TRIBHUVAN UNIVERSITY JOURNAL, VOL.: 32, NO.: 1, JUNE.

2018 273

CORRUPTION IN NEPAL: AN ANALYTICAL

STUDY
R.K. Shah*
ABSTRACT
Nepal is the 122 least corrupt nations out of 175 countries
throughout the world according to the 2017 ‘Corruption Perceptions
Index (CPI)’ reported by Transparency International. Corruption
Rank in Nepal averaged 127. 64 from 2004 until 2017 A.D., reaching
an all time high of 154 in 2011 and a record low of 90 in 2004. Various
cases of VAT fraud, massive irregularities in the distribution of relief
materials of earthquake victims and the government’s failure to control
the artificial increase of fuel and basic goods, prices after Madhesh
agitation and crisis in Nepal-India trade relation has evidenced that
corruption in Nepal has becoming systemic. However, no study is
undertaken to estimate the magnitude of corruption. Therefore, along
with the promulgation of the Federal Democratic Republic Constitution
of Nepal 2015 AD, time has come to conduct a nationwide survey to
estimate the magnitude of corruption in Nepalese economy and identify
the measures to control it. This study has analyzed the historical
trends of corruption and economic growth as well as conceptual and
theoretical issues of corruption. Moreover this study tries to analyze the
trend, extend and explore the determinants of corruption in Nepal. The
causes of corruption are bad system of governance, bad incentives and
weak civil society. The major determinants of corruption are economic
growth, trade liberalization, inflation and Human Development index.
Key Words: Corruption, promulgation, information, transparency,
economic growth, bribery.
INTRODUCTION
For at least a decade and more obtrusively in recent years, the
problem of corruption has been at the center of the political agenda in Nepal.
It is recognized as one of the chief causes of Nepal’s underdevelopment. It is
very widespread, has different manifestations, and is practiced at all levels
of society. The Nepali bureaucracy, politician, and the business sector are

* Dr. R.K. Shah is a Professor of Economics, Central Department of Economics,

Kirtipur, TU.
274 CORRUPTION IN NEPAL: AN ANALYTICAL STUDY

most seriously affected by, and inextricably involved in corruption. This

is really a great challenge to the campaign of modern Nepal (Upadhaya,
2003).
Corruption is as aged as the existence of man. It exists in the public
and private sectors, profit and non-profit as well as charitable organizations.
It subsists both in the developing and also in the developed nations but
predominant in the developing countries. Hence, it remains a system of
a poorly functioning nation. Corruption is a complex and multifaceted
phenomenon with multiple causes and effects, as it takes on various
forms and functions in different contexts. The phenomenon of corruption
ranges from the single act of a payment contradicted by law to an endemic
malfunction of a political and economic system. The problem of corruption
has been seen either as a structural problem of politics or economics, or
as a cultural and individual moral problem. The definition of corruption
consequently ranges from the broad terms of misuse of public power and
moral decay to strict legal definitions of corruption as an act of bribery
involving a public servant and a transfer of tangible resources (Mathew &
Barnabas, 2012).
According to Koltgaard (1991) corruption can be represented by the
following equation:
C=E+D–A
Where,
C = Corruption
E = Economic Rent
D = Discretion
A = Accountability
According to his model, corrupting can always have a green light
when individual exhibit monopolistic and discretional powers over the
control of goods or services of a country with little or no accountability
and decides who gets it, when he gets it and how much the receiver gets
(Klitgaard, 1991).Pervasive political corruption constitutes a major challenge
for foreign companies in Nepal. Kickbacks and facilitation payments are
widespread in Nepal’s public procurement and in the process of business
registration. Corruption reduces competitiveness and significantly increases
the costs of starting up a business in Nepal in comparison to the rest of
the South Asian region. The Prevention of Corruption Act 2002 AD is the
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principle of anti-corruption legislation and criminalizes corruption, bribery,

