July 29, 2011


[China is an opportunity for Nepal and South Asia –at least the Hindu Kush Himalayan regions of it - because, with China’s new economic and development policy, the centre of gravity of its  economic growth has and will move towards the hinterland of South West China and Central Asia from its currently dominant eastern seaboard. In the process, unfolding right before our eyes, unimagined opportunities with many new Silk Routes. It may be hypothesized that the ‘centre’ of Asia, henceforth, shall be in the regions of TibetQinghaiGuansuSichuanKunming and Xianjian, which are all in the immediate neighbourhood of  South and Central Asia.]

By Madhukar Shumshere  J B Rana

Image: Naxi Manuscript collection
Journalist  Kanak Mani Dixit has just written that ‘Between Sycophancy and Adventurism’  (Republica; July 27-28,2011) that “China’s diplomacy is meant to serve China and not Nepal” , as if Indian diplomacy or US diplomacy or Norwegian diplomacy is to serve Nepal and not their own national interests? Perhaps, he’s been smitten by the once-upon-a-time Bush-Blair’s airy- fairy ‘ethical diplomacy’ that saw nations as ‘good’ and ‘evil’ albeit with Christian lenses.

The fundamental question we, as Nepalese, must ask ourselves is this: is China a threat or an opportunity for Nepal? This author believes that it’s an opportunity not just for Nepal but all of South Asia. And that is why all South Asian nations welcomed it into the SAARC as Observer—albeit India reluctantly: since, other than the George Fernandez who sees China as an undiluted threat, India is yet ambivalent. Being still undecided as to what, where and how much cooperation, coordination, competition, conflict or just communication for confidence building?

Asia has emerged as the new geo political and geo-economical power house of the globe after around 300 years of imperialism and colonialism with total marginalization of the once flourishing Asian economies; exploited and left to forcibly trade with the metropolitan country only as slaves.

This structural change has been made possible, firstly, by the post-WW II rise of Japan from the ashes with its spellbinding economic miracle and its judicious adaptation of tradition with modernity during 1945-80. Japan laid the seeds of Asian geo-political and geo economic independence and self reliance: and implanted geo-psychological self confidence by virtue of its modernization found on its own civilization and cultural ethos.

Thereafter, the four modernization drives of China, since the late 1970s to this day, rendered China as the world’s factory for manufacturing of mass based, high quality consumer goods with intermediate technology maximizing economies of scale with economies of scope. And, since the 1990s, with the initiative of Prime Minister P V Narasimha Rao in India,  Asia’s renaissance is  irreversible  as India, reluctantly, launched its economic and financial reforms by dropping the ideology of Nehruvian socialism that engulfed Nepal too.

China is an opportunity for Nepal and South Asia –at least the Hindu Kush Himalayan regions of it --   because, with China’s new economic and development policy, the centre of gravity of its  economic growth has and will move towards the hinterland of South West China and Central Asia from its currently dominant eastern seaboard. In the process, unfolding right before our eyes, unimagined opportunities with many new Silk Routes. It may be hypothesized that the ‘centre’ of Asia, henceforth, shall be in the regions of Tibet, Qinghai, Guansu, Sichuan, Kunming and Xianjian, which are all in the immediate neighbourhood of  South and Central Asia.

Nepal assumes a new geo strategic importance as the buffer between China and India –the Gangetic plains. Especially, as the huge defence build up in the Tibet plateau and the construction of the Karakoram highway and railroad connection from Beijing to Lhasa-- and soon beyond to the borders of Nepal and Sikkim—make it that much more strategic, in depth and width,  in the 21st century as compared to the 19 and 20th centuries. 

 China’s high speed railway plan seeking to connect Kunming to Europe  via the Central Asian Republics will, coupled with its plan to build gas and pipelines to meet its energy needs,  will  add a new dimension to regional connectivity by integrating Europe with Asia by land. Undoubtedly, one may expect Turkey and Russia to be a part of this process as the BRICST nations playing a major role in the 21st century multi polar world. 

