Sujeev Shakya

Articles & Publications

Unleashing the potential of Nepali sports

Since the monarchical days, the Olympics have been a junket for near and dear ones of authorities.

For those Nepalis who like to compare their country with Bhutan, the Olympics this time was an apt opportunity. Nepal, a country of 28 million people, sent five athletes and 21 officials whereas Bhutan, with a population of 800,000 people, sent four athletes and five officials. In Nepal, the Olympics have been a junket for near and dear ones of authorities since the monarchical days. Therefore, the wife of Bamdev Gautam being singled out for criticism this time is not fair. People who have generally nothing to do with the sports have been part of the delegation each time.

Like in many fields of our life (apart from selling momos), there is an association or a cartel for everything. And, of course, there is a cartel of people who control the games. The only difference here is that the cartel members may not even know the rules of the game they are associated with. But in a country where seniority, ethnicity and gender can decide what one can lead, it is not surprising to see this happen when it comes to sports. However, we need to continue to be activists of change and recognise some of the transformations that are taking place and hope we can build on them.

The potential

I have been continuously writing about this issue as I see hope. When the South Asian Football Federation (SAFF) was held in 2013, the gate money from matches did provide lots of “party” funds of both kinds—lots of parties and money for political parties! In leveraging sports we discussed how it is possible to bring about a commercial scale to activities. Perhaps, this led to some entrepreneurial pursuits around the cricket and football leagues in different parts of Nepal, some of them without the toll tax and blessing to the syndicates. After the South Asian Games in 2019, we made calls again for transformation and learning from other countries.

Building a world-class facility using the abandoned Mahendranagar Airport with private or international government efforts still makes sense. Let us look at the big medal baggers—can we ask China, Japan, or the United States to help build academies and sports facilities that can sustain through hosting tournaments? The key issue remains to get the games to be managed by people who know the game rather than political appointees, spouses, or relatives of politicians. Perhaps Paras Khadka, the just-retired Nepal cricket captain, can show the way by leading the transformations of institutions as he has led the transformation of Nepali cricket.

Much has been written about the training regimes of swimmer Gaurika Singh and the dedication of family members for her to get this far. As The Nepali diaspora of knowledge workers and entrepreneurs grow, we will see more parents putting efforts behind their children to get the foundations right. This surely requires not only financial resources but dedication. With more Nepali companies in the day and age of social media and online platforms finding newer ways of seeing the association of brands with individuals, we may see more firms willing to provide their support. So it could be Goldstar shoes finding enough reasons to get associated with the teams like many global brands. The growth and aspiration of Nepali brands going global can fill the much-needed resource gap.

The inspiration
It is heartening to see Nepali film making getting away from the shackles of all sorts of associations, and now a YouTube show like Blind Date can garner close to a million views. Music-making and sharing has changed. Instagram stars can give everyone else a run for their money. With Nepalis in 180 plus countries connected by the internet, there is a huge market for products and services along with connecting with the Nepali identity. Like we see in the arts, music and entertainment, there are many global Nepalis coming out to help, we will see similar activities. We can imagine football teams and cricket teams that are backed by Nepali corporate houses from different parts of the world, there can be no limit to imagination.

While it is easy to blame politics and syndicates in the garb of associations, they stem from how our society is structured and how we define culture—be it of caste or ethnicity-based superiority, caste hierarchies within ethnic groups, gender, and our quest for pushing seniority over meritocracy. We are a country where 50 percent of the population is under 25, and they are growing up seeing in real time what is happening around the world. When they see that countries with a smaller population than Nepal produce so many world-class athletes and sportspeople, they will start wondering why they can’t do it. They will challenge the status quo and unshackle the potential. Hopefully, by the Olympics 2028, we will see Nepal in the tally of medals. For that, there are many things that need to start today. 

Nepal’s response to COVID-19

Nepal is yet to make an announcement of plans to see how it works on economic recovery and how it will approach multilateral and bilateral agencies for long-term support through investments, grants and loans.

The first person in Nepal to be tested positive was on 3 January, but till 29 March only five have tested positive out of a total of 917 tests. When Covid19 did hit Wuhan and China in a big way and the first and only case that was tested positive in January, Nepal realised it couldn’t escape this big virus that is taking on the world. However, rather than discussing preparedness, the tourism minister was quickly making announcements of how Nepal was a Covid19 free country and people should visit Nepal, pushing the tourism agenda. It took over two months to grapple with the situation. A lockdown was announced from 17 March and it has been extended till 8 April. International flights are now barred till 15 April. For Nepal, the biggest decision was to close its land border with India as thousands of people from both country move both ways.

