2003-00-00 - report - FES२०५९-००-०० - प्रतिवेदन - एफईएस

Archive ref no: NCA-18762 अभिलेखालय सि. नं.: NCA-18762

Political Developments in Nepal - 2002

The year 2002 remained highly turbulent for Nepal. Nepali politics suddenly took a new turn when King Gyanendra on October 4, sacked elected Prime Minister Sher B. Deuba for his "incompetence" to hold parliamentary elections. On May 22 Prime Minister Deuba had recommended the king for the dissolution of the 34-month old House of Representatives followed by a fresh election on November 13. Deuba took this decision on ground of his difference with his party president G. P. Koirla who was reluctant to endorse the state of emergency and maneuvered to remove him from power. On the eve of election date, Premier Deuba, on the advise of six parliamentary parties, suggested the king to postpone election for 14 months on security grounds contrary to the constitutional provision of holding it within six month.

On October 9 the meeting of six parliamentary parties--Nepali Congress (NC), Communist Party of Nepal-Unified Marxist Leninist (CPN-UML), Rastriya Prajatantra Party (RPP), Nepal Workers and Peasants' Party (NWPP), Nepal Sadbhavana Party (NSP) and People's Front Nepal-- asked for a collective audience with the King to talk about the formation of an all-party government and suggest him to "rectify the unconstitutional steps" while dismissing the elected government and assuming all executive powers. As the king refused to provide collective audience they met him individually. On October 11 the king nominated a royalist politician and leader of RPP Lokendra Bahadur Chand (63) to head a nine-member interim government with a mandate to restore law and order, hold mid-term elections and election of the local bodies which were dissolved on July 15, solve Maoist insurgency, implement development works and stop the economy sliding further downhill. The king nominated Badri Prasad Mandal, the acting President of NSP as the Deputy Prime Minister and picked other ministers from smaller parties and independents.

While the leaders of RPP and NSP welcomed the king's step, NC, CPN-UML, NC (Democratic) of ex-premier Sher B. Deuba and leaders of small left parties showed their disinterest in joining the government. CPN-UML asked the king to form a new government comprising major parliamentary parties as per the Article 128 of the Constitution. NC wanted the restoration of parliament, NC (Democratic) favored the revival of Deuba government and smaller parties wanted an all-party government. Home Minister Dharma Bahadur Thapa, however, said, "Article 128 of the Constitution is dead in the present context, as it was made to give legitimacy to the interim government, formed immediately after the people's movement in 1990." Dissimilar political positions taken by the parties and distrust among them have weakened their bargaining position.

On November 19 the CPN-UML issued an ultimatum to the King to correct his "constitutional mistakes and asked him to declare the dates for national and local elections. Otherwise, it said, "they would plunge into nationwide struggle." The party also suggested the king to act as per the "consensus of all political forces in the country." In contrast, the king, on November 18, expanded the Chand cabinet by adding eight ministers and five assistant ministers.

Prime Minister Lokendra Bahadur Chand Royal Palace Defense
Deputy Prime Minister Badri Prasad Mandal Agriculture&CooperativesLocal Developments
Ramesh Nath Pandey Information&CommunicationsGeneral Administration
Devi Prasad Ojha Education & Sports
Dr. Badri Prasad Shrestha Finance
Narendra Bikram Shah Foreign Affairs
Dharma Bahadur Thapa Home, Law, Justice and Parliamentary affairs
Gore Bahadur Khapange Women, Children and social welfare
Dr. Upendra Devkota Health, Science and Technology
Narayan Singh Pun Physical Planning and Construction
Badri Narayan Basnet Land Reforms & Management Forest and Soil Conservation
Kamal Prasad Chaulagai Labour & Transport Management Population and Environment
Kuber Prasad Sharma Culture, Tourism & Civil Aviation
Mahesh Lal Pradhan Industry, Commerce & Supplies
Deepak Gyawali Water Resources
Assistant Ministers

Anuradha Koirala Women, Children & Social Welfare
Gopal Dahit Population and Environment
Rabi Bhatka Shrestha Culture, Tourism & Civil Aviation
Jagat Bahadur Gurung Industry, Commerce & Supplies
Rabindra Khanal Education & Sports
Dr. Asharfi Shah Local Development
Prakash Chitrakar Pariyar Land Reforms & Management

On December 8, after the two months of the formation of government the King instructed the Council of Ministers to deliver and do not denigrate the political parties. He also asked them to implement reforms set for the Chand government at the time of its formation, remain clean and not to make incoherent speeches.

Government-Maoist Dialogue

The seven years old Maoist insurgency and counter-insurgency operations by the security forces has claimed the lives of over 7,000 Nepalese and over 4000 were killed after the imposition of emergency in November 2001 (which lasted nine months). 6,011 Maoists and 873 policemen, 773 civilians, 97-armed policemen and 219 army personnel were killed. Fifty-five percent of Village Development Committee buildings have been destroyed along with several bridges, police posts, telecommunication towers, hydroelectric projects and district administrative offices. On October 22 Home Minister Thapa said, "the government will consider a "give and take" measure. If the Maoists choose peaceful ways, we will welcome them. The government is committed for talks with the rebels but they should put a precise agenda." This indicated a ray of hope for political dialogue but due to lack of good intermediaries understanding between the king and the main political parties, between the main parties and the Maoists and between the Maoists and the king has not been reached for the resolution of national problems.

On October 22 National Human Rights Commission (NHRC) asked the government to declare cease-fire to create an atmosphere for talks, bring the Maoists to negotiation table, halt killing people in "fake encounters," follow minimum norms of human rights and stop the use of excessive force to suppress Maoists. It demanded an independent probe into the cases of mass killings reported during the security operation against Maoists, penalties for the wrong doers and compensation for the victims. Accordingly, it sent a letter to the Maoist leader Prachanda urging him to stop all sorts of killings including unarmed security personnel and personnel on leave, kidnapping and torture of captive persons, and follow the principles mentioned in Article 3 of the Geneva Convention and observe the minimum norms of international human rights practices.

On October 24 the UNDP Resident Representative to Nepal, Dr. Henning Karcher expressed the UN's readiness" to assist in the peace talks between the rebels and the government." But he said that neither of them has sought such assistance. The same day, the European Union Heads of Mission urged the government to hold negotiations with the Maoists. The EU team also "reiterated the need for accelerated reforms in the key areas of the government, vigorous action against corruption and human rights abuse, and effective action to tackle the underlying cause of the on-going conflict."

