Political Legal Environment - Unit 3

BUSINESS
ENVIRONMENT IN
NEPAL
BBA IV Semester
Course No. MGT 206
Unit 3 : Political-Legal Env.
Course Instructor:
B. G. Bhattacharya
Tribhuvan University
Nepal
Padma Kanya
Multiple
Campus
POLITICAL ENVIRONMENT
Politics and Business are

interlinked and
inseparable. Politics
determine the ruling
system of a nation which
is called Government.
This Government makes
appropriate rules and
regulations for the
smooth operation of
business.
Sl - 1
Rules and regulations through a stable political

system are essential for the sound operation of
business and to establish a rational business
opportunity.
On the other hand, government gather fund and

budget in the form of tax, revenue, etc. from business.
That fund is allocated for the overall development of
the nation.
Also, political parties get donation from the business

community.
Businessman offered ticket by parties to contest

elections is also a increasing practice in many
countries.
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A stable, efficient and honest political system is essential

for the growth of business. Political instability resulting
from civil war, emergencies, and terrorist activities
adversely affects the business.
The political philosophy of a country can be democratic, or

totalitarian, or mix of both which enormously influence
business activities.
Democracy provides greater role to private sector through

liberalization, globalization and competition.
Totalitarianism provides greater role to state through

planning, control, quotas, and state owned enterprises.
Mixed philosophies provide roles to both the private

sector and the state.
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Politics in the form of Government has the following
roles towards the business:
Facilitating role Assisting through finance,

provision of essential public services, arrangement of
vital inputs at concession rates.
Regulating role Prescribes the limits of operation

and freedom in order to check formation of
monopolies, concentration of economic power in few
hands, etc.
Entrepreneurial role Financial support to huge

capital requiring enterprises; encouragement
through subsidized policies in private sector.
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Components of Political Environment:
Political system It consists of the political parties,

election procedures and power centers.
Political institutions They are legislature, judiciary,

and executives.
Political philosophy It can be democratic,

totalitarian or both.
Pressure groups They represent different groups

which pressurize the business for different activities.
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NEPALESE CONSTITUTION
After a long wait and delay, the Nepalese

constitution came into effect on Sept 20,
2015, replacing the Interim Constitution
of 2007.
The Constitution was drafted by the
Second Constituent Assembly following
the failure of the First Constituent
Assembly to produce a constitution in its
mandated period.
The constitution was endorsed by 90%
of the total lawmakers. Out of 598 CA
members, 507 voted in favor of the
constitution while 25 voted against
and 66 members boycotted the final Sl - 7
debates.
Nepal has adopted a republican, competitive, multi-party

democratic system with a federal structure.
The country will be divided into seven federal units, with clear
lists of legislative powers for the central, provincial, and local
bodies.
Nepal has also adopted mixed election system. There will be

two Constitution Assemblies Representative Assembly and
National Assembly.
Nepal will be ruled according to constitutional presidency

while the prime minister will be the executive head. Executive
rights of the country are vested on the council of ministers.
The President shall remain as the ceremonial head-of- Sl - 8
the-state.
The salient features of Nepalese Constitution, 2015
Nepalese society will be governed according to the principles

of proportional inclusion and participation which is a
significant step towards economic equality and social justice.
Full rights have been given to people including civic freedom,

fundamental rights, human rights, periodic elections and
voting rights.
Full press freedom and independent, fair and competent

judiciary is guaranteed.
Commitment to socialism based on rule of law, democratic

norms and values, durable peace, and good governance. Sl - 9
Specific constitutional commissions (such as the Women

Commission, Dalit Commission, Janajati Commission, Tharu
Commission, Madeshi Commission and Muslim Commission)
will be constituted along with the National Human Rights
Commission.
Protection of the age old religions and culture, secularism

with freedom to adopt any religion.
Rights of gender and sexual minorities are protected by the

new constitution with provisions of special laws to protect,
empower and develop minority groups as well as allowingSl - 10
them to get citizenship in their chosen gender.
Recognizing the rights of women, the constitution of Nepal

explicitly states that women shall have equal ancestral right
without any gender-based discrimination.
Nepal also has also continued to abolish the death penalty.

