Submit your Article

Coronavirus is yet to enter Nepal (or so we are told). But the virus is already having a huge impact on the Nepali labor market, hitting those who rely on daily wages for bread and butter the hardest. Seemingly, the Nepali economy is agriculture-driven, as it accounts for 65 percent of our GDP. In reality, the economy’s real backbone is remittance, which has been badly affected by the spread of coronavirus in most destination countries for Nepali migrant workers. This will result in great damage, and not just in the labor market.

Yet the effects on the labor market will be the most disturbing. Many of the affected workers will be from the bottom of the wage spectrum, and a layoff or reduced hours in different industries could even lead to a broader financial crisis. Tourism is estimated to lose Rs 40 billion as 60 percent aviation fleet is grounded as of now. There has been a loss of around Rs 450 million in mountaineering permits. Hotels have 10 percent occupancy, which might eventually hit zero if the virus spreads here. Likewise, there has been 50 percent reduction in road transport and even those travelling are keeping themselves away from consuming goods and services. 

Most striking, 50 percent share of remittance to Nepal could be blocked due to the ban on entering destinations such as Qatar, Kuwait, Bahrain, Saudi Arabia, South Korea and Japan. In other words, around 15 percent of our GDP will take a direct hit. 

The fears from the coronavirus contagion have been growing ever since the WHO declared it a pandemic on March 11. The coronavirus could even be present in at least some quarters in Nepal. With significant disruptions in global supply chains, there has been an increasing tendency to hoard goods in Nepal, especially essential items. This mostly harms those without the capacity to purchase more than they need for a day. The government doesn’t seem keen on ensuring their basic food supply. 
Moreover, as Nepal is also closely integrated with China’s supply chains—just think of all the Chinese goods we use—the disruptions will be greater the longer the coronavirus pandemic persists. 

Against this backdrop, it is critical that Nepal learns from the policy measures China has taken to combat the crisis. It has come up with tax relief for small businesses and individuals; subsidies for those returning to work quickly; rent relief and wage subsidies for slow businesses; and accelerated local bond issuance for infrastructure spending. On the monetary front, China has cut the Reserve Requirement Ratio (RRR) for banks and injected liquidity. It would be wise to think about replicating these policy tools as the Nepali economy is also vulnerable to an outbreak.  

Some forecasts indicate there is a good chance non-performing loans will rise across Asia, and in Nepal. This will be first linked to service industries such as travel, tourism, and hospitality. But much will depend on how the government uses fiscal policy to support them through easier access to credit, delayed interest payments, lower taxes and rent, and wage subsidies to see the businesses through the worst times. 

The fate of our economy hangs in the balance. It is vital that we have a full-proof strategic plan to deal with a likely corona crisis. For a start, the Ministry of Finance should come up with multiple strategies to deal with different economic scenarios and to support those below the 
poverty line. 

The Chinese government is understandably touchy about any criticism of its handling of the novel coronavirus outbreak. No less than the longevity of President Xi Jinping’s tenure as Chinese president is on the line. When the contagion started spreading like Black Dragon Fire at the start of January, the consensus was that much would depend on the speed with which the Chinese leadership could contain it. Having botched his first response to the Wuhan outbreak, Xi could ill afford to let the contagion get out of hand. Thankfully for him, the rate of new infections in China is drastically down and the country is already trying to ease corona-related restrictions.

By showing that he can mount a fightback against corona, Xi is regaining the trust of his citizens. It is unclear if the slowdown in the rate of new infections is a temporary lull or a more permanent phenomenon. Yet it is safe to assume that Chinese leaders will have their hands full dealing with the fallout from the novel coronavirus pandemic for some time yet. They could have time for little else, including the kind of proactive diplomacy Xi has undertaken since the 2013 unveiling of his signature Belt and Road Initiative.

The Kathmandu Post fiasco illustrated the sort of damage-control job Chinese diplomats and foreign missions will be engaged in for the foreseeable future. The focus of Chinese foreign policy in this time will be to establish that Xi handled the corona crisis as well as (if not better than) anyone else could have. This narrative is important to assure Xi’s countrymen that he is still firmly in charge and capable of dealing with any crisis. ‘Uncle Xi’ will never fail them.

Only when he reestablishes his control over the popular narrative and firmly tamps down on any criticism from within the communist party over his handling of the coronavirus outbreak—only then will his focus again shift abroad, to that dream of making China the focal point of a new world order. This could have important ramifications for smaller countries in the region like Nepal. The Chinese leadership distracted, and the ‘botched Wuhan response’ narrative still finding takers, the westerners will try to play up the dangers of allying with an ‘authoritarian’ state like China that evidently doesn’t even care about its own people.

But the communist government in Nepal will continue to be loyal to Beijing, a position that won’t be unpopular with the people. They have not forgotten the pain of the 2015-16 Indian blockade, or China’s indispensability as that important counterweight to India. Moreover, the position of a powerful NCP faction that the American MCC compact has sinister anti-China agenda has found plenty of takers; ask any taxi-driver in Kathmandu. Perhaps there could come a time when China is mistrusted in Nepal. Right now, more common is the view that the western world is trying to demonize China when it is going through one of the toughest times in its recent history.

Anjali Gupta

In June 2015, transport ministers of Bangladesh, Bhutan, India, and Nepal (BBIN) met in Thimphu, Bhutan to discuss the sub-regional Motor Vehicles Agreement (MVA). Except Bhutan, the remaining three countries have ratified the agreement. Bhutan is in the process of completing its internal process for ratification to address the concerns raised by domestic stakeholders. But Bhutan has also announced that it would not be able to ratify the BBIN-MVA for time being and asked the other stakeholders to go ahead with the deal without it. Bhutan fears vehicular pollution and environmental degradation if trucks from neighboring countries are given access through its territories. On the other hand, Nepal and Bangladesh are eagerly pushing for the agreement’s early implementation.

