Will Nepal’s Business Culture Truly Evolve?

The new government has signalled a break from the past through high-profile arrests, demands for discipline and delivery from the bureaucracy, and a strong message that the old rules of proximity and protection may no longer apply. Whether this seriousness will hold across the system remains to be seen. The more consequential question is what a genuine shift would mean for how businesses are actually conducted. 

How Nepali Business Has Operated Historically 

Most Nepali businesses, particularly large and established ones, have long operated within an ecosystem shaped by policy protection, regulatory discretion and relationships with political and bureaucratic power centres. In an economy constrained by geography, infrastructure and capital scarcity, the state became the primary allocator of opportunity. Licences, quotas, tax incentives, access to credit, land and regulatory forbearance were often the results of proximity and influence. Over time, this produced a distinctive business culture that was risk-averse but politically agile, efficient enough within Nepal but less competitive globally, and not particularly transparent. 

It is easy to criticise this model in hindsight but we must acknowledge that many of Nepal’s most prominent business houses were rational actors within it. They played the game that existed. In doing so, they may have contributed to its longevity. But to be fair, there are too many imperfections in the system for a business to remain entirely clean in many cases even if its owner chooses to be.  

This brings us to the central question of whether the game itself is changing, or whether only the players are being penalised. The business community is observing recent developments with a mix of awe, apprehension and cautious optimism. A particular source of unease is what many perceive as an approach of ‘guilty unless proven innocent’. If that perception hardens, it risks chilling legitimate enterprise alongside illegitimate, precisely the outcome that reform should be designed to avoid. 

Old Guard and Emerging Players 

If enforcement continues with the consistency and urgency witnessed in the first months of this government, a deeper shift is likely to emerge: one that could create a meaningful divide within the business community itself. 

On one side stands the old guard: firms whose competitive advantage has historically depended on protection and access. In many sectors, this was a rational response to the environment as regulatory navigation became a genuine organisational capability, and in some cases served legitimate purposes around stability and market order. Many of these organisations are consequently optimised for policy environments rather than open markets, which is not a moral failing so much as a reflection of the incentives they faced. 

They will not disappear overnight. Some will adapt by professionalising management and strengthening governance. Others will struggle, particularly those whose business models depend heavily on advantages that are now eroding, and who have under-invested in the capabilities that competitive markets reward like operational excellence, customer responsiveness and strong institutional governance. The challenge for these firms is less about intent than about organisational inertia. Reorienting toward market competition requires not just different strategies but different cultures, different talent and different metrics of success. 

On the other side is an emerging cohort of younger firms, mainly in services, technology and light manufacturing, led by entrepreneurs with greater exposure to global markets. These businesses are structurally less dependent on mediated benefits. For this group, a rules-based system represents an opportunity where connections matter less, capability matters more and the possibility of a genuinely merit-based business culture begins to take shape. 

This divide may also surface within large business groups. Younger members, shaped by exposure to liberal culture and global business communities such as Entrepreneurs’ Organisation and Young Presidents’ Organisation, will be more inclined to put into practice what they have long absorbed through these networks. 

Meritocracy in business is ultimately an outcome shaped by incentives. It emerges when the returns from efficiency, innovation and competitiveness exceed the returns from influence and manipulation. If a company can earn more by improving productivity than by securing preferential treatment, it will do so. Not necessarily out of principle but out of reason. Conversely, if influence continues to yield higher returns, the system will revert regardless of rhetoric. The behaviour of Nepal’s business community will therefore depend on whether rules are applied consistently and whether success is demonstrably achievable without political mediation. 

International Parallels 

Other countries that have navigated similar transitions offer both cautionary and encouraging lessons. In China, market-oriented reforms created new opportunities for private enterprise and rewarded productivity and scale, but political connections did not disappear. They evolved alongside the market. Georgia achieved a more decisive break, where aggressive anti-corruption measures combined with regulatory simplification and digitalisation reduced opportunities for rent-seeking. 

The result was a rapid transformation in business culture and a surge in entrepreneurial activity. India’s liberalisation dismantled many barriers to entry and enabled new sectors and entrepreneurs to flourish, but legacy systems of influence persisted, creating a dual economy where meritocracy and cronyism continue to coexist. 

Sri Lanka sits somewhere between India’s dualism and Georgia’s clean break, leaning closer to the former. Following the 2022 crisis, the country has made a painful pivot toward fiscal discipline under its IMF programme, with some transparency improvements and attempts at state-owned enterprise reform. On paper, this resembles a Georgia-style cleanup. In practice, Sri Lanka has yet to deliver the systemic simplification that made Georgia’s transformation stick.  

Nepal’s Finance Minister has signalled an aspiration toward the Georgian approach. But the international experience offers a sobering reminder that reform reshapes the landscape without necessarily erasing the past. 

Structural Constraints 

For Nepal, the path to a merit-driven business environment faces several structural challenges that go beyond political will. 

The first is institutional consistency. Enforcement that is perceived as selective or politically motivated will undermine credibility regardless of intent. Businesses can adapt to strict rules but cannot adapt to their unpredictable application. 

The second is regulatory complexity. As long as compliance remains cumbersome, opaque and discretionary, the incentives for informal arrangements will persist. Simplification is a prerequisite for any meaningful reform. 

The third is access to capital. A truly meritocratic system requires that capable entrepreneurs can access financing without relying on networks of influence. This is where alternative investment structures also become critical. Without patient, risk-tolerant capital, new entrants cannot scale and the old guard retains its structural dominance. 

Finally, there is the question of state capacity. Administrative competence is precisely where Nepal’s track record has been weakest. The state machinery has limited execution capacity.  

Incentives Will Decide the Future 

The real test for this government lies not in headline-grabbing actions but in the steady, unglamorous work of improving routine institutional practice so that the system becomes predictable and delivery-oriented. If the system rewards efficiency over influence, transparency over opacity and competition over protection, businesses will adapt accordingly.  
In the end, the question is not whether Nepali businesses will come around. It is whether the system will make it worthwhile for them to do so.