A billionaire and a ghost trading floor – the tale of Nepal’s paralysis

Saturday, 12 October 2013 00:00 - - {{hitsCtrl.values.hits}}

Reuters: Nepal’s only billionaire made his name selling instant noodles. Now he’s got an eye on running the young Himalayan republic. Binod Chaudhary, recently valued by Forbes at a billion dollars, says he would give up business for a shot at governing one of the world’s poorest countries. But not yet. Nepal’s politics are just too messy, even for a man who was able to build a business empire during a civil war. Wedged between two of the world’s largest markets, India and China, and home to its most spectacular mountains, Nepal should be a manufacturing, tourism and trading success. Chaudhary is testament to the possibilities. Having started out selling noodles to India, then all over Asia, his family-owned conglomerate includes a bank, a telecommunications business and dozens of resorts, including two in the Maldives in partnership with India’s Taj Group. But Nepal is one of Asia’s most unstable countries, despite seven years of peace since the end of a Maoist war that helped topple a centuries-old monarchy. It has had five governments since 2008 elections and politicians have not been able to agree on a constitution that will lay out the contours of the state. Elections due on November 19 for a new constitutional assembly are expected to go ahead despite threatened disruption by a significant faction of hardline Maoist parties. That’s too soon for Chaudhary, who wants the political parties to finish writing a new constitution before he takes the plunge into full-time politics. “There is no point in getting caught in between in a situation that you can’t resolve,” he said, in a reception room offering sweeping views of Kathmandu’s packed streets and nearby mountains from the top floor of his headquarters. The tycoon, whose mansion is decorated with leopard-print furnishings, busts of black stallions and a fresco reproduction of Giovanni Battista Tiepolo’s ‘The Banquet of Cleopatra’, says he would like to jump squarely into politics when the impasse is resolved. Chaudhary said he would then apply his business acumen to create jobs and fix infrastructure, ending power cuts that keep the lights off for up to seven hours a day. Chaudhary does business from Thailand to Tanzania, a hedge against the uncertainties of his landlocked country. Amid the political churning, hundreds of thousands of people leave for jobs overseas every year and businessmen fear to invest. Growth slumped last year to 3.5 percent, the slowest in five years, and inflation was above target at 9 percent. With successive short-lived governments barely in power long enough to fill posts, there has been little clarity on what type of economic system the country will follow. “Every six months you have a new prime minister, a new government so how can people invest?” said the Finance Ministry’s top economic advisor, Chiranjeevi Nepal. “Whether to follow the liberal, open economy or the mixed economy, that is the confusion here. Investment needs clear policies.” Nowhere is that confusion more apparent than at the Nepal Stock Exchange. Located in a squat, brick building by a rubbish-strewn stream, the NEPSE feels a long way from Wall Street. Its hoarding is hand-painted, its electronic ticker blank since it broke five months ago. Inside is an abandoned trading floor, frozen in time since the exchange replaced open-outcry trading in 2007. Rows of dust-covered computers remain, as do the prices from the last day of trading, scrawled on white boards used for pricing back then. Nepal’s stock exchange is state-owned and, since 2007, decision-making by the government has been slow. Without government permission, the exchange’s employees cannot dispose of old equipment, or introduce new technology. The NEPSE uses an electronic trading system but is one of the last in the world to settle trades manually, with brokers exchanging paper receipts and certificates at the end of trading. “We sent a proposal to the government five years ago to privatise the exchange,” said NEPSE Deputy Manager Shambhu Panta. “There has been no response ... There is no stable government. No decisions are taken.” The NEPSE’s 50 registered brokers trade an average of $1.5 million a day, up from about $700,000 last year. This, said Panta, reflected Nepal’s economic potential and hopes that the elections would bring stability. The benchmark index touched a record 1,175 points in the election year of 2008 but bottomed out at 292 last year after the first constitutional assembly collapsed. It has since recovered to 541.

“When people think the politicians will agree on a constitution, the index rises,” said Panta. “When the politicians fight, it falls.” On that basis, the market might be heading lower. No party is expected to emerge strong enough from the elections to resolve a fight over how much power to give local governments. In a sign of the volatility leading up to the vote, gunmen on a motorcycle shot and wounded a candidate last week. Billionaire Chaudhary worries that Maoist splinter groups threatening protests will clash with troops or scare off voters, undermining the election’s legitimacy. Nepal’s most successful capitalist is already dabbling in politics via a long association with the Communist Party of Nepal (Unified Marxist Leninist), which is these days seen as centre-left. He was a member of the constitutional assembly until it collapsed last year and says he will campaign for the party in these elections. “I’m a political animal, I’m very much part of it,” he said. Chaudhary offers Pakistan’s Prime Minister Nawaz Sharif and Thailand’s former premier, Thaksin Shinawatra, as examples of businessmen-turned-politicians. “It’s going to be a very important decision for me. I would not like to wear two hats, I’d have to completely give up my current position and current role and involvement in business and then I’d have to work 100 percent full time with the single objective of transforming this country economically.”