Uncertainty is the Only Constant

On July 12, 2024, Prime Minister Pushpa Kamal Dahal will seek another vote of confidence. This is the fifth time he has done so since being elected eighteen months ago but this time he is set to lose as his main coalition partner, CPN UML, has withdrawn support. The three main parties Nepali Congress (NC), CPN UML, and CPN Maoist have tried every possible permutation combination. For the November 2022 elections, Maoist and NC jointly fought the elections. When the government was formed, UML supported Maoist. Then, everyone supported Maoist. Then, NC and Maoist came to a coalition. Then, Maoist and UML formed a coalition. This is the final permutation combination left where UML and NC are coming together. The other parties generally like being a part of the coalition and staying in the opposition is not something perhaps even smaller parties of Nepal like.

The rift between Maoist and UML was widening and the final nail in the coffin seems to be the appointment of the Chair of Securities Board of Nepal. Both parties had candidates that were also backed by coalition of business groups who wanted certain regulations and approvals to happen. In Nepal, it is nothing new that business-politicians nexus makes or breaks businesses. Coalitions are decided at homes of businesspeople. Every political party depends on donations that come to party, so its leaders are connected in an opaque manner with businesspeople. As a result, speculation surrounds who funded whom and why. Beyond that, little is known. Nepali businesses under guise of cartels or informal groups have been driving politics since the restoration of democracy in 1990. This process has only accelerated after Nepal became a republic in 2006. The mantra of the major businesses is inward looking myopia; they are fine trading in foreign goods but detest foreign investment, intellectual property rights, and technology transfer. They work with politicians for protectionism.

Nepal saw multiple big scams emerging in the past two years that involved leaders from every major political party. The unlucky ones got into prison whereas the lucky ones had to work on changing governments and political coalitions to stay out of prison. In a country where the government spending has swollen to USD 15 billion per year and budget of the highest grossing ward of a local government has crossed the USD 10 million mark, the money in play is huge. A fifteen percent graft means around USD 2.3 billion. Naturally, the high stakes require more complicated graft-sharing mechanisms. The fact that rivals know of the skeletons in each other’s cupboard makes the formations of coalitions even more complicated.

Geo-politics also plays a significant role in Nepal’s political landscape. As I wrote in my earlier column, 350-400 seats for NDA in the Indian elections would have surely changed the government in a different way. Now India just wants to ensure the communist unity is broken and keep K P Oli out of power as far as possible. However, this is not working out. China, on the other hand, has been sending many high-level delegations with the objective of ensuring a communist unity, so that the Belt and Road Initiative (BRI) projects get implemented. This, too, is not working out. Therefore, a government is potentially being formed that neither neighbors will be very happy about. Further, the infighting with the NC, which is more prominent, and the change of key interlocutors within UML will also make the upcoming coalition not immune to criticisms and internal scuffles.

While some people talk about the stability of the single party authoritarian Panchayat rule, they tend to forget that no prime minister has seen a full five-year term so far; therefore, instability has always been constant in Nepal. Robert Mugabe served Zimbabwe 37 years as Prime Minister and then President. However, this stability did not mean that Zimbabwe benefited from that stability. Political uncertainty is the only constant in Nepal and we have to accept this. The reality is that people have planned to move ahead despite all the political changes. It only matters if your operations are based on the politicians or political groups you support. If you do not seek or ask for favors, you can just move on.

Nepali GDP has grown from USD 7 billion in 2004 to USD 44 billion in 2024. This is a six fold jump, despite all the political challenges, the natural calamities, blockade, pandemic and political challenges. If we extrapolate this, Nepal’s GDP may be hovering around USD 250 billion mark in the next twenty years. The Nepali economy is increasingly driven by consumption, remittances, and population where 86% of people live in their own houses. The disposable income and increase in capital assets keep pushing the economy. Poverty brokers may find different ways to deny this story, but the reality is that Nepal keeps going. We need to ponder what will change if there is really a political stability for your business. Given the type of business community that rent seeks on instability, will we ever have political stability? It is not necessary to agree with this view point, but it is an alternate perspective nonetheless that people should not ignore.