The Privatization Policy Transfer: A Nepalese Experience

Laxmi Kant Paudel's picture
After three decades of state intervention throughout the world the 1980s and 1990s have seen a marked reversal in economic policies. Instead of government intervention, control and centralized planning, there has been a renewed and invigorating emphasis on a market oriented strategy. Privatization constitutes one of the cornerstones of that strategy. During the 1980’s there was a remarkable change in Nepalese economic policy, thereby, liberalizing its economy to facilitate the private sector and a competitive market system. The new initiative- from the commanding heights of the states to market forces- is entirely based on the external inducement by the IMF and the World Bank. This change culminated in the early 1990s when the Koirala government published a white paper ‘Policy Paper on the Privatization of Public Enterprises’ (1991), which clearly aimed to introduce a balanced approach between the public sector and private sector. To accelerate the process the government has also made various reforms on the registration and licensing, pricing and subsidies, financial markets etc. The main motive of this paper is to explain that the move towards privatization, in the Nepalese context, is a case of policy transfer. This paper tries to explain the causes of the occurrences of policy transfer, who transferred and what was transferred.
Main Article: 

1. Introduction

Policy Transfer has become more of an issue in both the academic and political arenas over the last three decades. It is a process of learning in which politicians, bureaucrats, think tanks etc. transfer ideas from one specialty to another. As Rose (1991:10) explains that policy transfer was a feature of ancient politics as well as today’s. For example, Aristotle examined the contribution of the city states for the sake of civic betterment and the founding fathers of the USA looked at the British system to avoid presumed defects in the constitution. Hence, policy transfer is an ongoing process and the historical dimension of policy diffusion demonstrates that it is difficult to mark its beginning.

In such a context, there has been no economic phenomenon that has been as widespread as privatization. It has been only in the last three decades that privatization in its pure form has been introduced as a viable economic measure in the agenda of governments around the world. From 1983 onwards, privatization developed around the world to become the cornerstone of governmental policy for economic development since it got political and economic success in Britain (Pirie, 1988:295).

The Nepalese government adopted privatization policy in the mid-1980s due to the pressure imposed by the international agencies such as the IMF and the World Bank. However, due to the various structural constraints the government could not successfully implement privatization policy during the Seventh Five-Year Plan (1985-1990). The movement in 1990 saw a U-turn in the Nepalese political system- from partyless Panchayat system to multiparty democracy. The change in the political system also affected its economic policy. The first democratically elected government published a white paper on privatization in 1991. By 2008, the government had already privatized 30 enterprises, and 36 are still in the government’s hand. The economic policy of the Nepalese government is launching towards a new trend of liberalized economy giving major roles to the private sectors in the industrial as well as service sector.

Research Objective

This research attempts to explain the privatization policy through the lens of policy transfer literature. It mainly concentrates on demonstrating whether policy transfer analysis successfully explains privatization policy or not. This research hopes to find out whether policy transfer has occurred in Nepal, and the causation of policy transfer. Similarly, it also investigates what was transferred and why it was transferred.


Documentary research and qualitative data are the main methodological devices employed in this research. For this, it utilizes both primary and secondary sources of data. Government publications, research reports of semi-governmental and international organizations are included as the main sources of data. Wherever these sources provide insufficient or incomplete data, they are supplemented by primary source such as acts, laws, by-laws etc. The sources of data and information used in this research are mentioned in the bibliography.

2. Policy Transfer in Political Science Literature­ - Variables and Framework

Dolowitz and Marsh (1995) explain policy transfer as a distinctive process in which policy initiatives are borrowed by elites from one spatiality to another. They define “policy transfer" and "lesson drawing" according to the divergent process by which policies, ideas or programs are transferred by policy makers from one spatiality to another through various processes. Policy transfer is being used as an inclusive way to refer to both voluntary and coercive forms of transfer. In contrast, “lesson drawing" refers to the voluntary transfer which occurs as a result of the free choices of political agents (Dolowitz and Marsh, 1996:2). Hence, voluntary transfer emphasizes the intentionality of the politicians (Evans and Davies, 1997). On the other hand, for Rose (1993), policy transfer and lesson drawing have similarities, referring to the process under which certain policies and institutions are transferred across time and space.

Wolman (1992) and Rose (1993) argue policy transfer as a dependent variable that explains the causes of transfer. Rose further argues that a lesson can be an exemplar of "what to do" and "what not to do" (Rose: 21) and the transfer of a new program or policy depends upon the intentionality of the actors engaged in the policy making process. In contrast, Bennett (1991) suggests policy transfer as an independent variable and the adoption of a new program is country-specific. He provides the example of how Britain and Canada utilized the American Freedom of Information Act in a different manner. The Canadian adoption can be explained in terms of "caching up"; in contrast the British non-adoption can be understood as a negative lesson.

