30Jan2023

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OP-EDs and Columns

Nepal PM’s Foreign Policy Plate is Full

– SANTOSH Sharma Poudel

The column originally appeared in The Diplomat on 16 January 2023. Please read the original article here.

Nepali politics continues to confound observers. Communist Party of Nepal-Maoist Center (CPN-MC) chief Pushpa Kamal Dahal, who was sworn in as prime minister on December 26 despite his party standing third in the recent general elections, received a strong but surprising boost in a trust vote in parliament on January 10 when his former electoral alliance partners, the Sher Bahadur Deuba-led Nepali Congress (NC) and the Madhav Kumar Nepal-led Communist Party of Nepal-United Socialist (CPN-US), voted in support of his new government.

Less than a fortnight ago, Dahal ditched the NC and CPN-US to head a government with support from the Khadga Prasad Sharma Oli-led Communist Party of Nepal-United Marxist Leninist (CPN-UML). NC and CPN-US backed Dahal in the confidence vote despite his last-minute betrayal.

The decision of the NC and CPN-US to support Dahal has become the topic of much discussion in Nepal. Some speculate that Deuba might have supported Dahal in an attempt to secure a share in the spoils of power. Others see Deuba’s move as aimed at driving a wedge between Dahal and Oli. Meanwhile, others see it as a shrewd move by Dahal to minimize Oli’s influence in the ruling coalition. Whatever the reason, it is evident that instrumentalism determines Nepali politics, and that gaining power is the only currency.

The ruling coalition comprises parties with diverse interests and political goals. Its survival and domestic issues will be Prime Minister Dahal’s primary focus. Speeches of leaders in the new parliament focused on domestic issues like good governance, political stability, corruption control, and effective implementation of federalism.

Coalition partners wield considerable leverage in the new government and Oli, who heads the largest party in this coalition, will exercise significant control. He leads the mechanism to support the government and develop a common minimum program for the coalition government. His leverage will increase if the presidency or the house speakership (or both) go to the CPN-UML. Dahal seems to be in for a rough ride.

Meanwhile, several issues on the foreign policy front deserve Dahal’s immediate attention. The need for Nepal to “balance” its engagement with the big powers – India, the U.S., and China – in the context of heightened Sino-Indian and Sino-U.S. competition while maintaining strategic autonomy and sovereignty will be a major challenge. Another is Nepal’s widening trade deficit. Such challenges have intensified in recent times.

Dahal will need to tackle several issues with India. Firstly, he will need to decide on India’s Agnipath scheme. The previous government, of which Dahal’s party was a coalition partner, kicked the Agnipath can down the road for the next government to deal with. The Agnipath scheme provides for short-term recruitment into the Indian Army, which violates the tripartite agreement between Nepal, Great Britain and India regarding the recruitment of Nepali Gurkhas into the Indian and British armies. Last year, such recruitment in Nepal was suspended because Kathmandu was opposed to the short-term recruitment of Nepalis into the Indian Army. The current government does not have the luxury of delaying a decision on the matter as Gurkha recruitment from Nepal, which has been a critical element in Indo-Nepal relations, is in jeopardy.

Secondly, Nepal needs New Delhi’s cooperation to export hydroelectricity to Bangladesh. In August last year, Nepal and Bangladesh decided to request India to allow the export of 40-50 MW of Nepali hydropower to Bangladesh as Nepal needs to use the Indian grid (via Indian territory) to export electricity to Bangladesh.

When Nepali officials raised the issue during the recent Power Summit organized by the Confederation of Indian Industries on grid connectivity in the Bay of Bengal Initiative for Multi-Sectoral Technical and Economic Cooperation (BIMSTEC), Indian officials said that the Baharampur-Bheramara line connecting Nepal to Bangladesh was “fully occupied.” Therefore, the issue will test Dahal’s diplomatic skills.

Thirdly, Nepal has requested that India grant air entry points to facilitate aircraft movement to Bhairahawa and Pokhara. The two airports were built by Chinese companies, though the former was funded by the Asian Development Bank. Without India granting appropriate entry points, airplanes will need to circle in Nepal for a few minutes before landing, increasing operational costs. Kathmandu should engage India at the earliest to ensure the international airports are sustainable for airlines to use.

Fourthly, Dahal needs to continue the “return to normalcy” in India-Nepal relations after its nadir in 2020, when the Oli government amended the Nepali map to include Kalapani, Limpiyadhura, and Lipulekh in the far west – territories also claimed by India.

There are also issues with China that require immediate attention. One is China’s opening of the Kerung border point. This was closed with the outbreak of the COVID-19 pandemic but was reopened after Dahal assumed the premiership recently. There are concerns in Nepal over the reopening of this border point amid the surge in COVID-19 cases in China.

Nepal needs clarity on its position on Global Security Initiative (GSI), a Chinese initiative to counter rival regional blocs such as the Quad. Beijing is keen for Nepal to join the GSI. Although Nepal has clarified its commitment to non-alignment, which would mean Nepal will not join any security pacts with any country, President Bidhya Devi Bhandari joined the GSI meeting last year despite the Deuba-led government’s reservations.

Also, Beijing is impatient to see projects under the Belt and Road Initiative (BRI) take off in Nepal. Days after Dahal’s appointment as prime minister, a Chinese delegation came to Nepal to conduct a feasibility study of the Kathmandu-Kerung railway connectivity. With a friendlier government in power, Beijing would like to see BRI projects make concrete progress.

Whether Dahal makes New Delhi or Beijing the destination of his first foreign visit will be keenly watched. However, it will be pragmatic if he were to pick New Delhi first, ceteris paribus. As much as his visit to Beijing would show that he is attempting to balance between Nepal’s two giant neighbors, which every leader in Nepal professes and which is the official foreign policy, the fact is that Nepal has more issues that require immediate engagement with its southern neighbor.

Kathmandu is abuzz with speculation that New Delhi wanted Deuba, not Dahal, to lead the new government. However, despite New Delhi’s suspicions of Dahal and Dahal’s earlier misgivings regarding New Delhi, Nepal needs healthy relations with India. He might get a warmer welcome in Beijing than in New Delhi. Yet, a visit to New Delhi will show his intent to tackle difficult issues head-on, not shy away from them.

In this context, his decision to make New Delhi the first port of call, likely to be in late February or early March, is a mature decision. He has the experience of engaging India as prime minister and has a host of immediate and enduring issues on his plate. His level of success in resolving those issues will determine his legacy.

The Explainer - NIPoRe Blog

Digitalization of Nepal – Few Policies and Possible Challenges

Pradhyumna Wagle

Digitalization has been at the forefront of development in the last 50 years. It has allowed developing countries to access information and resources like never before. Often, it is suggested that digitalization would help underdeveloped economies to skip the industrial development phase and quickly catch up with the developed economies, a process known as leapfrogging. Increased internet access and rapid transformation of bricks and mortar to digital form after the mid-20th century has laid out a base for the so-called Fourth Industrial Revolution (4IR). A World Economic Forum report suggests that 4IR will be a fusion of technologies that is blurring the lines between the physical, digital, and biological spheres. It cannot be emphasized more on how quickly developing countries need to prioritize digitalization and thrive through the 4IR. On the other hand, there has never been a time in history where access to information and knowledge has been so available. Therefore, it is a perfect opportunity for small economies to absorb as much resources as they can and recognize digital transformation as the way forward.

