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Over a month has passed since Prime Minister Pushpa Kamal Dahal dissolved his alliance with the Nepali Congress (NC) to form a new coalition with the CPN-UML and other parties, including the Rastriya Swatantra Party (RSP).

Dahal’s rationale for the shift in political alliance was his belief that the Congress ministers hindered his work, necessitating a fresh start for the government. However, there’s been little improvement in Dahal’s approach. He continues to repeat past mistakes, such as frequently transferring government secretaries and prioritizing ceremonial functions over office duties.

Meanwhile, the NC, as the main opposition, has been vocal about addressing pressing issues such as investigating Home Minister Rabi Lamichhane for his alleged involvement in the misappropriation of financial cooperative deposits. 

The Dahal government has also failed to address other key issues such as amending more than one dozen laws targeting the upcoming investment summit, improving the country’s economy and stopping mass exodus of youths to foreign countries.

Despite the UML showing considerable support for the Dahal government, internal dissatisfaction is growing regarding its performance. The UML leadership, led by KP Sharma Oli, has refrained from criticizing the government publicly but is privately concerned.

What will UML do if the Dahal government cannot deliver on his promises and goes on to become even more unpopular? The UML leaders do not have a definite answer to it. One glue that is likely to keep the Maoist-UML together is the dream of reviving the left unity. While Prime Minister Dahal says the Maoist and UML could ultimately form a left unity, UML leaders do not seem so optimistic. They view the coalition primarily as a ruling alliance, not a true leftist collaboration.

However, second-rung leaders from the Maoists and UML say that in the face of emergence of new political parties and growing public frustration, formation of left unity is imperative for the survival of both parties. Furthermore, they say the NC’s commitment to the 2015 constitution, particularly on secularism, is wavering and that left parties should come together to protect those achievements.  

“This was also one of the reasons that led Prime Minister Dahal to break alliance because the Nepali Congress was planning to make a proposal of referendum to decide on secularism,” said on Maoist leader. He added though the parties are under pressure to reconsider secularism, at least the Maoists and UML are unlikely to agree on it.

While these agenda are likely to keep the two parties together, it is still a difficult task because there are many differences among the communist parties. The first one is obviously a power-sharing among the key leaders of communist parties such as Maoist, UML and CPN (Unified Socialist). As per the informal agreement, Prime Minister Dahal will hand over the government leadership to Oli; and it is uncertain whether CPN-UML (Unified Socialist) Chairman Madhav Kumar Nepal will lead the government.

Amid all this, the potential for collaboration between NC and UML is gaining traction. Prominent NC figures, including Dr Shekhar Koirala, Gagan Thapa, and Bishwa Prakash Sharma, have signaled openness to cooperation with the UML to address public concerns and foster political stability. 

Even Sher Bahadur Deuba, NC’s president, has expressed willingness to engage with the UML, reflecting a growing consensus within the NC on the necessity of cooperation. His regret over past decisions reflects a growing consensus within the NC that cooperation with the UML is essential for addressing the public’s disenchantment and fostering a more stable political environment. 

NC leader Koirala, who leads the anti-establishment faction of NC, is at the forefront of leaders advocating for NC-UML cooperation. Of late, he has increased the frequency of meetings with UML leaders. Talking to reporters at Biratnagar Airport last week, he said that the NC and UML need to unite to bring stability and development to the country.

He said the new UML-Maoist Center coalition can neither deliver economic development nor provide political stability. “The new constitution could only be drafted when the NC and UML came together. There is no alternative to these two parties uniting for the country’s development,” he said. “It has become clear that there won’t be stability in provincial governments. If we want to bring stability and development to the country, NC and UML must come together.” 

The UML, too, appears receptive to collaboration. Oli, during the previous presidential election, hinted at the possibility of political shifts, indicating a willingness to adapt. 

If there is an agreement, UML Chairman Oli is likely to lead the government in the first phase and hand over the power to NC President Deuba to hold the elections in 2027. 

Interestingly, PM Dahal and Oli have differences over the nature of the new alliance. While Dahal insists that the long-term plan is to achieve left unity through this coalition, Oli is not willing to accept this alliance as a coalition yet. 

“What we have created is essentially a power equation. We all have different plans and election manifesto,” Oli said, addressing the Kaski District Convention of UML in Pokhara a few days ago. It clearly shows that both Oli and Dahal do not have a concrete plan for a long-term cooperation.

Over the past few years, Nepal has found itself in the midst of a tug-of-war among three major global powers: India, China, and the US. Each of these countries are vying for influence in Nepal’s economic, military, ideological and technological spheres.

