Dissecting Bordernomics: Understanding the political and socio-economic aspects of Nepal's borders

NEPAL ECONOMIC FORUM

DISSECTING BORDERNOMICS: Understanding the political and socio-economical aspects of Nepal’s borders

Supported by a grant from Open Society Foundations

Team Members and Cover Note Team Members: Anant Tamang Nasala Maharjan Sugam Bajracharya Pratyush Ghimire Ishan Bista Shraddha Ghimire

Cover Note: We are pleased to share with you the report titled ‘ Dissecting Bordernomics: Understanding the political and socio-economical aspects of Nepal’s borders. The report aims to provide insights on the political, social and economic characteristics of border towns that Nepal shares with China and India and in the process identifies their differentiating aspects.

Ultimately the report aims to highlight why some border towns flourish and why some remain under-developed and allow its readers to understand the political and socio-economic aspects of the border town areas in terms of their development.

The authors of the report would like to express their gratitude to its team members at beed and Nepal Economic Forum for their continuous support and suggestions to make this report an enriching one. Also, we would like to thank Mr. Swagat Pandey from Open Society Foundations for his guidance on the report

TABLE OF CONTENTS Executive Summary

01

01

Introduction 1.1

Objective of the study

06

1.2

Contextualising the border towns

07

shared by Nepal with its neighbours 1.2.1 Types of goods traded from India and China 1.2.2 Border arrangements/open border system/ movement of people 1.3

Understanding the border towns

11

1.4

Legislations/Acts/Trade treaties/ Trade policies

14

between Nepal and India, and Nepal and China 1.5

Brief review of four border towns considered

17

for the study

02

Understanding the border town economy 2.1

Kodari border region

19

2.1.1 Kodari border region analysis 2.2

Rasuwa border region

23

2.2.1 Rasuwa border region analysis 2.3

Birgunj border region

27

2.3.1 Birgunj border region analysis 2.4

Bhadrapur border region

31

2.4.1 Bhadrapur border region analysis

03

Conclusion

35

Bibliography

37

LIST OF FIGURES Figure 1

Nepal’s directin of trade since 1985

06

Figure 2

Volume of trade through four border points on FY 2076-77

08

(2019-20)

Figure 3

Nepal-China border citizen card in Zhangmu bazaar

20

Figure 4

Porters carrying Chinese goods from Zhangmu to Kodari

21

Figure 5

Nepal-China border citizen entry/exit pass

24

Figure 6

A business establishment of Raxaul advertising in the

28

neighbouring Nepali border town of Birgunj

Figure 7

A make shift money exchange counter in Birgunj-Raxaul

29

junction

LIST OF TABLES Table 1

Top products traded between Nepal and India

09

Table 2

Top products traded between Nepal and China

09

LIST OF ABBREVIATIONS BBIN

Bhutan, Bangladesh India and Nepal

BIMSTEC

Bay of Bengal Initiative for Multi-Sectoral Technical and Economic Cooperation

BRI

Belt and Road Initiative

FDI

Foreign Direct Investment

GCC

Gulf Cooperation Council

ICP

Integrated Check Point

IDA

International Development Association

IFC

International Finance Cooperation

LoE

Letter of Exchange

MoU

Memorandum of Understanding

NCP

Nepal Planning Commission

SAARC

South Asian Association for Regional Cooperation

SAFTA

South Asian Free Trade Area

SDP

Small Development Projects

TAR

Tibet Autonomous Region

VAT

Value Added Tax

WTO

World Trade Organisation

Executive Summary Then and now Historically, Nepal’s international trade was confined between India and Tibet primarily due to the nation’s primitive and isolated economy along with political seclusion. Post the 1950s, Nepal adopted more liberal foreign policy practices and established diplomatic relations with other nations and gradually opened up to the world. Furthermore, the economic liberalisation of the 1990s brought market reforms and opened trade regimes resulting more conducive conditions for trade and commerce. Though Nepal opened up to regional and international trade, its landlocked state meant that its immediate neighbours in the south and north were its main trading partners and trade primarily took place through land ports. Thus, border towns not only hold a substantial economic value but also political and social significance. Therefore, it can be said that each border region, and all the towns and cities encompassing them, hold their own significance among various stakeholders.

Border arrangements People-to-people relation: The open border system between India and Nepal allows free movement of people without any travel documents. The same is not the case at Nepal’s border along China. Only border inhabitants with a valid identity card and a pass can cross over within 30 km of the border point.

Free vehicular movement: A transport agreement signed between Nepal and India in 2004 allows for passenger and vehicular traffic to move freely without a permit or payable tax provided the vehicles return back to their respective countries the same day. In contrast, there is no arrangement of free movement of vehicles between Nepal and China either at the local (border towns’) level or national level.

Accessing cross border markets and facilities: An open border system makes it easier for inhabitants from India and Nepal to access border markets. This allows inhabitants to access and take advantage of the various facilities that are more conveniently available across the border at a much affordable cost compared to other major cities within their home country.

The cross-border activities with China, in comparison to those with India, are not as intense and dynamic.

This is due to the entry and exit visa requirement for people of both China and Nepal. This severely restricts the movement of people, which hinders the trade and cross border purchasing activities of the people of the border towns.

Understanding border regions The study focuses on the border towns of Birgunj and Bhadrapur in the south and Rasuwagadhi and Kodari in the north. These border towns were selected primarily because each is different from the other in various aspects which is explored in the study. The border towns have been specifically analysed on the three different

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aspects listed below: •

Political/legislative aspects: This highlights the local level policies adopted by the individual local governments that impact the activities in the border towns.

•

Economic aspects: Economic activities that are peculiar to the given border town have been analysed.

It tries to answer the questions of why certain economic activities are more common in that particular border town compared to others, and how such activities impact the bordering regions.

•

Social aspect: Peculiar social characteristics of border town have been determined and analysed.

Social issues such as migration (inward/outward), poverty, and livelihood, etc. have been determined.

Observation Kodari

Rasuwa

Birgunj

Bhadrapur

Political aspects It has been the primary

Rasuwagadhi border point

Largest volume of trade

The region is yet to be

corridor

bilateral

rose to prominence post-

of Nepal takes place

politically

trade between Nepal

2015 earthquake as Kodari

through

at

the

and Tibet (now China)

border point was shut.

and thus its economic

level

despite

for more than half a

importance has been

strategically located.

century.

misused

for

this

for

point

recognised national being

political

causes.

The

Government

of

The plans of Government

Due

to

occasional

China views the Kodari-

of China to extend railways

geo-political

Zhangmu border region

to Kerung by 2020 as a

between

and Araniko Highway as

part of its Belt and Road

Nepal,

security-sensitive area.

tensions

India

Border on

inhabitants

the

Nepali

side

and

of the border seem

border

dissatisfied with the lack

Initiative has further aided

region has been a victim

of action on promises

Rasuwagadhi’s irrevocable

of political turmoil.

made

this

rise to prominence.

by

political

parties in the area.

A border zone through

China elevated the border

The political tensions

Local

an agreement allows

point as an international

between

and

efforts and promises

border

checkpoint in 2017 and

India

the

seem passive at best in

cross the border up to

subsequently

economic

30 km on either side

people from third countries

impact local residents

without a passport or

to cross the border.

on both sides of the

visa.

residents

to

allowed

Nepal

such

as

blockade

government’s

the region.

border.

DISSECTING BORDERNOMICS |

2

The

development

of

Plans to develop the border

Political tensions arising

transport infrastructure

point as a major junction

out of one border town

in the border region

linking China to the whole

spill over to the other

is a practice of both

of South Asia.

across the border.

Citing security issues,

Citizens from both border

Madhesi

the Chinese side time

areas are mandated to

protests

and again, closes the

apply

maximum intensity at

border point from their

border entry/exit passes.

connectivity

and

geopolitics.

for

Nepal-China

side.

(Andolan) was

Birgunj-Raxaul

of region

that saw overarching impact

throughout

many regions of Nepal.

Economic aspects Before

the

2015

Post the 2015 earthquake,

The Birgunj dry port

Once

a

earthquake, the Kodari

the focal border point for

connecting

town

with

customs point collected

trade and transit between

India through rail is a

economic activity, the

as much as NPR 6 billion

Nepal and China has shifted

pivotal point for Nepal

construction

in revenue annually. In

to Rasuwa-Kerung border

in terms of trade and

West

FY 2019/20, only NPR

point.

connectivity.

prominence to other

Nepal

to

1.27 billion of revenue

sprawling bustling of

highway

East gave

neighbouring towns.

was raised.

Nepali

border

Bhadrapur experiences

travel

a decent amount of

meet

economic

Increased

well as traders from

activities have attracted a

inhabitants

the region lost their

large pool of local workers

to

livelihoods

from surrounding region

their daily needs as

as well as Chinese workers

essentials are cheaper

from across the border.

and are not required

post

2015 earthquake.

the

economic

The

Thousands of locals as

Raxaul

to

to pay custom duties on such essentials for household

use.

On

the other hand, Indian border inhabitants buy such goods in Nepal that

originate

third countries.

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from

activity

haat bazaar days.

on

Four

years

its

Tourism is emerging as one

Farmers living on both

Mechi

closure, the border re-

of the most viable economic

sides of the border

connects Bhadrapur of

opened in May 2019,

sectors of Rasuwa as it

towns buy and sell their

Nepal to Galgaliya of

but

constitutes major parts of

agricultural

products

India can play a pivotal

Langtang National Park.

and livestock at haat

role in creating a solid

bazaars

market

closed

after

again

in

January 2020 due to the COVID-19 outbreak.

of

border

towns.

spot

bridge

which

and

trading

the

border

in

region and regain its lost sheen.

The frequency of crossing

Birgunj is well known

increases in this area when

for unauthorized trade

there are border disputes

in gold, betel nuts, etc.

or clashes or bans on the Indian border side in the south.

