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Satoru Nagao is a fellow (non-resident) at Hudson Institute, based in Tokyo, Japan. From Dec 2017 through Nov 2020, he was a visiting fellow at Hudson Institute, based in Washington, DC. Nagao’s primary research area is US-Japan-India security cooperation. He was awarded his PhD by Gakushuin University in 2011 for his thesis, ‘India’s Military Strategy,’ the first such research thesis on this topic in Japan. Gakushuin University is a premier institution from which members of the Japanese Imperial Family have also graduated. Kamal Dev Bhattarai talked to him about Japan’s new security policy, US-China contestation among others. Japan has come up with its new National Security Strategy, what could be its possible implications for the Indo-pacific region? This National Security Strategy changes Japan’s security strategy drastically, and its impact will spread to the Indo-Pacific region. There are three pillars in this strategy. Firstly, Japan clearly identifies China, North Korea, and Russia as threats to Japan in this document. Secondly, Japan will integrate strategies both military and non-military to deal with the threats. And thirdly, Japan will strengthen international cooperation to deal with China, which means like Australia and India, Japan will possess counter-strike capabilities. In some cases, Japan will commit an offensive-defense operation. The offense-defense combination with long-range strike capability is a more effective strategy than a defense-only strategy to counter China’s territorial expansion. Say, if Japan and India possess long-range strike capabilities, this combined capability makes China defend multiple fronts. Even if China decides to expand its territories along the India-China border, China still needs to expend a certain amount of its budget and military force to defend itself against Japan. This document clearly mentions that Japan will increase official development assistance (ODA) for a strategic purpose. For the purpose of deepening security cooperation with like-minded countries, apart from ODA for the economic and social development of developing countries and other purposes, a new cooperation framework for the benefit of armed forces and other related organizations will be established. It will affect the whole part of the Indo-Pacific. For a long time, a ‘hub and spoke’ system has maintained order in the Indo-Pacific. In this system, the hub is the US and the many spokes are the US allies such as Japan, Australia, Taiwan, the Philippines, Thailand, and South Korea in the Indo-Pacific. A feature of the current system is that it heavily depends on the US. For example, even though Japan and Australia are both US allies, there is no Japan-Australia alliance.  However, China’s recent provocations indicate that the current system has not worked to dissuade its expansion. Between 2011 and 2020 China increased its military expenditure by 76 percent, and the US decreased its expenditure by 10 percent. Even if the US military expenditure were three times bigger than China’s, the current “hub and spoke” system would still not be enough As a result, a new network-based security system is emerging. The US allies and partners cooperate with each other and share security burdens with the US and among themselves. Many bilateral, trilateral, quadrilateral, or other multilateral cooperation arrangements—such as US-Japan-India, Japan-India-Australia, Australia-UK-US(AUKUS), India-Australia-Indonesia, India-Australia-France, and India-Israel-UAE-US(I2U2)—are creating a network of security cooperation and sharing the regional security burden. Japan’s latest security strategy is based on such an idea. Japan will share the security burden with the US by possessing strike capability and providing arms to countries in this region as one of the security providers of the US-led circle. Could you elaborate on Japan’s South Asia policy, its priorities, and its interest in this region? In the past, Japan did not have a strategy in South Asia. Japan supported many infrastructure projects in South Asia purely because Japan tried to contribute to the local society. However, since China expanded its influence in South Asia and provoked Japan in many places in the Indo-Pacific, Japan’s attitude has changed. Because China’s infrastructure projects are the ones with high-interest rate, it created huge debt and Sri Lanka needed to give China the right to control Hambantota port. This is one typical example of how dangerous China’s hegemonic ambition has become. This time, the National Security Strategy of Japan clearly wrote “Strategic Use of ODA.” Japan will continue many infrastructure projects in South Asia as pure assistance. But at the same time, Japan will increase the projects to save local countries and dissuade China’s hegemonic ambition. How do you see the growing rivalry between the US and China in the Indo-Pacific region? The most recent US National Security Strategy indicated that US-China competition will escalate. The document states: “The PRC is the only competitor with both the intent to reshape the international order and, increasingly, the economic, diplomatic, military, and technological power to do it. And three factors indicate that America is on the road to win the competition with China. First, the US