China and South Asia: Core Interests and Policies and Their Impact on the Regional Countries (A Nepalese Perspective)

By Nishchal Nath Pandey
Deputy Executive Director,
Institute of Foreign Affairs
August 9, 2003

I would like to thank Gen. Jamshed Ayaz Khan and the Institute of Regional Studies for inviting me to this very important and timely international seminar on "Major Powers and South Asia." I am confident that the papers presented during this seminar and the deliberations held will be purposeful and indeed useful for not only the participants but also as valuable policy input for the various governments and civil society actors of our region.

It is indeed regrettable that while the rest of the world is moving rapidly in the direction of economic development, South Asia continues to remain mired in malgovernance, political instability and pervasive poverty not to mention with shame that the region harbors one of the longest standing conflicts in the world. With the tit for tat nuclear tests conducted by two of the region's largest members, it is with little doubt that the sub continent has emerged as the most dangerous place on earth. Is it possible to build a South Asia that is prosperous, stable and secure? Perhaps, only with significant changes in current approaches and perspectives and with the changes in attitudes and mindsets that such a critical departure from the current predicament will be possible.

I will strive to examine the relationship, both historical and emerging between China and South Asian countries and try perhaps to analyze positive and also rather off-putting ramifications both in the short and in the long term of the growing intimacy between the region and China. In this context, it is matter of satisfaction that this particular seminar is taking place (when this paper was written) at a time of the annual meeting of China's parliament, which has appointed Hu Jintao as President and is set to appoint a whole new generation of leaders to guide the world's most populous nation. Almost 3,000 delegates to the National People's Congress, or NPC gathered in Beijing's Great Hall of the People and have approved a series of top-level alterations including the accession of Vice President Hu Jintao to the Presidency in place of Jiang Zemin who was reappointed the Chairman of the state central military commission and Wen Jiabao as the Premier. Of special significance is the fact that most of the outgoing leaders were in their 70s and they included Li Peng, Zhu Rongji, Li Ruihan, Wei Jianxing and Li Lanqing. Led by Hu, the new leadership has most of the leaders in their mid-50s or early 60s. China's leadership changes are naturally the subject of worldwide concern and debate as it throws not only the risk of possible political instability due to its swiftness but also the drive for further economic advancement because of the strong economic good judgment and experience that the new leadership brings with itself. It is this mixture of anxiety and expectation that makes the change so significant to the world community and to our own region. From the so-called Third Generation of leaders to the Fourth Generation, the power transfer comes at a time when China as a nation is emerging as a major world power economically, politically and militarily. Even the World Bank stated, "In only one generation, China has accomplished what took other countries several centuries to achieve." For the region, a key fact to be noted is Hu Jintao's enduring Tibet connection. As Party's chief in Tibet Autonomous Region (TAR) of China at a rather critical phase he is bound to have greater knowledge and interest on TAR and the neighboring countries than any of his predecessors.

China it seems will meanwhile continue to aim for high growth. Premier Zhu set a target of 7% growth in 2003 - down from last year's 8% growth, but still ambitious. "It will be financed", he said, "by issuing 140 bln. yuan ($16.9bn) through special long-term bonds, and priority will be given to construction projects which can help lift China's impoverished west out of destitution". Hence, clearly the priority now as laid out seems to be on emphasizing on reducing the gap between the cities that have seen an eye-raising economic prosperity and the provinces that are still lagging behind. Having successfully handed over power to a younger generation of politicians and cleared some of the ideological debris of the past, China it seems is ready to venture out to a more participatory and engaging neighborhood and international policy. The time is all in their favor. Beijing will host the upcoming 2008 summer Olympic games. World Tourism Organization forecasts for 2020 place China as the world's top inbound destination and the 4th largest outbound tourism generating market. Having entered the WTO in Doha in 2001, everyone accepts that China with an annual economic growth rate of 7 percent will be the most competitive of all nations. A comparatively peaceful international environment and the pragmatic economic policy of opening up will contribute certainly in sustaining these determinations. In a way, this will also have positive impacts for the neighboring countries.

China's Advent as a Major Power:

The world has seen momentous changes after the collapse of the Soviet Union and the subsequent end of the Cold War. This single event altered the conduct of international relations, its patterns and paradigms affecting small and big countries alike. A global power like the former Soviet Union has been replaced by regional heavyweights like China. In fact, regional powers have had much greater freedom to play a meaningful role in the contemporary world and China was quick to adapt to the new ideological and political realities of the changing era in a way that it could create options for itself. To avoid the same fate as that of the Soviet Union, "China was determined to tighten its ideological control and military preparedness against western ideas, culture and values while putting on a benign and peaceful front. Beijing's double-barred posture was known as nei-ching wai-sung (tight internal control, relaxed external appearance)".

