Quick questions with Niti Shah
Q. What is something that is important to you that you never really talk about?
A. My private life.
Q. A quote you live by?
A. ‘There is beauty in simplicity’.
Q. Are you a morning person or a night owl?
A. Morning person.
Q. Something your fans wouldn’t believe about you?
A. I am good at sarcasm.
Q. What’s your favorite smell?
A. Versace perfume.
Q. What’s the best part of your day?
A. Usually the end when I realize I had a productive day after working hard.
Q. Do you have a secret hunch about how you will die?
A. I have never thought about it.
Q. If you could change anything about the way you were raised, what would it be?
A. Nothing, because then I would not be me.
Q. If you were a flower, which flower would you be and why?
A. Lily. I love that it grows from bulbs to a flower over a period of time. I find it very beautiful.
Investment Summit is just a publicity stunt
The Nepal Communist Party (NCP) Co-chair KP Sharma Oli-led government has completed a year. The government was formed based on the twin mandate of ‘stability’ and ‘prosperity’. But while a semblance of stability has been ensured, there is a big question mark over its commitment on prosperity. FDI is down and trade deficit steadily inching up. Meanwhile, the government is preparing for ‘Nepal Investment Summit 2019’ on March 29-30. Biswas Baral and Kamal Dev Bhattarai talked to Former Finance Minister and senior Nepali Congress leader Ram Sharan Mahat to solicit his views on the government’s economic performance and the investment summit.
What is your assessment of Oli government’s economic policies over the past one year?
There is not much to be optimistic about. The government seems preoccupied more with publicity, self-praise, aggrandizement, and high-flying rhetoric, rather than undertaking tangible actions vital for the country’s long-term economic interest and sustainability. There is increasing trend toward unproductive expenditure like raising perks and privileges, and distributive and consumptive activities. The government thinks it has done a lot, but the country’s economic condition is getting worse. Good governance, security of private property and strong law and order are prerequisites for economic development. There were explosions in Arun-3 hydropower project last month. This week, there were blasts at dozens of Ncell towers as well, resulting in human casualty and corporate losses. Such incidents create suspicion and terror, which in turn affect foreign investment. With regard to public investment, thousands of infrastructure-related development projects approved and started by previous governments at the central level are in limbo as their implementation has been halted. This is one reason why the capital expenditure is low.
On what basis can we say the economy has fared poorly under the Oli government?
There are several indictors. The declining trend of NEPSE is a matter of concern. Stock market is often regarded as one nerve center of the economy. In the last one year since the formation of this government, the NEPSE index has gone down by over 25 percent. Similarly the country has slipped five places in the Doing Business Index. Nepal’s rank in the Corruption Perception Index (CPI) is getting worse too. The private sector seems terrorized. All this shows the country’s economy is not faring well. Cost of production is going up. The country suffers from a huge trade deficit and even the balance of payment has deteriorated now. Traditionally the country has maintained a balance of payment surplus, continuously raising the foreign exchange reserve. But this year it has gone down. We have to think of how to increase Nepal’s competitive strength. But the government does not seem concerned about these. Its activities are increasing the production cost and making the country less competitive.
After a long time, a stable government has been formed. Political instability was long blamed for the country’s economic woes. What is wrong now?
People had high expectations of the government because it was elected for five years with a popular mandate. But the government feels it can do anything with a majority in parliament. It thinks pompous speeches and high-flying rhetoric would bring about economic development and prosperity. The government’s stability must be reflected in its behavior, action and administration. Do you see stability in the administration? Obviously not. There have been frequent transfers of civil servants, even three or four times in a year. So political stability is not reflected in the government’s performance. Election of a new government for five years does not by itself ensure stability and steady development.
The focus should have been on strengthening existing institutions. There are coordination problems among federal, provincial and local governments, resulting in confusion and conflicts over the division of responsibility and mandate. The government’s failure to continue implementing the multi-year projects started in the past by taking ownership or handing them over to provincial and local governments on time, and with necessary funds, has created disarray in thousands of road, drinking water, irrigation and other projects. There are complaints from provincial and local governments about the lack of adequate manpower. Further, bureaucratic transfers and appointments are excessively politicized and based on partisan interests. To ensure good governance, you should have right people in right places. This is not happening. The government has failed to produce expected outcomes.
