Chinese Premier Wen Jiabao’s visit has proved successful in marinating cordial friendship with Nepal while at the same time preserving foredoom for action.

Chinese Premier Wen Jiabao  visited  Kathmandu on Januray 14th for four-and-half hour long visit. As were many speculations surrounding the nature of the visit, it has helped broaden the basis of mutual friendship, understanding and confidence between the respective countries. Wen is the highest level Chinese leader to visit Nepal in 10 years.  Nepal requested China to increase its annual aid to Nepal from 100 million Yuan to 200 million Yuan.  During the visit, discussion was also held on measures to be taken to promote cultural exchanges with necessary reforms in the existing agreements between the two neighbors. Moreover, talks with Chinese premier was focused on increasing Chinese cooperation in diverse fields including Nepal´s hydro power generation, infrastructure development and financial assistance to the Armed Police Force Nepal.

Premier Wen’s delegation signed eight agreements with Nepal including economic and technical assistance agreement, committing Nepal among other things, a grant assistance of 750 Yuan (Rs 9.75 billion) for the next three years. Under the agreements, China agreed to provide annual grant assistance of 200 million yuan (about Rs 2.60 billion) to Nepal, raising the aid volume by a third over what it was providing so far.  Though this will total the grant amount for the next three years to 600 million yuan, China also committed to provide additional 150 million yuan during that period -- making the total grant assistance package at 750 million yuan. The grant assistance will be used for the development of mutually agreed projects.

Wen also pledged special grant assistance of US$ 20 million (over Rs 1.65 billion) to the government to support the peace process. This is a budgetary support and will be used particularly for financing rehabilitation of Maoist combatants. During the bilateral talks, Nepal had tried to secure Chinese premier´s commitment for soft loans through Axim Bank for the development of large scale projects. But instead of making any commitment on credit line, China promised to do away with problems and complexities that Nepal faced in securing soft loans from China.

A Loans Operationalization Agreement, hence, has been signed to ensure easy access to Exim Bank loans.

China pledged financial and technical assistance worth 10 million yuan (about Rs 130 million) to enhance capability of Nepal Police. Another technical assistance package of 400,000 yuan (about Rs 5.2 million) too was signed for strengthening the Armed Police Force (APF).

Fundamentally, this technical assistance will go toward conducting study for the establishment of in APF college”.

The two sides also agreed to construct and manage dry ports along the six Nepal-China border points in a bid to facilitate bilateral trade and people´s movement. Under this, the two governments have agreed to develop international-standard dry ports and cargo terminals in Yari-Pulam, Rasuwa-Jilong and Kodari (Tatopani)-Zangmu (Khasha) customs. Dry ports at Kimanthanka-Dingri, Olangchungola-Riwu and Mustang-Ligzi, however, will be of bilateral standard. China further agreed to expedite the implementation of Tatopani Dry Port and upgrading and expansion of the existing Ring Road in the Kathmandu Valley.

In yet another agreement, China agreed to allow Nepalis residing within 30 km of the international border to use the pasture and graze their livestock on the other side of the border. During the bilateral talks, Nepali Prime Minister Bhattarai requested for additional grant and loans assistance from China for the development of hydropower and north-south highways.

Nepal also requested China to extend railway line that it was building up to the bordering areas to Kathmandu and also up to Lumbini. The Chinese premier said such an extension was highly possible and China was positive about it.

Wen also assured to enhance cooperation to ensure that the construction of Upper Trishuli 3A Hydropower Project, being developed with Chinese concessional loan, will proceed smoothly. He also positively acknowledged China´s participation in the construction of Pokhara International Airport.

In this connection, the two sides agreed to make full use of existing mechanisms like Nepal-China Joint Economic and Trade Committee and also decided to form a new Consultation Mechanism at foreign minister level.

Wen promised to encourage competent and well-established Chinese companies to invest and start joint ventures in Nepal. The two sides also agreed to continue discussions regarding signing of Bilateral Investment Protection and Promotion Agreement (BIPPA).

