NEPAL expects India and China to respect its concerns and trust it to resolve its own problems.

It is often said that the 21st century is going to be an Asian century. There is some merit in the claim. India and China will be the two main countries to provide leadership to this new transformation in Asia.

Before the onset of the industrial revolution, both India and China were relatively advanced nations. Historian Angus Maddison estimates that China and India together comrpised around 50 per cent of world’s GDP back in 1700.

This scenario started to alter as both countries could not adjust to the new challenges of the industrial revolution. The result was a steady decline in the share of world output and inability to face the rising might of new industrial-cum-colonial powers in the region. It is remarkable that by 1950, the share of both China and India decreased to less than 10 per cent from a high of almost 50 per cent three centuries ago.

Emerging trends

The Euro-centric model is now changing and the future will see the rise of these two Asian giants, which will also put Nepal in focus as we share a 1,400-km long border with China and over a 1,700-km long border with India. Thus, the geo-strategic shift that seems to be under way at present is both an opportunity and challenge for Nepal. It is an opportunity because if we are wise enough, then even a reasonable approach — call it piggy back economics — can help us in our march to prosperity.

On the other hand, nations, like people, have the potential to cooperate as well as compete and act in an adversial manner. This is part of human nature and we need to be aware of it.

But the current trend in both India and China gives us hope that the future will be characterised by cooperation geared towards prosperity. Chinese President Xi Jinping in 2013 put forward a truly ambitious and transformative proposal to improve connectivity between China and the rest of the world.

The proposal was the famous Silk Road project, which, in a very short span of time, has caught the imagination of people all over the world. For Nepal, it is of great interest because one branch of the Silk Road project known as the Southern Silk Road or the Tea Horse route — the tea from Yunan was exchanged for horses in Tibet in the past — holds the promise to link the Yunan province in China with Myanmar, Bangladesh, India, Nepal, the Tibetian province of China and finally back to Yunan. The Southern Silk Road promises great opportunities for all the countries in the loop since it reduces transfer cost of trade and opens fresh avenues for investment.

Indian Prime Minister Narendra Modi has announced its “neighbourhood first policy”. This has indeed been a welcome approach since intra regional South Asian trade stands at just 5 per cent compared with over 60 per cent in the European Union and 25 per cent in Asean. An inkling of this new Indian perceptive was clear when all the heads of South Asian countries were invited to take part in the inauguration ceremony of Modi. Perhaps in line with this new thinking, soon after assuming office, Modi visited Nepal. It was an unparalleled success. He pressed all the right buttons when he spoke before the Nepali Parliament and the Nepali people were overwhelmed. Of course, things have not moved ahead as planned. Instead Nepal has faced some very unfortunate and uncomfortable road blocks along the way.

But as the logic of unintended consequence is always a possibility, these problems should not be blown out of proportion, since the basic thrust of the neighborhood first policy is the promise of shared prosperity for all the countries in the region. And thanks to the capitalist model, India’s prospects for economic growth look bright. The growing Indian economy, if properly aligned with the economies of smaller countries, will usher in a new era of prosperity in South Asia within a generation.

Trans-Himalayan railway

Already China-India trade is poised to approach $100 billion, and the opportunities for investment in both the countries are expanding. In this context, there is an oppurtunity for trilalateral cooperation among Nepal, India and China. Improving rail and road transport connectivity, developing new linkages in the regional and global value supply chain, collaborative exploitation of Nepal’s huge water resources and a considerable expansion of neighborhood tourism in view of the rapidly rising middle class in both India and China should be considered. More specifically, a trans-Himalayan railway owned and managed by the private sector of India, Nepal and China should now be thought seriously. This is a realistic scenario given that both our neighbours are scouring for oppurtunities for investment and growth all over the world.

And here we are, right between the two nations, so close to both of them and yet so far in investment flows and balances in trade. Nepal must be able to manage its internal affairs and create a stable political environment conducive to investment both from internal and external sources. We have been in a political transition for too long and it is not yet complete. Still we expect our neighbours to understand this reality and allow the people of this country to find solutions on their own.

The Kathmandu Post

Published in Dawn, June 1st, 2016