News Analysis – May 2019


On a path of de-democratization


As international strategic interests make inroads, Nepal is at a decisive point where it needs to revisit its national interests and manage external pressures. While the Indo-Pacific strategy is backed by India and Japan, China is asserting itself aggressively by pursuing economic and security interests. The United States generated debate about the economic benefits of China-driven initiatives in Nepal, forcing the Chinese Ambassador to respond by asserting the benefits while trying to tone down public expectations.

Lok Sabha elections in India generated a buzz in Nepal with many speculating about the implications of Modi’s win. As Modi’s victory became certain, political actors sought to normalize the relation between the two countries. Both Modi and Oli, however, vowed that they would enhance the bilateral relations. 

At home, President Bidya Devi Bhandari presented the government’s Policy and Programme for the upcoming fiscal year. The ruling party members were prevented from speaking against the Policies and Programmes. The opposition stuck itself to controversies surrounding a terminology—‘my government’ as the President referred to the government—rather than delving into the content.  The Prime Minister, meanwhile, breached parliamentary etiquettes while responding to the criticism. The prime minister then jetted off on a week-long tour of Cambodia and Vietnam, raising questions about the purpose of the visit. With, no meaningful pre-budget discussion, the Finance Minister presented the budget, increasing salaries, regular expenditure, and pork-barrel funds. The budget, unfortunately, failed to meet aspirations of economic prosperity.

The government also refused to budge on issues related to freedom of expression and association, particularly on the proposed bills related to the media, human rights, and guthis. There were further controversies related to issues of citizenship and inclusion.

The government took initiatives to regulate Chinese digital wallets that were bypassing Nepal’s revenue regime. A commercial bank came forward with a proposal to handle it, provided Nepal’s central bank allows a permit.

Internal security continued to stir national politics. The Tharuhat Movement announced protest programs demanding that the Girish Chandra Lal report on Tikapur incident be made public. The conflict between a radical Maoist group and the state resulted in a nationwide strike and multiple bomb blasts killing four people. Along with the signs of a resurgence of violence, justice remains a far cry for many war victims. The government is still in the mood of delaying the appointment of members in the transitional justice bodies and tiring the victims.

The merger of NCP is stuck over issues of political control. The two co-chairs tussled with each other regarding a secret agreement about the transition of power.

International Relations

A.1 Nepal under pressure

US’s ARIA and Indo-Pacific strategy is putting the Nepali government in a tight spot. The US is putting pressure on China’s BRI strategy, forcing it to defend the economic benefits of BRI/loans. In the Indo-Pacific Strategy Report published on June 1, the US has recently added Nepal and Sri Lanka in State Partnership Program in the Indo-Pacific program. The US seeks to expand its defense relationship with Nepal, focusing on ‘humanitarian assistance and disaster response, peacekeeping operations, defense professionalization, ground force capacity, and counter-terrorism’. However, foreign minister of Nepal, Pradeep Gyawali understood it otherwise. He said, Nepal as a part of US targeted ‘region’ is different from Nepal as a part of a ‘strategy.’ He continued to claim that Nepal isn’t a part of IPS.[1] On the Indo-Pacific Strategy, leaders of Rashtriya Janata Party-Nepal urged the government to clarify Nepal’s role and position.[2] 

A.2 China

China is correcting Nepali people’s heightened expectations regarding railroad and connectivity. It is, however, aggressively pushing engagements through multiple bilateral mechanisms, including relations with the private sector. The Chinese Ambassador to Nepal Hou Yanqi, in her first press meet, tried to ease the heated debate on cross-border railway saying that the project is complex and will happen in four phases – pre-feasibility, feasibility, design, and construction. The funding modality is yet to be decided and things would take time, indicating that cross-border rails are not happening very soon.[3]

Tatopani transit bordering China in Sindhupalchok officially opened on May 29. Ambassador Yanqi, on behalf of the Chinese government, handed over the Miteri Bridge, Kodari Highway, and the Tatopani dry port to Nepali authority. Chinese authority only allowed traded goods to pass through the point and put border security as a high priority.[4] Since November 2017, the Chinese side had been negotiating a joint-command mechanism consisting of security forces of the two nations to regulate the border before allowing the border to re-open.

Ministry of Foreign Affairs expressed firm commitment to ‘One China Policy’ and said it would not to allow Nepali soil to be used for any inimical activities against China.

