They say you can choose your enemies, but not your neighbours. This rings true especially for small nation states bordering much larger ones.
And that is also what Mao Zedong told King Mahendra in Beijing in 1967, and it is the message successive Chinese leaders have given to Nepal’s rulers ever since: be clever, don’t rock the boat, learn to live with India.&nbsp;
In Beijing in 1988, Deng Xiaoping and Rajiv Gandhi demarcated each other's &nbsp;spheres of influence: south of the Himalaya India calls the shots, and north of it (including Tibet) China does.&nbsp;
Lila Nyaichyai, who did her PhD on Chinese Public Diplomacy in Nepal from Yunnan University, says China’s main concern in Nepal is stability.
“As a country grows to become a global power, its aspirations do too,” she says. “But China hasn’t cared much about whether Nepal is a monarchy, a democracy, or a federal republic as long as it is politically stable for development.”
Nepal’s royal rulers navigated the Cold War between the Soviet Union and the United States successfully, getting both to contribute to the country’s development. But the dramatic rise of India and China as global powers, and the fact that they are rivals in Nepal’s immediate neighbourhood has made the need for balance much more critical now.&nbsp;
A template could be the way Finland survived the Cold War between next door Soviet Union and the West. It did not join the Warsaw Pact, but its reference group was the other Nordics. The country decided to keep Moscow at arms length by appeasing it — a strategy that came to be called ‘Finlandisation’.
“Finlandisation was this attitude of yielding to pressure from a big brother,” Finnish journalist and author Katri Merikallio explained to me during a recent visit to Helsinki. “Finland remained independent, but its sovereignty was narrowed. There was a price to pay. We must acknowledge the risks that such a balancing involves, both for the sovereignty of a nation but also for internal politics.”
It was a survival tactic that saved Finland from being arm-twisted by the Soviet Union, like Hungary in 1956 and Czechoslovakia in 1968. But today with the Russian invasion of Ukraine, ‘Finlandisation’ is not in vogue anymore and Finland has joined NATO.
Nepal’s strategy of ‘equidistance’ between New Delhi and Beijing is somewhat similar to how Finland survived the Cold War. But it is a little more complicated than that. Indian strategists do not like the term ‘neutrality’ to characterise Nepal’s dealings with its regional rivals China and Pakistan.&nbsp;
South Asia is now in America’s blindspot with Trump’s turbulent second term, and without Washington’s countervailing presence geopolitics has become much more slippery than Prithvi Narayan Shah’s yam analogy.&nbsp;
Back in Kathmandu, former Foreign Minister Bimala Rai Paudyal of the UML contends that despite their differences, bigger countries do come to an understanding, often at the expense of smaller neighbours. An example of this is China’s refusal to get involved in Nepal's Limiyadhura dispute with India.
“It will not be easy, but we must maintain our policy of equidistance in dealing with India and China,” Rai Paudyal told us. “We must assure both that we are not a security threat, and that Nepal’s prosperity and stability is in their national interest as well.”
Nepal is the oldest nation state in South Asia, and has survived invasions, expansionist empires, and neighbours who do not see eye to eye with each other thanks to master strategists like Jang Bahadur Rana, Chandra Shumsher and King Mahendra.
Today, Nepal is one of the few remaining open societies in Asia with a free press, and a fragile yet rambunctious democracy. Yet feckless governments with leaders unskilled to steer a safe course in a volatile region means Nepal has never been as vulnerable to outside interference as it is today (page 1).
Here in Helsinki, NATO membership has finally finished off Finlandisation. It is a lesson for Nepal about how quickly the geopolitical terrain can shift and upend a nation’s established foreign policy doctrine. &nbsp;
Nepal needs to be supple and agile, pragmatic and self-confident. This will require monumental political reform marked by greater accountability, transparency, and good governance at home.&nbsp;
In other words, secure relations with our two giant neighbours needs sturdier domestic politics.
Sonia Awale in Helsinki