Responding to these appeals, on October 25 Maoist leader Puspa Kamal Dahal (Prachanda) revealed two ways of exit from the current crisis: "first, formation of the constituent assembly and new constitution through talks between our party, and all the other major political parties of the country including the intellectuals and the king. Second, the people at large would be left with no option but to go ahead with our decisive and historical struggle if the king continues with his reactionary stubbornness and deploys Army to suppress the people instead of making them sovereign in real sense, strengthen national unity and pave the way for progressive development." He also warned that they would come out with fresh mode of reprisal and protest program if their demands were not favorably responded.
The government also showed some flexibility. On November 7 it freed five journalists who were regarded as pro-Maoists and Home Minister Thapa indicated that the government is serious about resuming dialogue with the Maoists and even said that it is not his government but the Congress government that decided to call the Maoists as "terrorists" and affixed price tags on the heads of its leaders. He said, "these terms are not acceptable to the incumbent government as his government is preparing for dialogue with them. The current government cannot own all the decisions of the earlier governments."

On December 3 in a statement signed by Prachanda said, "For a peaceful, positive and progressive political outlet, the meeting has formed a central level high level committee to hold talks with the old regime (the government), provided that a conducive environment is ensured." He, however, did not disclose the names of the committee members. Newspapers speculate that the committee is headed by no.2 Maoist leader Dr. Baburam Bhattarai. The party has also decided to stop the targeting of political leaders of other parties and development infrastructure directly linked to the people's welfare. He, however, warned the cadres of other parties to stop spying against them.

Anti-Corruption Measures

On April 14 the House of Representatives passed four crucial bills-- the Commission for the Investigation of the Abuse of Authority (CIAA) (2nd Amendment) Bill 2002, Corruption Control Bill 2002, Impeachment (Regulate Working Procedure) Bill 2002, and Special Court Bill 2002 seeking to empower CIAA, set up Special Court and allow Impeachment. Accordingly, a high-level committee to investigate properties of public officials since the political changes of 1990 has been established under the chairmanship of an officiating judge of the Supreme Court B. P. Lamsal.

On the recommendation of CIAA State Minister for Forest and Soil Conservation, Surendra Hamal, and minister Gopal Man Shrestha were fired for taking bribe for approving a file of Khanal-Rojin and Turpentine Ltd. The CIAA also filed a case against 51 persons for embezzling Rs. 213.9 million while granting loans to a private party. It carried out overnight raids against 22 government employees and found millions of rupees without any reliable sources of income. On August 22 the government formed a Special Court under the chairmanship of judge Tapa Bahadur Magar to look after the cases of sedition and corruption filed by the CIAA.

The Lamsal Commission asked banks to furnish details of account held by 19 ex-ministers including G. P. Koirala and his daughter Sujata Koirala since April 2000. The CIAA equally interrogated former ministers Jaya Prakash Gupta, Khum Bahadur Khadka and R.K. Mainali, raided the houses of R. Chaturbedi of Royal Nepal Airlines Corporation (RNAC) and Joint Secretary Anand Khanal-- for amassing huge property and took into custody former ministers Khadka and Gupta and two engineers Narayan B. Thapa and Amodananda Mishra. Gupta has been accused of making huge amounts of money while issuing permit for the import of celluar mobile phone sets. Khadka and others were accused of corruption in Bakraha River Control Project in Sunsari district. On December 18, CIAA filed a charge sheet against former minister Chiranjibi Wagle at the Special Court for amassing over Rs. 32.9 million through illegal means. The government also registered an impeachment bill in the parliament secretariat proposing a probe committee to investigate the charges against the Supreme Court judges and the members of the constitutional bodies with the signature of at least 25 percent of Lower House MPs and also created a National Surveillance Center under the chairmanship of Mohan Bahadur Karki, to curb corruption and irregularities.

Reforms in Gender Laws: On March 7, the government constituted eight-member high level women's commission under Dr. Durga Pokhrel to redress women's problems. On March 14 the House of Representatives passed a Civil Code Amendment Bill guaranteeing equal property rights and conditional abortion rights to women. The Bill seeks to empower women by providing the unmarried ones equal rights to parental property, provides for share from husbands' property to those who are divorced and those who are widowed, besides banning the age-old practices of child marriage and polygamy. It legalizes abortion of foetus up to 12 weeks under any circumstances. But that should be done with the husband's consent and with the help of officially authorized paramedics or surgeons. It also allows the victims of rape or incest to abort the foetus till 18 weeks.

Formation of National Dalit Commission: On March 19 the government formed a ten-member National Dalit Commission under the Chairmanship of Padma Singh Bishwokarma aiming to ensure active participation of Dalit castes in the development of the country. The Commission will, inter alia, focus on areas requiring changes in legal and policy areas for Dalit rights, make recommendations to implement international documents to which Nepal has been a party, monitor and coordinate NGOs on dalit upliftment, launch programs on social awareness to end social discrimination and untouchability, receive petitions, act as per the existing law and draft a bill to make legal arrangements.

Code of Ethics Bill for MPs: On March 19 parliament passed the Bill related to the code of conducts for political parties stipulating a provision for stating the name, place and address of any organization or individual donating more than Rs. 25,000 to any political parties, mandating political parties submit their annul reports including the "income and expenditure" to the Election Commission (EC) within six month of the completion of the fiscal year and releasing the report publicly. The parties should audit their account of income and expenditure through the auditors recognized by the Auditor-General, state the election expenditure, elect at least 50 percent of the total members of the acting committee of the party in every five years, and refrain from accepting donation from any international organizations, foreign government, individual and the institution. The Bill bans to issue party membership to any person below 16 years and the acting civil servants. The parties contesting elections should also present their manifesto and attested program to the EC within seven days of the announcement of the election date. There is also a provision of cancellation of the registration of the political party if it is found to be issuing party members on the basis of caste, sex, group, community, religion and area.

Party Politics

Nepali Congress (NC): Factionalism and split gripped NC from the beginning of 2002. In February while president of ruling NC Party Girija Prasad Koirala argued that his idea of "Broader Democratic Alliance" (BDA) was meant to solve the country's social, political and economic problems, premier Deuba's faction smelled it as a ploy to remove him from power. Koirala pressurized Deuba to reduce the size of cabinet by 10 percent of the total of MPs, establish a commission to investigate on the assets of the public officials collected after the restoration of democracy and formulate laws to confiscate the assets of those failing to disclose the source of income. He also constituted a five-member committee headed by party treasurer Mahanta Thakur to give suggestions on the amendments of the present constitution. Despite opposition from Deuba, G. P. Koirala arbitrarily constituted a Parliamentary Committee and Central Works Performance Committee on February 26 manned mostly by his followers.

The disciplinary action taken by NC against three cabinet ministers and one Central Working Committee member for their remarks against the party president's decision to form the party's Parliamentary Committee further widened the rift with Deuba's faction. Factionalism became acute as Central Disciplinary Committee (CDC) of the party expelled Minister for Information and Communication Jaya Prakash Gupta from the party's general membership for a period of one year for supporting the remarks of Army Chief against the "bad governance" of political parties and politicians. On April 11, 33 ministers asked Koirala to immediately revoke the decision against Gupta.

