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Since the parliamentary endorsement of the MCC compact, China has stepped up its engagements with Nepali politicians. Chinese Ambassador Hou Yanqi has started reaching out to politicians, and as of this writing had met CPN (Maoist Center) Chairman Pushpa Kamal Dahal and Speaker Agni Sapkota.

Her leg-work comes ahead of the Chinese Foreign Minister Wang Yi’s impending Nepal visit at March-end, in what will be the first high-level visit from China since the formation of the Deuba government in July 2021. The Chinese foreign minister’s visit is being seen meaningfully as it will come hot on the heels of the compact’s endorsement—something that China did not want (See story here).

Ruling Nepali Congress spokesperson and former foreign minister Prakash Sharan Mahat says Nepal’s message to Wang on the compact will be simple: it is a purely development project and it will not create any problem in Nepal’s relation with China.

Following the compact’s endorsement, China is expected to push its pending BRI projects in Nepal. Mahat says the government is also ready to implement the BRI projects that are beneficial for Nepal. “Under the BRI, we expect more grant and nominal interests on loans,” says Mahat.

In a Feb 7 press conference, Foreign Minister Narayan Khadka had said there were some pending issues with China. Perhaps he was referring to the tightening of border points and Nepali students enrolled in Chinese universities being stranded in their own country due to China’s strict Covid-19 protocols.

Foreign policy analyst Milan Tuladhar who also served as foreign policy advisor to former Prime Minister Jhala Nath Khanal says it is inappropriate to link Wang’s visit to the compact. “There are many pending bilateral issues like the long delay in cross-border railway, problems at border points and implementation of past agreements,” he says. Not everything, he adds, needs to be related to the MCC compact. 

China’s strong opposition to the MCC compact was evident both before and after its parliamentary endorsement. The northern neighbor publicly blamed the US for engaging in ‘coercive diplomacy’ in Nepal, claiming that the $500 million grant came with ‘political strings attached.’

Before the endorsement, leaders of the Chinese Communist Party (CPC) had held a series of video-conferences with their Nepali counterparts, asking them not to endorse the compact from parliament. Beijing’s uncharacteristic statements on US-Nepal bilateral relations raised many eyebrows at home in Nepal as well as abroad.

So, does this signal a shift in China’s Nepal policy? Some see this as a reflection of China’s shift from quiet diplomacy to vocal diplomacy, something President Xi Jinping, the country’s most powerful leader since Mao Zedong, has championed. Foreign policy watchers note how China has become more aggressive and vocal everywhere, including in South Asia, on issues related to America and India.   

Harsh V. Pant, Professor of International Relations at King's College London, says Chinese are now more explicit in expressing their preferences. “We see the famous Wolf Warrior diplomacy of China everywhere—if they do not like something, they openly express it, their diplomats are now more expressive, and they push back against anyone who is critical of them even in social media,” says Pant.

Take Bangladesh, where the Chinese have also become more vocal than before. In 2021, some Bangladeshi media outlets reported that the South Asian country was mulling joining the US-led QUAD. China’s Ambassador in Dhaka Li Jiming responded by saying such a move would entail “substantial damage” to bilateral relations.

Bangladeshi Foreign Minister AK Abdul objected to the statement, terming it unfortunate and aggressive, and reminding China that Bangladesh is capable of taking its own decisions.

Similarly, Chinese officials have become vocal in other South Asian countries such as the Maldives and Sri Lanka when it comes to denouncing the US and India.

According to Amit Ranjan, a research fellow at the Institute of South Asian Studies, an autonomous research body at the National University of Singapore, the Chinese feared that the endorsement of the MCC Nepal Compact would help increase American footprint in the Himalayas. Ranjan argues that Beijing was confident that it could prevent the compact’s parliamentary passage. “Only when it became clear that the parliament would endorse it did they start becoming more vocal,” he says.

Ranjan says China adopts different approaches in different countries and so it is hard to arrive at a sweeping judgment of its diplomacy. China is trying to regain its lost space in the Maldives, and it is trying to assert itself in Sri Lanka. In Nepal and Bangladesh, it is increasingly competing against India and the US.

Though China has been adopting aggressive and explicit postures everywhere, Nepal remains a test case due to its strong communist parties with robust links with the CPC. “In other South Asia countries, communist parties enjoy little actual influence. Not so in Nepal. China sees an opportunity to influence Nepal’s political system by using the country’s vast communist network,” Pant says.

Another emerging trend in Chinese diplomacy, according to him, is their greater involvement in the domestic politics of other countries.

Returning to the MCC compact, China’s strong opposition also suggests growing geopolitical competition with America and Nepal’s slow progress on China’s Belt and Road initiative (BRI), say experts. “For the first time, they actually see real competition to the BRI in Nepal,” Pant says.