Nepal had abolished death penalty in 1990 after the
promulgation of the Constitution of the Kingdom of Nepal
1990.
The Constitution defines wide range human rights as

fundamental rights.
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Controversy over Nepalese Constitution, 2015
The promulgation of the new constitution was immediately

followed by virtual blockade of all checkpoints at Nepal-India
border. Various Human Rights Activists and some ethnic groups in
lowland Nepal have accused the Constitution of being gender
discriminatory especially in regards to citizenship provisions. They
allege new constitution makes it difficult for woman to pass on
citizenship to their children as compared to men.
Similarly, Madhesi and indigenous population view that the new

constitution fails to address demands of marginalized communities
and support status-quo of the ruling groups. They are protesting
mainly over the federal delineation of new states as proposed in
the constitution fearing existing demarcation could affect their Sl - 12
political representation.
Controversy over Nepalese Constitution, 2015
With the protest ongoing since August 15, 2015 or earlier, at

least 45 people, including 8 security personals and one
foreign National, have been killed. Human Rights Watch has
criticized the Nepal Government as well as the protesters for
violation of human rights during the protest.
Additionally, there is controversy over Nepalese citizenship

rules, which Nepal deems to protect the state from being
overwhelmed by Indian immigrants, and which India claims
discriminates against Madhesis of Indian origins, the draft
constitution and final constitution that passed differ on
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this issue.
Citizenship Provisions under Nepalese Constitution, 2015
The conditions to be fulfilled to be a Nepalese Citizen are outlined below
(Copied from Section 11, Part 2, Constitution of Nepal, 2015)(final)
(1) The persons who have acquired citizenship of Nepal at the
commencement of this Constitution and the persons who are eligible
to acquire citizenship of Nepal under this Part shall be deemed to be
the citizens of Nepal.
(2) The following persons who have their permanent domicile in Nepal
shall be deemed to be citizens of Nepal by descent:(a) A person who has acquired the citizenship of Nepal by descent before
the commencement of this constitution.
(b) Any person whose father or mother was a citizen of Nepal at the
birth of such a person.
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(3) A child of a citizen who has acquired citizenship of Nepal by birth
before the commencement of this Constitution shall, if his/her father
and mother both are the citizens of Nepal, shall be entitled to Nepali
citizenship by descent upon his/her attaining the age of majority.
(4) Every child found in Nepal whereabouts of whose paternity and
maternity is not known shall, until the mother or father is traced, be
deemed a citizen of Nepal by descent.
(5) A person born to a Nepali citizen mother and having his/her domicile
in Nepal but whose father is not traced, shall be conferred the Nepali
citizenship by descent.
Provided that in case his/her father is found to be a foreigner, the
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citizenship of such a person shall be converted to naturalized
citizenship according to the Federal law.
(6) If a foreign woman married to a Nepali citizen so wishes,

she may acquire naturalized citizenship of Nepal as
provided for in a Federal law.
(7) Notwithstanding anything contained elsewhere in this Article,
in case of a person born to Nepali woman citizen married to
a foreign citizen, he/she may acquire naturalized citizenship
of Nepal as provided for by a Federal law if he/she is having
the permanent domicile in Nepal and he/she has not
acquired citizenship of the foreign country.
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(8)
Provided that if his/her father and mother both are the

citizen of Nepal at the time of acquisition of the citizenship,
he/she, if born in Nepal, may acquire citizenship by
descent.
(9)
Except provided for in this Article, Government of Nepal

may confer naturalized citizenship of Nepal according to
Federal law.
(10) Government of Nepal may confer honorary citizenship

according to Federal law.
(11) In case any area is annexed into Nepal by merger, the Sl - 17
persons having domicile in such area shall be citizens
of Nepal subject to a Federal law.
NEPAL POLITICAL ENVIRONMENT

The different political parties of Nepal
In May 2008, the first democratic elections were held in Nepal.
The following is the list of main political parties of Nepal in
sequence of their seats procured in the May 2008 elections:
Unified Communist Party of Nepal (Maoist)
Nepali Congress
Communist Party of Nepal
(Unified Marxist-Leninist)
Madeshi Jana Adhikari Forum, Nepal
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The different political parties of Nepal
Tarai-Madeshi Loktantrik Party
Sadbhavana Party
Rastriya Prajatantra Party
Janamorcha, Nepal
A list of all
major and
minor
political
parties of
Nepal is
given in the
supporting
word file
Rastriya Janamorcha
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Nepal Workers Peasants Party

The political history & structure of Nepal
Nepal has seen rapid political changes during the last two
decades. Until 1990, Nepal was a monarchy running under
the executive control of the king.
Faced with a Communist movement against the absolute

monarchy, King Birendra, in 1990, agreed to large-scale
political reforms by creating a parliamentary monarchy with
the king as the head of state and a prime minister as the
head of the government.
Nepal has also been noted for its recent speed of development, such as being one of the few countries in Asia to
abolish the death penalty and the first country in Asia to Sl - 20
rule in favor of same-sex marriage.

