Submit your Article

The United States, over the past couple of years, has stepped up its engagement with South Asian, including in Nepal, promoted by  China’s growing military, economic and political footprints in these countries. Mainly after the promulgation of the new constitution in 2015—a period also marked by growing US-China tensions—Washington has substantially increased its presence in Nepal, say observers.

America was the second country, after the United Kingdom, to establish diplomatic ties with Nepal. Given its strategic location, Nepal has always been on the US radar. For a long time, there was an impression in Kathmandu that Washington sees Nepal through Indian eyes and it lacked an ‘independent Nepal policy.’ Indeed, during the Maoist insurgency and the subsequent signing of the peace deal between the Maoists and the Seven Party alliance, the US closely worked with India on Nepal-related issues.

But over the past few years there have been visible changes in US policy towards South Asia, including Nepal, as US officials seem to increasingly separate India from the rest of South Asia in their policy engagements. A series of high-level visits in the recent past suggest that the US wants deeper engagement with Nepal.   

Kelly Keiderling, Deputy Assistant Secretary for Public Diplomacy who oversees South Asia (except India), minced no words in saying that other South Asian countries get overshadowed as America’s political leadership naturally gives more attention to India.

Keiderling, who was in Nepal last week, said: “… We divided India from Nepal, Sri Lanka, Bangladesh, Bhutan, Maldives, and other South Asian countries because India naturally gets too much attention from our political leadership. We want to boost our relation with India but if we keep India with other countries including Nepal, they are going to be lost bureaucratically.”

She said that the US wants closer engagement on several issues. “There is much potential in a country like Nepal, and we want to be a part of that potential. We pay close attention to that potential,” she said. 

What then are the key American strategic interests in Nepal?

Also read: The many Indias in Nepal 

Assistant Secretary for South and Central Asian Affairs, Donald Lu, who visited Nepal last week, broadly highlighted three key interests. The biggest interest is collaborating with Nepal on its economic development to eradicate poverty. Second, he said, America would like to increase trade and investment. He then said America would also like to see Nepal as an independent and sovereign country.

“Nepal is a big country but you are between two bigger countries [India and China]. It is really important for the US that Nepal remains an independent and sovereign country,” he added.

A series of recent unprecedented visits also demonstrate the US’s growing interest in Nepal. Suresh Chalise, former Nepali Ambassador to Washington, says the US has increased its engagements not only in Nepal but in the entire region.

“There are several issues between the two countries,” says Chalise. “The US is supporting Nepal’s social and economic development. The MCC remains unsettled and there are engagements relating to the environment, mountains, among others.”

In the past couple of years, a $500 million grant under Millennium Challenge Corporation (MCC), has become a contentious issue in bilateral relations, overshadowing others.  

In 2017, the two countries signed the compact to spur economic growth and reduce poverty in Nepal. The MCC Nepal compact, the first in South Asia, purportedly aims to strengthen Nepal’s energy sector, improve regional energy connectivity, and control transport costs to encourage growth and the private sector.

As per the agreement, the compact should have come into effect in 2019—yet it remains to be endorsed by the Nepali parliament.

America is pressing Nepali political parties for its early parliamentary ratification, without which implementation can’t move ahead. Over the past few weeks, a series of meetings between Nepal and American officials have focused on the MCC compact, with Nepali leaders assuring that the compact would be ratified by political consensus.

In the second week of September, Millennium Challenge Corporation (MCC) Vice President of Compact Operations Fatema Z Sumar visited Nepal, again to press Nepal’s parties on early ratification.

Sumar and Jonathan Brooks, MCC’s Deputy Vice President for Europe, Asia, the Pacific, and Latin America, met community, business, and political leaders to discuss the economic opportunities provided by the compact and to offer any needed clarifications.

But whether or not the MCC compact is endorsed, say US officials, bilateral ties will continue to be on sound footing. Stating that it is up to Nepal political parties and parliament to settle the MCC, America wants the MCC debate done and dusted with soon. Though there are no specific deadlines, the MCC board convenes on February 14, and it is likely to take a final call on the compact. 

Amid growing Chinese influence, the US also wants to work closely with Nepal on democracy-promotion. America has invited Prime Minister Sher Bahadur Deuba to the ‘Summit of Democracy’ which President Joe Biden is organizing in December.

Climate change is another area where the US plans to work closely with Nepal. Former foreign minister Pradeep Kumar Gyawali says Nepal can benefit from the US leadership on climate change. The US Embassy in Kathmandu consistently says that the US wants to work closely with Nepal on climate change.

Over the past seven decades, Nepal has been blipping more and more on the US radar. In 1950, the principal aim of US policy was to minimize the influences of communist China and other powers. The year 1960 thus saw a huge surge in American aid.

In the 1970s, America’s aid decreased slightly; in the 1980s, America focused on human rights and in the 1990s, its priority was democratic governance and free markets.  

After 9\11, America’s interest and engagement with Nepal increased substantially. After 2015, Washington has set new priorities and it now seems more and more concerned over growing Chinese economic and military influences in Nepal.

US interests in Nepal have increased

Pradeep Gyawali, Former Foreign Minister

Nepal-US relations are over seven decades old and the ties are going from strength to strength due to our special geopolitical location in South Asia.

