- News>
- Newspapers
Our other neighbour in the north: The Indian Express
New Delhi, Nov 02: Our neighbour, Nepal, is in acute distress. Nepal is a small country with a population of about 24 million and an area of approximately 147,181 sq kms. It has a per capita GDP of about $ 225 and it is among the poorest countries in the world. Nepal`s economy is pre-dominantly agricultural. Water is its biggest natural resource and it does not have any mineral resources.
New Delhi, Nov 02: Our neighbour, Nepal, is in acute distress. Nepal is a small country with a population of about 24 million and an area of approximately 147,181 sq kms. It has a per capita GDP of about $ 225 and it is among the poorest countries in the world. Nepal’s economy is pre-dominantly agricultural. Water is its biggest natural resource and it does not have any mineral resources.
Nepal is a landlocked country. It lies between two giants, India and China. Much of Nepal’s politics and economics, and the psyche of the people, is affected by the fact that its two neighbours are the two dominant players in Asia.
In the last two years, Nepal has suffered greatly and in many ways. In 2001-02, GDP growth was negative (- 0.5 per cent) and in 2002-03 there was a mild recovery to 2.0 per cent. There was a decline in manufacturing and a slow down in the service sector including trade and tourism. September 11, 2001 only made things worse. Tourist arrivals are reported to have dropped by as much as 40 per cent.
Nepal has a special relationship with India. The border is practically open. Even where there is some control (to prevent smuggling), the border is notoriously porous. Out of all exports from Nepal, 60 per cent is to India and out of all imports into Nepal 42 per cent is from India. Nepal has a modest level of trade with some countries of the world but, surprisingly, none with other countries of South Asia. If we look at trade between Nepal and the SAARC countries, 99 per cent of Nepal’s exports is to India and 98 per cent of Nepal’s imports is from India. Nepal’s dependency on external help is pathetic. It depends on Overseas Development Assistance (ODA), that is aid doled out by developing countries. It depends on IDA, the assistance from donors organised by the World Bank. And it depends on the Heavily Indebted Poor Countries (HIPC) Initiative. While some debt relief has been provided to 27 countries, Nepal is still outside this Initiative. In the hope of gaining market access, Nepal has just become a member of the WTO.
During this period of economic crisis, the politics of Nepal also turned into a nightmare. King Birendra and most of his family were killed in a bizarre tragedy. His brother, King Gyanendra, succeeded him and has tended to be a more assertive ruler. There was a succession of Prime Ministers. Eventually, Parliament was dissolved. The Army is in virtual control. There is a rebellion led by Maoist insurgents. There was a brief period of cease-fire, but it did not hold for long. The Maoists are reported to be in control of large parts of the countryside. Their aim is to over throw the monarchy and the ruling oligarchy.
The oligarchy — a clutch of families related by marriage, the most important being the Ranas — is the object of hate among a large majority of Nepalese. The Ranas virtually rule Nepal, they are enormously wealthy in a very poor country, their children study in the best schools in India and Britain, and they holiday all over the world. Since 1951, India has cultivated friendship with Nepal. Not the least among the reasons for doing so is the fact that Nepal is a ‘‘Hindu’’ country! A formal treaty of trade was concluded in 1951 and modified and renewed in 1961, 1971 and 1978. It was obvious that India-Nepal trade cannot be on a reciprocal basis, so non-reciprocity was built into the treaty in 1971. Nepalese goods with local content of 90 per cent was given duty free access. In 1993, the local content requirement was reduced to 50 per cent. All this did not help Nepal boost its exports to India. The first major break through was made in 1996. The requirement of local content was replaced by a ‘‘certificate of manufacture’’. Nepal’s exports to India surged — from Rs 228 crore in 1996-97 to Rs 1698 crore in 2001-02. In fact, Nepal had a favourable trade balance with India after 1998-99.
Undeniably, there was some misuse of the provision for ‘‘certificate of manufacture’’. Goods produced in other countries notably China — used Nepal as a transit and found their way into India under the duty-free regime. Indian manufacturers cried foul. The number of offending goods was small, they could have been easily isolated and taken out of the 1996 facility, and subjected to duty. Instead, the Government of India forced Nepal to renegotiate the treaty. A new treaty for five years was signed on March 2, 2002 and the Certificate of Manufacture norm was replaced by the value addition criterion. In respect of some sensitive items, quotas were fixed for duty free imports. The new regime is really a throw back to 1971.
The Nepal government and Nepal’s business community deeply resent the change. They think — and not without reason — that India has abandoned the principle of non-reciprocity. Nepal’s exports to India account for less than 1 per cent of India’s total imports and is more or less matched by India’s exports to Nepal. So, why abandon non-reciprocity? The brain behind the new treaty is believed to be Mr Brajesh Mishra who is reported to have told the Nepal government that trade concessions could henceforth be extended only on a reciprocal basis.
India is making a mistake. Nepal’s other neighbour, China, has come forward to extend aid and other concessions to Nepal. Although not in a big way yet, China has the capacity and the political shrewdness to exploit any opportunity that may present itself. The Maoists are reported to be receiving help from China. The strife in Nepal has already spilled over into the Terai region of India. India has a very large presence in Nepal — its Mission is the largest, but it does not appear that South Block is paying enough attention to the grave situation in Nepal.
Lord Pashupatinath has four faces looking towards four directions and one looking upwards. The King, the Army, the political parties and the Maoists seem to represent the four faces of Nepal. Like Lord Pashupatinath, they are looking towards four different directions. Unless there is some convergence among two or three of the key players, the situation in Nepal is likely to deteriorate.
