MonitorsPublished on Aug 28, 2010
As political stalemate characterises present-day Nepal, analysts are worried over the impending economic fallout of the same in the erstwhile Himalayan kingdom. Already struggling with eight-hour power shortage which at times stretches up to 16 hours a day, the country is faced with a severe economic crisis.
Economic crisis cripples Nepal
< class="heading1">Analysis

As political stalemate characterises present-day Nepal, analysts are worried over the impending economic fallout of the same in the erstwhile Himalayan kingdom. Already struggling with eight-hour power shortage which at times stretches up to 16 hours a day, the country is faced with a severe economic crisis. While the economic ills may be independent of the political crisis, the non-resolution of the same means that no curative action is being taken or is possible. Although there is still an interim government functioning under caretaker Prime Minister Madhav Kumar Nepal with an interim Constitution and interim Parliament, too, in place, the present arrangement is just not adequate to take the nascent democracy on a road to growth and development.

Not enough progress has been recorded on the agriculture front, which is the mainstay of the Nepali economy. Other sectors, including tourism, too may have taken a hit as a result of the prevailing political uncertainty. Agricultural growth fell by more than 0.5-2.2 per cent, owing to a delayed monsoon and prolonged winter drought, which reduced both the cultivated area and productivity. The unemployment rate is hovering at 46 per cent, four per cent higher than in 2004. However, there is a substantial 12 per cent increase in the State revenue this year when compared to last fiscal. However, it should not be confused with a higher growth-graph. Instead, it was a result of the vigilance employed by the armed police force, which was deployed to prevent revenue leakage.

It is quite likely that Parliament may not pass the annual budget in time, mainly because of the ongoing power-game. If that be the case, all UN-funded development programmes in the poorest districts of the nation will suffer for want of funds.. These development programmes mainly cater to the poor population in the fields of education and health. Their discontinuation in any form would lead to further popular discontent. Besides hampering key development programmes, the delay in passing the budget would also affect the distribution of salaries To Government officials and teachers. Last year, the Madhav Nepal Government faced the problem, but the issue was sorted out with the support of the Maoists in Parliament. This year however the crisis might assume gigantic proportions in the absence of even a 'nominally-elected' government, pushing the country into bankruptcy.

The foreign direct investment in the country is extremely low, and stood at $1.0 m in 2009. The average growth rate is less than five per cent and is expected to touch the 4.5-per cent mark only by 2011. According to Transparency International, Nepal ranks 121 among 179 countries in the corruption-index, making it as one of the most corrupt countries in the world. The Asian Development Bank (ADB) has projected further deceleration in Nepal's economic growth for fiscal year 2010 due to political instability, weak exports, heavy imports, poor performances in agriculture and industrial sectors. Due to the after-effects of the global meltdown, there is also a downturn in inflow of foreign remittances. Political stability is needed for a stable economy. If the country fails to finalise its new Constitution by May 2011, there will be no escape for Nepal from an inevitable 'State failure'.

Dr. Anjali is Associate Fellow at Observer Research Foundation

< class="heading1">Country Reports

< class="heading12boldGeorgia">Army against extending UNMIN's term

The Nepalese Army (NA) has responded in the negative to a suggestion of the chief of the UN Mission in Nepal (UNMIN), Karen Landgren, to extend its tenure by another six months. Apprising the Government on NA's position on the question of the UNMIN term extension, NA Chief of Army Staff (CoAS) Chhatraman Singh Gurung told the Minister of Peace and Reconstruction, Rakam Chemjong, that the UN body has already completed its role as defined under the Comprehensive Peace Accord (CPA).

Clause 10 (5) of the Accord called for ending the concept of "two sides" after Parliament was constituted. Thereafter, all responsibility for implementing the Accord was left to the Interim Council of Ministers. With the Constituent Assembly performing the functions of Parliament, there was no need for a foreign body to carry out similar functions, the CoAS has said and reiterated his faith in the ability of Nepalese politicians to comply with the provisions of the Accord.

Besides their reservations over the UNMIN term, the NA has also refused to discuss its recruitment process at a meeting of the Joint Monitoring and Coordination Committee (JMCC). NA spokesman Ramindra Chhetri said that NA has started its recruitment process under the instructions of the Government and the JCMM was not a body to command the Government and the Army.
Source:, August 20, 2010

< class="heading12boldGeorgia">Another deadline missed

The Constituent Assembly (CA) missed its deadline to elect a prime minister for the fifth time. The next round of voting will take place on September 5. In the failed fifth round, repeated requests of the Communist Party of Nepal-United Marxist Leninist, the third largest in the Constituent Assembly, did not deter the two prime ministerial candidates -- Prachanda of the Maoists and Ram Chandra Poudel of Nepali Congress -- to withdraw their candidature in favour of a consensus nominee, despite their inability to garner a majority. In actuality, the reason for the repeated failures to form a new government is the neutral position of the CPN-UML and the alliance of the four Madhesi parties, the third and fourth largest blocs in the CA. Given the tough Maoists' stand towards the Madhesi demands, the sixth round of voting too is likely to fail.
Source: Hindustan Times, August 24, 2010

< class="heading12boldGeorgia">Cracks in Maoists party?