is still stronger than China. A SIPRI database indicates that the US military expenditure in 2020 was three times bigger than China’s. In addition, the US has more allies. The number of political partners has been a decisive factor in geopolitical competition. For example, in WWI, the winning side comprised 32 countries, but the losing side was composed of just four countries. In WWII, the winning side had 54, but the losing side had only eight. In the case of the US-Soviet Cold War, the winning side had 54 countries, but the defeated side had 26. In the case of the current US-China competition, the US has 52 legal-based formal allies including NATO, the Central and South American countries, and Middle East and Asian allies like Japan. But China has only North Korea as a formal ally. The history of the US indicates that the US will win the competition with China.  246 years ago, the US was a single colony of the British Empire. But they transformed into the world’s only superpower now. During this time, all rivals of the US, including Germany, Japan, and the USSR, disappeared. This means that the US system is a successful system to be powerful and win the competition. And indeed, the US had a long-term plan to win the competition. For example, before WWII, the US had an “Orange Plan” to defeat Japan and implemented it. But when that plan was declassified in 1974, the world was surprised to learn that there were also other plans, including a “Red Plan” to defeat Britain and Canada. Both in WWI and WWII, the US supported the British. But because the world is changeable, it is understandable that the US was prepared for any type of contingency. If the US National Security Strategy states that “the PRC is the only competitor,” it is natural to conclude that the US has the plan to defeat China. US Republicans and Democrats share many similar goals toward China. The Trump administration’s so-called ‘high-tech war,’ which banned products from Huawei and ZTE,  started when the Investigative Report on the U.S. National Security Issues Posed by Chinese Telecommunications Companies Huawei and ZTE was published in 2012, during the Obama administration. The current Biden administration also continued the policy. The US’s objectives in this competition have bipartisan support. Therefore, considering these situations, we should stand with the US because being on the winning side is beneficial. And three factors indicate that America is on the road to win the competition with China Where does India stand on the US-China rivalry? India and Japan share the same set of problems. For example, in the sea around the Senkaku Islands of Japan, China has employed its coast guards and increased its activities. In 2011, the number of Chinese vessels identified within the contiguous zone in the waters surrounding the Senkaku Islands in Japan was only 12. But the number increased to 428 in 2012, 819 in 2013, 729 in 2014, 707 in 2015, 752 in 2016, 696 in 2017, and 615 in 2018. By 2019, the number had reached 1097. A comparison between the number of Chinese vessels identified within the contiguous zone in the waters surrounding the Senkaku Islands in Japan and China’s incursions in the Sino-Indian border area are similar. In 2011, India recorded 213 incursions in the Sino-Indian border area, but in the following years, the numbers were larger: 426 in 2012, 411 in 2013, 460 in 2014, 428 in 2015, 296 in 2016, 473 in 2017, 404 in 2018, and 663 in 2019. These incursions are similar to China’s activities around the Senkaku Islands of Japan. Based on the number of Chinese incursions in the India-China border area and Chinese activities in the sea around the Senkaku Islands, it becomes apparent that China has increased its assertiveness in 2012 and 2019 in both regions. Therefore, India should cooperate with the US, Australia and Japan. However, cooperation also has a risk. In the QUAD, India could be the first target of China to make pressure. India shares a land border with China and the US, Australia and Japan do not. It is easier for China to provoke India by using ground and air forces. In addition, India is not a treaty-based formal ally with the US like Australia and Japan are. View from China is that India is the weakest link. If China wants to make pressure to disband QUAD, India could be the first target. Therefore, India wanted to be low profile in the QUAD military cooperation despite India promoting military cooperation with other QUAD members. However, China’s recent provocation against India on the India-China border changed India’s attitude. The more China escalates the situation, the more the QUAD should become institutionalized and cohesive. What are your suggestions to the countries like Nepal regarding the conduct of foreign policy in this turbulent geopolitical environment? The above mentioned answer indicated two things. Firstly, China’s infrastructure projects and economic support could be a ‘debt trap’. Japan’s one is workable and far better. Second, America is on the road to winning the competition with China. The winning side is always beneficial. But when Nepal shows a clear stance against China, China will provoke and try to punish Nepal. Therefore, Nepal should gradually distance itself from China. For Nepal to cooperate with the QUAD side more deeply and steadily is the best policy.  

