The renewal of Nepal-India treaty of transit for another seven years with effect from January 6, 2013 is the continuum of transit facilities within the existing framework of the treaty previously renewed in 2006. In a sense, it is business as usual for both governments, without any value added to the provisions of transit arrangements, which has remained a much hyped discourse of international trade and trade facilitation.
In the facilitation of transit, the simplification of documents and procedures, development of adequate transport and border infrastructures, automation of customs and border control offices, and development of institutional and human resources capacities of the related institutions are crucial to reducing transaction cost and facilitating trade. In order to become cost effective and efficient in an IT enabled environment, various trade related agencies across the public and private sector are now on a service-enhancement spree.
The facilitation of transit lies at the core of achieving competitiveness in trade, particularly for land-locked developing countries. It is one of the instruments that enables them to achieve the objectives of regional trade integration. Such a provision is well crafted in the legal texts of various regional trade agreements like those of South Asian Free Trade Area and BIMSTEC Free Trade Area, of which Nepal is a party. Nepal, as a member of WTO, negotiated a trade facilitation agreement within a multilateral trading system. The Geneva based negotiations centered on the three Articles of GATT (General Agreement on Tariffs and Trade) 1994 related to freedom of transit, fee and formalities, and publication and transparency of trade rules and regulations. Nepal has also expressed its commitment to implement the Almaty Program of Action (APOA), particularly its priority areas of fundamental transit policy issues. Nepal’s focus is establishing regional transit corridors; development of rail, roads, ports, inland waterways, and pipelines infrastructures; improving air connectivity and communication links; implementing trade facilitation measures, particularly by expanding the use of information technology; improving efficiency of customs control; simplifying documents and procedures; and garnering international technical and financial assistance to establish an efficient transit transport system.
INITIATIVES OF TRADE FACILITATION
The first decade of the current millennium produced watershed outcomes in the transit transportation history of Nepal, as the first three Inland Clearances Depots (ICDs) were constructed simultaneously in 2001-02, which facilitated and simplified the transit movement of rail traffic to the gateway ports in India. The rail locomotives and wagons carrying Nepali transit traffic landed in Nepal for the first time in July 2004. In 2006, customs automation was started with the introduction of an advanced version of ASYCUDA (Automated SYstem for CUstoms DAta). Legislative reform was started by making a comprehensive review and revision of the Customs Act with a view to making the legislation compatible with WTO and revised Kyoto Convention. Border facilities were upgraded by developing warehouses, inspection sheds, parking yards, and administrative blocks in order to facilitate the operation of customs and other border control agencies. The project for development of Integrated Check Posts (ICPs) at Birgunj, Biratnagar, Bhairahawa and Nepalgunj with Indian assistance, and the initiation of the development of a new ICD at Tatopani with Chinese assistance were other major activities towards trade facilitation. The Rail Services Agreement (RSA) signed between the Government of Nepal and India in 2004 provides a much simpler framework for transiting goods between Nepali ICDs and gateway ports of Kolkata and Haldia.
NEPAL-INDIA TREATY OF TRANSIT
Despite all these efforts, Nepali trade is still suffering, and is not competitive in international markets. Imported goods are expensive in Nepal in comparison to neighboring countries, and the demand for Nepali goods in international markets has reduced mainly due to trade liberalization, resulting in an erosion of preference for Nepali products and services. This has further kindled the need for measures that enhance the efficiency of trading across borders under a new supply chain management.
The Government of Nepal has taken some important initiatives in the past to enhance transit regimes, which are: (a) The use of Visakhapatnam port and Rohanpur-Singhabad rail corridor (b) Simplification of transit procedures through Fulbari-Banglabandha to reach Bangladesh through road corridor (c) Simplification of transit procedures for movement of transit traffic to/from Kolkata and Haldia, (d) Allowing the movement of bulk and break-bulk rail traffic to Jogbani and Nautanawa rail stations, and (e) Further simplification of export-import procedure through rail movement between gateway port and Birgunj ICD as part of Rail Services Agreement (RSA). Of these, the use of Visakhapatnam port and Rohanpur-Singhabad railway corridor, and simplifications of procedures on Kakarbhitta-Phulbari-Banglabandha corridor were agreed upon during the India visits of the then Prime Minister Madhav Nepal and current PM Bhattarai. The other arrangements were also in very advanced stages then, and were achieved later with extra efforts from the government. These initiatives are important in reducing the transit transportation cost and increasing bilateral cooperation on transit transport, which in turn would serve as building blocks for promoting regional cooperation.
Nepali officials, particularly political leaders, are politicizing all issues, including purely economic issues. The additional one-time lock policy implemented by the Indian customs since August 2011 has been a bone of contention among a sector of political demagogues of the ruling Maoist party, and there have been many discussions regarding it in public and private forums. The genesis of the new arrangement, its rationale, prevailing international practices, and the implications to Nepali trade were analyzed, none of which justify restraining legitimate measures adopted by the transit country. Our political leaders do not heed this new regulation, and instead choose to continue the old regulations, risking the important developments on transit facilitation. Here, economic rationale is engulfed in a whirlpool of political ambition.
WHAT LIES AHEAD?
Nepal, as the LDC coordinator in the WTO system, now has a greater responsibility to advocate the case of least developed and land-locked countries in multilateral forums. Among the 48 least developed countries around the world, 31 are landlocked, and they face 10-14 percent additional cost of transportation in comparison to similar countries with a coastline. They have obvious motivations to reduce their transaction cost, which would allow them to compete in international markets. Hence, trade facilitation agenda of those countries should focus on streamlining transit procedures, creating competition between various modes of transportation through diversification of corridors, upgrading transport infrastructures, introduction of institutional, legal and procedural reforms, and enabling various regulatory agencies within a single network for sanction and approval of export and import procedures. Various countries in Southeast Asia are implementing the national and cross border Single Window system for the simplification and harmonization of transit movement of goods. Nepal should make a conscientious effort towards implementing the Single Window framework.
The globalization of trade and economy has made it necessary for countries to work together to harness available opportunities to access the market under various trading arrangements. The achievements of the past decade towards streamlining transit facilities need to be consolidated and further enhanced in order to benefit Nepal from her economic engagement with outside world. This calls for a broad vision, a high level political commitment, and the courage to think out of the box. There is a need for renewed vigor and enthusiasm from government officials and political leaders to ensure that transit and trade facilitation agenda is not aborted. They should be mindful that a jungle is not lost to save a tree.
The author is former commerce secretary email@example.com