The Almaty Ministerial Conference
The Almaty Ministerial Conference (2003) was the first global venue to specifically address the problems of landlocked developing countries (LLDCs). It brought together Landlocked and Transit Developing Countries, Donor Countries, and International Financial and Development Institutions. The Conference and the Program of Action adopted at the Conference address the access problem of LLDCs, with the following seven objectives:
- Secure access to and from the sea by all means of transport according to applicable rules of international law.
- Reduce costs and improve services so as to increase the competitiveness of their exports.
- Reduce the delivered costs of imports.
- Address problems of delays and uncertainties in trade routes.
- Develop adequate national networks; reduce loss, damage, and deterioration en route.
- Open the way for export expansion.
- Improve safety of road transport and security of people along the corridors.
In order to reach those objectives, the Program of Action highlighted five priority policy areas for landlocked and transit countries to address:
1.Transit policy and regulatory frame works:
Landlocked and transit countries to review their transport regulatory frameworks and establish regional transport corridors.
Landlocked countries to develop multimodal networks (rail, road, air, and pipeline infrastructure projects).
3.Trade and transport facilitation:
Land locked countries to implement the international conventions and instruments that facilitate transit trade (including the WTO).
The international community to assist by providing technical support, encouraging foreign direct investment, and increasing official development assistance.
5.Implementation and review:
All parties to improve their monitoring the implementation of transit instruments and conducting a comprehensive review of their implementation in due course.
Vienna Program of Action
Vienna Program of Action for Landlocked Developing Countries for the Decade 2014-2024 The Vienna Program of Action for Landlocked Developing Countries for the Decade 2014-2024, adopted at the Second United Nations Conference on LLDCs in Vienna, Austria in November 2014, constitutes a renewed forward-looking approach by the international community to tackle the challenges that LLDCs face in a more comprehensive and coherent manner than before. The Program is based on renewed and strengthened partnerships between landlocked and transit developing countries and their development partners, within the context of South-South and triangular cooperation, as well as strengthened partnerships with relevant international and regional organizations, and between the public and private sectors.
The objectives of the Program are:
- To promote unfettered, efficient and cost-effective access to and from the sea by all means of transport, on the basis of freedom of transit, and other related measures, in accordance with applicable rules of international law;
- To reduce trade transaction and transport costs, and improve international trade services through simplification and standardization of rules and regulations, so as to increase the competitiveness of exports of LLDCs and reduce the cost of imports, thereby contributing to the promotion of rapid and inclusive economic development;
- To develop adequate transit transport infrastructure networks and complete missing links connecting LLDCs;
- To effectively implement bilateral, regional and international instruments and strengthen regional integration;
- To promote growth and increased participation in global trade, through structural transformation related to enhanced productive capacity development, value addition, diversification and reduction of dependency on commodities; and
- To enhance and strengthen international support for LLDCs to address needs and challenges arising from landlockedness in order to eradicate poverty and promote sustainable development.
The Six Priorities of the Vienna Program of Action for LLDCs
The Vienna Program aims to turn Landlocked Developing Countries into land-linked countries through concrete actions to be undertaken by all stakeholders within the following six inter-dependent priority areas:
- Fundamental transit policy issues
- Infrastructure development and maintenance
- International trade and trade facilitation
- Regional integration and cooperation
- Structural economic transformation
- Means of implementation
Economic and social underdevelopment
There are 42 landlocked countries in the world today. Except for the relatively wealthy landlocked states in Western and Central Europe (for example, Switzerland, Austria, the Czech Republic, Hungary and Slovakia), the rest are all poor and 31 landlocked countries can accurately be classified as LLDCs. Sixteen of the LLDCs are also categorized as least developed countries (LDCs). Notably, there are more LLDCs in Sub-Saharan Africa (SSA) than in any other region in the world. To address these issues, the General Assembly convened in 2003 a United Nations conference which adopted the Almaty Program of Action: Addressing the Special Needs of Landlocked Developing Countries within a New Global Framework for Transit Transport Cooperation for Landlocked and Transit Developing Countries.
Nepal is a landlocked country with extreme dependency on its transit neighbour India. India does not have poor relations with Nepal, nor does it lack relevant transport infrastructure or internal stability. In the 1970s, Nepal suffered from large commodity concentration and a high geographic centralization in its export trade: over 98% of its exports were to India, and 90% of its imports came from India. As a result of all this, Nepal had a poor trade bargaining position. In the 1950s, Nepal was forced to comply with India’s external tariffs as well as the prices of India’s exports. This was problematic since the two countries have different levels of development, resulting in greater gains for India which was larger, more advanced and with more resources. It was feared that a parasitic relationship might emerge, since India had a head start in industrialization, and dominated Nepal in manufacturing, which could reduce Nepal to being just a supplier of raw materials.