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Love thy neighbours

<figure><img src="https://superdesk-pro-c.s3.amazonaws.com/sd-nepalitimes/20221109191116/636beeb34b0ad905ca02ef60jpeg.jpg" alt="" width="1500" height="1112"/><figcaption>Charge d' Affaires L. Douglas welcomes BP Koirala to the US Embassy inaguration in 1959.</figcaption></figure>On 15 December 1960 (पुस १) exactly 60 years ago, King Mahendra ordered the jailing of Prime Minister BP Koirala and other political figures, many of whom the Nepali people had put in power 18 months earlier in Nepal's first-ever election.Ending a decade of democratic experimentation, Mahendra decided to rule the country directly. After his death in 1972 his son Birendra took power. Many of today's top political leaders cut their political teeth in years of underground opposition to the monarchy.The U S government at the time noted that Mahendra's coup was accomplished ‘with great secrecy and superb organisation’. After 1960, the US slowly shifted its approach in Nepal, embracing the monarchy and moving away from democratic reform.<img src="https://superdesk-pro-c.s3.amazonaws.com/sd-nepalitimes/20221109191116/636beeb64b0ad905ca02ef61jpeg.jpg" alt="" width="600" height="719">Ten years earlier, the globalisation of the Cold War had forced the US to pay more attention to South Asia. After China turned Communist in 1949 and war broke out on the Korean peninsula in 1950, Asian nations, particularly those near China, became hot spots for Cold War competition between the Soviet Union and China on one hand, and the US led capitalist democracies on the other.During the 1950s, believing economic progress and expanded political freedoms would inoculate Nepal against communist influence, the U S offered aid programs and supported democratic reforms. As part of this vision, Washington promoted health and agriculture programs but also, in part to counter populist Communist Chinese programs, pushed for economic leveling programs such as land reform.In the late 1950s, the US grew increasingly concerned as China and the Soviet Union expanded activities in Nepal. A November 1960 National Security document warned that Nepal had become ‘a particularly vulnerable target’.But the US believed that Nepal's 1959 election had strengthened the country. Nepal, the National Security document noted, ‘currently enjoys greater internal stability than heretofore, following the introduction of popularly-based parliamentary government’.The US also thought highly of B P Koirala. A 1960 memo explained, ‘Koirala is intelligent, forceful, respected by his party, and popular with his people.’ He was ‘basically pro-Western and anti-Communist’ and didn't underestimate the communist threat, showing ‘grave concern’ about it.<img src="https://superdesk-pro-c.s3.amazonaws.com/sd-nepalitimes/20221109191116/636beeb84b0ad905ca02ef62jpeg.jpg" alt="" width="465" height="578">The US had a less positive view of Mahendra. He was seen as anti-communist and as a ‘stabilising and unifying force’ but seemed less forceful, and less consequential. An internal memo discounted him as ‘a conscientious man of simple tastes and austere habits … rather naive politically and not particularly forceful as a ruler … awkward socially, and indecisive’. It noted he had advanced some reforms but that ‘he is firmly convinced that a strong monarchy is necessary to insure stability’.The last lines of an April 1960 US memo raised the possibility of a royal takeover in Nepal, saying the king was not ‘irrevocably committed’ to representative government. But it discounted the possibility: ‘Such a drastic step is not anticipated.’A week after the coup, on 20 December, 1960, CIA Director Allen Dulles told the National Security Council that the King's ‘strange coup’ owed to two reasons: Koirala was ‘too progressive’ and had too ‘close relations’ with India. He warned of a more ‘archaic form of government’.US Ambassador Henry Stebbins met with Mahendra on 21 December, 1960 and cabled Washington to say that the King professed a strong belief in democracy, which he claimed he himself had brought to Nepal. He said he dismissed the Koirala government and imprisoned its leaders because they were guilty of corruption and of aiding and abetting Communism. In a letter to US President Dwight Eisenhower a couple days later, he also blamed poor administration.Stebbins did not buy it. He wrote: ‘Mahendra is guided less by the issues of corruption and Communism than by a growing fear that his own personal position and prestige were dwindling and that if he did not act soon, it might be too late." Stebbins thought the coup might yield ‘disastrous’ results.President Eisenhower addressed the Nepal coup at a 11 January 1961 meeting, just 10 days before handing over the office to John F Kennedy. He was reminded of ‘intensive Bloc efforts to detach Nepal from India's sphere of influence’. The choice was to support the Nepali Congress or create some kind of accommodation between the NC and the king. The US chose accommodation, pointing to ‘the inevitable chaos which would be exploited by the Communists … and the Nepali Congress’ presumed inability to establish a viable government’.But this didn't mean giving the king full legitimacy. As a later document put it, for a short time after the coup, the US maintained ‘correct relations’ with Mahendra but didn't openly back him ‘for fear of alienating the exiled NCP (Nepali Congress Party)’.Things began to shift a year later, by early 1962, even before the dramatic events of later that year on the Sino-Indian border. ‘State is considering a new emphasis in our Nepal policy,’ reported a February memo. Department officials ‘now believe the King will probably stay in power despite the recent sharp increase in NCP-sponsored dissident activity’. They showed new concern the King would turn to the Communist bloc. ‘State feels now may be the time to move closer to him, lest he look increasingly to the Bloc for support.’Democratic values seemed less a concern than power politics. ‘Our chief problem is to keep Nepal from becoming too dependent on Bloc aid, especially from Red China, and to preserve her strong economic ties with India. In the past, we’ve tuned our policy to New Delhi’s.’At first, though, coming round to support the King did not mean the abandoning US efforts at democratic reform within Nepal. Instead, the US hoped Mahendra could be the source of reform. Mahendra, it said, ‘is probably making almost as much progress with economic and social reform as the NCP did’. He appeared to embrace land reform as well.<img src="https://superdesk-pro-c.s3.amazonaws.com/sd-nepalitimes/20221109191116/636beeb94b0ad905ca02ef63jpeg.jpg" alt="" width="500" height="379">Everything changed in the fall of 1962 when China and India came to blows over disputed Himalayan territory. Catching the Indians flat footed, Chinese incursions spurred a reversal of India's hardline stance toward Mahendra. India abandoned support of Koirala and the Nepali Congress dissidents, and moved to win back Mahendra's favour. The U S lost leverage in Nepal, and land reform lost momentum.Mahendra continued to back भुमी सुधार land reform, but only outwardly. By March 1963, an American Ford Foundation official had noticed a new ‘spirit of complacency’ in Kathmandu on the issue. He wrote: ‘The desire to move ahead with the measures of unquestioned importance for the welfare of Nepal, so evident in September is hard to find now.’A sea change in Nepal politics had occurred. Observers began to see the 1950s as a restoration, not a revolution. The monarchy had returned to full power, not the people. The US, once a strong voice for democracy in Nepal, now supported the king and gave up on programs such as land reform.America's