Murari Sharma: Brexit Blues

Theresa May, the British prime minister, is on a mission to breach EU unity over Brexit, the departure of Britain from the European Union. Michel Barmier, the EU negotiator for Brexit, has rejected out of hand the cherry-picking proposal of May, known as the Chequers plan. It is highly doubtful that May will succeed in her mission, which means more nasty pains for May and Britain down the road.

After Barnier rejected the Chequers plan, May has tried to use charm offensive and divisive strategy to have a good deal. In a charm offensive, she herself broke her vacation in Italy and visited Emmanuel Macron, the French president. France is one of the hardliners in the Brexit negotiations and potentially the largest beneficiary of Brexit, as Paris might get a substantial chunk of London’s financial industry.  Though the details of the conversation are yet to come out, one can conclude that the talks did not go in Britain’s favor.

May sent her ministers to several capitals to drive a wedge in EU unity. To be sure, some EU members are not as committed to the integrity of EU as others. Those that have rightist governments, such as Poland, Hungary, and the Czech Republic, and those that have suffered economic pain being part of the Euro, such as Greece and Italy, would welcome the loosening of EU grip on their countries. However, there are no indications that her ministers had much success to report either.

Ireland and Spain could veto any soft deal unless their concerns are fully addressed, which is bad for Britain. Ireland wants to keep free movement between it and Northern Ireland as promised under the Good Friday Agreement that ended the three-decade-long conflict in Northern Ireland. Britain’s maximum facilitation or maxfac, sacnning technology that would obviate the need for human intervention at the border, is a dream because such technology does not exist. EU is one of the guarantors of the Good Friday Agreement.

Spain wants the status of Gibraltar to be decided under the Brexit agreement. All along, Spain has claimed the rocks tucked into the Mediterranean Sea. Because EU takes decisions based on unanimity, each of these EU members has a veto on Brexit deal.  Such thorny issues had been brushed under the carpet before the Brexit referendum in June 2016.

Before the referendum, people were promised a huge Brexit dividend. Brexit hawks had promised that Britain will have a cake and eat it too. In other words, they will take back control from Brussels, limit EU migration, have the power to make trade deals independently, not pay the membership fee while continuing to have access to the single market. By a four percent margin, British voters voted for this fantasy.

The edifice of the European Union is built on five pillars — four freedoms: freedom of movement for goods, for services, for capital, and for people and the supranational jurisdiction of the European Court of Justice. If any of these five pillars has been weakened, let alone demolished, EU as we know it will not survive. What Britain is asking is just for that.

Donald Trump, the US president, has supported Britain. He believes a weaker Britain will be the taker of US demands and standards in any bilateral trade deal. EU food standards are much stricter than US standards.  For instance, EU has banned chlorinated US chicken and genetically modified foods. A weakened Britain would help Trump’s agenda to Make America Great Again at the cost of EU standards.

Reality has been biting Britain now as EU debunked its fantasy land. For two years, May could not rally her feuding ministers behind a common position on what Brexit should look like. Last month, she forced her hard-line ministers to accept a soft Brexit in her Chequers retreat, leading to the resignation of such Brexit hawks like Boris Johnson, then the foreign secretary, and David Davis, then the Brexit secretary, among others.

But Barnier rejected the Chequers plan as well. It was only a little softer cherry-picking than as promised during the referendum. If May has all but the Chequers plan to put on the table, a hard Brexit is sure to follow. So May visited Macron on a charm offensive and sent her ministers to Europe to drive a wedge in EU unity.

Meanwhile, though the impact of the Brexit referendum has not proved at cataclysmic as widely predicted at the time, the fear of a no-deal Brexit has begun to bite Britain. Sterling has already taken a tumble of 20 percent. Investment in the UK is being withheld due to the uncertainty. Growth has slowed down, and companies have started moving some of their operations to the continent and slash their workforce in Britain.

What is more, the May government is preparing for a hard Brexit now. Plans are being chalked up to mobilize the military to ensure an orderly distribution of food and other necessities. Sterling is expected to lose further ground. Growth is expected to slow down further and even enter into the recession territory. Brexit dividend promised during the referendum has vanished from official discourse. Predictions are being made about several miles of trucks waiting for clearance at Dover.

This has frightened a section of the ruling Conservative Party. Some Tory peers in the upper chamber voted against a hard Brexit, defeating the government’s hard Brexit proposals more than a dozen times. Some members of May’s party in lower chamber have threatened to vote against the government if it chooses to go for a hard Brexit.

