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Q.    What’s the favorite thing in your closet right now?
A.    A green semi woolen sweater that my grandfather passed on to me.

Q.    What are you holding on to that you need to let go of? 
A.    I hoard Apple products. I need to let go of 4 Macbooks and iPhones right now. (Wanted to say past relationships but again it’s too cliché.) 

Q.    What is your pet peeve?
A.    When someone I am talking to is too busy on their phones. It’s so annoying and irritating.

Q.    If you could have any three people (dead or alive) over for dinner, who would they be?
A.    Robin Williams, Arun Thapa, Kobe Bryant.

Q.    What’s on your playlist right now?
A.    Solomun / Lane 8 / Dennis Lloyd

Q.    If you had to work but didn’t need the money, what would you choose to do?
A.    Cut coconuts off trees somewhere in the Caribbean

Q.    Iphone or Android?
A.    Android for now

Q.    Is there an app that you hate but use anyways?
A.    Smoke Free (I haven’t smoked for over two years)

Q.    What is the stupidest thing you’ve done because someone dared you to?
A.    Ate a live, walking cockroach in high school over a bet.

Q.    You get an elephant. You can’t get rid of it. What would you do with it?
A.    Invite kids from all over the country to come play with it.

Q.    Summer or winter?
A.    Summer please! I catch cold and feelings quickly.

Q.    If you had to buy something for the person you love, what would it be?
A.    Fooooooodddd. I’ll give something I want in return gift.

Q.    What has been the funniest prank played on you? 
A.    Maybe not the funniest but recently in an event I announced bingo tickets were available. One drunk uncle said “the ticket is worth Rs 50.” I should’ve known he is “that drunk uncle at the wedding”. He pulled a good one, I must say.

Q.    If you could dis-invent one thing? 
A.    Hair straighteners! I want people to rock their natural hair—curls, wavy, bushy whatever.

Q.    What makes someone a hero?
A.    A heart that isn’t jealous. Someone who can be happy at others’ success is 
my hero.

Q.    What are the qualities you enjoy in a friend?
A.    Humor for sure. I want my friend to insult me back when I insult them. We laugh together that way. A friend that buys food. My best friend does somersaults and backflips when I am upset. So may be a little more drama, pretty please.

Q.    In what situation or place would you feel the most out of place in?
A.    After I started my professional life, I have become a potato. I go with everything.
Q.    What would you stockpile if you found out they weren’t going to sell it anymore?
A.    For now sanitizers and masks.

Q.    Shake hands or Namaste?
A.    Kisses and hugs? I am a chuppa kinda person.

Kamal Dev Bhattarai and Arun Poudel talk to economist Posh Raj Pandey, who is also the chairman of South Asia Watch on Trade, Economics and Environment (SAWTEE), about the impact of the global novel coronavirus outbreak on Nepal’s economy, with the focus on its impact on remittances.

How do you assess the impact of the coronavirus pandemic on the country’s economy?

Let’s first discuss the structure of our economy. The contribution of service sector in it is very high, which is mainly about people-to-people contact and movement. So, we see a higher impact of coronavirus in this sector. In manufacturing, there is comparably lesser impact but if there is a break in value-chains, it will also be affected. In our economy, the contribution of agriculture is about 27-28 percent, whereas the contribution of social and government service stands at around 4.5 percent. This means a third of the economy is insulated and would not be directly hit by coronavirus. There will be impact only in the remaining two-thirds.

How will the two-thirds of the economy that is vulnerable to coronavirus be affected?

There can be both direct and indirect, as well as positive and negative, impacts. The worrying factor is that the value-chain of the industrial sector is breaking down as we import intermediate and raw materials from other countries. This could result in less production and affect the country’s overall export. Similarly, the high flow of remittances boosts retail and wholesale trades. If remittances die down, health and education sectors could also be affected.

Next, the coronavirus scare is affecting our tourism. Basically, there are two components in tourism: hotels and restaurants, and travel and transport. These sectors are directly affected because movement of people is restricted. Similarly, there will be a direct impact in the construction sector. Big government projects will be hit.

What kind of positive economic impacts could the coronavirus pandemic have?

Due to the coronavirus outbreak, global oil price has come down. Despite some fluctuations, the price is on a downward trend. It would benefit our economy as we import a lot of oil. Similarly, concentration of our raw material resources in China was never a good thing. The world might now think of diversifying on raw materials and intermediate or final products. If the private sector and the government can come up with a calculated strategy, it also gives us an opportunity. On the negative site, as I said earlier, there is going to be a huge impact on remittance sector.

Remittances are considered the backbone of the Nepali economy. Will they be severely reduced?

