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Right or wrong, it is routine business for a Nepali prime minister to make New Delhi his first foreign port of call. And so on cue Prime Minister Sher Bahadur Deuba is visiting India from April 1-3. Covid lockdowns notwithstanding, when Deuba became PM last July, there was no enthusiasm in New Delhi to roll out a red carpet for the septuagenarian Nepali leader. Things have not changed much.

Deuba is thus unlikely to sign any important agreement. Foreign policy analyst Geja Sharma Wagle says it is more a goodwill visit to strengthen relations at the top political level (see Editorial).

The visit coincides with some vital domestic, regional, and international developments. Deuba is visiting India ahead of local polls which will soon be followed by national elections.

As India is concerned over the shape of the post-election government, say Nepali Congress leaders, the issue could figure in bilateral talks. Of late, India has adopted a hands-off approach in Nepal but it has also subtly let its distaste for a broad (Panda-hugging) left alliance be known. 

With India also closely monitoring the growing US-China competition in the Himalayas, the Indian side could convey to PM Deuba some message in this regard.

Says India-Nepal relations expert and ApEx columnist Nihar R. Nayak, India is uncomfortable with the growing strategic competition between two major world powers in the Himalayas. India expects these powers to respect India’s security concerns, he says, adding that this issue could crop up during Deuba’s Delhi trip. “India is worried that some Chinese projects in Nepal may undercut its strategic and security interests in the Himalayas. It does not want any disturbance on its northern frontier,” Nayak says.

The Russia-Ukraine crisis could also come up during discussions.

On the bilateral front, government officials say that even with low expectations, all outstanding issues will be discussed. Supply of fertilizers, connectivity projects mainly railways, Pancheshwar multipurpose development project are all on the agenda. Nepal is also preparing to raise the map dispute.

Chinese Foreign Minister Wang Yi’s three-day Nepal visit (March 25-27) was focused more on safeguarding China’s larger geopolitical interests than on bilateral cooperation. The readouts issued by the Chinese side during his stay as well as subsequent Chinese media reports suggest the same.

Securing the support of the South Asian countries on China’s position on the Russia-Ukraine crisis, countering America’s influence in the Himalayan region and creating a favorable political environment in Kathmandu were his key agendas. In his meetings with Nepali leaders, Wang pushed for Nepal’s ‘independent foreign policy’ and urged the country to stay away from geopolitical games—thereby becoming ‘a shining example’ of China-South Asia cooperation.

Speaking with Chinese media outlets in Beijing on March 28, the senior Chinese diplomat said there has been a general consensus among relevant countries that Russia-Ukraine disputes should be settled peacefully through dialogue, and neither war nor sanctions are the solution.

The US too is seeking the support of South Asian countries for its Russia-targeted sanctions. In Beijing, Wang said his trip to South Asia came at a time when the spillover of the Ukraine crisis is spreading, and world peace and development are facing new challenges. “Asia refuses to become a chessboard in the game between major powers, and Asian countries are by no means pawns in the confrontation between major powers,” Wang said. 

Beijing is urging small South Asian countries not to be influenced by America on Ukraine. 

Says Amish Raj Mulmi, the author of All Roads Lead North: Nepal's Turn to China, after the onset of the Ukraine crisis, China has been trying to build a new pro-Beijing consensus in South Asia. 

China, through various channels, has already conveyed its reservations over Nepal’s decision to vote against the Russian invasion at the United Nations.

Even though there is no direct mention of America in Chinese official statements, growing American influence in Nepal figured high in talks at various levels between Wang and Nepali leaders.   

In his meeting with CPN (Maoist Center) Chairman Pushpa Kamal Dahal, Wang said: “We should be vigilant against the resurgence of the Cold War mentality and chaos in the region and jointly safeguard the good situation of regional peace, stability and development.”

“It is necessary to maintain the hard-won peace, stability and development in the region, resist the temptation to introduce bloc confrontation and create turbulence and tension in Asia,” he added. 

According to Maoist leaders, Wang also reminded Dahal of American attempts to encircle China through its Indo-Pacific Strategy (IPS) and that Nepal risked becoming a pawn in a great-power confrontation. 

Chinese experts have also tried to explain Wang’s message to South Asian countries.  

In his March 27 Global Times article, Zhao Gancheng, director of the Center for Asia-Pacific Studies at the Shanghai Institute for International Studies, says the US has somewhat achieved its goal of turning some of China’s neighbors against it without investing too many resources. 

“This has encouraged Washington, making it believe it can contend with Beijing. Therefore, the US will mobilize more resources and be more active in an attempt to infiltrate what it sees as China's ‘sphere of influence’,” the article says.

In Kathmandu, Wang focused his message on mitigating growing American influence after the parliamentary endorsement of the MCC Nepal compact. Additionally, he sought strong commitment from the Nepali side on the “One China” policy. 

All top politicians, including Prime Minister Sher Bahadur Deuba and President Bidya Devi Bhandari, tried to assure Wang that Nepal is committed to One-China, and will not allow anti-Chinese activities on its soil.

