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Political, Economic and Social Development in Nepal in the Year 2008


Overview

Nepal's elections for the Constituent Assembly (CA) held on April 10 chose 601-members - 575 are elected and 26are appointed by the cabinet. The CPN (Maoist) won overwhelming victory in the election but it falls short of two-third majority to form a single party government. The CA election allowed substantive representation of women, ethnic and indigenous groups, Dalits (oppressed caste), Madhesis (people of southern flatland) and remote region. The new parliament abolished over two-century old monarchy and declared the country federal democratic republic on May 28. On June 11, King Gyanendra vacated the Royal Palace to respect the CA verdict and the government gave him and his family Nagarjun palace and security.

The consensus among major parties glued by Comprehensive Peace Agreement (CPA), however, collapsed as major decisions are made by simple majority. The Nepali Congress (NC), Communist Party of Nepal-Unified Marxist-Leninist (CPN-UML) and Madhesi Jana Adhikar Forum (MJAF) formed a new coalition to elect President Dr. Ram Baran Yadav (NC), Vice-President Permanand Jha (MJAF) and Chairman of CA (CPN-UML) Subas Nembang. On July 19 the CPN-UML and MJAF, however, shifted their alliance to elect CPN (Maoist) chairman, Puspa K. Dahal as Prime Minister thus ending four-month long deadlock in power transfer. On August 31 the CPN (Maoist) finalized the formation of 24-member cabinet of six-party alliance-CPN-UML, MJAF, Sadbhavana Party, CPN (United) and People's Front Nepal (PFN). The NC, unable to create anti-Maoist coalition, stayed in opposition.

The security, peace and development are marred by a lack of coherent vision and conflicting orientations. The ruling parties led by CPN (Maoist) is seeking integration of its combatants into Nepal Army (NA), relief measures, identification of disappeared persons and social transformation through "republic-patriotic alliance." The NC and its allies are struggling to forge a "broader democratic alliance" with non-Maoist parties and exerting pressure on CPN (Maoist) to implement nine-point deal, such as return of seized property to rightful owners, dissolve para-military structure of its Young Communist League (YCL), engage other parties in the peace process, deploy only government security to Maoist ministers and commit to parliamentary democracy. As per recently signed six-point accord with NC, the CPN (Maoist) agreed to fulfill them within March 2009. The subsidiary identities are engaged in distributional struggle and aligning across the party lines for group interest. Due to security vacuum, 33 armed groups are engaged in various activities--separatism, extortion, killing and even some are engaged in a dialogue with three-member government's team.

Factionalism in each political party has sapped the political will of government to perform governance functions, bridge the development gap and deliver essential services to the needy. The private sector and civil society ties are marked by strikes which has made the nation a worst place for media freedom, foreign direct investment and economic activities. The flurry of diplomatic activities in Nepal demonstrates its geopolitical importance but this has also posed a security dilemma to both neighbors-India and China. Cooperation of international community for post-conflict stabilization, economic growth, constitution-making and peace building is important for Nepal's stable democratic future.

Political Development

The year 2008 remained highly unstable for Nepal despite important political developments, such as understanding between the leaders about the demands of Madhesi political parties on February 28, successful holding of CA elections on April 10, transformation of Nepal into federal democratic republic on May 28, formation of a new government on August 31 and establishment of 14 CA committees-1 constitutional panel, 10 thematic and three procedural ones-- to draft new constitution.

The rise of CPN (Maoist) as the biggest party by garnering 220 out of 575 seats in the CA election provided it an incentive to transform its revolutionary ideology, structure and goal into a mass-based competitive party. The decline of old parties-- NC and CPN-UML who scored 110 and 103 respectively also inspired them to reform their party structures by making them inclusive of social diversity. By scoring 42 out of 116 allocated for Tarai, the southern flatland, CPN (Maoist) also posed a challenge to Tarai-based regional parties. Social representation into CA has substantially increased: women captured 33.22 % of total seats, Dalits, 8.17 %, ethnic and indigenous communities 33.39 %, Madhesis 34.09 % and backward regions 3.83 % and other caste groups 33.91 %. Due to mixed nature of election system 25 parties have been elected with none of them commanding two-third majority to form single party government.

Accepting the CA's Verdict, on June 11 ex-King Gyanendra Shah left Narayanhiti Palace after delivering touching speech to the Nepali people and pledged to remain fully dedicated to the independence and territorial integrity of the nation. The government gave the ex-King Gyanendra Nagarjun palace and his family members with adequate security.