Let’s begin with the US. The Biden administration in the US has made advancing democracy one of its key global priorities. In South Asia, Nepal appears to be in the high priority of the US democracy projects. The US has been inviting Nepal’s prime minister to its annual democracy summit. Both communist and non-communist prime ministers have attended the summit. The US is making efforts to counterbalance the influence of the Chinese Communist Party in Nepal and uphold democratic values in the region. In the meantime, the US is equally concerned about the influence of India’s Bharatiya Janata Party (BJP) which is pushing for the restoration of Hindu state in Nepal. A US document says: “The Nepali political class’s penchant for balancing relations with its large neighbors India and the People’s Republic of China (PRC) renders security cooperation, including with the United States, prone to political interference.” 

Despite claims that it does not export its communist ideology, China has been promoting its political model in other countries. Under the guise of showcasing its achievements, China has been exporting its ideology to South Asian countries. Chinese leaders are urging their Nepali counterparts, particularly those aligned with the communist ideology, to embrace the Chinese model. Every year, China invites a large number of Nepali communist leaders to its cities to showcase its development model. Of late, Nepali leaders have started saying that Nepal can replicate the same model which reflects a growing acceptance of the Chinese  model within the country.

Though India and the US are on similar pages on a range of issues, the two powers have divergent views about the democratic values in South Asia. India, on its part, is sending conflicting signals on the ideological front. While the Indian government seems committed to uphold democracy, secularism and inclusive constitution in Nepal, the ruling BJP harbors reservations about Nepal’s 2015 constitution, which, it perceives, is imbued with Western values. The BJP’s parent organization, the Rashtriya Swayamsevak Sangh, is reaching out across the political parties and the general people with Hindu-centric agendas. The BJP believes it can reduce Western influence on Nepal, dismantle secularism and restore Hindus state through such activities. Such activities are already polarizing Nepal’s political fabric.

In addition to ideological battles, Nepal is grappling with strategic challenges posed by major powers. China’s Belt and Road Initiative (BRI) and its insistence on the One China policy dominate all its engagements with Nepal. Likewise, China’s Global Security Initiatives (GSI) and Global Civilizational Initiatives (GCI) and Global Development initiative (GDI) are getting more prominence over economic issues. Nepal has consistently expressed its commitment to One China policy for over 50 years now. Still, China does not seem convinced and seeks reaffirmation on One China policy every time.

A press statement issued after Prime Minister Pushpa Kamal Dahal's visit to China last September also reiterated Nepal's firm stance against Taiwan Independence. His new Foreign Minister Narayan Kaji Shrestha echoed the same sentiment during his visit to China last month. Although China keeps emphasizing on the Belt and Road Initiative (BRI) in various meetings, tangible progress on infrastructure development under the BRI umbrella has not materialized yet. Government officials, politicians, and foreign policy analysts say that Nepal needs to capitalize on China's economic growth. However, this aspiration has yet to materialize due to the significant focus that both countries are placing on strategic concerns.

While Chinese investment in Nepal is on the rise and cooperation between the two nations has expanded in recent years, substantial investment projects that could catalyze economic growth remain elusive. Instead, Nepal’s attention is primarily directed towards ensuring that its territory is not used for anti-China activities. Regarding Chinese investment in Nepal, there have been occasional complaints from the Chinese side regarding obstacles faced by its investors.

Nepal engaged in a four-year debate on whether to accept the $500m support from the Millennium Challenge Corporation (MCC) of the US government. The MCC projects are finally into implementation. However, the project is not gaining the desired pace. Many attribute the slow progress to the government’s lackluster commitment to these projects. This tepid response was partly influenced by China’s strong opposition to the projects which labeled it as part of the Indo-Pacific Strategy (IPS). Nepali politicians, bureaucrats and experts continue to struggle in comprehending the US policy towards Nepal in the context of the IPS. Following discussions on the IPS, attention in Nepal shifted on the State Partnership Program (SPP) of the US government.

Under domestic pressure, the government led by Sher Bahadur Deuba of the Nepali Congress wrote a letter to the US government stating that Nepal won’t be a part of the SPP. Of late, there has been a notable increase in interest from US investors looking to invest in Nepal. However, Nepal has yet to effectively address this interest despite a substantial increase in US assistance through USAID.

All this shows that Nepal has already fallen into the geopolitical trap. Nepal is not seeing much investments in priority sectors as major powers are prioritizing their security and strategic interests. Though Nepal is pushing for more economic collaborations, strategic issues are dominating the bilateral negotiations and public discourse. Nepal’s current key priorities are economic recovery, minimizing the impacts of climate change and creating jobs but due to the geopolitical tensions these issues are getting a backseat in the engagement with major powers.

Nepal has struggled to take a clear stance on initiatives like the IPS, BRI, and other strategic endeavors. While managing these challenges should be the top priority of the government, the country is marred by internal political instability. Geopolitics is gradually creating rifts within Nepali society. Nepal needs to make concerted efforts to mitigate internal divisions and chart a path forward that safeguards Nepal’s interests amidst global power struggles.