US-based foreign policy expert Sanjaya Upadhayay says Wang sought to impress upon Nepali leaders “the imperative of creating the necessary domestic conditions” that would discourage Nepal from becoming a geopolitical playground against China. 

He believes Wang was interested primarily in gauging Nepal’s continued commitment to its traditional foreign policy tenets amid shifting global geostrategic contours. 

“In particular, Beijing sought to determine whether Kathmandu was adjusting its outlook and—if so—whether it was doing so under unwarranted influence of third countries,” Upadhayay says. As the Nepali side stated its case, he adds, Beijing must have sought fresh assurances from Kathmandu on One-China and other specific issues of Chinese concern.

To achieve those objectives, Beijing wants a favorable internal political situation in Kathmandu. Over the past few months, the relationship between Nepali Congress-led government and Beijing has deteriorated considerably.

Beijing thinks Congress is pro-India and by extension pro-US. The ruling party, meanwhile, is suspicious of Beijing’s “proactive measures” to bring left forces together.

In his meetings with Nepali leaders, Wang conveyed that China was ready to work with all parties, irrespective of their agendas and persuasions. Unlike in the past, the Chinese side did not explicitly raise the issue of left alliance this time.  

Binoj Basnyat, strategic affairs analyst, suspects that with Nepal headed into elections, the Chinese are also concerned about the type of government that will be formed at the center and whether that government would favor them. “The political message of Wang’s visit is that unity among communist forces would be beneficial to Beijing. If that doesn’t happen, Beijing at least wants to create a favorable environment for it here.” 

Basnyat is of the view that China wants to limit the activities of international forces in Asia. 

Mulmi says Wang’s Nepal visit can be seen both as China attempting to build on its influence in smaller South Asian countries, as well as to negate its setback after the MCC compact ratification.

The visit clearly showed that Kathmandu risks becoming an epicenter of US-China rivalry in South Asia.In this fluid situation, Prime Minister Sher Bahadur Deuba is traveling to India and senior American officials are soon visiting Kathmandu. Expect more turbulence in Nepal’s geopolitical weather-system. 

The 2015 constitution envisions local governments providing a range of affordable and timely public services. Responsibilities previously under the ambit of district administration offices or central agencies in Kathmandu are now handled by local units.

But as the sub-national bodies under the new federal setup complete their first five-year term, their performance has been mixed: some have done well while others are struggling.

According to a recent survey by the Commission for the Investigation of Abuse of Authority (CIAA), 67.3 percent of the respondents were satisfied with the services provided by their local governments. Only 11.2 percent expressed their dissatisfaction while 21.5 percent were neither satisfied nor dissatisfied.

The survey also suggests municipalities are performing better than rural municipalities, as the former are considerably better equipped both in terms of manpower and resources.

Federal affairs experts say as the first elected local governments under the new constitution, their five years were largely spent in infrastructure-building and capacity-enhancement. Their works, experts add, have laid a good foundation for the future.

Despite challenges, some subnational bodies still managed to do well.

The Municipal Association of Nepal ranked Waling and Putalibazar municipalities of Syangja district as the top performing local units in terms of service delivery and fiscal governance. Nilkantha Municipality of Dhading, Ilam Municipality of Ilam, Harion Municipality of Sarlahi, Tilottama Municipality of Rupandehi and Rapti Municipality of Chitwan were also on the association’s top municipality list.

Waling was recognized for its outstanding performance in service delivery through digital governance.

“In our municipality, people can access and pay for all services online,” says Mayor Dilip Pratap Khand.

Waling is also the first municipality in the country to pass laws and regulations required to implement the 22 exclusive rights the constitution provides to local governments.

To maintain transparency, the municipality discloses information about its services, activities, as well as incomes and expenditures. It has also developed a system to collect feedback on service delivery.

“We remove lapses in service delivery on the basis of the feedback we get from cross-party committees,” says Khand.

Some local governments like Bhaktapur Municipality proved their mettle during the pandemic. The municipal government, led by the mayor from Nepal Majdoor Kisan Party, provided door-to-door health services including PRC tests and built well-equipped quarantine centers in response to the pandemic.

In the past five years, judicial committees, led by deputy heads of local units, have also been instrumental in providing quasi-judicial services to the people. They are authorized to settle disputes in 13 specific areas, including those related to property boundary, canals, dams, road encroachment, wages, and lost and found cattle.

Most disputes settled by judicial committees have not been challenged in court—and that says a lot about their effectiveness.

But not all local governments have formed judicial committees owing to a lack of manpower trained in legal issues. Only 40 percent of local units have such committees.

Education is one vital area where progress in the past five years has been poor. Experts attribute this to the federal government’s reluctance to decentralize education as well as lack of local education laws, teachers and budget.

Still, some local bodies have set sterling examples by offering free school education.

Pyuthan Municipality of Pyuthan district provides free education up to the tenth grade. Its mayor, Arjun Kumar Kakshapati, says no children should be denied this basic right.

“Now all the children in the municipality go to school. We want the federal government to help us sustain our education campaign,” says Kakshapati.

