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Nepal in the Year 2014: A Glance

The Year 2014 sparked a new flicker of hope. Nepali political parties pledged to draft a new constitution by the Constituent Assembly (CA) on January 22, 2015. Creation of a coalition rule of Nepali Congress (NC) and Communist Party of Nepal Unified Marxist-Leninist (CPN-UML) led by Prime Minister Sushil Koirala, ownership of all prior accords, share of chairman of CA and legislative committees among different parties, control of armed groups and arduous negotiations with United Communist Party of Nepal (Maoist) and United Democratic Madhesi Front (UDMF) to build consensus on all political issue such as federalism, election rules, form of government, judiciary, citizenship etc added optimism to it.

The NC and CPN-UML proposed 7 federal provinces based on capability and parliament-elected prime minister as chief executive and the UCPN (Maoist) 10-14 ethnicity-based provinces and directly elected executive president. The UDMF proposed 9 federal structures with 1 province in the entire Madhes and power-sharing by president and prime minister. The spar, however, eluded consensus and the government did not dare to pass the constitution by two-third majority. Major parties provided Chairman of Constitutional-Political Dialogue and Consensus Committee of CA Dr. Baburam Bhattarai of UCPN (Maoist) authority to draft a satisfactory constitution while the chairman of his party Puspa K. Dahal is given the chair of the extra-CA High Level Political Committee to build consensus. Ironically, he is indulged in 19-party federal democratic forces for nationwide stir. The Hindus and radical lefts are, however, cheerless by wooly role of top leaders as they derailed hope of a new constitution in time.

Nepali state's outreach in society is thin. Patronage has cramped the integrity of its institutions to de-partisanize public administration, abolish impunity, improve human rights and promote transitional justice, reconciliation and peace building. Governance is marred by violence against women, cronyism, cartel, capital flight, corruption and poor service delivery while absence of elected local bodies since 13 years hobbled the state building from bottom up. Political parties suffered factionalism, splits and tension with their ancillary bodies and newly franchised social forces. They are struggling for power, resource and recognition as well as igniting debates for inner-party democracy.

Nepal attained some successes in education, health and poverty reduction. As remittance-led national economy, it is seeking labor receiving nations to sign labor pacts to reduce the cost of migration and create a win-win situation for workers, their homeland and destination countries. Economic priorities are: the utilization of hydro-energy, tourism, agricultural and infrastructure- led growth. Growing partnership between private sectors and the government created investment-friendly climate for development and redress huge trade imbalance with the neighbors. Power trade and development agreements with India holds hope for the solution of energy crunch while opening of a new land route with China is expected to boost its trade. Both the neighbours are focusing on Nepal's infrastructure development and suggested Nepalese leaders to draft the new constitution through consensus.

Nepal displayed competence in hosting 18th summit of South Asian Association for Regional Cooperation in November and became its chairman. Eight member states signed energy cooperation agreement. Nepal continued the chair of Bay of Bengal Initiative for Multi-Sectoral Technical and Economic Cooperation. Its strategic geography has increased Sino-Indian cooperation in soft power but also heating up triangular competition among the USA, India and China offering it opportunities to harness foreign investment, leverage for active diplomacy and funds for sustainable development.

New Political Equation

The year 2014 marked the rise of moderate forces in power. Nepali Congress (NC) President Sushil Koiral's election as Prime Minister on February 10 and his party's entry into a coalition government with the second largest party Communist Party of Nepal Unified Marxist-Leninist (CPN-UML) and some smaller parties generated a hope for consensus politics and resolution of constitutional issues - federalism, form of governance, citizenship, election system, judiciary etc. The ruling parties' decision to own the achievements of first Constituent Assembly (CA) glued the post-2006 agitation forces but it also made future direction complex. The ruling coalition, Maoists and UDMF have signed many contradictory agreements with 101 social groups and armed non-state actors which are difficult to implement. The 601-member second CA elected in November 2013 approved the rules of procedure, selected the chairpersons of five CA and parliamentary committees consensually. The most influential Political Dialogue and Consensus Committee has been given to UCPN (Maoist) leader Dr Baburam Bhattarai. Other committee chairmen are distributed among NC, CPN-UML, UDMF and small parties. They together promised to deliver a new Constitution by January 22, 2015.