After 9/11, America’s interest in Nepal increased substantially—as suggested by the visit of then-Secretary of State Colin Powell. At that time, America wanted to collaborate with Nepal in its global war against terrorism. This was a new issue in our bilateral ties.

America has always given high priority to Nepal. Most recently, during the Nepal visit of its officials, it has been trying to cover two bases: development projects such as the MCC and Nepal’s involvement in key events such as the Summit of Democracy.

Another of America’s concerns, from which we can benefit, is climate change. The US is trying to lead the fight against climate change. We should utilize such an interest, keeping our national interest at the center and without compromising on our foreign policy basics.

Not only America, the whole world’s concerns and interest has grown in Nepal after we promulgated the new constitution. Before that, Nepal was not much of a priority for global powers. But with the new constitution, we changed our whole identity on the global stage.

Nepal is headed towards political stability and it has finally become a safe place for investment. In the past three years, there have been substantial changes in Nepal’s identity before the world.

Recent high-level US visits to Nepal 

17 November 2021: Assistant Secretary for South and Central Asian Affairs, Donald Lu, along with Deputy Assistant Secretary for South and Central Asian Affairs Kelly Keiderling

9 September 2021: Millennium Challenge Corporation (MCC) Vice President of Compact Operations, Fatema Z. Sumar

20 February 2020: Chair of the House Foreign Affairs Committee’s (HFAC) Subcommittee on Asia, the Pacific, and Nonproliferation, Representative Ami Bera  

7 February 2020: Millennium Challenge Corporation’s Deputy Vice President for Europe, Asia, Pacific, and Latin America Jonathan Brooks

1 November 2019: Ambassador at Large for International Religious Freedom Sam Brownback

24 Feb 2019: Deputy Assistant Secretary of Defense for South and Southeast Asia Dr Joe Felter

11 January 2019: Commander of the US Indo-Pacific Command Admiral Phil Davidson

25 May 2018: A delegation from the US Government’s Millennium Challenge Corporation (MCC) led by Jonathan Brooks, Deputy Vice President for Europe, Asia, the Pacific, and Latin America

3 March 2017: The US Pacific Commander Admiral Harry B Harris Jr

Recent high-level Nepal visits to US

18 December 2018: Minister for Foreign Affairs Pradeep Kumar Gyawali on 18-20 December 2018 for delegation-level talks with Secretary of State Michael Pompeo.

14 February 2017: Finance Minister Gyanendra Bahadur Karki

2017: Chief of the Army Staff General Rajendra Chhetri to take part in Global Chiefs of Defense Conference on Countering-Violent Extremist Organization.

The main opposition CPN-UML is holding its 10th General Convention (GC) in Chitwan from November 26-28 to elect a new set of leaders.

Having concluded its Statute Convention in the first week of October, the sole purpose of this convention is to come up with a new set of party leaders for the next five years. Incumbent Chairman KP Sharma Oli is sure to be chosen party chair for another term but he is unlikely to be elected unopposed as leader Bhim Rawal has also announced his candidacy for the same post.

Via this conference, Oli intends to give a message of strength following the UML’s vertical split, with senior leader Madhav Kumar Nepal forming a breakaway party. Oli wants to give a psychological message that the Nepal-led faction’s exit has not damaged the party much. That is why PM Oli did not invite anyone from Nepal’s CPN (Unified Socialist) at the GC’s inaugural session even as leaders of other parties were invited.

Addressing a press conference in Kathmandu on November 23 that was organized to inform about the GC, Oli said that as Nepal had been expelled from the party a few months ago, there was no question of extending an invite. By not extending an invitation, the party is symbolically denying the existence of Nepal’s new outfit. Says a leader, if Nepal is invited to the inaugural session, it will cement the message of party-split among the rank and file as he would be addressing in the capacity of the head of a separate party.

For the same purpose, the party is desperate to bring a large number of cadres to Chitwan from across the country in order to show its strength. “We aim to gather at least half a million cadres in the inaugural session. Some party leaders and cadres have left but thousands of other cadres are joining,” said Oli, highlighting the mother party’s continued strength.

Also read: General Conventions: Old parties, old faces 

According to party leaders, attempts are being made to gather more cadres than in the previous general convention. There is no good data on how much damage CPN-UML suffered from the split. The only clear indicator is that about 10 percent of local representatives from CPN-UML have deserted to Nepal’s party.

Political analysts say though PM Oli is trying to downplay the effects of the party split considering the impending three-tier elections, the reality is different. Says political analyst Vijaya Kant Karna, it is the tendency of left leaders not to accept the existence of a breakaway party. “Though PM Oli is trying to give an impression that the party has not suffered, effects of the split are already visible. UML leaders are saying that around 30 percent of cadres have switched to the Nepal faction, which is going to hit the party hard in the upcoming elections,” he says. After the party split, UML lost its share in all six provincial governments.

Oli is all set to become chairman either unopposed or after an election. Leaders close to Oli have already started consultations with Rawal, asking him to withdraw his candidacy to elect Oli unopposed. Speaking to media persons, Oli, however, said that he welcomes the democratic process and would not object if any leader chose to contest him.