Employment opportunities

Common commodities

are on the rise both at

such

Rasuwa and across the

informally traded. Often

border in Kerung.

due to lower prices of

petroleum

petroleum in

products

bordering

Indian

Birgunj,

vehicles

neighbouring

are

from Raxaul

cross the border and fill petrol and diesel and return back.

Infrastructural development has

transformed

borderlands

into

the geo-

economic hotspots.

Social aspects Bhadrapur

is

one

between

among the many places

and

Sherpa

Construction activities and

Ethnic

ethnicity

are

major

the signing of Belt and

similarities

the

Road Initiative by Nepal has

people along the two

where

caused people to migrate to

sides of the border has

share cultural beliefs

the region for work.

promoted

and values with the

inhabitants region.

of

and

linguistic

Tamang

significant

social exchanges.

the

residents

residents of India.

DISSECTING BORDERNOMICS |

4

Nepali border citizens

Timure

are easily able to find

from surrounding regions

workers from Raxaul

celebrated

jobs on the Chinese

but the wage that they

and

year

side

receive has been reported

towns of India enter

attracts crowds from

to be low.

Nepal via Birgunj to

neighbouring

seek

and

as

busboys,

porters, labourers, and restaurant

attracts

workers

workers

Many

migrant neighbouring

employment

at

festival in

factories and industries

bordering

owners.

located in and around

India.

Several

hundred

Additionally, people have

Criminal and anti-social

Nepalis are registered

sought

activities

as residents in Dram

other income sources in

border

and

other

as the circulation of

Nyalam

County,

employment areas

within

or the

along

the

regions

such

according to the Border

region after moving away

counterfeit

Police Department of

from agricultural activities.

robberies,

China.

currency, smuggling,

drug trafficking, human trafficking have been reported in Birgunj.

Chinese border citizens

A loss for Kodari-Zhangmu

also cross into Nepal

border region has resulted

regularly, for religious

in a gain for Rasuwagadhi-

pilgrimage as well as

Kerung border region as the

medical treatment.

prominence of the former has declined over the years.

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every Bhadrapur

other

as well as restaurant

Birgunj.

5

Jhulan

Galgalia nearby

towns

of

1. Introduction Today, Nepal maintains trade relations with countries all over the world; however, historically, trade was confined only between the neighbouring countries India and Tibet.

Primitive and isolated economy along with political seclusion restricted trade between India and TAR initially. It was not until the 1950s that Nepal opened up to the world as the country adopted more liberal foreign policy practices and built diplomatic ties with other nations. Despite this opening up, a high level of state interference in the Nepali economy still hindered trade and commerce at least until the mid-1980s.1 International trade too was not easily facilitated until the economic liberalisation of the 1990s that brought market reforms and opened trade regimes that abolished the licensing system in export and import, reduced tariffs, developed transport and border infrastructure for international trade facilitation, and enabled full convertibility of Nepali currency in current account.2 However, even though Nepal opened up to regional and international trade, the primary trading partners, to date, still remain to be India and China. Even with these two countries, Nepal’s trade is mostly import-based.

At present, Nepal has diplomatic relations with 155 nations; however, its relations with China and India are much broader, wider, vital, dynamic, and feature special characteristics.3 Being a land-locked state between these two nations, Nepal’s trade between the two neighbours accounts to 75% of the total volume. Nevertheless, Nepal’s membership into international trade organisations such as World Trade Organisation (WTO) and membership into regional cooperation such as the South Asian Association for Regional Cooperation (SAARC), the South Asian Free Trade Area SAFTA, and the Bay of Bengal Initiative for Multi-Sectoral Technical and Economic Cooperation (BIMSTEC) has facilitated more trade diversification and encouraged more trade integration in regional and global arena.4 Nepal, over the years, has been able to expand trade relations with various countries, notably the United States, the United Kingdom, Germany, Japan, and Bangladesh. Figure 1 below highlights Nepal’s direction of trade since the 1980s.

Figure 1. Nepal’s direction of trade since 1985

Source: Department of Customs DISSECTING BORDERNOMICS |

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Considering Nepal’s landlocked state, a major portion of its trade takes place between its two immediate neighbours in the north and the south of the border through land ports, thus border towns hold significant value not only in terms of economical aspect but also political and social. Additionally, how the border regions are perceived at the superficial level and how they are perceived at the ground level is an important point to consider. For instance, a particular border region may hold significant political importance at a national level as it holds territorial integrity; however, at the local level, the same border region could hold more importance for local cross-border trade than territorial integrity. In addition, border regions’ social and cultural importance could hold more value than just economic and political standing. Therefore, it can be said that each border region, and all the towns and cities encompassing them, hold their own significance among various stakeholders.

1.1 Objective of the study Border regions play an important role in economic and social development. In fact, the existence of a border can create vibrant cross-border activities.5 When it comes to trade, custom house agents are usually stationed in border areas as such places can be a centre of trade and establish direct links between the demand and supply. Hence, border regions can be a prime place for small businesses to start their entrepreneurship ventures—we can usually observe flourishing retail businesses around border towns. For instance, the border region of Raxaul-Birgunj hosts numerous small-scale businesses that are supported by the cross-border purchasing activities. However, not all borders turn into a dynamic marketplace. There are instances of border regions that are virtually deprived of markets as they fail to create business opportunities or gradually lose their prominence over time.

This study, therefore, seeks to understand the political, economic and social aspects of the border regions and examine their characteristics (peculiarities). This will help determine why some border towns flourish and why some remain under-developed and allow readers to understand the political and socio-economic aspects of the border town areas in terms of their development.

1.2 Contextualising the border towns shared by Nepal with its neighbours Trade liberalisation has enabled Nepal to open up to trade and commerce beyond its immediate neighbours, India and China. However, as seen in Figure 1, the majority of trade still takes place with these two nations.

Furthermore, being a land-locked country, land routes are primarily used for transit of goods—the majority of goods traded to and fro Nepal passes via various border regions/towns with China and India. Due to this, the land ports turn into important transit hubs that result in the flourishing of peripheral border towns.

Nepal shares 1,751 km of border with India, surrounding the nation at the south, east, and west borders of the nation. Along the border with India, Nepal shares 6 major border crossings and 14 small border crossings.

The largest border town of Nepal along the Indian frontier is Birgunj, which shares a border with Indian border town of Raxaul; the largest volumes of goods pass through Birgunj.

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The border with China in the north is 1,415 km long, along the Himalayan range. With China, there are six designated border crossings, wherein two of the border towns, Kodari and Rasuwagadhi, have road connectivity.

Although Kodari/Tatopani was historically the major border town with China in terms of trade volume, in the recent past, Rasuwagadhi has become the border town through which the highest volume of goods has come in directly from China. Figure 2 shows the four border crossings considered in this study along the Nepal-China and Nepal-India frontier and the respective trade volumes in each crossing.

Figure 2. Volume of trade through four border points on FY 2076-77 (2019-20)

Source: Department of Customs

1.2.1 Types of goods traded from India and China6 Although Nepal and India’s bilateral trade comprises multitudes of goods and commodities, the two nations’ primarily trade in petroleum products, motor vehicles, metals, medicaments, textiles, garments, and agroproducts.

Nepal-China trade, on the other hand, primarily comprises goods and commodities such as essential oils, arts and antiques, machineries and electronic goods, medicinal herbs, grains, ready-made garments, and handicraft products. A more comprehensive list of the goods and commodities traded by Nepal between two nations can be seen in Table 1 below.

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Table 1. Top products traded between Nepal and India Top products imported by Nepal from India

Top products exported by Nepal to India

•

Petroleum products

•

Coffee, tea, mate, and spices

•

Motorcycles (including mopeds)

•

Vegetables, fruits, and nuts

•

Medicaments for therapeutic or prophylactic acid

•

Iron and steel

•

Motor vehicles

•

Man-made filaments

•

Chassis fitted with engines

•

Man-made staple fibres

•

Medicaments (surgical)

•

Vegetable textile fibres (paper, yarn, woven

•

Flat rolled products of iron and non-alloy steel

•

Rice

fabric) •

Other made textile articles, sets, and worn clothing

•

Residues, wastes of food industry, and animal fodder

•

Miscellaneous chemical products

•

Footwear, gaiters Source: Department of Customs

Table 2. Top products traded between Nepal and China Top products imported by Nepal from China

Top products exported by Nepal to China

•

Essential oils, perfumes, and toiletries

•

Tea and herbal tea

•

Miscellaneous articles of base metal

•

Pashmina, Nepali hand-made clothing

•

Carpets and other textile floor coverings

•

Handicraft products

•

Sugar and sugar confectionary

•

Agro and livestock products

•

Raw hides and skins (other than fur and leather)

•

Jute and timber

•

Articles of apparel

•

Raw sugar

•

Works of art, collector piece and antiques)

•

Tanned sole leather, medicinal herbs

•

Cereal, flour, starch, milk and dairy products

•

Food grains, wheat flour, tobacco

•

Vegetable plaiting materials, vegetable products

•

Dyes

•

Machineries and electronics

•

Plastic and rubber

•

Stone and glass

•

Noodles and other food snacks Source: Department of Customs

1.2.1 Border arrangements/open border system/ movement of people Apart from sharing close diplomatic and economic relations with its neighbours, Nepal and its neighbours are socially, religiously, and culturally related. Some important aspects of border dynamics and relationships between the inhabitants around the border regions are discussed below.

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People-to-people relation: Nepal shares an open border system with India that facilitates free-flow of its citizens across the border. Due to this, citizens are not required to present any travel documents such as a visa or a passport to travel between the two countries. The uniqueness of the Nepal-India open border allows millions of people to cross it every single day for purposes of education, employment, trade, and business. In various instances, even herds of cattle and wild animals have been found traversing this 1,751 km border on a daily basis. Due to ethnic and linguistic similarities between people across the India-Nepal border, matrimonial relationships among border inhabitants have been steadily increasing with more than 1,000 marriages taking place annually among the residents of the two nations.7

Unlike the open border system between India and Nepal, which allows free movement of people without any travel documents, the same is not the case at Nepal’s border along China. Only border inhabitants with a valid identity card and a pass can cross over within 30 km of the border point. Due to ethnic similarities and a view to enhance economic activity and livelihood in and around the border region, the Trade and Payments Agreement was signed between China and Nepal.

