Sunday, August 10, 2008



( Paper presented at a seminar organised by the Asia Centre, Bangalore, on Auguast 9,2008)

The Prime Minister, Dr.Manmohan Singh, met Nepal's caretaker Prime Minister Girija Prasad Koirala on the margins of the summitconference of the South Asian Association for Regional Co-operation (SAARC) at Colombo on August 3,2008, and reportedly assured him ofIndia's continued support to Nepal's democratic transition. During the meeting, Manmohan Singh told Koirala that he was impressed by thesteps taken by Nepal to usher in democracy, including the conduct of the Constituent Assembly elections on April 10.

2. At the time Koirala went to Colombo to attend the summit, an agreement on the formation of a new Government continued to elude themajor political formations in the newly-elected Constituent Assembly. In fact, the decision taken by Koirala without allegedly consulting theCommunist Party of Nepal (Maoist) and the Communist party of Nepal (United Marxist-Leninist) to represent Nepal at the summit hadbecome a matter of major controversy. The Maoists, who constitute the largest single grouping in the Constituent Assembly, and theCPN--UML felt that Nepal should have been represented by the newly-elected President Ram Baran Yadav and not by the caretaker PrimeMinister, whose days in office were numbered. Ultimately, the Maoists and the CPN-UML had agreed to Koirala attending the summit afterhe reportedly apologised for not consulting them in the matter in advance. This controversy brought into focus once again the suspicion anddistrust, which continued to mark the relations among the major political formations after the elections to the Constituent Assembly, withthe Maoists smelling an Indian-inspired conspiracy to deny them the fruits of office.

3. However, after the return of Koirala to Kathmandu from Colombo, the main political parties agreed on August 5,2008, to form a nationalunity Government led by the Maoists, who will be joined by the Nepali Congress, the CPN---UML and the Madhesi Janadhikar Forum (MJF)that represents the people of the Terai region bordering India. The Maoists reached an agreement with the leaders of the other threeparties to head the coalition after what was described as ``breakthrough'' talks by Jhala Nath Khanal, the General Secretary of the CPN -UML. According to Khanal, the leaders of the four parties agreed that the coalition will remain in office at least until the Assembly approveda new constitution, a process that may take two years to complete.

4. The talks on Government formation had gone through so many ups and downs during the last four months that any optimistic conclusionthat the suspicions and distrust, which had dogged the talks till August 5, would now be a matter of the past could be misplaced. Before thecontroversy relating to Koirala's participation in the SAARC summit, there was another controversy caused by the election on July 24,2008,of Ram Baran Yadav, an ethnic Madhesi, as Nepal's first President defeating a Maoist candidate. Following this, the Maoists had withdrawnfrom the talks on Government formation in a huff. It took some time and efforts to cajole them back into the talks. The interim Government,which paved the way for the elections to the Constituent Assembly and the declaration of Nepal with a population of 26.4 million as aRepublic on May 28,2008, after ending 240 years of the monarchy, had earlier this year agreed to give the Madhesis greater representationin state and local administration in order to end 16 days of strikes and protests that paralyzed Terai and led to fuel and food shortages inKathmandu. The Terai region is Nepal's agricultural heartland and, according to the Madhesi leaders, it accounts for 48 per cent of thecountry's population and 80 per cent of its commercial and industrial activities. It is the main transport link to India, Nepal's biggest tradingpartner.

5. If the latest agreement does not break down, Puspa Kamal Dahal, the Maoist leader known as Prachanda, is expected to lead thenational unity government as Prime Minister for the next two years. The CPN (Maoist) holds 220 seats in the 601- member ConstituentAssembly, double the number of its nearest rival, the Nepali Congress. With less than forty per cent of the seats, its role inpolicy-making----whether in relation to the new Constitution or in relation to Nepal's domestic and external issues--- should normally belimited. But what it lacks in terms of seats in the Constituent Assembly will be sought to be made good by it through its well-motivated andwell-trained cadres, who would try to enable the party to have its way in matters relating to its agenda through muscle and street powerwhen the voting power is found inadequate.

