NEPAL - MERCY IN THE HANDS OF GEOGRAPHY?

“If you are coastal, you serve the world; if you are landlocked, you serve your neighbors,” contends Paul Colliers. (1) It is sensible to look at this excerpt in light of Nepal’s specific context, which is landlocked as well as poor in terms of natural resources (except inland water resources).

Nepal can be said to be molded by its geographical circumstance in almost entirety. How Nepal is perceived in the world as well as how Nepal conducts itself in international politics is largely determined by its geographical position. Relations between Nepal and its neighbors have been preoccupied mainly on trade, security and migration concerns; Nepal’s enclosed geography and its proximity to India and China being the main reason. For instance, Nepal’s two third of foreign trade is restricted with India (2).  A look at the Indian embargo of 1989 can be instrumental in understanding how Nepal’s enclosed geography is deterministic of its relations with the neighbors. “In the final analysis, the dispute underscored a central geopolitical reality: landlocked Nepal did not have the military, diplomatic, or economic clout to withstand an Indian blockade as long as the government in New Delhi was willing to risk international opprobrium and press its case against the kingdom.” (3)

A landlocked country is one which does not have any self-access to the seas because it is surrounded by external land from all sides. Even the UN has considered special provisions for landlocked developing countries due to this inherent spatial disadvantage. By and large, it is not too far stretched to say that Nepal’s economic wellbeing to a very large extent is contingent on the kind of  relations with its transit neighbors, mainly India. Nepal’s most basic needs come from and through India.

Of course, simply having direct access to sea is not a panacea for all economic predicaments. There are many countries that have access to sea but still are not very well off as expected. It is beyond doubt that landlocked countries are disadvantaged in terms of trade openness, but it also circumvents possibilities to learn from wider experiences of the world. India is the only country through which Nepal connects with the outer world (as the transit country); giving the former an upper hand in negotiations in terms of how can its trade routes be used.

The most important obstacle that a landlocked country faces is hindrance to trade openness. Lack of direct access to important international markets result in supplementary transit costs; hence, export and imports come at a dear price. Even if they might not be facing tariff barriers, exports or imports in or out of the country become expensive. For instance, “The success or failure of trade of landlocked developing countries is largely determined by the availability and cost of transit transport.” (4)

A good example is the tax rate on automobiles in Nepal. At 238 per cent, Nepal has one of the highest tax rates on automobiles (5). Similarly Nepal’s exports do not compete very well because its products become relatively expensive by the time it reaches the international market. This is determined not only by the exorbitantly expensive transport facilities within the borders of Nepal, but also India’s mediocre transportation infrastructure. The latter determining efficiency of transportation and subsequent costs, that moves goods from land to the seas. 

With most of the countries in the world reaping the benefits of globalization, the plight of landlocked countries (with some exceptions) seem pessimistic. It is not too far stretched also to claim that some of South East Asian countries had similar economic conditions in the post-war period as Nepal’s. But the former countries benefited by direct access of the seas; not ignoring the government policies and the liberalization process that resulted in their economic growth.

Trade has been the magic mantra for most of the countries to prosper. Once trade reaches a certain level of maturity, proficiency automatically develops. This is exhibited by the comparative advantage theory. For instance, induced by proper incentives, increased output of production leads to cost advantage on one hand and better quality goods on the other hand. This increases the competitive ability of the producer. To an extent, one has to face global competition to become globally competent. Nepal neither faces global competition, nor is it globally competitive. This has led to lack of incentives for the producer.

Landlocked countries usually are subject to the prevailing condition of the immediate coastal country. The spillover effect- “With each additional 1 percent that the neighbors grow raises their growth by 0.7 %”.(6) Paul Collier contends that being landlocked is one of the four traps that hinder likelihood of economic prosperity in a country via ripping the benefits of a globalized world economy. Moreover, Nepal and India have open borders which facilitate movement of tens of thousands of people from both sides to the border to travel to and fro; especially India provides millions of job opportunities that the Nepali people would have otherwise not received in the home country.

Due to poor transportation infrastructure, the Terai has not been able to supply food deficits in the hills; rather it has to export to India. The Treaty of Trade 1991 governs bilateral trade between Nepal and India which was further revised in 1999, with a treaty of transit. “These provide that: (i) India allows freedom of transit for Nepalese third-country trade across its territories, through routes mutually agreed upon; (ii) permission is granted for the movement of Nepalese trucks to and from the nearest railway stations to pick up transit cargo; (iii) traffic in transit is exempted from customs duty and all charges excluding transportation and service charges; and (iv) ware- housing/storage facilities are provided for goods awaiting customs clearance before transport to Nepal”. (7) Moreover, there is a recent amendment to the Protocol to the Treaty of Transit of 1999 which allows Nepal to re- export goods through India which can have third country origins. (8) But despite such concession- from India, Nepal has not been able to fully utilize the market access provided to it. This is mainly ascribed to Nepal’s poor export performance. Regardless of these facilities provided by trading partners, Nepal’s incapacitated supply constraints have rendered it pointless.