Evans and Davies (1997:13) lay down greater emphasis upon the role of structure and agency in the international dimension of policy transfer. They argue that policy transfer needs to be explained in terms of the social and political action within the structured context, which influences the adoption and non-adoption of a particular policy. This model mainly stresses the multi-disciplinary and multi-level perspective policy transfer which constrain /or facilitate the adoption of certain policy.

In short, policy transfer is a strategy of learning and adopting policies and programs from within and across national boundaries through various channels of interaction and sources. Simultaneously, it is a process of policy change in which policy goals, structure and content, policy instrument, ideology, institutions, attitudes and concepts, policy styles and negative lessons are drawn upon by the policy makers.

Policy Transfer Framework

3. Privatization Policy in Nepal

Why transfer? Want to...Have to Who is involved in transfer? What is transferred? From where? Degrees of transfer Constraints on transfer How to demonstrate policy transfer How transfer leads to policy failure
Voluntary Mixtures Coercive Past Within a nation Cross national
Lesson drawing (perfect rationality) Lesson drawing (bounded rationality) International pressures
  • Image
  • Consensus
  • Perceptions
  • Externalities
Direct imposition Conditionality
  • Loans
  • Business activities
  • Obligations
Elected officials Bureaucrats Civil servants Pressure groups Political parties Policy entrepreneurs Experts Consultants Think Tanks Transnational corporations Supranational institutions Policies
Goals Content Instruments
Programs Institutions Ideologies Attitudes Cultural values Negative lessons
Internal Global State governments City governments Local authorities International organizations Regional State Local governments Copying Emulation Mixtures Inspiration Policy complexity Past policies Structural institutional feasibility Ideology Cultural proximity Technology Economic Bureaucratic Language Media Reports Commissioned Uncommissioned Conferences Meetings Visits Statements Media Reports

Adopted from Dolowitz and Marsh 2000

Privatization initiatives were taken up in Nepal by different governments since 1985.

However, the process accelerated during the 1990s after the restoration of democracy. This section tries to explain the steps of privatization policy adoption in Nepal.

3.1 Privatization under the Panchayat Regime

Nepal embarked on a major program of stabilization in 1985-86, supported by the IMF standby arrangement and structural adjustment programme (SAP) financed by the World Bank Structural Adjustment Credits (Guru-Gharana, 1996:22) due to the country’s poor economic growth. The programs were designed to liberalize the economy, improve public sector efficiency, and encourage private sector involvement in agriculture, forestry, trade and industry, reducing the scope for state intervention.

During this period, encouragement of private sector involvement, at least in principle, constituted an additional component of this new economic strategy. Accordingly, the government came up with an ambitious plan to sell off 12 enterprises in 12 months, the shares of Rastriya Banijya Bank, Nepal Industrial Development Corporation and Rastriya Beema Sansthan were offered to the public at premium prices (Manandhar, 1995:17-22; CPRS, 1996). Yet, this plan never materialized during the Panchayat days because the public response was very poor.

However, donor pressure, especially that of the World Bank, USAID, and UNDP, has been instrumental in accelerating Nepal’s privatization program since 1988. High-level seminars were organized by these agencies to discuss privatization issues. UNDP, in cooperation with the World Bank, assisted the Ministry of Finance in formulating privatization strategy for Nepal (UNDP, 1992). They did not only dictate the government to set up a "privatization cell" but also assisted to make feasibility study to suggest potential candidates for privatization (Manandhar, 1995). A privatization cell was established in the Ministry of Finance in December 1989 to plan and implement the privatization program. I firmly believe that the government, at that time, could not implement the privatization program due to two reasons. Firstly, the country had a severe political crisis as pro-democracy supporters were fighting for the reinstitution of democracy. Secondly, there was economic crisis due to the Indo-Nepal agreement on trade and transit, which affected the lives of the Nepalese people.

In this way, prior attempts to divesture failed. The hesitation to proceed with privatization is attributed, in part, to sensitivity to political and social concerns, such as inadequate participation of nationals in the bid process and resistance from pubic enterprise employees to divesture, and in part by the ad hocism in choosing PEs. The government intention to privatize was referred to informally or implicitly in various documents, however, there was a lack of a formal document that clearly defined government privatization policy, objectives, and strategies.