6. In the list of the irreducible minimum of its agenda is the integration of suitable members of its trained army into the Nepal Army, therebygiving Nepal for the first time an ideologically indoctrinated army. A People's Liberation Army (PLA) of Nepal will be the dream of Prachanda.Will the other three political formations be able to resist the Maoists' plans to reorganise the Army and make it the tool of the ultimatecapture of total state power by the Maoists? That is the first question, which ought to be worrying Indian policy-makers.

7. In the new Government, which would guide the initial steps in Constitution and policy-making, the Maoists will be in the driving seat ofpower, but not yet in total control of it, but total control will be their ultimate aim. The Maoists have reached where they are now through amix of the Chinese and Soviet tactics.Through Chinese-style armed peasant power, they established control over large parts of the ruralareas, but when control of Kathmandu and the Indian-influenced Terai region eluded them, they joined the other political formations in ademocratic street agitation, which gave them their present share of power. In Russia, the Bolsheviks led by Lenin rode to power piggy-backon the Mensheviks. After having got a share of the power and the exit of the Tsar, they kicked the Mensheviks out and established adictatorship of the proletariat, which was to last for nearly 74 years. Is a similar scenario possible in Nepal? That is the second questionwhich should preoccupy our policy-makers. Would such a scenario be in India's interest? If not, should India actively, but discreetly work toprevent it? Who could be its objective allies if it decides or is forced to do so?

8. Prachanda has taken pains to reassure India that it will have nothing to worry about due to the rise of the Maoists to power. Politicalequidistance between India and China, but not economic equidependence has been the central theme of his pronouncements.Nepal'seconomic links with India are so strong that there would be no danger of their dilution as a result of Nepal's closer relations with China, hesays. He told Karan Thapar of the CNN-IBN in an interview on May 20,2008 when he was asked what sort of relations he would be looking atwith India: " A new relation on a new basis. The new base has been laid down with the understanding from Delhi. A new unity with Delhi isalready in process. A new relation means better relations, understanding and cooperation. We want to come closer to New Delhi on thebasis of new relations. I always said that there is a special relationship with India, geographical and cultural, and therefore we should havea special relationship with New Delhi. No one can ignore this historical, geographical and cultural fact. What I am saying is that we will notside up with one country against the other. We will maintain equidistance in political sense and not in terms of cooperation and otherthings. The culture, history and geographical relationship that Nepal has with India will remain intact. It is a historic fact and we will have tostrengthen this relationship."

9. However, there are two issues relating to India on which his heart and mind are set. The first relates to the re-negotiation of the 1950Indo-Nepal treaty and a general review of all other bilateral agreements with India. He told Karan Thapar: " Our people have put forward thisconcern that they feel that the treaty (of 1950) lacks in equality and that it is not beneficial for Nepal. We thus want to review all the pointsof the 1950 treaty. And we want to revise it according to new necessity." When asked whether he wanted to drop the provisions for openborder and the national citizenship status for the people of Nepal in India, he was evasive and said: " Not exactly right now. There are otherprovisions that we want to discuss in detail." He indicated that one of these provisions requiring re-negotiation would be the defencepurchase provision which requires Nepal to consult Delhi and only then acquire arms. He added: "That also should be reviewed and shouldbe made according to the necessity of the 21st century."

10. Karan Thapar then drew his attention to a statement made by Babu Ram Bhattarai, his party colleague, to the "Nepal Telegraph" on May10, 2008, that it was only because of the open border that Nepal could not achieve economic prosperity and asked him whether he agreedwith that. He was again evasive in his reply. He said: "In the transitional phase, right now with the processes going on, it (Bhattarai's view) isnot correct." Prachanda added: " I want to have a general review on all the treaties. But specifically I want to review the 1950 treaty. Wewant changes in the 1950 treaty, others may be okay, or may be revised, but we want to generally review them.We want to strengthenrelations by re-negotiating."

