The 'babudom' and India’s bad vibes with neighbours

Pratim Ranjan Bose

'No one loves a huge neighbour,” Sashi Tharoor said in “Pax Indica”.

In his words, India is the proverbial 298-pound gorilla on the beach, whose slightest step will immediately be seen by the skinny 98-pounders as proof of insensitivity, bullying or worse. 

True that is. But is that an explanation enough to describe India’s bad vibes with smaller neighbours? The question struck me again while travelling in Nepal last month.

Bully power

I don’t pay much attention to the bully perception. Neither am I concerned about the regular dose of political rhetoric from Kathmandu or Colombo. To me, it is part of realpolitik.

“An American president’s most important power is not the veto pen or the ability to launch missiles. It is the bully pulpit,” The Economist once said.

India is not America. But as one of the two major powers in the region, it should counterbalance Chinese influence.

Theoretically, such geopolitical stability actually works in the interest of the less powerful to ward off undue pressure from anyone.

Such power balance helped India to take sides of the liberation cry of Bengali-speaking Muslims in East Pakistan in 1971. In 2014, the Indian support helped the Seikh Hasina government in Dhaka to come back in power and continue its tirade against the 1971 war criminals, ignoring opposition from Washington.

The 'good' or 'bad' depends on which side of the coin you are.

Many in Dhaka welcomed Indian “interference” in 1971 as well as in 2014. But many others didn’t. Similarly, Nepal is now divided into two camps, those who are looking forward to Indian support to end political discrimination of Madhesis and those in favour of a status quo.

There is less of ideology and more of self-interest in this game. Positions keep changing from time to time, depending on the internal politics of a country. And, to what extent India or any power will engage itself in the affairs of another economy depends on the marriage of convenience.

Hasina is enjoying Indian support because her actions are ensuring peace on India’s North East. Nepal has links to a number of terror attacks in India and is a major source of cross-border smuggling of fake currency and narcotics. Delhi should break this design.

But in the changed world order, such interventions are expected to be nuanced and non-military in nature.

Economics first

Gone are the days when the region saw many military interventions. The complex investment trail and increasing economic interdependence between the nations make such policies redundant.

A Dabur India, ITC, or upcoming FMCG major Patanjali will not subscribe to an Indian strategy that jeopardises their investments and market access in Nepal. In today’s order, even rival powers like India and China have a vested interest to keep the relationships stable.

The point can be best understood from China’s complex relationship with its small neighbour Taiwan. Politically they are far from friends. But economically they are inseparable.

Taipei is fifth largest trade partner of Beijing and, Hong Kong is the fourth largest source of FDI in Taiwan. And that prevents politics from either side to rock the boat beyond the sustainable limits. An economic commentator described them as “frenemies”.  

Delhi doesn’t enjoy such all-weather relationship with any smaller neighbour.

To me, the question, therefore, is: Has India failed to push economic agendas ahead of politics? Did it fail to create a regional growth paradigm that will force neighbouring economies to keep glued to India?

The question is tricky. I don’t foresee India-Pakistan relationship to follow the China-Taiwan example in the foreseeable future. This is simply because, Pakistan is far from taking a ‘business first’ approach.

Way back in 1994, the P V Narasimha Rao government proposed regional electricity grid with Pakistan and Bangladesh. The one with Bangladesh became operational in December 2013. Pakistan is still pinpricking Indian agenda of common energy grid in SAARC.

I am sure, the much talked about Turkmenistan–Afghanistan–Pakistan–India gas Pipeline (TAPI) will attain this fate. I have been hearing about it for last 10 years. And, no one expects it to materialise in next 10 years. 

Overall, India has limited opportunities for economic engagement on the West in the foreseeable future. That necessarily takes Delhi to focus on the East.  But do we appreciate it?

Politics willing

Theoretically, the answer is yes.

Narasimha Rao rolled out the ‘Look East’ campaign in 1991.

Diplomatic links were established with Myanmar. In 1993, a Kolkata-headquartered Tractors India (now TIL) become one of the earliest foreign investors in the country.

In 1992, India took the first step in implementing a two-decade-old agreement with Bangladesh to remove border disputes. Since then, politics, both at the national and the regional levels, has increasingly shown keenness in ensuring better ties with the Eastern neighbour.

In 1996, former West Bengal Chief Minister Jyoti Basu mediated the Ganga water-sharing pact with Bangladesh. Tripura Chief Minister Manik Sarkar put his weight behind the free trade agendas for last one and a half decades. He also lent crucial support to the cross-border electricity trade and, the recently concluded regional (BBIN) trade and transit treaty.

Even the mercurial West Bengal Chief Minister Mamata Banerjee, who foiled former Prime Minister Manmohan Singh’s plan to implement the LBA in 2011, turned 180 degrees. The pact was signed in 2015 bringing an end to a perennial source of political dispute.

At the national policy level, Atal Bihari Vajpayee (1998-2004) was an ardent supporter of stronger economic ties with neighbours.  Manmohan Singh (2004-2014) brought down the trade barriers. And, Narendra Modi made it the priority.

Having assumed power in May 2014, Modi started his overseas tours with Bhutan and sent his foreign minister to Dhaka.

In August 2014, when Modi visited Kathmandu – the first Prime Minister to do so, in 17 years – his speech to Nepali Parliament was exemplary. Economics, he said, would henceforth be the driver of bilateral relations.

Not much on ground 

Yet, India has little business ties with neighbours.

Delhi sources barely 0.5 percent of $447 billion (2014-15) merchandise imports from SAARC countries but earns five percent of the $310 billion export revenue from the region.

Narrow road. Customs office on right. Pathetic infrastructure at important Jogbani (India)-Biratnagar border with Nepal. 2015  

The trade imbalance causes a lot of heartburns among neighbours, especially the Eastern neighbours - like Bangladesh and Nepal - sharing two-third of India’s exports to SAARC.

The reason behind the one-sided trade can be traced in low business-to-business (B2B) relations in the neighbourhood. Indian companies invest (FDI) over $ 30 billion a year across the world. SAARC gets barely one percent of the total, that too is mostly (80 per cent) directed to Sri Lanka.

The Eastern neighbours sharing land boundary with us gets peanuts. Bangladesh that shares over 4100 km boundary with India and, is growing at 6 per cent for last one decade, received 0.09 percent ($ 28.5 million) of Indian FDI in2012-13. 