Propped up by the DUP, the May government has a razor-thin majority. Labor is in favor of a customs union with the EU, which raises the possibility of the government getting defeated if in case the hard Brexit is the only thing on the table. Pro-Remainers from all parties outnumber the Pro-Brexiteers in both houses of parliament. If push comes to shove, May’s government might fall, paving the way for fresh elections and installment of Jeremy Corbyn, the Labor leader, in 10 Downing Street.

To soften EU and breach EU unity, London is using its security leverage. But for EU, it is an existential question. If Britain gets what it wants, EU as it exists will unravel quickly. All its members would want its benefits but not its costs, like Britain. If EU keeps its integrity, Britain will have to live with what it doles out, so more Brexit blues are certain to hit May and Britain.


Murari Sharma: Damage that will Take a Long Time to Repair

The American President Donald Trump returned to his country after wrecking havoc to US relations with its closest allies and cozying up with its strategic rival, Russia, who is also viewed by US allies as a threat to their democracy and security. He has created a fine mess, and it may take many years to rectify. You can wreck things up quickly but you require a long time and right policies to repair the damage. 

His first trip was to Brussels, to the NATO summit, where Mr. Trump rubbed other NATO members the wrong way by bullying. While he was right to insist that other NATO members reach the target of 2 percent of their GDP to be spent on defense, Mr. Trump didn’t stop there. He asked them at that last minute to up the spending to four percent, something that had not been discussed, and threatened to pull out of the organization if the allies did not heed his demand. 

From Brussels, Mr. Trump flew to London where he insulted his host and stayed away from London. He undermined the sitting Prime Minister Theresa May, his host, and sang paeans of Boris Johnson who had just resigned his post and who was doing everything to undermine the prime minister. He said Mrs. May was wrecking the negotiations with the European Union and Mr. Johnson would make a fine prime minister.

That was not all. Mr. Trump broke the protocol by walking ahead of Queen Elizabeth. He mostly avoided London where huge protests took place throughout his UK trip against his intemperate remarks and false claims made by him multiple times in the past. 

Mr. Trump had insulted the London Mayor Sadiq Khan, blaming him for the terrorism and spate of knife crimes in London. He had even said mentioned the non-existent bloodbath on different occasions, though so far whatever has happened here in comparison to what happens every now and then in gun crimes in the United States. 

From London, he flew to his golf course in Scotland, where protests became a constant feature. But the worst happened in Helsinki when he met with Mr. Putin.  From there, Mr. Trump walked into his most embarrassing performance in Finland where he met his Russian counterpart, Vladimir Putin. 

Mr. Trump’s officials, as well as the Republicans and Democrats in Congress, had warned Mr. Trump to act tough with Mr. Putin with respect to Russian tampering of US elections and role in Syria and other hot spots. But Mr. Trump not only didn’t raise the irritating issues, at least as much as is publicly known, he also put down his own intelligence agencies and sided with Mr. Putin on the election tampering. As he returned to Washington to a barrage of criticism from all sides, Mr. Trump rowed back by saying that it was a slip of tongue. 

That was not all. He branded the European Union, something the previous US administrations had helped build to keep the peace in the perennially warring European states, as the biggest enemy of the United States. Besides, he criticized Angela Merkel, the German Chancellor, while he lavished his praise on Mr. Putin on multiple occasions.

It all came on top of the trade war that has started between the USA on one side and the European Union, China, and other countries, on the other. Mr. Trump has also threatened to pull the US out of the World Trade Organization, the successor of GATT, which the US had helped create for rule-based international trade.

Where will this destruction of the existing world order without anything to replace it lead? Chaos.  It will harm not only the United States and its allies, it will also weaken the World Trade Organization, and other mechanisms that have kept the world’s strategic and trading balance largely stable. It will adversely affect the rest of the world and seriously.

Will it make America Great Again, as Mr. Trump has vowed to do? Highly unlikely. 

When will the sun shine on Mr. Trump? He has already silenced his officials by ruthlessly firing those who disagreed with him. Congress, both houses controlled by the Republicans, could bring stop Mr. Trump from all this nonsense by standing up to him. But as the New York Times columnist Thomas Friedman has said, the Republicans in Congress have proved spineless to prevent Mr. Trump from his madness and shamelessness.      

So the ‘Trump madness’ will go on during Mr. Trump’s term unless Congress changes hands in November this year. It may continue if the American people give Mr. Trump another term. Because of Mr. Trump’s unprincipled and erratic actions, Mr. Putin and other leaders who flout democratic norms are having a great time.

