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Nepali Congress leader Krishna Prasad Sitaula is looking to make a political comeback by securing a National Assembly seat. Having lost two consecutive general elections of 2017 and 2022, the former home minister seems eager to wear the parliamentarian’s tag. 

The election for 19 new upper house members is set to take place next week and Sitaula’s victory is almost certain, thanks to a strategic electoral alliance within the ruling coalition. Sitaula, whose influence in national as well as party politics has been waning of late, managed to clinch the NA candidacy due to his closeness with the NC President Sher Bahadur Deuba. 

Despite differing opinions within the NC on the election candidates, consensus among top leaders of the ruling parties solidified Sitaula’s position in the upper house. Even Deuba’s rivals in the Congress party, Gagan Kumar Thapa and Shekhar Koirala, are rallying behind Sitaula, hailing it as an exceptional decision. Earlier, Thapa and Koirala were critical of Sitaula’s candidacy. They were in favor of fielding new faces, preferably experts on some fields, to honor the spirit of the NA as envisioned by the Constitution of Nepal, 2015.  

The buzz is that Sitaula’s entry into the federal parliament is not just a personal victory; it’s a strategic move made by the NC leadership to fortify the constitution against mounting challenges from royalist and anti-federal forces.

Whispers of Sitaula taking the reins as the chair of the upper house are also getting louder. Sources say that both CPN (Maoist Center) and CPN (Unified Socialist) have thrown their support behind Sitaula, putting an end to their claims for the coveted position. The term of incumbent NA chairman, Ganesh Prasad Timalsina, is ending in April.

Sitaula’s bid to enter the national assembly despite previous election setbacks has piqued the interest of many. After losing the 2017 and 2022 general elections to Rastriya Prajatantra Party Chairman Rajendra Lingden from Jhapa constituency 3, Sitaula was relegated to the margins of national politics. Though he enjoyed the title of a senior leader within the Congress party, his role and influence were limited.

Afraid that he could completely lose his relevance inside the party and national politics, Sitaula, who once harbored the ambition of leading the NC, got close to the party president, Deuba. In the meantime, he continued to maintain a good rapport with the top leaders of other major parties, mainly Prime Minister Pushpa Kamal Dahal of the Maoist Center. 

According to Sitaula, his candidacy is all about ensuring the complete implementation of the new constitution and safeguarding the rights of the people. 

Starting as a low-profile figure in the party after the restoration of democracy in 1990, Sitaula emerged as a key player during the peace negotiations with Maoist rebels. His alliance with then NC President Girija Prasad Koirala catapulted him into the national political arena, eventually leading to roles as deputy prime minister and minister for home affairs.

Sitaula’s moment to shine came as one of the chief negotiators of peace with the Maoist rebel group. His role in bringing the Maoists into mainstream politics was widely praised.  

After the success of Janaandolan-2, Koirala appointed Sitaula as deputy prime minister and minister for home affairs which further elevated his profile in national politics and inside the party. This also increased his political ambition and started projecting himself as the Koirala’s successor, ahead of other senior leaders including Deuba, Sushil Koirala and Ram Chandra Poudel. He even contested for the position of party president, only to lose the election with a huge margin.

It is no secret that Situala, who has lost his influence and supporters in the party, has only managed to maintain his relevance with Deuba’s support. Now Deuba’s support is set to land him the post of the upper house chair.

While China initially showed limited interest in Nepal’s early economic reforms for business investments, it emerged as the second-largest investor after India from 2012 onwards. During the initial period, Chinese economic engagements with Nepal were dominated by Official Development Assistance (ODA) rather than FDI, with Chinese investments in Nepal remaining under $1bn from 2002 to 2012.

The surge in China’s economic activities in Nepal, particularly as an investment destination, can be attributed to changes in the geopolitical landscape of the Himalayan region and the political transformation in Nepal from monarchy to multiparty democracy in 2008. Contrary to some Western scholars attributing this shift to China’s Western Development Programme (1999) and “Going Out” policy (2000), available information and Chinese investment data suggest that China did not significantly invest in Nepal from 1990 to 2012. China took approximately 12 years to become a major investor in Nepal from its “going out” policy, whereas India achieved a similar status in the 1980s. Notably, during this period, some small Chinese companies invested in Nepal’s food processing (primarily processed beef, pork, and buffalo meat) and agriculture sectors to supply processed foods to construction workers engaged in infrastructure developments in Tibet. China took interest in the hydropower sector around 2010, coinciding with Nepal’s further liberalization of the hydro energy sector for private company investments under the 1992 Electricity Act.   