China has already started an informal strategic partnership when it announced that it was to fund a $ 3 billion investment plan to build Lumbini as a world peace city to honour Lord Buddha in much the same manner as the Vatican and Mecca are to Christians and Muslims. This news is of immense geo psychological significance for all Nepalese as they now are starting to look North, so to speak, from the psychosis of an India locked, land-locked nation with no access to the High Seas. By all accounts, this investment decision signals a radical shift in Chinese foreign policy involving not  just state to  state diplomacy but, also, people to people diplomacy with space being given, henceforth,  to Buddhism and Confucianism in Chinese society.

For a solid strategic partnership, given that 85% of Nepalese are Hindus,  it behoves China to diversify its people to people diplomacy to  embolden the world Hindus geo psychologically by allowing them to build a Holy City in the area of Mt Kailash and Lake Mansarovar funded by the global Hindu diaspora. With such acts of enlightened spiritualism forthcoming, China will surely win the hearts and  minds of the Hindus, Buddhist and Bon peoples  with its soft power,  high voltage  cultural diplomacy to build world heritage sites  with or without UN engagement.

Having the UN agency and the active involvement of the UN Secretary General, Ban Ki Moon, is a far sighted idea as it is in Nepal’s interest to become the Zone of Peace and a neutral state with guarantees from the UN Security Council and all regional powers.
 It may be underscored here that Nepa’sl ZOP concept was endorsed by 116 nations except India and its ally the erstwhile USSRUS Secretary of State, Hilary Clinton, while visiting India recently, has wisely recalled the relevance of the Congress of Vienna, 1814-15, for the emerging multi polar world of the 21st century to garner world peace and security. 

Hopefully, global diplomacy post NATO withdrawal from South Asia, will move towards a Congress of Kathmandu, a s the capital of SAARC, to create not one but three Zones of Peace in South Asia: namely, Nepal, Afghanistan and Kashmir.  Failing this South Asia will become even more dangerous place than President Bill Clinton had originally imagined. Should the Congress of Kathmandu materialize it will liberate South Asia from the deadly stranglehold of its colonial history and raise it to being a Super Power on par with the US and China— if not greater.  All it needs is for the Congress of Kathmandu is for SAARC to invite Russia and Turkey as Observer nations. 

Political parties in Nepal must forge a national consensus on its foreign policy anchored on strategic partnerships with Bangladesh, China and India and a clear vision on its role in multilateral and regional diplomacy.  One would hope that UN, WTO and SAARC would be core pillars of its foreign policy and we accede to as many international treaties as relevant.  In particular Nepal must push all the coastal states to accede to the New York Convention on Land Locked States 1965 and  ensure that  as a land locked  of the  21st century it provides transit rights to all its neighbouring states and also its peoples that wish to go to a third country as refugees. 

Foreign policy must never be allowed to be hostage to any province of Nepal. It matters not which (ethnic or regional) province Lumbini falls under: an d if it does, then, political parties best agree to declare such heritage sites, be they cultural or natural, as central territory just as they would declare Special Economic Zones or Export Promotion Villages or Zones as falling under central jurisdiction.

Nepal sorely needs to develop new growth zones beyond the Kathmandu Valley and the Bagmati corridor. Pokhara,  Lumbini and Mt Kailash-Mansarovar are solid opportunities to usher regional balance. They are the ‘golden eggs’ for Nepal’s tourism and sooner it takes shape the better. One may suggest that Special Autonomous Development Authorities should be created in the spirit and letter of people-public-private -partnerships (4Ps, not 3Ps) .

Perhaps others for the proposed SEZ at Panchkhal , which should be a SAARC- SEZ that will allow value adding by all South Asian nations for exports to  China.  By no means should a moratorium be considered, as suggested by Kanak Mani Dixit, since the development show must go on, so to speak.  The Prime Minister’s Office must take full command over these programmes as it is likely to be hostage to bureaucratic bungling as it is heavily politicized and serves as fiefdoms of various bilateral and multilateral aid agencies.

