Kathmandu, September 26:

Rigid labour regime, high taxes and red tape are eroding confidence in Ne-pal, one of the deteriorating places to do business in South Asia, a study by the International Finance Corporation (IFC) stated.

The research — which ranked 178 countries around the world on the basis of trade, taxation, business start-up costs, labour laws and legal procedures — has placed Nepal at 111, lower than in its previous report.

Some South Asian neighbours did better in their overall rankings, with the Maldives ranked at 60 and Pakistan 76, Sri Lanka 101 and Bangladesh 107.

Nepal, however, scored ahead of Bhutan (119), India (120) and Afghanistan (159) in the ‘Doing Business 2008’ report by the IFC, a World Bank member that promotes private sector investment in developing countries.

It also ranked countries in individual problem areas. Nepal has been ranked at 155th most expensive country in the world to employ workers, as restrictive labour laws make it co-stly to dismiss staff. Companies must pay 90 weeks of salary to lay off a worker.

The report further states that Nepal’s situation in starting business, registering property, getting credit, protection of investors, paying taxes and trading across borders worsen this year. While, dealing with licences, employing workers, enforcing contracts and closing a business remained static. Nepal came 92nd on tax environment list, which is relatively better compared to its neighbours in the region, with firms having to set aside 32.5 per cent of their profits to pay taxes.

However, Nepal is rated worst in terms of tax paying hours, as it takes 408 hours, almost double of an average of 287.6 hours in the region. Nepal is also ranked 97th in terms of allowing firms to access credit from banks. The report states that Nepal has been found to be one of the worst in terms of time taken for dealing on licen-ces and permits and completing required notifications. It takes about 424 days to complete all procedures, whereas it is 238.3 days in the region and 153.3 days in OECD states.

When it comes to winding up a business, Nepal ranks at 95. Creditors spe-nd on average five years to recover money and only get 25 cents on the dollar.

However, South Asia picked up the pace of regulatory reform over the past year to become the second-fastest reforming region in the world, on par with the speed of reform in the countries of the OECD.

The pickup in reform was led by India, which rose 12 places on the ease of doing business and made the reform of business regulation a policy objective. India was the top reformer worldwide in trading across borders.

Bhutan and Sri Lanka are the top reformers in South Asia this year in reforms. Bhutan introduced the country’s first fundamental labour protection. Sri Lanka made it easier to start a business and to trade across borders.

Reformers made it simpler to start a business, str-engthened property rights, and enhanced protections.