Dahal in Delhi

This article was first published in The Kathmandu Post, Sep 20, 2016. 

Prickly issues were left untouched and irrelevant matters, such as projects that have been discussed but not implemented for the last two decades, were highlighted during Prime Minister Pushpa Kamal Dahal’s visit to India. The joint statement issued in New Delhi at the end of the tour is largely a repetition of formalities with very little substance. However, India was able to secure Nepal’s support for its bid for a permanent seat on the UN Security Council. Indian Prime Minister Modi has welcomed the establishment of the National Reconstruction Authority (NRA) in Nepal but he has not welcomed the new constitution. The joint statement shows that Nepal-India ties are as they were in September 2015 when the new constitution was promulgated. 

Dahal has expressed gratitude to India for its support in post-earthquake reconstruction activities, but he could not mention his ‘sincere appreciation’ for its ‘support’ to promulgate the new constitution. Relations with India are not as simple as Dahal projects here in domestic politics. New Delhi’s cold heart was apparent during Dahal’s visit when Modi did not show any regard for the Nepali people’s aspiration to have an equitable society through the new constitution. Against this backdrop, Dahal has lost two cards from his hand. One, his image of a nationalist leader, and two, his political capital to drive a hard bargain with two major forces, the Nepali Congress (NC) and the CPN-UML in the upcoming days. 

India’s next moves

Moreover, he has lost an opportunity to establish a new kind of relationship with northern neighbour China by hosting Chinese President Xi Jinping. Xi was willing to come to Nepal after seeing the prospect of having Nepal on board the One Belt, One Road (OBOR) project. However, with no possibility of Dahal signing such a memorandum of understanding, Xi has dropped his plans to visit Nepal in October. India was aware of China’s plan, which is why it went above and beyond to alter the course of Nepali politics by having Dahal in the prime minister’s seat with the NC’s support. The country has not lost much as there is plenty of time to discuss the OBOR project with China, but Dahal is a sheer loser. 

The reason he came to power is not because India likes him very much, but because there was no other way to sideline former prime minister KP Sharma Oli who was becoming too cosy with the northern neighbour. India first tried to split the UML and put Oli in a difficult position, but that did not work out. The second option was to weaken Oli by breaking the coalition government and taking away Dahal’s teeth that have made him a champion of inclusion and equitable society. India has succeeded in sidelining Oli and washing away the colour of Prachanda’s nationalism. Its next move will be to prolong the transitional phase by not letting parliamentary elections to be held, bring down the size of the UML in the next election or weaken Oli within the party.

An uphill task

Dahal and his party’s downfall started right after he assumed office with the support of India via the NC although he talked loudly about implementing the constitution by getting all sections of society on board. He knew that it would not be possible since the issue of Madhes is less about Madhesis and more about India’s interest in Nepal’s water resources. The question then is: why did he go for a new coalition with the NC? The simple answer is position. He had two things in mind when breaking the coalition with the UML—one, to work with the NC to avoid issues of the Truth and Reconciliation Commission, and two, to manage the money earned 

through unethical ways. He will be successful in both objectives in the short run, but India will always keep hanging these issues through one way or the other to keep him off-balance all the time. India is moving ahead strategically to work in Nepal through the Sher Bahadur Deuba-led NC for the next few years as there are trusted candidates such as Bimalendra Nidhi in it. Another alternative force for India is the newly launched Naya Shakti. Since Naya Shakti is too small to ensure Indian interests, it will have to keep the Oli-led UML under pressure. The Madhesi forces are mere tools and not a channel for India to have ‘controlled chaos’ in Nepal. Against this backdrop, the implementation of the new constitution in Nepal will remain an uphill task for any sincere leader, if there is any.

A futile debate

Now, on to economic issues. India has repeated its hollow commitments to expedite mega infrastructure and hydropower projects. However, that will not be reflected in India’s behaviour, as it is not interested in hydropower but in water resources to irrigate the vast farmlands of northern India. India is well aware of a looming water crisis in the upcoming decades, so it will not make the mistake of taking forward projects that may make Nepal economically inter-dependent with India in the near future. China’s entry into South Asia through Nepal is a much-touted discourse in recent days. But that will not happen as Nepal will not be able to show strong support to China’s plan to spread its wings in the region. Hence, the debate in Nepal of getting economic benefits from China is futile. China tried very hard to make the Oli-Prachanda coalition last, but failed largely because of Indian influence in Nepal’s media, civil society and political parties. 

