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Nepal’s Unfinished Search for Good Governance and Prosperity

Nepal’s repeated political transformations have failed to yield good governance and prosperity because the country’s deepest obstacles lie in political culture, institutional weakness, distorted incentives, and unresolved social, economic, geopolitical, and environmental contradictions.

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ratopati.com · By रातोपाटी संवाददात · 10 June 2026 · read the original in NE →

Although Nepal has passed through political revolutions, it has again and again had to confront incompleteness in its search for good governance and prosperity.

The tendency within political parties to place individuals above institutions, the bureaucracy’s lack of capacity and accountability, and the structural causes of corruption are the principal obstacles to good governance.

Ambiguity in economic policy, social division, geopolitical complexity, crises in education and health, the incomplete implementation of federalism, a weak media environment, and the challenges of climate change are obstructing the country’s development.

There is a strange paradox in Nepal’s political history. We ended the autocratic Rana regime, fought against the Panchayat system, made sacrifices for multiparty democracy, bade farewell to the monarchy, dreamed the dream of federalism, and finally drafted a progressive constitution through the Constituent Assembly. After every transition, a new wave of hope arrives; and every time, before that wave can reach the shore, it dissolves.

The question arises: why does our search for good governance remain unfinished again and again? Why does each new government become a prisoner of the same old structure? Why is our dream of prosperity always kept in reserve for tomorrow, never becoming the reality of today?

Because the desired good governance and prosperity were not achieved even after repeated changes, Gen-Z youth emerged in rebellion, and the country once again turned a corner. Not only Gen-Z, but citizens at large also appeared to stand on the side of change, and the election of Falgun 21, 2082, pushed aside all parties with long political histories and handed the reins of government to a new party and new faces.

After the present government was formed, the preface to the “Paper on Nepal’s Current Economic Situation,” issued in Baisakh 2083, begins as follows: “Though Nepal is rich in resources, possibilities, and goodwill, it could not become prosperous because of a crisis of thought, resolve, and integrity in governance. Nepal passed through many phases of political revolution, but the path toward meaningful transformation of the overall political-economic structure remained incomplete.”

The “absence of thought, resolve, and integrity in governance” is an obstacle to achieving good governance. It is for this reason that the hope awakened by every change has miscarried.

A trait powerfully described in the preface to the situation paper illuminates the weakness of our governing style:

“The root of Nepal’s political-economic crisis lies in a distorted incentive structure. Expensive elections, opaque fundraising, and a burdensome party structure had transformed politics from service into a profession and a medium of investment. As a result, policy corruption, transactional dealings, and crony capitalism flourished. Instead of economic growth through entrepreneurship, competition, and innovation, rent extraction through licenses, contracts, and regulation became the defining feature of the state-market relationship. This discouraged capable entrepreneurs and new entrants, pushing the economy toward an access-based structure rather than one based on value creation.”

Despite the weaknesses, it is not that there has been no progress in the past decade. A decade ago, installed electricity capacity was only 829 megawatts; now it has risen to 4,340 megawatts. Up to 2072, there were 11,798 kilometers of blacktopped roads; by 2082, roads built by the federal government alone had reached 20,202 kilometers. Provincial and local levels have increased investment in physical infrastructure. Over the last ten years, urban infrastructure across the country has improved visibly.

There has been steady improvement in the Human Development Index. Over the past decade, the literacy rate has risen from 58 percent to 76.3 percent. Poverty has declined. Even amid natural disasters or economic accidents every three or four years, the country’s macroeconomic situation has not deteriorated beyond control. Economic growth is certainly sluggish, but when assessed in light of political instability, a “distorted incentive structure,” the lack of strategic infrastructure, and the politicization of public institutions, the growth achieved cannot be dismissed as insignificant.

The list of positive changes and achievements could be longer than this. But the reality is that ordinary people were not satisfied with these achievements. Some argued that this much progress would have happened with the passage of time even if there had been no government at all. Others said that compared with the progress made by countries once at a similar level, this was not progress one could take pride in. Some, comparing present figures with imports of rice, vegetables, and other goods seventy or eighty years ago, insisted that the country is failing every single day.

