NATIONAL 6 -(Spotlight Weekly)]

Extended Coverage

There is some breathing space but the core issues still need to be resolved

By BHAGIRATH YOGI

Just five days before the expiry of the Nepal-India Trade Treaty, Indian Prime Minister Atal Behari Vajpayee telephoned his Nepalese counterpart, Sher Bahadur Deuba, and informed him that New Delhi had decided to extend the accord by three months (until March 5, 2002). Letters to this effect have also been exchanged.

Nepal's business community has felt relieved for the moment, but the extension was not something to rejoice at. "Instead, it has added to our agony," said a businessman. After India officially informed Nepal about its intention to review the treaty early this year, officials from both countries have sat for negotiations several times.

Nepal-India border : Anxiety looms large

"Now we have narrowed down our differences on most of the issues and, hopefully, the treaty will be renewed within the period of extension," Purushottam Ojha, joint secretary at the Ministry of Industry, Commerce and Supplies told SPOTLIGHT Tuesday. He informed that secretary-level talks between the two countries were going to take place soon.

The two-day official-level talks in Kathmandu (on Nov. 3-4) had mainly zeroed in on topics including certificate of origin, value addition and export ësurge'. In August, India formally notified Nepal that it wanted to review certain provisions in the treaty, saying that surge in exports in about half a dozen items from Nepal to India had hurt its industries. The Nepalese side maintained that it would like to see the renewal of the treaty without hampering its spirit. The accord provides for duty-free access to Nepalese manufactured products in the Indian market, except those in the negative list (tobacco, liquor and perfumes).

Indian industries have been complaining about the issue of `surge' in the export of five items, namely polyster yarn, vegetable ghee, copper wire, zinc oxide and galvanized iron pipes from Nepal to India. Indian officials had proposed that Nepal should have at least 50 percent local value addition prior to their export to India ó as was the case in 1991 treaty. The Confederation of Indian Industry and the Federation of Nepalese Chambers of Commerce and Industry had, however, agreed that 30 percent value addition by the Nepalese manufacturers would do the job.

Though the treaty has led to a quantum jump in Nepal's exports to her southern neighbor, Nepal still has a huge trade deficit with India. Last year, Nepal exported goods worth over Rs 27 billion to India whereas the kingdom imported goods worth nearly Rs 47 billion, leading to a trade deficit of nearly Rs 20 billion.

More than 44 percent of Nepal's total export is consumed by India, whereas little more than 35 percent of total Nepalese imports come from India. The five items objected by Indian industries constitute nearly 20 percent of Nepal's total exports to India.

"The very essence of the treaty is to promote Indian and foreign investment in Nepal, thereby accelerating the process of industrialization here," said Manoj Bharati, first secretary at the Indian embassy in Kathmandu. "But, unfortunately, the Nepalese media has failed to see the Indian point of view in the whole issue."

While the powerful Indian media has been raising the issue of Indian industries forcing their government to listen to them, the Nepalese media has neither the access nor the resources to lobby on behalf of the country's businesses.

Moreover, the less-than-transparent parleys between the apex business chambers of the two countries leave behind little room for the media to present the story independently.

Perhaps it is not too late. "The extension of the treaty has at least given some breathing space to Nepal," said a leading captain of Nepalese industry. "Now, Nepal should go for a media campaign in India to present its case, besides preparing well for the official-level negotiations."

During the talks, Nepalese officials have raised the issue of introduction of anti-dumping and luxury duties on a number of Nepalese products by different Indian states. But they have squarely failed to put their case through the Indian media.

Analysts say it would have been better had the negotiations concluded in time and treaty renewed before its expiry. The resultant confusion and uncertainty will not help either side. "There is waning desire for Nepal to be aligned to or integrated with the Indian economy. The global economy is considered a better policy option," said Madhukar SJB Rana, a noted management expert, in his article in a Kathmandu daily this week. "Neither has trade cooperation (between Nepal and India) been able to galvanize cooperation in other sectors, notably water resources, nor industrial manufacturers."

According to Rana, both Nepal and India should leave the treaty with its goals and articles unaltered for a further period of five years but negotiate proactively for mutual benefit over the protocol items to lay down a new vision of integrated trade and investment cooperation with a clear-cut strategic understanding over India's role in facilitating Nepal's dire need for industrialization.n