For months now, <a href="https://nepalitimes.com/news/nepals-home-minister-vs-the-media">Nepal’s media has been reporting</a> on depositors defrauded of their savings by crooked cooperatives. The spotlight got brighter after<a href="https://nepalitimes.com/news/heads-roll"> Home Minister Rabi Lamichhane was accused </a>of siphoning off savings from two cooperatives and investing it in his television company.
Given a chance to defend his case in Parliament, he resorted to whataboutery and accused the opposition Nepali Congress (NC) of even greater plunder. After the row brought the House to a standstill for over a month, a cross-party probe committee has finally been formed, but without naming Lamichhane personally.
Nearly 30 crisis-ridden cooperatives across the country which have more than Rs60 billion in depositors’ savings at risk will be probed by the committee. Another 500 cooperatives are said to be dodgy, and the government says it will be compensating depositors who had up to Rs500,000 in savings in cooperatives that have gone belly-up.
Economist Pushkar Bajracharya says that <a href="https://nepalitimes.com/here-now/cooperatives-leave-nepalis-high-and-dry">Nepal’s cooperatives have had problems </a>from their earliest years because of lack of regulation and monitoring which allowed unscrupulous shareholders to invest the savings in questionable real estate deals (best case scenario) or fraudsters to decamp with depositors' savings (worst case).&nbsp;
“The lawlessness in the cooperatives sector meant that the hard-earned savings of depositors were misused or stolen,” Bajracharya says.
At the root of this <a href="https://nepalitimes.com/editorial/institutionalised-inequality">pandemic of plunder</a> in cooperatives is the culture of impunity where trusting Nepalis are cheated out of hard-earned savings with the promise of high interest rates. Like pyramid schemes, these are ways for deceitful individuals to cheat gullible depositors because they know they can get away with it.
This is similar to the <a href="https://nepalitimes.com/editorial/nepal-s-corruption-carousel">rampant corruption at all layers of government</a> and across the country where the might of those who hold power seem to have the right to extort and defraud the powerless. In many cases shareholders in local cooperatives are even elected local officials.&nbsp;
There is even a sitting MP, Gita Basnet, who is accused of pocketing Rs165.8 million from her cooperative depositors, and she has been on the run. A mayor and his wife in Baglung siphoned off Rs3 billion from 1,500 depositors. Criminal cases have been filed against all of them in the courts.
Ironically, the <a href="https://nepalitimes.com/news/till-debt-do-us-part">crisis in Nepal’s banks and financial institutions</a> has turned out to be a bonanza for financially fragile daily newspapers which these days are filled with pages and pages of paid property auction notices by banks. These advertisements are from Class A, B, C or D financial institutions and point to an upsurge in loan defaults.&nbsp;
The Credit Information Bureau (CIB) Nepal monitors 129 financial institutions, and says the number of blacklisted borrowers has grown from 3,609 to 96,331 in the past ten years — nearly half of them made it to the list just this year. Bijay Kunwar of the CIB says the numbers shot up after despositers failed to pay back loans from microfinance institutions.&nbsp;
The real estate slump is at the bottom of this crisis. Those who had borrowed from cooperatives or banks to invest in property speculating, hoping for fast returns, were trapped with huge loans they could not pay back. The crisis began during the Covid crisis and continued with the economic slump in Nepal caused by the Russia-Ukraine war.
Many defaulters have rallied around businessman Durga Prasai, himself a wilful defaulter who failed to pay back bank loans for a hospital in Jhapa, and <a href="https://nepalitimes.com/news/street-politics">held nationwide demonstrations</a> earlier this year. Prasai urged his supporters to stop servicing their loans and to force banks to cancel their debt.
“Prasai’s debt cancellation campaign sowed confusion,” senior economist Keshav Acharya explains. “Some borrowers of cooperatives who wanted to pay back loans were stopped from doing so by activists. And bank borrowers covertly hoped for their loans to be waived.”
Nine months of data from Nepal Rastra Bank (NRB) for the past year shows that the wholesale and retail sectors had the highest proportion of credit (19.9%) and loans to real estate developers made up just 4.92%.
“Many borrowers took loans for business purposes but used a portion to buy property, but since there is a real estate slump it has led to banking defaults,” says Bhuvan Dahal, former president of Nepal Bankers’ Association.&nbsp;
The default crisis in turn has been a factor in record outmigration in the past year as Nepalis leave to earn money overseas to pay loans back home. If there is a way out of this crisis, it will be to henceforth provide loans for projects that create jobs and not in unproductive sectors.
Pinki Sris Rana

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Giving credit where it’s due

On 2 January 2023, Sita Adhikari (pictured above) was sitting in Narayan Chaur in Kathmandu, worrying about the Rs200,000 that she had deposited at Oriental Cooperative. She had saved the money to see through her old age, but it is now all gone. “I think I will die without getting that money back,” she said, chin resting on the palm of her hand. Adhikari is originally from Nuwakot, and spent her life alone and without any support. She was married in 1951 when she was 11 and her husband died three years later. In 1959, she came to Kathmandu, leaving everything behind. Now, she works in a household in Naxal. She had received Rs100,000 as part of her husband’s property, adding another Rs100,000 that she had saved and deposited the total amount in Nepal Bank Limited. After a kin told her that the Oriental would provide her a better interest rate, she deposited her money there. By the time she learned that this was a bad decision, it was already too late. When she needed money for medicine, she reached out to the cooperative. But the branch office was locked up. She has spent a decade since trying to get that money back. “It was all I had, the crooks stole it from me,” she added. Thousands of other depositers had also put their money at Oriental Cooperative, operated by a Sudhir Basnet, who is absconding. According to the office of Cooperative Management Committee, about Rs1.5 billion deposited by about 4,250 people at Oriental remains in limbo. Khagendra Kafle, chair of a victims’ committee, says that the depositors have been struggling financially and a dozen of them have already died.  <figure> <img src="https://publisher-publish.s3.eu-central-1.amazonaws.com/pb-nepalitimes/swp/asv65r/media/20230324100356_d20b1e6157630a9fcc7c765e073ee4e549975427f74b170efea0ad5547ca8db6.jpg" data-media-id="editor_0" data-image-id="20230324100356_d20b1e6157630a9fcc7c765e073ee4e549975427f74b170efea0ad5547ca8db6" data-rendition-name="original" width="1500" height="1000" loading="lazy" alt="Bishnu Bhagat Shrestha"> <figcaption>Photo: SUMAN NEPALI</figcaption> </figure>  Chhetra Dhanchhawa of Bhaktapur had deposited Rs2.6 million at Basnet’s cooperative. The money was to take care of her son Bishnu who cannot speak or walk. she died at age 83 in 2021, the loan her family took for her funeral rites remain unpaid, and Bishnu is being looked after by his niece (pictured above). Devendra Prasad Pokharel, chief of Kathmandu Metropolitan City’s Cooperative Department, meets dozens of depositers who have lost all to collapsed <a href="https://archive.nepalitimes.com/news.php?id=18430#.ZB121HZByJA">cooperatives</a> daily. “Some have warned they will self-immolate at the department’s office if they do not get their money back,” he says. “It is so depressing I feel like quitting my job right now.” After the department receives complaints, it summons cooperative operators for a discussion. If the operators pay back the money within a certain period of time, the case gets closed. If not, the department sends a letter to the police for an investigation. “So far, we have already sent 2,800 complaints against 56 cooperatives to the police,” Pokharel adds. And of the 1,600 financial institutions in Kathmandu alone, complaints have been filed against 125. Binda Budhathoki, who runs a retail shop in Balkot has Rs40,000 still stuck in Nagarik Bikas Cooperative. On 1 February its officials were asking depositors to visit after a month because it had a cash crunch. Between July and December, the Cooperative Department under the Ministry of Land Management and Cooperative received 451 complaints against cooperatives. Registrar Rudra Prasad Pandit said, “We take complaints if it is under our jurisdiction, if not, we suggest they visit the authorities concerned in local units and provinces.” The <a href="https://lawcommission.gov.np/en/wp-content/uploads/2019/06/Cooperatives-Act-2017-final-Eng-version-Dec-21-2018-1.pdf">Cooperatives Act 2017</a> has divided the work related to cooperatives’ registration and monitoring among the department, and provincial and local governments. There is no concrete data on how many cooperatives have not paid their clients’ money. Meen Raj Kandel, chair of Rastriya Sahakari Mahasangh, the umbrella association of cooperatives, says that as many as 32,000 cooperatives across the country have deposits worth Rs700 billion. But because of the fraud committed by some of them, there is widespread loss of faith in cooperatives.  <figure> <img src="https://publisher-publish.s3.eu-central-1.amazonaws.com/pb-nepalitimes/swp/asv65r/media/2023032411034_0566f5a5d46ab324ee0d912fc9e71db37b814c4b981f01f8f6fe32d45672aa53.jpg" data-media-id="editor_3" data-image-id="2023032411034_0566f5a5d46ab324ee0d912fc9e71db37b814c4b981f01f8f6fe32d45672aa53" data-rendition-name="original" width="1500" height="1000" loading="lazy" alt="suman nepali"> <figcaption>Photo: SUMAN NEPALI</figcaption> </figure>  “On the one hand, the country’s financial outlook is grim, and the cooperatives have not been able to get returns on their investment,” he said. “On the other hand, all depositors have been thronging to cooperatives to ask for their money back. This is creating problems.” The problem is not new, it has just got worse. In 2013 the government formed a probe commission to investigate cooperatives after many people were left high and dry. It found the operators themselves had been taking large amounts of loans and not repaying the principal and interest for years. According to the commission’s report, 22,170 depositors had yet to receive a total of Rs7,607,995,000 from cooperatives.Including interest, the sum crosses Rs10 billion. That was ten years ago, and the problem has gotten worse since most of the guilty were never punished. The report recommended that cooperatives should be regularly monitored, there should be strong laws to control unruly financial and managerial decisions, and registrations be stopped for new cooperatives. In addition, it also suggested that operators should not invest without collateral and all financial transactions be done through banks or financial institutions. None of this was ever implemented. Lalupate Cooperative in Khotang collapsed without refunding its customers’ savings. The Dhangadi branch office of Shiva Shikhar Multipurpose Cooperative shut down without refunding depositers. The Credit Information Bureau has blacklisted 11 cooperatives just in the current fiscal year. Gauri Bahadur Karki, chair of the probe commission, blames greed and mismanagement. “The business of collecting money from the public and mobilising it in real estate or other business by a single individual or a family has increased the risk of theft of public’s property, this is a business that should have been strictly regulated,” he said. Civil Cooperative, for example, used at least Rs5.67 billion from depositers, invested it in real estate and other iffy sectors and never refunded it. Investigation has shown that the cooperative loaned Rs1.32 billion to former chair and adviser Ichha Ram Tamang’s Civil Homes without securing any collateral. Cooperatives issued loans again and again without recovering the previous credits. The Department of Cooperatives did issue guidelines related to liquidity, investment, utilisation of savings, and institutional good governance from time to time, but it has failed to monitor and take action against the cooperatives that show reluctance to implement them. There is a provision that the cooperatives should maintain liquidity up to 15%, and invest more than half of the total credit in the production-oriented business in order to minimise the investment in the real estate, but this has never been enforced. Rudra Prasad Pandit says cooperatives and real estate businesses have become co-dependent. In fact, cooperatives start facing problems when cracks appear in the real estate sector. Real estate transactions are now down to half in the last six months of the current fiscal year compared to last year. Last year, 394,307 properties were purchased and sold, but the number is now barely 189,937. This means cooperatives that had speculated on land have not been able to recoup the money. Complaints lodged at the Cooperative Department show that almost all the cooperatives invested in real estate plotting or land transactions. Savings schemes and cooperatives have become the tool of money laundering due to the lack of regulation. Economist Keshav Acharya says that cooperatives that should have been established for the public good have been infiltrated by the land mafia who collect the wealth of the public and gamble on real estate. The 2013 probe committee states in its report that the operators who were found involved in misappropriation responded that they were unaware of the laws. ‘The cooperatives should have been opened after thorough research. There is no one to formulate operation rules,’ the report states. For instance, investigation into Oriental Cooperative found that Basnet had taken most of the loans in the name of fake depositers, even establishing more than half-a-dozen sub-cooperatives in order to collect money from the public. The Auditor General’s report in 2023 notes that many cooperatives have failed to establish a system to identify suspicious transactions and to conduct a detailed study of the high and abnormal financial dealings from their own members. In addition, cooperatives have become the hotbed for people blacklisted by banks and other financial institutions. In fiscal year 2021/22, of the total 2,401,714 financial transactions above Rs1 million, 274,113 were done by cooperatives. And, although the details of all transactions above Rs1 million and all suspicious transactions should be sent to the Financial Information Bureau, the implementation is lacking. Adds Dipak Raj Pokharel of the Money Laundering Prevention unit, “There is little investigation into suspicious transactions through cooperatives.” A high-level task force led by the National Planning Commission in 2066 concluded that cooperative organisations were a risk-factor for the economy. ‘A great disaster could be on the cards due to the weak monitoring/regulatory organisational system and legal provisions,’ the report states. Adds economist Acharya: “The government has failed in its responsibility to protect the wealth of the citizens. The government became helpless in refunding the savings of the public and taking action against the fraud even though the crime continued in the name of cooperatives.” A former colleague of Acharya’s committed suicide after he did not receive the Rs5 million he saved in a cooperative. Even a former executive director of Nepal Rastra Bank has been cheated of Rs20 million he saved in a cooperative. Although the 2013 probe commission found 162 cooperatives, including their branches, as problematic and recommended for property management, the government has declared only 12 as such. No action for management of property and liability has been taken against many cooperatives that have failed to refund the savers’ money and have disappeared.  <figure> <img src="https://publisher-publish.s3.eu-central-1.amazonaws.com/pb-nepalitimes/swp/asv65r/media/2023032411034_8b8f53546869197478909c0d19bdb0945afa82e54f81c691915bfdc82c92cf8a.jpg" data-media-id="editor_4" data-image-id="2023032411034_8b8f53546869197478909c0d19bdb0945afa82e54f81c691915bfdc82c92cf8a" data-rendition-name="original" width="1500" height="1000" loading="lazy" alt="suman nepali"> <figcaption>Photo: SUMAN NEPALI</figcaption> </figure>  Trilochan Pangeni, suggests that that the risk has increased due to the politicisation of the cooperatives. He argues that law has been deliberately weakened by people in power so that the cooperatives could be let free. “While formulating the Cooperatives Act in 2017, a stern legal action against those committing irregularities in the cooperatives was proposed, but the political nexus derailed those provisions,” he added. In 2016, Nepal Rastra Bank drafted a bill making fraud in cooperatives subject to punishment as banking offence. During discussions in the Parliament, the bill was taken to the Finance Committee which had cooperatives campaigner Keshav Badal, Civil Cooperatives chairperson Ichha Raj Tamang and other persons associated with cooperatives as members. The conflict of interest in the Committee limited the definition of the cooperative organisation to include only the organisations licensed by Nepal Rastra Bank. As per this definition, the Act would incorporate only 15 cooperatives that had obtained permission from the central bank. As a result, the fraud committed in other cooperatives could not be brought to action for banking offences. Says Tol Raj Upadhyay of the Department of Cooperatives: “The power to regulate the cooperatives could be developed at the local and provincial levels. Even the federation has only 20 staff. The long-standing deterioration that crept under the lack of institutional regulation has flourished now.” <a href="https://cijnepal.org.np/how-nepals-cooperative-are-leaving-customers-high-and-dry/">Originally published</a> by Centre for Investigative Journalism (CIJ).