The infection is spreading fast in Gulf countries and Malaysia, Nepal’s major labor destinations. Some countries have already blocked the entry of Nepali workers. Even India has said it will require Nepali travelers to be tested at the airport. This will restrict the flow of migrant workers as these countries are providing jobs to our unemployed people. Second, the remittances that Nepali workers send home have helped generate income and boost the economy. Remittances constitute one fourth of the country’s GDP, and if there are any ups and downs, our economy will be directly affected. Additionally, if economic activities slow down in those labor destination countries, they will ask for fewer workers. It will not only impact new recruitments, but also displace current workers. Can we generate employment at home for all those people?

Is there a way out of this potential economic crisis?

We are more or less without options. We have long been saying that sending workers abroad is only a transitional measure. And yet the government has been promoting it. We will not be able to manage the workforce if our workers return from those countries. We will be option-less because we cannot generate enough jobs for them at home. But even if we create some jobs, we cannot give the returning workers the wages they expect.

What could be the political and social fallouts of that?

Obviously, there would be big social and political impacts. It could result in political instability. There are also chances of social unrest and increase of crimes. It could also affect our social stability.

Will the national economy collapse if remittances stop coming, as some fear?

We have adopted flawed parameters of economic success. For example, the success of the finance minister is measured on the basis of the revenue and foreign aid he helps generate. It should rather be measured on how the money is spent. The finance minister takes pride in the revenue generated
but nobody cares where the revenue comes from. In the past decade, 47 to 58 percent of the revenue was collected from customs, which is import-based. Remittance money created demand here but we do not have enough supply. So the country had to import more, which in turn raised more revenue. So, more the remittances, more the imports and greater the revenue.

If the finance minister’s success were measured in terms of revenue from excise duty, which means more tax on goods produced at home, it would be better. Right now, the finance minister is complacent. The government thinks it need not work with the private sector. Even the Nepal Rastra Bank governor is happy because foreign reserves are in a healthy state due to remittances. Nobody cares about the huge import-export gap. Earlier, there was equilibrium between the country’s trade balance and inflow of remittances. So in a way the trade imbalance was compensated by remittances. In the past 3-4 years, the situation has worsened. Remittances have failed to make up for the deficit.

Does it mean remittances are decreasing or is the trade imbalance swelling?

The size of trade deficit has increased. Over the years, the gap between trade imbalance and remittances has continued to increase. Even in current circumstances, pressure is gradually building and remittances are not going to sustain the demand for foreign exchange. So, if remittances go down, we have to take foreign aid even to buy medicine, gasoline and food grains. Our economy will be captive to international financial institutions.

Compared to other countries in the region how dependent are we on remittances?

Obviously, India and Bangladesh get far more remittances than us. But in relation to the share of remittance to the country’s economy, we stand in the top three position globally. Except for some central Asian countries that send migrant workers to Russia, Nepal has the highest dependency on remittances. So we are in a very vulnerable situation. Regionally, we are the most vulnerable. When we talk about India, lower remittances will only have a local and limited impact. For example, it could affect the state of Kerela, not Delhi or other states. In our case, the whole economy will be affected. In Bangladesh, remittance contributes to just 5-6 percent to the national economy; in our case it was 25 percent last year.

What happens if we cannot find an alternative to remittance?

If we do not seek options immediately, our economy could crumble anytime. 

A ruling party taskforce has recommended substantial amendment of MCC accord. Is this possible?

Officially, we are yet to get the taskforce document. Based on media reports of the comments made by leaders, what I can say is that the comments are not substantial. You have to understand that the amendment process is long and difficult. Among other things, it has been said that the MCC compact violates Nepal’s constitution, which is not true. A communique to this effect has already been exchanged. We are not sure if the taskforce got that communique. There are other communiques, too, over other points. Some of the MCC points can be clarified if they are unclear. If there is a need for further clarification, an exchange of letters would be the shortest route.

Do you think the opposition to the MCC is ideological? Many ruling party leaders continue to see the US and all projects under it as ‘imperialist’. 

I don’t think so. What I would say is that some people have spoken against it on ideological grounds based on fake news and disinformation about the MCC. There are apparently around 500 websites disseminating fake news about the MCC compact. They say there is the MCC in Iraq and Afghanistan, which is wrong. There is no MCC project in the countries with American troops. The contents of fringe online media and social media show some bias. But mainstream political leaders are mostly in favor of maintaining cordial ties with the US.

How do you tackle the persistent perception that the MCC is part of US military strategy?

There are two issues here. First, as the MCC is time-bound, we do not have time to wait for such perceptions to die down. Once we start building the power transmission lines, towers and sub-stations, people will see our actual work. Seeing is believing. When people see the work, they will know that it is not military. As soon as parliamentary ratification and other conditions are met, we will go for speedy implementation. People will gradually understand what the MCC is all about. Similarly, not everyone can understand the 78-page long MCC compact document that was prepared by lawyers. These are international-standard documents and adhere to international norms. Unfortunately, some people are commenting on it without even reading the document or properly understanding the terms and conditions.