In the restaurant sector, only 4-5 Chinese restaurants were present in the Thamel area of Kathmandu initially. However, the number of Chinese restaurants in Thamel skyrocketed in 2012, reaching approximately 150 in 2022. It’s worth noting that Nepal was the first South Asian country accorded Approved Destination Status by China in Nov 2001.

Various studies and data from the IBN indicate that Chinese companies have shown interest in investing in services, hydro energy, manufacturing, apparel, and agriculture sectors in Nepal. Sectors like tourism were identified based on low investments and guaranteed high-profit principles, as Chinese investors anticipated a surge in Chinese tourists in the future. In 2013, Chinese tourist arrivals in Nepal crossed the 100,000 mark for the first time. Just before the Covid-19 restrictions, Nepal aimed to attract 2m foreign tourists, including 350,000 Chinese visitors, under the Visit Nepal Year 2020 campaign.

The available sources indicate a consistent surge in Chinese investment commitments in the Nepali market since 2012-2013, witnessing a decline in the fiscal year 2022-2023. The fiscal years 2015-2016 and 2016-2017 marked the peak of Chinese investment commitments, accounting for over 70 percent of Nepal’s total FDI during that period. Officials from the DoI in Nepal noted that initially, Chinese investments were primarily focused on small restaurants but gradually diversified into hydropower and other sectors. The tourism sector received the largest share of Chinese FDI commitments, reaching $125m as of July 2021, followed by other services and the information technology sector.

Private sources indicate that over 1,005 Chinese companies were operating in Nepal as of July 2016, with varying levels of investment, including large, medium, and small enterprises. On average, around 200 Chinese companies entered the Nepali market each year from 2012 to 2016. While most small companies operated with 100 percent investments from China, larger and medium-scale projects typically involved over 60 percent share from Chinese companies and the rest from Nepali partners.

Interestingly, Chinese companies showed limited interest in banking, higher education, and high-value technology-intensive manufacturing projects in Nepal, in contrast to substantial investments made in other countries. While Chinese restaurants and hotels contributed over 10,000 jobs in Nepal and revenue to the Nepali state, their impact on the technology and capital-hungry manufacturing sectors, apart from the cement industry, was relatively minimal.

Major joint venture projects

In Sept 2017, the Investment Board of Nepal facilitated a Project Investment Agreement (PIA) for a joint venture (JV) between Hongshi Cement of China and Shivam Cement Pvt Ltd of Nepal, resulting in the construction of a 12,000 TPD cement project in Nawalparasi district. Hongshi Cement holds a 70 percent share in the project, which started trial production in May 2018, showcasing an efficient implementation process within a year of the PIA.

Following the Hongshi-Shivam Cement JV, another PIA was signed between Huaxin Cement Narayani and the IBN in Beijing in June 2018. This paved the way for the construction of the 3000 TPD Huaxin Cement Narayani Project in Dhading district, with test production beginning in January 2022. Despite successful implementation, a sub-committee formed by the Public Accounts Committee (PAC) of parliament raised concerns about the project not adhering to the terms and conditions outlined in the Environmental Impact Assessment (EIA) report. Issues related to haphazard construction of access roads affecting local irrigation canals were also noted.

In addition to manufacturing, the hydro sector has attracted Chinese FDI, as evidenced by the IBN’s signing of an MoU in January 2020 for a JV with the Power Construction Corporation of China Ltd (PCCCL) and Hydroelectricity Investment and Development Company Ltd. (HIDCL) of Nepal. The MoU pertained to the development of the Tamor Storage Hydroelectric project with an indicative installed capacity of 756 MW in Terhathum and Panchthar districts. However, the project faced a three-year delay, prompting the IBN to seek an explanation from PCCCL in May 2023. Little to no significant progress has been achieved in the project since the signing of the project development agreement in Dec 2022. 

Furthermore, in June 2021, the IBN, chaired by then Nepali Prime Minister KP Sharma Oli, approved a proposed investment of Rs 33.41bn ($280m) for the development of the Lower Manang Marsyangdi Hydroelectric Project with a capacity of 139.2 MW. The project, developed under the build, own, operate, and transfer (BOOT) modality, involved a joint venture between Sichuan Provincial Investment Group Co Ltd, Chengdu Xingcheng Investment Group Co. Ltd, Sichuan Qing Yuan Engineering Consulting Co Ltd, and Nepal’s Butwal Power Company.

