19.03.2017 Author: Sofia Pale

The New Silk Road: a Wealth of Opportunities for Nepal

NEPAL_(f)_1220_-_Lavoratori_migrantiNepal is a small country in the Himalayas squeezed between India and China. These two Asian giants have long been vying for Nepal. Though, traditionally, India was considered Nepal’s key partner, lately China has been gaining foothold in this country.

Nepal is reportedly one of the poorest countries in the world. One of the retardants hindering the development of the Nepalese economy is its geographic isolation. Nepal is a landlocked country, with most of its territory located in the inhospitable Himalayan Mountains. Besides, Nepal shares borders only with two countries—India and China. Such a limited choice of trading partners holds back the development of trade. Another problem, the Great Himalayan range separates a large part of Nepal from China, de facto limiting the country’s choice of partner to India only. This is where almost all imported goods delivered to Nepal come from. The only way for the Nepalese goods to reach the outer world is through the Indian port of Calcutta. The volume of exports is, therefore, insufficient and the country’s ability to trade with other countries depends entirely on India’s goodwill.

It is a known fact that a limited number of trading partners has a negative impact on economy. To break away from its dependency on India, Nepal has been expanding its ties with China in the recent years. Today’s core objective is to create a Sino-Nepalese transport network. Meanwhile, to somewhat expand its network of contacts, Nepal has been engaging in cooperation with international organizations.

In March 2016, after the signing of a respective memo in Shanghai, Nepal became a Dialog Partner of the Shanghai Cooperation Organization (SCO). Nepali Prime Minister Khadga Prasad Sharma Oli was in attendance. Partnership with the SCO that unites India, Kazakhstan, Kyrgyzstan, China, Pakistan, Russia, Tajikistan and Uzbekistan is an important step toward the expansion of Nepal’s international relations.

After the signing of the memorandum, Khadga Prasad Sharma Oli and Chinese Premier of the State Council Li Keqiang held a meeting and signed a number of new cooperation documents. All the documents, to one degree or another, relate to the development of the Nepalese economy and transportation routes connecting the country to the outside world. One of the projects envisages the construction of a 450-kilometer railroad connecting the town of Xigaze in the Tibet Autonomous Region to the town of Gyirong near the Sino-Nepalese border by 2020. Chinese railroad will carry Nepalese goods to a Chinese seaport for further delivery to third countries. The Nepalese party has not announced its decision as to which Chinese port it is planning to use. China has also offered financial and technical assistance in the construction and development of a new international airport in the Nepalese city of Pokhara and committed to help Nepal in the exploration of its oil and gas fields. And, finally, China and Nepal have agreed to consider the establishment of a free trade area.

What’s more, Sino-Nepalese cooperation transcends the domain of economy. At the end of March 2016, media reported that China and Nepal are expanding their military cooperation. Defense departments of the two countries have agreed to exchange information, participate in joint disaster management projects and jointly prosecute separatists seeking to split Tibet from China.

In June 2016, China finally fulfilled its March promise and lent Nepal $216 million for the construction of an airport in Pokhara. Construction of the airport will be carried out by a Chinese company. The airport should begin its operation in 2020. Nepalese authorities has staked on the new airport in hope to increase the inflow of tourists.

In August 2016, Pushpa Kamal Dahal, leader of the Communist Party of Nepal, was elected new head of the Nepalese Government, which has also contributed to the development of mutual understanding between Nepal and China.

Though the railway bringing Nepal closer to the sea will launch its operation only in 2020, transport routes connecting Chana’s central regions with this distant country are already operating. In November 2016, the first cargo was delivered from Lanzhou (Gansu Province, China) to the Nepalese capital Kathmandu. Thus, a new Sino-Nepalese cargo service has launched its operation. The length of the route exceeds 2.5 thousand km.

Since the Chinese project the New Silk Road will eventually connect different Eurasian destinations, commissioning of the Sino-Nepalese railway service might turn a new page in the history of Nepal and be instrumental in relieving its isolation.

At the end of February 2017, the Nepal China Chamber of Commerce and Industry held its 14th annual conference in Kathmandu. The main topic discussed at the conference was the prospective participation of Nepal in the Chinese “One Belt, One Road” initiative. Speaking at the conference, Ambassador of China to Nepal Yu Hong said that China counted on Nepal’s support of the Chinese Silk Road Economic Belt and 21st Century Maritime Silk Route projects. She noted that China and Nepal were already making arrangements to sign a relevant memorandum of understanding. Yu Hong reminded that at least 100 states had already expressed their interest in the project, while more than 40 countries and international organizations had already acceded to it. She concluded her speech by saying that the Sino-Nepalese relations had great future, and that cooperation in the framework of the New Silk Road project would greatly enhance their bilateral cooperation.

Deputy Prime Minister of Nepal Krishna Bahadur Mahara said in his turn that his country was also looking to develop economic relations with China. He noted that the Nepalese Government was committed to boost the country’s investment appeal to attract more Chinese investors. When former Secretary of the Nepalese Government Purushottam Ojha took the floor, he said that participation in the “One Belt, One Road” initiative could be instrumental for the establishment of ties with the rest of the world for such inaccessible and partially isolated mountainous countries as Nepal and Bhutan. He also stressed the importance of development of a railway communication between Nepal and China and expressed his confidence that such development would inevitably happen if the countries commit themselves to cooperating in the framework of the New Silk Road project.

It is quite possible that enhanced economic and transport cooperation with China would help Nepalese economy to overcome its dependency on India. That, however, does not imply that Nepal intends to fully cease its cooperation with India. If fact, Nepal is planning to continue using the Indian port of Calcutta even after it gains access to the sea through a Chinese port. The country would benefit from a balanced relationship with both of its neighbors, which would be compelled to come up with more lucrative proposals as a result of healthy competition. As Nepali Ambassador to India noted in early March 2017 at the Forum “Nepal and India: Economic Development and Cooperation”, the fact that Nepal has two neighbors, China and India, might be very advantageous. This small mountainous country might act as a liaison between the two Asian economic giants facilitating the development of the entire region.

Sophia Pale, PhD, Research Fellow of the Center for South-East Asia, Australia and Oceania of the Institute of Oriental Studies of the Russian Academy of Sciences, exclusively for the online magazine “New Eastern Outlook.


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