money laundering, abuse of office and facilitation payments in the public
and private sectors (TI, 2017).
Corruption means the practice of obtaining power, influence, or
other personal gains through illegitimate means; often at other’s expense.
The more widespread and acceptable corrupt methods are in a given society,
the more corrupt that society is said to be.Transparency International (TI)
defines corruption as “the abuse of entrusted power for private gain.”
Corruption occurs when an office-bearer or a government employee acts
in an official capacity for personal gain. In other words, corruption is the
illegal use of public power to benefit a private interest. Bribery is the most
common form of corruption. It is the improper use of gifts and favors
in exchange for personal gain. Embezzlement of government coffers is
another common form of corruption. Corruption is a social and economic
evil which hampers the overall development of a country.
OVERVIEW OF CORRUPTION
Corruption is a complex and multifaceted phenomenon with
multiple causes and effects, as it takes on various forms and functions in
different contexts. The phenomenon of corruption ranges from single act
of activity contradicted by law to way of life of an individuals or groups.
The definition of corruption ranges from the broad terms of ‘misuse of
power and authority’ to ‘moral decay’ (Amundsen; Sissener & Soreide,
2000). Corruption is conventionally understood, and referred to, as private
wealth-seeking behavior of someone who represents the state and public
authority. It is the misuse of public goods by public officials, for private
gains. In simple terms corruption may be described as “an act of bribery”
or “the use of public power for private profits in a way that constitutes a
breach of law or a deviation from the norms of society (Amundsen, 2000)”.
It is a misuse of authority as a result of consideration of personal gain,
which is not necessarily monetary. This private gain is achieved by ignoring
prohibitions against certain acts, by exercising legitimate discretion to act,
or by fulfilling obligations to act. This is the abuse or misuse of public
offices, professional rights and duties for personal gains. The genesis of
corruption is found within the international, the national institutional and
national societal levels. At the international level, the globalization of
markets, finances and numerous other transactions between various players
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in the global game and the “host” government and its representatives take
part in this game. Multinationals are, for instance, buying concessions,
preferences and monopolies; kickbacks are offered on tenders, loans and
contracts, and development projects are sometimes eased through by
including travels, computers, and other fringe benefits for officials. There is
no question that corruption is, before anything, a type of crime. However,
the discourse of corruption varies a great deal from one country to another
with particular historical trajectories and the specific grammars of public
culture (Amundsen, 2000).
At the national institutional level, corruption takes place between
the government (the executive) and the administrative and bureaucratic
institutions (the civil service, judiciary, legislature, and local authorities).
The relationship can be corrupted because of overlapping and conflicting
authority, political power struggles over access to scarce resources, and
personal relationship of dependence and loyalty. Other contributing
factors are, a weak separation between civil service and partisan politics,
a weak professionalization of the bureaucracy, a lack of accountability
and transparency, and deficient political control and auditing. The more
discretion officials have through abundant, complex and non-transparent
regulations, the more corruption becomes likely (Amundsen, 2000; Bista,
1991 & Pyakuryal, 2000).
On the national societal level, the corrupt relationship happens
between the state and various non state actors – corrupt state officials and
the supplier of the bribes. It can be the general public, any nongovernmental
and nonpublic individual, corporate and organizational, domestic and
external.
Corruption, however, also exists within and between private
businesses and within non-governmental organizations, without any state
agency or state official being involved. There is a corruption in terms of
bribing, swindling and mafia methods in business, and there are treacherous
individuals and disloyal employees in many private firms, organizations
and associations. Besides, corruption also exists as a moral and cultural
problem in society, among individuals in their personal dealings.
OBJECTIVES
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The general objective of the study has to analyze the historical trends
of corruption as well as conceptual and theoretical issues of corruption. The
specific objectives of the study are as follows:
a) to analyze the trend and extent of corruption,
b) to explore the determinants of corruption in Nepal, and
c) to examine the relationship between corruption and economic growth
in Nepal.
METHOD
In the development of knowledge in this research and the
understanding of the determinants of corruption in Nepal has been presented
as a process drawn in the line of thinking of William by using both inductive
as well as descriptive approach. In order to obtain valid useful data about
corruption, academic research has been the main sources of information
in this research. The corruption data have been taken from Transparency
International which uses Corruption Perception Index (CPI). TI has begun
publishing data on corruption and measuring corruption in 1995. The data
of other variables have been taken from World Bank Data Set, ADB and
Economic Surveys of Nepal published by Ministry Finance (MoF).
FORMS OF CORRUPTION
The main forms of corruption are bribery, embezzlement, fraud,
and extortion. Even when these concepts are partly overlapping and at
times interchangeable with other concepts, some of the basic characteristics
of corruption can be identified through these concepts (Amundsen, 2000).
Bribery: Bribery is the payment that is given or taken in a corrupt
relationship. A bribe is a fixed sum, a certain percentage of a contact, or any
other favors in money or kind, usually paid to a state official who can make
contracts on behalf of the state or otherwise distribute benefits to companies
or individuals, businessmen and clients. There are many equivalent terms
to bribery, like kickbacks, gratuities, baksheesh, sweeteners, pay-off, speed
and grease money, (Amundsen, 2000) which are all notions of corruption as
perceived from below, from public. These are payments needed or demanded
to make things passed swifter, smoother or more favorably through the state
bureaucracy. By “greasing palms” corporations and businesses interests can
buy, for instance, political favors and escape the full burden of taxation and
environmental regulation, or buy protected market and monopolies, import/
export licenses etc. Bribery can also be a form of “informal” taxation, when
278 CORRUPTION IN NEPAL: AN ANALYTICAL STUDY