A neighbour in distress or disarray does not bode well for India. When Bangladesh (just before its birth) was caught in a war, over 10 million refugees poured into India. Because Bangladesh is still very poor, many hundreds cross over to India every day. When the LTTE and the government were waging a war in Sri Lanka, thousands of Sri Lankan Tamils fled to India. The lesson is that it is in India’s interest to help its neighbours remain politically stable and help in the growth of their economies. Hence the Gujral doctrine, which unfortunately seems to have been abandoned.
In the last two years, Nepal has suffered greatly and in many ways. In 2001-02, GDP growth was negative (- 0.5 per cent) and in 2002-03 there was a mild recovery to 2.0 per cent. There was a decline in manufacturing and a slow down in the service sector including trade and tourism. September 11, 2001 only made things worse. Tourist arrivals are reported to have dropped by as much as 40 per cent.
Nepal has a special relationship with India. The border is practically open. Even where there is some control (to prevent smuggling), the border is notoriously porous. Out of all exports from Nepal, 60 per cent is to India and out of all imports into Nepal 42 per cent is from India. Nepal has a modest level of trade with some countries of the world but, surprisingly, none with other countries of South Asia. If we look at trade between Nepal and the SAARC countries, 99 per cent of Nepal’s exports is to India and 98 per cent of Nepal’s imports is from India. Nepal’s dependency on external help is pathetic. It depends on Overseas Development Assistance (ODA), that is aid doled out by developing countries. It depends on IDA, the assistance from donors organised by the World Bank. And it depends on the Heavily Indebted Poor Countries (HIPC) Initiative. While some debt relief has been provided to 27 countries, Nepal is still outside this Initiative. In the hope of gaining market access, Nepal has just become a member of the WTO.
During this period of economic crisis, the politics of Nepal also turned into a nightmare. King Birendra and most of his family were killed in a bizarre tragedy. His brother, King Gyanendra, succeeded him and has tended to be a more assertive ruler. There was a succession of Prime Ministers. Eventually, Parliament was dissolved. The Army is in virtual control. There is a rebellion led by Maoist insurgents. There was a brief period of cease-fire, but it did not hold for long. The Maoists are reported to be in control of large parts of the countryside. Their aim is to over throw the monarchy and the ruling oligarchy.
The oligarchy — a clutch of families related by marriage, the most important being the Ranas — is the object of hate among a large majority of Nepalese. The Ranas virtually rule Nepal, they are enormously wealthy in a very poor country, their children study in the best schools in India and Britain, and they holiday all over the world. Since 1951, India has cultivated friendship with Nepal. Not the least among the reasons for doing so is the fact that Nepal is a ‘‘Hindu’’ country! A formal treaty of trade was concluded in 1951 and modified and renewed in 1961, 1971 and 1978. It was obvious that India-Nepal trade cannot be on a reciprocal basis, so non-reciprocity was built into the treaty in 1971. Nepalese goods with local content of 90 per cent was given duty free access. In 1993, the local content requirement was reduced to 50 per cent. All this did not help Nepal boost its exports to India. The first major break through was made in 1996. The requirement of local content was replaced by a ‘‘certificate of manufacture’’. Nepal’s exports to India surged — from Rs 228 crore in 1996-97 to Rs 1698 crore in 2001-02. In fact, Nepal had a favourable trade balance with India after 1998-99.
Undeniably, there was some misuse of the provision for ‘‘certificate of manufacture’’. Goods produced in other countries notably China — used Nepal as a transit and found their way into India under the duty-free regime. Indian manufacturers cried foul. The number of offending goods was small, they could have been easily isolated and taken out of the 1996 facility, and subjected to duty. Instead, the Government of India forced Nepal to renegotiate the treaty. A new treaty for five years was signed on March 2, 2002 and the Certificate of Manufacture norm was replaced by the value addition criterion. In respect of some sensitive items, quotas were fixed for duty free imports. The new regime is really a throw back to 1971.
The Nepal government and Nepal’s business community deeply resent the change. They think — and not without reason — that India has abandoned the principle of non-reciprocity. Nepal’s exports to India account for less than 1 per cent of India’s total imports and is more or less matched by India’s exports to Nepal. So, why abandon non-reciprocity? The brain behind the new treaty is believed to be Mr Brajesh Mishra who is reported to have told the Nepal government that trade concessions could henceforth be extended only on a reciprocal basis.
India is making a mistake. Nepal’s other neighbour, China, has come forward to extend aid and other concessions to Nepal. Although not in a big way yet, China has the capacity and the political shrewdness to exploit any opportunity that may present itself. The Maoists are reported to be receiving help from China. The strife in Nepal has already spilled over into the Terai region of India. India has a very large presence in Nepal — its Mission is the largest, but it does not appear that South Block is paying enough attention to the grave situation in Nepal.
Lord Pashupatinath has four faces looking towards four directions and one looking upwards. The King, the Army, the political parties and the Maoists seem to represent the four faces of Nepal. Like Lord Pashupatinath, they are looking towards four different directions. Unless there is some convergence among two or three of the key players, the situation in Nepal is likely to deteriorate.
A neighbour in distress or disarray does not bode well for India. When Bangladesh (just before its birth) was caught in a war, over 10 million refugees poured into India. Because Bangladesh is still very poor, many hundreds cross over to India every day. When the LTTE and the government were waging a war in Sri Lanka, thousands of Sri Lankan Tamils fled to India. The lesson is that it is in India’s interest to help its neighbours remain politically stable and help in the growth of their economies. Hence the Gujral doctrine, which unfortunately seems to have been abandoned.