NATIONAL 6 -(Spotlight Weekly)]

Imaginary Threat

The volume of Nepal-China trade is too negligible to pose a danger to India

By A CORRESPONDENT

Bringing in even a single truckload of goods from Kodari customs checkpoint on the Nepal-China border is difficult. It has to pass through rugged roads and high plateau of the Tibetan Himalayas. Exporting to China through Kodari is an equally difficult endeavor.

As hard as the task is made by geography, Nepal-China trade has been made even more difficult by a recent decision by the Nepal Rastra Bank making it compulsory for traders to go through the banking system. Because there is virtually no commercial bank near the border and traders there tend to operate through traditional means, the decision has triggered a sharp decline in the trade volume over the last few months.

The situation in the southern border is totally different, where big trucks loaded with all kinds of goods move easily to and from India.

The long natural open border between Nepal and India is often misused by nefarious elements of both sides. No illegal trade is possible without the support from officials across the border, but somehow it is always the Nepalese that are blamed for the smuggling.

Like with our southern neighbor, Nepal has centuries-long traditional relationship with Tibet. Nepal still exports some essential commodities like fruits, vegetables and construction materials to Tibet.

Although the Kodari point is 115 km from Kathmandu, travel takes at least seven hours along a rough and rugged terrain. For trucks loaded with goods, the route takes as much as 14 hours. Some small-time traders might be bringing in goods illegally, but this volume is very small.

According to Tatopani customs, Nepal imported goods worth Rs. 4.25 billion during fiscal year 1999-2000. After the introduction of new banking provisions this year, the trade volume has declined drastically. In the four months of the current fiscal year, Nepal imported goods worth Rs. 470 million.

"We don't understand why Indian businessmen are making such hue and cry over the trade," says Rajendra Khetan, a Nepalese businessman. "We do not tolerate any kinds of illegal trade," he adds.

As Nepal's exports to India increased after the signing of a trade treaty in 1996, it also flooded Nepal's markets with Indian goods. Ignoring this reality, a section of India's business sector recently asked the Indian government to reimpose additional duties on Nepalese goods.

From Kodari to Banepa, one has to pass through eight different checkpoints. "At a time when the Nepalese government itself is discouraging Nepal-China trade, it is virtually impossible to do business," a local businessman says.

Over the years, the revenue of Kodari custom office increased five-fold. If arrangements with Tibet matched those with India, there would have been a surge of imports from China.

Indian businessmen seem irked by the increase of exports from Nepal to India. Following the signing of trade treaty, Nepal's imports from third countries have declined drastically. According to preliminary figures published by Nepal Rastra Bank for financial year 1999-2000, India's exports to Nepal have increased several-fold.

On the other hand, Nepal's imports from third countries decreased by an average of 10.5 percent over the last two consecutive fiscal years, 1997-98 and 1998-99. In 1999-2000, imports from third countries have slightly increased once again.

Nepalese exports to India increased not because of Nepal's own production but because of joint ventures. "The manufactured items exported by three major Indian joint venture industries -- Dabur Nepal (P) Ltd, Nepal Lever Limited and Colgate Palmolive (Nepal) Pvt. Ltd -- comprises 30-40 percent of Nepal's total export to India in recent years," says Keshab M. Singh, manager of Nepal India Chamber of Commerce and Industry (NICCI), in an article published in the NICCI bulletin.

After continuous growth in 1997-98 and 1998-99, vegetable ghee exports drastically fell during in 1999-2000 because of new restrictions. Although the annual total production, volume and value of Nepalese vegetable ghee in India at the macro level is very nominal, Indian industrialists protested against it.

Strangely, a few weeks before the visit of a Nepalese business group to China, to participate in the meeting of Nepal-China Non-governmental Economic Forum, a section of Indian media squarely accused Nepal of promoting smuggling of Chinese goods to India.

Nepal's trade with India continues to rise. "When the import and export volumes are added up to arrive at the total trade volume, it can be found that the trade volume with India is steadily increasing and trade with India occupies a massive 40 percent of the total international trade volume of Nepal," says Shashi Raj Pandey, in an article in NICCI's bulletin.

The consensus in Nepalese business circles is that it is ridiculous to presume that Nepal-China trade can in any way pose a threat to Nepal-India trade.