Nepal keen to enhance connectivity with China under BRI : Foreign Minister

Foreign Minister Pradeep Kumar Gyawali said that he has requested China to construct the cross-border railway between the two neighbors under a grant.
Speaking at the airport, after returning home today wrapping up his five-day official visit to China, he said that Nepal has requested – during the bilateral talks with his Chinese counterpart Wang Yi – the China to build the cross-border railway under the grant aid as a symbol of bilateral relations between the two neighbours. "Developing cross-border railways between Nepal and China is a priority for Nepal government," he added.
However, Nepal is open for discussion about possible investment model, he said, adding that there could be several investment models for the implementation of projects under the framework of the Belt and Road Initiative (BRI), apart from enhancing cross-border connectivity.
The Nepal-China cross border railway line – from Kerung on China-Nepal border to Kathmandu and to Pokhara and Lumbini on Nepal-India border – is estimated to cost up to $8 billion.
Both sides have reached an understanding to conduct a feasibility study and preparation of the Detailed Project Report (DPR) for the Nepal-China cross border Railway line at the earliest. The agreement has been made 'for attaining common prosperity by incorporating areas such as railway line, trading port, air transport, electricity and communication', according to the press communique issued by the Foreign Ministry.
Gyawali also said that both Kathmandu and Beijing have agreed to implement all the past agreements – including the agreements by Prime Minister KP Sharma Oli in 2016 and by the then Prime Minister Pushpa Kamala Dahal in 2017 – signed between Nepal and China.
The Transit and Transport Agreement and the Memorandum of Understanding (MoU) on launching a joint feasibility study for a Nepal-China Free Trade Agreement (FTA) are the key documents signed during Oli visit. Likewise, the Dahal-led government had signed a MoU on cooperation on the BRI.
Introduced by China in 2013, the BRI refers to the Silk Road Economic Belt and the 21st Century Maritime Silk Road, aiming at building a trade and infrastructure network connecting countries along the ancient trade routes of the Silk Road.
He also said that both sides have shared common views on developing a Trans-Himalayan Multidimensional Transport Network to develop dry ports, railways, roads, air connectivity, cross-border electricity transmission and information technology for better connectivity between the two neighbours and ensuring sustainable common development.
Apart from meeting his counterpart Wang, Gyawali had also called on Chinese vice-president Wang Qishan.
During his visit to China, Gyawali had also held meetings with provincial leaders in Chengdu and delivered a speech at a programme held in his honour at Sichuwan University before his arrival back home today.
Delivering a lecture on Nepal-China Relations and Development Projects in the Trans-Himalayan Region at Sichuwan University in Chengdu, Gyawali appreciated China’s efforts at forging co-operative links between the countries in the region and beyond under the framework of BRI, reads the Foreign Ministry statement.
"Chinese investors may utilise the investment opportunities in Nepal for mutual benefits,” he said, assuring that Nepal government is fully committed to providing security to Chinese investors.

