Socio-Economic Inequalities and Peace in Nepal -Achim Wennmann

Nepal’s peace process has been accompanied by a puzzle: while socio-economic  inequalities were a major catalyst for the outbreak of the civil war and a central  agenda item for one of the belligerents, they hardly factored in as an issue in the  peace process. Instead, the peace processes focused on political and military issues such  as the abolition of the monarchy, the establishment of a constituent assembly, and the  management of arms and armies. It was only after the 2008 election and the victory  of the Communist Party of Nepal-Maoists (CPN-M), that economic issues have become  the main issue in the peace process. The United Nations observed that “the election is  only a milestone in the peace process (…). The real work of addressing the nation’s  deeper socio-economic difficulties and drafting a constitution (…) only begins now”  (UNSC, 2008b, p.15).

Together with studies on Sudan (north-south) and Indonesia (Aceh), this case study is  part of a larger project that attempts to establish an evidence base on the management of  economic issues in peace processes. The project stresses the importance of conflict-induced  economic transformations, as well as the economic agendas and conditions that shape the  organization and dynamics of armed conflict. It connects the political economy of conflict  with the study of peace processes and seeks to distil implications for peace mediation  practitioners.
This case study highlights that the Comprehensive Peace Agreement (CPA) settled only  two out of three conflicts in Nepal. The CPA addressed the Maoist insurgency and the  power struggle between the king and the political parties. However, “the concentration  of political and economic power in the hands of small elites at the expense of many  marginalized groups” remained an unresolved conflict that may complicate Nepal’s  post-conflict transition (ICG, 2006b, p. 13). The main findings of this working paper are:
W The financing and organization characteristics of the CPN-M defined their attitude  towards the peace processes in 2001 and 2003. In both cases, the peace process became  a tactical extension of a military strategy and not an effort to end the conflict. A better
understanding of the organizational features of armed groups at the initiation of a peace  process may therefore help to identify why armed groups engage with the process, and  assist in informing the peacemaking strategies of third parties.  W The absence of a parallel track on economic issues in the peace process threatens  the political and military achievements of Nepal’s post-conflict transition. Two years  after the CPA, the lack of a joint economic vision has increased political divisions  and obstructed development, something which is now used by opposition groups as  a political tool against the CPN-M.
W There was a common ground on economic issues between the CPN-M and the  government in 2003. It could not, however, be expanded into a parallel track because  the CPN-M needed to maintain a discourse monopoly on socio-economic inequality
for their mobilization strategy. The negotiation environment had also seriously  deteriorated by this point.
W General principles on economic recovery were included in the CPA. Their detailed  treatment was, however, delegated to take place within the new political system,  as part of “normal politics”. The policy of postponement was consistent with the notion  of a step-by-step peace process, and Maoist ideology that considered systemic political  change as a means to achieve socio-economic transformation.CCDP Working Paper6 After briefly presenting the background to Nepal’s civil war, the paper considers the role
of economic issues in the engagement of the parties in the three phases of the peace  process, occurring in 2001, 2003, and 2005/2006. The following section attempts to use the  mobilization and maintenance cost of armed groups as a tool to identify the role of a peace  process in the overall strategy of an armed group. The paper then looks at the management  of economic issues in the peace process. Usually, the issues in negotiation processes relate  specifically to the military and political sphere, as is confirmed by the peace process in  Nepal. However, most armed conflicts also have important economic characteristics,  which are often identified as contributing to the dynamics of conflict in various ways. While  there was no specific natural resource dimension to the conflict in Nepal, socio-economic  inequalities have been a central catalyst for conflict and feature strongly in the CPN-M  rationale for the war. The final section evaluates the consequences for Nepal’s post-conflict  transition of postponing the treatment of economic issues. The rationale of this focus is to  explore the value added for post-conflict transitions of including economic issues during  the peace process phase.