Wide roads, Better customs infrastructure. Nepali side of the Biratnagar-Jogbani border is more orderly

How does it affect trade? Simple, as someone told me American solar equipment crosses seven production stages. Four of them are shared by China and Taiwan. It means there is no one-sided export or import. A Taiwanese import from China is often converted into its exports to China or other countries.

Beyond SAARC, our trade interest is stagnant at a mere $ 2 billion with Myanmar. One of the top investment destinations in the region, Myanmar shares 1700 km boundary with India’s North East.

Last year, Beijing emerged as the top source of FDI to Myanmar by virtue of $14.5 billion investment by 87 Chinese companies. India doesn’t figure in top-10 investors’ list. 

Neglecting neighbours

I am not comparing Taiwan with a Bangladesh that has a little industrial base.

All I am saying is, our trade lacks depth. In the absence of B2B ties, politics of either country can afford to be reckless. The temptation will always be higher on the part of Dhaka; as they have little to gain from the ‘Indian growth’ story.

True, the ultranationalist Bangladeshi politics historically lacked aspirations. It is also true that they failed to emerge as a popular investment destination. But, then how do I count the success of Indian diplomacy? Was India merely doing narrow politics there? And, if they blame Bangladesh or Nepal for lack of aspirations, how will they defend the failure in Myanmar?

Immigration officers sit in a hut at Changrabandha border post with Bangladesh. 2015

There are few answers to these questions. But, as one of the few journalists who have travelled the majority of India’s land trade points with Bangladesh, Myanmar and Nepal – stretching over nearly 7500 km – I have a different take to this phenomenon.

All across, I noticed, India lacks in infrastructure creation. In comparison, the smaller and poorer neighbours did better. To me, it is a perfect indicator of the importance that India attaches to trade and commerce with its neighbours.

Take the case of Nepal that imports goods worth $3.75 billion (58 percent) from India and sources entire third country imports through India.

Indian customs infrastructure isrudimentary along the 1700 km border. 

Nepalese importers are left at the mercy of most inefficient Kolkata Port. Delhi denies them access to the efficient privately-run deep-sea port at Dhamra, in close proximity of Kolkata. They cannot use even a more efficient government port like Vizag or Paradip down South, because Indian Railways lacks capacity or intent, or both, to serve the trade.

And when it comes to roads, theoretically India has wider and better National Highway network than any of its neighbours on the East. But visit any prominent gate and you will realise, we barely have the last mile connectivity.

Infrastructure rots

Who bears the brunt of such poor infrastructure? Obviously the importing country- there trade cost goes up. It is no surprise therefore that Kathmandu accuses Delhi of acting like an economic bully - using the geographical advantage to force Nepal to trade with India.

Similarly, except at Akhaura (2013) in Tripura; the Indian infrastructure at any border gate with Bangladesh is pathetic. You may puke at the condition of the largest land customs point at Petrapole. And at Changrabandha you will not get a toilet to pee. It is shameful that the customs and immigration officials of world’s third largest economy, in terms of GDP, sit in thatched huts while their Bangladeshi counterparts enjoy cool chambers in sprawling office space.

Travel to the northeast on Myanmar border of Moreh and, the condition of the National Highway will remind you of sub-Saharan Africa. The irony is: The same Indian government built a beautiful road on the Myanmarese side of the border.

It is a pity that two decades after India spotted trade opportunities with Myanmar through Zokhawthar (Mizoram) border and more than a decade since Delhi approved a plan to set up a land customs station there; Zokhawthar hardly has any infrastructure. 

What does all this prove? It proves Delhi never felt the urgency in projecting the image of a trade facilitator to its neighbours.

A country that spends billions of dollars, to offer aids or soft loan, to Nepal and Bangladesh, doesn’t have a mere $12 million scanner that helps quick clearance of import-export cargo at border gates. It speaks a volume about our priorities. 

Zokhawthar-Champhai road on Myanmar border is under construction

And, whom should we blame for this monumental neglect? Should it be politics – the favourite whipping boy of Indian commentators? Sorry, my vote goes to babus –  the bureaucrats and diplomats of the country.

As the only continuity factor in the administration of a democratic nation, babus enjoy tremendous power without much accountability. And, it is they who are the biggest stumbling block in improving ties with neighbours.

Babus failed India

A former bureaucrat who served in Delhi in the 1980’s told me a story about the power of bureaucracy.

It was during former Prime Minister Rajiv Gandhi’s visit to Russia. My friend requested a senior bureaucrat in Gandhi’s office to sensitise the Prime Minister about a particular trade issue that is of extreme importance to the plantation sector, during the visit to Moscow. But the senior bureaucrat was against his Prime Minister to talk business. What happened to the trade issue is anybody’s guess.

The world has changed a lot since then. The reforms in 1991 forced bureaucracy to talk business. But, there has not been much change in its character.

In August 2009, Bangladesh (and parts of West Bengal in India) was devastated by cyclone Aila. The then finance minister (now President of India), Pranab Mukherjee was quick to respond to Dhaka’s request for supply of food grain to Bangladesh, ignoring an export ban.

The timely gesture turned into a major bi-lateral embarrassment with food grain shipment held up for months due to bureaucratic hurdle. The issue was finally resolved through the personal interference of Mukherjee, in October 2010 but the image of India was damaged.

Chaos unlimited at Panitanki border with Nepal. 

This what a popular Bangladeshi news portal reported in October 2010: "Though several months have passed since New Delhi responded to Dhaka's request and agreed to sell rice and wheat to Bangladesh, the shipment had been delayed – first due to differences between the two countries over grain prices and then due to procedural delays by different wings of the Indian government". 

If you are in need of more relevant examples, let's go back to a 2008 framework agreement between India and Myanmar that proposed setting up a port at Sittwe and connecting that with Mizoram through multi-modal transport. The proposal was a win-win for both countries and, Myanmar agreed to it.

Everything in order on the Nepali side (Kakarvitta) on Panitanki border

Seven years down the line, there is complete silence about the project. Last we heard in January 2015, the river part of the project is near-complete. But construction the crucial road project was yet to start. Analysts in Naypyidaw blame Delhi. And, privately babus in external affairs department blame their counterpart in finance ministry for the logjam. Read this story for details. 

Feudal or lethargic?