Cooperatives leave Nepalis high and dry

<figure><img src="https://superdesk-pro-c.s3.amazonaws.com/sd-nepalitimes/20221110141132/636cfdc29c7e80680e0a0c01jpeg.jpg" alt="" width="1400" height="661"/><figcaption>Photo: TOH EE MING / NEPALI TIMES</figcaption></figure>The one-size-fits-all regulatory policy does not seem to work for savings and loans (S&amp;L) cooperatives in Indonesia, and the country could benefit from Nepal’s experience with small and medium enterprises.In Indonesia, a small S&amp;L cooperative which has less than Rp10 million (approximately $690) of assets has to complete on the same accounting report structure as larger institutions with more than $690 million of assets. To give context to the figure, an average labourer in 17 essential sectors in Indonesia makes about $290 a month.If we are to enforce the same regulation and supervision for all the S&amp;L cooperatives, the smaller businesses would not survive. On the other hand, if the rules are too lenient, they could undermine market discipline with middle and large savings and loans cooperatives taking advantage of it.Indonesia needs to learn from the success stories of the cooperatives’ movement in other countries, notably Nepal, with its similar culture and socio-economic conditions to that of Indonesia.According to a 2013 Kathmandu University study by Nav Raj Simkhada ‘Problems and Prospects of the Cooperative Sector in Nepal for Promoting Financial Inclusion', more than three decades after the first cooperative was established in Nepal in 1956, the country saw minimal progress in the sector of small and medium-sized enterprises.Nepal’s <a href="https://www.ilo.org/dyn/natlex/natlex4.detail?p_lang=en&amp;p_isn=39064&amp;p_country=NPL&amp;p_count=118" target="_blank" rel="noopener noreferrer">Cooperative Act 1992</a> however specified that the government would no longer directly promote cooperatives, shifting its strategy from a top-down to a bottom-up approach. Additionally, it also prevented cooperatives from any political interference, they are forbidden from making a donation or providing financial assistance to organisations working for a political party, religion or community.This allowed for the<a href="https://archive.nepalitimes.com/article/nation/cooperatives-replacing-money-lenders,1172" target="_blank" rel="noopener noreferrer"> independent growth of cooperatives in Nepal</a>. There are now over <a href="http://archive.nepalitimes.com/news.php?id=18437#.YSJP4y1w3OQ" target="_blank" rel="noopener noreferrer">30,000 small, medium and large cooperatives </a>in Nepal with over 45 million members.The <a href="https://archive.nepalitimes.com/news.php?id=18430" target="_blank" rel="noopener noreferrer">role of women</a> was particularly crucial in developing credit cooperatives in Nepal. For example, Women Awareness Centre Nepal (<a href="https://www.globalgiving.org/projects/build-women-savings-and-credit-cooperatives-nepal/updates/" target="_blank" rel="noopener noreferrer">WACN</a>) has successfully established 41 microcredit organisations consisting of 30,000 women members.Another study conducted by Nepal Agriculture Cooperative Central Federation Ltd (<a href="http://asia.procasur.org/wp-content/uploads/2014/12/2.-Khairhani.pdf" target="_blank" rel="noopener noreferrer">NACCFL</a>) shows that <a href="https://archive.nepalitimes.com/article/editorial/Nepal-land-of-our-daughters,2901" target="_blank" rel="noopener noreferrer">empowerment of women </a>through cooperatives had benefited not only the individuals but their families and communities, financially as well as socially.Indonesian small S&amp;L cooperatives should similarly focus on building community-based members only, instead of giving in to the temptation of rushing to expand the business.A few reliable members who know each other well can better manage the cooperative than thousands of those who are virtually strangers. Moreover, a large number of members create a large span of control wherein self-control and self-regulation are difficult to achieve.As a collectivist culture, Indonesians would choose to deal with their S&amp;L co-operative where they are comfortable and are treated as a family rather than with commercial banks. Members could become loyalists if they have a voice and are heard. This is fundamental for an S&amp;L cooperative to grow sustainability.Grants and direct subsidisation by authorities often create a beggar mentality and increase financial dependency, which is at the heart of the problem.Irsyad Muchtar in his recent book Indonesia’s 100 Largest Cooperatives revealed that some large cooperatives tend to avoid publishing results, and are closed to the press -- worried that it will shine a light on their tax evasion.<a href="https://www.thejakartapost.com/academia/2021/06/23/who-should-supervise-savings-and-loans-cooperatives-in-indonesia.html" target="_blank" rel="noopener noreferrer">Thus, the concept of </a>a two-tiered rules and supervision institutional framework for S&amp;L cooperatives is more suitable for the Indonesian context. In the first tier, the Financial Services Authority (OJK) should regulate and supervise medium and large S&amp;L cooperatives at the national level to protect large members from any potential fraud by managements and create sound business competition among credit institutions to avoid regulatory arbitrage.In the second tier, the small S&amp;L cooperatives should not be supervised prudentially by OJK. They need more empowerment programs conducted by the Ministry of Cooperatives and SMEs and local governments. The policy aims to increase opportunities for those to graduate to a level where they can compete with other financial institutions. We understand that small S&amp;L cooperatives exist because they serve mainly the poor who have little or no access to formal financial services, especially since they lack collateral and a stable income.However, the empowerment programs from the government should not be financial aids or subsidies. Robby Tulus, the former regional director of Asia Pacific International Co-operative Alliance, says that when initiating a business, the source of seed money is often the starting point for people.In the case of Indonesia, their first choice is to look for special subsidies from the government. This is in line with some Asian governments favouring direct control and subsidisation to the small S&amp;L cooperatives.Tulus suggested that cooperatives must learn to focus on their competencies and deliver the best services to their members, instead of setting up the business only to get financial aids from the government and make quick money from the members.The Indonesian government can still play an important role, it can provide continuous and intensive support programs to cooperative members, such as training on management and entrepreneurial skills, risk management, bookkeeping standards and intellectual property rights. It can also promote micro-entrepreneur members of small S&amp;L cooperatives to potential customers as well as Indonesian-made products to empower micro-enterprises.While undertaking these strategies collectively, Indonesia can learn from Nepal to gradually cut down on financial schemes such as interest subsidies, credit guarantee funds, and grants to small cooperatives and their members.This will in the longer term empower the cooperatives while also reducing their dependency on the second or third parties.<a href="http://whistleblowing-indonesia.blogspot.com/" target="_blank" rel="noopener noreferrer">Bitra Suyatno</a> is a senior policy analyst at Indonesia's Ministry of Finance focused on financing service business issues. Currently, he is a team member on formulating Draft Law on Development and Strengthening of Financial Sector. The views expressed are personal.

