Nepal Has Powerful Friends in High Places: India and China

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Nepal Earthquake: India, China Lead Global Rescue Efforts

After the 7.8-magnitude earthquake that flattened parts of the Nepalese capital of Kathmandu on Saturday and unleashed avalanches on Mount Everest, India and China barely missed a beat.

Within hours of the disaster, Prime Minister Narendra Modi dispatched military aircraft carrying workers, medicines and blankets. A day later, President Xi Jinping’s government sent a search-and-rescue team to the Himalayan kingdom, together with medical equipment and sniffer dogs.

Yet even before the disaster that has left at least 3,700 dead, Nepal has been looked after by both Asian powers in recent years. The country is strategically located in a region that encompasses the Tibetan Plateau in southwestern China and some of the highest and most water-rich mountain ranges in the world. Chinese policies in Tibet have created serious tensions between India, as have border disputes.

In the middle stands Nepal, a desperately poor nation that has been home to a violent Maoist insurgency, a bloody royal family succession and a fitful transformation toward democracy. It is ranked a “least developed country” by the United Nations and its annual economic output is smaller in dollar terms than any of the 50 states in the U.S.

Yet on the rooftop of the world, a country that’s roughly the size of the American state of Tennessee is a player in a different sense. It holds some leverage to sway its far more powerful neighbors, according to Jayant Prasad, who served as India’s ambassador to Nepal from 2011 to 2013.

“Nepal balances India and China for its own purposes, obviously,” said Prasad. At the same time, he says he doesn’t see an Indian-Chinese cage match over influence in Kathmandu. “The Chinese are not in competition with us over there because they have good relations with Nepal and so do we.”

Water Tower

The peaks in and around the Tibetan Plateau are home to tens of thousands of glaciers. This water resource feeds Asia’s major river systems -- from the Mekong to the Ganges and Yangtze to the Yellow River -- that supplies water to more than a dozen countries. That includes China and India, representing nearly a third of the world’s population.

Nepal is endowed with rivers and mountainous topography and big potential, so far not realized, to generate hydroelectricity to supply power for both domestic and regional use. The government led by President Ram Baran Yadav has courted bids for hydropower deals.

In one of the biggest foreign investments ever in the country, Nepal’s Investment Board approved plans in mid-April for China’s Three Gorges International Corp. to build a $1.6 billion hydropower project.

Historically, India has had far closer political and economic ties, thanks to the Himalayas that served as a natural barrier to Chinese merchants. India still accounts for roughly half of Nepal’s trade.

Investment Dragon

However, in 2014, China overtook India as Nepal’s biggest foreign investor, funding power plants, noodle factories and meat-processing units. Late last year, in Kathmandu, Chinese engineers were working on construction of Nepal’s first eight-lane highway, a $45 million upgrade of an existing road that circles the capital.

“China is growing in importance,” Nepal’s Finance Minister Ram Sharan Mahat said in an interview with Bloomberg last December. “Because of new trade horizons and the cheap pricing of Chinese goods, Chinese trade vis-a-vis Nepal is growing.”

China’s embrace of Nepal dates back to March of 2008, when there was a spate of anti-China protests by Tibetans on the eve of the Beijing Olympics, according to Pramod Jaiswal, a political and security risk analyst in New Delhi who got his doctorate at Jawaharlal Nehru University.

Buffer Zone

“They wanted to curb the underground activities of the approximately 20,000 Tibetan refugees settled in Nepal,” he wrote in a paper last year.

Having an ally in Nepal would also serve as a land buffer between two countries that went to war briefly in 1962 over a border dispute, according to Li Li, a researcher at the China Institutes of Contemporary International Relations in Beijing. “From the perspective of geopolitics, Nepal is a vital passage in China’s quest for direct access to the South Asian countries.”

Chinese influence could grow further if a proposal reported late last year in the China Daily to extend the Qinghai-Tibet Railway to the China-Nepal border becomes a reality.

Silk Road

India, meanwhile, has announced plans to set up a special purpose facility to fund roads, bridges and power plants in Asia. Government officials familiar with the discussions say it’ll be less than a quarter the size of China’s $40 billion Silk Road fund, which will bankroll infrastructure deals in central and south Asia to replicate the old Silk Road trading route that once carried treasures between China and the Mediterranean.

Nepal is certainly going to need help in the coming months from both of its powerful neighbors. The country could face construction costs of $5 billion, equal to about 20 percent of the country’s annual economic output, Rajiv Biswas, chief Asia economist at IHS, wrote in a note to clients.

The two Asian powers are expected to take a leadership role in rebuilding Nepal. “Both India and China will look to compete with each other for reconstruction opportunities in terms of highways and hospitals,” said political analyst Jaiswal. “Short term it’s important for image, or soft power. Long term it’s about their security interests.”

The country’s primary business center is in a shambles, according to former Nepalese Finance Minster Madhukar SJB Rana. “Kathmandu is central to the nation’s economy, and it’s crippled,” he said.

Generators, Tents

The quake destroyed roads and topped power lines. Even before the disaster, the Asian Development Bank estimated that it needs to spend about four times more than it currently does annually on infrastructure through 2020 to attract investment.

China’s Ministry of Commerce announced plans to send about $3.2 million worth of generators, tents and other supplies via charter flights. The People’s Liberation Army will send four Il-76 transport aircraft with relief personal and rescue equipment, the Defense Ministry said on its website.

“Whenever there are military forces coming in, my bet is that it will set off alarm bells in Delhi,” said Constantino Xavier, a research scholar at John Hopkins University in Washington DC. Xavier said Modi has adopted a policy of delivering as much as possible to neighbors who “have been lured in recent years by China.”

Wipe Tears

Modi promised in a local radio interview that “India will make all efforts to wipe the tears of every person in Nepal, hold their hands and stand with them.”

Aid from its neighbors means Nepal will recover faster than it would’ve in previous years “but they will need hand-holding,” said Rajrishi Singhal, a senior geo-economics fellow at Mumbai-based Gateway House.

“The problem of bad infrastructure and poor logistics is now coming home to roost,” he said. “You’re looking at lower incomes, lower revenue, high inflation, loss of imports. It’s going to be a terrible year for them.”

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