English - Support to Participatory Constitution Building in Nepal ...

Private sector in post-conflict state building4. Government-private sector relationshipAlthough governments after the 1990 movement gradually promoted theprivate sector, their policies were not clearly or consistently reinforcedby subsequent ones. Little was done to address fundamental issues, likeloss-making public enterprises and a highly bureaucratic administration.The lack of clear signals to the private sector about the extent and natureof policy reforms, as well as the inconsistency of these policies, resultedin an uncertain financial environment. In the meantime, practices like ahigh level of non-performing loans, excessive government involvementin the banking sector, weak corporate governance and organisationalculture and unwanted political interventions, to name a few, continueeven today. There is an urgent need to undertake important measuresto strengthen the financial system. After all, a competitive, efficient andhealthy financial system is vital for enhancing growth, efficiency andmaintaining the stability of the economy.The governments’ continued failure to provide adequate support andprotection, even in the post-conflict situation, has been a major constraintfor a more active involvement of the business community in development,so claim the private sector actors. As a result, private investors’ confidencein the stability of government policies and the capacity of the governmentto provide support and protection is very low. Such low confidence onthe government has, it is believed, discouraged new investment andencouraged capital flight.The fact that last two governments in Nepal have been both led by the twobiggest communist parties has not been, it appears, a particular problemfor the private sector so far. The primary reason behind this is that bothof these governments have more or less adopted a similar and positiveapproach towards the private sector like the previous governments. Theyhave clearly stated time and again that private enterprises are economicnecessity to bring about the economic transformation the countryneeds and are essential for development. However, the parties havelooked ambiguous and uncertain at times. Certain youth wings and tradeunions appear to be driven by an anti-corporate ideology, and the partyleadership appears to have lost control of their actions. This has led todeterioration in labour relations, which in turn have intensified problemsof low motivation and poor discipline among employees. Such factorshave not only lowered the morale of the domestic private sector actors,but have also withered away foreign direct investment (FDI) from Nepalin the recent years.52