But the United States and the rest of the world will pay dearly for Mr. Trump’s actions. We don’t know what other dangerous ideas Mr. Trump has up his sleeves and how much more damage they will do. But what Mr. Trump destroys as the occupant of the White House will take decades to mend. Building something is always takes more time and resources than destroying it.


Murari Sharma: Political Myopia and Welfare Loss

The world is in economic turmoil thanks to the American President Donald Trump. The world trading system the previous American administrations had meticulously and painstakingly built after World War II is crumbling now under the pressure of Mr. Trump’s America First policy. Now the world is suffering from the mercantilist Trump Disease.

During the presidential campaign, Mr. Trump had promised to remove the burgeoning American trade surplus by imposing whopping tariffs. To fulfill this objective, first came the tariff on steel and aluminum. Then on other selected products. Other countries have retaliated and promised more retaliatory measures if Mr. Trump makes good his promise to impose the tariff on vehicles and other products. 

For politicians, international trade has been relatively an arcane subject, though it has always been a source of enrichment for countries. From the start of civilization, people have bartered things to address their needs — taking from others what they need and giving to others what they produced in surplus. For instance, Arab and European traders traveled far and wide to sell things they had in excess and buy things they didn’t produce but needed.

At the heart of international trade is the comparative advantage. You produce and sell things which you can produce better and cheaper and sell them to others. If everyone, every country does the same, the total welfare of the world would be maximized. You will get better and cheaper products for everyone. Some politicians, like Mr. Trump, don’t have the patience to wait for the cycle of give-and-take to complete and promote aggregate welfare for all. They need it here and now.

One must admit the non-discriminatory approach Mr. Trump has assumed in terms of imposing tariffs though you cannot say the same thing about his immigration policy. Speaking to the Norwegian prime minister in Washington DC, Mr. Trump said he wanted the people of Norway to immigrate to the United States, not criminals from Mexico and from sithole countries like Haiti, in Mr. Trump’s words. Already, he has banned the citizens of several Muslim countries from visiting the United States.

Coming back to the import tariffs, Mr. Trump seemed to use discretion by giving exemption to European countries for a while only to treat friends and foes alike by imposing the tariff on all at the same rate, including Canada, the next door neighbor. Although Mr. Trump framed his policy as a help to the steel and aluminum-using industry in the United States, the impact has been just the opposite.

For instance, General Motors, one of the main users of steel and aluminum, has filed a report to the Commerce Department asking it to review the tariff because it would force them to reduce production and slash the workforce. Harley-Davidson, which produces heavy motorcycles among other things, which Trump had touted as exemplary, has planned to shift its production to other countries to avoid the impact of the Trump tariff.

Rather than reflecting on the far-reaching negative impacts of his policy, Mr. Trump has dug down and threatened companies like General Motors and Harley-Davidson to abandon their plans to reduce /relocate their production or be prepared for higher tariffs. While the president of America, the biggest economic and military power on earth, wields a big stick, it is uncertain that the rest of the world submit to Trump, as he wants. So, he is pushing the world into the abyss of a trade war, which he has said America can easily win.

But there is whopping room for doubt. The European Union is a bigger economic power that the United States. Add to that other countries like China, Japan, India, etc., the chances that America will win the trade war become pretty slim. Even if America wins, it will have enormously suffered like everyone else, making it a pyrrhic victory. I have named this illusory grandstanding as Trump Disease.

But the Trump Disease did not start with Trump. Many other countries, including the emerging economic powers like China and India, had suffered from the Trump Disease. Chairman Mao and Prime Minister Nehru instituted license raj in China and India, respectively. The Chinese communist leader Deng and Indian democratic leader started the liberalization of their respective countries. Deng’s comment is famous in this respect. He said it does not matter whether the cat is black or white as long as it catches mice.  

More than anything else, the push for liberalization made China the workshop of the world that can produce things at a much lower cost than most countries. India is moving in the same direction though not at the same pace as China. Sandwiched between the two countries, Nepal has been caught in a political dilemma. Perhaps, political confusion will be the right word.

In Nepal, the color of the cat has been more important that the cat’s ability to catch mice. In other words, political considerations always color everything we do and they outweigh economic rationale in respect to its immediate neighbors and rising economic powerhouses of the world. We tend to think that improving relations with one must be at the cost of the other. By the way, this flaw lies with India and China in equal measure.

