2001-00-00 - report - FES२०५७-००-०० - प्रतिवेदन - एफईएस

Archive ref no: NCA-18685 अभिलेखालय सि. नं.: NCA-18685

Political Development in Nepal: 2000

Nepal completed 10 years of democracy established in the Spring of 1990. During these years, the country witnessed changes in 10 governments. Except a 9-month rule by Communist Party of Nepal Unified Marxist-Leninist (CPN-UML), Nepali Congress ruled the country most of the years either alone or with coalition with political parties of many hues—the right, the left and the center. Still, governmental instability continues. In 2000, political situation in the country remained highly unstable caused by in-fights within the ruling Nepali Congress party, growing Maoist insurgency, regular Nepal Bandh (shut down) program organized by smaller parties and industrial unrest. Concerned with the country’s worsening law and order situation, His Majesty King Birendra, in early March, instructed the parliament to focus on three important subjects—reach concrete agreement regarding the free and fair election in the future; promulgate act on political parties and seek solution of Maoist problem.

Prime Minister Krishna Prasad Bhattarai initiated moves on all these fronts and set up commissions to solve Maoist problems and suggest ways to make elections free and fair. But, on March 14, sixty-nine out of 113 Nepali Congress Members of Parliament (MPs) close to Congress President Girija Prasad Koirala registered a no-trust proposal against premier Bhattarai in their parliamentary party, accusing him of poor performance, failure to show leadership qualities and heading a directionless government. Three days later, premier Bhattarai resigned. Subsequently, on March 18, election took place for parliamentary party leadership of Nepali Congress in which Nepali Congress President Girija Prasad Koirala defeated former Prime Minister Sher Bahadur Deuba (69 versus 43 votes, with one vote declared invalid). On March 20 king Birendra appointed Girija Prasad Koirala, the new Prime Minister of Nepal. Law and order, good governance, corruption control, poverty alleviation and negotiation with Maoist were his topmost priorities.

Former premier Sher Bahadur Deuba formally opened a contact office in Kathmandu for those dissatisfied with Koirla government and on August 7 he collected the signatures of about 50 MPs against Prime Minister Koirala. The next day premier Koirala sacked Water Resource Minister Khum B. Khadka from his cabinet as he was leading the rebel with Deuba and was putting the following demands: a) premier Koirala should resign from the party president and appoint Sher B. Deuba as acting president; b) initiate full-fledged reshuffle of the Central Working Committee of the party (CWC); c) reshuffle the cabinet for the formation of new government in consultation with Bhattarai and Deuba which means inclusion of equal number of people from rebel camp; and d) postpone the party’s general convention scheduled for November.

Premier Koirala postponed the party’s general convention by January 19, 2001 as well as set up a five-member election committee for the election of central committee members of the party and the president.

On December 28, fifty-six members of the ruling Nepali Congress, led by former premier Deuba, registered a no-trust motion against Prime Minister and Party President Girija Prasad Koirala in his parliamentary party office with the signature of 57 MPs. Deuba said: Koirala had failed to fulfil the pledges he made when he took office as Prime Minister. He also implicated Prime Minister’s involvement in the controversial Lauda Air deal.

In a no-trust vote that took place on January 4, 2001 premier Koirala survived. The 41rebel members of parliament who boycotted the vote questioned the validity of the voting. 69 votes went against no confidence. "We have decided to boycott the voting as we don’t want to be a part of the conspiracy to split the party" said Deuba. He also said that the voting was invalid because no-trust proposal was not debated in the parliamentary party.

On January 22, 2001 in the 10 General Convention of Nepali Congress Party, Prime Minister Girija Prasad Koirala has been elected to the post of Nepali Congress party for the second term by scoring 64 percent of the votes. Koirala obtained 936 votes out of the total valid 1,453 votes and defeated his two rivals Sher Bahadur Deuba (507 votes), and Ram Hari Joshi (10 votes). Out of 18 elected Central Committee members of NC, 12 are from Koirala side while 6 from Deuba-Bhattarai side. On February 7 premier Koiral reconstituted 37-member council of minister in which only one member from Bhattarai-Deuba side was taken. This fuelled the ire of Bhattarai.

Upon resumption of office Premier Koirala took a number of initiatives:


Maoist problem

The six years of Maoist insurgency caused the death of many people and billion dollars worth of property and affected both political stability and development process. Until December 2000, according to human rights reports, 1513 persons were killed in the Maoist People’s War (out of which 251 were police, 999 innocent public by the police and 263 Maoists). Out of 75 districts in the country, four districts are in Maoist control, in 46 districts they are active and in 25 they are expanding their activities. Due to pervasive poverty, inept handling of the issue, governmental instability, growing corruption and mis-governance in the country, Maoist activities are rapidly expanding. Maoists' targets are local feudal, corrupt, informant, police, bank and occasionally party worker of major political parties. They had looted property and guns.