The question on why neighbor matters

It is suggested no matter how far or near a landlocked country is situated from the closest shore of the neighbor; the cost of exporting is usually extremely high. The coastal country’s expenditure on transport infrastructure determines the transport cost for a landlocked country. “If you are landlocked with poor transport links to the coast that are beyond your control, it is very difficult to integrate into global markets for any product that requires a lot of transport, so forger manufacturing- which to date has been the most reliable driver of rapid development”. (9) This means, if the coastal neighbor has extremely efficient transportation system, it is favorable for landlocked country’s exports.

A quick look at the trade provisions will be helpful in this context; and also how Nepal's economic fate is 'pegged' with India's. “This was to be achieved by levying an export duty that ensured that the landed price of imports from Nepal into India should not be less than the price of equivalent Indian manufacture.” “If the members of a customs union have different levels of development, there is a greater likelihood of gains going to the member country which is more advanced in economic development and far bigger in size and resource.”  “Further, there is also the fear of the emergence of economic dualism in that the advanced country with a head start in industrialization may dominate the less advanced member country in manufacturing and reduce it to the level of being a supplier of primary goods.”

The sovereignty of a dependent country is always a question that yields uncertain answers. Paul Collier claims, resource less landlocked countries which are very far off from transit coastlines should have ceased to exist in the first place, because it creates harsh dependency conditions for the landlocked country (10). For instance, former landlocked countries of Tibet and Sikkim seized to exist because of their particular landlocked landscape and history. While Tibet was annexed by China in 1959 and Sikkim’s integration into the Republic of India took place in 1975.

REFERENCES- 

(1) Colliers, Paul. The Bottom Billion p. 54

(2) <http://www.tepc.gov.np/tradestatistics/gl-01-trade-composition.php>

(3) <http://www.country-data.com/cgi-bin/query/r-9187.html>

(4) Chowdhury, A. and Erdenebileg, S. Geography against Development -A Case for Landlocked Developing Countries –preface 47

(5) "Duty on duties-The hefty taxes we pay for automobiles should be reflected in better roads and highways", <http://nepalitimes.com/news.php?id=18513>

(6) Colliers, the Bottom Billion, p- 57

(7) Main transit transport corridors around the world 101- Geography against Development

(8) “India, Nepal amend transit treaty”, http://www.ndtv.com/article/india/india-nepal-amend-transit-treaty-478037

(9) Colliers, P. (2007)-The Bottom Billion p. 55

(10) Ibid p. 57

The Post-American World: Fareed Zakaria

Every civilization is subject to ascendancy and decline. With the rise of the two great Asian countries, China and India, speculations are being made about the ‘next’ super powers, however its implications on the World politics is still in need of a well comprehension. Fareed Zakaria has put forth a very strong case why China and India will inevitably become global players, expedited by a relative decline of USA, towards a post-American World. While great changes give off much skepticism, the shift of power from the west to east may seem fictitious to many around the world. In such a scenario, this book maps the shift in balance of power in the global arena.

The title of the book sounds alarming initially, but to determine clearly if ‘Post-American‘ world is a harbinger of adversity to the global community is yet to be determined. Though there are many articles and books which talk about the decline of the US, Zakaria has successfully put this idea in a perspective that corroborates the truth and also puts aside false notions. Other similar books to refer on this topic are: Are we Rome? By Cullen Murphy; Why America Failed: The roots of imperial decline by Morris Berman; and Time to Start Thinking by Edward Luce.

What is The Post-American world?

In brief, post-American world means that the USA is not the only pivotal player like it was following the great wars till the beginning of the 21st century. For Zakharia, post-American world is “not about the decline of America but rather about the rise of everyone else”. Post American world symbolizes the relative rise of the others and but not absolute decline of the US. The book centers on how America rose to become the super power and the factors that led to its rise. The “rise of the rest” has never seemed so real till recently.

The “rest” also include non state actors, and shift of power from traditional bodies such as government units. The rise of the rest does put some constraints on the American influence; however, it still remains a single super-power at the politico-military level in the world. Economically, there is an assumption that if the pie expands everybody benefits, but politics is a zero sum game and one always gains at the cost of others.