Himalaya Airlines, a Nepal-China joint venture in the aviation sector, was established in 2014, representing the largest FDI from China in Nepal's aviation sector. In the realm of Special Economic Zones (SEZs), a Memorandum of Understanding (MoU) was signed in Oct 2019 between Lhasa Economic and Technological Development Zone Jing-Ping Joint Creation Construction Project Development Co Ltd (JPJCCPD) and Damak Clean Industrial Park Pvt Ltd (DCIP) with the assistance of IBN for building the China-Nepal Friendship Industrial Park in Damak, Jhapa district. However, as of the latest update, the project implementation is pending, and the completion deadline has been extended to 2024.

Top 10 priority sectors 

• Services (Hotel, restaurants, telecommunication)
• Manufacturing
• Aviation
• Slaughterhouses
• Packaged drinking water
• Ready-made garments
• Electric vehicle assembly
• Copper mining
• Agriculture
• Hydro energy

Major Chinese FDI stock in Nepal

(In Rs, in m)

Source: Field Survey, 2023, published by Nepal Rastra Bank, Nepal

An excerpt of the policy brief published by Asian Institute of Diplomacy and International Affairs

The world is currently grappling with multiple crises, ranging from the Russia-Ukraine conflict and tense dynamics between the US and China to escalating tensions in the Middle East, economic recessions, and the pressing issue of climate change. Navigating foreign policy and international relations efficiently during such tumultuous times is challenging for every country.

As major power rivalries escalate, countries in the Global South are facing difficulties staying away from this bloc and alliance politics. Powerful countries are putting pressure on these countries to support them on global issues such as the Russia-Ukraine war and the crisis in the Middle East. In the aftermath of the Russia-Ukraine war, a noticeable shift has been seen in the Global South which is trying to adopt a policy of neutrality on various international matters. A common thread among these nations is that they do not want to engage in strategic and military competitions between two countries, but want to maintain equal economic relations with all countries.

Amid these global challenges, leaders from about 120 countries have gathered in Kampala, Uganda, for the 19th Summit of the Non-Aligned Movement (NAM), which kicked off on Monday. There is a high-level participation from Nepal in the summit under the leadership of Prime Minister Pushpa Kamal Dahal. Minister for Foreign Affairs NP Saud has already addressed the ministerial conference, highlighting non-alignment as the basis of Nepal's foreign policy. Saud has conveyed a clear message that Nepal maintains an independent and balanced foreign policy and will never join military alliances or security pacts.

The statement of the foreign minister has come at a time when there are intensive discussions on the relevance of the policy of non-alignment in contemporary geopolitics. Such discussions and points of view are misguided because the policy of non-alignment is not merely a movement that began in the 1960s; it is a principle that is still relevant. While interpretations of non-alignment may vary, its essence remains rooted in the refusal to align with one power at the expense of antagonizing others. Nepal's policy of non-alignment has not hindered its ability to forge economic cooperation with all powers.

The policy is still relevant today as powerful nations vie to pull Nepal into their orbits, pressuring it to abandon its neutral stance and support their military and strategic initiatives. Given its geographical, geopolitical, and strategic location, Nepal cannot afford to take sides. Through the policy of non-alignment, Nepal has to give a clear message: it seeks engagement on economic terms while steering clear of military and strategic entanglements. It is willing to consider economic offers devoid of strategic components. As the world grapples with complexity, we urge the government and political parties in Nepal to adhere to the principles of non-alignment.

The Vibrant Gujarat is a flagship investment summit of India’s Prime Minister Narendra Modi which has drawn the regional leaders and leading countries demonstrating commitment and keenness to share the pie of economic growth opportunity that India offers.

Japan, Australia, the UK, the US, Norway and the Netherlands, among others, were actively seen to showcase their companies, strengths and collaboration projects at the summit where Who’s Who of India’s Business was present. At this perfect platform for networking and striking partnerships for the future, it was clear that countries wanted their share of success in Aatmanirbhar Bharat—Viksit Bharat 2047.

Days ahead leading to the summit, international diplomatic leaders could be seen highlighting their pavilion and promoting their capabilities. X and other social media platforms were full of posts from these countries on how they engaged with Prime Minister Narendra Modi as he visited their pavilions. They were engaging with the media to showcase their partnership, the strengths of their collaborations and where they can make a difference in the future.

Nepal was one of the 35 partner states, who had the opportunity to host a pavilion. The Nepali delegation was led by the Finance Minister Prakash Sharan Mahat together with Ambassador Shankar Sharma. The Indian government website of communication of government policies and outcomes tweeted around seven minutes byte of address by Mahat. Other than that, half day into the first day, there were no signs of Nepali industry, pavilion and business persons. There was no coverage in Nepali media of what Nepal could bring to the summit and in which sector. Automotive, defense, precious stones, energy, industrial innovations, tourism and education were among the country’s presentations.

