Countries at the Crossroads 2006 - Nepal

Publisher Freedom House
Author Ravi Bhatia
Publication Date 3 August 2006
Cite as Freedom House, Countries at the Crossroads 2006 - Nepal, 3 August 2006, available at: [accessed 19 December 2018]
DisclaimerThis is not a UNHCR publication. UNHCR is not responsible for, nor does it necessarily endorse, its content. Any views expressed are solely those of the author or publisher and do not necessarily reflect those of UNHCR, the United Nations or its Member States.

(Scores are based on a scale of 0 to 7, with 0 representing weakest and 7 representing strongest performance.)


Nepal is facing one of the biggest political crises in its history. A civil war between radical agrarian Maoist rebels and King Gyanendra (backed by the army) has affected vast parts of the civilian population and damaged relations with India and the West. The violent insurgency led by the rebels first emerged in 1996 and has grown large enough to threaten Nepal's constitutional monarchy. The civil war has led to the deaths of more than 11,000 people.

Using the civil war as an excuse, through a series of creeping coups culminating in an overt coup in February 2005, King Gyanendra has suspended Nepal's entire democracy, dismissed parliament, and appointed a handpicked prime minister and cabinet. The rule of law has been subverted through the creation of a number of extrajudicial bodies, and human rights have been profoundly compromised. The army, security forces, and the Maoists have all committed grave human rights violations including summary executions, torture, and detention without trial.

It is estimated that Maoists control up to two-thirds of the country. They espouse an extreme left-wing ideology and partly model themselves on the Peruvian Shining Path guerrillas with the ultimate aim, in theory, of establishing a peasant-led revolutionary Communist regime. In practice, they want Nepal to have a new constitution, written by members of a newly established constitutional assembly, which will "abolish the monarchy" and establish some form of republic.

The Maoist insurgency has been strengthened by the lack of a unified front to tackle it, the result of severe tensions between the king and Nepal's political parties. Even prior to the Maoist insurgency, Nepalese politics had traditionally been unstable, with coalition governments collapsing frequently. Arguing that he was faced with perpetual political instability on the one hand, and a strengthening Maoist threat on the other, in October 2002 the king suspended Nepal's normal democratic procedures and began appointing prime ministers by royal decree. Between October 2002 and February 2005, the king appointed (and dismissed) four prime ministers. However, during that time parliament remained active. Going one step further, in what was widely referred to by the media as a "royal coup," on February 1, 2005, the king dismissed the prime minister and government, adjourned parliament completely, placed leading politicians, including the prime minister, under house arrest, and declared a state of emergency.

Since February 2005, King Gyanendra has ruled as chairman of a self-appointed council of ministers. He has, however, stated that he intends to restore multiparty democracy. Crucially, he continues to be strongly supported by the army (although the army chief has said that he remains loyal to whichever government is in power). The February 1 coup angered the politicians and a large part of the urban and rural public and led to widespread demonstrations and protests in several towns across Nepal. It also led the politicians to consider closer ties with the Maoists, something that in the past they had refused to do.

The triangular, tense, and unstable relationship between the king, the politicians, and the Maoists makes the future of Nepal highly uncertain. In mid-November 2005, at secret meetings held in New Delhi, India, Nepal reached a turning point when seven main political parties arrived at an understanding with the Maoist movement. Both the political parties and the Maoists agreed to oppose "autocratic" or absolute monarchy and press for the election of a new constituent assembly (one of the Maoists' key demands). In a 12-point statement released by the political parties and the Maoists on November 22, the Maoists stated that they were ready to disarm and take part in elections if the United Nations oversaw them. In return, the political parties would support the Maoist campaign to set up a new constituent assembly, which would draft a new constitution. The joint announcement by the Maoists and the parties asserted that they would oppose "autocratic" monarchy, leading several politicians to argue that perhaps a "ceremonial" monarchy with limited powers might be acceptable to the Maoists.

The November 2005 developments make it more difficult for the king to maintain the current direct royal rule as he now faces an alliance of the main political parties and the Maoists. The developments mean that Nepal has reached a turning point in its political crisis. The understanding between the Maoists and the political parties sharpened the lines of the political struggle, with the Maoists and the political parties on one side and the king and the army on the other.

