Political Risk Analysis - New PM's Strong Mandate Positive For Policy Making Process - APR 2018
BMI View: The appointment of the Left Alliance's Khadga Prasad Oli as Nepal's prime minister will be positive for policy making as the alliance controls almost two-thirds of parliament and will go some way in enabling Oli to implement policies aimed at tackling Nepal's long-term challenges. However, the low levels of development will continue to present challenges, and we expect the government to seek to strike a balance between China and India. We thus maintain our short-term political risk score at 44.0.
In our view, the appointment of Khadga Prasad Oli as Nepal's Prime Minister on February 15 will be positive for the country's policy making process and external relations. Oli is the leader of the Communist Party of Nepal (Unified-Marxist Leninist) (also known as the UML) and his Left Alliance controls almost two-thirds of parliament. The strong majority will be positive for efforts to pass bills in an attempt to tackle Nepal's long-term challenges such as an underdeveloped agriculture sector and an extremely weak infrastructure system. However, we expect Nepal's low levels of development to present long-term challenges and believe that the government will face implementation difficulties. On the foreign policy front, we expect the government to seek to strike a balance between China and India. Oli has historically leaned towards China and we believe that Kathmandu will seek to further develop ties with Beijing, boding well for longer term foreign direct investment inflows (FDI). At the same time, given that India is Nepal's largest trade partner, Oli will likely seek to ensure cordial relations with New Delhi following strained relations between the two in 2015. We thus maintain our short-term political risk score of 44.0 (out of 100).
Government's Majority To Support Policy Making