The civil movement in April 2006 brought about a change in
the nation's governance: an interim constitution was promulgated, with the King giving up power, and an interim House
of Representatives was formed with Maoist members after
the new government held peace talks with the Maoist rebels.
The number of parliamentary seats was also increased to
330 which was previously 205.
In April 2007, the Communist Party of Nepal (Maoist) joined
the interim government of Nepal.
On April 10, 2008, the first election in Nepal for the constituSl - 21
tion assembly took place. The Maoist party led the poll
results but failed to gain a simple majority in the parliament.

On December 10, 2007, the interim parliament passed a bill
that would make Nepal a federal republic, with the Prime
Minister becoming head of state.
On May 28, 2008, lawmakers in Nepal legally abolished the
monarchy and declared the country a republic, ending 239
years of royal rule in the Himalayan nation.
The newly elected assembly, led by the former communist
rebels, adopted the resolution at its first meeting by an
overwhelming majority.
King Gyanendra was given 15 days to leave the Royal
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Palace in central Kathmandu by the Nepalese Constituent
Assembly. He left the former Royal Palace on June 11.

Since 2008, major parties such as the Unified Commu-nist Party
of Nepal (Maoist), Communist Party of Nepal (Unified MarxistLeninist) (CPN UML) and the Nepali Congress agreed to write a
constitution to replace the interim one within 2 years. However,
uncooperative and "selfish" behavior of the political parties has
been cited as the major cause behind the de-railing of the peace
process.
Political leaders continue to discuss plans to end this turmoil, but
none of the talks have been successful. Rising inflation, economic downturn, poverty, insecurity and uncertainty are the major
problems. Many analysts opine that freedom has brought
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anarchy to the country.
NEPAL
GOVERNMENT AND
ITS
BRANCHES
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NEPAL GOVERNMENT & ITS BRANCHES
Political
Institution
Executive
Legislative
Judiciary
Sl - 25

THE EXECUTIVE SYSTEM
The Executive System of the Government is the

highest authority in the political system.
It consists of three layers:

1. The President
2. The Vice- President

3. The Prime Minister and his cabinet of
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ministers

THE EXECUTIVE SYSTEM : THE PRESIDENT
The President of the Federal Democratic Republic

of Nepal (Nepali: ) is the head of state of
Nepal. The office was created after the country was
declared a republic in May 2008.
The first head of state of Nepal is President Ram
Baran Yadav, elected in July 2008. The current
Presi-dent of Nepal is Bidhya Devi Bhandari.
The President is to be formally addressed as "The

Right Honourable (Nepali: ) ."
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THE EXECUTIVE SYSTEM : THE PRESIDENT
Under the Interim Constitution adopted in January

2007, all powers of governance were removed from
the King of Nepal, and the Nepalese Constituent
Assembly elected in the 2008 Constituent Assembly
election was to decide in its first meeting whether to
continue the monarchy or to declare a republic.
During the suspension of the monarchy, Girija
Prasad Koirala, then Prime Minister of Nepal, acted
as Head of State. On 28 May 2008, the Assembly
voted to abolish the monarchy.
Koirala continued acting as Head of State until
Yadav was sworn in as President in July 2008.
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THE EXECUTIVE SYSTEM : THE VICE-PRESIDENT
The position of Vice President of Nepal (Nepali:

) constitutes the deputy head of State of the
country of Nepal and was created when the
Nepalese monarchy was abolished in May 2008.
The Fifth Amendment to the Interim Constitution
established that the President, Vice-President,
Prime Minister and Constituent Assembly chairman
and vice-chairman would all be elected on the basis
of a "political understanding". However, if one was
not forthcoming, they could be elected by a simple
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majority.

THE EXECUTIVE SYSTEM : THE VICE-PRESIDENT
The first election in this regard was the Nepalese

presidential election, 2008. The parties failed to
agree on candidates for President or Vice President
so an election took place.
Parmananda Jha of the Madhesi Janadhikar Forum
was elected Vice President with the support of the
Nepali Congress and the Communist Party of Nepal
(Unified Marxist-Leninist).
Jha took office on the 23rd of July, 2008
and continued till he is succeeded by the present
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vice-president of Nepal,Nanda Bdr. (Kishor) Pun.

