Maina Dhital
E-Kantipur
July 17, 2015
Connecting China and India through Nepal could be tremendously beneficial for Nepal’s post-quake economy
JUL 17 – It looks as though the discussion on the much-awaited trilateral corridor between China and India via Nepal has finally moved forward. This was possible after the Indian foreign minister Sushma Swaraj and her Chinese counterpart Wang Yi held talks in Kathmandu on the sidelines of the International Conference on Nepal’s Reconstruction in June. Minister Yi also brought up this matter while meeting with Prime Minister Sushil Koirala. China and India have geared up to set up a feasibility study group for this economic corridor in which Nepal remains a crucial centerpiece.
The proposed China-Nepal-India corridor includes railway lines linking the three countries through Tibet, and a joint reconstruction project to rebuild Nepal in the aftermath of the devastating earthquake. Nepal, acting as a transit point, stands to benefit from the linking of these two giants. Further, this trilateral cooperation can also provide greater market access and bring in more investment to all the concerned parties. Infrastructure, trade and tourism sectors, among others, stand to benefit most from it.
Roads that connect
The main focus of the proposed trilateral corridor will be the development of railways and expressways. The potential to link China with India through Nepal exists, as Nepal already has two highways—Araniko highway and Syaphrubesi-Kerung—that connect with China.
China is further willing to repair and upgrade the Araniko Highway, which connects Kathmandu to the Chinese border town of Khasa. Araniko highway has traditionally been used as the main trading route to China. Nepal annually imports goods worth about Rs 20 billion from China through this highway. Currently, it takes about five hours to reach the Chinese border from Kathmandu. If the roads were widened, the travel time would be reduced significantly.
Similarly, China is in the process of developing railway lines from Lhasa to Khasa. The distance from Khasa and Kathmandu is about 123 kms, and Raxaul, an Indian border city is only 1100 km from Lhasa. This is not much of a distance for high speed trains. On the southern side, we already have access to broad-gauge railway service from Raxaul to Jogbani. Nepal should explore the potential of linking Khasa to Raxaul by train. This will allow Nepal to emerge as a key trade hub between India and China.
For that, Nepal needs to focus on the construction of a Kathmandu-Terai road. The economic viability of this road crucially depends on the creation of a second international airport at Nijgad; therefore, the construction of both projects needs to move forward simultaneously. Unfortunately, each successive government has only paid lip service to this project for the past decade. Even though the Nepal Army has opened up the track for the expressway, further construction has been stalled. Now that India has also expressed an interest in building a second international airport, the government needs to push these two projects forward as they are the cornerstones of the proposed corridor.
China has already expressed its interest in building railway lines through Tibet, connecting Nepal and India. The Chinese government plans to extend the Tibet Railway up to the Nepali border within the next five years. The line will be extended by 540 km from Xigaze to Kerung, 35 km away from the Nepali border. China has already urged Nepal to conduct a feasibility study for the extension of this line to Kathmandu and beyond. Additionally, the extension of the Beijing-Lhasa railway to Shigaste, a city close to the Nepali border, would add a new dimension in furthering economic relations.
Infrastructure development will boost the economic growth of Nepal, revitalising local economies along the highway. It also has the potential of creating employment along the highways through which vehicles would pass.
Gateway of trade
One of the direct benefits that Nepal can get from the bilateral trade between India and China is revenue generation through custom duties and taxes. Nepal should aim to be a ‘trade gateway’ for both countries.
Of late, China has become India’s largest trading partner and India is the seventh largest export destination of China. Bilateral trade between the two has already increased from under $3 billion in 2000 to $100 billion in 2015. The trade volume between India and China could hit a trillion dollar mark in a few decades. If Nepal could tap into even a small percentage of this trade volume, then it would do wonders for the Nepali exchequer. Chinese companies primarily export electronic hardware and construction machinery to India, whereas Indian companies export items such as steel, iron and cotton to China. Most of these items are currently being transported via shipping routes, as they are bulky in nature. If Nepal can connect China and India through railways and highways, more goods can be transported via Nepal.
Revitalising tourism
Once Nepal focuses on building the required infrastructure to link the two countries, it can attract foreign investment in its tourism sector, which will ultimately generate more employment and income. As of now, Nepal is far behind in capital investments in the travel and tourism sector. According to the 2013 Travel and Tourism Economic Impact Report, the total contribution of the travel and tourism sector to the national economy was $1.6 billion, comprising 8.2 percent of the GDP.
India and China are the two major sources of Nepal’s tourists. In recent years, the number of Chinese tourists visiting Nepal has increased significantly. Nepal received almost 71,000 tourists from China in 2014, second only to tourists coming in from India. Most of the Chinese tourists who visit Tibet want to visit Nepal as well. It is expected that around 100 million tourists from China and 50 million from India will travel abroad by 2020. If we could attract even one percent of these tourists from China and India, we would have 1,000,000 tourists from China and 500,000 from India. The trilateral corridor has the potential to spur the growth of tourism in Nepal in an unprecedented way.
Nepal has a comparative advantage in the tourism, agriculture, water and human resource sectors, which can be exploited to foster economic growth. The trilateral corridor will help Nepal attract new investments, manufacturing plants and businesses, by allowing easy access to the huge markets on both sides of the country. This vision for Nepal is realistic, since both India and China stand to gain tremendously through bilateral trade, and will look at this prospect favourably.
This corridor will eventually expedite the rebuilding of Nepal in the aftermath of the earthquake. Nepal, however, needs to convince both its neighbours that the trade routes will be free of obstacles and red-tapism. A trilateral corridor truly has the potential to emerge as a win-win scenario for all parties concerned.