Indonesia can learn from Nepal’s cooperatives

It was 30 years ago this month that investment into ‘Baby Arun’, the 201MW first phase of the run-of-river Arun III project, was brought to a screeching halt when the World Bank officially withdrew its support. This brought about profound and fundamental changes in the way Nepal’s power sector subsequently developed. Nepalis suffered debilitating power outages between 2008-2016 due to shortages attributable to the cancellation. At the same time, the gap left by Baby Arun was filled by private sector investment in ways that were not obvious in 1995. It took 30 years, but in many ways Nepal’s power sector is more healthy today than it has ever been, and likely better than if the project was built as planned. At a projected budget of $1.08 billion, Baby Arun would have cost the equivalent of Nepal’s entire annual government expenditure in 1995. It was to be funded by concessional grants and loans from multilateral and bilateral funders, including the World Bank, Asian Development Bank (ADB), KfW, and investment by the government itself. At the time, Nepal’s total electricity generation capacity was only 230MW, and the trajectory of the power sector changed dramatically following the cancellation. In the past 30 years, $5.4 billion has been invested in the power sector led by private investors, and much of it from domestic banks and pension funds (table, right).  <figure> <img src="https://publisher-publish.s3.eu-central-1.amazonaws.com/pb-nepalitimes/swp/asv65r/media/20250829150840_c13d6f9f34d7163832b3089eabdad6f20d2d5cef3a53039e0432add2be6c32f0.jpg" data-media-id="editor_0" data-image-id="20250829150840_c13d6f9f34d7163832b3089eabdad6f20d2d5cef3a53039e0432add2be6c32f0" data-rendition-name="original" width="984" height="521" loading="lazy" alt="30 years after Baby Arun"> </figure>  Nearly 70% of the new megawatts generated were by private independent power producers (IPP) in the past 30 years, while the Nepal Electricity Authority (NEA) and its subsidiary companies added 30% of new capacity. Almost 80% of total debt financing came from domestic banks and employee retirement funds. International assistance for power generation dropped dramatically over this time, accounting for only about 15% of investment. Before 1995 new power projects used to be entirely dependent on foreign aid. Since 1995, 63% of new generation came from 171 small hydropower projects with an average capacity of 12MW, while 4% was from 21 solar photovoltaic and biomass projects developed by local IPPs.  <figure> <img src="https://publisher-publish.s3.eu-central-1.amazonaws.com/pb-nepalitimes/swp/asv65r/media/20250829150844_5bc299fc78be90b95ce4727b0b3bdaa4542e17e126718cc8725d136630ffc097.jpg" data-media-id="editor_1" data-image-id="20250829150844_5bc299fc78be90b95ce4727b0b3bdaa4542e17e126718cc8725d136630ffc097" data-rendition-name="original" width="988" height="503" loading="lazy" alt="30 years after Baby Arun"> </figure>  Over three decades, investment in Nepal’s power supply came primarily from new actors that had never before been involved in this sector. The rate of electrification rose from 10% to close to 100% -- sufficient to meet domestic needs during most of the year, and in 2024 made Nepal a net exporter of power to India for the first time in its history. As practically all the new investment in this period went into run-of-river hydro and solar projects, rather than into hydropower reservoirs with seasonal storage, Nepal continues to rely on imports from India during the dry winter months. Surplus electricity generation for export during the monsoon is slated to grow rapidly as another 200 solar and hydro projects are nearing completion of construction, with over 5,000MW of power capacity. Private Power The cancellation of Baby Arun inadvertently accelerated the entry of the private sector into Nepal’s power generation. The government enacted the Electricity Act in 1992 to attract private IPPs and diversify away from total dependence from international aid, but had been struggling for several years to conclude the first agreement with the 60MW Khimti Project. There remained a large gap between the tariff that the government thought was reasonable versus what was demanded by the Norwegian investor Statkraft, and the private sector arms of the World Bank and ADB that were financing the project. The shock of World Bank withdrawal from Baby Arun put tremendous pressure on the government, then led by the UML as it is now. The Bank’s decision to terminate its involvement was ostensibly, at least partially, taken in response to a letter critiquing the project sent by the UML while it was in the opposition.  <figure> <img src="https://publisher-publish.s3.eu-central-1.amazonaws.com/pb-nepalitimes/swp/asv65r/media/20250829150848_7fb3641d776fe86a09ad60a758f7e16660a409fdb15e541644f13646b0894347.jpg" data-media-id="editor_2" data-image-id="20250829150848_7fb3641d776fe86a09ad60a758f7e16660a409fdb15e541644f13646b0894347" data-rendition-name="original" width="949" height="446" loading="lazy" alt="30 years after Baby Arun"> <figcaption>BAD NEWS: Newspaper clippings from the early 90s on tender announcement ahead of loan approval (left) and secrecy surrounding environmental assessment (centre) of Arun III before its eventual cancellation in August 1995.</figcaption> </figure>  The government was forced to soften its position and agree to the investors’ terms following the cancellation of Baby Arun. It directed NEA to sign a power purchase agreement (PPA) with Khimti. It was concluded in January 1996, and this was followed by a second PPA in July 1996 with Panda Energy, the American developer of the 45MW Upper Bhotekosi project. The expensive USD-denominated agreements to buy power from two international private producers, with price escalation clauses tied to the New York Consumer Price Index, sent alarm bells ringing. There was worry that the country was heading towards unaffordable tariff rates for the consumer and potential bankruptcy for NEA as a result of inevitable future weakening of the Nepali Rupee. The government had strong-armed NEA into signing these agreements, and realised that concessionary financing terms that Nepal was used to receiving for public sector projects such as Baby Arun and Kali Gandaki A, that included below-market interest rates and 40 years repayment period with a 10 year grace period before starting repayment, were not the norm for private sector investors. Nepal’s status as a less than attractive destination for foreign investment meant that the country had few options but to accept expensive dollar PPAs from international developers with the high commercial interest rates and short repayment periods imposed by their banks because of high investment risks. In the end, the government ended up having to additionally provide a sovereign guarantee in order to close the deal at the insistence of the lenders – committing it to repayment in case NEA defaulted on paying the IPPs. It is reasonable to assume that the extraordinarily high political cost of agreeing to the PPA terms would have meant that no government would have willingly agreed to them in 1995 had it not suffered the trauma of the loss of concessionary-financed public sector projects as large as the Baby Arun. It has taken NEA 25 years to consider offering dollar-denominated PPAs again: to cover the foreign exchange portion of the investment in the 216MW Upper Trisuli-1 and 120MW Rasuwa-Bhotekosi Hydropower projects. It seemed unlikely at the time, but it turned out that the dire situation Nepal found itself in 1995 planted the seed to mobilise investment for affordable power from within the country. Double Whammy After the dual shock of first losing investment in Baby Arun and having to sign expensive power purchase agreements with international IPPs, the first proposal for an alternative strategy to mitigate the risk of foreign currency investment