US annual reports tell a lot about America’s view of Nepal

Every year, the US State Department comes up with its annual reports on different thematic issues of the countries with which it has diplomatic relations. Such annual reports provide insights into how the US views other countries. 

In this article, we present the major highlights of the key US reports such as 2023 Investment Climate Statements, Trafficking in Person’s Report, International Religious Freedom Reports and Country Reports on Human Rights Practices.

This week, the US State Department published its Investment Climate Statements. According to the report, hydropower, agriculture, tourism, ICT sector and infrastructure have significant commercial potential for investors. Nepal has an estimated 40,000 megawatts of commercially-viable hydropower electricity generation potential, which could become a major source of income through electricity exports, the report says.

The report recognizes that Nepal has established some investment-friendly laws and regulations in recent years, but significant barriers to investment remain. One of them is corruption which is impeding the investment climate in Nepal. The report states that political uncertainty is a continuing challenge for foreign as well as domestic investors.

Nepal’s ruling parties have spent much of their energy over the last years on internal political power struggles instead of governance, the report says.

The report further states that there is a lack of understanding of international business standards and practices among the political and bureaucratic class, and a legal and regulatory regime that is not quite aligned with international practices also impede, hinder and frustrate foreign investors. 

The Investment Climate Statements also raises questions about the role of trade unions. “Trade unions, each typically affiliated with parties or even factions within a political party, and unpredictable general strikes can create business risks, although this problem, once common, has diminished in recent years.”

The US report also questions the role of the Commission for Investigation of Abuse of Authority (CIAA), the national anti-corruption body. It says: “The 2015 constitution empowers the CIAA to conduct investigation of any abuse of authority committed through corruption by any persons holding public office. In practice, according to the report, the CIAA arrests and investigations tend to focus on lower-level government bureaucrats.”

According to the 2022 Corruption Perception Index released by Transparency International (TI), Nepal ranked 110th among 180 countries, placing it in the range of “highly corrupt” countries. In Jan 2018, local media reported that the CIAA is drafting a bill to replace the Prevention of Corruption Act, with the goal of making the new law compatible with the UN Convention against Corruption that Nepal signed in 2011. But the private sector is opposing some of the provisions of the draft. Nepal is not a member of the OECD Anti-Bribery Convention.

While anti-corruption laws extend to family members of officials and to political parties, the report says, there are no laws and regulations that are specifically designed to counter conflict-of-interest in awarding contracts of government procurements.  

A few months back, the US came up with its International Religious Freedom Report which raised issues that Christian groups continued to report difficulties operating as non-governmental organizations and multiple religiously affiliated organizations reported increased challenges renewing or registering their organizations. Christian groups said they continued to face difficulties buying or using land for burials, especially within the Kathmandu Valley, the report mentions.

It also speaks about the growing influence of India’s Bharatiya Janata Party in Nepal. The report cited Nepali civil society leaders as saying that the influence from India’s ruling party, the Hindu nationalist BJP, and other Hindu groups in India continue to pressure politicians in Nepal, particularly, the pro-Hindu, Rastriya Prajatantra Party, to support reversion to the Hindu state.

The report drew criticisms for its baseless accusation that BJP provided money to Nepali leaders for the Hindu cause. There were reports that the government sought clarification from the US side on the issue but it was never made public.

The US also has significant concerns over the religious freedom of the Tibetan community in Nepal, although the report does mention that there has been some improvement when it comes to the rights of the Tibetan community. The report cites Tibetan community leaders highlighting an increased ability to celebrate some religious and cultural holidays without police interference.

In June this year, the US came up with the Trafficking in Person’s Report which states that Nepal does not fully meet the minimum standards for the elimination of trafficking, but is making significant efforts to do so.

In its Country Reports on Terrorism, the US has raised questions regarding the security situation in Nepal’s international airport as well as the open border that it shares with India. A more significant threat is non-Nepali international terrorist groups using Nepal as a transit/staging point for soft targets, the report says. Because of the open border with India and insufficient security protocols at the country’s sole functioning international airport in Kathmandu, the report says, it could be used as a transit or staging point for international terrorists.

In its Country Reports on Human Rights Practices, the US has provided its perspective on various aspects of human rights in Nepal. On transitional justice, the report says the government and judiciary did not significantly address most conflict-era human rights and humanitarian law abuses committed by the Nepal Army, Armed Police Force, police and Maoists. The country’s two transitional justice mechanisms—Commission of Enforced Disappeared Persons and Truth and Reconciliation Commission—are not fully independent.