Off the Record 048: This week in Nepal
Issue 048 • 08 April 2022
It’s April 8, 2022, and you’re reading Off the Record, the weekly newsletter from The Record. We are an independent, ad-free, digital news publication out of Kathmandu, Nepal.
I’m Pranaya Rana, editor of The Record, and in this newsletter, we’ll stop, take a deep breath, and dive into one singular issue that defined the past week.
Good morning, good afternoon, and good evening from overcast Kathmandu. Spring might be in the air but so are excess amounts of particulate matter, leading to a perpetually cloudy, dreary Kathmandu. It’s been this way for over a week now and although the weather is hot and muggy, there’s been little respite by way of rain.
But pollutants are not the only thing in the air. Much has happened this past week that bears discussion. So this week, I’ll be doing something different. Instead of one deep dive, I’ll be briefly discussing a number of developments, economic, geopolitical, diplomatic, and political. Perhaps I can switch between the two formats, depending on what has happened over the past week. I may be nearing a year of writing this newsletter but it is still a work in progress so all feedback will be greatly appreciated. Please don’t hesitate to reply to this email!
Here we go:
Mr Deuba goes to Delhi
Sher Bahadur Deuba meets with Narendra Modi in Delhi on April 2, 2022. (Photo: RSS)
Prime Minister Sher Bahadur Deuba returned home on Sunday, April 3, after a three-day visit to India. Surprisingly, not much was said in the Nepali press, unlike when Chinese Foreign Minister Wang Yi was here last month. Nepal-India ties, it seems, are old hat. Enough has been written about them, enough has been said. Unless, of course, there’s a crisis, like in 2019, when India issued its new administrative map and included parts of Nepal. That mess culminated in the KP Sharma Oli government issuing a new political map of its own (‘chuchhe naksa’), pointedly encompassing the Kalapani, Limpiyadhura, and Lipulek areas that India had subsumed.
Deuba’s visit, however, did spark quite a few opinion pieces from across the border, including one by former Indian Ambassador to Nepal Rakesh Sood. In his article, Sood mentions the elephant in the room — the border issues — but ends the piece before he can really dwell on it. The row over Kalapani, Limpiyadhura and Lipulekh might have died down publicly with Oli’s unceremonious exit but Nepal’s Parliament endorsed a new map and now we find ourselves in a situation where both countries have officially and very publicly staked claims to the same area. The Indians, quite obviously, took affront to the new map, saying that Nepal had “unilaterally” issued it. Then Foreign Minister Pradeep Gyawali had got the cold shoulder from Narendra Modi when he traveled to India in early 2021 and no discussion was held on the border, despite repeated entreaties from Gyawali.
This time around, as per an official Ministry of Foreign Affairs press release, the “two Prime Ministers discussed the boundary matters. The Prime Minister of Nepal urged the Prime Minister of India to resolve the boundary matters through the established bilateral mechanisms.” But tellingly, the official Ministry of External Affairs press release makes no mention of the boundary, even though Deuba announced the discussion in Modi’s presence.
It appears that Deuba pressing the border issue is purely for domestic consumption, given that this is an election year. India has so far refused to discuss the border and I believe it will continue to do so. India does not seem to have pressed its own understanding of the issue, as far as we can see it, perhaps in order to help Deuba’s electoral chances, as a dear friend of The Record recently pointed out to me. An article in The Hindu makes this point abundantly clear:
India also urged Nepal to avoid "politicisation" of the boundary dispute. Foreign Secretary Harsh Vardhan Shringla briefing the media after the talks said, "There was a general understanding that both sides needed to address this in a responsible manner through discussion and dialogue. In the spirit of our close and friendly relations, politicisation of such issues should be avoided." India's position on avoiding politicisation of the Kalapani issue appears to be aimed at the upcoming election season in the Himalayan country when emotive issues like the border dispute are expected to be raised during political campaigns by both the opposition led by former PM K P Sharma Oli and some sections of the ruling coalition of Nepali Congress and CPN - Maoist Center.
