Recently, we have all heard declarations on the virtues of privatisation in Nepal. They come from the large Nepali business houses, the global capitalist states, and financial organisations like the World Bank and Asian Development Bank. Somewhat uncharacteristically, the Nepali Government also has joined the chorus. Two successive finance ministers, P.C. Lohani and B.B. Pradhan, have made high pitched exhortations in favour of privatisation.
Privatisation is touted as a prime remedy for various ills that face the country. It is expected to help locate viable investment sectors, mobilise private savings, create a class of national entrepreneurs, correct market distortions, help import substitution and promote exports. On the whole, it is expected to "lighten the state's burden." Some have even gone as far as to draw a premature and tenuous link between privatisation and the "basic needs programme" of the Government.
Let us first remember that privatisation has a long history in Nepal, having been pursued aggressively, since the historical consolidation of the country. Privatisation of the "commons" – communal agricultural lands, forests, pastures, river banks, urban real estate – used to be the order of the day. A systematic narrowing of the domain of the commons, made large fortunes for a small section of hill households, a larger section of the landed aristocracy in Tarai, and, high officials and traders.
The cultural and political legitimacy of private property and aggressive privatisation was also recognised in post 1950 Nepal. The expansion of private agricultural land, legal sanction to a highly skewed distribution of landownership, low and regressive land taxes and absence of agricultural income taxes, should have generated, under conventional wisdom, a high rate of investment in the rural areas, and thus created rural agricultural-industrial entrepreneurs. In the growing urban economy, low levies for import of raw materials, low excise rates, long industrial tax holidays, nearly non-existent urban property taxes and a host of other features and measures should have led to a relatively independent class of industrial-financial urban bourgeoisie.