Domestic Development

On 23 May 2022, the Office of the Attorney General (OAG) and the Anti-Corruption Commission (ACC) signed a memorandum of understanding (MoU) on strengthening partnership and collaboration in the prevention, investigation, and prosecution of corruption cases. The MoU provides a framework for professional communication and cooperation between the two agencies to work closely in the best national interests of the country.

Inter-agency cooperation in anti-corruption initiatives has been Bhutan’s weak link. OAG claims that the ACC has a mandate for investigation, not prosecution, per the constitution. However, the ACC act of Bhutan provides provisions for prosecution in particular circumstances.

Bhutan’s corruption ranking has slipped one place from 24th last year to 25th this year as per reports by Transparency International in its Corruption Perception Index 2022. However, the country’s score of 68 has remained the same for the past three years since 2018, and Bhutan is the least corrupt country in South Asia.  

Regional Engagement

India agreed, in principle, to provide a third internet gateway to Bhutan. Bhutan’s foreign minister, Tandi Dorji and Indian External Affairs Minister, S. Jaishankar, reached an agreement during the latter’s visit to Thimpu on 6 May. The rate is not yet finalized but is understood to be less than USD five per Mbps (megabits per second). Currently, Bhutan pays USD seven per Mbps for the Internet connection through the Siliguri corridor. The new link will benefit Bhutan’s Eastern districts and remote pockets of the country. It will also ensure continuity in service during emergencies such as internet shutdown caused by cycle Amphan in other gateways. Bhutan also expects the connection to attract foreign direct investment in information technology (IT) and IT-enabled services and employment generation.

Bhutanese Prime Minister Lotay Tshering said the internet is to be free and that the country should push to reduce the data charges and enhance access to the internet. However, he emphasized the need for responsible use of the internet.

Earlier this year, Bangladesh agreed to provide 10 Gbps IPLC (International Private Leased Circuit) to Bhutan at a friendly rate of USD three per Mbps. The decision came during Tsering’s meeting in Dhaka with his counterpart Sheikh Hasina on 24 March 2021.

Global Engagement

Bhutan unveiled its Sustainable Development Goal (SDG) seven roadmap in Thimphu on 31 May. It aims to ensure universal access to affordable, reliable, and modern energy services. The roadmap focuses on efficiency in transport and domestic fuel use. Thimpu has partnered with ESCAP and UNDP for the same. Bhutan stepped onto the international stage as the first country to become carbon negative in 2017. It means the country’s greenhouse gas production is more than offset by its extensive forests and export of renewable energy. The Constitution of Bhutan states that forests should cover more than 60 percent of the country at all times.

Domestic Updates

The Maldives is at a high risk of dollar reserve depletion by 2023. The primary causes are Covid-19’s impact on the tourism industry, soaring global fuel prices, and rising borrowing costs. Maldives has USD 829 million in reserve. However, the national debt, at USD 5.9 billion in 2021, has ballooned to USD 6.4 billion in the first quarter of 2022.

Minister of Finance, Ibrahim Ameer, assured that the Maldivian finance is in better shape now than in the last three years. The economy is growing with the arrival of tourists. The Maldives is expected to grow at 13-18 percent in 2022.

Regional Engagement

Maldives and India conducted the second joint hydrographic survey of Maldives, covering 6500 nautical miles. The survey is critical for the Maldives to update the Navigational Charts/Electronic Navigational Charts for ship safety in several areas of Maldives and enhance Blue Economy. The first phase of the survey started in 2021. Some of those areas were not surveyed since 1853.

The joint survey resulted from India’s policy of supporting the Maldives to set up Hydrographic facilities. India provided the Maldives with hydrographic survey equipment in 2021 and 2022. The joint survey will enable economic development, defence, security, coastal zone management, environmental protection, and scientific research.