A.3 Japan

Countries like Japan are responding to China’s growing influence in the region. Sri Lanka approached India and Japan to construct a container terminal at a port in Colombo. This container, constructed next to a Chinese-built terminal under BRI, will cost around USD 500 million, and both the countries will be nominating a company to handle the project. Japan will be providing a 40-year soft loan with 0.1% interest and 10-years grace period. This is seen as an effort to balance China’s influence in Sri Lanka.[5] During a reception to celebrate the accession to the throne of Japanese Emperor Naruhito, Japanese Ambassador to Nepal Masamichi Saigo said Japan will support the vision of “Prosperous Nepal, Happy Nepali” by deepening and widening bilateral relations between the two countries in a dynamic manner.[6]

Japan is formally not a part of BRI and remains wary of China’s assertiveness in the region. Japan pushed its plans to be a bigger player in the region under its free and open Indo Pacific strategy. Japan will go out and get involved in marketing the free and open indo-pacific brand in competition with China’s BRI. Japan is willing to collaborate with any country, including China, in the region on the infrastructure development sector to increase and strengthen its presence in the Asia-Pacific region. Japan is collaborating with China but at the same time, is also competing with BRI.

A.4 India

Nepalis have reacted in mixed ways to the Indian election. Foreign Minister Jaishankar’s appointment, in particular, has not gone well. India’s priority in Nepal would be to counter China’s growing influence in strategic and economic relations. India emphasizes Nepal over Madhes, and will likely pursue economic relations that will provide an alternative to China’s ‘debt-trap’ diplomacy.

Narendra Modi-led Bharatiya Janata Party (BJP) swept 303 out of 542 seats with a single-party majority in the lower house, since 1984, in the history of India’s general elections. BJP successfully executed victorious election and kept their strongholds, and also claimed some of the opposition strongholds.[7] The leftist parties winning just 5 Lok Sabha seats are at a historic low.[8] Kanhaiya Kumar, the former president of Jawaharlal Nehru University Students’ Union, who came to limelight in February 2016 upon his arrest on changing slogans on supporting secession in Kashmir, lost to Modi’s development pitch.[9] BJP, along with its allies, had a landslide victory in the election, letting Modi win a second term as the Indian PM.[10]

Voting began on 11 April, the final ballot was cast on 19 May with results out by 23 May, and the new PM sworn in on 30 May. Prime Minister KP Sharma Oli, main opposition party NC President Sher Bahadur Deuba, NCP Co-Chair Pushpa Kamal Dahal, RPP Chair Kamal Thapa, government ministers, and other NC leaders congratulated Modi. Nepali political party leaders didn’t seem to want to miss out in congratulating Modi on his win.

Modi invited the leaders of the Bay of Bengal Initiative for Multi-Sectoral Technical and Economic Cooperation for his swearing-in ceremony. BIMSTEC is a regional cooperation mechanism comprising Bangladesh, Myanmar, Sri Lanka, Thailand, Nepal, and Bhutan.[11] However, Pakistan was conspicuously not invited. PM Oli traveled to New Delhi to attend the ceremony on May 29 and returned two days later after a one-to-one meeting with PM Modi on May 30. Foreign affairs experts and former diplomats said that political discourse in Kathmandu is likely to center on the future of Nepal-India ties, given the increasing power maneuvers in the region.[12]

India’s Lok Sabha elections received good attention of Nepal’s political parties and the media. Nepal-India relations, however, still remains difficult, as it took a frosty turn in September 2015, after the promulgation of the constitution in Nepal and subsequent imposition of Indian blockade. Some in Nepal are cautious about Modi while some political parties seem to be dreaming of coming to power and have gone as far as saying that the rise of Modi for the second time is an excellent opportunity for Nepal’s development. The likeliness of India’s increased engagement in Nepal’s economic development can, however, come as a counter or as a replacement to China’s increased presence. India’s increased engagement compared to China’s could be felt substantially in terms of the amount that India contributed to Nepal’s development and that could increase in the days to come. Nepal can definitely tap the opportunity in its best interest with due consideration of striking a geopolitical balance, irrespective of the personal relationship among leaders of both the countries.

A.5 China-India relations

China requires India’s active cooperation to make economic inroads into South Asia. China is in its quest to become a regional power, and it seems that they have realized it’s a no-win until they become responsive in regional issues. China not putting a technical hold to blacklist Azhar Masood (JeM leader) this time must be its friendly gesture towards India after it shunned BRF for the second time. On the other hand, after the Pulwama attack, Nepal has been vocally supportive of India.[13] As Nepal and Pakistan became the only South Asian countries to attend the second Belt and Road Forum, it became a subject of concern for China to rethink its relationship with India.

