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During the constitution drafting process from 2008 to 2015, the electoral system emerged as a key contentious issue among major political parties and stakeholders. Various electoral systems practiced in different countries were proposed. Ultimately they compromised on a mixed electoral system combining first past the post (FPTP) and proportional representation voting system. The aim was to address demands for inclusion and proportional representation across society. Since the promulgation of the new constitution in 2015, which solidified this mixed model, two elections for the three-tier government have been held, with parties preparing for the next elections in 2027, pending any unforeseen circumstances.

Ever since the country adopted a new constitution in 2015, no single party has secured a majority to govern the country independently. Although there was a single-party majority following the merger of CPN (Maoist Center) and CPN-UML, it was not a result of the election. With no possibility of single-party majority, parties have turned to coalition governments, resulting in frequent and unpredictable changes. Many, both within and outside active politics, attribute this political instability to the current electoral system, suggesting that Nepal cannot achieve stability unless changes are made.

Senior Nepali Congress leader Shekhar Koirala has been a vocal advocate for changing the electoral system, proposing that the House of Representatives (lower house), consisting of 275 members, be elected solely through the FPTP model to ensure a single-party majority and political stability. However, his own party, NC, has not officially discussed changing the electoral system. Koirala argues that the root cause of the current political crisis lies in the electoral system itself.

Despite Koirala’s proposal, cross-party political leaders and experts argue that changing the electoral system, which is closely linked to inclusion, a fundamental aspect of the constitution, is nearly impossible. The proportional representation system has ensured the representation of marginalized communities in the legislative process, although political parties have been criticized for appointing their family members. Santosh Pariyar, chief whip of Rastriya Swatantra Party, vehemently opposes changing the current electoral system, considering it a violation of the constitution and a threat to the rights of marginalized communities.

Deepak Bhatta, a CPN-UML leader, contends that once a system is adopted, it should be allowed to function for at least 15-20 years before considering changes. He criticizes the shifting political agendas of leaders and emphasizes the need for stability in governance. However, past experiences have shown that even single-party majority governments have failed to complete their terms due to intra-party disputes, casting doubt on the correlation between electoral systems and political stability.

While major political parties such as Nepali Congress, CPN-UML, and CPN (Maoist Center) have yet to officially discuss constitutional amendments, there are various viewpoints within each party. The issue of electoral system change must be carefully considered, as it requires consensus among major political parties, including those representing Madhes. Until political parties address systemic issues and work towards genuine consensus, achieving political stability will remain a distant goal, with electoral system changes alone unlikely to suffice.

The main opposition party, the Nepali Congress, has been obstructing parliamentary meetings for the past few days demanding the formation of a parliamentary committee to probe the alleged involvement of the Deputy Prime Minister and Minister for Home Affairs in a cooperative fraud. However, ruling parties do not agree with the NC’s demand, stating that there is no solid evidence of the minister’s involvement in the misappropriation of cooperative funds. 

While political parties have every right to stage protests in the Parliament, they should never forget that rights come with responsibilities attached. In Nepal’s context, major parties have misused this right to protest all too often by holding the parliament hostage for fulfilling their petty interests. In essence, all major parties are responsible for not allowing a smooth, independent and effective functioning of the parliament. This practice seriously hampers the law-making process and deliberations on the people’s agendas.

A case in point: It has been a decade since Nepal formally adopted federalism, but dozens of laws are yet to be formulated, giving successive governments opportunities to rule through ordinances without parliamentary scrutiny. 

Therefore, it’s time for all major parties—the Nepali Congress, CPN-UML and the CPN (Maoist Center)—to realize their mistakes and vow to never obstruct the parliament again by keeping in mind that such obstructions have never benefited them as they have to reach a compromise solution sooner than later.  Allowing the parliament to work independently is crucial, especially at a time when voices against the current political system are getting stronger and regressive parties are questioning the relevance of the current political system by pointing toward a dysfunctional parliament. 

The time has come for the parties to put an end to such obstructions once and for all—like they did with Nepal Bandh protests in view of tremendous hardships caused to the people—and allow the House to fulfill its duties, given that several urgent bills, including those related to the 2024 Nepal Investment Summit, remain pending in the House. 

A declining public trust toward the parliament resulting from the tendency of using the sovereign body to make or break a government and pursue various other petty interests should also act as a wake-up call for the main opposition and other parties to end such obstructions and get back to business. The sooner they do it, the better.

Balkrishna Basnet, President of Press Council Nepal, has been honored with Himdamaru title. The award was conferred to Basnet by the Literary Journalist Association on Thursday.

He was honored for his contribution to the environment by studying and researching mountains and environment and informing people about saving the mountains through journalism. The association felicitated him for his studies on protecting the mountains, environment and the effects of climate change and producing a documentary on the impact of climate change on the Himalayan region. He was honored for his 25 years of dedication for protection of the mountains.

Senior literary figure Rochak Ghimire, senior artist Madan Das Shrestha and Mount Everest climber Tembachiri Sherpa honored Basnet with a certificate and a shawl.

Basnet after receiving the award requested that journalism should be focused on the protection of the mountains and the environment to save the earth. He has also suggested that the concerned bodies should be serious about the fact that the snow in the mountains of Nepal is decreasing because of climate change and this is damaging the entire tourism industry.

“If the mountains survive the water and tourism area remains. Foreigners come to see mountains and therefore we need to save the mountains,” Basnet said.

Ghimire praised Basnet for working for prosperity for a long time through the field of journalism.

Sherpa shared his experiences of working together with Basnet for the last 24 years. He recalled the days when Sherpa first climbed Mt Everest at the age of 14, when Basnet along with a management team had gone to the Everest Base Camp. 