With our South Asian psyche, Nepalese also only took it seriously when it started to hit the developed West ⁠— Europe, UK and the US. In the past, since dengue, malaria, diarrhea and other waterborne disease became big problems in India or Bangladesh, it does not really attract the attention of Nepal. Like our food, culture, attire and other elements of day-to-day life, the West holds a much stronger ground in the country. Since this has hit the West it has also become a geopolitical tug-of-war.

The government has now formed a high level committee headed by the deputy prime minister to deal with the situation. However, given a weak government that hardly delivers and addresses the concerns of common people, there is little trust in what the government says or does. The video of a doctor talking about the ill preparedness of the government recently went viral as people could resonate with what he said. Nepal is listed as having a very high Non-communicable Diseases (NCD) burden, meaning a spread of Covid19 in Nepal can result in fatalities.

Nepal has been looking at India in terms of announcements with regard to the open border mechanisms. In Nepal, despite tints of anti-India sentiments being a major political weapon of Nepali political classes to demonstrate their nationalism, it always follows India’s footsteps. Nepal is not like Bhutan, where they have created their own disaster response system that tries to copy the Singapore model and the respected royal family lead from the front. In Nepal, like in India, political leaders make speeches on social distancing and share on social media their pictures in crowded gatherings. In India, some analysts are trying to make the closure of border by Nepal as a big issue, but we need to understand that these are times when even states and districts within India have restriction on movements.

The Nepalese are now left fending for themselves. Out of Nepal’s population of 28 million, about 3 million are outside Nepal and half a million live within the Kathmandu valley. The Kathmandu valley is the land of economic opportunity, therefore people migrate for work here. Estimates are that about 3 million of the valley’s 5 million are internal migrants; and a good number have started to go back to their villages and towns due to the Covid19 threat. Nepalis in Kathmandu valley and other areas hit by the Gorkha earthquake of April 2015 and the areas in the southern plains of Nepal that battle with flood practically each year look back at their own experiences of resilience. The whole country was brought to a grinding halt during the Indian blockade that lasted for five months when Nepal was trying to recover from the earthquake. These were times when Nepal’s power shortage peaked at more than 16 hours a day. Working from home at that point at this scale would have been impossible given the power situation. The optic fiber cable connections from China have boosted Nepali internet connections and the penetration of smartphone and social media, a helpful infusion of capacities in communications and information flow specifically during the times of a crisis.

Nepal is yet to make announcement of plans to see how it works on economic recovery and how it will approach multilateral and bilateral agencies for long-term support through investments, grants and loans to handle this major crisis. Kathmandu has instead opted to take short-term approaches. Nepal has looked up to China for supplies, and first batch of grants from Beijing have been approved and purchases made by Nepal were airlifted on 29 March. The US also has made contributions. China who thinks has gone one up in the global geopolitical game will not mind using its full strength to help Nepal as it gives a big opportunity for it to increase its soft power in India’s backyard especially when there is a government that on paper peddles communism. Twenty first century geopolitical victories are based on investments, business and soft power not selling arms to the military. For India, if it contains the virus well within its country, it will want to also extend its expertise to Nepal. Our proximity with India through land borders make the relationship unique at the same time brings about challenges in stemming movements and implementing proper screening procedures and policies.

It is all about changing mindsets to working together in getting over this global crisis. Nepali people are used to overcoming crisis, they can also tell the world how they do it.

Finding Nepal in Indonesia

Cross-cultural links abound in Buddhist temple complex at Borobudur

In recent years there has been growing interest in cultural and historical linkages that connect seemingly disparate societies. As a Nepali writer from the Shakya clan, belonging to the Newa community and hailing from the city of Patan, adjoining Kathmandu, I grew up with stories of how our ancestors traveled the world.

My curiosity grew as the internet provided previously unimaginable access to places, documents and stories. In Beijing, for example, I learned that  there are hutongs (lanes) designed by Arnico, an artisan from Patan who built many temples in the city under Kublai Khan, fifth head of the Mongol empire, who ruled China from 1272 to 1294.

Other Nepalis moved to the islands of Java and Sumatra, in what is now Indonesia. Javanese legend attributes the UNESCO World Heritage-listed Buddhist temples at Borobudur, built in the eighth and ninth centuries near Muntilan in central Java, to Gunadharma, an artisan thought to have hailed from Nepal.

Visiting these shrines, I felt curiously at home. The carvings in the restored gates look similar to those at my family’s local temple, the Hiranya varna Mahavihar (Golden Temple) in Patan —  not least because the lions in both temples have faces resembling monkeys. Real lions were not found in either place.