In October, preempting his opponents' November 22 announcement, the king ordered the Election Commission to hold a general election before mid-April 2007. He also called for lower-level municipal polls scheduled for early 2006 to proceed (however, the political parties have stated they will boycott these as they view them as a back-door attempt by the king to legitimize his rule). In November 2005, Gyanendra softened his stance further by stating that his February 1 actions were not designed to curb democracy but rather to save Nepal from becoming a failed state without clear leadership.

However, the situation could also go the other way and provide the king with an excuse to crack down on both the Maoists and the political parties. The king has already asked the political parties to clarify their positions on terrorism (existing laws bar any form of association with Maoist rebels, who have been declared terrorists, and this includes drafting joint declarations with the Maoist leadership) while the police and army have been heavy-handed with politicians and prodemocracy activists.

What is clear is that a polarization has taken place, with the king backed by the army on one side and the political parties and the Maoists on the other. Essentially a deadlock and somewhat of a balance of power has been reached. The deadlock should be viewed as an opportunity to negotiate a compromise that both the king and the Maoists can accept, one in which the king gives up most of his powers, the Maoists give up arms and join the mainstream political process, and democracy is restored. The best basis for the improvement of Nepal's human rights situation and the freedom of Nepalis is the cessation of violence and the restoration of some form of full democracy.

Accountability and Public Voice – 2.23

Since 1990, Nepal has, in theory, been a democracy; however, normal democratic procedures have been suspended since October 2002. Between October 2002 and February 2005, the king appointed four prime ministers by royal decree. On February 1, 2005, the king dismissed Prime Minister Sher Bahadur Dueba (whom he had selected), placed him under house arrest, and appointed himself chairman of a new, handpicked council of ministers, without consulting any of Nepal's main political parties. Subsequently, several other leading politicians have been placed under house arrest, and the king has suspended civil rights and the independent media. The army, loyal to the king, began patrolling the streets to maintain law and order. The king made a rare television broadcast in which he said that he had dismissed the government for failing to quell an ever-growing Maoist insurgency. On February 18, political parties protested the February 1 action; several demonstrators were detained that day.

In sum, the authority of the government in Nepal is not based on the will of the people as expressed by regular, free, and fair elections and universal and equal suffrage. Since February 2005, the situation has become even worse, with participants in prodemocracy campaigns and protests subject to summary detention by the state administration and political parties not being permitted to campaign. However, the current royal administration does seem to treat all political parties with equal disdain.

The executive, legislative, and judicial branches of government in Nepal are not able to hold each other accountable. Despite protests, the legislature was unable to stop the king from suspending democracy. The judiciary has also largely remained mute on the subject. Distribution of power among the king, political parties, and judiciary has always been troubled. The royal household has traditionally wrestled with politicians since limited democracy was first introduced in Nepal in 1959.

The civil service is widely viewed as being politicized, inefficient, and corrupt. Promotions and dismissals remain highly politicized, and merit is only one of a gamut of considerations. The civil service is dominated by Bhramins (the highest Hindu caste) and Kshatriyas, despite the fact that they represent only around 40 percent of the country's population.

Since 1990, when restrictions on nongovernmental activity were lifted, civil society groups and nongovernmental organizations (NGOs), most of which are reliant on foreign aid, have expanded swiftly. By 2005, Nepal had over 30,000 vocal NGOs commenting on government policy, legislation, and the democratic process. However, since the royal coup of February 1, 2005, a clampdown on civil society groups and NGOs has been in effect.

On November 10, 2005, the government issued a 15-point code of conduct to regulate NGOs. The new code requires NGOs to operate in accordance with government priorities and seek approval before obtaining foreign assistance. Further, the Social Welfare Council (SWC) has the power to suspend or dissolve NGOs that violate the new NGO code, and all employees of the SWC are government officials. NGOs have also been threatened by the Maoists, who have accused NGO workers of acting as government informers in remote districts.

The new government code of conduct upset several NGOs, and when the NGO Federation of Nepal met on November 18, they stated that they would not abide by it. The code is also being challenged in the Supreme Court. On November 23, in an interim order, the Supreme Court requested that the government not implement the code pending its analysis of the case.