The political consensus of top leaders of NC, CPN-UML, UCPN (Maoist) and UDMF is sputtered by distrust, internal factionalism, crisis of leadership succession, power struggle and protracted deadlock over the distribution of state posts straining the resolution of political issues. The NC and CPN-UML have proposed 7 federal provinces based on geography and capability and parliamentary form of government, UCPN (Maoist) 10-14 ethnic-identity based provinces, the southern flatland bordering India, and presidential form of government while UDMF 1 autonomous province in the entire Madhesh and mixed form of government. Their 3-point deal of June 7 agreed to resume parliament, form extra-CA High Level Political Committee (HLPC), respond to the demand of round-table conference with CPN (Maoist) led 33-party alliance on September 16 and complete the remaining tasks of peace process especially the formation of two commissions Truth and Reconciliation (TRC) and Disappeared Persons (DP).

The first two initiatives came into effect while the later two left a chasm. The roundtable conference to be chaired by Prime Minister Koirala was rejected by CPN (Maoist). It blamed the government for its apathy in power-sharing and settle political issues. On April 9, two Bills to form TRC and DPC had been endorsed by the President to the dismay of conflict victims, the court and the international community as their provisions defied international norms. The UCPN (Maoist) asserted that all the war-era cases should be handled by the TRC. The government's move to file charge against 13 Maoist cadres accused of killing Krishna Adhikary in 2004 could not proceed despite his father Nanda P. Adhikari's death during hunger strike on September 22 demanding justice.

The dialogues of mainstream forces to narrow down their differences, however, burst in a livid diatribe. Underneath the negotion lies the choice for portfolio in a post January government. The international community's advice for consensus-based constitution, even accommodating all forces outside the parliament, instead of two-third majority, is sure to linger the gulf and flatten the gridlock.

Crisis of Trust

With diminished clout in the second CA, UCPN (Maoist), UDMF, ethnic and indigenous parties built a 19-party coalition of opposites for the institutionalization of secular, federal democratic republic. Yet, they are ridden with rifts between personality-oriented leaders and collective demands, between Hindu nationalists and secular forces, between indigenous Tharus and outsiders, and between high and low castes. Tharu leaders urged the government to remove their identity from the list of Madhesi people. Rastriya Prajatantra Party Nepal (RPP-Nepal) demands the restoration of Hindu state and constitutional monarchy, a view also shared by many NC and CPN-UML leaders. The CPN (Maoist) led alliance demands the dissolution of CA and Rastriya Janamorcha Nepal detests federalism. The growing tension between the government and 19-party alliance caused the regular obstruction of parliament. On October 8 a five-point deal signed between NC, CPN-UML and UCPN (Maoist) formed HLPC with 3 members each from them, 3 from Madhesi parties and 3 from small parties; made the chairman of HLPC rotational in every two months among them while UCPN (Maoist) chairman Dahal became the first to coordinate; government agreed to provide US $ 1,947 to the families of those killed or disappeared during conflict; made crucial provisions for land registration in western hilly districts by charging only 2 % fees; and promised to tax Indian vehicles entering Nepal. The discrepancy, however, persisted and opposition threatened to organize nationwide protests.

Bureaucracy and police are weakened by politicization and frequent reshuffle in each change of government while Nepal Army is demanding its participation in National Defense Council and various committees related to security. Recruitment of party loyalists in the state institutions such as Supreme Court, Public Service Commission, National Human Rights Commission, educational institutions, and anti-corruption watchdog is fiercely debated in the media. Control of legislators by party whip has undermined the autonomy of parliament while subordination of court to legislative hearing has weakened power separation and checks and balances. Absence of local body's election since 13 years tottered the capacity of Nepali citizens to build democracy from below and address the need for common good. Lack of accountability is causing widespread misuse of public authority and social security funds. Opposition is uncomfortable to hold local elections for fear of risk to federalism. To expand their patronage, legislators of all hues, however, endorsed the constituency development fund of $97 thusands for each constituency.

Political Factionalism

Nepal's political parties are mired in internal conflicts led by fractious leaders. CPN-UML's ninth general convention on July 3 elected K. P. Oli as the chairman defeating Madhav K. Nepal. The bitterness between Oli and Nepal has been shelved by the distribution of 22-member Standing Committee and 62-member politbureau posts to their loyalists. The party viewed that with the abolition of monarchy and declaration of secular, federal democratic republic the country is no longer semi-feudal and semi-colonial but has moved to capitalism. It deleted "class war" and opposed the formation of ethnicity-based ancillary bodies. NC has postponed its 14th National General Convention in September 2015 though its tenure expired on September 20 this year. Sher B. Deuba faction of NC considers the government survival-oriented while Ram C. Paudel is demanding the post of acting President of the party. Another group led by Khum B. Khadka is engaged to fortify "nation, nationality and Hindu state."