Government told to start work for granting transit rights to India, China

Experts have proposed to the government start homework for granting transit rights to both the neighbors.
Presenting a paper entitled 'Toward a New Framework for Nepal's Trade and Industrial diversification' at the International Conference on Key Trends in China-Nepal-India Relations and New Development Strategy for Nepal,' jointly organised by South Asian Institute of Management (SAIM), Institute for Integrated Development Studies (IIDS) and Nanyang Technological University of Singapore, in Kathmandu today, former finance secretary Rameshwor Khanal said that the two neighbours – India and China – will, sooner or later, ask for transit rights. "Nepal should start homework right now to make sure that transit agreements would be in its favour,” he added.
He also proposed implementing connectivity infrastructure projects that support transit and trade diversification in the changed context of recent trade and transit blockade.
As the need of the hour is to diversify trade for a self-reliant economy, Khanal also proposed promoting energy-intensive industries, developing cross-border energy market and economic corridors along north-south transit routes, and promoting high value niche products and specialized services for trade diversification.
“Nepal has failed to diversify trade and transit even though each periodic plan – after the second periodic plan – has been emphasising on trade diversification, export promotion, foreign investment promotion,” Khanal said, adding that the country is still harping on trade diversification after six decades of the planned development practice.
Nepal started planned development practice from 1956 when over 95 per cent of its trade was with India. Trade with Tibetan Autonomous Region of China was confined to border region and most of it was bartering. Nepal had little to export to outside world then.
With foreign assistance, particularly from the then Soviet Union and China, critical manufacturing factories that aimed at import substitution were established in the decade following 1956. But following the calibrated reforms of 1985-86, policy reforms spanning all sectors of the economy were implemented between 1990 and 1992, he added. "The reforms led to trade diversification, growth of manufacturing sector, export growth, and some of the positive changes could also be seen lasting until 1998."
However, overall development policy did not support the trade and industrial policies started during the economic reforms of post-1990. Lack of continuity of reforms, weak institutions, and above all no infrastructure support held back the growth, Khanal said.
Commenting on his paper, chief executive of Investment Board Nepal (IBN) Radhesh Pant said that finance is not the problem for infrastructure development in Nepal. "Finance is the least of the problems," he said, giving examples of how foreign investors have been eager on putting money on Nepal's infrastructure development ranging from hydropower projects to cement factories.
Nepal needs huge investment in infrastructure development to meet the gap that can fuel economic growth, according to former member of the National Planning Commission (NPC) Swarnim Wagle. Hailing Chinese approach to development, Wagle said that quick delivery of aid without strings attached will help infrastructure development in Nepal.
In his paper on 'Asian Infrastructure Investment Bank (AIIB) and Infrastructure Construction in South Asian Countries', Prof Dai Yonghong, Director of Center for Myanmar Studies in Sichuan University and Deputy Director and Center for Nepal Studies in Sichuan University, highlighted benefits of Nepal as a transit economy. "It will help strengthening sub-regional cooperation between Sichuan-Tibet and SAARC, adjusting the area of cooperation, establishing Sino-Nepal FTA, and build Nepal overland trade route," he said, adding that it will also strengthen infrastructure development in border areas, apart from expansion of trade preferences and encourage investment, and expanding tourism cooperation, innovation and tourism business one-stop service mode.