What do you make of the 6.5 percent projected growth in this fiscal year?
Economic growth in the past two years has been favorable, particularly against the poor base of 2014/15 and 2015/16, which was the result of the earthquake and the blockade. But such growth cannot be sustained. The government is boasting about 7-8 percent growth, and trying to influence estimates by others. Around 5-6 percent growth can be achieved because of several factors. First, a good monsoon has contributed to greater agriculture output. Second, massive post-quake reconstruction works are taking place due to the policies and initiatives of previous governments. This is also boosting growth. Third, there is now uninterrupted power supply and expansion of the service sector.
Data show Foreign Direct Investment has declined after the formation of the new government.
The country’s investment climate is not good, as I said before. The stock market, which is a nerve center of the country’s economy, is continuously declining. The private sector seems terrorized and foreign companies are apprehensive. Even domestic investors do not seem confident about the future. Wide-spread corruption in bureaucracy, administrative hurdles in doing business, lack of confidence in the communist government, deteriorating quality of governance—all these contribute to low foreign investment.
Is the communist background of the government also turning investors off?
Bombs are going off at various places, which raises questions about investment security. There are reports of the finance minister’s remarks that the state should own land, meaning it should not be privately owned. Similarly, the stock market has been billed as an unproductive sector. Communist ideology could have played a role.
Are there any structural and legal problems that contribute to low FDI inflows?
There are not many legal problems with FDI, although some refinements here and there may be required in response to the evolving situation. The real problem lies in implementation, confidence- building and administrative efficiency. We have enacted a law on special economic zones and established one in Bhairahawa, but only a few industrial units have been registered and set up there. A new labor act has been enacted through consensus. During the Investment Summit in 2017, donor agencies had pledged $14 billion but that has not materialized. We have generally a favorable legal framework but the problems are with implementation, quality of governance and confidence-building. Several provisions in the last budget including tax measures were not helpful either.
If the money committed in the last investment summit failed to materialize, what could be the point of holding another one?
It is for the government to explain its rationale. My own advice would be to first review the commitments made in the last summit, and analyze why these pledges have not materialized. There must be a serious appraisal of that, with proper follow-ups. Only after that, and only if it is necessary, should another investment summit have been held. Follow up on previous commitments, and only then think about the future. But the government seems to be planning the summit more for publicity, to show that it is actually doing something.
What do you make of the government’s recent employment guarantee scheme? Surely, it is good.
Creating more employment opportunities is a good thing. But there must be proper homework and preparation before announcing a scheme. The problem in Nepal is not just lack of employment opportunities, but creating skills and motivating Nepalis to take up jobs where foreign manpower is being utilized. There are plenty of job opportunities in areas where foreign labor is being used. Many development projects are suffering for lack of manpower. A few weeks back, I had read that there is a lack of manpower in big industries and they are having to bring manpower from India, Bangladesh and other countries. The construction industry is dominated by foreign workers. Nepal is the seventh biggest remittance sending country to India. Of our total remittance inflow of US $7 billion this year, we send about $3 billion to India. We only have to provide skills to Nepali nationals so that they can work here. The employment guarantee scheme seems to be directed more toward distributing money and providing an unemployment allowance rather than creating skills. We need solid programs to create jobs. This calls for a serious exercise by top experts and policy makers with the right background and expertise.
Do you think the communist government is trying to follow the Chinese economic model?
I cannot say what the government has in mind. As far as attracting foreign investment is concerned, China is a great success story. But they have adopted a different political system, which makes it difficult for others to exactly replicate their model. However, we can learn a lot from their model and experience with regard to productivity growth, work discipline, technological improvement and foreign investment. It must be noted that the growth and prosperity of China started with the policy shift in 1978, when the inward-oriented, centralized and state-centric policy of the Maoist era was discarded in favor of an open and liberal policy.
