The Belt and Road Initiative and Sustainable Industrial Growth of Nepal
Sudan Kumar Oli
Introduction:
The Belt and Road Initiative (BRI) is a potentially transformational geopolitical development initiative, introduced by China, which encompasses 65 countries, accounting for roughly 32 percent of global GDP, 39 percent of global merchandize trade, and 63 percent of the world’s population (Huang, 2017). Kohli (2018) defines that The Belt and Road Initiative as the Silk Road Economic Belt (SREB) and the twenty-first century Maritime Silk Road (MSR), which leads a geopolitical initiative. The initiative seeks to develop a wide network of connectivity and cooperation spanning the entire Eurasian land mass and parts of Africa, including Central Asia, Southeast Asia, South Asia, the Middle East, Europe, and North and East Africa.
Kawoju (2018) stated that the underdeveloped and undeveloped countries want support based on mutual benefits rather than interferences on the guise of support. However, western countries practiced such policy of invasion in the name of support and BRI is accepted by almost whole world as the mutual beneficial program by the whole world. China through the BRI project wants to develop the whole world in equal ground. Unequal development is the major source of war and worries. Therefore, BRI is the farsighted project to eradicate war and establish sustainable economic growth and peace throughout the world. Development and prosperity in the world should not limited to the narrow material construction, rather development is equal opportunity and right of life to all human being in safe environment and it is a step ahead for this model of development based on humanity with shared destiny.
The magnitude of investments anticipated under the BRI is massive. According to the Chinese government, US$890 billion worth of investments have already been disbursed under the BRI umbrella, with an expected total Chinese investment of US$4 trillion over the course of the initiative (The Economist, 2016). These are order of magnitude numbers, however, as no official list of BRI projects has been released. Chinese authorities are actively encouraging for providing direct financing to BRI projects and related activities by international institutions including the IMF, World Bank and OECD and private sector such as Deutsche Bank and HSBC (Kohli, 2018). Politically and economically, China seeks to increase cooperation and engagement with its neighbors and regional influence through greater connectivity and trade. China’s economic engagement with Southeast Asia in the past decade has been higher than with any other developing countries.
The BRI project has focused on five major thematic areas such as Policy coordination, facilities to connectivity, trade and investment, financial integration and cultural exchange to promote people to people bond and cooperation. The BRI has covered across the world;
- China- Central Asia-Russia-Europe
- China–Central Asia-West Asia-Persian Gulf- Mediterranean sea
- China-South Asia- Indian Ocean
- South China sea- Southeast Asia-Indian Ocean- Europe
- South China-South Pacific
Figure 1 Primary Broad Route of BRI
BRI and Nepal:
Nepal has signed BRI project as an official partner to connect Nepal with BRI linked regions. From historical point of view India is the converging point of Maritime Silk Road (MSR) and the ancient land based Silk Road and China and India have traded and interacted extensively via Nepal. Nepal is mostly a mountainous country with complicated and challenging geography. Economic backwardness, political instability, complicated social structure and corrupt lethargic bureaucracy have been the major obstacles to overcome this challenge. BRI as the mega project to connect the whole world appears as a beam of hope for the Nepalese people (Kawoju, 2018).
China has been taking as the great values of its friendship with Nepal. OBOR project could be the opportunity to Nepal for developing great land and maritime connectivity with entire world and reduced its dependency with India. China and Nepal have agreed on joint development of Nepal-China Silk Road Economic Belt. This includes development of rail network from Tibet to Kathmandu and Kathmandu to Patna, India. From the road connectivity Nepal will be the common point of business between China and India.
China Nepal Trade:
The high Himalayan range in Nepal’s north has always countered as a natural barrier prompting the country to trade more across its flat boarder with India. Due to dependency with India, Nepal faced trade obstacle time and again. Therefore, Nepal has to explore alternative and tackle the challenges by developing new trade route and trade relation. Business with China has been booming in recent years through the trade balance is largely tilted towards China. According to the statistics report of Trade and Export Promotion Centre (TEPC), growth rate in Nepal’s trade with China has outpaced that with India.
Table 1: Foreign Trade Composition of Nepal
Year
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
Export
India
65.90
63.50
65.50
66.40
68.70
67.00
65.10
64.50
55.80
56.80
China
1.6
3.1
2.2
1.4
1.7
3.3
3.6
3
3.5
2.8
Other
32.5
33.4
32.3
32.2
29.6
29.7
31.3
32.5
40.7
40.4
Total
100
100
100
100
100
100
100
100
100
100
Imports
India
60.1
56.7
57
65.2
64.5
66.2
66.7
63.7
62.4
65.5
China
9.9
11.9
11.6
11.7
10.7
11.4
10.9
12.9
15.1
13.5
Others
30
31.4
31.4
23.1
24.8
22.4
22.4
23.4
22.5
21
Total
100
100
100
100
100
100
100
100
100
100
Trade Deficit
India
58
54.4
55.4
64.9
63.8
66.09
66.97
63.65
63.08
66.2
China
12.4
15
13.4
13.8
12.2
12.58
11.95
14.11
16.3
14.4
Others
29.6
30.6
31.2
21.3
24
21.33
21.08
22.24
20.62
19.4
Total
100
100
100
100
100
100
100
100
100
100
Table 1 explains the foreign trade composition of Nepal over a decade from FY 2007/08 to FY 2016/17, China-Nepal Trade has been increasing. In FY 2007/08 there was only 1.6 percent share of export from Nepal whereas it is increased to 2.8 percent in FY 2016/17. It implies that there is positively changing in export market of Nepal with China over a decade. Likewise, import of products from china has been increasing from 9.9 percent in FY 2007/08 to 13.5 percent in FY 2016/17. These data indicates that the share of Nepal’s foreign trade is increasing over a decade. Due to high growth rate in import comparison to export, the trade deficit of Nepal with China has been increasing. Which also explain with the figure2.
