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.


Murari Sharma: Nepal’s Interest in the India-China-US Triangle

The interest of India, China and Western countries collide in Nepal. India and China, regional powers eager to deepen and expand their hegemony, are treading on each other’s toes: China in South Asia and India in South East Asia in collaboration with the United States to cordon off Beijing.  This configuration poses great threats  as well as offers great opportunities for Nepal.

Nepal, India, and China have been intertwined for ages. Brikuti, a Nepali princess, and Nepali and Indian scholars spread the light of Buddhism in Tibet and beyond, and Nepali businessmen traded in Tibet. Chinese scholars visited South Asia cataloged its history and wisdom.  

Nepal fought two wars with China and two with India. We lost one war and won another with China. In the second war, the Chinese forces reached to Betrawati, deep inside in Nepal. Similarly, we defeated British India in one war and sustained heavy losses in the other, losing almost one-third of our territories under the Treaty of Sugauli.

After China became communist, the United States joined in the Nepal-India-China mix by training and arming the Khampas against Beijing.   

While Nepal stayed in the Indian sphere of influence after with King Rana Bahadur Shah, China sought diluting Indian impact since it became communist, especially after it absorbed Tibet.  Its spectacular economic development, which helped it build a formidable military, has made China more ambitious over the last couple of decades and encouraged it to reach out to South Asia, Africa, and South America. 

Though India has also logged an impressive growth over the last two decades and building its military capability, China is far ahead thanks partly Pakistan.  Actually, it was the case during the Indo-Chinese war of 1962 already. China has nurtured Pakistan as a continued thorn in India’s side, and expanded its presence in Sri Lanka, Maldives, Myanmar, and Nepal. 

India has been trying to maintain its grip on its old sphere of influence, South Asia, and seeking to reach out to South East Asia, China’s backyard, with US support.  The United States wants to preserve its global hegemony, for which it much cut the emerging powers to their size. 

Yet, it would be wrong to read too much in this tense triangle. Despite all this contest, India, China, and the United States are huge trading partners, and their economic interaction has been growing. In this situation, Nepal should not perceive itself as a pawn in this broader geopolitical game to promote the players’ interests.

Neither should allow others to perceive and use Nepal as a pawn in this game.  Therefore, Nepal must be careful in what it says, and more importantly, what it does to preserve its de facto sovereignty and independence. 

In other words, Nepal must maintain the best of relations with its geographical neighbors, China and India, and our sky neighbors, mainly the United States and Europe. We must desist from being the pawn of one or another for instant gratification. We must dilute Indian hegemony in Nepal while not allowing China to increase its.

Neither should we allow Western countries to destroy Nepal indirectly, mainly by promoting identity politics and conflicts fueled by it.

Meanwhile, we must use their friendship and economic support to strengthen Nepal’s sovereignty and independence and promote Nepal’s economic and social development. If the Cold War is any guide, Nepal will be freer and safer if it did not align itself too much with any of our neighbors and it became prosperous.

For its progress, Nepal should attract more investment from inside and outside and try to be part of the global supply chain. For such investment to increase, there should be financial and economic incentives, policy stability, and strong institutions that give confidence to investors. To mitigate our geographical disadvantage, we ought to focus more on light weight and high-value products and industries. 

Our immediate neighbors and sky neighbors have been investing in Nepal to bring into their ambit. They have all deploying words and extending support to give the impression that they have Nepal’s interest at heart. However, no matter how much and how hard they promise, their first and foremost interest would be to promote their own national interest. 

We must bear in mind that our national interest would be peripheral and subservient at best and antithetical at worst to our immediate and sky neighbors. Therefore, we must increase connectivity with all three neighbors, resisting the temptation of being favorite of one or the other. We must not allow them to dictate our policies geared to promoting the safety, security, and development of Nepal and prosperity of the Nepali people.

At the same time, we should respect their genuine interest Nepal. For instance, we must not allow any of our neighbors to build a military presence in Nepal or let our territories be used against them. It should be a two-way street. History tells us how covert and overt anti-Nepal activities have been allowed and supported by our immediate and sky neighbors. 

