Opening the 1952 km Qinghai-Tibet railway and its extension to Shigatse in three years will have a huge impact on Nepal’s transport economy. The railway connects Tibet with China’s vast rail network. Trains will cover 2,520 miles between Beijing and Lhasa in 48 hours.

For the same distance, truck transport would cost around Rs. 36. Moreover, railway freight requires transhipment cost in Lhasa which increases the total cost. However, China Railway Authority will increase freight capacity of the high-speed cars, which makes the railroad an option. A significant volume of trade which has been taking place through Kolkata may be diverted through Tibet, helping increase the 2003/04 Sino-Nepal trade value of $166 million. The Kolkata route takes about one month, whereas Tibet route takes around 15 days to deliver goods to Kathmandu from Guangzhou, the main point of origin of merchandise. The transport cost and traveling time will further decrease as railway moves further west.

Secondly, the Tibetan railway will help commercial farming of herbs in Nepal as India and China are good markets. We can persuade tourists visiting Tibet to extend their trip to Nepal. This July and August, Tibet hosted 913,000 tourists, earning Rs 8,534 million. In comparison, Nepal receives around 500,000 tourists annually.

Thirdly, Nepal will break from its total reliance on India, which makes for 89 per cent of its trade. Arniko Highway transports 3 per cent of the total products. Similarly, air transport represents a little over 8 per cent. If India wishes to use Nepal as a transit corridor, Nepal will be less dependent on India. This will strengthen our position in trade and transit treaty with India.

The maximisation of benefits needs to be achieved under four constraints. Firstly, India is concerned about the Chinese intent of building ultra-modern but economically unprofitable railway. Sections of Indian press argue the railway will help Chinese strategic supremacy over India. Indians suspect that the railway will facilitate Chinese to construct dams in the rivers flowing to India and will present the threat of flooding. Another Indian fear is that the railway will help change Tibetan demography. People of Han ethnic background will be in majority after a few years, strengthening Chinese strategic position in Tibet. Nepal needs to handle these issues cautiously.

Secondly, snow blocks passes during winters. Those that are blocked for shorter periods are better than those blocked for longer periods. On the other hand, production and consumption centres need to be connected by shortest routes. Lhasa and Kathmandu are production and consumption centres in Tibet and Nepal. They need to be connected by the shortest route which should not be blocked for long. Another issue is the mode of transport to connect Nepal with the Tibetan Railway. Some argue that the railway is better because: it carries heavy load, its maintenance is cheap and it utilises domestically produced hydropower. However, the railway will have two limitations: high investment, and it won’t promote local development. The fourth issue concerns financing of transport infrastructure connecting India with China. Either, the government of Nepal can request bilateral donors plus India or China or request loans from the ADB and the World Bank. The mode of financing will depend on the volume of traffic. The roads with a low degree of return won’t be financed by the banks.

India has opened the Nathula Pass customs point, through which $186,250 worth of trade was conducted during July-September, far less than expected due to the elevation of the pass, at 4545m above sea level. The road too is not suitable for heavy vehicles. It won’t be possible to use Nathula Pass to increase trade volume. The Indo-Chinese trade is expected to hit $20 billion by 2010. It’s in India’s interest to obtain direct access through relatively convenient Nepali passes. India has approached Nepal to allow it to use Nepali corridors. China would be interested in exporting consumer goods to India and Nepal. It will also be cheaper for Tibet to import bulky goods from India and Nepal instead of transporting them from mainland China.

The Qinghai-Tibet Railway with its proposed extension to the western Tibet creates big opportunities for Tibet, Nepal and India. Besides saving travelling time, the expected decrease in transport cost of Tibetan Railway will create additional economic opportunities. The railway will foster a conducive environment for the commercialisation of herbal products. Nepal can use the transit corridors as a bargaining chip for improving negotiating capacity with India via-a-vis its access to Kolkata, hydropower development and balanced regional development. Nepal needs to take the initiative to sign transit treaties with India and China with full acknowledgement of both Indian and Chinese security interests.

Shrestha takes interest in transport economics