The recent change in the governing coalition has cast a shadow over the upcoming investment summit scheduled for April 29-30 in Kathmandu. Former finance minister Prakash Sharan, who was leading the summit preparations, has been replaced by Barsha Man Pun. Before the coalition shift, Sharan had been actively engaging with various international stakeholders to organize the summit. Now, the responsibility falls on Finance Minister Pun to ensure its success.

The government is relying on significant foreign investment to recover from the current economic crisis. However, with less than a month until the summit, preparations seem to be moving slowly. Despite pledges to amend numerous laws and regulations to create a more investment-friendly environment, officials report that progress in this regard has been sluggish.

Officials at the Office of the Investment Board Nepal (OIBN) note that the change in the ruling alliance has hampered preparations for the summit. While Finance Minister Pun has urged officials to expedite preparations, the process of amending laws has not gained momentum, partly due to the federal parliament being preoccupied with political issues. 

In addition to summit preparations, the Ministry of Finance is busy with drafting principles and priorities for the fiscal year 2024/25 budget and a new five-year plan. This leaves Finance Minister Pun with limited time to focus on the investment summit.

Several committees have been formed by the government to prepare for the summit, each with specific responsibilities. The finance minister leads the Steering Committee, while the chief secretary heads the Implementation Committee, the industry secretary leads the Technical Committee, and the CEO of OIBN leads the secretariat. 

The Steering Committee initially decided to amend 10 laws and two regulations to signal to investors that the investment environment in Nepal has improved. However, priorities seem to have shifted following the sudden change in power dynamics.

A task force, chaired by the Office of the Prime Minister Secretary Ek Narayan Aryal, has been established to propose amendments to laws and regulations related to foreign investment. Its recommendations include amendments to various acts and regulations, including the Industrial Enterprise Act-2020, Foreign Investment and Technology Transfer Act-2019, Special Economic Zone Act-2016, Forests Act-2019, and National Parks and Wildlife Protection Act-1973, to improve the investment climate in Nepal.

Additionally, the task force has also suggested amendments to the Lands Act-1964, Land Acquisition Act-1977, Environment Protection Act-2019, Electronic Transactions Act-2008, Civil Aviation Act-1959, Foreign Investment and Technology Transfer Regulations-2021, and Forest Regulations-2023.

In addition to the amendments to laws, officials say the process of selecting projects for the summit has also been affected. While the implementation and technical committees have evaluated approximately 130 projects, final selections have yet to be made.

Notable projects evaluated by the committees include the Rs 104bn China-Nepal Friendship Industrial Park, the Rs 85.83bn Upper Marsyangdi-2 Hydropower Project, and the $21.02bn 40 MW solar project in Kohalpur and Banganga. Several other projects like industrial zones, special economic zones, hydropower projects, solar and wind energy projects, and reservoir projects have also been submitted for consideration to the Investment Summit Secretariat.Besides, provincial governments and the private sector have also submitted projects for inclusion in the summit. 

In the 2019 Investment Summit, the government had showcased 77 projects, including 27 from the private sector, covering sectors such as energy, infrastructure, agriculture, education, and health. Although investors expressed interest in over three dozen projects, investment agreements were signed for only 15 projects.

International investors have expressed concerns about Nepal's bureaucratic hurdles and various restrictions, hindering their willingness to invest.

For instance, American private investors are keen to invest in Nepal’s tourism, medical, and other sectors. But they are unsure about the investment environment in Nepal. Prospective investors in China and India too have concerns about funding projects in Nepal. Their concerns range from a bad investment environment to unstable politics to problems related to labor issues and exit plans. 

This will be the third summit in recent history, following those held in 2017 and 2019, with the government aiming to showcase Nepal as an emerging destination for global investors, particularly in green energy, tourism, agribusiness, and the IT sector.

Minister Pun emphasizes the government's commitment to ensuring the protection and security of investments, as well as providing efficient facilitation throughout the business cycle.

Box

Proposed areas for international investors 

• Agro processing 
• Education 
• Health 
• Energy 
• ICT 
• Manufacturing 
• Mines and minerals 
• Tourism 
• Transport 
• Urban development 

Why is Nepal a preferred destination for investment?

• 57 percent population is between 15-59 
• Low-cost of Labor 
• Nepal is a member of SAARC 
• BIPPA agreement with five countries 
• DTAA agreement with 11 countries 
• Treaty of Trade and Transit with India
• Treaty of Transit and Transport with China 
• 100 percent ownership to foreigners 
• Repatriation holiday 
• Competitive corporate tax system 
• Private-sector friendly laws
• Market access to two Asian giant India and China 
• Easy visa service

The newly-formed five-party coalition has outlined its policy priorities across various critical areas such as the economy, service delivery, federalism implementation, job creation, transitional justice and foreign policy. The document known as common resolution has aptly highlighted the growing pessimism among the youth who are increasingly becoming more belligerent toward the government and political parties.  However, past experience suggests that governments struggle to translate such lofty ideals and visions into tangible outcomes. Over the past year, little progress has been made in areas such as service delivery and improving the country’s economic landscape. Prime Minister Pushpa Kamal Dahal’s decision to change coalition partners under the pretext of overcoming obstacles posed by the Nepali Congress does not align with ground reality. Dahal has paid little attention or no attention to the pressing issues facing the nation. He has dedicated his time to attending public events, like book launches and inauguration of infrastructure projects, rather than focusing on governance.

