Amid criticism for its commercial ventures, Nepal Army now seeks to invest in high-return projects

The Nepal Army seems to have an unquenchable thirst for business, even though it has faced much criticism for its overly increasing involvement in commercial activities

Aug 01, 2020

The Nepal Army seems to have an unquenchable thirst for business, even though it has faced much criticism for its overly increasing involvement in commercial activities. The national defence force has submitted a draft bill for a revision to the Nepal Army Act, seeking legal clearance to invest money from its welfare fund in business activities “as a promoter.” It had been lobbying for the same for the last few years.

Judge Advocate General Ranta Prakash Thapa, who is in charge of the Army’s legal department, said they are expecting that their draft bill soon gets government approval before it goes for parliamentary ratification.

The national defence force on July 16 submitted the draft to revise the Nepal Army Act (2006). The current provisions bar the Army from investing in business enterprises, companies and infrastructure projects like hydropower.

Security experts say the Army seems to be more inclined to business than limiting itself to its primary role of ensuring national security, gathering intelligence, protecting national parks and natural reserves and saving people during the times of disaster.

“It’s quite a worrying sign. The more the Army is involved in non-military activities, the more it will get weakened professionally,” said Geja Sharma Wagle, an analyst who often writes on security related matters.

The national defence force for quite some time has been attempting to rebrand its image in the face of growing criticism that it is doing business rather than performing its primary duties.
During the conflict, the Army was involved in building roads. But it continued that work even after the insurgency ended. The Army then started to get involved in contracts for various projects which otherwise should be taken care of by civilian entities.

The Army’s current investment is in areas including gas stations, schools, medical colleges and emulsion plants. It even sells bottled water.

It has also been contracted for building the Kathmandu-Tarai expressway and other construction activities for which also it has garnered much criticism.

The Army, however, denies that its involvement in several projects is “commercial venture” and argues that what it makes from all these is meant for the “welfare fund”.

Constituted in 1975, the Army’s welfare fund currently has cash deposits of Rs 45.86 billion in different banks, apart from an investment of Rs 5.74 billion in different ventures. Every year it has been adding billions of rupees, as the interest and the contribution from those who are deployed in United Nations peacekeeping missions, to its coffers. It saw an increment of Rs 7.29 billion in its welfare fund in the last fiscal year alone.

Recently the Army ran into a controversy for leasing out a new building it has erected in Mahakal in the prime location to replace the earthquake-damaged Tri-Chandra Military Hospital.

The Army had demolished the 85-year-old neoclassical structure, saying it would build a new hospital there. Britain had helped build the hospital in 1925 in memory of 20,000 Nepalis who were killed in Europe in the first World War.
The army leadership, however, is not satisfied with its present income and is saying that investment in the projects that give high returns is necessary to “expand its welfare fund”.

“Bank interest is not a sustainable source of income. We want an investment in the projects that give high return,” said Thapa, at a presser on Friday. He added that the draft bill proposes provisions that would allow the national defence force to invest in projects “only after the government’s approval”.

After receiving the draft bill, the Defence Ministry has formed a committee comprising officials from Defence and Law ministries and the Army to study it.

Defence Secretary Resmi Raj Pandey said the ministry will take a decision based on the recommendations from the committee.

“The bill seeks revisions to different clauses including the one related to the investment of money from the welfare fund,” Pandey told the Post.

The draft bill needs an approval from the Cabinet before it is tabled in the federal parliament for endorsement. The Army on several occasions has expressed its dissatisfaction over the provision in the Act to bar it from investing as a promoter, but hadn’t proposed its revision in writing.

The Army has been eying investments in hydro projects and in the treasury bill, which will provide more returns than the interest that banks pay.
The Act is yet to be amended, but the Army has already approached the Department of Electricity Development, seeking to invest in the 25 MW Dudh Khola and 32 MW Bhimdang Khola hydropower projects.

Thapa confirmed the Army’s interest in investing in the hydropower sector. He, however, stopped short of providing the details.

Security experts say the defence force is getting involved in commercial activities in such a way that it is now becoming “a corporate army”.

“The national defence force’s image will get further tarnished and it will lose respect and people’s faith if it continues to be involved in money-making businesses,” said Indra Adhikari, a security analyst who has written a book on military and democracy.

“Army does not mean business. There's a difference between the welfare fund and investment fund. The very concept of using welfare’s money in business is wrong.”

She said that Nepali people want to see a fair, disciplined and uncontroversial army.

“I can just hope that the government does not forward the bill to Parliament,” she told the Post. “The way the Army is becoming too commercialised, it will soon lose its identity as a trustworthy institution.”

Newsletter Subscription

The subscriber's email address.
Stay informed - subscribe to our newsletter.
Tweets about SAMonitor
SAM Facebook

DMM Thank you