Then there is the question of the election of second-rung leaders. For instance the race for party vice-chair is heating up between Subash Nembang, Ishwar Pokhrel, Shanker Pokhrel, Bishnu Poudel, and Ram Bahadur Thapa. They are all seeking Oli’s blessings.

However, Oli made it clear that he would not choose some leaders over others. His message was clear enough: “I would not take the side of any leader. There should either be consensus among the aspirants or you have to contest intra-party elections.” The bottom-line is that Oli wants to go into the three-tier elections with his party intact after the general convention. 

The 26th conference of the parties (COP) to the UN Framework Convention on Climate Change (UNFCCC) opened with the event’s President Alok Sharma putting Nepal on the spotlight.

“On a visit to Jomsom in Nepal, in the Hindu-Kush region, I spoke to communities literally displaced from their homes from a combination of droughts and floods,” he said.

Sharma was in Nepal in February this year to understand the effects of global warming on mountainous communities first-hand. Sharma’s mention of Nepal, according to officials, put the Himalayas at the center of the global climate agenda, and set the tone for the conference to ratchet up ambition to limit global temperature rise.

Negotiators were also made aware of the dire situation of the planet ahead of the global conference in Glasgow by the UN’s environment agency, UNEP. Its annual Emissions Gap Report suggested that the world was on course to a warming of around 2.7 C with potentially highly destructive impacts.

Research has shown that a one-degree rise in average global temperature translates to a much higher increment in temperatures in the mountains, triggering various natural disasters in mountainous countries like Nepal.

Addressing the summit, Prime Minister Sher Bahadur Deuba urged world leaders to recognize specific climate vulnerability of the high mountains and prioritize the mountain agenda in all climate-related negotiations. PM Deuba said keeping global temperature rise to below 1.5° Celsius was vital for the mountain people.

Maheshwar Dhakal, fromer UNFCCC focal person for Nepal and head of the climate change division at the Ministry of Forest and Environment, says more effort is needed to highlight the mountain agenda in the international forum. “We have been raising this issue for long but it has never been heeded,” says Dhakal, who is now member-secretary at the President Chure Tarai-Madhes Conservation Fund. In comparison, the likes of Bhutan and Bangladesh have been much more effective in highlighting their plight in international climate forums.  

Though the government is raising the issue of the impact of climate change in the Himalayas, there is a shortfall of research in the area, says former member of the National Planning Commission Krishna Prasad Oli.  “Due to climate change, there is a danger of glacier outbursts and avalanches in the Himalayan region,” he says. “But do we have proper research to back that up to show the international community? No.”

Climate finance was another vital issue raised by Nepal at the summit. PM Deuba said, “We have mechanisms to ensure that international climate finance is channeled to support transformational approaches in implementing adaptation, mitigation, and disaster management actions together.”

In 2009, developed countries had agreed to give $100 billion a year by 2020 to help poorer countries fight climate change. But the developed countries are yet to fulfill their promise. The Glasgow pact now pushes the deadline to 2023.

Loss and damage caused by climate change was another agenda that Nepal, along with other Least Developed Countries, raised. PM Deuba called upon the parties to make loss and damage a stand-alone agenda for negotiations and to support the framework of additional financing for it. Nepal is of the view that there should be adequate support for adaptation in the most vulnerable countries by scaling up financial, technological, and capacity-building resources.

In the meeting of the Least Developing Countries (LDC) held prior to the summit, Sonam Wangdi, chair of the LDC group, said, “Dealing with the loss and damage caused by the climate crisis is a top priority for vulnerable countries. Years of inadequate action on climate change means that it is no longer possible to mitigate or adapt to wholly avoid irrevocable harms, costs, and losses from climate change.”  Wangdi said finance and technical support to address loss and damage are urgently needed.

However, the Glasgow pact makes no mention of funds to deal with the loss and damage due to climate change. Critics say there was not even a promise to set up a financial mechanism to deal with the issue as developed countries feared incalculable fines if the UN accepted financial compensation for historical emissions.

The politics of ‘net-zero’

Ahead of COP26, many countries jumped on the bandwagon to announce dates to achieve ‘net-zero’ (absorb more greenhouse gases from the atmosphere than they emit). While the UK and the US set net zero target for 2050, India set its for 2070. Critics argue that big emitters are just shifting the responsibility of taking urgent action by coming up with net-zero dates. Deadlines of decades don’t make sense when the world is faced with extreme impacts of climate change in the present.

Nepal, meanwhile, committed to net-zero by 2045. Earlier, Nepal had promised the milestone by 2050. A senior government official at the Ministry of Forest and Environment requesting anonymity says the target is not pragmatic. “We are in the process of establishing new industries, urbanization is gaining pace and the number of vehicles is increasing, which means we are going to emit more,” says the official. “We should have set the target of 2050 or 2055 at the earliest.”

Following the summit’s conclusion, even UN Secretary-General Antonio Guterres expressed his disappointment. 

He said in a statement, “The approved texts are a compromise. They reflect the interests, the conditions, the contradictions and the state of political will in the world today. They take important steps, but unfortunately the collective political will was not enough to overcome some deep contradictions… Our fragile planet is hanging by a thread. We are still knocking on the door of climate catastrophe.”

