Even though away from Nepal for a few days one tends to keep a track of developments in the country. One can’t help but do that especially when the country is at the cusp of momentous changes in its polity. The internet enables one to remain aware of the latest happenings even across the oceans by going through Nepalese newspapers 24X7.
The newspapers and their websites reflect considerable optimism about emergence of a stable dispensation in Nepal soon. The political cauldron has been on the boil for over a decade in the country. Politicos popped up and vanished like bubbles during the period. There has been anything but stability in Nepal. The country has been limping along somehow, thanks to the immoral opportunism of politicians, cutting across parties and so called ideologies. Over $4 billion worth aid, which arrived from abroad following the devastating 2015 earthquake, lies largely unused even as people continue to suffer while politicians remain busy with their power games.
Yet, many of our newspapers and their websites continue to exude amazing optimism at the electoral process undergone so far. No doubt, the left alliance has come up as a clear winner. Yet the overall poll process, which has yet to be completed, has witnessed hiccups galore. The outgoing government too is taking its own sweet time in handing over the reins of power. A smooth transition smooth has remained a mirage. This being the background, there can be only faint hope of a lasting and peaceful parliamentary and political process. But miracles do happen. Let’s pray for one.
But can we deny the fact that the recent and on-going political turmoil is adding to an environment of uncertainty and ambiguity? As for business, commerce and industry, such a noxious atmosphere shakes the bedrock of stability and makes management for executives difficult and arduous. Development and growth take a knock. It takes a long time to restore normalcy.
In Nepal, we have witnessed things only hurtling down over the last three decades. All this has been chronicled comprehensively by the news media and will continue to be done till things really settle down. So repetition of the details is hardly warranted. Moreover, much more would have happened by the time the latest issue of this magazine hits the newsstands.
So, in keeping with the theme and character of Business 360, let me move on to a subject which is relevant with the times in Nepal. Young executives will find it useful.
The major political upheaval in the country will not leave our business and industry untouched. As in other countries, Nepal too is likely to witness radical change in policies, regulations, etc. as a centrist political party (Nepali Congress) makes the way for a hard core leftist alliance. A visibly pro-China K P Oli of CPN (UML), backed by CPN (Maoist Centre) is all set to be the new prime minister.
Obviously, captains of industry and their executives will find themselves grappling with the new reality. Though this is routine in most democratic countries, such change becomes all the more cumbersome for managers because most of the transactions between big business and government departments are based on relationships rather than rules. Long rule of overarching monarchy, 10-year civil war with no accountability fixed, so far, for thousands of lives lost and persons missing, the last 10 years witnessing 10 prime ministers in power and those too from the elite class/castes, opportunistic wheeling dealing with neighbours India and China have eroded the moral fabric of Nepal country which has the dubious distinction of being amongst the most poor and corrupt countries in the world.
So, how does the business in Nepal function in growing ambiguity and uncertainty? Senior managers, no doubt, have experience of dealing with the whims and fancies of changing power centres and somehow cope up with the turmoil. But younger managers passing out from business schools where they have learnt about corporate governance, rule of the law, pro-employee practices, compliance protocol, etc. find the upheavals and changes of our kind rather unnerving. They either get sucked into the system by saying goodbye to whatever the professors and books taught them or opt for a moral and ethical path elsewhere. In both cases, the country loses.
‘End Poverty in South Asia’, a research paper by Zahid Hussain of World Bank, has sought to analyse the deep interconnection between political instability and economic growth. It is obvious that unstable political environment may reduce investment and, therefore, economic growth as well. This often results in political and public unrest and fall of government.
“On the other hand, poor economic performance may lead to government collapse and political unrest. However, political stability can be achieved through oppression or through having a political party in place that does not have to compete to be re-elected. In these cases, political stability is a double edged sword. While the peaceful environment that political stability may offer is a desideratum, it could easily become a breeding ground for cronyism with impunity. Such is the dilemma that many countries with a fragile political order have to face,” Hussain writes.
He further explains, “Political stability is by no means the norm in human history. Democratic regimes, like all political regimes, are fragile… The recent empirical literature on corruption has identified a long list of variables that correlate significantly with corruption. Among the factors found to reduce corruption are decades-long tradition of democracy and political stability. In today’s world, however, there are many countries that combine one of these two robust determinants of corruption with the opposite of the other: politically stable autocracies or newly formed and unstable democracies.”
One is provided the example of Vietnam and some African countries. Vietnam is run by the Communist Party of Vietnam. It advocates socialist-oriented market economy which used to one of the most volatile in Asia, with 7-9 % GDP growth and moderate trade deficit from 1997-2006 . But the country could combat 1997-98 Asian financial turmoil, which partly curbed the FDI inflow. Public and private sector firms began to experience structural problems, rising inefficiency, and waste of resources from 2006. Inflation peaked to an annualized 23 per cent level for that year.
According to Hussain, the proliferation of so-called “zombie” workers at Vietnam’s state-owned enterprises (SOEs) is one of many manifestations of the economy’s underperformance. SOEs account for 40 per cent of GDP and many of them are hurting because they took advantage of easy credit to make unwise investments. Over the years, powerful interest groups within the ruling Communist Party have largely resisted calls to reform the SOEs. Senior party officials allegedly regard them as their personal cash cows.
In Africa, some countries are stable and have been able to achieve high growth rates. But a number of relatively low performing African states also have remarkably stable political systems. “When we talk about political stability in the context of growth, leaving aside resource-driven bubbles, we mean a specific kind of stability: the rule of law, strong institutions rather than powerful individuals, an efficient bureaucracy, low corruption and an investment enabling business climate. Indeed, what we really mean is that stable governance is crucial for growth. This admittedly academic distinction is an important one to recognise. Governance goes well beyond just politics,” Hussain’s World Bank report states.
It is obvious that Nepal needs political stability but as long as it translates into good governance.
Basant Chaudhary is a Poet, Writer, The Chairman of BLC and Basant Chaudhary Foundation. (firstname.lastname@example.org)