Bhaktapur Municipality has also taken some notable steps in education, such as providing education loans and research funds.

Pyuthan and Bhaktapur are the outlier municipalities in education. Most local units are struggling due to inadequate resources and poor support from the central government.

According to the Ministry of Federal Affairs and General Administration, 87 percent of the local governments don’t have enough teachers.

Federal affairs expert Khim Lal Devkota says despite many challenges, there have been some positive changes in the state of education at the local level.

“Take the dropout rate,” he says. “The rate has come down thanks to initiatives like scholarships for children from marginalized communities.”

Besides education, local governments have also not made desired progress in health. Most of them still lack decent health facilities.

In the past five years, just 11 percent of local units built 15-bed hospitals, as required by the constitution. Government data shows that about 54 percent local governments are in the process of constructing such hospitals.

But even when hospitals have been built, they have lacked many basic health services. Lab services are generally poor and qualified and specialized doctors are in severe shortage.

Overall, some experts say while there is still a long way to go for the federal system to work smoothly, local governments have achieved significant progress in their first term.  

Khemraj Nepal, a former government secretary, says local governments were concerned about the rights and plights of the marginalized groups, an issue that the central government largely ignored.

“Some local units in the Tarai have launched campaigns focused on the education of girls and children from marginalized groups,” says Nepal. “For instance these children are given bicycles to motivate them to go to school. These local bodies have also done a lot for senior citizens,” Nepal says.

His major gripe with local governments is with their manifest failure in stopping skilled manpower from migrating abroad.

Most local governments say inadequate infrastructure and resources mar their performance. They are short of human resources, including chief administrative officers, badly affecting service delivery. Dearth of staff means people are deprived of even basic services such as registration of life events, social security benefits, and recommendations for passports and citizenships.

Political disputes have also contributed to poor service delivery and dysfunction.

Over the past five years, dozens of local governments failed—some repeatedly—to bring their budget on time due to chronic disputes between municipal chiefs and their deputies. As many as 13 municipalities are yet to pass their budget for the current fiscal year. 

According to a new study commissioned by the Ministry of General Administration and Federal Affairs, of the 753 local units, more than 200 have been operating under acting chief administrative officers. Works of these local units could be severely affected if these officers are transferred.

While local governments have taken the initiative to provide services, they have failed to make service delivery effective, says the study.

The ministry has recommended that the local governments invest in capacity-building and human resources.

Experts on federal affairs are optimistic that the performance of local bodies will improve.

“I’m happy with the overall performance of local governments in the past five years. Now we must focus on  addressing the lapses in service delivery,” says Devkota.

Chinese Foreign Minister Wang Yi arrives in Kathmandu on March 25 on a three-day visit, with project-selection under the Belt and Road Initiative (BRI) among his top agendas. 

But with the Nepali side unprepared, the visit, however, is unlikely to be fruitful on the BRI front. Discussions are underway to forge an understanding for its implementation. But even such an understanding does not guarantee selection and implementation of specific projects.

A senior foreign ministry official requesting anonymity told ApEx that the ball is in Nepal’s court. 

“First, we have to identify the projects. Then we have to conduct feasibility studies and prepare detailed project reports (DPRs) before proposing them to China. If the Chinese side agrees to our proposals, negotiations on investment modality can begin,” says the official who is also involved in bilateral negotiations.

On each of the nine projects Nepal has shortlisted under the BRI, it has to negotiate loans with Chinese banks—not the Chinese government. (But the Chinese government can instruct those banks to offer loans on lower interests or even, in rare cases, interest-free.)

“There is a misconception here, even among our top politicians, that once we make a list of projects, the Chinese will do the rest. That is not so,” says the official. 

According to him, the BRI is a broad program, but in Nepal, it is often—and wrongly—thought of as synonymous with specific development projects.

In the past five years since the signing of the BRI framework, negotiations between the two sides have focused on preparing legal documents. The only other achievement in this period was the inclusion of Nepal-China Trans-Himalayan Multi-Dimensional Connectivity Network, including a cross-border railway, in the joint communique of the second BRI conference in 2019. 

“So far, we have focused on the blueprint and legal documents. We are yet to enter real negotiations on specific projects,” says the official. 

The BRI is basically about taking loans from Chinese banks to build infrastructure. But Nepali leaders who are in conversation with Chinese leaders have been emphasizing grants for the BRI projects. For instance, in 2018, the KP Sharma Oli-led government negotiated with the Chinese on the Keyrung-Kathmandu railway. The Oli government reportedly told the Chinese side to provide a grant for the railway project. 

“China is not ready to build such a big project on grant-basis as it entails a big financial commitment,” says the government official. 

Prakash Saran Mahat, former foreign minister who signed the BRI framework, says Nepal plans to mainly improve road connectivity with the Chinese money. 

“We cannot afford projects under commercial loans. We should thus emphasize grants and soft loans,” he says. 

There was no discussion on investment modality when the framework agreement was signed. However, global trends suggest grants under the BRI projects are hard to come by.

