Consensus Blues of Nepali Politics

The ruling elites of Nepal who are invariably in the majority never want consensus to hear the voices of weaker sections of the masses. 

Photo: DECCAN Chronicle

When India PM Narendra Modi said, ‘Nepal should make a constitution on consensus taking confidence of dissident parties rather than majority voting’ sparked a political debate in Nepal. Mr Modi’s remarks in the course of his visit to Nepal during 18th SAARC summit in Nepal has provoked some leaders of Nepali Congress and Communist Party of Nepal, United Marxist and Leninist (CPNUML) who are pro-rightist. Whereas the Maoist leaders are more assured of it, and thought to aid in their stance of consensus for the constitution. 

Mr Modi’s suggestion is taken as intervention by pro-rightist leaders of Nepali Congress and CPNUML. Those leaders, mostly belonging to the traditional ruling elite of Nepal, are not convinced to address all the subdued voices of the weaker section of the ethnically diverse Nepali society. Since they’ve been in majority throughout the democratic history of Nepal, they’re less likely to accept the representation and inclusion of all the people left behind. Whereas, Maoist leaders who are regarded as pro-leftist and close to all the disadvantaged people of Nepal are in favor of consensus in constitution building. Their demand is to address the voice of the people belonging to the weaker section of Nepali society who barely has a majority in the Constituent Assembly.

Leaders of NC and UML have criticized Mr Modi’s remarks. Gagan Thapa, a young and popular leader of the NC has said that Modi doesn’t have right to intervene in Nepali politics. In addition, Mohan Bikram Singh, the leader of a fraction of CPNUML said that Modi’s remarks over Nepal’s process of constitution making is intervention in Nepal’s sovereignty. Both of them belong to the ruling elite of Nepal.

Nepal holds the story of dominance by ruling elite in executive, judicial system and the legislature. Those ruling elites are Bahun, Chhetri and Newar, or popularly known as people of the mid-hill. After Janga Bahadur Rana, the powerful and cunning prime minister promulgated the Civil Code 1910 based on caste hierarchy the people belonging to lower echelon remained oppressed. His Civil Code is just a continuation of Jaya Sthiti Malla’s division of Nepali society into four categories—Brahmana, Chhetria, Vaishya and Sudra—based on the very Hindu philosophy of Vedic saint Manu. Even after so called restoration of democracy in 1950 the same group got a chance to exercise power. After two decades of democracy, then the King Mahendra declared Nepal a Hindu state which further helped mid hill people to prosper. As a result, they got a chance to gain education, collect property, acquire most of the political and administrative positions and patronized their cronies to rule the country. The situation remained same until the second democracy in 1950.

The majority voting system was further restored in 1950 after falling partyless Panchayat regime of the monarch. Yet, the people of lower hierarchy remained away from exercising democratic values in the country. It was until the third peoples’ revolution in 2006 which introduced inclusive democracy. A coalition government was made based on consensus. Realizing the fact that the mere majority voting could not represent all the people, the coalition government held the Constitution Assembly election following first past the post and proportional representation voting system. The interim government was formed from the Constituent Assembly, which also drafted an interim constitution.

The interim constitution is a short term arrangement for restoring peace and addressing the voice of the people left behind by the mainstream development. Its mandate is to make a constitution that can address the suffering of all the weaker section of Nepali society who have never felt associated with the state. Thus, there was an agreement of listening to the voice of all the people who normally do not have representation (or enough representation) in government.

However, those ruling elites of mid hill are not happy with listening to the voice of all those left behind. Although consensus was the only mantra to write constitution first, then follow the norms of constitutionalism i.e. rule of the majority, periodic election, supremacy of the people, democracy, rule of law and judicial review.

Narendra Modi who is watching the political advancement of Nepal closely, just uttered few words to reinstate what Nepal has decided to go ahead with. Some leaders are simply commenting on him to defend their greater share of several decades of power usage.      

   

Reform way forward for New Nepal

The ride to the economy is not easy for the new government. For years, Nepal's economy has long been entangled in its structural problems. The economy is in ruins--as per some indicators, and a sign of improvement is looming.  Now, adoption of an appropriate fiscal policy is the way forward.  In order to stabilize the macroeconomic balance, we have to promote a new round of reform. The country is still pursuing dual economy. Owing to majority—more than 65 percent—of rural population, a single economic development strategy will not reap the advantage.  For crafting Nepal’s economic reform, the political leadership should take a bold decision. 

Before exploring Nepal’s new economic development possibilities, it’s worth knowing the challenges.

Uneven development

Nepal has been facing the problem of imbalanced development for decades. Since the fifth 5 year development plan the concept of regional development emerged, thereby allocating budgets in equitable basis. However, the distribution was never justifiable. Surprisingly, some influential districts have been disbursed up to a quarter of the national budget, while others were granted only an amount less than a hundredth. The situation worsened after the political change in 2046 BS. Some influential—leaders, MPs and bureaucrats, due to their higher echelon gave out more to their particular districts. For example, in Morang and Sunsari districts, where most of the Prime Minister, Finance, Home and other ministers belong to, have been given a big chunk of the national budget. Likewise, top bureaucrats from National Planning Commission, department of Irrigation, Physical Planning and the local development division also used their power to draw budget into their home town or districts.

The unequal distribution battered hard on other developing regions. They barely received regular development budget. It affected more to Karnali and Far Western districts. Beside the western hill areas, some districts in the plains—Mahottari and Dhanusha also got to suffer by budget crunch. As a result, these areas have human development index below the national average. People in those areas could never feel the presence of the state.

Highway Economy

The construction of East-West highway by the then King Mahendra helped to foster economic activities around the areas; however, only the eastern part of the country reaped benefits. High way helped to develop small market towns around it, which has reached up to 125. Another road, mid-hill highway has also laid foundation for most market towns and increased trade and industry in those mountain patches.

