Nepal: No shipment has moved for seven years since the transit agreement with China

After signing the trade and transit agreement with China seven years ago, which gave Nepal access to seven Chinese ports for trade with third countries, not a single shipment has moved, the Kathmandu Post reported.

Then-Prime Minister KP Sharma Oli paid an official visit to China in April 2016, where the two sides signed an agreement giving Nepal access to four Chinese seaports in Tianjin, Shenzhen, Lianyungang and Zhanjiang and three land ports in Lanzhou, Lhasa and Shigatse for third-country imports.

The deal also allowed Nepal to conduct exports through six special transit points between Nepal and China, the Kathmandu Post reported.

The two sides have expressed their satisfaction with the conclusion of the agreement on transit traffic and instructed the authorities to immediately start negotiations to develop a protocol that will be an integral part of the agreement, according to the text of the agreement signed on April 23, 2016 . in Beijing.

Later, during then-President Bidya Devi Bhandari’s state visit to China in April 2019, the protocol to implement the transit and transport agreement was signed after delegation-level talks between Bhandari and her Chinese counterpart Xi Jinping, the Kathmandu Post reported.

Then Foreign Minister Pradeep Gyawali and Chinese Transport Minister Li Xiaopeng signed the agreement.

Industry, Trade and Supply Ministry officials said not a single shipment has been moved between the two countries in the seven years. After the protocol failed to be implemented, the Nepalese side has asked China to convene a meeting to implement the protocol and is awaiting a response from Beijing.

“We had submitted a request for a joint meeting to implement the protocol about four months ago, but so far there has been no response from the Chinese side,” said a joint secretary at the ministry.

Oli was hailed for turning north to break Nepal’s near-total dependence on its southern neighbor for third-country trade. It has now been seven years since the agreement was signed and over two years since the protocol was signed, but Nepal and China have yet to develop the standard operating procedure (SOP) to implement the transit agreement, the Kathmandu Post reported.

One of the ideas behind the trade and transit agreement was to bring petroleum products from Kazakhstan out of China via a pipeline.

Former Nepalese ambassador to China Mahesh Maskey said: “We were confident that we could deal with Kazakhstan.”

But Nepal received negligible amounts of petroleum products after signing the agreement with China, and that soon stopped too. And there was no discussion about importing petroleum products from Kazakhstan.

A few months after the protocol was signed, the Covid pandemic spoiled all trade prospects with China, the official at the Ministry of Industry, Trade and Supply said.

“Now we are considering resuming talks with China to explore the feasibility of using these ports, but no date has been set for a meeting,” the official said.

“Also, we didn’t realize what we would export through China and what we would import from third countries,” Maskey said, adding that the prospects of importing petroleum products through China had become slim after the construction of a 69km Raxaul-Amlekhgunj petroleum pipeline.

Nepalese officials were also confident that Nepal could trade with other BRI member countries through China after signing for China’s Belt and Road Initiative.

“We had also agreed to set up special economic zones in Kerung and Nuwakot districts to facilitate bilateral and third-country trade through China. As for why these deals and agreements aren’t moving forward, I have no idea,” Maskey said.

During Oli’s visit to China in 2016, the two sides agreed to explore establishing cross-border economic cooperation zones along existing border posts and speed up work on other border ports and trade points. The establishment of special economic zones and negotiations on free trade agreements are also part of the BRI, the Kathmandu Post reported.

After four years of signing the Protocol to the Trade and Transit Agreement, not a single shipment has arrived, said former Commerce Minister Purushottam Ojha. “We should bring at least one shipment, either from Japan, South Korea or Kazakhstan.”

Even bilateral trade between Nepal and China has slowed since the pandemic began. There were negligible charge movements. The Nepal-China border has two main trading points, both of which have been frequently closed. Most recently, the Rasuwagadhi-Kerung border resumed operations on April 1, and the Taopani border will do so on May 1.

“Once we bring a shipment from a third country via China, we have a better understanding of things like cargo movement, insurance, means of transport and logistics. For this, the government should enlist the support of the Federation of Nepalese Chambers of Commerce and Industry,” said Ojha.

Many say third-country trade via China is now a pipe dream at a time when even bilateral trade with the North has been difficult.

Strong political will is required to implement such agreements.

“No foreign or trade minister has shown much interest in the implementation of the protocol in the past four years,” said another Commerce Department official.

“Nepalese traders and freight forwarders feel uncomfortable bringing goods through China for several reasons.” There has been no progress at all, said Prakash Karki, former president of the Nepal Freight Forward Association.

“Bilateral trade with China has resumed, but it will take time, probably years, for third-country trade via China.”

Some officials who were actively involved in negotiations with the Chinese side ahead of the signing of the trade and transport deal say the seven-year sluggish development is discouraging.

Former joint secretary Rabi Sainju has held a series of negotiations with Chinese officials. “We need to develop infrastructure on our side and we should arrange pilot broadcasts over China immediately,” Sainju said.

“It’s disheartening that in the last seven years not a single shipment has arrived and we haven’t even been able to hold talks about how to proceed,” Sainju said. The only virtual meeting during the time of Covid did not bring a positive result.

“On the one hand the government could not push for the implementation of the agreement and on the other hand it could not strengthen the confidence of the private sector. As a result, the private sector is unwilling to bring supplies from China,” Sainju said.

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