One, supposedly highly learned, member of parliament in a recent public discussion declared, 'The menace of cartels and syndicates in the Nepali market are the result of adopting the free-market economy and giving everything to private ownership.' This sweeping remark exposes the superficiality of knowledge at our policy-making level.

 

The history of prosperity in the present day developed world is directly attributed to their timely vision to implement the anti-trust laws, the laws meant to do away with the syndicates and cartels in the market, as early as in the beginning of twentieth century.  What constitutes an absolute monopoly or oligopoly and how we should be measuring degree of collusions and fixings in the market has always been a debatable issue. Many big price cartels like OPEC are still thriving. But, the less market freedom, they have expanded the more.

 

In Nepal we have not sincerely tried to ensure the market fairness by dismantling gigantic structures of syndicates like in the public transport systems and price cartels almost in everything— services and goods markets. Pretty recently, a 'syndicate' of political parties forced medium-sized long-running and profit-making hydropower projects in the district of Sindhupalchok to agree to provide the people equity shares, without investing a penny. This is political face of extractive institutions.

 

The government and the political parties seem to be doing nothing to stop these malaises. It is because the political parties themselves are vehemently protecting these practices. Take, for example, all-pervasive transport syndicate. Each party has one so-called ‘transport entrepreneurs' association’ officially affiliated to it. If some are left, their office-bearers are elected under the political party banners. These syndicates are perhaps the biggest source of political financing. This clearly is a conflict of interest issue and this dependence cripples the ability of the political parties, including the one that forms the government, to take action against them.  Obviously, as in the case of Sindhupalchok, respective leadership of the parties is turning a blind eye to the overstepping of their cadres. Therefore, these syndicates and cartels are impossible to be broken until and unless the hat of political patronage is taken off from their heads.

 

Referring back to the naïve statement of the lawmaker, it is not the exercise of the free market that has promoted the syndicates and cartels but, on the contrary, they have thrived primarily due to every possible kind of anti-free market interventions— from the government, political parties and relevant regulators, including the social auditors and civil society.

 

When government takes a half-hearted approach even to enforce the existing laws, that provides incentive to collude in the market. If the major political parties dared to severe the affiliation of the 'associations' primarily created to protect such cartels, the larger part of the problem would be resolved automatically. But, are they willing to do so? Answer is a clear NAY! 

 

There is also a problem with the consolidated anti-trust law that views all sorts of price cartels and syndicates through the same lens. Some rules designed to regulate the market are fragmented and jurisdictions too are similarly divided among many agencies. Market research to gauge the extent of deviation from fairness parameters does not exist.  The penalty and punishments are very small compared to the benefit received from these practices. Also, at the theoretical level, the competitive market outcomes have been proved to be the best to stop these sorts of market distortions. From the perspective of both economic efficiency and social welfare, business practices that have the least deadweight loss are undoubtedly optimal.

 

If the country really wants to attract investment and progress faster, we need more effective anti-trust laws, their effective enforcement and sincere adoption of free-market economy approach. The precondition is: political parties must stop patronising the syndicates and cartels of all possible forms.