into hydropower projects came from a group of engineers within the Arun III team at NEA. Led by <a href="https://archive.nepalitimes.com/news.php?id=4900">Deputy Director Damber Bahadur Nepali,</a> engineers convinced the leadership that NEA needed to invest in a subsidiary company to build a series of locally-designed and domestically-financed projects that would have lower cost with rupee-denominated PPAs. They registered the Chilime Hydropower Company Limited (CHCL) in October 1995 with 51% shares from NEA, 25% from its employees, and 24% available for the general public, 10% of which was prioritised for local residents at the project site. The 22.1MW project is in Rasuwa on a tributary of the Trisuli, and mobilised debt financing from the Employee Provident Fund, which manages retirement savings for employees of the government, public enterprises, and private sector institutions. CHCL’s experience showed that NEA employees themselves believed that individual hydropower projects with operational independence from NEA could be developed profitably in Nepal by its own engineers -- and they were willing to put their own money on the line. Chilime also demonstrated that there was money in the country, particularly with retirement funds, looking for opportunities for long-term investments. Following completion of Chilime in 2003, CHCL led the formation of three other NEA subsidiary companies that completed construction in 2023 and 2024, producing 168.3MW using fully rupee-tied investment. NEA’s largest subsidiary, the Upper Tamakosi Hydropower Limited, completed construction of its 456MW plant in 2021.  <figure> <img src="https://publisher-publish.s3.eu-central-1.amazonaws.com/pb-nepalitimes/swp/asv65r/media/20250829160812_ce9ab8b49c598970db3f5bf0a079061ef52f153b28d9f4ead2bb1b26bfd7c2f3.jpg" data-media-id="editor_4" data-image-id="20250829160812_ce9ab8b49c598970db3f5bf0a079061ef52f153b28d9f4ead2bb1b26bfd7c2f3" data-rendition-name="original" width="3000" height="1571" loading="lazy" alt="30 Years after Baby Arun"> <figcaption>DAMNED: The $700 million 456MW Upper Tamakosi built entirely with domestic funds before it was destroyed by the September floods last year. </figcaption> </figure>  There were some delays and cost overruns on this run-of-river project, the largest in the country with a final cost of over $700 million -- all of it sourced domestically. The five subsidiary companies launched by NEA have produced almost two times as much new power as NEA has over the past 30 years. Seven other NEA subsidiaries are currently constructing projects to add another 474MW to the national grid. But even more important than NEA subsidiaries have been local IPPs: Nepali companies which have over the past three decades enthusiastically entered the hydropower sector. From a regulatory perspective, the credit for mobilising domestic private investment to engage in power generation goes to Minister of Water Resources Shailaja Acharya, who in 1998 offered a flat feed-in-tariff of Rs4/kWh for hydropower projects under 10MW. This upfront offer removed a major barrier that early developers had faced of having to spend money to carry out a detailed feasibility study before they could even start tariff negotiations with NEA. She had laid the foundation stone of the Chilime project, and proved to be the champion of opening up the sector for domestic IPPs. The guarantee of a PPA with a fixed tariff, irrespective of project specifications, gave small power developers the confidence to apply for survey licenses and invest in feasibility studies so they could directly approach commercial banks and make a case for their project producing required revenue to repay loans. Domestic IPPs started adding power to the national grid in 2002. Their contribution was initially modest, and first projects were small and commercial lenders who took time to be confident about providing debt financing to a sector which had previously not been considered suitable for private sector investment. While the first 10 years were slow, with less than 10MW being added to the grid each year, this increased twenty fold over the following ten years, resulting in the equivalent of a Baby Arun being added by Nepali IPPs to the grid each year. A total of 84 IPPs added 232MW, 328 MW, 454MW, and 400MW of new generation to the grid in 2021-2024 (graph). There was explosive, exponential growth as domestic developers have surged ahead to account for 76% of the new megawatts added to the grid since 2020, compared to 24% by NEA and its subsidiary companies. The megawatts that IPPs are adding have followed the classic ‘hockey stick curve’ with the ‘breakout point’, signaling the rapid growth phase in 2020. Private producers are expected to accelerate new generation in the coming years with 300 solar and hydropower projects adding 11,000MW. Another 166 hydropower and 96 solar projects are currently in the survey stage, and are in line to add another 11,000MW to the construction pipeline. One major challenge is finding financing required for the projects. Domestic investment will no longer be sufficient to finance this ambitious pipeline of renewable energy projects. Project developers as well as NEA and the Electricity Regulatory Commission will have to leverage their substantial experience accumulated through the construction of over 200 projects to attract regional and international investment and hedge the risks of dollar-denominated PPAs. Following the cancellation of Baby Arun, <a href="https://nepalitimes.com/opinion/people-power/decentralising-power-in-nepal">Nepal developed a highly distributed power sector</a>. The national electricity grid is currently supplied with power from a remarkably decentralised array of hundreds of hydropower and solar photovoltaic projects spread across 43 districts and all seven provinces.  <figure> <img src="https://publisher-publish.s3.eu-central-1.amazonaws.com/pb-nepalitimes/swp/asv65r/media/20250829150848_0c3aa66b34bfb08380a624f397bf3ebb4126f4d6b41a26115848b496876f501b.jpg" data-media-id="editor_6" data-image-id="20250829150848_0c3aa66b34bfb08380a624f397bf3ebb4126f4d6b41a26115848b496876f501b" data-rendition-name="original" width="1228" height="867" loading="lazy" alt="30 years after Baby Arun"> </figure>  This presents a sharp contrast to the pathway of a few large public sector hydropower projects with a sprinkling of private sector projects that was envisioned as part of NEA’s investment planning when Baby Arun was being considered the front runner for investment. The strategy then was to allow public sector investment in a few large hydropower projects with thermal plants to fill the gap. Knowing what we know now about acceleration of climate change impacts and increased extreme weather events, following this path would have made Nepal’s power sector highly vulnerable. Decentralised generation greatly improves the resilience of Nepal’s power supply as damage to power plants in one part of the country need not affect other areas that have their own generation. Following the investment plan where over two thirds of the country’s power supply would have come from power plants on the Arun River, would have greatly imperiled Nepal’s energy security. All rivers in Nepal are susceptible to flooding from cloudbursts made more frequent by climate change. The Arun River which is fed by glaciers in Tibet is also at risk to glacial lake outburst floods. Bikash Pandey is Director of Clean Energy and Circular Economy at Winrock International. People Power is his regular column in Nepali Times on global energy issues relevant to Nepal. <h2>Decentralised and Diversified</h2> In the 30 years since the cancellation of ‘Baby Arun’: Hydropower projects constructed cover capacities ranging from less than 1MW to 456MW and developed by IPPs from across the country with strong local involvement in purchasing equity shares. Renewable energy sources contributed to the generation mix through solar IPPs that further contribute to climate resilience, and cover shortfalls during low rainfall. The government is committed to solar contributing 10% of the power on the grid. Increasing solar beyond this target and providing incentives to project developers to invest in utility-scale battery storage would further improve resilience. BIG ARUN: The 900MW Arun III project under construction since 2018 at Num in Sankhuwasabha (pictured, below) is a separate initiative by a different project developer using a different financing modality. The ‘Baby Arun’ version of Arun III was cancelled in 1995.  <figure> <img src="https://publisher-publish.s3.eu-central-1.amazonaws.com/pb-nepalitimes/swp/asv65r/media/20250829150852_df534df5166eb5a9bb4cbe101627bdec7ac1df2a405a9d3988d1c86fcc8ecdeb.jpg" data-media-id="editor_7" data-image-id="20250829150852_df534df5166eb5a9bb4cbe101627bdec7ac1df2a405a9d3988d1c86fcc8ecdeb" data-rendition-name="original" width="1750" height="1312" loading="lazy" alt="30 Years after Baby Arun"> </figure>