Nepal and China enjoy very close, friendly relations, on account of geographical proximity and close cultural and economic bonds. During this visit, the two countries will discuss a host of bilateral and regional issues, including expansion of trade, investment and energy ties. Preparations are on in full swing for the upcoming visit of Chinese

Nepal-China relations have always remained good and cordial. These relations have been marked by friendliness, mutual support and understanding and appreciation of each other's aspirations and sensitivities. The establishment of diplomatic relations between Nepal and China in 1955 formalized the centuries old contracts and traditional friendship. The recorded history of Nepal- China relations dates back to the days of Sronstan Gampo, in the first half of the 7th century, who has given the credit of introducing Buddhism with the help of his two wives from Nepal and china. The relations have expanded to the economic, cultural and trade fields as well. China has been a partner in Nepal's progress.

Along with further development of the friendly relations, the trade cooperation between the two countries is increasing rapidly. The trade relation with Tibet is very ancient. The trade between Nepal and China including Tibet Autonomous  Region (TAR)  of the People's Republic of China had undergone significant changes.

Some opines that the visit of Chinese Prime Minister Wen Jiabao to Nepal has been less political. It was more economic, trade and investment  related. Nepal which is located between world’s two fastest growing economies, China and India, could extract greater benefits. We need to encourage the Chinese investors as we have been doing with the Indian regime. It was highly  expected that during Prime Minister Wen’s Nepal visit BIPPA would be signed with China.

Exchange of High level visits:

The exchange of high level visits has greatly contributed to strengthening the friendly relations existing between the two countries. Such visits provide opportunities of broadening co-operation by identifying various areas of mutual interest in the fields of trade, investment, agriculture, sports, tourism etc. The Present visit of Premier Wen to  Nepal  is the first visit  at the high level after the restoration of Democracy in Nepal. Just to recapitulate, the official goodwill visit by late B.P Koirala in 1960 and the visit of Chinese Premier Zhou En Lai to Nepal had taken place in sixties.  The previous visit to China by Prime Minister  Girija Prasad Koirala in 1992 gave new dimension to Nepal – China relations.  Nepal enjoys excellent relationship with its northern neighbor China and is committed to further promoting and consolidating bilateral political, economic and trade relations. It was with this objective in mind and also to express the sentiments that Nepal attaches  great importance to its relations with China that Prime Minister Gririja Prasad Koirala went on an official visit to the PRC from March 16to 22, 1992.  In the changed political context in Nepal, the new government wanted to affirm that the relations between Nepal and China would continue to receive priority attention and be pursued with warmth, sincerity frankness and understanding the  visit gave an opportunity to exchange views on a whole gamut of issues of bilateral , regional and international importance.   . The visit of Nepali Premiere was followed by the visit of the  President , Jiang Zemin, to Nepal in December 1996, and this laid the foundation of reinforcing the lasting friendly relation on the 21st century. Subesquetly, Nepalese Prime  Ministers  Man Mohan Adhikary,  Sher Bahadur Deuba, Pushpa Kamal Dahal, Madhav Kumar Nepal also visited China.

Nepal has to benefit from the China's double digit growth and the market for China's products and the exportable products of Nepal for easy market access to China. For this to happen, there should be an exchange of visits of businessmen, trade delegation and participation in exhibitions and trade fairs in each countries.

China has provided huge economic cooperation for the development of Nepal.  Government of Nepal and the Nepali are  thankful for the assistance provided by the Chinese government in various sectors like road/transport, industries, water resources, health and education, sports, IT sector and culture and seek further assistance in the changed situation.

Meanwhile, Nepal seeks the help from China in promoting FDI in Nepal in the sectors like leather, shoes, silk farming, sheep farming, and agro processing and pharmaceutical industries. Nepal, in future, wishes to work together in inviting more Chinese investments in Nepal.

Chinese government has declared Nepal as her outbound tourist destination; however, the inflow of Chinese tourists to Nepal has not been up to the desired extent. So, to attract the Chinese tourists to Nepal, private sector needs to do a promotional campaign in China. In this regard, embassy of china in Kathmandu could help to promote the private sector of Nepal.

