Nepal may be on its way to economic stardom. The key: infrastructure. Even as Nepal’s GDP grew around 4.45% in 2024, there remains enormous potential for faster economic growth.
Many landlocked nations don’t have superpowers for neighbors. Nepal is blessed with a growing India to the south but also a massive economy to the north.
China is the world’s largest exporter. But more importantly, China has now become the world’s largest consumer market in history. That’s an opportunity for Nepal.
While Nepal may not have seaports, it is blessed with opportunities for interconnectivity with both India and China.
Recent Belt and Road Initiative projects announced by Nepal and China are just the start of the potential for increased trade.
With increased cross-border trade, Nepal will have the opportunity to vastly increase its prosperity.
A journey of Electric Vehicles bound for Kathmandu now takes 15-20 days. With time and more investment in transportation, these timetables can be brought down, and profit margins up, for companies on both sides of the border.
While developing nations in South America and Africa are spending billions on ports, all Nepal needs is roads and rail. Connecting with and being a connection for India and China equates to opportunity.
Nepal and China expressed a willingness to sign a memorandum of understanding to build a “Trans-Himalayan Multi-Dimensional Connectivity Network,” according to a joint statement on December 3rd, 2024.
Numerous smaller and related projects mentioned are “ports, roads, railways, power grids, and telecommunication” systems to interlink the two nations through trade.
Nepal and China have expressed plans for tunnels, roads, rail, and a handful of ports to facilitate increased trade.
These projects will, of course, take time to fully mature, but many projects which the two countries have engaged in have already borne fruit for Nepal and for increased cross-border trade.
The more support these projects get from regular Nepali people, the stronger the political capital those at the table will have.
The sooner these linkages can be developed, the more prosperous the people will become.
China and Nepal both have the desire to provide better lives for their peoples. Nepal joined the Belt and Road Initiative on May 12th, 2017.
The cooperation between the two nations extends beyond the scope of the BRI, and China has sought to be a benefactor for Nepal in more ways than just interconnectivity.
In 2017, for example, China gave a grant to Nepal of 55 million RMB to reconstruct Durbar High School, which was damaged by the 2015 earthquake.
Accelerating these developments can occur if the potential for both goodwill and good business is seized upon.
And China began working with the Nepalese people far before Nepal’s joining of the Belt and Road.
In 2001, China donated 35 million US dollars for the construction of the Civil Service Hospital in Minbhawan, which was finished in 2008.
In 2016, China donated 37 million RMB to install solar panels at Singhadurbar, with the project completing in 2018.
As far as interconnectivity, China has been at the forefront of supporting Nepal’s access to China’s markets as well.
By leveraging these gestures to support an intensification of work on interconnectivity, Nepalese farmers and businesses will benefit.
A major feature of international trade access pertains to tariffs and trade restrictions.
These are at the core of the current tussle between the US and China, where the US has been continuously adding tariffs to Chinese goods, owing to their increasing quality and affordability.
US manufacturing simply cannot keep up domestically, and as such, the US has sought to make Chinese goods too expensive through added tariffs. This is not the case with Sino-Nepalese trade relations.
In the case of Nepal, however, China has made goods from Nepal entering into China free of tariffs.
As of December 1st, 2024, China completely erased all tariffs for Nepal and a number of other developing countries.
China’s Foreign Minister Wang Yi has said this will facilitate more Nepalese specialty products to enter China, according to an article by CGTN on December 2nd, 2024.
This means Nepalese goods will trade at lower prices, in some cases, than similar Chinese products.
With the right export strategy, Nepal gains immensely from exporting goods to China.
This, in turn, creates enormous potential for increased economic growth and prosperity in Nepal.
One thing remains a critical physical obstacle: the logistics infrastructure needs to be upgraded as soon as possible to afford the movement of goods into China.
The actual physical upgrades have taken time, but so have the negotiations to get these projects started.
One project Nepal and China can develop is the Araniko Highway Upgrade. According to Chinese Ambassador Chen Song, these projects were approved on August 22nd, 2024.
The interim period following has seen rapid development in diplomatic work on both sides. On the Chinese side, enhancements to the border with Nepal are taking root.
This would mean enormous potential gains. More rapid implementation is the only obstacle to making Nepal a far wealthier nation, sooner. The road to development is paved with more roads.
A new road-rail service from China’s Qinghai to the Nepal-China border hub at the Gyrong Port is facilitating expanded trade as well.
A journey of Electric Vehicles bound for Kathmandu now takes 15-20 days. With time and more investment in transportation, these timetables can be brought down, and profit margins up, for companies on both sides of the border.
While upgrades are beginning on the Araniko Highway, other projects are critical in increasing cross-border activity.
China, for its part, has said it will help build an Inland Clearance Depot (ICD) and Integrated Check Post (ICP) at Korala, Mustang.
Both Nepal and China have expressed willingness to study the possibility of a Jilong/Keyrung-Kathmandu Cross-Border Railway, but this dream will likely take more time to make a practical reality.
Such a project, if eventually implemented—or one like it—would be a major piece of a complicated puzzle. But it would mean a dramatic increase in what is possible for Nepal’s economy.
Trade with the world’s largest economy to the north will give Nepal the opportunity for far higher economic growth.
As a focal point between India and China, enhanced infrastructure would also see Nepal not only as an exporter but as a critical juncture between two giants.
This would mean enormous potential gains. More rapid implementation is the only obstacle to making Nepal a far wealthier nation, sooner. The road to development is paved with more roads.
(Jason RB Smith is the host of The Bridge to China radio show with more than 1.5 million followers around the world)
