Constitutional stalemate

Following the abolition of the Nepalese monarchy in 2008, the country elected a Constituent Assembly (CA), with the Maoists' political party, the Unified Communist Party of Nepal–Maoist (UCPN-M), winning a majority of the seats. However, the CA was dissolved four years later, mainly because of its inability to reach a consensus.

In the November 2013 elections, the more conservative Nepali Congress (NC) and the Communist Party of Nepal–United Marxist-Leninist (CPN-UML) overshadowed the UCPN-M and formed a coalition, temporarily alleviating the political deadlock in the Himalayan nation. However, the new CA has also been struggling to draft a new constitution.

In a DW interview, Alison Evans, Senior Asia Analyst at IHS, talks about the major issues of contention within the current CA, and explains how the body's apparent failure to finish a new constitution is leading to key policies being delayed in parliament and, subsequently to a policy paralysis.

DW: How has the political situation in Nepal evolved since the past elections in November 2013?

Alison Evans: Nepal's political scene has been dominated by the issue of drafting a new constitution since 2008. Yet, the political landscape remains fragmented and the parties have missed every deadline – including the third extension of the final deadline – for agreement on a draft constitution before January 22, 2015 for promulgation.

Why are decisions on key policies still delayed in the Nepalese parliament?

Over the past decade multiple administrations have fallen before the end of their terms – it is this instability that has prevented governments from deciding on and implementing clear policy programs. While considerable progress – for example on peace and political inclusion – has been made, the dissolution of the CA in May 2012 limited progress on key legislature, notably a June 2013 draft of a new FDI policy. Decisions on key policies are still delayed in the Nepalese parliament because forging consensus on the constitution remains the government's priority.

Given that this not the first time Nepal's political parties have failed to promulgate a constitution, what are the main issues of contention?

The single most contentious issue is whether to create federal states based on caste or ethnicity, which is demanded by the UCPN-M and its allies. The four major issues of contention are: state restructure, form of governance, the electoral system, and the judicial system. The NC and CPN-UML call for centralized governance of maximum seven provinces, a parliamentary system, first-past-the-post elections, and a supreme court. The UCPN-M calls for decentralized governance of 10 to 14 provinces; a directly elected executive; proportional-representation elections; and a constitutional court. In addition, the NC and CPN-UML want to pass the constitution by majority vote in the CA, while the UCPN-M demand that an agreement be formed by consensus.

Besides the constitution, what other issues are affecting the country and hampering its economic development?

Other key issues frustrating Nepal's economic development are to do with energy and infrastructure. Despite high potential hydropower resources, Nepal suffers from an energy deficit that impedes its economic growth: the capital Kathmandu experiences blackouts for up to 14 hours per day. Nepal is also not only heavily dependent on imports of electrical goods, machinery, medicine, and petroleum products, but almost 25 percent of its GDP is made up of remittances. Its reliance on India for 80 percent of its imports and underdeveloped energy and transport infrastructure mean that Nepal's economic turnaround is unlikely to be swift.

Given the passing of all but one constitutional deadline, is there a heightened risk that public protests break out?

There has been a decline in violent protest in Nepal since 2012. Nevertheless, there is a precedent of public protests, including against political parties' ineffectiveness, particularly in Kathmandu and the Terai Region. For example, there were mass student protests before the dissolution of the previous CA in 2012.

What is your outlook for Nepal in the coming months?

Nepal's economy is on an upward trend, and the continued inclusion of the Maoists' and their many affiliated parties in constitutional negotiations is positive. However, the fact that the NC and CPN-UML coalition reiterated their agreement – excluding the UCPN-M – means that political consensus is unlikely in the three-month outlook. A constitution may be agreed upon in 2015, but is unlikely by January 22, 2015.

The Maoists' and other minority groups have already threaten protests if the NC and CPN-UML submit their agreed draft constitution to a vote without consensus. It is this political instability and subsequent slow progress on economic and institutional reform that will continue to undermine Nepal's outlook for growth and investment in the coming months.

Alison Evans is Senior Asia Analyst at the global analytics firm IHS.