But babus can make a difference if they so desire. India’s former ambassador to Nepal Shyam Saran was of that category. It was he who had set up a consulate at the main trade route of Birgunj and proposed upgrade of India’s trade infrastructure with neighbours.

Saran’s proposal caught the fancy of politics. And, the government immediately approved a scheme to set up modern integrated facilities (ICP) at nearly a dozen border check posts. 

Sadly, there are not many more Sarans in the government. So far only two of those proposed integrated check-posts are implemented. And, the first one to come up, in 2012, was at Attari on the Pakistan border – the country that has least trade relations with India. The ICP at Akhaura on Bangladesh was completed in 2013, courtesy largely to the insistence of Tripura government.

Poor infrastructure at Indian side of Petrapole border with Bangladesh

I am not critical of modern trade infrastructure with Pakistan. I am only pointing that in terms of trade, a Petrapole or Birgunj should have got priority. Petrapole handles half of the $ 6 billion Indo-Bangladesh trade. And, Birgunj accounts for 70 per cent of Nepal’s $ 7 billion foreign trade.

Sabyasachi Basu Ray Chaudhury, professor of the department of Political Science and Director of the Centre for Nepal Studies at the Rabindra Bharati University, in Kolkata, has a nice take on this. “How many of our bureaucrats or diplomats visited the East?” he asks.

He is right. Leave alone, border outposts, our bureaucrats rarely visit even a Kolkata, the only metropolis in Eastern and North Eastern India and the proverbial ‘gateway to the East’. As a Kolkata-based journalist, I can count how many times I have seen our bureaucrats or diplomats attended business meetings here over the last one year. Business is expected to fly down to Delhi.

Bangladeshi infrastructure at Petrapole-Benapole border is superior

In contrast, you will see ambassadors of the developed world visiting Kolkata too often to meet with business. I remember the US ambassador to meet the Coal India chief at the latter’s office, to discuss “business” on behalf of American companies.

The senior diplomatic staffs of foreign embassies are never tired of travelling down to the border areas of Mizoram, Nagaland, or Manipur. But, ask locals when was the last time they saw a babu from Delhi and, they may die out of heart attack.

Babus are pricey. They prefer travelling down to more exotic places on earth - like US, Europe and so on – at the drop of a hat.

Closed economy mindset

Before I end this long piece, here is an epilogue on the power or perceived power of babus.

A few days ago, I was writing a piece on the prospect of Bhutan-Bangladesh-India-Nepal (BBIN) trade and transit treaty that Modi recently signed. 

Manik Sarkar welcomed it with open arms as it would end the remoteness of Tripura and North East. West Bengal’s Mamata Banerjee is acting overtime to widen the highways in North Bengal to facilitate trade through West Bengal. In fact contrary to her anti-land acquisition politics, she didn’t mind acquiring land or removing encroachments for border trade projects.

Business in all the countries is bullish that such an arrangement will bring rich dividends. A top Indian company is reportedly busy preparing its investment plans in Tripura. Industry in Bangladesh and Nepal are expecting this arrangement to increase B2B ties between India and its Eastern neighbours.

Collected from facebook

The only thorn in the neck is some babus who are wary that such an arrangement might dilute India’s ability to arm-twist neighbours because Nepal can henceforth freely trade with Bangladesh or Bhutan that through Indian territory.

True, such an arrangement will bring revenues to India. Indian business will gain too. Our landlocked North-East can attract industries who will send goods through a Bangladesh.

But who cares, babus are still living in that closed economy era when they ruled the roost by managing supplies, not fuelling the growth.

Modi is keen to shift the course of India’s relationship with neighbours. He wants to see India as a trade facilitator. But to reach this goal, he may first have to break the babudom.

***

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Solution soon on Madhesi issue? Ball in Kathmandu's court, as New Delhi denies to 'interfere'

Pratim Ranjan Bose

“Not taking a decision is a decision in itself,” India’s visionary former Prime Minister P V Narasimha Rao, once famously said.

It is not known if the upland-elite dominated ruling class in Kathmandu are avid followers of Rao; but, they have nearly pushed the country to the brink by sidestepping a decision on the just demand of Madhesi, Tharu and other communities (loosely referred as Madhesi here) from the Southern plains, for equality and federalism.

The angry Madhesis blocked the main trade route of Nepal for the last four months, inflicting major damage to the economy, giving rise to black marketing of essentials, like fuel, and causing tremendous hardship to common Nepalis, especially the earthquake hit poor in the hills at the onset of winter.

Political map of Nepal

But, neither the coalition government of K P Oli, a known Madhesi hater; nor the principal Opposition, Nepali Congress have shown adequate interest to treat the issue with dignity.

On the contrary, they are playing a political football with it. The economic plank is limited to either flashing of ‘china card’ or India-bashing that is a popular currency in Kathmandu.  

The deep divide

To understand the reasons behind the current controversy one must take a look at the neglect and discrimination meted out by Kathmandu to nearly one-third of the country’s population.

Decades ago, they needed a pass to go the capital city. The restriction was withdrawn in the 1950’s, but Madhesis were all across treated as outsiders in their own land – a land that they claim to have once ruled, much before most of the hill population migrated to Nepal from today’s India.

It is not important to go back to the history. What is more important is to understand the deep divide between the two sides.

Madhesis have matrimonial links with neighbouring Indian states of Bihar and Uttar Pradesh. They prefer wearing dhoti-kurta (that is commonplace in the entire North India) over Daura-Suruwal (pajama, long shirt and topi), the traditional costume in the hills. Their mother tongue is Maithili or Bhojpuri, not Nepali.

Such cultural diversity is not uncommon in the subcontinent. Like India, Nepal is multi-cultural too. But the feudal, if not racist, approach of the ruling class, made all the difference here. They were never keen to share power with ‘dhotis’ or ‘Biharis’ – as Madhesis are commonly referred - and, denied every opportunity to bridge the gap.

Kathmandu spends a fraction of its development budget in the plains that contributes over two-third of the tax revenue. Any doctor working in the area will tell you about the high incidence of poverty and illiteracy at the Madhesi heartland of Janakpur.

Angry Madhesi youth driving the movement

Almost all senior government officials, media persons and social elites you meet in Kathmandu are of hill origin. Madhesi representation in armed forces is negligible. And, out of top 10 districts of Nepal which send the largest number of workforce overseas, nine are from the plains.

