Delhi must do more if it is to entice its Himalayan neighbour away from Beijing’s growing influence. Humphrey Hawksley reports from Kathmandu

Any investor wanting to explore business opportunities in Nepal would likely pass through Kathmandu International Airport, only to be taken back into a bygone age of air travel with rustling paperwork, claustrophobic queues and a push-and-shove scrum around a creaking baggage carousel.

As Asia has risen to account for two thirds of global economic growth, so its airports have been modernised. From Delhi to Hanoi to Singapore there is a realisation that airports give first impressions of a country.The more modern and streamlined, the easier business feels it is for investment to flow, thus giving a chance for living standards to improve.

Infrastructure is now a key political factor in the global balance of power andin Nepalit is being played out between broadly pro-West and democratic India to its south,and Communist Party-controlled China to its north.

Buffered between these competing Asian powers, Nepal has become one of the world’s least developed nations. Its dire state is underscored by the less than $3,000 average per capita income among its 30 million people, which compares to the more than $7,000 in India and $16,000 in China.

Since British colonialism, Nepal has been firmly placed within India’s arc of influence. Yet first impressions of Kathmandu are of a left-behind place – quaint, perhaps, for those seeking temples and trekking, but with not much else on offer amid paint-peeled buildings and crowded streets that clatter with traffic jams.

This is essentially a South Asian hill city, rich with the bartering, religions and unruliness of the sub-continent and out of step with the type of homogenous order seen in China. Nepal, therefore, is India’s to lose and China’s to win, raising the question as to why Delhi has done so little to ensure that its vulnerable neighbouris not harnessed more tightly within its fold.

Since Beijing’s hard-driving expansion began in 2012, Delhi appears to have adopted practices designed not to befriend Nepal but to drive it away.

In 2015 China overtook India as thebiggest foreign direct investorand by 2017 its investment of $427 million made up 84 per cent of the total, dwarfing India’s $46 million.

In 2015, too, Nepal suffered a trade route blockade carried out by people of Indian origin living in the south of the country whoaccused the government of discrimination. The blockade caused shortages in fuel, medicines and other supplies. The widespread belief that it was supported by Delhi prompted Nepal to try to break India’s hold on the economy by diversifying trade routes through China.

Three years later, in September 2018, China agreed to give Nepal access to four ports – Tianjin, Shenzhen, Lianyungang and Zhanjiang – as well as inland hubs in Lanzhou, Lhasa and Xigatse, to facilitate trade with third countries.

The port project accompanied a parallel one for a Chinese railroad from the Tibetan border town of Kerung to three Nepali destinations, Kathmandu, Pokhara and Lumbini, marked as the birthplace of Buddha, a massive engineering project blasting miles and miles of tunnels through the Himalayas.

Running parallel is Beijing’s infiltration into Nepal’s defence and security and it is here that the country’s troubled and bloody modern history comes into play.

The current government is controlled by the Nepal Communist Party, a merger of two far-left political movements, one based on old Soviet Marxist-Leninism and the other on the doctrines of Mao Tse-tung, who long argued that Nepal was an extension or ‘finger’ of Tibet, which was the ‘palm of China’. The views of party leaders, including Prime Minister K P Sharma Oli, were forged through the Cold War atmosphere of the 1960s and 70s. They led a decade-long civil war that ended in 2006 and are now in government.

Therefore, while culturally Nepal’s affinity leanstowards Delhi, particularly as more than 80 per cent of the population are Hindu, deep strands of its political affiliation lie with Beijing.

For the past two years, Nepal has been taking part in low-level military exercises with China, focusing on counter-terrorism and disaster management. Last year, it cancelled similar long-standing exercises it had been carrying out with India.

Beijing has also been supplying aircraft and military vehicles as part of Nepal’s policy to lessen its reliance on India and now, defence analysts report growing security ties between Nepal and India’s arch-rival, Pakistan. The first foreign head of government to visit Nepal after Oli became prime minister last year was the then Pakistani prime minister Shahid Khaquan Abbasi.

While China makes no secret of its intentions, India has yet to show clear forward-thinking on how it plans to counter the advance. Again, it should be stressed that Nepal is India’s to lose on at least three levels.

First, India’s port at Kolkata is only 1,000 kilometres from Kathmandu, whereas China’s closest port is 3,000 kilometres away. India remains a natural trade route, the Himalayas a natural barrier and the roads and rail links have yet to be built. India has a window of several years to make its ports and trade routes more appealing to Nepal than China’s.

Second, the BRI is running into trouble, accumulating a debt-trap, neo-colonialist reputation, with Sri Lanka, Malaysia and others publicly stepping back from it. Nepal has longexperience of the benefits and pitfalls of dealing with India while it will need to scrutinise carefully what China has to offer.It should not be beyond the wit of Delhi to reverse the trend of declining Indian investment in Nepal and come up with high-profile projects of its own, then see them through to completion.

And third, there areshared languageand dialects and anopen border between India and Nepal, meaning that citizens of both countries can criss-cross freely to work, live or trade. Beijing still has a visa regime in place and visas are not easy to get.

The current push-back against Beijing’s expansion is global and India now has an exploitable window in which it can temper China’s advance across the Himalayas. The United States and other democracies would give support and motivate sluggish Western institutions such as the World Bank to put together finance packages that can match China’s BRI vision without the stigma of a debt trap.

‘There are infrastructure gaps, and the World Bank has been very slow,’Andrew Cainey of Chatham House told a recent Democracy Forum seminar. ‘China is an additional choice.’

Buffered between two giants, Nepal, is now showing its determination to diversify even more. A contract for its long overdue Kathmandu air terminal has been awarded not to a Chinese or an Indian company, but a French one. Group ADP says it will be finished by 2021. India is due to build some of the aircraft hangars.

Originally posted in Asian Affairs