Nepal’s inability to compete with other developing countries in industrial development, especially manufacturing, can be primarily linked to geographical structure and human resource, among others. While digital infrastructure would need geographical convenience at installation, connectivity and evolution do not. Nepal is in a good position to exploit the digital resources that are available, and the ones it can generate from within, like electricity, to climb up the development ladder. The base for digital infrastructure, electricity, can be accessed by 94 percent of the population and Nepal Electricity Authority plans to achieve 100 percent electricity access by 2024. Internet penetration is at an all time high with 99 percent of the population having access to mobile broadband connection. It is safe to say that the Government of Nepal has realized the importance of digitalization and recognized it as the future. Hence, it published the Digital Nepal Framework 2019 (DNF) which includes short-, medium-, and long-term plans to reshape Nepal’s economic and social structure. As the government plans to focus on transforming different sectors to digital infrastructure, I discuss a few specific policies, possible challenges and what we can learn from other developing countries.

Adoption of technology

While emerging technologies are readily available, there needs to be proper policies that welcome new technology and create a suitable environment for it to grow. A study by Samuel A. Ejiaku concludes that most developing countries have ineffective information technology policies, and this hinders the proper growth and application of the IT sector. Interestingly, Ejikau points out that developed economies also have not contributed much to assist developing economies. This is because exporting technology would need to be modified to suit the environment and culture of the target economy. This means there must not only be policies that make importing of technology smooth, but also emphasizes on the need of skillful people that can make the adoption of technology suitable to that location.

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Government of Nepal has identified digital foundation as one of the major sectors that needs to be addressed. Increasing quality digital access is the main goal of laying out the digital foundation. The government has recognized poor quality and connection strength, and digital literacy as the main problems that occlude the digitalization process. Hence, DNF includes plans to train all government employees using a proposed e-learning platform that is publicly available. It is expected that the training program would help increase digital literacy and the learning platform would generate awareness in the public as well as maintain the supply of digital trainers. The former makes sense, but the inclusion of the latter is vague. It is not clear if the platform would be used in schools or only the government agencies, but unless there are incentives to learn and teach, it would be difficult to consistently find digital trainers.  Also, there is a plan to establish ‘knowledge-parks’ in special economic zones, but this has only been linked to economic growth. Skillful manpower is one of the vital aspects of digitalization, but DNF does not include priority plans to increase technology-friendly workers in all aspects. The government should focus on changing the academic structure to push institutions to use available technology. This would help make the workforce ready and well equipped with technological knowledge. Training programs could then be used to focus on a certain technology.  

Government Services

DNF has focused on changing government agencies’ structure: from paper to digital. This includes structural transformation from within the agency: recordkeeping, budgeting, and cybersecurity as well as in the services provided: public service applications, document processing and digital signatures in national identity cards. This is promising and has already come to implementation in many offices. But there is a serious lack of maintenance among the installed technologies. Lots of public service offices showcase themselves as being ‘online accessible’ but people need to show up in person and that violates the entire purpose of making the system online. A study in Ghana about the barriers to digitalization of government budgeting in developing countries identifies outdated laws and culture of paper document flows as the institutional barriers to digitalization in public service sectors. Literature in this sector identifies culture and structures of government agencies, pre-established hierarchical structures within the organization, operational divisions and politics and resistance to innovation as the main barriers to digitalization. All of these can be associated with Government of Nepal’s offices. Hence, it is important for the government to think about tackling these issues alongside the implementation of digital platforms. Most of the plans regarding within office digital transformation listed in the DNF are longer-term and those about public services are short term. I believe that this should be the opposite. Making the internal systems secure, stable, and efficient would then pave the way for service-oriented technologies like payment systems, online registrations, and administrative works. So, there is a dire need to identify what plans are short, medium, and longer term to make the digitalization process smoother. 

Small and medium enterprises

With the wave of digitalization, all forms of market transform structurally. From production to sales, every aspect of the economy is affected by digitalization. While big organizations and manufacturers have early access to new technology using their power and accessibility, the government must ensure that small and medium enterprises are well placed to take advantage of digitalization. New technology provides small and medium enterprises comparative advantages especially in local markets and that is very important for the economy. Within the execution plan of the DNF, most plans focus on the agro-economic sector like training farmers about digital platforms and pre-season education, quality check of agricultural equipment using technology, and smart irrigation facilities. There are a few short-term plans about facilitating e-commerce services, digital payment systems and development of mobile apps for transportation and healthcare. However, all these plans require governmental support and political stability: which is missing in Nepal. A similar study about digitalization of small and medium enterprises in Yemen, whose numbers regarding digital penetration is similar to that of Nepal, finds that economic and political instability, and lack of support for small and medium enterprises to thrive, as the major challenges. What the government could do is learn from developing countries that have undergone digital transformation like Rwanda. Rwandan government is well known for creating an environment for small and medium enterprises to adopt technology and thrive, mainly through innovation support. Government of Nepal’s plans are good in a sense that they want small and medium enterprises to grow, there is no specific plan that promotes innovation. Small and medium enterprises excel mainly because of the uniqueness of their products and services and innovation is necessary for them to survive. The government should aim to remove bottlenecks in the creation of new enterprises and even if they fail, provide support to regrow through improved digital access and minimizing administrative hurdles, mainly in technological import, export, and deployment.  

Concluding Remarks

Digital access is penetrating every aspect of society today. When it comes to digital transformation, it is not if but when. The most important step developing countries like Nepal could take is to open all possible pathways to welcome and integrate digitalization into the society as smoothly and quickly as possible. In terms of time, the more time it takes for an economy to digitalize, the loss in potential to develop is exponentially worse. Therefore, it is high time Government of Nepal takes necessary progressive steps towards digitalization.

OP-EDs and Columns

Putting national interest first

NISCHAL Dhungel* and ABIJIT SHARMA

Dhungel is a non-resident fellow at NIPoRe. The opinion piece originally appeared in The Kathmandu Post on 18 January 2023. Please read the original article here.

With the onset of the Covid-19 pandemic and the Russia-Ukraine war, foreign relations trembled among major economic powers. While condemning Russia’s aggression and barraging the country with a series of sanctions, the West expected India to follow suit. However, New Delhi adopted studied public neutrality and abstained from successive votes condemning the Russian move in the UN Security Council, General Assembly, and Human Rights Council. Just like India, China maintained relative neutrality, with a solid foreign policy stance in response to the conflict. Despite its closeness with Russia, Beijing stopped short of supporting it in the war. It also stopped short of calling Russia the aggressor and abstained from a United Nations Security Council vote denouncing the ‘invasion’. Beijing and New Delhi had made their decision loud and clear. And they were not going to listen to anybody.

Assertive New Delhi

Speaking at the Globsec 2022 forum in Slovakia, Minister of External Affairs of India, Dr S Jaishankar laid clear India’s increasingly confident foreign policy. “Europe has to grow out of the mindset that Europe’s problems are the world’s problems, but the world’s problems are not Europe’s problems,” Jaishankar said. He criticised the West for hoarding vaccines, which impacted the Least Developed Countries (LDCs). It is crucial to understand how India came to this position, which was unimaginable until a few years ago.