“You have to keep in mind that the BRI projects in Africa, Latin America and Southeast Asia were built with loans from the Exim Bank of China, the China Development Bank, and other Chinese banks,” says the government official. 

According to a report prepared by AidData, an international research and innovation lab, China Eximbank and China Development Bank led a major expansion in overseas lending in the pre-BRI era. 

“However, the country’s state-owned commercial banks—including Bank of China, the Industrial and Commercial Bank of China, and China Construction Bank—have played an increasingly important role during the BRI era. Their overseas lending activities increased five-fold during the first five years of BRI implementation,” says the report.

The specifics of such deals are hard to find in the public domain. But government officials say loans under the BRI should not be frowned upon as we need all the money we can get to build big infrastructures and spur economic growth. In any case, they say, Nepal is already taking loans from other international financial institutions. 

“In the past, many multinational financial institutions snubbed our request for infrastructure loans. So we can use Chinese loans to build desired projects if we get the right rate,” says the official. 

For instance, Nepal has built Pokhara International Airport with a Chinese loan at two percent interest.

Officials say multinational financial institutions like the World Bank and the Asian Development Bank work in ways that are distinct from how the Chinese operate. These institutions themselves conduct feasibility studies and prepare DPR for a proposed project, and they offer loans only if they find the project feasible. On BRI projects, however, all these tasks are undertaken by the loan-recipient countries.

Over the past decade, China’s policy on loans has undergone a sea-change. Initially, they provided loans without considering the pay-back capacities of recipient countries. As a result, many countries could not pay back, resulting in what has often been portrayed in Western media as ‘debt-trap’.  

Government officials say China has learned its lesson and is now more cautious while providing loans under the BRI projects. 

“Unlike in the past, the Chinese are not pressing poor countries like Nepal to take loans for development projects. They are also asking us to consider our pay-back capacity and come up with feasible projects,” says the government official. 

Chinese loans constitute only three percent of Nepal’s total foreign loan portfolio. The Ministry of Finance seems reluctant to take out a loan under the BRI, owing to its high interest rates. This is one reason for the BRI’s slow progress in Nepal.

To move ahead, it is vital that political leadership offer policy-guidance to the bureaucracy. 

China is already providing large grants to Nepal. Officials say it is obvious to expect more grants from China, but it is better to ask for bilateral grants instead of grants under the BRI.

Suresh Chalise, a former Nepali ambassador to the US, says it is illogical to ask for a BRI grant just because we have gotten a grant under the Millennium Challenge Corporation compact. “China is already giving us other grants,” he says. 

But Kalyan Raj Sharma, a China expert, does not rule out the possibility of BRI grants. “There are many ways the two countries can cooperate financially under the BRI,” he says. 

China offers three categories of assistance to other countries—grants, interest-free loans, and concessional loans. It has also canceled debts of some hard-pressed countries.

According to a 2019 World Bank report, most Chinese loans are concessional, but with terms that may not be favorable for low income developing countries (LIDCs). Most Chinese loans to LIDCs have fixed interest rates, with a median rate of two percent, a grace period of six years, and a maturity of 20 years, according to the report.

Da Hsuan Feng of the Center for Asian Studies at the University of Texas at Dallas, says China wants prosperity for its neighbors, even the poor ones, through the BRI vehicle. 

He says the 10 ASEAN nations, especially poorer ones like Cambodia and Laos, are showing signs of economic vitality thanks to the BRI.  

“Under the BRI, China and Laos collaborated in constructing 1,000km high-speed rail from China’s Kunming to Laos’ Vientiane,” he says. “Clearly, by itself, Laos could not and would not have the financial and technological means to build this vital rail-line.”

The new railway could transform the future of this landlocked country, he says.

He says leveraging the BRI to collaborate with Nepal must be a high priority for China, just like collaborating with Laos is a high priority. “A prosperous Nepal will be a tremendous plus for China in the same way that a prosperous Laos is a plus for it,” he says. 

In the most recent assembly elections, India’s ruling party Bharatiya Janata Party (BJP) consolidated its hold in five states including in the most populous Uttar Pradesh. This has increased BJP’s prospects of winning national elections for a third consecutive time in 2024. With the exception of Punjab, the BJP also gained in Goa, Manipur and Uttarakhand.

This suggests the BJP has wooed the masses with its ‘Hindu nationalist’ agenda. Over the past 70 years, Uttar Pradesh has had 21 chief ministers but none could do what Yogi Adityanath has: return to power for a second time after completing a full five-year term.

Adityanath is emerging as a powerful BJP leader, and a section of the party projects him as a future prime minister. As he leads a populous 204m-strong state that shares a border with Nepal, Nepali politicians and experts are also gauging his victory’s possible implications for Nepal.

Adityanath is a vocal supporter for the reinstatement of Nepal’s Hindu state. Sharat Pradhan and Atul Chandra document his remarks on secularism in Nepal in their recent book, ‘Yogi Adityanath: Religion, Politics, and Power, The Untold Story’. 

“That secularism is not his cup of tea has been expressed quite explicitly by Adityanath in his article penned under the headline, ‘Antar-raashtreey saazishon ke jaal me phansta Himalayee Rashtra Nepal’ (“The Himalayan state of Nepal has been caught in international conspiracies”).