In fact, the lifestyle change in the eastern part of the highway is clearly visible whereas the western part still struggles to thrive. The insufficient infrastructure and scattered settlement-- necessary for the growth of economic activity is somewhat lacking in the west.  For example, 1993 BS, Biratnagar-Sunsari has been developed as an industrial area. Later, Birgunj and Bara-Parsa were developed as Industrial Corridor. In contrary, poorly developing manufacturing units in Butwal , Rupandehi , Banke - Kohalpur, Kailali are besieged for market access long distance of transportation, that have severely obstructed the economic activities.

So far, except in some binding conditions, the mid and far western districts didn’t feel the presence of the state. After the people’s movement, 2046 BS NGOs finally accessed to Karnali, identified injustice, and started pouring some fringe support. Though, the NGO culture merely made them more dependent.

Poor Industrial Development

Although industrialization began quite late, in 1993 BS, the progress is still infantile. During Rana Regime some Jute and match factory were established. In Panchayat era, other countries--Russia, China, and India supported to lay the foundation of the textile, sugar, cement, leather shoes, paper, pharmaceutical and additional factories. However, approval of establishing industries was very difficult because of the intervention of the palace. By acquiring shares up to 51 percent, absolutely for free, the Palace used to ascertain license to such industries. Therefore, no industry, including multinationals, could thrive during the autocratic rule. Its contribution to the GDP, once reached to 19 in 1995/96 has plunged to 15 percent as of now.

Moreover, more than a thousand of large and medium scale industries were closed due to a decade long people’s war. In addition, around twenty thousand of small and cottage industries also followed the similar fate.  

Worsening agricultural sector

Agriculture sector contributes 35 percent to Gross Domestic Product (GDP) and 65 percent of employment is also degenerating. In the 1970's, Nepal was exporter of agro products, contributing up to 40 percent of GDP. However, total production of food in the country is not sufficient to feed us. Therefore, we are importing hefty sum of grain and vegetable to suffice our need. Due to low production and productivity, agriculture is being abandoned. The production cost exceeds farther than the cost of the same imported goods.

High unemployment

Unemployment is towering because of the lesser opportunity in both the agriculture and industry sector due to their sluggish progress. For example, one in eight youths entering the job market every year gets a job. The only door open for them is to pack their bags, cue on the line, and go for foreign employment.  Currently, the rate of out-migration of 18-40 years of youth is more than 65 percent. The fleeing of working age population abroad is a great risk for the growing economy.

Lack of good governance and opacity

From the good governance perspective, Nepal is in dismal condition, as the corruption index says. Lack of good governance has contributed to deterrence in the economic development. Lack of good governance and opacity is regarded as the main cause of Nepal’s underdevelopment.  It increases the cost of development projects, and reduces spending. Donors also question on the expenditure thereby reducing their aid and investment. This is a great setback for countries like Nepal who depends heavily on foreign aid.

High trade deficit

Nepal is hit hard at present by a massive trade deficit of nearly 5 billion Rupees.  The total income of over a year is merely sufficient in importing petroleum. Substituting import has become just a daydream. At this juncture, there is a dire need to think about a policy—if implement—can substitute imports and increase exports.

If we have to drive the economy towards sustainability and stability, there is an immediate need of the second round of reform. And it should address all those aforementioned challenges.

Religious Tourism: Are we doing enough?

The diverse cultural wealth of Nepal provides huge potential for religious tourism. Motivating domestic visitors and attracting pilgrims from neighboring countries is of great importance.  

Nepal’s rich cultural heritage offers an ample possibility for religious tourism. The population—enriched with several castes, ethnicity and nationality is a portrait of a great cultural legacy. The variety of societies is a great cultural wealth in itself. The harmony among culture is a pride. However, has Nepal ever been able to harvest the benefits from its rich cultural diversity? Is there any mechanism where we can sell our rich family tradition? Or have we ever harvested substantial gain from religious tourism?

So far, Nepal’s religious tourism has always been dependent on luck. As the religion is dependent on faith, the path of its development has remained reliant on destiny. As a resolution, religious tourism in Nepal is following a stunted growth.

Approximately 300 to 330 million pilgrims visit the world's key religious sites every year, reports the World Tourism Organization. Likewise, Americans traveling overseas for "religious or pilgrimage" purposes has increased from 491,000 travelers in 2002 to 633,000 travelers in 2005 (30% growth), estimates the U.S. Office of Travel and Tourism Industries. This image indicates that religious tourists are getting.

However, religious tourism is one among the most promising sector in Nepal. In fact, Nepal harbors fertile ground for flourishing two of the world’s eminent religion—Hinduism and Buddhism. The country slotted between India and China shares a piece of the larger history of ancient civilizations blossoming in the area. Consequently, this tiny southern Asian state offers holy land for the Buddhists of the world. In addition, similarity in history, culture and geography with the vast populace of the south of Himalayas-- across the Ganges plains-- allures millions of Hindu pilgrims of India. Moreover, the country with abundant temples, monasteries and shrines are of outstanding importance for the predominant number of fans in Nepal and abroad.

Nepal is garnered with rich cultural diversity and harmonious religious co-existence among Hindu, Buddhist, Christian, Muslim, Bon, Kirat, Jain and Sikh. For the Hindus, there is one among the holiest--Pashupatinath Temple situated in Kathmandu. Devghat in Tanau district is also a famous spot for Hindus. Likewise, Lumbini, the birthplace of Lord Buddha is one of the most revered places for Buddhists in the world, is sited in Rupandehi district. In addition, there are monasteries and caves where Guru Rinpoche meditated. Up in the Himalaya of Mustang district Lord Vishnu is believed to reside in the temple of Muktinath. The district also contains Bonpo shrines. The holy lake of Gosainkunda near the mountain top is devoted to Lord Shiva. 