 For example, Australia’s presentation at Country Seminar is under the title “Australia–your destination for business, industry, study and tourism”. Saudi Arabia, the EU, Malaysia, Singapore, the UK, Germany, Vietnam, Kazakhstan, Oman, the UAE, Ukraine, Korea, Mozambique, and many others presented at the Country Seminar. Nepal’s country presentation was also listed  in the queue of the Country Seminar.

But the big question for now is that does Nepal leverage enough when invited? When the G20 India Summit invited Bangladesh as a special guest, there was an outcry as to why Nepal was not important enough to be invited to G20 India Summit. Perhaps this calls for an assessment in light of Nepal’s participation at Vibrant Gujarat. Does Nepali leadership at PMO, Ministry of Foreign Affairs and Ministry of Industry work in sync to make that difference and have a strategy to reverse the imbalance in the country with higher ODA than FDI? What preparations did they do ahead of “Vibrant Gujarat”?

Today the flagship business summit of India is being attended by world class industry leaders but Nepal’s Minister for Industry, Commerce and Supplies, Ramesh Rizal or Sushil Bhatta, CEO of Office of the Investment Board Nepal or president/leaders from Chambers of Commerce as FNCCI, NICCI, CNI or other leading businesspersons of Nepal are not visible. Interestingly, MoICS Minister Rizal attended the Nepal Country Pavilion at 6th CIIE held in Shanghai (China) toward the end of Nov 2023.  Wasn’t this an opportunity to engage with Indian and global leadership and other country leaders to showcase Nepal as a hub for tourism, service industry, mass manufacturing and winter sports. One of the most evident miss out is on Nepal’s reservoir of hydro energy and traditional medicines and herbs which contribute to green energy to better health.

Nepal will soon host its third International Summit, “Nepal Investment Summit” (NIS2024) in April 2024 and preparations are underway. This was a unique opportunity to promote NIS 2024, what it entails at the Nepal pavilion during VGGS2024. Senior leaders from Chambers of Commerce such as FNCCI, CNI and NICCI should have accompanied Mahat and engaged with international leaders on the margins of VGGS2024. With discussions on “Workforce for Future: Development of Skills for Industry 4.0”, Nepal could have showcased the diverse skill set and plans of Nepal Young Entrepreneurs’ Forum.

Prime Minister Modi visited many pavilions but did his visit to the Nepal Pavilion materialize or not? There were no photos, commentaries, or effort at any level to use as a pre-event marketing material and how it leads to NIS 2024. This shortcoming was evident. At a time when Nepal’s FDI performance in 2022 was bleak with mere $65m and recent exits of International Corporations as Malaysia’s Axiata and Pakistan’s Habib Bank from Nepali market and high level corruption cases have potentially dented the confidence of an international investor, is Nepal not keen to grow FDI and wants to be a donor’s ODA dependent country?

Who is to be held accountable? Did such a lapse occur for the first time? Previously, on many such occasions the business community did not take interest to participate and showcase their vision. Is it merely a political transition problem or to be blamed only on bureaucratic hurdles but the fact remains that there is a lack of sync between leadership in the political and business sectors.

The Nepali Mission led by Ambassador Sharma has made great inroads across industry and sectors. In my discussions from time to time, it appears that stakeholders from Nepal are not enthusiastic or more busy in domestic politics, that they do not prioritize international visibility, dialogue and partnerships. It wouldn’t be wrong to say that Nepali leaders have not leveraged the hard work and network of Ambassador Sharma and his team.

None of the above can happen till the time country leadership takes the reins of growth and the roadmap that leads to it. Vibrant Gujarat is led by Prime Minister Modi and CM Bhupendra Patel. Prime Minister Modi over the last 10 years has worked on the ground and around the world in working out partnerships for the private and public sector to implement. Even if Nepali political leadership succeeds in securing a stage to showcase and get an international commitment of investment, it is for the bureaucratic and business arm to make it happen. This is where investment summits/conferences under the GoN or chambers of commerce become more “check in the box” without actual conversions.

 The ownership, collective leadership and the will at all levels is self-defeating. Today, a Nepali is only concerned with watching his/her own interest and Nepal has been turned into an orphaned state with highest ODA in South Asia or made out as one by inaction and lackadaisical approach where more interpretation and analysis can be seen than action. Nepal had huge potential of high productivity but it has now been reduced as a trading country and treasury full of remittances, where both strategies will drive the workforce to foreign lands in search of work. It is easier said than done that foreign countries erode the richness of Nepal when its own leaders are responsible for the state of affairs. 

The author is a financial, geopolitical and security analyst