IMAGE: LO COLE
AT POKHARA’S new international airport, the silence is expensive. The gleaming terminal, inaugurated in 2023 with a $216m loan from China, was trumpeted as a national pride project. Today it handles a handful of domestic flights. No regular international services land on its runway, which extends towards the Annapurna range like a concrete question mark. Last December Nepal’s anti-corruption commission filed a colossal case over its construction, alleging $74m in losses and naming 55 people, including five former ministers. The headlines roared.
Yet the true scandal is not the alleged inflated invoices for earthworks. It is that Nepal is saddled with debt for a white elephant, a legacy to catastrophic planning. The obsession with chasing bribes obscures an ugly truth: the state is failing at its basic functions.
Nepal’s politics is consumed by a performative fight against graft. The Commission for the Investigation of Abuse of Authority (CIAA) is a prolific prosecutor. It files over a hundred cases a year, usually against low-level officials caught in sting operations over petty bribes or fake certificates. Its conviction rate is a respectable 60-80%. The media provides a relentless drumbeat of scandal. Donors applaud the commitment. The public rages.
Yet the country is not getting better governed. Development budgets go unspent. Infrastructure projects take 11 years on average to complete. The private sector is fleeing. Young Nepalis are voting with their feet—over half of secondary-school graduates want to work abroad. A focus on corruption as a moral crime, a deviation by bad individuals, has become a grand distraction from the systemic collapse of state capacity.
This performance has deep roots. Nepal’s modern state was not built on meritocracy or service delivery but on cronyism. The Rana dynasty treated the treasury as a family account. The Panchayat monarchy used resources to buy loyalty. The democratic and republican eras that followed did not break this logic: rather they democratised it. In a fragile, fractious polity, political survival depends on stitching together coalitions by distributing rents—jobs, contracts, subsidies and so on. Corruption is not an anomaly in this system. It is the glue. The legal framework has expanded for decades, from the Civil Code of 1854 to the Prevention of Corruption Act of 2002. Each new law promised zero tolerance. But the political incentives to bypass them only grew stronger.
The CIAA, for all its activity, is engineered to avoid threatening those incentives. It is legally independent but politically circumscribed. Its chief commissioner and commissioners are appointed through a settlement among the major parties. It lacks a permanent, specialist investigative cadre, relying on civil servants seconded for short stints, who must later return to the bureaucracy they investigate.
Consequently, it excels at chasing the small fish. In the 2021-22 fiscal year it received over 24,000 complaints but filed only 131 charge sheets. Most grievances vanish into a limbo of “preliminary investigation”. The commission’s statistical success is built on targeting clear-cut, petty offences while steering clear of “policy-level corruption”—the opaque cabinet decisions and legal exemptions that benefit powerful interest groups. It is a safety valve not a revolution.
Its methods have a perverse effect. The CIAA tends to engage in bulk prosecutions, charging every official who touched a problematic file, from senior secretaries to junior accountants. About half these cases end in acquittal, but the damage is done. The accused are suspended for years, their careers and reputations in tatters. The result is a bureaucracy gripped by paralysis. The safest decision is no decision. A former senior official describes the ethos as “don’t sign, don’t act, don’t get blamed”. This administrative freeze is a primary reason Nepal fails to spend its capital budget—only about 63% was used last year. The state is so afraid of corruption that it cannot function.
The real bottlenecks are not secret bribes but open structural failures. Consider infrastructure. To cut trees for a road, a project must deal with a nine-stage process across three tiers of government, taking nearly two years. Land acquisition follows a law from 1977, inviting disputes that can stall projects for a decade. The national budget habitually allocates money to projects before feasibility studies or land acquisition are complete. A National Project Bank, meant to vet projects for economic merit, is ignored. Politicians instead funnel funds to small, uneconomic schemes in their constituencies.
The fallout is a wasteland of squandered capital. Nepal’s Incremental Capital Output Ratio, a measure of how much capital is needed to generate growth, is the worst in South Asia. The public capital stock has fallen from 74% of GDP in the mid-1990s to about 50% today. The economy is haemorrhaging productive potential.
International donors have compounded the problem by prioritising anti-corruption compliance over actual governance reform. Aid programmes come with ambitious transparency targets and demands for new watchdogs. The government responds by creating more commissions or passing new laws, a performance of reform that leaves the underlying political economy untouched.
As Mushtaq Khan of the Anti-Corruption Evidence consortium argues, anti-corruption drives fail in fractured states when they ignore enforcement. If the rule-breakers are the political mainstream, more transparency just raises the price for buying off the enforcers. In Nepal the anti-corruption industry has become part of the ecosystem it pretends to clean.
A way out exists, though it is technocratic and unglamorous. In 2024 a High-Level Economic Reforms Commission chaired by finance minister Rameshwor Khanal delivered a blueprint. It advised a shift from “control-based” to “trust-based” regulation. Simplify the jungle of approvals. Create a permanent, professional procurement cadre insulated from political transfers. Introduce bonuses for project managers who deliver on time and budget. Abandon the politicised label of “national pride” for projects and select them on economic merit. The report identified specific capture points, like the 17 federal MPs and over 200 local representatives involved in the sand and gravel supply business. This is the granular, unsexy work of state-building.
Nepal’s anti-corruption spectacle offers a compelling narrative of villains and vigilantes. It satisfies a public hunger for justice and a donor check-list for accountability. But it is a palliative. The country’s crisis is about its ability to govern, not just its honesty. Every rupee lost to bribery is a problem, but every ten rupees lost to incompetent planning, bureaucratic paralysis and strategic folly is a catastrophe.
As long as the political class and citizens focus on individual scandals rather than the hard work of running the state, Nepal stays caught in a low-equilibrium trap: a nation that is very busy fighting corruption and very bad at getting anything done. ■