As the government extended the state of emergency for three more months and dissolved the Lower House, Koirala expelled primer Deuba from the party for three years. Ex-premier K. P. Bhattarai's efforts to bridge the differences too failed as Koirala asked Premier Deuba to revive the dissolved House. Koirala viewed that crisis in the party is the product of a "grand design." On June 16, Premier Deuba summoned all the NC general convention members for discussion in Kathmandu and also accused Koirala of breaking the party. Out of 1502 General Convention members 873 members attended the meeting. The meeting spelled out the preconditions for party unity--revocation of the expulsion of Deuba and others, reorganization of the party's powerful Central Working Committee, parliamentary board, and the party's Central Disciplinary Committee.

As Koirala seemed adamant on his stand fifty-six years old NC suffered a vertical split on June 18. The Convention removed the incumbent president G. P. Koirala from the party and a day later elected Deuba as the new president. Deuba faction accused Koirala of perpetuating "a dynastic rule." The Party elected Chiranjibi Wagle as vice-president, Khum Bahadur Khadka as the General-Secretary and Bijaya Gachhedar as the Joint General Secretary. Deuba nominated Bhim Kumari Budamagar, Amar Raj Kaini, Duryodhan Singh, Krishna Bahadur Gurung, Sheikh Zahir, Hom Nath Dahal, Gopal Man Shrestha, Chitra Lekha Yadav, Narendra Bikram Nembang and Krishna Prasad Bhattarai as CWC members in the 27-member Central Committee.

The Election Commission (EC) on September 17 recognized the pro-Koirala NC as the official party and entitled it to party flag and symbol. At the same time, the EC asked Deuba's faction to register a new party within seven days to facilitate its participation in the mid-term polls. The EC, however, said that it was only an "interim" order conceding that both the factions had more or less equal number of general convention members. On September 23 Premier Deuba registered a new party at the EC called Nepali Congress (Democratic) and received Kalash (a water jar) as the party's election symbol.

After Deuba's removal from power, NC president G. P. Koirala concentrated his attack on the King. On October 27 he said that King Gyanendra's assumption of executive power has blown away the notion of "king can do no wrong." The nation was caught in a "grand design." The Royal Massacre of June 1 last year was part of a grand design." On November 18 in a press meet organized at Birgunj, he said, "NC, which has long been in favor of constitutional monarchy, could change its stance in favor of a republic set up. But this would be decided by the party's general convention and not me alone." On December 18 speaking at the mass awakening campaign, NC President G. P. Koirala also demanded that the army should be made accountable to parliament.

Left Politics: Left political parties showed a trend towards unity and accommodation in politics. In the beginning of January Communist Party of Nepal-Unified Marxist-Leninist (CPN-UML) and CPM-Marxist-Leninist (CPN-ML) drafted their unity proposal. After four years of split, the splinter faction CPN (ML) merged into the CPN-UML on February 15. A senior CPN (ML) leader, C. P. Mainali has, however, denounced the merger and re-organized the party with the same name. Mainali forwarded a concept of "Broad Left Democratic Alliance" to resolve the present crisis in the country.

On January 11 CPN-UML parliamentary task force, constituted to monitor post-emergency situation, informed the government of various "unfortunate" incidents in the country and demanded to stop them. On February 12, all the left parties opposed the Terrorist and Disruptive Activities (Prevention and Control) Ordinance (TADO) 2001 and Financial Ordinance 2001 (First Amendment) in the parliamentary secretariat alleging the government for "introducing the ordinances and bypassing the parliament." The Finance Ordinance has been issued to channel extra funds to meet its skyrocketing security expenses. In doing so, it has slashed the annual budgets allocated to the country's 3913 Village Development Committees by 50 percent, 58 municipalities by 10 percent and parliamentarian development fund by 25 percent. The government allocated additional budget of Rs. 500 million to buy arms and recruit more security personnel to fight against the Maoists. On February 28 the House of Representatives passed the TADO Ordinance 2001 and Finance Ordinance 2001 introduced after the state of emergency despite opposition from smaller left parties. The new legislation empowers the security forces with the right to conduct search operations and house arrest of suspected individuals.

On April 22 CPN-Masal and CPN-Unity Center announced their merger stating: "Since the country is moving backwards, it is the responsibility of left parties and other people-oriented forces to come together for safeguarding the achievement of people's movement." The joint statement was signed by respectively by two secretary-generals--Ram Singh Shris (CPN-M) and Narayan Kaji Shrestha (CPN-UC). Similarly, on July 10 two other left parties --the United People's Front (UPF) and the National People's Front (NPF) formally announced their unification and constituted the People's Front Nepal.

On October 31, NC, CPN-UML and United Front Nepal (UFN) announced protest programs against the October 4 Royal proclamation to "safeguard the achievements of the 1990s people's movement, to meet the challenges against the nation and democracy, and to protect constitutional norms and democratic values." The UML also announced month-long public awareness program against what they call "conspiracy." The program began at national meet in the capital on November 19.

Just on the eve of UML's protest program, King Gyanendra discussed current political deadlock with Nepal. Nepal suggested the king to form the government under the Article 128 (2) of the Constitution which mentions that "His Majesty shall constitute a new Council of Ministers consisting of representatives from the main political parties" if the existing cabinet is dissolved. A day earlier NC President G. P. Koirala who had asked the king to revive the parliament suggested the king to form the government under Article 128 (2) of the Constitution. On December 14 addressing its crowd CPN-UML leader Madhav Kumar Nepal said, "The king does not have the right to sack or appoint a Prime Minister. The king has done both. October 4 move was unconstitutional and illegal. CPN-UML leaders warned the king to correct his constitutional mistakes otherwise "we will be forced to launch a decisive battle against the king, which will ultimately uproot the monarchy."

Leadership conflict in Nepal Sadbhavana Party: On November 25 in a move aimed to control the party, acting president of Nepal Sadbhavan Party, Badri Prasad Mandal removed his vocal critic and general-secretary, Hridayesh Tripathi, from the central working committee of the party and reconstituted 28-member CWC.

RPP Calls for Effective role for the King: The Central Working Committee (CWC) meeting of RPP held on July 23 in Kathmandu pointed out that no single party could relieve the country of the crises. It also highlighted the need for "consensus" and "alliance" among different political parties. The December 11 Third General Convention of RPP in Pokhara elected a new leadership for the next four years. The convention elected 18 central committee members including its Chairman Pashupati S. Rana. Rana garnered 735 votes where as his nearest rivals Dr. Prakash C. Lohani secured 320 and Rabindra Nath Sharma got 134 votes. The RPP concluded its meeting saying, "The king's cooperation is a must to get rid of the present problems including the Maoist one."