The CPA of 21 November 2006 formally ended a 10-year civil war between the  CPN-M and the Government of Nepal that killed between 8,000 and 13,000 people  and displaced about 200,000 (SATP, 2008; INSEC, 2008; IRIN, 2007). The civil war  unfolded in three phases. The first phase occurred between the CPN-M’s declaration of war  on 13 February 1996 and the breakdown of peace talks on 23 November 2001. The second  phase took place between the declaration of a State of Emergency on 26 November 2001 and
the breakdown of peace talks on 19 August 2003, which was followed by a third phase  that ended with the CPA. The first years were characterized by low intensity fighting and  CPN-M mobilization of rural districts. As of 2001, the conflict escalated and involved the
ever growing military capacities of the People’s Liberation Army (PLA) and the Royal  Nepalese Army (RNA) (Nayak, 2007, pp. 922-923; ICG, 2003a, pp. 22-23; ICG, 2005, pp. 8-10).
The civil war was initially paralleled by a political conflict between the palace and the  political parties that intensified after the royal palace massacre of 1 June 2001 (Whelpton, 2005, pp. 211-216). The conflict escalated when King Gyanendra assumed executive powers  on 4 October 2002 and dismissed the government on 1 February 2005 (ICG, 2005a, pp. 9-10).  The coalition between the Seven Party Alliance (SPA) and the CPN-M in 2005 represented  the merger of the civil war and the political conflict. The conflict thereafter expanded  from rural to urban areas and involved non-military tactics such as strikes and rallies (Bächler, 2008, pp. 18-20; ICG, 2006a, pp. 8-10). Socio-economic inequalities and state centralization have been two central elements at the origins of Nepal’s civil war (Deraniyagala, 2005; Murshed and Gates, 2005; Sharma, 2006;Lawoti, 2007). In the 1950s, Nepal pursued a policy of import substitution that greatly benefited urban business elites, while around 90 per cent of the population simultaneously lived in impoverished rural areas (Sharma, 2006, pp. 1241, 1245). In 1996, the per capita income of the mid-western and far-western districts was more than 75 per cent lower than that in Kathmandu (NESAC, 1998, p. 13). In the late 1990s, landlessness was estimated to include one million out of six million agricultural labourers (Bray et al., 2003, p. 117). Economic disparities also involved different castes and ethnic groups; Bahun, Chhetri, and Newar traditionally dominated the economy due to their closeness to the political sphere in Kathmandu. Those excluded groups were the Dalits – or “untouchables” – as well as the Madhesi, Tamangs, Magars, and Tharsus (Thapa, 2003, pp. 74-75).CCDP Working Paper 7 The centralized nature of the Nepalese state evolved from the succession of various dynastic cycles beginning in 1768. Until the 1950s, Nepal remained a largely isolated kingdom (Whelpton, 2005, pp. 1-3). The 1959 elections led to the first parliamentary government under the leadership of the Nepali Congress party. Only a year later, however, the king dismissed parliament and dissolved political parties all together. The king established the “Panchayat” (assembly) system in 1962, with all members nominated by him directly (Kergoat, 2007, pp. 120-133). It was only with the signing of the 1990 constitution that the king’s role was redefined and Nepal established as a constitutional monarchy. Still, the constitution contained contradictions that fostered political opposition (Upreti and Dhungana, 2006, pp. 215). In the 1991 elections, the Nepali Congress won an absolute majority, and used this position to establish its dominance within the state administration (Thapa, 2003, p. 69). Internal divisions led to a collapse of government in 1994, and a succession of six different coalition governments between 1995 and 1999 including the Communist Party of Nepal (United Marxist-Leninist) (CPN-UML) (Hutt, 2004, p. 4). Socio-economic grievances and governance failures developed into a catalyst for conflict when expectations for political participation and economic development among marginalized populations were disappointed in the early 1990s (Bray et al., 2003, p. 116; Lawoti, 2007, pp. 15-38). The government’s failure to deliver promises, and increasing corruption in the public sector, fostered disillusionment and encouraged rural communities to consider political alternatives (Pfaff-Czarnecka, 2004, p. 167). The CPN-M grew out of these disillusions and appealed specifically to socio-economic grievances as it mobilized in rural areas (Mahat, 2005, p. 337). Communist tendencies in Nepal had existed since the late 1940s but did not really gain momentum until the late 1980s. The 1990 Unity Centre and the United People’s Front of Nepal (renamed the CPN-M in 1994) became the first platform for the Maoist ideology in Nepal. The CPN-M distinguished itself from other communist parties by their insistence that feudalism could only be stopped