The government took a number of initiatives to curb Maoist problem: addition of portfolio of defense minister to finance minister Mahesh Acharya; appointment of Pradeep Shumsher Rana to the Acting Inspector-General of Police so that he can coordinate with the Chief of Army Staff Prajwal S. Rana in anti-Maoist maneuver; deployment of the army in 13 districts (according to Defense sources, the army men would be mobilized at the discretion of the appropriate Chief District Officer to protect the district headquarters); convening all party meetings and calling the insurgents for dialogue. Accordingly, on October 16 the Cabinet meeting had appointed Health Secretary Srikant Regmi as the new Home Secretary.

On August 31 Deputy Prime Minister Ram Chandra Poudel announced Integrated Development Program for those districts hit by Maoist insurgencies. A first class government officer, who will coordinate the development administration, police and the army, would implement the development program. The major objective was to avert the corruption in the development budget. On October 27 Poudel held "unofficial talks" with central committee member of Maoist party Rabindra Shrestha. The Maoist demanded the release of all detainees by the government as a pre-condition for talks. On November 3 the government released two Maoist leaders Dinesh Sharma and Dinanath and brought to the press where they said that they are renouncing violence. Later they refuted and their whereabout is unknown. Maoist Pary General-Secretary Prachanda said "the possibility of our party talking with the government and our faith in it is nearly over."

The initiative taken by former Prime Minister and coordinator of High Level Consensus Seeking Commission to resolve the Maoist problem, Deuba’s initiative could not bear fruitful result for what he said "he was neither helped by the government nor by the party to go ahead for dialogues with the underground rebels." Due to infighting in the party, the dialogue was interrupted after one meeting at Himalaya Hotel in Kathmandu.

On January 22, 2001 His Majesty the king with the consent of Council of Ministers, promulgated an "Armed Policy Ordinance 2057 B. S." designed to immediately institute an armed police force and make arrangements for its functioning. The force will be armed with modern weaponry and provided training in anti-insurgency operations. It will also be mobilized to control armed struggles, armed insurgency or secessionist activity, terrorist activity and religious and communal riots taking place or likely to take place in any part of the Kingdom of Nepal.


In October a controversial deal between the Royal Nepal Airlines Corporation (RNAC) and Lauda Air for the lease of Boeing 767 aircraft surfaced in the Public Account Committee (PAC) of the Parliament. The PAC probed into the matter and asked RNAC and Civil Aviation Ministry to scrap the proposal. The RNAC defying this instruction directly entered into negotiation with the Lauda Air and even sent a bank guarantee amounting to one million US dollars to the Lauda account without considering the security of the account. The PAC asked the civil aviation minister, premier Koirala and chairman of RNAC to furnish information regarding their decision. Two civil aviation unions also exerted pressure to scrap the deal, which they considered, was against the national interest. The chairman of RNAC was suspended from his job while Civil Aviation Minister resigned. The five main opposition parties joined hands to demand the resignation of premier Koirala. They are: CPN-UML, Rastriya Prajatantra Party (RPP), National People’s Front, Nepal Workers and Peasants party (NWPP), and United People’s Front (UPF) for his alleged involvement in the Lauda Air Deal and blocking the proceeding of the parliament.


Trade Unions News

The three main trade union federation of Nepal are: Nepal Trade Union Congress (NTUC), Democratic Confederation of Nepalese Trade Unions (DECONT) and General Federation Nepalese Trade Unions (GEFONT). Nepalese trade unions are gradually developing professionalism and are becoming active in a number of areas, such as eliminating child labor, rehabilitation of bonded labor, organization of agricultural workers, unionization of women workers and running trade union schools for the children of workers and a number of similar welfare programs. Some of labor issues surfaced in 2000 were as follows:

On January 22 International Confederation of Free Trade Unions (ICFTU) and Nepal Trade Union Congress (NTUC) which brought together 60 representatives from 29 countries jointly organized an international conference on Burma. The Kathmandu declaration issued on the concluding day said "restoration of democracy in Burma will not be possible without political and economic pressure against military junta." General-Secretary of ICFTU Noruyuki Suzuki noted that a plan to organize such a conference in India and Thailand did not materialize, as those countries did not give permission. For the first time General Federation of Nepalese Trade Unions (GEFONT) participated in such conference.

