China’s One Belt One Road Initiative and Opportunities for Nepal


135444908_14661426174961nBy Pratiksha Ghimire and Yunesh Pratap Singh–

The underlying or the basic physical facilities required for the operation of other growth activities for the smooth functioning of an economy are called infrastructures. The term ‘basic’, however, grows in its scope as the world advances. Whereas the basic needs of human beings include food, shelter and clothing; in today’s competitive, complex, and digitized societies, it encompasses other assurances as well, such as education, health care, social security and the like.

Likewise, basic infrastructure today has moved beyond its traditional understanding to include not only roads, bridges and electricity but also other essentials such as information technology, energy, proper housing, apt and adequate sanitation among others. However poor countries, embroiled in struggle for sustenance, find it difficult to keep pace with these changing demands thus pushing them into a vicious cycle of underdevelopment while the rest of the world moves ahead. Nepal, quite evidently and no less miserably, is one of those countries.

Context

China in the north and India in the south of Nepal are the two emerging economies of the World. China’s unprecedented growth has been attributed to its timely and robust investment in infrastructure. The Chinese government didn’t take long to realize the importance of railways, super highways, roads, telecommunications, and electricity. Construction of sufficient roads and railway networks allowed heavy manufacturing industries to flourish in China since the early seventies and this, coupled with its labor abundance, made China a manufacturing destination of the world.

One hundred million Chinese benefitted from development of infrastructures during late 1990s to 2005. From 2001 to 2004, investment in rural roads grew by a massive fifty one percent annually, and this investment in infrastructure is still being continued. This kind of consciousness, about the sheer importance of infrastructures, in the Chinese leadership early on and its admixture with other reforms, has yielded astounding results for the country and its people and is a cause of awe for the rest of the world.

The Indian establishment too, slowly but steadily, is starting to take cognizance of the importance of investment in infrastructure. The investment allocation in infrastructure has roughly been doubled and the railway budget has been increased by one-fifth of the previous year for the fiscal year 2016-2017. “They have acknowledged that infrastructure is the big elephant in the room.

Once these measures are implemented the elephant would start dancing and so will the overall economy” said Vinayak Chattarjee, head of the Infrastructure Service Company. India’s economy is set to get a boost with constructions of new infrastructures, for the success of which it is seeking private sector’s involvement too. If everything goes as planned, the Narendra Modi-led incumbent government aspires to add over one percentage point to its economic growth.

Case of Nepal

Turning to Nepal, Nepal’s policy makers have been dilatory to pay heed to the importance of infrastructure. History shows that Nepalese rulers desired cars before they could sense that cars needed roads to run. This kind of leadership has led Nepal nowhere. There has always been a paucity of a lucid vision regarding investment in infrastructure. Even the then Baburam Bhattarai government’s much-touted road expansion initiative in 2012 was more a product of circumstantial exigencies than a well thought out vision.

Roads are for network, connectivity, and movement. Roads are meant to reach to the most remote of places, to be decentralized; centralization of roads within valley and cities is contrary to its very nature. There has to be as many roads connecting rural places with each other and with cities as there are road networks within cities. Likewise, bridges and telecommunication networks, transmissions lines are the required basic infrastructures of today’s Nepal, which however, still have remained mostly elusive.

Agriculture and tourism have been backbones of Nepalese economy over the years. The potential inherent within these sectors to contribute to the economy has been marred by low investment in infrastructure. This is evidenced by the impediments in proper marketing and distribution of agricultural production due to the lack of apt, efficient and perdurable road networks and effective transport connection. Likewise, as the slogan “Wild west and virgin east” suggests west has remained wild, while the east has remained unexplored because of the lack of proper roads, bridges, hotels and transportation. Similarly, while on the one hand, unavailability of electricity has been one of the major hindrances (it wouldn’t be an error to the state that electricity and stability have been synonymous; by being unstable). On the other hand, hydropower generation, which in itself has the potential of being an industry and on the benefits of which most scholars concur, can yield dividends only through investment in infrastructure such as transmission lines.

Moreover, Nepal’s prospects of benefitting from becoming a “bridge” between two giant economies, its ambitious dream of graduating from least developed country to a developing country (that too on the backdrop of the devastating earthquake) and erasing the curse of “land-lockedness” to grasping the blessings of “land-linkedness” hinges on it taking the fundamental step of investing on infrastructure.

