Nepal Balancing Well Its Economic Relations Between China And India

In recent weeks, Nepal has taken several major steps to firm up its faltering economy during the difficult post Ukraine war period. In the process, two of its recent decisions in terms of their diplomatic impact, can be perceived as a reminder to giant neighbours India and China, that Kathmandu prefers to pursue its own independent course on economic issues — it can play the balancing game between major competing powers as well as anyone in South Asia.

For India the good news is that a bilateral long term agreement in the power generating sector has been signed with Nepal following several rounds of official talks. Over the next decade, India will purchase at least 10,000 megawatts of mainly hydropower from its Himalayan neighbour. A number of green environment-friendly hydropower generation projects have been currently under way in Nepal for some years now. Some of these mega investment projects are being executed with Indian financial/technological help and advice.

Nepalese authorities are confident that a vast, relatively stable market with an ever increasing demand for power like India, is itself a major advantage for its domestic power producers. A long term agreement between the two countries will result in tangible short as well as long term benefits, leading to fresh jobs for educated Nepali youths. It will generate new opportunities for the expansion of the country’s fledgling manufacturing sector.

The export of power to India as well as Bangladesh, which currently buys 50 megawatts daily, can eventually enable the landlocked country to earn more revenues than even the flourishing tourism sector over time, according to Nepali planners.

India stands to gain as well, as ensuring reliable clean non polluting uninterrupted supplies from Nepal, (except for natural calamities) would be an advantage. Its dependence on the use of ‘dirty fuel’ coal will diminish, which should help countries directly threatened by the effects of global warming.

However there is good, perhaps even better — news for China as well. During the last few weeks Nepal has begun to use the Chinese ports to increase its exports. This path-breaking development for some reasons has not been widely reported in the Indian mainstream media.

While a shift in the movement of Nepalese export-bound cargo should not cause India too many worries, given the volumes involved, the development does indicate that China’s ambitious Belt and Road Initiative (BRI) has made a major regional breakthrough that Indian policymakers can no longer ignore.

What should cause concern in Delhi are recent comments made by Nepalese Customs and related official authorities suggesting that the country’s traditional dependence on India for carrying out its import/export trade was finally ending! There can be no mistaking the overall tone of relief and satisfaction over what Nepal and China have worked out to implement finally a long term proposal that had been under discussion for some time.

This, analysts admit, certainly counts as a major gain, a success for the Chinese BRI initiative on South Asia. Bangladesh had earlier assured China of its participation in joint infra-related connectivity projects, within the BRI programme.

India it may be recalled had drawn up its own parallel BBIN transport connectivity project in the region. It had consistently opposed the BRI on account of the use made by China of the disputed POK region in its CPEC highway project through Pakistan.

However, while India, Bangladesh and Nepal responded positively to the BBIN and operationalised hassle-free movement of people and goods cutting down on time, expenses and bureaucratic procedure, Bhutan had opted out, pleading environmental concerns as well as a lack of suitable domestic infrastructural development.

An additional factor that added to the attractions of supporting the BRI project, for most developing countries, was of course, the prospect of securing timely financial aid from China, as an alternate source to the IMF or the World Bank.

Transit-related matters with China were finalized, according to Nepali media reports, during the visit made a few years ago by former Prime Minister Mr K.P. Sharma Oli to Beijing. Mr Oli is known for his generally pro-China views and approach. Negotiations had continued for over eight years.

Nepali sources have confirmed the recent dispatch of homemade noodles (nearly 2400 cartons) to Japan, costing about $12,000 through Chinese ports. It is not exports alone, imports through Chinese ports have also begun, with Myanmar exporting turmeric recently to Nepal.

As per existing provisions of the bilateral Nepal/China agreement, Nepal can access at least six Chinese ports, some of them coastal, and 3 dry (land) ports, to access the seas/international waters. Its near total dependence on the ports of Kolkata and Vizag to a lesser extent, will be sharply reduced.

Kolkata Port Authorities it may be stated had made several arrangements to help ease and speed up the movement of Nepali imports and exports. A separate dock had been built to deal only with Nepal cargo. Indian Railways had worked out arrangements to ensure speedy northward movements, ensuring a priority for the Nepalese goods.

However Nepalese authorities often complained about the administrative delays involved in seeking clearances, finalising cost of operations etc, mainly because the final clearance had to be secured from Delhi-based Government offices and Ministries concerned.

Aware of these problems Bangladesh authorities, keen to step up business from and activities in the relatively new Mongla and Chatttogram posts, had made special offers to Nepal ( as well as Indian companies) to increase operations on their territory. (IPA Service)