NGOs have not been the only casualties of the current political climate. The state is also actively involved in direct and indirect censorship of the print and broadcast media. From 1990 on, Nepal had managed to establish a prolific media and radio presence that was respected all across South Asia. After February 1, 2005, the government went to the extent of stationing military officers in newspaper, radio, and television stations to control activity. Prominent editors have been summoned to government offices to be reprimanded for "objectionable" material. Private radio stations were no longer permitted to broadcast the news. (Radio remains the largest news source in a poor country where vast numbers of the population remain illiterate and too poor to afford a television set.) The government also stopped publishing public notices in private newspapers, leading to a sharp fall in advertising revenue.

In May 2005, the government ordered the closure of a radio production company, Communications Corner, arguing that it was operating illegally. Later in the year, the authorities raided the offices of a major radio station, Kantipur FM, attacked journalists, and confiscated transmission equipment. The radio station was then ordered to stop relaying news. In October 2005, the government promulgated a Media Ordinance that amended six separate statutes regarding the media. It strengthened restrictive provisions contained in those acts and introduced new restrictions on the right to seek and impart information. The ordinance made defamation a criminal offense and gave the government-controlled Press Council the ability to cancel journalists' licenses.

The United Nations expressed concern that the restrictions went beyond those permitted by the International Covenant on Civil and Political Rights. In October 2005, under the ordinance, FM stations were banned from broadcasting anything other than entertainment programs. In late 2005, Nepali police forced the closure of another radio station, Sagarmatha Radio, for attempting to broadcast a BBC interview with a Maoist leader. Protests by journalists have led to immediate arrests. In November 2005, more than 2,000 people staged demonstrations against the controversial new media law. In other demonstrations, over a dozen journalists were arrested for protesting. The state funds its own media channels and is aggressively attempting to promote an official point of view.

The new and controversial media law as well as action taken against journalists in the wake of the February 1, 2005, events, demonstrates that the state does not oppose the use of onerous libel, security, and other laws to punish those who scrutinize government officials and policies. The government has not protected journalists from extrajudicial intimidation and arbitrary arrests and detention at the hands of state authorities or other actors. Nor have there been fair and expeditious investigations and prosecutions when cases do occur.

The state continues to monitor the internet as an information source. On February 1, 2005, the government cut all international telephone lines and internet connections but reestablished them shortly thereafter.


  • As part of a negotiated settlement between the king, the political parties, and the Maoists, the current ceasefire must be maintained and extended indefinitely. A prolonged ceasefire must then be transformed into a negotiation process and a peaceful settlement whereby democracy is restored and the Maoists are encouraged to enter the mainstream political process.
  • The king should restore parliament, with full freedom for political parties, and restore the independence of state institutions.
  • NGOs must be permitted to operate without intimidation. To achieve this, an independent NGO regulator, with domestic and international representation, should be established with the freedom to publicize and probe intimidatory acts. Further, the new code monitoring NGO activity should be repealed.
  • Journalists must be permitted to operate without intimidation. To achieve this, an independent media regulator, with international representation, should be established with the freedom to publicize and probe intimidatory acts.
  • The new media ordinance must be repealed.

Civil Liberties – 2.80

According to a human rights group, Informal Sector Service Centre (INSEC), the conflict between the Maoists and the government has led to more than 12,690 deaths since 1996. INSEC states that while the Maoists have killed 4,530 people, the state has killed 8,163 people. Going by these and similar statistics, Nepal remains far from a free society where civil liberties are upheld. Nepalese civilians have been victims of rising tension between the Maoists and the state. Prison conditions remain poor, and the state has taken little action when attacks have led to the deaths of political activists. Several citizens have been held for long periods without trial.