But ask a hill politician and rarely will he admit the discrimination. Instead, they will complain against India for taking the side of Madhesis, knowing fully well that until recently India hardly cared for them.

India’s historic neglect

A couple of examples will make India’s historic lack of attention to the plains, amply clear.

First, India is one of the principal donors to Nepal. “But barely 20 percent of the country’s Nepal aid is spent on Terai (Hari Bansh Jha, Whither Madhesh, my Republica, October 8, 2014). Second, though India offers countless scholarships to Nepali citizens, you will need a microscope to find Madhesi names in it.

The third example is a trickier.

In January 2007, when Nepal was moving ahead to form the first democratically elected government in May 2008, Madhesis put up a strong case for due political equity in a democratic Nepal.

The movement, originally spearheaded by a civil rights group (Madhesi Jana Adhikar Forum, Nepal, of Upendra Yadav), was significant for two reasons: (a) It challenged the stranglehold of all established parties, including Maoists, in the plains and (b) the mass support to the movement underscored popular aspirations of the people of the region.

For the next one year, Terai saw more violence and strikes than ever. The movement went through many twists and turns, including a split in leadership, before entering a decisive phase in February 2008 when Madhesis called an indefinite strike to force the interim government to carve out the political space for Madhesis before Nepal went to the election in May.

The southern plains of Nepal

The strike had a crippling effect on the economy. But before it could bring Kathmandu to its knees, the Manmohan Singh government (2004-2014) in New Delhi literally forced Madhesis to sign on the dotted lines.

They strike was withdrawn after 19 days (some say 16 days) with the government promising to fulfil those demands once they bring the new constitution of democratic Nepal at a later date.

After years of delay, the constitution was hurriedly promulgated on September 20 this year. And, as anticipated by common Madhesis, the provinces were demarcated in a manner so that the domination of hill districts remains intact in six out of seven States. This coupled with the shape and size of electoral constituencies will keep power balance tilted against the Madhesis.

All those promises made 2008, found their way to the waste paper basket.

Promises were broken again

The entire exercise was unclean.

The State restructuring committee formed by the first democratically elected Parliament (referred as first Constituent Assembly) proposed the creation of 11 States to give space to ethnic identity groups.

But as the ball started rolling in July-August; Kathmandu first proposed six provinces. The decision was soon changed for eight. But a mere two-day strike by upland population in Karnali, in early August, convinced the government that they should go for seven provinces.

But why did they go for such hurried demarcation?

Kathmandu says they wanted the issue to be handled by a Commission, combining academicians and civil society representatives, after promulgation of the constitution; but a Supreme Court verdict forced them to go for the demarcation before the Constitution is promulgated.

True, but they could wait for so many years, why couldn’t they wait for a few more days or months to achieve the consensus?

Kathmandu has little answer to this question. Probably they relied heavily on their time-tested floor management skills. Probably they thought they would accommodate a few more deputy prime ministers (there are six in Oli cabinet) and Madhesi leaders will sign on the dotted lines. Given a chance, that might have happened too. But the common Madhesis put a spoke in the wheel.

As I travelled through the riot zone last month, I could see barely 15 or 16-year-olds taken charge of the street. They have little faith on the system and, even on their own leadership. It’s no more a political movement. It’s a mass frenzy. The entire society is gripped by the hysteric call for ‘Madhesh’ - a symbol of their political, cultural and economic identity.

What was once a cultural divide, has now taken the shape of a deep emotional divide; which, if not handled with care and compassion, may invite disaster to both Madhes and Nepal as a whole.

It is doubtful if the political pigmies in Kathmandu are yet to realise that.

They have agreed to delimit the electoral constituencies but the core demand for amending the contours provincial maps will be taken to an all-party committee for resolve in next three months. But, given the track record of Kathmandu common Madhesis suspect the intention.

India distanced itself

If the frequent visits of top ministers and ruling politicians to New Delhi, throughout the last week, are of any indication, Kathmandu is now lobbying with India for an ice-breaker. The intention is clear, let New Delhi play the decider; so that they can keep the political constitutions in hill intact by fanning anti-India sentiments.   

The seven provinces

All the three major national parties - Oli’s CPN(UML), Prachanda’s UCPN(Maoist) and Nepali Congress witnessed sharp erosion in their traditional support base in the plains, in the wake of the current phase of Madhesi movement - and, are now dependent on hill constituencies, for survival.

There is every reason to believe that Madhesi leaders would also welcome India to push their demands to Kathmandu. They are happy that New Delhi didn’t join hands with Kathmandu to steamroll their protests nor did it try too hard to send goods to the upland – an act that Kathmandu kept referring as ‘Indian blockade’.

They also know that they have nearly lost control over the movement that had lasted far longer than they could imagine. The moderate forces in Madhesi Morcha (forum) are afraid that not taking part in the reconciliation process, may alienate them further from the hill population; giving Kathmandu fresh opportunity to declare the movement as secessionist.  But at the same time, the leaders are afraid that agreeing to Kathmandu’s proposal may drastically erode their support base in the plains.

It’s a deadlock. And, there is a tempting invitation to New Delhi to repeat its act of political interference in Nepal’s domestic issues. But the Narendra Modi government is now refusing to be caught in that trap.

India is already embarrassed at the monumental failure of its diplomatic apparatus in reading the minds of Kathmandu between June and September this year. Modi himself was taken aback by the shrewd play of Kathmandu, in November last year when he wanted to visit Janakpur, the mythical birthplace of Sita in the Hindu epic of Ramayana.

Modi was the first Indian Prime Minister, in 17 years, to visit the hill country in August 2014. The visit enthralled the Nepali population. In his address to the Nepali Parliament, Modi clearly underlined a shift in Indian strategy from a bullying big brother to a trade facilitator. 

So in November, when Modi proposed travelling down to Janakpur as part of his scheduled visit to SAARC summit in Kathmandu; little did he anticipate that the then Sushil Koirala government (February 2014 to October 2015) of Nepali Congress to play the ‘safety’ trick to prevent him from visiting the Madhesi heartland.

Janakdham temple that Modi wanted to visit

Some political analysts believe Kathmandu did disappoint Modi at the influence of the Chinese who surely didn’t enjoy the unprecedented popularity of an Indian PM in Nepal. If that is correct, China surely played a smart nuanced game.