The UCPN (Maoist) also faced factionalism between Chairman Dahal, Dr. Bhattarai and Narayan Kaji Shrestha. Dr. Bhattarai pointed out the need for a "third force" and claimed the post of party Chairman. The party decided to convert the existing Central Committee into Special Convention Organizing Committee, develop the party's new ideology to bring all communist parties together and initiate organizational change to renew the party's muscle. The CPN (Maoist) suffered split with its dissenter led by party secretary Netra Bikram Chand formed a new party CPN- Maoist accusing Baidya incapable of leadership while the latter is seeking dignified merger with UCPN (Maoist). Mainstream communist parties' flirtation to capitalism and parliamentary path may provide scope to draft the constitution but the long socialization of their cadres on class war risks bringing the volatility back. The RPP-Nepal's General Convention on May 26 reelected Kamal Thapa.


Nepal's population is 28m (m-million) with a growth rate of 1.35% per year. It ranks 145th out of 187 countries in the Human Development Report of 2014. Life expectancy at birth is 67 years (male 65.88: female 68.56 years), literacy rate is 48.6% (male 62.7%: female 34.9%). Nepal's economic size is: $20b (b-billion) with a growth rate of 4.5 %. With a per capita income of $717, the income poverty line is 25. 2% and power purchasing parity is $1.25. Nepal has achieved moderate success in education, poverty reduction and health. It has reduced child mortality rate to 40.35 per live 1,000 birth attributed to immunizing against diseases, breastfeeding and awareness about maternity health care. Those having access to safe drinking water is 88%, sanitation 30%, electricity 37% and Internet access 30%.

Subsistence agriculture absorbs 72.3 % of workforce where social security is zero. Due to initial phase of industrialization the unemployment rate is as high as 40%. Some 1,700 youth daily leave the country for the Gulf region, Southeast Asia and East Asia. The contribution of migrant workers to GDP is 23.7% to reach $4.44b. But its social cost is huge. Agriculture suffers due to lack of dynamic manpower. The contribution of tax to GDP is 13% which is insufficient to create effective state, subsidize social security and mitigate the effects of fast change of Himalayan ecosystem. The contributions of agriculture, industry and service/tourism to GDP are: 33.7%, 14.1% and 52.3% respectively. Nepal unveiled a $6.4b budget for 2014-15 with the policies of economic growth, poverty reduction, agricultural productivity, power supplies and infrastructural development. It aimed to mobilize $ 4.118b from revenue, $513.602m internal loan, $180.418m saving, $714.467m foreign aid and $9.737m principal repayment.

Foreign aid contributes 5% to GDP. It is characterized by multilateral institutions, bilateral donors and INGOs. The main donors are: WB, ADB, UN, UK, India, China, Japan, USA and Germany. The EU's support for 2014-2020 is €360 m for rural development, job-creation, quality education and democratic governance. Parliament has passed the Anti-Money Laundering Act and Proceed of Crime, Seizing, Freezing and Confiscation of Properties. Illegal capital flight represents 4% of the country's GDP. A new Development Cooperation Policy defines the minimum limits to grants $5m, soft loans $10m and commercial loans$20m from development partners.

Nepal Rastra Bank in November revealed that exports, mainly agricultural products, dropped by 2.3 %( $219.364m) while imports, mainly industrial products, rose to 24.7 ($1.87b). The surge of trade deficits reached to $1.65b. India became the largest trading partner of the country, followed by China and other countries. Trade deficit with India and China increased by 28.4 % and 37.8 %.The balance of payment surplus at the end of first quarter of 2013/14 stood at $513.505m and foreign exchange reserves $6.615b. The country's total debt stands $5.214b while in per capita term debt burden to every Nepali stood at $195.402. Inflation remains at 7.5 %.

The Global Gender Gap Report 2014 ranked Nepal 112th among 142 countries in the world. This gap is calculated on the basis of economic participation, educational attainment, health and survival and political empowerment. Eliminating gender-based violence and bridging gender gaps are top policy challenges. Nepal's 16 % of the people is underfed, 29.1% of under-five children is malnourished and 4.2% of them die before they reach 5years of age. The annual girl and women trafficking to India and Gulf region is 29,000. Illiteracy, lure of better employment and weak law enforcement are its main causes. Minimum monthly wage of formal sector worker shot up to $ 90.23 as a result of unity among trade unions. Out of 9.2m children, 2.6m between 5-14 years work as child workers.HIV/AIDs affected is 48,000. To increase the access of people in health service the government is preparing Health Support Sector Program 2015-20.

