International Trade and Nepal Essay Example for Free

International Trade and Nepal Essay An isolated, agrarian society until the mid-20th century, Nepal entered the modern era in 1951 without schools, hospitals, roads, telecommunications, electric power, industry, or civil service. The country has, however, made progress toward sustainable economic growth since the 1950s and is committed to a program of economic liberalization. Nepal has used a series of five-year plans in an attempt to make progress in economic development. It completed its ninth economic development plan in 2002; its currency has been made convertible, and 17 state enterprises have been privatized. Foreign aid accounts for more than half of the development budget. Government priorities over the years have been the development of transportation and communication facilities, agriculture, and industry. Since 1975, improved government administration and rural development efforts have been emphasized. Agriculture remains Nepals principal economic activity, employing 80% of the population and providing 37% of GDP. Only about 20% of the total area is cultivable; another 33% is forested; most of the rest is mountainous. Rice and wheat are the main food crops. The lowland Terai region produces an agricultural surplus, part of which supplies the food-deficient hill areas. Economic development in social services and infrastructure has not made dramatic progress due to GDP dependency on India. A countrywide primary education system is under development, and Tribhuvan University has several campuses. Please see Education in Nepal for further details. Although eradication efforts continue, malaria had been controlled in the fertile but previously uninhabitable Terai region in the south. Kathmandu is linked to India and nearby hill regions by road and an expanding highway network. The capital was almost out of fuel and transport of supplies caused by a crippling general strike in southern Nepal on February 17, 2008. Major towns are connected to the capital by telephone and domestic air services. The export-oriented carpet and garment industries have grown rapidly in recent years and together now account for approximately 70% of merchandise exports. Nepal was ranked 54th worst of 81 ranked countries (those with GHI 5.0) on the Global Hunger Index in 2011, between Cambodia and Togo. Nepals current score of 19.9 is better than in 2010 (20.0) and much improved than its score of 27.5 in 1990 Relations between India and Nepal are close yet fraught with difficulties stemming from geographical location, economics, the problems inherent in big power-small power relations, and common ethnic, linguistic and cultural identities that overlap the two countries borders. New Delhi and Kathmandu initiated their intertwined relationship with the 1950 Indo-Nepal Treaty of Peace and Friendship and accompanying letters that defined security relations between the two countries, and an agreement governing both bilateral trade and trade transiting Indian soil. The 1950 treaty and letters stated that neither government shall tolerate any threat to the security of the other by a foreign aggressor and obligated both sides to inform each other of any serious friction or misunderstanding with any neighboring state likely to cause any breach in the friendly relations subsisting between the two governments. These accords cemented a special relationship between India and Nepal that granted Nepal preferential economic treatment and provided Nepalese in India the same economic and educational opportunities as Indian citizens. Jayant Prasad is Indias ambassador to Nepal. Nepal is developing county with an agricultural economy. In recent years, the countrys efforts to expand into manufacturing industries and other technological sectors have achieved much progress. Farming is the main economic activity followed by manufacturing, trade and tourism. The chief sources of foreign currency earnings are merchandise export, services, tourism and Gurkha remittances. The annual Gross Domestic Product (GDP) is about US$ 4.3 Billion. Agriculture : Eight out of 10 Nepalese are engaged in farming and it accounts for more than 40% of the GDP. Rolling fields and neat terraces can be seen all over the Terai flatlands and the hills of Nepal. Even in the highly urbanized Kathmandu Valley, large tracts of land outside the city areas are devoted to farming. Rice is the staple diet in Nepal and around three million tons are produced annually. Other major crops are maize, wheat, millet and barley. Besides food grains, Cash crops Like Sugarcane, oil seeds, tobacco, jute and tea are also cultivated in large quantities, Manufacturing : Manufacturing is still at the developmental stage and it represents less than 10% of the GDP. Major industries are woolen carpets, garments, textiles, leather products, paper and cement. Other products made in Nepal are steel utensils, cigarettes, beverages and sugar. There