Government of Nepal in the recent past was seeking for the alternative way of importing Petroleum products from China and seeking an observer status in Shanghai Cooperation Organization. The private sector assured their full support and cooperation needed to materialize.  The proposal of running China-Nepal Direct Cargo Service by the Chinese Railway Company would further help to develop the economic relations of our two countries. Moreover, it would also help the Nepalese businessmen to export their goods to the third countries using this service. However, showing the pro & cons, the in-depth study should be carried on mutually agreed basis.

There is a great potential in promoting business and investment between Nepal and China, if the railway line linking Mainland China and Lhasa is extended to the Nepal-Tibet border. Nepal would also like to see herself as a transit country between the China-India trades.

Nepal has adopted liberal industry policy since 1990. Nepal entry's into the World Trade Organization has also helped create friendly climate for the foreign direct investment in Nepal. Since, China and most of the SAARC countries are also members of WTO, Nepal is always of the opinion that the programs for LDCs should deserve due consideration.  Now, Nepal is the Chairman of the LDC countries grouping.  The participation of China in the SAARC Summits in last few years as observer country would help in raising the economy of the Region as a whole. Besides, the region can get the benefit of huge market entry.

Nepal would like to seek China's support and cooperation to teach Chinese language volunteers to the business community and also seeks the cultural and sports exchange programs like Chinese acrobats, which will be taken care during the Prime Minister's visit.

In the changed political context, the visit by the Nepalese Prime Minister to China will be instrumental in further enhancing the bilateral tries existing between the two countries.

Zero Duty for Nepal

In a landmark achievement, Nepal and China in 2010 signed an accord that will allow zero-tariff entry facility to 4,721 Nepali exportable items in the Chinese market. The list of commodities enjoying the facility covers some 60 percent of total products that Nepal exports to China. The majority of them are agricultural produces like mushroom, orange, cherry, coffee, apple, ginger, tomato, onion, strawberry, honey, cauliflower, broccoli and grapes.

Nepalese industries are enjoying preference in exports as non-LDC countries provide special dispensation to LDCs under these various trading arrangements. The direct or joint venture investment on Nepalese agriculture, mineral, textiles, leather, cement, hydropower and food processing industries deserve comparative advantage. As Nepalese products enjoy duty-free and quota-free access to EU and other countries, if foreign direct investment could be made from China , the products could be easily exported to Lhasa, China and other overseas countries from Nepal

Trade Deficit and Prospects for Exporting:

Nepal incurred a deficit of over Rs. 43 billion with China during 2010/11. Nepal exported goods worth Rs. 746 million to China during that year, a sharp drop from Rs. 1 billion a year earlier. In contrast, imports amounted to Rs. 45.63 billion, up from Rs. 39.21 billion in 2009/10. Nepal mainly exports wheat flour, vegetable fat, coffee, sugar, juice, paints, incense sticks, handicraft products, carpets and bricks to China and these items do hold good export potential in the bilateral trade. China currently offers zero tariff facility to Nepal on 721 items. However, Nepal’s export to China has remained negligible because of the taxes levied by the government of the Tibet Autonomous Region as well as imposition of non-tariff barriers and the complex payment system. Delay in informing Nepal about changes in policies and regulations, communication gap due to the language barrier, a complicated quarantine system for export of potential items, and low competitiveness of Nepali goods are some specific reasons behind the dismal Nepalese export to China.

It is believed that due to the present arrangement of the zero duty , Nepal's trade deficit with  China will gradually decrease provided Nepal can show its competitive strengths.

Trade deficit, on part of Nepal, seems to be continued unless both the governments of Nepal and China take immediate and effective measures. Frequent but minor trade disputes caused by the customs procedure, high tariffs in Chinese customs and unequal treatment to commodities of same kind in various Chinese customs points and Autonomous Tibet Region are some of the issues that should be amicably resolved to give a smooth movement of Nepalese goods to Chinese market.

