Will President Donald Trump give his Chinese counterpart Xi Jinping a gift? While Trump prizes unpredictability, Xi aims to position China as a force for global stability. Thus, there is a widespread assumption that China will rush to fill the vacuum left by an increasingly nationalist and isolationist United States.
The Chinese leadership has no interest in filling America’s shoes. Attempting to do so could cost China dearly just when it is undertaking a broader economic reorientation at home. The world may be tired of US interventionism – and, now, of <a href="https://nepalitimes.com/opinion/trump-s-first-month">Trumpian aggression</a> – but that does not mean it is ready to welcome an abstemious superpower.&nbsp;
China has studiously avoided becoming involved in major crises beyond its <a href="https://nepalitimes.com/editorial/trans-himalayan-handshake">immediate neighbourhood</a>. Though it has proposed global initiatives on ‘development’, ‘security’, and ‘civilisation’, and articulated a vision of multipolarity in which all countries are treated equally, its efforts to realise these goals have not gone beyond economic statecraft.
While foreign commentators debate what <a href="https://nepalitimes.com/here-now/what-is-xi-jinping-s-big-surprise">China’s vision </a>entails – with some describing it as a potentially benevolent hegemon, and others as a malevolent one – Chinese authorities and intellectuals are more immediately concerned with weathering the storm that Trump has unleashed.
Viewed from outside, China’s core <a href="https://nepalitimes.com/here-now/staying-neutral-in-a-us-china-confrontation-8qni2ij1">national interests</a> seems straightforward: to replace the US as global leader. But pursuing that role may contradict other core interests, such as maintaining regime legitimacy and security, orchestrating a continuous rise in living standards, and reunifying Taiwan with the mainland.&nbsp;
These goals might best be served by maintaining a cold peace with the US, rather than embracing conflict with it.
Having watched the US, China knows all too well that being a <a href="https://archive.nepalitimes.com/news.php?id=4815">global superpower </a>would inevitably draw it into regional conflagrations that it would prefer to avoid. But China also knows that it has benefited massively from the relatively stable world economy that the US and its allies helped bring about.
China needs to retain enormous amounts of resources and manpower domestically to tackle its biggest challenges. Chinese leaders must <a href="https://nepalitimes.com/news/nepal-s-bubble-economy">manage an economy</a> that is no longer driven primarily by property development and exports, while preparing for the possibility that one of its largest trading partners could descend into total isolation.
Trump’s ‘Liberation Day’ tariffs and escalatory duties in response to Chinese countermeasures were a wake-up call. Whatever happens in the trade war, China urgently needs to rebalance its economy by stimulating greater domestic demand.
While Chinese leaders have long acknowledged the need for such a rebalancing, they have been slow to follow through with the necessary policies. Public messaging notwithstanding, they have continued to prioritise industrial output over living standards, and capital investment over consumer spending. But the prospect of losing one of its biggest export markets should change this calculation.
Read also: <a href="https://nepalitimes.com/opinion/turning-point-in-us-india-relations">Turning point in US-India relations</a>, Shashi Tharoor
Similarly, China has an interest in building resilient supply chains for critical technologies in order to circumvent US chokepoints. A significant share of national resources has already been redirected toward promoting domestic innovation.&nbsp;
With the Sino-American rivalry intensifying over the past decade, Chinese leaders have come to regard domestic innovation as a strategic necessity.
Beyond boosting domestic innovation, China is eager to seize opportunities to set the global governance agenda for emerging technologies.&nbsp;
Its recent successes in <a href="https://nepalitimes.com/here-now/nepal-needs-to-be-more-intelligent-about-ai">AI</a> – most notably <a href="https://nepalitimes.com/here-now/artificial-censorship">DeepSeek</a>’s release of low-cost models that rival those from top US developers – have created a strong impetus for China to amplify its voice. China’s message – that a handful of rich countries should not be able to monopolise the technologies that will determine everyone’s economic future – undoubtedly resonates with many around the world.
