, due to the irregularity and fluctuations in power

supply, there was still loss records of about Rs. 16,429 in an average due to low

capacity use, delay in delivery time and wastage of time by 6 days each and increased

in repair and maintenance costs by Rs. 10,000 in an average. The amount of monetary

loss, costs, and wastage and delay time were estimates of the respondents in the

year.

2.7 Infrastructure and transportation route permit

Transport infrastructure consisted the roads, vehicles repair and maintenance

workshops, facilities for transport workers, health and safety, accident reporting and

rescuing facilities as well as monitoring mechanism installations.

There was an estimate of 35,000 transport trucks in the country but only about 10,000

transport trucks registered as transporter. Similarly, there were about 800 red number

plate trucks engaged in transportation of materials, but registration of those trucks was

for private use not on hire/freight.

2.7.1 Procedural constraints and costs

The constraints and costs of obtaining transportation route permit widened the time

and costs variation. The time variation was 14% lower in Dhading, zero percent in

Nuwakot, and 5 times higher in Gorkha. Similarly, the costs variation was 18% lower

in Dhading, 43% lower in Nuwakot, but 26% higher in Gorkha. Variation in time was

due to the variation in total days included in documentation and application process.

Figure 2.19: Status of getting required electricity

60%

67 %

100%

Dhading (N=10) Gorkha (N=6) Nuwakot (N= 14)

33 | P a g e

Variation in costs was due to the variation in document charges, application fees,

consultation fees, route permit fees, and other miscellaneous expenses (see Figure

2.20 and Figure 2.21).

There was an incident that father-in-law cut a tree of his ownership and gave the logs

to his son-in-law. The son-in-law was in custody for more than three weeks under a

charge-sheet of transporting logs without permit. The key informants were feeling such

incidents as unnecessary constraints and costs.

It was quite difficult to obtain route permit to run the vehicles in chosen areas. If

obtained at any costs, it had to renew in every three months. The owners of vehicles

had to go with their vehicles to the same state/zonal office of its registration for renewal

and/or sale. The provision of taking the vehicle at the place of its registration is not

fair.

Figure 2.21: Time required to obtain route

permit

2.7.2 Steps taken

An inquiry on the process of obtaining transportation route permit to find the slowest

and longest step resulted no distinctly different steps i.e. edges of the steps were too

blurred. Some transporters were obtaining permits in a day and some were waiting for

more days. In an exception, there were two cases in Gorkha that one case of waiting

for a month and another was waiting for three months.


There were no informal payments from 77% (17) transporters while obtaining

transportation route permit, but it was from 23% (5) of them. Altogether, the number

of enterprises involved in transportation of construction materials was 22 (17

transporters + 5 producers and suppliers) in the study. There were two micro

enterprises paying Rs 2,575 each for the permit in Dhading. One small enterprise in

the same district was paying Rs. 33,000 for it. In the same line, one small enterprise

70550

46413

69000

0

10000

20000

30000

40000

50000

60000

70000

80000

Gorkha Dhanding Nuwakot

0

1

2

3

4

5

6

Gorkha Dhanding Nuwakot

Figure 2.20: Total cost incurred for

transportation route permit

34 | P a g e

had paid Rs. 1,600 in Gorkha and one small enterprise in Nuwakot had paid Rs. 6,200

for the permit.

2.7.4 Information dissemination mechanism

Information dissemination mechanism about route permit were citizen charter,

friends/relatives, and face to face inquiry at the transport office. The citizen charter

was main source of finding information about transportation route permit for about 10%

respondents. Friends/relatives (45%) and face to face inquiry (45%) were main

sources of the information for remaining respondents.

2.7.5 Effectiveness of transportation route permit

There was mix response about the overall effectiveness of transportation route permit.

The feeling of overall effectiveness refers the process of obtaining permit and renewals

of it in addition to the materials transportation. About 56% respondents considered the

provision of route permit effective enough and about 44% considered not effective

enough. In the same line, the provision of Patake permit was not practical. There was

no office of issuing such permit at local level and it was difficult to travel distance for

such permit. Overall, the provision of route permit was effective in case of materials

transportation (Table 2.5)

There were some additional comments on the provision of road permit like frequent

visits to the transport office, very short period of 4 months’ duration, and no guarantee

of getting business during the period of permit. Similarly, there were some of the

difficulties reported during the study—difficult to transport materials to and from distinct

locations, delay in delivery while obtaining route permit, unnecessary stoppage at

check points, and so on (Figure 2.22).

Table 2.5: Effectiveness of route permit for materials transportation

Particulars Dhading Gorkha Nuwakot

High Low Not at all

High Low Not at all

High Low

Not at all

Ensures smooth mobility of materials

5 2 0 5 0 0 2 0 0

Possibility of on time delivery

7 0 0 5 0 0 2 0 0

Maintains standard load of vehicles

1 4 1 5 0 0 2 0 0

Provides statistics of materials

1 4 1 5 0 0 2 0 0

Maintains security of the roads, materials, carriers, and the staff

2 5 0 5 0 0 2 0 0

35 | P a g e

Figure 2.22: Difficulties due to transportation route permit

2.7.6 Conditions of infrastructure

Monsoon season was unfavorable for construction MSMEs mainly because of muddy

or bad roads. More specifically, poor condition of roads was adversely affecting the

quarry-based business such as sand-washers and stone-crushers.

An assessment on the status of roads found three categories of roads—earthen,

graveled, and blacktop. Only the blacktop roads were all season road and graveled

roads were serving for about 6-8 months altogether except some exceptions i.e.

somewhere the road was serving for longer period as well. However, earthen roads

were not working in monsoon season. The study found some monetary losses

recorded by the entrepreneurs in relation to the bad road conditions. Nevertheless,

there was negligible reporting of worst roads condition.

63

25

38

25

38

67

50

67

17

67

67

33

Difficult to transport material to differentlocation

Delay in delivery while obtaining route permit

Unnecessary stopage at checkpoints

Reasons for seeking informal payments

Increase transportation cost unnecessarily


1

2

2

1

3

2

4

2

5

5

5

2

4

4

4

2

3

3

2Road Conditions

Road Design itself

Parking Space

Public Toilet

Traffic sign and road marks

Workshops

Security/accident reporting facilities

Excellent Good Fair Poor Worst

Figure 2.23: Conditions of roads

36 | P a g e

2.7.7 Added costs and time bore

Poor road conditions were damaging construction materials including blocks and

bricks while transporting. There was no loss and damage of construction materials

reported while transporting through blacktop roads whereas such loss and damage

was happening during the materials transportation through the earthen, graveled and

under construction roads (Table 2.6).

Table 2.6: Functional status of roads


Earthen road Functional (Months) 7 7 7

Loss (Rs) 142,500 152,500 60,000

Gravel Road Functional (Months) 7 6 8

Loss (Rs) 43,333 42,500 46,000

Under construction

road

Functional (Months) 7 6 2

Loss (Rs) 50,000 30,000 20,000

Average

Average functional

(Months) 7 6 6

Average loss (Rs) 78,611 75,000 42,000

2.7.8 Overlapping or duplication of transportation levies

There was feeling of overlapping or duplication of transportation levies among the

transporters. In fact, different municipalities were imposing levies of same/similar type

on the transported goods i.e. when a truck passes through two or more municipalities,

it may pay tolls at two or more points of two or more municipalities.

2.7.9 Disproportionate impact on women

The study found only one female respondent in transportation business in the study

districts. She had no specifically mentionable impact of transportation route permit on

her business. When asked to others, in general, about the reasons of minimum or

insignificant number of women in transportation business, the respondents had no

exact idea about the reasons of not starting transportation business by women.

However, they were making a guess that the women had to handle household chores,

but transportation business can take them too far from their home. Some respondents

termed that, transportation business was not for women”.

2.8 Land laws/property ownership

The steps involved in getting land ownership certificate—Laal Purjaa is presented in

Figure 2.24 . However, the informal costs were fueling the fear of unknown like what

37 | P a g e

next if not paid. Comparable situation was prevailing in getting vehicle ownership

certificate—Blue Book. There was no specific provision for obtaining ownership

certificate as such in case of other properties like plant and machineries installed in

the industry. There were concessions for women in land registration fees. In general

no more significant constraints found that were relating to women entrepreneurs.

Figure 2.24: Process of obtaining land ownership

2.8.1 Steps involved to get land ownership

Most of the respondents were unaware about the steps involved to get land ownership

certificate because they were running their business on lease or rent. When asked

whether they had obtained it or aware about it, 27% respondents were aware of

necessary steps. There were entrepreneurs recently buying land for their own

business purpose. If anyone was doing so, had no memory of exact steps involved in

the process.

2.8.2 Land ownership process

Land ownership was not a big issue among the entrepreneurs. Most of the

arrangements were based on mutual understanding between the land owner and the

entrepreneurs. Ownership of land was not necessary as such to start and run a

business. Lease or rent agreement paper was sufficient for it.

2.8.3 Time taken and costs incurred

There were cases of micro and small enterprises involved in leasing/renting land for

their business purpose. Time variation was zero in case of micro enterprises, but the

Documentation Registration Process

38 | P a g e

variation was 33% higher in case of small enterprises. Similarly, the costs variation of

micro entrepreneurs was negligible of about 0.1%, but such variation was about 33%

in case of small enterprises (see Error! Reference source not found.).

