Impact of Economic Blockade in Nepal

Despite being endowed with huge economic resources, Nepal with per capita income of US$ 700 is one of world’s most poor nations. This is so because the ruling hill elites have never been serious about the development of the country. Even after the restoration of multi-party system in Nepal in 1990, the economy could not improve on account of the decade-long insurgency (1996-2006). The nation had not even properly recovered from the insurgency when the deadly earthquakes of April 25 and May 12 destroyed physical property worth over $7 billion, apart from killing nearly 9,000 people and injuring hundreds of thousands of people. Soon afterwards the indefinite strike imposed by the Madheshi Front and Tharuhat Struggle Committee in the Terai region of Nepal continuously for almost three months against the unjustified constitution has given fatal blow to the already ailing economy.

Though the constitution was approved by the 90 per cent of the members of the Constituent Assembly and promulgated on September 20, people mostly from the Terai region rejected it for its biasness against them. In the agitation against the constitution, nearly fifty people have been killed, thousands have been injured and many more have been forced to take asylum in India.

People in Madhesh want past agreements with them to be implemented in letter and spirit, which include formation of autonomous Single Madhesh Pradesh with right to self-determination. Other demands of the people in this region are the formation of electoral constituencies for the parliament on the strength of demography and not on geographical land area, proportional representation in different government machinery and end of discriminatory provisions in citizenship and other related issues.

As it is well known, of Nepal’s 75 districts 20 districts are in the Terai bordering Indian states of Bihar and Uttar Pradesh. Though this region occupies only 23 per cent of Nepal’s total geographical area, it inhibits 51 per cent of the country’s population of 28 million. The Terai region is important as it is still the Grain Basket of the country. It accounts for 59 per cent of GDP, 76 per cent of government’s revenue, 66 per cent of total cultivable land, 57 per cent of cereal crops production and two-thirds of industrial production. Potentiality for economic development of this region is high mainly on account of higher Internal Rate of Return (IRR) in roads, irrigation and other development sectors.

However, the local Madheshi and Tharu people are poor because of lack of control over the resources of this region. Because of the exclusionary policy of the government, only 10 to 15 per cent of the Madheshis and Tharus have their presence in the courts, cabinet, parliament and political parties. Those people have been victims of internal colonization and failed development.

Per capita allocation of budget expenditure in Terai has always been kept far lower by the ruling hill elites of Kathmandu. Infrastructural facilities, including irrigation, power and road are awful. Because of poverty, each year many of the youth in the region go in search of food and work in the Middle East, Malaysia and different other countries. A study conducted by ICIMOD a few years back showed that such districts in Terai as Saptari, Siraha, Dhanusha, Mahottari, Sarlahi, Rautahat, Parsa, Bardiya and Kailali were in worst condition in terms of poverty and deprivation.

Unfortunately, Nepal missed the opportunity to bring the excluded Madheshi and Tharu communities in the national mainstream by addressing their concerns in the constitution. The present trouble is the outcome of the failure to do so. As such, during the present strike in Terai, Nepal is expected to have incurred economic loss of over US$ 5 billion, which is one-fifth of the country’s total economy of $20 billion. This loss is mainly due to the decline in custom revenue and the closure of industries and business activities in the private sector. It is to be noted that the country already incurred economic loss of over $7 billion due to the earthquakes of April 25 and May 12.

Impact of the strike is most severe in the urban areas, particularly in Kathmandu Valley and the Terai region. The Terai region is affected most because the Madheshi Front agitators have virtually closed all the shops, industries, transportation services, educational institutions and other commercial ventures. Nearly 75 per cent of the vehicles have been grounded in the nation due to the lack of fuel. Besides, tourism and banking sectors have also been affected. But more than any other sector, the strike has given a death blow to the agricultural sector in the Terai, which is the backbone of Nepal’s economy.
Never before in Nepal’s entire history had the country suffered so much on account of the shortage of vital necessities as it is today. All such items as medicines, oxygen cylinders, fuel gas and petroleum products have become out of stock in the market. Each section of the Nepalese society is plagued by the shortage of goods in the market.

Prices of essential and other items have skyrocketed. Petrol is sold in the black market at $5 per liter when its normal price is around US$1 per liter. Price of vegetables, food and other items of daily needs have also escalated by several folds. Amidst a situation in which unemployment rate is as high as 40 percent in the country, the loss of job by the daily wage earning group people has really made the life most difficult.

But instead of trying to address the grievances of the agitating Madheshi and Tharu ethnic groups, the government tried to divert people’s attention by blaming India for the economic blockade of Nepal. But gradually international communities have realized that the present economic blockade in Nepal is staged by the Madheshi and Tharu agitating groups rather than India. Protests against the import of oil by the Madheshi Front are strong at Birgunj-Raxaul border point from which 70 per cent of oil is imported into Nepal. Nepal has been receiving only 30 per cent of oil at present from other transport routes where the protests by the Madheshi Front is weak. This is one of the main reasons for the scarcity of oil in Nepal.

In the meantime, the government of Nepal has signed an agreement with China whereby China is in the process of supplying 1,000 metric tons or 1.3 million litres of petrol to Nepal as grant. Before this agreement, Nepal had to rely entirely on Indian Oil Corporation for the import of oil and gas from India.

But the question is how long China will continue to supply oil in grant to Nepal. Will it also be supply cooking gas to Nepal? If it is so, to what extent will it be? The Chinese officials have said that the oil given to Nepal is emergency arrangement. Does it mean that the Chinese will supply to Nepal only temporarily? In fact, China does not produce all the oil that it consumes. It also depends heavily on third countries for the import of oil. In such a condition, will China be able to sell petroleum products to Nepal in the long term at a price lower than what it is available in the market today?

In 1988-89 when Nepal’s relations with India had deteriorated after the country imported arms from China, Indian government allowed only two entry points to Nepal for trade with third countries. During that period also there was temporary shortage of goods and petroleum products in the country. Nepal then had tried to air lift oil from Bangladesh, apart from importing oil from China. But import of oil from China proved costlier to Nepal. All those vehicles which used oil imported from China developed serious problems.

As expected, the Madheshi Front leaders have expressed displeasure over the way the Chinese provided oil to Nepal through the Rasuwagadhi-Kerung route. They are somewhat afraid if the import of oil from China makes the economic blockade less effective. It is not known if they could adopt other strategies to intensify the protests if the economic blockade fails to gain ground due to the import of oil from China. But considering the fact that the talks between the government team and the Madheshi Front ended in fiasco due to the lack of seriousness on the part of the government, it is more likely that the agitation would prolong and cause still more hardships to the people. The need of the hour is to exert pressure on the government and major political parties of Nepal to resume serious dialogue with the Madheshi Front leaders with a view to ending economic blockade and general strike through the amendment of the constitution.

Jha is Professor of Economics and Executive Director of Centre for Economic and Technical Studies in Nepal

---

Published Date: 3^rd November 2015, Image Source: http://linkis.com [3]
(Disclaimer: The views and opinions expressed in this article are those of the author and do not necessarily reflect the official policy or position of the Vivekananda International Foundation)