Rajendra KC is the founder of Southwestern State College and one of the founding members of Nepal PhD Association. He has previously served as the chief advisor to HISSAN central committee, chairperson of Rural Environment and Development Association (REDA-Nepal) and board member of Kathmandu Capital Ltd as well. A notable person in the education fraternity, KC now has developed a concept of University of Three Generation (U-3G). Pratik Ghimire ApEx talks to him in this context. How did the concept of the U-3G come about and what does it actually mean? If we look around the world, we see different institutions teaching students a variety of courses in the name of universities. But they are essentially operating only to provide academic certificates. This makes it difficult for the students in the future, because certificates alone can’t help them compete in the global market. What we need to do is connect formal and informal education. In this method of education system, a senior professor, for example, can share his or her career story, of all the ups and downs. And as formal education, students are taught the academic curriculum. U-3G means three generations coming together and sharing their understanding, experience and knowledge. It brings all three generations: youths, working men and women, and retired citizens together to empower and involve the students, so that they could lead and transform society. Why do you think we need such a university? A large number of Nepali youths are abroad. Young energy, be it physical, mental or psychological, is extremely important for a country. But our youngsters have been migrating overseas for jobs and higher studies. To stop this, what we thought would come into use was the experience of adult citizens. The citizens mostly of the 50-59 age bracket who are experienced in different areas could  motivate the youths. Their network or finance could also be helpful. This exchange of experience between adult citizens and those below 40 years will act as an informal education to enhance the overall personality of our students. And since this university aims to promote, foster, and encourage all stakeholders for collaboration, partnership, alliances, and development based on 4Ps modalities (public-private-people partnerships), this concept is the need of the hour. Are the works going well with the establishment of university? Yes. We are in our initial phase and all the legal work has been completed. We have a team of experienced individuals like former government secretaries, retired Nepal Army officers, bank CEOs, academicians, and social workers, among others. How could we utilize human capital? In Nepal, especially for political leaders, capital basically means property, house and vehicle. What we have failed to realize is that the first capital for any nation is its citizens. This human capital is what eventually makes what we know as financial capital. Human capital includes the ideologies of the youth and their enthusiasm and the experience of adult citizens. As a university, we can provide the best education and experience to our students with which the trend of moving abroad could be reduced. Of course, we cannot and should not stop anyone if they wish to go abroad, but we can limit the trend of Nepali citizens migrating overseas permanently. What should our educational system look like?  In the name of globalization, we are adapting a combined curriculum from different countries. We should plan our own curriculum depending on our needs and resources. So, it is clear that our educational system has many loopholes. They should be revised as soon as possible.

Times are difficult for banks and financial institutions at present. International and domestic economic uncertainties have surrounded the Nepali financial system creating problems like a severe shortage of investment-grade liquidity, skyrocketing inflation rate, and problems in the external sector of the economy affecting the profits of banks. Anil Kumar Upadhyay, the President of Nepal Bankers’ Association and CEO of the Agricultural Development Bank, says that the current focus of banks is to sustain rather than earn profits. In a conversation with ApEx, he talked about the current problems surrounding the banking system, emerging challenges to the banks, and digitization, among other topics. Excerpts: Of late, umbrella organizations of the private sector have upped their ante against banks, accusing them of charging high-interest rates. As the President of Nepal Bankers’ Association, do you think that banks have treated businesses in unjust ways as claimed by businesspersons? The banking sector works under certain regulatory frameworks of the Nepal Rastra Bank. But those various regulations are applicable in different situations. When there is adequate liquidity in the banking system, we can have various offers to our customers but when the situation is difficult like at present, we are required to become very careful to sustain. So, this is not an injustice as said by businesspersons. This is just a result of the situation. Unless any bank demands interest rates higher than allowed by the central bank, it is not unjust. We have seen a shortage of liquidity at different times over the past couple of years. How is the current situation? Why does the acute shortage of investment-grade liquidity continue despite a sharp decline in demand for loans and a hike in deposit interest rates? Currently, the liquidity situation has improved. The recent festive season and the elections have helped the flow of cash in the market. But the fact is the banks have not aggressively invested and lent money to borrowers. Yet, we have a shortage of investment-grade liquidity because there is a huge gap in financial resources and demand for loans. It will take some time to get things back on track. These days, banks are more into portfolio management so that we would not hamper regulations. Given the current economic slowdown as well as the prolonged liquidity crunch, what major challenges do you anticipate for the banking sector in this fiscal year? The major challenges are the continued shortage of resources, inflationary pressure, and impacts of the global and domestic economic recessions. Besides, the adaptation of new technologies and the transfer of data from paper to online networks is also challenging. The expectations and demands of customers are also high which will be a challenge for us to meet. Unless there is wise management of resources, the