This flaw is pronounced in Nepal’s economic policy towards India and China, and India and China’s policy towards Nepal. Each of our neighbors does not want Nepal to diversify its trade and wants Nepal to remain one of their economic clients, though a small one at that. So India is trying to keep Nepal under its security and economic wings while China is trying to change the status quo in its favor. And our leaders have played pawn for our neighbors.

Diversification of trade is beneficial to all countries. We already know the comparative advantage rewards every country with a unique endowment of resources. In other words, if every country produces things which it can produce better and cheaper and faster than others, their aggregate benefits will be much higher than if each country were to produce everything.

Europe, America, and Japan became rich by importing cheaper raw materials from the rest of the world, finishing them in their factories and exporting the finished high-value products. The main motive behind colonization was Europe’s hunger for cheap raw materials. China is emulating them now. East Asian tigers have followed the same example. But we in Nepal are still struggling to determine what is best for the country. This confusion will continue as long as we see through our neighbors’ eyes and think through their brain and don’t use our own.

As a result, Nepal has sustained a continuous loss of welfare for the Nepali people. As you would see in the following rough graph, how Nepal is losing its welfare. As the chart below shows, one supplier will supply a product at a higher price, p a, at the higher supply line but two or multiple suppliers will supply it at a lower price, p b, at the lower supply line, assuming that they don’t form a cartel. When the price comes down, more people can afford the product, expanding the the demand from q1 to q2. Therefore, the shaded area (p a, p b, t,u) would be our welfare loss if we rely on only one supplier, in this case, one country.

Chart: Welfare Loss


Politicians are the smartest people. If that were not the case, they, usually the losers elsewhere, would not have been ruling the smart ones. Unfortunately, they often pursue their own narrow political interest and fail to rise to statesmen. This narrow interest makes them overlook and disregard the welfare loss from which Nepal and the Nepali people are suffering.

Will Nepal get out of this phenomenon of? It will depend on whether any politician wielding power, the prime minister in our parliamentary democracy, has the will to rise above his and his party’s narrow national interest and work as a statesman to advance the interest of Nepal and the Nepali people. I don’t know how long Nepal will have to wait for such a leader to emerge.

In fact, the chances of the Nepali version of Donald Trump emerging in Nepali politics are higher than the emergence of George Washington, Mahatma Gandhi, and Nelson Mandela. But you can never tell. All these great men were not born great; they grew up over time to understand that they could and should rise above their narrow interest. So let us keep our hopes alive.

Murari Sharma: Mr. Oli’s China Visit in National and Wider Perspective

At a time when American President Donald Trump is upending the post-war global order, the rest of the world is forced to consider political and economic realignment. In this context, the Nepali Prime Minister KP Oli’s recent visit to China is remarkable not only nationally but also globally and regionally.

The global context first. Mr. Trump has pushed South East Asian countries to China’s embrace by pulling America out of the proposed 12-country Transpacific Partnership Agreement. He pushed European countries and China into the same side by abandoning the Paris climate agreement and slapping tariffs on steel, aluminum and other imports. Such economic necessity is bound to generate a new political alliance among countries that was deemed impossible before Mr. Trump’s rise to power.

Regionally, China has been pushing hard to expand its sphere of influence through, among other things, trade and the One Belt One Road infrastructure initiative. India has been desperately trying to limit Chinese influence in South Asia.

Nepal sits on these colliding fault lines. Mr. Oli’s China visit has taken place in such a delicate time of change. His visit and the various agreements signed in his presence in Beijing suggest that Nepal has inched away from the US-Indian regional orbit and into the Chinese orbit.  It has significant impact for Nepal nationally as well. 

Two weeks ago, a formerly highly placed official had given me a discouraging prognosis about the Oli government’s direction of travel, and in my previous article, I reflected his sentiments. However, after Mr. Oli’s China visit, it appears that things are not so pessimistic after all if action follows the symbol and word.

During the visit, Mr. Oli met with the Chinese President Xi Jinping and his counterpart Li Keqiang in a spirit of warm friendship. The two sides also signed 22 agreements and understandings, 14 between two governments and eight between the two private sectors.

Among them, the most remarkable was Mr. Oli’s pet project: Nepal-China railway link, connecting Kerung and Kathmandu. It is expected that the project will be completed within seven years. This particular project invited serious discussion and difference in Kathmandu.

For instance, the former finance minister, Ram Sharan Mahat, questioned the wisdom of this project in view of its cost and utility vis-a-vis road and other projects. Certainly, from a purely economic standpoint, the geographical difficulties will make the railway costly to make and the distance from the economic hubs of China will make transportation uncompetitive compared to India. 