Free vehicular movement: A transport agreement signed between Nepal and India in 2004 allows for passenger and vehicular traffic to move freely through five cross-border points of Mahendranagar (known as Bheemdatta), Nepalgunj, Bhairahawa, Birgunj, and Kakarvitta. Both Indian and Nepali vehicles can cross the border points to nearby towns without a permit or payable tax provided the vehicles return back to their respective countries the same day. However, if vehicles want to travel beyond the bordering town or stay overnight and not return to their respective country the same day, then a vehicle permit is required to be acquired from the respective embassy or consulate of the visiting country. The successful implementation of the existing Bhutan, Bangladesh India and Nepal (BBIN) Motor Vehicle Agreement will further facilitate free movement of passenger and cargo vehicles.

In contrast, there is no arrangement of free movement of vehicles between Nepal and China either at the local (border towns) level or national level. However, in the recent past, the Chinese government had begun providing temporary passes to Nepali container drivers (not only from Rasuwagadhi but also from other districts of Nepal) in order to enter Kerung for the purpose of transportation of goods.

Accessing cross border markets and facilities: An open border system makes it easier for inhabitants from both sides of the border to access border markets. This allows inhabitants to access and take advantage of the various facilities that are more conveniently available across the border at a much affordable cost compared to other major cities within their home country. For instance, border inhabitants of Nepal and India frequently cross over to receive health treatment. Indian cities such as Siliguri (West Bengal), Darbhanga and Sitamarhi (Bihar), and Gorakhpur (Uttar Pradesh) are popular among Nepali border inhabitants seeking health services. Similarly, Indian border inhabitants also visit hospitals and medical institutions on the Nepali side of the border, which includes institutions as B. P. Koirala Institute of Health Sciences (Dharan), Cancer Hospital at Bharatpur (Chitwan), Eye Hospital at Lahan (Siraha) etc.

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Border inhabitants from the Nepali side of the border also travel frequently to Indian border towns to purchase basic necessities and household commodities. Border residents mainly buy and sell agricultural and livestock products at the border haat bazaars (open-air markets) and other market centres in each other’s territories.

Major commodities bought at such bazaars include goods such as sugar, food grains, clothes, cooking oil, cement, fertilizers, and electrical and electronic goods. Approximately 20,000 people cross the Nepal-India border every day to carry out their personal or professional business and activities.8 Nearly 55% of this border trade is conducted for private consumption, 23% for business purposes, and the remaining 14% for social functions. Around 68% of the border inhabitants use authorised custom checkpoints for border trade, while the remaining 32% conduct their trade through non-custom checkpoints and purchase their necessities through an informal channel.

The cross-border activities with China, in comparison to those with India, are not as intense and dynamic.9 This is due to the entry and exit visa requirement for people of both China and Nepal. This severely restricts the movement of people, which hinders the trade and cross border purchasing activities of the people of two border towns.

Over 90% of Nepal’s frontiers with China run through uninhabited altitudes with rocks, snow, glaciers, and ice fields. Due to the geographical sensitivity of this region, many border inhabitants are predominantly engaged in raising yaks and other cattle, and producing food crops such as potatoes, barley, buckwheat, and millet.

Border residents along the Nepal-China border line work as porters primarily in the border towns of Kodari and Timure. Many also work as guides and cooks and are active in trade, tourism, and other trekking-related businesses as the region is active in terms of tourist-related activities. Many of them cross over to neighbouring towns of Zhangmu and Kerung to seek employment. Many border inhabitants on the Nepali side also rely on visitors from the Chinese side of the border who purchase Nepali goods.

1.3 Understanding the border towns The study focusses on the border towns of Birgunj and Bhadrapur in the south and Rasuwagadhi and Kodari in the north. These border towns were selected primarily because each is different from the other in various aspects. Birgunj was selected because it is the largest border town in Nepal, and thus is substantially vibrant and bustling with economic activities. Bhadrapur was selected as it is the opposite of Birgunj—it is less vibrant and economically languished. Nevertheless, the border region of Bhadrapur could hold social and political importance for its inhabitants and the state.

Similarly, in the northern frontier, Kodari and Rasuwagadhi are the ideal, active border towns that Nepal shares with China. However, Kodari, which was once bustling with significant activities, has seen a vast decline as Rasuwagadhi has overtaken it in terms of activities.

The rise and fall of economic activities in some border towns tends to impact social and political structures—

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these are discussed in the study. The border towns have been specifically analysed on the three different aspects listed below: •

Political/legislative aspects: This highlights the local level policies adopted by the individual local governments that impact the activities in the border towns.

•

Economic aspects: In this, economic activities that are peculiar to the given border town have been analysed. It tries to answer the questions of why certain economic activities are more common in that particular border town compared to others, and how such activities impact the bordering regions.

•

Social aspect: Peculiar social characteristics of border town have been determined and analysed.

Social issues such as migration (inward/outward), poverty, and livelihood, etc. have been determined.

Political

Economic

Social

Borders, in geographical maps, separate the regional territory or mark sovereignty of a nation and their authority and control over a specific area. The border could be an imaginary line or a physical structure that demarcates and separates the areas of benefit and dominance.10 This geographical division is one of the many ways in which a border town is defined. However, apart from being a boundary, a border could also be a connecting point or a location to share resources among two divided regions. In the present day, borders are identified as elaborate multileveled and layered social structures that are woven in how a society is organised and they shape human psychology.11 As regions that lie within the proximity of countries or states’ frontier, border towns are points from where trade and commerce, and movement of people takes place between the two states and are oftentimes distant from the centre. Hence, such regions are denoted as transition regions where the citizens because of their distance from the centre are more often exposed to external influences, which many times lead to the formation of strong regional institutions.12 Border regions also face more influence from the neighbouring regions than from their own because of their distance from the centre.13 It is because of this specific characteristic that the growth of such regions is interdependent. Therefore, these regions, apart from being peripheral in nature are reliant on interstate relations for their growth and development.14 Regardless of how a border town is defined, the existence of such towns offers a more central understanding DISSECTING BORDERNOMICS |

12

to take place about the relationship between the state, the towns, and the citizens across the political and cultural borders.

While borders between countries is a sensitive issue that tends to prevent the freedom of movement, there has also been a long tradition of free movement of people across open borders.15 People move across these regions in open border areas for purchasing daily consumer goods and common goods during festivals, and even for business purposes. As economic activities take place in the border areas, cross border cooperation is becoming an important factor in establishing a stimulating business environment that includes different levels of cooperation between regions of neighbouring states.16 Economic activities such as trade also have high potential within the border regions. It has been identified that small and medium enterprises find it convenient to trade their goods and services if the market is close to their productive locations.17 Local traders and entrepreneurs may find it more convenient and cheaper to export their goods within a short distance of a few kilometres across the border than send products to other regions of their own country. The proximity plays a vital role that could enhance trade between two neighbouring cross border towns/cities.

Cross border trade often takes place as it entails various benefits such as access to local markets, increased demand for unique products and services, proximity which reduces transportation/freight costs, price advantages, free movement of people and vehicles and factors such as language and cultural similarities and family relations.

Cross-border activities also get accelerated because of various other factors such as their livelihood structures defined by their common and/or mutually intelligible languages, cultural similarities, family relations across borders, trust, and employment activities. In light of these issues, studies have indicated that the effects of a border on economic interaction depends on the nature of the border with respect to the degree of openness, the degree of cultural, racial and linguistic differences, political relations, and the degree of economic disparity.18 However, when researchers study borders from a people-centric approach, results suggest that while the socially constructed separations of national identity, culture and language act as separators, they also create a prejudice among the people living in border areas that tend to make those on the other side less real (such as “them” versus “us”).19 Because of the existence of this perception, people often view borders as barriers. This illustrates the considerable contrasts or conflicts that may exist in border areas despite the economic activities that may take place side by side.

The cross-border cooperation in border cities and towns in various parts of the world, such as in the United States and Mexico, reveal different stories about the respective regions. Nonetheless, they all share a similar perspective that the border cities and towns as well as the people residing there are not characteristically different from those who live in the other parts of the nation, in terms of their daily activities such as going to work, dropping children off at school, shopping at outlets, and others.20 However, the presence of a border could give rise to a selection of social practices that are distinct to the regions around the border. Such practices could be different from respective countries’ central or interior locations but similar between two cross-border 13 | DISSECTING BORDERNOMICS

regions. The presence of a common border shared between the citizens of two distinct nationalities of different socio-economic structures could create differences as well as bring people together. Citizens of the border regions may have to weave through opportunities and challenges that are specific to the border regions as compared to other interior regions of their own countries, thus making their experiences distinct.21 Lastly, what makes border towns vibrant also depends on policies and agreements between neighbouring nations that facilitate the movement of people and trade. The next section highlights important treaties of trade and agreements in terms of movement of people that Nepal has with its neighbours. Such agreements, primarily made at the national (superficial) level, have a significant effect at the local level impacting inhabitants at both sides of the border.

1.4 Legislations/ Acts/ Trade treaties/ Trade policies between Nepal and India, and Nepal and China Treaty/Agreements with India

Description

As close neighbours, Nepal and India have shared a unique relationship of friendship and cooperation since the signing of the 1950 Indo-Nepal Treaty of Peace and Friendship. Since then, both the countries have enjoyed excellent bilateral relations in political, economic, trade and cultural fields. Listed below are some of the major trade treaties signed between the two nations.

The 1950 Treaty of The treaty granted Nepal the right to freely import products including arms, Peace and Friendship

ammunition or warlike materials and equipment, from or through the territory of India. Similarly, the treaty provided the nationals of both the nations the same privileges in the matter of residence, ownership of property, participation in trade and commerce, free movement across the open border, and other privileges of similar nature.