It is pretty evident that India will help shore Deuba and the Congress’ position in the upcoming elections. After all, it is no secret that the Congress tilts south just a bit more than the communist parties. Deuba too appeared to cater to the Indian establishment with a visit to Varanasi where he was welcomed by Uttar Pradesh Chief Minister Yogi Adityanath. Deuba visited temples and performed pujas. Hopefully, catering to India will not entail catering to the majoritarian Hindubadi politics that are currently in vogue across the border. But then again, his wife, Arzu Rana Deuba, issued this statement, make of it what you will:
The economy is in trouble
Politics might be a little stable but the economy is certainly not. Ballooning imports, increasing inflation, along with a continuing liquidity crunch, have meant that the Nepali economy is looking at hard times, leading the public to panic, especially given what is happening in Sri Lanka. There are fears that the current crisis in Sri Lanka could be replicated here. Economists, however, say that that is not going to happen. Writing for Setopati, former Finance Minister Yubaraj Khatiwada and current vice-chair of the National Planning Commission Bishwa Poudel both said pretty much the same thing, dismissing any fears of Nepal going the way of Sri Lanka. Both pointed out that the current crisis is due to structural shortcomings in the Nepali economy — a massive trade deficit due to Nepal exporting a fraction of how much it imports, banks giving out cheap loans that are invested in easy money sectors like real estate and stocks, and a plateauing of remittance coming in through formal channels.
All of this has led to a severe depletion of Nepal’s foreign currency reserves, which is currently enough to import goods and services for about six-and-a-half months, according to Nepal Rastra Bank Executive Director Gunakar Bhatta. Remittances had decreased by 4.9 percent as of mid-February when compared to last year while imports had increased by 42.8 percent. Tourism, another significant source of foreign currency, is only just picking up after two years of being battered by the Covid-19 pandemic. Accordingly, the Nepal Rastra Bank has issued a ‘verbal directive’ asking commercial banks to ‘discourage’ lines of credit for the import of non-essential goods like automobiles, cosmetics, alcohol, tobacco, and gold. The Labor Ministry too has plans to encourage migrant workers to remit their earnings through formal banking channels and rely less on the informal ‘hundi’ system, including an additional 2 percent interest rate and tax waivers.
So things aren’t great but we’re not nearing a catastrophe either.
Financial crimes and Janardan Sharma
Finance Minister Janardan Sharma
In related news, Kantipur published a bombshell of a news report on Wednesday, showing how Finance Minister Janardan Sharma had himself written to the Nepal Rastra Bank, asking the central bank to release Rs 400 million that it was holding for investigation. Nepal Rastra Bank and the Department of Money Laundering Investigation had blocked the funds after receiving a request from the United States-based Financial Crime Enforcement Network to send back the Rs 400 million received by one Prithvi Bahadur Shah. Sharma’s press advisor later said that he had only asked the bank to release the funds after the investigation department found nothing illegal or suspicious.
Prem Prasad Bhattarai, chief of the department, however, said that the investigation had not reached any such conclusion. Shah, who has admitted to being involved with the Maoist party, of which Sharma is a member, operates numerous businesses related to remittance, travel, and marble tiles. But according to the Kantipur report, none of his businesses have such large turnovers and thus, the funds are likely the result of corruption, embezzlement, or financial crimes. Shah reportedly has 8 to 10 bank accounts and also receives funds in his family members’ accounts.
This case is concerning on a number of levels. The Department of Money Laundering Investigation and the Nepal Rastra Bank are both outside the jurisdiction of the Finance Ministry. KP Sharma Oli, while prime minister, had made the department answerable only to the Prime Minister’s Office while the central bank is a regulatory body that is not under the Ministry. Only the Finance Secretary sits on the board of the central bank and can recommend policy directions but cannot issue directives. So Sharma, by issuing a written order, has overstepped his authority.
Furthermore, the central bank took action on the basis of a request from the Financial Crimes Enforcement Network, a department of the United States Treasury. If Nepal does not do its due diligence and political actors continue to interfere in investigations, the country could once again get ‘grey listed’ by the Financial Action Task Force. In 2008, Nepal was put on the ‘grey list’, a list of countries that were deemed to be a ‘safe haven’ for money laundering. It was only removed in 2014 after enacting numerous new policies aimed at combating money laundering.