2.8.4 Clarity of laws at the local level

The laws about land and property ownership were sufficiently clear. The entrepreneurs

were seeking help of land brokers or legal services providers if they wanted to get land

for their use. There were no more reporting of loss or damage or problems due to

unclear land/property laws in the districts.

2.8.5 Added cost bore by entrepreneurs

There was no coverage of the respondents about the added costs bore by the

entrepreneurs because of land/property laws. There was no more reporting of informal

payment made for obtaining land ownership certificate. No entrepreneurs were

bearing added costs due to the legal provisions about land ownership and land

transfer.

2.8.6 Constraints relating to women

Land laws had granted concession and rebates to the women instead of posing

constraints to them. There was no coverage of the respondents about the constraints

relating to women about land laws. Women entrepreneurs had no difference in their

business because of having land registered in their name or in the name of others

2.9 Labor shortage and labor market regulation

There was no workforce planning in the region. Local labors were in foreign countries

and foreign labors were in local enterprises.

Main source of labor was Terai. Substantial number of labors were coming from India

and a few are from Bangladesh as well. Local labors were not opting to work in their

own locality. If hired, they were too expensive in terms of cash, kinds, facilities, efforts,

and duties. In some cases, local labors reported as problem creators by asking for

rights and facilities beyond the ability of the entrepreneurs.

The region of post-earthquake was accommodating a flood of multiple agencies

including INGOs and NGOs. Huge inflow of cash and kinds from foreign government

and donor agencies could not be instrumental to make the socio-economic status of

the districts stable. The agencies offered lucrative benefits for local workers/labors,

owners, and suppliers. As the agencies completed their jobs in the region, the lucrative

benefits expected from the local MSMEs as well.

For example, lower-level workers were getting a laptop, scooter/motor bike,

mobile phone and similar other facilities on top of about Rs. 50,000 salary per

39 | P a g e

month. In the same line, the house owners were getting more than twenty-five

times higher rent for their home/room. Those practices increased prices of

everything in the region, which was affecting normal business even after four

years of the earthquake.

2.9.1 Availability of skilled, semi-skilled, and unskilled workforce

The construction business had required both skilled and unskilled workforce. The

MSMEs were working with shortage of workforce (Table 2.7) with one exception of

unskilled workforce in Gorkha. The shortage was ranging from unskilled to highly

skilled workforce.

Table 2.7: Status of workforce

Distric

ts

Skilled workforce Semi-skilled workforce Unskilled workforce

Requir

ed

Availab

le

Varian

ce

Requir

ed

Availab

le

Varian

ce

Requir

ed

Availab

le

Varian

ce

Dhadin

g 1156 674 (-) 482 384 29 (-) 355 19 15 (-) 4

Gorkha 262 256 (-) 6 197 182 (-) 15 30 51 21

Nuwak

ot 989 954 (-) 35 772 215 (-) 557 117 27 (-) 90

Total 2407 1884 (-) 523 1353 426 (-) 927 166 93 (-) 73

The tendency of people going abroad or away from home in search of job was one of

the principal reasons of shortage of workforce in the reasons. Unrealistic status

consciousness among the people i.e. doing work in and around home location means

damaging the social status was another reason of such shortage. Preference to leisure

and pleasure (seeking more wages/benefits, holidays, events, festivals, etc.) at the

cost of quality work outcomes was instrumental in widening the shortage (Figure 2.25).

Figure 2.25: Reasons to the shortage of skilled workforce

2 2

14 14

511

34

13 16

28 25

50 52 53

2 4

1914

9

23

Seeking wagesand facilitiespost quake

Statuspreference

Events andfestivals

No skill trainingfacilities

Poor wage SeasonalVariation

Foreignemployment


40 | P a g e

The MSMEs were working with a diverse workforce. Geographic location of the

workforce was one determinant of the diversity (Table 2.8). Harmonious relationship

among the diversified workforce was exemplary in the region. The diversity was not

only in knowledge and but also in language, religion, and culture. In any circumstance,

there was no reporting of mischievous and unwanted behavior of the workforce at their

workplaces in the name of diversity.

Table 2.8: Geographic location of the workforce

Particulars Dhading Gorkha Nuwakot Total

Local Skilled 204 107 200 511

Semiskilled 17 87 105 209

Unskilled 20 11 22 53

Country Skilled 206 130 375 711


Unskilled 30 76 3 109

Neighboring country

Skilled 120 39 26 185


Unskilled 5 19 3 27

2.9.2 Key skills gap

There was key skills gap in every enterprise (Figure 2.26 and see Appendix 27).

However, there was practice of making new-comers trained by the existing ones in

most of the MSMEs. The practice of at least a minimum level of skills transfer to new-

comers or juniors was minimizing the adverse impact of skills shortage.

High employee turnover was also widening key skills gap in the industries. When

employee become skillful, either they wanted more benefits or left the jobs. The case

would be quite favorable if local labors could be employed because, at least, they

would be staying in the same locality even after retiring from the job.

Figure 2.26: Nature of skill gap

10

6

4 45 5

12 2

1 1 11

56

8

2 2

6

3

1 1 1 1 1

67

6

12 2 2

1 12


41 | P a g e

2.9.3 Economic costs due to workforce shortage

Shortage of workforce adversely affected the work completion time and output level in

addition to the added overheads costs (Table 2.9). Expectation of higher wage rate

and wage variation across the MSMEs was causing multiple imbalances in labor

market. There was compulsion of entrepreneurs to pay higher wages to the workers

because of work culture of the local workers and post-disaster wage surge in the

region. Higher demand for wages and low market prices of goods and services (due

to inferior and imported goods and services) were severe problems of the

entrepreneurs.

Table 2.9: Average effect of workforce shortage

Districts Delay in work completion (%) Added overhead costs (%)

Output gap (%)

Dhading 25 25 12

Gorkha 11 15 5

Nuwakot 20 19 7

Labors’ preference was for daily wages because it was higher wages than the division

of monthly salary. This tendency was not assuring continuous workforce availability

for months and years. High labor turnover was adding labor costs and causing delay

in products delivery. Thus, there was difficulty in implementation of insurance and

social security policies for labors.

2.9.4 Safety and standard procedures

The entrepreneurs were partially meeting

the provisions of Labor Act 2017 of Nepal

concerning working conditions, health

and safety, insurance and social security,

and employment conditions in the region.

In an assessment on the knowledge of

entrepreneurs about industrial safety and

work place standard procedure, Dhading

district was in forefront (Figure 2.27).

However, the compliance aspect of the

safety and standard procedures were not

effective enough due to unavailability of

information to the workers at workplace

(23%), low priority for the safety and

standards (20%), perceived added costs (16%), absence of monitoring (11%), and

carelessness (7%) among others (Appendix 28).

31%

21%

16%


Figure 2.27: Knowledge about industrial

safety and standard

42 | P a g e

2.9.5 Labor inspection authorities and their inspections

There were labors coming from neighboring countries—mainly, from India and

Bangladesh. Some workers were refugees from Bhutan and Myanmar as well. There

was no exact number of foreign workers with and without work permit. However, there

was reporting of occasional monitoring from the law enforcement authorities in the

districts.

2.9.6 Labor laws, rules, and regulations

There were more than a dozen of acts, rules, and regulations directed toward the

workforce of construction MSMEs. The Labor Act 2017, Child Labor (Prohibition and

Regulation) Act 2000, Children’s Act 1992, Bonus Act 1973, Trade Union Act 1992,

Labor Regulations 2075, Trade Union Regulations 2050, Bonus Regulations 2039,

Immigration Rules 2051, Foreign Employment Policy 2068, Trade Union Election

Directives 2052, Occupational Safety and Health (OSH) Standard for Noise and Light

at Workplace, among others. However, the entrepreneurs were almost unaware about

how those laws were affecting their business.

2.9.7 Labor laws and regulations restricting women

There were no more laws and regulations that were restricting women workers at the

workplace. Instead, there were laws, awareness programs, and efforts from social

organizations in against gender-based discrimination.

A binary regression model was run to derive a model using independent variables

determining increase in manpower shortage. The odds ratios were tabulated for

independent variables to determine the odds or chance of independent variables in

determining challenges due to manpower shortage for running the enterprise.

The Table 2.11 depicted the determinants for manpower shortage in the study districts.

Based on the table, significance factor affecting manpower shortage in all three

districts was the prevalence of poor wages (seeking higher wage by the labors). The

enterprises providing poor wages to the labor have 2.47 times greater chance of facing

manpower shortage. Further, the table also showed that enterprises registration,

business competition and training to labor can potentially reduce the challenge of labor

shortage but was found statistically non-significant.

Table 2.10: Odds ratios for challenges in manpower shortage


Local resident 1.92 (0.77 , 5.3)

Registered enterprises 0.64 (0.26 , 1.56)

Business competition 0.8 (0.41 , 1.58)

Absence of training 1.37 (0.67 , 2.78)

43 | P a g e

Attraction to foreign employment 1.03 (1 , 1.09)

Status preference 1.7 (0.71 , 4.16)

Poor wages 2.47** (1.24 , 4.96)

Due to festival 1.41 (0.69 , 2.84)

** denotes level of significance at 5 percent level

44 | P a g e

CHAPTER 3: CONCLUSIONS AND RECOMMENDATIONS

The study concludes with a statement—business climate is captive of informality

within formality. The informality refers the informal relationships and informal

economic activities whereas formality refers formal relationships and the regulatory

requirement necessary to comply with the existing policies, acts, rules, regulations,

and directives. General conclusions and recommendation and specific conclusions

and recommendation as well as remarks on business ethics are presented below.