The consensus politics among major parties glued by peace accord, however, collapsed as they made Fifth Amendment of the interim constitution on July 13 to take major decisions by majority vote. The three parties-NC, CPN-UML and MJAF formed a new coalition to elect President Dr. Ram Baran Yadav, Vice-President Permanand Jha and Chairman of CA Subas Nembang. But, on July 19 the CPN-UML and MJAF shifted their alliance to CPN (Maoist) to elect Puspa Kamal Dahal the new Prime Minister thus ending four-month long stalemate in power transfer from NC President G. P. Koirala. On August 31 the CPN (Maoist) finalized the formation of 24-member cabinet of six-party alliance-CPN-UML, MJAF, Sadbhavana Party, CPN (United) and People's Front Nepal (PFN).

As Koiral's desire to become the first president dampened NC bargained for important portfolios including defense ministry. Unable to get, it decided to stay in opposition, floated the idea of creating "broader democratic alliance" with traditional parties to deter authoritarianism, began public awareness campaign in the districts and blocked the parliamentary session to get its nine-point accord signed with CPN (Maoist) on November 11 fulfilled. The latter has assured to fulfill them within March 2009. Political deadlock also marred the establishment of several commissions stipulated in the CPA, such as Truth and Reconciliation Commission, State Restructuring Commission, Commission on Disappeared Persons, High Level Peace Commission etc. There is a clear divide between three major coalition partners in government as each threatens to quit when finds deceived in sharing the spoils. The implementation of CA's mandate-writing an inclusive constitution, state restructuring along federal lines, sustainable peace and holding next general election-seems Achilles heel as crisis of confidence continues to grip the parties.

On November 14, the CA unanimously endorsed both the CA Regulations and Legislative-Parliament Regulations. Despite the formation of 14 CA committees their chairmen have not been elected so far to start off the statute-drafting process and make it ready for promulgation by May 2010. As political parties are positional than accommodative on federalism it will likely to evoke a spasm of emotion. The constitution pledges autonomy for all future provinces. The CPN (Maoist) sketched 11 federal and two sub-states on the basis of ethnic composition, geographical contiguity, language base and ethnic viability. NC has drawn a sketch of 7 federal states based on territoriality and CPN-UML has drawn 15 on the basis of territory, caste, language and ethnicity. The TMLP, Sadbhavana Party and MJAF have proposed single Tarai province with several autonomous units governing it while the Tharus opposed this. Jana Morcha Nepal has opposed the concept of federalism and preferred unitary state with substantial devolution of power.

The government has requested the UN for extension of the United Nations Mission in Nepal (UNMIN)'s term for six months starting from January 23, 2009 so as to engage it in the management of arms and armies. Nepal Army (NA) has ruled out the possibility of inducting the 19,602 Maoist combatants into NA without meeting recruitment standards. Non-Maoist parties too fear the consequence of the integration of politically indoctrinated Maoists into NA. The Army Integration Special Committee (AISC) with two representatives from major parties which is expected to facilitate this process is yet to take a complete shape. The NA has recently refused to abide by the order of Defense Minister R. B Thapa to stop filling the vacant posts. UNMIN opposed the recruitment of armies by CPN (Maoist) and NA as a breach of the peace agreement. The NA asserted its move as a "legitimate to fill the vacant posts." Experts believe that neither Maoists nor NC is interested in army integration because it is not the best alternative, but only a bargaining tool for political gain. Stable peace requires the integration of combatants in productive life, compensation to victims, enabling the return of displaced persons to their homes and end of impunity.

Key Political Actors and Their Motivations
The transition phase of political life in Nepal is still marked by tension thus depriving the citizens of legitimate governance. First, the CPA was not sufficiently broad-based as it evoked the popular mobilization of women, Dalits, ethnic groups and Madhesis against both interim constitution and the CPA. Second, this mobilization has also eroded the social base of old parties, such as NC, CPN-UML, Rastriya Prajatantra Party (RPP), Rastriya Janashakti Party (RJP) and Nepal Sadbhvabna Party (NSP), facilitated the emergence of regional parties, such MJAF, Tarai-Madhesh Loktantrik Party (TMLP) and Sadbhavabana Party and renewed the discourse about political party transformation to make their district, regional and central political structures inclusive, democratic and program-oriented. Fearing the expansion of political space of the leftists, Chairman of RPP-Nepal Kamal Thapa demanded space for the king. He said, "CPN (Maoist), NC and CPN-UML are acting under grand design of India to weaken nationalism by overthrowing monarchy, issuing citizenship on the basis of birth, sudden emergence of the demand for single Madhesh state with the right to self-determination, adoption of secularism and increased foreign intervention."

