Besides, PM Bhattarai also elaborated on current issues on trade, tourism, investment and development financing in Nepal in the face of the ongoing political transition. The Chinese side appreciated these concerns as they reaffirmed their resolve to increase economic collaboration with South Asia and particularly Nepal in the days to come. Thus, the visit indicated areas where Nepal and its northern neighbor can take some specific steps to enhance economic integration and engagement between the two countries.
One of the crucial concerns of Nepal is how to increase complementarities in trade in the wake of widening and unsustainable deficit with China. The trade data of 2010-11 reveals that there is a trade gap of Rs 44 billion (with import worth Rs 45 billion and export worth Rs 1 billion). First, the volume of trade is low, incommensurate with the two countries’ contiguous location. In this climate, both the sides need to relook their respective trade policy and second, the asymmetry in export needs to be addressed. China provides duty-free access to 4,721 products from six designated border crossings under an agreement in April 2010. But, this facility has largely been unutilized due to various non-tariff barriers and procedural issues. This need to be resolved in an expeditious manner.
It will be appropriate to form a Joint Committee to look into the poor performance of Nepali export even on the availability of zero tariff market access. Such a committee should review the rules of origin criteria and consider addressing the non-tariff barriers like quarantine and food test, and at same time strengthen and harmonize the Nepali test and certification infrastructures and procedures.
Increasing transport connectivity is of utmost importance in promoting bilateral trade. The 1,100-kilometer common border between Nepal and Tibet autonomous Region of China extends across high mountains and rugged terrain posing a great difficulty in construction of highways and railroads. In spite of the six designated border crossings, only one border post of Tatopani-Zhamu is currently connected with road; even there the road on the Nepali side is in need of major repairs.
The second border post of Rasuwagarhi-Kyorong is likely to be connected by serviceable road in the near future, but it will still need improvements to upgrade it to highway standards. The other four crossings can be approached through trail and mule tracks, thus limiting their use. The border management agreement signed during the latest visit has paved the way for mobilization of Chinese assistance for the development of adequate transport infrastructure, including roads in the remaining border posts.
Transport connectivity should be adequately backed by other trade related infrastructures like Inland Clearance Depots, Container Freight Stations, warehouses, and the Special Economic Zones so as to fully utilize the potential of various agricultural and non-agricultural goods in the districts surrounding these border posts. This on one side will help fuel the development process and on the other increase the income level of the people in those areas.
Premier Wen has assured that the best companies in China would be encouraged to invest in various ventures in Nepal. This will be quite useful in increasing bilateral trade as the Chinese investors will also explore the areas where investment output will serve as the items of export from Nepal. Nepal, as an investment destination, offers lots of opportunities for investors as the products and services can be exported free of custom duties to various countries like India, the EU, the US, Canada and Japan under bilateral trade agreements or under Generalized System of Preferences (GSP).
Hydropower, tourism, information and communication technology, textile and garments, agro-processing and mineral based industries are the potential areas where investors will have comparative advantage in terms of domestic consumption and export. Nepal has been pursuing an open and liberal economic policy that is needed to lure foreign investment in multiple sectors.
The Tibet Autonomous Region of China has been prospering by leaps and bounds over the years, particularly due to improved transport infrastructure, growing agricultural production, manufacturing and service industries. One of the strengths of TAR is its success in high altitude agriculture which we can replicate with similar approaches and technology in the northern belt of Nepal. The production of crops like buckwheat, beans and oat and the farming of mountain goat, sheep, yak and fowl is a success story of Tibet. The sharing of technology, farming practices and support mechanism from Tibet will be important to bring about a turnaround in agricultural practices in northern Nepal, thereby making the local people food sufficient and rich.
Chinese collaboration and engagement with South Asia can be increased by facilitating transport linkages across the Himalayan range. Nepal can be a land bridge between India and China by means of highways and railroads connecting northern border with south. Thus, Nepal could transform itself as a ‘land-linked country’ from its current ‘landlocked country’ status and at the same time provide transit facilities to both its neighbors.
This may require a trans-regional or tripartite transit arrangement among China, Nepal and India besides addressing the physical barrier issues. The assurance given by the Chinese side to extend the under-construction railroad to Xigatse up to Nepal border will certainly help achieve a larger integration between South Asia and East Asia, particularly with China.
The visit of Premier Wen was meaningful not only in enhancing official aid for some specific projects but also forging a better partnership for the future. The development assistance of 750 million Yuan for next three years and US $ 20 million budgetary support may not be a significant amount but the goodwill and commitment of Chinese government to work with Nepal for enhancing the common people’s livelihood is of great significance to Nepal. It has been proposed that 2012 be observed as the Nepal-China Friendship Year, thus offering even more chances to further engage in bilateral economic cooperation.
Although Nepal is a landlocked and a least developed country, it is playing an important role in international forums through bodies like UN and WTO. The Nepali interests are well articulated in various bilateral, regional and multilateral forums and there is a great amount of goodwill and enthusiasm among development partners to advance the development agenda and capacity building process. However, we need to be prudent enough to harness those opportunities by keeping our domestic affairs and politics on the right track.
Timely completion of the peace process and constitution are the national priorities at the moment. Let us pray that these will happen sooner than later so as to leverage benefits from international cooperation.
The writer is Secretary, Ministry of Commerce and Supplies
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