Nepal-China Relationship Measures for India

by Binoj Basnyat - 15 August, 2019, 12:00 2819 Views 0 Comment

China the second largest economy, the 3rd largest country bordering 14 nations including Nepal and India. China’s impetus to be a global player is assuredly enlarging its political and security interests through economic interface the Belt and Road Initiative (BRI) with the philosophical principles of “win win”. The US National Security Strategy 2017, National Defence Strategy 2018, Indo-Pacific Strategic Report 2018 and South Asian Policy outline China’s additional strategic importance. The US has recognised China as a strategic competitor and India as a strategic partner though terminated the beneficiary developing nation under Generalized System of Preferences (GSP). The diplomatic role of India is crucial for furthering the shift of power to the Indo-Pacific.

US South Asian Policy was captivating a tougher line towards Pakistan for hosting terrorists and militants and thus regarded as a potential threat to regional stability in the region and India. President Trump’s statement on 21st August 2017 observed New Delhi as a bridge between its regional and geopolitical interests in South Asia. July 22 in the White House President Trump unexpectedly proposed PM Imran Khan to mediate or arbitrate the long running dispute between India and Pakistan over Kashmir. Further unanticipated, Trump asserted that PM Modi had sought his intrusion in the complication, which was difficult to believe for informed observers. Within hours, Indian Foreign Minister emphatically denied that Modi had made any such suggestions and reiterated India’s long standing position that Kashmir dispute must be solved through strictly bilateral negotiations between India and Pakistan. Is US at the stage of reconsidered the US Policy of South Asia?

Though Nepal-China relationship formalized on 1st August 1955, the association with China has been defined by the Sino-Nepal Treaty of Peace and Friendship signed on 28th April 1960 following the Sino-Nepal border Agreement on 21st March 1960, which has stood very relevant for developing trust. Nepal is committed to “One China Policy” and committed not to allow the territory to be used for any inimical activities against China. The Republic of Nepal has been making efforts to increase trade and connectivity with China who is the largest source of Foreign Direct Investment.

Nonetheless the occupation of Tibet in 1950 raised concerns of security and territorial integrity of Nepal, which drew Nepal even closer to India with the signing of the 1950 Indo-Nepal Treaty of Peace and Friendship. The political realm and the people at large have been influenced and observe things differently now and see Nepal’s relationship with both China and India with identical juxtaposition. The 1950 Indo-Nepal Treaty of Peace and Friendship is observed as an encroachment of its sovereignty and extension of Indian influence.  Nepal now has joint bilateral military exercise with both the Indian Army and the People’s Liberation Army. There was a political decision to withdraw from the Bay of Bengal Initiative for Multi-Sectoral Technical and Economic Cooperation (BIMSTEC) military joint exercise in the last hour.

China celebrated the 5th year of Belt and Road Initiative (BRI) that expressed priority to South Asia and President of Nepal’s visit did signify how Nepal is inclined to take the benefits of the scheme. Despite many challenges South Asia will receive prominence for securing economic integration for strategic presence in the Eurasian but also to thwart any future attempt by its adversaries to confine China in the East Asian region, which signifies the importance of South Asia and also Nepal that lies at the central of the Himalayas. 

The numerous state level visits of the President, Vice President and the PM of Nepal somewhat indicate the government’s change of mind that allows both the immediate neighbours equal footings following the promulgation of the 2015 constitution with Republic, federalism and secularism as its major transformation. The visits have been echoing infrastructure connectivity, logistics, trade and investment under the BRI. This is presumed to diversify and promote Nepal’s trade with countries to the north, including Central Asians nations and help tap the opportunities available in the emerging economies of Asia. Fourteen MOUs/LoEs including infrastructure, railway, energy, post disaster reconstruction projects, tourism and human resources was signed during PM Oli’s visit to China in June 2018.

China, the second largest trading partner of Nepal total exports to China stood above US$ 23 million in 2017/18 with import that stood above US$ 1.5 billion. China has given zero tariff entry facility to over 8,000 Nepali products since 2009, but the trade deficit in increasing.

The Trade and Transit Treaty of 2016 is very similar to the Trade and Transit treaty signed with India witnessing  diversification on strategic connectivity to China’s wider national railway network through railways, roads and air aiming to reach Kathmandu as projects of BRI. In 2018 China has allowed four sea ports to trade with third countries and three land ports aiming to reduce dependence on India for commerce, which was highlighted by 2015 unofficial blockade by India. The declaration of Nepal-China Trans Himalayan Multi-Dimensional Connectivity Network and Nepal China cross border railway projects is focusing on cross-border economic cooperation the communication corridor but will have strategic political and security challenges for Nepal-India-China. The questions of conducting trade and the feasibility is a herculean task given the long distance involved and the poor road connectivity.