The power balance dominated by CPN (Maoist) is trying to reshape the agenda of constitution-making by enlisting CPN-UML leader Madhav K. Nepal into the chair of Constitutional Panel of CA and articulating the restructuring of judiciary, public administration and security agencies. The NC and traditional parties fear the compromise of judicial independence, politicization of public administration and replacement of Indian priests of Pashupatinath Temple by Nepalese ones. The security dilemma continues to militarize politics as most of parties and social groups are raising their own militant groups and strained efforts towards reconciliation. The condition of statelessness was reflected on June 22 when over 200 Armed Police Force (APF) of Banke revolted against poor ration quality and senior official's ill-treatment. On June 23 the rebelling armed forces reached an agreement with the government and formed a nine-member team to listen their grievances and corruption. Similar event that took place in Parvat district, however, went unnoticed. The civil-military relations have yet to improve to strengthen the outreach of state in society and prevent political system's vulnerability to regular disruptions.

Constitutional Actors
Among the constitutional actors there is a lack of coherence. The governmental actors composed of six ruling parties led by CPN (Maoist) reflect widely divergent political orientations. This has forced the Prime Minister Dahal to admit that his government could not perform as expected due to "non-cooperative attitude of some ruling parties, NC, bureaucracy and foreign forces." Home Minister Bam Dev Gautam too revealed non-cooperation from his own party-CPN-UML in discharging his institutional duties and blamed Maoist affiliated YCL and CPN-UML's Youth Force for creating obstacles in "government's effort to create peace and security in the country." Political division at the center has spoiled effective governance to maintain code of conduct among the coalition partners and steer along common minimum programs.

The CPN (Maoist) has barely managed the friction of government leaders with party leader Kiran Baidya after the coinage of new term "Federal, Democratic People's Republic." On October 13 Prime Minister Dahal said that a federal democratic republic is his party's transitional objective and its long-term goal is to go for a people's republic. He said, "We will go for a new model of democracy which secures the rights of farmers, workers and marginalized people" and claimed that Maoist tag will be removed during unification program with other communist factions. The CPN-UML also stated that it will discuss about the removal of Marxist-Leninist tag in the forthcoming convention. Secretary-General of CPN-UML J.N. Khanal on September 21 said, "The British model parliamentary system has become outmoded. We have to leave that outdated model in the new political context." Another leader M. K.Nepal uttered to end the "remnants of feudalism and unfair practices with the help of Marxism."

While one section of CPN-UML competes to lead the government and opposes Maoist remarks of "people's revolt" against bureaucratic and feudal inertia through "republic-patriotic front," the MJAF and Sadbhavana Parties oppose Maoist determination to redistributive land reforms and integration of combatants into NA and insist on "One Madhesh, One Pradesh." The TMLP's threat to begin agitation by January 2009 in order to get its 13-point demand including a single Madhesh fulfilled is making difficult for Madhesi parties to stay in coalition government as all left parties oppose the demand of single Madhesh identity. The infeasibility of collective action has provided continuity to dysfunctional institutions and eroded the efficiency of governance to govern. The opposition parties led by NC are struggling to form an anti-Maoist "democratic alliance" with traditional parties and demanded the CPN (Maoist) to fulfill the nine-point agreement. A host of other small parliamentary parties outside the government are fighting for a legitimate space and opposing the amount of direct violence unleashed by the competition of youth wings of dominant parties and its consequence for reconciliation and social peace. Lack of inner party democracy, deeply rooted factionalism and personalized leadership have sapped the sociability of leaders to promote common interest by institutional means and carefully balance inter and intra-party rifts. Fear of topple-down from within the coalition has made the government survival-oriented than innovative as far as public demands of common good are concerned. The propensity of constitutional actors to inspire political change in society through extra-constitutional agitation has undermined the rule of law and opened incentives for anti-social forces to challenge its legitimacy by similar means.