Soon after assuming office after forming a new coalition, Dahal issued extensive directives. Interestingly, his tenure has been marked by frequent transfers within the bureaucratic ranks. He consistently said that he would reshuffle the cabinet to improve service delivery, but ended up changing the coalition. There has been a glaring lack of seriousness in addressing the grievances of victims of loan sharks and microfinance institutions, as well as in addressing the challenges facing provincial governments.  During this period, dissent against the prevailing political system has gained traction, yet the Prime Minister has taken no substantive measures to defend it. Instead, some of these measures have boosted the activities of political forces who want to overthrow the current political system.

Admittedly, Prime Minister Dahal appears to have acknowledged the existence of serious challenges that demand attention. His inclusion of the CPN-UML, Rastriya Swatantra Party (RSP) and Janata Samajbadi Party in the government reflects a desire for improvement. While Dahal may not be able to bring the desired changes, we should give him the benefit of the doubt and wait for a few months. Dahal may have counted his ability to lead the government, juggling between NC and UML, despite being the third-largest party with just 32 seats in Parliament. But his true success now lies in delivering tangible outcomes. Dahal knows that his ministers cannot deliver. That is why he is now banking on the performance of RSP ministers who are smart enough to brainwash the people even if they cannot offer much substance.

Rising out-migration of youth is becoming a big concern for Nepal. Youths are seeking opportunities abroad, whether through student visas or work permits. While government statistics and economists indicate that Nepal is in a position to benefit from a demographic dividend over the next 15-20 years, the ongoing mass exodus of youth paints a contrasting picture. Nepal is gradually losing this opportunity. The concerning reality of 2,000 youths leaving the country daily should serve as a wake-up call for political parties. However, it appears that this critical issue has yet to resonate with our politicians. Therefore, the first and foremost priority of the government should be to bring a long-term plan aimed at creating employment and other opportunities for the youth population.

Not only the youths, everyone, from ordinary citizens to prominent businessmen and politicians, are grappling with mounting pressures. Common individuals, including farmers and employees, are finding it difficult to make ends meet and support their families. Similarly, businesses, whether small or large, are facing challenges in operating smoothly and meeting their financial obligations including bank loans. While some prominent businessmen may have engaged in tax evasion or other misconduct, the government's response seems disproportionate. There have been complaints of politically-motivated systematic attack on a certain group of businesspersons, which has led to increased capital flight from the country.

Youth politicians from major political parties are particularly feeling the strain due to the increasing unpopularity of their parties and leaders. They recognize that public dissatisfaction, including within their own ranks, has reached a critical juncture. The plight of victims of loan sharks and cooperatives underscores the broader societal discontent. These people embarked on a long march to Kathmandu, demanding justice. But the government is cheating them by pledging to form a commission or something else. Their demands are not getting addressed. The only difference is that some parties are resorting to deceitful tactics, while others are exhibiting a harsher behavior.

The excessive politicization of governmental functions from the central to local levels has facilitated widespread corruption and exploitation of local resources. This exploitation has fostered a perception among the populace that the political system primarily serves the interests of a select few. At the same time, certain regressive elements are trying to capitalize on public sentiment against the current political system. If the existing system fails to demonstrate improvement, it will not only jeopardize its own stability but also undermine the very foundation of democracy itself.

Politicians cannot evade this reality by attributing it to the actions of certain political forces trying to sow pessimism and anarchism in society. This situation did not arise overnight but is rather the result of a cumulative effect stemming from the poor governance of major political parties that have held power since 1990. Instead of shifting blame onto others, political parties must engage in introspection and undertake necessary reforms. PM Dahal, who has successfully navigated between the NC and UML to maintain his hold on power, does not have much time to revel in this situation. Since UML has given him a free-hand in running government as well as key ministries, he will have no other parties to serve as scapegoats, as he previously did with the NC, should he fail.

Deputy Prime Minister and Minister for Foreign Affairs Narayan Kaji Shrestha, who is on an official visit to China, has completed his key meetings in Beijing.

He engaged in bilateral discussions with his Chinese counterpart, Wang Yi, covering a wide array of bilateral matters. Additionally, senior leaders of the Communist Party of China (CPC) also met with Shrestha to explore avenues for strengthening party-to-party relations. While Shrestha’s visit held symbolic significance, no tangible agreement was reached on specific issues. However, the Chinese side emphasized the significance of Shrestha selecting China for his inaugural foreign trip after taking charge of the Ministry of Foreign Affairs. 