public officials charge additional amount under-the-table payments (called

ghush in Nepali) or expected “gifts” from clients.
Embezzlement: It is the theft of public resources by public officials, which
is another form of misappropriation of public funds. Embezzlement happens
when a state official steals goods and resources from the public institution in
which he/she is employed, and from resources he is supposed to administer
on behalf of the state and the public. However, corrupt employees in private
firms can also embezzle money and other resources from their employers.
Some people think that embezzlement is not considered as corruption from
a strict legal point of view. In general terms, corruption is a transaction
between two individuals; state agent and other civilian, when the state agent
goes beyond the limit of the law and regulation in order to secure himself/
herself a personal benefit in the form of a bribe. Embezzlement is regarded
as theft because it does not involve the “civilian” side directly. The general
public is deprived when public funds are embezzled, but individual property
is not stolen, and it is argued that the individual citizen will have no legal
right to present themselves as forfeited. This is a very dangerous argument.
There has to be a political will and legal capacity as well as public sanction
to control it. In Nepal, embezzlement is one of the most important modes of
economic accumulation. In fact political leaders and higher administrative
bureaucrats are earning money by this method.
Otherwise, how is it possible to earn multi million rupees within a few
years of bureaucratic post or being a political authority? It is a fundamental
part of the resource extractive capacity of the ruling elite, and it should
be taken more seriously than extraction through bribes. Another form of
embezzlement is - some power holders systematically use their political
office to enter into, secure and expand their private business interests. In
Nepal, the political elites have link with businessperson, decision makers
and control media personnel, development workers and human rights
activists through their contact. They hold a major share in private schools
and colleges, and nursing homes, pharmaceutical companies, transport and
media and many more ventures.
Fraud: This is a serious crime that involves some kind of dishonesty,
swindling or cheating. When the ministers, bureaucrats and academicians
take their share for closing their eyes they have an active role in it. This is
also known as phohari khel or phohari rajniti, ‘dirty politics’. Dirty politics
include, giving unnecessary loans that will never be paid back, provide
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contracts without competition, issuing license to manufacture poor qualities

of medicines to pharmaceutical companies, approving bills without proper
supervision, select less qualified and unskilled persons, transferring qualified
bureaucrats to other places if he/she is not favoring political authority. This
dirty politics is tied to the interest of national and international agencies
and authorities and the dominant feudal culture. In Nepal, dirty politics
is playing a major role in the selecting, nominating and promoting of less
qualified, politically corrupt people in vital posts.
Extortion: It is money and other resources extracted by the use of
coercion, violence or threat to use force. By creating an atmosphere of
insecurity where individual citizens, private businesses and public officials
are harassed and intimidated. Only those who pay the protection money
will be exempted from further harassment. With more or less concealed
threats, rulers can extract resources from private source businesses. These
businesses rarely take the chance of refusing state or ruling party officials.
The present political conflict has played very important role for promoting
such extortion in Nepal.
Favoritism: It is a mechanism of power abuse implying “privatization”
and a highly biased distribution of state resources, no matter how these
resources have been accumulated in the first place. It is the tendency to
favor family, friends, relatives, clan, caste, ethnic group, gender, race, place
of origin, members from the same party, and anybody closed and trusted.
In political sphere, it is the liking of state officials and politicians who have
access to state resources and the power to decide upon the distribution of
these, to give preferential treatment to certain people. It is a basic political
mechanism in many autocratic and semi-democratic countries. In Nepal,
the Prime Minister has the constitutional rights to appoint all high-ranking
positions, legal or customary rights that extend exceedingly the possibilities
for favoritism. It easily adds up to several hundred positions within the
ministries, diplomatic organization and other line agencies.
Nepotism: It is a special form of favoritism, in which an office holder
(ruler) prefers his proper kinfolk and family members (wife, son, daughter,
brother, sister, nephew, cousins, in-laws, etc.). Many political leaders have
tried to secure their power position by nominating their family members to
political, economic, various public councils and committees and security
positions in the state apparatus. Through such mechanisms, many politicians
and bureaucrats have been able to move their family members from public
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position into private business, to transfer public power to private wealth.