He spelled out what should have happened at the summit, “I reaffirm my conviction that we must end fossil fuels subsidies. Phase out coal. Put a price on carbon. Build resilience of vulnerable communities against the here and now impacts of climate change. And make good on the USD 100 billion climate finance commitment to support developing countries…”

When the conference concluded, COP President Sharma described the pact as an “incredibly delicate balance—if any of us tug at that, it will unravel all too easily”.

The people of Jomsom, if they could understand what this means for them, would be disappointed.

Ringside view from COP 26

Dr. Radha Wagle, Joint Secretary, Climate Change Management Division, Ministry of Forest and Environment

This time we had made comprehensive preparations by working on various thematic areas. There was sufficient time to prepare as there was no COP summit last year due to Covid-19. We had worked on 10 thematic areas.

We raised our climate change agenda through the Least Developed Countries (LDC) group, G-77, and other multilateral and bilateral platforms. Just before COP26, Nepal witnessed two extreme events—flooding in Melamchi and extreme rainfall in October—causing immense damage to lives and livelihoods. So we presented these examples of how climate change is affecting us. We took a firm stand that global temperature rise should be kept under 1.5 C, as targeted by the Paris Climate Agreement 2015.

Another major agenda that Nepal and other LDC countries raised is that of climate finance. Let us say a foundation has been laid on this. Without enough funds, we cannot implement the programs that we have chosen for adaptation and mitigation. In the coming years, we expect developed countries to meet their monetary commitments to poor countries.

Loss and damage were other issues we flagged at the UN Summit. Some progress has been made in this issue but a lot still needs to be done. Similarly, we have said that there should be a clear demarcation between regular aid and climate finance that countries provide us. Mountains are obviously another prominent issue that we raised.

In a nutshell, from our perspective, COP26 has been very successful. As there was participation from the prime minister’s level, a lot of bilateral meetings were also held. We also signed some climate change-related agreements.

Ranjit Rae served as the Indian Ambassador to Nepal from 2013 to 2017. In this period, Nepal witnessed some historic developments including drafting of a new constitution in 2015. In the aftermath, India imposed an economic blockade on Nepal when Rae was the ambassador.

Recently, Rae has published a new book titled ‘Kathmandu Dilemma: Resetting India-Nepal ties’ that examines India’s perspectives on these developments, in the context of the civilizational and economic underpinnings of the India-Nepal relationship, as well as issues that continue to prevent this relationship from realizing its true potential. Kamal Dev Bhattarai talked to Rae over the phone.

Over the past few years Nepal has been pressing for the review of the 1950 Treaty on Peace and Friendship but India remains mum. Why?

Clearly, the 1950 treaty has become an irritant. Nepal is unhappy and wants a review of the treaty. For any treaty to be meaningful and effective, it must benefit both sides. As you are aware, the treaty is a fine balance between security and economy, or national interest treatment of the two countries. At the high political level, India has conveyed its readiness to review the treaty and consider any proposal Nepal presents. I am confident that two foreign secretaries can work out a revised text based on the changed global context, taking into account the interests and concerns of both the countries.

Also read: Maoist’s revival: Challenges galore 

How do you view China’s growing influence in Nepal?

As China’s strength and riches have increased, so has its influence and outreach all over the world, as well as in South Asia and Nepal. Following the Nepal visit of President Xi in November 2019, bilateral relationship between the two countries has been elevated to the strategic level, and not only between the two governments but also at party-to-party level. There has been a comprehensive upgradation of bilateral ties. Nepal today is a signatory to Chinese Belt and Road Initiatives, and it has reservations on the US sponsored Indo-Pacific Strategy, which it feels is aimed against China.

These developments are taking place in a troubled global and regional context where we see a growing contestation for influence between the United States and China. The relationship between India and China is also at low ebb. The fact that Nepal has been unable to endorse the US $500 million grant MCC project is another pointer to China’s growing influence. And a new China-led SAARC subgroup has set up a Poverty Alleviation Center. Clearly, these developments are significant and need to be monitored.

How do you see the future of Nepal-India ties?

There is no option but to strengthen India-Nepal ties. Our futures are intertwined; we must build upon solid civilizational bonds by stepping up our economic engagement through enhanced connectivity and stronger partnership. We should envision BBIN as an open interconnected and interdependent economic space where each country is able to exploit its comparative advantage to the fullest. Cooperation in hydropower is the surest way to strengthen the engagement. Recent decisions enabling Nepal to send its electricity to the Indian market as well as Bangladesh via India would go a long way towards meeting the objective.

'Kathmandu Dilemma: Resetting India-Nepal ties' a book by Ranjit Rae

Let’s turn to your book. What motivated you to write ‘Kathmandu Dilemma’?

A couple of factors. First, I felt there were a lot of misperceptions and lack of awareness of each other and of the nuanced, multi-layer relationship between our two countries. I wanted to bring greater clarity and frankness in our mutual understanding. Second, I wanted to explain to the general public the logic of Indian policy towards Nepal, particularly India’s role in certain pivotal moments in Nepal’s contemporary political history. Third, I wanted to provide what I feel should be a template for our relationship for the future in a world that looks very different.

What are some of the important issues you deal with in your book?