Nepal signed up with the MCC and BRI in the same year (2017). But Nepal is yet to select specific projects under the initiative. Increasingly, America, Indian, and western-country representatives are fretting about growing Chinese investments in Nepal. In private meetings with Nepali politicians and bureaucrats, they like to give the example of Sri Lanka, cautioning Nepal on ‘debt trap.’

China sees this as a part of a wider pattern in South Asia, all aimed at encircling it. Writing in Global Times, Li Tao of the Institute of South Asian Studies, Sichuan University, argues that the US is trying to use the MCC compact to make Nepal an important part of Washington and New Delhi's anti-China coalition.

She says Nepal’s decision to endorse MCC will have political, diplomatic, and economic consequences. “Diplomatically, Nepal will be forced to change its “equidistance” policy with China and India. Nepal, moreover, will now have to get involved in the Indo-Pacific Strategy, and there is a risk of the country being used to contain China's development.” For Li, the American intention is clear enough: to obstruct the BRI in South Asia and to undermine the security and stability of China’s southwestern frontier.

On February 23, Chinese Foreign Ministry Spokesperson Hua Chunying termed the MCC compact ‘Pandora’s Box’. On March 7, a China Daily editorial warned of serious consequences should “any part of the compact be used against neighboring China”. It further advised Nepal to stay out of “the US' geopolitical games”.

Pramod Jaiswal, Research Director at Nepal Institute for International Cooperation and Engagement, a Kathmandu-based foreign policy think-tank, says the Chinese were not bothered about the MCC compact before American officials linked it to the IPS.

“The MCC compact itself is not a big issue for China as it only relates to roads and transmission lines,” Jaiswal adds. “What the Chinese fear is Nepal tilting more towards America and also ultimately joining the IPS, a fear that has made them more vocal.”

To counter growing American and Indian influence, China has adopted a new approach in South Asia. The trend is of engaging small South Asian countries collectively, side-by-side the old bilateral engagements.

Soon after becoming Chinese president, President Xi had in 2013 directed his Foreign Ministry to develop new political, economic, and security cooperation policies to tie the neighboring countries to China more closely.

In 2020 and 2021, China held collective meetings with South Asian countries, in what some see as Chinese efforts to create a sub-regional body under its leadership.

On 8 July 2021 the China-South Asian Countries Poverty Alleviation and Cooperative Development Center was launched in Chongqing City in the presence of resident ambassadors of Afghanistan, Pakistan, Nepal, Sri Lanka, and Bangladesh. China also held collective discussions with the same countries on Covid-19.

The Kathmandu-Tarai fast track was conceived decades ago. But work on it started only after the government handed over the project to Nepal Army (NA) in 2017. In a revised deadline, the army has pledged to complete the 72.5 km expressway by 2025. But that timeline will be tough to meet. Here is an explainer about the project history, challenges and current status.  

The start

The construction of Kathmandu-Tarai fast track, an alternative highway linking Kathmandu valley with (Bara district in) the Tarai, was envisaged during the Panchayat era. But the project spent a long time in incubation and planning stages. 

In 1992, two years after the restoration of democracy, the National Planning Commission in collaboration with the Danish Development Cooperation conducted a feasibility study for the fast track. Four years later, in 1996, the government invited an expression of interest from companies. Yet there was no progress for more than a decade. 

In the intervening period, Nepal was thrust into an armed conflict, followed by a popular uprising. The centuries-old monarchy was overthrown and the country became a federal republic.    

In 2008, the fast track plan was revived after the Asian Development Bank (ADB) prepared a feasibility report and preliminary design. The same year, the government proposed an alternative to Kathmandu’s Tribhuvan International Airport in Nijgadh, Bara, further boosting the expressway’s prospects.

The army was entrusted with opening the track in 2008. After this was completed in 2011, successive governments sought international investors to develop the project, but there was again little progress.   

Failed international bids

The process of inviting international bidders for the fast track development started after 2011, but the response was tepid. The project was largely seen as light in terms of returns. 

In the pre-qualification bid in 2014, the Infrastructure Leasing & Financial Services (IL&FS), the Larsen and Toubro (L&T) Infrastructure Development Project, and the Reliance Infrastructure expressed interest.  Two companies later pulled out raising the issue of the project’s economic viability. The then Nepali Congress-led government decided to give the job to the consortium led by IL&FS. The company was assured annual revenue of Rs 15 billion from the expressway. 

But the government decision to award the contract to the company was challenged in the Supreme Court. The petitioners argued that the project’s cost was very high. In response, the court on 9 Oct 2015 directed the Nepal government to halt all related works. 

The subsequent CPN-UML government led by KP Sharma Oli terminated all agreements and contracts signed with IL&FS.  

In the fiscal 2016-17, the government decided to develop the fast track with domestic resources by allocating Rs 10 billion for the construction of its Budhune-Hetauda stretch.  

The army’s choice

The government had planned to construct the Kathmandu-Tarai fast track under the build-own-operate-and-transfer (BOOT) modal, but international companies were uninterested. Meanwhile, the army was lobbying to secure the contract. 