Nepal has faced condemnation at the United Nations for its poor human rights record. In March 2005, the United Nations warned that Nepal was facing a humanitarian crisis. In a subsequent report, the United Nations listed, in strong language, the difficulties faced by individuals caught up in fighting in Nepal. It stated that Nepalis are denied access to humanitarian and medical supplies. In May 2005, the UN Office of the High Commissioner for Human Rights (OHCHR) opened a branch in Nepal. It presented its first report to the UN General Assembly on September 16, 2005. The report stated that it was investigating reports of a number of human rights violations by the state, including extrajudicial executions, killing of civilians, disappearances, arbitrary arrests, detention, torture, threats, and violations of the rights to freedom of expression, assembly, and association. The UN body was also looking into violations by groups that receive direct or indirect support from the security forces as well as violations by Maoists. The report further stated that in July 2005, 187 detainees were being housed in army barracks, and 1,200 others were being held under the Terrorism and Disruptive Activities (Control and Punishment) Ordinance (TADO). The OHCHR declared that it would inform the UN Department of Peacekeeping Operations (DPO) about Royal Nepalese Army (RNA) personnel and units implicated in the violations so that DPO could review their suitability for deployment under the UN flag.

In practice, Nepalese citizens do not have the means of effective petition and redress when human rights violations occur. Articles 11 to 23 of Nepal's 1990 constitution provide a number of fundamental rights, including freedom of expression and due process of law. The prohibition of torture is defined in Article 14 (4) of the constitution and states that no person who is detained during investigation or for trial shall be subjected to physical or mental torture or cruel, inhuman, or degrading treatment. In addition the 1996 Compensation Relating to Torture Act (CRT) permits a victim to file a claim for compensation in the courts; the alleged perpetrator of torture is defended by the attorney general. Several other legal safeguards exist. However, in practice, these safeguards are not implemented, and human rights violations occur regularly.

From September 10 to 16, 2005, the United Nations dispatched a special rapporteur, Manfred Nowak, to Nepal on a fact-finding visit at the invitation of the Government of Nepal. On September 15, Nowak accused the security forces of systematic torture. In his later report, he concluded that "torture is systematically practiced by the armed police and Royal Nepalese Army. Legal safeguards are routinely ignored and effectively meaningless. Impunity for acts of torture is the rule, and consequently victims of torture and their families are left without recourse to adequate justice, compensation or rehabilitation." Nowak also stated that only one person had been compensated for torture since the Torture Compensation Act took effect in 1996. The report's appendix highlights several individual cases of human rights violations. Nevertheless, the Royal Nepal Army continues to deny systematic torture.

Women especially have been victims of the civil war. In theory, Nepalese law does not actively discriminate against women but, in practice, women do not enjoy the same rights as men. For instance, women hold less than 10 percent of civil service positions, and violence against women is a major problem. Nepal is also one of the few countries in which female life expectancy is lower than that of males. The overall adult literacy rate in Nepal is 57 percent, but among women it is only 30 percent. In November 2005, the Supreme Court ordered the government to issue passports to women under the age of 35 without the (previously required) consent of their guardians after a writ challenged a 1995 decision. However, the government has yet to address the right to citizenship by descent through the mother or the existence of discriminatory inheritance and property laws. The Nepalese government has recognized that gender inequality is a problem and has therefore included gender equality programs in Nepal's Tenth Five-Year Plan. The plan identifies women as vital to achieving poverty reduction and development. Nevertheless, the Tenth Five-Year Plan does not specifically address gender discrimination in employment in either the public or the private sector.

In the current political climate of intimidation and fear, domestic violence against women has also risen. The police have sent out directives stating that domestic violence is a criminal offense. However, this has been hard to enforce due to entrenched ideas. In a survey conducted by a local NGO, Saathi, 42 percent of respondents stated that medical personnel were uncooperative in cases of violence against women. The Human Trafficking Control Act prohibits the sale of persons within Nepal or abroad, and Nepalese law prescribes strict jail sentences of up to 20 years for persons who traffic women. However, antitrafficking enforcement is weak and convictions are rare.

Ethnic minorities have also suffered since the suspension of democratic freedoms. Although the government and the laws do not overtly discriminate against the country's 75 ethnic and religious minority groups, in practice it is commonplace. Nepal is a Hindu-dominated society, and caste discrimination remains widely prevalent. Furthermore, freedom of conscience and belief was shaken when in 1990 Nepal's new constitution declared Nepal to be a Hindu state. Tibeto-Burman ethnic groups questioned this as they did not consider themselves Hindus. As a result of the caste system, several ethnic minority groups are often treated quite like lower-caste Hindus. The domination of upper castes however, preceded the 1990 constitution.

