Nepali Times
Sneak preview

SHAPE OF THINGS TO COME: Pushpa Kamal Dahal with his wife, Sita Poudel, flies the national flag in Home Minister Krishna Sitaula\'s official car as he arrives in Kathmandu airport last Friday for talks.

Last week's pact between the seven parties and the Maoists revived hopes for durable peace but recent hardline remarks by Maoist leaders has dampened the mood in the business community.

The rebel comrades have been using their first month above ground to make contradictory and often extremist statements. The government on the other hand sounds disunited, confused and weak. Because the Maoists have better soundbytes, the media has given the comrades wide play.

Although the people have cautiously welcomed all this as a sign that peace is at hand, the statements have spooked Nepal's beleaguered businesses. Industrialists have serious concerns about the lack of support from both the Maoists and the seven parties in response to the mass closure of factories due to escalating labour disputes.

"The situation is very bad for us," says Rajendra Khetan of the Confederation of Nepali Industries (CNI) which organised a conference on Tuesday to which the head of the Maoist's Economic Department, Deb Gurung, was invited.

Businessmen at the meet accused the Maoists of inciting workers to make unrealistic salary and benefit demands. Maoist-affiliated trade unions are competing with mainstream unions to be more populist, and this has promoted unions affiliated to the NC and UML to also make even more radical demands so they don't lose members.


COKE ON STRIKE: Factory workers of Coca Cola, affiliated to Maoist trade unions, have been on strike since 19 June in Balaju. More than thirty industries have closed from Thursday after the dispute between the industrialists and the workers relating to salary, and other facilities intensified.
Dozens of factories have closed in Kathmandu, Chitwan, Hetauda, Birganj and Biratnagar and businesses accuse the government of inaction. "How can we go on like this?" asks Khetan who has shut down his Himalayan Snacks and Gorkha Brewery units in Chitwan.

Gurung, who is also a member of the Maoist negotiating team, tried to assuage businessmen at the CNI meet by saying he was for capital accumulation.

Development and prosperity will not happen without industrialisation and wealth creation," he said.

But his separate remarks in interviews in newspapers on land reform and nationalisation have not gone down well. The conference also heard Arjun Narsingh KC of the NC and Bam Deb Gautam of the UML who, aside from asking businesses to "be patient" and wait for the political issues to be sorted out, had no immediate concrete ideas about reopening industries.

Budgeting for a political transition


Prospects for peace have never been better, yet there is even less optimism about the future in the business and development communities.

In the Ministry of Finance, work on the budget for the next fiscal year has reached its final stages but there is a sense of uncertainty even about whether Minister Ram Sharan Mahat will actually be presenting it. This insecurity permeates all sections of government, including the cabinet itself which doesn't know its own lifespan.

And despite a slew of visits by senior donors (the latest were the heads of Danish aid agency Carsten Staur, the Asia director of Europe Aid Cooperation Office, Erich Muller and an IMF mission) the international aid community seems to be in wait-and-watch mode.

Last Friday's pact was a dramatic political compromise but it forced just about everyone to wait at least three more weeks before the interim constitution and an interim government that includes the Maoists is set up. Public disagreement with the pact from members of the governing alliance haven't helped put doubts to rest.

The IMF pre-budget mission is reportedly satisfied with the macroeconomic scenario, which has been propped up by remittances, but is seriously worried about the slow pace of reforms, the delay in tackling wilful defaulters and the impact of rising fuel prices on the current account deficit. However, as a reward for having restored democracy through people power, the IMF is likely to give the 'budget certificate' on Friday that Nepal needs for the World Bank, ADB and other donors to follow suit.

Minister Mahat is seeking funds for his 'interim development plan' not just for reconstruction, but to take a great leap forward in infrastructure and delivery to prove to the people that the government means business. However, experts are worried about the government's chronic inability to spend money, which has been exacerbated by the conflict.

As signalled in Mahat's White Paper presented to parliament last month, the top priority is a massive investment on new roads. Nearly 15 districts and over 4 million Nepalis still have no access to roads and construction would also create jobs in rural areas.

"No one would dare oppose the pro-poor programs and not even the Maoists would dispute that," says a government official who revealed that the government is consulting widely with all political players, including the rebels, as it readies the budget.

The needs are urgent and monumental: Rs 140 billion for new investments in hydropower to cover crippling shortfalls this winter, Rs 3 billion to improve access to safe drinking water and billions more for education, health and roads. The government just doesn't have that kind of money, and although there are pledges of support, it will take time for the cash to materialise.

"There will be increase in support but only if the the peace process remains on track," says Mark Mallalieu of the British aid ministry, DfiD, in Nepal. Donors remain concerned about the safety of their staff and are still uncertain about the Maoists' commitment to allow development work. In recent weeks, the rebels have hiked demands for donations and registration of non-government groups.

"Development work should be allowed without any hindrance and it is important that people in the villages mostly benefit from the peace process," Mallalieu told us.

Until now, India has made the single largest contribution: a Rs 7.3 billion development package, Rs 2 billion in budgetary support, a waiver of Rs 1.6 billion owed by the army and rescheduling of Rs 5 billion owed for petroleum imports.

The Danes announced assistance worth Rs 2 billion next year on top of regular bilateral assistance of Rs 1.88 billion. It also offered Rs 500 million for the ongoing peace process, constituent assembly elections and demobilisation.

Nearly all Kathmandu-based donor offices said they would have problems continuing aid if the Maoists were included in a future government without first renouncing violence. They also need an IMF green light, clarity on budget priorities and a demonstrable decrease in Maoist extortion and threats in the countryside.

"Our direction will be set by how the government's budget looks," says Rajiv Upadhyay of the World Bank.

Questions remain about how the peace dividend from the government's cuts on military spending will be used. Recent arms deals have been cancelled, but the upkeep of a 120,000 plus security force is a drain. Other grey areas include support for the Maoist army so they give up extortion, and who is going to foot that bill.

More delay

After gender rights groups went on warpath because of the absence of women in the commission set up to draft up an interim constitution, the UML also decided it didn't have a representative and has demanded a slot.

The wrangling has meant that a week has gone by after the Maoist-parties pact and there is only one more week for a draft interim constitution to be ready. Even the Maoists agree that is not possible. Although it will be a cut-and-paste job (throwing out everything from the 1990 constitution that doesn't tally with parliamentary proclamations last month) the parties want the commission to take its time.

The delay means an interim government is at least a month away, if not more. Parliament still exists, and its various committees have been busy electing chairmen this week. Since the budget can't wait for the start of the fiscal year, Finance Minister Ram Sharan Mahat is presenting an interim budget on 7 July.

(11 JAN 2013 - 17 JAN 2013)