There are snide remarks about K P Oli, prime minister and co-chair of the Nepal Communist Party, heading off next week to the World Economic Forum in Davos. What is a communist leader doing in a capitalist winter wonderland?
But Chinese President Xi Jiping who is also General Secretary of the Communist Party of China, has attended Davos as well. And just as China is Communist only in name, Nepal’s current state model is half-jokingly called ‘crony Communism’.
China will soon be the world’s largest economy, and is stepping in globally to fill the military, geopolitical and economic gap left by American disengagement. Nepal, on the other hand, is struggling with poor governance and economic stagnation despite having a government with vast powers. And while China is a one-party state, Nepal’s united Communists were duly elected in a landslide in 2017.
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Oli has said his main agenda in Davos is to send a signal that Nepal has put conflict and instability behind it, and is open for business. The Communist leader of one of Asia’s poorest countries is going to be speaking in panels on ‘South Asian Security’ and on ‘Beyond GDP’, and hobnobbing with the likes of Vietnamese Prime Minister Nguyen Xuân Phúc.
While no two countries are the same, and what works in one does not always serve as a model for another, if Oli did only one thing in Davos, it should be to take a few pointers from Vietnam on how it achieved record growth in Foreign Direct Investment (FDI) which hit $30 billion last year.
Nepal wants to be a medium-income country in the next decade, and for that it needs foreign capital. Even to achieve the United Nations’ Sustainable Development Goals by 2030, it is estimated that the country needs to spend Rs18 billion a year. But FDI in Nepal has dipped in the past three years to a record low of only Rs35 billion, and represents less than 1% of the GDP.
As the ICIJ and CIJ Nepal joint investigation released this week proves: the impunity and lack of transparency have got so bad that even the FDI Nepal receives is largely laundered ill-gotten wealth. The take-home message from the report is that it is not just the government that is dirty, so is the private sector. In many cases they are in cahoots to rob the people.
There is nothing his Vietnamese and Chinese comrades can teach Prime Minister Oli in Davos about how to boost investment that he does not already know. It is not for the lack of laws that foreign investors are skittish. Despite the field being wide open in Nepal for investors who want to leverage the country’s proximity to the world’s two largest markets in India and China, Nepal is better known as a kleptocracy than a democracy. In an interview with this paper the South Korean ambassador was diplomatic when he said Nepal needed a better business climate to attract investors.
The red tape in repatriating profits takes years, delayed by demands for kickbacks. Foreign contractors involved in large projects like Melamchi or Kathmandu Airport have been harassed by corrupt officials who brazenly ask for their cut. Ride-hailing startups like Tootle are targetted by transport cartels with political protection. Licenses for hydropower projects are hoarded by companies in which bureaucrats are shadow partners. Rules are made and changed overnight just so that foreign companies can be shaken down. In this setting, only investors who are unscrupulous themselves, or contractors whose intent is to never complete a project, will venture into Nepal.
Prime Minister Oli has said he will be show-casing Nepal’s impressive achievements of the past decades in improving its human development status, in resolving conflict, promulgating a federal constitution and holding elections to three levels of government. He will be underlining that from the strategic, trade and investment point of view Nepal is ideally located for investors.
His underlying message will be: forget that we are a Communist government with a supposedly socialist ideology, your investment will be safe here. With a strong government at the centre, and decision-making that is decentralising under the new federal structure, Oli’s pitch to the global business community will be that the early bird will get the worm.
But that is going to be a hard-sell. Investors will have seen the Ease of Doing Business rankings which project an iffy investment climate in Nepal.
The government is holding another Investment Summit end-March, but at current levels of extortion, extraction and corruption, and with much better investment contexts in other Asian countries, there is no option but to clean up our own internal act. All the schmoozing in Davos or speechifying at investment summits are not going to help.