Figure 2.Trade deficit status of Nepal.
Nepal and China trade has some physical barrier including high Himalayan ranges, poor road condition, and unsuitable means of transportations. Due to such physical barrier Nepal China trade is in high deficit. Nepal does is not able to promote its products to Chinese markets as it can.
BRI and Industrialization
Nepalese economy is open dependent economy. According to World Bank report, import of Nepal is 42.02 percent of total GDP in 2017. This indicates that Nepalese economy is depending on import markets. The major reason behind that is land locked country. Nepalese industries are depending on Indian market for raw material and other accessories. Chinese market is far away due to high difficult road transportation.
Nepal signed BRI project and accepted the proposal for world connectivity via road network. There are multiple benefits to connect with world second largest economy in the world. Experts roundly believe that Nepal can only stand to gain if it fully explores and concludes business deal with ancient middle kingdom. For the industrialization Nepal need to focus on physical infrastructure and raw material easy access. After completion of BRI project Nepal will directly connected with China and other countries which provide benefits to Nepalese economy and industrialization and at the same time foreign trade dependency would also be reduced.
Nepal could be the commercial bridge between China and India with upgraded infrastructure. Chinese have already funded a high mountain container facility at Tatopani add pledged $190 million for a 44.5 Sq km cross boarder free trade zone at Kerung. Nepal and China have also agreed to upgrade the infrastructure of customs and road connectivity at seven other border points. Reportedly, full-fledged customs points will be operated in Yari, Humla-Purang, Olangchung Gola, Taplejung-Riwa, Jumla-Penan, Mustang-Lizi, Larke, Gorkha-Tibet, Chhekampar, Gorkha-Tibet and Kimathanka, Sankhuwasabha-Riwa in a bid to boost trade relations with the northern neighbor.
The recent developments in the economic and trade spectrum indicates that the Chinese business community has attached a high priority to investing in Nepal focusing on sectors like tourism, mineral, extraction, cement production, information technology, education, hydropower, agriculture and herbal medicine (Tripathi, 2016). This initiation and government to government business deal lead Nepalese business and industrial sector to new age.
With the improved physical infrastructure foreign investment in Nepal will be increased. China has been focusing on hydropower sector, cement manufacturing and other sectors which will promote industrial development and attract FDI from abroad. Chinese investment will be the foundation and develop confident on other developing agencies and business community for doing business in Nepal.
China Nepal Boarder Security:
Currently, China has little concern about Tibetan refugees and boarder security. Time and again China has been reminding China Policy and Nepal also assuring that Nepal with a China Policy. Sometime, Tibetan refugees try to raise their issues and promote religious leader Dalai Lama but due to Nepal’s a China Policy, it has been completely under control. At same time, Nepal also has some issues of illegal export import from China boarder to Nepal. To control these boarder security issues, both the country need to understand priority issues and respect sovereignty of each other.
Technology advancement:
BRI project will connect Nepal directly to the entire world through road link. In a BRI action plan released in March 2015, China announced its vision to develop Information Silk Road to promote digital trade and information exchange among Belt and Road countries. This vision definitely supports Nepal to improve and introduce advance technology to adjust in the dynamic high tech business world.
Overall China proposed optimistic project Belt and Road Initiative is the invention of new economics and business concept to the world. Existing market economy and international business practice has been waiting for new ideas to revive again after economic crisis. From the investment of huge amount of money to connect entire world with road is the entrepreneurial and sustainable humanitarian focus business. Therefore, Nepal should focus on mutual benefits and promote national economy to the entire world with this connectivity with cultural value of origin.
Reference:
Huang, Z. (2017, May 15). OBOR: Your guide to understanding OBOR, China’s new Silk Road plan. Quartz.Retrieved from https://qz.com/983460/obor-an-extremely-simple-guide-to-understanding-chinas-one-belt-oneroad-forum-for-its-new-silk-road/
Kawoju, N. (2018). Belt and Road Initiative a huge opportunity for Nepal. Chinadaily.com.cn.
Kohli, H. (2018). Looking at China’s Belt and Road Initiative from the Central Asian Perspective. Global Journal of Emerging Market Economies, 9(1), 3-11.
Tripathi, H. (2016). Nepal China trade: Prospects and Challenges. New Business Age, 4-10.
Zheping, H. (2017). Your guide to understanding OBOR, China new Silk Road plan. Quartz Retrived, 1-5.
Trade and Export Promotion Centre (2017). A Glimpse of Nepal’s Foreign Trade.