I don’t have concrete data or a crystal ball to say whether this project makes economic sense. I agree with the points Mr. Mahat has made about the cost and competitiveness. However, I also know that many a time, supply creates its own demand, as the economist John-Baptiste Say has said. If the trade overland between China and Nepal increases, the volume could bring down the cost. 

But the rail project is important in a political sense. It will somewhat reduce Nepal’s total reliance on India as the main supplier of many goods and sole transit country to and from third countries. This will mitigate the impact of the kind of economic blockades we have faced in the past if they are ever repeated.

Other agreements are important in their own right. It is good news that the Miteri Bridge, destroyed by the 2015 earthquake, would be rebuilt and another bridge will be built in Rasuwagadhi. They will restore the lost and create a new connectivity between the two abutting countries. Besides, the press release also promises early conclusion of the Protocol to the Agreement on Transit and Transport, which 

But the reconstruction of the destroyed schools and the Nuwakot Palace, though important, might be viewed as Chinese aid being sprinkled for maximum political but minimum economic advantage for Beijing and the ruling communist party in Nepal.

The agreements between the private sectors of the two countries heavily focused on constructing hydro-power projects, which is welcome. Even though Nepal has the second highest theoretical hydro-power production potential in the world, after Brazil, we still rely on India and thermal power to meet our shortages and still cannot avoid brownouts and blackouts in the lean season when water flow and power production dip.

These agreements are important not only they help Nepal build its capacity, they are important in another significant context as well: They will motivate India to abandon its policy of making commitments and holding projects for years without implementing them. This tendency had started with the Kohalpur-Banbasa part of the East-West Highway and has continued with the Hulaki Roads, hydropower projects, and the like.

I might be wrong to think so, but I always thought the commitment made by India during Mr. Oli’s visit to New Delhi and Indian Prime Minister Narendra Modi’s Kathmandu visit to link Kathmandu to the Indian railway network would not come to fruition without the Kerung-Kathmandu link promised by Beijing.

On a broader level, the presence of China and India in some of the same sectors will set off a virtuous cycle for Nepal’s progress. If China keeps its promise this time, India will keep its. Similarly, if India keeps its promise, it will prompt China to follow suit as well, into a virtuous cycle.

Unfortunately, though, the implementation aspect has not always been encouraging. Though bilateral mechanisms have been established now with China and previously with India to monitor progress, there must first be progress to monitor. Besides, the virtuous cycle, if it comes into being, could make Nepal complacent and more reliant on its neighbors than on its own creativity and resources for respectable development.

On the whole, Prime Minister Oli’s China has been positive and encouraging at the agreement and symbolic level. Let us hope the implementation aspect would also move forward smoothly. While I don’t doubt the strong relations between Nepal and China for the good visit, the US President Trump’s upending of the post-war global order did contribute to make China Beijing more generous than before.

Murari Sharma: Communist Unification, Budget and G-7 meeting

The old edicts go, a barking dog does not bite. After several months of high expectations, my friend, a former senior government official, wondered with me recently, on the condition of anonymity, about the KP Oli government.

Indeed, Nepali people had high hopes from the government because it was a majority government after a long time and Prime Minister Oli had made tall promises, which to his critics sounded deluded and even insane. There were reasons for optimism.

The electoral coalition of the CPN-UML and CPN-Maoist Center had won a clear majority in the federal parliament leading the two parties to a merger and unification. This communist unification is a rare event in Nepal’s political history for which Prime Minister Mr. Oli and to a certain extent, Pushpa Kamal Dahal, the co-chair of the CPN without any appendix, deserve appreciation.

While there are many economic and social challenges to progress in Nepal, one thing is different this time in terms of leadership. Prime Minister Oli does not have children to engage in personal corruption to amass wealth for his children, which has been the case with former prime ministers with children. This gives hope that the government would formulate and implement policies promised in the manifestos of the coalition partners.

I do not agree with the regressive elements in their manifestos. For instance, you need consolidation of agricultural land so that mechanized agriculture with high production and productivity becomes possible, not further fragmentation of land in the name of land reform to please communist voters and hold the country back.

Similarly, I do not agree with their promise to let the political workers engaged in revenge killings, like Bal Krishna Dhungel, to be released or not persecuted and jailed. Neither do I agree with their anti-industry labor militancy, the type the Maoists have promoted.