Nepal within the Region and Bilateral Relations

Nepal successfully hosted 18th SAARC Summit in Kathmandu on November 26-27 where agreement on energy cooperation has been signed by 8 member states. Nepal is the chairman of SAARC and Bay of Bengal Initiative for Multi-Sectoral Technical and Economic Cooperation. Both are focusing on poverty alleviation, energy and connectivity for trade, mitigation of climate change and development. It hosted the 3-day ministerial meeting of Asia-Pacific Least Developed Countries in December aiming to enhance graduation drive to developing countries. Nepal opened 2 consulate offices in Portugal with a view to attract tourists and investment but the European Commission has not lifted the ban on its aviation on account of safety measures. The USA and the UK preferred to work together for the "mutual security and prosperity" while showed strategic concern over the Chinese request to Nepal to repatriate the Tibetan refugees. The US aid to Nepal stands $79.700 m.

Nepal's ties with the neighbors, India and China, have scaled up. With India, relation shifted from bureaucracy to political level with the visit of Indian Prime Minister Narendra Modi twice and other dignitaries and injection of $3b of investment in Nepal. India's annual loan and grants stand $7.565b. On November 25 both signed 10 agreements and MOU-expedite Arun III hydro project, extension of $1b credit, construction of a police academy, tourism promotion, operation of cross-country bus service, three sister city agreement, cooperation on traditional medicine, etc. India constructed a trauma center at Bir Hospital and handed over 2 Advance Light Helicopter to Nepal Army. The increased engagement of INGOs in the changing geostrategic landscape of Madhesh heightened the security concern of India which is facing problems of terrorism, cross-border crime, human trafficking and flow of fake Indian currencies. On April 21 Nepal annulled registration of 26 INGOs for working against their mandate and spending money in religious conversion. The government requested the donors to use national system to channel aid, sought the accountability of INGOs and restricted judiciary and parliament from receiving any foreign aid. The problem with the government, however, is that it could utilize only 76 % of grant and 36 % of loan. International cooperation is essential to move Nepal's rapid progress.

China prefers Nepal's political stability, loathes ethnic federalism and looks to it as bridge to South Asia. Its multi-sectoral cooperation is aimed to minimize extra-regional powers' support to dissident Tibetans. It provided $35m grant to development, $9.75m for security, $25m for erection of transmission line and 6 aircrafts, 4 on soft loan and 2 as grants, $ 1.9 m health, $1.63m in infrastructure in Nepal's 15 northern districts and pledged $73m investment which outstripped India's $ 6.5m. High profile visits from both sides elevated cooperation on Tibet-related affairs through "mutual security and stability." Nepal joined China led Asian Infrastructure Investment Bank and promoted private sector joint venture for Himalayan Airlines. Trade route at Rasuwagadhi has been opened for bilateral trade, China provided quota and duty-free access to 199 more Nepali products and allowed the use of each other's currency for border trade. During Chinese Foreign Minister Wang Yi's visit to Nepal in December China increased its grant for next year to $126m.


BIMSTEC Bay of Bengal Initiative for Multi-Sectoral Technical and Economic Cooperation
CA 601-memmber Constituent Assembly
CPN-UML Communist Party of Nepal Unified Marxist-Leninist led by Chairman K. P. Oli
CPN (Maoist) Communist Party of Nepal (Maoist) led by Chairman Mohan Baidya
MOU Memorandum of Understanding
NC Nepali Congress Party led President Sushil Koirala
RPP Nepal Rastriya Prajatantra Party-Nepal President Kamal Thapa
SAARC South Asian Association for Regional Cooperation
TRC Truth and Reconciliation Commission
UCPN (Maoist) United Communist Party of Nepal (Maoist) led by Chairman Puspa K. Dahal
UDMF United Democratic Madhesi Front is a constellation 6 regional parties of southern flatlands-Madhesi Jana Adhikar Forum (Democratic) led by President Bijaya Kumar Gachhedar, Madhesi Jana Adhikar Forum-Nepal led by President Upendra Yadav, Tarai-Madhes Loktantrik Party led by President Mahantha Thakur, Sadbhavana Party led by President Rajendra Mahato, Tarai-Madhes Sadbhavana Party Nepal led by President M. P. Yadav and National Madhes Socialist Party led by President Sharat S. Bhandari.
Copyright©2001. Friedrich Ebert Stiftung, Nepal Office
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