In international relations, countries have no permanent friends or permanent enemies, as Lord Palmerston has said; they only have permanent interest.  The worst form of enmity results in wars, which only happen between immediate neighbors. Our leaders will be wise to keep that in mind when they deal with our near and far neighbors.

In other words, in the extant tension among our immediate and sky neighbors, there are great opportunities if we keep our national interest front and center and pursue them. However, if we align with one or the other for instant gratification, our safety, sovereignty and independence will be jeopardized.

Murari Sharma: Black-and-white world

Are you worried about your future? About the future of your children? We live in a grey world, but when you have leaders that tend to see things only in black and white, you have to worry.  I am talking about the reactions to what Prime Minister KP Oli and President Donald Trump, both sorts of cult personalities, do. 

Cult personalities command blind loyalty from their supporters and aversion from others. Some sections of Nepal praise Mr. Oli to the sky and others view him as someone on the steroid, of course, to treat his illness. Likewise, Mr. Trump is a hero for arch-conservatives, while for others, he is a crazy moron. 

Take Mr. Oli’s recent India visit, for example. Mr. Oli’s party colleagues and supporters have characterized the visit as a grand success. The Nepali Congress Party has said it was a lost opportunity and his detractors have faulted him for leaving out many important issues from the conversation. What is the truth? 

Hegemons often extract advantage from their smaller counterparts during high-level visits or official negotiations. India and China, the regional hegemons, do the same. Who does it overtly and widely, who does it covertly and narrowly, depends on their political systems, level of transparency required by them, and on the scope of engagement with other nations.  

If the leader of a small country comes home from a trip to bigger countries without unduly compromising his national interest, that is a success. If he comes with substantial assistance as well, that is a remarkable success, assuming that the assistance will materialize.

We do not know what transpired between Mr. Oli and his Indian counterpart Narendra Modi in the one-on-one talks. If Mr. Oli has not made any undue compromise in those talks, then the visit should be deemed as a success, because he did not give in anything publicly and secured promises of support for his pet projects, rail, and waterways. It is a different question how quickly India implements its commitment.

Those areas were not probably the most urgent needs for Nepal, but when the next election arrives in five years, we will ask Mr. Oli what promises he had made in the last election were fulfilled. Besides, it is a matter of approach to development.

For good reasons, some believe in balanced development; others in unbalanced growth, in which two or three key sectors lead the way to take off. The Soviet Union, which focused on power, roads, and railways, was the best example. So it becomes a question of an ideological bend of commentators.

It leads me to the second subject: Mr. Trump.

As we have witnessed, Mr. Trump is constantly in the news. Whatever he says or does polarizes the United States. For instance, his immigration pronouncements and policies. His arch-conservative base blindly supports his racist, anti-immigration comments and policies as if they are coming from God. His opponents see him and his words as racist.

Similarly, Americans are divided over the Special Counsel investigation into Mr. Trump’s collusion with Russia during the presidential campaign. Mr. Trump and his close supporters view the investigation as a witch hunt. To safeguard the integrity of American democracy, his opponents find the investigation legitimate and essential. Even most Republican leaders want the investigation to proceed to its logical conclusion. 

Mr. Trump’s tariff on import of steel and aluminum and on Chinese goods has received a similarly divided reaction. His core supporters believe he is right, but his opponents worry about the potential trade war that will hurt America, China and the rest of the world. China has already announced its own tariff on American products. 

Ditto about Mr. Trump’s treat to tear the six-country nuclear deal with Iran.

In any democratic political system, differences across the political divide are common. But cult leaders evoke a more visceral reaction from their supporters as well as opponents because of their provocative words and deeds.  Unfortunately,  they often end up harming themselves, like committing suicide or pushing others to do it to make their point or to escape a concocted apocalypse.