Describing 18 May 2006 as a ‘Black Day’, when the country’s kangaroo parliament passed an ‘unfortunate and unexpected ‘resolution declaring Nepal a secular state, Adityanath blames Maoists, Islamic militants, and Christians for the ‘unconstitutional’ decision,” the article says.

Asmita Bhandari, Acting President, World Hindu Federation International Committee, for her part says Adityanath’s emergence is good news for Nepal. “He has a special relationship with Nepal. He is not only the chief minister of Uttar Pradesh but also the head priest of Gorakhnath temple,” Bhandari says. “He wants to see Nepal as a Hindu state.”

In meetings with Nepali politicians, BJP leaders are becoming more vocal on the Hindu agenda. Dhananjay Tripathi, assistant professor, department of international relations, South Asian University, says the BJP won’t directly support the Hindu-state agenda but some Hindu front organizations could lend their support to their pro-Hindu counterparts in Nepal.

“As Hindu forces become influential in India, they will try to push and prod like-minded forces in Nepal,” says Tripathi. He, however, does not believe the agenda will much influence Nepali voters. “The kind of appeal the BJP has in India is hard to replicate for any of Nepal’s political parties,” he says.

The two countries have distinct domestic politics, Tripathi says. Unlike in India, there are no entrenched religious divisions or polarized debates among Hindus, Muslims and those of other faiths. Over the past couple of decades, communist parties have become dominant in Nepal, adds Tripathi, which also distinguishes the country from India.

Tripathi argues that political debates here are centered more on monarchy, democracy and republic than on religion. In Nepal, there are strong Hindu sentiments in major parties but their top leaderships remain committed to the secular state.

Civil society member Hari Sharma says the BJP’s victory in India could encourage Nepal’s anti-secularists and influence its liberal forces. “Take Nepali Congress. Last September, a Congress delegation under Prakash Sharan Mahat visited India. They did not hold fraternity talks with other political parties there, except with the BJP,” says Sharma. “Instead, after New Delhi, they went straight to Uttar Pradesh and met Yogi Aditayanath.”

He speaks of the need to maintain good rapport with all of India’s important political parties. As Hinduism is a populist agenda, Sharma adds, Nepali parties may be thinking it could increase their votes too. “They may also want to appease Indian Prime Minister Narendra Modi. But appeasing Modi would not serve our national interest,” he says.

In line with what Sharma says, a group in the ruling Nepali Congress, with Central Working Committee member Shankar Bhandari at its lead, is pressing party leadership to stand in favor of the Hindu state.

Bhandari says he takes India’s recent electoral outcomes in a positive light but he thinks the Nepali campaign for Hindu state won’t be much influenced by the BJP.

“We want to declare Nepal a Hindu state as the majority of Nepalis are in its favor. Our politicians have betrayed people by embracing secularism, an agenda pushed by foreign powers,” Bhandari says. He says Nepali parties cannot entirely shun the Hindu agenda; nor can they fully support it.

Inside CPN-UML, the main opposition party, there is no organized group in favor of the Hindu state. But in recent times its Chairman KP Sharma Oli has been trying to appeal to the Hindu constituency. Most recently, Oli renewed his statement about Lord Ram being born in Nepal.

Political analyst Lokraj Baral does not think Oli will achieve much by invoking Ram, as he does not speak based on facts. “But he may nonetheless get some public support for his pro-Hindu line,” Baral says.

The backers of Hindu state are buoyed by India’s recent electoral outcome.

Dhawal Shumsher Rana, General Secretary of Rastriya Prajatantra Party, a pro-Hindu party, says BJP’s victory will have “some but not significant impact on Nepal. Till date, our party has had no formal collaboration with the BJP. But we also can’t rule it out,” he says. 

Baral says BJP’s emergence in India has not brought a significant Hindu wave in Nepal. Even though Nepali politics is tough to predict, “it is hard to believe that the BJP wave in India will significantly affect Nepal. It has been nearly a decade since the BJP came to power in India and Hindutwa’s impact on Nepal has been minimal.”

Asmita Bhandari says big political parties can learn from India that the Hindu religion as a political issue has some appeal. “You may now find that our major parties are ready to take up the Hindu state agenda,” she says. 

On February 28, the Cabinet passed a resolution stating Nepal would not allow the “use of its soil for activities against any friendly nations”. The decision was taken on the heels of a series of statements issued by China against the $500 million US development grant under the Millennium Corporation Challenge (MCC) compact. It was meant to assuage China that the compact’s passage would not undermine its security.

Growing American influence in China’s ‘backyard’ has sent Beijing into a tizzy.

Foreign policy experts say though China does not object so much to the compact itself. Beijing’s policy-makers rather think Western powers could use the grant to increase their influence in the Himalayan region. Multiple political and diplomatic sources confirmed to ApEx China’s worry over the prospect of ‘anti-Chinese activities’ on Nepali soil.

