China lets Nepal down

Six years down the line from Kathmandu signing with Beijing a Transport
and Transit Agreement and two years after the signing of the protocol on
implementation of the agreement, the treaty has turned into a non-starter.
Businessmen in Nepal have been left with only protesting against China
at the two main trading points on the Nepal – China border —
Rasuwagadhi and Tatopani —- accusing Beijing of imposing an unofficial
blockade as container trucks loaded with importable consumer items have
not been allowed to cross the border into Nepal, according to reports from
Kathmandu. To harass Nepalese traders, Chinese transporters have even
increased freight charges over four times along the nearly 25 km stretch
between the Chinese border point and the Nepalese border. The reasons
for this Chinese betrayal of Nepal remain undisclosed, but traders from
Nepal asking the Chinese authorities to abide by the international
agreement and allow the smooth movement of containers from China to
Nepal has been of no avail. In effect, China has imposed an undeclared
blockade on Nepal.
The signing of the protocol meant that Nepal could use four Chinese sea
ports – Tianjin, Shenzhen, Lianyungang and Zhanjiang — and three land
ports — Lanzhou, Lhasa and Shigatse — for imports from third countries.
The agreement also allowed Nepal to carry out exports through six
dedicated transit points between Nepal and China. Kathmandu Post
quotes former commerce and industry secretary of Nepal Purushottam
Ojha in 2021: “Nepal is yet to receive a single consignment from any third
country via China under the agreement that the government signed five
years ago.” Only one border trade point through Rasuwagadhi — Kerung
is operational and there too trade has dipped sharply.” Former president
of Freight Forwarders Association of Nepal Prakash Karki says traders in
Nepal are routing their trade through the Indian port of Kolkata.
Nepal had signed the Transport and Transit Agreement with China
following the disruptions in movement of trade in its southern border with
India in the wake of the Madhesi agitation in 2015, but five years down the
line the realization has dawned in Kathmandu that it is far easier to do
business with India in the south than with China in the north. In fact, the
experience of Nepal in doing business with China has been pathetic.
Distinguished journalist of Nepal Hari Bansh Jha quotes the Industry and
Commerce Minister in K. P. Sharma Oli’s cabinet Lekh Raj Bhatia who
says that it is time for Kathmandu to rethink if they need to conduct trade
with China at all. In the festive season of October – November 2020, China
stopped the entry to Nepal of nearly 2,000 containers with clothes, shoes,
cosmetics, electronics and industrial raw material, making the excuse of
the pandemic. Nepal National Traders’ Federation president Naresh
Katuwal has said that in 2021 Nepalese traders did not place any order
for the import of new summer goods through China as the Chinese
authorities did not issue visas to Nepalese traders. Even some
businessmen importing Chinese goods have rerouted their imports
through the Kolkata Port, though this route is much longer and the
transportation costs are much higher.
The real reason for the Chinese ire against its poor neighbour has not
been spelled out by Beijing, but it is not difficult to hazard a guess. China
has started creating difficulties with Nepal ever since the pro – Beijing K.
P. Sharma Oli government in Kathmandu has got into difficulties, leading
ultimately to its ouster. China had invested much for the success of the
Nepal Communist Party that was formed from the merger of Sharma Oli’s
Communist Party of Nepal (Unified Marxist Leninist) and Prachanda’s
Communist Party of Nepal (Maoist Centre), but the Oli government
collapsed when Prachanda pulled the rugs from under its feet. This led to
the pro – India Nepali Congress forming the government in Nepal in July
2021 with Sher Bahadur Deuba as the Prime Minister.
According to a report in the Sunday Guardian, China’s promotion of the
Maoist movement in Nepal was a part of its grandiose plan to bring Nepal
under its own sphere of influence, weakening Indian influence in Nepal
and ultimately to target India. There was a major hidden Chinese hand
behind the Maoist movement in Nepal and Beijing used to propagate the
view that for Maoism to thrive in the region India must be defeated. Now
that the realization has dawned on Beijing that India is Nepal’s historical,
spiritual and economic partner since ages and India – Nepal relationship
cannot be replaced by any partnership, it may be out to teach Kathmandu
a lesson.