Quick questions with Swoopna Suman
Q. What’s an opinion you hold that most people would disagree with?
A. Fries should be eaten without ketchup.
Q. What are you proud of but never have an excuse to talk about?
A. My cooking skills.
Q. Your alternate career choice?
A. An army officer.
Q. A Nepali singer you would like to collaborate with?
A. Astha Tamang Maskey.
Q. Which country would you like to go for a concert tour?
A. The USA.
Q. If you could pick a day to relive, which day would it be?
A. My first ever concert at Pragya Pratisthan.
Q. You were star-struck when you met?
A. Respected Sujil Karmacharya Dai.
Q. What’s one superpower you would not want?
A. To be able to read people’s mind.
Q. What would you like to be remembered about you?
A. I want people to remember me for my music and my songs.
No illusion that Nepal will pick sides on Indo- Pak dispute
Constantino Xavier holds a Phd in South Asian studies from Johns Hopkins University. Currently a Fellow in Foreign Policy Studies at Brookings India, Xavier is writing a book on India’s crisis response and involvement in Nepal, Sri Lanka and Myanmar. He is also researching the challenges of connectivity and security across the South Asian and Indian Ocean regions. A close observer of South Asian geopolitics, Xavier sat down with Biswas Baral and Kamal Dev Bhattarai to discuss growing Indo-Pak tensions, the Asia Pacific Strategy and India’s relationship with Nepal.
How do you view the recent terrorist attacks in Kashmir and developments in Indo-Pak relations since?
No doubt it is going to escalate. We do not know how India will retaliate. War is a big word, and there are many ways in which these two countries can go about it.
Is there a possibility of a repetition of the 2016 ‘surgical strikes’?
Surgical strikes, cross-border strikes, sanctions, mobilizations—there are all kinds of options before India.
What would be the regional implications of this conflict?
It is certainly not good for SAARC as the regional body has not moved ahead in the past four years because of tensions between India and Pakistan. With the tensions flaring up again, the process of reactivating SAARC will be further delayed. Nepal has been pushing for the SAARC Summit, and other member countries have become increasingly impatient because it is an important regional organization, in fact the most important in South Asia. And regionalism cannot be made hostage to bilateral relations. That has happened with SAARC. With other organizations like BIMSTEC, it has not.
Despite the tensions over Rohingya refugees, Bangladesh and Myanmar have continued to cooperate in BIMSTEC. I know India often faces criticism vis-à-vis SAARC. There are three or four instances when India tried to push regional cooperation through SAARC, including the SAARC motor vehicle agreement, a SAARC satellite and a transit corridor though India and Afghanistan. On all three issues, Pakistan consistently blocked the way.
That is Pakistan’s right, but the way Pakistan has bilateralized issues has affected the SAARC process. At some point, India said enough is enough, we cannot let regional cooperation be hostage to these issues and we will have to look for alternatives. Regional cooperation is not a monopoly of SAARC. There is BIMSTEC, BBIN, the India-Nepal framework on hydropower and transportation, and some triangular mechanisms. So recent developments have not been good but they don’t also spell the end of regional cooperation.
Beyond SAARC, how does the tension between India and Pakistan affect this region geo-strategically?
To cooperate, you need to be connected. SAARC has been unsuccessful for so many years because it is not connected properly. Earlier, India was defensive and a closed economy. And Nepal could not connect with China. Now, you have those options. You can also help bring China into South Asia. Now, there is a new world of connectivity. This is very different to the security-centered conflict between India and Pakistan. I do not see the possibility of war between India and Pakistan; and I do not see military escalation affecting the connectivity corridor between Nepal and China, or between Nepal and the Bay of Bengal, or between Bhutan and Bangladesh.
India and Pakistan want other countries in the region to take their side, which makes people nervous. In 1962 when India and China fought a war, Sri Lanka said it would be neutral and mediate the dispute. China agreed but India was very upset. India said to Sri Lanka that since it is an immediate neighbor, it couldn’t be neutral, and that it should not try to be a mediator. India said it was a bilateral issue. As a result, relations between India and Sri Lanka suffered. So there will obviously be pressure. In 2016 when India pulled out of the SAARC summit, it expected support from other countries. Several countries in the region supported India. Since then, many countries including Nepal have been impatient and saying that SAARC must be reactivated.