India’s political, social and economic fabric had been damaged after 200 years of colonialism. Its foreign policy could not remain untouched. Following independence, New Delhi slowly started to chart its own path, pursuing different strategic approaches from 1946 to 2013. Nehruvian influence persisted from 1946 to 62, an era of strategic non-alignment amidst US-Soviet Union rivalry. From 1962 to 1971, considered the decade of realism and recovery, India made pragmatic choices in national security and political challenges despite a lack of resources. The country went through a complex phase from 1971 to 1991 as the US-China-Pakistan axis came up. From 1991 to 1999, it had challenges in retaining its strategic autonomy in a unipolar world, whereas from 2000 to 2013, India focused on balancing power.

But since assuming office in 2014, Prime Minister Narendra Modi has made an unprecedented transformation of Indian foreign policy. Modi has put India as an emerging superpower on the map and sought to engage rather than remain ‘non-aligned actively’. New Delhi now understands that it deals with multiple global complexities, making decisions based on calculated risk-taking. As a result, India is slowly standing out, drifting away from strategic ambiguity to strategic freedom and taking a solid foreign policy stance on international fora. This is a significant departure from the older ‘non-alignment’ tenet that had long established India’s typical social values and norms, at least in foreign relations.

India’s central foreign policy tenet under Modi is seen to be guided by the Eastern principle of ‘Vasudhaiva Kutumbakam’, which translates to “the world is one family”. This was evident during the Covid-19 pandemic when New Delhi delivered more than 100 million doses to countries in Asia and Africa. While Modi has spearheaded this new brand of foreign policy, his bureaucrats and ministers have helped implement it. In 2015, just two days before his retirement, the Narendra Modi government appointed a highly agile foreign service officer, a foreign ambassador to the US and China, to the position of foreign secretary. Jaishankar has been the flag bearer of Modi’s foreign policy ever since Modi’s second term in office. Jaishankar openly admits India’s shortcomings and stays committed to securing its national interest with/without taking any sides.

‘Wolf-warrior’ in Beijing

Coinciding with India’s assertive stance in global politics is China’s equally aggressive stance, especially against the West. The Chinese foreign policy has been so assertive and aggressive in recent years that it has earned a new name: ‘Wolf-warrior’. While aggressive Chinese rhetoric might appear quite normal now, it is a shift from China’s earlier foreign policy. And the man to bring about this shift is none other than Xi Jinping. At heart, Xi’s diplomacy calls for a more active role for China as a great power on the world stage, including reforming the Western-dominated international order and creating what China calls “true multilateralism”.

When the architect of China’s economic reform, Deng Xiaoping, came to power following Mao Zedong’s death in the late 1970s, he prescribed a foreign policy which was subtle and cooperative. His approach focused on “biding one’s time without revealing one’s strength”. As a result, in the 1980s and 90s, Beijing was focused on “securing position, coping with affairs calmly and hiding capacities”. The leaders who came to power after Deng continued the policy.

But Xi’s ascendance since 2012 has slowly changed things in Beijing. Far from “biding time and hiding strengths”, it is now focused on making its stance clear on the global stage. Most importantly, it is open to show its strength. Take, for instance, its recent response to the Taiwan issue. Just before the then US House of Representatives Speaker Nancy Pelosi visited the island in August last year, the Chinese President issued a stern warning to his American counterpart, allegedly saying that “… those who play with fire would perish by it”. When its alarm went unheeded, the Chinese military launched targeted military exercises.

Xi’s ambitions to help China regain its glory of the Middle Kingdom years have been evident since he took office. Upon gaining power in 2012, he immediately identified “national rejuvenation” as his primary goal. The ambitious Belt and Road Initiative (BRI) was announced a year later. At the 19th Party Congress in 2017, Xi stated that China would no longer shy away from world leadership and efforts shaping the international order. The BRI is an important example of how China has pursued its foreign policy interest. The initiative has 147 signatories and includes US allies and partners such as Saudi Arabia, Greece and UAE.

Quite naturally, the West has been critical of this stance, often saying that it might invite dangerous confrontations between China and the West. But Beijing has maintained that it is not the real aggressor but simply responding to Western threats. Defending China’s aggressive foreign policy, the then-Chinese Foreign Vice Minister Le Yucheng said last year that Beijing “had no choice but to fight back against constant ‘nagging’ and ‘insults’ from foreign critics”. Interestingly China has many flag bearers of this new assertive foreign policy, most notably the foreign ministry spokesperson Zhao Lijian. Zhao has had public spats with US diplomats and has been a vocal critic of the West.

If there is any lesson that Nepal should learn from its neighbours, it is that we need to pursue an independent foreign policy, especially in light of the geo-political games often played in the country.

NCIThe Explainer - NIPoRe Blog

Digital Infrastructure in Nepal

NISCHAL DHUNGEL

Quality digital infrastructure is the foundation of a fully-functioning digital economy. Digital infrastructure using any form of the technology enables a smooth flow of goods and services in the economy. The Government of Nepal (GoN) considers the advancement of digital technology as a crucial enabler of more resilient, inclusive, and growth-oriented development. The GoN came up with the Digital Nepal Framework (DNF) plan in 2019 to restructure the economy through integration of available ICT tools. It plans to do so by granting all segments of the population equal access to services and infrastructure, encouraging private sector innovation and competitiveness, and enhancing the delivery of public services. The DNF comprises 80 initiatives divided into eight categories – digital foundation, agriculture, health, education, energy, tourism, finance, and urban infrastructure. The Nepal Planning Commission (NPC) has deemed the DNF a game-changing initiative.

Before diving into Nepal’s digital landscape, it is crucial to understand the state of digital-related infrastructures in the country. Electricity is the backbone of digital connectivity in addition to availability of quality infrastructures. In this regard, electricity is fuel to develop any form of digital connectivity. Without proper access to electricity, it is almost impossible to foster digital connectivity in the desired way. Hence, access to electricity directly impacts the availability, adoption, and use of digital connectivity. Digital connectivity may be less readily available if a steady electrical supply is not always available. Even though the electricity supply has reached most of the population, the government needs to deploy base stations in non-electrified areas to ensure affordable and reliable electricity access for all Nepali citizens.

Figure 1: Access to Electricity, Nepal (Percentage of Population)

Source: Nepal Economic Survey 2021/22, Ministry of Finance *Till – Mid March 2022

More than 90 percent of the population have access to electricity as of mid-March 2022 (Figure 1). Access to electricity has considerably increased over past years from 88 percent in 2018/19 to 94 percent till mid-March 2021/21. During the same period, the Madhesh province has the highest access to electricity i.e., 99.66 percent of Madhesh population and the Karnali province has the lowest access to electricity 43.87 percent of Karnali population (Figure 2). In 2021–2022, the installed electricity capacity stood at 2,189.6 megawatts (MW). Increasing the installed capacity of electricity has made it possible to increase access to electricity. Nepal experienced power outages that lasted up to 18 hours a day for more than ten years, from 2006 to the mid of 2017. The country currently has surplus energy, primarily during the wet season, and “load-shedding” has almost been eradicated thanks to better management, leakage control, and increased power generation. Although electricity penetration in Nepal (90 percent of the population) as of 2020 is slightly low in comparison to South Asian (95.7 percent of the population) countries, Nepal stands in an excellent position to strengthen its digital infrastructure. Before the target year of 2030 was established by Sustainable Development Goal 7, the Nepal Electricity Authority (electricity regulatory body)  revealed its plan to achieve 100 percent electricity access by 2024. The plan is realistic to set a strong base for the uptake of other digital infrastructures.