At the 18^th Summit of the South Asian Association for regional Cooperation (SAARC) in Kathmandu in 2014, the Heads of the State for the first time expressed a strong determination, “to deepen regional integration for peace, stability and prosperity in South Asia by intensifying cooperation, inter alia, in trade, investment, finance, energy, security, infrastructure, connectivity and culture; and implementing projects, programs and activities in a prioritized, result-oriented and time-bound manner”. However, due to the political issues among SAARC member countries, the agreement faced several difficulties and the idea was soon dropped.

However, Bangladesh, Bhutan, Nepal and India understood the relevance of this motor vehicle agreement. Therefore, they soon started negotiations among themselves through several Joint Working Groups. India has approached Bangladesh and Nepal through diplomatic channels to develop modalities to operationalize the MVA among Bangladesh, India and Nepal. BBIN-MVA is considered crucial for the diversification of the trade economics of Nepal and Bangladesh.

Even World Bank projects a potential for trade in the South Asian region. With intra-regional trade at less than 5 percent of total trade, South Asia is the least integrated region in the world, compared to East Asia’s 35 percent and Europe’s 60 percent. If South Asia manages to reduce trade friction, it can raise the Bangladesh’s exports to India by 300 percent; and reduce prices and enhance access in land-locked regions like Nepal, Bhutan and also Northeast India. World Bank has been suggesting elimination of tariffs and reduction of non-tariff barriers, leveraging of private infrastructure investment, efficient connectivity and border crossings, and liberalization of logistics, shipping, air travel, etc.

After the agreement’s implementation, there will be better regulation of passenger, personal and cargo vehicular traffic between these four neighboring countries in South Asia. This hassle-free, faster transition of vehicles is going to further facilitate trade in this sub-region. MVA gets rid of the cumbersome process of trans-loading and allows the entry of vehicles all the way to inland container depots (ICDs), thus mitigating border congestion and reducing both time and trade cost. It is likely to generate economic dividend, especially for Nepal, Bangladesh and Bhutan. India, despite being the largest trading partners among the three countries, is going to benefit from the deal as well.

A total of 30 priority transport connectivity projects with an estimated total cost of over $8 billion were identified under the BBIN-MVA agreement. These priority projects were meant to rehabilitate and upgrade remaining sections of trade and transport corridors in the four countries. The corridors and associated routes were determined based on analysis of patterns of regional and international trade. This transformation of transport corridors into economic corridors could potentially increase intraregional trade within South Asia by almost 60 percent, and with the rest of the world by over 30 percent.

In order to realize this economic potential, BBIN-MVA was a step in the right direction. Even with one member less, BIN-MVA still has huge potential to generate economic dividends for the region. Despite the huge potential, there are several unanswered questions. One important aspect, due to which even Bhutan stepped out of the agreement, is environmental protection, which has not been clearly spelt out. Definitely, there is a need to look beyond the agenda of building roads and simple exchange of traffic rights. There should also be appropriate regulatory, financial and digital connectivity among individuals, businesses and governments if these countries are to unlock the true potential of their economic integration.

The author is Research Intern in Foreign Affairs and Diplomacy at the Asian Institute of Diplomacy and International Affairs (AIDIA)

The Chinese government is understandably touchy about any criticism of its handling of the novel coronavirus outbreak. No less than the longevity of President Xi Jinping’s tenure as Chinese president is on the line. When the contagion started spreading like Black Dragon Fire at the start of January, the consensus was that much would depend on the speed with which the Chinese leadership could contain it. Having botched his first response to the Wuhan outbreak, Xi could ill afford to let the contagion get out of hand. Thankfully for him, the rate of new infections in China is drastically down and the country is already trying to ease corona-related restrictions.

By showing that he can mount a fightback against corona, Xi is regaining the trust of his citizens. It is unclear if the slowdown in the rate of new infections is a temporary lull or a more permanent phenomenon. Yet it is safe to assume that Chinese leaders will have their hands full dealing with the fallout from the novel coronavirus pandemic for some time yet. They could have time for little else, including the kind of proactive diplomacy Xi has undertaken since the 2013 unveiling of his signature Belt and Road Initiative.

The Kathmandu Post fiasco illustrated the sort of damage-control job Chinese diplomats and foreign missions will be engaged in for the foreseeable future. The focus of Chinese foreign policy in this time will be to establish that Xi handled the corona crisis as well as (if not better than) anyone else could have. This narrative is important to assure Xi’s countrymen that he is still firmly in charge and capable of dealing with any crisis. ‘Uncle Xi’ will never fail them.

Only when he reestablishes his control over the popular narrative and firmly tamps down on any criticism from within the communist party over his handling of the coronavirus outbreak—only then will his focus again shift abroad, to that dream of making China the focal point of a new world order. This could have important ramifications for smaller countries in the region like Nepal. The Chinese leadership distracted, and the ‘botched Wuhan response’ narrative still finding takers, the westerners will try to play up the dangers of allying with an ‘authoritarian’ state like China that evidently doesn’t even care about its own people.

But the communist government in Nepal will continue to be loyal to Beijing, a position that won’t be unpopular with the people. They have not forgotten the pain of the 2015-16 Indian blockade, or China’s indispensability as that important counterweight to India. Moreover, the position of a powerful NCP faction that the American MCC compact has sinister anti-China agenda has found plenty of takers; ask any taxi-driver in Kathmandu. Perhaps there could come a time when China is mistrusted in Nepal. Right now, more common is the view that the western world is trying to demonize China when it is going through one of the toughest times in its recent history.