The report highlighted the fact that political parties are the most distrusted institutions in Nepal. Around 54 percent of those surveyed mentioned the political parties as the most corrupt, followed by the legislature and the police. Many in Nepal took the report as a clear reinforcement of rampant corruption. Opinion pieces decried the phenomenon, and labeled ‘corruption’ as the disease plaguing Nepali developmental processes. For me, this is where the problem lies: We don’t seem to realize that corruption is not a disease, but a symptom.
Corruption is never ‘the’ problem or even the ‘root’ of the problem. We have to realize that rampant corruption is a symptom of dysfunctional state mechanisms, overregulation, uncontrollably large public service sector, and, in Nepal’s case, absence of strictly enforced rule of law. And, then, there’s our faulty understanding: We take corruption as an absence of ethics. What we must understand is that corruption is not so much of absence or lack of ethics but absence of freedom, mostly economic.
The lack of economic freedom is visible in most aspects of our lives. Business corporations do not have the freedom to pursue their capitalistic pursuits in the best of possible ways because of intermittent disturbances from political or trade unions. Recent closure of Surya Nepal Garment in Biratnagar is a case in point. Travel agencies do not have the freedom to operate their vehicles in popular tourist destinations due to threats from local syndicates. In Pokhara—Jomsom route, red-plated and green-plated vehicles are not allowed to make trips. These are, but, only two examples.
In both the examples I cited above, corruption is an obstacle to business growth. The first case has to do with political corruption where political establishments misuse and mismanage the trade unions affiliated to the respective political parties. Some people even suggest that political parties fund and foster these unions for the very purpose of creating chaos. In the second case too, politics has a lot to do. The political parties and their unions favor one group of travel entrepreneurs over others for which they supposedly receive a “healthy” aid of corruption money in return.
However, we have to realize that corruption is only the symptom in both these examples. The underlying disease is the in punishing those involved in restricting the freedom of others for their own pursuit of wealth. Presence of weak rule of law in Nepal has fostered increase in corruption and in informal market, shadow economy is growing. A recent report by Nepal Economic Forum estimates that the informal economy of Nepal is worth somewhere between 40 to 50 percent of the GDP.
The other disease that plagues us is the weak property rights law. Many of us lack the knowledge about processes of practicing our freedom over property rights. Even when we have had enough knowledge, the bureaucratic hurdle we have to go through to register our properties is, sometimes, a nightmare. On the other hand, there are people that engage in corrupt behaviors to get more than they deserve. For example, thousands of homeowners in Kathmandu valley had captured and profitably used public lands for years, if not for decades, until the municipality council started to track them down recently.
Weak rule of law and weak property rights means we do not have a very conducive environment for pursuing business opportunities. The World Bank’s Doing Business, a report from this year, has it that it takes, on an average, 7 different procedures, 29 days, and around $241 to register a new business in Nepal. Even after ignoring the amount of money needed, the fact that it takes 7 different procedures and 29 days to register a business suggests that there are plenty of opportunities for our officials to engage in corrupt activities, from plain-old under-the-table money taking to rent-seeking.
One possible way to reduce such type of corruption is to reduce the number of steps and days needed to register a business. Unless we do so, we will always have people shying away from opening a new business. How many entrepreneurs can we afford to discourage from opening new businesses due to our poor Doing Business records? How many jobs could such entrepreneurs have generated if a system to encourage them to open new businesses with relative ease were in place? It is time for our government and entire bureaucracy to ponder over this question if we are to improve business environment in Nepal.
Perhaps we should try a solution that Indian economist Kaushik Basu has proposed. Let us make paying bribe legal but receiving bribe illegal. In addition, if a bribe-payer can provide evidence of paying a bribe, not only would the amount paid in bribes be reimbursed, but the bribe-payer (now considered a ‘whistle-blower’) would be rewarded with prize-money for exposing the corrupt official.
Then, every potential bribe-taker would refrain from taking bribe because it would be difficult to determine if the bribe-payer is a ‘normal’ bribe-payer or a whistle-blower. Kaushik Basu’s proposed idea might have some flaws of its own, but it’s worth a try in a region that Transparency International calls the ‘most corrupt’ in the world.
The writer is an economist
mukhanal@gmail.com
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