The book is broadly divided into two sections. In the first part, I discuss the nature of Nepali nationalism. I see it in some detail and this is an undercurrent throughout the book. Thereafter, I examine India’s understanding, approach and role in two seminal developments of Nepali history, namely the peace process that ended the Maoist insurgency, and the constitution drafting process and its aftermath. 

In the second part of the book, I examine some key irritants such as the 1950 treaty and boundary issues. In addition, I look at main drivers of relationship, the civilizational linkages, and the economic dimension including humanitarian assistance and disaster relief during the earthquake. I also discuss the role of other countries, notably China in Nepal. I conclude with a chapter on the way forward.

This is the season of political parties’ general convention (GC). Both big and fringe ones are holding their conventions to elect new leaderships in the coming weeks. With the number of Covid-19 cases dwindling, parties are now rushing.

The sentiment both in and outside these parties is that incumbent leaders must go and new ones with new vigor and dynamism should replace them. Unfortunately, as parties are approaching their respective conventions, such sentiments are being sidelined. Almost the same set of leaders who have been at the helm of parties as well as successive governments after 1990 are set to continue for the next five years.  Despite their high-sounding rhetoric, youth leaders are not contesting party presidency.

Take the main opposition CPN-UML whose convention is to take place in Chitwan from November 26-28. Party leaders and cadres are projecting KP Oli (69) as an indispensable leader for the next five years, and he is likely to be elected unopposed.

Candidacy by some second-rung leaders cannot be ruled out but Oli is sure to win and lead the party for the next five years, says UML leader Deepak Prakash Bhatta. After the Madhav Kumar Nepal faction formed a separate breakaway party, Oli found himself in a position to monopolize the UML.

In Nepal Congress, there is a strong sentiment that Deuba must go due to his age and inability to lead. Additionally, there are voices that as Deuba (75) has become prime minister five times and also got to lead the party, he should pave the way for someone else. Efforts are underway to arrive at a common anti-establishment candidate to weaken and defeat Deuba. But he is still likely to hang on.

Even if Deuba goes, youth leaders are unlikely to come to the helm. After Deuba, the likes of Ram Chandra Poudel, Shekhar Koirala and Prakash Man Singh, all fast-aging leaders, are in a race for party presidency. Says political analyst Puranjan Acharya, Shekhar Koirala could emerge as a formidable challenger to Deuba this time if anti-establishment factions come together. “Shekhar has gained ground in selection of general convention representatives. But his triumph depends on Ram Chandra Poudel and others responding to him.”

Also read: Smaller coalition partners want electoral alliance. Not so much Nepali Congress 

Chances are high of Deuba winning the presidency again due to his strong hold on the organization. He is in a position to dispense favors as prime minister and the anti-establishment faction remains fragmented. So come NC convention on December 10-12 in Kathmandu, Deuba could again rule the roost. Youths are unlikely to ascend to the top from this convention. “Some youths are likely to be elected office bearers but the same old leaders would continue to dominate the party,” says Acharya.

CPN (Maoist Center) is preparing to fulfill its own constitutional obligation of five-yearly general convention. Chairman Pushpa Kamal Dahal (66), who has been at the helm of the party for three years, has clearly said that he will not retire. And no party leader will dare to file candidacy against Dahal.

Even in fringe parties, leadership change is unlikely. CPN (ML) led by CP Mainali held its General Convention in Chitwan, once again electing him party general secretary, a position he has been occupying since the 1970s.

CPN (Unified Socialist) led by Madhav Kumar Nepal (68) is also preparing to hold its convention, even though exact dates are yet to be finalized. As it is a new party and there are no other towering political figures, Nepal is likely to lead the party himself for the next five years.

As Rastriya Prajatantra Party led by Kamal Thapa (66) prepares to hold its own general convention in Kathmandu on November 13-16, there are demands of leadership change, which, again, is not happening given Thapa’s stranglehold on party machinery.  

All parties are holding their general conventions in the run-up to the three-tier elections, which will probably take place in 2022. And all those vying for party presidency either close to or above 70. The younger leaders will continue to have to wait for their turn, at least for the next half-a-decade.

How will the US-Nepal relations be affected if Nepal rejects the MCC compact? This query was put to Fatema Z Sumar, vice-president of the Department of (MCC) Compact Operation, who visited Nepal in September this year to press Nepali leaders for the compact’s early parliamentary ratification.  

At the press meet, she sounded confident that bilateral relations would remain cordial with or without the MCC but said she was still optimistic about early ratification. Highlighting the age-old bilateral relations, she said: “The two countries have shared a special bond for more than 70 years. This partnership will endure long before and after the MCC… The MCC is one offer from the American people to grow the economy here.”

It has been over four years since the MCC compact was signed between the two countries but parliamentary ratification, a prerequisite for its implementation, is still in limbo. Though she did not set a deadline, she said, “It’s high time Nepal ratified the compact,” adding, “How long can we afford to wait [for it] to be endorsed?” As per the agreement, the compact should have come into force in 2019.