30 years after Baby Arun

This is the 72nd episode of Diaspora Diaries, a Nepali Times series in collaboration with Migration Lab providing a platform to share experiences of living, working and studying abroad. My father ran a store and that is where I spent all my time till Grade 6. Doing my homework. Serving customers. I then moved to my maternal grandparents’ house because I used to get along with my cousin who was a year older than me. We did everything together, and were best friends. We took turns studying: I was a night owl, and he was an early riser. Before I went to bed after studying all night, I woke him up. My mother was 44 when I was born, the same year my eldest brother got married. My sister-in-law becoming a part of our family was how my mother referenced my age. I liked making money, and was always a hustler. In Grade 7, I learnt to handle a tractor and helped my brother-in-law to plough, earning Rs10 a day. As I got better, he paid me more. By Grade 9, I was already making Rs500 per day, but had to slow down to prepare for my exams. From an early age I knew I did not want a 9-5 job. There just wasn’t enough money in it. I wanted to get into business, and compared my brother who worked in the post office and what businessmen made. It did not help that my brother was honest, and never took bribes. A friend and I made money selling cheap Chinese phones at a premium to our friends. We blasted music on the phones and pretended that we were giving them a discount. After SLC, I started teaching math and other subjects. I was soon a shareholder in the same school and in the evening I was involved in our family’s floriculture business, growing amaranth and marigold for garlands.&nbsp;  <figure> <img src="https://publisher-publish.s3.eu-central-1.amazonaws.com/pb-nepalitimes/swp/asv65r/media/20250831020844_1b54b999d67122a50c4c7e6204cc737bcc99bf2a68db6499a4566a7f61a880b4.jpg" data-media-id="editor_0" data-image-id="20250831020844_1b54b999d67122a50c4c7e6204cc737bcc99bf2a68db6499a4566a7f61a880b4" data-rendition-name="original" width="955" height="1314" loading="lazy" alt="Diaspora Diaries 72"> </figure>  It was then that a friend suggested we learn the Korean language. We could be earning significantly higher in Korea for similar efforts. I had no plans to go abroad but he convinced me. I did not know anything about Korea, and was scolded at the language institute when I asked someone to point Korea on the map.&nbsp; It was only there that I learnt you had to pass an exam for the Korean Employment Permit System (EPS), and pay for language classes. After a week, I decided it was not for me and dropped out. But my friend convinced me to give it one more try. I did not prepare much for the exam, and it was no surprise that I failed. But it was just by one mark, and people would pity me for failing “just by one mark”. It was a brand of failure. It hurt my ego. I had to turn things around by taking the exams seriously, and locked myself up to study hard.&nbsp; Even when we had visitors, my wife told them I was not home. If I was not in my room learning Korean, I would be with a group of ten of us test-takers comparing notes and practicing late into the night. The exam was difficult, but this time I passed, the only one in my group who did.&nbsp; As someone who never liked the idea of doing a job, I still had my doubts about going to Korea. It did not help that one of my acquaintances had returned a month after he had left, and he discouraged me from migrating given that I was already making good money in Nepal.&nbsp; But my wife suggested that I give it a shot since I had worked so hard for it. And if it really turned out not to be my cup of tea, I could always return. What did I have to lose, I thought, at least I would get to visit Korea. My job there was in an electrical company that made circuit boards. I worked all day, earned good money. In the evenings, I kept myself busy with my real estate business back in Nepal. I had learnt the tricks of the trade from fellow real estate agents back home, but at the time did not have the capital to invest.&nbsp;  <figure> <img src="https://publisher-publish.s3.eu-central-1.amazonaws.com/pb-nepalitimes/swp/asv65r/media/20250831020848_941e961e2045058f255ad89884b51faa7d2365c68236e5cbe573d63d769ac6c5.jpg" data-media-id="editor_1" data-image-id="20250831020848_941e961e2045058f255ad89884b51faa7d2365c68236e5cbe573d63d769ac6c5" data-rendition-name="original" width="1500" height="1000" loading="lazy" alt="Diaspora Diaries 72"> </figure>  In Korea, it helped that I had salary records that allowed me to get loans from financial institutions both in Korea and in Nepal. Ultimately, I started earning more from my real estate deals in Nepal than from my job in Korea. This was all thanks to my ability to take loans because of the EPS scheme. My wife has been managing the flower business while I was away. My finances grew stronger over the eight years I was in Korea. I paid off the loans that I had borrowed to buy land. But real estate did not satisfy me entirely. I wondered: what is my brand? What will I be known for? What is my contribution to society? Real estate is for wealth, but that is about it. I needed to sell one piece of land and use the revenue to start a venture. I took classes in business, and returned to Nepal six months ago and got back to my family’s ancestral roots in floriculture. In Nepal too, I am continuing the entrepreneurship training I had started in Korea with the Bridge International. Such exposure helps us reflect on our business such as our branding, vision, and proactive aspects like the importance of strong recordkeeping.&nbsp; I am now working to upgrade and expand my floriculture business. With a friend who is still in Korea I am building a cooling room to increase the shelf-life of flowers and other produce and set up a market in my village where others can sell their produce. Floriculture is our primary business, but it is seasonal and earns good money only during festivals like Tihar.&nbsp;  <figure> <img src="https://publisher-publish.s3.eu-central-1.amazonaws.com/pb-nepalitimes/swp/asv65r/media/20250831020848_a008ffeba13896e6918f68ff6e687c8fe11140d86a96f1ec11690547f2bcd415.jpg" data-media-id="editor_2" data-image-id="20250831020848_a008ffeba13896e6918f68ff6e687c8fe11140d86a96f1ec11690547f2bcd415" data-rendition-name="original" width="1280" height="720" loading="lazy" alt="Diaspora Diaries 72"> </figure>  So, I grow tomatoes to ensure year-round earnings. I also am engaged in other businesses like real estate and online shopping. I work round the clock in Nepal — a strong work ethic is something I picked up in Korea.&nbsp; My Korean bosses would work alongside us, that motivated us. I work just as hard in Nepal as I did in Korea. People here often ask me why I am pushing myself so hard. But making garlands comes easy to me, it is work my forebears were involved in. My childhood memories are about plucking flowers with my sister. I have a comparative advantage in this work. It comes naturally to me, it is easy and I enjoy it. And sometimes, if there are too many garlands to make, I can multitask while holding meetings. My fingers just fly. I am good at this job, but my wife is even better and faster.&nbsp; When there is too much load, we can also outsource the work. To be known as the flower guy would be great personal branding. The मखमली guy. Or the सयपत्री guy. I decided to come home for just this with a one-way ticket. “अब पासा: जाँदैन ल्हासा!” &nbsp;

