Baburam, BIPPA and Bilateral Ties with India

Yuba Nath Lamsal

No sooner Nepal and India signed Bilateral Investment Protection and
Promotion Agreement or BIPPA, than scathing salvo started being fired at
Prime Minister Dr Baburam Bhattarai and his government both in parliament
and outside. A hardliner faction within his own Maoist party has come out
openly criticizing the Prime Minister for what it called compromising
national interest and sovereignty to New Delhi, while opposition parties
used public forum to criticize the BIPPA agreement. Hardliner Maoist cadres
demonstrated in front of the main gate of the Tribhuvan International
Airport and greeted the Prime Minister with flag flags when he returned from
India sojourn.

There are two sets of opinion on the BIPPA. A section of people are critical
of the agreement and dub it as a national capitulation and surrender of our
national interest to India. There are other types of people who have blindly
supported the deal saying the deal was a step towards bringing foreign
investment which is necessary for the country's industrialization and
economic prosperity. Both types of opinion have flaws and limitation. Those
who praise the deal are of the view that the BIPPA would be instrumental and
catalyst for attracting Indian investment which would transform Nepal into
an industrialized economy. In fact, this view, too, lack objective analysis.

If we look at the deal and other situation and circumstances, we should
neither be jubilant nor desperate. The BIPPA does not contain any provision
that is objectionable. The deal contains the provisions of compensation to
be paid by the state if the production and business of the Indian companies
are hampered and obstructed. This has also clearly specified the conditions.
The government does not have to pay compensation in every circumstance. If
production or business of the Indian enterprises is obstructed because of
the declaration of emergency, natural calamity, war and civil strife, the
government is liable to pay compensation. Earlier there was an apprehension
that Nepal would have to pay compensation for any kind of obstruction
including the one caused by labour strike. In other word, the BIPPA deny the
workers with the right to revolt and strike to press for their demand. But
this provision does not exist, which is a matter of solace for us, to a
certain extent. However, there are still some ambiguities in some
provisions. This is related to natural disaster. There are countries in the
world that have signed similar kind of agreement. The basic spirit of BIPPA
signed by any two countries contains the provision of compensation, which is
to be paid by the host government only when business is obstructed due to
state's policies, decisions and actions. Natural calamity is beyond human
and government's control. The provision that seeks compensation for
obstruction of industry due to natural calamity, thus, cannot be justified
and is also not be in the interest of Nepal.

So far as the praise of the deal is concerned, this is also another extreme.
Nepal is not likely to benefit much from it. India is our close neighbour
and big economy whose products have unrestricted access to Nepali market.
Nepal currently does not have any kind of natural resources and raw material
for which Indian businesses may invest. Raw materials have to be brought
from outside for manufacturing or assembling industries in Nepal. This makes
Nepali products relatively costly. Compared to the products manufactured in
Nepal are costlier than those manufactured in India. Since Indian products
have free access to Nepal, Nepali products usually cannot compete with
Indian goods. When there is unrestricted access to Nepali market for the
Indian products, the Indian investment in Nepal may not be forthcoming.
Moreover, Nepal lacks infrastructure and other services required for
industrial growth, which may discourage external investment. More than that
Nepali market is so small that big manufacturers are less likely to come to
Nepal for investment. The only sector that is attractive for foreign
investment in Nepal is hydro-power. Even for hydro-power, Chinese are more
interested and more skilled, who should be lured. The track record of Indian
businesses in hydro-power is not good. It has been more than a decade since
the accord for Pancheswar Hydro-power project was signed. But no work has so
far been initiated to develop this project. The tendency of Indian companies
and Indian government is to keep Nepal's hydro-power project in their hand
and keep on holding so that other countries may not come up with investment
in Nepal. Indian companies have, so far, not developed any single
hydro-power project even if they got license. Given this track record,
Indian investors are less likely to develop any hydro-power project in
Nepal.