In case of a conflict, while there will be pressure from Delhi to take sides, no one is under any illusion that Nepal will give in. Sometimes, India also faces pressure from China and America to choose sides. It’s the same with Nepal. As an immediate neighbor, Nepal will have special consideration for India’s position, but it also has good relations with Pakistan, which it doesn’t want to spoil. Frankly, no one will really care. Smaller countries have learned to hedge their bets.
In your view will the national elections in India this year change its Nepal policy?
I hear in Kathmandu that the BJP, the Congress and various Indian communist parties have different policies on Nepal. Fundamentally, I do not think it matters much which party is in power in New Delhi. The broad lines of India’s Nepal policy are clear. Its main objectives like connectivity, interdependence, support for Nepal’s development will not change. You now have a strong and stable government in Nepal after 20 years of instability. I think New Delhi is clear that it has to engage with the government led by Prime Minister KP Sharma Oli. There is a good relationship between the two prime ministers, and between the two states and bureaucracies. So whoever is the prime minister in New Delhi, there would be continuation in Indian foreign policy.
Do you think there has been a change in India’s Madhes policy after the blockade?
I do not have evidence to prove that the Indian state was complicit in the blockade. As a scholar, I can speak only on the basis of evidence and facts. What I can say is that the Indian government could have done more to help Nepal overcome the pain of the blockade.
Let’s assume India had no hand in the blockade. In that case, India could have supported Nepal. It could have airlifted essentials like food and fuel into Kathmandu. It did not. That hurt bilateral relations.
Let’s now assume that India had a role in the blockade, whatever the motive: support for the Madhesis, an inclusive constitution, etc. What instrument you use to pursue your interest is important. Do you use a blockade or diplomacy? Do you use pressure and what form of pressure? I think whatever happened, it left a bad aftertaste in bilateral relations. India learned that it has to respond to its neighbors’ demands and it cannot let neighboring countries develop anti-Indian feelings. So even if India had no role in the blockade, it could have done more to help Nepal during the humanitarian crisis.
How do you assess India’s current relationship with Madhesi parties?
The salience of the Madhes issue in bilateral relations has gone down. You see general statements about inclusiveness and diversity, but there are not prescriptive statements India used in 2015/2016 about what Nepal should be doing in terms of its constitutional and political arrangements. I think there is now a focus on delivering development assistance, implementing connectivity projects and diversifying outreach in Nepal beyond the usual groups of people who are friendly to India. No minority issue is permanently resolved. Every country has to continually work on diversity, bring in new people, redistribute. Even in post-war Sri Lanka, there is a continuous process of reassuring minority groups. Various minority groups in Nepal including the Madhesis want more rights. Generally speaking, India thinks nation-states need to be more inclusive.
Looking from New Delhi, how do you see the relationship between the communist government in Kathmandu and China?
China has always been around but its financial clout and emphasis on public diplomacy are relatively new, with a short history of just five to 10 years. All countries have to adjust to this new reality. I think India has gone through it. Now, India does not have a monopoly in this region. China is an immediate neighbor of Nepal. Often Beijing is portrayed as being far-away. But China is just across the border and is developing huge infrastructures on the border. Tibet is going to witness tremendous growth and infrastructure development. I think India is now focused on delivering because that is the only way it can pursue its interest. It does not have a special prerogative anymore. The best product is the cheapest, whatever Nepal gets it from. Nepal should pursue its national interest based on that. India’s clear focus now is on delivering more.
Is that because of pressure from China?
If you are a fan of connectivity in South Asia and believe Nepal and India should be more integrated and interdependent—in terms of infrastructure, roads, rails, inland waterways, airplane connectivity, data connectivity, educational exchanges, defense diplomacy—you have to ask why that didn’t happen in the past 70 years? Therefore ‘Thank you China!’ By coming into Nepal and developing that connectivity, China made India wake up to the importance of regional integration. India as the largest country in South Asia has a special responsibility in promoting connectivity. If Nepal wants connectivity with Bangladesh, it should have permission from India for the movement of trucks and data. It is in India’s interest to promote that, but it took China’s greater presence in South Asia for India to realize and speed up its investment in connectivity.
You have maintained that Nepal-India relations are still special, even though the idea of a special relationship is increasingly contested in Nepal.