The Maoists have been sympathetic toward the demands of ethnic minorities and have been urging that ethnic minorities should gain autonomy over areas in which they are in a majority. Despite the tensions associated with the Maoist action and the February 1, 2005, action, the situation has not grown much worse than it was previously. Religious freedom has largely been maintained, and the state continues to refrain from involving itself in the appointment of religious and spiritual leaders and generally steers clear of the internal activities of faith-related organizations.

Nevertheless, ethnic minorities continue to face traditional discrimination. Brahmins and Kshatriyas dominate politics and the senior military and civil service ranks. Members of low-caste groups face active discrimination in competition for both senior and junior posts. The state has made few efforts to lessen ethnic and caste discrimination, and in practice terms of employment and occupation have not changed. The state has no formal policy on maintaining interfaith understanding. In addition, reacting to Chinese pressure, the state has restricted public celebrations by the Tibetan community. In January 2005, the government closed two offices associated with the Tibetan leader, the Dalai Lama. While in principle there is no discrimination against people with disabilities, in practice little has been done to further their rights.

Since February 1, 2005, a state of emergency has been in effect, and the state has suspended the right to freedom of association and assembly. Rallies have been banned, and several public meetings have been curtailed or forcefully disbanded. Several reports of police tear-gassing demonstrators, as well as arresting demonstrators on unclear legal grounds, have surfaced. There has also been a failure to provide medical care for injured demonstrators. In September 2005 a senior UN human rights official and representative of the OHCHR, Ian Martin, voiced concern at the alleged use of excessive force against prodemocracy demonstrators in Nepal. Martin referred to beatings and abuse and stated that they constituted torture. Citizens are not protected from being directly or indirectly compelled to belong to certain associations. In particular, vast numbers have been unwillingly inducted into the Maoist movement under threat of violence. Maoists have a policy of forcibly recruiting one family member per rural household into their movement.


  • The Royal Nepal Army (and the Maoists) must, as part of the ceasefire, stop killing, torturing, and harassing members of the public. In particular the RNA must stop attacking "potential Maoists" and Maoists must stop attacking "royal sympathizers."
  • The government must improve human rights training for the army and the police. In particular, the government must work with the United Nations to improve the army's trigger-happy engagement tactics.
  • Indefinite and arbitrary detention of Maoists and others must cease.
  • Human rights violations on both sides must not go unpunished. Domestic and international NGOs and international official bodies must be permitted by the government to engage Maoists to set up oversight systems to document and punish cadres for excessive use of force in combat operations as well as force used against civilians. An internal Maoist human rights watchdog should be established with the power (granted by the Maoist leadership) to liaise with NGOs and UN officials and monitor Maoist operations from a human rights standpoint.

Rule of Law – 2.73

Nepal's legal system is based on the British legal system and legal principles, and judges are required to have earned a recognized law degree. They are reasonably well trained to carry out justice in a fair and unbiased manner. Unfortunately, in practice Nepal's judiciary has failed to deliver timely and equitable justice, and judges are not always appointed, promoted, or dismissed in a fair and unbiased manner. Because the king is involved in their appointment, many judges' loyalty resides with him. Lower courts are viewed as slow and corrupt. Cases can, in some circumstances, take over 20 years to be resolved. The judiciary is also severely underfunded.

In principle, everyone charged with a criminal offense is presumed innocent until proven guilty. In theory, citizens are also given a fair and public hearing by a competent tribunal. Citizens also have the right and access to independent counsel, and the state does provide citizens charged with serious felonies with access to independent counsel when it is beyond their means, although in practice this rarely happens.

Since 1990 the judiciary has often been called on to interpret the constitution. The judiciary has traditionally remained outside the political fray, although there have been some corruption allegations against the institution. Under existing law, only parliament can impeach Supreme Court judges. The judiciary comprises 75 district courts and 16 appeals courts of general jurisdiction, one special court, four revenue tribunals, one administrative court, a labor court, one loan-recovery tribunal, a loan-recovery appeals tribunal, and the Supreme Court.