The Nepali Congress-Maoist Center government at the time was wary about awarding the project to private companies and decided to entrust the project to the army in 2017. Then, South Korea’s Soosung Engineering Co. prepared the fast track’s detailed project report (DPR).

The government officially handed over the Kathmandu-Tarai Fast Track Road Project to the army on 11 Aug 2017. 

The current status

The army tracks the project’s progress in two ways: physical and financial. According to its latest data, overall physical progress stands at 16.10 percent and the financial progress at 14.51 percent. 

According to the army, 96 percent land-acquisition has been completed, except at Khokana in Lalitpur district. Similarly, 99.02 percent of tree feeling has been completed. 

By mid-July 2022, the NA aims for 21 percent overall progress.  

The key features

According to the army, the fast track is designed as per the Asian Highway standard, with a two-lane dual carriageway that will be 25-meter wide in the hills and 27-meter wide in the plains. 

The 72.5-km expressway starts at Khokana in Lalitpur and ends at Nijgadh in Bara where it meets the East-West Highway. It will traverse parts of Kathmandu Valley, Siwalik hill range, Doon valley, Mahabharat range and Tarai plains.  

The environmental concerns

The Ministry of Forest and Environment approved the project’s Environment Impact Assessment (EIA) in 2015. The army claims to have fully factored in environmental concerns while developing the expressway. Compensatory tree plantation (25 trees for every one felled) has been expedited as mandated in the EIA; 402,823 tree saplings have been planted as of July 2021.

The EIA report says that there is a high chance of landslides due to deforestation. Moreover, if soil and debris from construction activities are not properly managed, they could pollute rivers and affect land fertility.    

Environmentalist Prabhu Budathoki says environmental concerns are routinely neglected in big development projects. As such, there should be a close environmental follow-up on the Kathmandu-Tarai fast track.

Concerns of Khokana residents

Khokana in Lalitpur district is an ancient Newa town known for its culture and heritage. Khokana residents are against the expressway, whose construction, they fear, could lead to a loss of their heritage and ancestral lands.   

The army says timely project completion will be difficult without resolving their issues. 

Factors slowing it down

Land acquisition in Khokana is one of the key hindrances. The Covid-19 pandemic also slowed work. 

The army says interference by parliamentary committees has also hindered progress. 

Tunnel construction is said to be one of the most challenging and time-consuming parts of the project and the army is still in the process of planning the tunnels.  

To expedite work, the army has asked the government to allocate sufficient funds in the coming years.  

The army says it can complete the project by the January 2025 deadline, provided the government allocates sufficient funds and settles disputes related to land acquisition. (The initial project deadline was September 2021.)

Former government secretary Tulsi Prasad Sitaula blames the army’s lack of experience in large infrastructure projects for the delays.

Another reason is the absence of contractors capable of undertaking a large infrastructure like the fast track. As a result, adds Sitaula, the army had to bring in international companies, which is also taking time. 

The army won’t meet the January 2025 deadline if it fails to select international companies on time. In that case, says Sitaula, the project could be pushed back by at least another year.  

The cost 

Delays have massively increased project cost. In 2008, the ADB had estimated a total cost of Rs 70 billion. The Korean company that prepared the DPR in 2019 raised the cost estimate to Rs 112 billion. Today, the army estimates that the undertaking could cost Rs 175 billion. It has also issued a caveat that the project cost could further increase if there are more delays.

Potential economic benefits

Experts say the fast track will have multiple positive impacts on the economy. The distance between Kathmandu and Birgunj through the Tribhuvan Highway is 159.66 km. With the fast track, the Kathmandu-Terai route will be much shorter. In fact, it will be the shortest trade route between Kathmandu and India. The fast track could also one day become a transit route between China and India. 

Shorter time and distance will also reduce fuel consumption, saving millions of dollars of import every year. Transport fares for commodities will also be lower. 

Travel time between Kathmandu and Tarai will be cut to an hour. Additionally, the fast track will create jobs and increase economic activities along the entire route. 

In the past few weeks top Nepali politicians faced immense pressure from the US and China over its preparations for parliamentary ratification of the MCC compact. 

As political parties vacillated on endorsing the compact, it was the Americans who first warned Nepali leaders to either push the pact through the parliament or risk bilateral ties. Soon after, China too weighed in. In a series of video conferences, mainly with communist leaders, China urged caution over the compact. In breaking with its traditional quiet diplomacy, the northern neighbor became vocal this time, issuing a series of anti-MCC statements.

Both America and China violated diplomatic protocols by trying to force Nepali leaders to toe their respective lines. The Nepal government, meanwhile, did not issue any statement pinpointing the undiplomatic conducts of the US and China. 