In short, although privatization was initiated by the international agencies in the mid-eighties, this policy fell short of action and expectation during the Panchayat rule due to the constraints mentioned above.

3.2 Privatization Under Democratic System in 1990s

The democratic movement of 1990 brought a discernible and fundamental transformation in the political system- from the partyless Panchayat system to a multiparty democracy. Dissatisfactions with the earlier political system was also reflected in the economic policy. The constitution of Nepal clearly states, “the fundamental economic objective of the state would be to transform the national economy into an independent and self-reliant system". Furthermore, after the election victory of 1991, the Nepali Congress-led government implemented the Enhanced Structural Adjustment Facility (ESAF) with the objective of: (a) raising GDP growth to about 5 percent per annum in the next three years, (b) reducing annual inflation to 5.0 percentage and limiting current account deficit to 9.6 percent of GDP, (c) reducing fiscal deficit to 7.8 percent of the GDP with domestic borrowing limited to 0.2 percent of GDP by the end of the program period (1994-1995). One of the conditions involved in the grants was "privatization" (Adhikari, 1997:3). Apart from this, after the fall of communism in Eastern Europe, the concept of socialism received a strong blow, leading to the wave of liberalization and openness throughout the world economy. Nepal could not remain unaffected by this world trend.

Consequently, the democratically elected government made a commitment towards comprehensive privatization program for the public enterprises as part of an overall program of the liberalization of the economy. In this context, the Nepalese government introduced a white paper "A Policy Paper on the Privatization of Public Enterprises 1991" to provide a balanced approach and access to the private sector. The Koirala government’s approach, particularly as regards the Nepalese public enterprises, was to sell shares in the stock market on a competitive basis, thus, widening the "ownership" of the newly privatized companies and at the same time to set up regulatory regimes to ensure that the companies were exposed to competition, and providing some competition for the consumers (Policy Paper, 1991).

Compared to the pre-1990 privatization bid, the process used by the Koirala government to implement its privatization policy was significantly different as it clearly stated: Why the government is going to privatize; how it is going to privatize and what would be emphasized in the process of privatization.

The First Phase of Privatization (1992)

The Nepali Congress government, which had a strong political will and clear objective, took a phased approach to privatization. The privatization cell, under the active support of UNDP, the World Bank and US AID, made a comprehensive feasibility study on project finding, redundancy modalities, and revaluation of business and assets of three manufacturing PEs selected for privatization. Expatriate consultants from IDA worked in close coordination with the local counterparts. Simultaneously, Frank Peacock prepared a privatization strategy paper for the MoF under UNDP assistance (CRPS, 1995:12). Experts from IDA completed the privatization feasibility studies of six public enterprises. With the UNDP/World Bank support, Delitte Rose Tohmatsu of New Zealand was involved in the valuation of the first three enterprises sold under phase 1 (ibid:25). During the first phase, which was completed in November 1992, three manufacturing PEs were privatized, through the sale of their business and assets by public tender. The PEs privatized under the first phase were:

  1. Brick and Tile Factory Ltd.
  2. Bhrikuti Paper and Pulp Factory
  3. Bansbari Leather and Shoe Factory Ltd.

On the recommendation of the HLPC (High Level Privatization Commission), the cabinet approved the modalities prepared by the specialists. The administration, the transfer of ownership, handover of business to the successful bidders and liquidation of the redundant PEs was contracted to a local firm of chartered accountants.

The Second Phase of Privatization

As part of the long term privatization program mentioned in its plan, 14 PEs were marked for privatization in 1993 and 1994. Seven of these were wholly government owned and the rest were jointly owned by the government and the private sector. Five of them were related to the agriculture sector, two related to services, four manufacturing sector and three were related to trading petroleum products (CPRS, 1995). The motivating factor for privatizing more PEs in the second phase might have been based on two reasons. Firstly, the performance of the privatized industries was found to be better. For instance, Bhrikuti Paper Mills had earned Rs. 7.82 million in 1991/92, whereas it earned 21.25 millions in the year 1993/94. Secondly, the government’s policy was to encourage the private sector to work in those areas so that the government would be able to devote in other areas of development where the private sector was not willing to involve itself.

However, during the second phase, only 5 PEs namely the Balaju Textile Factory (BTF), Nepal Film Development Corporation (NFDC), Nepal Lube Oil Ltd, Bitumen and Barrel Industry Ltd, and Raw Hide Collection and Development Corporation (RHCDC), had been privatized. The modalities selected for the privatization of these PEs were similar, but differed from those adopted in the first phase of privatization. In addition, Jute Development and Trading Corporation and Tobacco Development Company were liquidated.