Reform Push in 1950s NepalVisiting Kathmandu in 1953, US Ambassador to India and Nepal Chester Bowles confronted a tricky issue: As an outsider working in a starkly hierarchical society, how much should you work with the existing power structure and how much to push for change?Nepal's land ownership patterns, some of the most unequal in Asia, spurred Bowles to ponder this question. He had come to Nepal to meet with Nepal's King Tribhuvan to discuss land reform. How hard should the U S push?Many foreigners in Nepal do not see the country's harsh hierarchies. Or they see parts, such as class and gender divisions, but miss more unfamiliar caste and ethnic divisions. I still remember my disappointment visiting Dang a few years ago after the end of the Maoist war, and learning that, of the many foreign volunteers working in the district, all of whom lived with local families, not one lived with a Tharu or Dalit family.But Bowles had an unusual background, and the early 1950s were a special moment. He had emerged from a progressive tradition, connected to the Great Depression of the 1930s, that had emphasised structural poverty and social reform. And because of family relations, he possessed a much deeper understanding of America's history of racial discrimination than many white Americans. In the 1950s, he pioneered opportunities <a href="https://www.nepalitimes.com/here-now/african-americans-in-cold-war-nepal/">for African Americans as diplomats</a>, including in Nepal.In February 1953 Bowles <a href="https://archive.nepalitimes.com/article/nation/land-reform-in-cold-war-Nepal,4192">travelled from New Delhi to Kathmandu</a> to meet with Nepali government officials, including King Tribhuvan, to discuss new American development programs for Nepal. In the previous year the US had started mineral surveys, agriculture, and health programs. But most of all Bowles wanted to discuss land reform.<figure><img src="https://superdesk-pro-c.s3.amazonaws.com/sd-nepalitimes/20221109191116/636beebb4b0ad905ca02ef64jpeg.jpg" alt="" width="640" height="357"><figcaption>Chester Bowles Papers (MS 628). Manuscripts and Archives, Yale University Library</figcaption></figure>Few Asian countries had starker disparities in land ownership than Nepal. A UN report as far back as 1952 highlighted that fully one-fourth of Nepal's cultivable land was tax-free birta and that the jamindar landlord class held most of the other land. ‘The illiterate peasants,’ the report said, ‘are always exploited by Zamindars and used for state labour.’ Rents ate as much as 50% of each crop.Unequal land distribution seemed to hold Nepal back economically and politically. But it was a tricky issue. How much should Bowles push? Would he alienate powerful Nepalis he hoped to win over to the US side?The early 1950s saw new worlds emerge. In the previous five years, three huge earthquakes had shaken South Asia's political landscape: Indian independence from Great Britain (1947), the Chinese communist party's takeover of China (1949), and war in Korea (1950).<figure><img src="https://superdesk-pro-c.s3.amazonaws.com/sd-nepalitimes/20221109191116/636beebc4b0ad905ca02ef65jpeg.jpg" alt="" width="300" height="422"><figcaption>The cover of Bowles’ book, Ambassador’s Report, 1954</figcaption></figure>Both Nepal and the US stood at the crossroads. In Nepal, after the Rana regime that had ruled for a century collapsed in 1950, a new coalition government promised democracy and development.The U S had emerged from World War II Asia's most dominant power. The British departed. War between North and South Korea had intensified Cold War competition between the Soviet Union and its communist allies and the United States and its democratic capitalist allies all over Asia, particularly those, like Nepal, near China's borders. ‘The invasion of Tibet by Chinese Communists,’ Bowles wrote in 1952, ‘has catapulted Nepal into the front line of the cold war.”To bolster Nepal, the U S relied upon India’s security umbrella, but also economic development programs. The US gave taxpayer dollars for health and agriculture programs in Nepal for altruistic reasons, but also for geopolitical gain. But would these programs succeed without more equal access to the single most essential resource in Nepal's rural society: land?On one hand, pushing for land reform could be seen as a kind of internal interference, an overreach that smacked of imperialism. Even if in the name of greater equality, what gave the US the authority to judge right and wrong and to decide the path for change? And didn't the US have its own huge problems of inequality?On the other hand, the US was giving hard-earned resources for programs desperately needed in Nepal. Bowles wanted those programs to be effective. It might be convenient to partner with the castes, classes, and genders that ran Nepal, but wouldn't that just reinforce them? Today, especially in the wake of Acemoglu and Robinson's influential 2012 book Why Nations Fail, ideas of ‘inclusive institutions’ and ‘inclusive development’ have become conventional wisdom among development professionals. Wasn't Bowles simply pursuing an early variant of this?In a candid letter from early 1953, Bowles reflected on exactly this dilemma: how much should an outside country like the US press for internal reforms in Nepal. Bowles noted that the year before he had proposed that US foreign aid be denied to any country not making sincere progress at land reform and other internal reforms. He also noted that many diplomats and policymakers strongly disagreed, seeing his proposal as inappropriate internal meddling.In the end, he decided that donor countries must insist upon certain ‘basic reforms’ within recipient countries or else ‘our aid is wasted’. Pressure for reforms should not be dismissed as interference, as he saw it, because development aid would fail without those reforms. To not push for serious reforms would be not just nonsensical but also counterproductive; it would mean ‘wasted’ aid.<img src="https://superdesk-pro-c.s3.amazonaws.com/sd-nepalitimes/20221109191116/636beebd4b0ad905ca02ef66jpeg.jpg" alt="" width="693" height="847">In the early 1950s, several factors made it easier for Bowles to make these arguments in Nepal. Prominent Nepali Congress leaders like B P Koirala also called for land reform. And it seemed that such efforts would help counter the appeal of Chinese and Soviets calls for resource redistribution. So Bowles wasn't really going far out on a limb.In his 1953 meeting with Tribuvan and his advisers, including some of Nepal's wealthiest men, Bowles pushed hard for land reform. Many American programs in the 1950s, including its flagship program in Chitwan, featured strong land reform programs. In the end, they often failed to deliver much social levelling, but not for lack of trying.American programs in Nepal in the 1950s reflected the reformer hopes of Bowles. <a href="http://archive.nepalitimes.com/article/Nepali-Times-Buzz/how-chitwan-was-opened,4159">Paul Rose</a>, the top US official actually based in Nepal from 1952 to 1958, described U S programs in Nepal as a ‘prescription for revolution’.On 15 December 1960,  Tribhuvan's son Mahendra seized absolute power. For a couple years, the US government continued to push for land reform in Nepal but the push for such reform would not last long. In the early 1960s, people and politics would align in a very different pattern than in the early 1950s.<a href="https://www.nepalitimes.com/here-now/african-americans-in-cold-war-nepal/">Tom Robertson</a>, PhD, is author of  Notes from the Archive: U.S. Ambassador Chester Bowles’s 1953 Letter to King Tribhuvan, about Land Reform and U S Development Programs in Nepal, Studies in Nepali History and Society, December 2020.