So far as the contents of the BIPPA are concerned, there is, on the surface,
nothing objectionable in the agreement. It is primarily a deal to protect
Indian investment in Nepal. A country that is desperately seeking foreign
investment including the one from India, signing BIPPA with India should not
create big furor. BIPPA is government's guarantee to protect Indian
investment in Nepal. Our government has concluded an international agreement
to protect foreign investment. As a member of the World Bank, Nepal has
already entered into the Multilateral Investment Guarantee Agency (MIGA)
which covers protection of all international investment in Nepal including
Indian investment. MIGA has already made BIPPA irrelevant. Thus, the BIPPA
has nothing new but an attempt of Nepal's present government to assure India
that it would seriously look into Indian interests including investment.

This write up intends neither to criticize nor condemn the BIPPA signed with
India because it does not contain any new provision in it. Prime Minister
Baburam Bhattarai has claimed that BIPPA is a milestone in Nepal-India
relations especially in connection with Indian investment in Nepal. However,
the agreement is not what it has been said. BIPPA is not likely to bring any
significant Indian investment.

Since BIPPA is nothing new the criticism is just for the sake of criticism.
But there is definitely procedural mistakes in signing the agreement. India
had long ago proposed this agreement and Nepal had kept on deferring it.
This issue had been raised even during the official visit of ex-prime
minister Madhav Kumar Nepal but Mr Nepal had deliberately put it on hold.
Prime Minister Bhattarai was aware that India would push for this agreement
during his New Delhi sojourn. He could have consulted with other parties
and got their consent on the agreement so that his critics both within his
own party and also outside would not have ground to assail him. However, on
the contrary, the Prime Minister, prior to his departure for New Delhi
sojourn, stated both in public and private that he would not sign any deal
with India having long-term impact but would take only those measures that
build confidence with the Indian establishment as well as the people. Other
parties, too, could have given their consent easily had Bhattarai sought
their cooperation genuinely which would have made his position stronger.
Prime Minister Bhattarai kept all political parties and people in dark on
this issues. Herein lies the fundamental flaw. Firstly, people felt that
Bhattarai lied the people and entered into the agreement against his own
promise. Failure to take parties into confidence and signing the agreement
against his own promises are the main issues of debate and controversy.

One thing we must take into account is the fact that Nepal and India have
asymmetrical relations in all fronts. Nepalese people are always extra
sensitive towards any kind of deal with India. History has proved that Nepal
has always been cheated in dealing with India be it during the period of
British colonial rule or after India's independence. The imposition of
Sugauli Treaty which reduced Nepal into the semi-colonial status is the
beginning of Nepal's asymmetrical relationship with India. There is a
widespread feeling among the people of Nepal that India always applies
coercive diplomacy in order to squeeze Nepal in every deal. When India got
Independence, New Delhi adopted the same old colonial policy in its
neighbourhood especially in dealing with its smaller and weaker neighbours
like Nepal, Bhutan, Sri Lanka. This was reinforced in the 1950 treaty with
Nepal as New Delhi hastened to sign an agreement with the outgoing
oligarchic regime, which Nepalese people have dubbed as an unequal treaty
and are demanding its abrogation. Agreement on Koshi and Gandaki dams, 1965
security treaty, and Mahakali treaty are the testament of India's hegemonic
and coercive policy towards Nepal. We have been cheated in all these
agreements. Whenever Nepal enters into any kind of agreement with India,
Nepalese people become susceptible. The present case with BIPPA can be
viewed against this background. The hush-hush manner with which BIPPA was
signed has created a sense of suspicion among the people. Had the Prime
Minister Bhattarai concluded this agreement in a more transparent manner
taking the political parties into confidence, it would have cleared
suspicion and created more congenial environment to work together. The
Nepali government and leaders must learn lesson from all past agreements and
make thorough homework before entering into any kind of deal with India.
Otherwise there are always chances of being cheated by the wolf at our next
door.