That is what worries me. Both Mr. Oli and Trump have become sort of cult leaders due to his unmeasured words in Mr. Oli’s case and his unmeasured words and whimsical deeds in Mr. Trump’s case. They are prone to interpreting national interest  — protecting sovereignty and independence and promoting the prosperity and welfare of citizens — as they see fit and act accordingly.

Obviously, that could prove dangerous if there are no people around them to check their impulses by reminding them that the world is more grey than black and white.

Murari Sharma: Stand for the Country

Bal Krishna Sama has said one’s patriotism does not die even if his country is miserable and a wife’s devotion does not die even if the husband is sinful. There is absolutely no reason why Nepal should feel inferiority complex and conduct its foreign relations with dignity. As Prime Minister KP Oli prepares to visit India from this April 6-8, he will, I hope, make us proud, as he has done twice before on different foreign policy issues.

First, he called the Indian economic blockade of 2015/16 by its name and asked the Indian government to lift it while other senior leaders kept loud silence while the Nepali people suffered. The Nepali Congress did not. Again, Mr. Oli stood up to the European Union when it sought to foment ethnic strife through its election observation report, undermining the hard-won Constitution of Nepal. This time, the Nepali Congress did it too.

Does this mean Mr. Oli has made a paradigm shift? The biggest test of it will be his India trip in a few days. Like all other countries, Indian will try to maximize its national interest during this visit. We will see whether Mr. Oli can take the right stand to advance our national interest.

We did not have enough of him the last time he was prime minister for a year. But before that, when he was deputy prime minister and minister maker in his party, he was known as a close friend of India. He has been far from consistent in standing for national interest.

For example, Mr. Oli first opposed the Mahakali Treaty and then supported it. Though he called the Indian economic blockade of 2015/16 what it was, he has never expressed his concern when China has closed the Nepal-Tibet transit points repeatedly. Evidently, he had been part of Nepali political culture.

Broadly, it means if you belong to a communist party, anything China does is good and acceptable. If you are part of a non-communist party, anything India or the West does is good and tolerable. More specifically, foreign intervention is welcome if it benefits you or your party and unwelcome if it benefits your opponents.

The spokesperson of the Indian External Affairs Ministry had once briefed Nepali journalists that Nepali leaders often visited New Delhi with personal agendas rather than national.

Such personal favors include support to gain or retain power, scholarships for their children or relatives, free medical treatment facilities for their family and friends, observation tours for them, projects in their constituencies, new vehicles for them, etc.

It is a chronic disease in Nepal, and it has only become severer with the passage of time. Started with King Rana Bahadur Shah,  the disease deepened with the rise of Jang Bahadur Rana, widened after 1990, and reached its utmost depth and openness after 2006.

Some examples. Indian counselor Mehta’s advice to unleash a storm for One Madhesh, One Pradesh and the Indian blockade of 2015/16 to support it. The EU’s recent comment on the Nepali Constitution to foment ethnic tension. The previous British ambassador Spark’s comment on freedom for conversion. China’s objection to Nepali NGOs working with the Taiwanese NGOs.

Has Mr. Oli steered Nepal’s foreign policy ship into a new direction with his stand against the Indian economic blockade and the recent EU’s suggestion?  Will he maintain his new position as a matter of policy? Until we have a stack evidence, we have no way to know.

As it appears from outside, Mr. Oli has the political strength to do it. His government enjoys nearly the three-fourths majority in the federal government and the coalition of the UML, Mr. Oli’s party, and the Maoists lead six of the seven state governments.

However, Mr. Oli might not be as strong and confident as he appears from outside. Inside his party, he faces entrenched opposition from the factions led by other senior leaders. The Madheshi parties have supported him to entice Mr. Oli to amend the Constitution, as they want.

More importantly, the Maoist leader Pushpa Kamal Dahal is a wild card. Mercurial and unreliable, he might abandon Mr. Oli and the UML-Maoist integration process mid-course and fall back into his default character. His recent demand that both parties must have 50-50 officeholders in the merged party is a clear pointer.

