Coalition To focus on Accelerating the Economy

Two major political parties, Nepali Congress and CPN (UML), have formed a coalition government with an agreement to lead the government alternately until the next general election. Under this arrangement, CPN (UML) Chair KP Sharma Oli, who was appointed Prime Minister on July 14, will lead the government for the next two years, after which he will be succeeded by Nepali Congress President, Sher Bahadur Deuba.

A coalition government between these two major political parties is a rare occurrence. In the recent past, they collaborated in the government to bring the Constitution in 2015, ending a decade-long political transition.

Reportedly, during this period, the two major political forces have agreed to resolve the political impasse and accelerate the economy to address the growing public discontent. Frequent changes in government have become a common phenomenon in Nepal. However, the political deadlock intensified as the third-largest party, CPN (Maoist Centre), with 32 seats in the House of Representatives, was leading the government. Then Prime Minister Pushpa Kamal Dahal ‘Prachanda’ made frequent changes to his Cabinet and faced a vote of confidence in parliament five times in one-and-a-half years until he was ousted on July 14, 2024.

“The erstwhile Prime Minister and the government couldn’t make any impactful intervention for the effective delivery of public services and execution of development projects because he was preoccupied with safeguarding the shaky position of the prime minister,” said Pradeep Kumar Gyawali, Deputy General Secretary of the ruling party, CPN (UML).

“The complete anarchy and political gimmicks of the coalition partners have done nothing but spread disappointment among the public. The widespread disappointment has led to rampant outmigration, resembling a mass exodus. Against this backdrop, the two longstanding parties must create an environment that retains people in the country by fostering opportunities, encouraging private sector growth, and ensuring good governance,” he added.

Seven-point agreement

Prime Minister Oli, while facing the vote of confidence in parliament, revealed the seven-point agreement with the Nepali Congress. The coalition government of both parties will implement these agreements, which are considered the fundamental framework for the government.

The seven-point agreement includes the formation of a government of ‘national consensus’ under Article 76 (2) of the Constitution, inviting other political parties to join the government to protect national interests, ensure political stability, control corruption, and expedite development projects. The national consensus government will prioritise amending the Constitution and drafting new laws by reviewing the strengths and weaknesses encountered during its enforcement, aiming to guarantee political stability.

The third point of the agreement focuses on the economy. It seeks to accelerate economic activities by creating a favourable business environment, encouraging both domestic and foreign direct investment (FDI), including investment from the Nepali diaspora, to generate adequate and decent employment opportunities and end the economic downturn in the country.

Additionally, the agreement stipulates that the CPN (UML) Chair and the Nepali Congress President will lead the government alternately until the next general election. The current government will serve for the next two years, after which Nepali Congress President, Deuba, will lead for one-and-a-half years.

The national consensus government will also develop a common minimum programme to protect national interests, control corruption, ensure good governance and expedite development projects. The government, led by the two major political parties with equal status, will bring other political parties into the coalition. Finally, the provincial governments will be formed based on the spirit of the national consensus government and development efforts at the provincial level will be accelerated.

Though the opposition is weak in parliament due to the coalition of the two major political parties forming the government, this coalition provides the government with the advantage of quick decision-making. It enables the government to push forward development projects by addressing their challenges, boost private sector confidence, curb bureaucratic delays and advance various bills towards conclusion. A crucial element of the peace process is also progressing, with the endorsement of the Bill to amend the Enforced Disappearances Enquiry, Truth and Reconciliation Commission Act by a majority vote.

“However, if this strong government, backed by two major political parties, fails to deliver, there will be complete chaos in the country. This government has no other option – it must deliver at any cost,” said Gagan Thapa, General Secretary of the Nepali Congress.

Actions speak louder than words

Prime Minister Oli has instructed the ministers and secretaries of all ministries to deliver tangible outcomes starting next month. The government, which has been heavily criticised for its sluggishness, has decided to operationalise two new international airports – Gautam Buddha International Airport (GBIA) and Pokhara Regional International Airport – by offering incentives on airline tickets and fuel to airlines operating from these airports. The private sector has made significant investments in hotels, hospitality, and tourism infrastructure, anticipating an increase in tourist flow and business activities with the operation of GBIA. However, both GBIA and Pokhara International Airport currently lack sufficient international flights.