are many modern large-scale factories but the majority are cottage or small scale operations. Most of Nepals industries are based in the Kathmandu Valley and a string of Small towns in the southern Terai Plains. Trade : Commerce has been a major occupation in Nepal since early times. Being situated at the crossroads of the ancient Trans-Himalayan trade route, trading is second nature to the Nepalese people. Foreign trade is characterized mainly by import of manufactured products and export of agricultural raw materials. Nepal imports manufactured goods and petroleum products worth about US$ 1 billion annually. The value of exports is about US$ 315 million. Woolen carpets are Nepals largest export, earning the country over US$ 135 million per year. Garment exports account for more than US$ 74 million and handicraft goods bring in about US$ 1 million. Other important exports are pulses, hides and skins, jute and medicinal herbs. Tourism : In 1998, a total of 463,684 tourists visited Nepal, making tourism one of the largest industries in the Kingdom. This sector has been expanding rapidly since its inception in the 1950. Thanks to Nepals natural beauty, rich cultural heritage and the diversity of sight-seeing and adventure opportunities available. At one time, tourism used to be the biggest foreign currency earner for the country. Nepal earned over US$ 152 million from tourism in 1998. INDEPENDENT POLITICAL HISTORY 1950–1970 In the 1950s, Nepal welcomed close relations with India, but as the number of Nepalese living and working in India increased and the involvement of India in Nepals economy deepened in the 1960s and after, so too did Nepalese discomfort with the special relationship. Tensions came to a head in the mid-1970s, when Nepal pressed for substantial amendments in its favor in the trade and transit treaty and openly criticized Indias 1975 annexation of Sikkim which was considered as part of Greater Nepal. In 1975 King Birendra Bir Bikram Shah Dev proposed that Nepal be recognized internationally as a zone of peace; he received support from China and Pakistan. In New Delhis view, if the kings proposal did not contradict the 1950 treaty an extension of nonalignment, it was unnecessary; if it was a repudiation of the special relationship, it represented a possible threat to Indias security and could not be endorsed. In 1984 Nepal repeated the proposal, but there was no reaction from India. Nepal continually promoted the proposal in international forums and by 1990 it had won the support of 112 countries. 1970–1980 In 1978 India agreed to separate trade and transit treaties, satisfying a long-term Nepalese demand. In 1988, when the two treaties were up for renewal, Nepals refusal to accommodate Indias wishes on the transit treaty caused India to call for a single trade and transit treaty. Thereafter, Nepal took a hard-line position that led to a serious crisis in India–Nepal relations. After two extensions, the two treaties expired on March 23, 1989, resulting in a virtual Indian economic blockade of Nepal that lasted until late April 1990. Although economic issues were a major factor in the two countries confrontation, Indian dissatisfaction with Nepals 1988 acquisition of Chinese weaponry played an important role. Treaties and letters exchanged in 1959 and 1965, which included Nepal in Indias security zone and precluded arms purchases without Indias approval. India linked security with economic relations and insisted on reviewing India–Nepal relations as a whole. Nepal had to back down after worsening economic conditions led to a change in Nepals political system, in which the king was forced to institute a parliamentary democracy. The new government sought quick restoration of amicable relations with India. 1990s The special security relationship between New Delhi and Kathmandu was reestablished during the June 1990 New Delhi meeting of Nepals prime minister Krishna Prasad Bhattarai and Indian prime minister V.P. Singh. During the December 1991 visit to India by Nepalese prime minister Girija Prasad Koirala, the two countries signed new, separate trade and transit treaties and other economic agreements designed to accord Nepal additional economic benefits. Indian-Nepali relations appeared to be undergoing still more reassessment when Nepals prime minister Man Mohan Adhikary visited New Delhi in April 1995 and insisted on a major review of the 1950 peace and friendship treaty. In the face of benign statements by his Indian hosts relating to the treaty, Adhikary sought greater economic independence for his landlocked nation while simultaneously striving to improve ties with China. India sponsored Nepals admission to the U.N.O. in 1990. 