Private perceptions

DEC 27 -

Much of the corruption in Nepal takes place at the nexus between the political sector, the private sector and the bureaucracy. In this triangular relationship, the three different actors have different motives and roles to play. The politicians represent the demand side of the corrupt transaction; they need money to finance party activities, win elections, take care of party cadres and maximise their returns. The private sector represents the supply side; they dole out money to influence policy decisions, get access to government services and have protection of their business interests. The bureaucrats (read the word rat inside) perform an intermediary role or they act as interlocutor between the demand and supply sides of the corruption equation. In the process they seek to fulfill their interests, which include an adequate share in kickbacks and commissions, job security and ensuring perks and privileges. Much has been written on political and administrative corruption. But there is little information available on private sector corruption in Nepal. This small write-up is meant to shed information on private sector perception of corruption in Nepal. Let me openly assert here that, corruption is still the “C” word, a taboo in Nepal’s private sector boardrooms.

In April 2012, a British consulting firm called Margon, with funding support from Dfid, organised a management survey of the Nepali economy. The survey covered 544 Nepali business people residing in five major urban centres in Nepal. One tables from the survey report gives the frequency distribution of the respondents for the question: Which of the following is perceived as a main barrier in terms of your enterprise growth? It is interesting to note that, out of the 12 different identified factors; “corruption expenditure” is rated at the lowest level of importance with only 16 percent responding it to be “very important”. The business people have identified price of the commodity, government legislations and regulations and the cost of production as the three top-most important barriers. The second table shows the frequency distributions of the responses ranked for the question: What would improve the government’s performance? It is amazing to find here a whopping majority of the respondents (82 percent) saying “enforcing effective measures to curb corruption” as the second most important factor to improve government performance. Without questioning the survey methodology involved, clearly, there is a margin of difference between what the business people in Nepal say and what they actually do. The responses in the table imply that corruption expenditure is not a big problem for Nepali business people but when it comes to business solutions “curbing corruption” becomes an important agenda. Clearly, there is inconsistency in the response pattern.

 On the one hand, we have business people ranking the corruption problem at the bottom and, on the other, the same people are saying that curbing corruption is an important factor. The contradictory response can also be interpreted this way: for the business people in Nepal, corruption is not a big problem. As everybody resorts to bribing, there is a kind of level playing field in the bribery transactions. This must be the reason for corruption expenditure coming at the bottom among the list of business problems. However, when it comes to the receiving end of the transaction, they put the blame on public officials. Confronted with two choices, people are more eager to talk of someone asking for bribes from them than him or her offering bribes. The private sector in Nepal read themselves as the victim rather than a source of the corruption problem. This is the reason why the private sector anti-corruption drive has come to a state of limbo in Nepal.

Let us move on to another set of data. Very recently, FNCCI released the Business Confidence Survey said to be taken in June-August 2012 with a sample size of 403 respondents, covering 42 districts of Nepal. This reflects an average of less than 10 people from each district. The survey puts corruption (assuming it is subsumed within the governance factor) to be the fourth most critical challenge facing the Nepali economy. In the survey political instability, supplies of energy and strikes and bandas have been reported to be the three top-most business challenges.  The Business Confidence Survey, reported to be a first of its kind, is funded by USAID. I am not sure whether the surveyors are aware of the USAID-supported Provincial Competitiveness Index in Vietnam or, for that matter, the superb survey done by Social Weather Stations in Philippines. One can judge the quality of the survey report simply by flipping through the pages.   

I suppose more reliable information on private sector perception of corruption comes from the Davos-based World Economic Forum survey organised for its annual publication, Global Competitiveness Index. Actually, the survey work has been commissioned to CEDA in Nepal. In the survey, in 2007-8, out of 15 problematic factors, Nepali business people rated corruption to be the fourth most important factor. The three top-most factors included government instability, policy instability and inefficient government bureaucracy. In the latest survey (2012-13), the ranking of the corruption factor has moved on to become the second most important factor. Government instability is still at the top. Last year, corruption was at third place. The international survey far more clearly and consistently presents private sector perception of the corruption problem in Nepal. The results of the survey are also consistent with “freedom from corruption index” published by the New York based-Heritage Foundation. In its composite index, comprising of 10 factors, after investment freedom, freedom from corruption is rated as the second most problematic factor for business operations in Nepal.


Posted on: 2012-12-27 08:35