More on BIPPA and the media

A section of the Nepali media, including Nagarik daily, had reported that under Nepal-India BIPPA, compensation for losses arising from incidents other than war, national emergency, riots and insurrection--e.g., labour strikes and shutdowns--would be decided by a Nepal-India joint business/industrial committee. This scribe went through the BIPPA text posted on the website of the Ministry of Industry of Government of Nepal only to find no such provision. It is good that such a provision is not there. But this also ridicules the hoopla created by the media about how the BIPPA, by addressing India's security concern for the investment of its nationals in Nepal, will trigger a bounty of investment from south of the border and thereby help reduce our trade deficit with India, which stood at 200.87 billion rupees in the first 11 months of FY 2010/11 as per Nepal Rastra Bank. Unless one can interpret strikes and shutdowns and the locking up of managers as "riots". Or unless there is a letter of exchange to that effect.
Is this just poor reporting or something more sinister?
No attention has been given to the provision related to expropriation, which also includes indirect expropriation, in Article V.
One thing that one can infer from the brouhaha over the BIPPA is this: India, Nepal government, the media all believe that the security situation of New Nepal is going to worsen further in the days to come; insurgency, rioting, state of emergency, civil war are going to be the order of the day.
Let the fox guard the hen pen.

PM’s India visit and manufacturing of consent

1. Media reports say the Bilateral Investment Promotion and Protection Agreement (BIPPA) will provide “national treatment” to Indian investors. National treatment means according the same treatment to foreign investors and domestic investors alike in certain or all respects (e.g., equity participation, taxes, etc.). It is not clear in what respects national treatment is to be accorded to Indian investors. In practice, Indian investors are treated on a par with domestic investors and enjoy more rights than do other foreign investors, thanks to the 1950 Treaty.
2. Nepal’s Foreign Investment and Technology Transfer Act allows foreign investment without any restriction on equity participation in all but 21 sensitive sectors (e.g., cottage industry) and permits repatriation of earnings and investments, while, for services sectors, Nepal’s commitments under the World Trade Organization (WTO)’s General Agreement on Trade in Services (GATS) are relevant. Under GATS Nepal has committed to allow foreign investment with up to 80 percent equity participation in 70 sub-sectors in 11 services sectors. In practice, the actual level of equity participation allowed is greater than the GATS commitments; even 100 percent. Prime Minister Bhattarai, for all the media hoopla about his being a political economist, seemed unacquainted with these facts; more seriously, neither his economic advisor: the prime minister was quoted as telling a crowd of Indian businesspeople that they will be allowed up to invest  in ventures in Nepal with up to 44 percent share! While the actual provisions of the treaty will be known only after seeing it in black and white, the highlight in the media was its provision requiring Nepal government to compensate Indian investors for any losses they incur due to war, insurrection and riots. This is, for practical purposes, more than national treatment, unless Nepal government decides to compensate domestic investors similarly. Since Nepal’s law does not allow Nepali nationals to invest abroad—although quite a few prominent business houses are known to be doing exactly that, some ostensibly through their “NRN” scions—the BIPPA will only impact investment into Nepal, if at all, as admitted by media reports. In that case, Nepal’s strategy should be to treat ALL foreign investors alike, regardless of their nationality.
3. The BIPPA is supposed to allay India’s concerns about the disruption of operation of Indian investment projects, including Upper Karnali hydropower project. But if as per media reports (and media reports is what we have to rely on since neither the government sought the opinion of all relevant stakeholders nor the media thought it their duty to inform the people of its contents, so much for their investigative journalism zeal) compensation is required only for losses arising from war, insurrection or riots, then the treaty will not be able to address concerns related to disruption due to strikes, shutdowns, etc which are major concerns. Nepali investors too are grappling with such disruptions. A media report says whether to provide compensation for losses arising from incidents like strikes, shutdowns will be decided by a joint committee comprising both Indian and Nepali businesspeople.  As can be expected of journalists poor in substantive matters and especially economic journalists who have learned economics by obtaining and printing the quotes of party-affiliated economists, the reportage is riddled with contradictory interpretations: the treaty will encourage Indian investment by addressing security concerns of Indian investors; to prove that Nepal has not given away much through the treaty, it is emphasized that compensation is confined to losses arising from war, insurrection and riots (thereby contradicting the hype about the treaty being key to attracting Indian investment into Nepal); and then it is let on that a committee shall decide on compensation for other types of losses (arising from labour strike, shutdowns etc). The media in general seemed to be in an overdrive to “manufacture consent” that the BIPPA is key to attracting Indian investment, giving the impression that  Indian investment will flood in just because the SLC topper of a PhD PM is positively in the goods books of the Indian establishment.
