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Nepal - Uncertainty The Only Constant

July 13, 2016

I have been bombarded with questions on what the current political situation in Nepal means for the economy and business, here are some thoughts:

 

1. Nepal has moved in the words of Prof Subas KC - from #PartylessPanchayat to #PartyfullPanchayat. Very few countries in the world where there are no opposition parties as everyone is looking at the next combination and a third largest party can lead the party with highest number of parliamentary seats. This means that a political syndicate rules the country. This structure percolates to grass-root levels.  Be ready for syndicate rule and crony capitalism to continue.

 

2. Who ever leads the government, it will be for a short duration making short term political gains generally achieved through distributive economics will be priority rather than any long development of markets, reforms and strong regulatory environment.

 

3. Uncertainty on appointments of Ambassadors, especially India (which is key to normalize relations) and other political positions. Expect brawls and washing dirty linen once again in public to continue.

 

4. Reconstruction work and response to disasters will suffer as NRA appointment would be put under scanner and also deputations to the agencies. Further confusion to the already confused working style of No Reconstruction Authority. 

 

5. Stock markets will take a hit and so will transactions in land. Land papers that were issued by the Maoist parallel government to be regularized will make some people happy but will lead to many contestation in court. 

 

6. Development partners will continue to work on short term programs and foreign investment flow will continue to remain low despite many agreements on papers.

 

It is always a challenge to go through the hustle in the kitchen and would wait for the dish to arrive on the table before making any more comments.