The CPN-UML-led government recently cancelled a visit to India by President Bidhya Devi Bhandari and recalled Nepal’s Ambassador to India Deep Kumar Upadhyay. These two decisions have caused significant controversy. So has the statement by the Nepali Congress (NC) President Sher Bahadur Deuba criticising the government’s decision to build the Kathmandu-Nijgadh Fast Track using national resources. Mukul Humagain and Kamal Dev Bhattarai spoke with former finance minister and senior NC leader Ram Sharan Mahat about these controversies and about the state of governance, the Madhesi movement, political appointments in bureaucracy and the upcoming budget.

What in your view do the latest two developments—cancelling the President’s visit and recalling the ambassador from India—indicate?

I think these are unfortunate developments and major setbacks in Nepal-India relations. They were impulsive decisions. Cancelling a presidential visit at the last moment, that too without consulting and intimating the other side is an undiplomatic move. Similarly, recalling the ambassador is unceremonious. Immediately after the change in government, Ambassador Deep Kumar Upadhyay had expressed his desire to resign; he was ready to leave at any time. So instead of recalling him, he should have been asked to resign. These incidents point to the low quality of governance in the country.

Nepal’s relationship with India is at its lowest ebb in recent times. What do you attribute the deterioration in ties to?

The government utterly failed in ensuring a smooth supply of essential goods, including fuel, even after the supply from India normalised. It completely failed on the post-earthquake reconstruction front. After inheriting a sound foundation in terms of international goodwill and resources, it did not plan and start the reconstruction process on a war footing.   

Nepal is not to blame for the border blockade. I think it was a wrong decision on the part of the Indian government to impose the blockade. But India is not to blame for the subsequent developments; the government is responsible for them, and it should be held accountable.

The recent two incidents came on the heels of an attempt to change the government, in which the NC was allegedly involved. What is your take?

I have not been involved in the latest political developments, particularly in toppling the government. I do not want to make my views public on this topic; I will give my opinion on this subject within the party forum. From what I have come to know, the incident happened because of the internal contradictions within the government. But the NC should have dealt with the incident with greater maturity.  

What about the shortcomings of the government?

This is a government that is full of contradictions. It has practically failed on all fronts. If the NC was involved in toppling the government, then it should have succeeded. But I have been saying all along that we should not be involved in the game of toppling governments. I believed the present government would collapse under the weight of its own contradictions.

So you do believe there is a need for a change in government?

This was not the right time for that. We misjudged the real intention of the Maoists and the depth of their party’s position on the issue.

How have you viewed the politicisation of government apparatuses and mechanisms?

There is excessive party politics—UMLisation—in appointing key bureaucratic positions. Immediately after this government was formed, it started reshuffling the civil servants and making appointments, not based on the competence, integrity and track records of candidates, but on their personal and political affiliations. This has been the trend not just in the bureaucracy but also in the judiciary.

There are problems on the diplomatic front as well. Denmark closed its embassy in Kathmandu citing austerity reasons [to be closed by the end of 2017]. But Nepal is continuing its embassy in Denmark. There are already so many Nepali embassies in Europe; now the government is opening one in Austria, which does not have an embassy in Nepal.

This trend of political appointments for ambassadorial positions has been there for a long time, including by governments led by your party. How can we make the process more professional?

All parties have made mistakes. But this government has gone overboard. The whole problem is that when one party pushes politicisation to the extremes, it creates pressure on other parties to do the same. The UML has done this in the past and is doing it now again. This process needs to change. It is a sign of bad governance, which has to be reversed. Appointments—be they for academia, medical institutions, judiciary or diplomatic positions—must be based on merit and professional expertise.  

The Madhes-based parties have now started another round of protests and are demanding another set of constitutional amendments. What is your opinion on their demands?

Most of the Madhesi demands have been met. The key demand is about the demarcation of federal territories. Serious discussions must take place within the concerned parties and mutually acceptable solutions have to be found. There should be no need for further protests. Agitation has not helped the Madhes-based parties in the past and it will not help them in the future either. The Madhesi people are the ones who have borne the brunt of the protests. I am not in support of any agitation that affects the ordinary people and pushes the economy back.

The government is presenting the budget in two weeks’ time. Based on the policy and programmes that the UML-led government presented in Parliament, how do you think the upcoming budget is going to be? What should the budget prioritise?

It should prioritise the long-term interest of the country. Growth, economic justice, macro sustainability, controlling inflation, encouraging investment and reviving economic activities should be the government’s priorities. The real problem that the country faces at the moment is not the lack of proper policies and programmes; it is their implementation. So the budget should focus on strengthening the implementation capacity of the government.

If we are to build a strong nation, we should not hesitate to make strong decisions. Distribution is easy; it can be done with the stroke of a pen. But what the country needs right now is growth, which is harder to achieve. Only with growth will government revenues go up; only then can we adopt distributive policies.  

The NC took some tough decisions to liberalise the economy despite opposition to them. The government revenues have jumped up now because of the economic policies we pursued. For example, the government makes billions in revenues when a company is sold.  Revenue collection was at Rs12 billion when I presented the budget in 2048 BS; now it is at Rs500 billion. This increase made some distributive programmes possible. The present challenge is to revive our economy and accelerate growth by creating a favourable environment for investment, constructing infrastructure and enforcing the rule of law. Our recurrent costs must be controlled and our capital investment must grow.

NC President Sher Bahadur Deuba’s statement on the government’s decision to build the Kathmandu-Nijgadh Fast Track using national resources was controversial and he was forced to retract it. How do you look at this?

People are making comments without verifying facts. An international tender was called for constructing the fast-track road. The first two tenders failed as no serious bidder was interested. The third time, two bidders showed interest after we promised a minimum revenue guarantee, and the concerned ministry held negotiations with one of them. But when it came to the Ministry of Finance for approval, I was not happy because the deal was heavily loaded on the developer’s side and there were substantial risks for the government. So we thought a re-negotiation was necessary, and a high-level task force was formed at my initiative to review the whole deal. The task force has already submitted its report.  But before it could be discussed, there was a change in government.

The contract has not been awarded to any company; rumours about it being awarded to an Indian company are false. The government’s credibility will erode if it awards the contract to another company while the negotiation process is going on. There should be a logical conclusion to the stalled negotiations. While there is no doubt we need foreign investment, we should not accept all the terms and conditions of foreign companies in the name of attracting investment.

The task force has made very sensible recommendations favourable to the government. It has recommended reviewing the preliminary negotiations of the proposed IRR to the developers, minimum revenue guarantee, traffic forecast and other vital issues that could affect the overall project risks.  It would be logical for the government to renegotiate the project based on the recommendation of the task force. If that succeeds, it will significantly reduce the costs and risks for the government. If the developers do not accept the recommendations, the negotiations will terminate.