Considering his party’s strength, his demand lacks the sense of proportion and justice. They have taken cabinet positions on 70-30 ratio, and it seems right given their electoral performance and number of seats in the federal and state legislatures. However, Mr. Dahal made that demand anyway.

The Nepali Congress Party has thrown its support to Mr. Dahal for prime minister if he broke from the UML-Maoist integration. Most external powers do not want the merger either; they have been sending feelers to Mr. Dahal. At a critical juncture, Mr. Oli’s strength might prove the Potemkin’s village.

Therefore, let us appreciate Mr. Oli for his stand against external intervention and urge him to maintain it the future. Let us hope Mr. Dahal will not be a foreign pawn.  Let us expect the Nepali Congress not to knock on foreign doors to destabilize the Oli government.

And finally, let us hope the Oli government does not flout the fundamental norms of democracy and freedom. If he did it, we might have to ask the international community for their moral support to put a spanner into his plan. Because power corrupts, it is entirely possible.

Consequently, the world has produced a surfeit of Ferdinand Marcos, Robert Mugabe, Pervez Musharraf, Zia-ul-Haq, Zia-ur-Rehman, Suharto, Than Shwe, and so on. Who had thought President Xi Jinping of China would change the Chinese Constitution to open the door to keep him in power for life. Leaders like Mahatma Gandhi, George Washington, and Nelson Mandela have been rare.

Every progress starts with the first step. Let us hope Prime Minister Oli will continue following the spirit of Bal Krishna Sama’s poem and put Nepal and its people front and center, not succumb to the diseased political culture.

Murari Sharma: Make federalism sustainable or face conflict

Your idea and my idea of federalism might have been different, but you and I are now stuck with the bill. The bill will make politicians richer and everyone else poorer and sow the seeds of conflict for the future.

I have supported the idea of federalism ever since I visited Brazil in 2002. Brazil has a few, economically sustainable states that compete in delivering development and services to their denizens. For Nepal, my idea was to have fewer and largely self-sustainable states, which would compete to make us richer and our country prosperous.

Since 2009, I have been making this point along with a few others. Citing the examples of the United States, United Kingdom and India, I had argued that since federalism is expensive, Nepal must have just three — at most four — states.  Several political pundits, living in a fantasy, rebuffed my analysis and suggestion. Now the reality has just begun to bite, and it is painful.

Have you recently paid the land tax? If you have, then you would know the land tax has increased 1,000 percent under the new system. The local government used to issue several certificates to citizens free of cost before; now every service costs you. What cost 20 rupees before now costs you around Rs.500 or more.

This is just the first bite. It will be ten times worse after the newly elected central, state, and local governments envisage the expenditures needed for their new structures and human resources and for development activities. At the central and federal level, 884 politicians will be members of legislative bodies, more than ever. Ministers will have their political advisors in hundreds, most of them new posts.  All 753 local governments will have paid politicians unlike in the past when they were voluntary positions.

While some existing government employees will be transferred to the state and local levels, a large of new people will be necessary to make the new governments functional and effective. Political and bureaucratic officials require salaries as well as allowances, offices, rent, fuel, vehicles, and so no.

Nepal’s revenue is not enough to cover its pre-existing recurrent expenses if you include the stealthily hidden significant chunk of recurrent costs under capital expenditures.  Such hidden costs include the costs of buying weapons, helicopters and equipment, protecting the forest, etc. of the army; the regular salaries of teachers; the fuel and travel expenses of the ministries that have development projects, and so on.

Even if we stick to the published budget figures, the picture looks frightening. In 2015/16, Nepal’s revenue collection was Rs.4.85 billion and total recurrent expenditure Rs.3.71 billion. It left only 24 percent of the revenue for the capital expenditure — roads, new power projects, new schools, new hospitals, and so on.

In 2016/17, the revenue and recurrent expenditures were Rs.5.81 billion and Rs.5.62 billion respectively, leaving only 3 percent for development activities. In 2017/18, the estimated revenue of Rs.7.30 billion is insufficient to cover the recurrent expenditure of Rs.8.04 billion.