On March 7 the Nepalese parliament passed the Child Labor Prohibition and Control Bill by a majority. The Bill was to prohibit the use of child labor in hazardous working conditions like that in factories and mines and establish their right to education.

On April 3 Democratic Confederation of Free Trade Unions (DECONT) handed over a 21-point memorandum to State Minister for Labor, Surendra Hamal stating that not much has been done for the upliftment of laborers ever since the restoration of democracy and that laborers are deprived of various legal rights. Their demands include: representation of laborers at the managerial level, immediate rise in the minimum wage of laborers, enforcement of accident insurance for them, implementation of all labor laws, creation of a National Welfare Fund, etc.

In January, the government fixed minimum wage for agricultural workers. Accordingly, a worker gets Nrs. 60 per day (Nrs. 7.50 per hour). On April 25, the Nepalese government fixed the minimum wages for laborers and employees working in institutions other than the tea industries. The minimum wage for unskilled laborer has been fixed at Rs. 1,450 per month, Rs. 1,500 for semi-skilled, Rs. 1,610 for skilled and highly skilled and Rs. 1,144 for child workers. The above-mentioned minimum wage also includes an additional dearness allowance of Rs. 666 for adults and Rs. 500 for children. Likewise, adult workers working on a daily basis is entitled to receive Rs. 74 per day while children will receive Rs. 60 per day.

Third National Congress of General Federation of Nepalese Trade Unions (GEFONT) that took place on May 1 passed a 16-point resolution that promised welfare measures to the workers. The resolution protests against non-implementation of Labor Act, blind privatization of public enterprises, immediate stoppage of unfair labor practices and demands to end of sub-contracting, compulsory security provisions for workers in risky jobs, provision for issuing identity cards to workers, formation of permanent wage board, diplomatic protection to Nepalese migrant workers and guarantee on the right to unionize. The Congress also elected new national committee of GEFONT chaired by Mukund Neupane. The Congress elected Lalit Basnet, Bishnu Rimal and Binod Shrestha on the posts of Vice-Chairman, Secretary-General and Treasurer respectively.

Industrial Unrest From May 10 DECONT leaders started series of peaceful agitation programs against Nepal Civil Aviation Authority in response to suspension of 27 low-level workers from their job. These workers were members of Nepal Custom and Airport Workers Union (NCAWU) affiliated to DECONT. On June 28 four police van arrived at the airport and threw all the 47 workers who were sit in strike to van and took to police custody. Among them were 2 deaf, 4 infants and many women. Police also manhandled labor leaders including DECONT president, vice-president, secretary and central committee members, wounded 7 workers and also kept them in custody thus numbering 70 persons. A day later the detainees were released.

On July 1 nine police and three ordinary person were injured as police and labor confrontation blocked the Nepal-India border at Jogbani. Police fired 14 cells of tear gas, five rounds of gas grenade and 4 rounds of blank fire to disperse the agitated workers. The incident occurred as the government planned to close Biratnagar Jute mill, the oldest factory of the nation. On July 4 an agreement was reached between the workers and the management and the stalemate ended. Management agreed to run the mill according to Labor Act and provide facilities to the workers accordingly.

On August 16 employees of the public enterprises who had been pressing the government to fulfill their demands called off their weeklong strikes. The apparent reason behind the strike was that while the new pay scale increased salaries, it has done away with all other allowances and perks. The striking employees affiliated with the Inter-Corporation Employees Association, Inter-Banking Employees Association, Nepal Financial Corporation Employees Association and Nepal Inter-Corporation Employees Association had their score settled when the Ministry of Finance constituted a five-member committee. The committee reviewed the institutional structure and financial capacity and recommended for additional perks and facilities.

Since mid-November Hotel Workers’ Association of Nepal related to major trade unions strongly demanded with the government and hotel owners, to impose 10 percent additional service charge to be given to workers’ welfare with immediate effect. If their demand is unmet they threatened to go for an indefinite strike beginning December 11. The government set up a high level committee under the vice-chairman of National Planning Commission to study in detail on the issue of the 10 percent additional service charge. The committee submitted its report in its stipulated time but it did not endorse the 10 percent service charge. Instead, it only recommended the "regularization" and "institutionalization" of tips. Restaurant and Bar Association of Nepal (REBAN) had raised it’s concern over the imposition of 10 percent charge on hotel bills stating that foreign and local tourists will be greatly affected which will affect tourism industry in the nation.