America, Nepal and the Royal Coup

<figure><img src="https://superdesk-pro-c.s3.amazonaws.com/sd-nepalitimes/20221109181144/636be7ae9c7e80680e087817jpeg.jpg" alt="" width="1500" height="1112"/><figcaption>Charge d' Affaires L. Douglas welcomes BP Koirala to the US Embassy inaguration in 1959.</figcaption></figure>On 15 December 1960 (पुस १) exactly 60 years ago, King Mahendra ordered the jailing of Prime Minister BP Koirala and other political figures, many of whom the Nepali people had put in power 18 months earlier in Nepal's first-ever election.Ending a decade of democratic experimentation, Mahendra decided to rule the country directly. After his death in 1972 his son Birendra took power. Many of today's top political leaders cut their political teeth in years of underground opposition to the monarchy.The U S government at the time noted that Mahendra's coup was accomplished ‘with great secrecy and superb organisation’. After 1960, the US slowly shifted its approach in Nepal, embracing the monarchy and moving away from democratic reform.<img src="https://superdesk-pro-c.s3.amazonaws.com/sd-nepalitimes/20221109181144/636be7b19c7e80680e087818jpeg.jpg" alt="" width="600" height="719">Ten years earlier, the globalisation of the Cold War had forced the US to pay more attention to South Asia. After China turned Communist in 1949 and war broke out on the Korean peninsula in 1950, Asian nations, particularly those near China, became hot spots for Cold War competition between the Soviet Union and China on one hand, and the US led capitalist democracies on the other.During the 1950s, believing economic progress and expanded political freedoms would inoculate Nepal against communist influence, the U S offered aid programs and supported democratic reforms. As part of this vision, Washington promoted health and agriculture programs but also, in part to counter populist Communist Chinese programs, pushed for economic leveling programs such as land reform.In the late 1950s, the US grew increasingly concerned as China and the Soviet Union expanded activities in Nepal. A November 1960 National Security document warned that Nepal had become ‘a particularly vulnerable target’.But the US believed that Nepal's 1959 election had strengthened the country. Nepal, the National Security document noted, ‘currently enjoys greater internal stability than heretofore, following the introduction of popularly-based parliamentary government’.The US also thought highly of B P Koirala. A 1960 memo explained, ‘Koirala is intelligent, forceful, respected by his party, and popular with his people.’ He was ‘basically pro-Western and anti-Communist’ and didn't underestimate the communist threat, showing ‘grave concern’ about it.<img src="https://superdesk-pro-c.s3.amazonaws.com/sd-nepalitimes/20221109181144/636be7b39c7e80680e087819jpeg.jpg" alt="" width="465" height="578">The US had a less positive view of Mahendra. He was seen as anti-communist and as a ‘stabilising and unifying force’ but seemed less forceful, and less consequential. An internal memo discounted him as ‘a conscientious man of simple tastes and austere habits … rather naive politically and not particularly forceful as a ruler … awkward socially, and indecisive’. It noted he had advanced some reforms but that ‘he is firmly convinced that a strong monarchy is necessary to insure stability’.The last lines of an April 1960 US memo raised the possibility of a royal takeover in Nepal, saying the king was not ‘irrevocably committed’ to representative government. But it discounted the possibility: ‘Such a drastic step is not anticipated.’A week after the coup, on 20 December, 1960, CIA Director Allen Dulles told the National Security Council that the King's ‘strange coup’ owed to two reasons: Koirala was ‘too progressive’ and had too ‘close relations’ with India. He warned of a more ‘archaic form of government’.US Ambassador Henry Stebbins met with Mahendra on 21 December, 1960 and cabled Washington to say that the King professed a strong belief in democracy, which he claimed he himself had brought to Nepal. He said he dismissed the Koirala government and imprisoned its leaders because they were guilty of corruption and of aiding and abetting Communism. In a letter to US President Dwight Eisenhower a couple days later, he also blamed poor administration.Stebbins did not buy it. He wrote: ‘Mahendra is guided less by the issues of corruption and Communism than by a growing fear that his own personal position and prestige were dwindling and that if he did not act soon, it might be too late." Stebbins thought the coup might yield ‘disastrous’ results.President Eisenhower addressed the Nepal coup at a 11 January 1961 meeting, just 10 days before handing over the office to John F Kennedy. He was reminded of ‘intensive Bloc efforts to detach Nepal from India's sphere of influence’. The choice was to support the Nepali Congress or create some kind of accommodation between the NC and the king. The US chose accommodation, pointing to ‘the inevitable chaos which would be exploited by the Communists … and the Nepali Congress’ presumed inability to establish a viable government’.But this didn't mean giving the king full legitimacy. As a later document put it, for a short time after the coup, the US maintained ‘correct relations’ with Mahendra but didn't openly back him ‘for fear of alienating the exiled NCP (Nepali Congress Party)’.Things began to shift a year later, by early 1962, even before the dramatic events of later that year on the Sino-Indian border. ‘State is considering a new emphasis in our Nepal policy,’ reported a February memo. Department officials ‘now believe the King will probably stay in power despite the recent sharp increase in NCP-sponsored dissident activity’. They showed new concern the King would turn to the Communist bloc. ‘State feels now may be the time to move closer to him, lest he look increasingly to the Bloc for support.’Democratic values seemed less a concern than power politics. ‘Our chief problem is to keep Nepal from becoming too dependent on Bloc aid, especially from Red China, and to preserve her strong economic ties with India. In the past, we’ve tuned our policy to New Delhi’s.’At first, though, coming round to support the King did not mean the abandoning US efforts at democratic reform within Nepal. Instead, the US hoped Mahendra could be the source of reform. Mahendra, it said, ‘is probably making almost as much progress with economic and social reform as the NCP did’. He appeared to embrace land reform as well.<img src="https://superdesk-pro-c.s3.amazonaws.com/sd-nepalitimes/20221109181144/636be7b59c7e80680e08781ajpeg.jpg" alt="" width="500" height="379">Everything changed in the fall of 1962 when China and India came to blows over disputed Himalayan territory. Catching the Indians flat footed, Chinese incursions spurred a reversal of India's hardline stance toward Mahendra. India abandoned support of Koirala and the Nepali Congress dissidents, and moved to win back Mahendra's favour. The U S lost leverage in Nepal, and land reform lost momentum.Mahendra continued to back भुमी सुधार land reform, but only outwardly. By March 1963, an American Ford Foundation official had noticed a new ‘spirit of complacency’ in Kathmandu on the issue. He wrote: ‘The desire to move ahead with the measures of unquestioned importance for the welfare of Nepal, so evident in September is hard to find now.’A sea change in Nepal politics had occurred. Observers began to see the 1950s as a restoration, not a revolution. The monarchy had returned to full power, not the people. The US, once a strong voice for democracy in Nepal, now supported the king and gave up on programs such as land reform.America's Reform Push in 1950s NepalVisiting Kathmandu in 1953, US Ambassador to India and Nepal Chester Bowles confronted a tricky issue: As an outsider working in a starkly hierarchical society, how much should you work with the existing power structure and how much to push for change?Nepal's land ownership patterns, some of the most unequal in Asia, spurred Bowles to ponder this question. He had come to Nepal to meet with Nepal's King Tribhuvan to discuss land reform. How hard should the U S push?Many foreigners in Nepal do not see the country's harsh hierarchies. Or they see parts, such as class and gender divisions, but miss more unfamiliar caste and ethnic divisions. I still remember my disappointment visiting Dang a few years ago after the end of the Maoist war, and learning that, of the many foreign volunteers working in the district, all of whom lived with local families, not one lived with a Tharu or Dalit family.But Bowles had an unusual background, and the early 1950s were a special moment. He had emerged from a progressive tradition, connected to the Great Depression of the 1930s, that had emphasised structural poverty and social reform. And because of family relations, he possessed a much deeper understanding of America's history of racial discrimination than many white Americans. In the 1950s, he pioneered opportunities <a href="https://www.nepalitimes.com/here-now/african-americans-in-cold-war-nepal/">for African Americans as diplomats</a>, including in Nepal.In February 1953 Bowles <a href="https://archive.nepalitimes.com/article/nation/land-reform-in-cold-war-Nepal,4192">travelled from New Delhi to Kathmandu</a> to meet with Nepali government officials, including King Tribhuvan, to discuss new American development programs for Nepal. In the previous year the US had started mineral surveys, agriculture, and health programs. But most of all Bowles wanted to discuss land reform.<figure><img src="https://superdesk-pro-c.s3.amazonaws.com/sd-nepalitimes/20221109181144/636be7b79c7e80680e08781bjpeg.jpg" alt="" width="640" height="357"><figcaption> </figcaption></figure>Few Asian countries had starker disparities in land ownership than Nepal. A UN report as far back as 1952 highlighted that fully one-fourth of Nepal's cultivable land was tax-free birta and that the jamindar landlord class held most of the other land. ‘The illiterate peasants,’ the report said, ‘are always exploited by Zamindars and used for state labour.’ Rents ate as much as 50% of each crop.Unequal land distribution seemed to hold Nepal back economically and politically. But it was a tricky issue. How much should Bowles push? Would he alienate powerful Nepalis he hoped to win over to the US side?The early 1950s saw new worlds emerge. In the previous five years, three huge earthquakes had shaken South Asia's political landscape: Indian independence from Great Britain (1947), the Chinese communist party's takeover of China (1949), and war in Korea (1950).<figure><img src="https://superdesk-pro-c.s3.amazonaws.com/sd-nepalitimes/20221109181144/636be7b89c7e80680e08781cjpeg.jpg" alt="" width="300" height="422"><figcaption> </figcaption></figure>Both Nepal and the US stood at the crossroads. In Nepal, after the Rana regime that had ruled for a century collapsed in 1950, a new coalition government promised democracy and development.The U S had emerged from World War II Asia's most dominant power. The British departed. War between North and South Korea had intensified Cold War competition between the Soviet Union and its communist allies and the United States and its democratic capitalist allies all over Asia, particularly those, like Nepal, near China's borders. ‘The invasion of Tibet by Chinese Communists,’ Bowles wrote in 1952, ‘has catapulted Nepal into the front line of the cold war.”To bolster Nepal, the U S relied upon India’s security umbrella, but also economic development programs. The US gave taxpayer dollars for health and agriculture programs in Nepal for altruistic reasons, but also for geopolitical gain. But would these programs succeed without more equal access to the single most essential resource in Nepal's rural society: land?On one hand, pushing for land reform could be seen as a kind of internal interference, an overreach that smacked of imperialism. Even if in the name of greater equality, what gave the US the authority to judge right and wrong and to decide the path for change? And didn't the US have its own huge problems of inequality?On the other hand, the US was giving hard-earned resources for programs desperately needed in Nepal. Bowles wanted those programs to be effective. It might be convenient to partner with the castes, classes, and genders that ran Nepal, but wouldn't that just reinforce them? Today, especially in the wake of Acemoglu and Robinson's influential 2012 book Why Nations Fail, ideas of ‘inclusive institutions’ and ‘inclusive development’ have become conventional wisdom among development professionals. Wasn't Bowles simply pursuing an early variant of this?In a candid letter from early 1953, Bowles reflected on exactly this dilemma: how much should an outside country like the US press for internal reforms in Nepal. Bowles noted that the year before he had proposed that US foreign aid be denied to any country not making sincere progress at land reform and other internal reforms. He also noted that many diplomats and policymakers strongly disagreed, seeing his proposal as inappropriate internal meddling.In the end, he decided that donor countries must insist upon certain ‘basic reforms’ within recipient countries or else ‘our aid is wasted’. Pressure for reforms should not be dismissed as interference, as he saw it, because development aid would fail without those reforms. To not push for serious reforms would be not just nonsensical but also counterproductive; it would mean ‘wasted’ aid.<img src="https://superdesk-pro-c.s3.amazonaws.com/sd-nepalitimes/20221109181144/636be7b99c7e80680e08781djpeg.jpg" alt="" width="693" height="847">In the early 1950s, several factors made it easier for Bowles to make these arguments in Nepal. Prominent Nepali Congress leaders like B P Koirala also called for land reform. And it seemed that such efforts would help counter the appeal of Chinese and Soviets calls for resource redistribution. So Bowles wasn't really going far out on a limb.In his 1953 meeting with Tribuvan and his advisers, including some of Nepal's wealthiest men, Bowles pushed hard for land reform. Many American programs in the 1950s, including its flagship program in Chitwan, featured strong land reform programs. In the end, they often failed to deliver much social levelling, but not for lack of trying.American programs in Nepal in the 1950s reflected the reformer hopes of Bowles. <a href="http://archive.nepalitimes.com/article/Nepali-Times-Buzz/how-chitwan-was-opened,4159">Paul Rose</a>, the top US official actually based in Nepal from 1952 to 1958, described U S programs in Nepal as a ‘prescription for revolution’.On 15 December 1960,  Tribhuvan's son Mahendra seized absolute power. For a couple years, the US government continued to push for land reform in Nepal but the push for such reform would not last long. In the early 1960s, people and politics would align in a very different pattern than in the early 1950s.<a href="https://www.nepalitimes.com/here-now/african-americans-in-cold-war-nepal/">Tom Robertson</a>, PhD, is author of  Notes from the Archive: U.S. Ambassador Chester Bowles’s 1953 Letter to King Tribhuvan, about Land Reform and U S Development Programs in Nepal, Studies in Nepali History and Society, December 2020.