The way in which statues of the Buddha are orientated in six different directions at Borobudur is also similar to their arrangement in the Golden Temple and the Swayambhu temple in the Kathmandu Valley. Several other Buddhist temples seem to have been built in this manner — including large terrace-style stupas (dome-shaped Buddhist shrines) constructed at  Nalanda and Antichek in India and at Paharpur in Bangladesh.

There are many other similarities. For example, the Buddha’s eyes in the pillars of the Mendut temple in Borobudur are similar to those found in the Swayambhu temple. Researchers have also found similarities between the floor plans of Borobudur and the Gyantse Kumbum temple in western Tibet, also built by Nepali artisans. And there are mandalas (geometric arrangements of images) at Borobudur that resemble images in Tibetan and Nepali stupas.

By the 1970s, the temples at Borobudur were largely in ruins, having decayed badly under Dutch colonial rule from 1800 to 1949, when part of the complex was used as a café. Indonesian tourist guides tell visitors that the Dutch plundered the temples, removing many images now hanging in museums and private homes in the Netherlands.

Restoration was begun by UNESCO in the 1970s, in line with a master plan produced in 1972 by the Japan International Cooperation Agency,  and the site was given World Heritage status in 1991 — an event described by Moe Chiba, head of the cultural unit of UNESCO’s Science Bureau for Asia and the Pacific, as a “game changer” for restoration of the temple complex.

In a way, though, the successful restoration of these temples has created a problem that did not exist before — the widespread view that the point of a World Heritage listing is to provide commercial value through tourism. This has led to overcommercialization of the site at Borobudur, culminating in a controversial concert by the American singer Mariah Carey in 2018. Cheap entertainments unrelated to the heritage site flourish because they are said to be attractive to tourists.

The Indonesian government’s priority for Borobudur — and a 10th century Hindu temple complex at Prambanan, in nearby Yogyakarta — is to take advantage of the business opportunity created by their World Heritage status. But a shift in thinking is required to reinstate conservation and historical research as the principal objectives of renovation and reconstruction.

The key change needed is an improvement in heritage management, currently shared between UNESCO, the Indonesian government and local authorities. The government has launched an attempt to unify different agendas, and the Ministry of Public Works and Housing is developing an integrated tourism master plan for Borobudur, Yogyakarta and Prambanan.

It is not yet clear whether the plan can be an effective tool for coordination. But on a recent visit, I was struck to see how many of the guides and sightseers at the temples at Borobudur and Prambanan were Muslims. My guides commented repeatedly on the similarities between Javanese language and culture and South Asian civilizations.  That is a potent reminder that tracking historical and cultural ties between countries with different religious and sectarian cultures can yield valuable cross-fertilization. To me, it stands as testament to the enduring nature of my own clan’s contribution to modern Indonesia.

Picture source:

Making digital transformation work

Last week, a photograph of people queuing up at the Shukraraj Infectious and Tropical Disease Hospital at Teku to get a certificate saying that they have been vaccinated filled newspaper front pages and social media posts. It was not that the people had not been given vaccination certificates, but they had been given ones that were not internationally acceptable as they did not conform to international norms, neither were they in English. In most countries, the vaccination process has been through registration online, getting appointments online and even getting certificates online. However, in Nepal, we like to ensure that the digital process does have manual intervention.

The same goes for the online registration when one fills out the form. First, the site does not work most of the time as one gets the “Your session has expired” message. The barcode on the form is never scanned on arrival. Rather, there is another manual set of records that are again handwritten. A handwritten chit with the name of the hotel is given. That is the basis of getting oneself through arrival. Similarly, for vaccination, people were asked to fill the forms online, but the vaccination process has never asked anyone to bring the code that was generated. This basically shows how far off we are from internalising the digital process.

Why we can’t go digital

There are four reasons for our reluctance to go digital. First and foremost, the manual process allows human intervention, which means money can change hands or one can influence the process. For instance, digital scanning of locked containers at the customs means that there is no way the people can make money, so the best way is to ensure that the machine does not work. Similarly, when procurement processes are underway, it is not unusual for the server to crash as a manual substitute to the process can bring about much needed manual intervention. At the Registrar of Companies, it is rare to see the system work as there is no money to be made by touts and officials if the system works fool proof.

Second, it is our love for documents. Even in banking and financial services, where most of the stuff has gone digital and automated, everyone loves to have that copy of citizenship certificate or the manual form. In a year, I lose count of how many times I submit the same document to the same branch of the same bank. Yes, they also want to play safe as if any dispute goes to court, it wants everything on pieces of paper. So, you may be doing all sorts of transactions digitally; but if something goes wrong and you have to go to court, it is only the manual documents that count.