banking sector will suffer during these uncertain times. Amid a slowdown in economic activities, are we seeing a surge in non-performing loans (NPLs) of banks as debtors are struggling to repay the loans? We have to extend loans no matter what the situation is. Even during the height of the Covid-19 pandemic, we disbursed loans. We have been helping customers whenever they are in need. However, we have fewer resources and this is a problematic situation. Now, when we didn’t receive installments and interest payments, we had to search for new incomes. There are no other choices left for us. The central bank has recently reduced the spread rate in the first quarterly review of the monetary policy. What impact will it have on the banking sector, especially on profitability? Definitely, the new monetary arrangement will reduce the profits of banks. However, given the current uncertain global economic situation, we are more focused on sustainability than on earning profits. What kind of impact will the recent mergers and acquisitions make in the Nepali banking sector? Are we heading towards large but few banks in our system? In other countries, whenever a bank sees a continuous decline in profit, has less capital, or is not in a position to afford the expenses, it opts to merge with another bank. In Nepal too, due to problems in the economy, our banks have felt the same. When the banks go for a merger, it reduces the expenses in various aspects but increases the size of the business along with the quality and service. Mergers provide a chance to improve competitiveness among organizations. So, it feels like we are really heading for a large but few banks in the system and I think it is good for the industry. Digital banking has taken a new direction post-Covid-19 pandemic. How is your bank digitizing products and services for customers? How will digitization shape banking in Nepal in the coming days?  Digitization is the biggest achievement in the banking sector after the Covid-19 pandemic. In the Asia-Pacific region, I think Nepal is after India to progress digitally. In our bank too, we have updated ourselves digitally. Previously, we had only around 10,000 mobile user customers but now, this number has reached around half a million. So, we have extended our online and QR-based services in rural areas too. For the farmers, we have added content and information related to agriculture in our bank app. It provides a situation of farming, market and weather. We are also soon introducing a mobile loan service. Besides, like other banks, we have provided all the banking facilities to our customers digitally.

Ayshanie Medagangoda-Labé (Sri Lanka) is UNDP Resident Representative for Nepal. Prior to this appointment, Ayshanie was UNDP’s Deputy Resident Representative for Programme and Operations in Nepal. GM Media, a news agency, talked to her about a wide range of issues related to Nepal and the UN. How do you see the status of Nepal as seen in the Human Development Index? If I take this year’s human development report 2021/2022 and compare it to 1990 human development report data, I can definitely say Nepal has been improving like 90 percent of the other countries. Since 2019, we can observe a bit of a red flag that says something is happening that is not only for Nepal. So, we had a slightly bumpy road in 2019, 2020, 2021, and 2022, which we need to take into consideration while doing policy orientations, investments, planning, and budgeting types of work. Overall, Nepal is improving and has been improving, so we should not just rest on achievements made over the last 30-plus years. Looking at this year’s report, it seems Nepal is going down a bit overall in integrated indicators. Is it only because of Covid-19 or are there other factors as well? If you look into the last 32 years, HDR is trying to put forward interactions of people with security, democracy, culture, climate change and other aspects that interact with human nature and to see how people’s development changes with these issues. So, there is no exception on issues that the HDR is trying to put forward this year (2021/2022). We definitely had a covid pandemic, but we also live amid conflicts in Russia, Ukraine and other parts of the world. The pandemic affected everyone equally, conflicts affected us unequally. Now, we have obviously planetary pressures, climate change, pollution and all these pressures coming together making people scared.  People are not really settled because of what is happening in the world. It's not only about environment and climate, it's also about conflicts, inequality and access to basics. So, this comes together and then there is the pursuit of transformation in the society. How people are trying new ways to cope with this uncertain situation? People are scared again. Can we work a way out to cope with this planetary pressure, conflict, climate change over this pandemic? People are trying different ways of working, that's the second tier of uncertainty.  That is where you need protection, if you’re afraid of getting into certain areas where you’re not completely sure about what it is that you're living in. Then the third tier:  Conflicts, disagreements, polarized societies because of disagreements in the society, the community, the family. This is what you face as a result of social and political polarization and disagreement that comes with it. The report tries to illustrate these three types of uncertainties, apart from new ways of coping with planetary pressures and how to try different things to ease them.... These three types of uncertainties are what we call uncertainty complexes. Because when you have different layers, it becomes a bit more complex than when you’ve to deal with only one set of complexities. You only have to deal with conflict then fine, but if you’ve to deal with conflict, if you’ve to deal with the failures to act and lose people and if you also have to deal with basically the political violence in a country or societal violence you might be adding yourself uncertainties and that becomes a bit more complicated to deal with. So, that is what the report is trying to put forward and also to show how these complexities are affecting human development, basically your choices, your options for education, health, and standards of living in a country. This is what the report is trying to illustrate and also offer some of the solutions, policy orientations that the researchers and the authors think that the country could consider