“Thai AirAsia has been granted permission to operate four flights a week from Bhairahawa to Thailand. We are working to fully utilise Pokhara and Bhairahawa international airports for international flights,” Prime Minister Oli announced on the social media platform X. “A task force has been formed to present an airport operation plan. This will reduce the pressure on Tribhuvan International Airport.”

Prime Minister Oli has also instructed concerned agencies to resolve the dispute over dedicated and trunk line electricity tariffs between Nepal Electricity Authority (NEA) – the sole power off-taker in the country – and industries, as this dispute has led to power cuts in the industrial sector.

Additionally, PM Oli has praised the initiatives taken by the Ministry of Health and Population (MoHP), stating that cancer treatment will be expanded to all provinces following the endorsement of the Procedure to Expand Cancer Treatment, 2024. Cancer treatment will be available at Bhaktapur Cancer Hospital, Sushil Koirala Cancer Hospital (Nepalgunj), Koshi Provincial Hospital, Narayani Hospital (Birgunj), BP Koirala Memorial Cancer Hospital (Bharatpur), Pokhara Academy of Health Sciences, Surkhet Provincial Hospital, and Seti Provincial Hospital (Dhangadhi).

Governance, amiable foreign relations, and accelerating development are on priority

Prime Minister Oli is avoiding making grand promises. Instead, he has instructed the early and timely completion of development projects and urged the government to address the issues faced by investors and the private sector. “Rather than making promises, the government is focused on completing ongoing projects on time, boosting private sector confidence, improving public service delivery, and creating jobs,” said Yubaraj Khatiwada, the Prime Minister’s Development Advisor. “The government will ensure a level playing field, with investor- and taxpayer-friendly policies to spur growth,” he added.

Recent measures include an accommodative Monetary Policy to ease credit flow to the private sector and the time-bound execution of the budget – both are early interventions by the government. Prime Minister Oli and Deputy Prime Minister and Minister for Finance, Bishnu Prasad Paudel, have monitored the progress of the Kathmandu-Terai fast track, with the prime minister observing the breakthrough of the tunnel at Bakaiya Rural Municipality-12, Dhedre, on August 5.

“The main objective of this coalition is to ensure the government runs for the full tenure of the House of Representatives. Due to the political deadlock, there was a risk of parliament dissolution or other unwanted situations,” remarked Gyawali, Deputy General Secretary of CPN (UML). He added that a stable government provides policy stability, ensures better governance, controls corruption, pushes forward bills and necessary legislative amendments, and maintains amicable foreign relations. “Obstructions in implementing the government’s annual budget have had a costly impact on the economy. Development expenditure has slowed to a crawl for some time now,” Gyawali concluded.

He further emphasised that implementing the budget is crucial for stimulating private sector investments. Frequent changes in tax rates, revisions in investment conditions, the lack of a level playing field, and the intimidation of the private sector have severely impaired the investment climate in the country. Promoting entrepreneurship, particularly among youth, will be advanced as a campaign, creating a favourable environment for innovation, skills development, ICT, and digital technologies, and leveraging the demographic dividend, according to Gyawali.

“The government will introduce effective interventions to transform the current subsistence agriculture model and reduce the country’s dependency on imported agricultural commodities,” he added.

Moving forward, strengthening governance and improving foreign relations are also key focuses of the coalition government. “The nexus between administration and judiciary has fostered a corrupt mindset in society, victimising innocent and decent people,” said Gyawali. “The government must address rampant corruption, the influence of powerful networks within state agencies, and the partiality and ineffectiveness of anti-corruption bodies, which pose significant challenges to ensuring good governance.”

Most importantly, Nepal has lagged on the international stage. Strengthening relations with the international community has been a low priority in recent years. The coalition government reportedly plans to reinforce the foundation of Nepal’s foreign policy – non-alignment, balanced relations and the five principles of peaceful coexistence, which include mutual respect for sovereignty and territorial integrity, non-aggression, non-interference in each other’s internal affairs, equality and mutual benefit, and peaceful coexistence. The issue of the border with neighbouring India will be resolved through diplomatic dialogue, and a common foreign policy among all political parties will be developed with a focus on national interests.