Global Engagement

President Ibrahim Mohamed Solih sought approval from the parliament to join the International Islamic Trade Finance Corporation (ITFC). Maldives is not a member of ITFC. Yet, ITFC has provided financial assistance to the Maldives since 2005. ITFC aims to advance trade among members of the Organization of Islamic Cooperation (OIC). The Russian invasion of Ukraine has adversely impacted Maldivian tourism. The two countries jointly accounted for 14 percent of tourist arrivals between January to March of the current year. Despite this, Maldives condemned the Russian invasion of Ukraine at the United Nations General Assembly (UNGA) vote. Furthermore, the Maldives has reiterated its firm belief in principles of respect for sovereign states and sovereign equality. Yet, Maldives has taken a cautious approach to enforcing the sanctions imposed by the West in the aftermath of Russian aggression in Ukraine.

Domestic Updates

Bangladesh Nationalist Party (BNP), the marginalized opposition party in Bangladesh, held a protest against Prime minister Sheikh Hasina for her ‘defamatory’ remarks. During a press conference, Prime Minister Hasina insinuated that Khaleda Zia, chairperson of BNP, be dropped from the Padma Bridge. Hasina and Zia were political rivals, but Hasina and her party, Bangladesh Awami League (BAL), have dominated Bangladesh politics since 2009.

Human rights violations and marginalization of the opposition have been a hallmark of the BAL regime. Khaleda Zia was sent to jail after she was sentenced to five years imprisonment by a special court in the Zia Orphanage Trust corruption case on 8 February 2018. In addition, observers have questioned the integrity of the 2014 and 2018 elections held under BAL.

BNP has been a shadow, with little representation in the national parliament. Currently, they are protesting against inflation, demanding elections under a neutral government and the release of the party chairperson. However, questions remain over their sustenance and impact on Bangladesh politics.

Bangladesh has seen spectacular economic growth in the last two decades. Yet, Bangladesh’s foreign reserve peaked at USD 48 billion in August 2021 but dropped to USD 42 billion by May 2022. Global price increase of oil and wheat because of the Russian invasion of Ukraine, import growth due to Covid-19 free situation, and low remittance inflow are the significant causes. This has raised fear in some quarters that Bangladesh is following Sri Lanka’s path. As a result, the Bangladesh Bank has hardened its import policy for luxury and non-essential items like sports-utility vehicles, washing machines, air conditioners, and refrigerators to mitigate the situation.

Regional Engagement

Bangladesh’s foreign minister, Abdul Momen, attended a two-day NADI-3 (Natural Allies in Development and Interdependence) Conference, which began on 28 May in Guwahati, Assam. Indian External Affairs Minister S. Jaishankar and Chief Minister of Assam Himanta Biswa Sarma also attended the conference. In his inaugural speech, Momen said, “We have developed strong connectivity with our neighbours, particularly India. We have developed robust connectivity by road, railways, waterways, and air routes. We have more to do in waterways because it is cost-effective. I am looking forward to a new Indian subcontinent where we can help improve the connectivity of all the waterways. We also developed connectivity in our energy sharing.” Momen urged Nepal and Bhutan to join in connectivity. However, BBIN motor-vehicle agreement (MVA), which brings all four countries together, is languishing.

Global Engagement

Bangladesh observed 29 May as the International Day of United Nations (UN) Peacekeepers. Nearly 7000 Bangladeshis serve as the UN peacekeepers, 9.2 percent of a total of 75,516. Bangladesh is the largest troops contributor to peacekeeping operations. Hasina has assured that Bangladesh is ready to contribute more peacekeepers.

The Ukraine war has also resulted in the price hike in necessary food items, especially wheat. Even though India banned wheat export, it will continue to export to neighbouring countries. Bangladesh, which had successfully engaged China, India, and other major powers through open regionalism, is facing a new challenge because of increasing competition between China and the US (and Quad). All Quad members are key development partners of Bangladesh.