Figure 2: Access to Electricity by Province (Percentage of Province Population)

Source: Nepal Economic Survey 2021/22, Ministry of Finance *Till – Mid March 2022

The Government of Nepal has placed great importance on transforming the potential of ICTs within the broader context of its ambitious developmental objectives, which are based on reducing poverty as its primary goal. The Information Communication Technology (ICT) Policy 2015 outlines the rules and practices for developing IT infrastructures and human resources for a knowledge-based society. ICTs have the potential, among other things, to help create the environment for better governance with more open, transparent and effective bureaucracies. ICTs can also address structural issues in education and health systems, enabling more access to education and health services and bridging quality gaps in education and health.

The internet is a crucial component of the digital economy. Over the past few years, Nepal’s technology and communication sector have experienced significant growth. Nepal Telecommunications Authority (NTA) is the telecommunication regulatory body of Nepal established to provide a favorable and competitive environmentfor the development, expansion, and operation of telecommunications services along with private sector participation. According to NTA Annual Report 2021/22, total broadband (mobile and fixed) internet subscriber has considerably increased over the past years, from 66 percent in 2018/19 to 131.6 percent in 2021/21. According to the same report, there are around 38.3 million broadband subscribers in Nepal, of which 28.7 million are mobile broadband subscribers and 9.6 million fixed (wire and wireless) broadband subscribers in 2021/22. While fixed broadband (wired plus wireless) penetration has reached 33.1 percent of the population, mobile broadband penetration is 99 percent in 2021/22. Mobile broadband peneration has significantly increased over the past years from 52% of population in 2018/19 to 99 percent of population in 2021/22. According to the report, mobile broadband is the most popular means of using the internet, and the trend of mobile broadband users is increasing faster than fixed broadband. With 3G and 4G internet service already in place, the government is advancing the testing of 5G technology.

Figure 3: Broadband Internet Penetration (Percentage of Population)

Source: Nepal Telecommunication Authority, Annual Report 2021/22

Despite the progress in internet and electricity penetration, there are still issues with affordability, the digital divide, and digital illiteracy in many areas of Nepal. With regards to digital governance, the government has taken steps to digitalize public services, including, but not limited to, the digitization of data from land revenue offices, the introduction of the Nagarik App, the launch of the Nepal National Single Window (NNSW) system, the opening of the National ID card, and others. However, service seekers continue to encounter issues due to limited installed technology capacity and improper system management.

Workplace practices are changing due to disruptive technologies like artificial intelligence (AI), robotics, and the Internet of Things. The governments and businesses around the world are now able to fully realize the promise of exponential development because of digital technologies. Since the initial shutdown starting from March 2020 onwards (due to COVID-19), online commerce and digital payments have become more common. Also, the use of digital technology and GDP growth are closely related. A World Bank study found that a country’s economy grows by 1.3 percent for every 10 percent rise in internet access. Nepali pay more for internet connection than people in other South Asian countries, according to the Connectivity in the Least Developed Countries Status Report 2021. The report has emphasized a need for effective solutions in developing nations like Nepal to increase digital access and the need to develop specific policy proposals to hasten the transition to inexpensive and universal connectivity. 

Way Forward

The digital economy highlights the importance of digital technology in improving trade and competitiveness, economic opportunity and efficiency, and international economic integration of an economy. The COVID-19 pandemic and related lockdowns have sped up the uptake of digital services, making remote learning, e-commerce, and digital payments more crucial than ever. The pandemic has also made it clear how vital it is to adapt systems to accommodate shifting preferences, hastening the transition to a cashless and digitally aware society.  Supportive policies and investments in the workforce, vital digital infrastructure, and cybersecurity will have a long-lasting impact on leveraging the digital economy in Nepal. For Nepal to develop into a technologically advanced, rapidly expanding economy, digitalization and digital governance should be implemented, strengthening its digital-related infrastructure.

Recommendations

  • Bring stakeholders from the public and corporate sectors and civil society to help shape digital policy in several key areas. 
  • Encourage the adoption of inclusive digital policies and collaborate with the appropriate governmental entities. A working group on internet affordability should be established, with representatives from the private sector, civic society, ISPs, and regulators. 
  • Build collaborations with the private sector to construct a digital economy that benefits all Nepalis.
  • Concentrate on improving transactional efficiency, security, transparency, traceability, and financial inclusion. 
  • Work with universities and technical schools to solve the cybersecurity workforce and research and development demands.
  • Support the reform of IT curricula in higher education, work with the private sector to start apprenticeship or internship programs, and support the ICT initiatives of the Ministry of Education to increase the skill-building of the digital talent pool to match the demands of IT-sector employers better and increase Nepal’s competitiveness in the IT labor supply.
OP-EDs and Columns

For More Women in Politics

– BINITA Nepali

The opinion piece originally appeared in the January 2023 Issue of New Business Age Magazine. Please read the original article here.

Nepal ranks first in South Asia and second in Asia in terms of the share of women representatives in the parliament. However, it ranks 123rd in the world in terms of the number of women holding ministerial posts. Women in Nepal have been assigned ministerial roles at general ministries only. It demonstrates the reality that, despite increased female political participation, women are not trusted to exercise authority and manage resources at the key ministries that have the potential to make major policy implications in the country.

In 2008, a mixed-model election system [First Past the Post (FPTP) and Proportional Representation (PR)] was introduced to encourage positive discrimination of women and other marginalised and unrepresented groups in the country. However, the political parties have exploited the PR system and turned it into the sole route for women to enter politics.

Political parties are reluctant to field women under the FPTP system. Therefore, to ensure constitutional adherence, women are brought onto the PR list. Only 9% the FPTP candidates in the 2022 federal and provincial elections were female. Most of the female candidates were fielded in fiercely competitive constituencies, with the less competitive seats going to the supposedly “strong” male leaders.

As per Article 84 of the Constitution of Nepal, at least one-third of the members elected from each political party to the federal parliament must be women. Therefore, at least 92 of the 275 members of the new federal parliament must be women, as there are currently only 19 women (32.2 percent), in the 59-member upper house. As only nine women were elected directly, the remaining 85 seats have been filled through proportional representation. It means there are just nine women in the top decision-making positions, as it has been found that the directly elected representatives – more than 95% of whom are men – hold greater sway over resources, authority, and influence than those who come via the PR system in Nepal’s parliament.

The country also fell short of meeting the target of having 50% women representatives in the local units. Only 14,407 (41.21%) out of the 34,953 elected in 753 local units were women. Of them, only 25 women have been elected to top or decision-making posts (13 mayors and 12 chairpersons). Moreover, women were sidelined in the guise of political coalitions during the recent local, provincial, and federal elections. Consequently, fewer women today hold leadership roles at all three tiers of government, owing to political parties’ aversion to promoting women to decision-making positions. To put it another way, Nepal missed out on the opportunities that more women in decision-making positions would bring.

First, more women in politics means a more inclusive democracy. A study shows more women in decision-making roles, with their inclusive and cooperative leadership styles, result in tangible gains for democracy. This entails better service delivery, stronger collaboration across racial and political boundaries, expanded social safety nets, and a more sustainable future.