3.1 General conclusions and recommendations

General conclusions Recommendations Key agencies

There is entrepreneurial spirit among the people. They want to become an entrepreneur and engaged in one or more types of business subject to the compatible business climate.

Highly diversified entrepreneurs are engaged in complex business of construction industry. Involvement of both male and female entrepreneurs from various age groups, caste and ethnicity having academic qualifications ranging from simply literate to doctorate level in the industry is exemplary.

Employers’ associations/organization like FNCCI, FNCSI, CAN, WEAN, and similar others are helping the entrepreneurs in many ways. Additionally, intermediaries/consultants are simplifying the tasks of the enterprise registration, obtaining business permit/license, paying taxes, and getting access to finance.

Complete information and documentation are urgency of this age. However, ignoring the role of digital connectivity in optimization of information and documentation, either regulator or regulated wish to have completeness in their decisions and actions than that only invites unnecessary stress and frustration between both the regulators and regulated.

There is high expectation of the entrepreneurs from the governments of every level. They want to see more business opportunities, few taxes and charges, and prompt service delivery. Complete awareness about the government services, easy access to required information, and clear road-map of service delivery in every aspect of governance is essential. A well-established Business Information System (BIS) is urgent in the districts.

Provision of one window policy for activities like enterprise registration, obtaining business operation license/permit and renew of it, payment of taxes, and documentation including certification and recommendation at local level.

Enhancing coordination in the policies and practices among the employers’ associations/organizations.

Establishment of a state-of-the-art Business Information System (BIS) and Decision Support System (DSS) capable of linking all the regulating and regulated establishments of public and private sectors.

Acceleration of every efforts of bringing informal economy under the purview of formal economy.

Revisit the practice of using Upabhoktaa Samiti to promote the activities of construction companies i. e encouraged for the involvement of registered construction enterprises in construction activities at local level.

Concerned Ministries and Departments of Central and Provincial Governments.

Employers’ Associations.

MSMEs

45 | P a g e

Increasing influence of informalities in every aspect of business is damaging the beauty of meritocracy, equity, and fairness. The informalities are fueling the informal/underground economic activities in the districts.

Tendency of relying on informal payments and informal relationship are promoting informal economy in the districts.

3.2 Specific conclusions and recommendations

Indicators

Conclusions Recommendations Key agency

Starting a business

Majority of sampled enterprises are registered, however, there are still about 13% were operating their enterprises without registering.

However, legal costs and procedures of registering and running industrial enterprise has been quite taxing for the entrepreneurs. Regulatory and policy constraints and degree of information availability and clarity thereon have been burning issues, more specifically in furniture, hollow concrete blocks, stone crushing, and sand extracting and washing businesses.

Attention and involvement of multiple authorities at local, provincial, and central level in enterprise registration, licensing, taxation, and regulation are incredibly good practices. But, the attention and involvement stay only to impose taxes and charges on the business enterprises instead of becoming a valid source of entrepreneurial enthusiasm.

Existing industrial standard specification for industry establishment are selectively impractical for selective enterprises—mainly, the stone crushing plants, sand extractor/washers, and furniture.

Unfair business practices were not only from entrepreneurs but also from the regulators and law enforcement agencies. Low quality products are entering from the custom points.

Provision of one window policy for activities like enterprise registration, obtaining business operation license/permit and renew of it, payment of taxes, and documentation including certification and recommendation at local level.

Establishment of industrial zones in each district. The zone may include one or more types of industries. New industries should be established only in respective industrial zones. Existing industries should be encouraged to shift to the industrial zones.

Modification of existing specification for industry establishment, operation permit/ license and renewals.

Enhancement of materials quality testing facilities/laboratories in each district.

Ministries and Departments of Central, Provincial and local Governments

Employers’ Associations.

MSMEs

46 | P a g e

Unfair and unethical business practices are not only polluting the business climate but also adversely affecting the revenue mobilization in the country.

Taxation Laws are complex by nature—either the tax laws or non-tax laws. The laws need not to be the source of manipulation and corruption. The government at every level needs revenue and enterprises have to pay for it. At any cost, the government and its officials need to assume that promotion of business and industries is their one major responsibility along with the collection of rates and taxes.

The taxpayers want to know, in fact, where their money is going and how much their payments is being instrumental in facilitation and protection of their business interest. When one does not know the answer, he/she tend to evade the taxes. In the same line, every enterprise need to know the difference between a firm genuinely meeting regulatory requirement and another firm intentionally violating the requirement.

The regulators’ commitments is useful to promote confidence of the entrepreneurs. The government officials, at any cost, must not be the source of corruption and manipulation. Both the entrepreneurs and regulators need to release the business climate from the captivity of informal relations and informal activities.

More emphasis on implementation and monitoring thereon of existing rules and regulations. Focus on acceptability, enforceability, predictability and sustainability of policies, laws, and regulations.

Revisit the different taxes/charges imposed by local authorities as well as province and central level authorities.

Ministry of Finance

Department of Inland Revenue.

Employers’ associations

MSMEs

Business permit/license

Inadequate information availability and clarity concerning compliance and reporting measures and practice of informal payments for obtaining business operation permit/license forced to draining out the precious time and money of the MSMEs.

Establishment of a state-of-the-art BIS and DSS.

Operationalization of industrial zone.

Adoption of one window policy.

Ministries and Departments of Central, Provincial and local Governments

Employers’ Associations

MSMEs

The conventional banking practice does not help best in the region.

Rapid adaption of e-procurement and e-

Ministry of Finance

47 | P a g e

Assess to finance

Financial institutions need not to transfer all the risks to the borrowers i.e. in the name of risks, interest rate and service charges must not be adjusted in all the cases. Focus on documents and transaction volume do not make adverse impact on large business as those do make impacts on MSMEs.

Inflow of cash and kinds from foreign governments and organizations has not been instrumental for socio-economic stability of the region. The system of materials, manpower, money, and methods of multiple agencies needs integration with the local requirements.

governance systems in as many areas as possible. Enhancement of monitoring and grievance handling mechanisms of Nepal Rastra Bank, government, and law enforcement authorities at local level to ensure that there is equity, fairness, and justice in the functioning of MSMEs, financial institutions, and regulatory agencies.

Revisit the service charge and interest rate imposed by different financial institutions in view of their rationality and transparency.

Nepal Rastra Bank

Financial Institutions


MSMEs

Getting electricity

Electricity connection and continuity in power supply is not a problem in the region. However, 3-phase electricity power connection is a bit of challenge in terms of time consuming and costlier top.

Establishment and operationalization of industrial zone where basic facilities and utilities for industry are available.

Nepal Electricity Authority

MSMEs

Infrastructure and transportation route permit

Condition of roads is not good in all the seasons. Loss and damage of materials while transportation is obvious.

Capacity of roads and capacity of transport trucks is not compatible.

Vehicles registration/renewal offices, pollution check-points and vehicle-tax collection centers are limited only in few major areas of the country.

Road-capacity and transport truck-capacity requires to make more compatible.

Extension of vehicles registration and renewal offices, pollution check-points and vehicle-tax collection centers to the local level.

Department of Roads.

Department of Transport.

Transporter’s Associations.

MSMEs

Land laws/property ownership

Land and property laws are not influencing the entrepreneurial spirit. The entrepreneurs are doing their business on rent, lease, or own property, which were in congruence with the existing laws.

Effectiveness in implementation of existing laws.

Department of Land Reform and Management

Local Government

Labor shortage and labor market regulation

Attitude towards work among the local workforce is unfavorable for the enterprises. Local labor does not like to do a particular work in his/her locality, but he/she does the same job in other districts or in foreign country. Similarly, local labors are less competent and more problematic when compared with labors from distance or neighboring countries. There are foreign workers working in the districts but no practices of

Beginning of workforce planning at the local level to ensure the workforce is available for the local enterprises.

Construction of at least a few high-rise buildings in a district that are enough to accommodate about 150-200 families for home/land less/needy people to ensure labor sufficiency in the region.

Department of Labor and Occupational Safety

Local and Provincial Government

MSMEs

48 | P a g e

keeping statistics of such workers. Shortage of skilled, semi-skilled, and unskilled workforce in the district is one of the challenges of the entrepreneurs. Nevertheless, there was no more discrimination in doing business on the basis of gender, caste/ethnicity, language, any other form.

Buildings close to the industrial zone serves the industries at its best.

3.3 Business ethics specific conclusions and recommendations

Conclusion Recommendation Key agencies

There were reporting of under-invoicing and over-invoicing practices. For an instance, an item of Rs. 28 was under-invoiced to Rs. 8 and an item of Rs. 15 was over-invoiced to Rs 26.

Relationship and influence of the enterprise owner(s) were two major elements of doing business in the region. Ordinary owner in absence of relationship with the regulators, politicians, bankers, and suppliers were experiencing complications right from the start of their business registration. If the owner was a politician or influencing personality in the locality or relative of politician/influential person than he/she was experiencing concessions but not complications. The owners, keeping good personal relationship with the bankers, regulators, police, business organizations and professional associations were also enjoying more concessions in the business process. The concessions consisted favors of several types like better services, low costs, less efforts, and best opportunities.

