Political Environment

Uddhab Shiwakoti
M Phil in Management (Corporate Ethics)
Kathmandu University School of Management
(KUSOM)

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 Political Environment

• Political Surrounding
• Influence on business practices and outcomes
• Components
– Political Ideology (Philosophy)
– Political Structure (Constitution)
– Political Institution (legislative, executive, and judiciary)
– Political Parties

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 Political Structure

• Composed of constitution, election procedure, and power

centre
• Nepal is governed by the Constitution 2015

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 Constitution

• Legal document
• Blueprint for the governance of a state or country
• Lays down the
– Fundamental principles, policies, institutions, powers, sets the
limitations for the exercise of power
• History
– Not have long history
– 1st constitution in 1990
– Interim constitution 2007
– Constitution of Nepal 2015

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 Election Procedure

• Three types of election

– General election
– State level election
– Local body election
• General election for legislative
• Periodic election (5 years)
• Local body election
• Representation of local representatives of the civilians

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 Power Centre

• President represents head of state

• Prime Minster represents executive power of the nation

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 Political Parties

• More than 100 political parties

• Major Political Parties
– Nepali Congress (NC)
– Nepal Communist Party (CPN-UML + MC)
– Rastraya Janata Party
– Madeshi Janadhikar Forum

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 Government and Its Branches

• Legislative-parliament system
• Two types of government
– Central government
– Local government
• Presidential Office represented by President is the head of
state
• Prime Minister, head of the cabinet holds executive power
ruling the country
• Ministers in cabinet have collective responsibilities towards
the nation

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 Local Government

• Represented by local body of the government

• VDCs – 3915
• Municipalities – 58
• District Development Committees (DDC)

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 Political Institutions

• Legislative
• Executive
• Judiciary

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 Business – Government Relations

• Business Relations with Government

• Government Relations with Business

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 Business Relations with Government

• Payment of taxes
• Execution of contracts
• Providing advices
• Provision of information

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 Government Relations with Business

• Promoter of Business
• Regulator of Business
• Caretaker of Business

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 Promoter of Business

– Public Enterprises
– Infrastructure Development
– Procurement
– Incentives and Subsidies
– Provision of Finance
– Provision of Information

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 Regulator of Business

• Provision of rules and regulations

• Set of standards
• Set of procedures
• Issue of orders and circulars

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 Caretaker of Business

• Protection of domestic industries

• Security
• Assistance
• Patents and copyrights

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Basic Issues in Government – Business Relations

• Government in Business
• Public-Private Partnership
• Labor as Political Forces
• Employer Association

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 Risk in Nepali Business Environment

• Political risk = f(change environment and impact on

business performance and outcomes)
• Government instability
• Political risk
– Government actions
– Actions out of the control of government control
• Government Actions
– Enactment of new laws
– Rise in operating costs
– Devaluation of the currency
– Changes in tax rates

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 Risk in Nepali Business Environment

• Outside the control of Government

– Extortion
– Kidnapping
– terrorism

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 Types of Political Risks

• Ownership Risk
• Operating Risk
• Transfer Risk
– Currency controls
– Changes in tax laws
– Government interventions
– Nationalizations

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 Evaluation of Political Risks

• Political Factors
• Economic Factors
• Firm Specific Factors

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 Management of Political Risks

• Build image
• CSR
• Lobbying
• Insurance
• Avoidance

10/12/2020 Uddhab Shiwakoti