Nepali leaders are often blamed for inviting intervention in the country’s internal affairs. The immaturity of Nepal’s top leaders in dealing with big powers, many fear, could cost the country dear. In one example, Kathmandu-based diplomats often complain that Nepali politicians say one thing in private and do the opposite in public. 

The MCC compact did get through the parliament but ahead of its endorsement, party leaders had appraised both the US and China about their plans to pass it with interpretative declarations.  

A top Nepali diplomat, who spoke with ApEx on the condition of anonymity, says Nepal asks for suggestions from China on American projects, and vice-versa. “They ask China whether to endorse an American compact. On the BRI, they ask the US. Why can’t our political leaders take their own principled stand?”

He suggests Nepali leadership practice strategic autonomy in dealing with big powers.    

Former Nepali Ambassador to China Tanka Karki also believes top politicians’ poor handling of foreign policy is inviting serious problems in the conduct of international relations.   

“Our leaders’ lack of consistency and maturity has eroded both their as well as the country’s credibility in the eyes of big powers,” says Karki. “Over the past few decades, our geopolitical importance for big powers has greatly increased. Our politicians have apparently failed to grasp this simple idea.”

Former Nepali Ambassador to the US Suresh Chalise cites a couple of examples to demonstrate the mishandling of sensitive issues by politicians. 

“Take Budhigandaki hydropower project, which has become a victim of frequent government changes. One government awards the project to a Chinese company but the deal is then terminated soon after another government comes into power,” says Chalise. 

In the next example, the former ambassador mentions the issue of the former KP Sharma Oli-led government reiterating that there are no border disputes with China. 

But then when Sher Bahadur Deuba came to power, he formed a committee to investigate the border dispute with China. “Unlike the Oli government, the Deuba government found that there were indeed border issues that needed to be resolved,” says Chalise.

He adds that the controversy over the MCC compact is the most flagrant example of our politicians’ inconsistency. 

“All the major parties were involved in the MCC compact process. But then some politicians started to protest against the compact. But in the end the same politicians came to its rescue when they realized they could otherwise fracture the ruling coalition,” says Chalise.  

There is a tendency among Nepali politicians to exploit foreign policy issues to advance political interests, which often jeopardizes diplomatic ties. For long, they have been adopting a regime-centric or even leader-centric foreign policy.  

In 2020, when Oli dissolved the House of Representatives, there was no response from India, the US, or any other country. At the time, the parties opposed to Oli’s move openly urged external powers to speak against the House dissolution. 

Experts say political parties are allowing foreign powers to dictate the country’s internal affairs. If our leaders do not mend their ways and fail to forge consensus on foreign policy, external interference could increase. Big powers already directly deal with politicians instead of relevant government agencies, they say.

Chalise says balancing ties with big powers like the US and China is becoming a big challenge for Nepal. 

“The effects of growing rivalry between the US and China is evident in Kathmandu as well,” he says.

Karki fears Nepal could be pushed into a very difficult situation if our politicians don’t mend their “errant ways”. 

Anil Sigdel, founder of Washington DC-based Nepal Matters for America, a think tank, says the MCC compact’s endorsement has sent a strong signal to the world that Nepal is both capable of and determined to maintain its strategic autonomy and decide in its best interests.

“At a time of global and regional geopolitical stress, Nepal’s decision assumes great significance. The country should continue to convince external partners that Nepal’s engagement with one does not come at the cost of another,” he says. 

To avoid the trap of growing big power rivalry, experts suggest Nepali leaders focus on economic diplomacy. 

Nilanthi Samaranayake, a geopolitical analyst with the Center for Naval Analyses, a Washington-based research organization that advises various arms of the American government, says Nepal should strive to chart its own path as a small state, separate from the competition between great powers. 

“Focus on economic security will help Nepal and other small states in the face of great power rivalry,” she says.

According to Upendra Gautam, general secretary at China Study Center, the current mess in foreign policy was not created overnight but is a result of a series of lapses. 

“Political parties are making foreign policy and international relations inseparable from internal power politics, eroding our credibility,” he says. 

He says because of our political parties, foreign powers are making inroads into our politics. “Parties are inviting foreign interference in our politics, in the process weakening themselves. If we become weak, outside powers will obviously try to meddle.”

Nepali politicians have paralyzed the key foreign policy mechanisms, as was also evident in the dispute surrounding the MCC compact. 

The Ministry of Foreign Affairs was nowhere in sight as the dispute unfolded and took a nasty turn. Foreign Minister Narayan Khadka is yet to appear in any official meeting over the compact. 

For the first time in Nepal’s political history, the 2015 constitution gave local governments the right to present their annual budgets, raise taxes and establish local treasuries. The constitution also envisioned federal grants—fiscal equalization, conditional, special, and matching grants—for these local governments.

This meant a large volume of funds has started trickling down to the coffers of local governments. Yet many of them are still unable to carry out their fiscal responsibilities. Some are struggling to present their budget on time while others are unable to manage their expenditures.