Badri Kumar Guragain is the Chief Executive Officer (CEO) of National Cooperative Bank Ltd (NCBL) with over 16 years of experience in finance, budgeting, planning, management and consulting. Currently, he is pursuing PhD in risk management of financial cooperatives in Nepal. He has also been awarded with ‘Prabal Janasewashree Chaturtha Shreni’ by the President of Nepal for his contribution in the cooperative sector.

Guragain, in this cooperative blueprint, has presented a report on the cooperative sector on four dimensions—present condition, challenges, way forward and the outcome. 

Introduction

Cooperatives occupy a foundational tier in Nepal’s financial ecosystem, focusing on empowering and supporting impoverished communities. They primarily serve individuals lacking skills, capital, and land, who constitute the cooperative’s target demographic. Despite receiving training, resources, and credit assistance, businesses within these communities often operate at a modest scale and face vulnerability, necessitating additional support such as insurance provided by cooperatives. As these businesses gradually expand and thrive, banks, the subsequent component of the ecosystem, extend their services to accommodate them. Thus, the primary goal for cooperatives is to empower poverty-stricken communities, ensuring their sustainable growth and development.

Production-driven

Cooperatives ought to prioritize production-driven initiatives to effectively contribute to the economy, functioning as a genuine sector. However, in Nepal, cooperatives often charge the highest loan interest rates. This contradicts the cooperative ethos of cooperation and undermines its true essence. To rectify this, cooperatives should focus on establishing a presence in marginalized areas and empowering residents with lower interest rates, subsidies, resources, and skills. Achieving this necessitates an alternative channel for resource provision, as cooperatives cannot rely solely on their deposits. Therefore, capital from the Youth and Small Entrepreneurs Self-Employment Fund which has around Rs 20-25bn, along with the 4 percent lending allocation by banks for deprived sectors (total around Rs 200bn), could be utilized. 

Mission drift

The ongoing crisis in the cooperative sector stems from past mismanagement and misuse. Historically, cooperatives have been community-oriented enterprises. However, there has been a decline in the spirit of community and cooperation within these entities. Factors contributing to this include management practices centered around promoters, marginalization of member roles, disregard for legality and due process in favor of individual interests, restriction of meaningful member participation to secure personal assets, and a shift towards individual benefit rather than collective financial gains. Hence, there is a misalignment between the intended purpose of cooperatives and their actual utilization—a mission drift.

Regulatory bodies

It is said that cooperatives rely on self-regulation, but as they grow in size and turnover, the need for an effective regulatory body becomes unavoidable to safeguard members’ savings and trust. Presently, the cooperative sector is overseen by a group of civil servants within the administration, yet the effectiveness of this regulation and monitoring is hindered by inadequate coordination in managing the detailed internal affairs and financial risks of cooperatives. This suggests a need for structural modifications—a second tier regulation system. Certain services offered by the country’s banking sector and financial cooperatives are similar in nature. However, differences in regulatory provisions create challenges. In cases where regulatory systems are weak, there’s a heightened risk of financial misconduct and tarnishing the reputation of the entire sector.

Youth and skilled human resources

The cooperative sector faces a shortage of skilled human resources, largely because the younger generation is not drawn to it. Additionally, existing employees often lack even basic knowledge of cooperative norms, values, and principles. This suggests that skilled individuals may not be attracted to the sector due to inefficiencies in employee selection, training, career development, service provision, and working conditions. As institutional governance weakens and the sector’s reputation declines, employee turnover rates escalate, contributing to high migration from the cooperative sector. It appears that cooperative organizations have made minimal efforts to enhance the capacity of their current workforce.

Community spirit

Cooperative business operates on principles distinct from individual entrepreneurship and open-market dynamics, prioritizing collective interests and common needs. However, there’s been a departure from upholding fundamental norms and values such as self-reliance, accountability, democratic management, equality, justice, and solidarity, with some businesses operating beyond the organization’s intended scope. The responsibility for self-regulation has been neglected, and cooperative education has been reduced to mere formality. As a result of inadequate coordination among cooperatives, the collective spirit inherent to cooperatives is diminishing.

Asset/liability analysis

The organization needs to conduct a thorough analysis of the costs associated with resource collection and the profits generated from its operations. This analysis should include an examination of financial sources such as share capital, funds, deposits, and the ratio of external debt. It appears that the cooperative sector is encountering challenges due to insufficient analysis. Specifically, cooperatives are grappling with a liquidity crisis, primarily stemming from their practice of investing in long-term loans and fixed assets using short-term deposits.

Direction

Cooperatives must avoid functioning as parallel banks. Reports from the National Planning Commission and other institutions pinpoint regions with high poverty rates and less resources, which cooperatives should prioritize. They should refrain from extending loans to financially capable individuals who can readily access funds from traditional banks. By concentrating efforts on underserved areas and directing resources to those truly in need, cooperatives can fulfill their intended purpose more effectively.

Way forward

The government should take the lead in returning depositors’ money in installments, prioritizing the poor and needy, especially those with relatively small amounts (less than Rs 500,000) that are crucial for their livelihood. As a first step, the property of cooperative management teams and employees should be frozen. To facilitate these payments, the government can introduce various schemes, such as tax-free funds. An amount of around Rs 10-15bn would be sufficient for this purpose, which can later be reimbursed to the tax-free fund investors by auctioning off the property of those responsible for mismanaging the cooperatives.

Result

Understanding the true essence of cooperatives and addressing all mismanagement issues while aligning with the aforementioned directions will lead to a reduction in multidimensional poverty and an increase in per capita income. As we approach graduation from Least Developed Countries (LDCs), access to loans at lower interest rates and subsidies from the World Trade Organization may diminish, potentially resulting in inflation, given our import-dependent market. However, a thriving cooperative sector can bolster locally-produced goods, meeting domestic demands and mitigating these challenges.