Divided opinions marred the proceedings of the Maoists Central Committee meeting held on August 25 after it had been postponed thrice since August 12 over the divergent views over future policies and strategies.

At the Augsut 25 meeting, party chairman Prachanda and two vice-chairmen, Mohan Vaidya and Baburam Bhattarai, expressed divergent views with the latter two expressing separate views that are however common in countering the proposals of the former. Prachanda does not want the party to quit the prime ministerial race while Mohan Vaidya has advocated the need for consolidating the Republican system while preparing for a 'people's revolt'. Prachanda in his party dossier also blamed the parliamentary system, 'foreign (Indian) interference' and sections within the party as the main impediments in the formation of a Maoist government. Party ideologue Dr Bhattarai took a moderate line, in which he emphasised the need to cooperate with other parties in order to defend the political achievements made so far by the Maoists.

Diverging opinions in the UCPN-M is not a new phenomena as the Maoists party itself is a breakaway faction from the Communist Party of Nepal.
Source:, August 25, 2010

< class="heading12boldGeorgia">Parliament passes Finance Act, returned by President

Parliament has passed the amendment to Public Finance Act which was earlier rejected by President Mohamed Nasheed, making it mandatory for the latter to ratify it. Thirty-nine of the 74 members present in the 77-seat House voted in favour of the amendment. Simultaneously, the House also rejected 36-34, a proposal by ruling MDP group leader, 'Reeko' Moosa Manik for returning the Bill to the committee, for further assessment.

Under the Bill, State assets could be leased or sold only in accordance with a law passed by Parliament. The Bill also requires the government to seek Parliament's approval to secure loans for the government or government companies.

As may be recalled, President Nasheed's 13-member Cabinet resigned en masse less than 24 hours after the Bill was hurriedly tabled by the Opposition and passed on June 28. Earlier, the Government had signed an agreement with a consortium headed by Indian infrastructure giant, GMR, for upgrading the Male International Airport to global standards.
Source: Haveeru Online, 26 August 2010

< class="heading12boldGeorgia">Opposition MP joins Government

Maafannu-West MP Abdulla Abdur Raheem belonging to the main Oppsition Dhivehi Rayyithunge Party (DRP) has joined the ruling Maldivian Democratic Party (MDP). The move came amid accusations by the DRP that Abdur Raheem had been meeting President Mohammed Nasheed lately.

Abdur Raheem, had proposed a pro-Government amendment to the Public Finance Act.
Source: Haverru Online

< class="heading12boldGeorgia">IMF likely to restructure loan

Given the crisis situation caused by the recent floods in Pakistan, the International Monetary Fund (IMF) may ease the terms of its loan arrangement and restructure its funding. Pakistan had earlier requested the IMF for three waivers on its loan conditions In return, Islamabad would not avail any more IMF loans for flood relief and rehabilitation, choosing to depend on multi-lateral and international community funding, instead. It had further requested the IMF to release the last tranche of $2.6- billion of the promised $11.3-billion loan.

Pakistan had planned to freeze Provincial and federal development programmes for fiscal consolidation. Even as growth-rate targets were down-graded from 4.5-2.4 per cent, the Finance Ministry dismissed suggestions from the economic advisory wing that it could become nil.

As is known, Pakistan's relief activities and its entire financial system continue to hang by the thread of international aid and assistance.
Source: Daily Times, August 24, 2010, Dawn, August 27, 2010

< class="heading12boldGeorgia">Floods to affect anti-terror operations: Army Chief

Pakistan Army chief, Gen Ashfaq Kayani, has said that troop deployment for flood relief could affect anti-terror operations. The US military leadership however continued to back the Pakistan Army's efforts against the militants and refused to comment on the possible slowing down of the pace of operations.

The U.S has not only emerged as the largest donor for flood relief for Pakistan but has also assured Pakistan that the Marines would be deployed for relief work. At the same time, U.S drones also bombed Dandy Derpakhel, known to be a stronghold of the Haqqani network in Northern Waziristan.

It is believed that militants are regrouping in parts of the tribal areas, taking advantage of the flood situation .The Pakistan Army will have to tread a careful path of troop- redeployment in flood areas to prevent any reversal in their 'war against terror'.
Source: Dawn, August 26, 2010

< class="heading12boldGeorgia">Fake degrees' controversy

The Higher Education Commission has cleared 42 of the 49 law-makers under scrutiny for allegedly submitting fake or invalid degrees as proof of qualification. This takes the total number of law-makers with genuine degrees to 289. Out of the other seven whose degrees were said to be either fake or invalid, one resigned and the remaining six did not appear before the Election Commission. The issue will now be taken up by the court.