Third, our digital solutions have to be home-grown as protectionism has been key. Governments do not want imported software, and the local cartels know how to push local solutions. So we have a stock exchange solution that is so primitive compared to the contemporary solutions that one can get from international service providers. Like international legal, accounting or consulting firms, we have serious issues with international solutions.

Finally, we do not believe in outsourcing. Globally, even the most sensitive digital work is being outsourced to competent firms. If there are some good companies that can manage issuing driving licences and vehicle registration solutions, outsource the process to them. If there are companies that can manage digital identity for financial purposes—get them on board.

Our taxation system is less complicated than that of our neighbours, and the system is pretty robust given how many points there are of manual intervention. Yes, leakages continue; but for companies that would like to do business in a clean manner, the system is pretty well oiled, and one can manage a good part of one’s tax management without human intervention. Similarly, the passport issuance system has worked well. It could be better, but given the volume handled, it is pretty efficient. We need to learn from what works.

In Rwanda, the entire government to citizen service is through a digital platform Irembo. This has made services efficient as one can pay for everything from passport, driving licence and PCR test to trade fees through this portal. There is no manual intervention anymore. The government of Rwanda is aware of the digital divide; and many of the services can be availed even if one is using a basic phone and does not have a smartphone. To make this service reach its citizens, the government is now introducing a subsidy scheme for people to be able to buy basic versions of smartphones. Unlike in Nepal, where people move back to cash from digital payment after the lockdown ends, in Rwanda, digital payment has proliferated during the pandemic. It is also about the mindset of adoption.

Digital transformation is the only way ahead as we are literally living in two worlds. In one world, we use the most advanced social media platforms, watch content over platforms, use email and other software platforms like any other citizen in the world. We chat on the most advanced platforms that are being updated and improved in real time. We are very good at doing that! However, when it comes to providing services or availing services, we like heritage variety—go manual, avoid digital. This mindset has to change as it is not the challenge of using technology, but about the mindset to make it work for day-to-day stuff also.

If one can get into the intricacies of creating VPN to access pornography or find free sites to watch a game of football or favourite movie, they should be able to manage the system to apply for driving licences online and get it delivered to one’s doorstep.


The recent meeting of the Commerce Ministers of the SAARC countries and the SAARC Trade Fair culminated in announcements and commitments. SAARC Trade Centres are going to be established and so are Corporate Clubs. The removal of trade barriers has been unanimously brought forward to 2000.

From the time the SAARC organisation was established, such announcements have been a regular feature. In December 1995, tariff cuts were announced by all the seven member countries, but the goods given such preferential treatment comprise less than five percent of the total regional trade.

Each country harps on the need for barriers to go down. But the announced tariff cut on import of chewing gum by Nepal or dental cement by Bangladesh will not boost regional trade. The true test of free trade will be when Pakistan starts importing tea from India and not from Britain.

India is still seen as South Asia´s “shark economy”, and the foundation of true free trade will be laid only when this perception starts being erased. New Delhi has taken the right step by giving most-favoured nation status to Pakistan.

Where the entire region is being strapped by liquidity, why do the governments not allow intra-region investment, wherein a share of a Pakistani company could be traded in Nepal or Sri Lanka? Why should a factory in Bangladesh not be funded by a consortium of Indian and Pakistani banks? Why is it that people in Assam cannot buy Bangladeshi goods and have to pay heavy transportation cost of bringing cargo long distances overland?

The truth is Saarconomy has thrived all along without SAPTA at an unofficial level, where gold is smuggled from Nepal into India, Bombay satta market is backed by financiers from Karachi, and Indian goods find their way into Sri Lanka. Governments need to think about formalising this trade by removing barriers.

The price of deferring this decision is being paid by South Asia´s 1.3 billion people. Freedom cannot come in stages. South Asia is either a free trade zone or not. Cutting tariffs on chewing gum and dental cement is not a start, but stalling.

Black and white money

Two months ago, the Hawala took politicians by surprise in India and raised certain fundamental questions regarding the incestuous association between national-level politicians and the businessmen who have been holding the reins of the Indian economy. The Supreme Court´s directives to the Central Bureau of Investigation is the start, hopefully, of a much-needed drive against a rot that everyone knows exists but which has flourished unhindered thus far. The overall economic implications of such a drive is to make the Indian economy more transparent, efficient and productive. To that extent, the decision handed down by the justices is a positive economic step.

