Sandwiched between India and China, Nepal stands to gain significantly by tapping into the two fastest growing economies of the world. Thus begins almost every treatise on contemporary economic affairs on Nepal.
There is a great deal of sadness about how Nepal has been unable to leverage its strategic geo-position between India and China. Every conference is peppered with long soliloquies that rue how Nepal is failing to take advantage of this great opportunity.
Save the misery, please. On the contrary, the long shadow of India and China remains Nepal’s biggest misfortune. There is a world beyond India and China that Nepal must discover.Start with most obvious misconception—the notion that Nepal borders two of the most dynamic economies of the world. Technically, yes, but look closer. Nepal borders the worst performing states and provinces of India and China.
The states of Uttar Pradesh and Bihar, which share the majority of the southern border and have long exerted great influence on Nepal, are Indian laggards. Along the northern border, the province of Tibet displays little of the economic sparkle of China.
Uttar Pradesh and Bihar are the two worst performing states in India in terms of the human development indicator, a widely accepted measure for the level of socio-economic development. Tibet has the lowest human development index of any region or province in China.
These days though, Bihar is often regarded as a turnaround story. It’s Chief Minister, Nitish Kumar, has pursued an impressive development agenda that combines good governance and economic reforms. Growth in the state now routinely exceeds the Indian average. But Bihar is also operating from a low base of economic activity. The state still has a long road ahead.
Last month Nitish Kumar held a rally in Ramlila Maidan (ground) in New Delhi to demand special status for his state so that he could command more resources from the central government. At least for Nitish Kumar there was the Ramlila Maidan, where he could flex his political muslces. He converged there with thousands of supporters, shut down half of Delhi for a day and threatened that he would take special status for Bihar through the next general election if it were not granted sooner.
Unfortunately for Nepal, there is no Ramlila Maidan in Delhi or Beijing.
It would be one thing to be bordering prosperous areas, say a Gujarat or Shanghai. But being sandwiched between Uttar Pradesh, Bihar and Tibet doesn’t make Nepal’s geo-position any more economically strategic than being sandwiched in the smelly armpit of a very strong (or beautiful) person.
If India and China appear content to push on with growth models that allow some regions within their countries to prosper while others like Uttar Pradesh, Bihar and Tibet continue to languish, surely it is unreasonable to expect that Nepal will be offered any special dispensation.
Part of the problem is that we, Nepal, live with a false sense of self-importance, perhaps fuelled by the benefits that Nepal extracted from the Indo-China trade many centuries ago. Those moments of history have passed.
We mistake the attention that India and China shower on us as a sign of our strategic importance when it might be nothing more than their concerns for security. We mistake their deep seated political and economic indulgence, both covert and overt, as a sign that they are truly responsive to Nepal’s aspirations when it might be nothing more than their need to assert regional superiority.
If India and China allow some regions to prosper while others languish, Nepal can’t hope for any special dispensation.
Shortly after taking office last month, China’s new President Xi Jinping, unfolded a five point strategy for China’s relationship with India. He spoke of maintaining high-level contacts, expanding economic complementarities, boosting cultural-social ties and multilateral cooperation, and for both countries to “properly handle” their differences.
Although Jinping didn’t mention it, Nepal is clearly an important component to the Indo-China puzzle. But that importance doesn’t guarantee our economic wellbeing, doesn’t provide us political stability or ensure that we are placed firmly on a path of prosperity. The belief that we can extract mileage by leveraging the Indo-China relationship merely because we are geographically located between the two countries has done little for us, except perhaps reduce us to a playing field.
We must find a way to emerge out of the shadow of India and China.
Our current trade patterns partly reflect the unitary focus on India and China that must be challenged. India alone accounts for approximately 70 percent of our exports. Our next largest export destination, the US, merely accounts for 7 percent of our export volume.
There is a similar concentration on imports as well. India and China, the two largest exporters to Nepal, account for two-thirds of our total imports. Within that India alone accounts for about 65 percent of imports, though Chinese imports have grown steadily over the last two decades.
At the same time, the bedrock of the Nepali economy already comes from beyond these two countries. Remittances, which currently account for about 20 percent of our gross domestic product (GDP) and are five times higher than export earnings, come primarily from countries other than India and China. It is these remittances that finance our imports, support our consumption and currently provides the basis for growth.
The issue is not to challenge the supremacy of India and China as Nepal’s trading partners. The whole world seems to be keen on doing business with India and China. There’s no reason we shouldn’t. But it is our stunted outlook that appears to stretch only as far as Delhi and Beijing that needs to be challenged.
Multilateralism beyond India and China has been only a small part of Nepal’s trade initiative. We hold trade agreements with about 16 different countries, other than India and China. We participate as part of the South Asia Free Trade Area and the Bay of Bengal Initiative for Multi-Sectoral Technical and Economic Cooperation (BIMSTEC). But both of these are highly dependent on Indian leadership.
Although Nepal is a signatory to the World Trade Organization (WTO), it has extracted little from this pact in terms of expanding trade beyond India and China.
Although trade with India, and now increasingly China, continues to dominate, the most successful Nepali industries have originated from technical collaboration outside of these two countries. On average, the Nepali diaspora are far more successful outside of India and China. Several academic studies continue to point out significant competitive opportunities for export outside of India and China.
Our trade policy outside India and China cannot be limited to having an office that is content with providing proper paperwork for migrant labour. Our supporting foreign policy framework must believe that there is a world beyond Delhi and Beijing.
Nepal, like many other countries, is beginning to establish meaningful non-governmental channels to develop and strengthen economic, political and cultural relationships abroad. This style of non-official diplomacy, broadly referred to as Track II, could be a mechanism in which we explore the world outside of India and China.
The windows in Singha Durbar only look out to far as Delhi and Beijing. Associations representing Nepali civil society should learn to look beyond.
The author is a consultant on energy and environment
bishal_thapa@hotmail.com
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