China is sending a high-level delegation to Kathmandu under Foreign Minister Wang Yi to take up Beijing’s concerns with the Nepali leaders. Traditionally, Beijing has sent such high-level teams following big political changes and developments in South Asia and Kathmandu.

Soon after the parliament’s dissolution in 2020, China had sent Guo Yezhou, Vice Minister of the International Department of the Communist Party of China, to take stock of Nepal’s political situation. Similarly, Wei Fenghe, Chinese State Councilor and Defense Minister, had visited Nepal on 29 November 2020 at the peak of India-China border standoff in Galwan valley.

Lately, new issues have also emerged in Nepal. The US and its allies in Kathmandu are turning up pressure on the Home Ministry to document Tibetan refugees and provide them with identity cards, a process that had stopped in 1994 following Chinese pressure.

US officials say Nepal should provide identity cards to Tibetan refugees to ensure their access to education, health and jobs. China objects to this idea.

On March 11, Chinese Ambassador to Nepal Hou Yanqi held a long conversation with Home Minister Bal Krishna Khand to discuss Tibetan refugees and China’s security interests.

China’s renewed security concerns stem from recent developments in South Asia and Nepal, says Sundar Nath Bhattarai, the vice-chairman of China Study Center, a think-tank.

“America is advancing its Indo-Pacific Strategy in South Asia. There is a growing military and strategic cooperation between India and the US, and China’s relations with India are souring due to border disputes,” he says. “The Chinese are thus concerned with possible instability in South Asia.” 

Bhattarai adds that as the US and other Western countries are yet to accept Tibet as an integral part of China and are investing in Tibetan refugees, China is paying close attention to recent developments.

Another issue that has raised Beijing’s eyebrows is the phone conversation between Prime Minister Sher Bahadur Deuba and US Secretary of State Anthony Blinken on Russia’s invasion of Ukraine. During the tête-à-tête on March 2, Deuba had intimated to Blinken that Nepal stood in support of Ukraine’s sovereignty and territorial integrity. The following day, Nepal voted in favor of the UN resolution on Ukraine. Before that, Nepal on February 24  had opposed the Russian invasion of Ukraine and called on peaceful resolution of disputes through diplomacy and dialogue.

Though Nepal’s position on Ukraine is in line with its stated foreign policy, Beijing suspects Washington is influencing Kathmandu in its policy on Russia and Ukraine.   

Growing engagements between Kathmandu and Washington in recent months are viewed with skepticism in Beijing. To offset the US influence, China is banking on Nepal’s communist forces—mainly the CPN (Maoist Center) and the CPN (Unified Socialist), two coalition partners in the current government led by the Nepali Congress.

Chinese officials are said to be in constant communication with Pushpa Kamal Dahal of Maoist Center and Madhav Kumar Nepal of Unified Socialist. The two leaders are in turn conveying their concerns to Prime Minister Deuba.

“Beijing wants Kathmandu’s solid assurance on its security concerns in Nepal,” says Rupak Sapkota, a foreign policy expert. 

For China, implementation of past agreements with Nepal under its Belt and Road Initiative (BRI) remains a priority—even more so after Nepal passed the American MCC compact.  

China thinks it is high time to push the BRI projects in Nepal. Kathmandu and Beijing had signed a framework agreement on the BRI in 2017. The BRI projects have made no progress even though the two countries had agreed to expedite their implementation during President Xi Jinping’s Kathmandu visit in October 2019.

Officials have been working to finalize the investment modality for the BRI projects in Nepal, but they have not made much progress due to lack of clear political guidance.

“Nepal is not solely responsible for the slow progress on bilateral issues with China. But Deuba’s apparent indifference on China-related issues cannot be overlooked,” says Sapkota.

China expects some headway on the BRI projects during Wang’s Kathmandu visit.

Bhattarai, the vice-chairman of China Study Center, says the MCC compact would not create any obstacles f0r the BRI projects.

“We have to implement the agreements with China. I do not think Americans can create obstacles in our relations with our northern neighbor,” he says.

With China prioritizing the BRI in Nepal, Chinese ambassador Hou has also started pressing the Deuba administration, through different channels and leaders, to do the same.

She has in recent times met President Bidya Devi Bhandari, Speaker Agni Sapkota and Maoist Center chair Dahal to convey Beijing’s message.

On March 11, China’s official mouthpiece Global Times published an interview of President Bhandari in which she called for “common effort” to expedite BRI projects.

While Nepal as a sovereign state is free to decide on its own—on MCC compact or on Ukraine—foreign policy experts say it should take neighboring countries into confidence before making decisions with geopolitical implications. 

“If any of our neighbors express skepticism over our decisions, it is prudent to explain to them our rationale—that is not happening,” says Sapkota.

Mrigendra Bahadur Karki, executive director at Center for Nepal and Asian Studies, says after the compact’s endorsement Deuba’s key foreign policy challenge is to create an environment of trust with China.

“The Chinese side has also realized that it should build good rapport with the ruling Nepali Congress (NC) to secure its interests in Nepal,” he says.

Over the past few years, the relationship between the NC and China has not been very smooth.