The flower guy

Nepal has shut down dozens of social media platforms in a move that is widely seen as an effort to tax the revenue they generate in the country, and to control content critical of government. The sites were blocked as of midnight on Thursday, 4 September and affects all Meta products including WhatsApp and Messenger, Threads, and others. Although YouTube, Google and X are also on the government’s list, they were still working as of Friday midday.&nbsp; The government says it took the action after repeated warnings to the platforms to open offices in Nepal, a Cabinet decision last month setting a deadline, as well as a 17 August Supreme Court ruling also requiring them to register and pay requisite taxes. However, the Bill cited in the ban, ‘The Operation, Use, and Regulation of Social Media in Nepal’ has not yet been passed by Parliament. Some social media platforms which were already paying taxes in Nepal even though they are not officially registered, have also been blocked. The move is the latest in <a href="https://nepalitimes.com/news/big-beautiful-bills" target="_blank">a slew of draft legislations</a> designed to undermine Nepal’s open society. A Bill amending the Print and Publications Act would allow district bureaucrats to shut down media. Another draft Bill would allow political appointees to head a new Media Council with the power to revoke the licenses of journalists.&nbsp; A counter-intelligence Bill would let just about anyone in government to arbitrarily tap phones, read emails and trail citizens. On Wednesday the government announced new immigration requirements that would allow it to track the movement of all foreigners in the country. Yet another draft Bill has been set to Parliament to dissolve the <a href="https://archive.nepalitimes.com/news.php?id=10675" target="_blank">Social Welfare Council (SWC)</a> and move registration and monitoring of non-governmental organisations, nonprofits and charities to the Ministry of Social Welfare. Seen in this light, the blockage of social media platforms this week is seen as the latest government attempt to constrict freedom of press. Nepal is one of the few remaining open societies in Asia, and now appears to be drifting towards authoritarianism. The government’s sudden shutdown of social media has been greeted with howls of protest on platforms that still remain open, like Viber and TikTok, as well as in Nepal’s mainstream press. Even senior members of the ruling UML-NC coalition have sharply criticised the move, asking if the government is trying to “turn Nepal into North Korea”.  <figure> <img src="https://publisher-publish.s3.eu-central-1.amazonaws.com/pb-nepalitimes/swp/asv65r/media/2025090508098_a2ab330e403e8418a7006cd5e915607382628dd6984524332bf7b99c74743656.jpg" data-media-id="editor_2" data-image-id="2025090508098_a2ab330e403e8418a7006cd5e915607382628dd6984524332bf7b99c74743656" data-rendition-name="original" width="4280" height="5187" loading="lazy" alt="social media ban in Nepal"> </figure>  The Regional Director of the New York-based Committee to Protect Journalists (CPJ) Beh Lih Yi said in a statement: ‘Nepal’s sweeping ban on social media sets a dangerous precedent for press freedom. Blocking online news platforms vital to journalists will undermine reporting and the public’s right to information. The government must immediately rescind this order and restore access to social media platforms, which are essential tools for exercising press freedom.’ Besides undermining press freedom, blocking social media platforms will also hurt commerce and the economy since so many small and medium business trade through Instagram, Facebook and other platforms. Nepal’s vibrant social media has also been a boost or citizens to assert identity, build solidarity against injustice and play an adversarial role when the mainstream media does not do it. Social media platforms have also become the tenuous link for Nepali families scattered across the world to keep in touch with each other — its importance growing with the increasing size of the diaspora. The government wants social media platforms to register, pay taxes and remove posts on their sites that ‘undermine the national interest and Nepal’s territorial integrity, disturb social and religious harmony’.&nbsp; In response, rights activists have said while there is need for the government to regulate extreme content and hate speech, officials appear to be more intent on clamping down on free speech and trying to force platforms to share the revenue. On Friday, the government had allowed WhatsApp back online, but there were reports that it had instructed the Nepal Telecommunication Authority (NTA) to instruct mobile and internet service providers to block by Friday night all platforms, including Facebook, Instagram, Messenger, WhatsApp, X (Twitter), YouTube, LinkedIn, Reddit, Threads, Snapchat, Pinterest, Signal, Clubhouse, Rumble.&nbsp; Platforms that have registered and are allowed include TikTok, Viber, Nimbuzz, Popo Live, WeTalk, Global Diary and the Nepali portal Hamro Patro. TikTok was banned last year for ‘disturbing social harmony’ and it was lifted after the platform registered its office in Nepal. But even while it was banned, many users simply switched to VPN. Telegram was also banned for ‘financial crimes’ and it has since also been allowed back. NTA officials confirmed that some Asia-Pacific regional offices of platforms, including Meta had been in touch overnight inquiring about the registration process.&nbsp; Nepal is not alone in regulating social media. China bans most Western platforms, Russia and Turkey regulate their and require platforms to locate their data servers in the country. Gulf countries allow social media but keep a tight control on dissent.&nbsp; Experts have said even the government will not dare close down YouTube since so many Nepali individuals and companies make money with posts on that platform, and closing it would also impact on Google and Gmail. Facebook had also just launched a monetisation scheme for videos and reels, and Nepalis uploading content would lose revenue.&nbsp; Blocking the platforms has already hit content creators, influencers and cut small businesses from reaching customers. A survey of social media use in Nepal by Sharecast Initiative showed that 94% of those with smart phones used YouTube, followed by Facebook (92%) while TikTok was in the 50-60% range. X and Instagram were in the single digits. A YouTube ban will also hurt the mainstream media since up to 20% of the revenue of Nepal’s main tv channels came through YouTube. Some 11.1 million Nepalis watch YouTube content every day, the survey showed. ‘For global giants like Meta or Google, Nepal is a small market, and they may not even flinch — but for millions of Nepalis, these platforms are central to daily life, livelihoods, and connections across the world,’ wrote AI consultant Naresh Newar in a LinkedIn post. Some experts said the government’s sweeping ban on social media networks was untenable and the government would be forced to rollback sooner or later. Said editor Shiva Gaunle: “The platforms had given citizens a voice and broken the monopoly of the government, legislators, the courts and journalists over public opinion. This is an effort to reassert that monopoly, but Nepal can never be turned into a North Korea.”