During the post-Liberation Day staring contest with the US, China convened an impromptu gathering of the all-powerful Politburo and Chinese ambassadors stationed abroad. The purpose was to assess China’s relations with its neighbours, and the stature of those in attendance spoke to the sense of crisis that had swept through the country’s top leadership.&nbsp;
More to the point, the meeting confirmed that China’s strategic orientation remains focused on its own region – not the global context.
Beijing remains fully committed to maintaining strong ties with the Kremlin, viewing Russo-Chinese alignment as a geographical and strategic necessity. The two countries’ 4,209km land border gives China more than enough reason to work with Russia.&nbsp;
China’s ultimate focus is not Russia but its long-term rivalry with the US. An axis with President Vladimir Putin’s regime might well offer a workable (if imperfect) solution to the containment strategy that America has been pursuing against China.
Likewise, China has been de-escalating tensions with India, another large, nuclear-armed neighbour. Both know that the structural and historical strains on their relationship – characterised by an obvious power imbalance and mutual mistrust – will not be easily eliminated. But both also know that predictable, stable ties will yield big benefits over time, especially in a new multipolar order.
PAX SINICA
Beyond managing relations with its immediate neighbours, China has sought to mobilise the Global South behind reforms to multilateral institutions.&nbsp;
When Chinese leaders and diplomats speak of ushering in an ‘orderly multipolarity’, they mean an international order in which the non-Western world has much more clout. Hence, China is a strong advocate of the recent BRICS expansion, and of proposals to redistribute voting shares within Western-dominated international financial institutions.
China has also sought to shape the agenda at United Nations-affiliated institutions where the US historically has had less influence, such as at UN Trade and Development and the South Centre. It can assume a limited leadership role without directly confronting the US and the rest of the G7.&nbsp;
China does have a foreign-policy interest in subtly countering US influence in the developing world, which is why it builds large-scale infrastructure and addresses long-ignored development needs there without making any demands about democracy, human rights, and accountability.&nbsp;
Instead of offering security guarantees, China offers roads and bridges. In exchange, it can secure access to critical raw materials and open new markets for its state-owned enterprises and private companies at a time when the US and Europe are closing their doors.
China did broker a modest rapprochement between Iran and Saudi Arabia, and its Global Security Initiative <a href="https://www.iiss.org/research-paper/2024/10/the-global-security-initiative-chinas-international-policing-activities/" target="_blank">aims to</a> foster international cooperation in counter-terrorism, cybersecurity, biosecurity, and emerging technologies.
But in the case of the <a href="https://nepalitimes.com/opinion/how-to-agree-an-armistice-in-ukraine?%2F=">Russia-Ukraine </a>and<a href="https://nepalitimes.com/opinion/mortality-in-the-gaza-israel-war"> Israel-Hamas</a> wars, it has avoided taking direct responsibility, let alone providing any security guarantees. Of course, China’s self-proclaimed neutrality on the war in Ukraine has not gone unchallenged.&nbsp;
In Gaza, China has criticised the US for supporting Israeli Prime Minister Binyamin Netanyahu’s agenda of continuing the war. But unlike Iran – which China relies on for oil – these other flashpoints have been kept at arm’s length.
Read also: <a href="https://nepalitimes.com/editorial/world-wars">World wars</a>
China would face three big challenges in pursuing even partial or limited global leadership. First, given America’s accelerated withdrawal from international affairs, China might struggle to sustain its commercial engagement with many parts of the world. After all, the US wants to impose drastic costs on those who do business with China, and it may well get its way.
Second, China cannot avoid engagement in dangerous security situations forever. Sooner or later, it will have to develop a truly global foreign policy. In fact, simply putting its own Global Security Initiative into practice would require it to do much more heavy lifting, not only in setting the agenda but also in terms of deploying security personnel and resources. America may be retreating, but that does not mean it will sit idly by and watch China try to increase its own influence.