Domestic Updates

In late May, India announced a ban on wheat exports. New Delhi intended to secure the supplies for the nation amidst rampant inflation and a disrupted global supply chain caused by the Russian invasion of Ukraine. India accounts for just one percent of global exports and thus has only a regional impact. India banned the exports of sugar earlier. It has not yet banned rice exports and is considering exporting wheat to select regional nations.

India continues to face a slow but steady ‘fourth wave’ of the novel Coronavirus pandemic, with new cases climbing fast. The country counted over 4,000 new cases for the first time in the last three months. Amid the domestic crisis of the COVID-19 pandemic, India has earmarked USD 26 billion to curb rising prices and record inflation.

Regional Engagement

India has extended financial aid assistance to economically-decrepit Sri Lanka by deferring loans worth USD 1 billion. In addition, India sent energy supplies (diesel) to Sri Lanka. The economic downturn of the latter has led to political and social crises. As a result, Colombo lacked essentials such as food, fuel, and medicines in May.

Prime Minister Narendra Modi visited Lumbini, the birthplace of Gautam Buddha in Nepal. Modi offered prayers at the sacred Maya Devi temple on the occasion of Buddha Purnima. India views Nepal from the prism of being within its geostrategic ambit and desires to reduce Chinese influence in Kathmandu.

India appointed ambassadors to Nepal and Bhutan in May. Following PM Modi’s visit to Nepal, the Ministry of External Affairs announced the appointment of Naveen Srivastava. He is known as a strong China hand and handled the East Asian Desk before being appointed Nepal ambassador. Ambassador to Bhutan appointee Sudhakar Dalela is also an old China hand. The appointments reflect New Delhi’s efforts indicate that China views its neighborhood from a security perspective and intends to counter Chinese influence in the region.

Global Engagement

Modi embarked upon a trip to Japan to attend the Quad Leaders’ Summit on 23 May. Modi spoke of India’s role in the maritime domain as the Quad made progress on maritime domain awareness (MDA). He described Quad as a ‘force for good’.

However, the Quad continues to remain divided on Russia. India is reluctant to criticize Russia, India’s time-tested strategic partner. Amid the ongoing conflict, India-Russia bilateral trade has witnessed an exponential rise. India is not just purchasing cheap oil from Russia but is also procuring other commodities such as fertilizers. Moscow is now the fourth-highest supplier of crude oil to New Delhi. As two major powers, India and Russia are consolidating their traditional partnership through an enhanced trade relationship that is only bound to grow. India also continues to have a different position in Moscow than the European Union. India’s Minister of External Affairs, S. Jaishankar, was quite critical of European hypocrisy over procuring oil from Russia to meet India’s needs. He said that Europe’s purchases of oil from Russia far outweigh India’s. However, the Quad is firmly united in its view of the global threat posed by rising Chinese influence.

Domestic Update

Shanghai gears up to lift restrictions and resume regular daily operations from 1 June. China has taken a ‘zero tolerance’ approach to control the Covid-19 pandemic, locking millions of residents in pandemic-hit areas. The Chinese economic outlook is bleak because of the pandemic. Chinese Premier, Li Keqiang, held a massive video conference among provincial and local governments to revitalize the Covid-19-impacted economy. China introduced several measures to meet its 5.5 percent GDP growth target. It includes stimuli like handing Shenzhen 300 million digital money (RMB) to residents,  adding 40,000 non-commercial vehicle licenses to the total quota for this year, and 10,000 RMB worth of subsidy for replacing old cars with electric cars in Shanghai.

On 19 May, Premier Li attended the Symposium on the 70th Anniversary of the China Council for the Promotion of International Trade (CCPIT) in Beijing. The CCPIT has significantly strengthened the bond between Chinese and foreign businesses and promoted international economic and trade exchanges.

The 6th Hong Kong Chief Executive (CE) election, the highest office of the Hong Kong Special Administrative Region (HKSAR), was held on 8 May. The former Chief Secretary for Hong Kong and former Security Secretary John Lee Ka-Chiu were elected. The election was the first after the implementation of the national security law for HKSAR. His election indicates that Beijing views HKSAR increasingly through a security lens.

