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HomeOpinionNepal must become self-dependent. China’s undeclared trade blockade hurts Kathmandu

Nepal must become self-dependent. China’s undeclared trade blockade hurts Kathmandu

During the festive season, nearly 2,000 containers with clothes, shoes, cosmetics, electronics and industrial raw materials were stopped from entering Nepal.

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Nepalese businessmen have protested against China both at Rasuwagadhi and Tatopani checkpoints at the Nepal-China border. They even accused China of imposing an unofficial blockade as container trucks loaded with importable consumer items have not been permitted to cross the Nepal-China border into Nepal. To harass Nepalese traders, the Chinese transporters even increased freight charges along the nearly 26 km stretch between the Chinese border point and the Nepalese border from RMB 15,000-16,000 to 60,000-65,000. The Nepalese traders have talked to the Chinese authorities on these issues, but there has been no positive outcome.

During the protests, they asked China to ensure smooth movement of containers from China to Nepal and to also abide by international trade laws and transit agreements. They also asked for China take the initiative to end the undeclared blockade.

Echoing the sentiments of the businessmen, Lekh Raj Bhatta, incumbent Minister for Industry, Commerce and Supplies in Prime Minister K.P. Sharma Oli’s cabinet, expressed his dissatisfaction with the Chinese behaviour on trade with Nepal and slammed Beijing for its move to block trade with Nepal for over a year over one pretext or the other. He also said that the time had come for Kathmandu to re-think if they needed to conduct trade with China at all.

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Ever since the establishment of diplomatic relations between Nepal and China on 1 August 1955, there was hardly any occasion in which any government body in Nepal could speak up against China, though there had been ups and downs in the relations between the two countries on different issues. Presently, there are nine trading routes between Nepal and China, including Hilsa, Nagcha, Ko Rala, Gorkha Larka, Rasuwagadhi, Tatopani, Lamabagar, Kimathanka, and Olangchung Gola; of which Rasuwagadhi and Tatopani are most crucial. It is these two crucial border points that have been closed since January 2020.

During the festive season in October-November, nearly 2,000 containers with clothes, shoes, cosmetics, electronics and industrial raw materials were stopped from entering Nepal. Using the excuse of COVID-19 prevention, China allowed only four to five truckloads of goods each day from each of the two key border points — Tatopani and Rasuwagadhi — to enter Nepal. On average, this meant only five per cent of the normal cargo entered Nepal each day.

Naresh Katuwal, president of the Nepal National Traders’ Federation has revealed that Nepalese traders have not placed an order for the import of new summer goods this year because the Chinese authorities have not shown any eagerness to issue visas to the traders. Also, reports say that several businessmen importing Chinese consumer goods through land routes have had no option left but to reroute their goods through India’s port at Kolkata, because of the lack of initiative on the part of the Chinese authorities to reopen the country’s northern border with China.

Now, nearly 70 per cent of the traders in Nepal have started using Indian seaports as alternative transit points to import goods from China. However, because of the long route, the transportation costs of importing Chinese goods through Indian seaports have escalated enormously. The costs in importing goods from China through Indian seaports has increased costs by NRs 1.2 million per container. Earlier, it used to take only two weeks for container trucks to reach Nepal through the northern land border with China, but it now takes nearly two months for Chinese goods to reach Nepal when imported through Indian ports.

The closure of the border has not only caused loss to the traders but also the government. Nepal received only around 15 per cent of its annual targeted amount of NRs 11 billion through the Rasuwagadhi Customs Office and NRs 400 million from the annual targeted amount NRs 5.47 billion from the Tatopani Custom Office.

It is not known why Nepalese businessmen are being made to suffer in their trade with China when relations between the Communist Parties of the two countries are harmonious. Nepal adheres to the “One China” policy and also signed China’s Belt and Road Initiative (BRI) for different infrastructure projects when Maoist leader Pushpa Kamal Dahal was the Prime Minister in 2017. In 2016, China allowed Nepal to have access to three dry ports (Lanzhou, Lhasa, and Xigatse), apart from the four seaports including Tianjin, Shenzhen, Lianyungang, and Zhanjiang in China.

China, of late, has emerged as the largest source of FDI in Nepal. The inflow of tourists from China to Nepal has been growing exponentially. While the number of Chinese tourists visiting Nepal in 2003 was only 7,562, it jumped to 169,543 in 2019. Besides, trade is favourable to China rather than to Nepal. China’s share in Nepal’s total exports accounts for only 1.2 per cent; while its share in Nepal’s total trade exceeds 15 per cent.

In recent years, the smuggling of unauthorised goods such as animal products, gold and red sandalwood have figured prominently between Nepal and China. Also, cybercrimes, bank fraud, and human trafficking are other issues of concern.

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The closure of the Nepal-China border by the Chinese authorities for over a year has created enormous difficulties for the Nepalese. It is unlikely that the Chinese authorities are unaware of this reality. But the indifferent attitude of the Chinese towards these problems of Nepal hints at the presence of a misunderstanding in the relations between the two countries. The government of Nepal could start a dialogue with the Chinese authorities at the diplomatic level to address these issues. However, far more important would be for Nepal to give a thrust to import-substituting industries as part of its efforts to become self-dependent. Launching the “swadeshi” movement vigorously and changing plans and policies to move in this direction is the need of the hour, as this could substantially reduce Nepal’s dependence on China for the import of consumer goods. Also, this might prove to be a blessing in disguise for Nepal’s potential to generate income, employment opportunities and wealth.

Hari Bansh Jha is a Visiting Fellow at ORF. Formerly a professor of economics at Nepal’s Tribhuvan University, Hari Bansh’s areas of interest include, Nepal-China-India strategic affairs, border issues, conflict and peace, international migration, child labour, human trafficking, among others. Views are personal.

The article first appeared on the Observer Research Foundation website.

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