the challenges facing landlocked developing countries: a case study ...

TRANSPORT INFRASTRUCTURE
Roads
The bulk of Nepal’s transit trade has traditionally traveled by road over India’s poorly
maintained and highly congested road system. With the newly constructed containerized
cargo facilities at Biratnagara and Bhairava at the border, road transport from Nepal through
India is significantly faster and cheaper than before.
Domestically, Nepal has a 5,500km road network of, less then one third of which is paved.
The majority of roads are graveled or dirt roads, and wash out frequently during the June-
September rainy season. Most hill and mountain trails are only suitable for pedestrians and
pack animals (EIU 2001). Construction and maintenance of paved highways is heavily reliant
on foreign aid. Development assistance to the transport sector totaled $US 450m between
1990-99 (Stone 2001).
Rail
Despite only having 59km of rails, the Nepalese rail system provides direct and adequate
transport of cargo to Indian ports. The recent construction of a 5.2 km railway connecting
the new inland container port of Birganj directly to India’s rail network has further improved
this system and is predicted to increase rail traffic significantly. The port offers an
improvement in cost, speed (up to 10 days faster) and reliability of transit (Chakra
Infrastructure Consultants 2001). Moreover, the Indian rail network, to which this railway
connects, is of good quality. Shipping costs on the rail system, however, are alleged to be
high since freight transport is used to subsidize passenger transport.
Ports
Transit trade passes mainly through Calcutta Port (425,000 tons p.a.) and Haldia Port
(160,000 tons p.a., mainly imports), both of which have been described as having inefficient
management, excessive delays and high costs (Subramanian and Arnold 2001). The ports are
operating at excess capacity and can have turnaround times of several days, with the average
at Indian ports being 4.7 days (EIU 2002).
POLITICAL RELATIONS
As discussed, Nepal’s geographic location requires transit trade to pass through India. Such
dependence has rendered Nepal subject to political pressure from India, which has often been
able to leverage its strategic position in trade negotiations, with implications for Nepalese
politics. An Indian blockade of Nepal in 1990, for example, is considered to have
precipitated the downfall of the Nepalese panchayat government. And while several bilateral
treaties such as the 1950 Peace and Friendship Treaty and the Treaty of Trade and Commerce
provide the basis for the free movement of goods between the two countries, these have not
been uniformly applied. In 1989, for example, India declared several transit treaties expired
and closed all but two border crossings. Such limitations on trade and transit are considered
to have been imposed in retaliation for Nepal’s importation of weapons from China.
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