KATHMANDU: The Nepali Army’s (NA) initiation to open a Letter of Credit (LC) through the Himalayan Bank for the procurement of weaponry from China worth Rs 6 billion may entail serious repercussions, such as the possibility of facing financial sanctions and the initiation of criminal proceedings.

The NA, entrusted with the fundamental duty of safeguarding the country, appears to be conducting itself more like a business entity, while senior officials are deepening their ties with China, potentially driven by substantial commissions, at a time when the country grapples with an economic crisis.

Such actions seem to prioritize personal interests over the welfare of the nation, NA sources claim.

The NA, consisting of a considerable strength of 97,500 personnel, has been exhibiting a lack of commitment towards democratic institutions, while the government has been unsuccessful in holding it accountable for its actions.

NA’s opening a Letter of Credit with the Himalayan Bank to procure weaponry from China is one such example. The NA has sent a request Letter of Credit (LC) to Himalayan Bank on 17 April 2023.

Khabarhub has obtained evidence suggesting that the NA leadership is involved in concealing opportunities for transition and crises.

Despite ongoing efforts to address corruption and irregularities within the army, along with its involvement in economic activities, the Ministry of Defense and the Prime Minister have thus far been unable to take appropriate action.

Major General of the Nepali Army, Pradeep Jung KC, Brigadier General Santosh Ballav Poudel, and Brigadier General Tika Ram Gurung represent the NA signed the MoU with Norinco while Cao Yi, DGM Asia Pacific, and Shi Qun, General Manager Military Logistics Department, represents the Chinese company.

The NA, seemingly diverted from its core responsibilities, has become involved in lucrative road contracts, occasionally deceiving students through the establishment of private medical colleges, and even venturing into industries such as mineral water and banking.

These actions have raised concerns about a growing trend of corruption and the misuse of power within the army.

There is evidence to suggest an increase in corruption and the abuse of power within the army. It should be noted that the NA on April 17, 2023, sent a formal letter to Himalayan Bank Limited, to open the LC to procure weaponry from China.

The bank, however, remained hesitant to proceed with the transaction and transfer funds in US Dollars concerns about possible breaches of U.S. sanctions.

The NA seeks to acquire weaponry including Armored Personnel Carriers (APCs) meant for NA peacekeepers in Sudan, worth Rs 6 billion from China North Industries Group Corporation Limited (Norinco), a Chinese arms manufacturer.

This decision has been made despite Norinco being sanctioned by the United States Treasury Department.

The NA also explored alternative methods to facilitate the acquisition of weapons and is considering routing the payment through a different country.

Sources, meanwhile, claimed that this may carry consequences, including the potential imposition of financial sanctions, and even the initiation of criminal proceedings.

“There is also a risk that economic sanctions could be targeted towards Nepal’s Central Bank as a result of the NA’s actions,” the source said.

Recently, it has come to light that the Nepali Army violated the embargo on Russia by sending funds for the procurement of spare parts for Mi-17 helicopters through Dubai. This action represents a breach of the imposed embargo and raises concerns about compliance with international regulations and restrictions.

It may be noted that several relatives of Nepali Congress leaders, including Lokendra Karki, the brother of NC leader Gyanendra Karki are actively involved to settle the financial transaction.

In fact, earlier, during the then Prime Minister Sher Bahadur Deuba’s tenure, the process was advanced without obstruction, as Defense Minister Purna Bahadur Khadka did not intervene by sending a letter to halt it.

It also should be recalled that the US had imposed sanctions on two individuals of Myanmar– Tun Min Latt and Tun Min Latt’s wife, Win Min Soe, who is co-owner with her husband of the three business entities: Star Sapphire group of companies, Star Sapphire Trading Company Ltd, and Singapore-based Star Sapphire Group PTE Ltd, whom the US Treasury Department had imposed sanctions for enabling the regime’s continuing atrocities.

Meanwhile, Khabarhub has uncovered information revealing that the army has recently finalized a Memorandum of Understanding (MoU) with China for the procurement of additional weapons.

It should be emphasized that the NA, despite lacking the opportunity to carry out annual firing exercises and having limited requirements for weapons, except for the APC (Armored Personnel Carrier) needed for United Nations missions, has entered into a continuous MoU with a Chinese company, seemingly motivated by commissions.

In a recent development, the NA has also entered into an MoU with the Chinese company Norinco for the establishment of an ammunition plant.

The publication “Nepal Kleptocratic Network: Mapping Corruption and Impunity” by Niti Pratishthan (PublicationNiti ) highlights the presence of centralized corruption within the Nepali Army, which poses a threat to national security.

The Niti Foundation report has concluded that corruption within the Nepal Army is not only systemic but also of a concerning magnitude, posing risks to governance and national security.

The report highlights the highly centralized nature of the army’s corruption, with all illicit activities being channeled through the Office of the Chief of Army.

The army’s involvement in various rent-seeking ventures, such as operating medical and nursing colleges, real estate ventures, petroleum retail, and investments through the Army Welfare Fund, has been identified.

Additionally, the army has expanded its involvement in government-contracted development services, including the construction of airports and roads.

Meanwhile, Chief of Army Staff Prabhuram Sharma made it clear that the Nepali Army does not currently require additional weapons for peacekeeping missions.

Off-budget allocations play a significant role in the army’s rent-seeking strategy, whereby substantial sums are obtained from the government and politicians, experts allege.

The report also points out illegal practices in the army’s civil work operations, where private contractors are subcontracted for projects, leading to inflated costs and misappropriation of funds.

Despite ongoing efforts to address corruption and irregularities within the army, along with its involvement in economic activities, the Ministry of Defense and the Prime Minister have thus far been unable to take appropriate action.

During the decade-long conflict period, the size of the Nepali Army doubled from 48,000 to 97,500 within a span of five years.

Experts have warned that Nepal may face significant consequences if the army is not effectively trained and equipped to be professional and capable.

Additionally, reining in the escalating economic ambitions of the military leadership is deemed crucial to avoid potential negative ramifications.

Experts believe that procuring weaponry from countries and companies that are banned or subject to restrictions puts the country at risk of international censorship and potential repercussions.

Therefore, procuring weaponry from China’s Norinco, disregarding the US ban on the company, is likely to amplify the risk of encountering embargoes in the banking system.

It is worth noting that in some countries, such as Kenya, instances have been reported where soldiers lost their lives due to the use of poor-quality Armored Personnel Carriers (APCs) that were procured, which the Chinese military itself does not utilize. This highlights the potential risks associated with relying on substandard equipment for military operations.

Meanwhile, Chief of Army Staff Prabhuram Sharma made it clear that the Nepali Army does not currently require additional weapons for peacekeeping missions.

During a program in Kavre on Friday, he emphasized that the army already possesses an adequate stock of arms.

He further stated that while it is common to purchase parts for various vehicles from relevant countries or nearby markets for UN missions, there is no need to acquire weapons.

He clarified that no arms have been procured from China, and any potential arms purchase must follow government approval and adhere to laws, policies, and regulations.

He also addressed rumors circulating in the media about the army’s arms procurement by stating that no letter of credit (LC) has been opened for purchasing weapons from any country.