But many elements in the CPN-UML and CPN-Maoist Center manifestos are what Nepal needs to make a leap forward. Just to name a few, it is a great idea to depoliticize civil servants and teachers, focus on transport and other physical infrastructure, and pursue a balanced foreign policy. But the performance of the KP Oli government in the first three-plus months gives little room for optimism because whatever started with a bang had ended/may end with a whimper.

For instance, dismantling syndicates in various sectors — every sector of Nepal has syndicates, starting with politics — was a great idea. But as the efforts to this effect started having a bite, leaders have begun to peddle back. Once the existing transport syndicates were weakened to introduce new transport companies owned and blessed by communist leaders, the Transport Minister Mahaseth removed the man from the Transport Department who had been instrumental in doing it.

Similarly, the newly-minted Communist Party of Nepal co-chair Pushpa Kamal Dahal has threatened Home Minister Ram Bahadur Thapa not to punish the non-performing contractors because he lives in a house given to him by a contractor. Given the Maoist cadre’s strong-arm tactics in contract awards, Dahal could very well be at the top of the corrupt construction syndicate.

We all know Mr. Dahal is at the top of the crime syndicate. He pushed for the release of his supporter and a convicted murderer Bal Krishna Dhungel from jail and paved the way for the culture of impunity. Prime Minister Oli said his case was just a strand. A great and pithy orator must have known that even oceans are collections of small drops.

Mr. Dahal has been trying his level best to save Maoist criminals who engaged in revenge killing from the law. If the government releases politically connected criminals, then what moral right does it have to jail politically unconnected criminals? Even Mr. Oli was found crying over the persecution of those thugs who were connected with the CPN-UML.

On a broader and more important level, Mr. Oli promised a nimble government, but he ditched the promise and expanded his government to make it a coalition government, which are the epitome of corruption. But Mr. Oli will not have the same level of control on the cabinet members from the Federal Socialist Forum. He had shown wisdom in not appointing a deputy prime minister, but as the first sign of corruption, he had to appoint two deputy prime ministers who would jockey for power.

While the Oli government is engaged in these little things, his big promises — making provincial and local governments effective and sustainable, ending tuins (ropes to cross rivers) in two years, connecting Kathmandu by rail, Nepal having its own ship, etc. — have not gone forward much or gone in the wrong direction.

The recently presented budget of 1.31 trillion rupees has abandoned many of the key promises Mr. Oli had made before and after the election. Yet, the budget is quite good with the customary weaknesses of a developing country. Unfortunately, it is being opposed from within the ruling party because it does not reflect their personal priorities. I hope Mr. Oli rises over this bickering.

Speaking of budget, most notable among the things gone wrong is related to provincial and local governments. The Oli government has failed to check these where it must and checked in areas where it must not. For instance, these governments have set salaries, allowances and other facilities that their revenue cannot sustain, which will leave no money for development activities and make Nepal more dependent on foreign assistance for development than ever before.

It brings me to foreign relations. While the Oli government seems to strike a new balance between India and China, which is necessary, it has yet to grapple with winder foreign relations issues. For example, US President Donald Trump has upended the existing global governance, which will have direct and indirect impacts, most of them adverse, for Nepal.

Mr. Trump has withdrawn from the Transpacific Trade Partnership and the Paris Treaty on climate change. Likewise, he has threatened to pull the USA out of the North American Free Trade and the North Atlantic Treaty Organization. He has triggered a trade war with the imposition of tariffs on the import of aluminum and steel, which has prompted China, European Union, Japan, Canada and Mexico create similar protectionist barriers against American products.

He undercut the recent G-7 meeting over the trade dispute with other countries. Not only he called on other members to invite Russia to join the G-7 again, he also riled against other members of the exclusive club of rich countries and withdrew the United States from the joint statement released at the end of the summit.

All this is pushing the world towards trade war, which will impact Nepal directly and indirectly through China and India. While our neighbors and the rest of the world are taking steps to minimize disruption to their trade and to maximize their benefits in the midst of adversity. I doubt Nepal has done anything to protect itself from this fallout.

Mr. Oli’s adage-filled speeches must not only entertain but also deliver if he wants people to believe him. I hope my friend, who has begun to give up on Mr. Oli and his government with some justification, would be proven wrong.

Murari Sharma: How Could Left Unity Affect Us?

Prime Minister KP Oli said that the united communist party will be like a jet aircraft that has tow pilots, not an auto rickshaw with a single driver. It was his response to a question related to two leaders co-chairing the merged Communist Party of Nepal. This left unity might lift or ruin our lives, depending on what the new, powerful party chooses to do in the days ahead.

