Post-Protest Survey Reveals Historic Low in Investor Confidence Following 'Gen-Z' Unrest

Most political parties have already published their manifestos for the House of Representatives election scheduled for this coming Falgun 21. In their manifestos, they consider the private sector the main engine of the economy and claim they will implement policy reforms to boost the confidence of the business community.

To reassure investors, manifestos include commitments such as maintaining stable tax rates, ensuring the state acts only as a facilitator or regulator, creating a fear-free environment, encouraging domestic production and new entrepreneurs, eliminating monopolies, amending laws to remove obstacles, and promoting investment in productive sectors over trade.

However, the wounds inflicted on the private sector due to the attacks on their property and physical infrastructure during the 'Gen-Z' agitation of Bhadra 23/24 last year remain fresh. Therefore, regardless of which party comes to power after the upcoming House of Representatives election, it appears that the government must make substantial efforts to heal the distress felt by the business community.

A study report recently published by the online news portal 'Clickmandu.com', titled 'Investor Confidence and Business Environment After the Gen-Z Revolt, 2082,' also shows that private sector confidence has reached its weakest point in history.

According to the report, 98 percent of investors showed weakened morale to some extent, while 97 percent of businesspeople felt the investment climate was poor. Furthermore, the report concludes that 70 percent of businesspeople are in a 'wait-and-see' mode regarding further investment.

The study, conducted with the objective of measuring physical and economic damage, assessing investor morale, and examining the business environment, revealed deep psychological and economic trauma among Nepal's established and large business owners. Specifically, the damage to trust and morale appears far more alarming than the physical damage.

The private sector's contribution to the country's Gross Domestic Product, capital formation, job creation, and government revenue mobilization is significant. However, the report concludes that the two days of activity severely damaged the private sector's physical infrastructure, production systems, and service delivery, while also severely impacting the morale of entrepreneurs.

Participating investor-entrepreneurs in the study highlighted that billions of rupees in direct physical damage, disruption to production and sales, fragmentation of the supply chain, and the potential loss of employment for hundreds of thousands of Nepalis are direct consequences of the 'Gen-Z' revolt.

Physical damage and arson occurred at various business establishments, private homes, and vehicles during the 'Gen-Z' demonstrations. Analyzing the nature of the losses suffered by businesspeople due to the 'Gen-Z' protests, the impact on morale was found to be greater than the physical damage.

Chandra Prasad Dhakal, President of the Federation of Nepalese Chambers of Commerce and Industry (FNCCI), who was a key informant in the report, stated, "Vandalism and looting of industries and business establishments built over decades of hard work and billions in investment not only cause physical damage but shake the very foundation of an entrepreneur's confidence. Living in fear of whether one's investment and property are safe is the greatest pain for any businessperson."

According to him, the 'psychological damage,' which cannot be measured in figures, is far greater than the physical damage. He noted that the collapse of investor morale and the rise of insecurity will prove very costly for the country's long-term development.

Former FNCCI President Shekhar Golchha stated, "Details of the economic losses are still emerging after the protests. However, I feel the mental damage is greater than the economic damage. It is unbearable that the class which creates jobs, pays taxes, and takes risks to create wealth is being attacked out of envy and malice."

Golchha argued that if the private sector does not take risks and conduct business, the country cannot be run. "But we are always seen merely as 'profiteers.' If we do not take risks, jobs are not created, and the government does not receive taxes." Golchha asserted that profit is not inherently a bad word; entrepreneurs earn profit and pay taxes within the confines of the law. "Attacking the entire private sector based on the faults of a few limited individuals is a product of ignorance," Golchha stated.

In Clickmandu's study, 98 percent of participating businesspeople responded that their morale was affected—slightly, significantly, or extremely—by the 'Gen-Z' protests, while only two percent reported no change in morale. This fact confirms that the confidence of businesspeople has become extremely weak. Eight percent of businesspeople stated they were not ready to add investment or expand their business, while 70 percent are in a wait-and-see mode. Only 21 percent of businesspeople appeared willing to make further investments.

The report states, "The physical or economic damage during the 'Gen-Z' movement of Bhadra 23 and 24, 2082, will eventually be recovered over time, but the trauma inflicted on the business community is indelible." It added, "The study found widespread extreme despair, insecurity, and anxiety related to uncertainty among businesspeople."

The report shows that private sector confidence has reached its weakest state in history. It mentions that plans for new investments have been postponed, and some entrepreneurs have even begun contemplating 'capital flight.' The message that Nepal has become an unsafe destination for investment further diminishes the possibility of attracting foreign investment.

The private sector incurred approximately NPR 34 billion in direct damage from vandalism and arson at industries, banks, commercial establishments, and vehicles during the 'Gen-Z' revolt. The indirect economic damage, estimated at around NPR 81 billion, is even more severe than the direct physical damage. This is estimated to impact Nepal's GDP by up to five percent.

Participating entrepreneurs felt that a wrong narrative has developed in society where businesspeople, who should be called architects of economic development for contributing to job creation and revenue, are viewed as 'profiteers' or 'exploiters.' The report concludes that the dominance of negative public perception towards the private sector stems from the failure of the media, political parties, and the education system to foster a culture that respects entrepreneurship.

Nevertheless, the government's immediate actions following the 'Gen-Z' revolt—restoring law and order and introducing some immediate relief packages after listening to the private sector—have brought some hope to investors.

Pushpa Prasad Dulal, Chairman of Clickmandu, stated that this study report, released on the eve of the House of Representatives election, has prodded political parties and sent a message that maximum positivity must be developed to restore confidence in the business community.

Dulal said, "The tension following the 'Gen-Z' revolt is not just a psychological problem; it is a crisis linked to the very existence of Nepal's private sector. If the state does not immediately guarantee security, reinstate the rule of law, and create a private sector-friendly environment, the country risks being pushed into a long-term severe economic vortex and significant intellectual and capital flight." He warned, "If the pervasive fear among investors is not addressed in time, there is a risk of upsetting the social and economic balance."

According to the report, the confidence of businesspeople has been deeply wounded, and they continue to live under psychological distress today. The report concludes that the discouraging sentiment that 'making a profit by doing business is a crime' and the narrative of 'rich versus poor' have completely shattered investor morale and business confidence.

The report states, "When deep skepticism is expressed about the investment climate, it will take a very long time for the investment environment to return to its former rhythm unless the state guarantees peace, security, and the rule of law, and takes concrete steps to boost the diminished morale of businesspeople."

The study report concludes that since the private sector is the engine of the economy, sustainable economic development is impossible without the protection, promotion, and awakening of confidence in the private sector by the government. The report mentions that Nepal's economy can only move towards stability and sustainability if mutual trust, dialogue, and cooperation between the state, the private sector, and society are strengthened.

The report also suggests immediate, medium-term, and long-term actions that respective bodies or sectors should take to boost private sector morale. The report suggests, "A sustainable investment environment cannot be formed unless the state plays the role of a 'facilitator,' the private sector demonstrates 'professionalism,' and society expresses 'respect.' The state should not only consider the private sector as a 'milking cow,' nor should the private sector view the state only as a 'mechanism for causing trouble.' Prosperity will come to the country only by building a bridge of trust between these two; this is the only option today."