Trade Unions

In the year 2002 violent conflicts and declaration of the state of emergency, which suspended fundamental rights of citizens, including the workers overshadowed the trade union movement. Trade Union activities were thus confined to seminars, training, workshops, advocacy and education. Every year 300,000 persons enter into the labor market in Nepal. Out of the total population of 23 million 5.2 percent of them are unemployed while 32 percent are under-employed. Forty-one percent of children aged 5-14 is economically active. Average work in Nepal is 45.6 hours per week for paid employees. The average daily income for the worker is Nrs. 60, which is less than a dollar. Higher unemployment, lower paid jobs and lack of favorable conditions affect women. This year marked a decline in union activities. Out of 1491 enterprise level unions until June 2002 the registration of 731 union has been cancelled. The migration of youth abroad owing to violent Maoist conflicts and a lack of employment opportunities cause decline in union membership. There are also some positive achievements.

On February 1, the national tripartite committee dropped the new proposed labor law which wanted to give the power of hire and fire to employers, formed a nine members committee to implement labor laws and find out the reasons of non-implementation of labor laws. It also proposed the amendments of all labor-related laws and to make them effective.

On April 29 a high level tasks force has been set up by Nepal Trade Union Congress (NTUC) and General Federation of Nepalese Trade Unions (GEFONT) to form a national level apex trade union with single authority. They have adopted seven point agenda for the year and formulated a series of policy recommendations to improve the well being of workers. Common position among the three trade union federations-NTUC, GEFONT and Democratic Confederation of Nepalese Trade Unions (DECONT) is evolving especially in areas, such as Poverty Reduction Strategy Paper (PRSP) of the government, gender equality and promotion, cooperation in construction, wood and building sectors, Chemical, Iron and Energy, hotel and catering sectors, foreign employment and migrant workers, revision and promotion of minimum wages, social security and MNCs.

The Supreme Court decision of July 26 required all Indian workers working in factories and other sectors in Nepal to acquire work permits. The Court had instructed the government to initiate the necessary steps towards reviewing provisions in the treaty and the Labor Act to issue work permit for Indians. The Nepalese Constitution visualizes the right to work for Nepalese citizens.

The International Labour Organisation (ILO) on August 12 objected to the government's decision not to allow the hotel workers to go on strike demanding for their rights and privileges under the newly legislated Essential Service Act.

Foreign Policy

On foreign policy front, Nepal's achievement is considerable. Nepal successfully organized the eleventh South Asian Association for Regional Cooperation (SAARC) summit in Kathmandu on January 5-6, 2002 after the hiatus of three and a half-year. President of Sri Lanka Chandrika Bandaranaike Kumaratunga handed the chairmanship of SAARC to Premier Sher Bahadur Deuba.

The SAARC leaders signed the Convention on Preventing and Combating Trafficking in Women and Children for Prostitution and Convention on Regional Arrangements for the Promotion of Child Welfare in South Asia. They committed to the SAARC economic union as the common long-term goal of SAARC and to frame South Asian Free Trade Area (SAFTA) by the end of this year; endorsed the reports of the Council of Ministers and decided to address terrorism in a holistic manner; directed to expedite some specific programs such as the completion of SAARC social charter; discussed about making a common position on various international issues, especially related to the WTO; and ended with the release of Kathmandu Declaration in which they agreed to commit themselves to 56 points of various issues including poverty alleviation, terrorism and cooperation in the economic sectors and agreeing to meet in Pakistan which, unfortunately has been cancelled.

On August 19, the SAARC Standing Committee comprising the foreign secretaries agreed that the member states' domestic laws on terrorism had to be made compatible with international laws on terrorism. In its meeting on January 1 in Kathmandu, the Committee had recommended that the UN Resolution 1373 (on combating terrorism) be implemented in the region. The Committee took up several other issues, such as SAARC Integrated Program of Action, narcotics and drugs, intra-regional economic co-operation, inter-government group on trade liberalization, SAARC network of researchers on global financing and the finalization of the SAARC Social Charter.

On August 28-29 SAARC Conference on Cooperation in police matters, a meet of police chiefs in this region to control crime and terrorism in South Asia took place in Kathmandu. Information sharing and intelligence gathering were two basic hallmarks of fighting terrorism and drug trafficking. The formation of SAARCPOL, a regional police body, to fight drug trafficking, terrorism and crimes has been endorsed, in line with the Interpol.

Bi-Lateral Relations

Nepal-India Relations: Nepal and India are historically close neighbors. Nepal's geophysical exposure towards south, circulation patters, transport and communication, transit, tourism, open border and treaty obligations make cordial ties with India a necessity. In February 6, Nepal and India simplified travel procedures for the nationals of both countries visiting by air. The immigration authorities recognize passports and voters ID cards as valid travel documents.

Nepal-India Trade Treaty 1996 was renewed and came into effect from March 6, 2002. Officials of both sides agreed to impose a mandatory 25 percent value addition slab on material and labor content on Nepali goods to gain duty free market access to India in the first year, and 30 percent from the second year onwards. The percentage of value addition would be calculated taking the export price at the base. They also agreed to include provisions relating to safeguard measures in case of surge in export from any of the countries. Similarly, four Nepali items--vegetable ghee, acrylic yarn, copper products and zinc oxide-- that India claimed to have surged will now be allowed to enter free of basis customs duty into Indian market on a fixed quota basis. The exports of these four items constitute almost 20 percent of the total Nepali exports to India.

During his six-day goodwill visit to India on March 19 Premier Deuba sought Indian assistance in curbing the Maoist terrorism, review of the treaty of peace and friendship 1950, inundation problem due to Laxmanpur bund, border demarcation, implementation of Mahakali Agreement, enforcement of Nepal-India trade treaty, Indian cooperation in development projects, etc. During his meeting with his counterpart Atal Behari Bajpayee, both the countries decided to work closely in fighting terrorism. The two governments agreed, "not to allow their respective territories to be used for activities inimical to the interest of the other," "intensify their cooperation and continue to work closely with each other," and "an early conclusion of the agreement for mutual legal assistance and updating the extradition treaty." They agreed to set up an Institute of Technology in Nepal, conduct survey on East-West Railway feasibility, hold negotiations on the operationalization of Raxaul-Birgunj rail link, cooperation in science and technology, tapping of hydropower, border demarcation, etc. The two sides should hold negotiations and conclude the bilateral agreement on the operation of the Birgunj-Raxaul rail-link and the Inland Container Depot (ICD or dry port at Birgunj). On April 12 India extended grant assistance to the tune of Rs. 1344 million to Nepal for setting up optical fibre cable based 1,000 km long information superhighway.