Tom Robertson

<img width="675" height="849" src="https://superdesk-pro-c.s3.amazonaws.com/sd-nepalitimes/20221109181144/636be7739c7e80680e0877ffjpeg.jpg" alt=""/>It was a hazy winter afternoon  when without warning at exactly 1PM, soldiers appeared on the streets of Kathmandu. Singha Darbar was cordoned off. Politicians, including Prime Minister B P Koirala who had been elected a year-and-half previously, were picked up simultaneously from their homes or offices, and hauled off to prison.   On Tuesday, 15 December it will be exactly 60 years since that fateful day which would determine the course of Nepal’s history for decades. King Mahendra and Prime Minister BP Koirala met at the palace for dinner a few days before the putsch. The King had just returned from a four-month trip to Japan, the United States and UK, and top secret plans were already in place for the coup d'état. Years later, Koirala related how towards the end of that meal, Mahendra (wearing trademark shades even though it was dark inside the room) gestured to Queen Ratna to leave and told him: “There cannot be two lions in a cage.”BP writes in his memoir that he had a ‘love hate’ relationship with Mahendra, who appreciated his work ethic, but was increasingly jealous of his popularity. The King’s aversion to political parties was well known, zamindars hated BP’s new land reform bill, and Mahendra sensed that Nehru’s India and Mao’s China, for different reasons, could live with a coup, as long as it did not make Nepal unstable.So, on पुस १, २०१७ (first day of the month of Pous 2017) the King made his move. In a speech he accused the Nepali Congress government of “failure to maintain law and order, being anti-national, corrupt and unaccountable”. The Swiss Ambassador was visiting Kathmandu from New Delhi on 15 December, and wrote a long cable to Berne about how BP Koirala had earlier talked about the difficulty of maintaining Nepal’s neutrality amidst Cold War tensions.US Ambassador Henry E Stebbins had met King Mahendra on 9 December in which he was given no hints of what he was planning, even though preparations must have been at an advanced stage. After the coup, Stebbins wrote to President Eisenhower: ‘…we feel that the King’s motives in taking the precipitate action he did were guided less by the issues of corruption and Communism than by a growing fear that his own personal position and prestige were dwindling and that if he did not act soon, it might be too late . . . the real motive behind the move was the preservation of the monarchy and the Shah dynasty in its absolute form.’However, just as Mahendra reckoned, Nepal’s two giant neighbours went along. China’s annexation of Tibet had spooked the Indians and Americans, and the British were focused on continued Gurkha recruitment. In fact, Queen Elizabeth was in Kathmandu on a royal visit within two months of the coup, and even went tiger hunting in Chitwan. History repeats itself repeatedly in Nepal. In 2005, King Gyanendra staged a carbon copy royal-military coup. Like his father and Stebbins, Gyanendra hoodwinked British Ambassador Keith Bloomfield into thinking that a coup was the last thing on his mind. Gyanendra’s speech on 1 February 2005 was identical to Mahendra’s in 1960. The son followed his father’s footsteps. On the 60th anniversary of पुस १ Nepal comes another full circle as supporters of a return to a Hindu monarchy exploit the political disarray, infighting, governance failure and corruption, to march on the streets demanding the secular republican constitution be scrapped. Some of the geopolitical dynamics of the Cold War in 1960 are also playing out again as Washington and New Delhi align against Beijing. Hindutva politics  in India may also be pushing the pendulum back to the right in Nepal. Tune in to Tom Robertson's article on Nepali Times Weekend Longreads on Saturday 12 December with declassified papers with new revelations about the US response to King Mahendra's coup.

Kunda Dixit

‘Putsch Ek’

<img width="675" height="849" src="https://superdesk-pro-c.s3.amazonaws.com/sd-nepalitimes/20221109191116/636bee754b0ad905ca02ef48jpeg.jpg" alt=""/>It was a hazy winter afternoon  when without warning at exactly 1PM, soldiers appeared on the streets of Kathmandu. Singha Darbar was cordoned off. Politicians, including Prime Minister B P Koirala who had been elected a year-and-half previously, were picked up simultaneously from their homes or offices, and hauled off to prison.   On Tuesday, 15 December it will be exactly 60 years since that fateful day which would determine the course of Nepal’s history for decades. King Mahendra and Prime Minister BP Koirala met at the palace for dinner a few days before the putsch. The King had just returned from a four-month trip to Japan, the United States and UK, and top secret plans were already in place for the coup d'état. Years later, Koirala related how towards the end of that meal, Mahendra (wearing trademark shades even though it was dark inside the room) gestured to Queen Ratna to leave and told him: “There cannot be two lions in a cage.”BP writes in his memoir that he had a ‘love hate’ relationship with Mahendra, who appreciated his work ethic, but was increasingly jealous of his popularity. The King’s aversion to political parties was well known, zamindars hated BP’s new land reform bill, and Mahendra sensed that Nehru’s India and Mao’s China, for different reasons, could live with a coup, as long as it did not make Nepal unstable.So, on पुस १, २०१७ (first day of the month of Pous 2017) the King made his move. In a speech he accused the Nepali Congress government of “failure to maintain law and order, being anti-national, corrupt and unaccountable”. The Swiss Ambassador was visiting Kathmandu from New Delhi on 15 December, and wrote a long cable to Berne about how BP Koirala had earlier talked about the difficulty of maintaining Nepal’s neutrality amidst Cold War tensions.US Ambassador Henry E Stebbins had met King Mahendra on 9 December in which he was given no hints of what he was planning, even though preparations must have been at an advanced stage. After the coup, Stebbins wrote to President Eisenhower: ‘…we feel that the King’s motives in taking the precipitate action he did were guided less by the issues of corruption and Communism than by a growing fear that his own personal position and prestige were dwindling and that if he did not act soon, it might be too late . . . the real motive behind the move was the preservation of the monarchy and the Shah dynasty in its absolute form.’However, just as Mahendra reckoned, Nepal’s two giant neighbours went along. China’s annexation of Tibet had spooked the Indians and Americans, and the British were focused on continued Gurkha recruitment. In fact, Queen Elizabeth was in Kathmandu on a royal visit within two months of the coup, and even went tiger hunting in Chitwan. History repeats itself repeatedly in Nepal. In 2005, King Gyanendra staged a carbon copy royal-military coup. Like his father and Stebbins, Gyanendra hoodwinked British Ambassador Keith Bloomfield into thinking that a coup was the last thing on his mind. Gyanendra’s speech on 1 February 2005 was identical to Mahendra’s in 1960. The son followed his father’s footsteps. On the 60th anniversary of पुस १ Nepal comes another full circle as supporters of a return to a Hindu monarchy exploit the political disarray, infighting, governance failure and corruption, to march on the streets demanding the secular republican constitution be scrapped. Some of the geopolitical dynamics of the Cold War in 1960 are also playing out again as Washington and New Delhi align against Beijing. Hindutva politics  in India may also be pushing the pendulum back to the right in Nepal. Tune in to Tom Robertson's article on Nepali Times Weekend Longreads on Saturday 12 December with declassified papers with new revelations about the US response to King Mahendra's coup.

<figure><img width="1400" height="1011" src="https://superdesk-pro-c.s3.amazonaws.com/sd-nepalitimes/20221108101144/636a252a9c7e80680e0439b3jpeg.jpg" alt=""/><figcaption>Illustration: DIWAKAR CHETTRI</figcaption></figure>Venezuela is in the news worldwide for US-backed attempts to bring down the Nicolas Maduro government, but it is making headlines in Nepal because of conflicting statements by the ruling party and the government on a country on the other side of the world. NCP co-Chair Pushpa Kamal Dahal issued a harshly-worded statement condemning US ‘imperialism’, and he did it while Prime Minister K P Oli was in Davos trying to make the West forget that Nepal has a Communist government. Asked for a clarification by the US Embassy, the Ministry of Foreign Affairs fell back on more diplomatic language. Read also: <a href="https://www.nepalitimes.com/?p=20774&amp;preview=true" target="_blank" rel="noopener">A yam between 3 boulders</a>, Editorial<a href="https://www.nepalitimes.com/?p=20802&amp;preview=true" target="_blank" rel="noopener">Nepal now has to balance not just India and China, but also the West</a>, Bhairaja Pandey<a style="background-color: #ffffff; font-size: 15px; letter-spacing: 0.01em;" href="https://www.nepalitimes.com/?p=20801&amp;preview=true" target="_blank" rel="noopener">Eminently beneficial for India and Nepal</a>, Ajit BaralThe Venezuela controversy exposed a fault-line between ex-UML and ex-Maoist elements within the NCP. It also brought into sharp focus Nepal’s need now to balance not just its northern and southern neighbours, but also the West. The pre-1990 bipolar world has turned into a multi-polar Cold War, and analysts say Nepal needs to be more careful about not being dragged into any of the alliances. Nepal’s location makes this new geopolitics much more sensitive than ever before. China is a rising global power, India is aspiring to be the same, and America is trying to rope New Delhi into its geostrategic alliance. Nepal has to take advantage of the economic powerhouses to the north and south by hitching its wagons to the Indian and Chinese locomotives, and try to get them to pull it in the same direction. For this it needs a new coherent foreign policy strategy that does not allow outside powers to back proxies in Kathmandu.