Similar to Nepal-India Joint Oversight Mechanism co-chaired by Foreign Secretary of Nepal and the Indian Ambassador that met every two months, Nepal-China Joint Consultative Intergovernmental Mechanism which is led by the Foreign Secretary of Nepal and the Vice Minister of Foreign Ministry of China and a Joint Secretary level consultative panel for resolving bilateral trade and transit issues and the entire realm of bilateral relations. 

India is one of the major sources of remittance, a key development partner and largest trading partner. 38.3% of Nepal’s total approved foreign direct investments are by Indian firms. Nepal has worsening trade deficit with India. The Indian Ports of Haldia, Kolkata and Vishakhapatnam is being used with four Integrated Check Posts. Development of Railway infrastructure at five points along the Nepal-India border was signed in 2010 but has not transpired except for Jayanagar-Janakpur-Bardibas-Bijalpur. The goods to be transported from China is estimated to take 20 days less than half the time taken to do so from Indian ports because the customs clearance system are corrupt and too lengthy in India.

The utilization of water resources (irrigation, energy, drinking, flood control), Security and Security of Supply (Trade and Transit) are the main assets of Nepali economy and three main appeals of Nepal-India, which does not have a contented past.

A three tier mechanism the Joint Ministerial Commission for Water Resources (JMCWR), Joint Committee on Water Resources (JCWR) and Joint Standing Technical Committee (JSTC) has been set to implement agreements and treaties and also address water induced problems of flood and inundation. A supplementary apparatus-Joint Committee on Inundation and Flood Management (JCIFM), which deals unambiguously with the inundation, embankments and flood forecasting. Power Trade Agreement (PTA) was signed in 2014 paving way for two countries to trade electricity across the border without restrictions.

The issue of border management dwells silent apart from few cases that are carried by the media of miss behaviour of the Nepalese populous in the borders by the Indian SSB, but actuality territorial arguments include Kalapani at Nepal-India-China tri-junction in western Nepal and Susta in Southern Nepal. The open border is a significance of Nepal-India special relationship. There is Joint Working Group on Border management (JWG) and Border District Coordination Committees (BDCCs) to address jointly security and border issues. Joint Technical Committee of the Boundary Working Group (BWG) is carrying out works relating to construction, repair and restoration of boundary pillars, preparation of inventory of encroachment of No Man’s land and cross border occupation, and GPS observation of boundary pillars. Revisiting the border management using modern methods and technology should answer the issues so that the people to people grievances are not made another political tool.

To conclude, the last one year has witnessed global and the great powers diplomatic and geopolitical manoeuvring in the Indo-Pacific, which provided a manifesto for either a shift in geo-politics or conflict in reconfiguring international security. The magnitude of the Asian order will occupy a fundamental part in shaping the global configuration. When the containment of China by the US and the Allies is also visible, India and China both geopolitical rivals is competing and cooperating. Bilateral, Intergovernmental, Regional, Sub-Regional organization and I/NGO are platforms where global and rising powers influence their neighbours, allies and partners. India in its immediate and near neighbourhood is progressing with its “Act East Policy” towards the East Asian Nations through Asia Pacific Economic Cooperation (ASEAN) and BIMSTEC and to the Central Asian Nations together with China being part of Shanghai Cooperation Organisation (SCO). South Asian Association for Regional cooperation (SAARC) though contributory for South Asia is not striding as projected by Nepal. The Wuhan informal meeting after the Doklam dilemma between President XI and Premier Modi has accepted informal mechanism and different bilateral mechanisms to answer misapprehension through discussions and consultations. India is significant for the future of the region indicating an inclination to “rebalancing approach” and unfinished “First Neighbourhood Policy”.

China’s geo-political theory stands as 1) The “String of Pearls” and 2) Economic development and political influence through the BRI. Even if the BRI covers Eurasia, Central Asia; of the six corridors nation states in the South Asian region South Asia is concerned with 1) the projects that Nepal will encompass 2) the China Pakistan Economic Corridor (CPEC) and 3) Bangladesh-China-India-Myanmar Corridor (BCIM).

Comparatively, China is accomplishing equilibriums in Nepal.  The shift in geopolitics with China’s interest in Nepal has brought in strategic communication infrastructure network north to south that will bear strategic regional linkages, variety of transportations system and linkages from air, land, waterways to railways which will put up with security, economic and political significances and challenges.

Can Nepal be a bridge between the rising powers India and China with the change in the strategic communication infrastructure network is the fundamental question?

The political, economic and security situation in Nepal is volatile, uncertain, complex and ambiguity with diversification with nationalism is hand and extra regional and regional influences on national politics and traditional beliefs. Major transformation to–Federalism, Republicanism and Secularism remains a test.