During his four-day visit to Nepal on May 13, Indian Army Chief General S. Padmanabhan said, "India would provide Nepal more military hardware including an armed helicopter. There is quite a lot in the pipeline. Weapons such as small arms, armaments of various types like mortars, ammunition for smaller arms, some other vehicles, couple of helicopters, including an armed one are part of the package." India has already provided Nepal with two Cheetah helicopters, 20 military vehicles and arms and ammunition to fight Maoist insurgency.
On June 23, King Gyanendra and Queen Komal made their first six-day official visit to India at the friendly invitation of Indian President K. R. Narayan and Usha Narayan. The king said, "in recent years, Nepal has been afflicted with the menace of terrorism. Terrorists have launched a series of destructive and disruptive activities against society and the very roots of democracy. Nepal is prepared to extend all necessary assistance to industrialists, businessman and entrepreneurs from India to invest in Nepal. " On June 28 Indian Prime Minister A. B. Vajpayee pledged to help Nepal in its fight against Maoist rebels. He, however, also told that the "problem was an internal matter of Nepal and therefore must be solved by its government."

On July 5 the border demarcation joint team of experts of Nepal and India came to a halt as they found that India unilaterally built 300-meter long a dam over Bakraha river inside Nepal causing inundation in some border villages of Morang district and submerging about 400 meters of Nepali land. Jagadish Prasad, Indian team member representing Nepal-Indian Joint Demarcation Team claimed the Indian government's ignorance over the already built dam. Similarly, in the hill town of Pashupatinagar, Ilam, six houses of Nepalese and a government custom office have now fallen on Indian territory after the India side unilaterally erected four subsidiary border pillars in the eastern border of Nepal.

On August 16 in a secretary level meeting of Nepal-India Inter-Governmental Committee (IGC) in Delhi, the Indian side pledged to support the Nepali industries by removing all the additional taxes its federal states have been imposing on the Nepali exports to India and agreed in principle to wave Special Additional Duty (SAD) soon while it assured the immediate waiver of the Luxury Tax on Nepali exports. The Indian side had been imposing 4 percent SAD on all Nepali goods, which had hard hit the major Nepali exports. It also agreed to remove 40 percent Anti-Dumping Duty (ADD) imposed on acrylic yarn and zinc and decided to establish quarantine checkposts at Indian bordering cities of Sunauli, Jogbani and Banbassa in November 1 and lower down the existing quarantine fees. The Indian side also agreed to raise the quota fixed for Nepali copper wire exports by further 2, 500 tons.

On August 30 Nepal and India signed the Program of Cooperation and agreed to create viable atmosphere for exchanging scientific and technological support for the mutual benefit of the people of both countries. On September 15 forest officials conservationists from Nepal and India agreed to set up a joint trans-border committee to monitor progress related to landscape conservation. The committee will hold quarterly field level meetings to discuss protection measures for endangered wildlife species in a globally important eco-region.

Bhutanese Refugees: More than 100 thousand Bhutanese refugees are languishing at seven UNHCR-administered camps in the eastern part of Nepal. The Joint Verification Team manned by the officials of Bhutan and Nepal since 2001 has already verified about 1,300 refugees. Nepal has been awaiting Bhutan's approval for the dates to hold the 12th round of ministerial level meeting where they would discuss who of the verified refugees should be repatriated. The Bhutanese Refugees Support Group (BRSG) a non-governmental organization in Kathmandu called upon the government, the Bhutanese government and the international community to intensify their efforts to end the refugee crisis.

On July 3 European Union Ambassadors in Nepal who inspected one of the refugees camps expressed concern over the delay in the verification of refugees and called for immediate declaration of the results of the identification in the Khundunbari camp, "The delay in the verification process has made us worried and alert," said Gent Meinceke, Denmark's ambassador to Nepal. "We believe that there has to be long-term solution to the refugee problem as the refugees cannot remain dependent on aid." The visiting German Ambassador Rudiger Lemp said, "The results of verification must be declared immediately." He called for the immediate repatriation of refugees and conducting of the verification process in the other six camps.

On October 6 feeling frustration over the intransigent attitude of Bhutanese government on the solution of refugees Foreign Ministry of Nepal revealed its "last ditch attempt " to hold 12th round of negotiation. Said a Foreign Ministry official, "we will have no option but raise the issue at the international level since we cannot afford to let the issue linger any longer."

Nepal-China Relations: China is Nepal's another friendly neighbor providing it an alternative route for trade, tourism, foreign aid for development and the diversification in international relations. On April 16 in an effort to boost trans-Himalayan trade, China scrapped the provision of licenses for importing Nepalese goods aiming to reduce trade deficit between the two neighbors. On June 17 the agreement on bilateral cooperation signed by the central banks of both countries allowed the Chinese currency Yuan convertible in Nepal aiming to boost bilateral trade, tourism, and economic cooperation.

On July 9, King Gyanendra and Queen Komal made a ten-day state visit to China at the invitation of Chinese President Jiang Zemin. King Gynanedra and President Zemin held talks on matters of mutual interests and letters were exchanged on the opening of an honorary Nepalese consulate general in Shanghai, aside from its existing consulate generals in Tibet and Hong Kong. Agreements were signed on an annual grant of Rs. 780 million aid to Nepal and the renewal of trade treaty with Tibet which is done in every 10 years. The grant is utilized to construct an 18-km road between Rasuwa and Syaphrubeshi, to open a civil servant hospital and a polytechnic institute at Banepa. China's underbelly, Tibet, shares about 1,000 kilometers of border with Nepal. About 35,000 Tibetan exiles have settled in Nepal, forming an ongoing concern for Beijing. Chinese president also condemned "terrorists" action taking place in Nepal. Chinese premier Zhu Rongji indicated that China would help construct the Baglung-Beni-Jomsom road once Rasuwa-Syaphrubesi road is completed. On July 24 a Memorandum of Understanding was signed between the Federation of Nepalese Chambers of Commerce and Industries (FNCCI) and the All-China Federation of Industries and Commerce (ACFIC) hoping to reduce the annual trade deficit of Rs 12 million with China. Both the groups agreed to expand Nepal-China Non-Governmental Cooperation Forum.

In September the seven-member team led by Deputy Commander of the Lanzhou Military Region Command of the People's Liberation Army of China Lieutenant General Zhou Gengren returned home on completion of their six-day visit to Nepal. On March 24 as part of exchange of visits between high level army teams, a seven-member Nepali army team, led by Lt. General Pyar Jung Thapa, visited China and discussed about the matters of mutual interests.

Nepal-Germany Relations: On April 17 the Federal Republic of Germany committed 28.95 million Euro in grant to the Kingdom of Nepal for the next two years. Three agreed priority areas of cooperation in the year 2002-2003 are health and family planning, promotion of local self-governance and civil society and the promotion of renewal energy. Germany also supports Nepal through its contribution to non-governmental organizations and multi-lateral institutions.

Nepal-US Relations: On January 18 American Secretary of State Colin Powell visited to Nepal and met King Gynendra, premier Deuba, and Commander in Chief of the Army Prajwolla S. Rana. Powell condemned the Maoists saying that "there is no place for violence for bringing about a change in a democracy" but he also indicated to the deep-rooted causes of turmoil referring to the disaffected youth who have lost hope and are being attracted to radical cause. He pointed three measures--good governance, economic development and an end to corruption and assured the government of the continuity of American cooperation in Nepal's development including support to military exchange, training of military officers and equipment.