Moreover, other research links women’s political participation to improved governance, transparency, and low levels of corruption. As women are often seen to be more trustworthy and honest, it is hoped that their increased participation in politics will reduce corruption. In 2011, Mexico replaced all of its male traffic cops with female cops to curb corruption, since women are seen as more trustworthy. New Zealand has the highest level of female representation (49.2%) of any parliament in the Asia and Pacific Region and the sixth highest in the world. Now wonder, the country ranks first out of 180 in the Transparency International Corruption Perception Index (CPI). Whereas, Nepal  ranks first in South Asia in having more women in national parliament (32.7 percent) and is 117th out of 180 in the CPI. Undoubtedly, Nepal needs more proactive women leaders who would guarantee more inclusive policies and responsible institutions that combat the pervasive corruption.

Second, more women legislators mean a more stable, inclusive, and vibrant economy. Researches show that gender equity has favourable economic gains for everyone and that the presence of women in politics corresponds with a wider economic impact.

India showed much improved socio-economic growth with greater gender-sensitive spending on programmes related to health, nutrition, and education when women were present in a decision making role. Likewise, women’s political leadership and women’s broader engagement in the economy are intertwined. Thus, if Nepal wants more women at work, it should prioritise raising the number of women in elected offices.

The government, which remains dominated by men as of now, repeatedly attempts to prohibit women from being involved in the economy. One recent example is the government’s effort to implement a law requiring women under the age of 40 to get permission from their family and local ward chair before travelling to the Middle East and Africa. In Nepal, 74% of women are involved in agriculture. Only 15.7% of agricultural work is performed by men, while the rest 84.3% is performed by women. However, they have no say in the earnings from farming and endure various types of discrimination (such as access to land, water, seeds, and training, among others). Yet, the government does not consider it essential to implement women-friendly farming policies, training, or materials.

Thus, women’s participation in two of the most important economic factors, remittances and agriculture, is minimal. This would be drastically different if more women were in positions of legislative power. More women in decision-making positions would fight against such discriminatory restrictions that limit women’s full participation in the economy and create a vicious loop: women don’t have money, they can’t win, therefore they are chosen through PR.

Third, there is significant evidence that women politicians are changing the way politics work by introducing policies in areas that aren’t usually talked about at the political table, like domestic violence, women’s reproductive health, and maternity leave, and by broadening perspectives on other policy areas. This has been seen in France, Sweden, South Africa, Rwanda, and Egypt, among others. Increased policymaking that prioritises welfare, healthcare, education, families, water and sanitation, women, and minorities is also linked to the number of elected women. Here, the New Zealand experience serves as the best example.

Women politicians not only propose such policies but also tirelessly work to put them into effect, as Margaret Thatcher rightly stated: “In politics, if you want anything said, ask a man; if you want anything done, ask a woman.” A study done in the US has found that congresswomen provide 9% more government programmes annually to their home districts than their male counterparts. And women are 10% more effective lawmakers and pass twice as many bills on average than men. The increasing instances of gender-based violence, rape, early child marriage, acid attacks, and girls’ trafficking are tearing the country apart. With Nepal’s political class becoming more and more apathetic, it is certain that greater representation of women in decision-making positions will increase efforts to put an end to these issues.

Nepal cannot afford to ignore women. It must ponder seriously what might be done to avoid losing out on these costly opportunities. As was done in Rwanda (which implemented 30% gender quotas in the parliament only in 2003 but ranks first in the world in terms of the proportion of women, 61.25%, in its national legislature due to rigorous implementation), one of the most important recommendations is to implement the legally mandated gender quota with adequate political finance regulations to support it, as the exorbitant cost of political elections is a significant barrier for women who are interested in running for elective office.

The patriarchal attitudes of Nepali society and local political parties that “women cannot win,”  which limit women’s electability and winnability in the elections must be challenged by raising awareness of the importance that women could offer to overall political governance and public service delivery. As women cannot be what they cannot see, elected women should get more media publicity to inspire other women to pursue leadership positions. Lastly, there should be more training and networks for women who want to run for government. For example, a cross-party and cross-country network for women politicians could be set up. 

The Explainer - NIPoRe Blog

Evolving Trends in Foreign Aid Flows to Nepal

ANUSHA BASNET

As a developing country, foreign aid has been a major factor in aiding Nepal to meet the country’s all major development. Throughout the years, Nepal has mostly received foreign aid in the form of grants, loans and technical assistance. The country has received most bilateral aid support from countries such as  USA,  UK, Japan, India, and Germany and most multilateral aid from organizations including the European Union (EU), the World Bank (WB), Asian Development Bank (ADB), and the United Nations (UN). The central government created the country’s Foreign Aid Policy 2002 to create stipulations for donors. Also, the Nepal government  tried to streamline the process for the donors and make the whole system transparent by requiring the donors to upload all the accounting details related to the Aid Management Information System (AMIS) portal. The portal was launched by the government in 2019. 

The following graph presents the value of official development assistance (ODA) Nepal has received during FY 2016/17 and FY 2020/21:

Chart
Source: Ministry of Finance, Government of Nepal

The available data highlight fluctuation in the foreign aid that Nepal has received over the last five fiscal years. The official data for the first eight months of the recent fiscal year (FY2021/22) indicates a decline in aid commitment by 32.7 percent as compared to the same period of the previous fiscal year.

The following graph shows a breakdown of ODA disbursement from 2018 to 2020:

Source: Ministry of Finance, Government of Nepal

While Nepal mostly received grants during the 1960s, concessional loans have been a greater percent of foreign aid after the 1980s. The shift in the amount of foreign aid Nepal received from bilateral to multilateral partners caused this change. The above graph shows that 60 percent of total ODA in FY 2018/19, 69.91 percent in FY 2019/20 and 66.89 percent in 2020/21 were given as loans. A large portion of loans have been taken to develop the infrastructure projects in the country. In FY 2020/21, 98.8 percent of the disbursement received for the road transportation sector, 82.27 percent of the disbursement received for the energy sector, and 73.73 percent of the disbursement received for the reconstruction sector was received in the form of loans.

While the government has been taking out loans to finance development projects, concerns over this preference have been raised in the country. The biggest concern in recent years has been the fear of Nepal falling into debt trap and eventually facing an economic crisis. The tendency of development projects to get extended for completion and lack of effective aid mobilization puts Nepal in a precarious position as greater investment is required to complete these projects. Furthermore, even though its overall contribution to causing climate change is low, Nepal is one of the countries that is most vulnerable to climate change. It is estimated that the country will need USD 46 billion by 2050 to adapt to impacts of climate change. As such, Nepal taking loans from multilateral agencies for adapting to climate change will increase the  financial burden on the economy.

Way Forward

While foreign aid has always been an important component for covering the budget deficit, diversifying the source of financing is critical for the country moving forward. Few solution to minimize the reliance on foreign aid could include:

  • Focus on Foreign Direct Investment (FDI): Finding alternative sources of financing beyond foreign aid is essential to reduce the dependence on foreign aid. One option for alternative sources of financing could be FDI, which means attracting foreign investors to invest in businesses and projects in Nepal.
  • Increased focus on the productive sector: Nepal should strengthen the productive sectors of its economy. The government’s focus should be on providing support to agricultural, service and manufacturing sectors so that the economy can become  self-reliant and subsequently  a net exporter.
  • Applying for grants instead of loans: The government should push for grants instead of loans when it comes to getting foreign aid for projects that are geared towards achieving sustainable development goals and climate resilience. The Nepali government should aim at getting grants to combat the negative effects of climate change in the country.
OP-EDs and Columns

With China’s Help, Nepal Chips Away at Its India-lockedness

– SANTOSH Sharma Poudel

The column originally appeared in The Diplomat on 30 December 2022. Please read the original article here.