Hitching our wagon

The monsoon has got bad press because Nepal’s tourism operators actively told visitors to avoid <a href="https://nepalitimes.com/opinion/managing-the-monsoon?%2F">the rainy season</a>. It is time to change that. The reason can be found right here in the vast alpine meadows of Central Nepal where this time of year you can walk on velvet grass of pastures abloom with delicate pink, red and yellow flowers as the mist rolls up the valley. There is no sound except the hum of bumble bees. &nbsp;&nbsp; There are dozens of places across high Nepal called Chaurikharka, which means yak pasture. But this particular Chaurikharka in Rukum East located at an altitude of 4,000m stands out for its serene beauty, rustic charm and bucolic setting. There is just the occasional chime of <a href="https://nepalitimes.com/here-now/when-yaks-go-so-does-culture">yak bells</a> in the distance, and the sharp whistle of herders corralling sheep. &nbsp;&nbsp; The grass shoots are so fragile that one hesitates to step on them, the rounded ridges appear and quickly vanish in waves of mist. With the<a href="https://nepalitimes.com/here-now/before-the-next-monsoon"> arrival of monsoon</a>, these meadows are a soothing shade of green dotted with millions of <a href="https://nepalitimes.com/review/the-anatomy-of-a-flower?%2F=">multi-coloured flowers</a>. Until very recently, it took a week or so to hike up to places like Chaurikharka, but with the expansion of the road network even to these far-flung mountains in the lap of Dhaulagiri, they are much more accessible. It is just a three-hour uphill from the Mid-Hill Highway on the border between Baglung and Rukum East.  <figure> <img src="https://publisher-publish.s3.eu-central-1.amazonaws.com/pb-nepalitimes/swp/asv65r/media/20250802130828_a0b06b494d751b2144ffbbf10894ea64b29e8aed844bc8c66171783abfaf4e16.jpg" data-media-id="editor_4" data-image-id="20250802130828_a0b06b494d751b2144ffbbf10894ea64b29e8aed844bc8c66171783abfaf4e16" data-rendition-name="original" width="2048" height="1365" loading="lazy" alt="Visit Nepal in the monsoon"> </figure>  Purists would say that such easy access devalues the sanctity of these remote high meadows, but it also means more people will be moved to treasure the experience, appreciate <a href="https://nepalitimes.com/banner/natures-fragile-gift-to-nepal">the value of nature </a>so they can take steps to protect it.&nbsp; To be sure, the <a href="https://nepalitimes.com/here-now/deadly-monsoon-in-nepal-turns-deadlier">monsoon season can be challenging for road travel</a>. The roads are rough even at the best of times, and in the monsoon they become muddy and treacherous, often blocked by<a href="https://nepalitimes.com/news/monsoon-deluge-in-nepal"> landslides</a>. But that could be precisely the kind of adventure that the more intrepid visitors crave. Improved road connectivity has already made Chaurikharka and places like Badimallika &nbsp;and other sacred lakes in the mountains of western Nepal popular with domestic tourists. What is driving this traffic is the urge to go to exotic new places and share videos and selfies on social media. Several of Nepal’s travel vloggers have visited Chaurikharka and popularised the place, enticing followers on TikTok or YouTube to retrace their footsteps. But even as they become more popular, these fragile and once-remote places should be protected from over-tourism.&nbsp;  <figure> <img src="https://publisher-publish.s3.eu-central-1.amazonaws.com/pb-nepalitimes/swp/asv65r/media/20250731110736_f97110b7cdc3e7f80d5877690948fc9f4c95a09c583deb23b07355491e6c5446.jpg" data-media-id="editor_8" data-image-id="20250731110736_f97110b7cdc3e7f80d5877690948fc9f4c95a09c583deb23b07355491e6c5446" data-rendition-name="original" width="1083" height="699" loading="lazy" alt="Visit Nepal in the monsoon NT"> </figure>  <h2>INCREASING FOOTFALL</h2> Chaurikharka is located in Bhume Rural Municipality of East Rukum, near the scenic valley of Dhorpatan in Baglung district. Even in the <a href="https://nepalitimes.com/banner/monsoon-culture">middle of the monsoon</a>, there is a steady stream of Nepali hikers trooping to these high pastures – especially during festival days like Saune Sankranti which this year was on 17 July and actually marks the auspicious beginning of the monsoon here. “This year the rains have not been as heavy and there have been some clear mornings when we could see everything from Dhaulagiri to Machapuchre,” says Khageswar Bhandari, who trekked up here from the road. “The flowers, the greenery and the snowy mountain views make this an incredibly unique place.”&nbsp;  <figure> <img src="https://publisher-publish.s3.eu-central-1.amazonaws.com/pb-nepalitimes/swp/asv65r/media/20250802130824_1b9e26f2e9853fdfe69154bb42a7c9ea6da4bf4940efc1da99b304dcfbd7d3d9.jpg" data-media-id="editor_10" data-image-id="20250802130824_1b9e26f2e9853fdfe69154bb42a7c9ea6da4bf4940efc1da99b304dcfbd7d3d9" data-rendition-name="original" width="2048" height="1152" loading="lazy" alt="Visit Nepal in the monsoon"> </figure>  Chaurikharka is worthwhile to get to in any season, but it has a different charm during the monsoon. Word has spread and because it is now easy to get to from Baglung or even Pokhara, people have been flocking here.&nbsp; “Holidays and Saturdays see the largest crowds, with up to 500 visitors every day,” says ward chair Mankaji Pun of Bhume.&nbsp; There was a time not too long ago when local herders brought sheep, goats, cows, buffaloes, horses, and mules to graze here during the monsoon. Although there are still livestock around, animals have been replaced by visitors taking selfies. Read also: <a href="https://nepalitimes.com/here-now/the-monsoon-and-nature-s-arithmetic">The monsoon, and nature’s arithmetic</a>, Tom Robertson Ward Chair Pun says infrastructure development is his main priority. A foot trail to Chaurikharka was built last year by the Tourism Division Office in Kohalpur, but access via the Raniwas-Koipa road section still remains challenging.&nbsp; “If we get more budget, we can improve the road and facilities to make Chaurikharka the main tourist attraction of this region,” says Bhume Municipality Chair Hom Prakash Shrestha. “After that, we hope to promote Chaurikharka as a top tourist spot.”&nbsp; Economic activity is also picking up with the arrival of visitors, but there seems to be a need to manage the makeshift sheds made of corrugated sheets that spoil the beauty of the place. Tea shops and lodges are also available but facilities are basic. Kuldeep Neupane took a three-day trip from Ghorahi in Dang to visit Chaurikharka recently, and says: “This is an ideal trip to make a quick getaway and let nature recharge your mind and body. And it is much more fun with a tent, to watch the sunrise over the Himalaya or the mist blowing in.”