The US government announced US $ 4 million grant to Nepal for the betterment of children rescued from the child labor market and its Embassy has announced humanitarian assistance to the tune of $100 thousand to fund programs targeted at victims of the Maoist insurgency. On June 6 it showed readiness to end worldwide trafficking in humans including in Nepal by means of penalties which involve votes against loans from the World Bank and International Monetary Fund.

On April 24 State Department Spokesman Richard Boucher reported "We are assessing Nepal's needs and reviewing several options for military assistance to Nepal. We have asked Congress for a supplemental appropriation of $20 million in foreign military financing for Nepal."

On May 5 premier Deuba left Kathmandu for a visit in the US and UK seeking support for war against terrorism. On May 7 while talking to premier Deuba, the US president George W. Bush referred about global terrorism, regional security situation and Nepal-US cooperation.

On September 22 the US government agreed to provide Nepal a grant of $ 14.3 million for promoting peace through improved governance and incomes in targeted areas. It also disbursed $3.6 million this year while rest will be delivered over a period of four years. On December 12 the visiting US Assistant Secretary of the State for South Asia, Christina Rocca, discussed about security situation in Nepal and possible US Cooperation to support the government in the context of escalating Maoist violence, about Nepal's entry into WTO, Bhutanese refugee stalemate and possibility of increased economic assistance to Nepal. While meting the party leaders of main political parties, especially G. P. Koirala, Madhav Kumar Nepal and Sher B Deuba, she suggested them to forge unity with the king to fight against Maoists. The source close to Koirala revealed that "while the US wanted to end insurgency militarily, the parties on the other hand want to resolve the problem through dialogue. On December 31 Nepal and the US signed an agreement agreeing not to surrender each other's nationals to any international tribunal or in third country without the expressed consent of the other.

Nepal-UK Relations: On February 19 British Parliamentary Under Secretary of State for Foreign and Commonwealth Affairs responsible for South Asia, Ben Bradshaw, said, "We are worried about Nepal's security situation and our cooperation in this regard will be continued." Upon completing his visit to USA, premier Deuba reached London on May 12 and held talks with British Prime Minister Tony Blair. Blair pledged strong support to Nepal's fight against terrorism and assured the British government's support to Nepal's economic development. They also discussed about the pensions of ex-British Gorkha soldiers.

On May 19 General Sir Michael Boyce, Chief of Britain's Defense Staff, visited Nepal to discuss on the potential British military and development assistance to the Royal Nepal Army in fighting against the Maoist rebels. A team of senior British army officials would draw up a list of requirements of the Nepalese army. Boyce visited Maoist-hit areas and met ex-Gurkhas in Pokhara, Dharan and Okhaldhunga. About 3,000 Nepalese are still serving in the British army.

On November 27, ex-Gurkha soldiers have won the right to compensation from the British government after more than 50 years they were taken as prisoner by the Japanese. Ex-Gurkhas PoWs have won the right to compensation. Each of 343 surviving PoWs will receive 10,000Pound as compensation.

The UK organized Nepal Aid Meet in London on June 18 to discuss on the ways of international cooperation to Nepal to cope with the development problem as well as Maoist insurgency. It announced an increase of its financial assistance to Nepal from 20 to 27 million sterling pound annually including an increase of military support from 0.7 to 7 million sterling pound annually as it is concerned about the security situation in Nepal. British government also urged other donor countries such as United States, Japan, China, Australia, India, Russia and EU members, UNDP, UNDPA and the World Bank to increase aid to Nepal.

On July 24 the British Embassy in Kathmandu revealed that the UK government announced an aid package of 650 million to tackle the Maoist insurgency and two transport aircraft to Royal Nepalese Army. The UK Foreign Office Minister Mike O' Brian visited Nepal on October 9 to chair the first follow up meeting to the international conference of friendly countries on Nepal held in London in June. He said, "Nepal's struggle against Maoist insurgents should be seen as a part of the wider war against terrorism." All the donor community were concerned about the status of democracy, human rights and good governance and wanted the effective implementation of anti-corruption measures.

Nepal and Asian Development Bank (ADB): The ADB has been focusing on programs aimed at poverty reduction, gender and development, good governance, water supply and environment preservation. It agreed to provide Nepal $ 15.58 million aimed at training primary school teachers and building capacity of National Center for Educational Development and teachers' training centers. The loan carries an interest rate of one percent to be repaid within 50 years. On March 28 the visiting high-level mission of the Bank revealed that its proposed lending for 2002-2004 totals $300 million, an average of $102 million per year. The Bank can charge the amount depending on the performance of the beneficiary. The Bank agreed to provide technical assistance to Nepal amounting to Rs. 58 million (750,000 US dollars) for the purpose of preparing the community based water supply and sanitation projects and $20 million as an additional support for public expenditure management in Nepal over a period of one year. So far ADB provided 6 loans for US $ 75.7 million and 11 Technical Assistance for 5.1 million for education sector in Nepal. The Bank has approved a loan of US$30 million for improving essential infrastructure and services in nine urban areas of Nepal.

World Bank and IMF: Under the World Bank (WB) pressure, the Finance Ministry decided to hand over the management of the country's two largest commercial banks--Rastriya Banijya Bank and Nepal Bank Ltd. to private company. The WB warned that it would retract the promised loan of Rs. 830 million if the process were not completed by February 15. The WB agreed to extend a loan assistance of US $ 22.56 million to Nepal for the implementation of Telecommunication Sector Reform Project. Nepal has been trying to enter into IMF-sponsored Poverty Reduction and Growth Facility (PRGF). With its entry, Nepal will get US $ 20 million annually for the next three years, which would be spent on programs related to poverty reduction and pursuing reform measures.

On December 2, the WB scrapped nine irrigation projects in mid-western Nepal due to the lack of explosives. The security forces have tightened their grip on explosives used in development projects due to security reasons. On December 22 the WB approved a credit of US $ 16 million in support of Financial Sector Assistance Project. The current credit of US $ 16 million from the International Development Association (IDA), the concessionary lending arm of the World Bank Group, is part of a financing plan totaling US$30.1 million. The Department for International Development (DFID) will finance US$10 million and the government of Nepal will fund US $4.1 million. Discussing the progress report of the Bank's Country Assistance Strategy (CAS) for Nepal the WB Board of Executive Directors in Washington agreed that availability of resources would be parallel to Nepal's performance on reforms. Slow progress in addressing poor governance resulted in a sharp decline in the Bank's lending to Nepal.