According to experts and people familiar with the MCC, even though bilateral relations may not suffer drastically over the compact’s failure, such an outcome will have consequences. As Sumer suggested, there is growing impatience on the American side over the delay. Issuing a press statement on October 29, the MCC headquarters again reiterated: “The delays to ratification jeopardize the critical and timely support this $500 million grant would provide to help more than 23 million Nepalis access reliable energy and safer roads. The decision whether to move forward with the compact now rests with Nepal.”

Similarly, Deputy CEO of MCC Alexia Latortue met PM Deuba on the sidelines of the C0P26 summit. Deuba asked Alexia to wait for some time for the MCC endorsement. On his return to Kathmandu, Deuba for the first time disclosed that he and Pushpa Kamal Dahal had both committed to the compact's endorsement. Dahal accepted sending a letter to the US to that effect but then added that he would still like to see the compact’s amendment before its parliamentary endorsement.

Mrigendra Bahadur Karki, Executive Director at the Center for Nepal and Asian Studies (CNAS), points out possible implications of the grant’s rejection. Karki says it will mark a great setback to the old bilateral partnership. If the MCC is snubbed, Nepal’s larger policy of diversifying its trade and economy beyond two neighbors will be as well. “Such a strategic failure will certainly have consequences,” he cautions.

Some economists also fear a spoiling of the environment for foreign investment, as investors think twice before coming to a country where development projects are excessively politicized.  

Uma Shankar Prasad, an Associate Professor at the Central Department of Economics, TU, who is also a member of the National Planning Commission, however, does not subscribe to such views. “There has been an exaggerated debate in Nepal over the MCC,” he says. “I don’t think withdrawal of the MCC’s support, which is not a big amount, will have much of an impact on our overall investment climate.”

The MCC’s withdrawal may also have spillover effects on Nepal’s equation with China’s Belt and Road Initiative (BRI). Since signing a framework agreement in 2017, there has been a one-sided debate—that Nepal should unconditionally select projects under the no-strings-attached BRI. Karki says if the compact is canceled due to growing political polarization, it will trigger a debate on why the country should accept BRI and not the MCC. “In that case, it could be difficult to move ahead with the BRI as well, which is not good for Nepal,” he says.

China has not objected to the MCC projects in Nepal but reports from Chinese official media and think-thanks do suggest that the northern neighbor would like Nepal to maintain a distance from the MCC, which it sees as a part of the Indo-Pacific Strategy aimed at containing China. Now, there is little progress on both the MCC compact and as well as the BRI projects. Says Former Nepali Ambassador to the UK and US Suresh Chalise, the MCC and the BRI are inter-related and if one moves ahead the other one will as well.

But the chances of the compact’s ratification before the elections are slim as there are divergent views even inside the ruling coalition. Though Prime Minister Sher Bahadur Deuba wants the parliament to endorse the compact, two other senior leaders in the coalition, Pushpa Kamal Dahal and Madhav Kumar Nepal, are in favor of its endorsement only after requisite amendments.

Chalise says the compact’s implementation could pave the way for trilateral cooperation among Nepal, India, and Bangladesh on hydropower. His understanding is that India, which prefers bilateral cooperation with its neighbors, has agreed to trilateral cooperation only because the US is the third party. “We are ramping up electricity production and we need good transmission lines to sell electricity in the Indian and Bangladeshi markets. If the transmission line under the MCC is not built, we will suffer because there is a huge investment in the hydropower sector,” he says.

Indeed, a senior bureaucrat requesting anonymity says initially India was not in favor of building the Butwal-Gorkhapur transmission line and agreed to it only after the Americans entered the picture.

Also read: What if… the 2015 constitution had been delayed?

Some experts are of the view that as America has huge influence in multinational financial institutions, there could be some implications for Nepal there as well. The US won’t go to the extent of punishing Nepal even if it rejects the compact, says Chaise. “But America is a superpower. If it remains indifferent or silent on Nepal’s agenda in the international forum—that will most certainly affect us. On the other hand, if we gain its trust, it could speak in our favor.”  

According to him, the US-Nepal bilateral relationship is far more important than the MCC compact or any other project.

Domestically, if the compact is rejected, the CPN (Maoist) and other fringe communist parties that are continuously opposing it are likely to gain from it electorally.  The compact’s rejection would also signal the prevailing of communist narrative on Nepal’s foreign policy.

Expert opinion

What if MCC is not approved?

Chandra Dev Bhatt

In the past three-plus decades, interaction between Nepal and the US has increased to the extent that it has trickled down seamlessly to people-to-people level. Today many of our youths interact more with the US than the Nepali state itself, for multiple reasons. The most important is the failure to create opportunities for the educated youths and others within the country and in the neighborhood. Both ‘pull’ and ‘push’ factors have forced people to go outside and the US has become their number one destination.

The pull and push factors have created confusion as to how the state should craft its foreign policy. Whether it should follow societal needs or retain its traditional approach. The situation has become complicated with the MCC row. There are those who are in its favor. Others strongly oppose it yet would still like to benefit from other opportunities that America offers.

For many Nepalis, the US is increasingly becoming a second home. If the MCC Compact does not make it through, this definitely will have consequences even at the people-to-people level.

America, over time, has become an indispensable neighbor, albeit one with which we do not share our borders. If the Chinese and Indians are interacting with the US on multiple levels, why should not Nepal?

