April 30, 2013 Sujeev Shakya

They Call the Shots

Many a time, we have observed that, when people are playing cards for fun or real gambling, a few persons emerge with certain rules that they say are the real ones, and they garner the support of the other players. After that, the game is played by the rules set by the few. We see this happening in many aspects of life, like a few people dictating rituals, whether at marriages or cremations. Oligarchy is so deeply rooted within our society that perhaps it is reflected in the way we run businesses and do politics. After having seen the Shah oligarchy where the rulers bore the title of Shree Panch (five) and the Rana oligarchy, who gave themselves the title of Shree Teen (three), Nepali politics is being determined by the oligarchy of the four political parties, the Shree Char (four), so to speak. 

In business, gas dealers get together to decide how they can continue to not follow the rules on weight; and, of course, our petroleum products dealers will never leave an opportunity to gang up to decide how they can continue to sell lower quantities of adulterated fuel for higher margins. Taxi operators have associations that can cartel to ensure that they can continue to rig metres and charge higher fares. Educational institutions have created different associations that again have an oligarchy to determine fee rates, tax payments and negotiate extortion.

With every new business that is started in Nepal, people feel it is important to start associations, and with the help of other associations, change the rules of the game. We can see this happening in every aspect of life we deal with, whether a few people dictating chicken-producing cartels and fixing prices or self-proclaimed leaders in the courier business deciding the rates for courier packets. In the development world, bilateral and INGO oligarchies decide the capping rates for Nepali consultants or decide to continue paying Nepali consultants far lower rates than for international ones. The assumption for the different rates is that Nepalis cannot be international-consultant-quality material, and such is the decision of the oligarchy.

In a democracy, it is very interesting to see how oligarchy works, like at the election of political parties where there are oligarchs in each party. In associations and NGOs of all kinds including philanthropic social organisations like Rotary, elections have to be held because they are supposed to be democratic institutions. However, we hear the word ‘panel’ a lot. So there are different sets of oligarchs that actually fight the election and then run the institutions accordingly. It is very amusing to see that in practically every institution in Nepal, there are a couple of people who run the show; and when the ‘team’ changes, the oligarchs change.

The oligarchy culture fundamentally has two problems. First, oligarchs survive on the basis of rent-seeking behavior and not promotion of entrepreneurship. The opposition to the Sajha bus re-launch basically demonstrates the fact that the transport association oligarchs want to continue making extra bucks without providing service or following the laws. Similarly, if chicken from Thailand is good, then there should be no restrictions on import of the same as the quality is better and so is the price despite adding expensive airfreight. But, the chicken oligarchs want to continue to rent-seek through a law that will not allow such imports. Similarly, hyrdo oligarchs will not want to push for greater reform in the energy sector as they will lose the rent they can seek out of their licenses.

The second problem is that oligarchy does not allow society to be built on merit. In elections, you don’t see the best people winning, the people who win are those who have a ‘panel’ that can rule. Furthermore, with the love of the government and donors to work with such associations, we have people who do not have merit to be discussing policy issues at the helm of affairs in each of their fields. So these people bring about policy changes that suit a certain oligarchy, but not the best solution for the business, industry or social field. The rules, laws and regulations are never to promote meritocracy as they themselves realise that if merit was the criteria, they would not be there.

Like with government tenders, the best people are not at the right places. The oligarchs assigned to appoint the CEO of the Nepal Tourism Board have not been able to do so for the past 18 months purely because the structure is not based in a manner where merit is a priority. However, if we look at the way the CEO of the Investment Board was appointed, the person best suited for the job got it because no oligarchs were involved.

However, we have a solution to learn from the momo industry. Momo in Nepal represents the free market, where market forces decide the fate of the momo shops. There are no cartels like that of fruit juice sellers that determine prices. The consumer decides to choose from among the number of choices one has and patronizes one seller based on the product and service. If a seller continues to compromise on the quality or service, the customer will go to another one. We cannot do this with regard to petrol or diesel as the sellers have decided to cartel.
Pricing is decided by the market, and if you start overcharging, people will turn to other choices, which we cannot do with cabbies. You can have as many variants and varieties at different price points, and you are free to determine your product. Unlike not being able to run long distance luxury bus services or premium petrol or sell better quality imported chicken. The entrepreneur cannot rent-seek, the success or failure of the business is purely based on the quality of the product, the service and the price. Nothing can be a better symbol of the free market.

So in every place where we see oligarchies and cartels ruling, we have to start thinking about how can we bring the ‘momo’ element in it, and let the consumer get the best service at the best prices. What is the next industry we can start pushing the momo model? Since Sajha has re-launched, can we then look at the transportation industry to ‘momo-ise’?

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