Realities in Conflict of Interest and Corruption Challenges in South Asia: The Case of Nepal

ASIA--PACIFIC, 1 May 2023

Kedar Neupane - TRANSCEND Media Service

1. Introductory Background and the Context

22 Apr 2023 – According to the 2021 Corruption Perceptions Index by Transparency International, Nepal is one of the most corrupt in South-Asia and it ranks one of the top fifteen most corrupt in Asia. Corruption is a well-documented issue in Nepal, and several government institutions and individuals have been implicated in corrupt practices. According to Transparency International’s Corruption Perceptions Index 2021, Nepal is ranked 117th among 180 countries, indicating that corruption is still a significant problem in the country. This has not improved in real terms yet. There have been reports suggesting executive branch of the government, judiciary, public procurement, security agencies, public transport, health care system and education sector have been perceived by people involved in corruption.

Examples of corruption shows that corruption and political interference in the judicial system involving appointment of judges and the handling of high-profile cases; police force’s for accepting bribes and engaging in other corrupt practices in relation to traffic violations and land disputes; public procurement process for lacking transparency and accountability, and absence of performance auditing and collusion of interests; financial mismanagement in health sector in procurement of medical supplies and equipment; education sector in relation to the allocation of scholarships and the appointment of teachers; lack of proper accounting of approved budgetary allocations authorized for disbursements during the fiscal account (known as Berouzu account or unedited year-end expenditures) remain unaccounted for years in billions of rupees under the successive governments.

Sources of the major conflict of interest in Nepal seems to have emerged prominently and openly in public domain with promulgation of state of Nepal into a federal democratic republic and the rise of political oligarchs in the name of an illusionary federal democratic system of governance. It is understandable that a certain level of conflict of interest could have been expected because of age-old socio-economic inequalities entrenched in a society with diverse ethnicities, cultures, and conflicting traditions, for these issues are trapped within the confines of inter-generational poverty and feudal-mindset, lacks critical thinking, and awareness of functional education and prefer political interferences at all levels of governance while keeping financial interests, impunity, and nepotism unbroken.

This landscape can be fertile ground for radicalization of population in socio-political context. This could further weaken governance modules without realizing such imbalances could generate destructive forces in nation building process. This phenomenon easily manipulates national psychic and has adverse impact on political, social, and economic development prescripts in nation’s thinking, and impact fairness and good governance.

Is conflict of interests the mother of all corruption?                  

Conflicts of interest occur when an individual or organization has competing interests that interfere with their ability to act impartially or in the best interest of others. This creates opportunities for corrupt behavior, such as when public officials use their positions for personal gain or when businesses use their influence on secure favorable treatment.

One must equally recognize that conflicts of interest are not always inherently corrupt, and many organizations have policies and procedures in place to manage them appropriately. Additionally, corrupt behavior can occur even in the absence of a conflict of interest, so it is important to address corruption through a range of measures, including transparency, accountability, and effective law enforcement.

Issues of Public Concern:

Root causes of common conflict of interests

There are some common causes that perpetuate competition over actual incompatible desires which have potentials for developing into conflict over varieties of issues, money, resources, time, power, authority to satisfy own needs at all levels of social and economic spheres, including at work and institutions impacting operating modules resulting into widespread corruption to malfunctioning of democratic norms of governance. Contextual comprehension of such situations requires deeper understanding and recognition of socio-economic compact, political environment construct together with associated evolutionary trends in people’s psychic. More importantly, what it meant by conflict of interests in following areas will require contemplation prior to enacting preventive measures:

• Political power: Different political parties and factions within the government modules would have conflicting interests in terms of gaining and maintaining power. Nepal has had a long history of political instability and conflict, with different political parties and groups competing for power. Political violence, protests, and strikes are common. These are common occurrences from learning institutions to civil organizations, state enterprises disrupting public services delivery and quality education affecting daily life and business. Checks and balances between the power centers are required in a democracy for effective functioning of institutions and ensuring delivery of services for greater goods of the public. But in this republic, it has been severely undermined by political parties’ obsession of power for personal gain and authority at any costs, like in an autocracy, as evidenced by the current party politics in Nepal.
• Ethnic and regional identities: Nepal is a diverse country with ethnic and regional identities, but not large population like in some other nations like India, Nigeria, or Ethiopia. Conflicts would easily arise when diverse groups feel that their interests are not being adequately represented or protected by the government. Sometimes ethnic groups could have conflicts with each other on issues of little importance at the national level when communities become radicalized for various local reasons. For example, Madhesi people in the southern Tarai region have had conflicts with the Nepali-speaking hill people over issues such as language, representation in government, and resources. Likewise, silent, and unnoticed tension arising from population movement or relocation for economic and social reasons from other regions to urban areas in Tarai, Kathmandu and Pokhara valleys could generate future conflicts. There may also be other issues slowing developing as such when people become increasingly aware of their identities, socio-economic isolation, and demand state recognition.
• Religious conflict: Nepal is a predominantly Hindu country, but there are also significant Buddhist and Muslim population, and a growing number of Christians. Media reports indicate there have been tensions between Hindus and Buddhists in the past over issues such as religious practices and festivals, and social events linking with class identities and ethnicity.
• Resource allocation economic inequality: Conflicts may arise over the distribution of national resources and state revenues including land, water, forests, and minerals in areas with valuable natural resources. According to World Bank data Nepal has the highest tax rate in terms of GDP per capita in the sub-continent while being one of the poorest countries in Asia. This would imply there would be, in future, more often conflicts over resources, such as land and water and state subvention to support different tiers of governance structure. This means government policies and development projects could also lead to conflicts of interest with local communities.
• Corruption in governance system: Financial and political corruption are the major obstacles in good governance in Nepal. Conflicts, however, could also emerge, without much realization of the ground situation, when individuals or groups seek to exploit government resources or influence for personal gain. Government involvement in corruption scandals is plentiful reported by news media. A few examples illuminate the scale of the problem. Scandal on medical supplies procurement deals with OMNI; scandal on collusion between senior officials of Inland Revenue Department and Tax Settlement; controversy surrounding implementation of never-ending Melamchi Water Supply Project which have overran initial costs at every turn of the execution and have displayed abject mismanagement of large project work; scandal involving land acquisition at Lalita Niwas inside Prime minister of Nepal’s residential compound may adequately highlight the ebb and flow of corruption patterns at different levels of governance. Similarly, anomalies surrounding Nepal Airline Corporation’s violation of Public Procurement Act in purchasing and/or leasing aircrafts are widely reported in local media. It shows the government’s ineptness in managing state enterprises which only magnifies authorities’ zeal for abuse of power and display of government’s extravaganza of financial resources.
• Foreign relations and regional conflicts: Nepal’s relationship with dominant powerful neighboring countries, like India and China, would remain a source of conflict, particularly in terms of trade and border disputes, despite successive governments repeatedly claiming, every now and again, that they are close friends. Political elites use this proclamation, more frequently than ever China and India, and according to political leadership’s personal interests and choosing. Without delving into the realities, context and facts of the issues, the population at large is being polarized against each other in shrouded theme of nationalism and sovereignty without consideration of larger interests of the common people. This is the utmost conflict of interest that dominates Nepal’s socio-political landscape. It has, thus, become a major roadblock in forging collaborative partnerships with the neighbors, and Nepal has miserably failed to become a vital connecting economic and socio-cultural bridge between the two major world powers. This does not require compromises over nationalism or sovereignty, as trumpeted and orchestrated, and promoting Nepal’s future development alignment and interests with the systems of those of its neighbors while maintaining strategic autonomy, and ensuring that Nepal could benefit over trade, education, tourism, transport, infrastructure, manufacturing, supply chain, information, technology, water resources, and other mutually beneficial joint efforts, including in climate adaption and mitigation, and avoid border tensions, for example.
• Socio-economic issues: With high level of poverty, low wage and income, out-migration of productive work force for education, work, and future job opportunities overseas, falling agricultural production of basic food commodities, lack of skills development and productivity, absence of affordable quality healthcare, transport and, sustainable infrastructure development could lead to conflicts of interest within the different tiers of governance, socio-economic strata, and community due to competing interests and priorities over resources and funding.

Why is tiny nation Nepal being labelled most corrupt in South-Asia?

