Bibek Paudel’s weblog

Nepal’s poor economy has never had the opportunity of a sensible political leadership. Especially since the civil war in the 1990s, it is in total disarray. The peace-process is only existent in name and paper. Industries are either already closed or are on the verge of shutting down. Industrialists are leaving the country for greener pastures as Maoist-affiliated labor unions’ high-handedness doesn’t seem to cease but instead appears to have encouraged other unions for similar actions (Read more about the unions’ excesses in a recent issue of a popular Nepali newsmagazine Himaal).

There are a few sectors where Nepalis feel safe investing, however. Real estate is one of them though it’s not institutionalized yet. People invest all they have in land and houses. In a country where there’s no better use of money than saving it, banking is perhaps the only other trusted place for investment. Maybe, that’s the reason for the increasingly popular trend of investing in the banking industry.

Every time a bank’s IPO is announced, queues can be seen all over Kathmandu of people vying to get a piece of the cake. The same enthusiasm is very rare in the stock markets though. In the past 9-10 months, a little less than a half a dozen banks have announced their IPOs and I haven’t seen the craze fading. Last week, Citizens’ Bank and Bank of Asia announced their IPOs. For Citizens’ stocks worth NRs 300,000,000 people have readied NRs 6,000,000,000. For similar figures, people deposited NRs 5,000,000,000 in Bank of Asia’s coffers. A few months ago, Global Bank Ltd received NRs 12,000,000,000 during its IPO. Those are huge figures by any means in a country like ours, especially for the stocks offered. Such occasions used to be unheard of during the past.

My observation tells me that about 5 percent of Nepal’s population is usually interested and/or aware of such IPOs. Among those who apply for stocks, most people invest only about 10-30% of their savings. This indicates the amount of Nepal’s untapped wealth. If there were suitable conditions for investment and business, the government could have easily run many successful ventures including power plants. The irony is that the government’s paraphernalia themselves are hell bent on not letting such possibilities turn into reality. They will make sure that strikes, obstructions and other machinations of destruction will follow no sooner than the people will start investing.