Another lesson Nepal has come to learn the hard way in recent months is
that the ‘Made in China’ brand really stands for substandard cheap
products that do not last long and are not worth the price. Nepal Airlines
have lately grounded six aircraft made in China as it is unaffordable to fly
them. Now they have decided to lease the aircraft out or to sell them
outright, provided there is a buyer. The Chinese aircraft are substandard
equipment that require heavy maintenance. In total, there were two MA60
and four Y12E aircraft. One each of the two varieties had been given by
China to Nepal as a grant. Nepal purchased the four others from China.
The deal involved a loan of 3.72 billion in Nepalese currency for the
purchase of the aircraft. One Y12E type was lost in an accident in 2018.
On March 28, the Y12E aircraft landed about 60 metres short of the
runway at Nepalgunj airport and skidded before halting on the nearby
grassland. Luckily, the passengers and crew members were evacuated
safely. The aircraft had lost power in one engine and could not make a
smooth landing with the other engine. Nepal Airlines have repeatedly
complained that the aircraft were sustaining heavy losses. Interestingly,
experts from Bangladesh had earlier rejected an offer from China for the
sale of these aircraft after examining them. China had tempted Nepal with
the offer that it would get two aircraft for free if it purchased the four others.
China’s pet project in Nepal, the Belt and Road Initiative (BRI), has also
run into difficulties. Nepal signed the BRI agreement with China in 2017
but five years down the line no BRI project is yet to take off. What is worse,
the infrastructure building project of the USA under Millennium Challenge
Corporation (MCC) is now poised to upstage the BRI in Nepal. “Projects
that are a part of China’s Belt and Road Initiative and other investments
across Nepal are facing serious resistance from the local population.
Many believe that the Chinese lucrative promises of infrastructure
development are now harming the Himalayan kingdom,” writes
Kathmandu Post. Nepal has learnt from Africa where many countries have
cancelled contracts for Chinese projects. “BRI may lead to a debt trap
which Kathmandu cannot withstand.”
Nepal has been prudent enough to take into consideration other possible
reservations against BRI. Kathmandu Post quotes former Deputy Prime
Minister of Nepal Rajendra Mahto: “How will it impact our national and
international relations? How will it impact India, our neighbour’s
sentiments with whom Nepal shares an 1,800-km long border? We need
to give special emphasis that Nepalese land should not be used against
anyone before deciding on the BRI project.” Among the stalled BRI
projects are the Budhi Gandaki hydro project that would affect 40,000
people and two railway projects, the Kerung – Kathmandu railway line and
a railway line from Sagarmatha to Kathmandu through a tunnel. These
would degrade the environment in the fragile Himalayan region.
The history of U. S. developmental assistance to Nepal is a long one. It
goes back to 1951 when the USA supported Nepal with its Point Four
Program. USAID has been the traditional developmental assistance arm
of the U. S. to Nepal. Now the MCC Compact Agreement with an
assistance component of $500 million that was signed in September 2017
is awaiting ratification of the National Assembly of Nepal. The MCC
projects include the construction of about 300 kms of electricity
transmission lines and maintenance of 300 kms of roads. Now at the end
of 2021 the Nepal government has formally started discussions on
accepting the grant of $500 million. “The preliminary discussion on MCC
has advanced positively,” Information Minister of Nepal Gyanendra
Bahadur Karki is quoted to have said. Prime Minister of Nepal Sher
Bahadur Deuba has decided to forward the grant project. Even Maoist
leader Prachanda is favourably disposed to the U. S. offer. “We should
gladly accept the assistance that comes in the form of grants for the
construction of our physical infrastructure,” he is quoted to have said.