Third, China still needs to orchestrate a domestic economic rebalancing – a process that will have enormous global consequences. Shifting from export-led growth to greater domestic consumption will take years, and the push to rebalance may run up against China’s ambition to remain a global manufacturing powerhouse.&nbsp;
The latter objective is already causing tensions with Europe and some developing countries whose domestic manufacturers are struggling to compete with Chinese national champions (such as the electric-vehicle maker BYD).
Even as its economy continues to grow, China will remain a largely self-centered and reluctant superpower. Unlike the US, its domestic political economy calls for a more restrained foreign policy, focused primarily on its immediate neighbours and commercial opportunities in the Global South.
As the world grapples with the decline of US power and the shift toward multipolarity, China will increasingly become the centre of gravity in the global economy. The rivalry between a political and military superpower and an economic one will be dangerous for everyone. Both must tread carefully to prevent economic warfare from escalating into a conflict that all would regret.
&nbsp;©Project Syndicate&nbsp;
Yu Jie is a senior research fellow on China in the Asia-Pacific Program at Chatham House.

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What China wants

When two nearby cyclones rotate around each other, merging into a larger and more dangerous storm, meteorologists call it the Fujiwhara effect.
Is something like this developing in Northeast Asia?
Recent decades have seen an increase in what analysts call ‘transnational conflicts’ – that is, conflicts with local, regional and international dimensions. Ukraine is one example, Taiwan is another. It is difficult to address these multi-level conflicts, since responses are needed at all three levels.
Read more: <a href="https://nepalitimes.com/opinion/comment/ukraines-lessons-for-sandwiched-nations-like-nepal">Ukraine's lesson for sandwiched nations like Nepal</a>, Bhaskar Koirala
Recently, transnational conflicts in different parts of the world have started to merge together. Responding to these emergent global conflict complexes will be a still more daunting challenge.
East Asia has a raft of unresolved conflicts, left over from the postwar settlement of 1945. &nbsp;The legacy of the Korean war fuels continuing tensions and fears of war. The unresolved dispute over the <a href="https://www.businessinsider.com/china-taiwan-war-us-no-allies-2024-7">status of Taiwan </a>leads to dangerous military activity around the island. The territorial and maritime disputes in the East and South China Seas involve clashing nationalisms but also broader strategic concerns over supply lines and resources.
Events in these hotspots were always calibrated against the state of relations between the <a href="https://nepalitimes.com/here-now/40-years-after-the-sino-us-thaw">US and China</a>, China and Japan, Japan and North Korea. But it is only recently that they have become connected with conflicts in Europe.
The Russian invasion of Ukraine in 2022 rang warning bells in policy circles in East Asia. Policy-makers feared that President Xi might be emboldened to act against Taiwan following Putin’s lead.&nbsp;
The Ukraine conflict came closer with North Korea’s decision to supply the Russian Federation with weapons, and closer still when President Putin concluded a defence pact with Kim Jong-Un in June 2024. The Russian Federation and North Korea pledged to provide mutual assistance should either be attacked. Kim Jong Un offered “full support and solidarity to the Russian government, army and people in carrying out the special military operation in Ukraine” (CBS News, 19 June 2024).&nbsp;
Meanwhile, on the Korean peninsula, Kim Jong Un warned his people to prepare for war, and ordered the army to undertake <a href="https://asia.nikkei.com/Editor-s-Picks/Interview/China-s-drills-appear-to-be-rehearsal-for-Taiwan-invasion-U.S.-admiral">‘actual war drills’</a>, while proposing to change the constitution to refer to ‘completely occupying, subjugating and reclaiming the R.O.K. and annexing it as a part of the territory of our ​republic in case a war breaks out on the Korean Peninsula.’