The Communist Party of Nepal (United Marxist-Leninist) and the Communist Party of Nepal (Maoist Center) have merged on 17 May 2018 to for the new party. Until the next party convention, the new party will have Mr Oli and Maoist leader Pushpa Kamal Dahal will be co-chairs.

Communists of Nepal have earned a well-established reputation that they are better at splitting, rather than uniting. The Communist Party of Nepal (CPN), established in 1949, splintered into nearly a dozen and a half parties in the later years. Their mergers have proved less enduring than their splits.

One of the few enduring mergers has been between the CPN (Marxist) and the CPN (Marxist-Leninist) and the CPN (United Marxist-Leninist). Even though the CPN (UML) broke over the Mahakali Treaty with India, the splinter groups came together after a disastrous defeat in the general election. What will be the fate of the newly minted CPN without any adjective, when it has a two-thirds majority in the upper house?

It is hard to say for sure at this point because I don’t have a crucible to the future. No one has for that matter. Therefore, the only way to guess would be to look at the cases elsewhere. There are two examples in our own region: China and West Bengal.

Even though one might be tempted to use the example of China, it does not exactly fit our situation. China is still an authoritarian one-party-state politically, though economically it has embraced capitalism. Therefore, West Bengal is a more appropriate example here, because both Nepal and West Bengal have communist party rule in democratic societies with competitive politics.

Under the communist rule that started in 1977, West Bengal launched a series of land reform and promoted labor militancy. As a result, lost its economic ground considerably. According to Prof. Subba Iyer, West Bengal’s contribution to India’s GDP went down from 7.2 percent in 1980/81 to 6.1 percent in 2000-01 and per capita income from 1.02 times to 0.96 times.  The share of manufacturing slipped from 21 percent to 13 percent.  Infrastructure also suffered under communist rule, while there was some gain in poverty reduction, though less than Tamil Nadu. 

Communist leaders in democratic countries make populist land reform and labor militancy as their first port of call — a quick fix to please the poor and win the election. While land reform and workers’ rights are important to reduce poverty and promote justice, too much of them stifles growth and makes everyone poorer by hollowing out the economy. in the long run. If Nepali leaders also pursue this quick fix, Nepal will suffer the same fate as West Bengal, making Nepal and the Nepali people poorer. 

However, if the left government delivers on what it has promised, Nepal could be a blossoming country in next 10 years.  The promises have indeed been tall. As Prime Minister Oli has pronounced that Nepal will double its per capita income in 10 years, remove the blackout and tuin (single-rope river crossing), and rail connection to Kathmandu from India and China in five years, to name a few.

Policies and pronouncements often come up cheap, while their implementation is expensive and complicated. It requires strategic thinking, commitment, hard work, and perseverance for a prolonged period from government and people and sustained support from development partners. And external assistance depends largely on how major donors perceive the communist government.

India is not pleased with the communist government, even though Indian Prime Minister Narendra Modi tried to sooth the wound he had given to Nepal with his undeclared economic blockade in 2015/16 in support of the disagreement with the new constitution shown in the parts of the Terai plains. While India needs to work to slow down the Chinese inroads and continue to engage, Western countries are under skeptical about the Nepali communists’ commitment to democracy.

In this situation, the question now is whether PM Oli and his colleagues follow the path of West Bengal under the Marxists or do something more creative to ensure that the Nepali economy and society avoid the stagnation suffered by the Bengalis. Because the recently unified CPN commands a nearly two-thirds majority in the federal parliament, on the party will depend on the fate of Nepal for the next few years. 

The co-chairmanship of CPN will come with its own additional conflicts and perils. I hope it will be as short as possible and as little damaging as possible.

Murari Sharma: Modi’s Nepal Visit

A friend told me that a whole community of deprived people he just visited has become dependent on foreign assistance for their every-day needs. Indian Prime Minister Narendra Modi has returned to New Delhi after his two-day visit to Nepal, making this dependency disease acuter.

My friend said until the foreign money poured, the community worked hard to make a living. They were poor but had the self-respect and dignity of standing on their feet. Now that the foreign money comes in, the whole community has abandoned its traditional occupations, skills, and crafts. They have lost their traditional skills while have yet to acquire new skills.