A routine of religious and ethnic festivals are enjoyed in these pilgrimage sites. The large number of devotees, both Nepalese and Indians, visit Pashupatinath temple during Shivaratri. They also celebrate Maghe Sankranti in Devghat and Kumbhamela in Chatara, Sunsari. 

Several honored religious leaders, priests, saints, monks and Maulanas have been inhabited these places. They have been preserving cultures; motivating people for visiting the place, and inspiring devotees for of pilgrimage.     

However, the epic significance of the religious sites and the perpetual efforts of those religious figures are still insufficient. As a result, Nepal has not been able to showcase its religious hotspot to the prospective customers—pilgrims and tourists—in the region. 

For example, in India, religious tourism has been given an utmost priority. Religious figures, government, private sector and media are playing a significant role in promotion. Most of the locations of mythological significance are already enlisted in scriptures. For example, Gaya, Kashi, Puri, Badrinath dham, Kedarnath dham, Haridwar, Dwaraka etc have already collected hoards of publicity in religious teachings. Next, their media and film also played a significant role in promoting religious tourism. Some Bollywood movies portrays religious sites. The television channels also encourage their viewers to believe in their respective believes and promote religious tourism eventually. Furthermore, celebrated religious persons—there are many in India—play an important prominent role for influencing people for pilgrimage. As a result, countless people flock to India annually in their voyage for religion.

Moreover, people of Mecca, the Muslim holy place, do not need agriculture because the God has given them the pilgrimage as their yearly crop. Millions of Muslims go to the Islam’s holiest site, Saudi Arabia to take part in the year’s haj. The annual haj ceremony brings approximately 16.5 billion dollar—3% of GDP to Saudi Arabia. Next, Jerusalem, a holy metropolitan for all three Abrahamic religions, also draws large number of pilgrims. Likewise, huge number of Shia Muslims visit shrines in Iraq.

Despite having Buddhists’ holy site—Lumbini in Nepal, an adequate mechanism is still lacking. World’s second largest economy—China is just at the northern border. Although Buddhist population is rapidly being converted to Christianity in China, the remaining number of Buddhist in the country are still higher than any countries in the world. If Nepal can attract them, it would be enough for sure.

There is a need to attract religious tourists/devotees by promoting pilgrimages through religious personalities, government agencies, private sector and media. Definitely, media has a profound effect—proved by many researches—on customer’s motivation. A regular discussion on pilgrimage sites in media with eminent spiritual personalities has a profound effect on potential visitors. It helps local devotees/pilgrims to explore native religious places of divine reputation rather going India or China because travelling to other countries has become riskier for Nepalese pilgrims.

In a nutshell, we have to promote our religiously valued holy sites to our citizen first, that will save a huge sum of money from going abroad. Besides visiting Indian cities or Manasarovar of China for religious tour, we have to explore our historically important places. Next, the strategic location of Nepal between two great Asian cultures—India and China gives us a great opportunity to earn, develop and prosper. This can also be possible through religious tourism. Also, attracting the prospective tourists of the Indian Sub-continent to visit the Nepalese pilgrimage destinations is a big battle to be won.

TBT Agreement Promotes Production of Quality Goods for Export

Implementation of Technical Barriers to Trade (TBT) not only promotes producing quality goods but also restricts import of cheap and low quality goods that are harmful for people and the national economy.

Nepal’s membership of the WTO in April 2004 has harnessed its integration into the international economy. It has aimed to establish an enabling environment for the private sector thus fostering improvement in competitiveness. Technical Barriers to Trade (TBT)--an agreement within the framework of the WTO—assures the quality production of goods for export that helps to promote Nepal’s international trade.

What is Technical Barriers to Trade?

Technical Barriers to Trade is a protective measure applied by the government to protect its domestic producers from foreign influx of goods. The Government of Nepal (GoN) applies domestic regulatory process that allows limited entry of products from other countries. In addition, TBT is Non-tariff Barriers and measures (NTBs) other than border tariffs affecting trade in goods, services and factors of production. TBT is rule for product weight, size, packaging, ingredient or identity standards, mandatory labeling, shelf-life restrictions, and import testing and certification procedures.

The aim of the TBT Agreement is to insure that technical regulations, standards and conformity assessment procedures, do not create unnecessary obstacles to international trade. In addition, the agreement allows adequate regulatory discretion, to protect human, animal and plant life and health, national security, the environment, consumers, and other policy interests of the member countries.

The TBT Agreement establishes rules and disciplines designed to prevent mandatory technical regulations, voluntary standards, and conformity assessment procedures from becoming unnecessary barriers to international trade. Nevertheless, the TBT Agreement seeks to allow members with sufficient domestic policy autonomy to pursue legitimate regulatory objectives.

How did Nepal sign the Agreement on Technical Barriers to Trade?

Agreement on TBT is one of the agreements within the World Trade Organization. The WTO was created with the aim of removing any form of barriers (both tariffs and non-tariffs) for international trade. Therefore, TBT, as one of its agreements, serves the function of taking out those product quality barriers.

The WTO Agreement on T BT entered into force in 1995 which was the conclusion of the Tokyo Round of Trade Negotiation in 1979.  During the accession process to the WTO, Nepal agreed with the checklist of the Working Party in April 2000. In addition to Trade in Goods, Trade in Services and Intellectual Property Rights, TBT agreement is one of the mandatory obligations of the WTO. Therefore, Nepal adopted the principle of the Agreement on TBT as one of the ingredients of the WTO accession package on 23^rd April 2004.

What is the mechanism for monitoring Technical Barriers to Trade in Nepal? 

 

The government of Nepal has designated Nepal Bureau of Standards and Metrology (NBSM) as a national enquiry point. Since its establishment, the section has been notifying and publishing various information regarding TBT that include; national and international notice of standards, technical regulation and conformity assessment procedures and other concerned information. Presently, in that respect are three technical officers specially assigned to regulate this part.  

What are the benefits of the TBT Agreement for Nepal?

