We need to end the distrust factor on both sides

Nepal has gone through a historical political change from being a monarchy to a republic. It’s in the process of writing a new constitution and completing the much awaited peace process. The delay in consolidation of such political events achieved as a consequence of 15 years of armed struggle is beginning to pose serious issues in terms of an instable and fragile political environment on the one hand and much needed good governance on the other.

If we leave aside the window dressing and formalities, historically, Nepal and India both have their own serious disconnects in their economic agendas in terms of real and far-reaching economic cooperation. And the situation continues. We in Nepal feel that there is no serious or concerted desire on the part of India to address the ever growing trade deficit and the BoP, take advantage of the huge hydropower prospects on a fair and mutually win-win basis, use Nepal’s cheap labour to produce exportable quality products at various points in bordering Nepal using Nepal’s natural resources and so forth.

Always, tariff and non-tariff barriers come into play. The landmark 1996 treaty and what followed thereafter is a vibrant example of this. Projects like Pancheshwor/Karnali have continued to remain on the back burner for decades. Additional customs duty on Nepali exports, problems in exporting agro products, accepting Nepali institutions’ certificates and various transit issues to Nepal and to other countries through India continue to impede efficient and free flow of goods and services. Our currencies are pegged, but the capital markets are completely disconnected thereby making it difficult for a free flow of capital, equity, quasi equity and debt instruments which prohibit the capacity of Nepali enterprise creation with significant investment.

On the other hand, India often feels that there is discrimination against Indian businesses. Politically motivated hurdles come into play in operating businesses. Likewise, hydro power cooperation in Nepal continues to remain a political card that was earlier used by the authoritarian rule and which is now used by most political parties to serve their party interests rather than the interests of the country at large.

Minor events as those related such Indian JVs as UTL and Surya Nepal continue to take centre stage in all our bilateral discussions on economic cooperation, thereby blocking a major breakthrough and impede serious and honest engagement. Every time a new prime minister and his government plan yet another significant visit to India, concerns and voices are raised back home, “Don’t sign anything! Don’t indulge in any serious discussions on key/critical issues.”

Why? How long are we going to continue to play this game whereby both parties only lose? India is emerging to become the world’s third largest economic power in the world. It’s beginning to make significant gestures as an emerging developing partner to many Asian countries, be it Myanmar or Vietnam. Then why should South Asian neighbours be deprived of this prosperity through linkages?

Now is the time for the much needed “critical departure” to walk away from this unfortunate stagnation and uncomfortable/undesirable situation.

Our South Asian neighbours ask in regional forums such SAARC: Can India be a global leader if it is surrounded by impoverished, disgruntled neighbours all around with serious political instability and weak economic environments thereby contributing to serious unemployment, law and order and trans-border crime issues? Serious regional imbalances can pose serious repercussions—prime examples are Greece and Portugal in the European context.

Similarly, the ongoing Wall Street dilemma clearly indicates that a more rational and balanced distribution of prosperity is the only way for lasting peace and harmony in the region. Therefore, it’s India’s responsibility as a leader to lift the region economically.

And the timing is right. Our newly elected Prime Minister Baburam Bhattarai has demonstrated an unparalleled commitment and skills as a very successful finance minister and has publicly announced that now is the time for him to stage another revolution, an economic revolution!

On the other hand, India has to open its market, offer the same benefits and packages it offers to SEZs in various backward states within India like Uttaranchal and the North East. No more barriers of the past. An honest and free and liberal trading regime. Creation of SEZ throughout the Indo-Nepal border where both governments work to help create production capabilities to serve the Indian market.

Only then the essence of BIPPA and avoidance of double taxation will serve the larger vision. If investment is going to shy away and businesses are going to tumble down, avoidance of double taxation or protection will lose its significance. Likewise, let India clearly state its wish list and acceptable commercial modalities “if major” hydro power cooperation has to move forward. The style of avoiding “catching the bull by the horns” and refusing the need to give top priority needs to be corrected at once with the understanding at the highest level of both countries. And the time is right!

I am a businessman and sit in the parliament with members of all the political parties. What I am voicing here is the shared feeling of all of them. But no one wants to admit this in an open forum, leave alone what they say in private meetings. Many of them wait to use major economic events to play the game of change of power. It’s for these reasons that someone needs to pull the cat out of the bag.

Let there be transparent, market driven commercial arrangements based on fair and acceptable give-and-take—those from the media and with all senior journalists and business organizations and prepared to enable the environment to bring the political parties to the same table to accomplish this historical task—to help Dr Baburam Bhattarai transform the lives of the Nepali people and enterprise creation than just asking for aid!

Nepal—despite our share of protracted political events leading to frequent political changes and concurrent instability—has emerged as a significant market with high investment potentials. US$ 5 billion inward remittances annually has pushed high demand. 300 MW of domestic power shortage. Seven or eight flights to Delhi daily, leave alone the 10s of flights from the Middle East, suggest growing traffic in tourism. No hotel rooms, unparalleled opportunities in infrastructure, new airports, fast track roads, Lumbini and Pashupatinath as global heritage destinations and world famous trekking continue to remain open and available for your investment.

What’s missing, however, is the need for ending the distrust factor on both sides and beginning of a new era of cooperation on the economic front.

Excerpts from the speech given by CNI President Binod Chaudhary at a business luncheon organised by Indian private sector bodies during the prime minister’s recent Delhi visit