Free Riders
A growing public fear that fractious leaders is jeopardizing Nepal's future has been well-proven by the existence of unstable party politics, opportunism and free- riding making long-term cooperation unpredictable. The tendency of a section of CPN (Maoist), CPN-UML and MJAF parties to occupy the space of both government and opposition and get more benefits through free-ride than their actual representative strength has been facilitated by a lack of any party mustering two-thirds majority in the CA to form effective government. The move of major parties from consensus to competitive politics has offered the medium and small parties an opportunity to maneuver in the self-interested game of politics and often switch sides between the two central poles-CPN (Maoist) and NC depending on the calculated utility of defection. It has weakened the unified will of central state to create public security and carry out social and economic development programs. Twenty small parties who won seats only through proportional representation system have formed a coalition to fight "hegemony, dictatorship and discrimination of big parties," and asked to involve them in the constitution drafting process. The central poles of power have risked the polarization of Nepalese politics into the left and the right with the potential to spark confrontation and reciprocal vulnerability to regional and international geopolitics. Strengthening democratic oversight and human rights-based code of conduct for political cadres are essential elements to overcome democratic deficit, impunity and incapacity of politics to produce good governance.

Social Movement Actors
Irresolution of many of legitimate grievances in Nepal has become the major drivers of social movement and provided a new rights-based orientation to politics. Twenty out of 101 ethnic groups who are left out from CA are demanding their participation. The distributional struggle of social movement actors, such as Dalits, women, trade union, indigenous people and ethnic groups have made the political actors of Nepal sensitive to the demands of public and even adopt populist policies beyond the capacity of state to fulfill. Their propensity for autonomy and assertiveness has made Nepal's politics aspiration-fuelled. Assertion of subsidiary identity contest rooted on class, caste, ethnicity and territoriality of Tarai-hill divide marks the decline of the meaning of citizenship in Nepal and a sense of loyalty to the state. Non-implementation of agreements with several groups, such as Nepal Federation of Indigenous Nationalities (NEFIN), Federal Republic National Front (FRNF) and Federal Limbuwan State Council (FLSC) Sanjuhang Palunga, TMLP which focused, inter alia, on complete federal autonomous system of governance based on the historical background, language, geography, region and economic resources and viability has left them frustrated. Democratic political system naturally allows space for the voice and visibility of subsidiary identities. But, it has to limit their ability to overwhelm national interests and institutions.

Armed Groups
The concentration of mainstream leaders in Kathmandu has caused security and public order deficit in Tarai and eastern hills and incubated 33 armed groups of various hues acting as extra-constitutional forces. They are engaged in open predation, killing, extortion, revenge and strike and challenging the writ of state. They have the advantage of a sanctuary in the lawless tribal areas across India and sympathy of Madhesh-based parties. Despite the engagement of government's three-member talk team led by Minister for Reconstruction and Peace Janardan Sharma, many of these groups continue to act as spoilers of security and peace and eroding the nation's development space. This year alone these groups killed 17 business persons. The transition from violent past to a civic culture requires the restoration of reason of state, entrenchment of human rights, transitional justice and enforcement of law and order. Inter-party consultation for broader support for the talks and engagement of Madhesi parties are keys to the solution of this problem.

State of Governance
The annual report of the Supreme Court (SC) revealed, "The judiciary has not been as independent, competent and effective as it should be as per the principle of separation of power and universally-accepted values." The judiciary's image is marred by corruption, inconsistent decisions and failure to stop constitutional breakdown. The National Human Rights Commission expressed dissatisfaction over non-implementation of 75 % of its directives to the government. It made the CPN (Maoist) responsible for holding back information on the 299 disappeared persons and the NA for personal details of 671 disappeared, expressed concern over the worsening human rights situation in the Tarai due to ongoing violence by non-state armed groups, called the government to end impunity and asked political parties not to provide "political protection to criminals." The Office of the Auditor General's annual report showed $12.46m government spending unaccounted for. On November 19 the Commission for the Investigation of Abuse of Authority, stated that among its 180 directives to the government, 143 were never implemented while 37 are still under consideration in the court. It also directed the government to prepare a Technical Assessment Regulation in order to assess various development projects. Nepal ranks 121 positions in the Transparency International Corruption Perception Index.