On December 27, a team of Chinese experts landed in Nepal to conduct the feasibility study of the Kathmandu-Kerung (Geelong) railway. On the same day, China opened the Rasuwagadhi border point, which had remained closed for 35 months because of the COVID-19 pandemic. It came a day after Communist Party of Nepal-Maoist Center (CPN-MC) Chairman Pushpa Kamal Dahal, a.k.a. Prachanda, assumed the premiership. These appear to be “goodwill” gestures from China to the new communist leader in Nepal.

The dream of a railroad linking Nepal to China is an old one. King Birendra Shah and Chairman Mao Zedong mooted the idea in 1973.

Landlocked Nepal’s connectivity with the rest of the world is through India. This has been a source of frustration for the Nepali public and policymakers as it has made Nepal very dependent on India. The railroad to China offers Nepal a way to break its India-lockedness and provides it with alternative access to the rest of the world. Also, there is an increasing need for better connectivity, given the expanding trade volume between the two countries. It was after the Indian economic blockade on Nepal in 2015 that Nepal and China accelerated their efforts on making the railway project a reality.

Then-Prime Minister Khadga Prasad Oli signed an agreement in 2018 during his visit to China. In April 2019, China included the Nepal-China Trans-Himalayan Multidimensional Connectivity Network in Beijing’s joint communiqué of the second Belt and Road Forum. The two countries signed an MoU on the feasibility study of the proposed railway during Chinese President Xi Jinping’s visit to Nepal in October 2019. Xi said the connectivity network would help Nepal “transform from a landlocked country to a land-linked country.” For China, the vision is a part of Xi’s ambitious Belt and Road Initiative.

The proposed rail will connect to the Lasha-Shigatse railway in Tibet. On the other side of the border, the rail could be expanded to connect Pokhara and Lumbini, two other major cities in Nepal.

The railroad offers hope and has significant potential. It will symbolize the Nepali dream of better infrastructure and economic connectivity and represent good Nepal-China relations. Strategically, railway connectivity with China diversifies Nepal’s connectivity and reduces dependence upon India. It will ensure Nepal will suffer minimal consequences if India imposes a blockade in the future. Economically, it will facilitate trade with China. Supporters also point out that the railroad could be instrumental in bringing a large number of tourists from China to Nepal.

However, obstacles aplenty remain. First, the railroad has to transverse the mighty Himalayas. The terrain and ecology are challenging. China has shown that it can build a railroad in a complex landscape. However, the trans-Himalayan railroad will test Chinese abilities. Almost 98 percent of the railroad will either be a bridge or tunnel because of the terrain.

Second, the cost of the railroad is a primary concern. Previous estimates put the cost at $3 billion. However, it is expected to now cost around $8 billion (to link up to Shigatse). We will have a more accurate estimate after the feasibility study. There is a high chance of the cost being revised upwards. It will be a massive commitment for Nepal, whose GDP is around $30 billion.

Third, China has provided a grant for the feasibility study, estimated to cost around $300 million. However, it will be loans that will likely fund the implementation of the project. There is a fear that Nepal could go the Sri Lankan way if Nepal undertakes such loans without due diligence. The Nepali media is abuzz with apprehensions over the “debt trap,” citing what transpired in Hambantota port in Sri Lanka. The Nepali ambassador to China has sought to dissuade such concerns, but it will not be easy.

Fourth, some are concerned that the railway does not benefit Nepal. Nepal’s trade with China amounted to NRs 235 billion ($1.8 billion) in 2020/21. However, Nepal’s exports accounted for a paltry NRs 1 billion ($8 million). With a 1:234 export-to-import ratio, trains running will carry Chinese goods to Nepali markets but can be expected to return empty. Therefore, the railroad could only increase Nepal’s imports from China.

Fifth, India sees the Himalayas as its natural defense frontier and the region south of the Himalayas as its sphere of influence. It could see the railroad as China broaching India’s security perimeter. India was not pleased when Nepal signed the BRI agreement in 2017.

Talks of a railroad connecting Nepal to China has had India on its toes. In recent years, Nepal and India have upgraded and expanded the dysfunctional Janakpur-Jayanagar railway to Kurtha. In April, Indian Prime Minister Narendra Modi and then Nepali Prime Minister Sher Bahadur Deuba jointly flagged the cross-border railway service between Jayanagar (India) to Kurtha. The 35-km-long railway was built with an Indian grant worth NRs 10 billion ($75 million). In addition, work is underway to expand the road to Bardibas via Bijalpura. This is one of the five cross-border links being talked about between Nepal and India.

Nepal has its task cut out. Firstly, it needs to do a cost-benefit analysis in conjugation with the financing modality. If the current trade trend continues, the benefit to Nepal will be minimal. Meanwhile, Kathmandu needs to engage New Delhi to communicate Nepal’s rationale and assure it that the railway will not affect Indian security interests. Nepal needs connectivity with both neighbors, and it is not a competition. Also, Nepal needs to harmonize infrastructure development to its northern border with China and its southern border with India to support Nepal’s growth.

India builds a broader gauge railway, and China, a standard gauge. It will be a challenge for Nepal to find a way to make the railway tracks built in collaboration with the two countries interoperable. This will be a major test of Nepal’s diplomacy.

OP-EDs and Columns

A green techno-economic paradigm

– NISCHAL Dhungel

The opinion piece originally appeared in The Kathmandu Post on 4 Jan 2022. Please read the original article here.

Globally, there has been a shift toward a low-carbon economy and a developing green “techno-economic paradigm.” British economist Chris Freeman and British-Venezuelan scholar Carlota Perez coined the term “techno-economic paradigm,” an innovation-based theory of economic and societal development that remains at the centre of the capitalist development process. Least developed countries (LDCs) like Nepal face enormous challenges pivoting towards green techno-economic transformation compared to advanced economies. Although LDCs have contributed the least to climate change, they are at the forefront of the crisis—over the past 50 years, LDCs accounted for 69 percent of all deaths resulting from climate-related disasters.

Compared to pressing infrastructure and poverty alleviation demands in LDCs, a robust pro-climate agenda may seem counterproductive and anti-development. At the same time, there is a developing transition toward a low-carbon economy, which some authors have referred to as a “green techno-economic paradigm.” There is a shift of productive resources from high-emission industries (sunset industries) to lower-emission ones (sunrise industries). LDCs are often condemned to be technological laggards, with the development of modern technologies remaining strikingly concentrated in advanced economies. Sunrise industries may encourage productivity and strengthen intersectoral productive lineages due to the formation of a new green-techno-economic paradigm, which may offer new and more sustainable pathways to LDCs and developed countries. Nepal, for instance, can emulate India’s growth in the renewable energy sector.

Nepal contributes roughly 0.1 percent of global greenhouse gas (GHG) emissions. Most of Nepal’s energy comes from hydroelectricity, a remarkable achievement that has created a strong base for future climate-smart prosperity. One of the richest water-resource countries in the world with more than 6,000 rivers and rivulets, Nepal can become the bedrock of energy security for South Asia, using renewable means. The country can significantly uplift one-third of South Asia from non-renewable to renewable energy consumption, reducing approximately 3.5 percent of the total GHG emissions worldwide by 2040.

