Belt and Road helps Nepal diversify relations and expand trade ties

Belt and Road helps Nepal diversify relations and expand trade ties


Despite a high amount of political pressure exerted by India, Nepal signed a Belt and Road initiative deal with China on May 12, three years after a preliminary agreement.

It is believed that Nepal would have signed an agreement earlier if the government of Khadga Prasad Oli had not been toppled last year. During the formation of Oli’s successor government led by Prachanda, most India- and Kathmandu-based newspapers reported that the new government formed in Nepal hewed to New Delhi’s Nepal interests.

Moreover, many Nepalese intellectuals had believed that Chinese President Xi Jinping would visit Nepal just ahead of the Goa BRICS summit last year and would announce massive financial support under the Belt and Road framework. But Nepal’s political situation took a different course.

Immediately after the agreement in May, Nepalese Ambassador to India Deep Kumar Upadhyaya said, “It is important to look at the overall situation. We are aware of India’s reservations about the China-Pakistan Economic Corridor but Nepal is not taking any position on the issue by joining the Belt and Road initiatives.”

This diplomatic reply of Upadhyaya makes clear the high pressure of India on Nepal not to be involved in the Belt and Road initiative.

There are five aspects of the Belt and Road initiative: policy coordination, facility connectivity, unimpeded trade, financial integration and people-to-people bonds. There is a long route to go for full-fledged implementation of the initiative in all its dimensions.

Nepal is more focused on and has prioritized facility connectivity. The dream of the Belt and Road initiative is to create a community of common destiny. Nepal still has to do many things, even at the level of policy coordination, which is related not only to facility connectivity but also to unimpeded trade, financial integration and people-to-people bonds. Nepal seems reluctant to stretch out due to pressure from its southern neighbor.

The Belt and Road deal has allowed only collaboration in construction of cross-border railways and highways, transmission grids, parks, special economic zones, airports and dry ports. But China has been emphasizing all dimensions of the Belt and Road initiative. Other dimensions are also very important for Chinese trade, commerce and promotion of its soft power around the globe.

In contrast, the other aspects of the initiative may be worth carefully reconsidering for countries like Nepal, which do not produce anything that China specifically demands.

One way the Belt and Road initiative can potentially help Nepal is from its trade deficit and highly unbalanced dependence on India for trade.

Prior to the Belt and Road deal, former prime minister Oli inked a Transit Trade Treaty with China in March 2016. The deal opened trade between Nepal and the Chinese port of Tianjin, almost 3,500 kilometers away.

If the Belt and Road deal and the transit trade treaty are fully and honestly implemented, Nepal will start to shift from Indo-centric geopolitics toward globalism based on realpolitik. Therefore, the transit trade treaty has the potential to be a breakthrough in Nepalese history for the diversification of its relations and trade.

Nepalese intellectual Sridhar K. Khatri has written that the international environment will be quite conducive to Nepal’s diversification, enabled by its new deals with China.

These deals will be the gateway for Nepal to diversify trade and diplomatic relations beyond neighboring countries.

The author is a Kathmandu-based foreign policy analyst having a Master’s degree in International Relations and Diplomacy from Tribhuvan University.