The Agreement on TBT offers Nepal with sufficient rights to restrict low quality products from being imported. The standards and technical regulations set at the world class levels protect domestic consumers. In addition, it also avoids unnecessary barriers to imported goods that will benefit the national economy.

Side by side, the agreement promotes national exporters to meet international criteria that boost them to produce quality goods for export.

Further, it also protects exporters against unnecessary TBT-related barriers in foreign markets.

What are the hurdles in implementing the Agreement in TBT?

We have not been able to utilize the benefit of the TBT Agreement because of our weak technological development. The lack of sufficient infrastructure at the border has allowed low quality products in the domestic market. In addition, the private sector has a lack of sufficient understanding of TBT provisions and has not brought these issues to the notice of the government. As a result, we have not been able to export quality products to the foreign markets and low quality products are easily entering domestic market.

Are there any technical assistance to improve technical standards, credibility and conformity assessment in Nepal?

Least Developed Countries (LDCs) including Nepal are liable to receive technical assistance from rich WTO member countries. Wealthy countries provide advice and technical assistance and they shall give priority to the needs of the least-developed country members.

Nepal has received technical assistance from the European Union to enhance its TBT and Sanitary and Phyto Sanitary (SPS) related capacity. The International Trade Centre (ITC) has also supported identify non-tariff barriers for some products in the context of Nepal’s Trade Integration Strategy.  

What is the future strategy of Nepal to get maximum benefit from the Agreement on TBT?

The Government of Nepal has launched NTIS 2010 as one of its trade strategy for consecutive five years. One of the objectives of NTIS 2010 focuses to strengthen capacity of GoN to coordinate and manage Trade Related Technical Assistance (TRTA) and Aid for Trade (AfT).

The Ministry of Commerce and Supplies (MoCS) has already secured funding from WTO under the Enhanced Integrated Framework (EIF) to manage TRTA and AfT to enhance TBT related capacities of the government. In addition, the government has planned to enhance monitoring TBT commitments under the support of Tier 1 funding mechanism of the EIF. 

Implementing Development Projects in Nepal

A development partner has to address Nepal’s heterogeneous society, tactful private sector and hierarchical civil service structure to successfully implement any projects.  

I have gone through variety of experience while implementing developing project at local, regional, central government level, as well as with private sector in Nepal. The special structure of Nepali society, political culture, civil service and the growing bureaucracy within it hold some implications for materializing any missions under foreign aid.  

As per my involvement in some projects under the German Development Cooperation (GIZ) I came to know that some projects achieved success while another remained their goal unattained within the given time.

Although the tasks I was involved with became successful, a huge effort was required to bear out the actions.

I met frequently people from local government—District Development Committee, Village Development Committee and Government Line Agencies--during implementing ‘Inclusive Development of the Economy Program (INCLUDE). The project was targeted at enhancing economic status of the poor and increasing their access to finance. I was monitoring and evaluation officer always tightening belts of my colleagues for acquiring project related information. At the district level, it became really easy to come in contact with the targeted local people. The local government authorities have good rapport with Civil Society Organizations (CSOs), Non-Government Organizations (NGOs) Farmers’ Groups (FGs), Trade Unions, and private beneficiaries.

There is always a chance of captivating benefit by few people in the rural areas. Some local elites, few educated ones and sometimes party cadres are mostly chosen for information gathering. I too arrived to select few of them as there was no other choice given. They were the lone knower of all the developmental activities in the region. In summation, they attend most of the trainings and know information about the local socioeconomic status. As a consequence, most development workers choose them. I was not an exception either.

Next, I worked with local CSOs, NGOs and FGs while implementing Capacity Building for BioTrade Project (CBBT). The project was jointly implemented by the United Nations Conference on Trade and Development (UNCTAD) and GIZ in Peru, Namibia and Nepal. GIZ supported private sectors including CSOs producing essential oil in Nepal. While working with CSOs and NGOs, I came to recognize that they’re really adept at mobilizing local people. Government line agencies have good relation with those CSOs and NGOs which is an asset.

In spite of their earnest bond with locals, there is a chance of only favoring their own clans. As a consequence, some backward communities, such as Dalits remained outside the benefit. In my project districts, a majority of Dalits couldn’t be mainstreamed. Indeed, Dalits are very hesitant in passing along with local elites and any new entrants in the hamlet.

In due course, I acted with most of the development partners and high level government officials of the ministries of Nepal during executing Supporting Nepal’s Implementation of its WTO Commitments and the Enhanced Integrated Framework (WTO/EIF-SP) project. The strategy was directed at improving export trade by capacitating GoN to implement its WTO commitment. Another component was effecting Nepal Trade Integration Strategy (NTIS 2010). By mobilizing Aid for Trade (AfT), and Trade Related Technical Assistance (TRTA) through multilateral funding of the WTO under the Enhanced Integrated Framework (EIF), the project demanded harnessing the effort of all the related ministries and development partners of Nepal.

So far, the project remained successful. It achieved its goal on time by drafting all the laws, conventions and policies. I worked hard to design a monitoring mechanism for the Government of Nepal (GoN) to monitor the implementation of its WTO commitments. Yet, I still doubt its furtherance. Although, together with my team, I constructed a robust mechanism and handed over it to the ministry.

However, during the enactment of the project, I came to encounter a number of hurdles. Particularly, the particular structure of civil service at times impeded smooth running of project activities. All the powers consolidated at the highest echelon of Nepal’s bureaucracy needed special attention at the top. Influencing secretaries and joint secretaries only pushed the operation forward. The appertaining vertical pyramid structure of public personnel didn’t let me execute activities at an officers’ level.  

Also, frequent transfer of the personnel often posed hurdles for project execution. The transferal triggered another teething troubles, such as, fading institutional memory. Recurrently, I encountered different faces on the same chair. That demanded repeated orientation efforts. In addition, feeble IT infrastructure in some of the ministries hindered regular communication with the GoN staffs. In fact, the nature of bureaucracy is accustomed of restricting the flow of information towards below. This is the area to be taken charge of.     