4. Why, pray, even in loktantra open discussions and debates on such treaties are not held? If there are any rules that bar such a discourse, then such rules should be amended. Are there any takers in the mainstream media? A treaty has been signed without even people living in the capital city with access to the internet and the media knowing the exact contents of the agreement, this scribe included. But then it may be naïve to expect the media that do not have the guts to spell out the names of tax evaders in the VAT scam to be concerned about the public’s right to information on this issue. 
5. Yes, providing assurance of compensation to foreign investors has been practiced by many countries to lure in foreign investment. But such a provision can potentially entrench a wrong, criminal policy in a country like Nepal: for example, choice hydropower projects were awarded to foreign investors to be built as export-oriented ventures even as the country is starved for electricity. There have been protests against such projects. The means of protests have been violent at times and this no doubt cannot be condoned. But at the same time the policy that prompted such protests should also be condemned. The provision of compensation in the BIPPA gives the government a veneer of legitimacy in the form of “international obligation” to use force against such protests and/or use the state treasury to compensate foreign investors affected by the protests although such investment is not in the national interest in the first place. It may not be difficult to interpret the protests and associated vandalism as rioting. Or perhaps it is the joint committee that is to decide on compensation should they not be interpreted as rioting. Ironically, the Maoists were in power when some choice hydropower projects were awarded to Indian investors for export purpose; a faction within them then started opposing such projects; and now a Maoist Prime Minister signs on a treaty with a provision that if implemented would mean taking action against those disrupting the operation of the projects, and by implication supporting the policy of exporting hydropower at dirt-cheap rates when there is no dearth of demand for the same inside the country both for domestic consumption and industrialization.
6. The media apparently do not deem it worthwhile to question the prime minister about his position on the export-orientation of hydropower policy in practice. They are busy portraying him as a pragmatist. There is a thin line between pragmatism and opportunism. Once upon a time he used to write fiery articles about how Nepal was forced into underdevelopment courtesy of the core-periphery relationship with its southern neighbour. Can he explain how exporting cheap hydropower can spur economic development in Nepal, which in his considered view is essential to strengthen nationalism? Doesn’t such a policy smack of a conspiracy to accentuate a neo-colonial relationship? Mind you, he has not squeaked a word against it (or for that matter, on issues of border encroachment)--perhaps this exemplifies why he has been projected in a positive light in most of the mainstream media otherwise highly critical of the Maoists. What do his comrades at his alma mater, JNU, or at Communist Party of India (Marxist), which is nursing its wounds of electoral defeat,  have to say on this? The PM reportedly broke down when visiting his alma mater and said that he is what he is because of JNU, where he learnt Marxism. Does JNU Marxism/communism mean keeping one’s own country underdeveloped while allowing its resources to be exploited by its neighbour—if you happen to be a Nepali? Did he miss an opportunity to tell CPI(M) comrades and leftist gurus at JNU not to protest against Indian trade liberalization moves, including its free trade agreement with the European Union that also covers some investment issues, and not to demonstrate “hollow” nationalism?  Or publicly congratulate the CPI(M) for wooing Tata to set up a plant in West Bengal and for being trounced in the state assembly polls. It seems that the Marxism taught at JNU is to be interpreted differently for different folks—one version (pragmatist) for Nepal and the other for serving Indian interests.
7. Bhattarai is said to have had “closed door” on-one-one meeting with his Indian counterpart Manhoman Singh, the media dutifully reported. This is hogwash. The truth is in such meetings the Indian prime minister is flanked by his aides whereas the Nepali leader is unaccompanied. The media people either do not know about this or pretend not know for obvious reasons. They do not see any incongruity in such differential treatment.
8. Transit issues—which are critical for Nepal’s third-country trade (expansion and diversification)—were put on the backburner, as were the barriers faced by Nepali exporters to India.