Economic empowerment and the foundation of stability
Political debates in Nepal often revolve around constitutions, coalitions, and leadership changes. Yet one fundamental reality receives far less attention: political stability rarely precedes economic stability. In most successful societies, the sequence is reversed. Economic empowerment creates stability, and stability, in turn, reinforces good governance.
When citizens are able to earn, invest, build enterprises, and gradually improve their standard of living, they begin to value predictability, transparency, and the rule of law. A society where people feel economically secure tends to be calmer, more cooperative, and more invested in its institutions. Conversely, when economic opportunity is limited or concentrated among a few actors, politics becomes a contest over access to scarce resources.
This relationship between economic inclusion and political stability has been widely examined. In Capital in the Twenty First Century, Thomas Piketty shows how excessive concentration of wealth can destabilize societies. In Why Nations Fail, Daron Acemoglu and James A. Robinson argue that nations prosper when institutions allow broad participation. In Corruption and Government, Susan Rose-Ackerman makes a more uncomfortable point: corruption is often not just a moral failure, but a consequence of limited economic access.
For Nepal, these are not abstract ideas. They reflect structural realities that continue to shape the country’s economic trajectory.
Growth vs participation
A country does not become prosperous simply because its GDP increases. It becomes prosperous when its citizens have the opportunity to participate in that growth. An economy can expand while remaining narrow, concentrated, and exclusionary. In such cases, wealth accumulates, but opportunity does not spread. Over time, this imbalance creates both economic fragility and political tension.
Every resilient economy rests on a broad base of small and medium enterprises. In Nepal, SMEs contribute approximately 22 percent of GDP and employ around 1.8m people (Friedrich Naumann Foundation, 2024). These businesses are not peripheral—they are central to inclusive growth.
This idea has long been established. In Small Is Beautiful, EF Schumacher argued that economies built around human-scale enterprises are more balanced and sustainable. In The Mystery of Capital, Hernando de Soto emphasized that the real wealth of developing countries lies in enabling ordinary citizens to convert their assets and ideas into productive capital.
The practical question, therefore, is simple: can an ordinary Nepali realistically build and grow a business?
The structural barriers
For many, the answer remains uncertain. Access to finance continues to be a primary constraint. The banking system, regulated by Nepal Rastra Bank, relies heavily on collateral-based lending. While this ensures financial discipline, it excludes individuals who lack property but possess viable ideas.
Nepal’s import-driven economic structure further concentrates opportunity among those with capital, networks, and scale. Smaller entrepreneurs are often confined to the lower end of the value chain, with limited ability to expand.
Regulatory and compliance requirements add another layer of difficulty. What is routine for established firms can be overwhelming for new entrants. The result is not deliberate exclusion, but a system that consistently favors those already positioned to succeed.
When policy does not broaden opportunity
Governments often attempt to address these gaps through targeted incentives. Nepal has done the same, particularly in promoting industrial activity. Yet outcomes suggest that such measures do not always lead to broader participation.
Nepal has repeatedly attempted to stimulate industrial activity through targeted tax incentives. Yet several cases raise questions about their effectiveness. For example, vehicle assembly plants received over Rs 14bn in tax concessions in five years, but according to the Auditor General, the value added within Nepal did not match the revenue forgone, and consumers saw little meaningful price reduction. The issue is not the intent behind such policies, but their distribution. Firms with scale and capital are better positioned to capture these benefits, while smaller entrepreneurs remain largely excluded. Growth, in such cases, does not necessarily translate into wider economic participation.
Corruption as a structural outcome
This leads to a deeper issue. As Susan Rose-Ackerman argues, corruption often emerges from competition over limited economic access. When licenses, contracts, or economic gateways are scarce, businesses compete not only in markets, but for influence. In such environments, access becomes more valuable than efficiency, relationships begin to outweigh capability, and economic power concentrates. Corruption, in many cases, becomes a rational response to constrained opportunity. Reducing corruption, therefore, requires more than enforcement. It requires expanding the number of people who can participate in the economy.