Evidently, all genuine development expenditures came from foreign assistance, most of it loan, and internal loan in 2015/16, all development and part of recurrent expenditures came from the external and internal loans in 2016/17, and all development and a large chunk of regular expenditures will come from those to sources in 2017/18. It is getting worse every year, and if you count the hidden recurrent expenses, the picture turns uglier.

We or our children must pay back the external and internal loans; Nepal will not be rich in next five-ten years; money does not grow on trees because we have pleased our leaders with hundreds of paid posts. So all three levels of government will tax you and me to death to pay for their expenses and to implement development projects, which take years to create jobs and earn a new stream of revenues.

When you have to choose between paying the taxes and feeding your children, you will certainly to choose the latter. Sooner or later, the increasing taxes, the declining services, and dead-end before you frustrate you so much that you will revolt, inviting a conflicting and the need for another political transition. It looks like our 30-year political transition is not the last one.

Can we prevent another revolt and another transition? If we have the will, we can. We must push our elected leaders to reduce the number of states, merge local bodies, or privatize public services.

I understand where the identity politicians come from. If we apply their logic, then Nepal should have 12o plus ethnic states. If we have accepted multi-identity states,  why the unsustainable seven and why not sustainable three — at the most four — states? The number of paid politicians and staff will be reduced by half, reducing the expenses on their salaries, allowances, offices, housing, vehicles, fuel, and so on. And such states will also offer the economy of scale.

Another choice could be merging the local bodies. Due to their financial constraints, the boroughs in the United Kingdom have been doing it, for instance. In the first round, several boroughs, facing a financial crunch, merged with the adjoining boroughs. For instance, in London, Kensington and Chelsea merged to become Kensington and Chelsea borough and Hammersmith and Fulham to become Hammersmith and Fulham borough.

In the second round, adjoining boroughs, such as Wandsworth and Richmond in London, have been merging their administrative functions to reduce the duplication of costs and services.

Yet another choice is to privatize most government activities so the government expenses in those activities are saved and taxes would not go through the roof though you pay to the private sector for the services they provide. We have privatized some of our public enterprises, but other countries have gone much further.

The United Kingdom is the case in point again. After the rise of Margret Thatcher as prime minister, most public services, including rail, prison, and some roads, were privatized. The mail service went into private hands only recently. The government is stealthily pushing parts of the National Health Service into private hands too. Chile and several other countries have gone down this route.

Sure, you end up paying more for the same services once they go to the private sector. But you would not complain about the government taxing you too much, and if you do not regularly consume those services, may not feel too bad about it.

Anyway, the federalism we have embraced is unsustainable. We have created too many states where tons of political officials and thousands of additional employees will be on the public payroll, who will demand allowances, vehicles, fuel, pension, office space, and so on, siphoning off every penny from the revenue for their own maintenance.

Unsustainable federalism is a source of conflict and secession: Look at Sudan. Nepal should strive for successful federalism, not a dysfunctional one that will only breed another revolt and another transition and will bankrupt the ordinary Nepalis.

Murari Sharma: Trump, May, and Oli

The world is hurtling towards an unfamiliar territory or the territory that was thought left behind as not good and un-visitable anymore.  It is happening in politics and economics, and it will only end in tears and pain, as before.  Nepal will be no exception.

We are once again going back to rabid nationalism and identity politics that had given us wars, chaos, economic disruptions, and poverty for the majority across the world. From Roman wars, intra-European wars, and European colonial wars across the world, as well as the intra-Asian wars and Asian wars against Europe were all geared to control resources for the rich and powerful countries. This series effectively ended after World War II, when a rule-based global governance emerged to use the global resources for the benefit of all.

The United Nations, GATT, the World Bank, the International Monetary Fund,  the World Trade Organization, regional cooperation, such as the European Union, as well as international conventions and covenants were the products of the rule-based global governance. Unfortunately, some powerful countries have been ditching them for their narrow national interest, on course back to the pre-World War II chaos and possibly wars and misery.