At the same time, the West has not yet learned the lesson that NATO expansion is dangerous, and NATO is preparing to expand its activities into the Indo-Pacific region and north east Asia. <a href="https://apnews.com/article/nato-japan-south-korea-australia-new-zealand-6c3d9aa6fccc1253ca99ee140073f95c">NATO is developing links with South Korea and Japan</a> and invited them to attend its last two summits.
Staff talks between NATO and the Japanese Self Defence Force have identified areas of cooperation in responding to security challenges, cybersecurity and military planning. A NATO office was to have been opened in Tokyo, though France objected to this plan. &nbsp;
NATO sees its involvement in the area as a necessary response to the challenges to the ‘rules-based order’ coming from China, North Korea and Russia. The NATO summit of July 2023 declared that “The People’s Republic of China’s (PRC) stated ambitions and coercive policies challenge our interests, security and values.’ The NATO Secretary General followed this up by saying that security is now globalised and security crises in one part of the world reverberate in another.
In April, before attending the NATO Summit for the first time as a South Korean leader, President Yoon condemned any ‘attempt to change the status quo by force’ in the Taiwan Strait, and promised that South Korea would cooperate with the international community to prevent such an outcome. The Japanese strategic community also believes that Japan would be drawn in, under this contingency. The Korean and Taiwan and Japan-China conflicts are thus potentially interlinked.
China and North Korea see the collaboration between NATO and Japan and Korea as a US-led effort to bring NATO into the region. In North Korea’s case, it is seen as part of a US strategy to overthrow Kim’s regime. In China’s case, NATO expansion is seen as a "grave challenge" to global peace and stability. "Despite all the chaos and conflict already inflicted, NATO is spreading its tentacles to the Asia-Pacific region with an express aim of containing China."
The US is deliberately emphasising the interconnections between the European and Indo-Pacific theatres as part of its strategy of building alliances with democratic partners. "We are also growing the connective tissue between US alliances in the Indo-Pacific and in Europe…allies in the Indo- Pacific are staunch supporters of Ukraine, while allies in Europe are helping the United States support peace and stability across the Taiwan Strait," notes National Security Adviser Jake Sullivan.
NATO has addressed the possibility that it might become involved in conflict in the Taiwan Strait, specifically in the situation where US territory and forces came under attack, which would trigger Article 5.
China also objects to the participation of NATO members’ naval units in Freedom of Navigation operations in the Taiwan Straits.
How can the risks of transnational conflicts coming together into global conflict complexes be defused? Second-track dialogue meetings can convene interlocutors from different arenas and bring them together to discuss all aspects of a situation.&nbsp;
But though dialogue efforts are vital, they cannot bear the weight of conflict prevention alone. Restraint, trust-building and moderation on the part of political leaders is also needed. So is a climate of domestic political discussion that replaces security fears and nationalism with mutual understanding and an appreciation of our common humanity.
This article was issued by the Toda Peace Institute and is being republished from <a href="https://toda.org/global-outlook/2024/turbulent-currents-merging-storms-northeast-asia-outlook-june-july-2024.html">the original</a> with their permission.
Hugh Miall is Emeritus Professor of International Relations at the University of Kent, and Chair of the Conflict Research Society, the main professional association for peace and conflict researchers in the UK. He is a Senior Research Fellow at the Toda Peace Institute.

Turbulent Currents, Merging Storms

The current wave of anti-Chinese sentiment in the United States has been building for years. It started in the early 2000s, when US policymakers first raised national-security concerns about Huawei.&nbsp;
China’s national technology champion, the market leader in developing new 5G telecommunications equipment, was accused of deploying digital backdoors that could enable Chinese espionage and cyber-attacks. US-led sanctions in 2019 stopped Huawei dead in its tracks.
But Huawei was just the start. The US has since spiraled into a full-blown outbreak of Sinophobia – a strong word that I don’t use lightly. Phobia is the extreme or irrational fear or dread aroused by a particular object or circumstance.