B. Security and Strategic Affairs

B.1 Biplab

Government policy over Biplab is generating political differences. Bhojpur district cadre of Biplab’s party succumbed to injuries in a police firing.[14] As a response to the police killing of their party workers, Biplab’s Maoist faction imposed a nationwide general strike demanding investigation of the death.[15] The strike had a nationwide impact following multiple blasts in the capital. Party cadres burnt a vehicle in Surkhet, planted IEDs near NCell office in Pokhara, and planted pressure cooker and sockets bombs in Mahottari, Jhapa, Baitadi, Sarlahi.[16] Two bikes were also burned in Karnali.[17] Party cadres also carried out a bomb blast in Kalikot while the Karnali Province Chief Minister was attending a program there. The blast caused no damage.[18]   

Security experts said that multiple blasts on Sunday with four casualties suggested a complete failure of the security agencies.[19] Commenting on the blasts, home minister, however, termed Chand and his party cadres as ‘non-citizens’ and were carrying out criminal activities against the constitution. Human rights activists have objected to the word used by the home minister.[20]

Three party cadres including Rautahat district in-charge and two members surrendered to Lalitpur police.[21] Dang district member and Ghorahi in-charge abandoned the party.[22] A politburo member of the party also joined NCP.[23]

The country saw a resurgence of violence with a nationwide strike and multiple explosions in the Capital and the outlawed party claiming that those activities were in retaliation to the police killing of one of its cadres. It is an indication of the parties choosing violence rather than opting for a peaceful settlement. Historically, conflicts have settled through talks, negotiations, and power-sharing agreements. The government and the outlawed party should duly consider this and resolve the differences for the best interest of the people and the country.

Digital Dilemma

Chinese influence in the digital/IT sector is increasing, including in e-pay services. Three days after Nepal banned Alipay and WeChat, the Chinese payment companies expressed their interest to work with Nepali authority without breaching Nepal’s laws and regulations. Himalayan Bank has confirmed that the bank signed an agreement with Alipay to facilitate a cross-border online payment facility. However, the central bank is yet to issue permits.[24]

Nepal is concerned about protecting its interests, especially regarding commercial transactions. Chinese payment companies expressed their interest to work with Nepali authority without breaching the law of the land. The central bank should resolve the issue and permit the facilitation of an online payment facility.

B.2 Hacking/CCSI

Government websites were hacked in early May. According to sources at the CIB, the police raided the office of China Communications Services International (CCSI), a subsidiary of Huawei over the hackings and arrested some individuals. CCSI is part of the growing cooperation between Nepal and China in the area of information technology, Chinese Ambassador Yanqui claimed. The Chinese ambassador was also seen at Dhading together with PM Oli at a ceremony organized to inaugurate the laying of optical fiber.  The optical fiber project is fully funded by Nepal Telecommunication Authority, NTA, through the Rural Telecommunication Development Fund.[25] The contract for laying of the 555-km optical fiber along the mid-hills highway in Province 1 is awarded to CCSI, Hong Kong.[26]

The hacking of Nepal Government sites would not be by any means for content. According to sources, it is an attempt to expose its vulnerability. Security has not been a concern so far.

B.3 PM’s sinister relations?

Nepali media reported signs of sinister relations between e-Sewa, CCSI and PM Oli as well as possible corruption interests in the expansion of 4G and security printing press.

Prime Minister KP Sharma Oli will be on a trip to three European countries from June 9 to 15.  The PM will participate in the centennial celebration of the International Labour Organization in Geneva and travel to the UK for a lecture at Oxford University, and then to France. Bilateral agreements on the establishment of a security printing press in Nepal and having own satellite orbit slot would be signed in France. [27] As the PM plans to make a deal with the French and the technology would also be received from them, chances are likely that public procurement procedures be overlooked. The risk is that it may turn out to be a new scam like the wide body corruption case.

C. Gender, inclusion, human rights, and press freedom

C.1 Press Freedom and Human Rights

There were worrying trends regarding human rights, press freedom, and civic space in Nepal. The latest attempt by the Oli-led government to replace the existing Press Council Bill with a Media Council Bill is being seen as yet another measure to curb press freedom in Nepal as it will have draconian powers like levying heavy fines on journalists.

