National The Telegraph - Weekly (Nepal)

N A T I O N A L

By: Professor Hari Bansh Jha

Nepal-China relations are as old as the history of the two countries. Yet the economic relations between Asia’s two asymmetrical nations in terms of population and geography took a new turn with the establishment of diplomatic contact in 1955.

In the modern era, economic cooperation between Nepal and China started with the signing of project agreement for the construction of the Arniko Highway in 1961 with a view to linking Nepal’s capital city Kathmandu with Lhasa of Tibet Autonomous Region of China. Other major roads constructed by China in the subsequent years, include Kathmandu Bhaktapur Road (13 km), Prithvi Highway (174 km), Narayanghat –Mugling Road (36 km), Khajuwa-Gorkha Road (24 km), Kathmandu-Bhaktapur Trolley Bus Road (14 km), Kathmandu Ring Road (27 km) and Pokhara Baglung Road (65 km).

Chinese entrance into Nepal through the road sector was a major diplomatic victory for this country as it helped dilute part of India’s influence in Nepal. Most of the roads developed by China in the north or mid-hills are strategically important as they provide direct and indirect access to different sensitive parts of Nepal. China also tried to reach southern part of Nepal close to Nepal-India border by bidding Kohalpur-Banbasa road sector in global tender in late 1980s. India, however, had to use its pressure to cancel the tender as the area not only touch Nepal-India border but it is also close to Delhi.

In the industrial sector, China helped Nepal construct Bansbari Leather and Shoes Factory, Hetauda Cotton Textile Mills, Harisiddhi Brick Factory, Bhaktapur Brick Factory, Industrial Gloves and Apron Manufacturing, Bhrikuti Paper Mills and Lumbini Sugar Mills. Sunkoshi Hydroelectricity Plant and Pokhara Water Conservancy and Irrigation Project are the two major projects constructed by China in Nepal in water resources sector. B.P. Koirala Memorial Cancer Hospital at Bharatpur is the major hospital set up by China for the treatment of cancer patients. Chinese assistance for the construction of Sports Complex, National Trading Complex, Warehouse, City Hall and Birendra International Convention Centre are the major Chinese projects in Nepal.

Chinese grant assistance to Nepal under the Economic and Technical Cooperation increased from Rs. 340 million in 1994 to Rs. 735 million in 2001. However, Nepal’s balance of trade with China is in deficit to the tune of Rs. 3.92 billion as the country’s exports of Rs. 1.63 million is almost negligible. Nepal’s trade with China is only 5 per cent of the country’s total trade. China’s share in Nepal’s total exports constitute 2 per cent only; while the share of this country in total imports is 5 per cent.

Nepal’s exportable items to mainland China constitute handicrafts, paper and paper products, wooden and bamboo goods, readymade garments and hides and skin. Exports to Tibet consist of flour, vegetable ghee, metal statue and incense. On the other hand, major items imported from mainland China are electrical goods, machinery and parts, medicine and medical equipment, textile, shoes and sandals, watch and bands, chemicals, transport equipment, radio cassette and parts, battery cells, construction materials, paints, aircraft spare parts, iron sheets, etc. Major items imported from Tibet are raw wool, textiles, jean pants and jackets, and electronic goods. The prominent overland trade routes with China (Tibet) are Kodari/Nyalam, Rasuwa/Keyrong, and Yari/Purang.

Considering Nepal’s burgeoning trade deficit with China, Nepal is asked by the Chinese authorities at different forums to lure at least 1 per cent of the 10 million Chinese people visiting foreign countries each year. Statistics, however, show that the number of Chinese tourists to Nepal was only 7,139 in 2000.

For last few years, Chinese investment in Nepal has been coming mostly through the private sector in joint venture projects. China so far conducted 31 investment projects in areas like garment, hydropower, aviation and catering services.

In future, China is committed to complete more of road sector projects like Syprubesi-Rasuwa Road (18 km), Trishuli-Galchhi Road (17 km), and Baglung-Jomsom Road via Beni (72 km). Support from China is likely to be made available for the construction of Polytechnic Institute in Banepa, Industrial Estate at Panchkhal and Rural Medium Telephone Exchange.

China also appears to be attracted towards Nepal’s physico climatological conditions for the cultivation of variety of agriculture products within the range from subtropical to polar within a span of some 100 km. Chinese interest in the processing of herbs and vegetable seeds is also growing. China is also reported to set up its Industrial Park at an appropriate location between Kathmandu and Zhangmu outlet with adequate provision of water, electricity, transportation, personnel visa, land usage, taxation and equipment importation. As this project is likely to be tied to Western China Development Strategy after the development of Qinghai-Tibet Railway, the Industrial Park will have potentiality to dump more of Chinese goods in Nepal. It appears that Chinese interests in Nepal are strategically important whose implications need to be analyzed in proper perspective.

The author is Professor of Economics and Executive Director of Centre for Economic and Technical Studies in Nepal.

