Kathmandu:

Nepal, some say, is landlocked. Let us convert that to being land-linked, and then see where the opportunities lie. Wedged between China and India, there are opportunities available to the people of this country which the rest of the world can only envy.

What do China and India offer? Let us see what is happening in these two giant neighbours. Measured by purchasing power parity – an economic measure which compares countries according to what its currencies can buy for its people – the five biggest economies of the world are the US, China, Japan, India and Germany. No country, other than Nepal, has two of the world’s top five as its neighbours. Not only is the absolute size of these economies gargantuan, but their growth rates are above the world’s average, and much higher than those of the US. Is there any reason for Nepal, linked to these two giants, not to do well?

Not at all, but only if Nepal can understand the advantages of deepening the links with these two countries, and the rest of the world as well. China and India are recognised as the world’s locomotives. China’s GDP at $1800 billion is 13.2 per cent of world’s total, India’s GDP is $800 billion or 5.9 per cent of world’s. $260 billion gets added to the world’s output if these two economies grow by 10 per ent. Nepal’s GDP of $6 billion would have to increase by over 40 times to match the annual growth taking place in China and India.

The two neighbours are wealthy, their people have money to spend. This much is a given. All Nepal has to do is to attract an insignificant portion of this wealth. What may matter little to China and India, will wipe out poverty and unemployment in Nepal in no time. An additional $6 billion GDP would double Nepal’s wealth and matter not at all to India and China.

How can Nepal get a share of the enormous upsurge in wealth in these two giants? Identify what the Chinese and Indians want.

First, they want to shop. Is Nepal in a position to fulfill this demand? Not at present, but it could create the right conditions overnight. Convert the whole of this country to a duty-free state.

This will make Nepal the world’s cheapest shopping destination, bar none. How much goods cost to the final consumer is a function of the intrinsic cost of the merchandise, the expense involved in hiring people working in malls, showrooms and department stores, and the cost of real estate where these retail establishments come up. Nepal has a big advantage as labour and real estate costs are a fraction of what they are in Singapore, Hong Kong, Dubai

and other zero or low tax states around the world.

Goods in Nepal can thus enjoy a significant price advantage. An immediate shopping boom will result. Open up the retail sector to foreign investment and a frenzy of construction activity will takeover Nepal. Construction and tourism will take off. More tourists mean more hotels, casinos, travel agencies, as well as shops selling their wares.

Second, the Indians and Chinese want a secure place to park their growing wealth. In their own countries, the tax authorities take too much of a bite. Why not let Nepal provide offshore foreign currency accounts to people of the world?

For this to happen, Nepal needs to allow international banks establish operations here without bureaucratic red tape. When banks of repute, with employees trained

to guarantee confidentiality come here, their clients will come too. If a Swiss bank offers the same guarantee to an accountholder in Nepal, as is available in Switzerland, why will Indians and Chinese not bank over there?

Third, to ensure smooth movement of tourists, Kathmandu’s TIA, and other airports in the country need to be modernised. This can only happen if the government privatises airports and lets entrepreneurs — foreign and local — build new ones. The aviation policy must also change to permit any airline from anywhere in the world to fly here.

To do all this is as easy as saying one, two, three. Will it happen? Surely. When? No one knows.

(The writer can be contacted at: everest@mos.com.np)