On August 27 two major trade unions of the country NTUC and GEFONT had held their second dialogue aiming to form apex trade union. Ineffective implementation of Labor Act, Policy, Rules and regulations gave birth to the concept of forming an apex body of trade unions. Safeguard of rights, well being and interest of workers prompted them to come together. GEFONT has proposed "National Labour Senate-Nepal" which will have one representative each from labour organizations and five from each trade union federations. The senate will at least make comprehensive supervision of trade unions, constitute an administrative board for the management of the Senate through multi-lateral agreement. However, NTUC proposes to establish an authorized union at every enterprise and to form similar types of unions at the national level. GEFONT also wants the participation of DECONT while NTUC wants to avoid.


Social and Economic Development Indicators

With about 23.9 million population and having a per capita income of US$ 210, Nepal remains one of the poorest countries of the world. It ranks 144th position in UN Human Development Index out of 174 countries listed in the Human Development Report. Nepal’s Human Poverty Index is 51.3 percent. More than fifty percent of its population live on less than a dollar a day. Over 80 percent of population live in rural areas, pursuing agriculture as a source of livelihood, most on small plots that produce insufficient food for survival. If the current growth rate (2.4 percent) of population continues, the population of Nepal will reach 40 million by the year 2020. The Human Development Report concludes that in Nepal the rich are getting richer and the poor are getting poorer. While the richest 20 percent of the population earn 44.8 percent of income, the poorest 20 percent earn 7.6 percent of the income only. Adult literacy is 39.2 percent and school enrolment ratio is 61 percent. The social sector still receives a low priority in budgetary allocation. At present, the human expenditure ratio in Nepal is less than 3 per cent of GNP that is very low as compared to the internationally recommended ratio of 5 per cent.

The average annual Gross National Product (GNP) growth rate of 3.4 percent roughly balances the population growth. The population growth is higher than food grain production (2.2 percent). Until 1975, Nepal used to be a major food grain exporting country. Despite heavy investment and top priority given to the agriculture sector, the country now imports food grain every year from abroad. Ironically, this sector still dominates the economy viewed from the share in GDP contribution. More than 60 percent of its development budget comes from foreign aid and aid constitutes a major instrument for Nepal to escape from poor income, low saving (about 10 percent) and low investment trap. The growing fiscal deficit gap in the economy indicates a trend towards debt spiral. Debt is so huge that even four years of revenue collection cannot pay back the debt. About 90 percent of population do not have access to adequate health services, 29 percent do not have safe drinking water and 85 percent of population do not have access to sanitation. The infant mortality rate is 83 per thousand, and the average life expectancy of male is 57.6 and that of women 57.1. Nepal is the only country in the world in which life expectancy for women is lower than for men. The literacy rate for women is 28 percent and for men 62 percent. Only 23 percent of women above 15 years of age in Nepal are literate, as against 58 percent of males.

The Ninth Five-Year Plan Document (1998-2002) defines three broad objectives of the state: poverty alleviation, employment generation and promotion of balanced development in the country. The Report of Nepal Development Forum 2000 reports that "fiscal management has been poor; and the budget has been balanced largely at the expense of development activities. And, there has been little tangible progress in reducing widespread poverty—Nepal’s principal development challenge—as well as in addressing structural problems which are hampering Nepal’s longer term development."

The statistics in Nepal are very confusing. The data produced by Central Bureau of Statistics, National Planning Commission and Nepal Rartriya Bank are not consistent to each other. On September 5 Nepal Rastra Bank claimed that Fiscal Year 1999-2000 marked acceleration in economic growth and a sharp deceleration in inflation rate. The real economic growth stood at 6 percent due mainly to improvement in the agriculture sector followed my marked growth in the manufacturing, trade and electricity sectors. Broad money registered a decelerating growth of 19.2 percent amounting to Rs. 182,211.6 million compared with the growth of 20.8 percent during the previous year. The growth of time deposits decelerated from 25.1 percent in the previous year to 20. 6 percent during the review period. Narrow money growth accelerated from 13.1 percent in 1998-99 to 16. 6 percent during the review year. Total domestic credit of the banking system decelerated slightly to 16.1 percent from 16.4 percent in the preceding year. The flow of bank credit in the private sector increased by 20.1 percent compared with 18.9 percent in the preceding year.