Visit Nepal in the monsoon

Two weeks ago, Prime Minister KP Sharma Oli announced jubilantly on social media that Nepal had achieved a historic annual growth of 81.8% in exports. He was right. Nepal’s trade did take a great leap forward compared to last year. But the dramatic rise was mainly due to processed soya bean oil.&nbsp; However, Nepal does not produce the edible oil it exports. In fact, the soya and palm oil that make up 44% of total exports are imported from Southeast Asia and South America, and simply re-exported, mostly to India.&nbsp; Under the SAFTA (South Asian Free Trade Area) Agreement, Nepal can export products to India duty-free if it has at least 30% value-added. Nepal’s traders have taken advantage of SAFTA even though the edible oils they export do not reach that value addition threshold. “The 30% value addition requirement is often only on paper,” says former commerce secretary Purushottam Ojha. “It is clear that simply packaging edible oils in Nepal does not fulfil the terms of the trade agreement.” Prime Minister Oli is aware of this, and even called Nepal’s export figures “fake” at an earlier event. The government is relying on other iffy figures to suggest that Nepal’s economy is strong and getting stronger. For example, the value of imports rose by 13.25% in 2024-25 compared to the previous fiscal year.&nbsp; Some of it was due to a jump in electric vehicle imports worth Rs 31.76 billion, but mostly it was because more wholesale soya oil was imported to be re-packaged and sold in India. The very fact that the government boasts about increased imports is an indication of how much it relies on taxing them for revenue. Touting such trade figures cannot be the basis to claim an economic rebound.&nbsp; “A jump in the value of imports can be interpreted as an increase in purchasing power, but it is not evidence of a stronger economy,” says economist Keshav Acharya. “Even though imports have increased, Nepal's domestic production and productive capacity have not improved.” Nepal Rastra Bank's semi-annual economic activity study report shows that industrial production was down in the first six months of the last fiscal year. This despite an increase in the number of new industries registered and investment commitments. Out of the Rs70.2 billion proposed foreign investment, Nepal received only Rs17.9 billion last year.&nbsp; Meanwhile, the rate of capital formation was limited to 24% last year, which is lower than the year before, suggesting that new investment, job creation and economic expansion all declined. If domestic production does not improve in relation to this year’s inflated trade figures, the outflow will put pressure on foreign exchange reserves like it did three years ago. At that time, Nepal borrowed from the IMF under its Extended Credit Facility Program to kickstart the economy.&nbsp;  <figure> <img src="https://publisher-publish.s3.eu-central-1.amazonaws.com/pb-nepalitimes/swp/asv65r/media/2025080710084_2cdaaa5795828c4a7de93a0604ba884ef0a8b8f24cccd939f6c24e279ab6058f.jpg" data-media-id="editor_0" data-image-id="2025080710084_2cdaaa5795828c4a7de93a0604ba884ef0a8b8f24cccd939f6c24e279ab6058f" data-rendition-name="original" width="1633" height="723" loading="lazy" alt="Nepal's bubble economy NT"> <figcaption>Source: NEPAL RASTRA BANK</figcaption> </figure>  The macroeconomy is on firm footing with foreign exchange reserves at a comfortable Rs2,520 billion in May, up 23% from last year. This was largely due to remittances, and partly due to a falling NPR exchange rate. Real estate transactions and the stock market index have also been climbing as a result of government policies to revive the sector.&nbsp; However, former executive director of Nepal Rastra Bank Nar Bahadur Thapa cautions: “This is not organic growth, it is the result of deliberate policy decisions to relax rules on real estate and stock markets transactions.” In reality, the sharp rise in land prices have increased the cost of production, and excessive monetisation of the real estate has become the main source of Nepal’s economic woes. The central bank has announced a slew of new policies, shifting the terms of loan repayment for industrialists and entrepreneurs, reducing interest rates, and injecting more working capital — all designed to inject adrenaline into the real estate and stock market sectors.&nbsp; When he was governor, Mahaprasad Adhikari made several financial reforms during the latter half of his tenure to stimulate the economy, including tightening credit flow.&nbsp; By the last fiscal year, additional financial reforms had resulted in a credit expansion rate of around 8%. As the pace of credit expansion slows, real estate prices have started to fall. This is actually beneficial to the economy, because it lays the foundation for improvements in land-related entrepreneurship, production, and the construction sector. Just because real estate and the stock market transactions increase, it does not indicate an economic turnaround — especially when manufacturing and productive sector continues to languish.&nbsp; “It is foolish to believe that real estate and the stock market have magically revived our economy. Agriculture employs more than half of the population, but it is in decline. Investment in the productive sector has not increased, and job creation has not increased.” Two years ago, Nepal’s industrialists, business leaders, and political leadership predicted a recession amidst a sluggish business, declining market demand, large-scale job loss, and a shrinking real estate and share market.&nbsp; Still, the economy grew by 3.36% in fiscal year 2023/24. In fact, Nepal’s economy has grown nominally over the last two decades even when all sectors of the economy are in decline.&nbsp; Says Keshav Acharya: “The growth in trade, real estate, and the stock market are bubbles. The real economy remains stagnant.”

Nepal’s bubble economy

The final investigation report on the crash of a Saurya Airlines jet on 24 July 2024 at Kathmandu airport has revealed flaws in the carrier’s technical operation procedures, poor monitoring by the Civil Aviation Authority of Nepal (CAAN) and gaps in the airport’s emergency response. Eighteen people including a child were killed, and only the captain survived as the plane plunged seconds after takeoff, crashing within the airport perimeter. This was the latest in a series of aircraft accidents in previous years, and further tarnished Nepal’s already poor aviation safety record and contributed to the country being retained in the EU’s air safety list. &nbsp;&nbsp;&nbsp; The circumstances in the Saurya crash were different from the Yeti Airlines crash in Pokhara in January 2022 that killed all 72 on board, and two Tara Air crashes in February 2016 and May 2022 on approach to Jomsom that together claimed 45 lives. However, all four tragedies were a result of negligence of carriers and crew, failure to follow procedures, regulatory slackness, and overconfidence. The Saurya crash, especially, was a glaring example of how an ailing airline broke its own rules to allow passengers, including non-employees, a joy ride to Pokhara on a maintenance ferry flight. CRASH REPORT The Final Investigation Report prepared by the Aircraft Accident Investigation Commission and released on the first anniversary of the crash last week carried a long list of rules that were ignored or broken, and of regulatory failure. The first mistake was to cram spares, tools and inflammable chemicals needed for the aircraft’s C-Check in Pokhara into the cargo hold flouting its own ground handling procedures.&nbsp; There was no check-in of passengers, some of whom were not even employees – even though regulations say only flight and maintenance crew should be on board a maintenance positioning flight. Many brought their own luggage into the plane and stored it unsecured in the cabin. There was no flight attendant to give a safety briefing to passengers. The load and trim charts given to the flight crew were rough estimates, and the total takeoff weight of the plane was 18,300kg plus or minus 200 kg. That would still have been all right, but there was a glaring mistake in the speedchart Saurya pilots were using to calculate the minimum takeoff speed (known as VR), and it had been wrong ever since the 21-year-old aircraft entered service with the airline in 2017. FAULTY DATA&nbsp; The Commission probed Flight Data Recorder inputs from previous takeoffs of the Canadian-built CRJ200-LR in 2023-2024 and found that the undetected error in the speedchart had caused the plane to pitch up at an abnormal rotation rate at least 18 times on previous takeoffs.&nbsp; Any rotation rate more than 3°/sec is regarded as unusual. But on at least two occasions, this aircraft with tail number 9N-AME had rotation rates of 5.8°/sec and 5.5°/sec, the second one was when the pilot who survived was flying in March 2024.&nbsp; On this particular day, the plane’s rotation rate was 6.5°/sec, causing it to go into a deep stall soon after takeoff, the Commission report said. Essentially, the plane was not flying fast enough down the runway to take off safely.&nbsp; It is not yet clear whether excess weight, unsecured luggage, wrong centre of gravity were also factors, but relying on a faulty speedchart for the given takeoff weight, the captain flying pulled back on the yoke before the plane had reached takeoff speed and at a pitch angle that was too steep. The investigation report says the plane then went into a deep stall and started banking right with the stick shaking. At this point, the flight officer on the right hand seat is heard on the cockpit voice recorder saying: “Whoa, whoa, whoa. Sir, Sir, Sir…” It then banked left before the pilot flying turned the plane sharply to the right again in an evasive action to avoid the parking aprons of the international and domestic terminals. Had he not done so, there would have been a disaster of a much greater magnitude at Kathmandu airport that day. The plane scraped the runway with its right wingtip, collided with a container having helicopter spare parts, and plunged into a gully east of the runway, exploding in a fireball. The investigation also noted that the impact forces seemed to be survivable for some occupants. The fire trucks took unnecessarily long to reach the site even though it was inside the airport perimeter. The absence of an ICAO-standard runway strip, inadequate rescue drills, lack of training, and a blocked emergency service gate leading to the crash site were cited as other factors. &nbsp;&nbsp; <h2>Timestamp of a Disaster</h2>  <figure> <img src="https://publisher-publish.s3.eu-central-1.amazonaws.com/pb-nepalitimes/swp/asv65r/media/20250731110724_39cdd04693994ce6e55a5b302905c0fa4884fe85bed21ff0779bb1439f3a5725.jpg" data-media-id="editor_0" data-image-id="20250731110724_39cdd04693994ce6e55a5b302905c0fa4884fe85bed21ff0779bb1439f3a5725" data-rendition-name="original" width="778" height="826" loading="lazy" alt="Flouting rules caused Saurya tragedy NT"> </figure>  11:10:34 - The Saurya Airlines CRJ200 on the takeoff roll from runway 02. It had a takeoff weight of about 18,300kg, but the pilot’s speedcard had a previously undetected mistake about the minimum takeoff speed. 11:10:55 -The plane with tail number 9N-AME goes into deep stall soon after takeoff because it does not have enough speed to lift its weight. The plane also has an abnormally steep nose-up attitude.&nbsp; 11:11:03 - Without enough speed to generate lift, the plane banks right, then left and right again in CCTV photos taken from the domestic apron (below). If it had not banked right, it could have hit the aprons and terminal buildings. Seen parked is Saurya’s other CRJ200 with tail number 9N-ANM.&nbsp;  <figure> <img src="https://publisher-publish.s3.eu-central-1.amazonaws.com/pb-nepalitimes/swp/asv65r/media/20250731110732_608132f7225c649125cca2691dd6a6bf930984c5b359e888d7ad9e5eacce3afd.jpg" data-media-id="editor_1" data-image-id="20250731110732_608132f7225c649125cca2691dd6a6bf930984c5b359e888d7ad9e5eacce3afd" data-rendition-name="original" width="770" height="555" loading="lazy" alt="Flouting rules caused Saurya tragedy NT"> </figure>  11:11:08 - The plane scrapes the runway with its right wingtip, and falls into the gully. The captain is thrown off the left side of the cockpit and survives. 11:11:15: Plane explodes in a fireball inside the airport perimeter. Firefighters take time to reach the site because of lack of access road and a blocked gate. Read the full investigation report <a href="https://www.tourism.gov.np/files/9N-AME%20AIC%20Final%20Report.pdf">here</a>.