Economic Development

Economic Review
Nepal is one of the poorest countries in the word. Its per capita gross domestic product is US$ 457, the human poverty index value is 38.1 and power purchasing parity is $1 day. The human poverty index puts Nepal 84th among 108 developing countries. Nepal's population is 29m with a growth of 2.09% while GDP growth rate stands at 2.3%. It ranks 143rd out of 177 countries in Human Development Report 2008. The Human Development Index stands at 0.534, life expectancy at birth is 60.94 years (male 61.12: female 60.75) and adult literacy stands at 51.4% (62.7% for male: 34.9% female). Agriculture provides a livelihood for three-fourths of the population and accounts for 38% of GDP. The World Food Program has identified Nepal as "hunger hotspots" as 42 out of 75 districts are food deficient, while over one-third of districts fall below the minimum food security supplies. Tax contributes only 12% to GDP.

Due to the decline of agricultural production from 1.1% to 0.7%, Food and Agriculture Organization of the UN has appealed for $1 9.80m for food security. Flood and drought damaged this year's crop production. Industrial strike, power cut for 12 hours a day and security concerns relating to political activities have led to a decrease in industrial production. Prospects for foreign investment except in hydropower and tourism sectors remain poor because of the small size of the economy, its technological backwardness and regular civil strife. Due to peace accord, tourism sector has indicated slight improvement as the total number of visitors reached 374,661. Inflow of remittance from Nepali workers stands over $ 1.5b which helped to reduce poverty from 42% in 1996 to 31% now. But, the growing inequality requires distributive justice to prevent conflict. The rate of savings is 11 % of GDP, which means increasing dependence on foreign aid for economic growth. The global financial crisis will further reduce the prospect for foreign employment, FDI and foreign aid. The Inflation has reached to 14.5 %.

Exports witnessed a rise of 27.1 % during the first three months of the current fiscal year against 4.3 % rise in the last year. Exports to India saw growth by 10.1 % against 0.6 % compared to last year. Exports to third countries grew by 58.3 %. The imports from India rose by 19.3 %. Nepal's trade deficit with India is in tune of $1409.39m. The Nepal-China trade currently stands at $4,010m. While China sells goods worth about $386m, Nepal exports goods worth of $15m only. The volume of imports from other countries rose to 48.5 % compared to just 12.1 % in the last year. Likewise, the balance of payment recorded a surplus of $ 9.87m in the first quarter of this fiscal year while foreign exchange reserves stood at $3b in mid-October, which is adequate for financing imports for 10 months. Industrial strikes have scared foreign direct investment and even the Non-Resident Nepalese to establish a $10m fund they had promised.

Nepal's annual budget stands at $3025.64m; $1653.85m are borne by current source of revenue, $833.33m by foreign grant and $231.66m by foreign loan. The net budget deficit of about $600m will be financed by domestic borrowing. The current budget wants to "Make Our Village Better and Beautiful," by enhanced poverty alleviation, road construction, income generation and livelihood training in 20 districts. Its main priorities are constitution making, peace process, socio-economic transformation, role of private, public and cooperative sectors in economic progress and special plans for Karnali region. The government's long-term plan spells: electricity at every household in 10 years by generating 10,000MW electricity; clean drinking water for all in five years; road in all district headquarters in 2 years; increment in allowance and grants to local bodies; fast track road from capital to Tarai; survey for electric railway from Tibet to Chitwan via Kathmandu, Pokhara and Lumbini and from east to west and formation of nine various commissions on labor, truth and reconciliation, disappeared persons, land reform, landless squatters, state restructuring, administrative restructuring and Muslim.

The Asian Development Bank (ADB) pledged a grant of $106.3m for Nepal for the execution of Governance Support program until 1012, $8m for education sector, $18.1m to employer's council and $2.18m grant for IT development. The ADB, British DFID and World Bank pledged $1.50b for 2009-2011 for development. The UK provided $ 2.075m for flood-affected people, 20m pounds for development activities for the next two years, 102m pounds for peace fund, $875.000 to combat the climate change, $14m aid for peace and human rights and $55m for four years to connect all of rural areas by roads. The US development aid stands at $42m, food aid $ 7.5 m and flood relief $1.3m. The Swiss aid is $27m. Norway provided $4.875m to implement Integrated Pest Management Program, South Korea a loan of $45m for the execution of 30-MW Chamiliya hydro-power project. The EU provided Euro 120m for the period of 2007-2013 to be spent in education, peace building, trade facilitation and capacity building and Euro 4.5m to flood victims. China provided $15m development assistance and $0.3m relief aid while Nepal asked for $200 soft loan.

On December 15 the 70-MW Mid-Marsyangdi Hydro-electricity project has began its operation. Germany bore 85 % of the cost. The German government has committed Euro 36.5m grant to Nepal for the coming two years to be spend in health, local governance, civil society, renewable energy and peace process. It provided UNICEF $ 0.64m to support children associated with armed forces, euro 11m for relief aid to flood victim and a grant of $1.7m for public-private partnership.

