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Nepal signs OBOR

What is One Belt One Road (OBOR) initiative?

OBOR is an ambitious project initiated by China, aiming to link 65 countries across 3 continents: Asia, Africa and Western, 4.4 billion people and about 40 percent of global GDP. OBOR, also known as ‘the Silk Road Economic Belt’, is an outcome of China’s aspiring economic reform and sits at the centre of its economic development plan. While the initiative seeks to promote economic cooperation among countries through a network of land and sea routes, the primary intention of the project, nevertheless, is to endorse the demand of Chinese products. Thus, in reality the economic corridor is designed to facilitate the flow of Chinese goods to the respective markets. The cost estimates for the project is expected to be at USD 4-8 trillion. However, the project also aims to enhance policy coordination across the Asian continent; trade liberalisation; financial integration; and connectivity including people to people links.

Benefits for Nepal

Nepal has historic trading ties with China and can benefit tremendously with OBOR connectivity. In earlier days, Nepal was the main trading link between the two neighboring giants and benefited enormously by acting as a gateway. The link can again be revived with the implementation of OBOR project. Moreover, as China and India have border disputes and China does not maintain any diplomatic relations with Bhutan, only Nepal can provide the physical connectivity between China and South Asia.The project will definitely help Nepal redefine its geographical position from landlocked country to a land-linked nation.  However, Nepal needs to act proactively to reap the potential benefit of OBOR connectivity. A joint commission with one-window policy should be set up for the smooth implementation of the project, while the required infrastructures within Nepal should also be prioritized. Likewise, priority should be given to Nepali workers while constructing the infrastructures. The commission should be mobilized not only to improve the market access but also to attract direct investment.   

Challenges to India

The signing of OBOR brings major challenges to India. Few of them are highlighted here. Due to the project India may lose its geopolitical influence in South Asia as it might decrease the trade dependence of South Asian countries, especially of Nepal, that they maintain with India. Moreover, as India is not likely to agree with the OBOR project, the implementation of the project can further deteriorate the bilateral relations between the countries. The ChinaPakistan Economic Corridor which passes through Pakistan administered Kashmir, Gilgit-Baltistan, is a case in point. Furthermore, the project may pressurise Indiato respond with its own benchmark project.  

Niraj K.C
Niraj is currently working as an economist beed and has over three years of experience working in the financial sector. He holds a M.sc in International Business and Economics from University of Hohenheim, Stuttgart, Germany with specialization in International Trade and Financial Econometrics. He is also a MBA graduate from Kathmandu University School of Management (KUSOM) with a major in Finance.
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