Nepal-China transit treaty to shift geo-political balance

In a major geo-political shift, Nepal has signed a transit and transportation treaty with China today that will give the land-locked Nepal access to sea from China.
Currently, Nepal has the access to sea, which is vital for third country trade, only through India, the southern neighbour. India and Bangladesh are the only two other countries with whom Nepal has signed transit treaties. But the transit treaty with Bangladesh is based on India, as Nepal and Bangladesh do not share border, and thus has not been implemented fully.
However, today's treaty will give Nepal access to a Chinese port for its third country trade, which is expected to reduce Nepal's dependency on India for trade and transit.
Despite historic and socio-cultural integration between India and Nepal, India's imposition of economic blockade for almost five months generated widespread disenchantment in Nepal, forcing Nepal to seek trade alliances beyond the southern neighbour. Though Tianjin Port, the nearest Chinese port is 3,300 km away from the Nepal border – as against the closest Indian port of Kolkata which is only 1,000 km – the treaty is also expected to shift the geo-political power balance in the region.
The agreement on transit and transport with the People's Republic of China could be a psychological shift for the future, according to senior economist Bishwhambher Pyakuryal. "The agreement is going to have a huge psychological shift in otherwise India-locked Nepal as the country will now have an option for international trade," he said, adding that the implementation of treaty is but a herculean task.
Likewise, trade expert and former commerce secretary Purushottam Ojha also opines that the treaty is a milestone, but Nepal needs to invest its huge resources and efforts on road infrastructure to benefit from the treaty. "Nepal must increase road and railway connectivity to take advantage from the transit treaty and increase economic integration with China," he added.
Apart from widening of Rasuwagadi customs point, and upgrading Korala and Kimathanka customs points and access roads, Nepal also has to work hard to simplify trade-related issues, including visa, currency and language, to make the treaty work in its favour, Ojha said.
Likewise, Nepal has to exchange a protocol with China, which will define the procedures that need to be followed. Nepal also have to have railway connectivity to take advantage from the agreement, which will be automatically reviewed every 10 years, as ferrying goods via road through Tibet may not always be cost-effective and convenient.
The visiting prime minister Khadga Prasad Sharma Oli and his Chinese counterpart Li Keqiang today witnessed the signing of the 10-point bilateral agreement and memorandum of understandings (MoU), including landmark transit and trade deal, in Beijing's Great Hall of the People, according to a press communiqué issued by the Nepali Embassy in Beijing after the signing ceremony.
To increase the connectivity, China has also agreed to construct a strategic railway link between the two countries through Tibet. The railway link, which is expected to link Kathmandu and Tibet, is also likely to be expanded to Pokhara and Lumbini.
According to officials in the meeting, Oli's visit has raised the possibility of the construction of two rail lines connecting three of Nepal's most important cities. China has already expanded its railway service to Shigatse, in Tibet, which is around 450 km from Kerung. Kerung lies at a distance of around 26 km from Rasuwagadi in Nepal. China plans to extend its railway service to Kerung by 2020, and also a longer term plan of extending railway lines from Kerung to Kathmandu depending on geographic and technical conditions, as well as financing, according to the officials.
But, Nepal will have to enter into a separate deal with Beijing to make use of the Chinese railway service for trade purpose.
The high profile visit also witnessed signing of Memorandum of Understanding (MoU) between the Ministry of Commerce of the People's Republic of China and the Ministry of Commerce of Nepal for launching the Joint Feasibility Study of China-Nepal Free Trade Agreement (FTA). Based on the findings of the feasibility study, both the governments will decide whether to sign the FTA.
The FTA is, however, not going to benefit Nepali products, which have lost their competitive advantage against the Chinese products. "Nepal should have pushed for preferential trade agreement with China," Ojha said, "As Nepali products cannot compete with that of China's."
China has already given duty free access to over 8,000 Nepali products. Of the total trade, Nepal's exports to China stand at just 2 per cent, whereas Nepal's imports from China stand at 12 per cent, widening Nepal's trade deficit with China. "FTA will only further widen the trade gap," according to Ojha.
Trade between China and Nepal has been governed by Trade and Payment Agreement signed for the first time in 1974.
According to the press communiqué the two countries also signed agreement on concessional loan for a new airport in Nepal's Pokhara and a feasibility study for oil and gas survey projects, though the much-anticipated agreement on commercial import of petroleum products from China was cancelled at the last moment.
Likewise, China has also agreed to distribute solar panels in Nepal’s rural areas by tapping its Climate Fund, and build, manage and maintain Xiarwa Boundary River Bridge at Hilsa, Humla, apart from signing MoU to strengthen intellectual property system in both the countries, and extend cooperation and exchange information on banking regulation.

