THE LEGATUM PROSPERITY INDEX™ 2016

Bringing Prosperity to Life

Nepal

Ranked 94th of 149

At a glance

Ranks

94 th on the Legatum
Prosperity Index™

53rd
107th
87th
116th
112th
82nd
50th
67th
129th

SUB-INDEX RANKINGS

In the Prosperity Sub-Index rankings, Nepal performs best on Personal Freedom and Economic Quality and scores lowest on the Natural Environment sub-index.

Visit our Rankings table to see how Nepal compares to other countries.

Prosperity Gap

The ‘Prosperity Gap’ takes a country's GDP and uses it as the yardstick to measure a nation's expected Prosperity Index ranking.

Despite being one of the poorest countries in Asia, Nepal is part of the global top twenty over-deliverers of prosperity. It delivers more prosperity to its citizens relative to its wealth than France and is the second best in Asia, only just behind Kyrgyzstan.

Note:
In the chart above, each dot represents a country. The curve shows the general tendency with which prosperity increases as GDP per capita increases. If a country falls below the curve, then we can say that compared to all other countries, it is under-delivering prosperity for its citizens. Likewise, if a country rises above the curve, then we can say that it is over-delivering prosperity for its citizens. Learn more about the Prosperity Gap here.

Alternatively, have a look at the Prosperity Gap view on our Rankings table for a full list of countries and to see how each of them are performing on the various sub-indices.

Commentary

Since the end of its ten-year civil war in 2006, Nepal has successfully transitioned from its post-conflict status to a stable democracy, enabling the country to move up 17 ranks in the Governance sub-index. The elections in November 2013 represented a peaceful transfer of power and an important step in the formation of an inclusive and democratic state. Nepal has been able to maintain a high democracy level since 2006 and since the 2013 election there has been a noticeable improvement in political participation rights, confidence in the honesty of elections, and in government confidence.

Additionally, in 2015, Bidhya Devi Bhandari became the first woman elected president in Nepal and the country’s first democratic constitution was finally ratified, driving the country’s already improving Personal Freedom sub-index to the global top fifty. The constitution has defined human rights as fundamental rights, abolishes the death penalty, and decriminalises homosexuality. The nation has declared itself secular and neutral to all religions, hence enjoying the lowest governmental and social religious restrictions in South Asia. Tolerance of ethnic minorities and immigrants has increased by 16.7% and 8.3% respectively, again, placing Nepal far ahead in the regional bloc. Contrastingly, satisfaction with freedom is not as high as expected and civil liberties and press freedom continue to lag behind India, suggesting that there are still fundamental challenges Nepal needs to overcome.

Personal Freedom scores in South Asia in the 2016 Prosperity Index.
Nepal’s Personal Freedom score well exceeds that of its regional peers, leaving a 52 rank difference between Nepal and India, the country with the second highest score.

As Nepal moves forward, more focus is needed on its economic potential as current growth levels are too low to reduce poverty which has been falling very slowly. The nation’s Economic Quality sub-index has been improving steadily since 2009, yet satisfaction with living standards and household income remains low and trailing 5-year growth is at 2.95%, one percentage point behind the regional average. The economy is too dependent on remittances, aid, tourism, and agriculture, which represents one third of GDP and employs three quarters of the population. Export quality and export diversity are amongst the worse in the regional bloc and little effort has been made to modernise the trade and investment regimes to diversify the economy into higher value activities.

Nepal’s biggest development challenge lies in stimulating its Business Environment performance which has fallen by 10 ranks since 2007 to 107th. Foreign and local investors need to be encouraged as currently they are being constrained by a difficult regulatory environment and a 6% decrease in the ease of resolving insolvency. Other obstacles to entrepreneurship include: unreliable electrical power, low broadband connectivity, and increasingly difficult access to credit. Poor infrastructure and transportation networks are hindering job creation and delivery of services such as cash transfers, which are expected to stimulate business growth amongst lower income groups.

Nepal’s tremendous 76 rank improvement in Social Capital offers high hopes for more stable growth. Since the 2015 earthquakes, Nepalese devotion to charitable activities has increased. The number of people making donations has risen by 40% and 75% of the population claim to be involved in volunteering. This strong social cohesion is supported by a high degree of satisfaction with interpersonal relations. Almost 80% of respondents are satisfied with the opportunity to make friends, and since 2007 there has been a 100% increase in the number of households sending financial help to other households in the last year. Finally, people feel more secure to voice their opinions which is supported by a rapidly growing trust in the local police force. All these factors suggest a rapidly increasing sense of community and frequent cooperation at individual level which is ready to help drive national prosperity.


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Data

How to read this graph:
When comparing multiple countries on a spider chart, data points that appear
further away from the center represent a better performance to the points that are closer to the center.