The of

1950

Treaty The 1950 Treaty of Transit signed between India and Nepal recognised that Nepal

Transit

and as a land-locked country needed freedom of transit, including permanent access

Commerce

to and from the sea to promote its international trade, along with recognising the need to facilitate the traffic-in-transit through the two territories. Similarly, the issuance of import license/permits and the issuance of letter of credit (Customs Transit Declaration) were established to facilitate smoother import and export of goods and commodities between the two nations.

The

1952

Nepalese

Citizenship Act

The 1952 amendment to Nepal’s Citizenship Act allowed Indians to immigrate to Nepal and acquire Nepali citizenship for their residential, commercial, and other personal engagements in Nepal.

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The 1960 Treaty of The 1960 Treaty of Trade and Transit animated Nepal and India’s common desire Trade and Transit

to strengthen their economic and political relations. In particular, the treaty allowed for goods produced in both the nations to be exempt from customs duties, other equivalent charges, and quantitative restrictions.

The 2002 India-Nepal The Free Trade Agreement between Nepal and India was signed for a period Foreign

Treaty

of of five years from 6 March 2002 till 5 March 2007. The treaty allowed for free

Trade Agreement

and unhampered flow of goods needed by one country to the other, along with exemptions in basic customs duties and other import quantitative restrictions on exchange of primary goods.

Nepal has always maintained a friendly and cordial relation with its northern neighbour, China. The historic and multi-faceted bilateral relations between the two countries have evolved since the signing of the SinoNepal Treaty of Peace and Friendship in 1960. Below are some of the major trade treaties signed between Nepal and China.

The 1956 Agreement The Agreement between China and Nepal on Economic Aid, which was signed in between China and October 1956, mandated the Chinese government to provide Nepal with grant Nepal on Economic assistance and loans under the ‘economic and technical cooperation’ section of Aid

the agreement. As per this section, Chinese assistance to Nepal fell under three main categories: grants (aid gratis), interest free loans, and concessional loans.

Some of the major on-going projects under this assistance include the upper Trishuli hydropower project, Kathmandu ring road improvement project, Larcha (Tatopani), Timure (Rasuwagadhi) frontier inspection station project, and Pokhara international airport.

The

1960

Sino- With a desire to maintain and further develop peace and friendship between

Nepalese Treaty of China and Nepal, the two countries signed a peace treaty on 28 April 1960, which Peace and Friendship

respected each other’s independence, sovereignty, and territorial integrity.

The 1981 Trade and Nepal and China signed the Trade and Payments Agreement on 22 November Payments Agreement 1981, to facilitate trade between Nepal and the Tibet Autonomous Region (TAR) of China. The treaty allowed the exchange of goods between the two nations in accordance with their respective laws, regulations, and procedures regarding import and export and other foreign exchange regulations of the respective countries. To develop the trade overland between the two nations, the contracting parties also agreed to utilise the following trading points along their frontier: Kodari/Nyalam, Rasuwa/Kerung, Yari (Humla)/Purang. Likewise, to improve the economic life of border inhabitants, the contracting parties allowed border inhabitants, within an area of 30 km from the border to carry out traditional trade on a barter basis.

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The 2002 Agreement The treaty laid new provisions for people movement across the Nepal-China Between Nepal and border. For instance, traders of either country were allowed to enter the other China on Trade

territory if they held valid passports issued by their native nation and visas issued by the other nation. Similarly, border inhabitants were allowed to travel to the border districts of the other country for border trade (including porters, muleteers, local motor vehicles drivers, artisans, and religious pilgrims) provided they possessed ‘exit-entry passes’, which were issued by competent authorities of both the nations. The border inhabitants were allowed to cross through entry points which included Purang, Kyirong, Nyalam, Riwo, Yari, Rasuwa, Kodari, and Olangchung Gola. Likewise, the treaty also allowed both the nations to make full use of the Lhasa-Kathmandu highway on a reciprocal basis to transport goods and passengers.

The 2016 Nepal-China The trade agreement signed between Nepal and China in 2016 was mainly Transit Trade Treaty

envisioned to promote China’s economic and technical support to Nepal to implement various development projects such as Pokhara international airport, Xiarwa Boundary River Bridge, along with allowing Nepal to use China’s major seaport facilities to augment Nepal’s international trade.

The

2017 The major thrust of this MoU was to promote mutually beneficial cooperation

Memorandum

of between Nepal and China in various fields such as economy, environment,

Understanding (MoU) technology, culture, policy exchanges, infrastructure connectivity, trade on

Cooperation connectivity, and financial integration.

under the Belt and Road Initiative

The 2018 fourteen- In 2018, a 14-point joint statement was issued by the governments of Nepal and point Joint Statement China, which included agreements/MoUs/Letters of Exchange (LoEs) on matters related to cooperation in railway projects, utilisation of highways in TAR by Nepal for cargo transport, and investment and cooperation on production capacity between the National Development and Reforms Commission of China and the National Planning Commission of Nepal. Likewise, an agreement was reached between the two nations to construct a ‘friendship bridge’ at border points of Sindhupalchowk and Rasuwagadhi.

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1.5 Brief review of four border towns considered for the study Although Nepal shares multiple border points with India and China, this study focuses on two border points along India and two border points with China. A brief review of the border points has been shared below— this highlights the key points and features of each border point and is followed by an in-depth analysis of the border town.

Birgunj: Birgunj (Birgunj in Parsa District, Province Number 2, Nepal) is one of the most important entry/exit points between Nepal and India. Out of the three dry ports in Nepal, Birgunj has one in Sirsiya, which facilitates trade with third countries. The dry port is connected with India via rail and is used for direct transhipment of goods between the Birgunj and Kolkata port in India. Birgunj has easy connectivity to major Indian cities via Raxaul which has wide rail connectivity.

Birgunj has been a vibrant and busy industrial and commercial city due to its strategic location. Along with trading, a large number of industries have been set up on the industrial corridor between Birgunj and Pathlaiya, producing a significant volume of products such as steel, textiles, cement, plastic, cigarettes, aluminium, pharmaceuticals, vegetables, etc., for both domestic consumption and exports. The Indian border town of Raxaul neighbouring Birgunj has also become a busy town due to heavy transportation because of the high trade volume.

Along with the formal trade, there is also a lot of informal trade that goes on. Birgunj has been found to be the largest centre for informal trade from Nepal to India. Many Indian traders from different cities place their orders for informal imports directly in Birgunj, rather than in Raxaul.

Bhadrapur: Bhadrapur (Bhadrapur in Jhapa District, Province Number 1, Nepal) is a border crossing with a customs office. The Mechi Bridge joins Bhadrapur with neighbouring Indian town of Galgalia and acts as a lifeline for them.

Bhadrapur was once a booming city until business activities shifted to Birtamode after the construction of Mahendra (East-West) highway. Bhadrapur is one of Nepal’s most multicultural cities. People from all over, including from India, Bhutan and Bangladesh, have migrated to this city. Bhadrapur is also known to be Nepal’s ‘tea city’. In the last decade, it has transformed itself into a tea hub with new plantations and new factories.

Along with this, Bhadrapur is also renowned for its rice cultivation.

Kodari (Tatopani) : Kodari (Kodari in Sindhupalchowk district, Baghmati Province, Nepal) is one of two major border crossings between Nepal and China. Kodari checkpoint used to be the largest checkpoint along the Nepal-China border as a substantial portion of trade overland occurred via this route. Before the 2015 earthquake, Kodari border accounted for 69% of total exports to China and 25% of total imports from China.22 However, post-earthquake, the focal border point for trade and transit has shifted to Rasuwa-Kerung border point, which now overshadows Kodari-Zhangmu.

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Kodari-Zhangmu point has been a critical artery for Nepali trade as well as international tourism. However, it is prone to much environmental vulnerability. For example, landslides along roads are not infrequent occurrences. Due to landslides, trade along this route is often suspended. After the earthquake in 2015, the Chinese government started prioritising the Rasuwa-Kerung border, evacuating the town of Zhangmu. Han Chinese and ethnic Tibetan residents of Zhangmu were relocated to a settlement in Shigatse. This closure changed the economic situation of the border communities on the Nepal side. Livelihoods of many inhabitants along the Nepal-China border were made by carrying loads of goods as porters across the Friendship Bridge and the Nepal-China border posts. This business has evaporated since then and the opportunities have been relocated.

Rasuwa: On 1 December 2014, the Sino-Nepal border at Rasuwagadhi officially opened for commercial purposes. Rasuwa-Kerung is the most recent major border post to facilitate trade, tourism, and foreign aid between Nepal and China. The border point was inaugurated just five months before the massive 2015 earthquake that hit Nepal.

One of the major border points amongst six points along the Nepal-Tibet border, Nepal and China both have agreed to construct a dry port at Rasuwa. Earlier, this point was only accessible by foot; however, there is a serviceable road connecting the border towns of Rasuwa and Kerung today. At present, this region sees the presence of a lot of transport and trade entrepreneurs from the Kathmandu valley, both Nepali and Chinese labourers building various hydropower projects, government officials, surveyors, arbitrators, contractors and subcontractors, western tourist groups, etc. Employment in other similar areas is also popular for the region.

As massive capital continues to fly in from China, the international infrastructure has expanded greatly and the everyday life along the road in Rasuwa (also Rasuwagadhi) has intensified significantly. Historically, the border did not have good infrastructure, but the production of new power corridors has had sweeping implications for both the indigenous and the exiled populations that call Rasuwa home. Timure and Ghattekhola, two culturally Tibetan trading settlements located near the Nepal-China border spaces, have become hubs of economic activities today.

