Nepal update (November 27, 2011)

1) Double Taxation Avoidance Agreement:

Nepal and India signed the Double Taxation Avoidance Agreement (DTAA) on Sunday replacing the old agreement which was in effect from 1987. The pact comes soon after the two countries signed the Bilateral Investment Promotion and Protection Agreement during Mr. Bhattarai’s visit to India last month. The DTAA was also to be signed during that trip, but the plan was postponed citing need for more preparations. These preparations were taken care of by Foreign Secretary Ranjan Mathai. The agreement was signed by Nepal's Finance Minister Barsha Man Pun and India's Finance Minister Pranab Mukherjee in the presence of Prime Minister Baburam Bhattarai at the PM's official residence in Baluwatar.

"The revised DTAA will provide tax stability to the residents of India and Nepal and facilitate mutual economic cooperation as well as stimulate the flow of investment, technology and services between India and Nepal. In the revised DTAA the threshold withholding tax rates on dividends, interest, etc., are rationalised to reflect the present day situation and developments in the area of international taxation. India has 81 such DTAAs. In line with the best practices followed, we have incorporated in this DTAA also, the provisions for effective exchange of information, assistance in collection of taxes between tax authorities and the anti-abuse provisions to ensure that the benefits of the Agreement are availed of by the genuine residents and not misused by third country residents. In the area of exchange of information, the revised DTAA provides for internationally accepted standards including sharing of bank information and sharing of information without domestic tax interest. Further, the information received can be shared with other law enforcement agencies with the consent of the information supplying country," said Mukherjee in his Press release after signing the pact.

A DTAA enables Indian investors and traders to enjoy tax relaxation in India once they pay taxes in Nepal. Sujeev Shakya, head of BEED, a consultancy and financial advisories firm, told The Hindu, “This is positive and was required as India is our biggest business partner. It will pave way for greater investment, transparency, and allow both countries to avail of each other’s comparative advantages.” He explained that since tax rates were lower in Nepal, investors who had paid taxes in India would not have to do so in Nepal and those who paid taxes in Nepal would only have to pay the differential amount back in India. Nepal hopes that the two agreements together would encourage further Indian investment in Nepal, which in turn would lead to greater exports and help bridge the growing trade deficit with India. India accounts for more than 45 per cent of foreign direct investment in Nepal, while two-thirds of Nepal’s trade is with India.

Sources close to Mukherjee said he met top leaders (separately), including President Dr Ram Baran Yadav, UCPN (Maoist) Chairman Pushpa Kamal Dahal, Nepali Congress President Sushil Koirala, senior leader Sher Bahadur Deuba, general secretaries Prakash Man Singh and Krishna Sitaula, and CPN-UML Chairman Jhal Nath Khanal, KP Sharma Oli, Bidya Devi Bhandari and Bharat Mohan Adhikari.

2) Maoist reintegration process:

As of Saturday evening, out of the 13,065 combatants who participated in the regrouping process, 7,097 opted for integration and 5,966 voluntary retirement, while two opted for rehabilitation in the second division in Sindhuli. The November 1 seven-point agreement stipulates a maximum of 6,500 for integration. This will pose fresh problems in the integration process and could throw up a possibility of the Maoists pushing for renegotiation.

Maoist leader and member of the Special Committee Barsha Man Pun said that the clause in the seven-point deal stating that a maximum of 6,500 combatants would be integrated in the Army could be reviewed. “We will discuss the issue with other parties and find a political solution,” he said. “We can accommodate the excess personnel in Nepal Police or the Armed Police Force.” The opposition parties—Nepali Congress and CPN-UML—are strongly against any inflation or revision of the numbers.

While combatants are fast choosing integration, commanders loyal to the Maoist hardline faction led by Mohan Baidya are confident that the PLA would not be able to meet the 6,500 ceiling by the time a new directorate is in place. “The constraints on age and educational qualification and conditions set by the Army will bar many from serving in the Nepal Army,” Durga Prasad Chudhary, a Division Vice-commander of the Sixth Division at Dashratpur, Surkhet, said. “I think the final figures will go around 4,000 to 4,500,” he said, urging his party leaders not to give ‘false promises’ by ‘misinterpreting’ the seven-point agreement.