However, Nepal has a serious funding gap of $13-18 billion in infrastructures and the government and its apparatuses are marked by a deficient spending capability to boot. Data shows that, the state treasury hit record high surplus of NRs.206 billion this year, as the allocated capital budget couldn’t be spent. Whatever little is spent, is spent in a haste, and that too during the end of the financial year which is susceptible to malfeasance.

Possibilities brought about by China

Nepal can take advantage of having a friendly and cordial relationship with China, which has brought an ambitious dream but at the same time which also holds the capacity to turn it into a reality- “One Belt One Road Initiative (OBOR)”, propounded by the Chinese President Xi Jinping in Kazakhstan in 2013 during his official visit. In the 60 years of Nepal-China diplomatic relations, building of roads has been an important gesture of the Chinese support to Nepal. The Kodari highway, built in 1965, helped Nepal link with the China’s Tibet autonomous region when Nepal’s only way was towards south. China’s support to Nepal in recent years has deepened and especially after the devastating earthquake last year it has extended immense brace both symbolically and financially.

The OBOR, which is the revival of ancient silk trade route, is an instance of China’s focus and expertise on infrastructure for development. More than anything else its interest in South Asia is of connectivity and trade. A report of Rand Cooperation about China’s foreign aid and government sponsored investment activities (FAGIA) published in 2013, showed that unlike other regions such as Latin America or Africa, China’s FAGIA in the South Asian region is focused on infrastructures like road, bridges, ports among others. Traversing 65 countries with a population of over 4.4 billion, the OBOR has the potential to benefit countries both big and small and even those which are not directly connected to the network. The United Kingdom, which has already expressed its assent to the Asian Infrastructure Investment Bank, is seeking to benefit in the form of financial services and investment opportunities. Likewise, Georgia is looking to develop itself as a hub between Asia and Europe through OBOR. Nepal, given its location in South-Asia, should also get benefit in a similar manner from the outstanding initiative.

A famous proverb “give a man fish and he will eat for a day, teach a man fishing he will eat for a life”, implies that making someone able to do things by themselves by eradicating their impairment will make them self-reliant. Likewise, building roads will allow people-to-people contact and their movement, allow them to engage in trade, pursue education and explore for new opportunities. Access to roads and bridges can make them more independent. Nepal should embrace China’s “One Belt One Road Initiative” with the same spirit.

Thus, irrespective of the model of cooperation adopted and despite sounds of discontent on Nepal having been left out of the BCIM Economic Corridor (Bangladesh, China, India Myanmar Economic Corridor), the OBOR along with the funding opportunities from the AIIB stands to benefit Nepal at a time when interest in funding trans Himalayan connectivity from other sectors has been few and far between.

Likewise, the initiative also has the potential to mollify Nepal’s growing concern regarding harmonization of development projects with local policies and priorities as it is based on the principles of joint consultation, joint building and joint sharing. Likewise, recent developments in Sino-Nepal relationship, such as the 10-point agreements, MoUs and LoEs concluded between Nepal and China during Prime Minister K.P Sharma Oli’s recent landmark visit to China, which among others included Transit Transport Agreement, Agreement on the construction, maintenance and management of Xiarwa Boundary River Bridge, (Hilsa) Humla, and the MOU on launching the joint feasibility study of China -Nepal Free Trade Agreement is also a step in the right direction to reap the benefits out of OBOR.

Conclusion

It is highly imperative for Nepal to expeditiously address its infrastructure gap to move up the value chain and further integrate with the global economy. The OBOR initiative along with the proposed agreements with China has the potential to do just that. However recent political upheaval in Nepal will surely raise doubts about the implementation of the bilateral deals reached between the two countries during the prime minister’s historic visit to China in March this year. Be that as it may, our leaders should put aside their political interests and be prepared to reap whatever has been sowed till date and remain alert to the possible benefits that China’s initiatives can bring to Nepal. Only then will we be able lay the basic foundation for the economic transformation of the country that has been promised to us and that we all yearn to see.

(Ghimire and Singh are pursuing Master’s in international Relations and Diplomacy(MIRD) at the Tribhuvan University, Kathmandu, Nepal.)

Published on July 15, 2016

References:

http://www.spotlightnepal.com/News/Article/Was-Nepal-a-Soft-Power-Victory-for-China

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http://www.reuters.com/article/india-economy-infrastructure-idUSKBN0OH17Z20150601

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https://thehimalayantimes.com/nepal/chinas-obor-project-will-also-benefit-nepal/

 

 

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