This pragmatic approach succeeded and began paying dividends. China's entrance as an important power to reckon with in the last 5-6 years has initiated world wide debates and discussions which obviously has generated ample amount of understanding about the country not only among scholars and analysts but also among entrepreneurs and students. These debates have arisen due to China's influence over the various smaller states along its periphery, which is another important factor meriting attention. One may wonder at the outset, why the world is hotly deliberating about China? The answer is fairly simple. China is growing like a continental power and has gained much influence and importance in world affairs. It is a large country with a great military and economic clout with nuclear capability and obviously human beings have an in-built temperament to talk and discuss about the strong.

Essentially, there are principal arguments in favor and critical of China as it assumes the role of a military and economic power of the 21st century. First, that it will be a sensible nation, accommodative and supporter of mutually beneficial undertakings and the second that it will be an assertive power exerting its influence not only around the neighborhood but also around Asia and the world. The former is based on the understanding that China desperately needs a peaceful regional environment to pursue its economic agendas. The latter claims its disagreement with the first with the assertion that China has engaged in a sustained effort to modernize the PLA, still has the largest standing army even after 25 percent reduction in the late 80s and possesses ballistic missiles capable of even reaching the United States. But both agree that China will inevitably become more like the west- non-ideological, self-centered, less emotional, corporatist and materialistic in its conduct of international relations.

Most South Asian countries, more than the economic development of the coastal areas of China are naturally concerned and contented to see the massive modernization of Tibet as it has a direct significance on them. While Tibet's economic growth could be a source of inspiration for bordering areas of neighboring countries, it could also create an inferiority complex to the population of these countries that are linked with their Tibetan kith and kin through marriage, family lineage and close interaction. For now, the speed of the modernization drive seems unstoppable in Tibet Autonomous Region, a semblance of which this author had the opportunity to see during his visit to Lhasa in 1995. Not only were modern industries, transportation and telecommunications facilities established; the agriculture, animal husbandry and commerce already in place has developed rapidly since then. The gross national product of the Tibet Autonomous Region hit 11.742 billion yuan in 2000, with the primary industry developing gradually. Farmers and herders drew an average income of 1,331 yuan, and the local revenues reached 500 million yuan. Grain production has since 1987 been reporting bumper harvests. Investments in social fixed assets reached 66.47 billion yuan in transport, energy, communication and other infrastructure facilities, and mining and building materials sectors. In 2000, retail sales of social commodities increased further to reach 42.87 billion yuan.

After reviewing the successes China had scored in the last five years, the newly elected President Hu Jintao noted that Tibet, too, "has made noticeable progress in its drive for development". He called on the people in Tibet "to work hard still for faster economic growth and continuous improvements in the livelihoods of the people of all ethnic groups in the autonomous region". To promote the development of the vast western China, he called for "enhanced efforts to do a still better job in the key points of the current work and, at the same time, map out good blueprints for development on a long run".

Like most of the world, it is with little doubt therefore that China is also going through a transformation not only regarding its economy, political system and cultural life but similarly with its thinking process. But there need not be any misgiving that it is focusing on economics and by far means in achieving certain standard of modern living for its people. Known as the "Sick man of Asia", the history of old China following the opium war of 1840 was one in which China was harshly bullied and humiliated by big powers. This past of harsh suffering is now entering a new era of an enviable position that China has not known since the end of Chien-Lung period in the 18th century. Obviously, its physical and population size makes its performance and progress a cause of profound interest to all the countries of South Asia and therefore requires proper and unprejudiced assessment of China's political, military and economic progression.

Impact on South Asia:

Countries of South Asia like the rest of the world were stunned with the horrific events on the black day-September 11 in the United States. In fact, the attacks on the United States have changed the international situation in numerous ways affecting small and big countries alike. "Firstly, the world has realized that terrorism is no longer a local law and order problem affecting individual countries. Its transnational character and deadly reach has united the world community to root out this phenomenon. Secondly, in the war against terror, the leading role of the US has further cemented the unipolar character of the international system in the post Cold War era." Even after one and half years since the horrific event, intellectual exercises still seem inadequate to capture the full meaning and impact of what happened to the US, and by implication to the world, on that day. For South Asia, the striking reality was difficult to comprehend and even more challenging to analyze and chalk out possible foreign policy and economic options there from. The negative fall-outs were so prominent that it took some time for the governments to manage their economies already in difficulty due to various reasons. "Tourism to South Asia dropped dramatically, international investments fell, trade and commerce suffered a setback with apparel exports to the U.S in particular reducing sharply."