Most of the owners of construction equipment like excavators, back hoe loaders, tipper trucks were either politicians or their relatives/activists. They had influence not only in mobilization of public funds for construction projects but also in decision-making like where to deploy construction machines at which rate. Similarly, they were the owners of hardware shops, crushing plants, sand washing plants, furniture factories and other construction MSMEs. In a few respondent’s opinion, the government employees and police personnel were directly and indirectly involved in construction business. Involvement of all of them was questioning the ethical standards of doing business in the districts.

In some cases, firm registration was in the name of local person but operation of the firm was from foreigner(s).

There were reporting of illegal transaction and theft of timber in furniture business

Formation of ethics committee in each municipality. Provision of ethical audit of both the regulator and regulated making policy research and policy audit as an integral part of business ethics.

Availing a common venue for regular discourses about the concerns of the regulators, entrepreneurs, pressure groups and consumers.

Provincial and Local Governments

Nepal Bureau of Standards and Metrology


MSMEs

Pressure Groups like Consumer Forums, Environmentalists and so on.

49 | P a g e

Quantity of materials: Weight of iron rods and cement bags and volume of sand and aggregate was less at site delivery than it would be. There was no convenient access to materials for stone crushing and sand washing plants because the main sources of the materials was river from where MSMEs were not allowed to extract; however, the case was quite opposite for those construction companies that were involved in the project of national pride.

Quality of materials: Inferior quality of sand, mainly because of unsuitable particle sizes and soil content with it.

3.4 Indicators challenging the business climate

Based on the result of the binary logistic regression, this study has arranged the indicators

from most challenging for business climate as mentioned below.

1. Starting a business

2. Labor shortage and labor market regulation

3. Access to finance

The other indicators were selectively influencing the decisions and actions of the MSMEs.

3.5 Likely issues for policy dialogues

1. Establishment and operationalization of industrial zones in the districts. Construction

of high-rise buildings.

2. Designing and developing BIS and DSS. Rapid adoption of e-procurement and e-

governance system.

3. Extension of quality tests and controls facilities to the local level. Facilitation for quality

certification and its adoption.

4. Formation of ethics committee at provincial and local level. Initiating the practice of

public policy audit.

REFERENCES

Bonus Act. (1974). Retrieved from Department of Labour and Occupational Safety:

http://dol.gov.np/ckeditor/kcfinder/upload/files/bonus%20act%201974%20enlish.pdf

Child Labor (Prohibition and Regulation) Act. (2000). Retrieved from Department of Labour

and Occupation Safety: http://dol.gov.np/ckeditor/kcfinder/upload/files/child-labor-

prohibition-act-english2057.pdf

Children's Act . (1992). Retrieved from Nepal Law Commission:

http://www.lawcommission.gov.np/en/archives/category/documents/law-

archives/statutes-acts-law-archives/childrens-act-2048-1992

50 | P a g e

Environment Protection Rules. (2055). Retrieved from Nepal Law Commission:

http://www.lawcommission.gov.np/en/wp-content/uploads/2018/09/environment-

protection-rules-2054-1997.pdf

Foreign Employment Policy. (1992). Retrieved from Nepal Law Commission:

http://www.lawcommission.gov.np/en/wp-content/uploads/2018/09/foreign-

investment-and-one-window-policy-1992.pdf

Immigrant Rules. (1994). Retrieved from Department of Labour and Occupational Safety:

http://dol.gov.np/ckeditor/kcfinder/upload/files/immigration-rules-english%202049.pdf

Industrial Enterprise Act. (2073). Retrieved from Nepal Law Commissoin:

https://www.ilo.org/dyn/natlex/docs/ELECTRONIC/105921/129637/F2020732780/NP

L105921%20Npl.pdf

International Organizaiton for Migraiton. (2016). Barriers to Women's Land and Property

Access and Ownership in Nepal. 768/12 Thrimbam Sadak, Baluwatar – 5.

Labor Act. (2053). Retrieved from http://www.lawcommission.gov.np/en/wp-

content/uploads/2018/10/labour-act-2048-1992.pdf

Labour Rules. (1993). Retrieved from http://dol.gov.np/ckeditor/kcfinder/upload/files/labour-

rules-2050-english.pdf

National Planning Commission. (2015). Post Disaster Needs Assessment Vol. B: Sector

Reports. Government of Nepal.

Occupational Safety, Health and Environment. (2006). Retrieved from International Labor

Organization:

https://www.google.com/url?sa=t&rct=j&q=&esrc=s&source=web&cd=1&cad=rja&uac

t=8&ved=2ahUKEwi44YSIt67jAhVJiXAKHWqfDnAQFjAAegQIAxAC&url=https%3A%

2F%2Fwww.ilo.org%2Fdyn%2Flegosh%2Fen%2Ff%3Fp%3DLEGPOL%3A503%3A

6271660841605%3A%3A%3A503%3AP503_REFERENCE_ID%3A146

Trade Union Act. (1992). Retrieved from

http://www.lawcommission.gov.np/en/archives/17998

Trade Union Regulation. (2050). Retrieved from

http://dol.gov.np/ckeditor/kcfinder/upload/files/Trade%20union%20rules%20english%

202050.pdf

51 | P a g e

APPENDICES

Appendix 1: Entrepreneurs' demography

Type Characteristics Gorkha Dhading Nuwakot Total

N (%) N (%) N (%) N (%)

Gender Male 69 99 64 94 60 87 193 93

Female 1 1 4 6 9 13 14 7

Education status Literate 20 25 68 39 58 46 146 39

Under SLC/SEE 23 29 51 29 27 22 101 27

12 Class 23 29 28 16 21 17 72 19

Under Graduate 11 14 19 11 11 9 41 11

Post Graduate 1 1 7 4 7 6 15 4

Doctorate 1 1 1 1 1 1 3 1

Caste/Ethnicity Brahmin 31 44 35 51 25 36 91 44

Dalit 8 11 3 4 5 7 16 8

Newar 10 14 14 21 10 14 34 16

Janjati 18 26 12 18 20 29 50 24

Terai Madesh 3 4 4 6 9 13 16 8

Average age 39 ±11 38 ±11 35 ±10 37 ±11

52 | P a g e

Appendix 2: Number of responses on choosing business location

Particulars

Dhading Gorkha Nuwakot Total


Dhading Gorkha Total

Micro Small Medium

Market center 17 9 17 43 29 29 19 77 3 2 5

Nearness to my residence

12 22 19 53 31 31 23 85 1 2 3

Convenience 7 1 10 18 19 19 13 51 3 1 4

Personal relation/connection

4 2 6 12 15 15 9 39 1 0 1

My own property 7 10 8 25 8 8 7 23 0 1 1

Others 1 1 1 3 0 0 2 2 0 0 0

Appendix 3: District wise number of registered enterprises

Districts Number of Registered Enterprises Unregistered enterprises

N % N %

Dhading 63 35 5 19

Gorkha 58 32 12 44

Nuwakot 59 33 10 37

Total 180 100 27 100

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Appendix 4: Reason for not registering the business

Particulars



Micro Micro Micro Small Small Small

Procedure cumbersome 3 1 7 11

0 5 1 6

Burdensome/costly 2 2 5 9 0 2 0 2

No knowledge about procedure

4 0 3 7 0 5 1 6

Reporting and renewal cumbersome

1 4 1 6 0 2 1 3

Reg. Not necessary 1 1 1 3 0 4 0 4

Appendix 5: Places/authorities for business registration

Particulars


Total

Dhading

Gorkha

Nuwakot

Total

Dhading

Gorkha Total

Micro Micro Micro Small Small Small Medium

Medium

Registration of business

Yes 18 24 24 66 (78)

42 31 35 108 (93)

3 3 6 (100)

No 5 6 8 19 (22)

0 6 2 8 (7)

0 0 0 (0)

DCSI Avg. Yr of Reg

2069 2070 2072 2070 2071 2068 2070 2070

2072 0 2072

Number 13 20 22 55 (83)

32 29 32 93 (86)

1 0 1 (17)

Company Registrar

Avg. Yr of Reg

2069 2072 2070 2070 2071 2069 2072 2071

2070 2071 2071

54 | P a g e

Number 9 14 5 28 41 3 9 53 3 3 6 (100)

R/ Municipality

Avg. Yr of Reg

2073 2070 2072 2072 2073 2072 2073 2073

2073 2071 2072

Number 11 6 14 31 (47)

20 11 21 52 (48)

2 1 3 (50)

Ward Avg. Yr of Reg

2073 0 2066 2070 2073 0 2062 2068

2072 0 2072

Number 2 0 1 3 10 0 1 11 1 0 1

CSIDB Avg. Yr of Reg

2069 2062 2071 2067 2071 2060 2061 2064

2072 0 2072

Number 10 2 5 17 22 2 3 27 1 0 1

Appendix 6: Process map for registration of enterprise


Total Dhading Gorkha Nuwakot

Total Dhading Gorkha

Total Micro Small Medium

Documentation days

Actual 4 7 8 6 7 10 23 13 30 32 31

Cost for preparation of documents Actual 2810 1356 1506 1891 5053 1252 2419 2908 42500 45000 43750

Registration time Actual 7 10 4 7 8 11 13 11 8 33 20

Registration Fee Actual 4157 4750 5324 4744 15782 11771 12224 13259 50000 32000 41000

Consultation fee Actual 500 NA 2075 2575 6650 7750 26179 40579 66667 1000 67667

55 | P a g e

Appendix 7: Number of responses on reasons for non-availability of required information