The Deuba government has raised the issue of China’s alleged border encroachment in Humla district. A Home Ministry report had concluded in October 2021 that there were “some issues” at the Nepal-China border, which China has denied.

Then there is cross-border trade. Nepal-China border points remain virtually closed despite Nepal’s repeated request to ease the movement of goods through them. Nepal’s export to China has almost stopped. Ahead of Wang’s visit, some progress is expected on the issue, as officials from both sides have started talking about easing trade bottlenecks at the border.

Similarly, China is yet to arrange for the return of Nepali students who were rescued and brought home in the wake of Covid pandemic. Commercial flights between Kathmandu and various Chinese cities remain suspended. At present, only a few cargo flights are in operation between the two countries.

Nepal is likely to bring up all these issues during Wang’s visit and seek China’s cooperation on their resolution. On the BRI, Nepal has some expectations with China. Even as China is pushing Nepal to select BRI projects, Nepal is in turn urging China to agree to more projects on a grant basis and to offer concessions on others.

“Wang’s visit could be beneficial as both sides will be able to convey their concerns,” says Bhattarai.

Along with bilateral issues, China is likely to push for the unification of Nepal’s communist parties, say political experts. They say China wants to install a favorable communist parties-led government in Kathmandu.

Chinese leaders have been encouraging Nepal’s communist forces to unite. Beijing was upset when the Nepal Communist Party, the largest and most powerful communist force in the country’s political history, split in 2021.

The 2015 constitution provides 22 exclusive political and administrative rights to local governments (see list alongside). Similarly, there is a long list of concurrent powers the three tiers of government can implement in coordination.

That is why it is often said Singha Durbar (the central administrative body) has reached villages, which means people can now get all services at their doorsteps without, unlike in the past, the need to visit Kathmandu. But as local governments are set to complete their first five-year term, they are still grappling with grave legal, budgetary and human resources problems.

The constitution authorizes them to draw up laws, policies, plans, and annual budgets, just like the federal and provincial governments, but in the past five years they have struggled in these tasks.

Former government Secretary Gopi Nath Mainali says local governments are yet to fortify themselves to be able to fully exercise their constitutional rights.

“The constitution provided them the right to self-government, but local leaders and politicians are yet to fully grasp this idea. They are unclear about how they should operate,” says Mainali.

In these five years local governments paid little attention to building a robust system and continued to rely on the federal government for resources.

Subnational governments get federal money under four headings: fiscal equalization, conditional, special, and complementary grants. There is a clear demarcation on the spending of these allocations.

In the fiscal year 2021-22 alone, the federal government allocated Rs 362.63 billion to the provincial and local governments. According to the Ministry of Finance, around 18 percent of the federal government’s total budget was allocated to support local governments.

But over the years, Mainali says, local bodies did little to generate their own revenue and resources.  

“They [local governments] have failed to collect taxes, their key revenue source. They did not want to collect taxes out of fear of losing voters,” says Mainali. “Budgetary constraints at the local level can’t be resolved from the center. Local governments need to expand their economic activities.”

Hom Narayan Shrestha, chairman of the National Association of Rural Municipalities in Nepal (NARMIN), does not subscribe to Mainali’s views.

He says it is continued centralization of resources that has hampered local governments from the start.

“While the constitution decentralized the duties, the federal government centralized resources, paralyzing the functioning of local governments,” he says.

The association has been fighting for budgetary independence of local bodies by drawing the attention of political leaders on the huge gap between the local level’s rights and resources. 

To function independently, local governments need human resources from diverse fields, but the federal government has failed to appoint administrative officers in many places, according to Shrestha.

The adjustment of civil servants in the three-tier of government was tardy and often controversial. The process of forming the provincial Public Service Commission dragged on for a long time.

Similarly, the federal government did not offer training and orientation on formulation of laws and other programs. Although some non-governmental organizations did train elected officials in some places, the training was insufficient.

In many areas, the performance of local governments is unsatisfactory. For instance, a study by the Ministry of Federal Affairs and General Administration shows 88 percent of local governments don’t have separate departments for waste management. Likewise, many have been unable to create municipal police.

Shrestha says these issues could be resolved, provided the center provides sufficient funds and resources.  

“With enough funds we can hire experts to perform highly-technical tasks. We can ask the Public Service Commission to provide the human resources—but only if we get enough money,” he says.

Local governments have also been entrusted with the right to conduct their own census and collect records, but they are still relying on the data produced by the Central Bureau of Statistics (CBS).

Dissatisfied with the census conducted by the CBS, Khandadevi Rural Municipality in Ramechhap district recently deployed its own team to carry out the local census. Similarly, Chandra Nath Municipality in Jumla district is conducting its own census. But the majority of local units across the country say they lack resources to carry out their census duties.

The resource woes of local bodies have also hit sectors like health, education and environment.

Schedule 8 of the constitution mentions that basic and secondary education shall remain the sole jurisdiction of local governments and conditional grants from the federal government shall be spent on teachers’ salaries and other expenditures. But Shrestha says the center has been allocating less budget in education compared to what it used to when the country was a unitary state.

