Nepal signs trade point pact with China to offset India's trade monopoly

23 Mar 2016


Nepal on Monday signed a transit and transportation treaty with China for its third-country commerce, in a move to help Katmandu end is overdependence on Kolkata's Haldia port for international trade.

The two countries signed the agreement along with nine other treaties in Beijing, a day after Nepal Prime Minister KP Sharma Oli began a week-long trip to China.

Oli's move is likely to end New Delhi's hold on the landlocked Himalayan nation's trade and perhaps help avoid another Madhesi blockade of India trade points that caused acute fuel shortage in Nepal a few months ago.

Oli's maiden visit as the Nepal prime minister comes at the invitation of his Chinese counterpart Li Keqiang.

The visit is significant in the light of Nepal's efforts to reduce its decades old dependence on India after Madhesi protestors in southern plains blocked supply trucks coming in from the southern neighbour.

The five-month long blockade caused a huge crisis as fuel and medicine supplies dried up. The blockade halted for months Nepal's third-country trade, apparently prompting the Nepalese government to look for an alternative to the Haldia port.

Kathmandu blamed New Delhi for supporting the protestors who were agitated over a new Constitution that denied them their due through a realignment of constituencies. India has denied any involvement in the agitation.

The transit agreement with China gives Nepal an option to use the next nearest Tianjin port in China that is 3,000 km from Nepal border. India's Haldia port is 1,000 km away.

However, there are concerns that Nepal cannot immediately use the Chinese port as infrastructure in the tiny country is poor and transit points from Chinese are located at a higher altitude.

The two countries also signed an agreement for construction of a bridge in Hilsa, far west Nepal that will connect the republic with Tibet. Hilsa was a traditional trade route to Nepal.

China has also pledged $216-million soft loan to Nepal for construction of a regional airport in the second largest city of Pokhara, some 200 km from Kathmandu.

China also got Nepal to sign a Free Trade Agreement (FTA) to boost bilateral trade. China has also agreed to explore oil and gas resources in Nepal and will provide all technical and economic support for it.

One of the commercial banks in China has also agreed to open its office in Nepal. Similarly, Nepalese banks can also open their branches in China.

China has also agreed to help in installation of solar panels in 32,000 Nepalese households.

Besides, the two countries signed agreements in the fields of science and technology, sister-city relations between various Nepalese and Chinese cities, and establishment of Nepal's Consular General Office in Chengdu, China.

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