Based on official statements issued post-meetings and scrutiny of Chinese media coverage, it appears that China primarily raised two concerns during the discussions: The advancement of the Belt and Road Initiative (BRI) and Nepal’s reaffirmed commitment to its security interests. Despite China's push for Nepal to sign a BRI implementation plan, no progress was made during Shrestha's visit. Nevertheless, Shrestha conveyed Prime Minister Pushpa Kamal Dahal’s assurance that Nepal would soon sign the document.

Foreign Minister Shrestha also provided reassurances to the Chinese side regarding Nepal’s steadfast adherence to the ‘one-China policy’, particularly in light of the recent Taiwanese election results. China has been seeking reaffirmation of this policy from neighboring countries since the victory of William Lai Ching-te from the Democratic Progressive Party in Taiwan’s election earlier this year. Prime Minister Dahal was the first leader from South Asia to make a statement on the same issue

In his meeting with Shrestha, Chinese Foreign Minister Wang emphasized China’s commitment to Nepal as a friendly neighbor and strategic partner, highlighting Nepal’s importance in China’s neighborhood diplomacy. He expressed China's readiness to strengthen the traditional friendship, bolster political mutual trust and collaborate on high-quality Belt and Road Cooperation.

The Chinese side also raised the issue of implementing agreements reached during President Xi Jinping’s visit to Nepal in 2019. Yi noted the historic significance of Xi’s visit in elevating bilateral relations and praised the success of Dahal’s visit to China the previous year, which led to essential consensus on enhancing China-Nepal relations.

Foreign Minister Shrestha said the new government of Nepal attaches great importance to China. He reiterated Nepal’s willingness to collaborate on advancing the BRI and joining the Group of Friends of the Global Development Initiative. 

Notably, there was no mention of China’s Global Security Initiatives and Global Civilizational Initiatives during this visit, despite discussions on these topics in previous years. The formation of a new coalition government has sparked interest in Beijing, hinting at potential progress in bilateral relations.

In recent weeks, the Rastriya Swatantra Party (RSP), the fourth largest political entity in the House of Representatives (HoR), has emerged as a focal point in national politics.

Firstly, the primary opposition, the Nepali Congress (NC), has been demanding resignation of RSP leader Rabi Lamichhane from the post of deputy prime minister and minister for home affairs over his alleged involvement in a fund misappropriation from a Pokhara-based financial cooperative. 

Several NC leaders have demanded that Lamichhane step down to facilitate an independent and impartial investigation.

While some Congress leaders, notably General Secretary Gagan Kumar Thapa, have vocally criticized Lamichhane, internal dissent persists, with some advocating for patience before demanding resignation so soon after the formation of a new coalition. Some factions within the party believe that ousting the RSP from the coalition could jeopardize the current alliance. They are of the view that the party should wait for at least 100 days before demanding Lamichhane’s resignation.

Furthermore, there are also voices within the NC that suggest adopting a more conciliatory approach toward the RSP, acknowledging the potential for future collaboration, especially if all communist parties unite in subsequent elections. Despite the assertive stance of figures like Thapa, senior leader Shekhar Koirala, and certain youth leaders, Congress President Sher Bahadur Deuba maintains a neutral stance.

Shankar Tiwari, an NC youth leader and a political analyst, emphasizes the party’s commitment to upholding the rule of law, stressing the importance of ensuring that ongoing investigations into Lamichhane remain uninfluenced by political power dynamics. He argues that Lamichhane's appointment as home minister presents a conflict of interest, particularly as he is under police investigation, setting aside any political motivations.

Nevertheless, critics view the Congress’ stance as an attempt to prevent Home Minister Lamichhane from opening old corruption cases, which could potentially implicate its own leaders. The RSP too accuses the main opposition party of stifling its voice by disrupting parliamentary proceedings. 

Lamichhane told a gathering on Saturday that he was willing to engage in a debate with NC General Secretary Thapa in his own constituency, Kathmandu-4. He said the allegations leveled against him by the NC were baseless.

Thapa had claimed in the HoR that Lamichhane was involved in the misuse of funds from the Pokhara-based Suryadarshan Cooperatives, citing a report commissioned by the Pokhara Metropolitan City. 

“A study panel commissioned by the Pokhara Metropolitan City states in its report that one of the individuals opening a fake account in the cooperative is Rabi Lamichhane. Rs 10m has been released in Lamichhane's name, although he is not a member of the cooperative,” Thapa told parliament.

Lamichhane denies any wrongdoing and maintains that he hasn’t been named as a defendant in the case pertaining to the fund misuse of the financial cooperative in question. He has questioned NC’s political integrity, pointing that one of its sitting ministers had felt no moral compulsion to step down even when he was being investigated by the Commission for the Investigation of Abuse of Authority.  