Green structural transformation

It is high time LDCs shifted toward strengthening resilience, moving away from fossil fuel, and aligning national objectives for sustainable green structural transformation. The Doha Programme of Action reflects the continued importance of structural change and productive capacities for LDCs. Despite placing greater emphasis on increasing production capacity and facilitating economic diversification, most LDCs have made little progress in changing the structure of their economies. The disastrous effects of Covid-19 on trade, investment and production in LDCs, and its broader economic and social effects have further slowed progress.

The prospects of structural transformation are available to LDCs through internal structural change, targeted policy decisions, or exogenous changes in the international setting. The structural transformation occurred in developed or emerging economies shifting from agriculture to manufacturing to the service sector. In Nepal, a structural transformation occurred directly, shifting from agriculture to the service sector following the contribution to Gross Domestic Product (GDP). Agriculture, which accounts for two-thirds of the workforce and one-third of GDP, has to undergo reforms to increase productivity, reduce poverty and free up labour for new sources of economic growth. The broad-based reforms Nepal implemented between 1986 and 1996 made a positive impact on the economy. The share of industry in GDP and exports, as well as the share of manufacturing, virtually doubled. This led to an increase in the economy’s openness and diversification. Compared to the manufacturing and agriculture sectors, the structural restructuring of Nepal’s economy over the previous decade has resulted in tremendous growth in the service sector. Besides, a knowledge-based economy cannot be sustained without the support of an expanding manufacturing industry.

Remittance is the mainstay of Nepal’s economic activities and the largest source of foreign exchange earnings for the country. According to the Nepal Rastra Bank (NRB), the country received 1.007 trillion rupees in remittances in 2021, or 20.8 percent of its GDP, and it is expected to increase to 22 percent in 2022. Given the noticeable increase in remittances, they are probably the main driver of the improvement in living standards seen in Nepal, directly (households receiving remittances) and indirectly (increased labour income of those that remained). To escape the out-migration and remittance trap, a clear set of plans and policies to increase domestic employment should be the top priority of the federal, provincial and local governments. Large-scale migration is a symptom of underlying, long-standing issues rather than a sign of strength. It is a monumental task switching from foreign to domestic employment. Without rethinking its development model, Nepal cannot prosper or graduate into a middle-income country. More human capital must be put to productive use for Nepal to continue on a more robust and sustainable growth path.

The structural change could be strengthened by accelerating the development of productive capacities, which will trigger an organic process whereby investment (i.e. capital expansion) is accompanied by a gradual shift of labour and production inputs towards more advanced and higher-value-added industries. A virtuous cycle of catching up with advanced economies could result from a structural process, which could increase labour productivity within the industry and through structural change, and reinforce the profit-investment nexus. Nepal’s plan for industrial growth and how trade, infrastructure, exchange rates, and other economic policies can help with industrial development is still not clear.

In their book Creating A Learning Society, Noble Laureate Joseph Stiglitz and Columbia University professor Bruce C Greenwald stressed that a nation’s comparative advantage is influenced by the products it creates. Governments must constantly evaluate how well their industrial policies are working and whether they are being “captured” by special interests. Governments must also continuously work to implement industrial policies more effectively, and industrial policy design must reflect the capacities and capabilities of the government. For example, LDCs can employ the same technologies (computerisation, information technology), labour management, and inventory control procedures (such as just-in-time production) that maximise productivity growth in different sectors.

One crucial thing to take away from developed nations like the USA is that they have institutionalised learning as they go along. For instance, in July 2022, the US Congress passed the CHIPS Act to address new challenges, supply chain disruption on semiconductors arising from the Covid-19 pandemic and the Russia-Ukraine war. The Act aims to strengthen US domestic semiconductor manufacturing, design and research. Industrial policies that function in one environment and at one level of development do not function in another. LDCs should learn a lesson from developed countries to enact and implement policies targeting a specific sector that maximises productivity growth.

The biggest market failure the world economy is currently dealing with is arguably climate change. With rare exceptions, it has proven challenging to persuade nations to enact carbon pricing or cap and trade, which would prevent people and businesses from considerably reducing their carbon emissions. Industrial policies that promote renewable energy and dissuade carbon-intensive companies and technologies can help developing nations decrease their carbon emissions. Lastly, creating green jobs in the industrial sector of the LDCs is a step in the right direction toward replacing carbon-intensive industries.

OP-EDs and Columns

Pushpa Kamal Dahal Heads New Government in Nepal

– SANTOSH Sharma Poudel

The column originally appeared in The Diplomat on 27 December 2022. Please read the original article here.

This year’s Christmas brought a “surprise” in Nepal. Pushpa Kamal Dahal, the chairman of the Communist Party of Nepal-Maoist Centre (CPN-MC), which won only 32 seats in the 275-member lower house of parliament in the recent general election, was appointed prime minister after he secured the support of seven parties, including the party led by arch-rival Khadga Prasad Sharma Oli of the Communist Party of Nepal-Unified Marxist Leninist (CPN-UML).

Sher Bahadur Deuba, who believes that he is destined to be the prime minister of Nepal seven times and was expecting to be the premier for the sixth time, was left out to dry, although his party, the Nepali Congress (NC), won the largest number of seats.

The timely election and selection of the prime minister is an achievement for Nepal’s nascent democratic process. Yet, the formation of the government reeks of a democratic deficit. CPN-MC, which stood a distant third and won only 11 percent of the votes, will lead a government that excludes the largest party. Nepal’s parties have ignored the “mandate of the people.”

As expected, the November 20 election produced a fractured result. The NC emerged as the largest party, winning 89 seats in the federal parliament. CPN-UML, CPN-MC, the National Independent Party (NIP), and the Rastriya Prajatantra Party (RPP) rounded off the top five, winning 78, 32, 20, and 14 seats, respectively. The newly-elected parliamentarians took the oath of office on December 22.

Parties had jostled for electoral alliances before the elections. Two major alliances contested the polls: a five-party ruling coalition led by the NC, which included Dahal’s CPN-MC, and the opposition coalition led by the CPN-UML. As the election results started to pour in, leaders of political parties engaged in negotiations on government formation. Deuba was confident that the ruling coalition would endure. Dahal repeated the same in public until he made a volte-face at the eleventh hour on December 25.

Primarily, two parties were vocal about their claim to lead the government: NC and CPN-MC. Within the NC, Deuba was challenged by a young leader, Gagan Thapa. While Gagan Thapa remains popular among the general populace and represents the change of generation from the old to young leaders, Deuba has a significant numerical advantage within the NC. Thus, the NC elected Deuba as the leader of the parliamentary party, who is also the party’s prime ministerial candidate, over Thapa by 64-29 votes. Meanwhile, the CPN-MC selected Dahal unopposed.

With this, the contest narrowed down to one between Deuba and Dahal. The two leaders had agreed to take turns leading the government, but neither was willing to concede the chance to lead the government first. Deuba felt he had the natural claim to the leadership first because his party was the largest by a mile, and he was confident that Dahal and Oli would not get back together. Dahal claimed it was his turn after Deuba led the government from 2021 to 2022.

Meanwhile, Dahal was engaging Oli’s CPN-UML through his trusted lieutenants. Oli was waiting in the wings to drive a wedge in the ruling coalition.ADVERTISEMENT

The president invited leaders to claim premiership with majority support by December 25. Deuba was steadfast in his claim of the premiership as the day loomed. Then, Dahal left the coalition and indicated his ditching of the alliance, saying it had “lost its relevance.”