The atypical characteristic of Nepali society and public service needs special attention while implementing development projects in Nepal. Coming up to the aforementioned issue paves way for the success of any development charges.    

Nepal in Figures

A reflection in World Development Indicators shows that Nepal is on track of gradual progress. 

World Development Indicators 2014 delivers a com­pilation of pertinent, first-class, and globally comparable statistics on development and poverty. The indicators are synthesized under six themes--world view, people, environment, economy, states and mar­kets, and global links. Other sections comprises stories highlighting particular global, regional or country trends. The report portrays progress of every countries including Nepal against the backdrop of development indicators. The report compiles statistics from more than 200 countries through a concerted effort of partners including the United Nations, the Organization for Economic Co-operation and Development, the International Monetary Fund, and the International Telecommunication Union.


Global poverty is reducing at faster rate. Nepal belongs to South Asia where half of the world's poor live. Growth is faster in this Asian region. As of 2012 Nepal has GDP US $ 18.96 Billion which is lowest in South Asia. However, it is on a constant rise. It means, despite all the odds, wealth is increasing in Nepal.  

GDP (current US$)

Data from World Bank

Over the years, per capita income is also increasing; however, not in a way as expected. Although GNI per capita is low in South Asian region, it is little bit higher than that of other low income countries. Per capita income reached to US $ 700 in 2012.

GNI per capita, Atlas method (current US$)

Data from World Bank

Foreign investment is crucial for Nepal's development. In fact, the low balance of payment and small reserve of foreign currency has left Nepal to seek support from foreign investors. Besides international Assistance (Aid) foreign investment is playing a crucial role for creating wealth in Nepal. So far, foreign investment was almost US $ 91 million in 2012 which was slightly less than in 2011. The following year has brought more FDI in the country.  

Foreign direct investment, net inflows (BoP, current US$)

Education sector has seen a remarkable progress. School enrollment in primary level was increased by 135% in 2013. This is almost close to attaining Millennium Development Goals.   

School enrollment, preprimary (% gross)

Data from World Bank

Owing to increased awareness, education and health facilities, Nepalese are living more than before. As a matter of fact, average age of a Nepali as of 2012 is 68 years. 

Life expectancy at birth, total (years)

Data from World Bank

The economic transaction of the country remained turbulent lately. It declined to almost nothing in 2010. Though, the remittance and tourism helped the economy make better saving that soared Balance of Payment (BoP).

Current account balance (BoP, current US$)

Data from World Bank

Betterment in aforementioned indicators is one of the good news for Nepal's economy. After a long duration of stalemate, something is good is slowly happening. 

Trade Projects in Nepal

There are a number of projects run by Nepal's development partners in trade. As of April 2014 international organizations including the World Bank, Asian Development Bank, German Development Cooperation, United Nation's specialized organizations and other bi and multilateral entities working in Nepal have supported Nepal's trade sector.

Here is list of some of the trade projects

1. Nepal-India Electricity Transmission and Trade Project (WB)
2. Project for Agriculture Commercialization and Trade (WB)
3. Multimodal Transit and Trade Facilitation Project (WB)(closed)
4. Supporting Participation in the South Asia Subregional Economic Cooperation Trade Facilitation Program (ADB)
5. Nepal India Regional Trade and Transport Project, IDA 
6. Nepal Economic, Agriculture and Trade Program (NEAT), USAID
7. Ginger Competitiveness Project: Enhancing Sanitary and Phytosanitary Capacity of Nepalese Ginger Exports through Public Private Partnerships, WTO
8. Nepal Enhanced Capacities for Trade and Development (NECTRADE)
9. Trade Promotion Programme in Nepal

SAARC: Propagating south Asian poverty

The ineffectiveness of SAARC has pushed poorer members, especially Nepal into further poverty and deprivation.

SAARC has not been able to tackle poverty in South Asia. Although in this South Asian regional bloc had been created in 1985 with the aim of progress and economic success in the region, no fortune has been created in the poorer countries, such as Nepal. Unlike other regional blocs in the neighborhood, SAARC suffers from poor integration, non-implementation of decisions, India-centric and reluctant to spread out its membership. As a result members with LDC status are more affected and reaping poverty rather than prosperity.

Although SAARC has made a number of landmark decisions such as transport links, growth corridor, Preferential Trade Agreement, Free Trade Area, they were barely implemented.

In a contrary, another regional cooperation in the locality--Association of South East Asian countries (ASEAN), created in 1999, has left no stone unturned thereby making greater amalgamation of trade, technology and capital among them. ASEAN has left SAARC far behind not only in cooperation among members, but also in prosperity.

Poor Regional Integration

This southern bloc of Asia is creeping at a snail’s pace towards integration. It has hardly climbed up to the second stage of the cooperation staircase. Regional cooperation has six stages. A rise in integration to the succeeding stage is accompanied by higher collaboration as well as free flow of capital, commodities and technology without any restrictions.

Stages of regional integration

So far, the SAARC has ended up in Preferential Trade Arrangement (PTA) and Free Trade Agreement (FTA) in the territory. PTA reduces tariffs for certain goods in the region, whereas FTA eliminates tariffs, quantitative restrictions and non-tariff barriers to conduct trade freely.

On the other hand, regional blocs in the neighboring continent—Pacific Alliance (central and southern America), the Andean Community (South America), Southern African Custom Union (Africa) and European Union Custom Union (Europe) —have extended their cooperation a step further to Customs Union. This alliance eliminates customs tariffs among members and applies common tariffs for other states. The nations of eastern and southern Africa established a common market under their alliance Common Market for Eastern and Southern Africa (COMESA). This system helps them to move factors of production—capital, labor, technology—across the member states. Furthermore, European Union (EU) has entered into the Economic Union with common economic and monetary policies among members. Amid rapidly growing regional blocs with deeper integration, SAARC is still hovering over swallow integration with no substantial benefit for its members.     