“The federal government has curtailed the spending rights of local units,” he says.

The constitution also allows local governments to develop and implement local curricula, so that children can be educated in their mother tongues. Again, there has been little progress in this area.

As per the law, local governments need to conduct Environmental Impact Assessment (EIA) before launching an infrastructure project, but more than half of them have no experts for the task. As a result, many are undertaking infrastructure projects without the EIA, which could have serious environmental consequences down the line.

Health is another area where sub-national bodies are failing to perform their duties. Although every local unit is required to have a 15-bed hospital, government data shows only 12 percent of them do so. Even then, these hospitals lack specialized doctors and technical staff, and patients are still compelled to visit cities for even basic treatment.

Many local units across the country are in the process of building hospital buildings, but they cannot run smoothly without enough trained health workers. 

Despite having to work with limited funds and resources, some local governments are optimistic things will turn around. They say the first five-year term was spent learning the ropes of self-governance and building a foundation for future local governments.

Fiscal transfer in 2021-21

Amounts in Nepali rupees (in 1,000s)

Source: Natural Resources and Fiscal Commission

Exclusive rights of local bodies

·      Municipal police

·      Cooperative institutions

·      Operation of F.M. stations

·      Local taxes

·      Management of the local services

·      Collection of local statistics and records

·      Local level development plans and projects  

·      Basic and secondary education 

·      Basic health and sanitation

·      Local market management, environment protection and biodiversity

·      Local roads, rural roads, agro-roads, irrigation

·      Rural Municipal Assembly, Municipal Assembly, District Assembly, local courts

·      Management of mediation and arbitration, local records management

·      Distribution of house and land ownership certificates

·      Agriculture and animal husbandry, agro-products management, animal health, cooperatives

·      Management of senior citizens, persons with disabilities, and the incapacitated

·      Collection of statistics of the unemployed

·      Management, operation, and control of agricultural extension

·      Water supply, small hydropower projects, alternative energy

·      Disaster management

·      Conservation of watersheds, wildlife, mines, and mineral

·      Protection and development of languages, cultures and fine arts

Source: Constitution of Nepal 2015

Three months ago, Sher Bahadur Deuba defeated Shekhar Koirala to be reelected party President at the 14th Nepali Congress General Convention. After the convention, Koirala emerged as the leader of the party’s rival faction. Koirala has since adopted the policy of supporting Deuba on an issue-by-issue basis. Kamal Dev Bhattarai talked to Koirala to solicit his views on electrical alliance and intra-party rivalry.

How do you evaluate Deuba’s performance as party president in the past three months?

It is too early to evaluate his performance this early into his re-election as party president. In this period, we have handled a few issues. He made some nominations in the party. Obviously, questions were raised on the nominated names and appointment criteria. I have been pushing to define criteria for such appointments.

On the MCC compact negotiation, the party president involved all of us under his leadership and it produced a good result. He was successful in bringing major parties on board to ratify the compact, which is a plus point. To resolve issues related to the party’s sister organizations, we are still doing homework. There is no alternative to dissolving sister organizations and starting afresh.

There are talks of an electoral alliance with communist parties. Do you see that happening?

In local elections, we should not forge an alliance with communist parties. Nepali Congress is capable of winning on its own. If we forge an alliance, we will appear weak in front of voters.

Further, there is a lot of animosity between the Congress and Maoist cadres at the grassroots level. The wounds of the 10-year Maoist insurgency are yet to heal. Congress cadres at the local level were the prime targets of the Maoist party during the insurgency.

Our ideology, our orientation, and our behavior do not match those of communist parties. In the previous elections, we supported some candidates of other parties, but we did not get anything in return.

I do not think supporters of communist parties would vote for our candidates, as there is a gap between our schooling and theirs. There are some fundamental differences. For instance, Congress is a mass-based party, while communists are cadre-based. We should take this reality into account. Communists always see Nepali Congress as an enemy.

As for the current ruling coalition, it should continue till the elections and beyond, as the chances of a single party securing a majority are slim. But an electoral alliance is not beneficial for us.

There are also talks of deferring local elections and holding federal polls first.

We have already announced the date for local elections and they must be held on time. The Supreme Court has also ruled that local elections were announced as per the constitution. But if we plan on early federal elections, the main opposition, CPN-UML, and other major parties should be on board. The decision should be based on consensus. 

What is the state of factionalism in Nepali Congress, which had reached new heights at the time of the general convention?

It is normal for relationships among rival factions to sour during general conventions. We have already left the animosity behind. This was evident when the Nepali Congress presented a united front on the MCC compact. Our party moves ahead as one based on agendas. We will also stand united during the elections.

But there is a worry that disputes at the center have percolated to the grassroots, harming the party’s electoral prospects.

There is some discord among rival factions at the local level. I have been counseling leaders at the grassroots level to bury old differences emanating from the convention and maintain unity. Winning and losing are part of democratic process. Now, we have to fight against other parties. It will certainly take time, but I am hopeful that most grassroots-level differences can be resolved in the next two to three months.