Prime Minister Dahal’s major failure is his inability to document losses to Nepal’s economy due to the months-long economic blockade by India last year. He has not only ruined the country’s prospects to connect Nepal with Chinese ports and industrial zones but also failed the Nepali people. History will judge him poorly when the new constitution goes astray in the absence of another statesman in the country to correct the course again.

Let’s get together

This article was first published in The Kathmandu Post, July 19, 2016. 

Nepal’s plan to become a middle-income country by 2030 is a pleasant but improbable prospect considering the current level of economic activities and inflow of foreign investment. Without a massive influx of foreign investment and development of large-scale hydropower and other infrastructure projects, Nepalis cannot hope to be on a par with consumers from other middle-income countries. Inviting private investment from China and India is a daunting task as they see Nepal as a market with less profit with high risks. The immediate task for the government is to help investors mitigate risks resulting from ultra-nationalistic groups and political instability. Nepal should also form an economic and strategic dialogue committee with representatives from all three countries with the special purpose of assisting investors.

China’s One Belt, One Road (OBOR) project to connect the Eurasian region by land and sea is a chance to enlarge the size of Asia’s contribution to the world economy. The Asian Infrastructure Investment Bank (AIIB), a China-led multilateral bank, is dedicated to complementing the projects surrounding the OBOR initiative. Nepal is a founding member of the bank, but it will have to work to find ways to make optimal utilisation of this initiative. Nepal has submitted proposals for five infrastructure projects to the AIIB for possible financing. Moreover, the Asian Development Bank (ADB) and the World Bank have approved $1 billion to develop the hydropower sector. 

Elephant and the dragon

Against this backdrop, Nepal-China relations have become even more fragile not because they have entered into any kind of conflict but because of their proximity. This closeness has caused paranoia in New Delhi, leading China to be more cautious about moving at a fast pace. Nepal-China ties cannot be built and strengthened in an absolute vacuum given that Nepal has always been submissive to India culturally, socially and politically. This submission is a result of its complete economic dependence on the southern neighbour. In order to untangle such a complicated relationship, Nepal should work on the economic front to make Nepal-India relations economically interdependent. Chinese investment can be a complementary force to make this happen in the next one or two decades. This is where Nepal should draw lessons from China. Deng Xiaoping used to frequently cite an admonition from the Warring States period, “Hide your ambitions and build your capability.” 

Having said that, India is a democratic country and it has a strong civil society and an opposition, which was vocal during the four-month-long economic blockade of Nepal. However, India’s official ‘Nepal policy’ may not change dramatically. We have seen the attitude of the Indian establishment of maintaining controlled anarchy in Nepal using various means and forces and sometimes even sympathetic investment in radical groups. Conspiracy theorists go even further and argue that the not-so-genuine groups making unrealistic demands get support from various Indian sources. Whatever that might be, the leadership should focus on managing genuine Indian security interests and feeding its regional hegemonic ‘ego’ until Nepal becomes economically sophisticated enough to host Indian migrant workers in the Tarai.

India’s relationship with China is driven mostly by paranoid security hawks’ thinking from New Delhi rather than from the perspective of trade, investment and cooperation. But China does not consider India a competitor in terms of economic and military power anymore. The only fear for China from India is the latter’s ideological proximity with the West and its soft power such as the media and civil society. Which is why there is no strong foundation for China-India cooperation in many areas. In this context, Nepal should be able to bring the southern and northern neighbours together in a common dialogue forum. “Nepal can’t be prosperous only by being close to India, it has to please India to prosper. Nepal has to win India’s heart; but do establish strong trade and investment ties with China.” This is what I hear from people who have been managing India-Nepal relations. Meanwhile, what China and India have in common in their dealings with Nepal is that both test the waters and work to get their interests served. 

Striking a balance

Nepal has failed to work diplomatically with China and India. A very recent example of this is the Lipu Lake Pass episode. There was a great hue and cry from Nepal’s civil society and political parties when China and India issued a joint communiqué during Indian Prime Minister Narendra Modi’s visit to China in 2014, but the Nepal government failed to hold discussions with China and India regarding the issue of Lipu Lake and explain clearly to the Nepali people what exactly is the case. The public outrage was used for political manoeuvring by some so-called nationalist political forces, but they didn’t take any official initiatives to resolve the issue. This shows the level of diplomatic efficiency of Nepal and the political maturity of the Nepali leadership beyond nationalistic rhetoric for public consumption. 

There are numerous issues to be resolved trilaterally, so it will be wise to form a dialogue forum with representatives from China, India and Nepal. There is already an Eminent Persons Group (EPG) from Nepal and India, and it should work to include China too. If the EPG feels nervous about having China on board, the government should get people with an open mind and who are driven by constructive idealism to take it forward.