China announces fresh $146 million aid for Nepal

China has announced a fresh aid package of RMB 900 million (around $145 million) for Nepal.
The decision was taken during a 30-minute meeting between Chinese President Xi Jinping and President Ram Baran Yadav today on sidelines of the Boao Forum for Asia in South China's Hainan Province. President Yadav is currently at Hainan and met Chinese President for the first time since Nepal replaced monarchy and became a republic in 2008.
The northern neighbour had last week announced to increase its annual grant to Nepal by over five-fold from RMB 150 million to RMB 800 million (nearly $128 million) to give further boost to its economic agenda in Nepal.
"The package is in addition to the annual grant and will be used to improve the 115-km long Araniko highway that connects both the nations," according to deputy spokesperson at the Foreign Ministry Lekha Nath Bhattarai. "Likewise, China will also be training some 1,500 Nepalis in technical and non-technical sectors over the next five years."
Not long ago, India has – during the prime minister Narendra Modi's visit – also increased a line of credit worth $1 billion to Nepal.
Nepal's increased economic engagement with both northern and southern neighbours is expected to propel development activities in the land-locked country and bridge the infrastructure gap.
Nepal has already expressed its willingness to be part of major Chinese initiatives like the $40 billion Silk Road Economic Belt – that is expected to improve China's connectivity to Europe through a maze of road, rail and port network – and Asian Infrastructure Investment Bank (AIIB). In fact, Nepal is also going to be a founding member of the Bank.
Chinese President on the occasion also welcomed Nepal to participate in the Belt and Road cooperation. "China-Nepal relationship is a model of peaceful coexistence and mutually beneficial cooperation between big and small countries," Xi said, welcoming President Yadav to the annual conference. "China is willing to be Nepal's good friend of mutual respect and mutual support, good partner of common development and common prosperity and good neighbour of mutual assistance in security," he said, suggesting that the two countries should strengthen cooperation in traffic interconnectivity, infrastructure, hydropower development, modernisation of agriculture, science and technology. "China is also willing to negotiate Free Trade Agreement (FTA) with Nepal at an early date."
Calling on both the countries to enhance law-enforcement and security cooperation, Xi asked to be well prepared for a series of commemorative activities as this year marks the 60th anniversary of the establishment of China-Nepal diplomatic ties.
He also called on to beef up cooperation in the areas of youth exchanges and tourism and enhance coordination on multilateral occasions to safeguard their common interests.
China appreciates Nepal's firm support on issues concerning China's core interests, including issues related to Tibet and Taiwan, the Chinese President said, also supporting Nepal's effort in safeguarding independence, sovereignty and territorial integrity. Likewise, President Xi also voiced the hope that Nepal would not allow any forces to use its territory to engage in anti-China separatist activities.
Replying President Xi, President Yadav said Nepal would never allow its territory to be used by any anti-China activities. Nepal also supports China's initiatives of jointly building the Silk Road Economic Belt and 21st-Century Maritime Silk Road, apart from Asian Infrastructure Investment Bank, he said, adding that strengthening cooperation between South Asian Association of Regional Cooperation (SAARC) and China will help promote regional interconnectivity and economic development.
However, China wish to join SAARC at the last year's SAARC grouping's conference at Kathmandu was foiled by India.
Likewise, President Yadav, on the occasion, also said that poverty, hunger and deprivation still exist in many countries. Urging for concerted efforts to resolve the problems he stressed to create a more stable, secure and prosperous future for Asia by ending poverty, hunger and disparities. “Peace and poverty cannot go together," he said, adding that development of the continent as a whole has to, therefore, be a common goal and all countries must find space and resources to grow and prosper.
Saying that lack of adequate infrastructure, low level of industrial base, inadequate capital, lack of technological know-how and shortage of skilled human resources and low level of productive capacity were the problems of Nepal's economy, the President stated such things have resulted in lack of qualitative change in the living standard of people despite the abundance of natural and human resources with enormous potentials of tourism, hydropower and agriculture development options.
The President also appealed the international business community to invest in Nepal as the country offers a liberal and attractive regime for investment.

Opening-day speakers say yes, multilateralism is in crisis

Yes, multilateralism is in crisis because it does not seem to be equipped for dealing with the problems of today. While this was the blunt assessment of the speakers during the opening day of Public Forum 2012, they also expressed general optimism for the future of multilateralism.
In his welcome speech to the Public Forum, director-general of World Trade Organisation (WTO) Pascal Lamy said that “the rules of the game — whether in the trade sphere, in the economic sphere, in the environmental or food security spheres —and indeed across all areas of international policy making, are in need of adjustment.”
He said that “this year’s forum will deal with a vast array of challenges that you, yourselves, have brought to the house of trade. Over a three-day period, we will be hearing from you on issues as diverse as trade and the environment and the regional Free Trade Agreements (FTAs).”
The former President of the Swiss Confederation, Micheline Calmy-Rey, in the Forum’s inaugural speech, said that “multilateralism is failing on many fronts and is clearly unable to deliver in these very difficult times we are witnessing across the globe.”
As an example, she said that “the inability of the WTO members to agree on the conclusion of the Doha Round is certainly a setback that is very difficult to understand particularly within the context of the current crisis.”
Calmy-Rey commended “the excellent work done by WTO to monitor protectionist pressures,” adding that the multilateral trading system “can help (WTO members) contain extreme protectionist measures.”
Director-General Lamy and Calmy-Rey were also members of the inaugural panel session on “Is Multilateralism in Crisis?”
During the panel’s discussions, Lamy said that multilateralism is not in good shape because it is 20 years outdated. With all the changes in the world and in globalization, the current system shows it cannot adjust to it and the present economic crisis does not help, he said.
Calmy-Rey said that the international institutions do not reflect today’s realities and that there is a big need for reform.
Minister of Trade of the United Arab Emirates (UAE) Sheikha Lubna Al Qasimi also considered that present day rules are not up-to-date and need upgrading.
But to the question from the moderator, Andrew Harvey, former BBC presenter, on whether the panelists were optimistic or pessimistic for the future of multilateralism in about five years’ time, Chile’s senator Ricardo Lagos, Calmy-Rey and vice chairman and chief financial officer of eBay International Nicholas Staheyeff, said they were optimistic.
Al Qasimi said she was ‘carefully optimistic’ and Lamy said he was ‘carefully pessimistic’.
On his assessment for the future, Staheyeff said that the future multilateral system will need to learn to cope with increased volatility in trade and economic conditions and be “ready for a bumpy ride”.
There were not many solutions given to the problem.
Lagos mentioned that countries will have to learn to give up some sovereignty, and Calmy-Rey said that because many issues are solved at the international level, if countries want to have more influence in the world they’ll have to play internationally.
Lagos also made a passing reference to the fact that the five members of the UN’s Security Council do not reflect today’s realities.
The work of the WTO was discussed, in particular the importance of this institution to remove frictions, the negotiations on trade facilitation to facilitate customs procedures and to remove ‘trade obstructions’, the fight against protectionism through its monitoring mechanism and also its work to encourage more financing for trade.
Calmy-Rey also said that the WTO system of common rules and disciplines is a good example for other international organisations.