The next day, Dahal received the support of the seven parties, including the CPN-UML, to become the prime minister for the third time. So it is déjà vu, and 2017 again, though the left parties have weakened significantly and needed support from newer parties.

Politics has created strange bedfellows in Nepal in the past. However, this coalition trumps them all.

Besides the CPN-MC and CPN-UML, the coalition includes the four-month-old NIP, the conservative RPP, Madhes-based Janata Samjbadi Party-Nepal (JSP-N) and Janamat Party (JP), and ethnic Nagarik Unmukti Party (NUP) as well as three independent members of the parliament.

Among the coalition partners, the CPN-MC and the CPN-UML largely share common agenda. They were instrumental in introducing federalism and making Nepal a secular state. However, Oli has has indicated his aversion to federalism and secularism in recent times. At a personal level, Oli and Dahal share a tumultuous relationship.

If the two communist parties are from Venus, other coalition partners are from Mars. NIP ran on a “no, not again” platform, attempting to usurp anti-establishment votes. NIP’s leader, Rabi Lamichhane, had said that he would not be a part of any government led by the establishment leaders. The RPP ran on the agenda of reviving constitutional monarchy and the Hindu state. NIP and RPP seek to undo the provincial structure. JP contested against the JSP-N, accusing the latter of ignoring the Madhesi people’s issues in their lust for power. NUP ran on an anti-establishment platform, arguing that the Tharu community in the mid-Terai needed to be freed from the establishment’s control.

The coalition partners have come together in their lust for power. There is bare-knuckle bargaining going on for ministerial portfolios and other political appointments, including in provinces. It can be seen in Lamichhane’s appointment as the deputy prime minister and home minister. There is a court petition against Lamichhane, a Nepali citizen-turned U.S. citizen-turned Nepali citizen, regarding his citizenship. Yet, he now leads the ministry which issues the citizenship certificate. It symbolizes that the coalition is devoid of ethics too.’

Given the breadth of the coalition, Dahal’s focus will be to maintain his hold on power. He will lead the government for at least two years, for the constitution mandates that a no-confidence motion cannot be introduced against a prime minister for two years. However, we can expect a revolving door for the ministerial portfolios. The council of ministers will likely report to their party leaders, not necessarily to the prime minister, weakening the government. It will be a huge miracle if there is a smooth transfer of power to Oli after two years. It will not be a surprise if a new coalition emerges then.

China and India quickly offered “warm congratulations” to the new Prime Minister.

Some Indian analysts believed New Delhi was readying to welcome Deuba as the prime minister. Others, such as former Indian envoy to Nepal Ranjit Roy, had expressed the need for India to engage all parties, big and small. Nepal’s relations with India had normalized under the Deuba-government after it had hit a new low during Oli’s tenure over Nepal’s new map in 2020.

New Delhi is not very fond of Dahal. In its early stages, his party called India an “expansionist” force. He has accused New Delhi of orchestrating his ouster from prime ministership in 2008 and insinuated that New Delhi plotted to kill him. However, he has changed his tune in recent times. During his visit to New Delhi earlier this year, he visited the ruling Bharatiya Janata Party (BJP) headquarters. He met with many senior leaders although Indian Prime Minister Narendra Modi snubbed him. However, New Delhi still considers Dahal unreliable.

Meanwhile, China could not have been happier at the moment. China had nudged CPN-MC and CPN-UML for a communist unification in 2017 and had tried its best to keep the unified Nepal Communist Party (NCP) together when it was on the verge of splitting at the end of 2020. Beijing was less engaged this time but will cheer the communist-plus coalition.

Deuba, known in Beijing as a pro-India leader, cold shouldered the Belt and Road Initiative, a pet project of Chinese leader Xi Jinping, arguing that he prefers grants to loans. Deuba led the ratification of the $500 million American grant, the Millennium Challenge Corporation (MCC), despite vocal Chinese opposition. He has been wary of the Chinese Communist Party as it has invested in party-to-party relations with Nepal’s communist parties.

Dahal shares a better relationship with Nepal’s northern neighbor. His fondness for China will be of concern to the U.S. American engagement in Nepal has increased tremendously in recent years and could slow down during Dahal’s term.

However, Dahal has been pragmatic, if unimaginative, about Nepal’s relations with the two neighbors and the U.S. He has been in politics and power long enough to understand the importance of all three major powers and their interests in Nepal. Therefore, we may not see any significant turn in foreign policy like he frequently does in national politics.

In saying that, the new government has a gamut of issues that require immediate attention. The Deuba-led government had put off the difficult decision on the Agnipath scheme of recruiting soldiers in India. Dahal will have to deal with that controversial issue now. Border disputes with India and China need his immediate attention too. The most pressing will be how Nepal engages India, China, and the U.S. amidst the Sino-Indian regional tension and the Sino-American global tussle. It will also be the issue with the most far-reaching consequences for Nepal’s security.

Dahal has shown his Machiavellian nature to grab leadership at home. We will find out if he can pull out a “surprise” in Nepal’s foreign policy.

EventsNews

Press Release – Diplomats’ Forum with HE Ambassador Nona Deprez, the EU Ambassador to Nepal

The Nepal Institute for Policy Research (NIPoRe) organized the fourth session of the Diplomats’ Forum on 22 December 2022 with H.E. Nona Deprez, the European Union Ambassador to Nepal. Ms. Sewa Lamsal, the Joint Secretary of the Ministry of Foreign Affairs, Government of Nepal, was the Chief Guest for the Forum. Dr. Swarnim Waglé, Chair of IIDS and a former National Planning Commission Vice-Chair, gave closing remarks. The Forum discussed ‘multilateralism, rule-based global order, and climate change’ as key areas of mutual interest between the EU and Nepal.

Ms. Sewa Lamsal, the Spokesperson and Joint Secretary at the Ministry of Foreign Affairs, delivering her remarks

In her opening remarks, Joint Secretary Lamsal highlighted the cordial relationship EU and Nepal has enjoyed for nearly 50 years. She mentioned that the EU has been “supporting Nepal’s efforts in achieving sustainable development goals for the people of Nepal through project grants, service contacts and budget support which is mutually agreed on the basis of Nepal’s development priorities and objectives including education, agriculture, energy, net zero emission and local development.”

H.E. Nona Deprez, the EU Ambassador to Nepal, in conversation with Mr. Santosh Sharma Poudel, Co-Founder and Lead of the Center for Strategic Affairs (CSA), NIPoRe

Ambassador Deprez highlighted the EU’s support both bilaterally and multilaterally to Nepal in areas of climate change resiliency, biodiversity conservation, and healthcare systems (pandemic preparedness). She asserted that “the EU Nepal partnership is one of equals”. The ambassador further mentioned that the EU’s goals with the GRID (Green, Resilient, Inclusive Development) are aligned with the sustainable development goals of the Government of Nepal. Talking briefly about the history of the EU, the ambassador said that the EU’s goal is to follow and promote effective rule based international order. She further said that “each country whether small or big should be allowed to choose its own security arrangements”.

Dr. Swarnim Waglé, PhD delivering his closing remarks

The program ended with the closing remarks by Dr. Waglé. In his remarks, Dr. Waglé reiterated that smaller nations need multilateral institutions even more and expressed that the EU has been an example to Nepal in terms of cooperation, regional integration and development. He also further mentioned that electorates should make it costly for any political parties that want to stop working for regional integration.

Contact

Ms. Binita Nepali

Focal Person, Diplomats’ Forum

Email: [email protected]