THE EXECUTIVE SYSTEM : THE PRIME MINISTER
The position of Prime Minister of Nepal was created

in 1799.
Few of Nepal's Prime Ministers have carried a
democratic mandate. The first elected Prime
Minister was Bishweshwar Prasad Koirala, in 1959.
After he was deposed and imprisoned, Nepal did not
have a democratic government until 1990, when the
country became a constitutional monarchy.
The monarchy was abolished on 28 May 2008 by the

Constituent Assembly.
The current Prime Minister of Nepal is Khadga
Prasad Oli.
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THE EXECUTIVE SYSTEM : THE PRIME MINISTER
In Nepal, the Council of Ministers, headed by the

Prime Minister, represents the executive system.
As is true of a republican parliamentary democracy,
the real repository of power is the Cabinet, under
the leadership of the Prime Minister.
The Prime Minister along with his cabinet,

functioning on the principle of collective
responsibility, is the top policy-making body in the
government.
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THE LEGISLATIVE SYSTEM
The legislature is the parliament which consists of

peoples representative elected by the people.
The legislature performs many functions. For
example, it formulates different types of law
required for the country, formulates national
policies, and approves the countrys annual budget.
The businesses of the country have to be operated
according to the laws, acts, rules, and regulations
passed by the legislature.
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Legislature consists of the representatives of all

parties who have been able to be elected in the
election.
The party with largest member forms the
government and the second largest party plays the
role of opposition party.
The elected representatives are called parliamentarians or law makers.
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Under the Nepal legislative system, the Nepalese Constituent Assembly is a unicameral body of 601 members
formed as a result of the Constituent Assembly Election
held on April 10, 2008.
Of the 601 members, 240 members were elected in single
seat constituencies, 335 were elected through
proportional representation, and the remaining 26 seats
were reserved for nominated members.
The Nepalese Constituent Assembly is headed by Chairperson. The chairman of a parliamentary chamber is
often called the Speaker. Mr. Subash Chandra Nemwang
was the chairman of the Nepalese Constituent Assembly,
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2008 and Ms. Purna Kumari Subedi was the vice
chairperson. The present Speaker is Onsari Gharti
Magar.

THE JUDICIARY SYSTEM
The judiciary makes judgment as to whether the

government activities are according to the
constitution or not.
The Supreme Court including the courts of different
level represent the judiciary.
Nepal has made provision of various types and levels
of court, such as district court, zonal court, appeal
court, special court, and supreme court.
The judiciary gives judgment on the litigations

between the government and the people and
between the people and people.
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Business disputes ranging from right to property including intellectual property rights, transactions between
businesses, consumers rights, obeying of pollution
rules, payment of taxes, etc. are settled by the judiciary.
The Supreme Court of Nepal ( ) is the
highest court in Nepal. It has ultimate appellate
jurisdiction over all Appellate and District court.
The Supreme Court is composed of the Chief Justice,
fourteen Justices and ad hoc Judges.
The present Chief Justice of Supreme Court of Nepal
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is Honorable Ms. Sushila Karki, who is the 24th
Chief Justice of Nepal.

Chief Justice is appointed by President on the

recommendation of the Constitutional Council. He/
She is appointed from among the justices having
minimum three years of experience of the Supreme
Court.
Justices of the Supreme Court are appointed by Chief

Justice of Nepal on the recommendation of the
Judicial Council. The ad hoc judges are appointed by
the Chief Justice on the recommendation of the
Judicial Council.
The Registrar and other officers of the Court are Sl - 38
appointed by Government of Nepal under the
recommendation of the Judicial Service Commission.

The Supreme Court has both judicial and extra

judicial powers. The judicial powers include the
power of hearing the writ petitions, the power of
hearing appeal, the power of reviewing its own
judgments, the power to revise the judgments
delivered by the Court of Appeal and the power to
try certain cases (as specified by law).
The Supreme Court also has power of making rules,
administration of all the Court of Appeal and all the
District Courts, formulating policies and programs
regarding judicial administration, managerial
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reforms in various courts, the publication and
dissemination of the Supreme Court decisions.

The judicial power of Supreme Court is used through

the composition of the various types of Benches.They
are called as Single Bench, Division Bench, Full Bench
and Special Bench. Jurisdictions of the different
benches are determined by the judicial council.
Single Bench is formed of a single justice. A Division
Bench is composed of two justices, whereas three or
more justices constitute a Full Bench and Special
Bench.
Formal meetings of all the justices present including
the Chief Justice is called The Full Court. It is a high
level policy making body of the judiciary. The Full Sl - 40
Court is basically responsible for the formulation of
policies relating judicial administration.

