Nepal’s transit deal with China makes no headway even after five yearsAgreement to allow Nepal access to seven Chinese sea and land ports for third-country trade remains idle because of Kathmandu’s failure to push for its implementation.
In May 2016, KP Sharma Oli, who was appointed prime minister in October 2015 following the promulgation of the constitution, signed a landmark Transit and Transportation Agreement with China.
The deal came on the heels of a months-long border blockade imposed by New Delhi in response to the adoption of the constitution by Nepal. The hardships created by the Indian border blockade pushed Nepal to find ways to diversify its trade and transit options with other countries.
In April, 2019, a little over a year after Oli returned to power, Nepal and China signed the protocol on implementing the Trade and Transit Agreement, which meant Nepal could use seven Chinese sea and land ports for third-country trade.
Oli received accolades for turning north to break Nepal’s near-complete dependency on the southern neighbour for third-country trade.
It’s more than five years since the agreement was signed and over two years since the protocol was signed, but Nepal and China have yet to develop even the standard operating procedure (SOP) on implementing the transit agreement.
Experts and former officials who were part of negotiations to complete the agreement said the government failed to accord the required priority to implement the agreement.
“Nepal has yet to receive a single consignment from any third country via China under the agreement that the government signed five years ago,” said Purushottam Ojha, a former commerce and industry secretary. “It looks like the government wanted to show India that Nepal also has a transit agreement with China.”
The signing of the protocol meant Nepal could use four Chinese sea ports in Tianjin, Shenzhen, Lianyungang and Zhanjiang, and three land ports in Lanzhou, Lhasa and Shigatse for third-country imports. The agreement also allowed Nepal to carry out exports through six dedicated transit points between Nepal and China.
For decades, Nepal has completely relied on India for its third-country trade, for various reasons including historical relationship, open border and road infrastructure. But they sometimes have become an irritant for Nepal, as any obstructions along the border would lead to a lack of goods in Nepal.
Multiple officials with a good understanding of the China transit issue told the Post that Nepal is not yet clear about how to utilise the transit facility provided by Beijing.
“Nepali authorities do not even know whether the facility provided by China is in our interest,” said a senior Ministry of Foreign Affairs official who did not wish to be named. “And no one here knows how to make the most of the facility if it indeed is in Nepal’s larger interest.”
According to the official, the Covid-19 pandemic also created hurdles in implementing the transit agreement with China.
Around eight months after Nepal and China signed the protocol on the Transit and Transport Agreement, the coronavirus emerged in the Wuhan city of China in late 2019. The virus subsequently spread to the rest of the world.
Nepal too, like any other country, came under the grip of the pandemic, but it also saw political upheavals. Political uncertainty has continued and by now the Nepal Communist Party (NCP)—Beijing was said to have heavily invested in its formation—has fallen apart.
Oli, who won the election on an ultranationalist plank, criticising India for the border blockade, has made rapprochement with New Delhi. His inclination towards the north has not been as strong as it used to be.
Ever since the pandemic began, even bilateral trade between Nepal and China has tapered off. On April 20 last year, the Chinese side agreed to open the Tatopani-Khasa border, initially to hand over medicines and medical equipment for the Covid-19 pandemic. But cargo movements were negligible. Meanwhile, on the pretext of Covid-19, the Chinese side stopped sending cargoes through the Rasuwagadhi-Kerung customs point as well.
Prakash Karki, former president of Freight Forwarders Association of Nepal, told the Post that trade with China has sharply dipped in the last one and a half years and only one border point, Rasuwagadhi-Kerung, is in operation.
“Sometimes our government does not show interest, and at other times, the Chinese government is reluctant. As a result business with China is suffering,” Karki told the Post. “There has not been any big cargo movement through the Rasuwagadhi-Kerung point in the last one and a half years so we are routing our trade via Kolkata [India].”
Many say third-country trade via China now is becoming a pipedream when bilateral trade from the north has been hit hard.
Experts say a strong political will is a must to implement such agreements.
“From our side also we have not been able to make a push for the implementation of the agreement,” said Tanka Karki, who served as Nepal’s ambassador to Beijing from 2007 to 2011.
Karki believes that the Nepal side is “under some kind of pressure” not to translate the agreement into action.
“Why are these agreements with China not moving forward? Who is slowing them down?” said Kari. “Our foreign policy is based on the standing of national strategic autonomy, but why is there a Cold War-like mentality? Why are we paying heed to others’ interests?”
Officials who were actively engaged in negotiations with the Chinese side in materialising the signing of the Trade and Transport Agreement say the sluggish development in the five years is disheartening.
Rabi Saiju, a former joint-secretary, is one of those officials to have held a series of negotiations with Chinese officials.
“The first half of the total initial life of the agreement has elapsed without a single consignment arriving in Nepal from any third country,” Saiju told the Post. “I wonder if the agreement will expire without its practical implementation. It, however, can be extended for five years again after the expiry.”
According to Saiju, even five years after the agreement, there is no clarity on how Nepal could bring in goods from third countries via China.
“While the government could not make a push for the operationalisation of the agreement, it also failed to boost the confidence of the private sector which is wary of trade via north and finds it easier to do business from and via south,” said Saiju.
“It’s a shame that we have failed to develop even the standard operating procedure of the protocol. Without this, logistic and administrative issues like documentation, price, timing, customs and matters related to local transportation cannot be determined.”
Saiju believes such agreements should not be made a tool for political gains by those in power.
Ojha, the former commerce and industry secretary, said no one knows how this agreement can really be implemented.
“The government should have made a push for bringing in at least some Nepal-bound cargoes from Japan and South Korea via China,” said Ojha. “That would have given some idea regarding the cost, time and process to our traders about conducting third-country trade via China. An agreement is not everything, what matters is its proper implementation.”