PM Modi Visits Lumbini, China’s Investment Ground; Looks To Reset Ties With Nepal

Described to be the birthplace of the Buddha, Lumbini happens to be an important spot, where at least 13 nations have built a temple including China, Sri Lanka, Germany and Singapore.

Prime Minister Narendra Modi in Lumbini, Nepal on May 16, 2022. (Image: Twitter/ PIB)

New Delhi: Prime Minister Narendra Modi’s one-day trip to neighbouring Nepal to participate in the foundation laying ceremony for the construction of a centre for Buddhist Culture and heritage within the Lumbini Monastic Zone is being viewed as central to showcase the ties shared by the two countries,

This is a significant visit as Lumbini also happens to be the province where China pledged investment of USD 3 billion in 2011. The Gautam Buddha International Airport at Lumbini was constructed by Chinese company Northwest Civil Aviation Airport Construction Group.

Described to be the birthplace of the Buddha, Lumbini happens to be an important spot, where at least 13 nations have built a temple including China, Sri Lanka, Germany and Singapore.

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With an increasingly dominating China, which is bettering its ties with India’s neighbours, while at the same time increasing its incursions across the Line of Actual Control (LAC), it has become essential for India to reinstate its age-old ties with neighbours. India and Nepal’s proximity is symbolised by the free movement of people, unrestricted by the need for visa, and the Indian rupees is also acceptable in Nepal.

But these relations faced a little speed bump when it was alleged that India had imposed an economic blockade in 2015 – which was denied by Delhi. The blockade came after Nepal’s decision to bring changes to its constitution, which the Madhesi community (who are culturally tied to parts of India) had vehemently opposed. The violent protests saw Madhesis who live in the border areas blocking roads. Trucks which supplied essentials like petroleum, food products and even medicines were halted.

This made Nepal realise of its heavy dependence on India, making it seek other import sources, mainly China. That period saw a growth reduction in India’s exports to Nepal by -8.28 per cent, according to data by Ministry of Commerce and Industry. While India’s export to Nepal was at Rs 2,785,909.77 lakh in 2014-15, by 2015-16 it became Rs 2,555,150.62.

However, it made up in the next term in 2016-17 when the growth grew to 43.16 per cent. The growth continued, with 2017-18 seeing 16.52 per cent of growth. This continued until 2019-20 when there was another setback with growth being negatively impacted at -6.61 per cent and in Covid era, 2020-21 the growth reduced by another -0.49 percent.

When Covid-19 hit and vaccines for it became available, India supplied Nepal with 11.12 lakh doses in its vaccine maitri scheme. Other than this it has also supplied Nepal with 20 lakh doses under commercial supply and further 63.870 lakh doses under the COVAX scheme.

But China was not far behind and sent a consignment of 8 lakh doses of Covid-19 vaccines on grant basis. In total, in May 2021, talks between the two countries had yielded in a promise of grant of 1 million doses of the vaccine to Nepal.

China Moving In

By 2016, Nepal and China signed the Trade and Transit Agreement (TTA) with its finalisation in 2018. This gave boost to the cooperation between China and Nepal, with the former providing seven transit points – four sea ports (Tianjin (Xingang), Shenzhen, Lianyungang, Zhanjiang) and three land ports (Lanzhou, Lhasa, Xigatse) – to Nepal for trade with third countries.

However, The Himalayan Times quoted Rajan Sharma, former president of Nepal Freight Forwarders Association (NFFA), saying that the Chinese ports were only additional ports for Nepal and should not be taken as optional ports of Kolkata and Visakhapatnam in India. “These ports will be used basically when trade via India gets disturbed. However, friendly terms and conditions of trade via Chinese ports will encourage traders to look into prospects of third-country trade via the northern neighbour,” he had said.

After the deal with China, Nepal also joined China’s Belt and Road Initiative (BRI)— seen as a plan of China’s to grow its global dominance. Launched in 2013 under President Xi Jinping, the initiative reminiscent of the Silk Road, would stretch from East Asia to Europe.

The Stimson Centre writes that the BRI-led construction of the proposed Kyirong-Kathmandu railroad, worth USD 2.15 billion, is a common reference point vis-à-vis Chinese financing in Nepal. It is also perceived as an attempt to both enhance connectivity and facilitate trade across the region.

More recently, a report in China Daily stated that Chinese investors committed 23.37 billion Nepali rupees (USD 195.74 million) in foreign direct investment in Nepal during the first six months of the 2021-22 fiscal year, versus 22.5 billion rupees pledged for the 2020-21 fiscal year, quoting data from Nepal’s Department of Industry.

It also says that Nepal’s service sector got 11.31 billion rupees (94.74 million dollars) in pledged Chinese investments, followed by tourism with 9.2 billion rupees (77.1 million dollars

Data available from the year 2019 shows that Chinese tourists was fourth in the number of arrivals into Nepal with a total of 18,281. The country which topped the list was Sri Lanka at 52,198 arrivals, followed by Myanmar with 35,071 and Thailand with 31,473 visitors. Tourists from India were at 9,519.