The UN provided $10m grant from the UN Peace Building Fund, UNDP $98.34m for development and $1.3m to combat climate change, UNICEF $68, 214,000m and UNFPA $28m for development. India provided $ 5.14m aid to various projects. It announced a relief assistance of $4.29m to flood victims and $2738.25m credit for fuel supply. Japan agreed to cancel debt of $107m and provided a grant of $ 2.60m for the improvement of Kathmndu-Bhaktapur road. The International Development Association has agreed to offer a grant of $ 25.28m for development. The World Bank approved a grant of $127m to support the peace process, primary health services in villages and improve rural water supply and sanitation. It gave Nepal $4.367m to pay Maoist PLA $576 each and families of those killed during insurgency $1,439 for each death.

Reform Initiatives
Addressing the proxy and root causes of conflict requires making the public institutions transparent, responsive and effective. On February 3 the government has prepared a draft of new Foreign Aid Policy which seeks mobilizing foreign assistance to address post-conflict development challenges through aid harmonization and proper utilization in social inclusion, equity, peace and reconstruction. It tries to build a system for monitoring aid information, mutual accountability and transparency.

On April 3 the government formed a Peace and Conflict Management Committee under the co-convenorship of D. N. Dhungana and P. R. Tuladher to assist the government in the peace process and conflict management in order to attain lasting peace and conduct the CA election. On October 16, the political committee under the cabinet headed by Prime Minister decided to form 25-member peace committee in all 75 districts with a view to restoring peace and social harmony. On December 11 the CA amended the interim constitution sixth-time to allow those who reached the age of 18 by the end of April 12.

On November 19, the cabinet formed a nine-member Commission on Administration Reform and Restructuring under the coordination of Minister for General Administration Pampha Bhusal to recommend on an overall restructure of the administration. On December 10 the government formed a seven-member High Level Scientific Land Reforms Commission under the chairmanship of Haribol Gajurel. But, the Law Minister Deb Gurung's remarks on restructuring of judiciary for the political appointment of judges have raised serious concern. The Judicial Council member Motikaji Sthapit refused to resign as per Maoist pressure so that laws are amended governing the appointment of judges.

Social Development

Delivery of basic services especially food, medicine, fuel and educational materials in remote areas is not adequate. The post-conflict reconciliation efforts have yet to begin relief support to victimized women, disabled and children. Nepal's total fertility rate is 3.91 children while infant mortality rate is 62 deaths for 1000 live birth. The maternal mortality ratio stands at 530 per 100,000 births. About 0.5 % of people are suffering from HIV/AIDs. Insufficient food and poor health facilities in rural and remote areas have caused malnutrition and high mortality. Due to low social consciousness and poor law enforcing mechanism over 7,000 girls are annually trafficked to India and the Gulf region for prostitution, slavery and bonded labor, nearly 50 % of them are minors. The government revealed that 4,098 children were lost in 20 months.

Unemployment rate in Nepal is as high as 42%. Each year over 300,000 youth enter Nepal's shrinking labor market. More than 90% of 11.12m workers are working in informal sector without any social protection. The ratio of those hunting jobs abroad rose to 10.9 % this year from the number of 204,775 last year. In many countries they do not have any agency to protect their labor rights but they bring over $1.5b remittance which has give life to rural economy. On April 29 Nepal and Bahrain signed a labor pact providing the Nepalese workers secure employment opportunities.

Major trade Unions of Nepal, such as Nepal Trade Union Congress (NTUC), General Federation of Nepalese Trade Unions (GEFONT) and All Nepal Trade Union Confederation (ANTUC) have created a Joint Trade Union Council (JTUC) of 8 confederations to work for common interest such as organization of informal sector, execution of core labor rights, democratization of unions, inclusion of workers rights in the new constitution and economic policies. On April 16 the SC ordered the government to promulgate act pertaining to social security.

On November 30, the employers' organization and unions agreed to new wage rates. The minimum monthly salary for unskilled workers is US $ 57.50 --- $ 38.12 as basic salary and $ 19.38 as allowance. The minimum daily wage is $2.38. The semi-skilled will get $58.13, skilled $59.50 and highly skilled $ 61.88. The government formed a nine-member committee, headed by Ministry of Peace and Reconstruction to implement the 13-point agreement reached with Haliya Liberation Federation. Haliya is a form of bonded labor practiced in far-western region of the country and about 10,000 persons are under this system.