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2. Understanding the border town economy 2.1 Kodari border region Political Aspects: The Kodari border region (also known as the Tatopani border) plays a vital role in the geopolitics of Nepal and China. It has operated as the primary corridor for bilateral trade between the countries, and for more than half a century, it has facilitated political, sociological and ideological relationships among the two countries. The Araniko Highway that connects Kathmandu to Zhangmu (border town at Chinese side) through Kodari was built with China’s assistance after bilateral relations were established in the 1950s.

The development of the transport sector in the border region of Kodari-Zhangmu is a practice of both connectivity and geopolitics.23 China has been the largest foreign direct investment (FDI) source for Nepal, and one of the biggest trading partners. The Chinese government also built a dry port in Larcha in Kodari.

The Kodari border, therefore, holds importance for the bilateral trade and political relations for Nepal. The 7.9 magnitude earthquake in 2015 gave China a huge opportunity to improve its political stance in Nepal through humanitarian aid and post-disaster infrastructure development in the highly affected border regions.

A bilateral agreement between Nepal and China has created a border zone extending up to 30 km on territories of both countries. The people living within these territories or ‘border inhabitants’, as termed by the treaty, are issued ‘border citizen cards’ (as shown in Figure 3 below) that grants them special rights to cross the border up to 30 km on either side without a passport or visa.24 Despite this agreement on movement of border citizens, the Chinese state has always viewed the Kodari area and Araniko Highway as security-sensitive. Citing the threat of anti-China activities by the supporters of the Free Tibet movement, the Chinese side often takes strict measures to control activities with strict checking and closure of the border on occasions.

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Figure 3. Nepal-China border citizen card in Zhangmu bazaar

Source: A Himalayan Border Trilogy: The Political Economies of Transport Infrastructure and Disaster Relief between China and Nepal, by Galen Murton.

The 2015 earthquake caused severe damage to the highway and the border towns in both countries, which led to the Kodari-Zhangmu border point being closed for four years. The local and federal governments have been trying to upgrade the highway through the Highway Repair and Opening Maintenance Project with the help of the Chinese government. During Nepali Prime Minister Khadga Prasad Sharma Oli’s (KP Sharma Oli) visit to China in March 2016, the Chinese side agreed to accelerate the feasibility study on the project. Similarly, during a Chinese Vice Premier’s visit in August 2017, an early opening of the Kodari-Zhangmu border point was requested by Nepal. However, citing security issues, the Chinese side has, time and again, been reluctant to fully open the border point. Both Rasuwa and Sindhupalchowk districts were severely damaged by the 2015 earthquake, but the Government of Nepal emphasised on restoring the Rasuwa-Kerung Road leading to the Rasuwa-Kerung border point, thus shifting the trade traffic from Kodari to Rasuwa. The historical importance and everyday livelihoods of the Kodari border area were largely ignored.25 Four years after its closure, the Kodari border resumed operation in May 2019, only to be closed again in January 2020 due to the COVID-19 outbreak.

Economic Aspects: The Kodari-Zhangmu border point is a lifeline for hundreds of thousands of Nepalis living along the Araniko Highway and, most importantly, a lifeline for the people living along the border and adjacent regions. Until the 1950s, the Tibetan-Newar community, known as Kazara, dominated substantial trading activities through Nyalam. The male Newar traders from Kathmandu generally married Tibetan women, and these families had both Nepali and Tibetan citizenship and spoke at least three languages: Newar, Nepali, and Tibetan. They had property on both sides, and paid tax to both governments. Nepali

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traders traded rice, flour, and ghee (clarified butter), for wool and salt in Nyalam. Many Nepali traders spent significant periods of time in Nyalam instead of going to Lhasa. With around 35 to 40 Nepali shops permanently established in the town owned by the well-established Kazara families before 1959, around 500 to 1,000 seasonal traders from Nepal stayed in the region each year. Most of the traders who came to Nyalam travelled by foot alone or in small groups and spent several days to weeks each year to do their business.

After the completion of the Araniko highway in the 1960s, the Kodari border point became the most used trade route between Nepal and China, until the 2015 earthquake. These towns, which were once bustling with the cross-border trading activities and the tourism they brought, gave the local inhabitants immense opportunities to indulge in several economic activities. Many locals found employment driving trucks, loading/ unloading containers, working as porters, etc. Many also earned their living by running businesses such as hotels, restaurants/ eateries, shops, and small trading businesses. Before the earthquake, the Kodari customs point saw a daily movement of at least a hundred containers and collected as much as NPR 6 billion in revenue annually. In the Financial Year (FY) 2019/20, the Kodari customs point collected a revenue of only NPR 1.27 billion. Along with the traders and businessmen visiting the border towns for business, the towns were also a form of attraction for Nepali tourists wanting to cross the border and visit the town and market of Khasa/ Zhangmu. The Kodari-Zhangmu border is also a gateway for the Kailash Mansarovar pilgrimage site in Tibet.

As many as 40,000 tourists used to make the trip from Nepal annually. Up to 80% of the tourists going to Mansarovar from Nepal were Indians, with the rest including Russians, Europeans, and Malaysians.26

Figure 4. Porters carrying Chinese goods from Zhangmu to Kodari

Source: A Himalayan Border Trilogy: The Political Economies of Transport Infrastructure and Disaster Relief between China and Nepal, by Galen Murton.

The 2015 earthquake brought trade through this point to a standstill, and business activities were completely halted as infrastructures on both sides of the border had either completely collapsed or sustained massive damages. Settlements on both sides were also heavily damaged, which impelled China to relocate its citizens from the border area. Thousands of locals as well as traders from Sindhupalchowk district

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lost their livelihoods as they were solely dependent on cross-border trading and tourism.27 Further pain was inflicted on the border locals when a huge flood in the Bhotekoshi River in July 2016 destroyed the highway, closing the border indefinitely. With the Kodari border shut for four years, trade was diverted to the Rasuwagadhi-Kerung border point, which was a huge loss to the already crumbling economy of Kodari. With no alternative income sources and uncertainty on when the border would open, hundreds of working-aged citizens from the Kodari border area and other nearby towns were forced to migrate abroad (mostly to countries in the Middle East and Gulf Cooperation Council (GCC) countries) for employment.28 Many of those who left for foreign employment also returned after a couple of years and got work as labourers in the Araniko Highway upgradation project.

After four years of closure, the Kodari border point finally resumed operation in May 2019 although the activities had drastically reduced compared to the past. The construction of the dry port at Larcha (near Kodari), the largest dry port in Nepal, has also been completed with the help of the Chinese government.

This is set to provide employment opportunities for the locals, and people have started leaving behind the market areas of Kodari to set up their businesses in Larcha.29 However, the border at Kodari was shut once again only months after its reopening due to the outbreak of the COVID-19 pandemic. The resumption of the Kodari border point is extremely important as it will boost economic activities on both sides of the border.

The families displaced by the earthquake and border closure would be able to resume their livelihoods as the revival of the border would bring back tourism, encourage infrastructure development, and give opportunities to small-scale industries.

Social Aspects: The border inhabitants of the Kodari border region are mostly of Sherpa and Tamang ethnicity. Being an ethnic minority in Nepal, the border citizens had long experienced oppression by the Hindu state and were not given any preferential treatment, unlike the Chinese. The Chinese state has preferential policies for the people identified as Xiaerba (in Chinese) or Sherpa (in Nepali) who inhabit the border area and are provided with benefits such as educational and job quotas within China. This attracts many border citizens from Nepal to make use of their border citizen privileges and settle in China. The socio-economic benefits of identifying as a Xiaerba/Sherpa is an important factor for increased migration by the Nepali border citizens in TAR. Settling in TAR permanently gives them access to the resources and better facilities of the Chinese state, thus helping them improve their economic situation. Nepali border citizens are easily able to find jobs on the Chinese side as busboys, porters, labourers, and restaurant workers as well as restaurant owners. Several hundred Nepalis are registered as residents in Dram and Nyalam, according to the Border Police Department of China. Nepali border citizens can stay on the other side of the border without any permit for up to a month. They can also apply for a six-month residence permit, extendable to a year, which can be renewed annually. A lot of Nepali border citizens want to settle in the TAR and get Chinese citizenship, which many do by marrying a citizen.

It was found that Chinese border citizens also crossed into Nepal regularly, for religious pilgrimage as well as medical treatment although no official statistics are available. A lot of Buddhist pilgrimage sites are closer to Kathmandu. The hospitals here also have access to specialist care, which are not available in Dram or Nyalam. They are much closer to Nepal compared to the nearest equivalent services in DISSECTING BORDERNOMICS |

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the TAR as the journey to Lhasa takes three-four days overland, while the journey to Kathmandu only takes a few hours. Since most Chinese border citizens of Tibetan ethnicity look similar to Sherpa people, and can speak at least a little bit of Nepali, they continue to Kathmandu and beyond as Nepali citizens.30

2.1.1 Kodari border region analysis The Kodari border region holds significant importance for Nepal-China relations. The border region is important for bilateral trade between the two countries. Additionally, the border region proves to be an important lifeline for the local inhabitants of both sides. Businesses flourish and jobs are created when the border region thrives, and more trade occurs between the two nations.

However, the Kodari-Zhangmu border region, which held historical importance politically, economically and socially, has been overshadowed by the Rasuwa-Kerung border point. Instances such as the earthquake in 2015 and the ensuing landslides led to the closure of the border for about four years which severely impacted trade between Nepal and China. Incidences such as these have resulted in social issues such as forced migration of people not only from Kodari and the surrounding border region to other parts of the country and abroad but also from Zhangmu. Border closure due to such incidents also causes disruption of tourism activities as Kodari-Zhangmu is a gateway for Kailash Mansarovar pilgrimage. The income of local communities and entrepreneurs who rely on tourism has been hit as well. The compounding effect of such natural disasters have severely impacted not only trade but also the overall economic activity of the border region. What was once a thriving border town slowly has started to lose its lustre.

To exacerbate the issue, the ongoing Covid-19 pandemic caused further closure of the border for several months adversely impacting the economic activity on both national and local levels. Revival of the border point through reconstruction of destroyed infrastructure such as roads and bridges is essential for the region’s inhabitants’ livelihood and prosperity.