Particulars




Micro Micro Micro Small Small Small Medium Medium

Difficult to understand terms and process

5 1 14 20 9 13 12 34 0 0 0

No clarity about person and place to contact

6 1 7 14 11 10 4 25 0 0 0

No information provider

2 1 10 13 4 12 3 19 1 0 1

No provision for further clarification

5 0 5 10 9 4 5 18 0 0 0

Gap between standard and actual

4 1 2 7 7 6 3 16 1 0 1

Others 0 0 0 0 2 0 0 2 0 0 0

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Appendix 8: Socio-cultural limitations for women entrepreneurs while the starting

Districts MSMEs Assuming business as a career

Maintaining partner with male businessman

Working with male coworkers

Taking care of family

Others

Dhading Micro 11 1 6 14 1

Gorkha Micro 2 4 4 12 0

Nuwakot Micro 13 7 3 23 2

Total 26 12 13 49 3

Dhading Small 11 4 19 35 1

Gorkha Small 17 11 17 29 1

Nuwakot Small 14 11 5 17 3

Total 42 26 41 81 5

Dhading Medium 2 0 2 2 0

Gorkha Medium 1 0 2 3 0

Total 3 0 4 5 0

Appendix 9: Different types of taxes paid by entrepreneurs

Particulars

Micro (n = 66)

Total

Small (n = 108)

Total

Medium (n = 6)

Total

Dhading Gorkha Nuwakot Dhading Gorkha Nuwakot Dhading Gorkha

Vat at Central level

9 14 5 28 41 3 9 53 3 3 6

Income tax Central 12 0 15 27 38 1 16 55 3 3 6

Provincial 1 19 1 21 1 13 2 16 1 0 1

Local 10 1 2 13 18 3 7 28 1 0 1

Property tax Central 4 0 0 4 9 0 0 9 1 1 2

Provincial 0 2 0 2 0 3 1 4 1 0 1

Local 4 9 7 20 5 11 9 25 1 1 2

House rent tax

Central 0 0 0 0 0 0 0 0 0 0 0

Provincial 0 0 0 0 0 0 0 0 0 0 0

57 | P a g e

Local 3 7 4 14 3 14 6 23 0 1 1

Toll tax Central 0 0 0 0 3 4 0 7 0 0 0

Provincial 0 0 0 0 0 5 0 5 0 0 0

Local 0 6 1 7 4 15 1 20 1 3 4

Land tax Central 0 0 0 0 0 0 0 0 0 0 0

Provincial 0 0 0 0 0 0 0 0 0 0 0

Local 8 19 11 38 11 26 15 52 1 2 3

Renewal fees

Central 9 14 5 28 41 3 9 53 3 3 6

Provincial 1 21 1 23 8 23 0 31 0 0 0

Local 14 8 24 46 28 17 30 75 2 1 3

Vehicle tax Central 1 0 1 2 5 1 0 6 0 0 0

Provincial 1 1 1 3 9 5 2 16 0 0 0

Local 1 0 0 1 8 4 1 13 1 1 2

Appendix 10: Cost, time and distance travelled by entrepreneurs for tax payment

Particulars Micro Small Medium

D G N D G N D G

Auditing/documentation/transaction process (hours)

Required 19 3 3 8 9 21 14 9

Actual 12 6 4 17 37 33 7 9

Auditing/documentation/transaction process (Rs)

Required 5300 986 1875 22605 2114 9700 50000 17500

Actual 5300 1352 1833 23313 2855 8347 50000 20000

Auditing/documentation/transaction office distance (km)

Required 12 122 9 42 106 7 46 110

Actual 12 122 8 42 105 12 46 110

Vat payment time (hrs) Required 5 2 2 5 36 3 11 2

Actual 4 5 2 7 50 3 8 3

Vat payment time (Rs) Required 3840 NA 51500 163320 407112 155000 600000 NA

Actual 3840 NA 35233 152767 407112 241889 600000 NA

Vat payment time (km) Required 15 NA 17 36 94 22 47 NA

Actual 17 NA 15 36 95 22 47 NA

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Income tax payment (hrs) Required 5 1 4 5 1 2 13 NA

Actual 5 8 6 10 5 3 13 NA

Income tax payment (Rs) Required 4500 NA 5556 121338 2500 17179 NA NA

Actual 4500 NA 5469 118283 2200 30119 NA NA

Income tax payment (km) Required 13 NA 14 48 68 16 19 NA

Actual 15 NA 16 48 68 17 19 NA

Property tax (hrs) Required 3 NA 1 1 1 1 9 NA

Actual 3 NA 1 1 1 3 9 NA

Property tax (Rs) Required 1750 NA 550 NA 1200 1567 NA NA

Actual 1750 NA 867 237500 1200 2050 NA NA

Property tax (km) Required 10 NA 5 1 1 6 10 NA

Actual 10 NA 5 1 1 6 10 NA

House rent tax (hr) Required 2 NA 2 2 1 1 1 NA


House rent tax (Rs) Required 5000 NA 6000 NA 4500 2000 NA NA

Actual 3500 NA 6000 NA 6000 2000 NA NA

House rent tax (km) Required 4 NA 2 2 1 5 1 NA


Inland tax (hr) Required 4 2 2 2 3 2 1 4

Actual 5 5 2 4 5 2 NA 4

Inland tax (Rs) Required 608 1336 521 425 1024 794 NA NA

Actual 342 1442 546 563 1257 845 NA 5400

Inland tax (km) Required 2 1 4 8 13 3 2 NA

Actual 2 1 5 8 13 4 2 NA

Toll tax actual (Rs) Required UA UA UA UA UA UA UA UA

Road tax (Rs) Required 1500 NA NA 1050 200 2000 NA NA

Actual 500 NA NA 6883 208 10000 NA NA

Vehicle tax (Rs) Required 20000 NA NA 25667 22250 20000 NA NA

Actual 20000 NA NA 24000 21200 38000 NA NA

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Appendix 11: Number of responses on constraints faced while paying taxes

Districts

MSMEs

constraints faced during tax payment

Unavailability of Tax officer

Intentional delay during the process

Traditional way of collection

Unclear policy regarding tax at local level

Multiple tax collection agencies

Others

Yes No

Dhading Micro 5 13 2 4 0 2 1 0

Gorkha Micro 3 21 0 1 1 1 1 0

Nuwakot Micro 0 24 0 0 0 0 0 0

Total 8 58 2 5 1 3 2 0

Dhading Small 8 34 2 4 3 5 1 1

Gorkha Small 7 24 2 5 4 6 3 0

Nuwakot Small 6 29 0 3 3 3 1 1

Total 21 87 4 12 10 14 5 2

Dhading Medium 3 0 0 1 2 3 0 0

Gorkha Medium 0 3 0 0 0 0 0 0

Total 3 3 0 1 2 3 0 0

Appendix 12: Number of responses on reasons for unclear information about taxation

Particulars Dhading Gorkha Nuwakot Total Dhading Gorkha Nuwakot Total Dhading Gorkha Total


Tax information clear and sufficient

Yes 3 19 7 29 21 16 13 50 1 3 4

No 15 5 17 37 21 15 22 58 2 0 2

Unaware about person and place to contact

2 4 9 15 10 14 5 29 1 0 1

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No information provider

5 2 7 14 8 11 9 28 1 0 1

Limited information available

6 1 6 13 7 10 11 28 1 0 1

Difficult to understand term and process

5 2 5 12 10 14 12 36 2 0 2

No provision for further clarity

10 2 3 15 13 4 11 28 2 0 2

No education and awareness program

6 0 6 12 14 1 5 20 1 0 1

Others 1 1 2 4 3 0 1 4 0 0 0

Appendix 13: Number of responses on incident and reasons of harassments faced by entrepreneurs

Districts

MSMEs

Harassment by tax officials

No referral

My Gender

No relationship with officials

Caste/ethnicity Social Status

Others

Yes No

Dhading Micro 5 13 1 0 1 1 3 0

Gorkha Micro 0 24 0 0 0 0 0 0

Nuwakot Micro 1 23 1 0 1 0 1 0

Total 6 60 2 0 2 1 4 0

Dhading Small 4 38 1 0 4 0 0 0

Gorkha Small 0 31 0 0 0 0 0 0

Nuwakot Small 1 34 0 0 0 0 0 1

Total 5 103 1 0 4 0 0 1

Dhading Medium 1 2 1 0 1 0 0 1

Gorkha Medium 0 3 0 0 0 0 0 0

Total 1 5 1 0 1 0 0 1

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Appendix 14: Procedure, time and costs of obtaining business permit/license

Particulars Micro Small Medium


Documentation (Days) 10 3 3 8 4 8 19 1

7 3 4 7 6 7 5 1

Cost of document preparation (Rs) 3256 1250 1400 8477 800 8477 20000 1000

2830 1400 1007 7244 1606 12556 20000 15000

Renewal fees (Rs) 2700 3800 1880 8118 2560 8118 85000 NA

3288 3800 3538 9021 3541 9021 15000 3000

Permit fees (Rs) 2620 1250 7000 6380 3000 6380 20000 NA

2520 1500 3813 5780 4333 5780 0 NA

Consultation fees (Rs) 1250 NA 3000 2000 500 2000 25000 NA

1250 NA 1750 3000 4250 3000 0 NA

Effort made (Days) 7 2 3 9 24 9 24 NA

15 10 10 14 12 14 13 8

Informal payment (Rs) 1250 NA NA 5750 NA 5750 200000 NA

500 NA NA 22167 NA 22167 200000 NA

Miscellaneous 1340 NA NA 3070 1250 3070 NA NA

1367 1875 2000 5308 3750 5308 NA 7000

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Appendix 15: Information availability and clarity on obtaining permit/license