Privatization after 1994

The political scenario of the country changed completely after the mid-term election of November, 1994 when the Communist Party of Nepal (UML) came to power. There was a remarkable difference between the Nepali Congress and the UML government in developing economic policies. The former was in favor of continual privatization, whereas the latter wanted to analyze the impact of public enterprises on the common people. In the budget statement of 1995/96, and then finance minister had said “…to lessen the financial burden of the government, a privatization program based on economic policies of the government will be implemented. Corporations that are to be privatized and those that are not will be separately listed. The privatization program will be expedited for those corporations included in the privatization lists” (Ministry of Finance, 1995:14). Despite the government’s announcement to pursue privatization policy in a selective manner, the short-lived UML government (9 months) neither announced the list of candidates for privatization nor commenced further privatization. The main reason behind it can be argued as its communist ideological underpinnings for supporting public sector. Since the inception of the party in 1949, the party fought for the egalitarian and classless society it became difficult for them to accept and initiate privatization comfortably.

After the collapse of the UML-led government, a three party coalition government (comprising NC, RPP and SP) was formed. The policy of selective privatization taken during the time of the previous government was reversed. The government’s policy and programs as enunciated in the Royal Address accepted the continuation of privatization policy in an open and transparent way, on the basis of national needs and social justice. It also promised to pursue a policy, which would preserve the rights, interests and welfare of the laborers. The coalition government privatized 4 more PEs, which included three manufacturing and 1 banking PE. Of the four privatized, three were sold with the sale of shares and only one, namely Biratnagar Jute Mills was privatized with a management contract (see Appendix for details).

After this, succeeding governments have taken office and engaged in privatization initiatives but it has been slow and controversial. The Nepalese government has already privatized 30 enterprises by various methods (see the Appendix).

4. Privatization Policy Transfer in Nepal

This section aims to link the theory to the case study. For this reason, the main emphasis here is to highlight the main motives and obligations that led to the adoption of privatization policy in Nepal. Furthermore, it endeavors to demonstrate the causes of policy transfer, the actors involved, and the objects of transfer.

4.1 Why Privatization Occurred in Nepal

The transfer of privatization policy in Nepal can be analyzed both in terms of internal and external factors. The internal factors can be interpreted firstly in terms of motivation of the policy makers by the evaluation of the poor economic performance of the public sector; secondly the perception of the policy makers being that Nepal was lagging behind its neighbors and the international community in crucial issues of economic development. Put another way, this was the result of dissatisfaction coupled with a feeling of being left behind. On the other hand externalities vary from the direct coercive role played by the international agencies to the indirect influence of neighboring country and the global economic trend.

4.1.1 Internal factors

Dissatisfaction- voluntary policy transfer

The literature on policy transfer identifies that one of the reasons why policy makers engage in policy transfer is dissatisfaction with the status quo. Rose (1993) argues that when routine stops working policy makers look to their past or abroad to search for new policies or programs. Though dissatisfaction is much more related to the subjective evaluation of particular policies by the policy makers, the prime motive to adopt new policies is to dispel dissatisfaction with the current policies. With reference to the Nepalese privatization policy, dissatisfaction is attributed to poor economic performance of the existing PEs. Like many other developing countries, Nepal’s development plans up to the 1980s laid heavy emphasis on maximizing output and growth through the creation of socio-economic overheads and inward looking industries. Nepal "relied on centrally directed, bureaucratically controlled development strategies, and the government itself has been the more rapidly expanding sector in the economy" (Rose and Scholz, 1980:109). I opine that this environment had two implications for Nepalese economic performance. Firstly, excessive bureaucracy created inefficiency and unnecessary red tape. Secondly, it discouraged the participation of the private sector in economically productive areas such as finance and industry. Simultaneously, considering the twenty percent of the total outlay of the PEs, the performance of these public enterprises has been disappointing (Sharma, 1986:108).

Therefore, the Nepalese government observed that, "it is now apparent that if nation fails to make concrete improvement in the existing economic policy, economic and social consequence will be serious" (NPC, 1981:14). As a result, the government came up with an ambitious plan for privatizing 12 PEs in a 12-month period. Paradoxically, not a single PE was handed over to private hands. For this reason, it is argued that the Panchayat regime pursued privatization policy in 1985-86 due to the poor economic performance of the PEs, and it had promised to encourage the private sector participation in front of the international organizations for the sake of loans, but no concrete steps had been taken in real terms (Asia Yearbook, 1986). It is, therefore, debatable that the dissatisfaction expressed by the politicians through the media could be considered to be sufficient enough leverage for voluntary policy transfer.