Several prominent members including Prime Minister Yousaf Gillani, the Chief Ministers of Punjab, Khyber Pakhtunkhwa and Balochistan, the Leader of the Opposition and the Deputy Speaker of the National Assembly await scrutiny of their degrees.

In the face of emerging political interference in its activities, the Election Commission had recently asserted its right to function independently, in a tersely-worded letter to all important Government officials. The outcome of the ongoing investigation could be an indicator of the degree of its autonomy.
Source: Dawn, August 22, 2010

Sri Lanka
< class="heading12boldGeorgia">Govt gets two-thirds majority

With the eight-member Sri Lanka Muslim Congress (SLMC) deciding to back the Government of President Mahinda Rajapaksa on removing the bar for the incumbent to contest a third term, the ruling combine now has two-thirds majority in Parliament, to effect constitutional amendments of the kind. The ruling combine now has 155 votes for the constitutional amendment in Parliament.

Before the SLMC, two MPs belonging to different parties of the Upcountry Tamils had crossed over to the Government side while a third one, also elected on the UNP Opposition symbol, identified with the ruling combine in parliamentary vote.

Though SLMC leader Rauff Hakkeem said that their support to the Government was restricted to the constitutional amendment and that they would sit with the Opposition otherwise, there are not many who would want to believe him. According to reports, four of the eight SLMC parliamentarians are keen on the party supporting the Government, for them to be able to facilitate official aid and grants reaching their constituents.

The SLMC decision has upset the UNP, on whose symbol the party had contested the parliamentary polls. The UNP leadership also allotted two 'National List' seats to the SLMC, against increasing pressure for the same from inside the party.
Source: The Island, 28 August 2010

< class="heading12boldGeorgia">Nirupama Rao, Special Envoy

Foreign Secretary Nirupama Rao will arrive in Sri Lanka this week as Indian Prime Minister Manmohan Singh's Special Envoy to assess the rehabilitation and reconstruction work on the IDP front, and also discuss reconciliation issues with the stake-holders. In a letter to Tamil Nadu Chief Minister M Karunanidhi, Prime Minister Singh had earlier indicated that a senior official of the External Affairs Ministry would be sent as Special Envoy to Sri Lanka.

Nirupama Rao will be followed by India's External Affairs Minister, S M Krishna, who will be visiting Sri Lanka in October.
Source: Uthayan, 28 August 2010

< class="heading12boldGeorgia">Ershad's rule held illegal

In a landmark judgment, the High Court in Dhaka has declared the Seventh Amendment to the Bangladesh Constitution illegal and unconstitutional. As a result, the military rule of Hussein Muhammad Ershad stands illegal, because the Seventh Amendment legitimised the proclamation of martial law by the then Army chief, Lt-Gen Hussein Muhammad Ershad.

Under the proclamation, Ershad declared himself the chief martial law administrator and imposed martial law in the country, on March 24, 1982 and seized power from an elected Government, headed by the Bangladesh Nationalist Party (BNP). In holding the military take-over illegal, the court has observed that Ershad should be punished but left it for the Government to decide.

The Jatiya Party (JP), of which Gen. Ershad is president, is desperately looking for ways to overcome this impasse. Speculations are on that JP, an ally in the current coalition Government, might seek help from alliance-leader Awami League to avoid Ershad's prosecution. Political analysts believe that the relation between Awami League and Jatiya Party may deteriorate if Awami League failed to help Ershad.
Source: The Independent / The Daily Star, August 27, 2010

< class="heading12boldGeorgia">Anti-govt movement after Id

The Opposition Bangladesh National Party chairperson Khaleda Zia has announced the decision to launch an anti-government agitation after the Id-ul-Fitr. Khaleda Zia accused the Government of mis-governance and said that the Government had failed in all sectors, including price front, power-supply water and gas, and maintenance of law and order across the country.
Source: New Age, August 25, 2010

< class="heading12boldGeorgia">Government order against forcing Burqa

The Government, in a landmark order, has asked all educational institutions not to force female students to wear burqa (veil) or any other religious attire. The Government also announced that no female student should be barred from participating in cultural activities or events, like sports, in their educational institutions.

The order categorically states that any attempt to force female student to wear burqa will be considered as misbehavior and would be subject to punishment.

The Government order came only days after the High Court, on August 22, directed the administration to ensure that no woman was forced to wear the burqa, or any other religious attire in educational institutions or offices across the country.
Source: The Independent, August 26, 2010

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