STRATEGIC PLAN OF THE NEPALESE JUDICIARY
Nepalese Judiciary is presently undergoing its

second five year's strategic plan (2009-2013). This
strategic plan was adopted by the Full Court of the
Supreme Court. The Strategic Plan has defined the
Vision, Mission, Values and Core Functions of the
Nepalese Judiciary, which are as follows:
Vision : To establish a system of justice which is
independent, competent, inexpensive, speedy, and
easily accessible to the public and worthy of public
trust and thereby to transform the concept of the
rule of law and human rights into a living reality Sl - 41
and thus ensure justice to all.

Mission : To impart fair and impartial justice in

accordance with the provisions of the Constitution,
the laws and the recognized principles of justice.
Values : Allegiance to the Constitution,
Independence and Autonomy, Duty towards Society,
Accessibility of Justice, Competent Justice, High
ethical standard, Representation and Inclusiveness
and Ownership.
Core Functions : Adjudication, Execution of
Judgment and Supervision and Monitoring.
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The Plan has projected TWELVE area of strategic

intervention which are as follows:
1: To reform case management process so as to make

adjudication process effective.
2: To make execution of judgment simple, speedy and
effective.
3: To develop human resources.
4: To develop infrastructure of court and manage
logistics.
5: To institutionalize the application of information and media technology.
Sl - 43

6: To strengthen inspection and supervision system.

7: Reform in security management.
8: To preserve the values of judicial independence,
accountability and autonomy.
9: To institutionalize research regarding adjudication,
justice system and judicial reform.
10: To strengthen and institutionalize relation with

stakeholders of the justice sector.
11: Increase access to justice and increase public trust.
12: To strengthen institutional capacity of courts
and tribunals.
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BUSINESS GOVERNMENT RELATIONS

Nepal being a mixed economic system, depicts the following
types of business-government relationships:
Business Relations with Government
1. Tax payment Business organizations pay tax to the
government as a major part of the revenue. They pay tax

on their revenue profit, sales, inputs, capital gains, etc. to
the local and national government. Business also helps
government to collect tax by deducting at source such as
salary, wages, etc.
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2. Execution of contracts Different development projects
of government are undertaken by the business

organizations to complete within a given time, cost and
quality. They are also supplying goods and services such
as food, airlines, etc.
3. Rendering of advice Business is the field where the
formulated policies are imposed. Only those, which really

realize the impact of these policies, are business
organizations. Thus, they can advice the government to
make policies, to solve the problems, and to improve the
weaknesses by their practical experiences.
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4. Source of information - Business and their associations
help in the efficient policy making by making available

statistics and correct information. Policy makers are
informed that government decisions should be made in the
interest of business and existing rules should be modified
to implement them timely. Different private sectors,
business houses, FNCCI, and NCCI are the major
information providers in Nepal.
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Government Relations with Business
1. Promoter Establishment of basic and public utility
industries such as hydropower, telecommunication,

infrastructure, etc. that requires a high capital investment.
Deals with the establishment of trading organizations for
essential goods and services. Establishes government sector
banking services providing low cost financing, insurance
services and mortgage facilities. Different incentives and
subsidies promote export volume, uplift the sick industries,
and encourage industry set-ups in backward areas. In Nepal,
construction of infrastructure, Nepal Electricity Authority,
National Trading Ltd., Salt Trading Corp., NBL, NRB, NLIC,
Deptt. of Statistics, are the main government efforts to
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promote business sector.
2. Regulation Most government regulations are
associated with control of business activities. In the

process of protecting consumers, investors and laborers,
the government significantly regulates business. In
Nepal, government is traditionally regulating the public
utilities of monopoly nature such as gas, electricity,
water supply and telephone. The government under
direct regulation controls the price of these firms.
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3. Caretaker The caretaker role of government to business
is increasing in Nepal due to globalization & liberalization.

Home industries are protected from the unfair foreign
competition by using the tariff protection tool. Guarantee of
security to grow independently, assistance to cottage,
small scale and sick industries, provisions of patents and
copyrights are the caretaker role of govt. to business.
4. Customer Government purchase large amounts of
products and services from private sector business as an

institutional customer. Therefore, the government as a
customer has significant power and influence on business
and their operation.
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Business
Tax Payment
Government
Protector
Welfare Programs
Contracts
Expert Service
Regulator
Promoter
Business
Information
Owner
Political Activity
Obey Laws
Customer
Sl - 51
NEPALESE
POLITICAL
ENVIRONMENT
RISK AND
EMERGING
ISSUES
Sl - 52
RISKS & ISSUES : NEPALESE POL. ENV.