When asked about the absence of interest in rehabilitation, seventh division commander Parwana said: “Combatants want to either get integrated or take the money and lead an independent life as soon as possible. Rehab would involve spending a minimum of one year undergoing training, the costs of which are being cut from one's package. And then there is no job security.” Adding that while “India, America, UNDP and foreigners” were pushing rehabilitation instead of cash, Mr. Parwana said the packages were not attractive enough.

A combatant in the same camp in Kailali said sneeringly, “Who needs to learn how to make orange juice or rear goats?” Mr. Bhatt, the secretariat member, however had a different explanation. He said the problem began with the word, “rehabilitation”, since it connoted to combatants that they had to be somehow reformed and re-accommodated in society. “They say they are in society, with the masses.” Other secretariat members suggested the commanders had not briefed the combatants properly, and they had misunderstood the concept.

A poor track record and successive failures of both the government and the international community to implement rehab packages in the past is also seen as a deterrent. The process of providing rehabilitation to the “disqualified” combatants who were discharged in early 2010 is widely perceived as “messy and flawed”. Maoist sixth divisional commander Prajwal said: “There is no faith in the government's ability to actually provide rehabilitation. To get a small thing done, you need so many connections. No one wants to get stuck.”

3) Water sharing talks:

India and Nepal are to hold bilateral talks on shared water programmes, including the progress on the 6,000-MW multi-purpose Pancheshwar hydro-power project on the Mahakali river near the border. The Joint Committee of Secretaries will meet on November 24 and 25, Union Water Resources Minister Pawan Kumar Bansal said here after inaugurating the Ministry's pavilion at the India International Trade Fair. A giant model of the Pancheshwar project, the Rupaligad dam, the Tanakpur and Banbasa barrage under the India-Nepal Mahakali agreement, greets visitors to the pavilion. The model shows the entire flow of the river and the projects conceived on it. The ‘live model' was switched on by the Minister. The project is being jointly developed by India and Nepal at an estimated cost of Rs. 30,000 crore. “The Secretary-level talks will be followed by Ministerial discussions at a mutually set date,” Mr. Bansal said.

4) Rubeena Mahato writes:

Monday, 21 November, marks the fifth anniversary of the signing of the UN-brokered Comprehensive Peace Accord (CPA) that formally ended ten years of conflict between the Maoists and the state. It ended the war, but didn’t bring peace. The Maoists lowered their guns, but didn’t abandon them. They joined mainstream politics, but didn’t abjure violence.

Few remember the sense of jubilation that swept the nation as Pushpa Kamal Dahal and Girija Prasad Koirala signed the document in the presence of senior leaders and the UN brass. The ceremony was held inside the BICC, that later served as the Constituent Assembly.

As I write this, the amnesty case of Balkrishna Dhungel is raging like wildfire, jolting Baburam Bhattarai’s seat of power. There have been five prime ministers in the last five years, all of whom have failed to deliver. There may now be a sixth. Impunity is rife, and the rot starts at the top. Power cuts and fuel shortage have worsened. Farmers are having to take to the streets to demand fertilisers. The middle class is struggling to keep up with inflation.

Never mind the disillusionment this has created in the general public, like a bad dream, the ex-guerillas who had fought for change are now engaged in an intense struggle for the hearts and minds of their own radicalised cadre base.

In the past five years, there have been 4-point, 5-point, 7-point agreements. Promises no one intended to keep, agreements not worth the paper they were written on. Everyone played for time until they ran out of time. All they were interested in was to lengthen their time in office so they could amass wealth from kickbacks and payoffs. Most people were past caring, they raised their heads when Baburam Bhattarai became prime minister with slender hope that he would be different. But they have been tragically disappointed again.