Lamichhane was referring to former health minister and NC leader Mohan Bahadur Basnet, who is under investigation for his alleged involvement in a corruption case concerning the  procurement of Telecommunication Traffic Monitoring and Fraud Control System (TERAMOCS) of Nepal Telecommunication Authority (NTA). 

Friction has also arisen between the RSP and its coalition partners regarding a potential alliance in the forthcoming by-election scheduled for April 27 in Ilam-2 and Bajhang (A). Political observers say the CPN (Maoist Center) and CPN-UML will find it hard to deal with RSP in the coming days. 

While Prime Minister Pushpa Kamal Dahal of the Maoist party and KP Sharma Oli of the UML have stood by Lamichhane, potential sources of friction linger. Although the RSP played a pivotal role in forming the current alliance, doubts persist regarding the coalition's cohesion.

Recently, RSP Vice-chairperson Swarnim Wagle disclosed Prime Minister Dahal’s offer for the RSP to join the government some three months ago. “Many told us that we could have waited until 2027. But we felt if we can make positive changes from the government, why not accept the offer,” Wagle said about his party’s decision to join the ruling coalition. “We have chosen ministries related to good governance and youths. If we fail to deliver, we will step down.” 

Wagle’s rationale for accepting the offer also betrays RSP’s plan to pull out of the coalition if the party ministers are not allowed to work independently.    

Within the coalition, managing Lamichhane presents a significant challenge for Prime Minister Dahal and the UML. Earlier, Lamichhane had to leave the Home Ministry within a month after he was dragged into a controversy for holding dual passport and citizenship. But he is unlikely to give up that easily this time, even though the NC has been disrupting parliamentary sessions, demanding that the government investigate Lamichhane.

Despite controversies, Lamichhane’s popularity remains intact, as evidenced by his resounding victory in by-elections. RSP’s electoral successes in Chitwan and Tanahun have bolstered their confidence, and it plans to contest the upcoming by-elections and not support other coalition parties.  

The RSP’s reluctance to engage in electoral alliances signals a potential rift within the government, though it is unlikely to directly impact coalition dynamics. To influence the election and party’s popularity, Lamichhane could also leverage his position as home minister by investigating major corruption scandals involving the leaders of major political parties. If that happens, it could exacerbate tensions within the coalition.

To demonstrate effective governance, Lamichhane is already pursuing investigation into the gold smuggling case involving former parliament speaker and Maoist leader Krishna Prasad Mahara. RSP's long-term aspirations to emerge as a significant political force by the 2027 general elections may prompt them to withdraw from the government if hindered by Prime Minister Dahal and his main coalition ally, UML.

Senior RSP leaders assert their commitment to fulfilling promises or resigning, garnering tentative support from Prime Minister Dahal, who believes RSP ministers are more likely to deliver tangible results, shaping public opinion favorably. However, populist decisions by RSP ministers is likely to cause friction within the coalition. So, managing the RSP presents a formidable challenge for both ruling and opposition parties alike.

Deputy Prime Minister and Minister for Foreign Affairs Narayan Kaji Shrestha is paying an official visit to China from March 24 to April 1 at the invitation of his Chinese counterpart Wang Yi.

This visit marks the first significant diplomatic engagement by a senior minister since the formation of a new coalition government on March 4. Shrestha’s transition from the home ministry to the foreign affairs portfolio underscores the shifting dynamics within the government. In addition to bilateral discussions with his Chinese counterpart, Shrestha, a prominent Maoist leader, is scheduled to hold meetings with top officials and leaders of the Chinese Communist Party.

Given lingering suspicions and allegations surrounding China’s role in orchestrating the recent political realignment in Nepal, Shrestha’s visit carries considerable significance domestically and internationally. Despite assertions from ruling alliance leaders that the coalition shift was driven solely by internal factors, doubts persist regarding China's influence.

Notably, Shrestha’s departure for China lacked comprehensive briefings from all ministry departments, raising questions about preparedness amidst heightened Chinese pressure to advance the Belt and Road Initiative (BRI) agenda. 

During Prime Minister Dahal’s China visit last year, preparations were made to sign the BRI implementation agreement. But it was put off after Nepal sought some more time, citing the need for further homework. China has been pushing Nepal for BRI implementation, especially after Nepal ratified the US government’s Millennium Challenge Corporation (MCC) grant agreement.

While Shrestha has publicly advocated for prompt BRI implementation, the Dahal-led government has yet to reach a consensus on the matter, indicating a reluctance to hastily commit to China's initiatives. Even though Shrestha has said that implementation of past agreements remains the top agenda of his China visit,  highly placed government sources say the possibility of Nepal signing the BRI implementation agreement is very low. 

Nepal reportedly had proposed nine infrastructure projects under the BRI, but there has been no progress. 