2.2 Rasuwa border region Political aspects: The Rasuwagadhi- Kerung is the 24 km long route of trading rout with China. It began operations in December 2014 and became the second largest border point for trade between Nepal and China after Kodari. Rasuwagadhi is part of an ancient trade route and lies in a geographically sensitive area prone to earthquakes. However, after Nepal became a signatory of the Belt and Road Initiative (BRI), the border region has begun to hold significant political importance for Nepal-China relations.

When China built the Araniko highway through Kodari in the 1960s, Rasuwa was overshadowed as the Kodari region became the centre of trading between Nepal and China. Later, when China shut down the Kodari border crossing due to the 2015 Nepal earthquake, Rasuwa underwent a dramatic reversal. The Chinese government’s plan to extend railways to Kerung by 2020 as a part of its BRI initiative has further aided Rasuwagadhi’s irrevocable rise to prominence. Thus, Rasuwa has witnessed significant infrastructural development, trade, and other cross-border traffic of people and commodities in recent years.31

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In the initial years after the Rasuwagadhi-Kerung border point began its operation, it remained just a trade route between Nepal and China. This meant that only nationals from the two countries could enter each other’s territory by carrying visas and passports. Later, on 30 August 2017, amidst a function in Lhasa in presence of the officials from the Chinese government and Consular General of Nepal in Tibet, China elevated the trading route as an international checkpoint between the two countries and subsequently allowed people from third countries to cross the border. The major objective of upgrading this border point as an international crossing point was to develop it as a major junction linking China to the whole of South Asia, which would further help boost trade, tourism, and people-to-people contact and help China implement the BRI initiative.

Social Aspects: The rumours of construction activities post-earthquake and upgradation of infrastructure in line with the BRI created a buzz in the border regions. Due to this, government employees, businessmen and migrant construction workers from elsewhere moved into this region. For instance, labourers from Surkhet migrated and worked to rebuild Timure police post as a part of the efforts of the National Reconstruction Authority.

Besides, the residents of Rasuwa also migrated outwards to urban areas as well as to GCC countries and Malaysia in search of employment opportunities, especially after the decline in agricultural work.

Additionally, people have sought employment or other income sources in other areas within the region after moving away from agricultural activities. Although Timure attracts workers from surrounding regions the wage that they receive has been reported to be low. Some returnee labour migrants work as porters at the Timure truck park.32 Residents living in Rasuwa did not use to require any paperwork to cross the border historically. However, with the Sino-Nepal boundary agreement in 1960, citizens from both border areas are mandated to apply for Nepal-China border entry/exit passes.33 Only the residents of Rasuwa are eligible to get the pass and cross the Rasuwa border customs. Additionally, a journey to the Rasuwagadhi today includes encounters with at least half-a-dozen security check posts with Nepal Police staff, Armed Police Force, and the Nepal Army.

Figure 5. Nepal-China border citizen entry/exit pass

Source: Record Nepal

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Having said that, Nepali traders are not allowed to travel beyond Kerung (to Shigatse or Lhasa). The Chinese authorities often check their mobile phones and revoke their travel pass if they are found carrying a picture of the Dalai Lama. There have also been claims of “non-regional” people being stopped on suspicion of being “Indian agents”.34 Economic Aspects: The roads in Rasuwa were primarily built to facilitate local resource and labour extraction, hydropower construction,35 and mining. As the Rasuwa border began to thrive, infrastructural development followed to transform the borderlands into geo-economic hotspots. Pictures of the current day Rasuwa show a major dry port and customs office in Rasuwagadhi, mushrooming of secondary markets like local eateries and banking institutions, emerging transportation enterprises, and construction of new Mailung-Syabrubesi road.36 These construction activities attract a large pool of local workers from surrounding villages like Timure and Thuman as well as Chinese workers. However, since the Chinese workers are considered more skilled, the local Nepali workers are subjected to extremely low wages.

Apart from this, tourism is also emerging as one of the most viable economic sectors of Rasuwa as it constitutes major parts of Langtang area, the third most popular trekking and tourism destination after Annapurna and Everest region. This area has been managed as the Langtang National Park since 1976, and it is one of the most prime tourism resources. Moreover, the geographical area of the park falls in Rasuwa district, covering 974.5 sq km out of 1710 sq km area of the park. This area alone absorbs about 10% of trekkers coming to Nepal.37 Besides the park, some of the prime attractions of tourism in Rasuwa are the beautiful mountain peaks including Langtang Lirung, Sanjen, and Ganesh Himal as well as adventurous passes including Ganjala pass, Lauribina pass, Pangsang pass, and Langmala pass. Considering this, opening of small lodges, shops and even investments in transportation enterprises have begun in Rasuwa however, locals still face the brunt of the inadequate infrastructure.

In trade between the two bordering towns, import of readymade garments, apples, shoes, slippers, bags, herbs like jimbu and glasses have been thriving. Among these, readymade garment is the topmost item imported by Nepal through the customs point. On the other hand, Nepal exports flour, metal crafts, woollen carpets, cosmetics, chili, rice, noodles, and fruit juice, among others.38 Apart from the trading activities that have been ongoing for decades, the frequency of crossing also increases when there are border disputes or clashes or bans on the Indian border side. For instance, following India’s onion crisis during September 2019 and the strict ban India imposed for 10 days, the demand for Chinese onions proliferated.

Likewise, a large number of locals also work in Timure Truck Park, where transportation of imported goods, after their customs clearance, takes place. The locals majorly work as porters, unloading imported goods from China onto Nepali trucks. Locals from neighbouring villages such as Thuman, Khangjim, Briddhim, Chilime, Gatlang and others also come here to rent a small room when the work is profitable. What is unique here is that the majority of the local employees here are women, and the truck park is often filled with toddlers playing around as their mothers move goods.39 A group of five or six porters often earn NPR 5,000-8,000 per day, whereas porters working in the parking lot can even earn between NPR 50,000-60,000 25 | DISSECTING BORDERNOMICS

during peak seasons.40 Now, with the BRI initiative on the rise, there is a big actor, Silk Transport, in operation in Rasuwa. This transportation company currently owns 38 trucks and is set to further increase the number to 200 within a few years, thus dominating the transport enterprise in this major border crossing region.41 With the opening of Rasuwagadhi-Kerung border points, employment opportunities have been on the rise both at Rasuwa and across the border. According to the Department of Immigration’s office at Rasuwa, a total of 9,614 Nepali citizens from Rasuwa district acquired a one-year pass to go to China (from a time period of 15 October 2015 to 1 November 2018). After getting the pass, Nepali citizens have been engaged in working at hotels, dance bars, transport companies, and construction companies. Some news articles report that those working in hotels are aged between 14 to 25 years and are earning up to NPR 35,000 a month in Kerung.42 Indian pilgrims headed to Mount Kailash have been increasingly using the Rasuwagadhi-Kerung route in Rasuwa since 2018. Due to this, the majority of hotels get an opportunity to host Indian pilgrims for a day or two. This has resulted in change in menus near the local eateries such as including Indian dishes in addition to Nepali and Western food.

Further, after the closure of Kodari-Zhangmu border due to the 2015 earthquake, Chinese nationals have begun to use the Rasuwa route more often from 2015 onwards. As a result, the highest percentage of tourists (Chinese nationals), nearly 65,000, was registered in the first four months of 2019 at the Department of Immigration of Nepal. This indicated a 20% increase from the previous year.

2.2.1 Rasuwagadhi border region analysis As the Kodari-Zhangmu border was closed following the earthquake in 2015, Rasuwagadhi-Kerung border region started to grow in prominence. So much so that the border region has overshadowed Kodari-Zhangmu border point and, over the years, it has resulted in an increase in economic and cross border activities.

The region is believed to be thriving as it holds a significant political importance not only due to increase in cross border trade but also after the announcement of Nepal as a signatory of the BRI. The Chinese government’s plan to further extend the railways to Kerung and elevate the border point to international checkpoint has given significant economic importance to the border region. Such an initiative at the national level has an overarching impact also at the local level as Rasuwagadhi, over the recent years, has undergone infrastructural development, increase in trade, and various other cross border traffic of people and commodities. Such developments have increased economic activities within the region, which has influenced social aspects of the region. Increased economic activity has attracted more citizens not only from neighbouring towns and districts of Nepal but also citizens from across the border and vice-versa to seek employment opportunities.

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As political relations between China and Nepal strengthens, trade relations between the two nations will continue to rise. Increase in trade and transit of goods particularly from Rasuwagadhi-Kerung border point will only increase cross-border activities between the locals of two border towns. As China continues to make infrastructural developments such as the ongoing construction of rail connecting Kerung to other central parts of China, this border point will gain further prominence.

It is clear that Rasuwa-Kerung border region’s political and economic significance has risen dramatically and has overshadowed the Kodari-Zhangmu border region. A loss for inhabitants of Kodari-Zhangmu border region has resulted in a gain for residents of Rasuwagadhi-Kerung border region.

2.3 Birgunj border region Political Aspects: Considering the importance of the Birgunj border for India as well as Nepal, many projects have been undertaken to foster trade in the region. The Raxaul-Birgunj border crossing was selected as the site of the first Nepal-India Integrated Check Point (ICP) to be constructed as about 60% of Nepal’s trade passes through this border point.43 The Government of India contributed INR 120 Crore (about USD 25 million) to the construction of the ICP on the Nepali side of the border, which has helped address problems of severe congestion. Though congestion has reduced significantly after the construction of an ICP, problems still remain.44 Physical infrastructure is yet to be upgraded in the transit corridor Kolkata-Raxaul-BirgunjKathmandu.

