Sunday, January 3, 2016

Third country trade triples in wake of Indian blockade

The economic blockade by India has hurt the southern neighbour also as Nepal's trade direction has changed in favour of third countries. Though India's share in Nepal's total foreign trade is still half, the trade with third countries other than China and India has tripled, whereas the trade with India and China has decreased, according to the Department of Customs.
According to the department, the share of trade with third countries was 11 per cent in the first five months of last fiscal year. The figure has jumped to almost triple to 31 per cent, in the corresponding five months of the current fiscal year of 2015-16.
Director general at the department Shirsir Dhungana says that the squeeze in the volume of trade with India and drop in the total trade volume have changed the trade direction scenario. He also attributed the growth in third country trade to the use of the Birgunj dry port. "We have been able to bring the dry port into operation from November 1," he said, adding that the government sent some 14,000 loaded trucks out of the country, and this has contributed to the third country trade. "Likewise, Tribhuvan International Airport (TIA) – yet another trade point for third countries – has also been operating smoothly."
Nepal's trade with India dropped to 54 per cent in the first five months of the current fiscal year from 65 per cent in the same period last fiscal year. Likewise, the trade with China has decreased to 15 per cent in the first five months from 24 per cent in the same period last fiscal year, the data revealed.
The devastating earthquakes on April 25 and May 12 damaged the only trade route to China through Tatopani customs, which is attributed to the drop in trade with China. The other trade route with China, Kerung, has also not been fully operational due to the earthquakes and also due to lack of physical infrastructure, including roads on the Nepal side. The government's apathy in developing the infrastructure including road leading to Kerung is the key concern in drop in trade with China.
But the Indian economic embargo has directly hit the trade with that India itself. Immediately after the promulgation of the new Constitution on September 20, the Tarai-Madhes-centric parties started agitations in the plains, and the southern neighbour, in order to support them, stopped cargo movement through Birgunj customs, which sees the bulk of Nepal's total trade with India. The drop in trade with India through Birgunj-Raxual customs – that contributes 70 per cent to the international trade – has also hit the revenue. The state coffer has lost Rs 50 billion in revenue in the first five months of the current fiscal year, according to the Finance Ministry.
The embargo has in particular hit the smooth supply of petroleum products – Nepal's major import from India – that constitutes almost one fourth imports from India. The drop of petroleum products import to 32 per cent, according to department data, has not only hit the trade with India but the day-to-day life in the country has also become difficult due to lack of fuel. Nepal imported Rs 110 billion worth of petroleum products from India in the last fiscal year, according to central bank figures.
Though, trade analysts claim that the current trade direction would not be sustainable once India lifts the blockade, the trade diversification and customs diversification is key lesson that Nepali policy makers, politicians and development strategists should understand. Sooner they understand, better will be the future of the countrymen.

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