Nepali Times


Five months after the declaration of the state of emergency, the military stalemate continues. There is no clear winner, but there is a clear loser: the national economy.

Information minister Jaya Prakash Prasad Gupta told us last week that over a third of the country's 3,900 VDC buildings have been destroyed, 13 districts are without phones, five hydroelectric plants are out of action, and 250 post offices have been destroyed. Telecom infrastructure alone will cost Rs 250 million to replace. Losses to business cannot even be calculated accurately.

But these estimates are already outdated-such is the acceleration of the crisis. This week, Maoists have hit telecom stations putting out four more districts: Okhaldhunga, Khotang, Solukhumbu and parts of Sindhupalchok. The main 132 kV transmission line has been hit in western Nepal, leaving four more districts without power. A Rs 70 million Radio Nepal transmitter in central Nepal was destroyed Tuesday night.

It's hard to detect a rationale for such wanton destruction of national assets. But going by the 9 April interview with Baburam Bhattarai in his party's underground newspaper, the attacks are aimed at pressuring the government to call off the army and agree to talks on the Maoists' terms.

The five-day bandh is also a part of that strategy. The Maoist militia has been feeling the heat and been forced to attack soft targets in recent weeks. They need a respite to regroup and retrain, and a a ceasefire and resumption of talks would be helpful to that end.

This week's strike and unspecified threats of an "indefinite strike" in the future are supposed to force the government to the table. It is now clear that the attacks on infrastructure and VDCs which began in mid-March weren't by local cadre acting on their own, but part of a deliberate plan to bring the government to its knees.

Either way, it is ordinary Nepalis who are directly hit. The five-day strike is estimated to cost the economy Rs 5 billion, and the losers are mainly dairy farmers, vegetable vendors, taxi drivers, bus companies, day-labourers, construction workers and the hundreds of thousands who depend on the tourism industry.

Rabi Bhakta Shrestha, president of the Federation of Nepalese Chambers of Commerce and Industries (FNCCI) has stopped talking about his favourite topics: tax concessions, business incentives, and the investment promotion board. His single obsession now is the security situation. "If things remain the same, the economy is going to fold up in less than six months," he warns. "This country should be in intensive care, it needs emergency treatment."

The gloom and doom is not exaggerated. Trade, tourism, retail sales and transport, all of which were already in crisis are being kicked while already down. All this is having a cascade effect on the rest of the country.

"Distribution is very badly affected, the first week of the month was a washout," says Sandip Ghose of Nepal Lever, one of the country's largest manufacturing operations. "Raw material transport has been hit. And there is no use producing if you cannot send your products to the stores anyway. The entire cycle is disrupted."

Statistics don't reflect the severity of the crisis yet, but banks are already facing liquidity shortages, even though few are borrowing. This is an indication of capital flight and large withdrawals as people start hoarding cash abroad, or buying other assets.

FNCCI spokesman Rajendra Khetan says: "At a time when we should be creating employment, there are layoffs in airlines, hotels and the garment industries."

Khetan blames the crisis on apathy and indifference among politicians, business and civil society.
The mood in the business community has gotten so bad, some have decided that since no one is listening and nothing is moving, there is no point complaining anymore. "I don't want to talk about it. What's the point?" says a visibly upset Narendra K Basnet, promoter of Himalayan Distillery.

What puzzles many is the paralysis of government-it seems to have given up trying to do its bit. This has convinced industry that no one is in charge. While an aggressive hearts-and-minds programme may have worked five months ago, today there is no government presence in large parts of the country. When asked, ministry officials admit things are bad, but say nothing can be done until the security situation improves.

Still, Finance Minister Ram Sharan Mahat believes the wreck may be salvageable. "We're not doing well because we cannot de-link the conflict from the economy," he explained to us. "Our economic fundamentals are still sound, and we can have a rapid turnaround if the security situation improves."

And that is the big "if". Lack of full information has made it impossible to make objective assessments about the state of the war. Many, including government, want to believe that the security forces have the upper hand, but the debacles at Accham and Satbaria have forced them to reassess. Deuba himself told Reuters last week that the war could drag on for another "five to ten years".

If we are in it for the long haul, then sustaining losses to the economy on this scale will mean that it will collapse before peace is restored. These losses do not take into account the roughly Rs 8 million daily cost of security operations presently. The security forces have serious logistical limitations, and have a shopping list that includes 12 helicopters, two fixed wing aircraft, and communications equipment. Mahat doesn't know where he is going to find the money to pay for all this, and the only alternative to financing that is help for hardware from India and the United States.

(11 JAN 2013 - 17 JAN 2013)