-----------
Simplifying
Construction and Electricity Permits
In March 2013 issue of Business 360, this column wrote
about “Reducing Construction and Electricity Bureaucracies”. The basis of the
discussion was the result of the WB’s Doing
Business 2013 Report. Nepal was among the developing countries that did not
score well in that annual report.
Societies develop and modernize mainly because of
innovation introduced by private enterprises and individuals in a competitive
environment. And innovation is often
stifled by unnecessary regulations, and by monopolies or oligopolies that are
protected by existing regulations that discourage, or even outrightly prevent,
the entry of new players.
Thus, reducing various business bureaucracies is one
important policy that any government, local or national, can undertake to
encourage more entrepreneurship and job creation. Which effectively fights
poverty, high unemployment and high prices of various commodities.
The Doing Business
annual report covers several areas of entrepreneurship like starting a
business, getting construction permit, getting electricity, registering
property, getting credit, protecting investors, paying taxes, international
trade, enforcing contracts, and resolving insolvency. It shows the number of
procedures to get certain permits, how many days or hours, and the cost to
enterprises in complying with those taxes, permits and regulations.
This article will cover two of those areas, (a) dealing
with construction permits and (b) accessing electricity.
When I was in Nepal in January this year, I noticed that
there were no cranes in building tall structures with 10 storeys or higher.
This means hard and difficult labor for the construction workers, having to carry heavy materials by stairs or by pulley.
Electricity was also erratic and unreliable, brownouts are frequent, reaching
up to 18 hours a day in many areas of Kathmandu.
Below is a summary table of those two areas for Nepal. Two
Asian countries are also included, Malaysia and Hong Kong. Malaysia is chosen because it has similar population
size as Nepal, 30 million and 28
million, respectively in 2014. Hong Kong is also chosen because it is a good
free market benchmark for many economies around the world.
Sources: WB, Doing
Business 2013, and Doing
Business 2015: Going Beyond Efficiency
There have been improvements in Nepal in these two areas,
shown by higher global rank covered by the Report. It’s global rank has
improved from 97th in 2013 to 91st in 2015 in
construction permits, and from 96th to 85th in accessing
electricity.
It is really costly to access electricity in Nepal. A
household wanting to have electricity in their new house will have to shell
out up to 1,285 percent of per capita income, although this is lower
compared to 1,763 percent two years ago. In contrast, an average household in Malaysia
will pay only 46 percent of per capita
income, and only 14 percent in Hong Kong.
If it is any consolation, the situation in Nepal is better compared to other developing
countries in Asia. In neighbor Bangladesh,
it ranked 144th in dealing with construction permits in the 2015
Report, taking up 269 days and 2.1
percent of warehouse value. To access electricity, it ranked 188th
(2nd to the last) as it would
take 429 days and a mind-boggling 3,890 percent of per capita income.
Myanmar in South East Asia is also worse off compared to
Nepal. In dealing with construction
permits, it ranked 130th, would take 128 days and 8.8 percent of
warehouse value. In regards to electricity, it ranked 121stand would
take 91 days and 2,802 percent of per capita income.
Houses and commercial structures in Kathmandu are
expanding far and fast. I saw it from the plane and from Swayambhu temple, a
huge hill in the city. Soon, old and
small structures in the city must give way and be replaced by new, taller and
bigger structures. Simplifying the procedures in granting new building permits
and their cost will help facilitate this. More land space can be saved and more
people can be housed if buildings are taller.
Current and future houses and buildings will also need
more electricity. Simplifying the granting of permits for new power plants, new
transmission and distribution lines will greatly help investors and
entrepreneurs in Nepal.
Highly bureaucratic governments tend to get low respect
not only from their own citizens but also from other people abroad. Reducing
these bureaucracies and making access to permits would greatly improve public
perception and esteem of governments.
-----------See also:
Two Years Writing for Business 360, January 05, 2015
Business 366 20: Trade and Development in Asia, December 25, 2014
Business 360 21: Cheap Oil and Nepal, February 20, 2015
Business 360 22: Nepal's Tourism Potential, February 23, 2015
Business 360 23: Electricity and Development, March 07, 2015