In contrast, after the historic event of 1990, which replaced the dictatorial partyless Panchayat system with multi-party democracy, dissatisfaction can clearly be seen to be one of the causes, which led to the government’s involvement in introducing privatization policy. A White Paper promulgated by the Koirala government clearly states that majority of the public enterprises are found to be operating unsatisfactorily. The financial loss and managerial responsibilities for these ailing units have to be borne by the government. This is certainly not conducive to the country’s economic growth. There are clear evidences that the performance of the PEs… could be improved under private sector management (Policy Paper, 1991:2).

Although the government has not furnished any evidence citing the performance of any particular country, the main arguments, which support dissatisfaction, can be classified as:

Political: there was motivation for the political leaders to have efficient economic policy

Economic: the government was fed up with the poor economic performance of the public enterprises.

Social: there was change orientation of the society.

(ii) Perception of Being Left Behind

Indirect coercive policy transfer can occur as a result of the comparative inadequacy of policies or programs. This demonstrates that policy makers engage in policy transfer when they perceive themselves to be falling behind the international community in the development of policies or programs. The government in the early 1990s seems to have been relatively aware of the inadequacy of Nepal’s economic development. Pyakuryal (1995:34) argues "the realization that South Asia was far behind the dynamism of their neighbors led to the restructuring and revamping of their economic policies towards a more open and liberal economic framework”. Nepal was no exception. Its overall development was not only poor compared to international standards, but it was also lagging behind many SAARC countries. For instance, its GNP per capita in 1989 was $180 compared to $340 of India, $370 of Pakistan, $430 of Sri Lanka and $180 of Bangladesh (WDR, 1991).

4.1.2 Externalities

The Role of the IMF and the World Bank (direct coercive)

The literature on policy transfer recognizes that direct coercive transfer can occur when one government or supra national organization forces another nation to adopt a particular policy (Dolowitz and Marsh, 1996). Due to the economic hardships, following the oil crisis of the 1970s, the economic condition of many developing countries was deteriorating. In such a situation, from 1980 onwards, the IMF and the World Bank have been critical agents in influencing the policies of these states. These have been primarily concentrated in the developing nations of the Third World who accepted structural adjustment programme (Khadka, 1986).

According to the World Development Report (1991:113) "structural policies are concerned with supply side; they address efficiency of resource use, emphasizing reforms in specific sectors, especially trade, finance and industry". The World Bank implemented its first adjustment program in 1980 to assist its member states to deal with the second oil shock by rapidly providing policy-based lending which came to account for 25% of the Bank's annual loan portfolio by the end of the 1980s.

Within the Nepalese context, the involvement of the international agencies can be examined from the 1960s onwards since Nepal commenced on her course of development through planning. According to Aran Schloss (1983), a team from the World Bank came to assist in the 1956-70 Plan, due to the lack of Nepalese experience. Despite this assistance, and huge input of foreign aid, the performance of the Nepalese economy was not encouraging.

By the early 1980s, like many other developing countries, Nepal experienced food shortages and the country’s economic condition was severe (Khadka, 1986). So, Nepal requested loans from the international agencies, as foreign aid only could not meet its budgetary requirements. In the fiscal year 1985-86, the government’s total budget, outstanding debt increased from Rs.346.1 million in 1975 to Rs. 10,330.2 million (Economic Survey, 1985-86). Thus, the dual crisis, escalating inflation and disequilibrium of the balance of payments, resulted in the urgent request to multilateral institutions to meet the estimated deficit in the budget for 1985-86. In fact, the leverage of the government to resist conditions by the IMF and the World Bank became weaker because of the deterioration in the balance of payments. The government had no option but to accept the IMF stabilization and the World Bank structural adjustment program to obtain international credit (Khadka, 1988:568). It is evident that it is necessary to be "creditworthy" in order to obtain loans from the IMF and the World Bank, as the loans are not free. On condition of the loans was the reform of PEs due to their disappointing performance compared to the investment. Hence Nepal had accepted privatization policy as one of the conditions imposed on economic reform (Adhikari, 1997; Rimal, 1996; Khadka, 1991)

Functional Interdependence

Policy transfer can also occur due to the functional interdependence. Functional interdependence refers to the reciprocal efforts of two or more countries in solving certain problems. When they perceive that the problems can be solved with mutual efforts, they work together.