The government expenditure increased by 9.9 percent, against 8.8 percent in the preceding year. Of the total expenditure, regular expenditure increased by 10.4 percent, development expenditure by 7.8 percent, and freeze expenditure by 43.1 percent. Resource mobilization marked a growth of 9.1 percent, against 18.1 percent in the preceding year. Revenue mobilization stood at Rs. 42,870.0 million, marking a 15.1 percent growth against 13.1 percent in the preceding year. Budget deficit amounted to Rs. 10,214.3 million, which is 13. 5 percent higher than during the preceding year. The government issued treasury bills worth Rs. 2,510.0 million, national saving certificates worth Rs. 2,200.0 million and development bonds worth Rs. 790.0 million during the review period. The annual average National Urban Consumer Price Index recorded a rise of 3.3 percent, against 11.3 percent in the preceding year. A fall in the prices of food and beverages helped lower the annual average inflation rate to a single digit. The annual average price index of Kathmandu, hills and Terai increased by 3.6 percent, 3.7 percent, and 3.0 percent respectively.

Exports increased by 44.7 percent and imports by 22.2 percent. Exports of pasmina increased significantly while the exports of pulses, tanned skin and nigerseed declined. The export-import ratio, which was 40.8 percent in the preceding year, improved to 48.3 percent. Trade deficit, which had declined in the previous year, increased by 6.7 percent. The overall balance of payment recorded a surplus of Rs. 14,047.6 million. As a result, foreign exchange holdings of the banking system increased by 22.6 percent as of mid-July 2000.


Budget at a Glance

On May 30 Finance Minister Mahesh Acharya announced a package of 91.62 billion rupees annual budget for the Fiscal Year 2000/2001.The new budget identifies poverty alleviation as its prime objective. To achieve this goal, the budget aims at enhancing public expenditure management, continuing financial sector reform and improving institutional efficiency. The new budget, up by35.6 percent from the revised estimates of the current fiscal year ending mid-July, would launch various pro-poor programs in the spirit of "Income to the Poor and Justice to the Downtrodden". 48.10 billion rupees had been allocated for development and 43.51 billion rupees for regular expenditure. The share of the development and regular expenditure is 52.5 percent and 47. 5 percent respectively. Out of 43.51 billion rupees allocated for regular expenditure, a major chunk (12.76 billion) will go for debt servicing, 3.89 billion rupees for defense and security, 5.27 billion for police force, 8.20 billion rupees for education and 1.66 billion rupees for health. On the development side, 35.1 percent will go for the social service, 7.1 percent for education, 6.3 percent for health, 8.0 percent for drinking water and 10.7 percent for local development. The economic service sector constitutes 63.4 percent of the total development fund, 13.8 percent for transportation, 22.0 percent for hydropower development and 19.6 percent for agriculture, irrigation, land reform and forest sector. As the sources of financing, revenue mobilization projection stands at 47.92 billion rupees, while the contribution of foreign grants and bilateral and multilateral debts would be 11.84 billion and 19.79 billion respectively. Twelve and a half billion rupees would remain as deficit.

Critics blame that the whole budget is like a subsidy, given importance to defense spending rather than poverty alleviation, regionally unbalanced and unrealistic. It will widen the gap between the rich and the poor. The general expenditure is higher than development expenditure—the latter is purely based on foreign aid.


Foreign Affairs

Nepal-India Relations

India is Nepal’s most important neighbor and for historical, economic and geopolitical reasons, both the countries maintain good relations. The Peace and Friendship Treaty of 1950, Trade and Transit Treaties signed in every five years and the Arms Assistance Agreement of 1965 define open border, common security provisions, national treatment to each other’s citizens in matters of trade, commerce, job and movement of population and a common foreign policy orientation in a number of areas, such as nonaligned movement, the UN, WTO and regional cooperation in South Asia. Despite these commonalities, there are a number of issues that affect bilateral relations of two countries:

On December 24, 1999 an Indian plane IA 814 carrying 178 passenger from Kathmandu to New Delhi was hijacked by 5 Kashmiri militants to pressurize the Indian government to release 3 Kashmiri rebels from New Delhi Jail. The plane first landed in Amritsar, India, Lahore, Dubai and finally in Khandar in the early hours of December 25. In Dubai they released 27 passengers, killed one Indian and took the rest to Afghanistan. After nearly 7 days of negotiations 3 Kashmiri militants were released from the Indian jail and the passenger were set free. There were 8 Nepali passengers on board. Indian government blamed Nepal for its security lapses while Nepali government resented. The Nepali government constituted a task force under former police chief Hem B. Singh to inquire into the problem. On January 24, the task force submitted its report and, accordingly, on January 27 departmental action had been taken against airport general manager, airport police chief and deputy superintendent of police. The Indian plane resumed its flight after 6 months of suspension from the second week of June 2000. This event badly hit Nepal’s tourism sectors.