Since the state of emergency was declared in February 2005, the judicial system has been severely altered. On February 16, the king created a powerful anticorruption body with questionable legal status. It comprises ex-government administrators, a general, and an intelligence officer. The six-member Royal Commission on Corruption Control (RCCC) has powers to investigate and indict suspects, to hear cases, and to order sentences in relation to smuggling, revenue-related crimes, irregular contracting procedures, and other acts. It is also authorized to investigate charges against the heads of constitutional agencies and to recommend necessary action to the king. Under rules approved on March 14, 2005, the RCCC can initiate investigations at its own discretion and order suspects to present themselves at its offices within 24 hours. It can also detain subjects up to 30 days. Individuals can be held in contempt by the RCCC and can also be jailed for six months.

The RCCC affects the entire structure of the legal system and has undermined the relative independence of the judiciary, as it reports directly to the king. Prosecutors within the RCCC are not independent of political direction or control. Very controversially, the RCCC has the power to investigate even Supreme Court judges. Critics also argue that it has an unusual structure, combining the roles of prosecutor and judge into one role. Nepal's most influential group of lawyers, the Nepal Bar Association, has stated that it will boycott the commission.

Given the developments since February 2005, Nepalese courts can no longer be viewed as being protected from interference from the executive. Traditionally, the legislative, executive, and other government authorities have complied with judicial decisions. However, this may change in the near future. A contest between the RCCC and the Supreme Court is a possibility. Judges in the normal courts (not the RCCC) have been appointed, promoted, and dismissed in an arbitrary manner. However, the possibility that the king will begin actively interfering in the judicial appointment process cannot be ruled out.

Apart from the differences between the RCCC and the Supreme Court, ruling party actors or public officials have rarely been prosecuted for abuse of power and wrongdoing. The military has been a crucial element in the overall political equation and has largely remained unchecked by law. Charged with thwarting a Maoist advance, especially into the Kathmandu Valley area, it has been given a relatively free rein. Nepal's army is commanded by the king. This strengthens the hand of the king in all political negotiations and provides him with leverage. The constitution states that the king is the supreme commander of all the armed forces and gives him the power to appoint the commander in chief of the army, on the recommendation of the prime minister. In an unclear check on the king's powers, Article 18 of the constitution puts the army under the control of a National Defense Council chaired by the prime minister and including the royally appointed commander in chief. The king also commissions officers, thereby keeping the officer corps loyal to him. Senior officers are traditionally promonarchy loyalists.

In addition, the police and armed forces are rarely held accountable for abuses of power for personal gain and have little regard for human rights. The army has been excessively brutal with protesters and prison inmates. The UNHCHR's report to the General Assembly "raised serious concerns & regarding alleged violations by security forces." When queried by the United Nations, the army stated that when human rights violations by military personnel occur, a board of inquiry is ordered, and on the recommendations of the board, the violator is sentenced by a military court. However the UN report states that "punishment in cases of grave violations remains light."

The Nepalese legal system also suffers from more mundane problems. Nepalese law recognizes citizens' rights to private property and the sale of private property both as individuals and in association with others. However, more than half of the backlog of legal cases in the courts relate to property matters. Owing to the lack of a tamper-proof registration procedure, disputes over title are commonplace. Courts are slow to provide judgments in property matters, and loss or expropriation of property in many cases goes uncompensated. In theory, all persons, apart from the king and the royal family (who remain above the law in several respects), are entitled to equality before the courts and tribunals.


  • The Supreme Court should take a more proactive stance in highlighting democratic and human rights breaches since February 1, 2005. Courts must penalize infringements of human rights. Judicial salaries should be raised, and funding for the judiciary must be increased.
  • The Royal Nepal Army must take immediate steps to punish gross human rights violations within its own ranks.
  • A computerized tamper-proof, corruption-free private property register must be created.

Anticorruption and Transparency – 2.30

Corruption appears to be widespread in Nepal. This is despite the country's several legal provisions designed to fight corruption. For example, a Prevention of Corruption Act is backed by several regulatory bodies, including the Auditor General's Office, the Public Service Commission, and the Election Commission. The constitution guarantees the Auditor General's Office total legal and professional independence. There is also a Special Police Department (SPD), a Commission for the Investigation of Abuse of Authority (CIAA), and a Public Accounts Committee. At the district level, Chief District Officers (CDO) are responsible for anticorruption efforts. In 2005, Nepal was ranked 117 on Transparency International's Corruption Perceptions Index alongside Afghanistan, Guyana, Ecuador, Bolivia, Guatemala, Libya, the Philippines, and Uganda.