If the politics and economies of South Asia were more inter-linked, the repercussions of Hawala would have travelled swiftly to all other capitals. As things stand, however, commentators in each of India´s neighbours seem content to draw parallels and leave it at that. It is clear that none of these polities are ready, as India seems to be, to dip into the cesspool. In Karachi as in Kathmandu, they would rather pinch their noses and look away in a show of distaste.

Fingers have been raised at the prime minister of Pakistan relating to business connections of her husband, the former prime minister of Nepal, Girija Prasad Koirala, is in a tangle relating to the national flag carrier, and Gen Ershad is still fighting cases in Bangladesh for massive fraud. Nowhere, however, have things been as open and relatively transparent as in India, which speaks of a good prognosis. While India as a whole might be lagging on entrepreneurial fire, compared to China, the predictability and quality of its judiciary is one of the things that puts it in good stead versus that other Asian colossus. Hawala will benefit, not harm India in the long run.

The Hawala racket is essentially about the ill-gotten, tax-free, unreported “black money” that exists in abundance in all South Asian countries and practically runs a parallel economy in them. This black money is generated with the blessings of the politicians, who end up feeding in the same trough as partial beneficiaries. Politicians and political parties have always made money by protecting industries during the so-called socialist era, and by pushing MNCs and other bidders in the liberalised era.

Hawala was really a way to finance political expenditure. Something which is an open secret is being pushed behind a Gandhian veil that everyone sees through. It has become necessary to find a means to formalise these expenses. Though state-funded politics would be a dream, contributions to a certain extent should be openly allowed. The underlying understanding behind this idea should be that the cost of black money to the economy is higher than the cost of white money.

What they said at CII

The timing of the Confederation of Indian Industry (CII) session on the eve of an election may have ushered a new era as far is acknowledging the role of business and commerce in Indian politics is concerned. Never before had such a jamboree of political leaders taken place in which they were expected to lay out their economic agendas before the captains of industry. Politicians have realised over the years that election manifestos have become a joke and that the influence of business houses is paramount. A hung parliament stares at the politicians and they look forward for the corporate world to bail them out.

The BJP leader Atal Bihari Vajpayee was impressive when he spoke at CII, but the other leaders were clearly uncomfortable in talking brass tacks before businessmen. It was clever of Vajpayee to have harped on the swadeshi plank, defined and adapted for the ears of Indian tycoons. At a time when lots of Indian business houses are succumbing to the onslaught of multinationals, they have found solace in the swadeshi slogan. What is clear is that while former Finance Minister Monmohan Singh has shouted himself hoarse in calling for liberalisation, the large pro-protection lobby of business houses has not gone away. And it is this lobby within the CII, breaking decorum to speak out last month, which might define how the reform process in India is going to unfold.

The coming five years shall determine whether or not India will become an economic superpower on the basis of its reforms, and how soon the government can get out of running business and industry. It is clear that reforms will not take place at the pace that Mr Singh generated these last five years. Since other economies in South Asia have keenly followed, and emulated, the Indian experiment with liberalisation in varying degrees, reforms in the other countries will also definitely slow down. Hence, can we see a South Asian deceleration, which will leave it as a whole even further behind the Chinese and the Asian tigers?

While referring to the CII meet, I must note with some chagrin that not one political party saw it necessary to focus on the regional economy —meaning South Asia´s economy as a whole. While India might have remained, and wants to remain, insular, market forces are bound to force it to look at economic relationships with Bangladesh, Sri Lanka, Nepal and—on a different plane—Pakistan. When the entire world is busy forming trade blocs, the delay in doing so in South Asia may be detrimental to the regional countries, although it is true that this insularity will affect the smaller economies like Bangladesh or Nepal than the larger two.

The bull run started by the FIIs on the eve of an election shows healthy signs as far as their trust in the Indian economy is concerned and reiterates the de-linking of politics, human rights and economic issues that is visible in the case of China. This clearly indicates that, slowly but definitely, economic agendas, and other ´non-political´ issues are having more of a role in the Indian politics than before. Perhaps the time will come when the politicos will also deign to look at neighbouring economies. Is the new government in Delhi listening?

Of hung parliaments and hanging reforms

First Nepal, then India and now likely Bangladesh—hung parliaments have become a South Asian phenomenon. Stable party governments are becoming rare as parties with different ideologies and values compromise to maintain their seats in power This, more than anything else, is affecting economic agendas the most.

In Nepal, the reforms that were initiated robustly by the Nepali Congress government under Girija Prasad Koirala slowed down when the communists came to power and now, under the present coalition, have completely lost direction. Liberalisation has become simply a buzzword for umpteenth seminars and conferences.