Broadly speaking, three major types of political risks can be
encountered by business firms:
Ownership risk, which exposes property and life of the firm.
Operating risk, which refers to interference with the ongoing

operations of the firm.
Transfer risk, mainly encountered when attempts are made
to shift funds from a country to another.
Political risk analysis can be done from two perspectives:

Macropolitical risks, affects all the firms operating in a
country. Examples of such risks are civil wars, riots,
terrorism, and the like.
Micropolitical risks, affects only a specific firm or firms

within a specific industry. Examples of such risks are
protests against certain products, boycotts and campaigns against foreign goods, and the like.
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POLITICAL INSTABILITY
In Nepal, it has been observed over the last 20 years that the
governments remained to power only for a very short period.
During this period, three general elections and one
Constituent Assembly election were held and as many as 20
governments were formed one after another.
Even after the historic Peoples Movement, 2006, the political
party alliance witnessed signs of conflict, confusion and
rigidity leading to problems of political stability. The main
political actors have changed neither their interests nor their
political and institutional culture.
There are also difficulties and debates among the alliance
parties represented in the government regarding several
issues and policies. The recent intra-party conflicts have Sl - 54
created further problems of political stability in the
country.

ECONOMIC FACTORS
Some crucial economic factors like inflation, balance of
payments (deficits or surpluses), and the growth rate of per
capita income are strong indicators of political risk.
Nepal is passing through very difficult economic times. Because
of many local and international factors, business activities are
being seriously affected.
The public sector banks which were in deep crisis are now
recovering slowly after NRB intervention. The collapse of Nepal
Development Bank and the crisis situation in many
development banks and finance companies recently caused
much concern among the depositors, shareholders and the
business community.
The scandals and corruption cases filed against politicians,
top-level bureaucrats and executives of many public sector Sl - 55
enterprises have disturbed the regular functioning of business.

TRADITIONAL HOSTILITIES & TERRORISM
Traditional hostilities between communities and countries
cause problems for business. Similarly, terrorism may be
present. If it is, can the business firm protect its personnel
and property? In Nepal, the security environment remains
unstable & disturbing.
Nepal Bandh, Valley Bandh, Chakka Jam, Dharna, Bomb
blasts, General Strikes and other forms of agitation are
frequent happenings in Nepal. These agitations have serious
effects on business and economic activities.
Business community and Industrialists are often victims of
kidnapping, killing for ransom, and harassment for donations.
During recent years, corruption has spread widely,
affecting private contracts, bank lending, education and
health services, and hiring for government services.
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LABOUR CONDITIONS
Labor conditions could cause investors to pause. Labor
productivity may be low, or labor costs may be high, or labor
unions may be militant. Business firms are particularly
careful to learn the composition of the work force available
in the country.
In Nepal, trade unions have flourished and strengthened
particularly after the restoration of Democracy in 1990. As
per 2012 statistics, there are about 580 enterprise-level
unions. In addition, there are about 38 associations and 6
federations of trade unions at the national level.
The key problems associated with trade unionism in Nepal
are political orientation, multiplicity, and outside
leadership. The psychological distance between manage- Sl - 57
ment, unions, and the government is very wide. The govt.
is squeezed between the employees and unions.

SUBJECTIVE FACTORS
The subjective measures of political risk are based on a
general perception of the countrys attitude towards
private and public enterprises: whether private enterprise
is considered a necessary evil or is actively welcomed.
In Nepal, the common people are not sensitive about the
role of private and public sectors (both positive and
negative) in the development of nations economy; and
hence, the business sector is played on by political
influence with vested interests.
The attitude of the people toward foreign investment, joint
ventures, technology transfers and so on is very important
to assess political risk. The traditional mindset and a
relatively unwilling attitude towards embracing globa- Sl - 58
lization in Nepal have encouraged political victimization of
the business sector.

OTHER PROBLEMS
1. Expropriation - Transfer of ownership initiated by the government with payment of compensation.
2. Intellectual Property Rights (IPR) Government intention to
weaken protection of IPR such as copyrights, patents, trademarks, and industrial designs.
3. Boycotts Campaigns against foreign goods. Blacklisting,

rejecting, boycotting firms goods and services.
4. Inflation, Taxation and Currency Devaluations Wider
fluctuations and uncertainty in these monetary and fiscal
policies of the govt. can create serious risks to business firms.
5. Embargoes and Sanctions These are the actions imposed
by a government as a coercive trade measure. This
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distorts free flow of trade in goods, services, or ideas.
LEGAL ENVIRONMENT
Legal environment of
business refers to the
legal surroundings
which affect directly or
indirectly to the
functioning of any
business. A legal
environment may either
promote or obstruct a
business, depending on
a particular situation.
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BUSINESS LEGISLATION IN NEPAL

