Wedged between India and China, Nepal’s economic dependence with India was unprecedented. Historically, we were dependent on our southern neighbor for the supply of essential goods as well as used its ports for trade with another country. But such excessive reliance on only one country cost us dear when in 2015, India imposed a blockade holding an entire country hostage.
Learning lessons from the bitter experience, two years after signing the watershed Transit and Transportation Agreement, Nepal and China have agreed on the text of the protocol to the agreement that will allow Nepali traders and businessmen to use Chinese sea and land ports for third country trade. This is definitely a welcome move as it ends the age-old dependence on India for overland trade and opens up new avenues to advance the economic interests of the country.
Overland trade to and from Nepal is mainly routed through the Haldia port in Kolkata which is 1000 km away from Nepal’s border. The transit agreement with China has provided Nepal an alternative to use the next nearest Tianjin port in China which is 3,000 km away. Beside Tianjin, the agreement allows the transit of goods from three other Chinese seaports in Shenzhen, Lianygang, and Zhanziang and dryports in Lhanzin, Lhasa, and Shigatse.
Earlier, limited entry ports had caused a supply side constraint. Access via different ports will open up new avenues that could unleash our export potentials. Even the Nathu La Pass, which holds much significance in terms of border trade, will help Nepal reach the ever-burgeoning middle class in India, Bangladesh, and Bhutan. Experts also say that cargo from Japan, South Korea, and Asian countries could be routed through China, helping cut shipping time and costs.
Additionally, with the agreement, one side of our border that had been completely dysfunctional until now has been revived. The agreement, if accompanied by the rail project with China, will have the potential to create new dynamics in South Asia. For example, if the Kerung road connecting Nepal’s Rasuwagadhi reaches up to Lumbini, the Kerung border crossing could be used in future by India, Bangladesh, Sri Lanka, and Bhutan to trade with China.
Mainstream media and public intellectuals rightly seem positive about the new development but it is not without its difficulties. Lack of proper roads and customs infrastructure on the Nepali side of the border is cause for concern. The fact that the nearest port is located more than 2,600 km from the border is another issue. Considering these factors, the benefits of this trade and transit agreement might not seem feasible right away, but it could very
well herald a new beginning in Nepal’s trade and economic enhancement. But for that, Nepal must up its game and maintain the roads and customs infrastructure. And the railway, it has to come hurtling down from Kerung—preferably at top speed.