Flouting rules caused Saurya tragedy

Nepal is graduating to become a developing country on 24 November 2026 after half-century in the Least Developed Country (LDC) category. By 2030, the country hopes to transition to middle-income status.&nbsp; Everone from Prime Minister K P Oli have boasted that this is a matter of national pride, and will have a multiplier impact on trade and economy.&nbsp; But will it make any difference to the average Nepali? Not unless improved governance <a href="https://nepalitimes.com/news/why-invest-in-nepal">spurs investment and creates jobs</a>.&nbsp; Countries need to meet at least two of the three criteria in two consecutive triennial reviews to be eligible for graduation from LDC. Nepal has consistently met the thresholds for the Human Assets Index (HAI) and the Economic and Environmental Vulnerability Index (EVI) in 2015, 2018, and 2021. But Nepal was recommended for graduation before meeting the per capita <a href="https://nepalitimes.com/banner/nepals-great-income-divide">Gross National Income (GNI)</a> threshold of $1,306. “A major implication of LDC graduation is the loss of preferential market access available through Generalised System of Preferences (GSP) and other arrangements,” explains economist Sameer Khatiwada. “But over two-thirds of <a href="https://nepalitimes.com/news/nepal-doesnt-produce-its-2-biggest-export-items">Nepal’s exports</a> are to India, and the preferential market access to India is through a bilateral trade agreement. This has nothing to do with our LDC status.”  <figure> <img src="https://publisher-publish.s3.eu-central-1.amazonaws.com/pb-nepalitimes/swp/asv65r/media/20250815060832_f5eabe7628a8cdf84f33b25d7cef3c4dc8913a26d8e5b253ea52a36e176b8a85.jpg" data-media-id="editor_3" data-image-id="20250815060832_f5eabe7628a8cdf84f33b25d7cef3c4dc8913a26d8e5b253ea52a36e176b8a85" data-rendition-name="original" width="640" height="470" loading="lazy" alt="LDC graduation "> </figure>  Furthermore, a provision under the South Asian Free Trade Area (SAFTA) allows Nepal to export to India duty-free if the items are at least 30% value-added. Nepali traders take advantage of this by re-exporting edible oils without meeting that requirement, falsely boosting Nepal’s exports.“ Following graduation from LDC, the value addition threshold might increase to 40%,” says Kalpana Khanal of the Policy Research Institute. “This is supposed to work to our advantage, because on paper value addition inherently means <a href="https://nepalitimes.com/multimedia/staying-home-to-create-jobs">job creation at home</a>.” But Nepal’s exports to other major destinations will face <a href="https://nepalitimes.com/news/nepal-and-the-us-india-tariff-tiff">tariff increases</a> with the graduation. A South Asia Watch on Trade, Economics and Environment (SWATEE) study shows that while tariff increase in the US market is relatively low (see page 5) it is considerably higher in Europe. The International Trade Centre (ITC) in a 2022 study also estimated that graduation could result in a 4.3% decline in Nepal’s projected exports, but this is excluding the impact of changes in ‘rules of origin’ provisions in preference-granting countries such as the UK and Europe.&nbsp; Nepal’s top export to these preference-granting countries is <a href="https://archive.nepalitimes.com/news.php?id=1482">carpets</a>, and will not be impacted, but other items such as textiles and apparel will be heavily affected due to higher cost of production. The impact will felt mostly by small and medium enterprises which represent the largest share of exports to LDC-specific preference-granting countries. As for the service exports, Nepal never really made use of the World Trade Organization’s LDC services waiver anyway, hence the effect will be minimal, if any. There is also concern about Nepal’s graduation at a time when the global economy is topsy-turvy, amidst <a href="https://nepalitimes.com/opinion/turning-point-in-us-india-relations">tariff wars and conflicts</a>. This affects Nepalis abroad directly and may impact <a href="https://nepalitimes.com/news/more-remittance-more-than-remittance">remittances </a>which hit $11 billion in 2024. In comparison, Nepal only received $350 million in foreign loans and grants last year.&nbsp; Tourism arrivals have finally reached pre-pandemic levels, but bad publicity about pollution, poor infrastructure and bureaucratic hurdles hinder further growth. Manufacturing continues to struggle, while hydropower and the IT sector have taken off.&nbsp; “Look at data -- <a href="https://nepalitimes.com/news/tourism-needs-a-new-push">tourism arrivals</a> are up, spending is up, IT exports are up, <a href="https://nepalitimes.com/news/why-nepal-needs-to-restore-ev-tax-subsidy">EV sales </a>are up, Europe still needs 85-90 million skilled workers. We are sitting on $16 billion in cash reserves, our balance of payment, foreign exchange reserve, tax to GDP ratio, credit flow are all positive, we have to build on these factors,” says Sujeev Shakya of the Nepal Economic Forum. He adds: “Our mindset creates negativity to promote rent-seeking behaviour, but this cynicism will go away after 2026 with LDC graduation. We must deal with data, look at trends, and projects which will bring in <a href="https://nepalitimes.com/from-the-nepali-press/why-there-is-no-foreign-investment-in-nepal">international investments</a>.” Khanal agrees that investment is not dependent on<a href="https://archive.nepalitimes.com/regular-columns/backside/Nepal-not-the-least-developed-country,306"> LDC status</a>. The factors that that affect investment are policy stability, a strong legal framework, market potential and ease of doing business. She adds, “That is where our focus needs to be, and we need to retain <a href="https://nepalitimes.com/diaspora-diaries/migrant-worker-returns-to-create-work-at-home?fbclid=IwAR09xJfsClCwn8uRVAmz28CU658vdKpuyDwB_b1sNlvKtAFFnSldnA0JS2g">Nepalis with jobs at home</a> for our sustained growth.” After 2026, financing support from donors and aid agencies could be affected and Nepal will no longer be able to access Least Developed Countries Fund (LDCF) to adapt to the impacts of climate change. But the Global Environment Fund and Green Climate Fund will still be available.“ LDC status does not determine bilateral development aid, that is usually driven by broader <a href="https://nepalitimes.com/here-now/looking-beyond-two-boulders">geopolitical considerations</a>,” says Sameer Khatiwada. “The World Bank and Asian Development Bank, which provide concessional loans to Nepal, it is determined mainly by per capita income, not LDC status.” &nbsp;However, Nepal may lose some concessional terms for loans. Nepal is currently a lower-middle-income country as per the World Bank in the bracket for GNI between $1,036 and $4,045. The country is already receiving more loans than grants and in July the World Bank increased its interest rate on loans by 100% from 0.75 to 1.5%. “All this means that the impact of LDC graduation for Nepal might not be as earth-shattering as some tend to think. Countries that have recently graduated, such as Botswana and the Maldives, have shows that graduation is just a step in a country’s development path,” says Khatiwada. Sujeev Shakya also sees the glass as half full, explaining that LDC graduation is just a stepping stone if Nepal has the right policies in place. He adds, “Nepal’s biggest advantage is our<a href="https://nepalitimes.com/opinion/investing-in-people"> working age population</a> and we have investments coming in. These aided by how adaptive we are as a society are the very foundations on which Nepal will grow.”

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