PM Narendra Modi has reinvigorated Nepal-India diplomacy. Nepal-India agreed to amend the Trade Treaty, Transit Treaty and the Railway Services Agreement (RSA) on reciprocal basis, the issues raised by Nepal this June. The Nepali rail and private Indian rail operators will be allowed to transport Nepal bound cargo from Visakhapatnam, Haldia and Kolkata to Nepal.

The historical, cultural, religious, social and lingual issues are the bonds and connecting factors of both the deep rooted peoples of Nepal and India and the unique relationship. The measures to enhance these connections must be re-enforced that sometimes contradicts to the expression of some political elites, officials that are guided by an occupied mind-set.

Nepal relies heavily on foreign aid and donors from donor countries, International finance Institutions and inter-governmental organisations. India increased its annual granted aid to Nepal for the fiscal year 2019-20 by 40% to Indian rupees 750 crore, when Rs 253.17 crore was granted for 2017-18 more than Sri Lanka and Afghanistan though Bhutan remains the largest recipient. The assistance that India provides should be directed to benefit the nine million youths who can serve as the stimuli rather than some of the political policy makers on chairs.

Nepal’s location and a large and porous border with India mandates that security concerns are interlinked and step up security management and defence ties would be in both countries interests.

Two main conceptual strategic frameworks should be espoused to augment Nepal-India relationship as measures for India. One, Nepal-India should adopt, “3T Political Theory”, with three effects that unquestionably stand out in geo-political and the geo-economics arrangement.

TRUST: Nepal-India-China needs each other is the first and most important understanding. Sino-India relationship is respectable and shares both encouraging and constructive many times dissimilar to the one portrayed. Trust in security, diplomacy, governance, professionalism, social activities, cooperation and coordination, economic behaviour, political trust, trust in political participation. Second is TRANSIT–in order for Nepal-India- China to grow to their full potentials both countries need to deepen their strategic infrastructure connectivity. Nepal’s geographical location, abundant natural resources like water, biodiversity and landscape, widening and deepening connectivity across the border through transportation networks is taking shape with the initiative of implementing strategic network within the country and with the agreements made with India and China for the development of energy, and strategic networks like road,  railways, airways and waterways provide enough avenues for bilateral and trilateral cooperation and space for effective transit procedures. Nepal could play on constructive role as dry port, economic zones, transit points in goods and services. Lastly, TDADE–which is most notably discussed. As per the Department of Customs Nepal is facing 1) trade deficit of Rs 1.03 trillion till mid June 2018  (mid-July 2017 to mid-June 2018), (imported goods worth Rs 1.11 trillion) (export of Rs 74.32 billion)2) The largest deficit of Rs 689.85 billion with India 3) Negative trade gap is also widening with China. The future of economic progress is trough fair trade, free trade, trade barriers by the way of foreign market, foreign knowhow, foreign technology and foreign investment. The 3T theory can be marked in a triangular form for Trade between Nepal-India-China, which will also add value for development and stability in the region. See figure below.

Two, political and economic institutions, Intergovernmental, International Organisations were founded after major wars like the establishment of League of Nations (which did not work), United Nations, International Monetary Fund (IMF), General Agreement on Tariffs and Trade (GATT), World Bank (WB) to bring everybody to the new political and economic association. These institution have helped in the last 250 years to bring the world together and ensure that relationship have not reached endanger. So it is important that India and Nepal and the regions relationship be strengthened mainly with 1) regional networking bilateral, trilateral and multi-lateral associations SAARC, BIMSTEC, South Asia Sub regional Economic Cooperation (SASEC) and Bangladesh, Bhutan, India, Nepal (BBIN), which need to stimulate as creating an environment of diplomatic isolation may revolve to strategic diplomatic error 2) India’s well-defined policy with the US, China and the immediate neighbours 3) establish Defence Diplomacy by initiating Defense and Military conference – SAARC/BIMSTEC Defence Ministers Conferences and SAARC/BIMSTEC Chief’s Conference and institutionalise Intelligence sharing.

The reality of Nepal, with the geopolitical contest as well as juxtaposed between two major and competing neighbours is a reality. It will be useful to co-operate in areas which the Nepal-India-China are contented, instead of working on a win-lose or no-win basis.

The traditional ‘security theory’ will continue to negate all attempts to find a way forward. Nepal-India ties are unique and time tested because of deep geographical, historical, cultural, people to people and familial linkages. The leaders should get out of the comfort zone and focus not only on changing policies, but should also equally focus on the changing minds.

Binoj Basnyat
Author is a retired Nepalese Army Major General and a political and security Analyst.

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