Streamlining the movement of traded goods between the gateway port and the land border stations is a crucial part of total supply chain of all landlocked countries. Inadequate port facilities, poor conditions of roads and railroads, slow clearance processes at the port and land customs stations and manual processing of documents requiring several interfaces between the traders and the border control authorities add to the cost of transaction, resulting into reduced competitiveness of exports goods and increased price of imports.
The Almaty program of action, an outcome of ministerial conference held in Kazakhstan in 2003, called for forging partnership between the landlocked countries and their transit neighbors, to compliment and reinforce the mutual interest and concerns of developing landlocked and transit countries. The program of action also proposed an efficient inter-modal transport system at the regional or sub-regional level that promotes competition between various modes of transportation and helps reduce the cost of transactions, in addition to promoting economic integration.
This has opened up a whole new discourse: Whether a particular landlocked country can be the land bridge between two different transit countries, rather than simply the beneficiary of transit facility. Such a possibility exists for Nepal due to its geographical location between two highly populated but emerging economies of Asia. The proposition of Nepal serving as a transit country between India and China was made by then king Gyanendra in June 2005 during his address before the summit of developing countries in Doha. We also occasionally hear from diplomats and academicians from both our neighboring countries that there are imminent possibilities for Nepal to be a land bridge and benefit from the spillover effects of their economic growths.
Transit has always been an integral part of overseas trade for Nepal for obvious reason. Limited transit facilities were granted to Nepal under the treaty signed in 1923 between Nepal and British India. Thus transit was made a part of Nepal-India trade treaty until the two were decoupled in 1978. Thus transit has undergone evolutionary changes in the direction of reducing cost of transit transportation and hassle-free operation. An improvement in the condition of transit facilities were seen particularly after 1991, which mainly included: introduction of one-time lock in containerized cargo, construction of railway spur from Raxaul to Birgunj, development of Inland Clearance Depots (ICDs) or dry ports in Nepal, simplification of procedures for rail traffic, and diversification of transit routes by opening the Kakarbhitta-Panitanki-Phulbari-Banglabandha corridor in 1997. The understanding reached in opening the Singhabad-Rohanpur corridor and Visakhapatnam port for Nepali transit traffic is an important development that will go a long way towards creating better transit services for Nepal. Besides, the development of road and railroad infrastructures in the Indian states of Bihar, UP and West Bengal in recent years will be an added advantage to the Nepali traffic in transit.
Negotiations of transit facility are tricky as the basis of such negotiations emanate from international instruments like United Nations Convention on the Law of Sea (UNCLOS), GATT Article V and New York Convention 1965. The international instruments guarantee transit rights of the landlocked countries but at the same time seeks protection of legitimate interest of transit countries. Hence, the agreements between the partnering countries define the terms, conditions and modality of transit operation; and countries follow their own modus operandi based on outcomes of bilateral negotiations. The transit agreements between Nepal-India, Pakistan- Afghanistan, Laos- Thailand and Mongolia-China have separate backgrounds.
Conventional wisdom tells that transit is the right and prerogative of landlocked countries and obligation of the coastal countries. But, this notion needs to be redefined as the process of regional economic integration is gaining momentum and countries around the world are competing to form free trade areas and customs unions, with increased connectivity their prime goal. Countries need to embark upon development of transport networks at regional or sub-regional level in order to facilitate cross-country movement of traded goods and services, which in turn will help increase complementarities on trade and economy. SAARC Regional Multimodal Transport Study (SRMTS) and BIMSTEC Transport Infrastructure and Logistics Study (BTILS) envisage creation of a regional transport network to help increase intra-regional trade, albeit the implementation of these concepts is still at a rudimentary stage.
The seven-year cycle of Nepal-India transit treaty will be completed in March 2013. Despite there being an automatic provision for the renewal of the treaty; the treaty mandated the review and modifications to the protocol and memorandum to meet the new challenges before such renewals. Currently, there is the issue of additional one-time lock which was initiated by the Indian customs since August 2011. This has been a contentious issue for Nepal as the Indian customs started putting additional lock on the container over and above the imprinted seal of the shipping line or his agent. This new provision has been added by the Indian authorities unilaterally, citing their concern about deflection of cargo en route. The agreement for operationalization of Visakhapatnam port and Singhabad-Rohanpur rail corridor has been held back due to differences on additional one-time lock.
India is the only transit country for Nepal as transit through Bangladesh, its third nearest neighbor, also requires crossing the small strip of Indian territories, the so-called goose neck between Kakarbhitta and Banglabandha. Transit to a third country through China is not practical due to long distances to the seaports of China and the rugged terrains of Himalaya and Tibet Autonomous Region of China. And there is no transit agreement between the government of Nepal and PR China to allow such movement. Thus, there are no alternatives to negotiate the transit deal with India for the facilitation of Nepali trade. Improving cross-border transport connectivity, simplifying documents and procedures, and establishing effective communication linkages are important aspects in streamlining the transit movement between the port in India and the land customs stations in India and Nepal.
Development of road and rail corridors and harnessing port facilities at regional level is vital for smooth flow of goods, services, investment and people.
Indian interest on transit issues may be two-folds: One, allowing the movement of Indian traffic through the Nepali territory to again enter India. This is not a regular feature and may be invoked only during natural calamities when such movements are warranted. Two, providing traffic in transit facilities to China–Tibet, which is provided by bilateral transit agreement itself. Further, negotiations may take place in finding a common solution acceptable to both sides; reducing the cost of transaction for Nepal on one side and protecting the legitimate interests of India on the other.
Development of transport infrastructures, connectivity and transport agreements at the regional and sub-regional levels could surpass bilateral transit issues. Hence, there should be a concerted effort to develop and improve the operation of road and rail corridors so as to bring the sub-region even closer and help achieve smooth flow of goods, services, investment and people. Now, there is need to think out of the box and resolve issues like additional one-time lock or rationalizing the number of transit passes in Nepal-India border with a broader vision. Diplomacy on transit should focus on substantive achievement and avoid mistaking forest for the trees.
The author is former commerce secretary. The views are personal