Regional Engagement

Following a suicide bomb blast that took the lives of three Chinese teachers at the Confucius Institute in Pakistan, Premier Li held a call on 16 May. He raised concern over the act of terrorism.

Coinciding with the 71st anniversary of Sino-Pakistan relations, Pakistan’s foreign minister Bilawal Bhutto Zardari made an official two-day visit to China in late May. It marked the first high-level in-person interaction between the two countries since former Prime Minister Imran Khan was ousted. Talks focused on reviewing bilateral relations, emphasizing economic cooperation and progress on China-Pakistan Economic Corridor (CPEC) and the Belt and Road Initiative (BRI).

China marked the first cross-border RMB direct investment business in Nepal with 750,000 RMB worth of investment funds remitted to Nepal by the Tibet Regional Branch of the Bank of China. With the launch of RMB in direct investment, China continues to promote its currency among the BRI members.

China has offered to lend “a few million dollars” to help crisis-stricken Sri Lanka purchase essential goods. However, the West accused China of ‘debt-trap diplomacy’ and forwarded Sri Lanka as the poster case. While China has been slow to come to Sri Lanka’s rescue, China only accounts for 15% of Sri Lanka’s debt. Meanwhile, the China-backed Asia Infrastructure Investment Bank (AIIB) has also approved a loan worth $250 million to Bangladesh for post-COVID-19 pandemic recovery.

China is currently building a bridge across a lake on China’s Himalayan border with India, which the Indian government has already condemned as “illegal construction”. On 31 May, China and India discussed the border and security issues virtually, and China vouched for a friendlier business environment for Chinese businesses in India.

Global Engagement

On 9 May, State Councilor and Foreign Minister Wang Yi virtually attended and addressed the opening ceremony of the High-Level Virtual Meeting of the Group of Friends of the Global Development Initiative (GDI) in Beijing. China pledged to enhance consultation with other emerging markets, step-up support for the South-South Cooperation Assistance Fund and China-UN Peace and Development Fund, establish a pool of GDI projects, and support countries in exploring suitable development paths.

On 16 May, Shanghai Cooperation Organization (SCO) members participated in a four-day counter-terrorism meeting, including delegations from India, China, Pakistan, and other SCO member countries. The SCO’s Regional Anti-Terrorist Structure (RATS) meeting is in New Delhi, India, which Chinese experts commended as a sign of effort towards regional stability and security. Chinese citizens have been targets of terrorist groups in Afghanistan in recent times.

On 19 May, BRICS released a joint statement on “Strengthen BRICS Solidarity and Cooperation, Respond to New Features and Challenges in International Situation”. Brazil, Russia, India, and South Africa met virtually under Chinese leadership. They expressed commitment to working together to ensure the success of the 14th BRICS Summit. During a Ministry of Foreign Affairs (MoFA) press conference on the same day, Zhao Lijian, spokesperson of the MoFA, condemned the US government’s Tibet envoy, Uzra Zeya’s meeting with the Dalai Lama. He urged the US to refrain from “using Tibet-related issues to interfere in China’s internal affairs”.

The United Nations High Commissioner for Human Rights, Michelle Bachelet, wrapped up her six-day visit to China, including its Xinjiang region. China hosted a UN High Commissioner for Human Rights for the first time in 17 years. Chinese President Xi Jinping virtually met with Michelle on 25 May in Beijing. The High Commissioner’s Office expressed willingness to enhance communication and explore cooperation with the Chinese side to make joint efforts for international human rights progress. Ding Xuexiang, Yang Jiechi, and Wang Yi (in Guangzhou) were the meeting attendees. However, western leaders and media criticized Bachelet’s visit to China.