Indeed, China threats now seem to be popping up everywhere. The US government has imposed export controls to cut off China’s access to advanced semiconductors – part of its concerted effort to stymie the country’s <a href="https://nepalitimes.com/opinion/artificial-intelligence-vs-human-stupidity">artificial-intelligence</a> ambitions.&nbsp;
The Department of Justice has just indicted a state-sponsored Chinese hacking group for allegedly taking aim at critical American infrastructure. Much has also been made of the purported risks of Chinese EVs, construction and dock-loading cranes and now TikTok.&nbsp;
Nor are the fears confined to technology. Several years ago, I wrote about America’s trade-deficit disorder, whereby the US government misdiagnosed a multilateral problem – a trade deficit with more than 100 countries – as a bilateral problem and punished China with tariffs.&nbsp;
Others have warned that Washington’s exaggerated claims of the Chinese military threat have, at times, bordered on hysteria as tensions mount in the South China Sea and the Taiwan Strait.
Of course, all this is only half the story. China is equally guilty of its own strain of Ameriphobia – demonising the US for its accusations of Chinese economic espionage, unfair trading practices, and human-rights violations.&nbsp;
Both phobias are related to the profusion of false narratives that I address in my most recent book, <a href="https://www.amazon.com/Accidental-Conflict-America-China-Narratives/dp/0300259646">Accidental Conflict</a>. Notwithstanding this tit-for-tat blame game, my point now is different:&nbsp;
There is good reason to worry about an increasingly virulent strain of this phobia spinning out of control in the US. Not since the red-baiting in the 1950s, has America so vilified a foreign power.&nbsp;
Back then, a two-pronged congressional approach, led by US Senator Joseph McCarthy of Wisconsin and the House Un-American Activities <a href="https://nepalitimes.com/review/the-destroyer-of-worlds">spearheaded an assault on alleged Communist sympathisers</a> under the guise of protecting Americans from Soviet espionage and influence.
Today, another politician from Wisconsin, Representative Mike Gallagher, has led the charge as chair of the House Select Committee on the Chinese Communist Party which, in an eerie parallel to the McCarthy era, has leveled a series of unsubstantiated charges against China. While Gallagher will retire from Congress in April, his legacy will live on, not just as co-sponsor of a bill that could lead to an outright <a href="https://nepalitimes.com/news/rattled-by-criticism-nepal-bans-tiktok">ban of TikTok</a>, but also as the leader of a congressional effort that has cast a long shadow over those who support almost any form of engagement with China.
The litany of US allegations is a manifestation of unproven fears wrapped in the impenetrable cloak of national security. Yet there is no “smoking gun” in any of these cases. Instead, it is all about circumstantial evidence of an increasingly aggressive China. At work is an unmistakable bipartisan politicisation of deductive reasoning.
For example, US Secretary of Commerce Gina Raimondo, a leading Democrat, <a href="https://www.wired.com/story/china-cars-national-security-threat-investigation/" target="_blank">asks us</a> to “imagine” what could happen if Chinese EVs were weaponised on American highways.&nbsp;
FBI Director Christopher Wray, a Donald Trump appointee and member of the conservative Federalist Society, warns that Chinese malware could disable critical US infrastructure “if or when China decides the time has come to strike” (emphasis added).&nbsp;
And a former US counterintelligence officer has compared sensors in Chinese-made cranes to a Trojan horse. There are many what ifs and mythical parallels, but no hard evidence on intent or verifiable action.
What is it about China that has generated this virulent US reaction? In Accidental Conflict, I stressed that the US has long been intolerant of competing ideologies and alternative systems of governance. The claim of &nbsp;American exceptionalism seemingly compels us to impose our views and values on others. That was true in the Cold War, and it is true again today.