Four years ago, just before the CA elections, I was travelling across Rolpa, the district that was the cradle of the Maoist revolution. Everywhere in Rolpa, hopes ran high. Infrastructure projects that had been stuck for more than a decade were being revived. In Thawang, ex-guerillas were building a micro-hydro power plant. A huge festival was being organised in Jaljala, a historically significant place for the Maoists, to promote tourism in the region.

Finally it seemed like Rolpa would rise. After all, the very leaders who had taken shelter in homes that were destroyed in bombings from helicopters had risen to power in Kathmandu. Thawangis were sure that their time had come. I can never bring myself to accept violence as a political tool, but could understand the anger of women who had lost all their male relatives to war, were raped and battered and were raising babies of the enemy. But even they lit up with hope talking about the future. They were glad the war was over.

The dream has shattered. The Maoists turned out to be like everyone else. After getting to power in Kathmandu, they forgot about Thawang and Jaljala. Parts of Thawang are still in ruins.

The promises of leaders to make Thawang a model commune commemorating the civil war fails to elicit any response from the villagers anymore. And there are other promises which have remained unfulfilled. The families of the disappeared are still seeking closure, thousands of internally displaced people are waiting to go back home. They have waited for five years without result and have now given up on the government.

This is the silence that is mistaken for peace today. This year, too, there will be the usual rituals marking the CPA anniversary. Leaders will wax eloquent on the historic agreement and its significance. The people will not be listening because they have heard it all before.

Why not do some damage control by paying a fitting tribute to the CPA, by immediately setting up the Truth and Reconciliation Commission, or by forming the Commission on the Disappeared? This is what will finally determine the direction of the peace process, how the grievances and discontent of the conflict affecting people are managed. In their squabble for power, leaders have forgotten what they had actually come together for five years ago. What a waste.

5) Interview with Balkrishna Dhungel (mentioned in the above report) in Naya Patrika, 16 November

Nayapatrika: What do you have to say about the presidential pardon for you which has become an issue of national politics?

Balkrishna Dhugel: The issue has been overblown. This is an attempt to criminalise the insurgency and the Maoists.

What do you think is the intention behind this? Those who had fixed a reward on our heads still want to finish us off. They have been trying to find a way to criminalise the Maoist movement and people’’s movement.

Where were you at the time of incident? What had actually happened? It was purely political, not personal at all. We found him spying on us and he was eliminated.

What proof do you have that he was a spy? The government categorised the conflict affected areas and recruited influential people in the regions to carry out the mission in 1996. Ujjan Shrestha used to live in Kathmandu. He was sent to village as advised by Bal Bahadur Rai and Gopal Rai to spy on us. He went back to village the following year. The government launched a bloody operation in Likhu areas in which families of the Maoists and Jana Morcha were killed and displaced. He played major
role in this. The police arrested 47 people including me, Puskar Gautam, Shambhu Gautam, Madhav Dhungel, Prem Prasad Dhungel among others. We were released on bail when Bamdev Gautam was the home minister.

What did you do to Ujjan after that? He was still working as an agent. We warned him, asked his relatives to convince him, party formally approached his family but he continued. Then, the party concluded that he should be eliminated.

Which level of the party had decided? If we have to eliminate someone during the insurgency, we had to take permission from the party command. No district or area command could take decision on elimination.

What was your position in the party then? We had demarcated areas from Tamakosi to Ramechhap including some VDCs of Okhaldhunga, Khotang, Solukhumbu and Bhojpur as our eastern base. Biswa was in-charge of the area and I was next to him.

How did the case reach the court and how did you land up in jail? I was involved in politics since 1986 and went underground from 1996. The incident took place when I was underground. The government launched a massive operation in the region. The party had concluded that he was a plain clothed policeman. Locals were arrested, tortured and forced them to sign in a paper saying Balkrishna Dhungel and Puskar Gautam were involved in killing. I was arrested in 1999 and released in 2006.

What will you do if the president doesn’’t grant you a pardon? I am a responsible party member. Whatever party decides is my decision.