The flood of Koshi River cut Nepal's road connection to eastern part of the country. Similarly, consumers in Kathmandu have to face more than 12 hours power cuts each day. This is caused by the collapse of transmission tower in eastern Tarai and low level of water in Kulekhani hydro-project. Flood toll climbs to 45 in far-western districts. The flood of Koshi River damaged the dam, rendered 30,000 homeless, affected 1,000 villages, killed 7,000 livestock and put 13 Village Development Committees at high risk.

Gender

In Nepal, gender gap is high in public sphere, especially in economy, administration, local government, political parties and media. The discrimination against women affects the entire life-cycle: sex-selective abortion before birth, childhood death from the neglect of nutritious food and medicinal care, dowry death after marriage, inadequate maternal health care, trafficking, slavery and bonded labor abroad due to lack of education and law enforcement, rape and torture in conflict zone and social stigma attached to widowhood. But, due to national and international efforts the gender gap is becoming narrower. For example, the CA elected 197 women, 33.22 % of the total seats. They mirror diverse ethnic cultures, tradition, group and geography. Still, the composition of cabinet is skewed, women represent only 17 %. Due to financial crunch National Women's Commission's activities are confined to Kathmandu only. On July 15, the SC ordered the government to reform a provision regarding marital rape. It also allowed woman the right to abort without husband's consent. Capacity building, re-socialization, involvement of women in public sphere and peace building are needed to bridge the gender gap through collective action.

Regional Cooperation

South Asia requires regional approach to find out a way to reduce tensions and address long-standing problems of instability. Anti-neighbor nationalism and cross-border terrorism in South Asia have increased the cost of non-cooperation and conflict. The 15th SAARC summit in Colombo, Sri Lanka (August 2-3) endorsed two agreements on South Asian Regional Standards Organization to improve South Asian Free Trade Area (SAFTA) and South Asian Development Fund with a capital of $ 207m. Afghanistan has joined SAFTA. The regional leaders finalized recommendations of Food Bank and Development Bank and welcomed Australia and Myanmar for the observer status. The 16th summit will be held in Maldives, in 2009.

On November 12, Prime Minister Dahal attended the second summit of the Bay of Bengal Initiative for Multi-Sectoral Technical and Economic Cooperation (BIMST-EC) in New Delhi. During his meeting with his Indian counterpart both sides discussed bilateral cooperation on water resources, cross-border crime control, climate change, etc. Nepal sought facilitation measures to boost its sub-regional trade. Track II actors are active in building confidence at Track I level for improved cooperation and mobilizing public opinion in favor of deeper integration.

Foreign Affairs
Nepal saw flurry of diplomatic activities. Violation of diplomatic protocol by some ambassadors prompted Foreign Affairs Minister Upendra Yadav to advise them to take permission from his ministry before meeting the Prime Minister and political leaders. During his visit to India (September 14-18) Prime Minister Dahal discussed the reconstruction of the breached embankment along Koshi river, review of all bilateral treaties, border dispute and expediting the work of Pancheshwor hydo-power project. India agreed to review the treaties. India's Foreign Minister Pranab Mukherjee during his visit to Nepal expressed his support to Nepal's efforts to eradicate poverty and expedite the peace process.

The Chinese Assistant Minister of Foreign Affairs He Yafei suggested Nepal to seek a suitable development path. China told Nepal to halt Everest trip till May due to the fear of Tibetans disrupting its plan to carry the Olympic torch up to Everest's summit and urged it to check on "Tibetan illegal political activities, fuelled by "foreign forces." The regular police arrest of Tibetan protestors in Kathmandu was condemned by European Union and the US. Their statement urged Nepal "to ensure the humane treatment of peaceful protesters."

During Prime Minister Dahal's visit to China on August 23 to attend Beijing Olympics and meeting with Chinese President Hu Jintao and Premier Wen Jiabao, greater connectivity between the two countries to promote trade, investment and tourism was stressed. On September 23 during Defense Minister R. B. Thapa's visit the Chinese government said, "They will not tolerate any foreign intervention in Nepal," expressed anxiety about the events taking place in Tarai, asked the Nepalese leaders to take independent decisions and offered a military aid of $1.3m. But, the Indian irritation increased when he and Minister for Information and Communication K.B. Mahara visited Tibet in October to watch the parade of the Chinese People's Liberation Army(PLA). On November 20, Home Minister formally sought the Chinese support to solve the border dispute in the Kalapani area to a Chinese high-level PLA delegation led by Major-duo, Jan Win and Wang Sun. Kalapnai, a tri-junction of Nepal, India and China, comprising 37,840 hectares of Nepali lands, is currently being occupied by India.