Nepal does not have a long history of business legislation. The
Company Act promulgated in 1936 was the first law to regulate
the management and other affairs of joint-stock companies in
Nepal. The Muluki Ain, which was adopted in 1963, also has
relevance for business firms.
The business legislations that form the legal environment in
Nepal are mentioned below:
General Business Legislation
Private Firm Registration Act, 1958
Partnership Act, 1964

Company Act, 2006
Industrial Enterprise Act, 1992
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Labor related Legislation
Bonus Act, 1974

Labor Act, 1992
Trade Union Act, 1993
Foreign Employment Act, 1992
Child Labor Act, 2000
Finance and Investment Legislation
Foreign Investment and Technology Transfer Act, 1992
Foreign Exchange Regulation Act, 1961

Income Tax Act, 2002
Value Added Tax Act, 1997
Sl - 62

Consumer Protection Legislation
Black Market and other Social Crime Punishment Act, 1997

Food Act, 1996
Nepal Standard Act, 1980
Consumer Protection Act, 1990
Nepal still lacks the legislations that support the growth of
business in Nepal. Similarly, the necessity of strong legal
provisions to safeguard the interest of the related sectors is
still felt. The judiciary system is still not as efficient as
expected. There is a strong supervisory body to ensure Sl - 63
the enactment of the existing laws related to the business.

Labor Legislation in Nepal
Several provisions have been made by the Constitution of

Nepal, 2015, and other laws to protect and promote the
interest of labor.
Some of the notable provisions are: right to work, prohibition

of slavery and forced labor, freedom of assembly,
association and speech, freedom of trade, business and
welfare, and elimination of child labor.
Labor problems are wide-spread in Nepal. Many of such

problems are deeply rooted in the larger complex politicoeconomic system. Some of them are due to the weak- Sl - 64
nesses of the labor laws prevailing in the nation.

Labor Legislation in Nepal
Nepal is a party to some ILO Conventions. Nepal has so far

adopted five Conventions. They are:
Equal remuneration for men and women workers for work
of equal value, 1951;

Non-discrimination in respect of employment and occupa-
tion, 1958;
Minimum wage fixation, 1970;
Application of the weekly rest in industrial undertaking,1971;

Tripartite consultations to promote the implementation
of International Labor Standards, 1976.
Sl - 65

Finance & Investment Legislation
The financial system in Nepal consists of the Nepal Rastra Bank (the
Central Bank), two large state-controlled commercial banks, joint
venture commercial banks, development banks, private finance
companies, insurance companies, share market companies, the
Employee Provident Fund, the Credit Guarantee Corporation, the
Citizen Investment Fund, and the Stock Exchange Center.
The commercial banks, finance companies, and insurance companies

are authorized to decide their own deposit and lending rates.
However, the commercial banks are required to allocate a minimum of
3% of their credit expansion to the priority sectors of investment as
determined by the NRB from time to time. Nepal has, thus,
Sl - 66
experienced rapid growth in the financial sector.

Legislation on Intellectual Property
Intellectual Property comprises of : patents, trademarks and

trade names, copyrights, and trade secrets.
There are two main acts in Nepal in the field of intellectual

property (i) The Patent, Design and Trademark Act, 1965
(amended in 1967); and, (ii) The Copyright Act, 1965
(revised in 1997 and 2002).
To avail IP rights, it is compulsory to register the intellectual

property with the Department of Industry (DoI). Foreigners
are also allowed to register their intellectual property
Sl - 67
rights in Nepal.

Patent rights can be transferred. The term of a patent is 7 yrs

from the date of issuance (renewable). Infringement of the
patent law is subject to a fine of up to Rs.2000.
The DoI also registers designs and issues certificates to respective machine designers. The design need to be either
novel or original to qualify for protection.
The right to register a design can be obtained initially for five

years, renewable to another two 5 year terms. Infringement
is subject to a fine of up to Rs.800 and confiscation of
Sl - 68
articles connected with the offence.

Trademarks, with signs capable of distinguishing the goods

or services distinctively from other related activities, can be
registered for protection under the PDTA,1965.
Trademark cannot be registered if it adversely affects the

interest of the general public and prejudicial to the national
interest, and if likely to harm the goodwill of other already established trademarks.
Foreign trademarks must be registered in Nepal to claim the

right of ownership. Similarly, trademarks for Nepali prod- Sl - 69
ucts should be registered under DoI before they are
introduced in the foreign market.