In September last year, the Finance Ministry under Sharma had also issued a Financial Act for the fiscal year 2021-22 that did not require investors in ‘nationally important’ projects to reveal their sources of income. These projects include hydropower, airports, highways, cement and steel factories, tourism, and also any business that creates employment for more than 300 people. As Nepal is currently being evaluated by the Asia-Pacific Group on Money Laundering for its laws, policies, and actions, Sharma’s intervention in the Shah case and his ministry’s provisions for not seeking sources of income could be black marks. Nepal placement on the grey list — or worse, the black list — would come with severe consequences for Nepal’s economy and on foreign aid.
As I was writing this newsletter, Sharma, at a national conference on economics and finance, accused a Nepal Rastra Bank board member of demanding USD 30,000 to clear the hold on Shah’s bank accounts. He went on to harangue the NRB for ‘leaking’ sensitive information to the media.
Let’s move on now to talk about Nepal’s foreign service. On Thursday, the Sher Bahadur Deuba government recommended 20 new ambassadors, more than half of whom are political appointees with no diplomatic experience. Chief among them is Bishnu Pukar Shrestha, a conflict victim and chair of the Campaign for Human Rights and Social Transformation, who has been recommended as Nepal’s ambassador to China under the Maoist quota. Shrestha has no previous diplomatic experience but is reportedly a close associate of Pushpa Kamal Dahal. For a country as sensitive as China, it would’ve made much more sense to appoint a career diplomat who could really press Nepal’s interests.
Even someone like Leela Mani Paudyal, a former chief secretary and former ambassador to China, would’ve sufficed. Paudyal was prematurely recalled as ambassador by KP Sharma Oli in March 2020, just after the Covid-19 outbreak in China. Although Paudyal had been instrumental in airlifting Nepalis out of Wuhan at the height of the pandemic, Oli was reportedly displeased with his ‘unilateral’ actions and had recalled him. It was during Paudyal’s tenure that Chinese President Xi Jinping made a historic visit to Nepal. Paudyal was reportedly being considered for ambassador to China once again but was not favored by Prime Minister Deuba.
Even Rupak Sapkota, another potential candidate, might’ve made a better choice than Bishnu Pukar Shrestha. Sapkota, who is the son of House Speaker Agni Sapkota, did his PhD in international affairs from China, speaks Mandarin, and was once executive director of the Institute of Foreign Affairs, the government-run foreign policy think tank. Sapkota might not have the experience but at least he has the academic credentials and a background in foreign affairs.
Given how central China has become to Nepal’s foreign relations, I had assumed Nepal would have a seasoned diplomat at the embassy in Beijing. But it was not to be.
Most of the other political appointments seem to have been made on the basis of nepotism and as ‘rewards’. Basudev Mishra, recommended as Nepal’s envoy to Sri Lanka, is Energy Minister Pampha Bhusal’s brother-in-law while Kailash Pokhrel, recommended for Australia, is Madhav Kumar Nepal’s brother-in-law. Milan Tuladhar, recommended for Russia, is a relative of Jhalanath Khanal while Jyoti Pyakurel, recommended for South Korea, is the wife of economist Bishwamber Pyakurel.
Dan Bahadur Tamang, recommended as Nepal’s envoy to South Africa, is a former president of the Nepal Association of Foreign Employment Agencies and a member of the Maoist party. Sharmila Parajuli Dhakal, former Nepal ambassador to Oman, has been recommended to Spain. Dhakal is believed to be very close to Oli but she had earned praise for repatriating stranded Nepali migrant workers from Oman and negotiating better airfare prices.
It is, of course, not a foregone conclusion that political appointees will always perform poorly. Deuba’s previous political ambassadorial appointments — Shankar Sharma to India, Sridhar Khatri to the United States, and Gyan Chandra Acharya to the United Kingdom — were welcomed by the public at large since all three appointees were established figures with a solid background in diplomacy and international relations. Oli’s political appointees, like the afore-mentioned Dhakal and Spain’s Dawa Futi Sherpa, niece of the late Ang Tshering Sherpa, had also earned praise for their work. So I guess how things go remains to be seen.
