Fighting back social challenges and natural calamities, Nepal, in 2017, made major strides in almost all areas including inclusive development, industry and commerce, economy, politics, human rights, among various others.

Here are some of the key highlights of major developments in Nepal in 2017:

Bilateral Ties and Key Pacts

2017 has been a prosperous year for Nepal in building its image in the global arena through diplomatic ties.

On December 19, 2017, Nepal completed 60 years of its diplomatic relations with Sri Lanka.

US Ambassador to Nepal Alaina B Teplitz (In Right)

The United States Embassy also celebrated 70 years of US-Nepal bilateral relationship on December 13, 2017.

Besides strengthening existing ties, Nepal also began its diplomatic relations with nations such as State of Eretria, Uganda and Kingdom of Bahamas.

Very recently, a new friendship association to boost Nepal-Myanmar diplomatic ties was also formed. The Myanmar-Nepal Friendship Association is the first such group formed since the establishment of diplomatic ties between the two countries in 1960.

Nepal also signed bilateral partnerships with various countries for cooperation across different sectors.

Nepali Foreign Secretary Shankar Das Bairagi and the Ambassador of Morocco to Nepal Mohamed Maliki signed a MoU for the formation of a bilateral consultation mechanism between Nepal and Morocco on August 3, 2017.

Nepal has also signed a Bilateral Labor Agreement with Jordan on October 18, 2017.

         Indian Businessmen Invited to Invest in Nepal

The Government of India also promised its investment in the Nepali industry.

In response, the Government of Nepal has very recently welcomed the Indian business community to invest in Nepal.

“It’s an opportune time to invest in Nepal with bilateral trade on the upswing,” says Embassy of Nepal Charge d’Affairs Bharat Kumar Regmi.

Japan and the United States also promised assistance and funding for the development of Nepali education sector.

In a move enhancing its diplomatic ties with Nepal, the Parliament of Brazil has also formed a six-member Brazil-Nepal Parliamentary Group.

This is the first such Group in the history of Nepal-Brazil ties and is formed as a result of the recently-approved statute to promote inter-parliamentary cooperation between the two countries.

In a recent meeting on December 25, 2017, Oman and Nepal discussed bilateral cooperation across various sectors, wherein, the Under Secretary of the Ministry of Commerce & Industry of Oman Ahmed Hassan Al-Dheeb welcomed collaboration with the Nepali business community across various sectors.

Earlier, Nepal had also expressed willingness to send its labor to work in Oman thus enhancing the Oman-Nepal labor cooperation.

With an aim to boost the Nepal-Austria bilateral ties, the Federation of Nepalese Chambers of Commerce and Industry (FNCCI) and the Austrian Federal Economic Chamber (AFEC) had also signed a MoU on October 31, 2017.

The new collaboration will focus on enhancing private sector collaboration for promoting trade, commerce and technology transfer between the two countries.

Here, it is noteworthy that the leftist alliance, which will form the next Nepali Government, has recently announced that the new Nepali Government will maintain Nepal’s diplomatic relations with neighboring nations based on independent foreign policy.

Politics

2017 has changed the political landscape of Nepal and has, in fact, emerged as the game-changer year for the country.

Local-level polls and legislative polls, the most-awaited elections for Nepal and its citizens, were successfully held in 2017. These elections were held in the country for the first time in the last 20 years.

The local polls were held in three phases with the first two phases on May 14 and June 28, and the third phase on September 18, 2017.

Another major milestone for Nepal is the two-phase country’s parliamentary and provincial polls held on November 26, 2017 and December 7, 2017, respectively. In this election, Nepali politics saw major political shifts with the Communist alliance winning the game finally to form the next government.

Interestingly, the red flag (left parties) registered grand victory in both the landmark polls of Nepal.

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Recent floods in mid-August 2017 have severely impacted Nepal’s economic activity, said the World Bank in its recent-released report.

“Nepal’s economic activity, which was expected to progress well in FY 2018, has been impacted by another natural disaster,” highlighted the World Bank report titled- Nepal Development Update.

Citing to its semi-annual assessment of economic performance, the World Bank informed that the recent floods in mid-August 2017 have hit 5 percent of the country’s overall population with several districts recording the heaviest rainfall in 60 years.

World Bank termed the recent floods as ‘the third major shock in three consecutive years’ as it informed that the floods and landslides have affected over 1.7 million people, houses, bridges, roads and other infrastructure.

According to the report, the damage caused by floods is likely to affect agriculture, economic activity and poverty reduction efforts of Nepal, even up to FY 2018.

“Over 80 percent of land in the southern Tarai, country’s food basket, was affected. Estimates of destroyed crops at 64,000 hectares will likely lead to a weak agricultural output in FY 2018,” the report noted.

While the estimates of damages remain preliminary, the growth for FY 2018 is expected to be lower than earlier forecasted and moderate thereafter, in line with the potential averaging 4.5 percent in the forecast period, it added.

World Bank releases the Nepal Development Update twice in a year, bringing out issues to be addressed for the overall development of Nepal.

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“As Nepal prepares for an ambitious shift from a unitary to a federal system of government, closer attention to sequencing political, financial and administrative decentralization will be key,” stated the World Bank in its latest report titled ‘Nepal Development Update’, released on September 17, 2017.

It further said that the country’s new fiscal federalism system is suggesting marked asymmetry between stronger decentralization of spending responsibilities and relatively unchanged low decentralization of tax collection powers. “Similar imbalances hold true between regions across the country,” it added.

According to the World Bank, a large proportion of Nepal’s federal spending would likely be passed on to subnational governments starting from FY 2018. It says such a move would lead to increased public spending in the country.

Commenting on the case, Takuya Kamata, the World Bank’s Country Manager for Nepal said, “The subnational governments will play an increasingly critical role in Nepal’s public expenditures. A system of fiscal transfers that is designed for transparency and predictability and supported by a small set of simple rules could go a long way in helping meet the development objectives of federal Nepal.”

On the other side, the World Bank also cautions that unaddressed issues in the new federal system might challenge the budget execution, especially in the coming fiscal year.

According to the report, recent floods in mid-August have largely impacted the rebounding economic growth of Nepal.

Budget Expenditure, a Perennial Problem in Nepal: World Bank

The latest update pointed at the issues related to Nepal Government’s budget planning.

“More than 60 percent of the capital budget was spent in the last quarter of the fiscal year, while expenditure remained significantly below the planned budget, a perennial problem in Nepal. The era of balanced budgets has ended with the fiscal deficit reaching an estimated 3.3 percent of GDP in FY 2017 and expected to increase going forward as well,” the Nepal Development Update said.

With regard to trade, the report noted that the country’s import growth remains strong, while exports and remittances are expected to remain sluggish.

The World Bank releases the Nepal Development Update twice in a year with a prime focus on the country’s economic development over the preceding months, placing them in a longer-term and global perspective.

This report is for the business community, policymakers, analysts and professionals engaging in economic debates related to the country and the public.

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