In comparison, Indian diplomacy appears lazy and blunt, drawing ire from all sides including Madhesis - who had nearly lost their political constituencies by voting for Sushil Koirala over Oli, during Prime ministerial election in October, reportedly under Indian influence. It was Koirala government that promulgated the controversial Constitutional provisions, in September. He was replaced by Oli on October 12.

Time to take a call

The Indian establishment, as it seems now, is taking a more considered view on Nepal.

It is concerned that trouble in the plains of Nepal, if not resolved, may spill over to the Indian territories through the open boundary. There is a distant concern that if the mainstream politics in Nepal fail to address the popular aspirations, radical forces may hijack the movement.

New Delhi cannot be dispassionate about the Madhesi movement as it enjoys popular support in UP and Bihar. At the same time, it is fully aware that continuation of the blockade is not in the wider interest of India.

To strike a balance, the Modi government is now advising both sides to come to a resolution. But it denied being a party in such negotiation.

The Indian stand has put the ball back in Kathmandu’s court. 

The political actors in Kathmandu can no more survive the crisis by fueling anti-India sentiments. The China card has failed to resolve the humanitarian crisis. It's time for Nepal to take a call on its domestic issues.

There is still confusion if Kathmandu will rise to the occasion. But some are optimistic that the crisis to end soon.

***

More on Nepal Crisis: 

1) http://www.thehindubusinessline.com/news/no-sign-of-end-to-the-deadlock-nepal-impasse/article7940811.ece

2) http://www.thehindubusinessline.com/news/at-a-crossroads-on-the-border-with-nepal/article7924117.ece

3) http://www.thehindubusinessline.com/economy/madhesi-agitation-hits-nepal-economy-hard-ripples-in-india-too/article7916357.ece

4)  http://www.thehindubusinessline.com/economy/are-indian-supplies-to-nepal-falling-at-undisturbed-gates-too/article7909317.ece#comments

5) http://www.thehindubusinessline.com/news/world/nepal-the-bad-vibes-between-the-hills-and-plains/article7905790.ece?ref=relatedNews

6) 
http://www.thehindubusinessline.com/news/national/madhesi-issue-nepals-political-rife-delays-solution/article7896709.ece?ref=relatedNews

7) http://www.thehindubusinessline.com/news/with-no-end-to-protests-nepal-continues-to-suffer/article7884479.ece?ref=relatedNews

"Jai Madhesh" and the India-Nepal relations

Pratim Ranjan Bose

The call for establishing Madhesi rights was given by Maoists who successfully paved Nepal’s journey to democracy in 2008.

Madhesis – a large number of people from the Terai region of the country on the South who having cultural bonding with communities living primarily in the Indian state of Bihar – extended support to the movement, and joined the coalition to form the first democratic government headed by Prachanda aka Pushpa Kamal Dahal, now the head of the Unified Communist Party of Nepal (Maoist).

The topsy-turvy in Nepal politics in the following years saw repeated change in governments. And, in that melee, the political class, including the Madhesi parties, failed to address the popular aspirations of those people living in the plains of Nepal. 

And, when the Prime Minister K P Oli announced the adoption of a new constitution, in September this year, Madhesh erupted in protests.

There were popular dissents against at least four controversial clauses, which – Madhesis allege - were adopted to deny them proportional representation in decision making and government jobs and, relegate them as a second class citizen. 

The angry agitators blocked the main trading route of the landlocked country not merely with India but with the rest of the country. Birgunj border, where an economic blockade is on for last three months, accounts for nearly two-third of India-Nepal trade and almost the entire import by Kathmandu from other countries through India.

The agitation is proving costly Nepal. At least 40 lives were lost and the life of common Nepalis (that includes Madhesis) is thoroughly disturbed due to short supply of essentials. Tourism, the biggest industry, as well as the primary source of foreign exchange to the country, suffered the biggest blow as arrivals have halved. There is an undeclared economic emergency in Nepal that seriously affected India-Nepal relationships.

The K P Oli government in Nepal squarely blames India for taking the side of Madhesis and not doing enough to send supplies, if necessary through other border gates. The allegation is not entirely unfounded.

Just before the adoption of the constitution, the Indian foreign secretary Subrahmanyam Jaishankar landed in Kathmandu, reportedly to impress Nepal to take a second look to the Madhesi cause. Hearsay reports suggest Oli government rejected the Indian request. 

Nepal was surely within its right to do so. And some analysts, like Sabyasachi Basu Ray Chaudhury Director of the Centre for Nepal Studies at the Rabindra Bharati University in Kolkata feel Indian diplomacy could have been more nuanced.

But the allegation may not be entirely true also.

First, India and Nepal shares a nearly border-less existence, with people of either country allowed to move freely in each other’s territory. This and the strong familial links of Madhesis in Indian side make it a trans-border social issue that no India government can ignore or suppress.

Second, in so far as the border trade is concerned, India cannot redirect the heavy Birgunj traffic through other gates due to infrastructural inadequacy. Leaving all protocols of border trade aside, there will not be enough roads or clearing facilities to tackle this huge quantity of cargo at other gates.

The bilateral relations have further worsened with Nepal flashing China card. While it makes sense for Nepal to open more trade options, there are definite geographical disadvantages for Kathmandu in trading through China.

Only one example will substantiate this point adequately. The third country imports through Kolkata port in India travels 750 km by road or rail to enter Nepal through Birgunj. In contrast, all such cargo has to travel a few thousand kilometres from the East coast of china before it enters Nepalese territories. And, longer the distance higher will be the cost impact.

So what will happen to India-Nepal relations and trade? To know, I will be travelling to Kathmandu next week.

Tweet: @pratimbose

Open border and thriving informal trade: Problems and prospects of promoting India-Myanmar trade through Mizoram

Pratim Ranjan Bose

(India’s rising trade and investment potential in Myanmar notwithstanding, the land border trade is languishing at negligible levels. Considering its peaceful status can Mizoram give the much needed fillip to the border trade?  

In June this year I participated in a field study at Zokhawthar (Mizoram)-Rih (Myanmar) border, organised by the Maulana Abul Kalam Azad Institute of Asian studies and the Jadavpur Association of International Relations.

Reproducing here the paper I submitted for due circulation with the India government.)