In the first week of July, an agreement between the home secretaries of Nepal and India concluded in Kathmandu in which the two sides agreed to introduce travel document requirement for the nationals of both countries from October 1 who are traveling by air. This does not apply to surface travelers. The meeting decided to send Nepali immigration and police officers to India for training to control criminal activities at the border areas.

On May 7 Foreign Minister Chakra Prasad Banstola left for a two-day visit to India. Matters of bilateral relations including Bhutanese refugees, 1950 treaty, water resources, etc were discussed. They also agreed to control criminal and terrorist activities in their respective borders.

On June 27 Minister for Water Resources Khum Bahadur Khadka urged the Indian ambassador to Nepal to work for the speedy resolution of Rapti river inundation problem. He added over 9,500 families in Banke district would be affected by Indian built-in Laxmanpur dam on the Rapti river. The construction of this dam that began in 1983 and completed in 1998, was undertaken by India in its territory without considering the effects it would have on the Nepali side.

PM’s India Visit: At the friendly invitation of Indian Prime Minister Atal Bihari Bajpayee, Nepalese Prime Minister Girija Prasad Koirala made a week-long visit to India on July 31. PM Koirala was accompanied by Foreign Affairs Minister Chakra Prasad Banstola and a host of secretaries who were set to talk on various issues including inundation of Nepali villages in Banke districts following the construction of the Laxmanpur Dam by India without Nepal’s concurrence and army withdrawal from Kalapani (On April 10 nine left-parties combined staged a sit-in outside the Indian Embassy for two hours demanding a removal of Indian troops from Kalapani area stationed in the early 1960s and a complete halt in the encroachment of Nepali lands in 64 different places). Nepal felt that India’s move amounted to violating the international principle on border management. Other issues discussed were India’s mediation in the repatriation of 1,00000 Bhutanese refugees stranded in Nepal. India was, however, silent on Nepal’s suggestion that India intervene to facilitate the return of Bhutanese refugees. India on its part insisted Nepal on checking "Pakistani-inspired activities against India." India assured Nepal that it has no intention of occupying "even an inch of its territory" but refused to accept Nepal’s demand that Indian army be withdrawn from Kalapani. The British imperial map and Nepal’s evidences show Kalapani under Nepalese territory. India insisted that Kalapani issue should be left to the same Joint Technical Boundary Committee and requested Nepal not to politicize the issue.

Premier Koirala’s goodwill visit also covered many topics that included Nepal’s insistence for a review of the 1950 Treaty of Peace and Friendship. The two countries agreed to leave the issue of revision or possible replacement of the 1950 Treaty to the foreign secretaries. Meanwhile, Nepal was to study alternative model, impact of the replacement of treaty and the status of the exchange of letters and other agreements between the two sides based on the Treaty of 1950. Similarly, both sides agreed to leave the issue of border disputes to the Joint Technical Boundary Committee with the instruction that it would complete fieldwork latest by 2002. They also agreed that final preparation to prepare strip maps in place of riverine border should be completed by the year 2003. On August 3, Nepal-India Joint Press Statement has been issued stressing on mutually beneficial future-oriented cooperation.

India acknowledged Nepalese apprehension about the likely damage that construction of Laxmanpur barrage on the Indian side of Nepal’s western Banke district and promised to undertake damage control exercise (Foreign Affairs and Human Rights Committee of Parliament had reached the conclusion that the Dam should be demolished). Nepal has insisted on a joint commission headed at the secretary level and technical experts be constituted to measure the damage and suggest precautionary measures. Both sides also agreed to set up joint committees to explore potential of hydel power projects in Nepal which is in high demand in India and which should be environmentally sustainable. Both the Prime ministers were keen on a Detailed Project Report (DPR) for 2001 complete the purpose of utilizing the hydro-power of non-controversial river. They hoped that the unresolved projects would be resolved soon indicating that tangible solution was found on the Mahakali and Pancheshwor projects soon. Both the PMs directed that the work on the preparation of Detailed Project Report be completed latest by the end of 2001. On Saptakoshi high dam and Sunakoshi-Kamala diversion projects, they agreed that the ongoing process be expedited.