On April 15 the US stated that it will observe the behavior of Maoist-led government before withdrawing terrorist tag on them. On May 24 the US Deputy Assistant Secretary of State for South and Central Asian Affairs Evan A. Feigenbaum arrived in Nepal for a political consultation with major parties. The British Foreign Minister for Africa, Asia and the United Nations, Lord Malloch-Brown, Minister for International Development Shahid Malik and Minister for International Development Mike Foster discussed about Nepal's political development. The UK army Chief Richard Dannat expressed willingness to support Nepal's security reforms.

In April the five-member German parliamentary delegation led by Thilo Hoppe, chairman of German parliament's Committee on Economic Cooperation and Development, assured to continue Germany's development assistance to Nepal. Erich Stather, Secretary of State, Federal Ministry of Economic Cooperation and Development, expressed "2008 is a very special year because the two countries are celebrating the 50th anniversary of diplomatic relation."

Norwegian Prime Minister Jens Stoltenberg, Deputy Minister for International Development H. A. Gulbrandsen and Minister for Environment and International Development Erik Solheim while visiting Nepal pledged to continue their country's support in energy, education and good governance. On October 31, the visiting UN Secretary-General Ban Ki-moon pledged the UN's continuing support for the consolidation of peace and reforms.

Abbreviations

ADB Asian Development Bank
CA Constituent Assembly
CPA Comprehensive Peace Agreement
CPN (Maoist) Communist Party of Nepal (Maoist) led by Puspa Kamal Dahal
CPN-UML Communist Party of Nepal Unified Marxist Leninist led by Jhal N. Khanal
MJAF Madhesi Jana Adhikar Forum led by Upendra Yadav
NC Nepali Congress led by G. P. Koirala
RJP Rastriya Janashakti Party led by Soorya B. Thapa
RPP Rastriya Prajatantra Party led by P. S. Rana
RPP Nepal Rastriya Prajatantra Party led by Kamal Thapa
SAARC South Asian Association for Regional Cooperation based in Kathmandu
SC Supreme Court
TMLP Tarai Madhesh Loktantrik Party led by Mahanta Thakur
UNMIN United Nations Mission in Nepal headed by Ian Martin
YCL Young Communist League affiliated to CPN (Maoist)
M Million
B Billion
$ US $

Cabinet List

Pushpa Kamal Dahal Prime Minister, Ministry for Women, Children and Social Welfare (CPN-Maoist) and Land Reform and Management
Bamdev Gautam Deputy Prime Minister and Minister for Home Affairs (CPN-UML)
Dr. Baburam Bhattarai Finance (CPN-Maoist)
Upendra Yadav Foreign Affairs (MJAF)
Ram Bahadur Thapa (Badal) Defence - (CPN-Maoist)
Bijaya Kumar Gachhedar Physical Planning and Works (MJAF)
Bishnu Paudel Water Resources (CPN-UML)
Krishna Bahadur Mahara Information and Communications (CPN-Maoist)
Jay Prakash Prasad Gupta Agriculture and Cooperative (MJAF)
Asta Laxmi Shakya Industry (CPN-UML)
Dev Prasad Gurung Law, Justice and Constituent Assembly (CPN-Maoist)
Rajendra Mahato Commerce and Supplies (Sadbhawana Party)
Gopal Shakya Youth and Sports (CPN-UML)
Renu Kumari Yadav Education (MJAF)
Pampha Bhusal General Administration (CPN-Maoist)
Hisila Yami Tourism and Civil Aviation (CPN-Maoist)
Giri Raj Mani Pokharel Health and Population (Janamorcha Nepal)
Kiran Gurung Forest Soil Conservation (CPN-UML)
Janardan Sharma Peace and Reconstruction (CPN-Maoist)
Gopal Kirati Culture and State Restructuring (CPN-Maoist)
Ram Chandra Jha Local Development (CPN-UML)
Lekh Raj Bhatta Labour and Transportation (CPN-Maoist)
Ganesh Shah Environment, Science and Technology (CPN-United)
 
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