The business of politics

During the 2017 elections, Baburam Bhattarai’s Naya Shakti Party propped up the Nepali Congress (NC) elsewhere across the country while seeking support in Gorkha, where Bhattarai himself would run, and Rasuwa where his party’s Prem Tamang was contesting.

But when it came time to register his candidacy, Tamang withdrew from the MP race and chose to run for state assembly instead, putting his support behind billionaire businessman Mohan Acharya, the bankroller of the NC.

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Acharya had registered his candidacy after convincing party chair and prime minister Sher Bahadur Deuba, presumably with money being exchanged, to let him run for office.

The construction contractor who spent a lot more money while campaigning, would go on to win Rasuwa. A year later during an interview, Bhattarai himself accused his party colleague Tamang of selling out his candidacy to Acharya.

Acharya’s opponent was Janardhan Dhakal, another construction businessman who had the UML ticket. The race in Rasuwa was therefore a battle between who could spend more money. Both candidates hosted lavish parties, had extravagant motorcades, and distributed cash to buy vote banks.

What happened in Rasuwa in 2017 is a reflection of Nepal’s current electoral system — competent candidates have no chance against powerful tycoons who have bought election tickets from party bosses.

Even as they spend extraordinary money to woo voters, Nepal’s political parties have failed to be transparent about their funding in official reports.

Donations from businesses are the primary source of funding for all political parties, and that is where the rot sets in.

However, the amount of financial support received from well-wishers, supporters and businesses are not broken down in the accounts of any of the parties. In fact, they are not mentioned at all.

Read also: Is democracy too expensive for Nepal?, Laxmi Basnet

The fact that all financial assistance is provided in cash and not through the banking system makes it easy for parties to circumvent institutions that oversee election management, even though The Political Parties Act 2017 stipulates that any transactions above Rs25,000 should go through the banking system along with the details of donors.

There is a similar lack of transparency when it comes to details about any fixed assets in the parties’ audit report. In many cases, private donors pick up the tabs for the renovation of party offices just to be above the board, like what the NC’s Umesh Shrestha did to get himself appointed minister by Prime Minister Deuba.

Nepal’s politico-business nexus began during the post-Panchayat era after the multiparty system encouraged collusion and quid pro quo. This co-dependency between business and politics became more embedded in subsequent elections.

“When political parties have to spend money to win elections, they start cultivating businessmen and then it is you scratch my back, I’ll scratch yours,” explains economist Keshav Acharya.

Over the years, watching from the sidelines was not enough, and Nepal’s rich directly entered politics as the country began its transition into a federal republic following the end of the Maoist conflict.

Former Finance Secretary Rameshore Khanal resigned in 2011 after Finance Minister Bharat Mohan Adhikari sought the counsel of industrialist Binod Chaudhary during the budget formulation process. He says Nepal’s political parties are at present governed not by institutional systems but the will of individual leaders who mobilise money by helping businessmen launder theirs.

“This practice was introduced by Girija Prasad Koirala in the NC and has been continued by both UML Chairman K P Sharma Oli and Maoist Chairman Pushpa Kamal Dahal,” says Khanal.

Indeed, public sector enterprises like Harisidhi Brick and Bhrikuti Paper Factory were privatised under the first elected government led by Girija Prasad Koirala, and turned into prime real estate.

The Ministry of Finance refunded value-added tax (VAT) to entrepreneurs on consumer goods for almost a decade after 2008, essentially putting VAT paid by Nepali citizens into the pocket of businesses, prompting questions of policy irregularities by the IMF.

Similarly, other NC leaders like former finance minister Ram Sharan Mahat formed the Tax Commission in 2014 which gave tax cuts worth Rs21 billion to big businesses, the case related to which is still pending in the courts.

More recently, Finance Minister Janardan Sharma is alleged to have made policy changes to benefit special interests, like the Shanker Group, through a bill to replace the budget brought by the Oli government.

Of late, businesses have also been actively involved in the infighting within parties that has characterised recent Nepali politics.

The photo of NCP co-chairs K P Oli and Prachanda having lunch with red rice at the home of business tycoon Durga Prasai to discuss party unity went viral and prompted widespread ridicule.

The two leaders also held several discussions at the residence of construction contractor Sharada Prasad Adhikari who was untouchable because of his proximity to Dahal, as well as at homes of businessmen like Niraj Govind Shrestha and Ajeya Raj Sumargi. Sumargi often acts as a frontman for Dahal’s business dealings.

Businessmen like Capt Rameswar Thapa and Moti Dugar were actively involved in negotiations related to party unification between UML leaders K P Sharma Oli and Madhav Kumar Nepal, who often met at their private residences.

Similarly, Oli's name has been linked to the Yeti Group, and the death of its founder Ang Tsering Sherpa in a helicopter crash in 2019 was a big blow to the former Prime Minister who had close personal dealings with him. Sherpa served as Oli’s fixer and was rewarded with coveted real estate and other deals for his conglomerate.

Entrepreneurs who transition into politics do so with the intention of influencing the state machinery to get business-related benefits. Moreover, interactions between business and politics are not limited to Nepali figures, as evidenced by the audiotape of Krishna Bahadur Mahara asking a Chinese businessman for Rs500 million on behalf of the Maoists during Constituent Assembly elections in 2013.

To be sure, politicians have always been making licensing and policies easier at the behest of banking, insurance, medical education, telecommunications, as well as in the stock market, allowing a select few to take advantage of the resulting decrease in competition.

Congress leader and former vice-chairman of the National Planning Commission Govinda Raj Pokhrel notes that money has become the lubricant in Nepali politics. In fact, voters themselves seem to seek out leaders who can take care of their financial interests.

“Unless we clean up our democratic system, our democracy is headed to the edge of a cliff,” he says.

Former Election Commissioner chief Bhoj Raj Pokhrel, in his recent article 'Political Finance Management: Opportunities for Electoral Reform' has proposed ideas for electoral reform, including the provision of grants to political parties to manage election-related expenses.

This proposal is not a new concept. Past governments have discussed this and former Finance Minister Prakash Chandra Lohani even made a related proposal in the 2004 budget.

UML leader Surendra Pandey argues that if political financing is to be made transparent, the government should provide financial support based on the votes received by each party.

Former Finance Secretary Rameshore Khanal argues that political parties should seek donations from Nepali citizens, which would consequently make them more accountable to the public.

Achyut Wagle, a professor of economics at Kathmandu University, notes that while government funding for parties is a viable option in an ideal democracy, it is questionable whether a country like Nepal can do it honestly.

Says Wagle: “It is more important to have transparency in political financing. Selling political positions for money has become the norm, and we need to ensure a democracy where businessmen cannot buy their way to power.”