Federal affairs expert Khim Lal Devkota recommends stern action against the local bodies that fail to bring timely budget.

“We should closely monitor local governments’ budget-handling,” he says. “If they fail to spend, the federal government should cut off their grants and transfer the funds to well-performing local bodies.”

Only around half of the local governments currently meet their budget presentation deadlines. Some introduce their budget weeks past the deadline while dozens of others cannot do so for much longer. This delay directly affects local-level development and governance.

The Intergovernmental Fiscal Arrangement Act-2017 makes it mandatory for all municipal governments to present their annual budget by Asar 10 (June 24). The date was specified so that development works could begin in July. But this isn’t the case in many local bodies.

According to the Ministry of Federal Affairs and General Administration, 14 local governments are yet to introduce their budget for the current fiscal 2021-22.

Thirteen of these local governments are from Madhes province and one from Bagmati province. Similarly, in the previous fiscal, four local governments from Madhes and one from Sudurpaschim failed to present their budget.

The Office of Auditor General (OAG) says both incomes and expenditures of local governments lose legitimacy if they fail to bring their budget by the legal deadline.

The National Natural Resources and Fiscal Commission, a constitutional body handling fiscal issues of all three tiers of government, has made timely budgets a condition for allocating federal grants to local governments. It has also suggested that the federal government cut performance-based equalization funds to delay-prone local bodies.

“But the federal government is yet to implement the commission’s recommendation,” rues Krishna Bahadur Bohara, the commission spokesperson.

There are a host of reasons resulting in budget-presentation delays in local governments—disputes between the chiefs and deputies of local bodies being the most prominent of them. This problem is particularly acute when candidates from different parties occupy the chief and deputy positions.

In the fiscal year 2020-21 more disagreements were reported between local body chiefs and deputies in Madhes province compared to any other other province, as per a study of the Democracy Resource Center (DRC), a Kathmandu-based think-tank.

In the fiscal year, the study shows, nearly half of the local governments in Madhes failed to present their budgets by the June 24 deadline and nearly 26 percent had not presented their budgets even by mid-August. By contrast, over 95 percent of local governments in other provinces had presented their budgets by mid-August.

The study also suspects that for the fiscals 2019-20 and 2020-21, budget-planning and project-implementation may also have been affected by the Covid-19 pandemic.

There are many instances of budget-presentation being delayed due to disputes between local government chiefs and deputies, with each wanting to allocate funds in their electoral constituencies. A case in point is Chhinnamasta Rural Municipality in Saptari district of Madhes. Chhinnamasta is yet to present this year’s budget, after failing to bring the budget last fiscal as well.

Surya Narayan Mandal, chairperson of the rural municipality, refused to talk to ApEx. Usha Kumari Mandal, deputy chairperson, meanwhile, blamed the chairperson for the budget-delay.

Political disputes aside, many local governments are also struggling with staff-shortage. Though it has been five years since the local governments were elected, the Ministry of Federal Affairs and General Administration is yet to supply the required staff to local governments.

The DRC study says both the federal and provincial governments have failed to provide enough help to local bodies in order to enhance their capacity.

Local governments are failing not just on timely budgets. Even the local bodies that have approved their budgets on time are hamstrung by skewed fund-allocation and low capital-expenditure. This is so mainly because many local governments have been ignoring fiscal rules while planning and allocating budgets. 

According to Local Level Plan and Budget Formulation Guideline 2017, local bodies should prepare a thematic list of ward-level projects prioritized by ward committees and the projects deemed necessary at the local level. But, instead of following the guideline, local leaders are busy shoring up their electoral constituencies.

The latest OAG annual report says local governments on average spent only 65.68 percent of the total budget, indicating that they are preparing their budget without serious planning. Similarly, 43 local governments overshot their budget ceilings while 57 are yet to undertake their fiscal audit.

Mounting arrears is another problem that plagues local governments, which, according to the OAG report, accounted for 4.05 percent of arrears. The report has identified several flaws in procurement, grant and expenditure management, and fiscal monitoring and reporting process, among other concerns.

The OAG has also identified the culture of local governments spending more money on small development projects to appease a particular group of voters as a problem.

Experts stress the need for supporting mechanisms to address these anomalies in local governments.

Says Devkota, the federal affairs expert, soon after the local governments were elected, he and others had proposed a dedicated think-tank to provide ‘knowledge support’ to local governments.

“But there was no initiative to implement the proposal. Local governments have been performing marginally better in recent years, but there are still many budgetary issues that need to be addressed,” he says.

Elected local representatives cite lack of coordination among the federal, provincial, and local governments as the main reason for delays in budget and development projects.

Bhim Prasad Dhungana, mayor of Nilkantha Municipality in Dhading district, says the federal and provincial governments don’t take the issues of local governments seriously.

“Lack of coordination has led to problems like budget duplication. There have been several instances of federal, provincial and local governments allocating budget for the same project,” he says.