Since PM Oli has a majority in the parliament, he can easily have any Bills passed, the weak opposition has made the government’s task to push through the legislation even easier.[9] The government is using its numerical strength to create tyrannies of the majority in order to isolate the dissenting stance.[28] At many instances, the government has simply ignored the voices of the opposition and other stakeholders alike. Same has been the fate for the Media Council Bill which the government has tabled in secrecy with provisions against press freedom. Editors of national dailies and online media, issuing a joint statement, urged the government to withdraw the Media Council Bill.[29]

Nepali Congress urged the government to withdraw the Bill as it would curtail press freedom.[30] Not just the opposition and the media but also a few key leaders of the ruling party criticized the government on the proposed bill and asked the government to revise it.[31] Leaders accepted that some provisions in the bill are against press freedom. They will not endorse it and demanded the government reconsider it.[32]

Following an outcry from journalists’ groups, Gokul Baskota, Minister for Communications and Information Technology, said the Media Council was not the final decision-making body and that ‘several good provisions have been incorporated into it and the government will not withdraw the Media Council Bill’.[33]

Nepal’s constitution guarantees full press freedom, but the bill is against the spirit of the constitution. Nothing can be more detrimental to democracy than an irresponsible government and an ignorant public. Control over the media is a ploy to keep the public uninformed of the government’s wrongdoings and repressive moves, giving no space for resentment. As long as the government attempts to repress the press, the opposition and the public will resent.

C.2 UNHRC/Transitional Justice

As the transitional justice process becomes contentious, the UN is raising concerns about conflict-era rape cases. They have significant implications for Nepal’s politics. Speaking at a program organized by Conflict Victims Common Platform, NCP senior leader Jhalanath Khanal called for a revision in the two transitional justice commissions incorporating Supreme Court (SC) verdicts, international treaties, and standpoint of the victims at the center.[34]

Central Executive Committee meeting of the platform demanded amendment of the Transitional Justice Act as per the principle of transitional justice and spirit of the Comprehensive Peace Accord.  The platform said they would not accept the commission if the former members were reappointed. The National Human Rights Commission called back its member from the recommendation committee set up for selection of members in the transitional justice bodies.[35]

Transitional Justice Recommendation Committee awaits political consensus for finalizing nominee for the bodies. The committee categorized the application based on their community and gender.[36]

The government suppressed the voices of the victims seeking transitional justice by not considering the appointment of the members in the justice bodies seriously and not meeting any demands of the victims. The chances of the victims getting justice appear bleak as the government prolongs the revision and endorsement of the TJ and HR Act.

C.3 Citizenship

Citizenship issue so far remains unresolved. The government tightened the eligibility criteria to receive citizenships. Nine people from Indian origin were recommended to get hold of Nepali citizenships. The Supreme Court stayed the implementation of April 3 circular from the Home Ministry that ordered all 77 districts administration offices to issue citizenship by descent to children of citizens by birth. A division bench of justices Ishwar Prasad Khatiwada and Sushmalata Mathema issued the interim stay order until and unless the issue is settled by a full bench of SC justice.

Issues on citizenship have been contested for more than half a year now. A case was reported where government staffers were allegedly involved in ‘selling’ citizenship to Indians in eastern Nepal. With these incidents, it has been a good reason to raise security concerns while discussing issues on citizenship. Security concerns have overruled equality call and the fundamental rights of a citizen in acquiring citizenship.  There is no headway to date.

C.4 Tharuhat Movement

Social movements continue on the threshold between politics and human rights activism. Experts said these movements can have political and security implications in the long term. Tharu leaders formed the Tharuhat/Tharuwan Brihat Sammelan preparation committee for a gathering planned for August. A youth wing, Tharu Yuva Dasta decided to organize a national summit as an agitation to protest against the Constitution. Leader Laxman Tharu claimed that their movement is to ensure the rights of the Tharus. As a protest movement, a Tharu Brihat Bhela has been announced for 7th Bhadra reminiscing the Tikapur Incident. The committee issuing an 8-point demand called on the government to publicize the Girish Chandra Lal report on the incident.[37]

Tharuhat movement would likely get support from the newly formed Samajbadi party in the same line, demanding a political settlement of the case and decriminalization of leaders who have been jailed as criminals.

D. Democracy and Federalism

D.1 NCP feud

Internal party politics remains contentious with leaders trying to negotiate personal benefits. Geostrategic interests are likely to have an impact on internal party politics.