Infrastructural development projects have been undertaken through bilateral initiatives by the governments of both Nepal and India to foster trade and commerce in the region. On 10 September 2019, KP Sharma Oli and his Indian counterpart Narendra Modi inaugurated the Amlekhgunj-Raxaul-Motihari petroleum pipeline that would help India export its petroleum products directly to Nepal without transportation costs.45 Moreover, international donors have also been involved in fostering infrastructural developments in the region. The Regional Trade and Transport Facilitation Project for Nepal and India has been financed by International Development Association (IDA) and International Finance Corporation (IFC) to decrease transport time and logistics costs for bilateral trade between Nepal and India and transit trade along the KathmanduKolkata corridor.46 In addition, the Indian government has also shown interest in improving railway infrastructure through an electric rail project from Raxaul border region to Kathmandu in order to have a solid market for local products of India.47

The Birgunj-Raxaul border point is a highly important and critical region that plays a significant role in the country’s domestic politics. Due to occasional geo-political tensions between India and Nepal, this border region has been a victim of political turmoil. The political tensions between Nepal and India such as the economic blockade impact local residents on both sides of the border. Similarly, political tensions arising out of one border town could spill over to the other across the border. This would have damaging impacts on the socio-economic and political-economic aspects of the region. One such example is the halt in supply of raw materials to Nepal via Raxaul caused by the protests by local residents, which was backed by political leaders from the Indian side.

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In light of the COVID19 pandemic, the Indian government imposed a complete lockdown of the country on 24 March 2020, while Nepal had closed its open borders with India on 22 March 2020. The decisions taken by governments on both sides of the border resulted in thousands of Nepali and Indian migrant workers getting stuck at the Birgunj-Raxaul border point.48 Economic Aspects:The Birgunj dry port connecting Nepal to India through rail is a pivotal trading point for Nepal that allows for direct shipment of goods between Birgunj and Kolkata Port to facilitate Nepal’s trade with countries beyond India. Kolkata acts as a transit for the bilateral trade that takes place between Nepal and Bangladesh.

Nepali inhabitants travel to India through the Birgunj-Raxaul point to seek various employment opportunities. After the green revolution (a transition from traditional agriculture in India and the introduction of high-yielding varieties of seeds and the associated agricultural techniques)49 in India, many Nepali border inhabitants, including those from Birgunj, have been attracted to India for seasonal employment. Since Nepalis are allowed to work in government, semi-government, and private sectors in India without any restriction, seeking employment opportunities in India has been a convenient option for border inhabitants in Birgunj.

Moreover, farmers living on both sides of the border towns travel to neighbouring towns to buy and sell agricultural products and livestock at haat bazaars. Such economic activities provide employment opportunities for many people in the border regions.

Figure 6. A business establishment of Raxaul advertising in the neighbouring Nepali border town of Birgunj

Source: Author’s own The Nepali border inhabitants travel to neighbouring border towns such as Raxaul to meet their daily needs as essentials are cheaper in India and they are not required to pay custom duties on such essentials for household use. On the other hand, Indian border inhabitants buy such goods in Nepal that originate from third countries.

In terms of unauthorised trade, the border area in Birgunj is well known for unauthorized trade in gold, betel

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nuts, etc., from Nepal to India. People involved in informal trade are often found to load goods either on their heads or on their bicycles to evade the attention of security personnel while crossing the border.

The incentive for carriers for informal trade is that they are paid 10% of the value of the goods they are able to cross the border with. Illicit activities such as smuggling of contraband also is rampant within the concerned border regions. Additionally, the alcohol prohibition order in the neighbouring state of Bihar spurred liquor tourism in the border towns such as Birgunj. This increased the sales of liquor shops in Birgunj.

Other common commodities that are informally traded are petroleum products such as petrol, diesel, and kerosene. Often due to lower prices of petroleum products in bordering Birgunj, Indian vehicles from neighbouring Raxaul cross the border and fill petrol and diesel and return back. However, the price arbitrage has also fuelled smuggling of petroleum products from Birgunj to Raxaul.50 Citizens from across the border in India enter Birgunj and purchase petroleum products to later sell across the border at higher prices.51

Figure 7. A makeshift money exchange counter in Birgunj-Raxaul border junction.

Source: Telegraph India

Also, across the border in Raxaul, one finds Illegal money exchange counters, colloquially known as Satahi counters. They are unofficial money exchange agents that convert currencies, primarily Indian to Nepali rupees and vice versa, for a certain commission.

The economic impacts of the blockade initiated by India in 2015 were severe. Due to the blockade, there was an acute shortage of all goods such as fuel and natural gas, medicine, food and other essentials brought from India—this led to widespread disruption of daily life of the border inhabitants of Nepal as well as the entirety of Nepali citizens. Schools in the border region of Birgunj were closed as a result of riots of Madhesi political parties as well as shortages of fuel.52 The obstruction because of the Madhesi protests was of maximum intensity at Birgunj-Raxaul because of which imports of essential commodities into Nepal were almost nonexistent.53 Separately, the COVID-19 pandemic reduced the demand of the Nepali population for Indian imports, and a huge reduction in the government revenue was seen as the Nepali government is heavily reliant on duties, 29 | DISSECTING BORDERNOMICS

excise, and value-added taxes (VATs) collected at the border.54 Social Aspects: Ethnic discrimination or insecurity has not been documented in the border inhabitants residing in the border areas of Birgunj-Raxaul border. If anything, ethnic and linguistic similarities between people along the two sides of the border—language, way of dressing and food habits being almost the same— as promoted matrimonial relationships among border inhabitants. Each year, thousands of marriages take place among the border inhabitants of the two countries, which has influenced the lifestyle, language, customs, and traditions of border inhabitants of both countries.55 Indian teachers from the neighbouring town of Raxaul travel to Birgunj to teach in schools and return back home across the border at the end of the day. Similarly, many college students from across the border are enrolled in medical colleges in Birgunj. However, discrimination against students occur as some private engineering and medical colleges opened in the border areas in Nepal charge higher tuition fees for Indian students than their Nepali counterparts.56 Furthermore, many migrant workers from Raxaul and neighbouring towns of India enter Nepal via Birgunj to seek employment at factories and industries located in and around Birgunj. Birgunj, being an industrial hub has been beneficial for migrant workers across the border as it has provided them with jobs.

Open borders between India and Nepal in the Birgunj-Raxaul point has proved not only to be beneficial for border inhabitants of both countries for receiving quality education but it has also helped border inhabitants receive quality health services in their neighbouring country.57 While Nepalis visit Bihar from Birgunj to receive health services, many Indian border inhabitants depend on different hospitals in Nepal such as Eye Hospital at Lahan and medical colleges in Janakpur and Nepalgunj for health services. Since Birgunj is connected to all cities of Nepal by road, locals on the Indian side of the border find it an easy point to enter Nepal in order to travel to various cities including Nepal’s capital Kathmandu.58 Additionally, the neighbouring town of Raxaul, which has a railway station that provides train services to major Indian cities such as Kolkata, Delhi, Hyderabad and Patna, is a gateway for residents of Birgunj and nearby towns to travel to various parts of India.

In spite of the advantages, the open border has failed to give border inhabitants a sense of security. Reports of criminal and anti-social activities along the border regions such as the circulation of counterfeit currency, robberies, theft, smuggling, drug trafficking, human trafficking and arms smuggling59 have made the daily life of border inhabitants risky and difficult. Despite security forces being deployed in the border region by both Nepal and India, many militants from other countries infiltrate India through the porous Nepal-India border adding to the lack of security of border inhabitants. Moreover, security personnel on both sides of the NepalIndia border are often found to harass people who carry with them goods for their personal use as the volume of such goods is not defined,60 increasing the feeling of alienation and fear among border inhabitants of both sides.

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2.3.1 Birgunj border region analysis The Birgunj border region is of prime importance for Nepal in terms of political, economic, and social standing.

As Nepal’s foreign trade primarily takes place through this border region, it serves as a major junction of economic activity with the southern neighbour. The customs office of Birgunj collects the highest revenue on behalf of the government than any other border customs of the nation.61 Therefore, it is the largest and the most prominent border point that Nepal shares with its neighbours. Over the years, Birgunj has grown to be a major commercial and industrial hub.

Owing to its strategic location and proximity to India, major industries have sprung up over the years, which has made it not only a major trade and transit hub but also a primary industrial hub of the nation.

This has created economic opportunities for citizens from various parts of Nepal causing inward migration of people. Similarly, it has also attracted workers from across the border town of Raxaul and surrounding areas.

Considering its economic importance, political disputes within the two neighbours have not only adversely impacted regional trade but also the lives of inhabitants of both the border towns of Birgunj and Raxaul. The two border towns support each other in terms of economic activities and social exchanges that take place between inhabitants of in and around these two towns. Similarly, inhabitants in and around Birgunj cross the border to seek employment in neighbouring Raxaul and surrounding towns. Such is the ease of open border access that workers cross borders on a daily basis and return to their hometowns at the end of the day. There is no doubt that border towns such as Raxaul thrive and sustain on Nepali customers travelling to Raxaul to take advantage of price arbitration. However, inhabitants from Raxaul and surrounding Indian towns do travel to Birgunj to take advantage of availability of certain goods and services available in cheaper and easier manner in Birgunj and nearby Nepali towns. This has increased economic interaction, which has resulted in further development of the region.

However, events such as the economic blockade of 2015 and the current pandemic have had a severe impact on the region and on the border inhabitants who rely on each other for their livelihood, especially in the form of rise in informal trade and smuggling. Therefore, this border point is highly sensitive and events such as these could give rise to clandestine activities as inhabitants of both the border towns are heavily reliant on each other for sustenance and livelihood.

