The important role of the private sector in the economic transformation of the country is well established among local governments in Nepal. However, there are reservations from a section of the private sector about the prospective role that should be played by the government. Barriers to trade, especially non-trade-related barriers, are increasing in Lumbini province. Due to the lack of institutionalized channels of communication between the government and the private sector, these barriers have not been addressed. One of the most prominent barriers is related to ways to address the conflict between businesses and their neighbors. This issue is largely understood as issue related to industry relocation. The practice of establishing businesses in residential locations has created a conflict between the business units and local citizens who share land boundaries with the businesses. Local people have to live with the nuisance value in terms of noise pollution, traffic congestion, waste, etc. created by the establishment of the business on the one hand. On the other hand, local people have also benefited from an increase in the price of land, and house rent in their locations because of the establishment of the businesses. There is no specific government policy to deal with these issues and businesses are using extralegal measures to deal with the issue. The small business owners are forced to make financial contributions to community events, help build or repair roads and help construct temples, bus stops/stands, and other small community infrastructure. The government response to this issue is limited to establishing Industrial areas and trying to shift all businesses within these areas.

The increase in conflict between businesses and neighbors is not healthy for the businesses and citizens also. An effective way to address this problem is through a dialogue between the businesses and local citizens at the leadership of the government. One of the ways the government can address the issue is by maintaining strict criteria and term limits for businesses to take from neighbors before starting a business. It is high time for local governments to categorize their land use and also categorize existing businesses to enable a phase while relocation plan for businesses. Government should designate areas for businesses according to their potential effect on public life. In designated areas only, businesses should be allowed to operate by taking permission from the neighbors for a fixed period of time. This effort of the government must be seconded by the establishment of industrial/ business zones for industries. There is a need for devising scientific mechanisms to assess the negative effect of the business operation in terms of creating public inconvenience. Periodic inspection of the effect of businesses on public life can be done by institutionalizing an auditing framework for environmental safeguards, waste management, and other public nuisance created by the presence of the businesses. Relocation should be mandatory for such businesses which have created hazards to public life. Governments must support businesses to relocate with certain waivers in taxes or financial support for relocations. Overall local governments must devise a policy for relocation such that businesses do not lose their competitiveness upon relocation. Businesses must also be allowed to operate on the premises after having taken permission from neighbors for a fixed period of time.