Equally robust were the reforms launched by Narasimha Rao in India but they began to lose steam in Mr Rao´s last year in office, presumably because of the approaching elections. With the United Front coalition in power the pace of reforms shall depend on how each partner of the Front chooses to define liberalisation. Though the state of West Bengal has opened up in the past few years even under leftist rule, it needs to be seen how the left parties in the United Front shall okay swift reforms at a national level. One thing, however, has become clear: no party can shy away from liberalisation although stances to the contrary might have been adopted while seeking votes. Even the BJP, with its Swadeshi rhetoric, had acknowledged this in its brief tenure in office.

In the case of Bangladesh, the little headway Khaleda Zia had made in opening up the economy in the post-Ershad era was stalled by two years of political turbulence and the drainage of resources in this year´s two elections. A hung parliament would lead to economic agendas being relegated to lesser priorities, hampering the process of reforms.

In a region that nurtured state control over most areas of production and provided subsidies on practically all basic necessities, policies that do away with state benevolence are never very popular. As Mr Rao´s term in office has shown, it needs a strong government, to confidently goad the economy to move, no matter what the cost. But when government is held hostage to the number game of coalition politics, reforms that come heavy on the electorate will certainly not be top priority. No party can risk alienating voters with the possibility of snap polls always lurking around the corner.

Sri Lanka, in spite of its internal problems, has been able to maintain the pace of reforms, leading it to be economically more developed than the other countries in the region. This leaves one wondering whether this process is being facilitated by a presidential form of government.

To wait for a time when reforms come about through businessmen becoming prime ministers may be a far cry, but the possibility of redefining democratic systems should not be ruled out. Hung parliaments should definitely not keep economic reforms hanging.

Surplus of Deficit

The common string that binds all ´South Asian economies is the ever-menacing problem of fiscal deficit. The region´s finance ministers always have a difficult time presenting deficit budgets, for they can only offer short term corrective action which do not really tackle the structural correctives that are required.

The gap between revenue and expenditure is ever -widening and is a matter of grave concern for every South Asian country. While inflation plagues all of them, the high deficit has curbed the growth of the Gross Domestic Product (GDP). The remedial measure of privatising industries to generate revenues has only been partially successful, and high government borrowings have raised regional interest rates to one of the highest in the world.

In a scenario where political dominance over economic issues prevails and hunger for power results in populist moves such as providing subsidies and sanctioning profligate feel-good schemes, the burden on the state exchequer is immense.

The fiscal deficit in the region has hovered around five and six percent, bringing down the GDP growth to below four percent. India, which generates 80 percent of South Asia´s GDP, has been raising the price of petroleum products. The purpose, which could be considered ridiculous, was to bridge the fiscal deficit gap. However, the move is will have a cascading effect on prices of all commodities. Inflation that has been kept at single digits for the past, few years may rise, leading to the vicious circle of higher interest rates, lower economic activities, higher deficits resulting in higher borrowing.

The way out may be a long drawn policy on encouragement of economic activities. Foreign Direct Investment (FDI) inflows in infrastructure are a necessity coupled with a transparent business environment that induces public accountability. FDI investment in developing countries is expanding at 10 percent per year, but the figure rests at a low 3 percent for the South Asian economies. The challenge is to increase the FDI-to-GDP ratio in these regions. Unlike other trade blocs, where intra-regional trade bails out nations with problems, this safety valve is not available to the economies of our region. Here, intra-regional trade is under five percent of the region´s trade, requiring the economies to have more of a global vision.

Fiscal discipline can be brought in by rationalising expenditure and simplifying revenue collection, administration and procedures. The parallel economies created in the countries of South Asian have helped sustain trade activities in Dubai or Singapore. The curtailment of flight of capital aided by plugging of revenue leakage shall contribute to narrowing the gap. While reforms are underway in the region, the speed of integration shall determine the destiny of these nations.

The opportunity of the yam

Nepal’s relationship with its northern neighbour, Tibet, was cemented when the Nepali princess Bhrikuti Devi married the king of Tibet, Songtsan Gampo, in the seventh century AD and earned the divine title White Tara. Thereafter, hundreds of Nepali artisans visited Tibet to build monasteries; and trade in bronze, gold and silver idols of Tara and other deities became one of the cornerstones of commerce between the two countries. For Nepal, Tibet was a more immediate entity than China, for thinking of distant Shanghai as a city with which to do business was farfetched.