11. The other issue relating to India on which his heart and mind are set is the re-examination of the question of recruitment of Gurkhas tothe Indian and other foreign armies. He told Karan Thapar:" We want to discuss this issue. We don’t want to stop it right now. We want toreview the whole history of the development and the implication on both countries. What kind of relation is created through this institution iswhat we want to review. We want to review and discuss it. I think this will be debated in our Constituent Assembly. It is an important topic.Now we are about to draft a new constitution and that will guide us for Nepal’s vital interest. These are historical questions. We will have toreview it in that perspective. Here in Nepal there was feudal autocracy as a political system. Now we are changing that into a democraticsystem, and we are looking at rapid economic development so that our youth don’t have to look for employment in other countries. We wantto change the political and economic scenario."

12. What are the present ground realities regarding Nepal's relations with India and China? Nepal's exports to India constitute about 55 percent of its total exports and its imports from India about 44 per cent of its total imports.There are over 265 approved Indian joint ventures inNepal of which over 100 are operational, with a cumulative total Indian investment amounting to between 36-40 per cent of the totalForeign Direct Investment in Nepal. The total project cost of these 265 projects is around Rs.28.5 billion, with fixed investment amountingto Rs. 21.9 billion and the foreign investment component amounting to Rs. 7.427 billion. These joint ventures are in practically every sector,including tourism, infrastructure, consumer durables & non-durables and export oriented industries like garments and carpets. A number ofIndian companies, including Dabur, Hindustan Lever, Colgate, etc., have established their manufacturing base in Nepal with the objective toexport their finished products to India. It needs to be added that these statistics taken from the web site of the Indian Embassy inKathmandu relate to the period till 2002-03. The figures must have further gone up since then.

13.The initial focus of India's economic assistance was on infrastructural projects, involving the construction of roads, bridges, hospitalsand airports. While infrastructure continued to remain the priority focus, projects also began to include health, industrial estates and othersectors. About 80 per cent of the Mahendra Raj Marg, a highway that runs the entire length of Nepal (1024 kms.) from the east to the westalong the southern terai, has been constructed by India. In addition, roads from Kathmandu to Dakshinkali, Trishuli, Balaju, Godavari andRaxaul via Hetauda, Sunauli to Pokhara, Rajbiraj to Koshi Barrage and the Janakpur town road are contributions of Indian assistance. Indiahas also constructed a number of bridges on these roads and separately two bridges on the river Bagmati at Kathmandu and one on theriver Mohana. The bridge on the river Sirsiya between the towns of Raxaul on the Indian side and Birgunj on the Nepalese side has alsobeen completed and opened for traffic.Twenty-two other bridges were constructed with Indian assistance on the Kohalpur-Mahakali Sectorof East West Highway.

14. The total value of trade (exports plus imports) between India and Nepal is about 48 per cent of the total trade of Nepal with foreigncountries as against about 10 per cent only in the case of Nepal and China. The total number of Chinese investment projects in Nepal was44 only till 2003-04 for which statistics are available as against nearly 300 in the case of India.Of these, 25 were operational, six underconstruction and the remaining 13 licensed. Chinese investments have been mainly in hotels and restaurants, electronics, radio pagingservices, readymade garments , nursing homes, hydropower, civil construction, etc. China has helped Nepal in the construction of 11 roadswith a total length of about 600 Kms as against nearly 1500 kms in the case of India. China has also been helping Nepal in the constructionof one hydel project, one irrigation project and two electrical transmission projects.