The Copyrights Act, Nepal, defines work as any work presented originally and intellectually in the field of literature, art
and science; and in any other field like drama, book, thesis,
article, musical notation, audio-visual works, photographs,
architectural design, painting, maps, and computer programs.
The presentation, translation, expression, database, folk

songs, etc. shall be protected as original work, without prejudice to the copyright of the original work.
Registration of a work shall not be required to acquire theSl - 70

right. The author of a work shall be the first owner of the
economic right of that work.

Laws for Consumer Protection in Nepal
The legal framework governing the field of consumer
protection in Nepal includes Food Act 1966, Black Market
and Crime Punishment Act 1977, Nepal Standardization Act
1980, and Consumer Protection Act 1999.
The various rights to consumers as given by the laws are

mentioned below:
Right to be safe from the sale and distribution of
consumer goods that harm life, body, health and property.

Right to be informed of price, quality, quantity, purity
and standard of customer goods and services for being

safe from unfair business activity.
Sl - 71

Right to be assured of the opportunity to select consumer
goods and services in competitive price as far as possible.

Right to be assured that appropriate agency will hear
regarding the protection of rights and interests.

Right to get heard and get compensation for exploitation
and harm caused by unfair business activity.

Provisions for proper labeling of products and their standar-
dization.
Provisions for consumer protection council & compensa- Sl - 72
tion committee.

Though the government has formulated a number of laws
and regulations for the protection of consumer rights, the
results are yet to be materialized.
The effectiveness of those rules and regulations largely

depends on their implementation.
There must be a mechanism to ensure the effective

enactment of the consumer protection laws.
The government, private sector and the society have to play

an important role for the effectiveness of the regulations
and laws.
Sl - 73
Sl - 74

Political Legal Environment - Unit 3

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BUSINESS

Politics and Business are

Rules and regulations through a stable political

On the other hand, government gather fund and

Also, political parties get donation from the business

Businessman offered ticket by parties to contest

A stable, efficient and honest political system is essential

The political philosophy of a country can be democratic, or

Democracy provides greater role to private sector through

Totalitarianism provides greater role to state through

Mixed philosophies provide roles to both the private

Facilitating role Assisting through finance,

Regulating role Prescribes the limits of operation

Entrepreneurial role Financial support to huge

Political system It consists of the political parties,

Political institutions They are legislature, judiciary,

Political philosophy It can be democratic,

Pressure groups They represent different groups

After a long wait and delay, the Nepalese

Nepal has adopted a republican, competitive, multi-party

Nepal has also adopted mixed election system. There will be

Nepal will be ruled according to constitutional presidency

Nepalese society will be governed according to the principles

Full rights have been given to people including civic freedom,

Full press freedom and independent, fair and competent

Commitment to socialism based on rule of law, democratic

Specific constitutional commissions (such as the Women

Protection of the age old religions and culture, secularism

Rights of gender and sexual minorities are protected by the

Recognizing the rights of women, the constitution of Nepal

Nepal also has also continued to abolish the death penalty.

The Constitution defines wide range human rights as

The promulgation of the new constitution was immediately

Similarly, Madhesi and indigenous population view that the new

With the protest ongoing since August 15, 2015 or earlier, at

Additionally, there is controversy over Nepalese citizenship

(6) If a foreign woman married to a Nepali citizen so wishes,

Provided that if his/her father and mother both are the

Except provided for in this Article, Government of Nepal

(10) Government of Nepal may confer honorary citizenship

NEPAL POLITICAL ENVIRONMENT

NEPAL POLITICAL ENVIRONMENT

Nepal Workers Peasants Party

NEPAL POLITICAL ENVIRONMENT

Faced with a Communist movement against the absolute

NEPAL POLITICAL ENVIRONMENT

NEPAL POLITICAL ENVIRONMENT

NEPAL POLITICAL ENVIRONMENT

NEPAL GOVERNMENT & ITS BRANCHES

NEPAL GOVERNMENT & ITS BRANCHES

The Executive System of the Government is the

It consists of three layers:

2. The Vice- President

NEPAL GOVERNMENT & ITS BRANCHES

The President of the Federal Democratic Republic

The President is to be formally addressed as "The

NEPAL GOVERNMENT & ITS BRANCHES

Under the Interim Constitution adopted in January

NEPAL GOVERNMENT & ITS BRANCHES

The position of Vice President of Nepal (Nepali:

NEPAL GOVERNMENT & ITS BRANCHES

The first election in this regard was the Nepalese

NEPAL GOVERNMENT & ITS BRANCHES