Nepal's Private Sector Optimistic as Election Results Signal Potential for Stable, Two-Thirds Majority Government

Kathmandu. The results of the elections held on Falgun 21 have brought an unprecedented wave not only to the country's political sphere but also to the sluggish economy and the disheartened private sector.

With the Rastriya Swatantra Party (RSP) receiving a clear mandate to form a government with nearly a two-thirds majority, the Nepali economy, which has been trapped in a vicious cycle of political instability and policy uncertainty for a long time, is now expected to find its footing.

Industrialists and businesspeople, weary of past coalition governments, policies that changed with every ministerial reshuffle, and the lack of accountability in the bureaucracy, appear very enthusiastic now that a stable government led by a single party is assured for the next 5 years. The RSP has secured nearly two-thirds representation in the elections.

The RSP won 125 out of 165 seats in the direct election and also emerged as the leading party by securing the highest votes in the proportional representation category. A single government with a two-thirds majority, combining direct and proportional votes, is now certain.

For the first time in history, a government with a two-thirds majority is about to be formed. In the past, even when a single party secured a majority, it could not achieve a two-thirds mandate. However, following the general movement on Bhadra 23 and 14, voters have given a two-thirds mandate to a single party.

With the assurance of a 5-year stable government backed by nearly a two-thirds majority, there is great enthusiasm among the general public and the country's private sector. In the past, the investment climate deteriorated, capital flight occurred, and business morale declined due to past coalitions and unstable governments.

However, the private sector now expects the doors to economic prosperity to open with the formation of a strong government led by a single party. Businesspeople, tired of policies, ministers, and a lack of chain of command that changed with every government transition, appear confident that an environment for investment and work will be established for the next 5 years. As a positive reflection of this, the stock market has hit circuit breakers, mirroring the high morale of investors. Trading is ongoing. This signals that the private sector and investors have welcomed the incoming government through the capital market.

Since many industrialists and businesspeople have also entered policymaking positions through the elections, the private sector also expects economic reforms to be carried out according to their demands in the coming days.

This is an unprecedented coincidence since the promulgation of the Constitution, says Kamlesh Agrawal, President of the Nepal Chamber of Commerce. He stated that in previous years, Nepal's economy was almost on a ventilator due to political instability and tight monetary policy following the COVID-19 pandemic.

He said, 'In the past, every economic indicator was turning negative. With the crash in real estate transactions and the stock market, billions of rupees invested by the private sector were put at risk. The number of industrialists and businesspeople being blacklisted increased, and due to this despair, more than 2,500 youths and students were forced to migrate abroad daily.'

It is his view that the country's economy reached a ventilator due to past political and economic policy instability, youths were forced to migrate at a rate of 2,500 daily, and the private sector incurred losses of billions of rupees when the stock and real estate markets crashed. 'But now, with a government nearing a two-thirds majority led by a single party, the morale of the private sector has shot up,' Agrawal says, 'We are fully confident that the government will now move forward prioritizing economic growth and creating an investment-friendly environment.'

He expects the new government to amend laws to create an investment-friendly environment and focus on job creation to stop youth migration. Suraj Krishna Vaidya, Vice President of the Federation of Nepalese Chambers of Commerce and Industry (FNCCI), shares a similar view. 'In the past, policies and regulations changed with every government change, creating an environment where businesspeople could not work at all,' Vaidya says, 'Now a stable government has arrived. Our expectation is that the government will move forward by keeping the private sector alongside and in collaboration when making policies. Businesspeople are very excited right now.'

Focus on Real Estate, Agriculture, and Trade Deficit Reduction

As soon as a stable government is formed, positive effects have started to be seen in key economic indicators. Bishnu Ghimire, President of the National Real Estate Developers' Federation, says that businesspeople are now free from the fear of which minister will come and which policy will change for the next 5 years. 'The new Finance Minister has already announced that the tax base will be widened, but taxpayers will be respected. Real estate business is a major revenue-generating sector for the country; if it is prioritized and moved forward, the business community will fully support the government,' Ghimire said.

Rajendra Mall, Immediate Past President of the Nepal Chamber of Commerce, also emphasizes that the upcoming government must bring a permanent economic policy that lasts for 5 years.

'This government is a great opportunity for the country's peace, security, and economic stability,' Mall says, 'Now, revolution must be brought in agriculture to stop billions in imports. The government should adopt a policy of promoting the IT sector to increase exports and widening the tax base rather than just increasing the tax rate.'

He stressed that the strong government to be formed must formulate a permanent economic policy that will not change for at least 5 years. He understands that this mandate has brought a huge opportunity, as foreign investors (FDI), as well as domestic ones, have been hesitant to come to Nepal due to unstable policies.

Mall says, 'We call ourselves an agrarian country, but we are importing billions of rupees worth of food grains. Now, this government must prioritize agriculture and make the country self-sufficient in food by utilizing fallow land.' Likewise, he emphasized the need to promote the IT (Information Technology) sector, appropriate for the current era, to increase exports.

Infrastructure and Construction Sector: 'Work Should Not Stop Now'

The construction sector, directly linked to the country's capital expenditure and development, also expects action-oriented work from the new government. Ravi Singh, President of the Nepal Contractors' Association, states that the governance and development agendas mentioned by the RSP in their manifesto must be implemented verbatim.

'In the past, due to the lack of a working environment, 7 lakh laborers faced displacement; there was no chain of command,' Singh says, 'Just as Balen Shah built roads in Kathmandu that were stalled for 20 years in a year and a half, work should proceed at the same pace across the country.'

He emphasized that this government must establish a system where the Public Procurement Act is made infrastructure-friendly, rewarding those who work and penalizing those who do not. Similarly, Ganesh Karki, President of the Independent Power Producers' Association, Nepal (IPPAN), has the same view. He stated that the energy sector is the most hopeful about the arrival of a strong government. His demand is that the government should immediately declare an energy emergency to fulfill the target of generating 15 to 30 thousand megawatts of electricity mentioned in the RSP's manifesto.

'Currently, projects are delayed due to running around various ministries like Forest, Land, and others. A single-window system with all authority must be implemented now,' Karki says, 'If private sector is allowed in electricity trade, investment in transmission lines is increased, and consumption is boosted by opening industries like data centers, the economy will be transformed.'

Karki has demanded that data centers be opened to increase electricity consumption, the private sector be allowed to invest in transmission lines, and the private sector be permitted to trade electricity.

'Currently, project costs are increasing due to delays caused by forest regulations, land acquisition hassles, and environmental impact assessments. If the policies mentioned in the manifesto are implemented exactly as they are, employment will be created, and foreign currency will also be earned,' he said.

The election results of Falgun 21 have quenched the private sector's long-standing thirst for a stable government.

Learning lessons from the plight suffered by the economy while past governments were preoccupied with the game of retaining power, the entire business sector appears confident and enthusiastic that the strong government led by the RSP will build good governance, policy stability, and an investment-friendly environment.

The challenge and opportunity of how to convert this high morale of the private sector into economic growth and job creation rests on the shoulders of the new government.