Read also: <a href="https://nepalitimes.com/here-now/staying-neutral-in-a-us-china-confrontation">Staying neutral in a US-China confrontation</a>, Project Syndicate
I also argued that excessive fear of China conveniently masks many of America’s own self-inflicted problems. Bilateral trade deficits may well reflect the unfair trading practices of individual countries – China today, Japan 35 years ago – but broad multilateral trade deficits stem more from chronic US budget deficits that lead to a deficiency of domestic savings.&nbsp;
Similarly, the technology threat is not only an outgrowth of the alleged Chinese theft of US intellectual property, it also represents, as I stressed in Accidental Conflict, America’s underinvestment in research and development and shortfalls in STEM-based higher education. Rather than taking a long, hard look in the mirror, it is politically expedient for US politicians to blame China.
As Sinophobia feeds on itself, fear starts to take on the aura of fact, and the dangers of accidental conflict with China intensify. By acting on these anxieties, America risks inciting the very outcome it wants to deter. Fears over Chinese aggression &nbsp;in Taiwan are a case in point.
The US can and must do better. Rather than excusing the excesses of Sinophobia as justifiable reactions to the China threat, US leaders need to avoid the low road and think more in terms of being the adult in the room. Global leadership requires nothing less.
In his first inaugural address in 1933, US President Franklin Roosevelt underscored the ultimate risk of this dangerous pathology with the memorable line, “The only thing we have to fear is fear itself.”&nbsp;
Amid today’s Sinophobic frenzy, that message is well worth remembering. © <a href="http://www.project-syndicate.org/" target="_blank">Project Syndicate</a>&nbsp;
Stephen S Roach is a faculty member at Yale University and the author of the forthcoming Accidental Conflict: America, China, and the Clash of False Narratives (Yale University Press, November 2022).&nbsp;

US afflicted with full-blown Sinophobia

<figure><img src="https://superdesk-pro-c.s3.amazonaws.com/sd-nepalitimes/20221110161152/636d1e879c7e80680e0af414jpeg.jpg" alt="" width="1500" height="934"/><figcaption>Photo: Stefan Fussan/Wikipedia</figcaption></figure>In just four decades, China’s economy has achieved an unprecedented level of wealth and development, and, until recently, its upward trajectory of economic growth and prosperity seemed set to continue.But as political pressures and the coronavirus push many countries – particularly the United States – to embrace more nationalist policies, the heyday of globalisation soon could be replaced by a post-pandemic era shaped by national-security concerns and border controls.This is not good news for China, which would prefer that the world maintain the economic openness it achieved in recent decades. For that reason, China had been working hard to align its economic and trade activities with international rules and norms. But now it seems that China must prepare for a future characterised by higher trade barriers and restrictions.To this end, China’s 14th Five-Year Plan makes clear that the country will seek to reduce its dependence on external demand. The “dual-circulation strategy” announced in the plan instead emphasizes reliance on the country’s huge population. China also <a href="https://www.nepalitimes.com/latest/china-builds-digital-and-medical-silk-roads/" target="_blank" rel="noopener noreferrer">plans to invest heavily</a> in cutting-edge sectors, such as artificial intelligence and semiconductors, and work to achieve self-sufficiency in core technologies.Outsiders are deeply suspicious of China’s moves to increase state control over its economic development, such as imposing new regulations on tech companies and capital markets. They fear that the country is prioritizing its geopolitical objectives over the quest to build a market economy. Some even worry that China will return to the development model that predominated before Deng Xiaoping launched the country’s “reform and opening up.”These fears are overblown. China is unlikely to return to a state-controlled economy or enact isolationist policies. Instead, the increased role of the state in the economy and a shift toward self-reliance should be interpreted as a response to a changing – and, at times, hostile – external environment.This shift likely would have happened even if Sino-American relations had not deteriorated as they have, owing to China’s enormous population. Recognizing the potential of its own massive internal market, China’s leaders have long sought to increase domestic demand as a hedge against external changes. As for technological progress, a larger population implies more talent and higher returns for innovation.But, amid the retreat from globalization, China’s advantage may be even greater. In a 2018 paper, Klaus Desmet, Dávid Krisztián Nagy, and Esteban Rossi-Hansberg showed that in a world of restricted cross-country trade and migration, countries with large populations can provide <a