Leading this regressionist trend is the US President Donald Trump with his America First slogan. He has threatened the United Nations and the countries that opposed the US decision to transfer its embassy in Israel from Tel Aviv to the disputed Jerusalem with serious consequences. He withdrew from the hard-earned Paris climate treaty and the Trans-Pacific Partnership trade; has threatened to pull the US out of the North American Free Trade Agreement.

He encouraged Britain, as a presidential candidate, to exit the European Union, which had ended the centuries of wars between European countries and made them prosperous. He has now slapped 25 percent and 10 percent tariffs on the imported steel and aluminum, which may trigger a trade war. Amazingly, he has even tweeted that trade war would be good for America.

The bulk of the Conservative leaders, spurred by the recidivist nationalist impulse to old nationalism and mercantilist desire, inveigled the British people to vote for Brexit promising the freedoms and goodies they cannot deliver and hurt a regional mechanism that has been a bulwark of peace and prosperity in Europe. Now Theresa May, the current prime minister, to have a cake and eat it, has come with red lines that will hurt the British economy and its standing in the world.

Both Donald Trump and Theresa May despise the rule-based political engagement and trade and economic exchange that benefits all, not just a few, though the larger chunk still goes to the big and powerful. For instance, the larger the trade of a country, the higher the benefits for it; the larger the coastal area of a country, the larger the exclusive economic zone and the right to exploit marine resources further afield. But that has not been enough for Mr. Trump and Mrs. May.

While they are leading the journey to old nationalism, they are not alone on this trip. China has been stepping on the toes of other countries in the Pacific as far as the Spratley Islands, triggering territorial discord with more than half a dozen countries, thanks to reviving Chinese nationalism, especially under President Xi Jinping, who has also thrown out the term limits for himself.  Narendra Modi, the prime minister of India, is imitating Xi in South Asia. While he started on the right foot, he quickly assumed a hegemonic policy and has now lost Sri Lanka, Maldives, and Nepal.

If Mr. Modi had not imposed the economic blockade against Nepal in 2015 and his functionaries had not directly interfered in Nepal’s politics, as his predecessors were doing, the anti-Indian sentiment, a.k.a. nationalism in Nepal, might not have flourished and the left alliance would not have obtained a nearly two-thirds majority in the general election for the national parliament and victory to the alliance in six of the seven states.  While nationalism has brought the left alliance this far and let it form the government at the center and six states, what will Prime Minister KP Oli and his government will do from this point onwards? Will they follow the toxic nationalist bandwagon or take a pragmatic tack?

Nationalism is necessary to arouse the public to come together, and sometimes, to draw a wedge between them. However, it will not deliver growth to the country and prosperity to the Nepali people. Growth and prosperity require wise management of national resources, unobstructed transit facilities and economic assistance from the neighbors and capital assistance from other development partners from across the world.

For this, Nepal needs a careful domestic policy, balanced foreign policy, and productive external economic policy. Our immediate neighbor’s preferences are different in terms of Nepal’s domestic policy. For instance, Beijing wants strict security control to prevent Tibetans from crossing the border between Nepal and China. New Delhi and Western capitals want just the opposite. China wants Nepal to restrict human rights, whereas India and Western countries stand on the opposite side.

Similarly, in the foreign policy domain, China wants Nepal to be close to it; so does India. Neither will be Nepal’s best interest. In external economic policy, both countries, more India than China because of the geography, want control over Nepal’s natural resources. Siding with one against the other would be counterproductive irrespective of which neighbor did what before now. Maintaining the right balance in these three areas for the best advantage of Nepal and the Nepali people is the challenge to KP Oli, the new prime minister of Nepal.

China would want a return on its political and economic investment in the left parties now. India, having invested in the other parties, would want to weaken the left government and destabilize Nepal. Mr. Oli needs to find a modus vivendi with India so that New Delhi remains a constructive partner of his government to maintain peace and promote investment and prosperity in Nepal. If too much dependence on India has not been good for Nepal, too much reliance on China will not be either.