15.In 2001, China and Nepal signed a Memorandum of Understanding on Tourism Cooperation, including Nepal into the list of the tourismdestinations for outbound Chinese travelers. Subsequently, the two countries signed an "Air Service Agreement", according to which, AirChina opened a direct air link between China and Nepal in 2004, by the route of Chengdu-Lasha-Kathmandu. In addition, the China SouthernAirline has also started operating an air service between Guangzhou and Kathmandu since February, 2007. Likewise, the Nepal Airline isoperating air services between Kathmandu and Shanghai and Kathmandu and Hongkong.

16.Military-military relationship has been given increasing attention since 1998, when the the Nepal Army started sending officers andsoldiers to study in Chinese military universities. In the academic year 2006/2007 , 21 officers and soldiers of the Nepal Army went to Chinafor training. China has sent military officers to participate in the adventure trainings organized by the Nepal Army since 2002.

17. While China's relations with Nepal have been expanding over the years, they are nowhere near the multi-faceted relationship betweenNepal and India. In terms of value and usefulness, Nepal's relations with India have been more significant than its relations with China.Nepal has benefited far more from its privileged economic relations with India than vice versa. If a Maoist-dominated Nepal tries forequidependence in its economic relations with India and China, it will be lifting a huge boulder and throwing it on its own feet. Prachandagives the impression of realising this, but not many others in the CPN(Maoist). Bhattarai blames the open border with India for Nepal'sbackwardness. One does not know how sincere is Prachanda when he talks of the importance attached by him to Nepal's relations withIndia.

18. Pro-China intellectuals in Nepal make no secret of their dislike for India.Chinese officials and diplomats keep emphasising that China'srelations with Nepal are based on the three principles of trust, equality and sincerity. They thereby hint that while China treats Nepal as anequal partner, India does not.

19.Addressing the Nepal Council of World Affairs at Kathmandu on August 5,2008, the Chinese Ambassador to Nepal Zheng Xianglin said:"Nepal is situated in a favorable geographical position in South Asia, and is a passage linking China and South Asia." That is the reason forthe Chinese interest in Nepal----as a passage to South Asia and as an instrument for strengthening the Chinese presence in South Asia.China has a Look South policy to counter our Look East policy.As we try to move Eastwards to cultivate the countries of South-East Asia, itis trying to move southwards to outflank us. China is not a South Asian power, but it already has a growing South Asian strategicpresence----- in Pakistan, Sri Lanka and Bangladesh. It is hoping to acquire a similar presence in Nepal with the co-operation of aMaoist-dominated Government. It has already acquired the status of an observer in the SAARC. Some in the SAARC would ultimately like tomake it a SAARC member to counter the presence and influence of India. Nepal in the past refrained from joining those working for theinclusion of China in the SAARC. A Maoist-dominated Government may do so in future.

20. China has already given indications of its interest in strengthening the value of Nepal as a passage to South Asia by connecting the roadnetwork in Tibet with that in Nepal and by extending the railway line to Lhasa to Kathmandu. If China succeeds in concretising theseideas, the threats to our security will be enhanced. China has other reasons to welcome the rise of the Maoists to power in Nepal. It ishoping with reason that Nepal would stop the anti-China activities of the 1000-strong community of Tibetan refugees in Nepal. They havebeen in the forefront of the agitation against the Han colonisation of Tibet. Some of them are being used by the US Govt.funded Radio FreeAsia for producing programmes directed to the Tibetans. China apprehends that if there is unrest in Tibet after the death of the Dalai Lama,these refugees might be utilised by the US----with the complicity of India--- to destabilise the Chinese presence in Tibet. It is hoping topre-empt this with the co-operation of a Maoist-dominated Government in Kathmandu.

21. India will find itself in Nepal in a situation not dissimilar to the situation in Myanmar----all the time having to compete with China forpolitical influence and economic benefits. Till now, India almost monopolised the strategic playing field in Nepal. Now, there will be a secondplayer in China. In Myanmar, whenever the military Government had to choose between Indian and Chinese interests, it always chose theChinese interests because of its fear of China and its gratitude to China for the support extended by it to the military junta in internationalfora such as the UN Security Council. In Nepal whenever there is a conflict between Indian and Chinese interests, a Maoist-dominated Govt.will choose Chinese interests not out of fear or gratitude but out of considerations of ideological affinity.