In 2017, when Nepal joined China’s Belt and Road Initiative (BRI), India had expressed its reservations through various channels. 

Nepal assuaged India’s concern by telling its leaders that projects under the BRI would be limited to connectivity and hydropower and would not affect India’s security. 

Now it is China that is expressing reservations over the $500 million American grant under the Millennium Challenge Corporation (MCC) compact, putting Nepali leaders in a spot. India, meanwhile, has maintained a studied silence on the controversy. 

A senior Indian official has said India does not have any say on MCC matters as it is a bilateral issue between Nepal and the US.  

But a senior ruling party leader in Nepal told ApEx that Indian leaders have intimated to their Nepali counterparts that Nepal should ‘independently’ decide.

One project under the compact is a cross-border electricity transmission line between Nepal and India, a part of which is to be built on Indian soil. 

According to the senior ruling party leader, India is silent on the MCC controversy also because the country has a massive investment in Nepal’s hydropower, which can be exported to India via the new transmission line.   

New Delhi-based political analysts see the political and public divisions in Nepal over the compact as a sign of growing Chinese influence. The MCC itself is not a concern for India, they say, as it is not going to impact Nepal-India bilateral relations.

“As it [MCC compact] has become highly controversial in Nepal, India does not want to comment on it. Franky, India is not bothered about whether or not the compact is endorsed,” says Nihar R. Nayak, a Nepal-India relations expert. “Regarding the American role in the region, there is a good understanding between India and the US.” 

Perhaps India reckons any kind of comments on the compact, a highly charged topic in Nepal, could backfire. “India has adopted a silent approach while dealing with Nepal in recent years, as the public sentiment in Nepal can quickly turn on an outsider’s remark on domestic issues,” says Chandra Dev Bhatta, a foreign policy expert.

“Yet India being taciturn does not mean it does not have any say on issues like the MCC compact. India will have to face the consequences if the geopolitical games in the region get out of hand.” India, Bhatta adds, would also not want to completely lose its influence on Nepal.  

While India is silent, countries allied with the US, such as the UK, Japan, Korea and Australia have asked Nepal’s leadership to endorse the compact. Ambassadors from these countries have been meeting Nepali leaders to convey their ‘implied message’ on the compact.  

Suresh Chalise, a former Nepali ambassador to the US, says the constituents of AUKUS and QUAD obviously want to push the MCC compact forward.  

“These countries want to promote clean energy in this region to tackle climate change and the transmission line [under the MCC] serves this purpose,” says Chalise. So it is only natural for the ambassadors of these countries to be actively pushing the compact.  

While the US has pressed Nepal’s political parties to get the compact endorsed by February 28, China has denounced what it has called “coercive” American diplomacy. 

Wang Wenbin, Chinese foreign ministry spokesperson, on February 18 said China opposes coercive diplomacy and actions that pursue selfish agendas at the expense of Nepal's sovereignty and interests. 

“China is glad to see the international community conducting development cooperation with Nepal to contribute to its economic growth and livelihood improvement,” he said. However, such cooperation should be based on full respect for the will of the Nepali people and “come with no political strings attached”. 

Media reports also suggest that the Chinese side has been urging the Nepali leaders not to ratify the MCC compact.

Over the past few years, Chinese officials had been mum on the compact; but of late, Chinese government media, including the vocal Global Times, have been publishing stories portraying the compact in a bad light.  Now, Chinese officials are publicly opposing MCC compact. 

In their conversations with Nepali leaders, US officials have conveyed that the delay in ratification owing to ‘external pressures’ would be unacceptable. The compact’s rejection, they have hinted, could also hamper US-Nepal bilateral ties. 

Senior Maoist leaders including Pushpa Kamal Dahal have been vocal about American pressure on them to back the compact. Some party leaders even claim the US officials threatened economic sanctions were the compact to be rejected.  

The US officials have objected to such claims of Maoist leaders. They have, however, said that some leaders could be held accountable on human rights violations and corruption cases, but that there will be no sanctions. 

Prakash Sharan Mahat, spokesperson of Nepali Congress, disagrees that the US is putting pressure on Nepali politicians for the compact’s ratification.

“As far as I know, the US is just telling Nepali leaders to take a prompt decision. There is no pressure,” he says. 

The US embassy on February 19 said in a statement that whether Nepali leaders ratify the compact is “a decision for Nepal to make, as a sovereign democratic nation, and Nepal’s decision alone”.

The compact was tabled in parliament on February 20 amid protests by the CPN (Maoist Center) and CPN (Unified Socialist), both parts of the ruling Nepali Congress-led coalition. 

Prime Minister Sher Bahadur Deuba has expedited efforts to put the MCC compact to the vote in the parliament meeting scheduled for February 24. 

The Unified Socialist has decided to vote against the compact. Meanwhile, the Maoist Center is yet to publicly state its voting intent.  

