Nepal’s rank in the Prosperity Index 2020- A review

According to the figures released by the London-based Legatum Institute’s 2020 Prosperity Index in November 2020, Nepal has risen slightly in its prosperity score from 49.5 in 2019 to 50.4 in 2020, and a rank of 114th position out of 167 countries.

The London-based Legatum Prosperity Index measures countries based on 12 indicators of prosperity under inclusive societies (safety and security, personal freedom, governance, and social capital), open economies (investment environment, enterprise conditions, market access and infrastructure, and economic quality) and empowered people (living conditions, health, education, and natural environment). Based on the indicators and the analysis, Nepal has reached 114th position in the overall prosperity rankings in 202o.

Nepal's ranking in the Prosperity Index over the years
Figure 1: Nepal’s ranking in the Prosperity Index over the years

Nepal's score in the Prosperity Index's indicators
Figure 2: Nepal’s score in the Prosperity Index’s indicators

In the year or even a decade prior to COVID-19, global prosperity had increased continuously as people were witnessing their experiences improving by being subject to more open economies, better education and health facilities, infrastructures and so on. For Nepal too, people’s lived experience had been improving since the last decade. Since 2010, Nepal has improved its prosperity score and has successfully moved up the rankings by 15 places. Specifically in 2018 and 2019, Nepal had witnessed huge improvements in all of the four indicators under inclusive societies, although it lacked proper governance, constant monitoring and timely action.

Moving to the 2020 index, while Nepal’s ranking has improved in all three pillars of the prosperity index, it has performed the best under inclusive societies. Even under inclusive societies, it has witnessed strong results in Safety and Security while the weakest in Natural Environment.

Elucidating this, Nepal improved its status from 151st position to 85th position in safety and security, from 64th to 71st position in personal freedom, 108th to 89th position in governance and 156th to 97th position in social capital. While the social tolerance among the Nepali people has relatively increased since the past decade, the freedom of speech and access to information, as well as freedom of assembly and association has been threatened. For instance, in the past year, the government brought out the Media Council Bill, and presented the controversial Information Technology Management Bill at the Parliament for discussion. These, including many others, curbed the freedom of speech and expression of people. Further, although improvement in the governance pillar has been reported since the past decade due to better rule of law in the country, political accountability, government integrity and effectiveness and regulatory quality, with current political turmoil and ill-planned rules imposed upon the public, the effects that it can have on the rankings can be damaging.

Moreover, the overall openness of the economy has improved 5 positions and trails at 118th position. Within this pillar, there are four different indicators such as investment environment, enterprise conditions, market access and infrastructure, and economic quality. Despite having progressed in the market access and infrastructure and economic quality, investment environment and enterprise conditions have been dwindling. Considering this, the weak financing ecosystem, restrictions on international investment and low domestic market contestability in the country could be improved for a better ranking in this pillar.

Likewise, the other grounds such as better education and health facilities, as well as the living conditions of the people have been prioritized and slight improvements have been realized in these aspects. However, given the emissions and air quality deteriorating to hazardous levels, it has fueled concerns about the situation worsening in addition to the impacts of COVID-19 pandemic. Thus, Nepal is undoubtedly still wedged by these problems and is in dire need of action-oriented reforms to achieve economic and social progress so that it can improve in its prosperity rankings further.

Moving ahead by interpreting the index

As the world welcomes 2021, a year where the threat of the coronavirus pandemic has still not subsided and possible conflicts are still growing in different parts of the world, it is of utmost importance to relentlessly track the performance of nations as the virus has shattered lives and disrupted numerous economies. In this regards, the Prosperity Index acts as an invaluable framework which helps the nations to assess their strengths and weaknesses as they map their way through and out of the COVID-19 pandemic.

By using the Index, it is possible for Nepal to compare its relative performance with other countries in each of the 12 pillars of prosperity. The elements within the pillars represent key policy areas such as investor protection, primary education, government integrity, air pollution and so on which demand targeted action. Considering this, policymakers can use this index to determine specific areas that require action to help increase prosperity. Likewise, political leaders can shape their priorities for a policy agenda to transform the country from poverty to prosperity based on these elements. Other wide range of users such as investors, business leaders, philanthropists, journalists, researchers can also make use of this index in a similar manner.

All in all, determining priorities is critical for building a functional economy, and the areas of high priority are often the ones that are performing poorly in the index. By establishing foundations in such a way, Nepal can strive to improve its economic sphere and kick-start its economic progress.