Protest grows against Nepal’s social media ban

It cannot be a coincidence that after pushing bills to constrict freedom of expression and allow greater <a href="https://nepalitimes.com/news/security-or-espionage">surveillance of citizens</a>, Nepal’s government is now tightening controls on civil society.
In a <a href="https://nepalitimes.com/opinion/guest-editorial/command-and-control">series of recent moves</a> journalists have been sued for contempt of court, imprisoned for YouTube videos, or ordered by courts to desist from investigating corrupt officials.
An amendment to the Print and Publications Act that would hand the power to shut online media to the Chief District Officer (CDO). Another draft Bill would allow a political appointee to head a new Media Council with the power to revoke a journalist’s license. The draft counter-intelligence Bill would let random officials to arbitrarily tap phones, read emails and trail citizens.
Now comes yet another draft Bill that would replace the <a href="https://archive.nepalitimes.com/news.php?id=10675">Social Welfare Council (SWC)</a> with direct government control over registration, regulation, and management of non-governmental organisations, nonprofits and charities. There are more than 54,000 NGOs, 200 international NGOs registered with the SWC.
The draft makes civil society organisations needlessly jump through hoops to carry out work that complements the government in the social sector. Critics say the Bill was drafted without any consultation with <a href="https://nepalitimes.com/opinion/comment/nepal-s-rights-groups-must-step-up-4r4z6ck4">civic groups</a>.
“This Bill’s content is questionable whether it intends to allow for civil society organisations in Nepal a free space to operate,” concludes Dr SP Kalaunee, Country Representative of BlinkNow Foundation and Chair of the Association of International NGOs in Nepal (AIN). “The draft seems oriented towards controling rather than facilitating the work of civil society organisations.”
The Bill will be open for feedback from the public, and integrates the National Directives Act (1961), Association Registration Act (1977), and the Social Welfare Act (1992) and proposes dissolving the SWC and replacing it with a new Social Welfare Department under the Ministry of Women, Children and Senior Citizens.
Non-government groups will now be required to get approval from the Registrar Office, the CDO or the provincial government depending on their area of operation. Those working across provinces will have to get permission from the federal government. &nbsp;
The government says the Bill is intended to vet organisations to see if they are engaged in espionage, violate national security, assist a foreign state, commit treason, cause strife between federal units, or incite communal violence.&nbsp;
CSOs working in Nepal have long called for legislation to better facilitate their work, minimise administrative and bureaucratic red tape which have posed operational challenges. But they are opposed to such drastic control.&nbsp;
Read also: <a href="https://nepalitimes.com/banner/the-crow-and-the-scarecrow">The crow and the scarecrow</a>, Om Astha Rai
The NGO Federation of Nepal also issued a statement this week calling the Bill ‘retrograde and cumbersome’. It added: ‘Most of its provisions are intended to further constrain and control civil society organisations rather than facilitate and strengthen them, and reduce the role of citizen participation … it is an attack on our civil liberties, inclusivity, and transparency, and curtails our <a href="https://archive.nepalitimes.com/news.php?id=5156">democratic values and constitutional rights</a>.’ &nbsp;
<a href="about:blank">Nepal’s graduation</a> from least-developed country status next year may mean less aid for Nepal, and higher interest rates on loans from multilateral creditors. The <a href="https://nepalitimes.com/news/how-usaid-cut-affects-nepal">closure of USAID </a>and reduction in bilateral grants means the work of INGOs will be even more vital – especially to meet its <a href="https://nepalitimes.com/here-now/target-2030-for-maternal-and-newborn-health">SDG targets by 2030</a>.&nbsp;
“We are competing with other countries at a time when the global aid environment is shrinking, so the support we receive is directly dependent on a conducive environment for INGOs to operate and function,” says Kalaunee. “INGOs follow regulations of the nations they operate in, they will not protest or wait around for governments to change their minds or policies.”
Social safety net
Since 1977, the work of non-governmental actors in Nepal has been regulated by the Social Service National Coordination Council (SSNCC) chaired by Queen Aishwarya.
After the <a href="https://nepalitimes.com/banner/one-moment-30-years-ago-today">1990 People’s Movement</a>, King Birendra set up the Social Welfare Council (SWC) as an autonomous body in 1992 through the Social Welfare Act. But since then the SWC has been dogged by controversy and allegations of corruption and extortion.
In 2018, the Commission for the Investigation of Abuse of Authority (CIAA) filed a Rs315 million corruption case against 14 individuals, including the Minister of Women, Children and Social Welfare and SWC chair Badri Prasad Neupane and other officials for violating public procurement laws to rent out three hectares of its property around Bhrikuti Mandap.
Civil society groups have for years called for reforms in the SWC, and a report was drawn up to restructure it before this Bill proposed its dissolution. INGOs in particular will now have to go through the Social Welfare Department and multiple ministries for permissions.
A particularly objectionable provision in the draft stipulates that NGOs must have a Board of Director made up almost entirely of secretaries of various ministries. The NGO Federation has urged the government to take a civil society-friendly approach and not tangle its work in red tape and control. It says the government has no option but to revise the bill in its current form.
“Civil society organisations need an open space to operate, and an autonomous body to oversee them,” says Kalaunee. “Non-government organisations support in the areas prioritised by the government but by definition they cannot be a part of government.”