by war and systemic political change (Upreti, 2006, p. 36-38). In 1996, the CPN-M “had almost no weapons, a tiny organizational base, and a strategy that seemed outdated and unrealistic” (ICG, 2005, p. 1). Overtime, they would develop into a movement under the leadership of “Prachandra” – meaning “the fierce one” – that included about 5,000 to 10,000 core fighters and 20,000 to 25,000 militias, a following of between 14,000 and 24,000 political workers, and between 100,000 and 200,000 sympathizers (ICG, 2005, pp. 8, 14). The CPN-M initially structured their activities around the Maoist doctrine of “protracted armed struggle”, which consists of the three stages of strategic defence, stalemate, and offence. Strategic defence involved mobile and positional warfare and building popular support. Strategic equilibrium reduced the government presence to urban centres while a united front against the government was to be consolidated in rural areas. Strategic offence took the fight into the cities. In recognition of having achieved the strategic equilibrium phase in 2001, the CPN-M adopted the “Prachandra Path” to expand into rural areas and provoke mass uprisings in cities in order to overthrow the government (Nayak, 2007, p. 921; Thapa, 2003, p. 99). The political characteristics of the Maoist movement, and the use of multiple strategies – such as propaganda, strikes, demonstrations, and also peace negotiations – in addition to the use of armed force suggests that it was a fully fledged political movement rather than just an armed group (Paffenholz, 2009). The civil war in Nepal was accompanied by three peace processes, occurring in 2001, 2003, and 2006. The 2001 peace process occurred in the context of Nepalese politics after the palace massacre and the implications of a changing international environment after the September 11th attacks on the United States. The three rounds of short talks were the first of their kind after six years of armed conflict. However, the CPN-M and the government CCDP Working Paper 8 showed limited commitment, following instead their short-term political interests while strong constituencies on both sides existed in favour of a military solution (Upreti and Dhungana, 2006, pp. 216-222; Mahat, 2005, pp. 300-301). The 2003 peace talks were better organized and accompanied by position papers. Nevertheless, the process was dominated by tactical considerations, with the existence of ongoing attacks and competing public statements emphasizing the lack of trust between the parties (Josse, 2004, pp. 20-28; ICG, 2003a, pp. 2-6; Paffenholz, 2003, pp. 11-14). A succession of events in 2006 contributed to the signing of the CPA. An evermore isolated king and government with little room to manoeuvre, and continuous mass protests in Kathmandu between 21 and 24 April 2006 forced the king to reinstate parliament after the RNA conceded that it was no longer able to protect the palace (Bächler, 2008, p. 20; Bragtvedt, 2007, pp. 43-45). Most peace negotiations were driven and facilitated by Nepalese actors even though donors supported the peace process with capacity building and expertise (Paffenholz, 2006, p. 16). In 2003, the CPN-M pressed for United Nations mediation in order to increase its legitimacy and support its claim of “two regimes”, including two armies and areas of control (Mahat, 2005, p. 336). After the palace coup in 2005, India facilitated the alliance between the SPA and the CPN-M mainly in order to weaken Maoist rebel groups in India (Nayak, 2007,p. 931). The European Union, Switzerland and other bilateral actors also supported the peace process. The United Nations became engaged in August 2006 to monitor the management of arms and armies (Bächler, 2008, pp. 25-27). Economic aspects of the engagement process This section looks at the role of economic issues in the engagement of the CPN-M and the government. The rationale for such a focus is that economic factors influence the incentive structure of belligerents and provide resources to finance armed conflict. In this way, they contribute to the initiation, perpetuation, or termination of armed conflict. When seeking to engage an armed group in a peace process, it is therefore important to understand if economic aspects are ends or means for belligerents, and their potential interaction with the peace processes. In this context, a more complete understanding of the initial conditions – both economic and otherwise – that led to the initiation of a peace process may provide important leads to gauge the meaning and commitment that the parties attach to such a process. In this way, a focus on the financing and organization of armed groups may be a helpful tool to support the strategic assessments of third parties in terms of when (or not) to engage with armed groups. The following section looks at Nepal’s peace processes of 2001, 2003, and 2006/2006.

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