Recent sidelining of Nepal’s monarchy has put in place the necessary “enabling conditions” — the term used by the “developmental assistance” agency USAID [14] — to overcome these concerns, and reports indicate foreign investors have taken notice. As Bikash Sangraula writes, “Immediately after reinstatement of democracy in April this year, 11 foreign companies, most of them Indian, had submitted regular requests, letters of interest and detailed proposals to the ministry and the Department of Electricity Development (DoED)” [15]. A “milestone” power summit between India and Nepal held in Kathmandu in September, organized “to understand the ground realities” of hydropower investment, brought together leading power developers, contracting firms, equipment manufacturers, international lending institutions, and insurance companies [16]. According to sources of the Financial Express, agencies identified “projects that are ready for development and others in the pre-development stage,” as well as “models for financing.” Of note was the mention that “With the new government, which has recently taken over in Nepal, the developers in particular [also assessed] the security aspect which is quite crucial for the long term investments” [17].

A key attendee of the meeting, Indian ambassador to Nepal Shiva Shanker Mukherjee made the unprecedented move on Oct. 31 of meeting privately with Prachanda at the Indian Embassy, no doubt in an effort to address this “security aspect.” For his part, it is reported that the rebel leader made “a ‘request’ [of India] to play a ‘pro-active role’ in accelerating the ongoing peace process,” notably urging Mukherjee to release two senior rebel leaders jailed in India [18]. Prachanda subsequently accepted an invitation, earlier turned down, to address an upcoming summit titled “India: The Next Superpower?” The summit is to be held in New Delhi on Nov. 17 and Nov. 18 and features such prominent international figures as British Foreign Secretary Jack Straw and New York Mayor Rudolf Gulliani [19].

The convergence of interest in Nepal’s rebel leader at this moment in time is not accidental. Nepal is currently entering a critical stage of democratization, with plans to draft a new constitution featuring prominently in this process. Clause 126 of the existing constitution, which applies to any agreement involving natural resources, requires a two-thirds majority of both Houses of Parliament at a joint sitting for ratification. Ananda Bahadur Thapa, former executive secretary of Nepal’s Water and Energy Commission, writes that “Clause 126 of the Constitution has been hailed by all quarters in Nepal as the most important provision that is helping to safeguard the vital national interest of our country” [20]. It is not hard to see how such a “safeguard” might serve to impede corporate interests, particularly in the case of large-scale hydropower projects.

Hydropower

Yet all indications are that key government agencies and corporate players are gearing up for initiating just such large-scale projects. A seminar headed by the U.S. Embassy in Nepal, held late last week at the Hotel Radisson in Kathmandu and titled “Empowering Nepal — Connecting Markets,” had as its stated aim “to bring together U.S. companies and other investors with key officials from relevant government agencies in Nepal and India to highlight the substantial opportunities to invest in Nepal’s hydropower sector” [21]. Jointly organized by USAID-Nepal, the Nepal-U.S. Chamber of Commerce and Industry (NUSACCI), the American Chamber of Commerce in India (AMCHAM-India), and the International Resource Group (IRG), the seminar connected U.S. and Indian corporations with government energy regulators in Nepal. Representatives of U.S. corporate giants General Electric and Alcoa, and Indian corporate giants Reliance Energy and Tata Power Company, reportedly met with heads of the Nepal Electricity Authority (NEA), Department of Energy Development (DoED) and Independent Power Producers’ Association of Nepal (IPPAN) [22].

Projects up for grabs at the seminar constitute a total generating capacity of 14,000 megawatts, nearly 30 times the current output of Nepal’s entire hydropower system, earmarked exclusively for export to India. Among the offerings was the Arun III Project (402 megawatts), originally proposed over 10 years ago with backing from the World Bank, estimated at the time to cost $1.1 billion (versus an annual Nepalese budget of roughly $700 million) but ultimately scrapped in response to concerted efforts by a grassroots movement, the first of its kind in Nepal [23]. Martin Karcher, a division chief at the World Bank and member of the department involved in the proposed operation, resigned from his post amid “reservations and misgivings,” remarking in an interview: “The project was not being handled in an objective and even-handed manner. Since senior management seemed to be committed to the project, a serious and open debate was no longer possible and even common sense questions were being dismissed” [24].

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