I would say institutution and you may go wonder what hancyguy is mean by institution. Well I define it as rules, regulation, administrations, the political systems, political parties etc.). We do have institutions but they are not functioning in a way the are supposed to. Got chance to read one research article by Olson (Nobel Prize Winner in Economics) who proved that your level of development depends on what type of institutions you have. Think going back just to 1950 (though we have longer history) and trace how different institutions came into being and whether they were successful or not and compare that to the institutions of the countries like South Korea, Thailand, India (all third countries whose level of development was the same at that time). Now you have a answer on what is holding development back in nepal.