Favoritism is not only a legal problem, but also a problem of flawed
qualifications, lacking skills and inefficiency (Amundsen, 2000). Further
where public position is strongly correlated to possibilities of corrupt and
extractive practices, favoritism can secure substantial prerogatives and
profit for certain families, clans or some social subgroups.
CORRUPTION IN NEPAL
Nepal is one of the least-developed countries with corruption.
Nepal is suffering a serious problem of corruption. Nepal is ranked 122 out
of 175 nations in the Corruption Perceptions Index (CPI). Nepal received
a score of 29 out of 100 in the CPI (TI, 2017). Scores range from 0 (highly
corrupt) to 100 (very clean). This rank and score show that public sector
corruption is rampant in Nepal.
Table 1: Corruption Rank of Nepal
Year
2008/09

2009/10

2012/13

2013/14

2014/15

2015/16

2016/17

2017/18
2010/11

2011/12

Rank 121 143 146 154 139 116 126 130 131 122

Source: International Transparency, 2017

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Table 2: Corruption Perceptions Index’s Scores and Ranks

Countries Year

2017

2016

2015

2014

2013

2012
Score

Score

Score

Score

Score

Score
Rank

Rank

Rank

Rank

Rank

Rank
Afghanistan 15 177 15 169 11 166 12 172 8 175 8 174
Bangladesh 28 143 26 145 25 139 25 145 27 136 26 144
Bhutan 67 26 65 27 65 27 65 30 63 31 63 33
India 40 81 40 79 38 76 38 85 36 94 36 94
Nepal 31 122 29 131 27 130 29 126 31 116 27 139
Pakistan 32 117 32 116 30 117 29 126 28 127 27 139
Sri-Lanka 38 91 36 95 37 83 38 85 37 91 40 79
Maldives 33 112 36 95 NA NA NA NA NA NA NA NA
Source: Transparency International, 2017
TYPES OF CORRUPTION
Transparency International classifies corruption as grand, petty
and political grand corruption consists of acts committed at a high level
of government that distort policies or the central functioning of the state,
enabling leaders to benefit at the expense of the public goods. Petty
corruption refers to everyday abuse of entrusted power by low and mid-level
public officials in their interactions with ordinary citizens, who are trying
to access basic goods or services in places like police stations, courts, land
revenue offices, district administration offices, and other public agencies.
Political corruption is a manipulation of policies, institutions, and rules of
procedure in the allocation of resources and financing by political decision
makers who abuse their position to sustain their power, status and wealth.
The cost of corruption can be divided into four main categories: political,
economic, social and environmental. In the political form, corruption is a
major obstacle to democracy and the rule of law. In democratic systems,
offices and institutions lose their legitimacy when they are misused for
private advantage. It is extremely challenging to develop accountability
political leadership in a corrupt environment. Economically, corruption
depletes national wealth. Corruption corrodes the social fabric of society. It
undermines people’s trust in the political system, in its institutions and its
282 CORRUPTION IN NEPAL: AN ANALYTICAL STUDY