District

Information availability and clarity on obtaining route permit

Yes No

N % N %

Dhading (N=63) 23 37 40 63

Gorkha(N=58) 27 47 31 53

Nuwakot (N=59) 25 42 34 58

Total 75 42 105 58

Appendix 16: Obstacles and regulatory constraints faced by entrepreneurs for obtaining business permit/license

Particulars



Dhading Gorkha Total Micro Micro Micro Small Small Small Medium Medium

Obstacles faces for renew/permit

Yes 8 0 3 11 7 5 10 22 1 0 4

No 10 24 22 56 35 26 25 86 2 3 5

Procedural delays 6 0 1 7 4 4 7 15 1 0 1

Delay in inspection 1 0 0 1 4 0 1 5 1 0 1

Difficult to fix the inspection date

0 0 0 0 5 0 4 9 1 0 1

Lack of required staff in offices

0 0 0 0 1 4 1 6 0 0 0

Unnecessary document formalities

4 0 0 4 4 3 2 9 1 0 1

Others 2 0 2 4 1 0 2 3 0 0 0

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Appendix 17: Major reasons for inaccessibility of subsidized loans

Particulars



Dhading Gorkha Total Micro Micro Micro Small Small Small Medium Medium

Don't need loan for business

5 2 6 13 10 6 4 20 0 0 0

No access to subsidized loan

10 12 11 33 14 22 14 50 0 0 0

No referral 2 17 5 24 9 18 2 29 0 0 0

Not eligible for Loan

3 0 0 3 6 3 0 9 1 0 1

No idea about subsidized loan

7 3 13 23 10 20 13 43 0 0 0

Unfair process 3 2 8 13 15 5 15 35 3 0 3

Others 1 7 3 11 2 8 4 14 0 3 3

Appendix 18: Average rate of interest for different banks

Particulars Rate of Interest (%) Average rate of interest (%)

Government Banks Max 13

13 Min 13

Commercial banks Max 14

13 Min 12

Development banks Max 12

11.5 Min 11

Micro finance Max 16

14 Min 12

Cooperatives Max 19

17.5 Min 16

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Appendix 19: Major hindrance while obtaining credit from formal financial sources

Particulars

Dhading Gorkha Nuwakot Total Dhading Gorkha Nuwakot Total Dhading Gorkha Total Micro Micro Micro Small Small Small Medium Medium

Obstacles while accessing finance (formal sources)

Yes 16 6 16 38 17 18 20 55 3 0 3

No 7 24 16 47 25 19 17 61 0 3 3

Condition of providing loan against collateral instead of plan

5 3 7 15 5 10 7 22 0 0 0

Low valuation of property

0 2 5 7 4 15 3 22 1 0 1

No collateral 4 3 4 11 1 11 0 12 0 0 0

High service charge 1 0 0 1 5 3 1 9 0 0 0

Need of regular income

1 1 1 3 2 7 4 13 0 0 0

High interest rate 8 3 5 16 8 13 7 28 2 0 2

Complicated administration process

5 1 3 9 6 4 7 17 1 0 1

Others 0 0 0 0 1 0 1 2 0 0 0

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Appendix 20: Source of finance for entrepreneurs

Particulars





Informal source 2 6 2 10 3 14 4 21 0 0 0

Formal Source 4 13 6 23 19 29 13 61 2 2 4

No finance required

17 16 26 59 22 8 22 52 1 1 2

Appendix 21: Connection process and cost in getting electricity


*Cost (Rs) Expected 5703 5833 12646

Actual 14762 6000 12662

Total time (Days) Expected 12 5 17

Actual 30 8 19

Informal payment (Rs) Expected 10667 500 6800

Actual 10667 500 6800

Total cost (Rs) Expected 16370 6333 19446

Actual 25429 6500 19462

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Appendix 22: Process map for getting electricity for enterprise

District Unit Connection (including application) Technical (field works) Informal payment

Total

Dhading

Estimated days 12 12

Actual days 30 30

Estimated Cost (Rs) 2703 3000 10667 16370

Actual Cost ( Rs) 12387 2375 10667 25429

Gorkha

Estimated days 5 5

Actual days 8 8


Actual Cost ( Rs) 4500 . 500 6500

Nuwakot

Estimated days 17 17

Actual days 19 19


Actual Cost (Rs) 9571 3091 6800 19462

Appendix 23: Total cost and time for obtaining route permit

Particulars Dhading Gorkha Nuwakot Average

*Total days Expected 7 4 4 5

Actual 2 5 2 3 #Cost Expected 49563 64567 43000 52376

Actual 46413 70550 69000 61988 Note: *Total days includes documentation preparation days and time taken for application

#Cost includes cost incurred while documentation, application fees, renewal fees, consultation service charges, route permit cost and miscellaneous

cost.

Informal payment is negligible in case of obtaining route permit

Significant number of transporters in Gorkha are unknown about procedure in obtaining route permit. Hence, the time taken days was high in this

district.

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Appendix 24: Process map for obtaining transportation route permit

Particulars Gorkha Dhading Nuwakot

Documentation (Days) Standard 1 3 2

Actual 5 2 2

Cost of preperation of Docs. Standard NA 963 7000

Actual 3733 838 4000

Application time (Days) Standard NA 3 2

Actual 2 2 2

Application fees (Cost) Standard 500 500 500

Actual 567 500 500

Renewal fees Standard 4000 17000 5000

Actual 6250 9325 14500

Cosultation fees (Rs) Standard 500 NA NA

Actual 500 NA 500

Route permit cost (Rs) Standard NA 30000 NA

Actual 60000 35750 50000

Application steps (Number) Standard NA 3 NA

Actual NA 3 3

Application efforts (Days) Standard NA 2 NA

Actual 6 2 2

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Appendix 25: Citizen Charter of land revenue office (both Nepali and English)

SNo. Type of

Service

Procedure and evidence to be fulfilled by service

recipient Service Charge Time

Responsible

Officer/ Branch /

Unit /Section

Remarks

1. Registration Original land owner certificates

Original and copy of citizenship of both

buyer and seller

Tax paid receipt for latest fiscal year

For house, present the land clearance

and resignation letter

As per stated in the

Economic Act every

fiscal year

Same day Registration unit

/section

2. Ownership

Transfer

Original land ownership certificate

Tax paid receipt for latest fiscal year

Relationship verification certificates

Death certificate

In case of multiple claimer, approval

letter from all

Recommendation letter from concern

municipality or VDC

Except for the deceased’s husband / wife

and son/daughter an inspection report of

public announcement

No cost within 35

days of death, then

after Rs. 10 only.

After

completion

of process

Ownership transfer

unit/ section

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3. Land

Registration

Land registration documents at the time

of origin including field book, map,

recommendation letter from concern

municipality and VDC

Relationship certificate between

deceased and the applicant

Relationship verification letter from the

concern municipality or VDC

Public announcement related to claim of

the land

Citizenship certificates and other

necessary certificates.

Rs. 10 for

registration of

ownership transfer.

Land tax paid receipt

since the beginning

to current fiscal year

After

completion

of process

Land registration

unit /section

Field inspection

report on the

land usage by

officer level

4.

Birta land (

Tax free

land)

Pota Birta document

Application needed as per the act

Land user’s ( Jotaha) statement

Field book, field map, if possible no. 7

form of Land improvement (Bhumi

sudhar 7 Phantbaari)

Recommendation letter from the concern

municipality or VDC where land is

located

Penalty upto Nrs.

100 to Nrs 1000 , if

ownership

transferred after 35

days of death of

owner additional Nrs.

10 should be

included , tax receipt

from 2016 to current

fiscal year

After

completion

of the

process

Land registration

Unit / section

Field inspection

report by officer

level regarding

the land uses

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If ownership is transferred according to

Rai. Pa. registration then relationship

verification certificate

Death certificates

Recommendation from the

municipality/VDC of permanent

residency/location

Public announcement claim notice and

other necessary documents

5. Birta land in

terms of

Jotaha

Application registration Rai.Pa. within

2053 Asadh end

Jotaha record (Nissa) ,if possilbe

Appendix land Improvement no. 2

Recommendation letter from concern

municipality or VDC

If ownership is transferred according to

Rai. Pa. registration then relationship

verification

Death certificates

Public announcement claim notice and

other necessary documents

For registration 10 %

of government rate

Rai. Pa. charge, 10

times more charge

of Service charge

After

completion

of service

Land registration

unit

Field inspection

report by officer

level regarding

the land uses

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6. Filing and

cancellation

(Dakhila

Khareji)

(Ka) Mohi filing and cancellation land

improvement’s decision and informative

letter

Original land ownership certificate,

citizenship and other necessary proof

As per Act Possibly the

day of

application

Filing, cancellation

and

implementation

unit / section

7. Amendment Changed in name ( land ownership

certificates, citizenship certificate, in

case of differences in name and caste,

recommendation letter from municipality

or VDC

Inspection notice and other necessary

proof

As per Act After the

completion

of process

Amendment Unit /

section

8. Cancellation

of Records

Original written document of approval

Decision paper

2 passport size photo and physical

presence of concern person along with

thumb stamps

No charge Generally

same day

Moth

(Documentation)

Unit

9. Pasting

Photos

Original land ownership certificate,

citizenship certificates, certified photos

along with three generation verification

No charge Generally

same day

Moth

(Documentation)