href="https://www.journals.uchicago.edu/doi/10.1086/697084?mobileUi=0">more opportunities</a> to increase economic output through internal trade and specialization.The most populous countries are not necessarily the richest today, the authors note, largely because of migration. But if barriers to migration grow high enough, populous countries will outpace smaller countries in innovation, even if the latter are richer. Because long-run growth is driven by improvements in technology, this translates into a major economic advantage for countries with larger populations. This outcome highlights just how self-defeating America’s turn inward is: it’s clear that America’s success is thanks to migration and globalization.To be sure, China is facing strong demographic headwinds: its birth rate <a href="https://www.bloomberg.com/news/articles/2021-11-23/china-s-record-low-birth-rate-underscores-population-challenges">dropped to a record low</a> in 2020. But the effects of this decline will take a few decades to have an impact. China’s demographics today give the country a significant advantage over the US in terms of human capital for at least the next 20 years. Projections of China’s future growth suggest that if China makes the most of this advantage – as it seems poised to do – the US will find it all but impossible to hamper China’s economic progress. Rather than thwarting China’s ambitions, America’s policies will encourage China to continue hedging its bets, including by rethinking its national-security strategy and shifting more resources to its science and technology sectors. In the worst decoupling scenario, the world’s two largest economies will end up dominating their own technology-supply systems, each with its own rules and standards.This is a distinct possibility. But visionary politicians should appreciate how much more could be achieved on both sides if the countries instead worked together. The US would be far better served by seizing the opportunities China’s rise creates. And, while China’s large population affords it a major advantage in a deglobalized world, it still has a lot to learn from more advanced economies, beginning with the US. China remains a developing economy, after all, with a per-capita GDP amounting to just one-quarter of the OECD average.More broadly, while a more populous country has a large domestic market to fall back on, that is no substitute for access to the global market. Likewise, ties to the outside world, including the sharing of knowledge and ideas, invariably accelerate technological progress. And an open and decentralized economic system that encourages market-led activity is far more conducive to the iterative process vital to the commercialization of innovation.It’s clear that China has much to gain from a more open global economic system. China’s leaders have emphasized that they are not abandoning the path of market-led development and returning to a closed economic model – and there is no reason to believe otherwise.Read Also:<a href="https://www.nepalitimes.com/latest/climate-covid-19-and-china/" target="_blank" rel="noopener noreferrer">Climate, COVID-19 and China</a>, Rastraraj Bhandari© Project SyndicateZhang Jun, Dean of the School of Economics at Fudan University, is Director of the China Center for Economic Studies, a Shanghai-based think tank.<img src="https://superdesk-pro-c.s3.amazonaws.com/sd-nepalitimes/20221110161152/636d1e8a9c7e80680e0af415jpeg.jpg" alt="" width="90" height="110">

China charts 2022 and beyond

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

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.”

Big, beautiful Bills

Nepal’s leaders often make grandiose promises that they will turn the country into Switzerland within a decade. We will be lucky if Nepal could even attain the per capita GDP of Swaziland.
Becoming another Switzerland or Singapore is the boastful fantasy of <a href="https://nepalitimes.com/editorial/politics-as-usual">incompetent serial politicians</a> who keep getting themselves elected again and again.&nbsp;
So, what has to change?&nbsp;
It has to be <a href="https://nepalitimes.com/here-now/looking-ahead-to-nepal-s-2027-elections">through elections</a>, but there is spreading distrust of the democratic system bordering on nihilism among Nepalis. The three main parties must have sensed by now that they are doomed if they do not get their act together and inject new untainted blood into tickets in 2027.&nbsp;
One election will not clean up the muck that has accumulated over the past 35 years, but we have to start with the next one. Politics cannot be business as usual any more, voters are fed up with what is on offer.&nbsp;
Over <a href="https://nepalitimes.com/news/push-factors-driving-nepalis-out">one-third of young Nepalis are not even in Nepal</a>, and they are not allowed to cast their ballots. But we saw in 2022 that the diaspora can have an impact on how their folks vote back home, and this trend is bound to increase in 2027. It would finally break the vote banks on which the established parties have relied on to perpetuate misrule.