The question is: Whether Mr. Oli and his government can overcome the nationalistic hangover from the election time and govern is a way that is in the best interest of Nepal. Which is to say strike a balance between opposite external interest, so the national interest can be served optimally. Will he imitate the nationalist leaders like Donald Trump, Teresa May, Xi Jinping, Narendra Modi and a number of communist leaders who have been one-sided and dictatorial after getting the levers of power or will he put democracy and progress at the front and center and govern as a wise leader who would go down in history as one of the greatest statesman of Nepal. 

Murari Sharma: Nine-Point Program for Prime Minister KP Oli

Lee Kwan-Yew transformed Singapore from a fishing village at its separation from Malaysia in 1960, into one of the richest and most advanced countries in the world, in his lifetime. I hope Prime Minister K. P. Sharma Oli will make Lee his role model, not the greedy and failed Third World leaders, because his health is poor and he does not have children.

Mr. Oli has become prime minister at an extremely difficult time. The treasury is empty, his predecessor has announced new welfare measures without costing them, financial discipline is non-existent, revenue collection is below the target, and the seven states have been asking for resources left and right. This situation could have been avoided. 

For instance, some, including me, had called for financial discipline, as well as fewer states from as soon as the federalist agenda came to the fore. Actually, when I was in the Home Ministry, I had drastically reduced doling out of public money from the ministry and reduced the fake claims drastically. When I was head of the Budget Division of the Ministry of Finance, I had introduced new measures to improve financial discipline with support from the government and the National Planning Commission. But susequently, the the Nepali Congress, the UML, the Maoists and other parties destroyed the financial decision. 

Federalism, done right, is beneficial, and I have supported it all along.  It generates competition among states and makes unity in diversity possible. But it is also incredibly expensive, requiring political and administrative structures and people, and their expenses at multiple levels. We cannot rely on foreign aid forever, especially as the people in developed countries are demanding a reduction in their foreign aid budget. For instance, now Britain gives out 0.7 percent of its GDP as foreign aid, but there is growing pressure on the government to reduce it substantially.

 Therefore, I had repeatedly warned about the expenses, citing the expenses of the United States, United Kingdom, and India and argued in favor of four states in the federal framework to make them financially sustainable. But politicians were more interested in expanding their paid employment opportunities than in making the country and the states financially sustainable. 

In this tight financial situation, Mr. Oli has two options. One, he can spend the next 3-5 years criticizing his predecessors for lack of growth, depletion of the treasury, and for increasing welfare expenses. He could announce new welfare programs the country cannot sustain for cheap popularity, as his predecessor Sher Bahadur Did just before he resigned. For it, Mr. Oli will have tax people to death, make the country bankrup, and lose power next time. It should be noted that, even the rich Western countries, including Britain, have been substantially slashing their welfare programs because they had become unsustainable. 

Two, Mr. Oli can make Lee Kwan-Yew as his role model, focus on long-term economic prosperity, and win power for him/his party for many years to come. Obviously, Mr. Oli can do better than Mr. Lee, who had children, and one of them, Lee Hsien Loong, is now prime minister of Singapore. He has no imperative to engage in political or economic corruption because his health is poor and he does not have children to promote or enrich. It is a great opportunity for him to go down in history as one of the greatest prime ministers of Nepal.

He had pronounced several programs — about gas supply, railway, ship, tuin, etc — when he was prime minister 19 months back. They were all good programs but the problem with them was that they were haphazard. Investment and growth require a pragmatic philosophy, a workable model, a deliberate program, and plenty of discipline.

A mixed economic philosophy, which allows the public and private sectors to flourish in sectors where they do best, will be best suited to Nepal. The state alone cannot transform the economy. If it could, China and Vietnam would not have done everything to promote domestic and foreign private investment.  As for the growth model, there are several of them, but let me mention two of them: Balanced growth model and Unbalanced growth model.