Will the incumbent coalition government remain intact till elections? All coalition partners confidently say, yes, it will. Are there any chances of an electoral alliance among coalition partners? On this question, coalition partners are not so sure. Sustainability of the incumbent government and a possible electoral alliance are two entirely different issues but often seen together.  

Being in the same government does not mean an automatic electoral alliance. For instance, in 2017, there was a coalition government of Nepali Congress (NC) and CPN (Maoist) but the latter still forged an electoral alliance with then opposition CPN-UML, in what came to be popularly known as the left alliance.

Now, it is an open secret that CPN (Maoist) Chair Pushpa Kamal Dahal wants an electoral alliance with Congress, like he did with KP Oli on the eve of previous elections. Likewise, Madhav Kumar Nepal, chairman of Nepal Communist Party (Unified Socialist), another ruling party, is ready for an alliance with Dahal but the latter believes that will be insufficient to win elections given the formidable strengths of Congress and UML. As the Maoists are weak in terms of organization and popular votes, Dahal has calculated that the party could face a drubbing without an electoral alliance.

Congress, mainly Prime Minister and Party President Sher Bahadur Deuba, has not spoken publicly about the possibility of an alliance with coalition partners. Party leaders say the issue is likely to be discussed in the party’s upcoming general convention. Says Nain Singh Mahar, a youth leader close to Deuba, NC could consider an alliance even though it is capable of winning elections on its own.

“Looking at things from the perspective of Congress, there is no need for an electoral alliance but if there is a guarantee of a long-term alliance, we could think about it,” says Mahar. For that, according to Mahar, Maoist chair Dahal must be ready to revisit his 2017 unceremonious turnaround and come up with a credible framework to ensure that there will be no similar break-up. Before the previous round of elections, Dahal had secretly negotiated a seat-sharing arrangement with UML Chairman Oli while he was still in a coalition government with Congress.  

Also read: Delhi undecided as Deuba seeks its blessings 

In the 2017 local elections, Congress had supported Renu Dahal for the post of mayor in Bharatpur sub-metropolitan city. With strong NC backing, Renu won as well. But this was followed by a strong backlash inside the Congress party, mainly after Dahal went on to align with UML.

Ideological differences also make it difficult for Congress to forge an electoral alliance with communist forces. Similarly, the Maoists have a history of violence, and local-level NC cadres are uncomfortable aligning with such a force. The long list of prospective NC candidates also makes it hard for the party to agree on a seat-sharing formula with another party. NC leaders are of the view that the party is capable of winning elections on its own. This is why leaders like Gagan Thapa and Arjun Narsingh KC have completely ruled out any kind of electoral alliance.  

“NC candidates are ready to lose but they do not want an alliance with other parties as they believe such an alliance will weaken their constituency,” says an NC leader requesting anonymity.

What could Dahal do if the NC rejects such an alliance? Will he again align with Oli? Given the growing animosity between Dahal and Oli, they are unlikely to forge an electoral alliance this time. But it cannot be ruled out because if there is no electoral alliance among big parties, the NC is likely to gain a lot. In that scenario, despite their differences, Oli, Dahal, and Nepal could come together to check the Congress party.

That is why PM Deuba and NC leaders want early elections. They believe animosity among communist parties will die down with time and they could again come together. China, which played a vital role in uniting UML and Maoists in 2017, is advising communist forces to come together this time as well. Though Dahal and Oli don’t see eye to eye, many second-rung UML leaders are still in favor of unity between communist forces in order to forge a powerful communist party.

Also read: Playing Squid Game in Nepal

Maoist leader Dev Prasad Gurung says it would be premature to talk of electoral alliance. The spirit is that the incumbent five-party alliance should be continued till elections, says Gurung. “Once the elections are announced, there will be discussions among the coalition partners on the possibility of an electoral alliance,” he says.

Similarly, the Nepal-led party is also angling for an electoral alliance. It is almost a given that there will be an electoral alliance between Nepal’s and Dahal’s parties as well as with other fringe communist parties. The Nepal-led party appears weak as influential second-rung UML leaders decided to remain with the mother party; of the elected UML representatives, only around 10 percent joined Nepal’s new party. So, for Dahal, even the support of the Nepal faction and other fringe parties is not sufficient to win the elections.

NCP (Unified Socialist) Central Committee member Shankar Bhandari is not hopeful of a large electoral alliance with Nepal Congress. He is of the view that there could rather be an alliance among his party, the Maoist party, the Janata Samajbadi Party led by Upendra Yadav, and other fringe communist outfits. “But there will be some seat-sharing with NC to ensure the victory of top coalition leaders,” he says. Nepal has already started consultations with left parties.

Political analyst Bishnu Dahal subscribes to Bhandari’s views. The NC could field weak candidates in the constituencies of Nepal, Dahal, or other senior leaders to ensure their victory. But the chances of an out-and-out electoral alliance are slim, says the analyst. “There is little chemistry between Maoist and Congress cadres at grass-roots level, which was evident when NC decided to support Renu Dahal in the 2017 elections,” he says. “NC and communist parties see each other as class enemies and their relations at the grass-roots level are poor. This means a larger poll alliance may not be feasible but there can still be some kind of collaboration to keep the coalition intact.” 