ADB says FTAs not cause of trade boom in Asia

Free trade agreements cannot be credited for the increase in intra-Asian trade as they are often restrictive in scope and difficult to implement, the Asian Development Bank (ADB) said today.
Despite the fact that there were 190 FTAs involving at least one Asian country at the last count in January, only a small percentage of the region's exporters and importers are using the agreements, the ADB said.

"There is a misperception about FTAs," head of the the ADB's Office of Regional Economic Integration Iwan Azis said.
"Is this increased trend of intra-Asian trade because of the growing number of FTAs in the region? My short answer is definitely no," he said at the launch of the bank's latest report, Asian Economic Integration Monitor.

Azis said the Manila-based ADB had carried out a survey of how many importers and exporters in Asia were using the FTAs and the percentages were 'very small'.

About 55 per cent of Asia's total trade was done within the region in 2011, up from 45 per cent 10 years ago, he said, adding that the increase was mainly due to 'unilateral liberalisation' by economies.

It was driven by market conditions as Asian countries traded more with each other as the eurozone debt crisis and feeble US economic recovery curbed demand for the region's exports.

Azis, however, said that FTAs in the future can help boost intra-Asian trade if their conflicting provisions are harmonised and implemented.

"Yes, the number of FTAs has been growing but it's becoming a noodle bowl," he said.

The proliferation of FTAs "has created a tangled web of overlapping bilateral and plurilateral trade arrangements," ADB said in its report.

"While these are clear evidence of regional cooperation, they are often restrictive in scope and not all aspects are easy to implement," it said.

"Differences across FTAs such as varying schedules for phasing out tariffs, different rules of origin and exclusion lists, and differences in rules on anti-dumping can limit their effectiveness and weaken efficiency," the report said.

FTAs have proliferated worldwide, including in Asia, after talks under the Doha round of the World Trade Organisation (WTO) collapsed in 2006 largely due to disagreements over farm subsidies.

