Nepal’s Opportunity as an Entrepôt

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--BY KRISHNA RAJ BAJGAIN

The future of Sino-India economic relations looks unpredictable given recent developments following border tensions. The growing fever of nationalism is exacerbating the already fragile economic relations. Business communities in both countries are serious about ongoing developments and are looking for a permanent solution to this phenomenon.

China’s economic engagement in India was growing in an encouraging trend over the past few years. China was investing in Indian startups and was a major supplier of vital industrial inputs. But now, Indian think tanks are worried about what will happen now and what will be the long-term impact of the growing economic nationalism which has sent clear signals that direct economic relations between China and India are less and less likely in the coming months or even years.

Nepal has an opportunity here if it wants and plays it out strategically. It is located between India and China and has relatively amicable relations with both rival neighbours. The recent differences can be ironed out easily if they both Nepal and India  have the political will. And, Nepal already has served as an entrepôt between India and China in the past.

Nepal should develop infrastructural facilities (physical and institutional) to minimise the cost of doing business in Nepal, making it at least on par with the cost of doing business in the best performing countries like Singapore and the other European countries. A functional entrepôt economy needs a competent human resource reserve. Predictability in rules, such as related to taxes and dispute settlement, is a must for an entrepôt to secure investment from the risk of being usurped by the state or powerful businessperson of the entrepôt country. Rule of law and good governance will remove the worry of state intervention. Simple and unambiguous procedures and tax regime are vital components in attracting investors in the entrepôt state.  

Considering the trade flow between China and India and taking the emerging geopolitical development into account, Nepal should make herself prepared to grab the opportunity available as a neutral country located between China and India. We should engage with India and China to establish assembling industries in Nepal targeted to these two markets. We should facilitate to establish contact offices, branches and outlets of the Chinese and Indian industries in Nepal. Nepal should organise trade fairs, exhibitions, B2B meetings, seminars, and appropriate academic activities to provide China and India with a neutral forum for more interaction and deeper connection.

 

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