Characteristics of regional integration

Growth Corridor in limbo

Moreover, SAARC has not become capable to implement previously proposed growth corridor (growth zones) in the country. These zones are said to boost rapid growth in the implementation area by consolidating efforts and resources. The cooperation for growth corridors focus primarily on infrastructure development, joint natural resource development, promotion of trade and investment and the creation of free trade zones. As a sub-regional cooperation this is a potent tool for speedy growth.

Regional Growth triangles    photo: www.wtec.com

Growth triangle of ASEAN, comprising Singapore, Riau Province of Indonesia and Johor state of Malaysia is a successful model. In addition, other growth zones are Tumer River Economic Development Area (TREDA) containing Yanji, Nakhoda and Chongjin of Chinese, Russian and North Korean region; ASEAN northern growth triangle including some regions of Thailand, Malaysia and Indonesia; growth quadrangle of Brunei, Indonesia, Malaysia and the Philippines; and BIMSTEC growth quadrangle comprising Bangladesh, India, Myanmar, Srilanka and Thailand. 

Owing to the example of successful sub-regional co-operations in the Asia, SAARC made an initiative to form a growth quadrangle in 1997. Four countries—Nepal, India, Bangladesh and Bhutan made an endeavor to create a growth zone aiming to develop infrastructure, tap natural resources, and build institutional linkages facilitating cooperation within members. The identified areas of cooperation were natural resource endowment (Bangladesh), tourism (Nepal), trade and investment (India) and environment (Bhutan). The ambitious SAARC growth quadrangle was expected to be completed in 7-13 years by 2009. Nevertheless, it wasn’t materialized.

SAARC Connectivity

Another episode of beautiful dream of SAARC was the connectivity of member states. The twelfth SAARC Summit held in Islamabad in 2004, planned to link South Asian Countries via strengthened transport, transit and communications. An assessment--SAARC Regional Multimodal Transport Study (SRMTS)—conducted in June 2006 10 road corridors, 5 Rail, 2 Inland Water Transport corridors, 10 Maritime and 16 Aviation Gateways for greater transport connectivity in the region. The only progress to SRMTS was on 14th SAARC Summit held in April 2007 in New Delhi that urged SAARC Transport Ministers to oversee for implementation. As time passed, it withered away.

Proposed Asian Highway Map              Photo: Wikipedia 

Over Indo-centricity

In fact, India has been piloting the regional bloc since its establishment. Role of India has been decisive for implementing SRMTS, and inviting new members in the alliance. However, India is reluctant in giving full transit right; access to the sea to landlocked SAARC members—Bhutan and Nepal. In addition, India is hesitant in inviting new members, especially China. India has sustained perennial enmity with China. As a result, the Indian national interest of Chinese evasion is daunting other state’s will of membership expansion.

“It is pointless to include new member, China, that doesn’t share a common culture, economy and history of South Asia”, a senior official of the Indian Foreign Ministry in New Delhi said in an interview to The Telegraph on 19^th March 2014. 

Accumulation of Poverty

The Perennial inefficacy of SAARC has resulted in reaping more poverty in south Asia. Despite national effort of poverty reduction in the member countries there is no substantial decrease in number of poor. In addition to the poor supply side capacity of LDCs in this Asian region restriction on trade and frail linkage—transport, policy and communication—among members has worsened the trade regime. Whereas, ASEAN’s endeavor has rocketed economic progress in East Asia. As a result ASEAN poverty which was more eminent than that of South Asia in 1980s, fell sharply after 1990s.    

The time has come to redefine the objective of SAARC, restructure and reform to the greatest possible extent. In addition, there is a need of upgrading the present cooperation into the higher level of regional consolidation. This regional bloc needs Implementation of current SAARC Free Trade Area and gradual advancement towards the SAARC Custom Union and Common Market where factor of production—capital, labor and technology can freely flow across countries. Then only, SAARC will garner its member states a robust economic development. 

Economic Diplomacy for Tourism Promotion in Nepal

The use of diplomatic channels for promoting economic interest including tourism is of paramount importance

Nepal’s dealing with the external world should focus on economics rather than politics. Due to the multitude of restrictive factors—difficult geography, inadequate military capacity, poor technological development, less influential leaders Nepal’s national capacity to play a big game of political diplomacy in the world stage is limited. Now, the only option left for us is steering our whole gamut of international affairs towards economic diplomacy. For instance, as a robust comparative advantage to others, tourism promotion at the forefront can harvest enormous benefit to enhance economy. The better economy would eventually increase our internal capability.

Nepal Tibet War                        Photo:Nepal Army

The economy had been at the essence of diplomacy during 18th and 19th century, when Nepal established business ties and an effective trade system with Tibet and British India. The relation, as a strategic alliance, was purely based on economic interest rather than political gain. Even after the war broke out between Nepal and Tibet--as a conclusion Thapathali treaty was signed in 1856. As per the truce, Tibetans agreed to pay an annual subsidy of ten thousand rupees to the Nepal Durbar and to allow a Nepalese trading station and agency to be established in Lhasa.

Government of Nepal (GoN) realized that tourism can contribute to the country’s economy only during the late fifties. Tourism Administration was formed in 1957. Next, a major step forward in Nepal’s tourism appeared in 1972 by the formation of ‘Nepal Tourism Master Plan’. Among other tourism promotion strategies, the master plan also recommended establishing ‘tourist bureaus in Western Europe and USA’. Also, the plan advised to distribute Travel Agents Manual for wholesalers in North America, Europe, Japan and Australia that operate in the Asian marketplace. Nevertheless, those recommendations are still a great challenge for implementation.

