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Nepal - China Abracadabra.

Colombo, Oct. 21 -- Nepal and China entered into a Transit and Transportation Protocol (TTP) almost a month back but it has failed to generate much enthusiasm amongst traders, importers and exporters and the business community at large in Kathmandu. They have not intrinsically reacted to it as an alternate cost effective transit route for their third country trade, which is presently through Indian ports of Haldia (Kolkata) and Visakhapatnam.

Both countries are yet to work out modalities of the transit trade. Also functional requirements like custom clearance, check points, road tax, demurrage charges, parking facilities, terminals for loading and unloading of materials. China has promised Nepal access to four ports namely Tianjin, Shenzhen, Lianyungang and Zhanjlang. Dry port facilities are assured at Lanzhou, Lhasa and Xigaste. Trucks with Nepali number plate will get access to these ports. Nepal government hopes to tap the new China linkage to push up trade with Japan, Koreas and other Asian countries as well.

TTP, also known simply as Protocol, is a sequel to the Trade and Transit agreement reached between the two countries in 2016. The accord was the highlight of K. P. Sharma Oli's sojourn to Beijing during his first stint as Prime Minister.

Nepal's trade with China is increasing in recent years though it is nowhere near the India-Nepal trade volumes. At present India is the largest trading partner of Nepal accounting for nearly two thirds of its total foreign trade. Bulk of Nepal's China trade also is carried through Indian ports. Reason? Poor, in fact, inadequate connectivity between the two countries.

The main road link between China and Nepal is the 115- kilometre long Arniko Highway. It connects Kathmandu with the border town of Kodari and Tatopani on the Nepalese side and Zhangmu (also known as Khasa in Nyalam County) in Tibet. The road is dilapidated. It is landslide prone. Moreover, high mountain slopes and turbulent rivers make the highway one of the most dangerous in the world. Anyhow, the Arniko Highway is not in use these days. It is closed to traffic after the April 2015 earthquake triggered heavy landslides at many places.

This leaves Kathmandu- Kerung link as the only alternate route to reach Xigaste, the Tibetan trading centre but this second largest city of Tibet famous for Tashilunpo Monastery (seat of Panchen Lama until his death in 1989) is about 540 kms from the border outpost. Trading through this route is not cost effective as goods carriers take long days to complete their journey through the treacherous mountainous terrain.

Furthermore, the entire stretch from Kathmandu to Tatopani or Kathmandu to Kerung and beyond into Tibet is landslide prone which makes the connectivity projects prohibitively costly and unattractive. The Himalayan range is also in the active Eurasia seismographic zone where movement of tectonic plates cause the earth to tremble too frequently leading to large scale landslides.

Transport infrastructure is practically non-existent on the Nepalese side. Long distance from the border to the Chinese ports pushes up cost of transportation. No surprise the business community sees the TPT through their balance sheets, and has given no thumbs up.

During Prime Minister Oli's visit to China in June 2018, the two sides agreed to intensify cooperation under Belt and Road initiative (BRI) to enhance connectivity in all spheres - roads, railways, ports, aviation and communication. Nepal is a signatory of BRI.

China also agreed to open six border check points for Nepali traders to transit their goods to the four identified ports and three dry ports for their trade with third countries. These are: Rasuwagadhi, Tatopani, Korala, Kimanthaka, Yari and Olangchung Gola in different border districts. Opening a check post is easy. But creating infrastructure is not. It will take time and money. Without the basic facilities for transporters, particularly on the Nepalese side, the check points will remain unused despite all the hype TPT has generated.

China-Nepal railway corridor also falls more or less in the same idle class. China likes to describe the cross border railway connectivity agreement as 'the most significant initiative in the history of bilateral cooperation'. Beijing apparently sees the venture in monetary terms. Well, it is funding the feasibility study as also preparation of the DPR- detailed project for two rail links: Kerung-Rasuwagadhi-Kathmandu and Kathmandu-Pokhra-Lumbini. The rail projects would be a marvel of engineering workmanship in the scenic Himalayas, attracting tourists from all corners of the world.

Herculean task it would be to build the railway line along the high Himalayan peaks and steep slopes. Already a Chinese company has poured cold water on Kathmandu-Kerung rail project, says Kathmandu Post, a leading English daily. The company has conducted pre-feasibility studies. "Complicated geological terrain and laborious engineering workload will become the most significant obstacles to building the cross border railway line," its report said. In the light of such observations, people have started wondering whether the rail project would ever see the light of the day.

A prominent Nepali trader told me on the condition anonymity that the distance and the time taken for transit of cargo through Chinese ports would be prohibitive. "The nearest port among the four ports allowed by China to ferry Nepalese goods is about 3,000 kms from our border. Compare this Haldia (port in India) which is less than 1,000 kms (from India-Nepal border). Visakhapatnam (port) is also not very far off. It is about 1,400 kms. Both ports have all weather rail and road connectivity. What more we want", he said.

A former President of Nepal Freight and Forwarders Association Rajan Sharma also harps on the cost factor. According to him, the Chinese ports would only be additional ports for Nepal and would be used primarily whenever trade via India gets disturbed. Friendly terms and conditions will however encourage traders to look into prospects of third country trade via China, he opines.

There is no denying that China has been increasing its footprint in Nepal. Both government and private companies are vying for more and more infrastructure projects in the Himalayan nation. The Oli government has decided to allow Gezhouba Group Corporation resume work on the $2.5 billion 1200 MW Burhi Gandaki Hydro power project.

This contract was cancelled by Sher Bahadur Deuba government on the recommendations of a Parliamentary Committee for lack of transparency. How the revival happened? The Chinese company knocked at the Prime Minister's office (PMO) for a hearing, and was heard. It wrote a letter to the PMO bypassing the Energy Ministry. Out went the orders for Burhi Gandaki revival without international bidding. The move has drawn much flak from lawmakers though.

Nepal is also laying transmission lines to transport surplus power to China. This is a futuristic venture of sorts. Right now, Nepal is short of power and the deficit is met with imports from India. Only when all the ongoing and proposed hydro-power projects are completed can Nepal hope to become power surplus. And only when that stage is reached, the power transmission lines to China can be energised. So for the present, it is no more than power abracadabra.

India, which is the largest growth partner of Nepal, is also trying to do one up on China. In its own way, of course. The two visits by Prime Minister Narendra Modi to Nepal in recent months and the visits to India by Prime Minister K. P. Sharma Oli and the Co-chairman of the ruling Communist Party of Nepal Pushpa Kamal Dahal have helped to identify new areas of cooperation.

Undoubtedly increased participation of India and China in ventures Nepal will benefit the Himalayan nation. But Nepal will have to take care of the security concerns of its northern and southern giants while allowing their greater participation in its development process.

Published by HT Digital Content Services with permission from Asian Tribune.

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Publication:Asian Tribune (India)
Geographic Code:9INDI
Date:Oct 21, 2018
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