In the first model, you sprinkle resources across sectors without regard to comparative advantage, productivity, and multiplier effect. This model is politically more popular because all sectors feel that they have been given priority, but the results are often disappointing. Because this model is populist, most non-communist developing countries have followed this model and remained largely poor.

The second model calls for higher priority in investment in sectors in which your country enjoys comparative advantage vis-a-vis other countries and in which productivity and multiplier effect are high to build the investment and growth momentum. Such sectors then pull the other sectors. Most advanced or fast-growing countries have followed this route. 

For instance, among communist countries, the Soviet Union went for planned development of heavy industry and heavy power plants to transform its economy. The result was so good that other countries also followed the planned development model. China and Vietnam took a different path. They gave top priority to agriculture until the sector hit its limit before graduating to industry and services.

Among non-communist countries, France, Denmark, New Zealand and Netherlands gave high priority to their agriculture before diversifying to other sectors. Britain and Japan took a different path. They focused more on industry: They imported raw materials from other countries and exported high-value finished products.

For a fast growth, Nepal needs to follow the second model and accord higher priority to tourism and hydropower. In tourism, it enjoys enormous comparative advantage. No other country has 8 tallest mountains out of 14 in the world. Very few other countries are culturally and naturally as rich as Nepal. Goh Chok Tong, the former prime minister of Singapore, had advised Prime Minister Girija Koirala that Nepal should focus on tourism. 

In hydropower, Nepal has the second highest potential, just after Brazil. Hydropower can substitute fossil fuel as the source of energy, help expand irrigation facilities, acclerate invest and production, reduce turn-around time, and increase increase per person production and trigger further investment at high levels. When he was foreign minister, Abdullah Ahmad Bidwai, the former prime minister of Malaysia,  had told his Nepali counterpart, Prakash Chandra Lohani, to use water resources wisely to make Nepal rich.

These two sectors will pull other sectors of Nepal along. If you do not believe me, look at Maldives and Bhutan. High-end tourism has made Maldives already a middle-income country. Similarly, the high-end tourism and the Chukha and Tala Hydropower Projects have catapulted once poor Bhutan to an unprecedented level of prosperity.

Focusing on agriculture and land reform is politically popular in Nepal. We should invest in this sector up to a point to make the poor’s life bearable. But subsistence agriculture will not transform Nepal’s economy. The transformation will come from creating employment opportunities in agricultural industry, manufacturing, construction, and services. As the country develops, see how the share of agriculture’s gross value addition gradually declines:

                                         Sectoral Contribution to Global GDP

Sector/Year 2005 2010 2017
Agriculture (% of Gross Value Added – GVA) 12.3 9.1 9.3a
Industry (% of GVA) 30.6 25.8 24.2a
Services and other activity (% of GVA) 57.2 65.1 66.6a

     Note: a. 2015 (Source: UN’s World Statistics Pocket Book 2017, p. 210)

Based on the above analysis, here are the priorities for Prime Minister KP Oli to pursue if he wants to be the Lee Kwan-Yew of Nepal:

  1. Give the highest priority to sectors like hydropower and tourism where Nepal enjoys comparative advantage due to its resources endowment.
  2. Promote agricultural industry to add value to agriculutal products. This will push up agricultural production as well.
  3. Develop main transport corridors while letting the local levels do the local transport infrastructure.
  4. Improve and increase road and rail connectivity with the neighboring countries.
  5. Incentivize high-value and low-volume products and services such as information technology and finance and banking.
  6. Focus resources and attention on high-priority projects, monitor and evaluate them regularly, and reward/punish the best/worst performers.
  7. Create a private-investment friendly environment (even the communist China had to do it for progress).
  8. Deliver corruption-free, efficient and effective government.
  9. Maintain close and balanced relations with the immediate neighbors and friendly and cooperative relations with development partners. Stop whining about our country being small and weak because it is a mid-sized country with proud history.

I hope Prime Minister KP Oli will consider these priorities and become Lee Kwan-Yew of Nepal. He has the opportunity to become a statesman, and hopefully, he will take it.