With his coalition partners up in arms against the compact, Prime Minister Deuba has reached out to the main opposition CPN-UML for support. 

The February 28 deadline issued by the US for the ratification of the MCC Nepal compact is just days away. The Americans are waiting with bated breath—as is the whole of Nepal for that matter.

In 2014, the Supreme Court (SC) directed the government to change electoral laws to give voters the option to reject all candidates if they do not like any of them. The NOTA (‘none of the above’) option on ballot papers enables voters to officially register a form of protest over the political parties’ candidate-selection process.

The SC ruling stated that as voters were exercising only ‘yes votes’, it was important to allow them to cast ‘no votes’ as well. A joint bench of Justices Kalyan Shrestha and Prakash Wosti argued that the right to reject was an integral part of freedom of speech and expression guaranteed by the constitution as well as by international treaties and conventions. But political parties are yet to change electoral laws to this effect, largely out of fear of their candidates being rejected.

‘White vote’, ‘blank vote’, and ‘against all’ are other nomenclatures for NOTA adopted in different countries like India, Ukraine, Spain, Bangladesh, Pakistan, and in some American states. When voters choose NOTA option in their ballot papers, they deem none of the available candidates worthy of elected positions.

It has been eight years since Nepal’s apex court order, but major parties continue to demur. Following the order, the Election Commission, in 2016, had incorporated this provision in the drafts of election-related laws. But parties opted to remove it after parliamentary deliberations in 2017.

Ayodhi Prasad Yadav, the chief election commissioner at the time, says he had tried to convince parties to incorporate the provision, but to no avail. He had visited India to study the procedures of NOTA option in elections and concluded that it could be easily implemented in Nepal as well.

“Honoring the Supreme Court verdict and with a view that it would strengthen the democratic rights of Nepali people, the Election Commission had pushed the NOTA option, but major parties were not willing,” says Yadav. “Such a provision cannot be implemented without agreement among the political parties.”

Save for a few fringe parties, none of the big parties has seriously entertained the notion of NOTA option for elections.

According to constitutional lawyer Radheshyam Adhikari, after debating the issue in parliament, the parties concluded that they should wait for some time considering the low level of voter education.

“In our context, electoral practices are yet to take root at the ground-level. We are still disseminating voter education on how to correctly select candidates,” says Adhikari. “In this situation, the implementation of NOTA could further confuse voters.”

Adhikari, nevertheless, is hopeful that after some periodic elections, higher voter education-level will allow for disapproval votes.

Bibeksheel Sajha Party, led by Rabindra Mishra, is among the small number of parties that demand NOTA voting option. The party has even incorporated the option in its statute.

“As per the Supreme Court’s ruling and successful practice of many democratic countries, we should not delay the implementation of NOTA option, which is a voter-right,” says Prakash Chandra Pariyar, a secretariat member of Bibeksheel Sajha Party. 

Election experts say the adoption of the NOTA option would bring a systemic change to the current electoral process, which is becoming increasingly costly.

Under the current system, there is a culture of political parties picking candidates who can spend the most to win elections. As a result, competent candidates seldom get the opportunity to represent their constituencies.

Neel Kantha Uprety, former chief election commissioner, says people always want to vote for competent contenders.

“With the NOTA voting opting, parties will be compelled to pick their candidates more judiciously. It will also minimize the influence of money in candidate-selection,” he says. “If a large number of voters select NOTA, parties will have to acknowledge that there was a problem with the candidate in question, which in turn will lead to an improvement in the quality of candidates in the field.”

Pariyar of the Bibeksheel agrees with Uprety. He says the principle of lesser-evil dominates Nepal’s current election system.

“Voters are compelled to pick a candidate who is equally if not worse than other contestants in the fray. With the NOTA option, they will get to tell the political parties that they want better candidates,” says Pariyar.

Normally, NOTA votes do not get a majority, although that cannot be ruled out. If the majority does vote for NOTA, there would be a re-election. But in a democracy even the voices of minorities are respected.

In 2013, the Indian Supreme Court mandated that both the federal and provincial governments offer a NOTA option for voters. It was subsequently implemented by the Indian government.

In the 2014 Indian general elections, the NOTA option received approximately 1 percent of all cast votes. A little over 1 percent of the Indian voters chose NOTA in the 2019 Lok Sabha elections. While 2.08 percent of the voters in Assam and Bihar chose NOTA, the ratio was just 0.65 percent in Sikkim.

The new voting right in India was gained after a long struggle. In 2004, People’s Union for Civil Liberties, a human rights group, had filed a legal petition asking for measures allowing voters to express their views without any pressure.

A year after India’s top court granted such a right, Nepal’s top court followed suit. 

“The voters should not be influenced to vote for a certain candidate and there should also be no imposition of certain ideologies on them,” Nepal’s SC said in its ruling.

