In the aftermath of the April/May earthquakes, Nepal has been facing low supply of Chinese goods for the last four months. With the festive season approaching, business people are in urgent need to increase the volume of imports at a time when both the Tatopani and Rasuwagadhi border points have remained closed. Ramesh Shrestha of The Himalayan Times spoke to Arjun Prasad Gautam, General Secretary of Nepal Trans-Himalaya Border Commerce Association, about the preparations taking place to import goods for the festive season, impact of the closed Nepal-China border points and the possibility to reap benefits from the devaluation of the Chinese currency.
How is current situation of bilateral trade with China?
Following the April 25 earthquake, trade between the two countries has come to almost a standstill as both the transit points of Tatopani and Rasuwagadhi have remained closed. Businessmen are not being able to import and export goods via road routes. Some businessmen have started importing Chinese goods by sea via Kolkata port. But, importing goods only through the sea route will not help ease supply as it takes more time for delivery of goods than road routes. This also pushes up the investment of traders and adds cost to customers.
Basically which sea route is followed for import of Chinese goods via India?
Goods ordered by Nepali businessmen are collected from different cities of China and they are brought to the Chinese ports to send them to Kolkata, India. After customs clearance at Kolkata port, Chinese merchandise are imported to Nepal via different customs points of Birgunj, Biratnagar, Kakarvitta and Sunauli. There is no possibility of importing goods in bulk by air from China but some small and emergency goods are being imported by air. The major reason behind it is that Nepal and China do not have air cargo system. The other aspect is that when the Chinese goods are brought by air then it also requires more investment and subsequently the price of goods for customers becomes dearer. If I am not mistaken some containers arrived via Araniko Highway after earthquake.
Some 80-86 containers that had already arrived at Tatopani Customs Office were released after clearing the disturbances in the Araniko Highway. Similarly, around 400 containers that were on the Chinese side were brought to Nepal on our own initiative and it involved huge risks. In case of Rasuwagadhi, we did bring some half a dozen containers after the earthquake. Now even though the road is clear on the Nepal side, the border has remained closed because China is not ready to open it citing safety reasons. Currently, some 500 containers have remained stranded in godowns of Khasa and they have been sealed by the Chinese government. The goods were meant for this summer.
Is there any initiative underway to reopen the two border points?
A few weeks ago, there was a bilateral meeting of Nepal China Tibet Trade Facilitation Committee. In that meeting, both sides spoke on the issue but the Chinese officials did not confirm when they would open the customs points. We have been told that roads on the Chinese side have also been affected due to the earthquake and there might also be other reasons of safety and security. We had requested the Nepali Consul General Office in Lhasa through the Ministry of Commerce and Supplies and Ministry of Foreign Affairs to help open the border points. However, so far there has been no indication of when the Tatopani and Rasuwagadhi border points would be opened for trade. It is urgent for us to import goods immediately due to the upcoming festivals. If the transit points are opened, goods ordered in the Chinese market can be brought to Nepal within 15 days and this will also help control possible price hike in the market. It is said that China is going to open both Tatopani and Rasuwagadhi transits after the rainy season.
Do you mean to say there will be shortage and increment in price of Chinese goods before Dashain which is hardly two months away?
If there is low supply obviously the demand will be high and prices will go up. Furthermore, merchandise that are brought via sea will cost more compared to the cost of goods imported via road. As it is a diplomatic issue, the government should resolve it at the earliest so that there is no shortage of goods including garments and shoes that witness huge demand during Dashain. There is no official record but it is estimated that around 70 per cent of the demand during Dashain is met through Chinese goods.
If we suppose the price of a T-shirt to be Rs 300 in the Chinese market then what will be the tentative difference in pricing if it is brought through road and sea route?
It takes around two months for shipments to arrive in Nepal by sea. This means traders have to wait for a longer time to get their delivery and this also puts their investment on hold for a longer period. At the same time, they are required to pay back the bank loans. The longer time required to import the goods and the increased expenses on transport push up the cost of the imported items. If a Chinese T-shirt costs Rs 300 in China, its pricing will be over Rs 400 in retail markets in Nepal if it has been imported through sea route. But the same T-shirt will cost below Rs 350 if imported by road.
Could you please share how businessmen are preparing to bring goods for the festive season?
Some 500-700 containers containing various goods for the festive season have already been loaded and are on the way to Nepal via Kolkata port. However, this will not help address the demand of the local market as there is a normal demand of 1,500 to 2,000 containers. Very few businessmen are brining goods by sea route as they have been facing shortage of resources to invest due
to the impact of the earthquake and huge quantity of goods already being stranded at the Tatopani customs point.
Even though businessmen import Chinese goods for the festive season by sea via India, there is currently a problem of bandhs in different parts of the country which will hinder the transport from Nepal-India border. In such a case, what will be situation?
Definitely the bandhs have made it difficult to import and distribute goods in different parts of the country for the upcoming Dashain. Businessmen had chosen the expensive sea route to bring goods after the closure of the two Chinese border points. Disturbance in transport means it will create shortage of goods and hit customers hard in the end. Political parties and people who are not happy with the draft of the new constitution should resolve their problems through due process of dialogue rather than organising bandhs, affecting the transportation system. More than 500 containers carrying Chinese goods are reported to have been waiting at various border points to enter Nepal.
Three weeks ago, China had devalued its currency which was expected to reduce the price of Chinese goods. How can we reap benefit from it as a customer?
In a simple way, it is true that it will cut the price of Chinese goods. However, we are more dependent on the US dollar for trading with China and now the dollar exchange rate has increased to Rs 106 per US dollar as of today. So, even though Chinese goods become cheaper, we cannot expect it to be of any benefit at the consumer level. It would definitely contribute in pricing of Chinese goods in the local market if the exchange rate of the US dollar was Rs 98.