Wang made a diplomatic tour of the Pacific Islands countries (PICs) and visited eight countries, including Kiribati, Samoa, Fiji, Tonga, Vanuatu, Papua New Guinea, and East Timor in ten days. This follows the first foreign ministers’ meeting (virtually) between China and PICs last year. He jointly chaired the second foreign ministers’ meeting in Fiji, during which both sides reached a new consensus to deepen cooperation on sectors including poverty alleviation, climate change, and agriculture. Wang urged Australia to stop viewing China as an adversary. On 24 May, Quadrilateral Security Dialogue (Quad) announced a USD 50 billion infrastructure aid and investment in the Indo-Pacific region over five years to maintain a “free and open Indo-Pacific”. The Quad sees this as an alternative to China’s BRI. Following the Quad summit in Tokyo, Wang Wenbin, a Chinese Foreign Ministry spokesperson, criticized the group for threatening peace, stability, and cooperation and claimed that it “runs counter to the trend of the times and is doomed to be rejected.”

Domestic Updates

Nepal held local elections on 13 May. It was the second such election after Nepal went into the federal governance structure. A few results were surprising as independent candidates won top mayoral positions in major cities like Kathmandu metropolitan city (the capital) and Dharan sub-metropolitan city. Nepali Congress topped the charts among the ruling coalition of five parties, and the Communist Party of Nepal (Maoist Centre) did well to come in third. The main opposition party, the Communist Party of Nepal (United Marxist Leninist), came second though most expected the party to perform better. Nepal will also hold its federal elections later this year in November.

A Tara Air flight carrying 22 people crashed into a mountain at an altitude of about 14,500 feet. It was Nepal’s 19th plane crash in 10 years and Tara Air’s 10th fatal one during the same period. The European Union (EU) has barred Nepali airlines from European airspace since 2013 owing to poor safety records. Meanwhile, Prime Minister Sher Bahadur Deuba inaugurated Nepal’s second international airport in Lumbini, the birthplace of Gautam Buddha.

Regional Engagement

On the occasion of Buddha Jayanti (Buddha’s birth, nirvana, and death all were on the same date), Indian Prime Minister Narendra Modi visited Lumbini, the birthplace of Buddha. The visit was Modi’s fifth to Nepal, and he had visited Hindu religious sites in his four previous visits. Nepali Prime Minister Sher Bahadur Deuba and Modi witnessed the exchange of six MOUs relating to the power and education sector. One was between India’s Satluj Jal Vidyut Nigam Ltd and Nepal Electricity Authority (NEA) to develop and implement the Arun IV hydropower project. Additionally, Nepal has signed agreements to sell up to 364 MW of electricity in the open market in India.

Nepal-India relation has been hot and cold during Modi’s reign. In 2014, Modi became the first Indian prime minister to visit Nepal in 17 years and received adulation across the board. However, the Indian blockade of Nepal in 2015 and overlapping territorial claims have tested the relations. Nevertheless, the relationship has recently improved, especially in energy connectivity.

Deuba inaugurated Gautam Buddha International Airport earlier that day, but Modi chose to land on a custom-built helipad 16 kilometers away. Many analysts argue that Modi snubbed the airport because it was built by a Chinese contractor (though financed by the Asian Development Bank). Nepal has the daunting task of balancing Indian and Chinese engagement and interests in Nepal.

At the foreign secretary-level, the 14th meeting of the Nepal-China Diplomatic Consultation Mechanism took place. Both sides talked about cooperation for mutual benefits and the further promotion of bilateral ties. However, China expressed displeasure at the US Undersecretary of State for Civilian Security, Democracy and Human Rights, Uzra Zeya’s visit to Tibetan refugee camps in Kathmandu (more on this below).

