Nepal-India Trade Treaty
Automatic Renewal Or Termination?

By Prof. Bishwambher Pyakuryal

The Context

NEPAL’S relation with India is a determinant factor that shapes up economic activities in Nepal because of the 1750-km long and open border between the two countries. For a long time Nepal became an entre pot to supply those imported goods to India the imports of which were highly restricted in India. Since this scheme helped to easily generate revenue, the authorities did not seem to be interested in exploring the inherent and sustainable comparative advantage of the Nepali economy vis-à-vis India and the rest of the world. Re-export of luxury goods to India in turn generated sufficient Indian currency to support Nepal’s imports from India. The history of Nepal’s industrial base was thus nothing more than the imports of such items that were restricted in India because of an excessively high tariff wall. After India aggressively introduced liberalization measures, electrical, steels, polythene based assembly plants that were earlier established in Nepal for re-exporting to India for a premium closed down one after another. Because of the narrow base of industrial development in Nepal, 90 per cent of the industries were closed down in less than a month during Nepal-India Trade and Transit Impasse that lasted from March 23, 1989 through June 10, 1990. Some reports also revealed that industrial production was reduced to as low as Rs. 850 million per month from Rs. 1700 million indicating higher degree of economic dependency on India.

Features of Treaty of Trade, 1996

In consideration of the size of the population, Gross Domestic Product, per capita income and poverty, the Nepalese market is pretty small. Indian market is therefore important for the Nepalese product. In this context, among all the treaties, the bilateral trade agreement of December 3, 1996 is the landmark achievement in Nepal-India relationship. According to Article V 1 of the treaty, the Government of India will provide access to the Indian market free of customs duties and the quantitative restrictions for all articles manufactured in Nepal except for articles in the negative list. Similarly, there is also a provision for the preferential entry on goods imported from India to Nepalese market without any quantitative restrictions. His Majesty’s Government of Nepal will waive additional customs duty on all Indian exports during the validity of the treaty.

The renewed treaty is more liberal on the ground that it provides improved access to Indian market by eliminating the 50 per cent rules of origin provision inherent in the former agreement. The number of items included in the negative list has also been reduced to only three. It is agreed that there will be an automatic renewal of the agreement for five years if either party does not give notice to rectify the agreement before the expiry of 3 months. It was further committed that Nepal would not misuse or jeopardize the Indian economic interest on the basis of openness of new treaty.

Win-win Situation

The average export growth to India remained only 25 per cent during mid-1990s. After the treaty, it increased to above 60 per cent during 1997/98 through 1999/2000. India’s share of Nepal’s import trade has also increased. The share of India in Nepal’s trade was 20 per cent during 1995/96; it however increased to 44 per cent during 1999/00. The magnitude of Nepal’s trade deficit however, widened in absolute term. It rose to 19 billion during 1996/97 through 1999/00 from merely 14 billion five years before the treaty of 1996.

After the treaty, there is an import diversification from India. Nepal mostly used to import raw materials and consumption goods from India. It has now switched over to raw material, machinery and technology creating more demand in Indian market. Nepal pays approximately 7 billion convertible currencies annually for the imports from India. Out of the 698 total foreign investment projects in Nepal under different categories such as agriculture, manufacturing, tourism, service, construction, energy, and mineral based, India has 244 projects constituting almost 35 per cent share. Visible increment can be seen especially after 1996 trade treaty.

Recent Issues

India has recently raised some issues regarding the implementation of the treaty. In a recent visit of Indian external affairs minister Mr. Jaswant Singh, he observed that certain issues have come up in the operation of the treaty over the past five years which need to be addressed and necessary adjustment be made. The Indian Ambassador to Nepal Mr. Dev Mukherji, in his address to the Reporters’ Club on August 23, 2001 in Kathmandu said
that some problems have arisen relating to what is described as "Surge" in Nepalese exports to India by causing serious problems particularly in the neighbouring states. The concern mostly raised is the re-export of third country goods to India without any value being added. India stresses former prime minister Mr. I.K. Gujral’s observation made during his 1997 visit to Nepal that Nepalese entrepreneurs should not resort to screwdriver technology industries. It should be ensured that certificate of origin to Nepalese manufactures which is left at the discretion of Nepalese government is done sincerely to guarantee the genuineness of the products.

(To be continued)

A Job Abroad And A Lot To Suffer

By Mohan K.C.

ANYONE can say with certainty that Nepalese economy is not moving the way it should. There may be many reasons for such a state. The development plans are in their place and paint a rosy picture of 6 or 7 per cent growth rate but when it comes to the realisation part the country is way behind. The plans and programmes reflect that in the years to come the country would forge ahead of its present rate of growth. But, unfortunately, there are a number of constraints that don’t let things move ahead as visualised.

The population growth has surpassed all expectations despite the inputs made to popularise family planning. It’s then not surprising to see that the population of the country at present is over 23 million and who knows, at the rate seen now, the population may double itself in two decades if not in one.

With burgeoning population it is essential that the basic needs of the people be fulfilled. But at the rate the economic development is taking place, the possibility of every family owning a house and employment for all the able ones is next to impossible in the forseeable future.

There are people who say that rapid industrialisation would serve the expectations. But the present times show that the industrialisation has not gone the way it had been expected to. Investment is the biggest hurdle for a country with a resource crunch. Blame also has to be shouldered by the lax implementation of the policies. The plans and programmes may be fine but when it comes to the implementation aspect there never has been the amount of desired seriousness to lift the people out of the mire of economic deprivation.