NCP Rupandehi district finalized the district committee unification process. The committee formed with 175 members, including government officials and teachers.[38]

The government presented a budget of Rs 1.53 trillion for the upcoming fiscal year 2019/2020 with a target of economic growth of 8.5%. The aim is to transform the country into a middle-income country by 2030. The revenue collection target is set close to a trillion rupees which is nearly as much as the recurrent expenses. The government will take a loan from internal and external sources to fulfill the deficit.[39]

NCP Chairman Pushpa Kamal Dahal made remarks referring to the 5-point agreement held between him and Prime Minister Oli at the onset of unification process of Nepal Communist Party. A point in the agreement mentions a power-sharing agreement between the two. Prachanda further claimed that no one would violate the agreement.[40]

Trust deficit among leaders is on the rise. Leaders are scared of what their position in the party would be after finalization of the merger. The idea that there would be a transition of leadership from K P Sharma Oli to Pushpa Kamal Dahal is gaining traction, possibly putting PM Oli under pressure.

D.2 Federalism

The process of federalism is moving ahead, but the ruling party is generating further questions about the intent of the prime minister. Prime Minister Oli said that there is a single government in the country of which the provinces and the local governments are the functional arms. Constitutional experts and the public criticized the PM’s statement calling it against the Constitution and Federalism.[41] District mechanisms are becoming more powerful and have become a means of political control. Local bodies, meanwhile, are not cooperating with the provinces, posing challenges. Former PM and Nepal Communist Party leader Jhalanath Khanal said that there is a need for amendment in the Constitution with regards to parliamentary and election system.[42]

D.3 Opposition parties

The opposition politics has so far been ineffective and the national awareness campaign launched by Nepali Congress has failed to capture people’s imagination. According to leaders participating in the campaign, many participants are turning against the party leaders conducting the campaign. They, however, also say the people are getting disenchanted with the Oli-government. These are, however, anecdotal claims.

Similarly, the merger of Babu Ram Bhattarai and Federal Socialist Forum can have a significant impact on any future political alliance. However, the opposition parties have been ineffective in providing oversight and controlling excesses of the government. Many believe that collusion in kickbacks and sharing the spoils of the state is the reason for the opposition’s non-performance.

D. 4 Budget and Economy

The budget is merely a continuity of the past and signals no policy departure to shoulder the enormous aspiration of economic prosperity. The policy and programs for the upcoming fiscal year passed without any discussion as many questions raised by the opposition party went unanswered. Speaker of the House seemed helpless in maintaining the supremacy of the parliament and was just supporting the ruling party.[43]

Not just the opposition, but the NCP leaders have expressed dissatisfaction on one-man leadership style of both the party chairs as the party directed not to speak against the policies and programs and have described Oli as the most intolerant chairperson in the history.[44] Lawmakers, former finance ministers, and leaders of ruling and opposition parties have put forward their suggestions and comments for the upcoming budget. Former Prime Minister Baburam Bhattarai criticized the poorly prepared Appropriation Bill. Similarly, former finance minister Surendra Pandey urged the government to focus on unemployment and trade deficit while preparing the fiscal budget.[45]

President Bidya Devi Bhandari presented the Policy and Programme for the Year 2076/77 at the Parliament on May 3, 2019. Lawmakers of the main opposition NC, RJP-N, and NWPP criticized the government’s policy and programs terming it baseless and brought without preparation and excluding development plans for their regions. A critical review of what progress has been made on the policy and programmes of last year remains unaddressed.[46]

Speaker of the House directed the secretariat to delete the ‘unparliamentary’ words that the PM used while responding to queries on the policy and programs at the parliament. The opposition party leaders had protested against those words claiming it to be against parliamentary norms and also disrespectful.[47]

A three-day pre-budgetary session ended without any significant progress and failed to give meaningful suggestions and recommendations for the fiscal year 2019-20 federal budget. The opposition lawmakers criticized the policies and program of the government while the ruling lawmakers were under censorship to go against the policy and programs.[48]

The budget for the upcoming fiscal year undoubtedly depicted the same spirit of the center and the units. For the provinces, the total budget for the upcoming fiscal year increased by 2.5% while the national increment stands at 17%. Budget for FY 2075/76 was Rs 1.31 trillion while it is Rs 1.53 trillion for the upcoming fiscal. Critics said the budget for the upcoming fiscal year is distributive.[49]

With, no meaningful pre-budget discussion, the finance minister presented the budget for the upcoming fiscal year at the parliament. The budget announced huge increment on salaries of government employees merely on the logic that it was not revised for the past few years. The minister seemed compelled to announce a purse of Rs 60 million rupees for the parliamentarians under the Constituency Development Fund. The targeted revenue collection just matches the recurrent expenditure while the amount on the capital expenditures will have to be ironically borne by grants and internal and foreign loans. Despite increment in the size of the federal budget, the increment in the budget of provinces and local governments is negligible.