Nepal is a landlocked nation between India and China. The impact of these two countries varies for geographical, social and cultural reasons. Geographically, Nepal is surrounded by India in the east, west and south and by the Tibetan region of China to the north. However, India’s impact on Nepal is much more pervasive than that of China because the border between the two countries is long and porous, through which both goods and people move freely. There are two main reasons for this interdependence. Firstly, Nepal and India share similar social and cultural values. Secondly, the southern part of Nepal is much more convenient for trade and transportation than the rugged Himalayan terrain of the north. Due to its geographical structure, Nepalese economic policies were influenced by India from 1959 onwards (Schloss, 1983),

Therefore, Nepal’s relationship with India is detrimental to its economic activity because of long and open border between the two countries (Pyakuryal, 1995:4). Since India was highly protected market until 1990, Nepal had difficulties in liberalizing her economy. Liberalization would have immediately led to a large-scale smuggling of goods from intermediate countries to India’s protected market. This could have resulted in excessive pressure for demand for hard currency, which could have been a cause for concern for the Indian government. But, in the 1990s, India had also shown commitment towards major changes in trade, financial and industrial policies that would inevitably have implications for Nepal’s economy. Some argue that if India had not liberalized its economic policy and shown commitment in privatization in the early 1990s, whatever the pressure of international agencies, the Nepali government would have difficulty in pursuing liberalization and privatization in such a radical manner. So, the implementation of privatization policy under the structural reform programs in India in the early 1990s had important implications in analyzing the Nepalese privatization policy.


Evans and Davies (1997) argued that international structures and agencies play crucial roles in the development of new policies. Globalization and the concept of global village indicate the interdependence between the countries of the world. It has become a common belief that national interest on the economic front can be enhanced through interaction with other countries of the world. In order to take advantage of the development of new technologies in different parts of the world, all the sectors of the country need to interact with their counterparts in other countries. The establishment of the World Trade Organization has necessitated this interaction at an even more rapid pace as the world trade becomes increasingly more competitive. However, the context of globalization trend in developing nations is slightly different than that of the developed country. So, it can be argued that one of the reasons why privatization policy transferred in Nepal is the global economic trend, which demands that every country be competitive on an international level.

4.2 What was Transferred what was not Transferred

The literature on policy transfer identifies various objects of transfer such as policy goals, institutions, concepts, ideology, and the transfer of a positive or negative lesson that is subjectively judged by the rational choice of the of policy makers.

Rose (1991:5) contends that international organizations such as the World Bank and the IMF are crucial agents in dealing with economic issues of 150 nations around the world, and the extensive experience is employed in advising its member states. It is clear that experts from donor agencies assisted the Ministry of Finance in formulating the privatization policy. But, it is not explicit which model was prescribed and to what extent it was incorporated in the Nepalese privatization process. Since the introduction of privatization policy in the 1980s was entirely based on adhocism and no policy paper was published, it is pragmatic to demonstrate the objects of transfer in the early 1990s, since the Nepalese government implemented a more determined privatization policy which seems to have been developed internally despite sufficient external pressure to adopt the policy.

The analysis of governmental documents such as "Policy Paper on the Privatization of Public Enterprise 1991’ and "Privatization Act 1994”, the following objects seem to have been utilized in developing the Nepalese Privatization Policy.


In developing the Nepalese privatization policy, the principle objects adopted by the Koirala government (1991-94) into the political system were attitudes and beliefs underpinning the efficiency of the private sector. Bhattarai (1994) believes that the concept of privatization in Nepal has been accepted on the premise that the market forces are superior over administrative directives in governing economic activities to achieve higher productivity and efficiency, as the management of the private sector is better than that of the public sector. Similarly, the policy paper on privatization of PEs (1991) states, "there are clear evidences that performance of the PEs could be improved under private sector management" (1992:2). After the successful review of some PEs and the initiation of International Agencies such as the IMF and the World Bank, the government concluded that the over-bureaucratization and managerial efficiency created poor performance of the PEs. So, HMG/N is determined to make far-reaching impacts on the development role of the government and the expansion of the private sector (ibid).

