At a time when the two nations are negotiating on the choice of major projects to be executed under the Belt and Road Initiative (BRI), the industrial park is a catalyzing factor to enhance other components of the global initiative in Nepal.
Nepal and China have opened a new chapter in their economic cooperation by giving the go-ahead to construction of the China-Nepal Industrial Friendship Park at Damak of Jhapa in eastern Nepal.
“It is the first BRI project being implemented in Nepal, which is expected to boost the national economy and bilateral cooperation between Nepal and China,” said the park chairman Govinda Thapa.
The first phase involves 600 hectares of land, targeted to create 45,000 jobs. The second phase will bring expansion to over 1,500 hectares. When it is in full operation, more than 100,000 people will have job opportunities, according to Thapa.
The project has been designed as a platform for diversified economic growth, encompassing all types of economic activities such as tourism and retail sales, permitting workers to reside on-site and providing a much broader set of incentives and benefits to domestic and foreign companies.
Local people see it as game changer in the economic development in the eastern region that holds huge potential for modernization of agriculture and national industrialization.
It is likely to improve overall economic competitiveness, be a channel for the transfer of technologies and management know-how, and forge business and trade cooperation.
Given Nepal’s excessive dependence on imports to meet its needs for basic as well as luxury commodities, the country stands to benefit from the industrial park that will primarily focus on manufacturing export-oriented items to achieve a better trade balance.
Its key products will include herbal and cosmetic items, electronic equipment and chips for vehicles, agro-industrial goods and textiles, among others. Their potential markets are Bangladesh, India, China and Europe.
Nepal has been facing huge trade deficits for several years. The deficit reached almost Rs1,321.42 billion ($11.79 billion) in fiscal year 2018/19. The country exported goods worth Rs97.10 billion ($86.60 million) while the imports totaled Rs1,418.53 billion ($36.76 billion) during the review period, according to the Foreign Trade Statistics released by the Department of Customs.
Thus, it’s obvious that anything that can create greater trade is welcome.
Another noticeable impact is in boosting the local labor market. It will definitely discourage Nepali workers from having to go abroad to find work.
Enhancement of the skill level of local laborers is another positive aspect. Chinese technical experts will train Nepali workers before they are employed in various construction and manufacturing units.
Once the industrial park gets off the ground, it will have an effect on other BRI development projects in Nepal considered to be vital to stimulating the economy marred by the decades of instability, energy crisis and shabby infrastructure.
The BRI is not just about building industries and roads. It is an open and inclusive framework with five components: policy coordination, connectivity, unhindered trade, financial integration and people-to-people relations. Nepal and China have witnessed growing bilateral activities in all these areas.
Nepal joined the BRI in 2017 to bring in more Chinese investment to build critical infrastructure projects and promote connectivity.
At the moment, Nepali government has stressed infrastructure connectivity for it has been compelled to pay at least 20% additional costs to its production and transit-transit cycle because of its landlocked status, which has reduced its competitiveness in the global market, hence its desire to join the BRI to overcome trade and development bottlenecks.
Against this backdrop, the Nepal-China Industrial Park will go a long way towards promoting trade, investment, technological and skill transfer and economic cooperation between the two neighbors.
(Ritu Raj Subedi is the Deputy Executive Editor of The Rising Nepal.)