Weak public service delivery, corruption everywhere from top to bottom, crony capitalism, unequal distribution of opportunity, the politicization of public institutions, and governance that is collectively devoid of accountability made the arguments of dissatisfaction stronger. As a result, the Gen-Z rebellion that arose with demands for good governance and corruption control received broad public support.

In this context, this essay seeks to identify the fundamental barriers that have prevented Nepal from moving forward on the path of good governance and prosperity. This is a purely technical analysis; it contains no political standpoint.

One: the crisis of political culture, and the vicious cycle of individualism and institutionlessness.

A terrifying tendency has been rooted for decades in Nepal’s established political parties: the tendency to regard the individual as supreme over the institution. Political parties are defined not on the basis of ideology, but on the basis of personality. Their internal democracy is weak, or absent altogether.

Party general conventions are not forums for genuine policy debate; they are merely formalities for the coronation of leadership. Young leaders cannot emerge, because a culture of seniority is suppressing new thinking. As a result, the people see the same faces, the same promises, the same failures.

The consequence of this tendency is extremely destructive. When institutions begin to work for individuals, the autonomy and effectiveness of the institution are destroyed.

The individualistic character of political parties has also affected the autonomy, independence, and capacity of constitutional bodies. The politics of appointments has lowered the credibility of constitutional bodies in the eyes of ordinary citizens. When the very chair of a chief commissioner in a constitutional body is decided in bargaining over power-sharing, that institution’s independence remains only on paper.

Not only constitutional bodies, but also important agencies that regulate economic and social activity, public health institutions, research bodies, educational institutions, diplomatic missions, and others saw the culture of party-based quotas and transactional dealings flourish in the selection of leadership.

The operating costs of political parties and the expenses required for election campaigning rose with every election. Because of a culture in which leaders sought to accumulate power within parties and remain in leadership, factions and subfactions developed in every party. In such factions, power began to be nourished not by ideas but by “finance.” For that, transparent sources of donations or the party’s lawful fund could hardly suffice. As a result, top leaders went on developing opaque sources under their own control; for this, collusion with business houses of ill intent developed as though it were a normal political tendency. As if that were not enough, posts of public importance became saleable commodities.

In an open society, it was not possible to hide these misdeeds. But top leaders stopped listening to public criticism and commentary. On the contrary, in some cases, organized use of counter-squads under various names and of social media began in order to neutralize public criticism. Counter-squads and social media were used to heap personal accusations on influential shapers of public opinion.

In countries where democracy has produced results, democracy within political parties is found to be strong. Political leadership listens to public voices and corrects wrong decisions or actions. Appointments to constitutional, regulatory, and important public bodies are made on the basis of definite standards, not on the basis of political or party quotas, and the officials of such bodies are not removed arbitrarily.

In this context, in the days ahead it is necessary to set by law the minimum standards of internal democracy in political parties. It would be appropriate to build institutional mechanisms for the formation of ideas within parties. Likewise, the existing laws on transparency in the financial sources for political parties’ operating costs and election expenses are not sufficient. Reform is necessary here. For good governance and prosperity, the right leadership must be selected in public institutions.

The relevant laws do contain standards and methods of testing for appointments to constitutional and regulatory bodies, universities, public enterprises, and diplomatic missions. But these are not used, or the experience is that leadership merely completes the method of using them in order to select the candidate it wants, or one who is ready to serve its interests. Therefore, this does not appear to be a situation that can be corrected only through legal or procedural reform. Its correction may be possible only through improvement in the conduct of leadership.

Two: the bureaucracy’s double crisis, lack of capacity and absence of accountability.

Nepal’s civil service is afflicted by two opposite problems at once: on the one hand, the number of capable employees is insufficient; on the other, the structure of accountability is so weak that no action is taken even when work is not done.

