Econ-ity » March 29, 2016

Daily Archives: March 29, 2016

Discretion of “The Honorables”

Regulatory discretion is not something that is unheard in Nepal. The government of Nepal time and again has stepped in and has amended policies, although market disruptive, in its own discretion. These are the some examples-

  • Himalayan Java prices a bottle of water at Rs 130. They get prosecuted (fined Rs. 75,000) for charging high price, although no Act or policy stipulates measure for charging certain amount of fine in such cases.
  • After the crash of Air Kasthamandap’s single engine aircraft, without any further investigation, the government banned operations of single engine aircrafts across the country.
  • Government agencies confiscating Surya cigarettes, for not carrying health-warning message on 90 per cent of the packet, although the Act to Control and Monitor Tobacco stipulates that the warning sign should cover 75 per cent of the packet.
  • Futsal was banned without any notice or warning stating that it promoted drug use, distraction from studies, etc. Futsal was gaining popularity as more and more futsal courts with investments over Rs. 1 crore were being established.
  • In 2008, the government banned registration of private schools because it was growing like mushrooms. Although growing number of private schools are beneficial as it promoted standards and increased choices for students and parents.
  • In 2000, taxi registration was halted with the rationale that there were too many taxis plying on the road. But in reality, the passenger taxi ratio suggested that the number of taxi plying in Kathmandu was not enough.
  • DoTM gave a 15 – day ultimatum to register e-scooters, stating that e-scooty sellers were selling it with false information that no registration, driving license or helmet is necessary for using them. But in reality, there is no law or policy that stipulates that an electric scooter should be registered with DoTM, neither do e-scooter drivers need a driving license. The department has also stated that from now on, the roadworthiness of the scooters will be tested and would be allowed to use on fixed routes only.

These are the instances of regulatory discretion in my mind; I bet there are more than dozens of such cases. But it all boils down to this: the government is not working under any rule of law, but is forming policies in its discretion.

So what difference does it make if our benevolent government practices regulatory discretion? Well, as a consumer and an entrepreneur, it makes a lot of difference. For example, if I were a futsal entrepreneur, seeing that there were profit prospects in this market, I would take loan from a bank, and would establish a futsal court. If, on the day of inauguration of my business, the government bans futsal, how would I repay my loan?

Similarly, as for the consumers, futsal is a popular sport among people of all ages. It is a recreational activity that leads to good health. Well, had it been banned, all of those people would not have been able to exercise and maintain good health, specially in a city like Kathmandu where there aren’t much open spaces to exercise.

All in all, this sort of regulatory discretion does more harm than good. It is because of such unstable business environment the private sector has not been able to become the engine of growth. While politicians and bureaucrats tend to emphasize how private sector will be incentivized to boost our economy, their policies turn out to do the opposite thing. Lets just hope, these sort of regulatory discretion doesn’t happen in the future.

Abyaya Neopane

About Abyaya Neopane

Abyaya Neopane is an independent researcher. He comes from an Economics background.

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