leaderships. Environmental degradation is another consequence of corrupt

systems. Non-enforcement of environmental regulations and legislation
means that previous natural resources are carelessly exploited. From mining
to logging, companies continue to pay bribes in return for unrestricted
destruction.
KEY HOLDERS OF CORRUPTION IN NEPAL
After the restoration of multiparty system in Nepal, we have
seen a significant institutional development in the political sphere of the
country. Many small political parties have emerged while many new faces
have been seen in the major political parties. However, the key political
affairs of the country is still - like in Panchayat days – being run by the
few elite that control, influence and manipulate the construction of political
and economic mainstream of modern Nepal (Subedi, 2001). These elites
maintain the informal as well as formal networks within their groups.
We have seen this over the last 14 years when there has been a frequent
turnover of the government. In almost 16 different governments that have
been seen over the last 14 years, we have seen, in many cases, the same
set of people representing different portfolio at various point of time.
Innovation, creativity, and discoveries are only possible with the new faces,
new minds and new ideas. Will any person, with creative and fair-mind,
have a place within the narrow lane of network in which the current political
framework is working? Existing political and social situations show that
the answers are negative. If things remain same, the economic disparity,
political instability, educational inequality, and social security troubles will
continue to persist in Nepal, and this situation will help those people who
are involved in corruption. As, a prominent sociologist with considerable
development experience sees “corruption and greed as two of the most
important factors that have hindered the Nepali society from moving ahead
(Pyakuryal, 2000,p.21).” He further writes:
“During the period of hung parliament, the law makers were sold
and bought for millions of rupees by political parties for defecting from or
supporting the parties. These political parties had to collect this money from
business houses or even smugglers. What would we then expect from such
leaders or the parties that had no choice than to surrender to the investors?
These lawmakers made business by passing a bill in the parliament to
get all tax exemption for the parliamentarians on imported vehicles.
Businessmen and smugglers imported costly vehicles on the MP’s quota,
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and as commissions, those MPs either took cash or cheaper vehicles from
their investors. Some other rented their vehicles to earn money. Several of
the MPs who had their constituencies on the high hills where there were no
motor able roads also imported vehicle for accumulating money. Those MPs
were not even ashamed of smuggling men and women to foreign countries
by misusing their diplomatic (red) passports. They even handed over their
diplomatic passports to the smugglers who imported foreign goods and
materials with all duty exempted at the airport custom. Thus there was an
utter misuse of authority, and those who misused most might have earned
most, and they were the ones who succeeded in becoming more powerful.
(Pyakuryal,2000, pp.21-22).
Thus, the lawmakers in Nepal developed the “pajero” culture, which
is synonymous to a corrupt parliamentarian. Pyakuryal further writes that
some diplomats in Kathmandu, the capital city of Nepal, who in the name
of supporting democracy in Nepal, got involved in financing these corrupt
politicians and parties. As a result, social status remained only on the money
and power, irrespective of its source. People with black money have gained
power and emerged as elites of the nation. The situation also gave a positive
chance for the emergence of wing of contractors and sub-contractors within
the institutionalized pattern of corruption in Nepal (Upadhaya, 2003).
Corruption among public servants has always existed in one form
or the other although its shape, dimension, textures and shades have been
changing from time to time and place to place. At one time, bribe was paid
for getting wrong things done but now the bribe is paid for getting right
things done at the right time. Honest politicians are a rare breed today.
Corrupt politicians not only go scot-free, unharmed and unpunished but
also they manage to strut on political stage as honorable leaders. In this
land, those who plunder the country masquerade as honorable citizen
with all the paraphernalia merely because they happen to be bigwigs in
politics or are close to centers of power. In the last one-decade or so,
several scandals and financial irregularities, including paying of massive
commissions, pay-off and kickbacks have been reported in our country.
Mostly, it is the Prime Ministers, Ministers, and leaders holding important
political positions, bureaucrats and big businessmen who are reported to be
involved in these scams. But nothing tangible has been done in uncovering,
tracing, apprehending, prosecuting and punishing the culprits on the plea of
inadequate evidence. While most people would say they know corruption
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while they see it, debate continues over the best way to define the concept
for analysis. Which acts have been called ‘corrupt’ in politics and public
service? More recently, most definition(s) have focused on the classification
of behaviors employing various standards, such as law, public opinion,
or the ideas of public interest, to identify abuse of office for the private
benefit. The following patterns of behavior among politicians and public
servants can be described as corrupt within the provision of law: acceptance
of gratification as reward for work in an official capacity, obtaining any
object or pecuniary advantage illegally, fraudulent misappropriation of
public property, being in possession of financial resources or property
disproportionate to one’s known sources of income, misuse or abuse of
official position, borrowing money for purchasing a costly article from a
person with whom one has official dealings with a known understanding
that the borrowed money will not be returned, accepting gifts by persons of
position from persons with whom they have positional relations, disregard
of neglect of rules purposely to help the citizen in dues/tax/duty due to be
paid to government, refusal to do a duty on some plea which may benefit
the other party and others.
There are different ministries in the government, which are regarded
as gold mines for making money. The government of Nepal (2015) for
example, spend a huge amount of total budget every year and it is said that
commission between 15 to 50 percent are not uncommon on purchasing of
weapons, spare parts, emergency expenditure, payments of bills, passing
bills, issuing cheques, approving supplies settlements of disputes and so
forth. People say that out of total cost sanctioned for the project, about
30 percent is invested in the work, 30 percent on contractor’s profit, and
40 percent goes into various ministers’ and officers’ pockets. The power
enjoyed by ministers and police are so wide that they can accuse, arrest, and
harass even an honest person. It is said that the failure to pay commission
results in delay in getting the bill passed and receiving the cheque.
The causes of corruption are sought in wholly different directions,
depending on the ideological stance and preferences of the seeker. The neo-
liberal school considers corruption to be one of the effects of the black market
caused by excessive state interventionism. The more the state intervenes,
the more it legislates, and the more it develops interfering bureaucracies,
the greater the risk of parallel procedures and market spawning unlawful
conduct. On the other hand, those who are not convinced of the state’s
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intrinsic perversity or market’s unquestionable merits stress another aspect:

the erosion of the public ethics, lack of political culture to politicians,
domination of dirty politics to the state bureaucrats, the loss of state’s
legitimate status as the incarnation of the general interest, and the dilution
of communal values through the pursuit of profit and the defense of selfish
private interests. However, these causes are not mutually exclusive.
ROLE OF CIVIL SOCIETY AND ISSUES OF GOOD GOVERNANCE
The present era is marked by the fact that corruption has become
widespread, that it affects more and more spheres of activity, and that it
reflects a negative trend compared with the progress made in stamping
it out, particularly in democracies. Many businesspersons, government
officials and consumers are unaware of the serious impact that corruption
has on Nepali economy and society.
The sensitivity of public opinion, towards corruption varies
considerably from one country and from one culture to another. Comparable
variations are to be found in political systems between public opinion at
large and social elite. Whereas latter usually tend to minimize the scale of
corruption (often after having ignored or denied it), public opinion has had
a marked propensity in recent years to exaggerate its extent. Opinion polls
show that the vast majority of the people interviewed are convinced that
“more than ninety percent politicians are corrupt”. Clearly, and whatever
the real degree of corruption, nothing can be adduced as serious evidence
for such a claim. The legal definition offers the advantage of safety and
certainty, i.e., corruption is what the penal code defines as such, or what
professional code of ethics prohibits. By establishing what is allowed and
what is prohibited, the law lays down in principle clear limits that should not
be overstepped. This principle raises two problems, the first being strictly
legal and second ethical.
The strictly legalistic approach presents shortcoming in that it tends
to sidestep the ethical principles and that are at the very root of repressive
measures. Corruption is not an ordinary offence comparable to a highway-
code or fraud. It constitutes a violation of duties, of office and a negation of
the values that should underlie the democratic, political and administrative
systems founded on the rule of law, such as distinction between private
and public interests, equality of treatment for citizens, transparency of
transactions, and so forth. By laying stresses exclusively on the strictly panel
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definition of corruption, we may lose sights of justification and purpose of