Policy goals

The performance of Nepalese PEs was disappointing both on social and economic grounds. The government in the 1990 adopted specific goals to improve the efficiency of PEs. The goals to accelerate privatization are as follows:

  1. Increase the productivity through the enhancement of efficiency of the state owned enterprises.
  2. Reduce the financial and administrative burden of the government.
  3. Usher all round economic development of the country, by broadening the participation of private sector (Privatization Act, 1994:1, Policy Paper, 1991:4)

Techniques/ methods

Another crucial element that the Nepalese government adopted is the technique/ methods of privatization. The government’s policy paper (1991:4) explicitly explains that it will privatize the PEs employing various options/ processes. by sale of shares of the enterprise to the general public, employees, and person or company interested in the management of such enterprises; by transferring assets of the enterprise; and by involving private sector in the management of the enterprise. Perhaps the clearest statement by the government official emphasizing the utility of the program is by the finance minister Mahesh Acharya (1991-94) who stated that the government would apply policy options to this process, considering the social and economic impacts of the PEs. This contrasted with the views of the opposition who were vocal against privatization policy (Kantipur, June, 1992). However, it is disappointing to note that the government had applied few options such as assets and business sale; only one PE was privatized through management contract (See Appendix).


The analysis makes it evident that the causes of privatization in Nepal are multiple and complex. Our empirical evidences suggest that the introduction of privatization policy in the mid-1980s was mainly due to the imposition rendered by the international agencies, but it failed. Undoubtedly, the Panchayat government had expressed dissatisfaction in the media, but the government did not seem to be wholeheartedly committed to privatization. If the government had had the strong desire to privatize, it would not have come up with the ambitious plan to privatize 12 PEs in a year on an ad hoc basis. So, the commitment by the policy makers to a certain policy through the media doesn’t guarantee that the policy transfer occurred as a consequence of dissatisfaction. For this reason, I have claimed that privatization policy in the mid-1980s was imposed by the International Agencies such as the IMF and the World Bank, but it failed.

The Nepalese privatization in the early 1990s is of very complex nature as there is no single cause and effect which can precisely explain it. The role of the IMF and the World Bank, perception of lagging behind, functional interdependence with its main trade partner India, and the global economic trend are the major factors associated with it. Despite the pressure from the international agencies, the government’s attempt to privatize is partly characterized by the dissatisfaction of the policy makers by evaluating the performance of the PEs. Furthermore, attitudes/beliefs; techniques/methods and policy goals were the main objects transferred in the Nepalese context.

The study, I can not claim, to be fully exhaustive in its nature. It mainly has tried to explain the causes of policy transfer, the actors involved in the transfer process and the objects of transfer. The policy transfer analysis applied in the privatization policy partially explains the causes, actors and objects of transfer as it is sometimes difficult to discern whether a policy is transferred voluntarily or coercively. Therefore, a further research may be required to establish more elaborative conclusion by involving the national as well as international policy transfer practitioners who are directly/indirectly involved in international policy transfer and its execution at the national/local level.


Adhikari, B. M. (1997) "Analytical Review of Privatization in Nepal"(in Nepali) A Paper Submitted to the Workshop on the “Need of Conceptual and Policy Consensus among Major Political Parties on Privatization” Kathmandu: SCOPE, February.

Asia Year Book (1986) Far Eastern Economic Review, National Fair Limited, Hong Kong.

Bennet, C. J. (1991) "How States Utilize Foreign Evidence", Journal of Public Policy 11(1), p.39-54.

Bhattarai, N. (1994) "Nepalese Promise of Privatization" Seminar on Managing the Privatized Enterprise, Washington DC, April.

CPRS (1995) Privatization of Public Enterprises in Nepal, Katmandu: CPRS.

Davies, J. & Evans, M. (1997) "Unpacking Policy Transfer Analysis, Economic Development Strategies in British Urban Government: The Case of Local Agenda 21", Department of Politics, UK: University of York.

Dolowitz, D. & Marsh, D. (1995) Who Learns From Whom: A Review of the Policy Transfer Literature, UK: Stratchclyde University

Dolowitz, D. & Marsh, D. (1996) "Who Learns From Whom", A Review of the Policy Transfer Literature Studies, 44: p. 343-357.

Guru-Gharana, K. K. (1996) "Structural Adjustment Concept and Practices with Reference to South Asia", in Ananda P. Shrestha and Nava Raj Dahal, (eds), Kathmandu: NEFAS.

Howlett, M. and Ramesh, M. (2003) Studying Public Policy: Policy Cycles and Policy Subsystems, New Delhi: Oxford University Press.

Hill, M. and Hupe, P. (2006) Implementing Public Policy: Governance in Theory and Practice, New Delhi: Sage Publication.

Kay, J.A. & Thompson, D. J. (1986) "Privatization: A Policy in Search of a Rationale", Long Range Planning, Vol.14, p.18-23.

Khadka, N. (1991) "Nepal’s Stagnant Economy: The Panchayat Legacy", Asian Survey, Vol.31 p.694-711.