The risk of concentration
Economic concentration also introduces systemic risks. The 2008 Global Financial Crisis demonstrated how large institutions can become “too big to fail.” The collapse of Lehman Brothers and the rescue of institutions such as American International Group forced governments to deploy massive public resources to prevent wider collapse. For smaller economies like Nepal, such risks are even more significant. Limited fiscal capacity means that the failure of large economic actors can place disproportionate strain on the entire system. A diversified economy, supported by a broad base of enterprises, is inherently more resilient.
An untapped engine: Women entrepreneurs
One of Nepal’s most significant opportunities lies in expanding the role of women in the economy.
Women contribute an estimated 36 percent of Nepal’s GDP, yet only 22.5 percent of working-age women are formally employed (UN Women Nepal, 2023; World Bank Gender Data, 2024). This gap highlights not a lack of capability, but a lack of access and opportunity.
Women’s economic contributions already span agriculture, small enterprises, services, and emerging sectors. Evidence globally shows that women reinvest a significantly higher proportion of their income into families and communities—up to 90 percent compared to around 40 percent for men (World Bank Gender Report, 2022). Studies such as those by EY (2023) also suggest that women-led enterprises often deliver stronger long-term value and sustainability. Countries such as India have recognized this and introduced targeted credit programs and policy frameworks to support women entrepreneurs.
For Nepal, this is not simply a matter of inclusion. It is one of the most immediate and scalable opportunities for economic expansion.
Rethinking the role of the state
A broader shift is required in how the state approaches the economy. Revenue generation cannot rely solely on taxation. In a developing economy like Nepal, excessive reliance on high and often punitive taxes can suppress consumption, discourage investment, and slow economic momentum. The state must evolve from being primarily a tax collector to becoming a strategic economic participant.
Nepal has significant untapped potential in sectors such as hydropower, infrastructure, tourism corridors, cable transport systems, and mineral extraction. These are commercially viable opportunities that, if structured correctly, can generate sustained national income. A more effective approach lies in well-designed Public Private Partnership models.
Under such a framework, the government initiates projects using concessional or soft loans from development partners including governments and other bilateral agencies, projects are structured with clear revenue streams such as electricity exports, toll collections, user charges, or resource royalties, once operational and de-risked, these assets are partially or fully offloaded in the capital markets
This model allows the government to build infrastructure without immediate fiscal strain, repay debt through project-generated income, and recover capital, often at a premium, through market participation. It also enables reinvestment into new projects, creating a continuous cycle of economic expansion. It is a model already proven globally across toll highways, energy infrastructure, ports, and transit systems.
For Nepal, the implications are significant. Hydropower exports, toll-based expressways, ropeways in difficult terrain, tourism infrastructure, and mineral development can all be structured in this manner. This approach reduces dependence on taxation, broadens the capital market, and allows citizens themselves to participate in national assets through equity ownership.
The direction ahead
Nepal stands at a crossroads. Its young population, expanding connectivity, and integration with global markets offer enormous potential. But prosperity cannot remain concentrated. A resilient future lies in empowering thousands of entrepreneurs - farmers, manufacturers, tourism operators, technology startups, and women leaders across every scale of the economy. When opportunity spreads, prosperity becomes inclusive and durable. And when prosperity is widespread, stability follows.
The foundations of a stable Nepal will not be built solely in parliament. They will be built in the countless enterprises where citizens take risks, create value, and transform ideas into opportunity. When people are able to thrive economically, peace and contentment follow. From that foundation, both economic and political stability naturally emerge.
Nepal’s new generation of lawmakers must now act with clarity. Expanding access to credit, dismantling structural barriers, reducing punitive tax regimes, and building an economy that rewards participation over proximity to power are not optional reforms, they are necessary corrections.
Because in the end, stability will not be delivered through politics alone. It will emerge when citizens believe they have a fair chance to succeed.
And that belief is built not through promises, but through opportunity.