these repressive measures.
Governance is a composite form of the state, the private sector
and the civil society. The strength of good governance is that where all
actors remain close to and co-operating each other. In such situation, they
complement to each other and at the same time keep checking and balancing
each other to obtain good results. Transparency is the major requirement
of good governance. It means that decision taken and their enforcements
are done in a manner that follows rules and regulations. It also means
that information is freely available and directly accessible to those who
will be affected by such decisions and their enforcement. It also refers to
the free availability of information to the general public and clarity about
rules, regulations and decisions. It also means that processes, institutions
and information are directly accessible to those concerned with them, and
enough information is provided to understand and monitor them.
Accountability is also a key requirement of good governance. “It
is the duty of public officials to report their actions to the citizens and the
right of the citizens to take actions against those officials whose conduct is
considered unsatisfactory. It is imperative to make public official (Decision
makers) answerable for government behavior and responsive to the entity
from which they derive their authority. The authority or the decision maker
is good or bad depending upon the level of transparency and accountability
in such decision making processes that directly or indirectly affects the
public life. An important activity should be to review business processes,
political related legislation and procedures, academic irregularities and to
develop the situation for more business friendly, fair election legislation,
academic environment and procedures that discourage corruption. The
CIAA (Commission to Investigate the Abuse of Authority) has complained
that it does not get enough well grounded complaints about political and
business related corruption. The other activity would be to collect corruption
cases to pass on to the CIAA and to deal with the other ways.
An organized effort and action based on the ground reality is
important to influence public policy and decisions that directly or indirectly
affect public life. A complaints unit should be set up in favor of fairness,
transparency to receive record and take forward complaints by and against
existing system of corruption in Nepal. For this, a public action committee
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should be formed with representative from the business community, lawyers,

academicians and local leaders to press the government to crack down on
corruption. This organization should put pressure on the government to
prevent corruption happening and to prosecute guilty parties. The intention
is that, for example, in a case where the government official has demanded a
bribe from a businessperson to clear some official procedure, the victimized
businessperson would report this case to the Complaints Unit. The unit
would then assess the truthfulness of the accusations, and, if convinced,
either send a complaint on to the appropriate government authority, such
as the CIIA for the government related cases, or deal with it in a alternative
way. The complaint unit will work out such as mediation or ‘naming and
shaming’ with the help of media, to deal with corruption cases as a way to
bypass the time consuming and expensive process of going to court.
At first it should be an informal group; but later it could develop
into a more formal structure or some kind of federated body. The name of
corrupt personnel should be published in the media. A website and regular
edition of a corporate ethics bulletin plays very important role to sensitize
the cases. The website should be used to provide information and expose
corrupt officials, businesspersons and academicians. This is also expected
to be an important part of the up-coming to operate more transparently and
to be more law abiding.
CAUSES OF CORRUPTION
Corruption is a national disease of Nepal which has been caused by
several factors. The major factors that cause corruption are listed below:

No social boycott

Bad governance
Weak civil society

Lack of surveillance Lack of transparency

Causes of Corruption

Lack of accountability
Lack of training

Bad incentive
288 CORRUPTION IN NEPAL: AN ANALYTICAL STUDY

The root causes of corruption are bad systems of governance.

There is little chance of getting caught. This comes primarily from a lack of
transparency.Lack of accountability is also the cause of rampant corruption.
Another equally important cause of corruption is bad incentive.Public
employs do not get anti-corruption training and education that emphasizes
the negative effects of corruption.There is no surveillance mechanism in
place. Electronic monitors, computer programs, and other technologies can
monitor corruption in government agencies and businesses. The civil society
in Nepal is not very strong and extensive to pressurize the government
in formulating and implementing stringent anti-corruption policies. The
corrupt people are not boycotted by the public. Instead, they get recognition.
There are certain attitudes that make average people disregard the law. For
instance, poverty or scarcity of goods may push people to live outside the
law. This creates the situation of bad governance.
DETERMINANTS OF CORRUPTION IN NEPAL
Main determinants of corruption are economic growth, openness to
trade, inflation and Human Development Index.
Economic Growth: It is assumed that there is a relationship between
the level of economic growth or economic development and the level of
corruption (Husted, 1999, p. 340). Lack of economic resources can emerge
as a fundamental factor leads to corruption. Corruption is a phenomenon
that existing in all countries. However, it can emerge more rapidly in low
income countries than in high-income countries.
Inflation: One of the factors causing corruption is inflation. Since, inflation
reduces the level of real wages; it negatively affects the purchasing power
of people. Although the purchasing power decreases, the basic needs must
be met first. If not, people might apply to any kind of illegal methods such
as fraud, bribery, embezzlement for needs. Therefore, these socio-economic
deteriorations lead the level of corruption to increase in a country. A lot
of people believe that inflation can be caused to moral hazard. And then
it can offer opportunity for illegal and unethical behaviour such as fraud,
deception, embezzlement. Moreover, any informational problems caused by
inflation can lead to more corruption. Because, high and variable inflation
is assumed to increase uncertainty about prices and, therefore, cost of
accounting the agent’s behaviour (Braun & Tella, 2004, pp. 79-80).
TRIBHUVAN UNIVERSITY JOURNAL, VOL.: 32, NO.: 1, JUNE. 2018 289