One-way road to Nepal

This article was first published in The Kathmandu Post, March 25, 2016. 

The ‘rhetoric’ about Nepal becoming ‘a vibrant bridge between China and India’ has been around since it became a republic. Former prime minister Pushpa Kamal Dahal had floated the idea of ‘trilateral cooperation’ between China, India and Nepal during his Beijing visit in 2009. Recently, China proposed building a China-India-Nepal Economic Corridor (CIN-EC) as part of its larger goal of implementing infrastructure development in the region. Chinese Foreign Minister Wang Yi had proposed this idea during his visit to Nepal to attend the International Conference on Nepal’s Reconstruction (ICNR) last year. 

Against this backdrop, China and Nepal signed an Agreement on Transit Transport during Prime Minister KP Oli’s visit to Beijing in March. However, China has not yet clearly laid out how it would like to go about cementing the relationship with Nepal. These developments have made India anxious, and it is waiting to see how far China will go to realise all these ‘beginnings’. 

Nepal’s priorities

Before speculating about where China and India stand, Nepal should identify what its priorities are in the long term. Its economic development largely depends on how much it can invest in the productive sector and how far it can fill the infrastructure gap. As investment flows are significantly low, young people have been leaving the country in epic numbers to work in the Gulf and Malaysia. Development activities that were anticipated to take off with the promulgation of the new constitution have not happened. Manufacturing and services have been performing below par even though the Indian blockade ended months ago. Tourism is the only sector that has been showing signs of a rebound, but it will be difficult to sustain the growth with a political crisis looming.

In order to revive the moribund economy, Nepal needs to come out of the current political instability and embark on the road of economic development. This is where China has space in Nepal, only one space: Nepal’s economic development. The country needs an exogenous shot in the arm. The development of transportation, health, education and hydropower will not be possible without a massive boost in foreign direct investment (FDI) from both China and India. 

Game of politics

Nepal has been seeing fast-paced political developments, especially after the promulgation of the new constitution, with India’s heavy-handed actions and China’s subtle participation. Since then China is said to be working to counter India’s political hegemony in Nepal, but there can be a counter-argument to such a claim, given the Communist Party of China’s very lengthy decision making process. 

In any case, China should not be engaged in petty political games if it wants to win the hearts of the Nepali people who have been suffering from a vicious cycle of poverty and underdevelopment. China should be playing a fair game of supporting Nepal to develop its infrastructure and push the country towards the path of economic prosperity. 

China should realise that playing a ground-level game as India has been doing in Nepal by being provocatively engaged in domestic affairs will backfire in the long run. A case can be made for a prosperous Nepal, which can stand up stronger against India and other international forces which want to exercise influence inside China through Nepal. 

Moreover, let us observe India’s actions after Nepal promulgated the constitution. Indian Prime Minister Narendra Modi went to Brussels and London from where he could include the issue of Nepal in a joint communiqué urging Nepal to correct its course. This clearly indicates India benefits from the support of Western forces given the values they share. 

That is the not the case with China. Having alliances and powerful friends is much more important for long-term dominance in world politics. China’s peripheral diplomacy is the result of such a realisation, but it has to be cautious when it comes to Nepal. It should be careful that its engagement in Nepal will remain confined to economic ties. 

Economics, economics, economics

Thus, the only space left for China in Nepal and the larger South Asia is to be active on the economic front. Chinese investments can easily be a key to trigger growth in Nepal, create jobs as well as push us towards having an interdependent economy with India. If China helps Nepal to produce electricity regardless of whether India buys it or not, Nepal can host manufacturing industries by providing heavily subsidised power. In that scenario, Indians from the northern part will cross the border into Nepal for better jobs, making India dependent on remittances from Nepal. 

This is just one example of how China can counterbalance India in Nepal. But for that, China should think long term, and Nepal needs to reciprocate. 

Sweet and sour

This article was first published in The Kathmandu Post, April 5, 2016. 

The accords signed between China and Nepal and the joint communiqué issued during Prime Minister KP Sharma Oli’s visit to Beijing may provoke New Delhi and widen the India-Nepal gap, but they are barely enough to take China-Nepal relations to a new height. Oli’s visit to China has been lauded as an ‘historic’ event, mostly by Nepali left-leaning thinkers, naive foreign policy analysts guided by sheer idealism and ‘accidental’ experts on almost everything. International relations and diplomacy can be interpreted as one wants to, but the truth is that this visit is a combination of showing off and testing limits in regional politics. What did not happen is more important than what did. 