Although Nepal signed the BRI framework agreement with China in 2017, no infrastructure project has moved forward so far. Of late, China has been trying to bring all areas of cooperation with Nepal under the BRI framework. Controversy has also arisen over China’s unilateral designation of Pokhara International Airport as a BRI project, exacerbating anxieties regarding debt sustainability. With the multi-million-dollar airport still unable to see international flights, there are concerns over how Nepal will repay the Chinese loan. 

Prime Minister Dahal has been urging the Chinese side to convert a significant portion, if not all, of the loan into a grant. He told a gathering in Pokhara a few days ago that efforts were underway to convince China on this matter. Dahal’s appeal for converting Chinese loans into grants reflects Nepal's growing apprehension towards accumulating debt, particularly in light of unfulfilled BRI promises and economic viability concerns.

The prime minister believes that if China converts the loan into a grant and makes it a gift project under the BRI, it would facilitate the BRI implementation agreement. China does not provide grants under the BRI, but the Chinese government could make such a decision if it desires. However, the Chinese side has not given a concrete response. 

Earlier last week, the Chinese Embassy in Kathmandu clarified that the Pokhara airport loan is not a noose around Nepal’s neck. It stated that Nepal’s external debt is higher from international institutions and other countries. China has expressed its willingness to bring international flights to Pokhara but has urged Nepal to provide new air routes for this purpose.

Previously, when the Nepali Congress was part of the ruling alliance, Prime Minister Dahal and other communist parties felt that relations with China were given low priority. China’s proactive engagement following the coalition reshuffle suggests a concerted effort to solidify ties with Nepal’s communist-led government. The absence of contentious issues such as the Nepal-China border dispute in the new alliance’s policy agenda signals an apparent alignment with Chinese interests, prompting optimism in Beijing regarding future cooperation.

Chinese activities seem to have increased in Nepal significantly following the formation of the new alliance. In the past, China has been slow to react to changes in government in Nepal. But this time, it issued a response soon after the new alliance was formed.

During her regular press briefing on March 4, Chinese Foreign Ministry spokesperson Mao Ning said: “We would like to work with the new government to uphold the Five Principles of Peaceful Coexistence, deepen traditional friendship, strengthen practical cooperation, advance the China-Nepal strategic partnership of cooperation featuring everlasting friendship for development and prosperity, and deliver more benefits to the peoples of the two countries.”

Two days later, Chinese Ambassador to Nepal Chen Song met with Foreign Minister Shrestha to extend congratulations and engage in in-depth and friendly discussions on bilateral relations and cooperation.

Vice-minister of the Chinese Communist Party Sun Haiyan also held talks with Nepali Ambassador to China Bishnu Pukar Shrestha right after the new alliance was formed.

During the meeting, she sought information about the recent political developments in Nepal. Vice-minister Haiyan had visited Nepal last month leading a delegation of the International Liaison Department of the Communist Party of China. During her interactions with Nepali political parties, she had remarked that efforts were being made to undermine Nepal-China relations.

Similarly, Lin Jian, a Chinese foreign affairs spokesperson, on March 22, reacted to Shrestha’s visit. In a regular press briefing in Beijing, he said: “The upcoming visit will be [Shrestha’s] first overseas visit after taking office as Nepal’s deputy prime minister and minister for foreign affairs.”

“China stands ready to work with Nepal to take this visit as an opportunity to further deliver on the important common understandings between leaders of the two countries, deepen political mutual trust, pursue high-quality Belt and Road cooperation, expand exchanges and cooperation in various areas and strive for new progress in building China-Nepal strategic partnership of cooperation featuring ever-lasting friendship for development and prosperity,” Lin said.

He added that China and Nepal were “traditional friends and neighbors linked by mountains and rivers. In recent years, our two countries maintained close high-level exchanges with deepening practical cooperation in various fields”. “Our two sides maintained close coordination and collaboration in regional and international affairs.”

Last September, Prime Minister Dahal paid an official visit to China and leaders of the two countries reached important common understandings on growing the China-Nepal relations.”  China expects its security concerns to be somewhat addressed under the communist government in Nepal, which is why Beijing appears more enthusiastic about the new alliance. Additionally, the Dahal-led government has fully banned activities concerning the free Tibet movement in Nepal. 

However, challenges persist in reconciling Nepal’s commitment to an independent foreign policy with the demands of regional stakeholders, particularly amid growing pressure to navigate competing geopolitical interests. Prime Minister Dahal’s emphasis on adopting a balanced diplomatic approach underscores the delicate balancing act facing Nepal’s leadership as it seeks to assert its autonomy while fostering fruitful relationships with key allies.

The five-party ruling coalition has formed a 10-member task force to prepare a Common Minimum Program (CMP) of the government. Along with domestic issues, the task force will also outline the foreign policy priorities of the new government.