After the country moved into a federal structure, this problem became still more complex. The challenge of providing skilled administrative personnel to seven provinces and 753 local governments remains incomplete. Most local levels do not have employees with the necessary expertise: no engineers, no auditors, no urban planners. As a result, budgets cannot be spent, plans remain only on paper, and the people do not receive services.

But deeper than the issue of capacity is the problem of accountability. When the promotion, transfer, and appointment of civil servants are determined in a game of political apportionment, capable and honest employees become demoralized. Those with “access” occupy good posts in the capital, and those without “access” suffer punishment in remote districts. This arrangement rewards not competence but political proximity.

If an employee in a ministry, department, or central office in the federal capital has to be punished, he is transferred to a remote area. Where administration that is accountable, people-oriented, and capable of exercising judgment is needed, precisely there arrives an employee who feels punished. How, then, can there be good governance, and how can citizens feel that the government is there for them?

The competitive examinations conducted by the Public Service Commission ensure the standard of entry, but evaluation of performance throughout the period of service is generally confined to formality. The annual performance evaluation report is not taken seriously, and instead of impartial assessment, the unwritten rule of “do not raise inconvenient matters” does the work.

Only the determination of measurable and objective indicators for examining the work done by employees, performance evaluation on the basis of such measurable indicators, and a promotion system based on performance can bring employees capable of producing results to the right place. Provision for appointing external experts to specialized technical posts would be appropriate, and a strategy of long-term investment in human resource development is essential for building the capacity of local governments.

Three: not control at the structural root of corruption; the system itself is at fault.

When corruption is discussed in Nepal, it is usually limited to a question of personal morality. But corruption is fundamentally a systemic problem. When rules are complicated, processes opaque, and discretionary privilege unlimited, corruption becomes the natural outcome.

All three of these conditions exist in Nepal. To obtain a simple business permit, how many offices must an average citizen visit, how many documents must he prepare? The forest office, the district administration, the municipality, the Department of Industry: at every door, a wait for a signature, and a price for the signature. This arrangement is an invitation to corruption, not an exception.

The public procurement process is another major center of corruption. Government accounts themselves show that the annual capital expenditure of governments at all levels is satisfactory. A significant portion of the budget is spent only in the final week of the month of Ashar. How does this tradition of “Ashar development” ensure the quality of work? The answer is clear: it does not. The aim becomes not quality, but merely showing expenditure.

The most troubling aspect in the field of corruption control is impunity in high-level corruption. Small employees are punished, but major corrupt actors escape under the shelter of political protection. In such a condition, the people’s trust in institutions breaks down, and the social psychology that “everyone does it” normalizes corruption.

Nepal’s position in Transparency International’s Corruption Perceptions Index has remained consistently poor. Only after being placed on the FATF grey list were we forced to acknowledge the weakness of the financial system. This is reform brought by external pressure, not by internal commitment, and that is the sign of our weakness.

A radical simplification of service-delivery processes through one-stop service centers, the reduction of discretion through digitalization, effective implementation of laws against money laundering, and transparency in the asset declarations of high officeholders would certainly help reduce corruption.

Four: the dilemma of economic policy: neither socialism nor the market, a confused economy.

Nepal’s constitution speaks of a “socialism-oriented economy,” but in practice neither has the state played an active role in production, nor has it given the market full freedom. This in-between condition, neither here nor there, is the root of Nepal’s economic confusion.

Consider the condition of government enterprises. Nepal Airlines Corporation, Udayapur Cement, Hetauda Cement: the history of these institutions is a history of losses. The state invests in them, but cannot run them with commercial efficiency. Political appointments take the place of skilled management. Yet abolishing or privatizing them also requires political courage, which has not been seen so far.

On the other hand, in the absence of a credible policy environment, the private sector too has shown more interest in speculation and rent-seeking than in productive investment. Land prices soar to the seventh heaven, but factories do not open. This is vivid proof of market distortion.