22. The relations of the State of Nepal with the State of Pakistan are miniscule and hence of no major concern to India at present. What is ofconcern to India even now and may be of greater concern in future are the activities of the Pakistani and Pakistan-based non-State actorsagainst India from sanctuaries in Nepalese territory and the growing presence and activities of Pakistan's Inter-Services Intelligence (ISI)from Nepal. In the 1980s and the 1990s, the Khalistani organisations based in Pakistan used to operate through Nepal. So too the jihadiorganisations in the 1990s and thereafter. Pakistan-based mafia groups like the one of Dawood Ibrahim have active supporters in theMuslim community in the Terai region of Nepal. After the Mumbai blasts of March,1993, some of the perpetrators fled to Karachi viaKathmandu. Large amounts of black money from India are laundered in or through Kathmandu, which is also a nodal point for the pumping ofcounterfeit currency notes by the ISI into India. Some years ago, the Government of India reportedly came to know that a cable TV network,which was to come up in Nepal, was actually funded by Dawood Ibrahim. Timely intimation of the information to the Nepalese authoritiesresulted in the withdrawal of permission for the project. Nepalese co-operation in counter-terrorism, counter-money-laundering and mutuallegal assistance are important for our intelligence and investigation agencies.

23. This co-operation and assistance were facilitated in the past by good police-to-police relations. Many of the old generation Nepalesepolice officers were trained in Indian police institutions. They networked well with their counterparts in India --- informally as well asformally. Under a Maoist-led Government, this co-operation is likely to become more and more formal and less and less informal. Over-formalised co-operation is often not very effective in the absence of the informal component.

24. Prachanda and others are yet to come out with detailed formulations on what would be Nepal's relations with the US under a Maoist-ledGovernment. The US Embassy in Kathmandu is reported to have already established lines of communications with the Maoists. The firstpriority of the US would be to discourage the Maoists from moving too close to China. This would also be in India's interest. The first priorityof the Maoists will be to have the name of the CPN (Maoists) removed from the list of terrorist organisations maintained by the US. Thisshould not be difficult since the CPN (Maoists), unlike the LTTE of Sri Lanka, has not been formally designated as a Foreign TerroristOrganisation under a 1996 US law.

25. What impact will the decision of the CPN (Maoists) to give up its armed struggle half-way through and join the democratic mainstream have on the spread of Maoism across the tribal belt of Central India? Not much. The ideological and material dependence of the NepaleseMaoists on their Indian counterparts was more than the other way round. The Indian Maoists, while complimenting their Nepalesecounterparts for their good performance in the elections to the Constituent Assembly, have at the same time been expressing theirskepticism over the success of the experiment being attempted in Nepal. Indian Maoists seem to expect that the Nepalese experiment willnot work and will come unstuck.

26. The Maoists have done well in the elections, which were widely perceived across the world as free and fair. The voters of Nepal havepreferred them over other parties, which had failed to come up to their expectations in the past. A Maoist-led Government is thefreely-expressed choice of the voters. India has no other option but to work with it so long as its policies do not take a blatantly anti-Indiandimension, which would be unacceptable to India. However, if the policies of the new Government do acquire such a dimension, India shouldhave the courage and confidence to be able to have the situation rectified with the help of its well-wishers in Nepal. Despite all that hashappened, there is still a large reservoir of well-wishers of India in Nepal. They should be nurtured and encouraged to be active---not forundermining the Maoists, but for preventing anti-Indian distortions. (7-8-08)

(The writer is Additional Secretary (retd), Cabinet Secretariat, Govt. of India, New Delhi, and, presently, Director, Institute For TopicalStudies, Chennai. He is also associated with the Chennai Centre For China Studies. E-mail: )