The Rising Nepal, September 11, 2022
By Suresh P Singh and Yatika Agrawal
A major challenge to cross-border trade of Nepal is high transport cost and transit-related expenses arising mainly from underdeveloped transport corridors and cartelisation of this sector by a few major players, which is estimated at more than 30 per cent of trade logistic.
This is further aggravated by high import tax of 288 per cent on imported vehicles. Therefore, transform-ing transport corridors into economic corridors, along with imparting greater competition in this sector, is imperative for Nepal to reduce its transport and transit costs, thus, boosting intra-re-gional trade. As per the statistics of National High-ways 2020-21 published by the Depart-ment of Roads under the Ministry of Physical Infrastructure and Transport, Nepal has 80 national highways con-necting different parts of the country. Out of them, several are operational, and construction of others is in prog-ress.
Many of the operational highways are utilised as sub-regional transport routes and cater to trade needs of Nepal. These, among others, include1,028-km long Mahendra Highway, connecting Kakarbhitta at the India-Nepal border in eastern Nepal with Kanchanpur (part of Asian Highway 2), a district in western Nepal, 155-km Tribhuvan Highway, con-necting Kathmandu with Birgunj (part of Asian Highway 42),184-km long Sid-dhartha Highway, connecting Siddhar-tha Nagar at India-Nepal border with Pokhara.
Production network
As Nepal is a landlocked country, it is an imperative for this nation to make these transport corridors efficient and hassle-free. One way of doing this is to transform them into economic corridors that have potential for attracting private investments and generate job opportuni-ties.
They can result in other benefits such as narrowing down development gaps among the plains and the Kathmandu Val-ley with its hilly regions by providing them better access to production networks and regional markets.
This transformation from transport to economic corridors has to pass through five stages (Srivastava, 2011) comprising transport corridor, trans-port and trade facilitation corridor, logis-tics corridor, urban development corridor, and finally economic corridor. At the domestic level, economic cor-ridor usually features a transport cor-ridor, industrial production centres and cities. From sub-regional trade perspec-tive, Nepal’s 1,868-km border with India has 20 entry and exit points for trade. Major ones include Birgunj, Bhaira-hawa, Biratnagar and Kakarbhitta. The distance from Kathmandu to Birgunj, Bhairahawa, Biratnagar, and Kakar-bhitta are 136-km, 264-km, 376-km, and 456-km, respectively.
Traffic congestion, high transportation costs due to cartel-isation and mediocre quality of transit regimes make the movement of passen-gers and cargos cumbersome and costly. Studies have suggested that there is potential for developing four economic corridors in Nepal, all culminating at some major production/consumption centres in India. These are the Kar-nali Economic Corridor, connecting the far-western region of Nepal with Kumaon in Uttarakhand and Lucknow in Uttar Pradesh, the Gandak Economic Corridor, connecting the western region of Nepal to Gorakhpur in Uttar Pradesh; the Bagmati Economic Corridor, con-necting the central region of Nepal with Patna in Bihar; and the Koshi Economic Corridor, connecting the eastern region of Nepal with Siliguri in West Bengal. In turn, they will get connected with the national highway networks of India.Out of them, the construction of the Karnali Corridor is in progress, and a major part has already been completed. The success of this corridor can serve as a good example of how economic corridors can contribute to inclusive growth and reduce transportation cost.
Evidences show that the project has cre-ated employment opportunities for local people in various districts of Karnali Province, and is helping local farmers to get their products to the markets with ease. It has contributed to increasing economic activities at the local level and decline in prices of essential goods; thus, improving the living standards of people. This is also helping better utilisation of barren lands as local markets are coming up. Therefore, Nepal government should consider replicating the success story of the Karnali Corridor and come out with plans to transform other transport cor-ridors, particularly corridors from Kath-mandu to Birgunj/Bhairahawa/Birat-nagar/Kakarbhitta into economic ones. Such initiatives could attract private investments and would give a huge boost to local employment generation, revers-ing rural-urban migration. This needs to be supported by a more informed trans-port ecosystem, wherein stakeholders are fully aware of government policies and initiatives on sub-regional connec-tivity such as Bangladesh-Bhutan-In-dia-Nepal (BBIN) Motor Vehicles Agree-ment (MVA).
Relevant rules
Thus, in order to achieve this poten-tial, other than hard infrastructure, required soft infrastructure including relevant rules, regulations, and stan-dards need to be in place. This, in turn, requires proper planning and strategies for setting up industrial production cen-tres along these corridors.
The govern-ment should consider the following mea-sures on a priority basis. Firstly, adequate infrastructure such as quality roads, warehouse network, internet connectivity, industrial and pro-duction hubs, regular power supply, etc. should be in place across the transport corridors.Secondly, the government needs to develop economic zones near the transport corridors and provide basic amenities like electricity, internet, and water services at subsidised rates so as to reduce the operat-ing costs. Also, measures should be taken to reduce loading and unloading charges and keep the transportation cost reason-able.
Thirdly, the government should con-sider lowering taxes on imported vehicles to encourage greater private sector partic-ipation in the logistics sector. There is also need for stable and transparent transport policies and practices by the government. Cartelisation of the sector should be addressed by taking suitable actions under the Competition Promotion and Market Protection Act, 2007.
(The authors are Fellows and Research Associates of CUTS International in Jai-pur, India.)
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