21st century Nepal remains poor and deprived in 21st century while India has acquired a central place in the world with a very high development rate. In 2005, after King Gyanendra took over, Nepalese relations with India soured. However, after the restoration of democracy, in 2008, Prachanda, the Prime Minister of Nepal, visited India, in September 2008. He spoke about a new dawn, in the bilateral relations, between the two countries. He said, I am going back to Nepal as a satisfied person. I will tell Nepali citizens back home that a new era has dawned. Time has come to effect a revolutionary change in bilateral relations. On behalf of the new government, I assure you that we are committed to make a fresh start. He met Indian Prime minister, Manmohan Singh, and Foreign Minister, Pranab Mukherjee. He asked India to help Nepal frame a new constitution, and to invest in Nepals infrastructure, and its tourism industry. In 2008, Indo-Nepali ties got a further boost with an agreement to resume water talks after a 4 year hiatus. The Nepalese Water Resources Secretary Shanker Prasad Koirala said the Nepal-India Joint Committee on Water Resources meet decided to start the reconstruction of breached Kosi embankment after the water level goes down. During the Nepal PMs visit to New Delhi in September the two Prime Ministers expressed satisfaction at the age-old close, cordial and extensive relationships between their states and expressed their support and cooperation to further consolidate the relationship. The two issued a 22-point statement highlighting the need to review, adjust and update the 1950 Treaty of Peace and Friendship, amongst other agreements. India would also provide a credit line of up to 150 crore rupees to Nepal to ensure uninterrupted supplies of petroleum products, as well as lift bans on the export of rice, wheat, maize, sugar and sucrose for quantities agreed to with Nepal. India would also provide 20 crore as immediate flood relief. In return, Nepal will take measures for the promotion of investor friendly, enabling business environment to encourage Indian investments in Nepal. In 2010 India extended Line of credit worth $ 250 million 80,000 tones of foodgrains.Furthermore, a three-tier mechanism at the level of ministerial, secretary and technical levels will be built to push forward discussions on the development of water resources between the two sides. Politically, India acknowledged a willingness to promote efforts towards peace in Nepal. Indian External affairs minister Pranab Mukherjee promised the Nepali Prime Minister Prachanda that he would extend all possible help for peace and development. In 2008, the Bollywood film Chandni Chowk to China was banned in Nepal, because of a scene suggesting the Gautama Buddha was born in India. Some protesters called for commercial boycott of all Indian films. BORDER DISPUTES So far as the Indo-Nepal border demarcation is concerned, Nepal-India Joint Technical Level Boundary Committee is working for the last 21 years (since 15 November 1981). But the boundary business is not yet completed. There may be so many reasons the boundary business not to be completed in due time, though it has the target to complete it by 2003. However, this type of target had been fixed many times in the past as in 1993, 1998 and 2001. But the target was not materialized. The main reasons and issues of the boundary business with India is the border encroachments, disputes on certain segments, divergence of opinion on basic materials such as maps and old documents for demarcation, slackness in joint survey field teams and so on and so forth. Nepal and India has two broad issues concerning border business: Border Demarcation Border Management BORDER DEMARCATION The Treaty of Sugauli of 4 March 1816, Supplementary Treaty of 11 December 1816 and Boundary Treaty of 1 November 1860 delineate the boundary of Nepal with India. British East India Company made treaty of Sugauli on 2 December 1815 and it was provided to Nepal to make the counter signature by fifteen days. But Nepal did not make the signature in due time, because of unwillingness. It was finally ratified after 92 days under pressure and compulsion enforced by the British regime that they will invade Kathmandu, the capital city of Nepal. Eventually, it was not signed by the King or Prime Minister/Maharaja but by only the courtier Chandra Shekhar Upadhaya. So there were disputes and conflicts and controversy on the borderline even after the ratification of the Treaty. Historical Border Disputes : There were so many issues of disputes just after the Sugauli Treaty. Some of the disputed areas are cited as examples as follows: Disputes on Siwalik Range : whether the borderline runs from the crest (ridge) of the Siwalik Range or northern or southern foot-hill of the range! Origin of the river Mechi : whether it is originated from north-east of Antoo Hill or from north-west! Dunduwa Range : India had claimed that the border line should be followed on the northern foot from Arrahnala to Talbagauda, whereas Nepal denied it. Dispute on ownership of the village and settlements of Ramnagar Zamindari area. Dispute on the lands adjoined with the districts of Tirahoot and