Namobuddha Monastry in Kabhre district   Photo: Author

Moreover, Tourism Policy, 1995 made special emphasis on promotion of tourism from Asian markets. Under its working policy, it attempted to direct attracting tourists from neighboring countries during the lean season when overseas tourists were few. In addition, it envisaged the then Royal Nepalese embassies and consulates abroad to mobilize promotion of Nepal's tourism. It also emphasized the provision of Nepalese people abroad, or foreign citizen involvement in tourism business or with a keen interest in tourism, could be appointed as representatives for tourism promotion.

Eventually, the GoN established Nepal Tourism Board (NTB) in 1999 after the realization that private sector’s effort is also necessary.  The Board is the public—private partnership model incorporating the participation of the private sector under a legitimate leadership of the government.

Nevertheless, the effort being made for tourism promotion through diplomatic channels is not sufficient.  NTB has been hit hard by lack of sufficient budget. Consequently, the board has not been able to deploy its office abroad.  In a contrary, other National Tourism Organizations (NTOs) with similar tourism potential has posed great threat to Nepal’s tourism promotion body. Nepal is facing a sharp competition from destinations--China, Sri Lanka, Thailand, Malaysia, Hong Kong, Singapore, Vietnam, and Laos. Due to adequately high promotional budget, these East Asian countries have comparative advantage over Nepal in many factors. However, Nepal is doing its best with its inadequate budget.

After the fall of the Soviet Union in the early nineties, the cold war eventually ended that gave a new dimension to diplomacy. Although it started a bit earlier, cessation of cold war put economy at the forefront of diplomacy rather than political gains.

Amid shifting global ideology, Nepal also underwent through major political transference i.e. restoration of democracy in 1990. Thus, Nepal adopted policies of open market economy, giving high priority to integration into the world economy. In this context, the Government emphasized economic diplomacy, a set of actions linked to cross-border economic activities. Economic diplomacy is a part of diplomacy that promotes the economic interests in its interactions with other countries, regional and international organizations. Diplomacy is the art and practice of conducting negotiations with other countries to secure national interests.

In order to mainstream the potentiality of Nepal’s advantageous sectors into foreign policy instruments, a separate division--Multilateral Economic Affairs Division (MEAD) was formed within the Ministry of Foreign Affairs. The division undertakes the function of promoting Nepal's economic interests abroad. It also emphasizes promotion of tourism along with foreign direct investment, export and development cooperation.

Today, amid insufficient tourism promotion in the country, and its continual failure to draw in foreign nationals, diplomatic and consular missions of Nepal is the only hope left behind. The political transition of this time has radiated hope in the international arena that Nepal is no more a dangerous place to shoot the breeze. 

This is a great leverage for Nepal’s diplomatic missions who have their presence in 29 countries, many of which have greater affinity for visiting destinations like Nepal. There is a need for further orientation of these staff of the missions who can play a vital role in tourism promotion. NTB can provide orientation programs for those mission members prior to performing their project. To lead the process ahead, the Ministry of Foreign Affairs should have adequate cooperation with other line agencies, including the Ministry of Culture, Tourism and Civil Aviation.

Furthermore, the GoN’s proposed action plan to promote tourism as well as foreign employment, investment, and hydropower through the medium of economic diplomacy should materialize as soon as possible. In that direction, GoN has formed a high-level coordination committee led by the Minister for Foreign Affairs and set up an economic diplomacy desk including representatives of the representatives from Nepalese diplomatic missions abroad.

The private sector’s role is also instrumental in promoting tourism overseas as the government’s effort is insufficient. As per examples from other states, private sector’s bilateral chamber of commerce in a foreign country supporting honorary consulate generals by organizing tourism trade fairs is highly fruitful. It is indeed a good initiative of the Non Resident Nepalis Association (NRNA) that its president Shesh Ghale has called supporting Nepal’s economic diplomacy through their presence in 65 countries across the globe. So far, supportive role of NRNA in Hongkong for promoting Visit Nepal Year 2011 is commendable.

A vigorous public, private initiative for promoting tourism through Nepal’s diplomatic and consular missions abroad is the need of this hour. Private sector’s expertise and resources coupled with GoN’s already established workstation can better promote the country’s brand image in the world. Besides 29 diplomatic missions, 4 consular missions in Kolkata, Beijing, Lhasa and Jeddah are important hub for showcasing Nepal’s sight-seeing portfolio. Federation of Nepal’s Chamber of Commerce and Industries (FNCCI) can start an immediate promotion plan in tandem with limited government staffs deployed in those missions in the region. 

Drawing the global customers starting from the immediate region is a proficient heads up for a start. A diplomatic leverage for promoting tourism in the neighbor and the rest of the world is something practically feasible approach. Amongst growing regional powers in the vicinity Nepal’s political dealing has reaped no fruits. At this juncture, Nepal has to use its comparative advantage--tourism to collect currency reserve that will ultimately protect national interests.      

Nepal’s Access to the Sea: Is it possible?

There are binding international laws that can grant Nepal's access to the sea. However, Nepal's over dependency over India and the later's reluctance diminishes this possibility.    

Nepal’s unfavorable terrestrial position is one among the several factors responsible for geographical, economic and developmental problems. The country’s export is cumbersome due to the unavailability of direct access to the sea. The international trade is expensive, un-competitive and incurs high cost of production.   

Nepal stepped in to the club of Land Locked Developing Countries (LLDCs) which contains 31 countries spread across Africa, Asia, Latin America and Europe. As a member of LLDCs Nepal has got a platform for raising its voice collectively for the transit rights. So far, Nepal endeavor has not reaped ample benefit in this regard. However, Nepal’s stance of implementing all the international obligation for the benefit of poor land locked through their neighboring transit countries is praiseworthy.