Deuba's India Visit
Joint Statement

Combating Terrorism/Security Cooperation

The Prime Ministers reiterated the determination of the two countries in combating the scourge of terrorism. They agreed to further intensify cooperation in curbing the activities of the extremists and terrorists. In this context, they expressed satisfaction at the ongoing cooperation under the existing mechanism in the areas of supply of equipment, training and exchange of information. Prime Minister Deuba thanked the Government of India for the timely and substantive support provided by India in Nepal’s efforts to deal with the Maoist insurgency. Prime Minister Dr. Manmohan Singh reassured the support of the Government of India for further strengthening of Nepal’s security forces including the Nepal Police.

The Prime Ministers stressed the need for an early conclusion of the Extradition Treaty and Agreement on Mutual Legal Assistance on Criminal Matters and directed the Home Secretaries to take up the matter in their next meeting with a view to finalizing the documents. It was noted that the next meeting would take place in October 2004 in New Delhi.

Boundary Demarcation

The Prime Ministers expressed satisfaction at the progress made by the Joint Technical Level Boundary Committee and directed the Committee to complete the remaining mandated tasks by June 2005.

Economic Cooperation

The Prime Ministers expressed satisfaction at the progress on the implementation of various Nepal-India economic and development cooperation projects. They reiterated their desire to further deepen and d

The Prime Ministers welcomed the proposal regarding cooperation for development of road network in the Terai, including the development of identified stretches of Hulaki Rajmarg.

The Prime Ministers welcomed the idea of cooperation for conservation and development of Churia range in Nepal. A concept paper would be forwarded by the Nepalese side.

The Prime Ministers decided that the proposed Institute of Technology in the Far-Western Region of Nepal would be set up in two phases. A team from India will visit Nepal soon for discussions with His Majesty’s Government of Nepal to select a suitable site for the project.

Water Resources

Emphasizing the importance of cooperation in the water resources sector, the two Prime Ministers stressed the need for expeditious progress on projects currently under active consideration including Pancheshwar and Upper Karnali. They also directed that work on the preparation of the DPR of Budhi Gandaki project be commenced expeditiously. The two Prime Ministers noted that the next series of meetings of bilateral institutional mechanisms including the meetings of the Joint Committee on Water Resources (JCWR) and the Joint Group of Experts on Pancheshwar would be held by October 2004. They welcomed the establishment of the Joint Project Office for Sapta Koshi Multipurpose Project and Sun Koshi Storage cum Diversion Scheme.

The Prime Ministers mandated the Joint Committee on Water Resources to prepare a comprehensive strategy for flood management and control, including measures that can be implemented in the short to medium term. The Prime Ministers directed the Standing Committee on Inundation Problems and the High Level Technical Committee to resolve all inundation and embankment related issues soon.

Trade, Transit and Investment

The Prime Ministers welcomed the operationalization of the Inland Container Depot and the opening of the Consulate General of India in Birgunj.

The Prime Ministers directed the concerned officials to discuss the matter related to use of the ICD for carrying of cargo for bilateral trade.

They stressed the need for an early formalization and implementation of the Motor Vehicles Agreement.

The Prime Ministers directed the two sides to expeditiously resolve outstanding trade issues, including in removing some practical problems in the implementation of the Treaty of Trade and to implement agreed trade facilitation measures speedily. They decided to accord priority, in particular, to addressing issues relating to quarantine and testing procedure for Nepal’s export of agricultural and food products, including Vanaspati Ghee.

The Government of India agreed to consider the utilization of Jawaharlal Nehru Port in Mumbai for Nepal’s use of its transit cargo.

The Prime Ministers agreed to direct the concerned officials to finalize arrangements for improving border infrastructure at four major customs points, and for development and upgradation of rail and road networks on both sides.

The Prime Ministers welcomed the agreement between Bureau of Indian Standards and Nepal Bureau of Standards and Metrology as first step towards mutual recognition of certification systems.

The Prime Ministers welcomed the agreement between Indian Oil Corporation and Nepal Oil Corporation for a joint venture regarding construction of an oil pipeline between Raxaul (India) and Amlekhgunj (Nepal).

The Prime Ministers agreed to further strengthen the policy framework for bilateral investments, inter alia, through speedy conclusion of a Bilateral Investment Promotion and Protection Agreement.

Culture and Sports

The Prime Ministers welcomed the conclusion of the Agreement on Cooperation in the fields of Culture and Sports, which would provide the necessary framework for institutionalized cooperation in these areas.

Science and Technology

The Prime Ministers welcomed the conclusion of Memorandum of Understanding on Cooperation in the field of Weather Forecasting, which envisages the setting up of an INSAT Ground Receiving Station in Nepal.

1950 Treaty of Peace and Friendship:

The Prime Ministers directed the Foreign Secretaries to continue discussion on the review of the 1950 Treaty of Peace and Friendship with a view to further strengthening the bilateral relations.(Excerpts)