IMAGE: GOLYAN GROUP
A VISITOR TO Kathmandu might easily conclude that the country is a subsidiary of a few private families. From the moment one arrives, the signs are everywhere. The bank that handles your currency exchange, the hotel that hosts your stay, the cement in the pavement and the instant noodles in your bowl often share a common corporate parent.
Welcome to Nepal’s “tycoon economy”, where a handful of family-led conglomerates exert a multi-sectoral grip on the nation. The country may have shed its monarchy, but its economy clings to the same tightly held family fiefdoms. The transition from a centralised monarchy was meant to democratise the counting house as much as the ballot box. Instead the “Licence Raj” of the past has evolved into a more sophisticated “Capture Raj”. In this world, the state acts as a facilitator for elite accumulation rather than as a neutral referee.
To see how it works, look at the “house” model of business. In more mature markets, firms tend to specialise. In Nepal, a single family network typically controls a portfolio spanning banking, insurance, manufacturing and international trade. This creates a closed loop of capital. The clearest example is the interlocking directorate, where board members of a commercial bank also hold controlling interests in the industrial firms that borrow from that same bank. It is an arrangement that makes a mockery of risk management. When a business house owns the source of its own credit, independent small and medium enterprises are pushed to the margins. They struggle to secure any funding at all—just ask any small business.
Data from the Nepal Stock Exchange gives a glimpse of partial evolution. In the 2018–19 fiscal year, banking and insurance accounted for a staggering 72% of market capitalisation. By last year, that figure had dipped to some 52.5%. In theory this suggests a broadening of the economy. Yet the change is largely driven by the entry of large-scale hydropower and manufacturing firms. Many of these “new” players are promoted by the same established business groups. The names on the letterheads remain disturbingly consistent. The Chaudhary Group, for example, dominates fast-moving consumer goods, banking and telecoms, holding a 39–50% stake in Nabil Bank and producing Wai Wai noodles for international markets. Shanker Group combines cement, steel (for example, Jagdamba Steels), hotels and so on. Vishal Group touches banking, real estate and education. Other players such as Golchha Group, Golyan Group and Khetan Group have carved out similarly dominant niches. Ten to twenty large groups receive as much as 40% of all bank loans, reckons Biswo Poudel, governor of the Nepal Rastra Bank.
Also read: Rules, cartels and banks combine to smother innovation at birth
The roots of this system run deep. They do not spring from recent liberalisation but from a century of patronage. During the Rana regime, which ended in 1951, the state and the ruling family were one and the same. The subsequent Panchayat era introduced a modern bureaucracy but kept the keys to the economy firmly in the palace. Access to foreign exchange and import permits was a gift bestowed upon a small group of courtier-merchants. These families accumulated the foundational capital that powers today’s conglomerates. When the 1990 restoration of democracy brought market reforms, these groups were best positioned to benefit. They competed in the new market while also capturing the institutions meant to regulate it.
The Maoist insurgency of 1996–2006 inadvertently strengthened their grip. Smaller competitors, lacking the financial firepower to survive extortion or insecurity, simply gave up. The larger groups possessed the resilience and the political connections to weather the storm. During that period, the “syndicate system” became the dominant organisational form. These cartels, often operating as trade associations, used their collective muscle to block newcomers. They fixed prices with the tacit support of politicians who relied on them for campaign funds. The result is a market where competition is viewed as a threat to be managed rather than a virtue to be pursued.
That concentration of power has produced stagnant innovation. In a truly competitive market, firms must innovate to survive. In a tycoon economy, they survive by maintaining their proximity to power. There is a big deficit in research and development. Dominant firms prefer the safe returns of “low productivity, high arbitrage” activities such as trading and infrastructure contracts. This has created a “remittance trap”. The country relies on the earnings of millions of young Nepalis working abroad, which now amount to 25% of GDP. These remittances fuel the consumption that benefits the trading arms of the big houses. It is a cycle that hides the underlying weakness of the domestic industrial base.
For the aspiring entrepreneur in Kathmandu, the ceiling is not glass but reinforced concrete. Young “Gen Z” founders in the tech and digital sectors find themselves at a structural disadvantage. They face a funding gap because banks are hesitant to lend to disruptive newcomers. Even when a start-up shows promise, it must deal with a “superficial” regulatory environment. The 2023 National Startup Enterprise Policy was welcomed with fanfare but has done little to remove the bureaucratic hurdles that prevent firms from scaling. As a result, Nepal misses out on the digital booms seen in neighbouring India. The talent simply leaves.
The social consequences are no less brutal. The wealth gap in Nepal is among the highest in South Asia. The richest 10% of the population control 26 times more wealth than the poorest 40%. The disparity is also geographic: Bagmati Province, where the capital sits, accounts for nearly 40% of national wealth. By contrast, provinces such as Karnali are mired in poverty. The state’s failure to invest in public services compounds the problem. With only 5% of the budget allocated to health and 10.75% to education, the elite can afford private alternatives while the poor are left with a crumbling public system.
Perhaps the most troubling trend is the direct entry of tycoons into formal politics. A record number of industrialists and bankers have been filing nominations for the House of Representatives elections, and many have won too. Binod Chaudhary, the dollar-billionaire chairman of the Chaudhary Group, argues that his business experience is needed to shape national policy. Others, such as the medical college operator Sunil Kumar Sharma, have followed suit. That convergence of economic and legislative power is the ultimate form of state capture. When the people who own the banks and factories also write the laws governing them, the distinction between public interest and private gain vanishes. It creates a toxic governance environment in which institutional independence is undercut.
Nepal’s situation is not unique, but it lacks the silver lining found elsewhere. In Bangladesh a few hundred families dominate the economy but they have built a globally competitive garment sector. In South Korea the state forced its chaebol to compete on the world stage through strict export targets. Nepal’s tycoons, by contrast, are focused on the domestic market. They are protected by high tariffs and a lack of antitrust enforcement. The Competition Promotion and Market Protection Act of 2007 exists on paper but is virtually unenforced. The government even retains the power to waive the act during a “crisis”, a loophole that has been used to protect favoured cartels.
Breaking this cycle calls for an institutional overhaul. An independent competition commission, free from political interference, is critical. The country must also decouple banking from industry. Prohibiting individuals from serving on bank boards if they are big borrowers would be a start. Without those reforms the trajectory for the next decade looks grim. The country risks falling into an “oligarchic capture” pathway, where inequality widens and the brain drain accelerates.
The promise of the republic was a more inclusive and prosperous Nepal. Yet the economic reality remains a game of musical chairs played by the same few families. If the state cannot reclaim its role as a neutral regulator, the “tycoon economy” will continue to stifle the potential of its people. Reforming the system is an economic necessity as well as a political one. Until the house stops winning every hand, the average citizen will continue to feel like a spectator in their own economy. ■