International community has always been in favor of weaker—land locked—countries of the world. Their rights are ensured by several international treaties. One of the pioneer effort is the Congress of Vienna, 1815 recognized the LLDCs. The discourse of transit rights of the Land locked accelerated after First World War. The shrink of Austrian empire into a land locked country accompanied by Czechoslovakia and Hungary revitalized the issue. The Treaty of Versailles, 1919 allowed land locked states to freely transit goods and personnel to sea ports. The Covenant of the League of Nations, 1920 also provided ‘freedom of communications and of transport and equitable treatment for the commerce of all members of the League’ through article 23. Later, the Declaration recognizing the Right to a Flag of States having no Sea-coast  was signed on 20 April 1921 in Barcelona, Spain, at the League of Nations Conference. Fifty States have ratified the declaration as of 2013. As an international law, it recognizes the rights of any state to sail ships on the sea under its own flag. Owing to this, a number of land-locked countries—Austria, Hungary, Switzerland, Luxembourg, Moldova, Slovakia, Paraguay, Bolivia, Mongolia, Laos, Ethiopia--have their own merchant vessel fleets. 

IGC Meeting between India and Nepal, 2013 (Photo: Kantipur)

A more robust strategy for supporting LLDCs right, including Nepal, came during 1960s only. After the formation of UNCTAD in 1964, the transit and transport problems of LLDCs were recognized. Further, in 1995, the UN General Assembly endorsed the Global Framework for Transit Transport Cooperation between LLDCs, transit countries and donor community. Later in 2003, United Nations organized an international ministerial conference in Almaty city of the world’s largest land locked country—Kazakhstan. With the goal of overcoming the problems of LLDCs, the conference adopted Almaty Declaration and Almaty Programme of Action (APOA). The objective of APOA is to establish a global framework for action in favor of both the landlocked and transit developing countries. The Programme of Action basically aims to secure access to and from the sea by all means of transport according to applicable rules of international law. It also addresses reducing costs of export, imports, delays, loss, damage as well as opening the way for export expansion safety improvement of road transport.

UNCTAD is the implementation partner of APOA and also provides technical assistance to the LLDCs.

The next episode of the ministerial meeting was held in Paraguayan city of Asuncion in 2005. It expressed concern of marginalization of LLDCs in multilateral trade, remoteness and isolation form world market is due to lack of access to the sea. The conference adopted Asunción Platform for the Doha Development Round aiming at trade facilitation and technical assistance to the LLDCs through negotiation.

Furthermore, the global body’s established the UN Office for High Representative for LDCs, LLDCs and SIDs (UNHROLLS) in 2001 to provide support for those poorer countries and implement APOA.

The aforementioned provision have been instrumental in supporting LLDCs rights of free transit to the sea. These multilateral international obligations in the form of international laws have benefitted most of the suffering countries.

Moreover, bilateral negotiations between the geographically locked countries and the transit countries have positive implications. In 1992, One among the large land locked country, Mongolia signed an agreement with Russia concerning its access to the sea and transit transport across the territory of the Russian Federation. Mongolia has been maintaining cargo ships in the East China Sea. Besides, land locked South American nation, Paraguay operates a navy of around a dozen vessels and has several thousand personnel. The Paraguayan navy could reach the open sea by traveling downriver through Argentina. In December 2013 Uruguay offered Paraguay and Bolivia, the South America’s only two-landlocked countries, access to the sea in exchange for hardwood sleepers used to reform railway infrastructure in the country. The Uruguay agreed a port to Bolivia in Rocha, located on the Atlantic Coast near the border with Brazil. 

Nepal’s most convenient route to the sea is via India and Bangladesh. Nepal shares similar cultural characteristics with India. There has been movement of people across the border between the two countries since time immemorial. Apart from this age old cultural ties, Nepal and India signed a Treaty of Peace and Friendship in 1950. The treaty allows free flow of people and goods reciprocally. Article 1 of this agreement binds the two countries respect each other’s independence, territorial integrity and sovereignty. Likewise, article 6 of the agreement allows free movement of people, capital and right to perform any industrial activities. This is only possible when the free and unrestricted movement of each other’s goods (traffic in transit) is given a good treatment. Additionally, article V of GATT 1947 (General Agreement on Tariffs and Trade) has the provision of 'freedom of transit through the territory of each contracting state via the routes most convenient. GATT was succeeded by the WTO in 1995. Both the countries are party to the WTO. A powerful Dispute Settlement Body (DSB) is there at the WTO which can bind its member countries to obey the laws. However, Nepal has never filed any case claiming hassle free and un-restricted access to the sea at the DSB. More often, Nepal has been raising the issue in bilateral talks. However, India is always reluctant in granting sufficient rights to its poorer northern neighbor.   

Government of India has become positive to grant Nepal with sufficient rights for transit via its territory. In December 2013, during a commerce secretary-level “Inter Governmental Committee (IGC)” meeting, the southern neighbor agreed to allow imported vehicles to be driven through Indian roads to Nepal from Kolkata’s Haldiya Port “on its own power”. This is one of the remarkable agreements between India and Nepal which include developing infrastructure at new customs points to facilitate bilateral trade; easing the current provision of transshipment which Nepal can further negotiate to establish port for Nepal.

Apart from this bilateral relation, Nepal can further strengthen the progress of SAARC and BIMSTEC in which both the countries are members. The current development of these two regional instrument is only up to Free Trade Areas as SAFTA and Bimstec FTA. Further diplomatic leverage can enhance the development of two of these regional cooperation into SAARC/BIMSTEC Custom Union, Common Market or, if more successful, Economic Union. Further up gradation of these fora allows free flow of capital, technology as well as a robust common economic policy in the region can allow Nepal a greater access to the sea. In order to materialize this regional instruments, Nepal should have more list of goods and services for export. At least, for now, implementation of Nepal Trade Integration Strategy 2010 which provides the list of 19 products and services as Nepal’s export potentials.

Although Nepal has several multilateral agreements and instruments to claim its rights to sea, there is always a win-win situation in bilateral dealings. The instances of Russia—Mongolia and Uruguay—Paraguay & Bolivia model of land locked state's access to the sea is beneficial for Nepal.