Manandhar, N. (1995) Privatization: An Experiment in Failure, Kathmandu: Narayan Manandhar.

Parsons, W. (1995) Public Policy: An Introduction to the Theory and Practice of Policy Analysis, UK: Brookfield.

Pirie, M. (1998) Privatization, London: Adam Smith Institute.

Pyakuryal, B. (1995) Impact of Economic Liberalization in Nepal, Kathmandu: Evergreen Expo.

Rimal, B. (1996) "Structural Adjustment Programme: Impact on Workers", Ananda P. Shrestha and Nava Raj Dahal, (eds), Kathmandu: NEFAS.

Rose, Leo E. and Scholz, John T. (1980) Nepal: Profile of Himalayan of a Himalayan Kingdom, Colo: Westview Press.

Rose, R. (1991) "What is Lesson Drawing?", Journal of Public Policy,11, p.3-30.

Rose, R. (1993) Lesson Drawing in Public Policy: A Guide to Learning Across Time and Space, New Jersey: Catham House.

Schloss, A. (1983) "Stages of Development and the Uses of Planning: Some Nepali Experiences", Asian Survey, Vol. 23, p.115-27.

Sharma, S. (1986) "Nepal’s Economy: Growth and Development", Asian Survey, Vol. XXVI, No.8, p. 897-908.

UNDP (1992) Privatization Strategy, Kathmandu, UNDP, Ministry of Finance.

Wolman, H. (1992) "Understanding Cross-National Policy Transfers: The Case of

Britain and the US", Governance, 5, p. 27-45.

World Bank (1991) World Development Report, New York: Oxford University Press.

Government Publications

Government of Nepal (2007) Economic Survey, Fiscal Year 2007/8, Kathmandu: GoN.

HMG/N, Ministry of Finance (1985) Economic Survey, Fiscal Year, 1985-86, Kathmandu.

HMG/N (1991) Policy Paper on the Privatization of Public Enterprises, Kathmandu: HMG/N.

HMG/N (1994) Privatization Act 1994.

HMG/N (1995) Budget Speech 1995-96.

National Planning Commission (1981) Government’s Economic Policy, Kathmandu: NPC.


Kantipur, National Nepali Daily, June 7, 1992.

The Rising Nepal, National English Daily, July, 1997.


Privatised and Liquidated Public Enterprises in Nepal

No Name of privatized PEs Methods Year
1 Bhrikuti Paper Factory Ltd. Assets and Business Sale 1992
2 Harisiddhi Bricks and Tile Factory Ltd. Assets and Business Sale 1992
3. Bansbari Leather and Shoes Factory Ltd. Assets and Business Sale 1992
4. Nepal Film Industry Ltd. Share Sale 1993
5. Balaju Textile Industry Share Sale 1993
6. Raw Hide Collection and Processing Co. Ltd. Share Sale 1993
7. Nepal Jute Development Co. Ltd Liquidation 1993
8 Nepal Bitumen and Barrel Industry Ltd. Share Sale 1994
9. Nepal Lube Oil Ltd. Share Sale 1994
10 Tobacco Dev. Co. Liquidation 1994
11 Nepal Foundry Factory Ltd. Share Sale 1996
12. Ragupati Jute Mills Co. Ltd. Share Sale 1996
13. Nepal Bank Ltd. Share Sale 1997
14. Agriculture Project Service Center Ltd. Liquidation 2001
15. Nepal Tea Development Corporation Share Sale 200
16 Biratnagar Jute Mills Co. Ltd Management Contract 2002
17. Himal Cement Industry Ltd. Liquidation 2002
18 Cottage Handicraft Sales Emporium Ltd Liquidation 2002
19 Nepal Coal Ltd Liquidation 2002
20 Hetauda Textile Ind. Ltd Liquidation 2002
21. Nepal Transport Corporation Liquidation 2002
22. Butwal Power Co. Share Sale 2003
23 Birjung Sugar Factory Liquidation 2003
24 Agriculture Tool Factory Liquidation 2003
25 Bhaktapur Brick Factory Asset Sale and Rent 2004
26 Lumbini Sugar Factory Asset Sale and Rent 2006
27 Nepal Rosin and Turpentine Ltd. Asset Sale and Rent 2006
28 Agricultural Mine Industrt Ltd. Liquidation 2006
29 Nepal Drilling Company Liquidation 2006
30. Neal Telecommunication Ltd. Share Sale 2008

Source: Economic Survey, Fiscal Year 2007/8 Ministry of Finance, Government of Nepal.