Nepal plans to build two cross-border economic zones on the border with India and two on the northern border with China as part of the effort to develop economic corridors that will link up with the two immediate neighbours.

Preliminary work has started for the construction of economic zones at Dodhara-Chandani in Kanchanpur and Jogbani in Morang that will connect with the economic corridors in India, said the Ministry of Industry, Commerce and Supplies.

On the northern border with China, the special economic zones will be located in Kimathanka in Sankhuwasabha and Korala in Mustang.

Construction work is expected to begin in the fiscal year 2021-22.

Industry Secretary Chandra Kumar Ghimire said that the construction of the cross-border economic zones would be initiated through mutual understanding with China and India to boost trade and investment.

“We have been holding talks with both countries, and hope the construction of these vital projects will begin from the next fiscal year,” Ghimire said.

According to the Trade and Export Promotion Centre, Nepal's total exports to China stood at Rs1.91 billion while imports amounted to Rs181.9 billion in the last fiscal year.

Nepal’s exports to India amounted to Rs70.11 billion in the last fiscal year, while imports from the southern neighbour were valued at Rs735.3 billion.

"The potential construction site in Korala has been identified, but we are still looking for an appropriate spot in Kimathanka," Ghimire said. “We have been holding talks with China on these issues.”

The available land in Kimathanka is small and narrow. But the proposed site in Korala looks feasible, officials said.

A possible building site has been identified in Dodhara-Chandani and Jogbani on the Nepal side of the border.

According to ministry officials, 500-600 bighas of land is available in Jogbani while the cross-border economic zone in Dodhara-Chandani will be built in the area where the dry port is expected to be constructed.

"Once the cross-border economic zones are constructed, they will attract investment for large and medium scale factories from domestic and international investors," Ghimire said. “It will create a tremendous number of jobs,” he added.

In November last year, a high-level delegation led by Industry Minister Lekh Raj Bhatta and Industry secretaries Chandra Kumar Ghimire and Baikuntha Aryal and technical team has conducted a field visit to Dodhara-Chandani to study the possibility of building a cross-border economic zone.

Nepal is setting its sights on Mumbai as a transit point for third country trade, and has started work to construct a dry port in Dodhara-Chandani on the western border with India which offers the shortest route to the sea.

The inland terminal will provide access to India’s largest seaport, Jawaharlal Nehru Port in Mumbai, and facilitate Nepal's foreign trade and lower costs, officials said. Dodhara-Chandani dry port will be the first business gateway to India from Nepal's far west.

The Intermodal Transport Development Committee under the Ministry of Industry, Commerce and Supplies has started exploring possible sites for the dry port at Mayapuri and ​​Gaurishankar community forests.

The manufacturing sector currently accounts for around 5 percent of Nepal's gross domestic product. “We expect that once the cross-border economic zones are developed, its contribution to the country’s GDP will double,” said Ghimire.

Large scale industrial development has lagged behind in the far western region, and the construction of the cross-border economic zone will help industrialisation in the province, insiders said.

According to ministry officials, jobs will be created in agriculture processing, herbal-based industries, forest-based industries and mine-based industries.

After the infrastructure comes online, it will pave the way for foreign trade and investment in the far west and allow it to connect externally, they said.

Nepal’s total foreign trade in the last fiscal year amounted to Rs1.29 trillion.

Among the country's 154 trade partners, India accounts for the largest share of exports and imports. In the last fiscal year, 62.22 percent of Nepal's total foreign trade was done with India.

China is Nepal's second largest trading partner. The northern neighbour accounts for 15.20 percent of Nepal's imports but only a small portion of its export trade.