Unit

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Recommendation from municipality or

VDC of permanent residence

Documents indicating ownership transfer

and other necessary proof

10. Three-

generation

detail

Original land ownership and citizenship

certificate

Recommendation letter with photo from

municipality or VDC indicating three-

generation details

Source of the ownership and other

necessary proof

No Charge Generally

same day

Moth

(Documentation)

Unit

Appendix 26: Total cost and time for obtaining land ownership

Particulars MSMEs

Micro Small

Total time (days) Expected time (Days) 13 9

Actual Time (Days) 13 12

Cost Expected Cost (Rs) 8955 2560

Actual Cost (Rs) 8967 3397

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Appendix 27: Key skill gaps in the enterprises

Particulars Micro Micro Micro Total Small Small Small Total Medium Medium Total


Accountants 1 0 2 3 9 1 5 15 0 0 0

Carpenters 4 3 4 11 2 2 2 6 0 0 0

Engineers 0 0 0 0 0 1 0 1 1 0 1

Electrician 0 0 0 0 1 1 0 2 0 0 0

Masons 3 1 0 4 1 5 1 7 0 0 0

Overseers 0 0 0 0 0 0 0 0 0 0 0

Pumblers 0 0 0 0 2 1 0 3 0 0 0

Metal welders 4 1 2 7 1 1 0 2 0 0 0

Painters 1 0 0 1 1 1 0 2 0 0 0

Receptionist 0 1 1 2 0 0 0 0 0 0 0

Supervisors 0 1 0 1 0 2 1 3 0 0 0

Sanitary fitters 0 0 0 0 0 1 0 1 0 0 0

Mechanics 0 0 2 2 4 2 0 6 1 0 1

Drivers 1 1 0 2 3 7 0 10 0 0 0

Security guard 0 0 0 0 0 0 1 1 0 0 0

Sales persons 0 0 1 1 1 6 1 8 0 0 0

Others specify 9 14 20 43 14 5 26 45 1 2 3

Appendix 28: Reasons for noncompliance with safety and standard procedure

Particulars Micro Micro Micro Total Small Small Small Total Medium Medium Total


Unavailability of information

8 1 13 22 2 8 10 20 0 0 0

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Safety is not prioritize

1 6 6 13 0 14 8 22 0 1 1

Carelessness 2 5 2 9 0 1 3 4 0 0 0

Additional cost 1 6 2 9 1 14 5 20 0 0 0

No monitoring by officials

0 1 7 8 1 5 6 12 0 0 0

Others 0 2 6 8 0 0 2 2 0 0 0

Appendix 29: List of documents and time required to register industries according to Enterprise registration Act, 2049

Services Necessary documents Required time

Revenue Focal Person For complain

Registration of industries a/c to Industrial Enterprise Act, 2049

Application form for enterprise registration With the day for submission of required documents

According to capital

Section officer of Industry Administration

Chief Industry Officer

Enterprise project plan (scheme)

Entrepreneur’s citizenship photocopy and stamp of Rs 10

Land ownership certificate with recent receipt of land tax

Recommendation from Local Government

Document informing about no negative impacts of proposed industry towards public place, temples, schools, neighbors and environment should be approved by at least 4 person residing four directions- east, west, north, south- of the same area.

Minimum 6 years contract should be agreed if house or land is rented.

Copy of citizenship of land or house owner

If the enterprise related to agriculture and livestock, the recommendation from Agricultural Department

Passport size photo 3 copies and quotation of machineries or receipt.

75 | P a g e

If the furniture related enterprise is outside Municipality, the source of timber, blue print map and certification of distance from the nearest forest by District Forest Office

For construction enterprises, requirement of machineries certified by mechanical engineer and his/her bio-data, VAT bill, insurance, technical officers and finance officers bio-data along with the commitment to work in the enterprise

For partnership firm, partnership contract need to be submitted.

If a company is to be register as industries, citizenship of shareholders along with regulation of the company should be submitted.

Industries related with health, tourism, communication, construction, recommendation from relevant department should be obtained

If the enterprise is related to training, curriculum along with certificate of the trainer should be submitted

For renew of firm

Original certificate of Enterprise registration

Annual progress report

Receipt of the tax paid to Inland Revenue Department during previous financial year

Application and necessary revenue fee

Within the day of submission of documents

A/c to capital

Section officer of Industry Administration

Chief Industry Officer

Appendix 30: Documents required for registration of enterprises in Cottage and Small Industries.

S.no Documents

1. Entrepreneurs citizenship photocopy and Rs 10 ticket/stamp 2. Land ownership certificate and receipt of current fiscal year tax payment 3. Related R/Municipality recommendation letter

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4. EIA if necessary, confirmation or permission by 4 people regarding industries location far from public places such as temples, schools, community people. Document informing about no negative impact of the proposed industry towards temple, public place, schools, neighbors and environment need to be approved by at least 4 people residing four direction -east, west, north and south- in the same area.

5. If house or land is rented, the contract of minimum 5 years of the same 6. Citizenship copy of land owner 7. 3 Passport size photos along with quotation of the machineries to be used 8. Recommendation from related department for veterinary and agricultural technical service 9. If the furniture related enterprise is outside Municipality, the source of timber, blue print map and certification of distance

from the nearest forest by District Forest Office 10. For construction enterprises, requirement of machineries certified by mechanical engineer and his/her bio-data, VAT bill,

insurance, technical officers and finance officers bio-data along with the commitment to work in the enterprise

Appendix 31: Citizen Charter obtained from electricity authority, Gorkha

Service Necessary documents Cost Time Remarks

New meter connection

a) Application form according to Annex I

b) Copy of citizenship c) Copy of Land Ownership or

documents according to Annex II d) Construction Completion Certificate

or recommendation according to Annex (In case of Rural municipality, need recommendation accordingly)

e) If land is rented, approval according to Annex III.

1. According to application a) Consumer = Rs 50 b) Others: Rs 100 c) Application for other purpose: Rs 5 For electricity connection (without materials cost) a) Consumer (5 to 15 Amp) : Rs 100 b) Consumer (to 30 Amp): Rs 200 c) Up to 60 Amp: Rs 300 d) 3 phase: Rs 500 Other consumers a) Up to 10 KVA: Rs 700

Consumers: 7 days

Others: 35 days

Electricity line should be in appropriate distance

No prior incident of illegal electricity leakage or disrupt of electricity due to illegal reason

All the wiring work should be completed

If the transformer is overload, the line would be provided after capacity enhancement of it.

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f) For enterprise/industries, certification of registration.

g) PAN or VAT certificate h) Recent passport size photo one

copy

b) More than 10 KVA: Rs 1000 c) T.O.D Meter: Rs 1000 For pole connection (kf]n h*fg ug{"

k/]df) a) Single phase per pole: Rs 200 b) Three Phase per pole: Rs 300

Increase or decrease of meter capacity

i) Application according to Annex 16 j) Necessary note to increase or

decrease the electricity load k) A/c to industries categories,

recommendation should be taken from relevant department of board

Application fee: Rs 5 a) Single phase:

To increase capacity Rs 200

To decrease capacity: Rs 100 b) 3 phase:

Increase capacity: Rs 200

Decrease capacity: Rs 200

If all the conditions are fulfilled, then within 1 week of application

All the electricity bill should be cleared

No prior incident of legal action against electricity leakage

Necessary materials should be managed

No increase or decrease of electricity load within one year

Sealing the meter

a) Detailed application 1. Seal in the box a) Application cost: Rs 100 2. sfof{non] km]nf kf/]df b) Terminal Seal: Rs 300 c) Reading seal d) CTPC Seal: Rs 1000

Within 3 days

All the electricity bill should be cleared

No prior incident of legal action against electricity leakage

There should be approved capacity MCB used.

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Appendix 32: Documents required for registration of transportation enterprise

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Appendix 33: Documents required for registration of furniture enterprise

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Appendix 34: Documents required for registration as contractor

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Appendix 35: List of key informants at national level

Appendix 36: List of key informant at district level

S.No Name Position Organization

1 Mr. Netra Prashad Pathak

Vice-President Federation of Nepalese Cottage and Small industries

2 Mr. Roshan Dahal Secretary General

Federation of Contractors’ Association of Nepal

3 Mr. Bishnu Gyawali Director Department of Industry

4 Mrs. Mina Shrestha Deputy Director General

Chamber of commerce and Industries

5 Mrs. Ramila Sthapit Office Manager Federation of Women Entrepreneurs Association of Nepal

6 Mrs. Ishwori Ji Tax officer Inland Revenue Department

7 Mr. Samir Hari Sharma

Assistant Director

Nepal Rastra Bank

8 Mr. Rajendra Bikram Baniya

Secretary General

Federation of Truck Transporter Entrepreneurs in Nepal

9 Mr. Ravi Jha Loan officer Rastriya Banijya Bank

10 Mr. Sumit Bajracharya Charter Accountant

J. B. Rajbhandary & DiBins

S.No Name Position Organization

Dhading District

Mr. Gokarna Duwadi Manager Sahara Mahila tatha Bachat Rin Sahakari, Nilakantha , Dhandingbesi