What are the important deadlines related to the MCC compact?

We have to understand that nothing lasts forever. We have fixed 30 June 2020 as the date of the accord’s entry into force. If we fail to meet that deadline, there will be credibility issue. So, June 30 is a critical date. Nepal government has dispatched a letter assuring that the compact will come into force after June 30. Non-compliance means violation of this commitment.

There could be further discussions, but it is beyond my jurisdiction to say what will happen after that date. But at the current rate, we could miss the deadline. The fiscal year of US government ends September-October. If the MCC is not endorsed before that, there will be uncertainty.

Even if the MCC and Nepal government agree on deadline extension, the US Congress can transfer unspent money to other heads. They could also withdraw the unspent budget. So it is a risky path. As it is, we have already lost five months, which in turn has greatly affected the morale of our staff.

Again, given the limited time, is there a chance of substantial changes in the compact?

It would not be difficult to explain some points through letters of clarification. For a substantial change, it should first land at the MCC board that includes the US Secretary of State. It would be difficult to justify the amendment to him because the compact was signed after sufficient discussion between the two sides. So it is better to finalize it through clarification letters.

There are also questions in Nepal about the need for parliamentary ratification of the MCC compact.

The rationale behind parliamentary ratification is to give legal status to the compact. There could be legal obstacles, and problems could arise, for instance while felling trees. Domestic procurement laws could be attracted. But we do not work as per the procurement law of Nepal. We follow MCC procurement guidelines. Therefore, the compact should be given the status of law for smooth project implementation. In case of conflict, the compact is implemented in line with section 7.1 of the agreement. On the interpretation of this provision, legal opinion was sought. Nepal government settled for a parliamentary approval through simple majority after legal consultations.  

Many people including senior NCP leaders are of the view that the US should clarify that the MCC is not a part of the Indo-Pacific Strategy.

It is up to the American government to say whether it is part of the IPS. What I have been repeatedly saying that the IPS is not an alliance. It is rather related to US foreign policy that covers areas from Indian Ocean to Pacific Ocean. It is about democracy, development, and defense. It is a policy document. In some policies we could align with the US and we can be partners. We can object to other policies that are not appropriate for us. We have that right. Nepal follows Panchasheel and America has its own policy. We the have power and capacity to pick and choose. So does it matter if it is a part of the IPS?  If China says tomorrow that everything that comes from China is under BRI, what would be our position? What will we do if the Indians say something similar?

The country should choose which path to pursue. The compact document has not mentioned anything about the IPS, so I do not understand what type of amendment we seek. Let us just follow what is written in the official documents that we have signed. We have to look at our relation with the US in the past 70 years.  We have to take decisions in a rational way.

Sri Lanka recently decided to reject a similar MCC grant. This has also fueled suspicions here.

Nepal and Sri Lanka have distinct political histories. From 2007-2009, Sri Lanka faced an ethnic civil war. Thousands of people were killed. There was international objection over extrajudicial and civilian killings. The UN and western governments took strong positions. They dragged many top Lankan army officials into war crimes. If you have followed recent news out of Sri Lanka, this had a direct bearing on the proposed MCC grant.

The MCC in Sri Lanka is related to road improvement and land management. Land management was aimed at digitalizing data and adopting new methodology. A section of people portrayed it as a data secrecy issue and termed it objectionable. However, the Sri Lankan government has not taken a firm decision that it would not receive the MCC grant. The current government is a transitional one as parliamentary election is due in December. The cases of Sri Lanka and Nepal are entirely different, and the position of Nepali leaders is not akin to those of Sri Lankans.

If there is no parliamentary approval, what could be the implications?

On the part of Nepal, there would be serious damage as the Nepal Electricity Authority has signed several Power Purchase Agreements (PPA) that are contingent on the construction of the Gorakhpur-Butwal transmission line under the MCC compact. The PPAs will be affected if the transmission line is not built. The proposed transmission line under the MCC can carry up to 3,000 MW electricity. The power sector in Nepal will take years to recover if this is not implemented. 

Next, the World Bank, JICA, Asian Development Bank and other international organizations visit our office and consult us about the transmission line. They synchronize their transmission lines accordingly. If the compact is not endorsed, it will affect their projects as well. It will give a message that doing projects in Nepal is difficult. It will be a big setback for the country as well as all foreign companies that are investing in Nepal’s hydropower. It would be difficult for us to even convene investment summits.

Nepal and the US have a 70-year history of cooperation. The US was the first country to support Nepal’s bid for UN membership. The MCC compact entails the biggest grant the US has provided to Nepal. It took more than five years to sign the project. I think no country should reject this. It is already signed, the design is ready, the office is already there, and the staff is working. It is not good to create disputes now.