On paper and in theory, every relationship is special and unique. Nepal-France relationship is special and unique. So is Nepal-Australia relationship. But I will speak to you realistically. As of today, geography, history and culture connect Nepal more to India than to China. Now, Nepal is saying it must change this and reconstitute linkages with China because it also has a long tradition of connectivity with China. Naturally, Nepal wants to diversify its options in order to reduce its dependence on India. At the same time, there still are elements that make Nepal-India relationship more unique and special. Even today, Nepali citizens are allowed to join the Indian civil service and armed forces based on the 1950 treaty.
Nepal could consider abrogating the treaty. But you have Nepali citizens serving as officers in the Indian air force. You cannot have Nepali citizens serving in the Chinese air force. In many ways, this is a vestige of the colonial era. The special treaty was signed on the behalf of British colonial players with the Kingdom of Nepal.
The open border is yet another aspect of the special relationship between Nepal and India. Again, it is up to Nepal to decide whether it wants to do away with this.
How does India see the greater engagement of western powers in South Asian countries like Nepal and Sri Lanka?
The US opened its embassy in Kathmandu in 1959. It then started providing development aid. It is still a big provider of development assistance to Nepal. The long history of US-Nepal relationship is independent of US-India, US-China or China-India relationship. In fact, India was opposed to the US entering Nepal because it thought that would create tensions with the Chinese. India advised the US not to open an embassy in Kathmandu as that would encourage the Chinese to follow suit. There was cold war rivalry. But now the world has changed. Nepal is one of the dynamic economies in South Asia, and it has a young population. Up to the 1970s, Nepali students used to go to Calcutta or Delhi to study. Today they are also going to China, Singapore, Australia and Korea to work, study and teach. This is a different world that India has to adjust to. Now, India and China are working together in third countries. For example, India and China are jointly training diplomats in Afghanistan.
US interest has always been there in Nepal. The way the US looks at Nepal aligns more closely with the way India or Japan looks at Nepal than with how China looks at Nepal. That naturally creates coordination in policies. India, the US and Japan agree that Nepal needs open and free democratic institutions to develop sustainably.
Could you very briefly define the so-called Indo-Pacific Strategy?
The Indo-Pacific Strategy is a US document, one I doubt many people have read. It is a small security and strategic document, part of a larger approach called Indo-Pacific. Indo-Pacific is an alignment of worldviews and interests about how to manage security, growth, connectivity and development in larger Asia. You cannot separate these. People ask if it is all about security; yes it is also about security. This are similarities of views on the best ways to manage Asia, in particular as a response to the Chinese view. Again, ‘Thank you, China!’ I have to say because by developing the Belt and Road Initiative and thanks to its larger outreach across Asia and Euro Asia, it has also highlighted the need to develop alternatives.
You will be surprised. The biggest Indo-Pacific proponents often are not in the US, Japan or India. They are rather in countries like Sri Lanka and Malaysia that are now flooded with Chinese investment. They want India-Japan and other coordination mechanisms as alternatives. You do not want to depend on one country. There is an interest in balancing China. Many South Asian countries such as Sri Lanka and Bangladesh as well as South East Asian countries want more of India. You have to deliver. The Indo-Pacific Strategy is not a security alliance, it is not about containing China, it is not about defense. It is about having alternatives.
Alternatives give you freedom and autonomy. If I depend on a single partner, whether it is India, China or the US, I am hostage to that partner. By having more partners, I gain greater bargaining power. That is why India still maintains a very good relationship with Russia, and the US is upset with it. The current impulse in Nepal is to focus on China, its next-door neighbor and the second strongest power in this world. Similarly, China here is taken as a reliable partner that has delivered in the past decade and it is ready to do more. While there is this inclination in Nepal, there is a case to be made to diversify. You should always keep your options open.
While our Foreign Minister was in Washington, the US State Department issued a statement that put Nepal at the ‘center’ of the Indo-Pacific. How do we understand this?
It means that when the United States talks about the Indo-Pacific and India, it is talking not only about maritime countries. It is talking about countries which have an interest in a free and open Pacific. This means bilateral relations based on transparency, mutually agreed-upon rules and sovereignty.