Nepal-Japan Cooperation: Nepal-Japan relations have always remained friction-free. It is one of the biggest donors for Nepal's development. The Japanese government extended a grant assistance of Rs.5, 791,000 to the Nepalese government for the Emergency Disaster Rehabilitation Project and its Embassy offered a grant assistance of US$82,500 to Milan Club Nepal to buy educational equipment to the primary schools in Kathmandu. Similarly, Japanese government provided a grant assistance of $897000 to Nepal as the Debt Relief Measures, $680,000 for the promotion of UNESCO's Education for All Programs in Nepal and US$10,667,000 as non-project grants aid. The latter grant was meant to aid Nepal's social and economic development. On July 25 the government of the US and Japan signed a memorandum on "Joint Japan-US Project Formulation Mission" to help Nepal in population and health, child and maternal health, tuberculosis and HIV/AIDS.

UN Cooperation: Kathmandu-based office of UNICEF provided Nepal a grant assistance of approximately Rs. 5624.65 million to enhance the need of children and women. The International Fund for Agricultural Development (IFAD) provided a loan assistance of $ 20.11 million and technical grant assistance worth US $ 37,358 for the Western Uplands Poverty Alleviation Project (WUPAP). The project covers 11 upland districts of Far and Mid-western Development Regions, which are remotest and characterized by a high incidence of poverty, low human development indicators and deprivation.

Other countries and Organizations: On June 25 the Danish International Cooperation Agency (DANIDA) provided US $ 30 million grant for the development of a secondary education program and 20 million Danish corner to help Bhutanese refugees. Norway promised to extend financial assistance of Rs. 200 million for the reconstruction of the Jhimruck Hydropower project, which was destroyed by the Maoists. On July 4, the Swiss government extended Rs.73.7 million grant for the fourth phase of a program to rehabilitate the Arniko Highway, the only highway linking Nepal and Tibet and Rs. 576.3 million for the implementation of Trial Bridge Sub-Sector Projects. EU: On August 19 the European Union approved a Rs. 46.5 million (Euro 615,000) assistance package to Nepal to help it reduce the impact of the current conflict on long-term EU assistance programs. The new package is financed under the EU 's Rapid Reaction Mechanism and forms the first stage of a revised strategy for EU assistance that is under discussion with Nepali authorities. Canada: On October 9 the government announced the launch of Local Development Facility (LDF) , which is five years project from 2002-2007 with a budget of 4.3 million Canadian dollar to support timely and innovative initiatives which address basic human needs and build socio-economic infrastructure and capacities of both government and civil society at local levels. Dutch Grant: The government of the Netherlands provided Euro 14.6 million technical grant assistance for the implementation of biodiversity project in Nepal. The money will be spent on poverty alleviation, and productive bio-diversity conservation through forestry sector development in Tarai and Siwalik.


The population of Nepal is 23.2 million. The population growth rate is 2.27 percent. About 80 percent of Nepalese works in agriculture where growth depends on monsoon weather. The GDP growth rate of 3.1 percent roughly balances the population growth rate. Life expectancy is 59.7 years. Nepal is among the few countries in the world where the female life expectancy is lower than those of males. GNP per capita income is US$ 249. About 40 percent of the population above 6 years cannot read and write. Nearly half of the population is below poverty line living on a dollar or less a day. According to FAO Report 23 percent of Nepal's population is hungry.

On December 17 the National Planning Commission (NPC) released its 10th Five-Year Plan with the sole objective of poverty reduction to 30 percent, from the present level of 38 percent. It projected two economic growth targets for the next five years--6.2 percent in normal case and 4.3 percent in abnormal cases triggered by the risk arising from the security situation and political instability in the country. The tenth plan aims to achieve an agricultural growth of 4.1 percent, and non-agricultural sector growth of 7.5 percent annually in the normal case and 2.8 and 5.2 percent in the worst case scenario. The key features of the plan, that define Nepal's Poverty Reducation Strategy, inter alia, include prioritization, participatory, trustworthy, crisp, performance indicator, poverty monitoring measures, establishment of poverty reduction fund, and Medium Term Expenditure Framework (MTEF) and decentralization of power. MTEF, implemented from this fiscal year, is a tool to bridge the gap between periodic plan and annual budget. It has provided an important mechanism for prioritization of public expenditure, leading to the elimination of some 165 low priority projects in the fiscal year 2002/03 budget and classification of all development projects in terms of priority.

Human Development Report 2002 ranks Nepal in 142 position out of the 173 countries with an HDI value of 0.490. According to Nepal Human Development Report 2001the HDI in rural area is 0.446 as against 0.616 in the urban area. Due to poor governance, the government's policies and programs intended to reduce poverty remained ineffective. Child Workers In Nepal Concerned Center (CWIN) Report revealed that infant mortality rate in Nepal is 64 per thousand live births and child mortality stands at 100 per thousand live births. Likewise, the percentage of child population suffering from malnutrition stands at 48 per 100,000. In the same way, diarrhea alone causes 27 thousand child deaths in a year, while 13 percent child deaths are due to Hepatitis B. Each year, 40,000 children die of pneumonia while three thousand others die as a result of diseases that are caused by vitamin "A" deficiency. UNICEF report 2003 reveals that AIDS has already orphaned 13,000 children in Nepal and there are an estimated 1,500 children living with HIV/AIDS.

Nepal Rastra Bank in November revealed that trade imports increased while exports declined. Total exports declined sharply by 25.9percent (Rs.6344 million) compared to the decline of 2.5 percent during the last year. Nepal's readymade garment exports to the United States, which absorbs over 85 percent of the total garments, fell by 22 percent. The total imports have increased by 3.9 percent (17337.3 million) as against the decline of 5.8 percent last year. As a result, trade gap has widened by 35.2 percent (Rs.11.0 billion). Gross foreign exchange holdings of the banking system grew by 2.6 percent (Rs 106.43 billion). Of the total reserve, the share of convertible currencies improved to 78.3 percent while that of non-convertible currencies declined to 21.7 percent from 24.2 percent last year. The total government expenditure, on cash basis, increased moderately by 7.4 percent due to a sharp decline in development expenditure. Due to regular strikes and violence tourism in Nepal declined by 27 percent as compared to total arrivals in 2001 affecting its foreign currency reserve. According to Nepal Tourism Board, a total of 215,922 tourists visited Nepal by air in 2002, whereas during the previous year was 298,456.

About 60 percent of its development budget comes through foreign aid. On October 2 a report launched by Action Aid Nepal and Citizens' Poverty Watch Forum revealed that only about 25 percent of total aid that comes to Nepal goes for development activities, that too, depending on the assumption that it is properly implemented. About 15 percent of aid goes for debt servicing, and 10 to 15 percent for defense that is mainly due to escalating Maoist violence and about 70 to 80 percent of aid coming to Nepal goes back to the donors as most of the development activities are designed and defined solely by the donors.