One net positive is that with the appointment of eight career bureaucrats, Nepal’s diplomatic corps will now have a majority of civil servants. Eighteen out of Nepal’s 33 diplomatic missions will be from the foreign service while 15 will be political appointees. This is a good sign. Nepal’s foreign service might pale in comparison to India’s elite IFS but we do have very capable, young members in the service and it would be a shame if they never got a chance to represent the country abroad. If this state of affairs continues, more educated, young Nepalis could also be encouraged to join the foreign service.
The individuals recommended will have to undergo a parliamentary hearing but that is usually a formality and those recommended tend to get appointed.
One more political appointment
In addition to recommending 20 ambassadors, Deuba also shuffled his Cabinet a little, moving Dilendra Prasad Badu from the Ministry of Law, Justice, and Parliamentary Affairs to the Ministry of Industry, Commerce, and Supplies, a portfolio that Deuba had kept with himself so far. In Badu’s place, Deuba appointed Govinda Bandi, an advocate who had been critical in challenging KP Sharma Oli’s dissolution of Parliament last year and establishing the Deuba government by court order. Bandi is also a human rights advocate and has fought cases on behalf of conflict victims.
Deuba reportedly hopes that Bandi will be able to put a definite end to the peace process by ensuring transitional justice to victims of the civil war. As Law Minister, Bandi will be able to play a critical role in ensuring the proper functioning of the Truth and Reconciliation Commission and the Commission of Investigation on Enforced Disappeared Persons. Bandi, although affiliated with the CPN-UML, is largely seen as a respectable voice in transitional justice. He has long opposed the transitional justice act’s provisions for amnesty, even in cases of gross human rights violations, and has even argued against current House speaker Agni Sapkota being appointed to ministerial positions given that the latter is accused of murder.
Conflict victims continue to suffer in ignominy despite the civil war officially ending over 15 years ago. Hopefully, Bandi will be able to ensure that the rights and dignity of victims are ensured while putting a definitive end to a very distressing episode in Nepali history.
As Bandi is not currently a Member of Parliament, he has six months within which he must be elected or appointed to either House. It is likely that he will be appointed to the National Assembly or Upper House, and will continue as minister for as long as the Deuba government stands.
And, that is all for this newsletter. Read on for more happenings and all that appeared on The Record this past week.
On The Record this past week:
Sajeet M Rajbhandari profiles mixed-media artist Sunita Maharjan
Happenings this week:
Sunday - Prime Minister Sher Bahadur Deuba returned from his three-day trip to India. In India, Deuba and Narendra Modi jointly inaugurated a cross-border railway from from Jaynagar in Bihar to Kurtha in Nepal and a 132 KV Solu Corridor transmission line. Nepal also formally signed up to the International Solar Alliance, a global alliance of countries led by India that seeks to reduce dependency on fossil fuels.
Monday - Indian Ambassador to Nepal Vinay Mohan Kwatra was named the new Foreign Secretary, replacing the outgoing Harsh Vardhan Shringla. Speculation is rife as to who will replace Kwatra in Kathmandu.
Tuesday - Two people were taken into custody in connection with the murder of 15-year-old Kabita Sunuwar in Udayapur. A 17-year-old minor and her uncle are alleged to have stoned Sunuwar to death over a conflict in school.
Wednesday - An 11-member all Black American team of mountaineers arrived in Kathmandu to attempt to summit Everest. The expedition, named ‘Full Circle’, hopes to spread awareness about the need for diversity and inclusion in outdoor sports like mountaineering.
Thursday - The Sher Bahadur Deuba Cabinet recommended 20 names for ambassadorial appointments across the world. Of the 20, 12 are political appointees while eight are career foreign service bureacrats.
Friday - The right-wing Rastriya Prajantantra Party held a ‘show of strenght’ in Kathmandu. Speakers at the event included current party chair Rajendra Lingden and former chairs Pashupati Samsher Rana and Prakash Chandra Lohani, and actor Rekha Thapa.
Article of the week:
‘Convenience over community’ — Prasansha Rimal on how chain supermarkets like Bhat Bhateni and Big Mart provide convenience but destroy a sense of community.
That’s all for this week. Off the Record will be back in your inboxes next Friday. I shall see you then, in your emails, for the next edition of Off the Record.
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