The budget for the upcoming fiscal year undoubtedly depicted the same spirit of the center and the units. For the provinces, the total budget for the upcoming fiscal year increased by 2.5% while the national increment stands at 17%. Budget for FY 2075/76 was Rs 1.31 trillion while it is Rs 1.53 trillion for the upcoming fiscal. Critics said the budget for the upcoming fiscal year is distributive.

D. 5 Civic Space

Government’s desire for political control is constricting the civic space, including political freedom. With NCP in power, civic freedom in Nepal shrunk, with the newly introduced Media Council Bill as an example. As they rose to power, there were speculations that NCP would bring the country under an authoritative regime and that seems to be turning into a reality now. The government secretly registered the Media Council Bill to replace the existing Press Council Act in the Federal Parliament on May 8. The government tabled the Bills in secrecy, bypassing consultation with stakeholders, who have mixed reactions on whether or not the media bill affects press freedom.[50] A closer look reveals that there are few reasons to believe that the government is against press freedom. Granted, the government can bring media outlets in the purview of tax and make it accountable to the laws of the land, but what it cannot do is decide for them what the outlets can publish and what they cannot. Censorship contradicts the very idea of a free press.

D.6 Judicial sector/corruption

The Supreme Court is struggling to maintain its independence and autonomy.

First time in judiciary history of the country, the Judicial Council meeting suspended two judges on charges of lack of work efficiency and corruption. On the chairmanship of Supreme Court Chief Justice Cholendra Shumsher JB Rana, the Judicial Council suspended Tanahu District Court Chief Judge Omkara Upadhaya and Bishow Mangal Atreya, Chief Judge, Lalitpur District Court.[51]  

Action is being taken against many justices involved in corruption. Questions about the separation of powers have become stronger in the context of government’s efforts of centralization of power since PM Oli’s rise to power. The government is delaying the processes as there are signs of national consensus on the high profile corruption cases. All parties, be it the ruling or the opposition, big or fringe, seem to be involved in one way or the other. International actors say that Nepalis may be subjected to arrest outside Nepal if serious crimes during the conflict are not addressed soon enough.

E. Good governance

E.1 FATF/APG Review

As the FATF/APG mutual review of 2012 FATF recommendations takes place, the government is trying its best to show progress from 2011. Pakistan’s issues with mutual evaluation, meanwhile, is generating further concerns in the region.

According to sources, Nepal is also making efforts to comply with the FATF recommendations and guidance. Nepal’s mutual evaluation report is due in 2020. The last review conducted in 2011 showed that Nepal faced a “number of money laundering and terrorist financing risks and threats.” The report also said Nepal’s laws were not good enough to comply with FATF standards.

The Asia-Pacific Group of the FATF met in January and again in May this year to track progress among some member countries to targets set for January and May of this year. The FATF plenary is being held in Orlando, Florida from June 16-21 this month, and the APG plenary will be held in Australia in November this year. Pakistan is likely to stay in the grey-list unless it takes measures to control the financing of terrorist groups. In March, Pakistan called for India to be removed as the co-chair to ensure fairness. China is to succeed as the next co-chair after India, but such a transition may not make it easier for countries that have not complied.

E.2 Audit Reports

Problematic audit reports about the federal government, provinces and local bodies have raised further questions about good governance. The Annual Report of the Office of the Auditor General reported an incremental amount of audit observations/objections.[52] Much of the observations are around not following the public procurement procedures, use of program budget in purchasing vehicle indicating deteriorating financial discipline in the provinces and local governments alike. If the pattern continues, public trust in the government and the federal system will continue to diminish.


FDI dynamics shows the influence of China and NRNs, also FDI’s linkages to corruption and illicit financial flows. The government of Nepal decided the minimum foreign investment threshold of Rs 50 million from existing Rs 5 million. Department of Industry recommended Ministry of Industry, Commerce, and Supplies to set the threshold at Rs 70 million.[53] A recent cabinet decision has set it at Rs 50 million. With the increase in the ceiling to Rs 50 million, Nepal expects big companies to come to the country compared to the past. The amount would be significant in some sectors like the service industry, which the country may want to promote in tourism as a key earning instrument for the country.














































[46] Address of the Honourable President at the Federal Parliament on May 3, 2019








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