India was vocal on raising its concern about the alleged growth of anti-Indian activities from Nepal and identified Pakistani ISI as being the main culprit. Nepal felt that Maoist had got a base in India to carry out "terrorist activities" in Nepal. Both sides agreed to intensify the anti-terrorist activities and instructed their respective home secretaries to co-operate each other in the field of security and strengthen information sharing. India agreed to take a positive stance regarding Nepal’s demand to wave four percent custom duties imposed on its goods in the Indian market. In exchange, Nepal agreed to relax the rule for certification procedures for imports of Indian vehicles into Nepalese markets. The Indian side conveyed that emission testing facilities were being set in the borders—Gorakhpur in India and Raxaul in Nepal, which would help streamline procedures for Nepali food exports to India. The Indian side agreed to assist in upgrading the testing facilities in Nepal as well as to help Nepal in IT, diary development, technology and development.

Both the PMs directed the inter-governmental committee on trade, transit and unauthorized trade, headed by commerce secretaries of the two governments, be convened soon to effectively address the remaining issues in a constructive manner so as to promote economic links between the two countries. It was agreed to conclude a bilateral investment protection and promotion agreement at the earliest.

In response to the request made by the Indian side for the regularization of the services of Indian schools and college teachers employed in Nepal, the Nepali side assured that the decision taken by the Nepalese government in 1988 in this regard would be implemented. Responding to the long-standing Indian request for the setting up consulate general of India at Birgunj, the Nepali side informed that the request was under consideration of the government.


Bhutanese Refugees:

The secretary level talk between Nepal and Bhutan on March 13 in Kathmandu focused on terms of reference, composition of the verification team, pro-forma and the verification modalities. The United Nations High Commissioner for Refugees Sadako Ogata visited Nepal and Bhutan in the first week of May with the possibility to resolve Bhutanese refugees problem. She said that "There has been a change in Bhutan’s stand since 1998," expressed UNHCR’s "willingness to act as a facilitator and welcomed any other international mediation. India with its presence, interest and influence would be very welcome to lend its support."

The tenth-round of Nepal-Bhutan bilateral talks took place on Dec. 25,2000. Bhutanese Foreign Minister Jigmi Thinley said that the recent American proposal to verify Bhutanese refugees would be considered bilaterally during the 10th round of Nepal-Bhutan Talks. During their visit to Bhutan and Nepal, two U.S. assistant secretaries-Karl Inderfurth and Julia Taft—had suggested the validation of 1,00000 refugees before actually verifying them. On December 27 Nepal and Bhutan agreed to verify the refugees on the basis of family units in one of the seven refugees camps in eastern Nepal within January 2001. A Joint Verification Team (JVT) was set up with five members from each side. The MJC also directed the leaders of the two teams to visit eastern Nepal within January 2001 for logistic, security and other arrangements to ensure smooth functioning of JVT. On the modality of verification, both sides agreed on a common definition of a family unit, maintaining family integrity and all valid documents will be looked up. For Nepal, there is one more hurdle, the issue of Bhutan’s position on the four agreed categories-- of the bonafide Bhutanese citizens, voluntarily emigrated, Bhutanese who have committed crimes and non-Bhutanese. So far, Bhutanese has insisted on taking back only the refugees of the first category-bonafide Bhutanese.

Relations with Other countries

China is landlocked Nepal’s next door neighbor in the north. Nepal’s relations with China are based on pragmatic grounds. Relations with China are determined by security, economic and political considerations. Nepal wants to diversify its relations and China offers one alternative. Before 1990 China and former Soviet Unions were the two major countries supporting Nepal’s industrialization, expansion in road, electricity, communication and education. Tibet Autonomous Region of China provides a small outlet for its trade and transit diversification and tourism expansion. Nepal has also requested China to open four more passes besides the traditional passes and the modern 113Km long Kodari (Arniko) Highway links Nepal with Tibet. Chinese and Nepalese officials are working to speed up the Syabrubensi-Rasuwagadi highway project. If constructed, the highway will link Nepal with Tibet’s Kerung, which lies next to Rasuwagadhi. China has agreed to provide necessary financial assistance for the project. Experts say that only 19-kilometers long road need to be constructed in the central mountainous district of Rasuwa.

China constructed a Buddhist temple in Lumbini, the birthplace of Lord Buddha in the year 2000. It has also agreed to support equipment maintenance facilities in BP Koirala Cancer Memorial Hospital as well as to provide six Chinese technicians for a period of two years to the development of Nepal Television. Chinese motivation to support Nepal is only to turn Nepal into an independent state, rather than becoming a conduit for anti-Chinese activities through free Tibet movements and succumbing to anti-Chinese pressures.