The US has virtually been the global ‘police’ after the great wars; from ensuring free movement at seas to being the sole torch bearers of the current globalized paradigm. However, the dynamics of power is changing in recent years. The various instances that have challenged American hegemony explain the changes in the status quo. For instance, even countries like India have become very assertive, this can be seen from India’s reaction over the arrest of her diplomat Devyani Khobragade last December, and how intransigent it was in asking for an apology from the US government. Immanuel Wallerstein states that “despite its decline, the United States remains a giant, but a giant with clay feet”.

The dynamism of International Politics

Since Zakaria published this book in 2008, countless events have occurred world-wide. For example, Arab Spring swept across the Arab world of which the Syrian conflict is still continuing. The US signed a nuclear deal with Iran last year. Huge numbers of classified documents were flashed out by Edward Snowden in 2013. Since then, it has come out as a public knowledge on how the U.S. National Security Agency (NSA) has been strictly spying on the top political leadership of Germany, France, Mexico and Brazil among others (not to forget, on numerous citizens of these countries as well).

Recently, America averted from getting involved in Syria, may be because it wants to assuage its already sagging popularity around the world for being too interfering in domestic affairs. After the Iran deal, Saudi Arabia is looking at US with suspicion; that can probably explain the sudden increase in military expenditure of Saudi Arabia this year. It has taken over the Britain’s position making it the world's fourth largest defense spender in 2013.

A Non-Western World: “The Challenger and the Ally”

Britain was known as ‘the workshop of the world’ at the peak of its industrial revolution, which is now a title assumed by China. China’s tremendous increase in growth has lifted some 500 million people out of poverty, which is the greatest feat ever achieved by any country in history. China seems to understand well that path to power is “markets, not empires”. Early this year China surpassed US as world's largest trading nation.

But one should not only look at the brighter side of things, it is quiet essential to understand both ends of the story to get a balanced view of the actual reality. There is a general frenzy about the rise of China and its implications for the world, and particularly for the USA. But China’s sustained prosperity also depends on how it manages an ever expanding urban middle class, resentment among ethnic minorities, tensions with neighboring countries, stark economic inequality, and rural poverty.

Another obvious question is, how will assume its position in global system when it becomes the dominant player? Zakaria writes, “China’s awakening is reshaping the economic and political landscape, but it also being shaped by the world into which it is rising”. Likewise, Zack Beauchamp from Think Progress maintains, “China wants to play inside the existing global order’s rules, not change them”. China reaps the benefits of public goods provided by the global paradigm set up virtually by the United States, but does not want to get its hands dirty. It does want to change the current paradigm, because that would mean draining a lot of resources and efforts.

India

The author admits that “While China’s rise is already here and palpable, India’s is still more a tale of the future”. He has written- in some details- the strengths of the Indian economy, the society in general and the government setup. In contrast to Chinese prudence in governance, Indian democratic system of governance “makes for populism, pandering, and delays. But it also makes for long-term stability”. The US has always opposed a single hegemony dominating Europe or Asia.  Hence, it got into strategic partnership with India so that balance of power does not tilt solely towards China. This partnership can be seen in Indo-US nuclear deal signed by President Bush in 2008.  The fact that  the new powers are more strongly asserting their interests is the reality of the post-American world.

Conclusion

The US remains the superpower only in Politico-military front. But in other sectors like industrial, financial, educational, social, and cultural- the concentration is shifting and moving away from American dominance. There is a growing anxiety to US over the rise of China. Many scholars hold a common opinion  that as the relative power of China increases, it will try to bend the rules and institutions of International system to benefit itself, hence, there is a possibility that this will create animosity in international politics.

In one of Fareed Zakaria’s interviews he says, “We start living up to our ideals and not just proclaiming them. As power becomes diversified and diffuse, legitimacy becomes even more important because it is the only way to appeal to all the disparate actors on the world stage. Today, no solution, no matter how sensible, is sustainable if it is seen as illegitimate. Imposing it will not work if it is seen as the product of one country's power and preferences, no matter how powerful that country”.

There is an immediate need for US to embrace “a world with a diversity of voices and viewpoints”, rather than dictating its terms without much considerations.  Not just being the law maker, it also needs to abide by it so that others are encouraged to play by the rules too. “It is one thing to scare your enemies: another to terrify the rest of the world”, Fareed Zakaria gives very pragmatic suggestions to the US if it is to retain its position as the global leader. Very acutely Zakaria discerns that down in history American will be remembered as a country that globalized the world, but which “forgot to globalize itself”.