I have noted it across Nepal over decades. People have abandoned their villages, farms, and arts and crafts and moved to towns and cities or foreign countries seeking employment. When the population declined, wild animals — monkeys, jackals, raccoons, and other pests — have invaded the villages and made them unlivable, forcing those who had stayed behind to move into towns and cities.

Some of the people who moved out of their traditional home have become better off. However, the majority has suffered poverty, humiliation, and other indignities. This example has become emblematic of the lahure culture of entire Nepal.

This is the lahure culture: Working for others is better than working for ourselves, especially in a foreign country. And those who stay in Nepal prefer to live on remittances rather than doing hard work at and around the home. This dependency culture has been a national phenomenon in Nepal.

Changing skill sets and occupations is a natural process of evolution. Therefore, we should not be too much worried about it. What should worry us is the lack of new skills while people have abandoned the old ones. As a result, a large number of people have nothing to support them.

While we the people need to take some blame for it, our political and community leaders deserve the lion’s share of the blame, because they set the policy and run the country and community. That brings me to Narendra Modi’s Nepal trip.

Mr. Modi was generous with his words about Nepal. He praised Nepal for its elections, promised a billion rupee assistance for the Ramayan Circuit, and started the construction of the Arun Power Project with Prime Minister Oli. Only time will tell whether his words translate into concrete actions. Nonetheless, no country can develop with foreign assistance alone, no matter how generous it is. The key to progress lies in the hand of the country concerned, particularly its leadership.

Due to its geo-strategic location, Nepal cannot develop without the generous cooperation of its immediate neighbors, mainly India. India looms large because Nepal depends on its southern neighbor for its transit to third countries as well as for essential goods and services, pilgrimage and cultural nourishment. The difficult Himalayan Mountains hinder the same levels of multiple interactions between Nepal and China, the other adjoining country.

India has three key interests in Nepal: security, water resources, and market. Since the days of the British Raj, India has viewed Nepal as a buffer between it and China and sought to keep it in its grips. Started with the Treaty of Sugauli, the trend has continued through the 1923 Treaty and the 1950 Treaty that enshrine such dependent relationship.

Under the 1950 Treaty, Nepal cannot import third-country military hardware without Indian approval. Foreign aggression against one is deemed as aggression against both. So much so, India had opposed the construction of the Kodari-Kathmandu Highway, and the contract given to a Chinese builder to construct the Kohalpur-Banbasa section of the East-West Highway.

India’s interest in Nepal’s water resources is threefold. It wants to tap the water in Nepal to produce power, for which demand is increasing by nearly 20 percent every year. It wants to irrigate its arid northwest by training rivers of Nepal. It also wants to protect its floodplains by taming rivers within Nepal.

Nepal’s captive market is another area of Indian national interest. Nepal’s largest trading partner is India. It depends on India for essential goods and services of all kinds — from construction material, medicine, petroleum, textbooks for higher education, films, clothing to motor vehicles. New Delhi would like to keep Nepal that way.

On the one hand, we should be grateful to India for what it has done for Nepal. Perhaps no sector in Nepal is free from Indian assistance at one time or another. Education, health, roads, power, agriculture, you name it and India has assisted Nepal in those sectors.

There is nothing wrong for India to protect and promote its national interest in Nepal, we in Nepal somehow find it unacceptable for India to do so. Sure, because India is a much larger and more powerful, Nepal naturally feels overwhelmed by its neighbor and sometimes, Indian leaders have not been fair to Nepal.

For instance, the three economic blockades simply because Nepal sought to chart a slightly independent course. Once, Nepal asked the Indian border mission to leave the Nepal-China border, again when Nepal bought some Chinese weapons, and again when Nepal promulgated its new constitution without India’s consent. The disproportionate share of benefits from the Koshi and Gandak Projects is another example.

While some of the blame lies with India, Nepal’s leadership is equally culpable in this unequal relationship. According to responsible officials of India, Nepali leaders may talk about their national interest in public, but in private they only speak about their personal interest. Even though the Nepali people elect them, they seek India’s help to become prime minister and ministers or to keep their posts.

For this reason, successive kings and prime ministers have failed to protect and promote Nepal’s national interest with respect to India. Now the Modi fever has caught Nepali leaders and a large section of Nepali intelligentsia. Let us hope our political and intellectual leaders would not make any compromise on our national interest with India during Modi’s visit.

The late US President John Kennedy had said, “Don’t ask what America can do for you; ask what you can do for America.” To paraphrase the statement, we should ask not what other countries can do for us. We should ask what we can do for our country. Only it will reduce our dependency on other countries.