Advances in modern technology and communications have facilitated an acceleration of the socio-economic growth of many developing countries. However landlocked countries, that is, countries that do not possess a seacoast, have not yet realized these benefits and are among the most disadvantaged and marginalised countries in the world. For landlocked developing countries (LLDCs), in particular, lack of access to seaports, their remoteness and isolation from major markets, continue to act as impediments to their development. This review contrasts the relative underdevelopment of LLDCs with the varying degrees of progress that have been achieved by the countries that have access to the sea.
Nepal’s trade deficit with India has surged in recent years with continuously rising imports and sluggish exports. Indo-Nepal trade continues to remain massively in India’s favor. Official bilateral trade was US$4.21 billion during the fiscal year 2010-11 (July 16 – July 15), while the unofficial trade between the two countries is also estimated to be about the same. Unofficial trade between the two countries has however flourished over the recent decades. Open border between the two countries has meant that madheshi immigrants living along the Indo-Nepal border trade unofficially to avoid paying importation tax in Nepal. Records from Nepalese government show that Nepal’s import from India amounted to US$3.62 billion and exports to India was US$599.7 million. In the first six months of fiscal year 2011-12, Nepal’s total trade with India was about US$1.93 billion; Nepal’s exports to India were about US$284.8 million; and imports from India were about US$1.64 billion.
Nepal’s main imports from India are petroleum products (28.6%), motor vehicles and spare parts (7.8%), M. S. billet (7%), medicines (3.7%), other machinery and spares (3.4%), coldrolled sheet in coil (3.1%), electrical equipment (2.7%), hotrolled sheet in coil (2%), M. S. wires, roads, coils and bars (1.9%), cement (1.5%), agriculture equipment and parts (1.2%), chemical fertilizer (1.1%), chemicals (1.1%) and thread (1%). Nepal’s export basket to India mainly comprises jute goods (9.2%), zinc sheet (8.9%), textiles (8.6%), threads (7.7%), polyester yarn (6%), juice (5.4%), catechue (4.4%), Cardamom (4.4%), wire (3.7%), tooth paste (2.2%) and M. S. Pipe (2.1%).
The protocol of treaty of transit designates 15 routes for Nepal’s traffic in transit. This permits Nepal to use Indian roads and rails facilities as well. At present, the Exim (Export-Import) trade of Nepal with third countries is being routed through the port of Kolkata and Haldia, situated on the East Coast of India. But due to draft limitation at these Ports, the containers are being transshipped en route and transported by feeder vessels resulting in unduly long transit time and high transportation cost lowering the trade competitiveness of Nepal. In the view of these, the Governent of Nepal requested India to provide a second transit point in addition to Kolkata Port. The Government of India agreed to consider utilization of Jawaharlal Neharu Port for Nepal’s use for canalizing its transit cargo and asked Nepal for a rational, including projection of traffic and the related details. In the recently held inter-governmental committee (IGC) meeting in New Delhi, avenues have been opened to consider pre-feasibility of other ports of India also.
The regional trade quagmire
The trade volumes between Nepal and Bangladesh point to a discouraging trend over the past few years. It is surprising as well as deflating to note that Nepal’s imports from Bangladesh have been consistently decreasing since 2010. While Nepal imported goods worth USD 48 million in the financial year 2010-11, it imported a mere USD 13 million worth of goods in 2014-15. The overall trade volumes have also been declining from USD 63 million to USD 38 million over the same period. What is also striking is that while India remains Nepal’s largest import destination constituting approximately 67% of its total imports, Bangladesh contributes a paltry 0.25% of Nepal’s imports.
There is a possibility of not just improving the trade volumes bilaterally between Nepal and Bangladesh but also a scope for diversifying and increasing Nepal’s trade with countries outside of the region. However, the major thrust should be towards promoting intra-regional trade within South Asia as the region has an abysmal intra-regional trade of merely 5% as compared to Southeast Asia’s 29%.
The operationalization of Visakhapatnam sea port and the use of rail transport between it and Nepal will not only allow for bulk trading and greater efficiency, but will also lead to trade diversification for Nepal and curtail its overreliance on a single country for trade. Also, Visakhapatnam being a deep sea port will enable movement of large vessels unlike Haldiya port which receives only feeder vessels weighing about half the size of main line vessels. Nepal can also intensify its use of Chittagong port in Bangladesh for transit. It will not only lead to more trade for Nepal, but will benefit Bangladesh in the form of transit revenue. Bangladesh will also have the opportunity to increase its bilateral trade with Nepal by exporting goods like sea foods, petroleum products, textiles and leather.