GAN for FTA with US, early passing of SEZ Bill

Garment Association Nepal (GAN) has asked the Ministry of Commerce and Supplies to propose for Free Trade Agreement (FTA) with the US in the next Trade and Investment Framework Agreement (TIFA) council meeting to be held in Kathmandu.
During the Readymade Garment Management Committee meeting chaired by secretary of Ministry of Commerce and Supplies Lalmani Joshi yesterday, the association asked the ministry to propose for FTA with the US to boost exports of readymade garments and pashmina to the US, take lead in passing the Special Economic Zone (SEZ) Bill that is in the parliament for the last three years and clarify on the 10 per cent countervailing duty (CVD) charged by India on the export of Nepali readymade garments to India.
"There is confusion over the 10 per cent countervailing duty charged by India on the export of Nepali garments to India," said president of GAN Uday Raj Pandey, adding that the Commerce Ministry has to clarify on the issue as the 10 per cent countervailing duty has made Nepali garments less competitive in the Indian market which in turn has hurt exports.
The Readymade Garment Management Committee has representation from the Ministry of Trade and Finance. "The concerned heads of the Customs Department themselves are not clear on the countervailing duty," he said, adding that the association, after getting the real picture, will decide on how to move forward.
Similarly, the association has also asked the Commerce Ministry to take the lead in passing the Special Economic Zone (SEZ) Bill that is in the parliament since the last three years. "The Industry Ministry alone has not been able to pass it, so we have asked the Commerce Ministry to help pass the SEZ Bill that is key to promote exports," said Pandey.
SEZ will also house Garment Processing Zone (GPZ) that will boost the exports of garment sector, according to the association.
The country is preparing for the Investment Year and needs to create a favourable investment climate and SEZ could ensure foreign as well as domestic investors of a conducive environment, he said, adding that FTA with the US will help US investors bring in investments to Nepal and Nepali readymade garments and pashmina will also get the most favoured nation status and Generalised System of Preferences (GSP) facility that could help boost exports. "It's a win-win situation for both countries."
"The TIFA council meeting that should have been held earlier has been postponed repeatedly, but this time the government should hold it and propose for FTA to make the TIFA a more practical vehicle for the promotion of Nepali garments and pashmina in the US market," according to the president of the association. "Nepal must propose the FTA during the TIFA council meeting that has been rescheduled for the last week of September."
At one time, the country used to export readymade garments and pashmina worth Rs 15 billion but it has come down recently. According to the central bank's data, in the first seven months of the current fiscal year, the country has exported readymade garments worth Rs 347.6 million to India and readymade garments worth Rs 2.80 billion to the third countries.
"Similarly, the country has exported pashmina worth Rs 1.87 billion to a third country and pashmina worth Rs 21.4 million to India," the central bank's data has revealed. However, exports of readymade garments and pashmina to third countries, except India, have increased this fiscal year as compared to the last three fiscal years.

Garment exports to third countries
Fiscal Year — exports
2009-10 — Rs 2.29 billion
2010-11 — Rs 1.89 billion
2011-12 — Rs 2.80 billion
(Figures of the first seven months of the fiscal year except India. Source: Nepal Rastra Bank)

Free Trade Agreements need consolidation: ADB

Asia is benefiting hugely from the many free trade agreements reached over the last decade but the region needs now to consolidate those agreements, says a new book from the Asian Development Bank Institute (ADBI) and Asian Development Bank (ADB).
The book, 'Asia's Free Trade Agreements: How is Business Responding', was edited by Masahiro Kawai, Dean of ADBI, and Ganeshan Wignaraja, Principal Economist in ADB's Office of Regional Economic Integration. It surveyed 841 firms in the People's Republic of China (PRC), Japan, Republic of Korea, the Philippines, Thailand, and Singapore and found that 53 per cent either use or plan to use free trade agreements.
Asia has seen a rapid increase in free trade agreements since 2000 with about 50 in place in East Asia alone as of January 2011 and another 80 or so currently being prepared. East Asian economies like the PRC, Republic of Korea, Thailand, and Singapore have been the leading players in the spread of the agreements, while others such as the Philippines have become increasingly active through the Association of Southeast Asian Nations (ASEAN). The agreements have all boosted trade within the region.
However, some of the agreements are complicated because they apply to different sectors and have different requirements, raising the cost for companies that trade with many countries. Small and medium-sized businesses, in particular, struggle to make use of free trade agreements. Consolidating the 'noodle bowl' of agreements would help individual companies and economies, says the book.
"A region-wide free trade agreement would have clear economic benefits. It would, of course, increase market access to goods, services, skills, and technology. It would also increase market size, permitting specialisation and greater economies of scale," said ADB president Haruhiko Kuroda at today's launch of the book. It would also "help buffer against protectionist sentiments which pose a risk to Asia's trade and economic recovery," he added.