Although Nepal has an impressive array of antigraft bodies, enforcement remains a severe problem. In addition, the anticorruption bodies do not always act impartially. Corruption is also viewed as a problem that affects all levels of society. In fact, it is widely perceived that corruption is institutionalized, with it almost accepted that embezzlement of public funds is the norm. In addition, a large bureaucracy, extensive red tape, and an ongoing civil war with the Maoists increase opportunities for corruption. Despite strong anticorruption legislation, part of the problem of enforcement stems from the fact that the Nepalese government's remit remains weak. This weak remit has permitted not only the growth of graft but the emergence of the Maoist movement and a new rural culture of corruption, lack of transparency, and extortion. Maoists have begun to run parallel administrations as well as quasi-legal systems in the areas they control. Corruption has worsened against the backdrop of the Maoist campaign – Maoists "extort money in 'revolutionary taxes' and ha[ve] a policy of forcefully recruiting one family member per household."

One of the biggest problems facing business is the threat of extortion from Maoist groups. In several parts of the country, a culture of extortion has developed with businesses and petty trade held to ransom. The International Crisis Group reports that "using extortion and coercion, the Maoists are imposing an authoritarian regime on steadily increasing swathes of rural Nepal." Maoists have staged blockades of Kathmandu Valley and imposed strikes that have paralyzed the entire economy.

As the state has begun to fail in its job of protecting businesses, opportunities for graft have grown. That the Maoists' systematic extortion of the countryside is possible is also due to the fact that Nepal is essentially an agrarian economy. Around two-thirds of Nepal's economically active population works in agriculture, and agriculture contributes approximately 39 percent of gross domestic product. This agrarian, often subsistence economy has historically been (and continues to be) largely free of government controls. It is this lack of government control that has let the Maoists fill the void. In the countryside they operate in an atmosphere of complete impunity.

The state does enforce legislation or administrative procedures designed to prevent, detect, and punish the corruption of public officials, but it does so in an arbitrary and biased manner. This bias is highlighted by the focused way the new RCCC is being misused. In what is widely viewed as a political trial, the RCCC charged former prime minister Sher Bhahadur Dueba with corruption. However, Dueba refused to recognize the commission, arguing that the institution is corrupt and charges against him are politically motivated. The trial related to a contract for the construction of an access road to the Melamchi Water Supply Project, which was funded by donor agencies including the Asian Development Bank. The Asian Development Bank, which launched its own investigation into the project, concluded that all business was aboveboard and ruled out corruption. Nevertheless, the RCCC claimed that Dueba and Prakash Man Singh, the former minister of works and transport, influenced contractor selection. On July 26, 2005, Dueba was sentenced to two years in jail and fined NRs90 million (US$1.3 million). The commission ordered a similar sentence for Singh. Four other people were also sentenced.

Both Dueba and Singh refused to testify before the RCCC, arguing that it was an unconstitutional and opaque body. They also had no lawyers representing them. Dueba has appealed to the Supreme Court to declare the rulings null and void. The legality of the RCCC remains an issue that the Supreme Court has begun investigating. A writ filed on August 10, 2005, argues that the RCCC is an illegal body. In September 2005, the Supreme Court asked the RCCC to explain why it jailed the former prime minister, sparking rumors of friction between the RCCC and the Supreme Court. As of November 30, 2005, the RCCC had not yet responded.

The entire RCCC matter highlights the fact that allegations of corruption are not investigated without prejudice. The state does not enforce effective legislation, nor is the administrative process designed to promote integrity and to prevent, detect, and punish the corruption of public officials. In addition, the state does not provide victims of corruption, or those accused of corruption, with adequate, clear, or transparent mechanisms to pursue their rights. Corruption investigations in Nepal are a selective and politically motivated issue – politicians out of favor become the target of anticorruption investigations. Anticorruption investigations are used as a tool to threaten individuals into remaining loyal to the king. Dueba is not the first politician to fall afoul of the selective investigation process. In May 2003, the CIAA, a constitutionally appointed body designed to deal with corruption, summoned 40 people, including another former prime minister Girija Koirala, for questioning on corruption allegations. Critics at the time argued that the entire investigation was designed to discredit Koirala.

