Finally the Nepalese government led by the Maoist signed the Bilateral Investment Promotion and Protection Agreement (BIPPA) with India on Oct 22, 2011. Almost all political parties including business organizations expressed an air of satisfaction with a hope that it may open a gateway to foreign investment in Nepal. However, a faction of the ruling party led by Baidya has opposed BIPPA claiming that it is a pretext to trigger political regime transition in Nepal without any benefit to the working class. Such contesting debate in the Nepalese political economy has created controversy that is yet to resolve.

Indian perspective

Indian state embraces pro-investor bias. She has extended her arms to various parts of the globe to accumulate economic resources not only to build up her home, but also to maintain regional hegemony at least in South Asia. In collaboration with international powers she has taken active role in Asia to enhance liberal democracy and global capitalism. In the same light, BIPPA is one effort to liberalize market and democratize regime, the precondition of global capitalism.

Investor's aim

Any foreign investors including Indians want to invest where there is high profit, and high income inequality. Prospect of profit is an economic determinant; however the second reason, high income inequality, is associated with political objective of investment. The economic disparity in the target country like Nepal offers two options for the investors from foreign lands. First, if the domestic elite are weak, the investors tend to stabilize dictatorship to enhance its economic objective. Second, if the elite in the target country are strong, it may help the foreign investors in two ways:

(1)They can collaborate with the elites to extract resources. Investment requires domestic factors like land and labor. Land is owned by the local elite in Nepal. Labor pool can be created with imposed poverty and dislocation. Today, the elite are holding various commercial and industrial licenses including extraction right and Build Own Operate and Transfer (BOOT). Issue of tax is also important in this regard. Both Indian investors and Nepalese collaborators want low tax on profit and they may raise tax on wage income. Hence, investors want consolidated autocracy that put Nepalese elite firmly in power who decide tax policy. Subsequently, Indian investors may provide capital and know-how to their Nepalese counterparts and make money without any hindrance.


(2) They can also challenge or coerce the elite by threatening sanction, sponsoring proxy civil war and even launching military intervention according to the agreement that safeguards the right of the investor in the foreign land. In Nepalese context, the elite are strong but dispossessed due to the decade long civil war. Additionally, various political parties in Nepal have "special" relationship with the Indian Houses. Both of them can capitalize their socio-political capital for mutual benefit. Indian financial intervention at this crucial moment can be helpful for the Nepalese elite to regain their earlier status, whereas Indian investors will have unrestricted access to Nepalese resources. India as a nation state is also comfortable at this point, for she has shown her capacity to depose or to support Nepalese leaders and the regimes they represent whenever her political and economic interests are at stake. Therefore, BIPPA is nothing other than a coalition between dispossessed Nepalese elite and Indian traders.

Nepalese perspective

Of course, Nepal wants development. But she must be sure about the type of development and its future consequences. She must consider some urgent questions before embarking on the issue of foreign aid and investment including Foreign Direct Investment (FDI): Who will benefit? Is it a necessary or sufficient or both condition to adopt a certain policy that limits people's sovereign right to their resources? Experiences from other countries have shown that human capital is the first precondition of development. Lending money from foreign countries and investing them on unproductive infrastructure does not ensure Nepalese quest for development. It may help "some" to go up on the political ladder in the name of development, whereas for others it will be an access to booty. And many others will have to experience "curse of development".


BIPPA is the beginning. Let it be not a beginning of the end. To ensure a sustainable Nepalese model of development, those concerned must revisit and reconstruct all legal infrastructures that restrict Nepalese sense of development and freedom.