With a population of 20,000, the district town of Champhai has a disproportionately large and thriving marketplace dotted with stores selling a wide range of household appliances, electrical wares, medicines, smart-phones, footwear and others.

Located a mere 28 km from the border gates at Zokhawthar; Champhai is one of the largest trading centres after the state capital Aizwal, and caters to the needs of the hilly North-Eastern state of Mizoram and the bordering Chin State in Myanmar.

But the disturbing fact is that the hustle and bustle are almost entirely driven by illegal or informal trade.

There are over 50 registered importers at Champhai, but only a few are active. Official trade is limited to the import of a single consignment of betel nut a week, and some occasional parcels of Burmese energy drink. There is no trace of exports from India.

"Location map India Mizoram EN" by Philg88; Attribution: Wikimedia Foundation (www.wikimedia.org) - Own work Includes derivative version of File:India Mizoram locator map.svg. Licensed under CC BY 4.0 via Commons - https://commons.wikimedia.org/wiki/File:Location_map_India_Mizoram_EN.svg#/media/File:Location_map_India_Mizoram_EN.svg 

“There are nearly 15 major informal trading routes along the 510 km[1] unfenced border shared by Mizoram with Myanmar. Champhai is the biggest draw of them all,” says Export Commissioner of Mizoram C Lal Zirliana.

In short that is the problem and prospect of Zokhawthar-Rih (Myanmar) border that has long been identified as one of the most promising trade routes, after Moreh in Manipur that presently controls 99 percent of the $ 56 million[2] (2014-15) land trade with Myanmar.

There is surely a huge appetite for cross-border trade through Zokhawthar. But the challenge is to expand the scope of formal trade. 

Open border and strategic advantage

A visit to the border gates presents a more vivid perspective of issues involved.

The 50 metre long Bailey bridge on the river Tiau – that marks the international border - is too narrow and weak, to allow movement of cargo-laden trucks. Goods are to be moved across the border, by head loads. Obviously that is not the prescribed infrastructure for the cross-border movement of bulk cargo.

The scene is reverse when it comes to the movement of people and informal trade. Excepting the names of two nations written on the archways on either side of the bridge, it’s an open border managed by local police.

There are some Assam Rifles Jawans standing guard at the Indian gate but more as onlookers. Mizoram remaining peaceful since 1986, Delhi maintains a skeletal presence of armed forces in this hilly State, when compared to a ‘disturbed’ Manipur.

Champhai town, in Mizoram, India

Two years ago, there was a proposal to strengthen this border by deploying Border Security Forces (BSF). But it is yet to be implemented. Many in the know say the proposal was sent to the cold storage to appease ‘local sentiments’.

At the Indian side of the gate, two State police persons are issuing entry passes - a small piece of paper of the size of bus tickets - to ‘visitors’ from Myanmar. A similar procedure is followed on the other end of the Bridge at Rih in Myanmar.

As per local rule, people of either country are free to travel 16 m inside the foreign territories between 5 am to 5 pm without any formalities. Officially the limit has been reduced from the past. But there is every possibility that these rules are observed more in the breach, thanks to the social bonds between people and the limited border vigil.

Champhai banks on buyers from across the border. Myanmarese students attend Indian schools. And, senior State officials say there are at least 30,000 Burmese Chins in the State capital of Aizwal, offering cheap labour to relatively wealthy Mizos who refuse to label them as illegal immigrants.

Chins are a linguistic relation of Mizos in Mizoram and, the mainstay of the population in Chin State that is now leaving its disturbed past behind for peace and prosperity.

The movement is not one sided. Ask any Mizo, chances are he has travelled deep inside the foreign territories, if not for jobs – that is seldom available in a less developed Myanmar, especially the Western part of it – then for business or simply to socialise. Many or most of them have family relations in Myanmar.

Peaceful atmosphere and people-to-people contact are two major attributes to promote cross-border trade. Add locational advantage to it and you have a perfect recipe for thriving trade.

 Zokhawthar is barely 50-60 km from two prominent towns Falam and Tiddim (also known as Tedim) in the Chin State. Travel a little further across the Magway division and, there is Kalemyo at the Southern end of Sagaing division of Myanmar.

Located barely 120-30 km from the Indian border, Kalemyo[3] is the largest consumption centre, complete with an airport and some industrial base, in this part of Myanmar. It is also the gateway to the more prosperous central Myanmar region that is now attracting FDIs from across the world.

The Indian government is keen to capitalise on the strategic advantages of Zokhawthar, but the effort has apparently hit a few logistical hurdles. The sloth decision-making may also be a reason for the lack of progress on this front.

The Indian plan to promote trade through Zokhawthar and the infrastructure gap

In its effort to enhance trade and investment opportunities in Myanmar, and most importantly to reach out to a more prosperous Vietnam market (Vietnam attracted nearly 68 per cent of India’s US$ 699.8 million investments[4] between April 1996 and March 2013 in the CLMV (Cambodia, Lao PDR, Myanmar and Vietnam) region); India already built a highway from Moreh-Tamu border to Kalemyo.

Open border with Myanmar at Zokhawthar, India 

Connectivity between Zokhawthar and Kalemyo should, therefore, give the much-needed fillip to India’s trade ambitions in the region.

But there are infrastructure bottlenecks to reach this goal. According to a press communique issued by the Mizoram Trade and Commerce Department in March 2015, “the road from Zokhawthar-Rih border to Kalemyo via Tiddim-Falam is a bad grade single lane Kuchha road” unsuitable for bulk movement of goods.

In a recent move, the India government entered an agreement with Myanmar to upgrade this segment into a single-lane highway. According to the State government “a detailed project report entailing an investment of Rs 711.47 crore was also approved by Delhi” but the construction is yet to start.

Apart from being shorter in length than the Tamu-Kalemyo segment; the proposed Rih- Kalemyo road will also bypass the troubled northern part of the Sagaing division.

A similar (if not bigger) advantage is anticipated in the Indian side too. The Moreh-Tamu border is connected to Guwahati (for a further journey into the mainland India) by 587 km NH-39 that passes through the insurgency affected areas of Manipur and Nagaland.

According to K Lalhminthanga President of Mizoram Chamber of Industries, nearly 20-21 active insurgent groups of Nagaland (17) and Manipur (3 to 4) collect a total of Rs 50,000 extortion money from every import or export consignment that passes through that route.

