Future Trade

Nepal needs to focus on ways to benefit from transit economy

By SANJAYA DHAKAL

After King Gyanendra said he talked with Indian Prime Minister and Chinese President about Nepal ’s willingness to act as transit between them, the debate on the subject has kicked off once again.

Located in a economically strategic point between two of the world’s largest and fastest growing economies – China and India – Nepal might have an enormous opportunities by facilitating trade between the two.

According to several projections by economists around the world, India and China are both growing at enormous speed and spreading wealth across each of their billion-plus population. “As such, Nepal is now no more land-locked but land-linked country,” said Dr. Mohan Man Sainju, senior economist and chairman of Poverty Alleviation Fund (PAF).

“We might not have access to the world via sea but we have access to two billion population in our immediate neighborhood,” said Dr. Rajeshwore Acharya, former Nepalese ambassador to China .

These facts make it attractive for Nepal to provide transit point facilities for Indo-China trade through its territory.

Experts and entrepreneurs have said that Nepal would need to swiftly conduct intensive internal homework if it is to succeed by providing transit facilities between India and China .

At a recent interaction program organized by Society of Economic Journalists and Nepal Chamber of Commerce (NCC), former Nepalese ambassador to China Rajeshwore Acharya said that Nepal should make efforts to reach transit agreement with China . Nepal already has a transit treaty with India . “But when we reach transit agreement with China, we should have long-term vision in mind and also request for access to Central Asian Republics – which are going to become strategically important place due to their proven oil/gas reserve in future,” Acharya said, adding that during 2000 when he was the envoy in Beijing, a draft of such agreement was already being discussed.

“If we can provide the transit facilities that would help in the development of efficient transport network and enhance other sectors of economy as well,” said Purushottam Ojha, acting Secretary at the Ministry of Transport and Labor Management. According to him, the Nepalese government wants to develop as transit point in order to develop its efficient transport network, encourage tourism, attract foreign investment, promote cooperation in hydropower and help in trade growth.

At present, the bilateral trade volume between India and China is growing astronomically. In 1990, it stood at US$ 260 million, which increased to US$ 7.6 billion in 2003 (compare this to total trade of Nepal , which stands at meager US$ 2.3 billion) and US$ 13.6 billion in 2004. In 2008, this figure is expected to touch US$ 20 billion. So, there is a lot of potential in acting as a transit point between the two Asian giants.

The NCC president Rajesh Kaji Shrestha called for immediate attention in opening up alternative highways and upgrading the existing road network to effectively make use of ‘transit opportunity.’

The entrepreneurs also said that rather than merely providing a route to Indian and/or Chinese vehicles, Nepal should try to extract solid economic benefits from such transit agreement.

In line with King Gyanendra’s announcement, Finance Minister Rana has said that one of the major objectives of the forthcoming budget and economic programs will be to develop Nepal as transit point between India and China . “We want to adopt bridge economy practices for our development,” he said.

One year ago, during the commerce secretary-level Inter Governmental Committee (IGC) meeting between India and Nepal , the former had proposed to use Nepal as transit to reach Chinese market. Following the proposal, the Ministry of Industry, Commerce and Supplies had carried out a study and submitted its recommendations. “After the King’s directions, this subject should now be positively pursued,” said Purushottam Ojha, Secretary at the Ministry of Labor and Transport Management. Ojha, who has worked for a long time in transit sector, added, “We now need to have a trilateral agreement and start working on north-south transit road development.”

The Ministry’s report had recommended that Nepal should provide the transit facility with the objective of expanding its service sector and physical infrastructure development. The report has also identified three alternative routes for the purpose apart from the existing Birgunj-Kathmandu-Tatopani route. The three routes include Bhairahawa-Kushma-Lomathanka-Leje (Kaligandaki corridor), Birgunj-Mugling-Galchhi-Trishuli-Rasuwagadhi-Kerung (Trishuli corridor) and Biratnagar-Dhankuta-Kimathanka (Arun corridor).

Experts opine that out of the proposed routes, a suitable one should be identified and developed as per the trilateral understanding. Experts have said that while providing transit facility, Nepal should try to maximize the benefit for its transport entrepreneurs, freight forwarders and other service sectors. Even the Ministry’s recommendation speaks about trans-shipment issue to provide benefit to Nepalese entrepreneurs. As per its recommendations, goods coming from India should be transferred to Nepalese trucks at a dry port in the border and they should then be transported to Chinese border. “This will help the internal transport business, hotel and other service sectors,” the report states. At present, dry ports or Inland Container Depot are functioning in Biratnagar, Bhairahawa and Birgunj while another one is being planned for Kakarbhitta. A ministry official added that the country would need to build dry port in Tatopani, Kimathanka and other border points with China as well. Entrepreneurs have also suggested for such port in Paanchkhal.

Meanwhile, the Federation of Nepalese Chamber of Commerce and Industry (FNCCI) president Binod Bahadur Shrestha has informed that the federation is going to hold a trilateral discussion among businessmen and traders of the three countries on the issue of Nepal working as transit-point. The discussion would be held within six months. Shrestha said that given the rapidly expanding economic relations between India and China, Nepal can benefit a lot from working as transit-point.