It also cited Article 25 of International Covenant on Civil and Political Rights 1966 that calls for universal and equal suffrage, and guarantee of free expression. 

Adhikari, the constitutional lawyer, says many people of voting age do not exercise their franchise as they do not like the candidates fielded by the political parties.

“If the right to reject is implemented in elections, such voters will get a chance to express their disapproval of candidates. They should get to express their disillusionment with politics through the electoral process,” he says.

On February 13, 98 lawmakers from the ruling parties registered an impeachment motion against Chief Justice Cholendra Shumsher Rana. The sudden move smacked of political opportunism. 

The judiciary had been in crisis for the past five months. The political parties were indifferent, all the while looking to exploit the crisis for their vested interest. They got to do so on February 13.

The impeachment motion was registered just before the hearing of a case against 14 lawmakers of CPN (Unified Socialist), a ruling coalition partner. The main opposition, CPN-UML, had filed a case questioning the legitimacy of the lawmakers who were expelled from the mother party.

The ruling coalition wants the Supreme Court to decide in its favor. If the court scraps the status of 14 lawmakers, there will be questions over the legitimacy of the incumbent government.

Similarly, ruling parties want to overturn the judicial appointments of KP Oli-led government while the UML’s case against Speaker Agni Sapkota is also under deliberation.

That the impeachment motion was registered against Rana to influence these court cases is clear enough, say observers.

For the impeachment motion to clear through parliament, it must have the support of two-thirds of the lawmakers. Thus the motion can’t be endorsed without the main opposition, UML, on board.

Last year, UML chair KP Sharma Oli came down heavily against Rana and four other Supreme Court justices who delivered the verdict to reinstate parliament and appoint Sher Bahadur Deuba as prime minister. Now, Oli is defending Rana and opposing impeachment, saying the motion is a blow to the judiciary’s independence. 

Similarly, PM Deuba, who was against impeachment just three months ago, has changed his mind and is now in favor of impeaching Rana. Also linked with the impeachment case is the much-debated Millennium Challenge Corporation (MCC) Nepal compact, says a Nepali Congress leader who spoke on condition of anonymity. 

“Maoist Chairman Pushpa Kamal Dahal had pledged to support the MCC compact after the agreement among ruling parties to impeach Rana,” says the NC leader. “That was the trade-off but Dahal backtracked.”

According to another ruling party leader, CPN (Maoist-Center) and CPN (Unified Socialist) are willing to table the compact if PM Deuba commits to keep the coalition intact.

It is an open secret that the UML will support the compact’s endorsement if PM Deuba breaks the coalition.

Nepali Congress Central Working Committee member Min Bahadur Bishwakarma says ruling partners are engaged in all kinds of political bargaining. 

“On the one hand, the Maoists and Unified Socialist want to see the MCC endorsed amid their protests. On the other hand, they also want to stay in the government,” says Bishwakarma.

Charan Prasai, a human rights activist, says the impeachment’s timing indicates that it is politically motivated.

“There are cases in the apex court that are directly linked to the fate of the coalition government. Media reports also suggest Rana was suspended so that the new acting chief justice will serve the coalition’s interests,” says Prasai. 

Prasai adds that it is no secret that chief justice and justices frequently meet politicians to bargain on under-deliberation cases. The two sides maintain communication through middlemen. Lawyers knock on the door of politicians to become SC judges, and they in turn deliver verdicts favorable to their political patrons.

Prasai is of the view that the nexus between executive and judiciary deepened after then Chief Justice Khilraj Regmi was appointed government head in 2013 with the brief of holding the second Constituent Assembly elections. After this, judges and politicians started to mingle freely and to see how they could support each other. “It has now become normal for politicians to interfere in courts through judicial council and engage in bench buying,” says Prasai.

The same is the case in bureaucracy. Senior bureaucrats frequently knock on the door of politicians for promotion and favor. In return, politicians seek their support for policy and monetary corruption. This is how many former bureaucrats get appointed to key constitutional bodies. The Election Commission, the National Human Rights Commission, and the Commission for the Investigation of Abuse of Authority are thus highly politicized.

Says political analyst Lokraj Baral all state mechanisms have deviated from their constitutional duty and morality. “Heads of state bodies such as the judiciary, Election Commission, and bureaucracy are in hock with politicians for personal benefits,” says Baral. Businessmen and politicians also maintain close connections and these businessmen influence decision-making of ministries and other state organs. As businessmen provide monetary support to political parties, politicians often take policy decisions favorable to them.

Political Analyst Bishnu Dahal says the nexus between politicians and businessmen and between politicians and criminals can be seen from grass-roots to center levels. There is ‘setting’ everywhere, badly affecting state institutions, says Dahal.

Dahal says the ruling parties were preparing to impeach the chief election commissioner Dinesh Kumar Thapaliya due to his firm stand in favor of timely elections but backtracked due to public backlash and decided to impeach the chief justice instead.