The main cause behind such trade disputes is lack of knowledge on Chinese legal system and procedures among Nepalese entrepreneurs. Therefore, it is necessary to enlist the customs charges including rules and regulations in English language at the Zangbu Customs, among others.

Along with the unequal treatment to same items of Nepalese products in Chinese customs, even the bills and invoices of the related goods are sometimes altered. There is an immense need to resolve this practice and this could be done fairly if quality inspection and certification mechanism is brought into operation. At the same time, we also need a mechanism for smooth flow of goods through the border to enhance bilateral trade. In order to do so, we need mutual recognition on self-certification mechanism.

In sum, as Nepal is going to be the transit country between India and China lot of opportunities are there. It is for the concerned to take the benefit from the waving of duty in the economic power of the world.

Investment:

Chinese investment in Nepal is growing, and has potential to further growth. Chinese investors are found interested in making investment in hotels and restaurants, electronics, radio paging services, readymade garments (pashmina), nursing home, hydropower, civil construction, etc. Improved law and order situation in the country and enhanced publicity in China could further increase Chinese investment in Nepal. FNCCI, especially under the framework of Nepal-China Non-Governmental Cooperation Forum, is also working towards attracting Chinese investment.

Tourism:

The Government of the People’ s Republic of China has designated Nepal as one of the tourist destinations for its people. At the same time, Nepal has made the following arrangements to attract tourists from China:  Chinese Yuan has been made convertible for tourists and businessmen,  Government of Nepal has waived visa fee for Chinese tourists, and Nepal’s Tourism Ministry and TAR Government have formed a joint committee to promote tourism

Economic Co-operation:

Chinese assistance and the economic co-operation occupy a prominent place in the economic development of Nepal. The extensive co-operation has played significant role in the field of development of transport and industry.

China has been extending co-operation to Nepal with a view to helping it in its efforts for economic development. An agreement relating to such co-operation was signed at Beijing on March 21, 1960. In 1961 another agreement relating to the construction of 104 km. Arniko High way ( Kathmandu –Kodari) was signed.

The various projects which have already completed under Chinese aid in the transportation sector, inter-alia,  includes:  Arniko Highway (104Km.), Arniko Highway (Rehabilitation), Kathmandu Bhaktapur Road ( 13 km), Prithvi Highway and Surface Pitch Paving ( 174 km), Narayanghat-Mugling Road ( 36 km.),  Gorkha Narayanghat Road,  Kajhuwa-Gorkha-Road ( 24 km), Kathmandu-Bhaktapur Trolly Bus 9 14 km), Kathmandu Ring Road ( 27.2 km), Pokhara-Baglung Road     In the industrial development sector, Chinese aid includes:  Heatauda Cotton and Textile Mill, Leather and Shoe factory(  Bansbari); Brick and Tile Factory( Bankatapur); Bhrikuti paper Mill ( Gaidakot); Lumbini Sugar Mill (  Nawal Parasi)  and Gorkahkali Rubber Udhyog.

As regards the hydro electric sectors, the assistance Nepal received were: Sunkoshi Hydroelectricity Plant, Pokhara Water Conservancy and Irrigation Project (Multipurpose), Sunkoshi Vicinity Electricity Transmission Project, Sunkoshi-Kathmandu Electricity Line Transmission Project

Other projects being completed by the Chinese assistance are: The Birendra International Convention Centre, BP Koirala  Institute for Cancer etc.

Ongoing China-aided Projects: Syafrubesi-Rasuagadhi Road, Civil Service Hospital, Polytechnic Institute in Banepa Nepal Television Metro Channel Station Expansion and Improvement.

In sum, Chinese Premier Wen Jiabao’s visit has proved successful in marinating cordial friendship  with Nepal while at the same time preserving foredoom for action. Mutual esteem, tolerance and perseverance from both the countries are required towards this end.

(The writer is General Manager of Nepal Stock Exchange (NEPSE). He can be reached at: This e-mail address is being protected from spambots. You need JavaScript enabled to view it )