Political interference, financial mismanagement, and lack of accountability of the public funds by the decision makers in the governance system have contributed to the conflict of interest across all three branches of the governance. It is perceived by people that government officials and political leaderships have conflicting interests, such as personal gain or loyalty to certain groups or individuals, they may be more likely to engage in corrupt practices, such as bribery or nepotism. This situation would lead to policies and decisions that serve their own interests rather than the public good and/or in favor of the common people. This undermines public trust in government institutions which are under the dominance of political patronage, and they are unable to function autonomously for the public good, leading to morally unjust behavior, political instability, and unrest.

Addressing both the causes of conflict of interest and effects of corruption in governance is crucial for promoting transparency, accountability, and good governance and community welfare in a society. This requires robust combating measures like anti-graft and corrupt practices and red-tape laws, independent oversight and enforcement mechanisms, and transparency in decision-making process.

Several factors have contributed to the cancer of corruption in state bureaucracy in Nepal, major ones being political interference, inefficient bureaucracy, fiscal abuse, ineffective parliamentarians, and the subservient nature of bureaucrats. Political interference is common where politicians use their power to influence bureaucratic decisions or engage in patronage networks to advance their own interests. This is exemplified by the appointment of unqualified or corrupt officials, and the misuse of public resources for personal gain.

Inefficient and inept bureaucracy enhance state corruption, as bureaucratic processes become slow and less transparent appearing like it is a complex, and opaque to most people. This concomitantly creates opportunities for officials and intermediaries to demand bribes or engage in graft and other corrupt practices to expedite or manipulate decision-making processes.

The other major problem is the subservient nature of bureaucrats in Nepal is a contributing factor to state and political corruption. It may also be recognized that, in many cases, bureaucrats may not be the only one and independent actors but serve on the whim of political leaders or senior officials. This creates a culture of deference and obedience, where officials prioritize loyalty to their superiors over their duties to the public.

Civil Service cadre in Nepal is influential because of unionization on political party lines and network of patronage who frequently use bureaucratic appointments to create a culture of favoritism and political loyalty, rather than merit-based appointments and transfers as a tool to consolidate power and reward supporters. This is one of the major problems that has wreaked the civil service in Nepal and system of governance has become near dysfunctional and have failed delivery of public goods for common people.

The issue of corruption in the state governance requires adoption and implementation of combat measures to increase transparency, accountability, and professionalism to reduce political interference and simplicity in bureaucratic decision-making processes. However, it is also important to note that combating corruption is a long-term process that requires sustained effort and commitment from all stakeholders.

Measures to Combat Cancer Culture of Corruption:

To manage corruption, Nepal needs strong legislations, rules, and regulations, upon analyzing root causes of the conflict of interest and operating environment that fosters corruption. This could include effective anti-graft and corrupt practices and anti-red tape laws, promote transparency and accountability, and build public trust in government institutions. Below are some measures which would help check political, financial, and judicial corruption in Nepal:

• Strengthening anti-graft and corrupt practices and re-tape laws and institutions with strong legal frameworks: Nepal needs a robust legal framework that criminalizes corruption and provides harsh penalties for those found guilty. The government must enforce these laws strictly and impartially. To do this, Nepal needs to have strong Anti-Graft and Corrupt Practices and the Anti-Red Tape Laws that would provide the backbone for the country’s fight against corruption. Our efforts should be focused on this just as democracy requires constant monitoring and reform. Laws should be applied across all segments of society and institutions to prevent and punish corruption without exceptions and to reduce conflict of interest. Effective execution and implementation of Anti-Graft and Corrupt Practices and Anti-Red-Tape Laws will require autonomous Anti-Corruption Commission (ACC) and the Commission for the Investigation of Abuse of Authority (CIAA) and strengthened to ensure their independence, impartiality, and effectiveness. Anti-corruption agencies should be provided with sufficient legal powers, resources, and authority to investigate and prosecute graft and corrupt practices which can go a long way in addressing this cancer in the governance. These agencies should start focusing their investigative attention to the big political fishes rather than running around only the lower ranks of the civil cadres. In parallel, the selection of senior appointees to run this institution is to be selected on the merits of individuals having impeccable exacting standards of relevant work experience and having non-political background. The selection process must also include open discussions on the candidates, and voting in public by a select committee, including members from civil society organizations.
• Increasing transparency and accountability: Nepal needs to promote transparency and accountability in its governance processes, including public procurement, budgeting (not only as a yearly event without open debate), and accountable fiscal management. Transparency and accountability are key to fighting corruption. Nepal can increase transparency by making government processes, budgets, and transactions publicly available and accessible. The government should implement a system of performance auditing and measures to ensure that public officials are held accountable for their actions as well as for their inactions. For this purpose, laws should be enacted allowing freedom of information accelerating programs like citizen’s partnership in scrutiny of the government’s auditing program to promote inclusive governance and transparency, modelling from international best practices. This must precede with audit of “Berouzu” account (yearly sum of billions of rupees) and performance auditing system in Nepal for financial accountability which does not exist yet.
• Enhancing public awareness: Encouraging citizen participation in decision-making process and creating channels for feedback and grievance redress can help to prevent corruption. Educating the public about the harms of corruption and how to recognize them and report would be equally crucial. This can go a long way in preventing and fighting corruption. The government, civil society organizations, and the free media can play a key role in raising awareness and promoting a culture of zero-tolerance towards corruption and minimize conflict of interest.
• Strengthening judicial independence: Judicial independence is critical to ensuring the rule of law and fighting corruption in any democracy. Selection of judges should be transparent, and on merit, and appointees must have impeccably exacting standards of relevant work experience and who are non-partisan and have no political affiliation whatsoever. The government should take measures to ensure that the judiciary is free and independent without political influence and pressure and can provide fair and impartial justice.
• Strengthening bureaucracy: The bureaucracy can play a crucial role in combating corruption. It is essential to recognize that no single institution can stop it on its own. It requires a collaborative effort from all segments of society to create a corruption-free Nepal. The bureaucracy in Nepal needs to be strengthened with competent and well-trained staff who are adequately compensated financially, secured, and protected from political interference. The merit-based recruitment system would help reduce corruption in recruitment and promotion processes.
• Creating a whistleblower protection mechanism: Raising awareness among working employees and civil society organizations about the impact of corruption on society and promoting civic education can help to build a culture of accountability and transparency. In these efforts, whistleblowers can play a vital role in exposing corruption. Nepal should create a mechanism to protect whistleblowers from retaliation and ensure their anonymity.
• Implementing e-Governance: E-governance could help reduce corruption by increasing transparency, reducing human interaction, and improving efficiency. Nepal should invest in e-governance infrastructure to ensure that government processes are streamlined, and corruption is minimized. This should start with reforming the government procurement process and focus on quality, timely delivery, and sustainability rather than cost-effectiveness.
• Strengthening political party finance regulations and electoral reform: Political parties are often the leading source of conflict of interest and causes corruption. Nepal should strengthen regulations around political party finance, intra-party consultation process, and electoral system reform to ensure that inclusive and transparency in their deliberations and management of party affairs, funding, finances, and abide by culture of ethics in democratic functioning of political party.

Implications:

Conflict of interest in parliamentary system of governance and uncertain future.

The parliamentary system of governance has failed deliveries on people’s expectations of sustainable economic development due to overwhelming conflict of interest in the system of governance. Governance operating modules and instruments appear to have been favorable to elected officials catering vested personal interests for power, authority of the position motivated by financial gains in policies or decisions being made by the government. This has created a situation where the officials prioritize their own interests over those of the constituency and the nation they are elected to represent. There have been several instances of conflict of interests among parliamentarians and decision makers in the executive, bureaucracy, and judiciary. Long term implications of such dismal performance of the governance system in this tiny republic are hard to predict except to say that there will be long-term adverse fall outs and compromises in common people’s aspiration to prosperity and wellness. Undoubtedly, this nation is actively transforming itself to become a failed state of the 21^st century, instead of graduating to the club of middle-income countries as a sustainable economy in coming years as predicted by the successive governments.

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Kedar Neupane is a founding, executive board member of the Nepal Policy Institute, an independent think-tank , a retired senior UN official, and president of ‘We for Nepal’ association based in Geneva, Switzerland where he lives. He has worked in several countries in Africa, the Middle East, Asia and Europe in his 38 years of service with the UN system and was Senior Change Management Advisor to UN High Commissioner for Refugees. Views expressed are his personal analysis and do not represent of institutions. neupanek1950@gmail.com

This article originally appeared on Transcend Media Service (TMS) on 1 May 2023.

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