The terms of the federal parliament, provincial assemblies, as well as the local governments expire next year. Growing debates in political circles on a possible ‘electoral alliance’ and ‘early elections’ of the House of Representatives (HoR) show that parties are already in an election-mode. They have started nationwide campaigns to strengthen their organizations, targeting the upcoming three-tier elections.

If things go as planned, local elections will take place first, to be followed by provincial and federal elections. Though the exact dates are yet to be finalized, sooner or later, the country will head to elections. Here is an explainer on how local, provincial and federal elections will take place.

Who declares the date of local-level elections?

As per Local Election Act 2017, the government is mandated to announce the date for local elections in consultation with the Election Commission. The government can choose to hold elections in multiple phases if they cannot be held in a single phase. At the local level, the first-past-the-post (FPTP) election model is applied for holding elections.  

How long is the tenure of local elected bodies?

The tenure of the village and municipal assemblies is five years. Article 225 of the constitution says: “The term of a Village Assembly and a Municipal Assembly shall be of five years from the date of the election. Another Village Assembly and Municipal Assembly shall be elected not later than six months of the expiration of such a term.”

The first local elections under the new constitution were conducted in 2017 in three phases (on May 14, June 28, and September 18). According to election experts, if there are to be multi-phase elections, the date for the first phase would determine the tenure of local bodies. So, ideally, the elections for local governments must take place within May-June next year. Even if parties choose to hold local level elections six months after their current term expires, local elections must take place by next August at the latest.

What about elections of provincial assemblies?

The provincial assemblies are unicameral and the numbers of provincial lawmakers vary from province to province. Unless dissolved earlier pursuant to the constitution, the term of the provincial assemblies is five years. Their term may be extended for a period not exceeding one year in cases where a proclamation or order of the state of emergency is in effect. As provincial assembly elections were held simultaneously with the federal elections in 2017, their tenure also expires in 2022. Under the FPTP component, twice as many members are elected to provincial assemblies as are elected to the federal House of Representative. 60 percent provincial assembly seats are filled through FPTP elections and 40 percent through PR elections. 

Also read: Delhi undecided as Deuba seeks its blessings 

And when are the federal parliament elections?

The House of Representatives and the National Assembly make up the Federal Parliament. On the term of the HoR, Article 85 of the constitution says, “Unless dissolved earlier, the term of the House of Representatives shall be of five years.” The previous federal and provincial elections took place in two phases in November and December 2017. So, the tenure of the incumbent parliament will be valid till December 2022, if the parliament is not dissolved earlier. After the completion of the five-year term, the federal parliament will get dissolved. As the constitution has not envisioned a parliamentary vacuum of over six months, elections for the federal parliament will have to take place within six months of December 2022.

Who declares the date for elections to the federal House of Representatives?

The government announces the date of the elections to the House of Representation in consultation with the Election Commission. The government can hold elections in multiple phases citing logistical and security issues. But the government must consult the commission before announcing federal elections.

What about the National Assembly?

The National Assembly is a permanent House that consists of 59 members, each with a six-year term. The term of office of one-third of the members of the National Assembly expires every two years. The election of NA will take place after the elections of local, provincial, and federal levels.

Are there any chances that elections to the parliament, provincial and local governments will take place simultaneously?

There is an ongoing debate on the possibility of holding simultaneous elections. However, parties are yet to begin deliberation over such a proposal. To conduct simultaneous elections, the law needs to be changed. For one, simultaneous elections will reduce electoral costs. Former Election Commission Commissioner Dolakh Bahadur Gurung says simultaneous elections are a good idea if all parties are on the same page. Towards this end, Gurung says legal arrangements must be accompanied by a huge exercise in arranging logistics.

Also read: Nepal’s decennial census needs a rethink

Should the Election Commission be allowed to announce the date of elections?

Right now only the government holds the right to announce the dates for elections. For a long time, the Election Commission has been making a case for its right to do so. According to former commissioner Gurung, giving the commission such a mandate will ensure timely elections. As the government has the right to announce dates, the ruling parties right now tend to declare elections as per their convenience.

Are there any chances of a change in our electoral system?

In the last election, a mixed electoral system—first-past-the-post and proportional representation (PR)—was adopted. But debate has already begun about changing it. Ruling coalition partner CPN (Maoist) has proposed a completely proportional election system. Maoist Chairman Pushpa Kamal Dahal has been saying that elections are becoming too costly and a complete PR system is the only solution. The Maoist party also fears losing elections if the FPTP component is high. In any case, Nepali Congress and CPN-UML are unlikely to accept such a proposal.

Are there any chances of early elections?

There are divergent views among political parties on early elections. The main opposition CPN-UML is in favor because it wants to justify KP Oli’s House dissolution and call for elections.

Inside Nepali Congress, there are strong voices in favor of early elections for the federal parliament. NC leaders believe that if local elections are held first, federal elections could be affected because of the ensuing factional feuds and chances of intra-party betrayal. Local-level leaders who lose elections are unlikely to support rival-faction candidates in federal elections. However, coalition partners CPN (Maoist) and CPN (Unified Samajwadi) led by Madhav Kumar Nepal are against early elections as they are both in party-building phase.