The billion-rupee question following Prime Minister KP Sharma Oli's state visit to China is: Is trade through China viable for Nepal? Won't it cost us a lot less to use India as transit?
Commerce Secretary Naindra Prasad Upadhaya, a member of the official delegation to China under PM Oli, shared his thoughts with Mahabir Paudyal and Rudra Pangeni.
A country adopts every measure to minimize the cost of doing business and facilitate and diversify its trade and transport routes to ensure competitiveness of its goods in the international market. A country seeks to overcome and minimize all tariff, para-tariff and non-tariff barriers to make its products competitive and enhance trade and development.
Member countries of World Trade Organization work through a number of mechanisms for regional and sub-regional connectivity as well. We are doing the same. For example, only last month we had an agreement with India to use an additional port, apart from the Kolkata port we had been using. China is a huge market for Nepali goods as well as a big source of investment. As a country that lies between two huge markets, it is imperative for Nepal to capitalize on the opportunities of trade and investment.
We had been requesting the Chinese side for easy access of Nepali tradable items in Chinese markets for a long time. The government of China had unilaterally announced preferential market access to LDCs as well. This however did not cover all goods Nepal exports.
Nepal sought transport access to benefit from sound infrastructure of China. The Chinese side agreed to it and hence the transit and transport agreement.
The nearest Chinese port is 3,000 kilometers from Nepal-China border, compared to less than 1,000 kilometers to Kolkata. Nepal has no good roads to China either. In this case how will the new treaty benefit Nepal?
You have to understand that this is a framework agreement. It has opened ways for us to explore which Chinese port is more viable to Nepal, and which modalities are to be adopted to use this access. Modalities and technicalities are yet to be discussed and resolved.
The issue of distance is often raised in Nepal. When we had a deal with India for Vishakhapatnam port last month, many said it is less feasible than Kolkata. In a way such concerns are valid. But traders will use the route they find cost-effective, accessible and efficient. If Kolkata is more efficient for them they do not have go all the way to Vishakhapatnam. If tomorrow they find Vishakhapatnam is more efficient than Kolkata, they will surely shift. In either case, there is more to gain than to lose. Having more ports to trade from is good for the country. We explored Vishakhapatnam as Kolkata alone is not being able to sustain the big flow of goods. Just like seeking access to Vishakhapatnam was an act of Nepal exploring every possible option for its trade facilitation, it is the same with Nepal seeking transit through China.
Supposing that Chinese railway comes to Kerung by 2020, how will that impact our trade with China?
More than distance we should look into matters of cost-effectiveness and efficiency while doing business. Business people choose do business through transit points that are cost-effective, efficient and nearer. It is up to the market to decide which point to use for business. The state's job is to facilitate and provide as many options as possible.
Even so how will doing business through China be viable for Nepal?
Have you calculated how soon goods travel from Chinese gateway ports to Lhasa? Transportation of goods from gateway ports to Lhasa is happening because it is cost effective. The Nepal-China agreement has helped create a predictable environment for foreign investment and trade in Nepal. By opening additional transit routes, the country has boosted confidence of investors and business people both in and outside the country. As I said we are yet to finalize operation modalities and technicalities of the framework agreement. Officials of two countries are yet to sit together and work this out. It would be a mistake to look at opening of additional transit routes only in terms of nearness and farness.
Some people say that China was not keen on this deal and that it agreed to it as it didn't want to let Nepal down.
That's a simplistic reading. How can you argue after the deal has been signed that one of the parties to it was not really keen on it? Like I said, any country explores every possible measure and clears every possible barrier for international trade and import and export diversification. In the process, they build infrastructures, ease transportation or open more transit routes to facilitate trade and boost confidence of business people. In this context, transit and transport agreement with China is an achievement for Nepal.
Nothing was mentioned regarding resumption of Khasa border in the joint communiqué.
This is something you should ask foreign ministry officials. But so far as I can tell, the issue had been discussed, and been given high priority. We will now work towards early resumption and upgrade of Kathmandu-Tatopani road. Nepal has requested China to expand Arniko Highway to two lanes and the Chinese side has assured to us that it will take up the issue with utmost priority.
Some criticize this treaty as tokenism. How do you respond?
The transit deal with China is something natural. We should not be overexcited about it. But nor should we be pessimistic. It will take time to build infrastructure on Nepali side so as to connect with China. That part is there. But also do not forget that in a few years there will be greater connectivity with China. Now imagine the benefits Nepal gets once this happens. We should not expect results overnight. As I said, transit agreement with China is part of our initiative to expand Nepal's trade. With the agreement, Nepal has added one more transit route for trade promotion and facilitation.
Would this agreement have been possible without the Indian economic blockade?
That is an irrelevant question. The Trade Facilitation Agreement of WTO encourages every signatory country to adopt measures to facilitate trade for its development. In fact, this is the priority agenda of each and every country. Nepal is no different.
How hopeful are you about foreign investment coming into Nepal?
We need investment friendly environment to attract investors. We also need certain infrastructures. Policy-wise, we have become more open to foreign investment. But foreign investors are concerned about our energy crisis and labor problems. We are in the process of gradually solving these problems. So there is room for optimism regarding foreign investment because we have the most liberal and open business policy in the whole of South Asia. Nepal as such has the most conducive environment for doing business. All that we need to do is provide basic facilities that all investors seek. The government has prepared policy measures for this. So I expect more foreign investment in Nepal in the days to come.
Nepali traders do not seem excited about doing more business with China.
Like I said the business community opts for the route that is near, easy and cost-effective. This is not something we should be worried about. If business people see greater benefits in trade through Chinese routes, language and other barriers are secondary. They will even learn the requisite language.