and propose to their policymakers. Since all development partners—UN agencies, donors and other parties—are engaged in helping the government collect, plan, and implement, they are also responsible, in a way, aren’t they? Of course, the moment we are using taxpayers’ resources to fund development, accountability lies on everyone. So, you have the duty-bearers and all the development partners are part of that group of duty-bearers in the same account as the government or other institutions. Citizens, including those working in the government, also fall under the category of rights-holders. Basically, it is a role that is interchangeable and everyone is responsible because you have to show results of what you invest in a country. That is why we have mutual accountability, an important principle of development cooperation. It is not only one-sided but mutual accountability where everyone mutually accounts for what the party has agreed to work on together. That is why we are also showing the SDGs (Sustainable Development Goals). If you go to goal no. 17, the partnership is an extremely important goal that brings everyone together. There is a role for everyone within intercountry and intra-country (settings) giving everyone the opportunity to come together and make sure that we go there together by 2030 for Global Goals or 2050 for some of the climate targets that we get there by the commitments that we made. In terms of realizing SDGs, how is the government faring? Does this report indicate anything? Until 2019, most probably many of the SDGs were relatively on track not only in Nepal. Unfortunately, with covid, we know that SDGs will not be on track. I think the HDR speaks about it. We would have lost 6 years of development gains just after the pandemic. If we are not careful, if we do not invest in health systems in basic services this can be aggravated more, more pandemics can come. I think I read about 10,000 zoonotic species of viruses that are interacting with humans. That can, all of a sudden, become a pandemic. Your interactions with nature are such that there is room for anything. We are interacting with animals, plants, natural minerals, and with other natural sources. The way that we are expected to behave in harmony with these elements, if that is disturbed, we do not know the outcome of it. There is still time to be conscious about the way we behave, the way we use fossil fuels, the way we exploit biodiversity and forests. The way we look into the glacial lakes in Nepal for example—an extremely important freshwater resource for billions of people. We have some 6m people in Nepal living below multidimensional poverty, but what does it really mean? How many meals a day? Can they really pay the medical bill? Can they send their children to school? How to make sure that you invest in clean energy, you diversify clean energy resources, going from hydro to solar to wind and making sure that it is accepted and invested together? These are fundamental questions about what is important for Nepal in terms of SDGs, in terms of ambitions that Nepal expressed in 2020, 2021 in terms of clean energy targets making sure that 10-15% of your energy would be clean energy. For Nepal, there is still time to be back on track (in terms of SDGs). Even human development trends since 2019 show there are bumpy situations for Nepal like other countries. But it’s time to make conscious and collective decisions. By taking politically, economically, environmentally, socially and culturally sound decisions, Nepal could set an example, I think. What if local governments, at the forefront of development, do not act properly? I think Nepal is uniquely positioned with federalism. The path Nepal chose to go moving from unitary to federal system breaking either way that your service delivery is happening. So, you have 761 different ways to bring those services to the people. Of course, it is a bit complex, it needs a lot of coordination, it means a lot of collaboration, it also means a lot of challenges that would arise from coexistence of these different tiers together. But I think it's an opportunity. We definitely cannot forget the role of local governments in delivering basic services related to education, health, and livelihoods for people in their vicinity. Everybody has a role to play. What do you think the media can actually do individually on this report? I think the media should not only look at the Human Development Index and say Nepal lost or gained. That should not be the headline. It should really go to the analytics of the report. Basically, there are three pieces in the report. You have the whole theme explained through the chapters, then the methodology and then the statistical annexes. The balanced reading of all these pieces would be very very useful. While looking into gender dimensions of human development progress, we sometimes miss out how the men fared or the women fared compared to each other. What does it mean in terms of reproductive health, empowerment or market access for females, for women, for gender inequality index? If you see that, certain provinces will have to double their efforts to bring their indicators a bit higher and to make sure they’re on the right track. Nepal has done a lot of analytics, SDG baselines, for example, in all seven provinces. You have clustered SDG analytics. The media could go beyond the hour of publication or its launch to show interest in the report. You have a good cohort of LDCs to look at. In terms of different dimensions, where can Nepal learn from other developing countries or the LDCs, bring stories forward and have creative debate about the topic? Media can also train younger journalists on Human Development concepts, where it comes from and why it mattered in 1990 and what is its relevance in 2022 or what has changed between 1990 and 2022. So, those are basically giving substance for the younger generation to really do this critical thinking beyond the index and to go to the report to make sure that it is translated into Nepali and other languages. The media can go to universities, bring students to television platforms and ask them to speak about the report to create interest and curiosity among students about development issues and make sure that the debate takes place. That’s what we call thought  leadership, critical thinking analytics. It will definitely shape their academic path and will ultimately get into their DNA in the way that they would be behaving in the country to make decisions.