The trans-Himalayan railroad has been in the news lately. And like everything else in Nepal, it is difficult to separate hot air from a cool breeze.
The Chinese cannot hide their irritation anymore about Nepal’s politicians day-dreaming. Ambassador Hou Yanqi was as blunt as a diplomat can be at a recent interaction in which she said (we paraphrase): “Not so fast.”
Which way will the Tibet-Nepal railway go?, Ramesh Bhushal
Dream Train, Ramesh Bhushal
The extension of the Qinghai-Tibet Railway to Nyalam and Kerung, then onwards to Kathmandu, Lumbini and the Indian border constitutes a part of Beijing’s Medium and Long-term Railway Network Plan. But laying train tracks on the rugged terrain of the Tibetan Plateau has been a daunting challenge even for the Chinese.
After the Lhasa line was connected to Xigatse and beyond, it was expected to reach Kerung on the Nepal border by the next year, but now it looks like it will be pushed back five more years. Yet Nepal’s hyperbolic politicians talk about it as if the locomotives will be chugging in by next Dasain.
The railway to Nepal was listed as one of the 64 Belt Road Initiative (BRI) projects at the second Belt and Road Forum in Beijing in April. The ambitious BRI aims to improve China’s overland connectivity to countries across its western border in Central Asia and beyond to even Europe. The Nepal link is not directly on the main line, but part of a sub-Silk Road that could, in the future, offer an alternative to two-way trade between China and India, which today follows a maritime route through the Strait of Malacca.
China is India’s largest source of imports, and it is in Beijing’s geostrategic interest to find land alternatives to choke points on its sea routes to the Indian Ocean. Two-way trade between India and China is now nearly $100 billion a year and a stable land corridor would be in both the countries’ interest. Besides that, China wants to integrate its southwestern regions of Tibet and Xinjiang with central and southern Asia.
But what does Nepal get out of the proposed rail link? First of all, theoretically, we can have cheap and reliable alternative access to sea ports. That Nepal needs this trade bypass is a no-brainer considering the five-month Indian Blockade of our southern border in 2015. Despite its initial cost, train travel is cheaper and environmentally much cleaner. A railway track through the mountains could interlink trade and tourist travel between the two countries, and be a catalyst for other train lines within Nepal.
Nepal’s politicians, including Prime Minister K P Oli, came to power riding the nationalist wave after the Blockade, and promised better access to the north. But one just has to see the slow progress of the road on our side of the Rasuwa border today to realise that it was all talk. Whatever progress there has been in upgrading the checkpoints in Rasuwa and Kodari, or the dry port in Larcha, are being built by China in our territory.
The biggest uncertainty about the trans-Himalayan railroad is who is going to pay for it, and if it will pay for itself. The 170km stretch from Kerung to Kathmandu will cost at least $5.5 billion. It is unlikely the Chinese will just gift the railroad, and a loan could be a debt trap. Unless Nepal’s exports to China rise dramatically, this railway will not make much economic sense.
Nepal’s trade deficit with China is expected to grow to $15 billion this year, as imports rose by 40% and exports fell by 30%. A cargo train makes sense if we can use the wagons to send goods back to China, not just to buy more.
China used its comparative advantage in the past to produce labour-intensive goods which it exported worldwide to buy knowhow. Now, China has attained an income level where some of those goods can be produced more cheaply elsewhere: like Nepal. In the 1990s, tax rebates attracted multinationals to set up manufacturing bases in Nepal for export to India. We do not have to reinvent the wheel.
Greater connectivity between India and China through Nepal, however, could open a new trans-Himalayan trade corridor which can offer Nepal another chance to be a manufacturing base for specialised products to be sold to both our giant neighbours.
But for that, we need a strategic vision and pragmatic policies. Nepal’s strategy should be to serve as a land bridge between India and China and get these two giant locomotives to pull in the same direction.