Openness to Trade: It is said that openness to trade is also important

determinant of corruption. There is a strand of literature that investigates
the relationship between openness and levels of domestic corruption. There
are a number of scholars that recognize the positive relationship between
the openness of a country to international trade and lower levels of domestic
corruption (Soudis, 2009).
Human Development Index (HDI): HDI is regarded as one of the main
determinants of corruption. When human development index increases,
corruption decreases and vice versa.
National Efforts Against Corruption
Although Nepal has slipped on the Corruption Perceptions Index-
2017 of Transparency International, it has made some genuine institutional
efforts to curb public sector corruption. The following are the national
efforts made by the Government of Nepal to Control Corruption:
The Commission for the Investigation of Authority (CIAA) is an apex
constitutional body for corruption control for the Government of Nepal.
The Constitution of Nepal 2072 has empowered CIAA to investigate and
probe cases against the persons holding public office and their associates
who are indulged in the abuse of authority by way of corruption.
National Vigilance Centre (NVC) is another anti-corruption body of the
Government of Nepal. It was formed according to Anti-Corruption Act,
2059 B.S. in order to reduce the corrupt activities in effective manner
and to build a corruption free society. It is a watchdog and so it plays a
preventive and vigilant role in order to ensure good governance by creating
far economic discipline, moral ethics and transparency.
Department of Money Laundering Investigation (DMLI) was established
by the Government of Nepal on July 15, 2011 to fight money laundering,
terrorist financing and any forms of illegal earnings including the property
earned by corruption.
As its commitment to fighting corruption, Nepal has ratified the United
Nations Convention against Corruption (UNCAC) on 31 March 2011.
UNCAC is the first global legally binding international anti-corruption
instrument.
290 CORRUPTION IN NEPAL: AN ANALYTICAL STUDY

Transparency International, Nepal Chapter, is a civil society organization

working in Nepal as a catalyst in the fight against corruption. It promotes anti-
corruption movement in Nepal through advocacy of transparency, integrity
and accountability in governance, and mobilization and empowerment of
people.
CONCLUSION
No study is undertaken to estimate the magnitude of corruption
in Nepal. Some data on corruption exists but it is also not sufficient,
systematic and authentic to estimate the actual size of the corruption.
National and international experiences indicate that it has been rampant
in the country. The study concludes that there is an urgent need to conduct
a nationwide survey to estimate the magnitude of corruption in Nepal so
that it could be accommodated with the white data, which in turn, would
facilitate the policymakers in formulating proper policies for the country.
Although the incidence of poverty is significant, no attempt has been made
to accommodate the corruption in analyzing the poverty estimation. It is
argued to modify the economic growth rate, saving and investment, poverty
incidence data by incorporating the corruption. Nepal is ranked 122 out of
175 nations in the Corruption Perceptions Index (CPI) (TI, 2017).
Corruption is an issue in public debates and everyday conversation
in many countries. To understand and fight against corruption, the legal
definition of corruption is too narrow and only concerns with legal
procedure, legal evidences and ignores the people’s own assessment of
courses of action. If we only give priority to legally sanctioned sphere
and ignore socially sanctioned sphere, it is very difficult to fight against
corruption in Nepal. This is related to democratization process. Economic
and political competition, transparency and accountability, coupled with
democratic principles of checks and balance, are the necessary instruments
to restrict corruption and power abuse. Civil society should hate, boycott
culturally and socially corrupt people for introducing people oriented good
government which should be transparent and accountable.
TRIBHUVAN UNIVERSITY JOURNAL, VOL.: 32, NO.: 1, JUNE. 2018 291

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