Nepal’s trade deficit grows every year. Imports rise, exports contract. A remittance-dependent consumption economy holds the system up. This is not our strength; it is our weakness. When the country’s youth force goes to sell its labor in the Gulf and Malaysia, who will run factories inside the country, who will build enterprises?

The deadline for graduating from the list of least developed countries is drawing near. This should have been a matter of pride for us. But what is the reality? Our export competitiveness has not increased; our Human Development Index has improved, but not enough; and our economic vulnerability index remains high. After graduation, exports to some destinations may be subject to tariffs, and the export of certain specific goods may be affected.

For decades, Nepal’s industrial policy has carried the slogan of an investment-friendly environment in writing, but in reality both opening and closing a business are cumbersome processes. Nepal’s position in the index published by the World Bank was never encouraging. Even the Investment Board’s “fast track” route remained confined to minutes for years.

A clear ideological decision in economic policy is necessary: a policy that can create opportunities for all and provide an equal basis from which to use available economic opportunities. For this, the commitment to move toward the framework of an “inclusive market economy” must be clear. For such an economy, government policy and investment must help all producers gain access to markets and develop the capacity to compete. Strategic investment is needed in domestic production, export promotion, and the modernization of agriculture.

Five: social division and the challenge of inclusion: diversity must become strength, not weakness.

Nepal is an extremely diverse society in terms of caste and ethnicity, language, culture, religion, and geographical settlement. This diversity is our wealth. But decades of unequal development and social discrimination have shown the risk of turning this diversity into division.

Inequality in access to state resources and opportunities on the basis of caste and gender is still a reality. There is mandatory provision for women’s representation in the federal parliament and provincial assemblies, but it is hard to say that this representation is being transformed into real decision-making power. Women representatives added through the “closed list” in the electoral system are often hostages to the will of party leadership.

The rights declared by the constitution for Dalits, especially the abolition of untouchability and the guarantee of representation, have still not been fully implemented. Questions of self-governance and cultural rights for Janajati communities remain contentious in political dialogue.

The Madhes question, which took the form of blockade and protest immediately after the constitution was promulgated in 2072, has not been fully resolved. The constitution has been amended seven times, but it is still difficult to say that the Madhesi community has a full sense of ownership. This incomplete social contract continuously challenges the country’s unity.

A further matter of concern is the widening gulf of economic inequality. The unequal distribution of development between city and village, between mountains and Tarai, and among development regions is becoming a permanent source of social tension. When the youth of villages go to the cities and the youth of cities go abroad, the very organizational fabric of society begins to come undone.

For inclusive development, policy commitment alone is not enough. Economic policy requires regional balance, equal access to education and health, and concrete programs of social justice guaranteed by long-term institutional mechanisms.

Six: geopolitical complexity: the Nepali art of balance between India and China.- छः भू–राजनीतिक जटिलता: भारत र चीनबिच नेपाली सन्तुलनको कला

Nepal’s foreign policy is a complex puzzle. Securing the national interest while maintaining balance between two enormous neighbors that exert deep influence on Nepal’s economic, security, and political dimensions is no easy task.

India is Nepal’s largest trading partner, the main source of our energy and fuel, and also a land of employment for millions of Nepalis. This is a reality of interdependence. But examples of India’s interventions in Nepal’s internal politics have also taken their place in secure memory.

Nepal joined China’s Belt and Road Initiative, but concrete implementation has not yet begun. The Kerung-Kathmandu railway project still remains only a dream. The trade balance with China is unfavorable for Nepal. Attracting Chinese investment and maintaining diplomatic balance will have to be accomplished at the same time.

The controversy over the Millennium Challenge Corporation compact assistance must be analyzed in this same context. That project, stuck in parliament for five years, and the geopolitical debate around it expose the lack of clarity in Nepal’s foreign policy. It is our misfortune that even accepting development assistance becomes afflicted by domestic politics.

The slogan of a “balanced foreign policy” alone is not enough. Nepal must determine the priorities of its foreign policy on the basis of specific national interests, using its comparative advantages: geography, water resources, tourism, and human capital.

