Nepal's business arrests: prosecute the owner, not the company

Nepal's business community has asked for the wrong thing. In July the three big business bodies asked Prime Minister Balendra Shah for anticipatory bail in financial cases, so that owners under investigation could stay free to run their companies, Ratopati reported. The prime minister was sympathetic, saying the economy "cannot move forward by cracking down on entrepreneurs." He should resist. A rule that lets the wealthy apply for bail before they are charged would tell every other Nepali that the law has a business-class lane.

The industrialists have identified a real problem, though, and it deserves a better answer. When the state arrests a company's owner or freezes his assets, it can stop the company itself: its payroll, its suppliers, its loans. The chairman and vice chair of the Shanker Group, whose businesses run from steel to the Hilton in Kathmandu, were among those detained in the money-laundering inquiry into the businessman Deepak Bhatta, OCCRP reported. Whatever the outcome of that case, the people who make the steel and staff the hotel are not suspects.

Separate the person from the firm

The answer is to treat the company and its owner as what the law already says they are: different persons. Where investigators believe an owner has committed a crime, they should freeze the specific assets they say are the proceeds of it, not everything he controls. Where an owner is detained, a court should be able to appoint an administrator so that a solvent company keeps trading under supervision. Nothing in that approach is soft on fraud. It protects workers, creditors and minority shareholders, who are also victims when a business collapses for want of a signature.

Get the process right the first time

The second change is procedural, and the state can make it on its own. Since the Rastriya Swatantra Party took office, police say they have arrested and charged more than 460 people as middlemen in bribery and extortion cases, OCCRP reported. The number matters less than what happens next. The money-laundering case against Sher Bahadur Deuba shows the cost of haste. A district court approved the warrant; a Supreme Court bench later said such offences belong in the Special Court and that the warrant appeared to have become void, Himal Press reported. Interpol twice declined to issue a red notice, at one point questioning the legal basis of the inquiry, The Kathmandu Post reported.

A prosecution that fails on procedure fails twice. The accused is neither convicted nor cleared, and every investor learns that the state's power is real but its process unreliable. For someone deciding whether to build a factory, that is the worst combination on offer. Charges should be filed in the right court, published when they are filed, and pursued to a verdict within a set time, with a judge reviewing any asset freeze that runs past it.

Confidence is the scarce input

Nepal does not lack money. Banks have plenty to lend at the lowest rates in a decade, yet private-sector credit has grown only about 6% a year, half the central bank's target, The Kathmandu Post reported. Economists quoted by the paper put the gap down to confidence. Arrests alone cannot fix that, and neither can special bail for the people being arrested.

The government should say plainly that fraud will be prosecuted whoever commits it, and then make the system predictable: targeted freezes, court-appointed administrators for companies whose owners are detained, and cases filed correctly and decided promptly. It should also give investors one voice on economic policy; the finance minister has been holding his own meetings with the same industrialists, Khabarhub reported. That is a programme a reforming government can defend to its voters and to its investors at the same time.