The status of the proposed oil trade between Nepal and China and the reopening of Tatopani customs remain like they were before Oli’s trip to Beijing where he was greeted in a language he could not understand. The use of translation devices to understand what Chinese leaders were saying shows how hard it is for Nepal to play the ‘China card’ against India. New Delhi is paranoid not because of what has already happened between China and Nepal, but because it is clueless about the course the Nepal-China pact could take. New Delhi has almost no access to what was discussed inside the Zhongnanhai former imperial garden. Chinese President Xi Jinping cleverly mentioned that there should be China-India-Nepal trilateral cooperation in the future in a subtle but clear message to New Delhi that Beijing is in no mood to hobnob alone with Kathmandu’s leadership. In other words, it is a message to the Nepali leadership that China will not go further with Nepal on a road that does not seem to be sustainable. 

Realism versus idealism

Chinese leaders know that what Nepali leaders say is not based on national consensus, and that everything can turn upside down with a change in the administration. It is important not to undermine this symbolic message. Such an implicit message signifies that Beijing is merely being generous to Nepal and the Nepali people. It means that Nepal cannot be China’s strategic partner to keep India off-balance in regional politics. Hence, it is difficult for the things that China agreed to during Oli’s visit to materialise. It is necessary to look at where China is coming from while signing agreements with Nepal and issuing joint communiqués. China shifted from Deng Xiaoping’s policy of ‘keeping a low profile’ to ‘striving for achievement’ after Xi came to power in 2012. Chinese foreign policy maven Yan Xuetang says that China seeks to gain more power regionally and internationally not by distancing itself from any power but by engaging them and supporting small countries to grow. 

Additionally, China’s engagement with Nepal is the result of its policy of ‘peripheral diplomacy’, which is helping and participating in the development efforts of the neighbouring countries. Oli’s visit has been seemingly successful on the basis of China’s policy, and not because Nepal did the required homework to lift the relationship to a new level. This is where Nepal has failed and will continue to suffer even though China wants to help it prosper. A prognosis of Oli’s visit to China will not be accurate because the northern neighbour’s foreign policy is strongly guided by a realist attitude and not idealistic thoughts. Oli, who believes in shrewd deceptive politics, went to India suggesting that his leadership would not lean towards the north at the cost of the southern neighbour. Failing to issue a joint communiqué from New Delhi was his failure; but more than that, it was a failure of Nepal’s collective leadership. 

The hype in Nepal over the signing of the Agreement on Transit Transport with China and Nepal was a result of the frustration caused by the months-long economic blockade by India. Arguably, it is an achievement, but it is Nepal’s right as a landlocked country to get transit facilities from its neighbours. The central issue is whether China will help Nepal to actually diversify its trade routes. The joint communiqué includes one of the major issues of connectivity, which is to develop a railway line between China and Nepal. If both the sides start working on it seriously and implement it, the rail link is expected to bring economic development through trade and tourist inflows from the Middle Kingdom. However, China has not promised to build the railway line. The language of the joint communiqué is clear that China will consider it after Nepal submits a detailed proposal.

Trade, not aid

There should be frequent high-level visits between the two countries if they are serious about boosting connectivity. And while trying to connect Nepal with the world through the northern door, China should open up the politically complicated Tibet to the world. One of the conditions for China to become a superpower is to open itself up without any hesitation. The question is when, and more importantly, if the communist leadership is ready to go that far. Conducting bilateral cooperation, synergising the development plans of the two countries, carrying out projects under the framework of the Belt and Road Initiative and increasing land and air connectivity are important. But the issue here is that Nepal lacks serious homework on how to make the optimal utilisation of the Belt and Road Initiative. 

Accelerating the feasibility study for the Araniko Highway repair project, Syabrubeshi-Rasuwagadhi Highway repair and opening maintenance project, building a bridge over the Karnali River at Hilsa and upgrading the Kathmandu Ring Road are some of the schemes for which China has extended support during Oli’s visit. They are indeed welcome, but what is important to notice is whether Nepal can foster an environment to attract Chinese outbound foreign direct investment (FDI). Without FDI, Nepal will not be able to emerge from the current status no matter how much foreign aid it gets. Continuing down the road to prosperity, Nepal will have to work with both China and India. The only safe way is to devise a neighbourhood policy to deal with the two rising powers. Nepal should state clearly what it wants from them and what it can offer in return. Pragmatic deals are far more important than diplomatic grandeur for a country like Nepal reeling under poverty and underdevelopment.