2.4 Bhadrapur Border Region Political Aspects: India and Nepal agreed in 2003 to implement Small Development Projects (SDP) in Nepal with the purpose of reducing unwarranted overhead costs, ensuring greater stakeholder participation and implementing projects that local communities can handle by keeping them simple and flexible. The SDP agreement plans to decentralise political power by giving local bodies of the government of Nepal like the District Development Committee (DDC), Municipality, Divisional office of the Department Urban Development

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and Building Construction (DUDBC), a greater role in development projects. Under the SDP agreement, the countries allocated an estimate of NPR 4,500,000 for the upgradation of road from India-Nepal Border to SP Mode in Bhadrapur. An additional project in the agreement that was promised was the construction of a 4.3 km blacktop road from BP Chowk to Bhanu Chowk in Bhadrapur Municipality Area in Jhapa.62 The Small Development Projects (SDP) is targeted at local communities in order to support social-economic development that provides livelihood opportunities, assist in the conservation of environment and cultural heritage, and facilitate women empowerment, child welfare, and community life by creating infrastructure in the sectors of education, health, agriculture and agro-industry, renewable energy, trade, transport and communication, recreation and community development.63 A milestone development project in the Bhadrapur-Galgalia border region is the construction of the Mechi bridge, which connects Bhadrapur in Nepal to Galgalia on the Indian side. The project, which remained in limbo for 66 years, was finally inaugurated by KP Sharma Oli on 31 January 2019.64 The project has been an example of development works being successful due to the formation of a stable government in the country.

However, despite some development projects coming to fruition in the Bhadrapur-Galgalia border region, most border inhabitants on the Nepali side of the border seem dissatisfied with the lack of action on promises made by political parties in the area. Locals report that there are no schools for children’s education and that they have to walk for hours to reach the nearest hospital when they fall sick. What is worse is that the two villages of Dolo Basti and Jyamir Gadhi in Mechi Pari have a total of 142 households and they get inundated every year during the rainy season. Yet, the local government’s efforts seem passive at best in the region as locals also complain that in the past elections, including the recently held local level polls, leaders had pledged to construct toilets, but nothing has happened so far.65 Economic Aspects: Bhadrapur town, in the past, was a popular trade destination for border residents and people from nearby towns and villages because of Bhadrapur’s proximity with the custom-free, open border with India. The custom-free, open border made large imports and availability of various products possible.

However, trading and shopping trends in Bhadrapur have declined due to heavy customs in the border region.

Another reason for the economic decline of the city, as speculated by locals and experts, is the construction of the East West Highway (north from Bhadrapur) that shifted the economic activities to Birtamode, another nearby town in Jhapa district. Bhadrapur town, nevertheless, experiences a decent amount of economic activity now on haat bazaar days. Many people visit the town for shopping, watching movies in cinema halls or just to visit the Mechi River and the bridge.66 Although Bhadrapur town has had various necessary facilities in comparison to other parts of Jhapa such as airport, easy and close access to Indian border, educational institutions, medical facilities and so on, slowly the town has been losing its once held sheen. As aforementioned, the construction of East West Highway shifted the sheen from Bhadrapur to neighbouring Birtamode. However, the completion of Mechi bridge has promised much required prosperity and economic activity to the town of Bhadrapur and DISSECTING BORDERNOMICS |

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the locals in it and at a time when Bhadrapur has gradually been transforming into a tea hub by setting up new plantations and tea factories. Mechi bridge can play a pivotal role in creating a solid market and trading spot in the border region and regain its lost sheen.

Though most export items from India to Nepal pass through Galgalia-Bhadrapur point since exports to Nepal are duty free under the Indo-Nepal treaty, very little revenue is generated at the Galgalia transit.

In addition, when the prices of consumption items in the border region are compared, most consumption items such as sugar, rice and pulses, are sold at a cheaper rate in the local market on the Indian side of the border. Therefore, residents of Nepal have an incentive to cross the border and buy necessary items in Galgalia. Locals of Bhadrapur lament that there are unfair trading practices in Bhadrapur and irregular and high pricing of goods that causes residents of the border region to travel to Galgalia to purchase essentials at cheaper rates.67 Since customs regulations of India restrict trade in consumption items only for commercial purposes, individual consumers from Nepal can freely carry those items so long as they are for household consumption purposes. However, traders often exploit this feature of the border region by transporting cheap necessary goods from Nepal and reselling them in Nepal at higher prices with disproportionate profit margins.68 Informal trade in the border region mostly involves locally produced goods informally traded from Nepal to India. In addition, informal trade of third country goods from beyond Nepal and India has been documented, indicating an organised network of informal traders in the border region.69 Often when exploring the incentives for informal trading, studies have discovered excessive transportation costs, documentation requirements, bureaucratic hassles, excessive time consumed in custom clearances at border transit points and bureaucrats’ rent-seeking attitudes to have been the causes of informal trade at BhadrapurGalgalia border region.70 Social Aspects: The Galgalia border point also acts as a transit centre for Bihar in India. Evidently, there are a lot of cultural similarities found between Bihar and the parts of Nepal connected to the state. Bhadrapur is one among the many places where the residents share cultural beliefs and values with the residents of India. Since the roots of the ancient culture of Mithila span between Bihar and Nepal, Hindu scriptures like Ramayana and Mahabharata are revered by inhabitants on both sides of the border region. For instance, the Jhulan festival that is celebrated every year in Bhadrapur attracts crowds from neighbouring Galgalia and other nearby bordering towns.

The open border in the region has fostered tremendous cultural exchange, and it also allows people from both sides of the border region to form matrimonial relationships with each other. Cross-border marital ties are common not just because of shared culture between Nepal and India but also because they give various advantages to married couples including legal title to property and a greater chance of obtaining a citizenship of their spouse’s nationality.71 Indeed, the unrestricted flow of people has fostered dissemination of ideas, culture, and values among inhabitants of the border region.

In terms of security concerns in the border region, there has been a history of dacoits compromising the 33 | DISSECTING BORDERNOMICS

security of inhabitants of the border region. However, in recent years there has not been much information regarding bandits and dacoits in the border region and their impacts.72

2.4.1 Bhadrapur border region analysis In comparison to Birgunj, this region is much smaller and less prominent. Although Bhadrapur was once a sprawling town with bustling economic activity, the construction of East West highway gave prominence to other neighbouring towns such as Birtamode and primarily Kakarvitta, which is a larger border point with neighbouring Panitanki of India. Out of the 24 customs offices in Nepal, the BhadrapurGalgalia border point stands as the third lowest point in terms of transit of goods between two countries.

Additionally, through this border point, Nepal did not export any goods to India or other countries in the last fiscal year.

The region is yet to be politically recognised at the national level despite being strategically located. Nevertheless, the recently completed Mechi bridge connecting Galgalia is seen as a major promising factor to boost trade and economic activity in the two bordering towns. Similarly, the proximity of Bangladesh from Bhadrapur, which is about 20 km, has a potential to reduce transportation time and cost of international trade between Bangladesh and Nepal.

In contrast to Raxaul-Birgunj border region, the movement of people is much lower in the Galgalia-Bhadrapur border point as the population is much lower in the latter than the former. Fewer cross border activities have resulted in constrained economic activity, which has thus pushed the region towards sluggish economic development in comparison to other prominent bordering towns such as Birgunj, Biratnagar or even the neighbouring Kakarvitta.

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3. Conclusion It is known that some border towns flourish, whilst some linger under the shadows of underdevelopment.

Each border town has its own story, which reflects the realities and peculiarities that makes them both distinct as well as similar in certain aspects. The study analyses the following four border towns through secondary research analysing previous studies, news reports, trade data, and anecdotal information: Birgunj and Bhadrapur sharing borders with Indian towns of Raxaul and Galgalia, respectively, and Kodari and Rasuwa sharing borders with Zhangmu and Kerung on the Chinese side, respectively.

Nepal shares historical relationships with both India and China and has entered into important agreements to facilitate trade and friendly relations. The study commenced with an understanding of Nepal’s bilateral relationships with the two neighbouring countries by looking at some of the important bilateral trade and friendship treaties and agreements.

At the border region with China, it was seen that Kodari, once a bustling and dynamic border town, suddenly started to lose it sheen due to a natural calamity and a politically driven decision that shut the border for almost four years. This significantly impacted the town and it experienced outward migration due to reduced economic activity on and across the border towns. So, on the one hand, Kodari lost a lot in terms of economic activities, but on the other hand, Rasuwa gained from this.

When the Kodari-Zhangmu border point remained shut, Rasuwa-Kerung became the primary border point through which direct trade between China and Nepal took place. This significantly increased infrastructural development in and around the border, in both countries. Construction of Mailung-Syabrubesi road through Chinese assistance and the construction of Rasuwagadhi hydropower project are some of the examples on the Nepali side. Similarly, the decision by the Chinese government to connect Kerung to other parts of China through railway as a part of BRI only raises the importance of the region. Such initiatives at the macro level will certainly have an overarching impact at the micro (local) level. It will increase economic activity within the region, which will further attract migrant workers not only from other various districts to Rasuwa but also from across the border and vice versa.

On the southern side of the nation, this study identified that there is a vast difference between the two border towns of Birgunj and Bhadrapur on the Nepal-India border. Birgunj continues to be a strategic point politically, economically, and socially. This was only reinforced when in 2015 the border region was besieged as a part of a violent protest, and this had extensive socio-economic and political implications throughout the nation of Nepal. Nevertheless, the town continues to play its role of a commercial and industrial hub and a gateway of trade and transit between Nepal and India. The presence of major industrial corridors and the transit of the highest volume of goods through the customs makes it a most prominent border town throughout the

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country. This has played a positive role in the town to further grow and become economically and politically active.

Ironically, Bhadrapur, which was once considered an important town with a promising prospect, started to lose its lustre owing to an infrastructural development—the East West Highway connecting east Nepal to west Nepal. Factories and industries slowly started to shift base and the town experienced reduced economic activity over the years. As the economic activity started to shimmer down, so did its political importance.

Although a modest level of cross border activity takes place between Bhadrapur-Galgalia citizens, it has not propelled the economic activity to foster development at the desired level. The construction of Mechi bridge connecting Bhadrapur-Galgalia could, however, boost regional connectivity and smoothen trade and transit as the town is very close to Bangladesh. Lowering custom duties and improving infrastructure that facilitates trade and transit could help foster growth in this town.

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