Let  Secretary General Ban Ki Moon and  our UN Permanent  Representative negotiate on the intricacies of whether the Lumbini Project should be managed by UNIDO or UNESCO or whatever. However, what Nepal should be seeking from China is to relocate its labour intensive manufacturing into the Pokhara- Lumbini growth axis to replicate the “flying geese” that Japan had set out for East and South East Asia to drive their industrialization process and eradicate poverty. What could be better for Nepal socially and economically than utilization of our human capital here in Nepal than to have the youth migrate overseas.

China has provided Nepal duty free access along with all other Least Developed Countries. A strategic partnership would necessitate that it be given new meaning with an Integrated Commodities Agreement (ICA) where a few commodities are targeted for exports to China seeking all manner of backward and forward linkages so as to transform the rural economy. One may use the FNCCI’s One Village One Product concept for this bilateral export strategy. 

Nepal’s competitive advantage lies in water resources, tourism, agriculture and agri-manufacturing, (including herbs, forestry, fisheries, floriculture and livestock), water and soil and mountain engineering (dams, roads, tunnels, irrigation); education and health.
It may be interest to China to joint venture with Nepalese educational institutions to set up a  China-Nepal University for  Multiculturalism, Science and Technology with the vision to bring, under one  roof of learning,  the Himalayan peoples to discover ways and means to create a green economy founded on their cultural heritage and eco-diversity. Development of nanotechnology to grapple with the challenges from climate change and finding ways and means to conserve and store energy could be other areas for strategic partnership along with advancement of herbal  medicine.

Exploration of minerals, gas and oil and collaboration in telecommunications and IT and soil engineering, land reclamation and disaster management will be mutually beneficial. 
China has the two largest banks in the world. It is time to  have a Chinese branch bank in Nepal and similarly for a Nepali bank to be established in China.  A joint venture to start a Nepali Reinsurance Corporation would be extremely beneficial for Nepal’s balance of  payments as well as its insurance industry.  Along with opening of bank branches, it would be most advantageous  if China could provide a soft medium term loan to Nepal to permit it to move to a managed floating exchange regime  with India such that the advantages of import substitution is not lost to  it, which has indirectly been  subsidizing Indian imports to Nepal with an undervalued foreign exchange rate. 

In conclusion, the Budget Speech of 2005 lays down the correct vision for a Nepal in the era of the Asian renaissance : as a secular Hindu state wholly subscribing to social pluralism and political devolution; ; as a transit economy between South and central Asia; as a bridge country between two great civilizations;  as a South Asian capital within SAARC; as the  financial and arbitration centre of South Asia; as a regional centre for peace and disarmament;  as the voice of the Himalayas in the world to save  Planet Earth, and last but not least—as a boy politic that pragmatically yields the lead role for economic growth to the private sector based on dialogue, consultation and partnership with strict application of the rule of law and independent regulation of market forces.
What is a miss is political stability without which nothing will materialize-- except Nepal being reduced to absurdities of inclusive politics in an ideological battleground over run by foreign intelligence agencies and a mafia economy of cartels and syndicates threatening regional peace and security.  What is also amiss are national institutions for its international identity which can only be projected by Hinduism, Buddhism and the Monarchy restored. These three institutions will guarantee national unity, sovereignty, independence, pluralism and democracy—and the Congress of Kathmandu internationally guaranteed its territorial integrity and neutrality.   A new Sino-Nepal Treaty of Peace and Friendship is eminently desirable.  

 Asian visionary statesman, Lee Kwan Yew, foresaw Tibet and Nepal as the core strategic fulcrums of Asia which is about to take form  as we  harness our vast water resources and opt for clean energy, land and river transportation; and seek culturally relevant solutions to  global warming and global unhappiness in a world blinded by materialism and corrupted by infinite greed where money power has disenfranchised and alienated citizens of the traditional liberal democracies. 

* The author is Professor of Economics at  South Asian Institute of Management and Former Finance Minister   of Nepal.