Its impact on South Asia in terms of the growing role of major powers especially the United States however is still being unfurled. "Post-9/11, the parameters dividing South Asia from the neighboring Asian regions have further weakened-especially with both Pakistan and India becoming part of the international coalition's war on terrorism and the presence of external military forces not only in Central Asia but also in the Indian Ocean." With one fifth of the world's population in an area of over 5 million sq. kilometers, the world's longest standing conflicts in countries neighboring the soft bellies of Xinjiang and Tibet and a sustained American presence by virtue of the war in Afghanistan; China was logically to be grave of its strategic leverage nurtured through decades of mutually benefiting undertakings with individual South Asian nations diminishing and bearing an impact on long-term stability of its relations with these countries. China has more than 3 thousand kilometers of land border with South Asian countries and with the American troops in South Korea, Japan and now in Central Asia, it even felt that it's being somehow "encircled". The war in Afghanistan altered its security calculus as well and compelled China to reevaluate its geopolitical position, forge concerted relations with neighbors and keep a closer vigil on ethnic separatist groups inside its territory. Today, for the first time since the Korean and the Vietnam wars, American combat troops and some of America's most sophisticated weapons are heavily deployed in China's neighborhood. Furthermore, "China's central Asian neighbors are drawing closer to America. Pakistan, the closest thing China has to an ally, met America's requests for use of bases and its airspace. Uzbekistan and Tajikistan offered invaluable assistance to American forces, and Kyrgyzstan appears winning to support a long-term U.S military presence. In Afghanistan, a relatively pro-American government is emerging that might have reduced ties with Pakistan, potentially limiting China's influence."

At this point, a point raised by some erudite academics deserves mention that South Asia although comprising of seven countries- Bangladesh, Bhutan, India, Maldives, Nepal, Pakistan and Sri Lanka in fact extends from Afghanistan to Myanmar. Essentially, a geographical entity is a derivative of geography but not of geographical factors alone. Added to it are human migrations, habitation and tradition, living beings with their behavioral qualities, their civilization and culture. In the Huntington premise, "China historically conceived itself as encompassing a Sinic Zone including Korea, Vietnam, the Liu Chiu islands and at times Japan. An inner Asian zone of non-Chinese Manchus, Mangols, Uighurs, Turks and Tibetans who had to be controlled for security reasons." Probably because of this-the Chinese interests and the economic and other needs of neighbors that in actuality helped cultivate the relations between China and the outside world especially in relations to its neighbors.

In fact, the physical barrier between China and the rest of countries of South Asia has never been an obstruction for building contacts, fostering and promoting economic and political ties and erecting solid pillars for the future intercourse to ameliorate. By virtue of Tibet and the Karakoram highway in modern times, China is adjacent to the rest of South Asia. It is said that Buddhism went to China from the sub-continent in the 3rd century. History is likewise witness that it was a Nepalese Arniko who planned and built the famous white Dagoba of Beijing.

The first Buddhist pilgrim from China was Tao Nan who came to the sub-continent as back as 316 A.D. The first monk from the region to visit China was Buddhabadhra also of the same period who stayed in China for 30 years, translating many Buddhist texts into Chinese. Nepalese King Angsuverma had his daughter Bhrikuti married to the Tibetan King Srangchan Gyampu seeing the military and economic potential of the then Tibet.

During times of a resonant and a vibrant northern neighbor, the nations of South Asia have tried their best to establish contacts in order to intermingle with its masses and reap the fruits from commercial correlation. Violence and destruction in China like the one after the overthrow of monarchy in 1911 that was followed by internal turmoil and external offences resulting in a civil war was a test illustration for not only the countries of South Asia but others in the neighborhood withdrawing themselves from busy commercial interchanges with China which was to awaken and resurrect itself in the coming decades. At the moment however, this old acquaintance could grow because the sleeping giant has woken up. Here, it is worthwhile to refer to Napoleon's forecast made two centuries ago, "There (China) lies a sleeping giant. Let her sleep. For when she wakes, she shall shake the world."

China-India relations:

With a history of mistrust and animosity, the two have lately come closer for mutually beneficial endeavors in all spheres. After all, the leaders of the two countries had once upon a time initiated the famous Five Principles of Peaceful Coexistence (Panchasheel). However, the main issues of bilateral relations still tag on 6 'T's: Territorial issues (it has been a crucial issue impacting upon the totality of the bilateral relationship), Triangular relations, (i.e., the China-India-US triangle and the China-India-Pakistan triangle), Tibet, Threat perceptions (military, nuclear and economic), Trade, NPT and CTBT.

Since China is India's biggest neighbor and India is China's second biggest, their desire to sort out outstanding differences and live peacefully remains to be an important basis not only for the stability of the region and the entire Asian continent but for their own economic growth propensities. China has been wanting to "end the past" with both Russia and India. Hence in parallel, the two Asian giants seem to be working on a rapprochement exercise which both feel will help not only in creating a conducive atmosphere of conviviality but also set a durable foundation so essential if the bilateral relations is to expand in the new century. "India-China relations have diversified and a series of dialogue mechanisms are in place including on subjects such as counter terrorism, security issues, policy planning and the boundary question. Functional delegations to learn from each other's experiences are crisscrossing each other's countries. High-level visits are also being regularly exchanged. Premier Zhu Rongji visited India early last year and Prime Minister Vajpayee will visit China this year. Both countries realize, however, that much more ground remains to be traversed."