In comparison, the journey from Zokhawthar to Guwahati is safer, as it enters Assam by passing volatile Manipur and Nagaland. The problem, if any, once again lies with infrastructure.

The 28 km road from Zokhawthar to Champhai is nothing better than a village road, unsuitable for movement of cargo. India is now upgrading it into a double-lane highway. The project is midway through implementation.

Champhai-Zokhawthar road is being upgraded

The 194 km road from Champhai that meets NH-54 in Aizawl is in good shape but too narrow and has too many sharp bends for movement of large multi-axle carriers. The road is currently accessed by two-axle trucks.

According to Zirilana, there is a proposal for widening the Champhai-Aizwal road into a two-lane highway. But neither the State nor India government has taken up the project so far.

Prolonged delay to set up border trade infrastructure: A reason for thriving informal trade?

If the Mizoram government is to be believed, there was prolonged delay on the part of Government of India in setting up basic infrastructure to promote formal trade through Zokhawthar and other informal trade routes through the State.

According to a Mizoram Trade and Commerce department[5] publication, New Delhi noticed the strategic advantage of Zokhawthar way back in 1994, while entering the Border Trade Agreement with Myanmar. The decision to set up a Land Customs Station (LCS) at Zokhawthar was firmed up sometime in the last decade. The LCS was “ready to be inaugurated” in 2011.  However for reasons better known to the State and Central authorities, the LCS was finally inaugurated in March 2015.

That doesn’t mean Zokhawthar LCS is fully operational. Most of the LCS officials operate from Champhai, as a parallel project to build Staff quarters near the gate is incomplete.

The proposed staff accommodation facility was sponsored through the recently scrapped ASIDE scheme (Assistance to States for Development of Export Infrastructure and Allied Activities). According to Zirilana, the project now stands abandoned due to lack of funding.

Also abandoned are projects to develop border trade infrastructures through ASIDE scheme in at least three other locations in Mizoram.

There are other issues too and some of them are highly confusing, if not contradictory in nature. 

The Union ministry of Development of North Eastern region claims that normal trade is allowed[6] through Zokhawthar. However, according to LCS superintendent V Hangzo, only ‘Border Trade’ is allowed through this gate, thereby restricting import-export to 62 items[7] (at 5 per cent duty), to which traders have limited interest.

David Thangluia, the owner of Champhai based Zoland Pali Traders Pvt Ltd, feels even the designated Border Trade is difficult under the existing set of rules that caps the maximum value of an import consignment at $20,000 or (approximately Rs 12.5 lakh at current exchange). “The limit is a big hurdle for traders, as one truckload of areca nut usually costs $ 5500 (approximately Rs 35 lakh) or beyond,” he says.

At Rih market in Myanmar. 

So how do traders negotiate the hurdle? Simple there are routes to cross the border avoiding the LCS.

Indian Ambassador to Vietnam, Gautam Mukhopadhaya confirms hurdles in promoting land border trade with Myanmar. “Measures are under way to normalise and upgrade border trade facilities at both Zawkathar and Moreh, but it will take a little time,” he said in a emailed response.

“Trade will pick up once the border trade infrastructure is upgraded to handle normal trade, the road projects that we are engaged in Myanmar are completed in the next 2-3 years, and new infrastructure and investment measures in the North East bear fruit,” Mr Mukhopadhaya said.

How big is the land trade opportunity through Zokhawthar?  Informal trade may leave some indication

India has a thriving $ 11 billion trade with CLMV countries as a whole, with balance in India’s favour. The trade with Vietnam is growing by 15-16 percent a year.

In comparison, India-Myanmar trade is stagnating in the range of $ 2 billion for the last couple of years. The balance is in favour of Myanmar due to heavy import[8] ($1.23 billion in 2014-15) of wood and wood products and edibles, especially pulses. From India, man-made fibre, pharmaceuticals and clothing accessories are the top three export[9] ($ 773 million in 2014-15) items.

When compared to Myanmar’s total trade of $ 27 billion[10] - including an import of $ 16.34 billion - India has failed to capitalise on its advantages so far.

According to Exim Bank, India has a respectable share in only a few major items imported by Myanmar. These include pharmaceutical products (37 percent share of total imports), cosmetics (6.6 percent), rubber and articles (6.2 percent), articles of iron or steel (5.6 percent), cotton (5.6 percent), and iron and steel (5.5 percent).

Officially, with a mere 0.02 per cent share in total trade, the land-border trade has a little contribution in India’s trade ambitions in the region. But a look at thriving informal trade through Mizoram, may force you to to change that opinion.

No one dares to guess the size of the informal trade. There is not much information with the Union Commerce Ministry either. But check any apparel, footwear or cigarette shops – most of the offerings are from Myanmar. When compared to Indian products, they are significantly cheaper.

A pack of 20 king size Chinese ‘FarStar’ cigarettes is available at Rs 40. A pack of 20 Winbody is Rs 25. In comparison, a pack of 10 regular India made Flake cigarettes cost Rs 50.

Consumer durables manufactured in Far Eastern countries like South Korea, China, and Malayasia are available freely. Be it an innocent tube light, spectacle frames or spares for the outdated Maruti-800 – the touch of Myanmar is all pervasive in the everyday life of a Mizo.

The ‘exports’ from India to Myanmar are no less impressive. Indian medicines, fertiliser (mostly urea), motorcycles, zarda a form of chewing tobacco), baby food, LPG, smartphones, mosquito repellents, pesticides, cycle parts, and solar gears fetch huge margins in Myanmar.

On the way from Rih market to Rih Dil. Majority of roads on this side of Myanmar are Kuchha 

The 14.2 kg LPG cylinders marketed in Indian at around Rs 460 (with subsidy) is reportedly lapped up by the Burmese at Rs 4000. One paracetamol tablet priced Rs 1.5 or less in India fetches Rs 5 at Tiddim.

According to Lalhinthanga, at least two truckloads of medicines (mostly analgesics, skin ointments and antibiotics) and five truckloads of fertiliser reach Myanmar every week, through Champhai (bypassing the Zokhawthar LCS). Lalminthanga is one of the earliest Mizo entrepreneurs with family links in Myanmar.

Interestingly, while the official India-Myanmar border trade of $56 million (2014-15) is in favour of Myanmar ($39.86 million in Indian imports), Lalminthanga says informal trade is in favour of India due to the export of relatively high-value items. Zirliana, however, feels the trade is evenly shared between the two nations.

