Nepal updates (October 21, 2011)

1) List of agreements signed: Linky

Prime Minister Manmohan Singh’s government today extended its policy of “good neighbourliness” to Nepal. New Delhi delivered on a promise it made in early 2010 by committing a $250 million (Rs1,200 crore) credit line to Kathmandu for infrastructure development. Over the past year, India has provided similar or larger lines of credit to Myanmar, Bangladesh and Afghanistan.

The credit line “will be used to finance infrastructure projects such as highways, airports, bridges, irrigation, roads, railways and hydropower projects”, a foreign ministry statement said. Nepal will be able to engage Indian companies in infrastructure development work from this line of credit. The agreement provides Nepal the loan at an interest rate of 1.75 per cent per annum with a repayment period of 20 years, including a five-year moratorium.

India has also promised Rs 2 crore in subsidies for iodised salt to help Nepal control goitre and other iodine-deficiency diseases in 22 of its remote districts. Apart from improving roads and other infrastructure, India wants Nepal to replicate the success of Bhutan’s hydropower sector. Indian investment in Thimphu has made it a power-surplus country.

The two sides also signed an agreement for the protection and promotion of investments, which New Delhi was keen on after Maoist attacks on some of its joint venture projects in Nepal. The agreement was on the anvil since 1998 but could not be signed because of misgivings within the Nepali bureaucracy. The investment promotion and protection agreement will remain in force for 10 years. In exchange for investment protection, South Block has assured Nepal Prime Minister Baburam Bhattarai that it will continue to support and help his government negotiate the peace process and draft its constitution.

More on BIPPA looking like the Indus Water Treaty redux: Linky

The two sides formalised the long pending Bilateral Investment Promotion and Protection Agreement (BIPPA), which commits one State to providing compensation to commercial entities, whose country of origin is the other. This applies particularly in cases of wars, national emergency, and armed conflict. Investments from either country in the territory of the other country are to be accorded ‘National Treatment' and ‘Most Favoured Nation' treatment. It also provides for elaborate dispute resolution mechanisms between investors and the government concerned, and between governments, including international arbitration.
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While Nepal had asked for soft loans of $1 billion, the final pact provided a $250-million line of credit to Nepal to finance infrastructure projects, at the concessional rate of interest of 1.75 per cent annually. India had announced a similar loan for Bangladesh during the New Delhi visit of Prime Minister Sheikh Hasina in January 2010. The billion-dollar soft loan deal, the biggest credit package New Delhi has ever earmarked for any nation, was inked when Finance Minister Pranab Mukherjee visited Dhaka in August last year.
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Despite extensive negotiations, the two sides failed to agree on a double taxation avoidance agreement which was on the agenda.
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A senior Indian official, who wished to remain anonymous, said Mr. Bhattarai's visit was an ‘unqualified success.' “It shows firm Indian political support for Bhattarai's government, and we are banking on him to complete the political transition. There is also recognition on both sides that our relations need to have a strong economic content.” A member of the Nepali delegation confirmed to The Hindu that India did not push security-related issues that Nepal finds politically uncomfortable to deal with, namely extradition and mutual legal assistance treaties.

More.... Linky

Dr. Bhattarai said he was aware that there will be a domestic backlash in Nepal, referring to criticism that the agreement will spell huge liabilities for the Nepali state. “I have taken a risk, but if you don’t take risks, the country cannot develop. We are at the stage of capitalist development. If we want double digit growth, wish to raise the per capita income of citizens to $3000 in ten years, and develop, this is the only route. It will create conducive environment for investment.”
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The Prime Minister clarified that the Double Taxation Avoidance Agreement, which was on the agenda, could not be signed because of ‘miscommunication’ between the two countries.

2) Dr. Bhattarai writes in the Hindu: Linky

One major field is the exploitation of water resources for mutual benefit. The next is drawing in Indian investment to Nepal — we are committed to creating a conducive environment for investors and providing them security. The trade balance between our two countries has been quite skewed. Our trade deficit with India is quite huge. The import-export ratio is about 7:1, which is not sustainable. That is another area where we have to deepen our economic cooperation.

3) Elsewhere... Linky

Nepalese Prime Minister Baburam Bhattarai on Wednesday sacked Defence Minister Sarad Singh Bhandari, a prominent Madhesi leader for allegedly making secessionist remarks, days after a Maoist leader was shown the door.

Mr. Bhandari was relieved from duty at the recommendation of his party Madhesi Peoples Rights Forum (MPRF)-Democratic. Earlier this week, Land Reforms Minister and Maoist leader Prabhu Sah was relieved from the post for his alleged links in the murder of a Hindu youth leader Kashi Nath Tiwari last year. Addressing the Legislature-Parliament in the capital, the prime minister announced that Mr. Bhandari and Mr. Sah have been relieved from their ministerial posts on the recommendation of their respective parties.
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Home Minister and chairman of MPRF-Democratic Biajaya Kumar Gachhadar has been given the responsibility of the Defence Ministry while Maoist leader and Minister for Local Development Top Bahadur Rayamajhi would look after the Land Reform Ministry.

SAAG says more on this matter: Linky

In the case of another, the Defence Minister S. S. Bhandari said to be close to the Deputy Prime Minister Gacchadar, was forced out, for making an indiscreet statement about Terai seceding, in a public meeting at Banepa on the 26th of September though in my view this did not call for the extreme punishment. There seems to be, finally a genuine feeling that the peace process and the completion of a draft constitution should be made without further delay.

4) Dr. SC avers that internal Maoist dynamics is all for show:

Second, is the internal opposition faced from the Mohan Baidya faction within the party (UCPN-M) that is said to prevent Bhattarai from being a little more flexible. The Nepalese press is full of articles describing the Maoist party of having a hardline faction and a moderate one with the Mohan Baidya faction being identified with the former and those of Bhattarai and the Chairman P.K. Dahal belonging to the “moderate” faction.

I am still not convinced that there are a hardline and a moderate faction within the party. If one looks at the statements made by Bhattarai until 2009, one could say that he was as much a hardliner as anyone else in the party. To me, it looks that the views of the so called hardline faction is being used by the Maoist leadership to be inflexible in the settlement of all the contentious issues relating to the peace process. Dahal is still in a position to take firm decisions in the matter of integration of PLA. There will be differences, but once the decision is made no one would oppose the party line.

5) On the sticky integration issue, Dr. Bhattarai says this: Linky

What is the meeting point on the contentious issues regarding the future of Maoist combatants?

First, for modality, we have more or less agreed that a separate directorate will be created under the Nepal Army. Second, international norms of security forces will be obeyed by all members to be integrated. But there will be certain concessions on age, education, marital status etc. Third, on ranks, our senior commanders will be brought back for political work and junior commanders can be adjusted. The fourth issue is package for those opting for rehabilitation or voluntary retirement or golden handshake. We are working out an honourable settlement. And on numbers, we proposed a figure between 8,000 and 10,000. With Madhesi parties, there was an agreement of around 7,000. Other parties have come to about 6,000. We will finally settle around 7,000; that should be the compromise number of those to be integrated. We can then immediately start regrouping, which can be completed in one month. And within two weeks after that, we should be able to complete the process of integration.
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There is suspicion that a part of the money given to the combatants as ‘golden handshake’ will be used to fill in Maoist coffers.

It is time to get over this kind of mistrust. The Maoist party, being a principled party based on firm political and ideological convictions, does not believe in duping people. The package will be utilized for the welfare of the PLA cadre. There is no question of the party taking away money from them.