The state makes no adequate provision against conflicts of interest in the private sector. Nor does it ensure transparency, open bidding, or effective competition in the awarding of government contracts. Economically privileged interests have historically commanded undue influence in manufacturing and industry and won government contracts with regularity. Nepalese industry is dominated by the overarching influence of the monarchy (and a small palace elite), a political elite, and the civil service (beset by inefficiency and corruption) in nexus with a few chosen industrialists. This coterie defends their privileges at the expense of the populace at large. Industry has been constrained by the small domestic market, Indian competition, and the lack of sea access, providing industrialists with a ready excuse for a lack of transparency. Fear of Indian competition has also provided local industry with high tariff protection. Consequently, smuggling from India has become rampant.

One of the by-products of this is that industrialists in favor have received loans at low interest rates and despite a track record of default have continued to receive funds. Government contracts are also not always awarded on merit. The privileges of the few industrialists were highlighted yet again in 2005. In May, the government announced that it would take tough action against major loan defaulters by blacklisting them, confiscating their passports, barring them from public office, and preventing them from disposing of assets other than to repay debts. However, the blacklisting was not implemented, owing to the fact that several defaulters allegedly included cabinet ministers, large industrialists, and relatives of the royal family. The state also does not protect higher education from graft, and corruption is therefore endemic at the university level. Anecdotal evidence suggests that bribes are a requirement for admission to universities and even to secondary schools.

Financial disclosure procedures that prevent conflicts of interest among public officials remain inadequate. The constitution guarantees the auditor general complete legal and professional independence; unfortunately, implementation remains a huge problem. The 1999 Financial Procedures Act and the 1999 Financial Administration Regulations contain detailed provisions for the reporting of government and budget expenditure and the production of financial statements. The Audit Act 1991 stipulates that the auditor general should examine whether the accounts and revenue and all other incomes are correct and that the rules relating to assessment, realization, and methods of bookkeeping are adequate and followed. Nevertheless, budgets are almost never monitored, and penalties authorized by these procedures are almost never imposed. State auditors generally lack sufficient expertise in accounting and finance, and internal auditing and management accounting remain poor. As a consequence, government tax administrators do not adequately implement effective internal audit systems to ensure the accountability of tax collection. In addition, the executive budget-making process is not subject to meaningful review and scrutiny. Nor does the government publish detailed and accurate accounting of expenditures in a timely fashion.

The Office of the Auditor General (OAG) in theory sends auditors for field audits to two-thirds of the most important (from a gross volume of revenue basis) districts. For the remaining districts, district treasury controller officers are told to complete the audit according to the requirements set by the OAG. However, in practice, Maoist control of the countryside has led to a new rural culture in which revenue owed to the government is diverted to the Maoists.

As anticorruption activists, whistle-blowers, and investigators do not have a legal environment that protects them, they do not feel secure about reporting cases of bribery and corruption. Government bodies in Nepal act with very little transparency, which facilitates corruption and makes it hard for the public to gain access to government information. In theory, Nepali citizens do have a right to obtain information about government operations. The constitution states that every citizen shall have the right to demand and receive information on any matter of public importance. However, in practice there is no mechanism to legally bind the government to provide this information nor is there a practical mechanism to petition government agencies for it. There is no right to information act (as was recently passed in India, for example), although several groups have been lobbying for one and several drafts have been presented. The state makes no special provisions in order to provide information in formats and settings that are accessible to people with disabilities. Several government offices are not even designed to provide wheelchair access. Foreign aid is closely monitored by donors, including the World Bank, and as a consequence these funds are more equitably distributed and monitored than government tax proceeds.


  • Foreign auditors should monitor key revenue and expenditure items of the government.
  • A right to information act should be passed that forces access to key financial statements and documents to any member of the public.
  • Civil servants should be protected from intimidation and their salaries should be increased.


Ravi Bhatia is the South Asia Editor/Economist at the Economist Intelligence Unit in London. He regularly comments on Nepalese and South Asian affairs in leading journals and on leading news channels.

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