On August 27 Foreign minister Chakra Prasad Banstola upon returning from his week-long visit to China said that Nepal and China had agreed in principle to add two more routes in the Nepal-Tibet border to facilitate increased trade between the two countries. The two new transit points are Kimathanka and Lizi, besides the existing Tatopani, Yari, Kerong and Olanchungola. He also raised the issue of trade imbalance between Nepal and China. He told, "I told the Chinese the imbalance has to be given a serious thought and they have assured to look into it." Chinese also showed interest to cooperate in Nepal’s hydropower resources and trade expansion through the avoidance of double taxation. Nepal’s relations with Bangaldesh remained cordial as usual. Bangaldesh provides Nepal transit facilities in Chittagong and Khulna-Chalna Ports. Both the countries are exploring to utilize Kakarbhita-Fulbari transit route (a land route that links Nepal with Bangladesh through India) to expand trade, commerce and investment opportunities.

Japan is the largest donor country in Nepal, which provides aid in the field of road, hospital, community development, agriculture, education and tourism. Each year over fifty thousand Japanese tourists visit Lumbini, the birthplace of Lord Buddha. Japanese interest in Nepal lies in economic development, market expansion and protection of heritage, environment and culture of Nepal. On August 25 Prime Minister of Japan Yoshiro Mori made a one-day goodwill visit to Nepal and discussed the matters of mutual interests with the Nepalese premier G. P. Koirala. Prime minister of Japan urged premier Koirala to provide security to 300 Japanese volunteers working in Maoist-infested areas and improve law and order situation in the country. His visit highlighted IT sector and 50 Nepalese youth would be provided IT training in Japan under Mori Fellowship. Besides, five thousand youths would also be invited under educational and cultural exchange program from the South Asian region. Japan also pledged a number of economic assistance for Nepal, according to which Nepal will get a grant of Rs 1.14 billion rupees during the Japanese fiscal year for the construction of primary schools and debt relief measures and 300 thousand US dollars for the relief of flood victims.

German cooperation to Nepal is based on the promotion of "rule of law, democracy, human rights, political participation and development orientation of state action." On February 17, a three-day bilateral meeting between Nepal and Germany took place in Kathmandu. The German delegation was led by Dr. Karl Kirchhof, Director of South Asia, Federal Ministry of Economic Cooperation and Development. Germany agreed to provide a total of DM 59 million during 2000-2001 period, including DM 33 million under financial cooperation and DM 26 million under technical cooperation. On July 12 the government of the Federal Republic of Germany agreed to provide Nepal a grant assistance of DM 42.0 million. The assistance will be used to support four different project activities: biogas support program, town development program, the renewable energies development program and the upgrading of the Makalu-Dhadingbesi road. On November 21, the government of Germany informed the Nepalese government that in addition of funds for financial cooperation for the two-year period 2000-2001 committed (totaling DM 33.0 million) a further amount of DM 12.0 million would be made available to implement a medium-sized-run-of-the river hydropower station (DM 8.0 Million) within the framework of the project "Renewable Energy" and the establishment of small hydro-power plants (DM 4.0 million). On November 29, German Development Bank, KFW, acting on behalf of the German government, agreed to provide grant assistance of DM 31 million for three development projects-biogas projects, Urban development program and upgrading of road between Malekhu and Dhadingbesi road.

Nepal-International Monetary Fund Enter Into Crucial Negotiation

On November 29, Nepal concluded a crucial negotiation with the International Monetary Fund (IMF) sponsored Poverty Reduction Growth Framework (PRGF), that will guide the country’s economic decision-making, including social spending for the next three years. Nepal’s entry into PRGF will particularly expedite the pace of economic reform initiated by Nepali Congress government in 1992 but slackened due to ensuing political uncertainty in the second half of 1990s. PRGF mainly focuses on macro-economic stability (low fiscal deficit, low inflation and comfortable foreign exchange reserve), structural reform (privatization of public enterprises, civil service reform and restructuring of financial sector among others) and poverty reduction. Though the IMF mission and high-level government officials concluded, it will have to be endorsed by the cabinet and IMF Board of Directors before Nepal enters into PRGF, possibly by April 2001. Besides, Nepal should pass through three crucial requirements to qualify for the entry: it should award the management contract of Rastriya Banijya Bank and Nepal Bank Ltd; conclude the mid-term Budget review and finalize Poverty Reduction Strategy Paper before April. With the entry into PRGF, IMF will extend Nepal an annual assistance of US $ 20million for the next three years, which will be spent in reducing poverty and pursuing reforms.

Copyright©2001. Friedrich Ebert Stiftung, Nepal Office