Nepalese government initiated some policy reforms to rectify some of anomalies. On January 16 it introduced an ordinance to change some clauses in the Finance Act 2001 to revise tax rates. As per the ordinance, special security duty of 1 percent has been raised to 3 percent, a levy of additional Rs. one has been imposed on the sales of petroleum products (including diesel, petrol and kerosene) and a special duty of 10 percent has been slapped on the imports of car, jeep, van and motorcycles. Similarly, in order to attract more tourists, the government introduced many incentives including the provision of multiple entry visas valid for five years for foreigners and buying products of the country for export or giving purchase orders for export, with the provision that they can stay for a maximum of 90 days at one time. To attract non-resident Nepalis (NRN) in investments the government offered special concessional visa scheme valid for 10 years for NRN involved either in academic pursuit, research or business. The visa fee per year to the students will be $50 and $100 for others. In the industrial sector, it brought out a New Industrial Policy 2002 to maintain long-term industrial growth. The new policy is based on the draft of the "Industrial Development Perspective Plan: Vision 2020" and aims to achieve poverty alleviation--through support and incentives to micro and cottage enterprises in rural areas and policy support to certain priority areas with potential for long-term growth.

The government dissolved the Agricultural Inputs Corporation. The dissolved AIC has been converted into the Agricultural Inputs Company Limited and National Seeds Company Ltd. The government also declared the shut down of Butwal spinning mill and decided to sack all political appointees in the government owned enterprises made by the previous government and effected significant changes in the administrative set up.

On January 31 according to the agreement signed between the Deloittee Touche Tohmatsu, an American consulting company and Nepal Rastra Bank (NRB) the management of Rastriya Banijya Bank and Nepal Bank Ltd. has been handed over to the former. The World Bank is funding the project with about Rs. 90 million. The American Company charges $ 57,49,790 for two years. The company will work in close collaboration with government-formed committee.

Nepal Development Forum: In the meeting of NDF in Kathmandu and Pokhara on Feb 4-7 Nepal asked for more aid to respond to security expenses. Donors, in contrast, pointed out "weak implementation of public policies," "lack of strong political leadership," " a lack of focus on long-term priorities," the failure of "fiscal discipline," corruption control and weak governance. It even failed to prioritize the needs for effective economic development. The donor community promised to help the Nepali government to turn crisis into opportunity by implementing reforms.

On February 4 the European Heads of Mission in Kathmandu also issued a veiled criticism of the government by pointing out corruption at all levels, low standard of governance, non-implementation of promised anti-corruption measures and serious deterioration in human rights situation in Nepal since the proclamation of the State of Emergency. The NDF meeting was participated by 24 donor countries and agencies with high government officials. The Nepalese government presented Tenth Five-Year Plan, Poverty Reduction Strategy Paper (PRSP), the Medium-Term Expenditure Framework (MTEF) and strategies and plans of action for the sectoral reforms as the key governance agenda. At the meeting, international community approved the draft of government's foreign aid policy aimed at taking foreign aid to the targeted groups in a transparent manner. Adopting a proposal to give final shape to the draft by February 22, the meeting decided to constitute a joint experts committee to monitor the implementation of foreign aid policy. Donors pledged assistance worth $ 500 million annually for the implementation of Tenth Five-Year Plan. The assistance would amount to a total of $2.5 billion over the 10th plan period. They also agreed to change the form of assistance from project-based to budgetary support.

Annual Budget: Expressing 'Investment for Peace' as the primary goal, Premier Deuba reveled a Rs 96.12 billion (US$ 1.22 billion) budget for fiscal 2002/2003 on July 8. The budget brought through Royal Ordinance focused on three areas: security, poverty reduction and accelerating economic reforms.

Rs 57.44 billion has been allocated for regular expenditure and Rs 38.67 billion for development. The cut in the development budget comes amidst failure to provide adequate security to execute development projects. It plans to cover Rs 54.80 billion from the internal revenue, and additional Rs 2.35 billion emerging as a result of changes in tax structures and administrative reforms.

The budget plans to mobilise Rs 14.56 from foreign grants, leaving Rs 26.75 billion to be covered from internal and external loans. An estimated inflow of Rs 12.14 billion in foreign loans leaves the government with Rs 12 billion to be compensated through internal borrowing. On a sectoral basis, the largest chunk of the regular expenditure goes in servicing debts (Rs 16.35 billion), which swallows almost 29 percent of the revenue mobilization. The second largest recipient is security, which is Rs 14.81 billion.

To achieve the targets of poverty reduction, the second most prioritized area, the government announced poverty-targeted programs and projects through Poverty Alleviation Fund (PAF), an umbrella plan that seeks to bring all anti-poverty programs under one roof. It is accompanied by an announcement to encourage one hundred thousand unemployed people to tap foreign employment opportunities, Food for Work, upliftment of women, dalits and marginalized population, infrastructural development, sanitation, education and health.

Other Developments: On July 23 the heavy rains, landslides and flood in the country caused the death of over 500 persons, (31 in Kathmandu valley, over hundred in Makwanpur and other districts). The mid-plain area of the country suffered the most. The rainfall broke three decades of record. The last highest recorded rainfall was in July 1972 when 102.8 millimeters of rainfall was recorded in Kathmandu valley. This time it was 207.0 mm. It also affected the communication and transportation, damaged roads, property, crops and plants. Two kilometers landslides in Krishna Bhir had affected travel from and to Kathmandu by road for several days. About 13,000 families have been displaced in 46 districts including Nawalparasi, Mahottary, Sarlahi, Sirha, Dhanusha and Sindhuli districts. In Bhojpur and Kaski districts 9 persons have been found dead while 17 persons missing. Pyuthan district faced acute food shortage as security forces imposed a ban on importing foodstuff two months ago ostensibly to starve the Maoists. On August 21 huge landslides in Bamti village of Ramechhap district caused the death of 70 persons.


ADB Asian Development Bank
CIAA Commission for the Investigation of Abuse of Authority
CPN-UML Comunist Party of Nepal-Unified Marxist-Leninist
CPN-ML Comunist Party of Nepal- Marxist-Leninist
CPN (Maoist) Communist Party of Nepal-Maoist
CPN-Masal Communist Party of Nepal-Masal
CPN-M Communist Party of Nepal-Marxist
CPN Unity Center Communist Party of Nepal-Unity Center
CWC Central Working Committee
DECONT Democratic Confederation of Nepalese Trade Unions
EC Election Commission
EU European Union
FAO Food and Agricultural Organization
GEFONT General Federation of Nepalese Trade Unions
IMF International Monetary Fund
MP Member of Parliament
NC Nepali Congress
NC (Democratic) Nepali Congress Democratic
NDF Nepal Development Forum
NTUC Nepal Trade Union Congress
NeWPP Nepal Workers and Peasants' Party
NSP Nepal Sadbhavana Party
RPP Rastriya Prajatantra Party
SAARC South Asian Association for Regional Cooperation
SAD Special Additional Duty
TADO Terrorist and Disruptive Activites (Prevention and Control) Ordinance
WB World Bank

Copyright©2001. Friedrich Ebert Stiftung, Nepal Office