During the mid-16th century, a treaty was signed between Nepal and Tibet that made Kathmandu the sole entrepot for the latter. In a fairly short timeframe, this allowed the ethnic Newar merchants of the Kathmandu Valley to build a roaring business with Tibet, trading with goods to and from India. However, defeat to a Chinese expedition force in 1792 changed Nepal’s fortunes till trade was restored in 1856, when Nepal invaded Tibet and forced the trade routes to re-open. The Newar merchants again began to set up businesses in Lhasa, where they could trade goods from India and other parts of the world for gold and silver.

Newly communist China invaded Tibet in 1950, the same year that Nepal’s first flirtation with democracy began after the end of the autocratic Rana regime and the reinstatement of the Shah kings. The relationship with Tibet quickly came under review, particularly in the context of an India that was at the time attempting to play a dominant role in Nepal, while King Mahendra attempted to play Nepal’s ‘equidistance’ card between India and China. Kathmandu subsequently agreed to Tibet being a part of China by substituting an ambassador in Lhasa with a consul-general. Nepal signed a comprehensive friendship treaty with China in 1960, and the following year construction began on a highway connecting Kathmandu with Lhasa, though this did not see commercial use for long. The 1962 India-China war changed the equation again, however, as India became increasingly concerned about Nepal’s position vis-à-vis China, leading to New Delhi’s agreement to a more flexible trade-and-transit treaty with Nepal. In turn, by 1964, Beijing agreed to unfreeze the bank accounts of Nepali traders in Lhasa, leading again to a resumption of trade relations between Lhasa and Kathmandu.

Yet over time, India’s role in Nepal’s geopolitical scheme remained dominant, despite Kathmandu’s attempts to prop up the Beijing relationship as a counterbalance. While China supported King Birendra’s Zone of Peace proposal for Nepal during the 1970s and 1980s, India saw it as an attempt by Nepal to wriggle out of its sphere of influence. India rejected the concept and Nepal itself dumped the proposal after democracy’s second coming, in 1990. India’s geopolitical supremacy vis-à-vis Nepal was thus confirmed, yet again. In 1989, the import of arms by Nepal from China without the knowledge of the Indians led to the imposition of a trade embargo by New Delhi. While this action sparked international condemnation of India, it did weaken King Birendra’s authoritarian power, giving way to a constitutional monarchy. In the democratic era after 1990, India continued in its privileged place in Kathmandu’s radarscope. The rush of Indian multinationals investing in Nepal further consolidated its position. It was only in 1994, after the Communist Party of Nepal (Unified Marxist-Leninist) won general elections that the relationship with China was revisited. The recent electoral success by the former Maoist rebels is a further extension of this, as the comrades just out of the jungle have sought rather desperately to woo Beijing.

As noted previously, however, Nepal’s relationship was long mostly with Tibet, not with China. Goods and services that were imported from or exported to mainland China always had to go through Calcutta, by sea to either Shanghai or Guangzhou. But Nepal was seen as a haven for Chinese goods by Indian customers, at least until India liberalised and reduced import duties during the early 1990s. Chinese goods would arrive in Kathmandu from Shanghai via Calcutta, and then be smuggled into India. This is the only explanation as to why, for instance, Nepal imported more than 25 million Chinese umbrellas every year during the late 1980s, at a time when the country’s total population was less than 22 million.

These Chinese goods found their way to India via many of the border towns of Nepal. But an especially large centre emerged in Dhulabari, in eastern Nepal, just seven kilometres from the Indian border. These items were bought largely by Tibetan businesspeople, to be sold in Darjeeling and Kalimpong, as well as in a full-fledged grey market in Siliguri, from an area popularly known as the Hongkong Market. One always used to wonder about the fact that, apart from raising their collective voice every year on 10 March (the annual Uprising Day, commemorating the attempt to evict the newly arrived Chinese soldiers from the plateau), these Tibetan traders seemed happy enough to make a good living trading Chinese goods.

During the modern era, Tibet and the Tibetan people have been the only issues about which both the Nepali and Chinese state seem jointly concerned. Whenever the Kathmandu government felt the need to appease its Chinese counterpart, it would simply ensure that it curtailed the activities of ‘Free Tibet activists’ from among the roughly 25,000 Tibetans living in Nepal. This would take the form of, for instance, the royal regime shutting down the Dalai Lama’s representatives’ office or, most recently, the Maoist-led government trying its best to ensure that no Tibetan protestors showed up in front of the Chinese embassy during the days surrounding Uprising Day in March.