Sarun. Land area of Sharada Barrage constructed by India on the river Mahakali. Disputes on the borderline of the river and rivulets, whether it has to be taken on the old course or the new channel. Disputes on the demarcation of borderlines in agricultural land, forest area and village areas, where there are not conspicuous features. Some of the above mentioned disputes were settled with mutual discussions. For example, identification of the origin of the river Mechi was solved by Campbell, taken as the origination from north-east, though Captain Lloyd had judged in 1827 that the area falls under the jurisdiction of Sikkim. Similarly, the dispute of Dunduwa range was solved jointly by Lieutenant Col. Mac Andrew and Siddhiman Singh Rajbhandari on 7 January 1875 that the borderline shall be demarcated on the southern foot-hill of Dunduwa Range from where the plain area begins. Regarding the disputes of Ramnagar Zamindari area, it was settled on 2 January 1841 with an Ikararnama of 95 people of village-heads, gentlemen, Chautaria and Guru Gharana. As far as the matter of the exchange of lands of Sharada Barrage is concerned, Nepal has not yet received 36.67 Acre of land from India. These are some of the examples of the then border issues between Nepal and East India Company. The main problem lies that Nepal’s southern borderline on the Indo-Gangetic plain with India does not run from the prominent natural features such as mountain peaks, passes, crests etc. NEPAL IS ONE OF THE POOREST COUNTRIES in the world and was listed as the eleventh poorest among 121 countries in 1989. Estimates of its per capita income for 1988 ranged from US$158 to US$180. Various factors contributed to the economic underdevelopmentincluding terrain, lack of resource endowment, landlocked position, lack of institutions for modernization, weak infrastructure, and a lack of policies conducive to development. Until 1951 Nepal had very little contact with countries other than India, Tibet, and Britain. Movement of goods or people from one part of the country to another usually required passage through India, making Nepal dependent on trade with or via India. The mountains to the north and the lack of economic growth in Tibet (Chinas Xizang Autonomous Region after 1959) meant very little trade was possible with Nepals northern neighbor. Prior to 1951, there were few all-weather roads, and the transportation of goods was difficult. Goods were able to reach Kathmandu by railroad, trucks, and ropeways, but for other parts of the country such facilities remained almost non-existent. This lack of infrastructure made it hard to expand markets and pursue economic growth. Since 1951 Nepal has tried to expand its contacts with other countries and to improve its infrastructure, although the lack of significant progress was still evident in the early 1990s. The effects of being landlocked and of having to transit goods through India continued to be reflected in the early 1990s. As a result of the lapse of the trade and transit treaties with India in March 1989, Nepal faced shortages of certain consumer goods, raw materials, and other industrial inputs, a situation that led to a decline in industrial production. Nepal-India Joint Technical Level Boundary Committee : Nepal-India Joint Technical Level Boundary Committee is working for the last twenty-one years. It is going to relocate the missing pillars, reconstruction of the damaged and dilapidated pillars, clear ten-yard width no-man’s land and preparation of strip-maps of both the sides of borderline. But it has not resolved the issues, such as Kalapani-Limpiyadhura, identification of the source or river Kali, Susta dispute, Mechi controversy etc. These are the major issues and problems of demarcations of border between two nations, which should be settled in higher level (most probably in head of the government level) with diplomatic and political level talks. The issues climb slowly up to the ministerial level but it is instantly pushed back to the technical level, which has its limitations as the nature of the problem. In such a fashion, major issues have not yet given yield by the higher level decision making authorities. BORDER MANAGEMENT There is an open border system between Nepal and India, whereas Nepal has its controlled border system with China. It needs passport and visa to go to China and recently Hong Kong, after China regained it from Britain. If we have a look back on the border management system between Nepal and India, anyone entering into Nepal particularly to the Kathmandu valley and towns of Tarai in general, had to get Rahadani or visa from the district administrations. It was prior to the restoration of Naya Muluk by Nepal in 1860, as the controlled border system was prevalent during that period. Afterwards, it was started slowly to keep the border open for recruiting the Nepalese hill and sturdy boys in British Gurkha regiment. The second factor was to have easy and