1. Mr. Kedar Kumar Khadka

Chief Enterprise Officer

Department of Cottage and Small Industries, Nilakantha, Dhading

2. Mr. Hari Shankar Gidel Magar

Technical Officer Nepal Electricity Authority, Dhading

3. Mr. Surendra K. Shrestha

Branch Manager Muktinath Bikash Bank, Nilakantha Dhading

4. Mr. Sushanta Shrestha Manager Mero Micro Finance, Dhading

Gorkha District

1. Mr. Anil Pathak Sub-engineer Nepal Electricity Authority, Gorkha

2. Mr. Manoj Kumar Shah Sc. Enterprise Development Facilitator

Department of Cottage and Small Industries, Nilakantha, Gorkha

3. Mr. Rajendra Khanal Loan Officer Agricultural Development Bank, Palungtar, Gorkha

4. Mr. Ram Saran Adhikari

Proprietor Dudhpokhari Hardware Suppliers and Transportation Service, Bhachek

5. Mr. Sitaram Koirala Proprietor Koirala Furniture Udhyog

Nuwakot District

1. Mr. Ganga Bahadur Rokka

Branch Manager Global IME Bank, Bidur Branch

2. Mr. Kiran Kumar Pant Chief Accountant Chautari Bachat tatha Rin Sahakari, Bidur

3. Mr. Lakhan Lal Shah Engineer Nepal Electricity Authority, Nuwakot

4. Mr. Suman Adhikari Chairperson Federation of Contractors’ Association, Bidur

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Appendix 37: List of participants during Focus Group Discussion at Nilkanth

Municipality, Dhading

S.No Name of the participant

Affiliation Designation

1. Ashita Gole NDRI Enumerator

2. Bheshraj Rijal FNCCI, Dhading Chairperson

3. Deepak Kumar Kandel Tribeni Grill and Shutter Udhyog Proprietor

4. Dhan Narayan Shrestha Manakamana Furniture Udhyog Proprietor

5. Kaji Man Shrestha Shree Mandali Block Udhyog Proprietor

6. Krishna Narayan Shrestha

Janahit Concern and Construction Service

Proprietor

7. Rajendra Khatri NDRI Researcher

8. Rajkumar Shrestha FNCCI, Dhading Senior Chairperson

9. Raju Giri NDRI Enumerator

10. Ramesh Adhakari FNCCI, Dhading Purnima Project Coordinator

11. Rudra Bahadur Khatri FNCCI, Dhading Chairperson

12. Saroj Budathoki Pranisha Tar Jali Udhyog Proprietor

Appendix 38: List of participants during FGD at Gajuri Rural Municipality, Dhading

S.No Name of the participant


1. Ashita Ghole NDRI Researcher

2. Ashmita Dahal NDRI Researcher

3. Bishesh Shrestha Gajuri Grill Udhyog Manager

4. Chandra Rai NDRI Researcher

5. Deepak Bikram Basnet

Entrepreneur Entrepreneur

6. Dinesh Kumar Bhujel Dinesh Furniture Udhyog Manager

7. Hari Bahadur Magar Gajuri Forest Department Officer

8. Jayaram Shrestha Shrestha Enterprise Proprietor

9. Kiran Neupane Department of Agriculture, Dhading District

Agriculture Technician

10. Pabitra Regmi Gajuri Rural Municipality Legal facilitator

11. Rajak Neupane Entrepreneur Entrepreneur

5. Mr. Sushanta Shrestha Manager Mero Micro Finance, Dhading

6. Mrs. Samikshya Adhakari

Business Helpdesk Officer

Skill Training Center, Nuwakot

7. Mrs. Sangita Ghimire Section officer Department of Cottage and Small Industries, Gorkha

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12. Rajendra Bikram Basnet

Gajuri Rural Municipality Chairperson

13. Raju giri NDRI Researcher

14. Saroj Prasad Adhikari Jaya Shree Najraj Grill Udhyog Proprietor

15. Shiva Subedi Avisha Enterprise Managing Director

16. Sujat Rokka Dhading Marble and Sanatary Suppliers Managing Director

17. Suman Rai Chandeshwori Block Udhyog Manager

Appendix 39: List of participants during FGD in Bishauni Hotel, Gorkha Municipality

S.No Name of the participant Affiliation Designation

1. Dr. Raj Kumar Bhattarai Nepal Development Research Institute (NDRI)

Study Coordinator, Business Climate Study

2. Atit Krishna Gurung Om Development Bank Loan Officer

3. Bhai Chandra Shrestha Chamber of Commerce, Gorkha Chairperson

4. Bishnu Kumari Dawadi Mott MacDonald CFFO

5. Dhiraj Bahadur Maskey FCA, Gorkha Former Chairperson

6. Jeevan Jyoti Shrestha FNCCI, Gorkha Chairperson

7. Kul Bahadur Kunwar Gorkha-2 Ward Chairperson

8. Manoj Kumar Shah Department of Cottage and Small Industries, Gorkha

Senior Enterprise Development Facilitator

9. Nanda Kumar Maharjan NDRI Researcher

10. Narayan Bhatta Nabil Bank Limited, Gorkha Officer

11. Padam Shrestha Gorkha Bricks Private Limited Proprietor

12. Satyaman Shrestha Satyaman Nirman Sewa Proprietor

13. Sitaram Koirala Koirala Furniture Udhyog Proprietor

14. Sophiya Mahajan CNI Program Officer

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Appendix 40: List of participants during Focus Group Discussion in Palungtar

Municipality, Gorkha

S. No

Name of the participant


1. Dr. Raj Kumar Bhattarai NDRI Study Coordinator, Business Climate Study

2. Er. Biraj Aryal Palungtar Municipality

Engineer

3. Er. Deepak Raj Kadel Palungtar Municipality

Mayor

4. Nanda Kumar Maharjan NDRI Researcher

5. Ram Prasad Devkota NDRI Researcher

6. Sophiya Maharjan CNI Program Officer

7. Vej Raj Pandey Palungtar-9 Ward Chairperson

Appendix 41: List of participants for FGD in Bidur, Nuwakot District

S. No

Name of the participant Affiliation Designation

1. Dr. Raj Kumar Bhattarai NDRI Study Coordinator, Business Climate Study

2. Ankita Thapa NDRI Enumerator

3. Bhairab Bahadur Pyakurel Sundardevi Block Udhyog Proprietor

4. Chakrapani Timalsina Mott MacDonald EDC

5. Geeta Amatya NCCI, Nuwakot Senior Vice Chairperson

6. Geeta Thapa Cotage Entrepreneur Association, Nuwakot

Chairperson

7. Ghanshyam Gurung FNCCI, Nuwakot Program Coordinator

8. Kiranrupa Magar NDRI Enumerator

9. Manoj Karki NDRI Researcher

10. Mukta Bahadur Bogati Nuwakot Forest Officer Vice Chairperson

11. Rajendra Khatri NDRI Researcher

12. Rajendra Shrestha NDRI Enumerator

13. Rajendra Shrestha NCCI Senior Vice Chairperson

14. Rasik Maganati United Aluminum Manager

15. Sanikshya Adhakari NCCI Business Help Desk Officer

16. Shakantala Thapa NCCI EDF

17. Sophiya Maharjan CNI Program Officer

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Appendix 42: List of Participants for Focus Group Discussion at Likhu Rural

Municipality, Nuwakot

S. No

Name of the participant Affiliation Designation

1. Narahari Pandey Likhu, 1 Ward Chairperson

2. Madhav Prashad Likhu, 1 Contractor

3. Pradip Neupane Likhu, 1

4. Krishna Kumar Guruwacharya

Likhu, 1

5. Hari Prashad Gajurel Likhu, 1

6. Ram Bahadur Thapaliya Likhu, 1

7. Sandesh Dhakal Likhu, 1

8. Lakshman Lamichhane Likhu, 1

9. Machindra Bahadur Thapa

Likhu, 1

10. Keshal Dhakal Likhu, 1

11. Rajendra Shrestha NDRI Enumerator

12. Kiranrupa Magar NDRI Enumerator

13. Ankita Thapa NDRI Enumerator

14. Manoj Karki NDRI Researcher

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Glimpse of Focus Group Discussion in the Study Districts















FGD during inception visit, Dhading

Nuwakot District

Nuwakot District

Nuwakot District

Nuwakot District

Nuwakot District

Nuwakot District

Nuwakot District

Nuwakot District

Nuwakot District

Nuwakot District

Nuwakot District

Sand Crusher plant, Dhading

Nuwakot District

Nuwakot District

Nuwakot District

Nuwakot District

Nuwakot District

Nuwakot District

Nuwakot District

Nuwakot District

Nuwakot District

Nuwakot District

Nuwakot District


Nuwakot District

Nuwakot District

Nuwakot District

Nuwakot District

Nuwakot District

Nuwakot District

Nuwakot District


Nuwakot District

Nuwakot District

Nuwakot District

Nuwakot District

Nuwakot District

Nuwakot District

Nuwakot District

Chamber of commerce, Dhading

Nuwakot District

Nuwakot District

Hollow block industry, Dhading

Nuwakot District

Nuwakot District

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FGD, Nuwakot

Nuwakot District

Nuwakot District

Nuwakot District

Nuwakot District

Nuwakot District

Nuwakot District

Nuwakot District

Nuwakot District

Nuwakot District

Nuwakot District

Nuwakot District

FGD Nilkanth, Dhading

Nilkanth, Dhading District











Bidur Municipality, Nuwakot

Gorkha Municipality, Gorkha

FGD in Gorkha Municipality, Gorkha District

Gorkha Municipality, Gorkha District






Bidur Municipality, Nuwakot

FGD in Bidur Municipality, Nuwakot District

Bidur Municipality, Nuwakot District


FGD in Bidur Municipality, Nuwakot District