But is it possible to ferry such huge volumes of goods across the border? Zirliana has an interesting anecdote to share. Like most of the Mizos he has relations in Myanmar. On a recent visit to Kalemyo, he noticed an India-made JCB earthmover. “The traders drove it through,” he says.

The question is if the border is so porous that trucks (or earthmovers) can ply freely between the nations, what is the incentive for formal trade? One may argue that creation of better road logistics and cost-efficient bulk movement of containerised cargo will throw smugglers out of business. But the argument is not full proof.

According to both Lalhmingthanga and Zirilana; informal trade through Mizoram is on the rise despite poor road logistics on the Myanmar side. A good percentage of the trade that was previously routed through Manipur now prefer Mizoram as a corridor. So much so that, Mizoram now shares approximately 30 percent of the total cross-border trade (including formal and informal), says Lalminthanga.

The bottom line is: Improved road infrastructure and a permissive society may end up widening the scope of informal trade in the region. And, the size of such trade may not be small. The $ 4 billion[11] (BSF estimates) cross-border cattle trade through porous West Bengal border is a case in point.

Economics may hold the key to success

There are debates over the effectiveness of border fencing especially in such hilly and inhospitable areas as in Mizoram, Manipur, Arunachal and Nagaland that shares 1643 km long land boundary with Myanmar.

But there is little doubt that the free movement of people (and goods) has made the region into a borderless territory, often misused for smuggling contraband. The concern has been expressed by both the former UPA and the current NDA[12] government.

Mizoram generally escapes this conversation due to its peaceful status. But it is a common knowledge with the State and Central authorities that lack of border vigil is making it a preferred[13] corridor for the movement of arms and drugs.

The issue has now come to the fore as India is hard pedalling on economic activity through the region. But a corrective measure is not easy to enforce, as there is strong socio-political resistance in Mizoram against strengthening border vigil. And the Indian government is understandably wary of disturbing peace in a fragile region.

Seen from this context, there are concerns that improvement in connectivity may open floodgates to third country imports and diversion of subsidised items, like Urea or LPG, to Myanmar.

Also, the success of formal trade depends on trade openness (measured by Trade-GDP ratio) of both the countries. Myanmar currently ranks the lowest in trade openness in the CLMV region. To optimise land trade potential, Naypyidaw has to make it a win-win for both the countries.

The balance may be struck by economics. Low on industrial activity, Mizoram economy is now largely dependent on huge fund flow from the Centre by virtue of its special tribal status. Nearly 95 percent of the State population of 11 lakh is Scheduled Tribes. Government jobs and contracts are the largest money churners here. Mizo entrepreneurship is mostly limited to shops and establishments.

Rih Dil in Myanmar. A popular tourist spot for Mizos from India

But the economy of largesse is not sustainable. And, Mizoram has started facing the heat. The State is undergoing through financial crunch[14] for nearly a decade or more. To add to the problem, during the three decades of peace the State made rapid progress in education. In the absence of adequate employment opportunity, there is a surge in number of educated unemployed. Lalhmingthanga says the State is staring at a social crisis in five years.

For now the clannish Mizo society may turn the heat on ‘outsiders’ (as they refer non-Mizos). But that will not solve the problem, as most of them are already driven out of the State. Demands for more funds from the Centre are unlikely to be met either, in the strict fiscal management regime that is in force in the country.

The solution, if any, lies in greater economic activity and optimising the tax revenue potential (in the lines of the neighbouring State of Tripura). Mizoram is currently losing huge revenue potential from informal trade. The thriving sale of cheap Chinese cigarettes is a case in point. Cigarettes are generally a major source of tax revenue to the State governments.

 There are indications that the realisation has finally dawned on Mizoram State government. In January this year, the State Government withdrew[15] a 17-year-old ban on liquor consumption ignoring opposition from Church. The initiative is yet to bear fruit as cheap foreign liquors are available aplenty, courtesy the informal trade. But the indication is clear: formal trade is emerging as a priority.

The move forward will not be easy. But the lure of money is also not easy to avoid. Probably Mizoram will respond to that and cooperate with the Centre to make formal trade initiatives a success.

***

(Conclusion: The thriving informal trade establishes the potential of Zokhawthar border with Myanmar. But a porous border, may pose a risk to the success of formal trade initiatives. Hopefully, the attraction of maximising the revenue potential will encourage Mizoram to help enhance the scope of formal trade through this land port.)  

[1] http://mha.nic.in/hindi/sites/upload_files/mhahindi/files/pdf/BM_MAN-IN-MYAN(E).pdf  

[2] http://www.mmtimes.com/index.php/business/15208-indian-gate-closed-for-unusually-long-time.html

[3] https://en.wikipedia.org/wiki/Kalaymyo

[4] “India’s trade and investment relations with Cambodia, Lao PDR, Myanmar, Vietnam: Enhancing economic cooperation” (2013), pg-19, Export-Import Bank of India.

[5] A Bird’s Eye View of Trade and Commerce (2011), pg 19.

[6] http://www.mdoner.gov.in/content/border-trade#e

[7] http://dgft.gov.in/Exim/2000/PN/PN12/pn3012.htm

[8] http://commerce.nic.in/eidb/Icntcom.asp

[9] http://commerce.nic.in/eidb/ecntcom.asp

[10] http://news.xinhuanet.com/english/2015-04/02/c_134119691.htm

[11] “The Great Barrier Grief” Business Line http://www.thehindubusinessline.com/news/the-great-barrier-grief/article4843585.ece

[12] “Myanmar border used for drugs and arms” The Tribune  http://www.tribuneindia.com/news/myanmar-border-used-for-drugs-arms-rajnath/105583.html

[13] “Drugs and arms: Mizoram fights an uphill battle”  Business Line http://www.thehindubusinessline.com/features/drugs-and-arms-mizoram-fights-an-uphill-battle/article7383679.ece

[14] “Mizoram Government is facing financial crunch” Business Line  http://www.thehindubusinessline.com/news/states/mizoram-government-facing-financial-crunch/article4952688.ece

[15] Mizoram lifts 17 year-old ban on liquor sales” live mint  http://www.livemint.com/Politics/5lT5IxCjdYPERI84dOHo2L/Mizoram-lifts-17yearold-liquor-ban.html