Seven: the crisis of human capital in education and health.- सातः शिक्षा र स्वास्थ्यमा मानव पुँजीको सङ्कट

The long-term prosperity of any nation depends on the quality of its human capital. And this is the very area where Nepal most needs investment.

The condition of public schools is worrying. The expansion of private profit-oriented schools and the neglect of public schools are creating a class divide. Those with money send their children to private schools; those without are forced to be content with poor-quality public education. This mocks the constitutional guarantee of equal opportunity and creates an obstacle to the efficiency of an inclusive market economy.

Higher education requires serious thought. Nepal’s universities have not been able to become centers of research and innovation. Even a large institution like Tribhuvan University does not hold a high position in world university rankings. Nepal’s best students go to study at foreign universities and often do not return. This brain drain is a waste of our human capital.

There is the same double standard in the health sector. Government hospitals are crowded, short of personnel, and lacking essential medicines. Treatment in private hospitals is beyond the reach of ordinary people. The gulf between health services in Kathmandu and health services in remote areas is shameful.

The Covid-19 pandemic exposed these weaknesses further. The lesson it taught us, that a country cannot become prosperous without adequate investment in the health system, has still not been fully internalized.

The solution is the transformation of public schools and hospitals, a constitutional guarantee of spending a minimum percentage of gross domestic product on education and health, and the creation of an attractive environment for outstanding technical personnel to work in the country in order to stop the brain drain.

Eight: environment and climate change, a neglected crisis.- आठ: पर्यावरण र जलवायु परिवर्तन, उपेक्षित सङ्कट

Nepal is among the countries most at risk from climate change, while our contribution to climate change is minimal. This is a vivid example of “climate injustice.”

Glaciers are melting, weakening the long-term basis of our hydropower production capacity and irrigation. The risks of floods, landslides, and drought are rising. Our agricultural system, still dependent on the monsoon, is not in a position to withstand the shocks of climate change.

But in our political agenda, climate change is always pushed to the back. The issue of environmental protection always falls in the last row of budgetary priorities. In access to climate funds, transition to a green economy, and implementation of the Sustainable Development Goals, Nepal appears weaker than its potential.

Hydropower is one of Nepal’s greatest comparative advantages. A country with hydropower potential of more than 82,000 megawatts still depends on India for electricity. This is a symbol of our policy weakness. The dream of increasing domestic consumption, exporting electricity to India and Bangladesh, and becoming South Asia’s “clean energy hub” still has not been fully implemented.

Nine: the unfinished project of federalism: the structure was made, the spirit was not.- नौ: संघीयताको अपूर्ण परियोजना: संरचना बन्यो, भावना बनेन

Through the constitution of 2072, Nepal moved into a federal structure. This was a historic change, from centralized rule toward a multilayered, empowered, decentralized system of governance. But the success of federalism depends not merely on the creation of structures, but on fiscal autonomy and administrative capacity.

Local levels received the authority to collect taxes, make plans, and implement them, but they could not obtain the necessary personnel and technology for this. The formula for fiscal transfers was applied, but it has not been updated with the times. The conflict of authority among the federal, provincial, and local levels has still not been resolved. If provincial and local levels need to acquire land for their development and construction work, they have to appeal to the federal government.

Some local governments have made notable innovations: parking management in Pokhara, public health programs in Dharan, and digital service systems in certain rural municipalities. These are positive signs. But the institutional mechanism to broaden them remains weak.

Ten: the media and information environment, the crisis of democracy’s fourth pillar.

Independent and accountable media are an indispensable basis of good governance. In Nepal, media freedom is constitutionally protected, and the numerical expansion of media has been remarkable. But the condition of quality journalism is worrying.

Most media outlets are not economically self-reliant; for advertising, they depend on business houses or political forces. Such dependence constrains editorial independence. The culture of “paid news,” in which the boundary between news and advertisement is not clear, strikes at readers’ right to receive truthful information.

…the essay continues at the source.