free access of British and Indian goods and material into Nepal and Tibet (via Nepal). Next was to secure raw materials from Nepal to India such as timber, forest products, herbs and medicinal plants, hides and skins etc. Open Border System : Nepal-India Peace and Friendship Treaty of 31 July 1950 motivated for the openness of border between two countries. After the installation of democracy in Nepal in February 1951, it became major turning point in reinforcing the Nepal-India border open with the accelerated movement of Indian nationals into Nepal. Indians used to come to Kathmandu as politicians as advisors to the Nepalese ministers, overseers as technical experts, unemployed citizens as teachers, retailers as whole seller businessmen etc. Similarly, Nepalese were also free to go to Indian cities in search of jobs and works as guards, domestic workers and restaurant waiters. All these phenomena can be cited as Nepal India open border as it is unique in the world in the sense that people of both countries could cross the international borderline from any point / any time. Single citizen could cross the frontier of both the sides without any record running to and fro so many times a day. Impact of Open Border System : Every object has its two aspects as every coin bears two faces. And every item has its negative and positive impacts. Similarly, Nepal-India open border system has its negative and positive impacts for both the nations. But Nepal has experienced a large percentage of negative impacts in many cases, as compared to India. If we make an inventory, negative impact outnumbers the positive one for Nepal. Followings are the impacts of open border system : Positive Impact: As we make a list of positive impacts, it may be the followings: Easy access: The most positive aspect of open border system is the easy movement of people of both the countries. Strengthens relationship: People to people relation on the frontiers of both sides has been maintained and strengthened due to free movement of people on either side of the border. Rescue operation: Prompt services have been offered and provided on either side during calamities and disasters. Health service: When there is an epidemic, health services can be offered from both the sides. Instant supply of labour: When there is a shortage of local labour in one side it can be supplied instantly from other side. Competitive Market: There is always a competition between the businessmen of the cross-frontier towns to be benefited to the consumers.. Prompt Supply of food grains and daily stuff: Unrestricted border has made comfortable for the prompt supply of food grains and daily foodstuffs from either side of the territory, where there are shortages. Open border has economically benefited the inhabitants of both sides of the border from the sell and purchase of livestock products, vegetables and daily kitchen stuff in Hat Bazars (open-roof markets) taking place regularly in various days a week in different parts on either side. An Overview of Nepalese Economy There is nothing much to talk about when it comes to Nepalese economy. The data doesnt paint a rosy picture at all. In fact the picture looks grim. Nepal is among the poorest and least developed countries in the world. In fact Nepal doesnt stand anywhere to its otherwise developing neighbors such as India, Pakistan and Bangladesh. Thanks to the Sub-Sahara African countries, it is not considered the poorest economy now. Nevertheless, with almost 45% of its population living below the poverty line, Nepal has to do much catching before being termed a Developing Economy. Agriculture is the mainstay of the economy, providing a livelihood for three-fourths of the population and accounting for 38% of GDP. Most of the agriculture activities take place in the Tarai region. The sub-standard equipments and pesticides along with the medieval mode of agriculture make it a tough affair. The industrial sector is in a dismal condition. Industrial activity mainly involves the processing of agricultural products including jute, sugarcane, tobacco, and grain. These things are hardly considered industrial activities by New-school economists. Due to its long stint with monarchy and feudalism, Nepal has one of the most uneven distributions of resources and wealth in the Asia. This has led to the birth of counter initiative movements such as Maoism. Security concerns relating to the Maoist conflict and counter insurgency initiatives have led to a decrease in tourism, a key source of foreign exchange. Nepal has considerable scope for exploiting its potential in hydropower and tourism. These are considered the up coming hot cakes in New-wave economy. Prospects for foreign trade or investment in other sectors will remain poor, however. There are lots of reasons for this such as the small size of the economy, technological backwardness, landlocked geographic location, civil strife and its susceptibility to natural disaster.