Nepal needs solutions urgently to address snowballing crises on multiple fronts: social inequity, joblessness and low purchasing power, failing agriculture, breakdown of services, a pandemic of corruption feeding mal-development, low capital formation, environmental woes, and to top it all off — a runaway climate emergency.&nbsp;
Yet, there are bright spots, many of which happened despite political instability: falling poverty rate, improved health and education status, increase in forest cover, conservation successes, growth in hydropower.&nbsp;
Just imagine how much further ahead Nepal would be if it was not plagued with chronic mismanagement, <a href="https://nepalitimes.com/opinion/higher-corruption-in-high-places">corruption and conflict</a>.
It is because of these modest gains that <a href="https://nepalitimes.com/news/not-poor-but-not-rich">Nepal will graduate</a> from a ‘least-developed’ to a ‘developing country’ in November 2026, and transition to middle-income status by 2030 — even though it still has an annual per capita income below the $1,306 threshold.
The driving force for this growth comes almost entirely from remittances which make up 26% of the GDP — the third highest in the world. Inflows officially hit $12.54 billion last year, and nearly 65% of households depend on money <a href="https://nepalitimes.com/editorial/the-new-equaliser">family members send home</a>, spending most of it on basic needs.
A recent discussion at the Institute for Integrated Development Studies (IIDS) titled Diaspora Dialogue: Innovation, Identity and Global Influence looked at leveraging the 4 million Nepalis who live and work abroad to spur investment and growth.
IIDS has been involved since 1979 in policy advocacy to propose sustainable solutions to governments under at least four different political systems. The fact that we are in the state we are in now must mean that not many of the policy priorities the IIDS put forward in the past 40 years have been properly implemented.&nbsp;
For decades, we’ve heard that Nepal’s path to economic growth lies in <a href="https://nepalitimes.com/opinion/people-power/nepal-can-level-up-tourism-with-electricity">hydropower and tourism</a>, but that narrative has to change, noted IIDS Executive Director Biswash Gauchan.&nbsp;
“Forget falling water, forest and forex,” he said. “Nepal has to move to a knowledge economy, boost investment and look beyond our neighbours to the diaspora.”&nbsp;
There is an artificial bubble in real estate and banking due to remittances. Even if Nepal gets 3 million tourists a year and exports most its hydropower it will not be enough to take the annual per capita income to $6,000 by 2050.
A knowledge economy means thinking beyond enrolment rates and basic literacy to quality education relevant to the <a href="https://nepalitimes.com/opinion/investing-in-people">human resources the country needs</a>. This will ensure jobs at home in import-substitution agriculture, value-added manufacturing and export of services.
And that is where global Nepalis come in. Connectivity means the end of geography, and diaspora talent and capital can be harnessed for investment and involvement in innovation to take Nepal into a <a href="https://nepalitimes.com/here-now/smart-ageing-is-nepal-s-next-frontier">digital future</a>.&nbsp;
This needs a paradigm shift away from a rent-seeking state to a ‘whole-of-government’ strategy that can only come from a new crop of competent technocrats with integrity and vision to seize the moment. They have to see migration not as 'brain drain' but as 'brain circulation'.
Those Nepalis exist. In Nepal and all over the world. Swaziland’s anuual per capita income is $4,000 — think we can do it <a href="https://nepalitimes.com/here-now/nepal-in-2050-wk6r5r1j">by 2050</a>?

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