Global Engagement

Zeya, the United States under secretary for civilian security, democracy, and human rights, visited two Tibetan refugee camps in Nepal. She is also the special coordinator for Tibetan issues. She went forward with visiting refugee camps despite Nepal’s reservations, though Nepal formally feigned ignorance of the visit. Nepal is home to over 13,000 Tibetan refugees and is a sensitive issue in Nepal-China relations. Nepal ascribes to the one-China policy, which states Tibet and Taiwan are integral parts of China, ever since diplomatic relations were established.

To assuage Chinese concerns, Nepal re-expressed its commitment to the One-China policy. However, the amalgamation of geopolitics and human rights principles makes Nepal’s handling of Tibetan refugees tricky. It has also been an arena for Sino-US competition in Nepal.

Domestic Development

Sri Lanka has faced its most challenging economic crisis since independence. Long-term structural factors and the current government’s poor financial decisions caused the trouble.

Sri Lanka imports more than it exports, and the balance of payment deficit has been a constant feature of the economy since 1977. These gaps were plastered over with the revenues generated by foreign remittances and tourism. However, the pandemic hurt foreign remittances and tourism.

Prime Minister Gotabaya Rajapaksa’s disastrous policies, such as significant tax concessions soon after his ascension, the decision to go fully organic overnight in 2021, and the soft peg of the Sri Lankan rupee exacerbated the problem.

Things took a disastrous turn for the worst on 9 May when Rajapaksa loyalists attacked peaceful, anti-government protestors at Galle Face Green, Colombo. The protesters had earlier convened at Prime Minister’s official residence near Galle Face and had been egged on by several government parliamentarians.

Following the government crackdown, many citizens, mobilized through social media, attacked pro-Rajapaksa mobs that had arrived in Colombo. Many Rajapaksa supporters who took part in the assault of peaceful protestors in Galle Face were attacked while returning home. Over 150 properties, mainly belonging to politicians were burnt, and angry mobs killed several politicians. Following the widespread violence, Prime Minister Gotabaya Rajapaksa, the president’s brother, resigned on the same day. Other ministers followed suit.

President Rajapaksa’s hold on power was increasingly more tenuous. Opposition parties were not keen to form a unity government under the president.

On 12 May, the president appointed the former Prime Minister and the leader of the United National Party (UNP), Ranil Wickremesinghe. The following days saw the appointment of a Cabinet of Ministers comprising members of Rajapaksa’s Sri Lanka Podujana Peramuna (SLPP) and some defectors from the Sri Lanka Freedom Party (SLFP) and the Samagi Jana Balawegaya (SJB).

Wickremesinghe made a statement on the state of the Sri Lankan economy on 29 May, in which he promised five finance committees and ten oversight committees to resolve the economic and political crisis faced by the country. He also pledged to introduce checks and balances to the powers vested on the executive president through a 21st constitutional amendment.

Regional Engagement

Sri Lanka’s dependency on India continued to grow in May, especially concerning the fuel supply. Sri Lanka spends over USD 500 million on fuel, a cost she can’t afford to bear. Some Sri Lankan media reported that Indian assistance was worth 6 billion US dollars in the last six months.

Meanwhile, China, one of the leading financiers of successive Sri Lankan governments, has sat on the sidelines during this crisis. China pledged 76 million US dollars in assistance and shipped large quantities of medicines and food but has not offered loans or a credit line. It comes despite Sri Lankan requests to China for a loan of USD 1 billion and a credit line of USD 1.5 billion.

Global Engagement

Sri Lanka suspended external debt repayments on 12 April and announced a plan to restructure its debt. The country is now attempting to restructure over USD 12 billion in overseas debt (total external debt of USD 51 billion). In late May, Sri Lanka hired heavyweight financial and legal advisers Lazard Freres and Clifford Chance to help renegotiate debts. Meanwhile, most Sri Lankan bondholders have appointed negotiators Rothschild, who is reputed to be extremely unwilling to accept a haircut. Sri Lanka has pinned its hopes on International Monetary Fund (IMF) assistance. However, given that this may take a few months, Sri Lanka needs to find bridge finance. So far, only India has stepped in.