KATHMANDU, Nov 8: The first business confidence survey conducted by the Nepali private sector has found that lingering political instability, energy crisis, weak governance, labor problems and scarcity of financial resources are major factors undermining the confidence of business people in Nepal.
The Federation of Nepalese Chambers of Commerce and Industry (FNCCI) - apex representative body of the Nepali private sector, with the support of the Nepal Economic, Agriculture and Trade (NEAT) program of the United States Agency for International Development (USAID), conducted the survey between June and August 2012 as a baseline.
A total of 403 respondents from 42 districts in all five development regions expressed their dismay over declining business confidence in the country.
"The Business Confidence Index (BCI) stands at just 39.7, which indicates low private sector confidence in the business environment of the country," states the survey report unveiled in the capital Thursday.
Worse still, the report portrays a bleaker picture for agriculture -- an engine of the Nepali economy -- in terms of BCI, compared to other sectors such as manufacturing and services.
"The BCI in the agriculture sector is just 35.7, which is lower than the overall BCI, whereas manufacturing and services are at 37.7 and 41.3 respectively," the report further says.
BCI-- an indicator of the perception of the business community about business prospects and the investment climate, is a consolidated form of sub-indicators such as production, employment, cost of production, profitability of company, export, import, company´s situation, inflation and process for securing loans.
According to the survey report, 67 percent of respondents expect the cost of production to go up in the next six months. "Various factors such as inflation, hike in labor cost and energy crisis are going to further push up the cost of production in the next six months ," adds the report.
However, 31 percent of respondents think that the employment rate will increase in the next six months while 22 percent expect employment to decline.
Highlighting dissatisfaction among respondents over the weakening business environment, the report further states that 51 percent of respondents predicted that the economic situation in Nepal would deteriorate in the next six months.
Analysing the views of respondents, the survey also predicted a worse economic situation in the coming six months.
"The upcoming six months also do not show any satisfactory environment in terms of business confidence in the country," the report concludes after summerising the views of respondents.
According to Dr Vikas Raj Satyal, a member of the survey team, the respondents represented different sectors, including agriculture, industry and services. "The future is more insecure for the business community," Satyal said, sharing the survey findings.
On the occassion, Krishna Gyawali, secretary at the Ministry of Industry, stressed the need for collective efforts to create a conducive environment for doing business."We have to wait some time to see the political instability improve. However, we can address other challenges through our collective efforts," he said.