For Nepal, the show of proximity and friendship to China came to be judged by the extent to which it went to curtail the movement of Tibetans within Nepal, and the nationalist way in which the ‘One China’ policy was supported, almost by rote. With the West taking the Tibet issue as something of a boutique cause associated with Nepal, there has never been a dearth of Tibetan sympathisers, from the diplomatic community to the legions of tourists visiting the country, many of them using Kathmandu as an entry point to Lhasa. To this day, US senators write sporadically to protest the Kathmandu government’s actions in interdicting and accosting Tibetans. To Kathmandu’s dismay, continuous streams of ‘pilgrim-refugees’ continue to flee across the high passes into Nepal, en route to Dharamsala in India.

Anchoring the axis
Nepal’s unifying figure, Prithvi Narayan Shah, famously referred to the new state of Nepal as “a yam between two boulders”. He was mostly pointing to the danger of being crushed between two empires; but in the modern day, with evolving transport and easier access, there are vast opportunities as well. With the emergence of China and India as potential leaders of the next global economic order, and as international economic visioning slowly shifts to the Bombay-Shanghai axis, Nepal is suddenly in an ideal position to take advantage of the emerging reality.

The situation has certainly changed quickly. While Kathmandu still believes that it should play the China card every time it engages in deal-making with India, the reality is that Beijing and New Delhi have closer ties than ever before – working together on myriad economic issues, and leaving only a few border issues to be sorted out later. With Indian companies now manufacturing goods in China for the Indian market, and Chinese companies beginning to set up companies in India for the global market, Nepal stands the chance of soon losing its relevance. Gone are the days of smuggling through the Nepali Tarai, with Chinese goods now being directly redistributed in Indian markets after they arrives in port at Calcutta. While Tibetan traders still peddle Chinese goods in Kalimpong and Darjeeling, these have been imported by Indian traders in Siliguri.

At the same time, new opportunities could well arise as China and India squeeze closer together. Nepal is now faced with the possibility of engaging in some longer-term, not to mention strategic, thinking in terms of gaining from the increased business activity between India and China, and legitimately benefiting from the same. The rail link from Beijing to Lhasa via Golmud is currently slated to be extended to near Khasa, the border town 120 km northeast of Kathmandu. In turn, this could lead to an extension of that rail-and-road link to the Indian border town of Raxaul, only another 200 km. Nepal’s strategic location as a transit link could subsequently be augmented by industries that would take advantage of the location. There would be income from links and through-transit. Indeed, a compelling business opportunity exists merely in transferring containers from trucks coming from China – which are left-hand-drive – to those coming from India, which are right-hand. To be sure, there are also many north-south road tracks being pushed through right now between the northern rimlands of Nepal and the midhills. These are bound to grow as commerce grows, taking advantage of the China trade as well as the natural bounty of the Tibetan plateau as it comes up for exploitation.

As Nepal goes forward, tourism also holds a potent opportunity for leverage. With more than four million tourists (though the number dropped dramatically after the protests on the plateau last March) now visiting Tibet annually (many of them from Mainland China), Kathmandu’s Tourism Ministry has to find ways to get a fraction of them to come south of the border. In this, building a good transit road (and allowing for a slightly more relaxed visa regime by the Chinese authorities) could well facilitate young Chinese and Tibetans to drive to enjoy Nepal’s unique tourism and entertainment offerings, including new ones yet to be established. If a million Chinese citizens go to Macau for gaming and entertainment every single day, then a small fraction could certainly be lured into world-class centres in Nepal, too.

Similarly, two of the holiest places for Hindus and Buddhists anywhere in the world are found in Tibet, with both Mansarovar Lake and Mount Kailash being must-visit pilgrimages for many. Nepal has already being a transit point for Indian tourists visiting this lake, though the country has yet to figure out how to take a slice of revenue from this tour. The Indians come via Indian airlines and transit from Khasa in Chinese vehicles, thus leaving Nepalis with only a bit of the money spent on a few nights’ worth of hotels, as well as the commission that Chinese tour companies provide. This is only a small example of Nepal being unable to charge a proper price for the vast offerings it has.

In the future, Nepal needs to focus intently on the two T’s – transit and tourism. In doing so, it will vastly increase its ability to bridge between the nearly two and a half billion people of India and China. This would certainly be preferable to the rote rendition of traditional political equidistance voiced by every Nepali prime minister on a visit to Beijing. Nepal needs to view its two massive neighbours not from the perspective of their geopolitics, but rather through the lens of economics. The starting point could be the forming of a China-India Economic Council in Nepal, which could not only look at Nepal’s economic position linking these two countries, but could also be a serious institution that could do much to anchor the Bombay-Shanghai axis. Critical economic strategy and research alike could flow from such an institution, which could hold out the possibility of not only redefining the next global economic order, but also of finding and rooting Nepal’s place in that new paradigm.