The dark underbelly of politician-businessman nexus: Can it be ever broken?

No agency is in place to check on harmful and collusive deals between the business sector and political parties. As a result, cronyism and rent-seeking have become integral parts of our system.

Abiral Gautam

  • Read Time 6 min.

Kathmandu: On 19 March 2021, over 200 private sector industrialists and business leaders joined CPN-UML, probably the first incident when private sector business leaders joined a political party en masse in Nepal.

They joined the party in presence of UML chair and erstwhile Prime Minister KP Sharma Oli and other UML leaders. According to media reports, Moti Lal Dugar, a businessman who served as the Minister of State for Industry, Commerce and Supplies in the Oli cabinet who was later appointed as Special Economic Adviser to Prime Minister KP Oli, was instrumental in getting them on board.

Evidently, the majority of them had some interests to fulfill by joining the then ruling party while some of the businessmen privately confessed that they were ‘compelled’ to join the party but they could not reveal the reason publicly. 

Even private sector umbrella organizations such as Federation of Nepalese Chamber of Commerce and Industry (FNCCI) Confederation of Nepalese Industries (CNI) chose to remain silent on the matter. 

Nepali Congress has indicated that it would be no different when it comes to awarding private sector business leaders with ministerial positions. A case in point is the appointment of Umesh Shrestha as State Minister for Health by PM Deuba.

In less than half a year, Nepali Congress (now the ruling party, which was then in opposition) has indicated that it would be no different when it comes to awarding private sector business leaders with ministerial positions. Appointment of Umesh Shrestha, a private education business tycoon,  has raised many eyebrows. 

Many believe that Binod Chaudhary, a dollar term billionaire who joined Nepali Congress immediately after he left UML in 2017, is also looking for a ministerial portfolio, next time if not now.

Maoist-Center is no exception. There are businessmen, traders and contractors who are, allegedly, linked with its supremo Prachanda

Open secret 

In today’s Nepal, the business sector follows particular politicians, rather than business rules or ethics. The business-politics nexus is so deep. It is open, yet it is also a secret. Open in the sense that politicians are openly favoring and promoting businessmen, industrialists and contractors.

However, how much money they provide to politicians and the source of that money remains a secret. What do the business leaders get in return for the money they give? How does the larger business community benefit from having some of their people in political parties?   

That none of such business leaders in politics have been held accountable for their wrongdoings is also an open secret. 

The collusion between business leaders and politicians is another open secret. In fact, Nepal has not witnessed any major investigations on the misconducts and frauds of the private sector after 2011/12 VAT fraud scam where 518 firms were found guilty. 

No agency in place to check on harmful collusive deals between the business sector and political parties. As a result, cronyism and rent-seeking have become an integral part of our system. 

Major government agencies supposed to conduct investigations on the wrongdoings of private as well as public sectors have been paralyzed. Some key agencies that are supposed to investigate wrongdoings of private sectors and safeguard consumer rights–such as Department of Money Laundering Investigation, Department of Revenue Investigation, Department of Food Technology and Quality Control (DFTQC), Nepal Bureau of Standards & Metrology (NBSM) among others–have, in many sense, remained almost idle for decades. 

The real estate sector is probably where one can see the nexus between politicians and businessmen, traders and contractors. Despite the open and loud demand to bring real estate agents to book and investigate massive tax evasion and money laundering activities, consecutive governments neglect the issue and choose not to initiate any investigation. 

A government official working at the Department of Money Laundering Investigation, who did not wish to be named, told Nepal Live Today that politicians are favoring illicit money laundering activities by remaining silent or even abetting the malpractices and massive tax evasion and money laundering activities in the real estate sector. “Large amounts of money are indeed given in exchange for policy favors but these bribes go to the powerful politicians and their relatives,” said the official.

One of the real estate agents we talked to said that politicians are investing in the real estate sector and collecting money through businessmen who are in their trust circle. 

It is noteworthy that Umesh Shrestha, whom Prime Minister Sher Bahadur Deuba appointed as the State Minister for Health last week,  has been allegedly acquiring land in northern Kathmandu by duping gullible villagers there. 

Another key area is related to quality monitoring of the goods and services. A few months ago, there were news reports about a police raid on a house that was full of chocolates. The case was not followed up. 

Government agencies hardly come up with any reports about substandard quality of products by the private sector. 

Similarly, the government has also allowed the private sector to enjoy syndicate and cartel. From airlines to products like cement and iron rods, prices are fixed by the cartel of private companies. Despite the fact that any form of syndicate and cartel are against the spirit of ‘free and competitive market’, the government has not been able to curb it. 

The ugly side of collusion does not end here. Some big corporate houses run industries. They also run banks and insurance companies. But governments do not even think of initiating the debate over the ethical aspect of running industries, banks and insurance by the same group of companies. “Discussion on ethical aspects has become beyond our imagination as the governor and other high officials do not want to confront politicians,” a Nepal Rastra Bank official told Nepal Live Today

In the past, intelligence of NRB was much stronger compared to these days, he said, adding that political appointees, these days, do not dare to take any action without consent from political leadership. 

Not like private sector 

Majority of established business houses who have already created business empires in Nepal do not want ‘rule of game’ to prevail in the country. The reason is they do not want new and innovative players to emerge in the market and pose a competitive environment for the established firms. 

In this sense, they are similar to top politicians of major parties who do not allow fair competition in politics and who do not allow new faces to rise and shine so that they can perpetuate their hold and hegemony in their respective parties. 

By taking the side of established politicians and financing them, established business empires have been able to influence the policy in their favor, said Bishnu Timilsina, General Secretary at the Forum of Protection of Consumer Rights Nepal.

For most of the established businesspersons in Nepal, free market, competition, rule of game, and level playing field are only catchy phrases to include in public speeches. In fact, they do not want these principles to apply in practice, for they can take leaders into confidence through donations and financing which enables them to game the system.

“Political parties know they need a huge amount of money for elections, and businesspersons have been their main source of money,” said Timilsina, adding that the nexus between businesspersons and politicians has become a never-ending chain in Nepal. 

Giving an example of how politicians and businesspersons have a strong connection, Timilsina said, “In 2016, a famous drugmaker was arrested on the charge of selling medicines at a higher price than the government-set price. However, the drugmaker was released due to the pressure from the business community,” he added.    

Where will it end?

Politicians are getting money without much effort and the situation is even more favorable to the business community as they do not have to be accountable to the people and system and they can operate business–ethical or unethical–without state scrutiny. 

As such, the trend will not end without massive public pressure and a massive policy overhaul, said Tara Nath Dahal, a political observer.

Cronyism and rent-seeking have become the norms, argues Bishnu Timilsina, adding that collusion between business leaders and political leaders will have a direct bearing on the federal system and democratic procedure as the people will see the malpractices as the result of system failure.  Both Dahal and Timilsina agree that people and leaders who believe in democracy should demand a thorough investigation into the property of leaders.

Politicians are getting money without much effort and the situation is even more favorable to the business community as they do not have to be accountable to the people and system.

The trend of business persons entering the political parties started before the second Constituent Assembly elections. 

“Politicians know they need money for elections. And in the PR category, a lot of businesspersons were included,” said Dahal, adding, “In the past, businesspersons used to be members of parliament, but now they are getting ministerial positions.”

Dahal believes that the only way the nexus between businesspersons and politicians can be broken is by introducing strict laws and by implementing them equally strictly.