Nepal’s stock exchange, NEPSE, for one is clearly spooked at the prospect of ‘communist state capture’. It is not unusual for markets to show unnatural exuberance when the political scene is shiny and to exhibit sudden panic when things start getting a little gloomy, everywhere in the world. Nepali investors, it appears, are not sure that the new left coalition that is poised to come to power after its landslide electoral victory will work in their interest. Perhaps Oli, Dahal and company are really committed to establishing a communist dictatorship, as some suspect. We believe the fear is overblown. The recent track records of the UML and the Maoists suggest both are committed to private enterprise and investment. They don’t always do so for the right reasons. Nepali political parties are in the bad habit of extracting rent from the private sector and channeling foreign investment in ways that benefit their cronies, and our communist parties have been no different. Nonetheless, it will greatly calm market nerves, and put many suspicions about the communist coalition to rest, if its top leaders clearly spell out their economic vision for the country.
For a country at Nepal’s stage of development, it is vital that the government invests in social security so that no one has to be deprived of basic education, healthcare and a minimum standard of living. It would, in fact, be dangerous, experiences from around the world caution, to leave everything to the ‘invisible hand’ of free markets. UML, in particular, is lauded for is past programs like aafno gaau, aafai banau (‘let’s make our village ourselves’) that helped generate countless small jobs at the village level. Its youth employment schemes are also considered largely successful. Even though its leaders now support some capitalistic measures, they are unlikely to abandon these social security schemes that paid them so handsomely in previous elections. If it does so, the left coalition will have our full support. At the same time, it must also take urgent measures to ensure that the economic pie—which will now have to be divided among one central, seven provincial and 766 local governments—is made bigger so that there is enough for everyone to go around. For this, it is vital to improving our business environment.
But Nepal has been going in the opposite direction. In the World Bank’s latest ‘Ease of Doing Business’ index, the country slipped to 107 from its position of 99 the previous year. The Work Bank, for instance, noted how Nepal has made the task of getting construction permits more difficult by increasing its cost. And nearly not enough has been done to promote small mom-and-pop businesses and middle-sized firms, which are together responsible for creating most jobs in advanced and less developed economies alike. The coalition, provided that it remains intact, will have the mandate to enact sweeping economic reforms and ensure equitable development now that the country has finally emerged from the protracted political transition. This will be the single-biggest criteria on which the success or failure of the new government will be judged.