The latest coalition has four communist parties—CPN-UML, CPN (Maoist Center), CPN (Unified Socialist), and Janata Samajbadi Party—and one centrist party, Rastriya Swatantra Party. Before the Unified Socialist entered the coalition, the four parties had signed an eight-point deal where they had made a brief mention about the government’s foreign policy. They pledged to ensure “a balanced and extended international relations, keeping national interests and priority at the forefront.”

The UML, Maoist, Unified Socialist, and Janata Samajbadi have almost similar views on foreign policy, while the RSP, a new party that emerged through the 2022 general elections, has no clear foreign policy outlook as of yet. 

Whenever the government in Nepal is overwhelmed by communist parties, the international community, particularly India and western democracies, keenly watch the priorities and approach of Kathmandu. As a result, the communist government always has to go the extra mile to win the trust of democratic world. China, on the other hand, feels comfortable when there is a strong communist government in Nepal. 

So building trust with major powers will be crucial for the government of Pushpa Kamal Dahal. 

Except for China, no countries have officially reacted to the formation of the new coalition. On March 5, Chinese Foreign Ministry Spokesperson Mao Ning said: “China has been informed about the formation of a new power equation and the reorganization of the cabinet in Nepal. We hope that the relevant parties of the alliance will unite and advance the work of forming a new government and bring about political stability, economic growth and improvement in the people’s livelihoods.”

After the Cabinet reshuffle in Kathmandu, major countries—the US, China, India, and the UK— have met Foreign Minister Narayan Kaji Shrestha and Finance Minister Barsha Man Pun. Unlike in the previous Cabinet, the two key ministries are now led by the Maoist party. Earlier, both ministries were headed by the Nepali Congress, and Prime Minister Dahal was unhappy with the working ways of the Congress ministers. 

The prime minister expects to bring some sort of uniformity in both foreign policy and economic fronts by appointing Maoist ministers. But it may take some time to identify the foreign policy and economic priorities of the new coalition. 

After taking a vote of confidence on March 13, Prime Minister Dahal plans to brief the international community about his foreign policy priorities. The prime minister’s secretariat has already been reaching out to major embassies in Kathmandu to assure that the new alliance will  maintain cordial ties with all countries. 

For Dahal, taking the international community into confidence is crucial ahead of the investment summit. 

In its CMP in 2022, the coalition of these same parties had outlined the foreign policy priorities. Its major points included protecting the country’s national independence and national interests, ensuring the rights of land-locked countries, and a relationship based on equality between big and small countries. It also talked about enhancing the policy of non-interference in internal affairs of other countries, adopting the UN Charter, Panchsheel, non-alignment, world peace and operating international relations based on the international laws. On the neighbors front, the 2022 CMP pledged to maintain “a friendly relationship with neighbors and all friendly nations for peace, stability, economic reformation and the people’s prosperity” based on mutual benefits and welfare.

The new CMP is unlikely to come up with any concrete or new points to provide guidelines for the new coalition. In the past, Prime Minister Dahal had tried to skip the contentious issues with major powers to focus on development and economic partnership. This led the main opposition at the time, CPN-UML, to blame the Dahal government for giving less priority to the relationship with China.  

Now the UML has become a key coalition partner in the Dahal-led government, and it will be interesting to see how the Maoists and UML will reconcile their differences. 

NP Saud, the former foreign minister from the Nepali Congress, says Nepal’s foreign policy is based on non-alignment and UN charter but in practice the country needs to make cordial ties with immediate neighbors India and China and other major countries.  

“Under my leadership, we have been successful in creating an environment of trust with both neighbors and other big powers. We signed energy trade cooperation with India which is instrumental to bring foreign investment in Nepal’s hydropower and other areas.” 

He adds that the previous coalition government also convinced the US and other western powers to make investment in Nepal, while the relationship with China was also moving in a positive direction. 

“There is an opportunity for this coalition government to bring in huge investments from the US and the UK. It will be a wise idea for the new coalition to follow the path that we have created in the last one year,” suggests Saud.

Dr. Nihar R. Nayak, research fellow with India’s think tank MP-IDSA, says given Nepal’s geostrategic location, Nepal does not have leverage to bring about strong changes in the conduct of foreign policy irrespective of which party comes into the power. 

“The policy of neutrality, Panchansheel,  non-alignment and not to join any military alliances are the key issues that the new coalition is likely to reiterate while conducting the foreign policy. The new coalition I think will try to keep a cordial relationship with neighbors and other powers such as the US, the UK, Japan, South Korea and other key development partners.” 

In China, Nihar predicts that there could be some progress on the BRI projects as both China and the left government want to move ahead with it. 

“China is likely to adopt some sort of flexibility in the negotiations with BRI such as concessional loans and other issues. 

In India, Nihar says, “there will not be any major changes and the current government is unlikely to raise any sensitive issues.”