Globalisation, liberalisation and free market policy have not been able to make a dent in the poverty status of most of the people. With over 50 per cent of the population below the poverty line, nothing can work overnight to radically transform their economic status. The government knows this. This is the reason for every five-yearly plan focussing on poverty alleviation with not much success.

When poverty is a big problem and employment hard to come by, it is obvious that the lure of employment overseas is uppermost in the mind of many people. The way people see gold pouring in with a job abroad is seen in the way people line up for having their passports made. The mushrooming of employment agencies, registered or not, is a reality.

The promises of a better future for oneself and family makes the people try their luck at getting a job in the Middle East or East Asia. But their eyes are blinded by the promises made by the employment agencies. And they might have also seen one or two friends of their striking it rich. But they have not seen the scores of people who have suffered in foreign lands.

The trouble starts right from here. The agencies promise a secure job abroad with a fantastic amount quoted as the income per month and so on. The prospective employment seeker is first of all made to part with quite a hefty sum for having himself/herself enrolled in the list of the people to be sent for employment in foreign countries. Of course, there is no guarantee that once you have paid the exorbitant fees you will get the job as promised. It is no big deal to get a passport and even the visa and the air ticket. The real agonising period starts once you land in the foreign country. There are numerous cases to suggest that once you land you are left to fend for yourself.

With nowhere to go and without a genuine work permit, you are bound to be deported. For this you have to appeal to your family or friends for plane ticket back home. When you return you turn a pauper with no land or property as they might have been sold or mortagaged to finance your first trip out of the country.

For some who manage to find their employer they have to undergo all sorts of hardships. It could be long working hours, malnutrition, torture at the hands of the foreign employers or you would receive no pay except for the return trip back home.

There are many stories of the ordeals that a person faces in foreign countries. And only a few have realised their dreams. They are the lucky ones. But for the majority working overseas is full of uncertainty and often it ends in tragedy.

The government has the duty to monitor the manpower agencies and also keep a tab on those who have gone abroad seeking employment. But it is easier said than done. The concerned agencies even cannot provide the statistics of the number of people who have gone out for employment. Rarely have they taken action against the manpower agencies which have violated the rules. After all there is big money involved.

Dashain: Whose Goat Is Bigger?

By Gandhi Raj Kafle

HOW fast time moves? Nobody takes it seriously, but it keeps itself busy in running and working. Times have magical touch, too. Its power to store old memories that always remain afresh is enormous. Leaves fall and greenery on the seasonally deserted trees returns again. Cloudy weather vanishes and tranquility of the blue sky steals the heart of human beings. It’s the time that brings festival again and again. Yet, people do not feel monotonous to celebrate because time makes all festivals spicy adding a new fragrance of joy, vigour and enthusiasm each time.

While moving with time, we Nepalese too are very near to celebrating Dashain, the great festival of the country. As usual, the people’s enthusiasm is not short for celebrating it. In fact, when Dashain comes, the people’s spirit to welcome it becomes stronger all the time. That’s why even in a time gap of one year, there is no dearth of joy, happiness and celebrating mood in the nation for this great festival.

The people cut goats. Buffaloes will be sacrificed. Many turkeys will be brought to the Kathmandu Valley and sold. Meat of ducks, chickens, lambs and porks will be consumed massively. New clothes also gets due priority. Babies or children, young or old, rich or poor; the festival of Dashain is for all, they must have to be in new clothes no matter how much it costs to buy. The guardians or family leaders take it happily paying no attention to the thickness of their wallets. No matter what, everybody has the urge to celebrate.

In fact, everyone competes to participate in the Dashain spree months ago. Income will surely be overruled by expenditure this time too because the people know all things to be managed for this great festival need money and nothing is available for free. After all the government too does its business in deficit funding. Then, why should be people worry? It is a common practice for people to knock the doors of Sahujis to get money. In fact, the public sense of debt in Nepal does not shows its effect on this occasion. Nothing can be done to be rational buyers once the Dashain starts ringing it bells loudly.

In fact, the festival of Dashain in Nepal is going deeper in the psyche of the people. It’s a living tradition and an evergreen culture enjoyed timelessly and wholeheartedly. The only difference in it is that some families think of it in time and try to manage resources for celebrating Dashain while many others jump into the last moment buying, which drains more money from the wallet naturally. But, the festival is festival. The pressing demand can’t be cut.

The shopping list for Dashain is naturally long. For ordinary consumers, fulfilling family needs is a taxing job. But, the trouble is that spending all the money to buy a goat and clothes can’t make Dashain really memorable. The list of miscellaneous items is also long and unavoidable. The tragedy of Dashain for low income group lies here. It may leave them in debt, which takes months’ effort to clear. This is the economic condition of the ordinary people of Nepal.

The Dashain has to be celebrated in a happy manner to uphold the spirit of family harmony, respect, relations and understanding. There should not be any doubt about it. But, it should not be a means for demonstrating family status. So, if the neighbour’s goat is bigger, let it be because his family size too can be bigger. But, the persons, whose family size is small, need a smaller goat and they should be satisfied in it. Goat buying is just an example in the long process of Dashain. The main thing in it is that the great festival should be celebrated happily according to the needs and capacity of individuals.