Policy Volatility Is No Substitute for Credible Governance

Editorial

The strength of a government is not determined solely by the number of seats it commands in parliament. A government is ultimately judged by whether the policies it formulates are well considered, stable, predictable and implementable. Speed in decision-making can be an element of effective governance, but hurried decisions followed by rapid reversals are not.

Recent developments have made this question increasingly important. A policy is announced, opposition emerges, and within days the government retreats. At the same time, when problems arise in supply management, market regulation or the business environment, government agencies and stakeholders often begin blaming one another. If such patterns become routine, the government may retain the authority to make decisions, but public confidence in those decisions will steadily weaken.

Correcting a wrong decision is not a sign of weakness. A democratic government must listen to citizens and stakeholders. The problem arises when a major policy affecting the economy or society has to be reversed almost immediately, raising legitimate questions about whether its legal, economic and social consequences were adequately assessed before it was announced.

The private sector’s concern over policy stability should not simply be dismissed as an expression of business interests. Entrepreneurs deciding whether to establish an industry, invest capital, create employment or make long-term plans need a minimum degree of predictability regarding taxation, imports, electricity, labour rules and regulation. If policies change repeatedly and unexpectedly, investors naturally become more cautious. The eventual consequences are felt in production, employment and government revenue.

That does not mean the government should accept every demand made by the private sector. Calls to alter tax rates, for example, or to introduce differentiated rates similar to India’s Goods and Services Tax system cannot be adopted without careful economic analysis. Nepal has its own revenue structure, consumption patterns and administrative capacity. Policy must therefore be determined by evidence and national requirements, not by pressure from any particular group.

The current problem surrounding cooking gas supplies also points to the same question of policy and administrative capacity. The government should have clear and credible data on imports, actual consumption, the number of cylinders in circulation, distribution bottlenecks and whether any artificial shortage exists. A prolonged situation in which businesses present one set of figures while government agencies provide another explanation only deepens public confusion. Consumers do not need competing publicity campaigns. They need an uninterrupted supply of cooking gas.

A government with a strong mandate and the prospect of serving a full term has an important advantage: it does not have to govern through short-term populism. It can spend three months studying an issue and produce a policy capable of lasting five years. It can publish draft proposals, consult businesses, workers, consumers, experts and relevant agencies, assess legal and economic consequences, and only then proceed to implementation.

For major economic and administrative decisions, a minimum institutional process should therefore become standard practice. Policy impact assessments, defined periods of stakeholder consultation, clear implementation schedules and mechanisms for subsequent review should be built into decision-making. Such procedures do not necessarily slow government down. On the contrary, they can save the time, economic cost and political damage created by poorly prepared decisions that later have to be withdrawn.

A government must retain the flexibility to acknowledge and correct mistakes. But even more important is reducing the frequency of decisions that require immediate correction.

Trust in the state is not built through speeches. It is built when citizens, businesses and institutions can reasonably believe that today’s government decision will still have meaning tomorrow.

Nepal does not need an endless stream of new policies. It needs fewer policies that are thoroughly studied, clearly communicated, consistently implemented and stable enough to command confidence.

That is the true measure of a strong government.