At a
time when Nepali officials are negotiating with their Indian counterparts for a
renewal of the bilateral transit treaty that expires 5 January 2013, it is in
order to recount the transit-related problems perennially faced by Nepal.
Under
international convention, a landlocked country has the right of transit passage
to the sea through its coastal neighbor. At the operational level, much hinges
on the discretion of the neighbour. Indian insistence on inserting in the
treaty a provision for an additional lock on transit cargo is reportedly holding
up treaty renewal. Industrialists and actors in the logistics chain argue it is
unnecessary to take a stand on this issue and, if anything, it should facilitate
Nepal’s third-country trade, avoiding hold-ups when a single lock seems to be
or really is out of place, and the benefit is worth the marginal cost of an
extra lock. The Nepali side, at the initiative of the foreign ministry, is
resisting the proposal. The resistance is not totally unfounded: Nepal having
to accept one demand after another of the other side even as a litany of
transit difficulties faced by Nepal remains unsolved. The additional lock issue
should, therefore, be considered in the broader context of Nepal’s transit
woes.
Lest
we forget (and that seems to be the habit of our stock), the blockade on Nepal
in 1989 was the first blockade imposed by a country on its landlocked neighbour
after World War II without a formal declaration of a war. Remember also the
reluctance with which Nepal’s long-standing demand for a separation of trade
and transit treaties was met in 1978. The demand stemmed from the principle
that transit—crucial for Nepal’s third-country trade links—must not be held
hostage to bilateral trade relations on one pretext or the other.
Security
is used to justify restrictive transit facility for Nepal (although Bhutan,
another landlocked country in South Asia dependent on India for transit, enjoys
a highly liberal transit regime, not least because it is allowed to conduct
transit trade under the supervision of Bhutanese customs). But, as fate would
have it, India’s desire to secure transit passage through Bangladesh for its
internal as well as international trade is running into stiff resistance in the
latter, and security concern is one reason behind the resistance. Such concerns
cannot be brushed aside especially in the light of the fact that India has been
denying landlocked Nepal unhindered transit through its territory for Nepal’s
trade with Bangladesh and third countries using Bangladeshi ports on security
grounds, besides fear of trade deflection. Surely, what is sauce of the geese
is also sauce for the gander. This is despite the fact that all three countries
are members of the World Trade Organization (WTO) and Article V of the General
Agreement on Tariffs and Trade (GATT) provides for “…freedom of transit through
the territory of each contracting party, via the routes most convenient for international
transit, for traffic in transit to or from the territory of other contracting
parties” on a non-discriminatory basis. Importantly, the Article does not
require the transit trade to be preceded or succeeded by a sea journey. Valid
concerns of security and trade deflection can be addressed through, for
example, the adoption of the TIR (Transports Internationaux Routiers) system or
a similar regionally based equivalent customs transit system. But if the
transit-providing country views transit as a leverage over its landlocked
neighbour, then no security concern can ever be mitigated.
The
controversy over double lock, in which the foreign minister has weighed in in a
queer fit of nationalism, diverts attention from other, far more serious
problems on the transit front. A host of transit restrictions is in place,
causing delays, raising the landed prices of imports and eroding export
competitiveness. The restrictions operate at two levels: transit to access
Indian sea-ports, and transit through Indian territory to access Bangladeshi
markets and sea-ports. Cumbersome transit processes, including procedural
controls, citing the possibility of trade deflection, are in place. It is
customary for Indian authorities to issue unilateral notifications on transit
and customs matters. Hassles in the form of multiple checking agencies mar the
entire transit process. Actual documentary requirements are higher than those
specified in the treaty. The consent to allow Nepal to use Vishakhapatnam port
as an alternative to the congested Kolkata/Hadia ports where mother vessels
cannot berth, thereby necessitating transshipment via Colombo and Singapore
ports, has not been followed through. Burdensome procedures and
controls—including one that causes high insurance costs for Nepali cargo—raise
transit time and cost, and thereby reduce trade competitiveness, hurting
producers and consumers alike. Through-bills-of-lading (TBLs) are not issued
for cargo to and from Nepal, with the result of low utilization of the Birgunj
dry port. The most important advantage of issuing and receiving TBLs at a dry
port is that they reduce customs and clearance activities at sea-ports to a
minimum, with only the transport activities of transit being emphasized. The
pledge to grant Nepal transit through India for Nepal’s bilateral as well as
transit trade with Bangladesh via the Rohanpur-Singhabad railway point remains
a pledge. And then there is the highly restrictive transit regime governing
road-based transit through India along the 55-km
Kakarbhitta/Panitanki-Fulbari/Banglabandh route.
While
bilateralism is India’s preferred approach to dealing with its neighbours, for
a landlocked country like Nepal, a regional approach to transit is in its
interest. A regional transit arrangement will create a level playing field and
address the problem of low bargaining power of the smaller and vulnerable
nations, particularly landlocked ones. Through a regional agreement, landlocked
countries stand to secure better transit rights, and the realization of such
rights will be less dependent on their political relationship with any
particular country as any restriction and the resultant dispute will be a
regional issue as opposed to a bilateral issue. Coastal countries—the traditional
“transit-providers”—also stand to benefit from regional cooperation on transit
and transport. For example, a 20-foot container takes at least 30-45 days to
move between New Delhi and Dhaka through the maritime route at a cost of around
US$2,500, whereas if there were direct rail connectivity, the time would be
reduced to 4-5 days and the cost would drop to around US$850. Likewise,
substantial time and cost savings could accrue if India were to be able to use
Bangladesh territory for transportation of goods between parts of India’s
northeastern states and Kolkata. Similarly, a container from Dhaka to Lahore
now needs to travel 7,162 km by sea instead of 2,300 km, as overland movement
across India is not allowed.
A
regional transit transport agreement would need to be backed by investments in
infrastructures (including roads, railways and sea-ports, customs and
communications. The SAARC Regional Multi-modal Transport Study identified 10
road corridors, 5 rail corridors, 2 inland waterway transport corridors, 10
maritime corridors and 16 aviation gateways as having great potential to
improve regional connectivity. But for their approval by the 14th SAARC Summit
in 2007, progress has been nil. When will the bilateralist mindset change?
(Published
in New Spotlight, 28 December 2012)