The trends in India-Nepal merchandise trade over the past few years (Nepalese fiscal year: July 16-July15) are as under.
In IRs crores
|Nepal’s:||Year||Growth in %|
|Export to India||3101||3187.4||3713.5||3491.5||2468.3||14.4||2.7||16.5||-5.9||-29.3|
|Import from India||18711.8||22939.4||29545.6||30728.4||29825.7||14.3||22.5||28.7||4||-2.9|
|Total trade with India||21812.8||26126.9||33259.2||34220||32294.1||14.3||19.7||27.2||2.8||-5.6|
|Total Trade Balance||-24212.9||-29988.9||-38654.3||-43085.3||-43967.6||16.7||23.8||28.8||11.4||2|
|Trade Balance with India||-15610.8||-19751.9||-25832.0||-27236.9||-27357.4||14.2||26.5||30.7||5.4||0.4|
|India’s share: in Nepal’s||95-96||96-97||99-00||01-02||03-04||05-06||07-08||09-10||11-12||13-14||14-15||15-16|
The previous trade treaty revised in 1996 can be considered as a turning point in the trade relations between the two countries. Since 1996, Nepal’s exports to India have grown more than eleven times and bilateral trade more than seven times; the bilateral trade that was 29.8% of total external trade of Nepal in year 1995-96 has reached 61.2% in 2015-16. The bilateral trade grew from IRs. 1,755 crores in 1995-96 to IRs. 32294.1 Crores (US$ 4.8 billion) in 2015-16.Exports from Nepal to India increased from IRs. 230 crores in 1995-96 to IRs. 2468.3 crores (US$ 371 million) in 2015-16 and India’s exports to Nepal increased from IRs. 1,525 crores in 1995-96 to IRs.29825.7.6crores (US$ 4.48 billion) in 2015-16.Further the treaty has been revised in 2009 details of which are provided under Bilateral Framework.
Exports from India to Nepal fell by 2.9%. The fall is mainly on account of the decreased level of exports of petroleum products, silver, m. s. billet, betel nut, crude palm oil, etc. About 14.7 % (i.e. IRs 4387.5 Crores) of these imports were against payment in US dollars and the balance in Indian rupees. The NRB purchased Indian currency (INR) equivalent to Rs. 385.47 billion through the sale of US$ 3.4 billion and Euro 0.21 billion in FY 2015-16
Nepal’s transit trade is routed through twenty two designated routes from India-Nepal border to the port of Kolkata/Haldia. In addition, Nepal’s trade with and through Bangladesh also transits through India.
Rising Trade Deficit with China
There are obvious benefits to increasing trade with the world’s 2nd largest economy. Experts roundly believe that Nepal can only stand to gain if it fully explores and concludes business deals with the ancient middle-kingdom. However, our export to China is far less than the import from there. In fact, the import has been rising every year while export hasn’t been able to keep pace with the rising import. In 2010/11 total export earnings from China declined to Rs 750 million from Rs 1 billion in 2009/10. In 2014/15, total exports to China stood at Rs 2.36 billion declining from Rs 2.99 billion in the previous fiscal year.
In contrast, import from China has been growing at the rate of 39 per cent per year. It rose from Rs 45.64 billion in fiscal year 2010/11 to Rs 100.85 billion in fiscal year 2014/15. As a result, the trade deficit with China has risen from Rs 44.89 billion in 2010/11 to Rs 98.49 billion in 2014/15. Although China has given zero tariff entry to nearly 9,000 Nepali products, Nepal hasn’t been able to bring the trade deficit down. Nepal has been exporting nearly 370 products including noodles and agro products to China.
Major Export/Import Goods
The top ten exports of Nepal to China are wood products; metal products; textiles; mineral products; leather products; wearing apparel; chemical, rubber, plastic; machinery and equipment; vegetable oils and fats; and crops. Basically, no high value added products.
Meanwhile, the top ten imports of Nepal from China are wearing apparel; textiles; electronic equipment; machinery and equipment; leather products; vegetables, fruits, nuts; chemical, rubber, plastic; manufacturers; metal products; and motor vehicles and parts. Basically, the demand for most of these is price elastic.
As China and India are neighboring countries of Nepal, as locked by these giant countries, Nepal has the rights to get transit without any hindrances under national and international instruments. Even in the absence of any bilateral and multilateral instruments, transit rights cannot be blocked in this globalised society which is against free flow of business and transaction. It is unexpected in the presence of such instruments having historical relation. The rejection of transit rights in a different political, economic and other ground may cause adversity to the mankind of the people which may cause humanitarian crisis and suffering. Such suffering creates havoc in the exercises. Transit rights should be established as an agenda of free movement of goods and services but not a political agenda. Nepal, India and China can make such agreement for free trading of their authorized goods and services.