India gains primarily because it can be sure of the security of its northern frontiers and additionally will be able to reap the economic benefits accruing from the gradual warming of its relations with China. China, too, has much to gain. Firstly, it will find a huge market for its goods in India. Secondly, it will benefit from India's expertise in the IT sector, which it has been seeking and thirdly, it can fully concentrate on its economic advancement drive.

China-Pakistan Relations:

Described as an "all weather friendship" , Pakistan-China relationship has moved into a high level of strategic understanding with the increasing frequency of high level visits. During his 4-day official visit to China from December 20-24 2001, in connection with the celebrations of the 50 years of the establishment of diplomatic relations, President Musharraf said, "Pakistan regards China as its most important and trustworthy friend and the promotion of friendly ties with China is the cornerstone of Pakistan's foreign policy." Pakistan has also supported the Chinese campaign against Muslim separatists in Xinjiang. "A strong relationship between Pakistan and China has been an important factor in the peace and stability of the region. As we develop and reinforce our partnership in the 21st century, there will also be a positive impact on the peace and stability of South Asia and beyond." This enduring and a multi-dimensional relationship has definitely withstood the ebb and flow of time and is based on commonality of interest [but] "with the relegation of political imperatives to secondary position, and the elevation of economic considerations to the primary level in the post-Cold War era, perhaps it would in the interests of both countries to further strengthen economic ties in a comprehensive sense and increase societal interactions."

China-Bangladesh relations:

Even though China supported Pakistan in 1971, its relations with Bangladesh has advanced and fostered with the encouragement of leaders of both the countries. Following the exchange of diplomatic missions in February 1976, the relations have grown stronger, centering on trade, cultural activities, military and civilian aid and exchanges of high-level visits. A grand symbol of bilateral closeness is the Bangladesh-China "Friendship Bridge," near Dhaka and warm military relations between the two countries is also another facet of the friendship. In the 1990s, the Chinese also built two 210-megawatt power plants outside of Chittagong.

China-Sri Lanka relations:

In April 1952 both countries entered into the famous Rubber-Rice Agreement, whereby Sri Lanka supplied rubber to China under a barter system, receiving rice in return. This agreement was entered at a time when certain countries had imposed a ban on the supply of strategic materials, which included rubber, to China. The most prominent symbol of Chinese economic assistance to Sri Lanka remains the Bandaranaike Memorial International Conference Hall. In 1991 the two Joint Committees formed under the Agreement of 1982 and 1984 were attached to constitute the Sri Lanka-China Joint Commission for Economic and Trade Cooperation. Mutually beneficial economic cooperation between the two started in 1982 and up to the end of 2001, the number of contracts for labor services the Chinese side has made in Sri Lanka is 390, amounting to US$633.56 million. Areas of cooperation include textile, electric power, water conservancy, highway building, communication, fishing industry and agriculture. In 2001, the bilateral trade volume was US$397 million, with US$387 million in export and US$10 million in import on the Chinese side.

China-Bhutan relations:

Although the two countries do not have formal diplomatic relations, they share a border of 470 kilometres and Bhutan as everyone knows has age-old traditional links with Tibet. The word "Bhutan" itself stands for "where Bhot ends". Bhutan and China signed an agreement to maintain peace and tranquillity on the Bhutan-China Border in 1998 during the twelfth round of bilateral border talks. This could be the first Sino-Bhutanese agreement or treaty till today. The Sixteenth round of China-Bhutan boundary talks were held in Beijing on 12 October 2002. Bhutanese Foreign Minister Lyonpo Jigme Yoeser Thinley met Chinese Premier Zhu Rongji. During the meeting the Chinese Premier said that China and Bhutan are resolving their boundary issues through mutual understanding and reconciliation and the 16 rounds of talks to date had achieved successes. He said that China-Bhutan relations had developed smoothly in recent years and the border areas had remained peaceful. He further said that China appreciated the Bhutanese government's support on the issues like Taiwan and human rights, and hoped to develop cooperative relations based on the principle of equality, mutual benefit and non-interference in each other's internal affairs.

China-Maldives relations

In the 29 years since the establishment of diplomatic relations, the bilateral relations have been continuously consolidated and their economic cooperation has also expanded. Some of the Chinese aided projects are fruits of bilateral friendly cooperation, which have enhanced the mutual understanding and friendship between the two governments and peoples and helped improve the lives of the people in Maldives to some extent. Though China and the Maldives are far apart geographically, there exist conditions and potentials for strengthening bilateral economic and trade cooperation. Premier Zhu Rongji held talks with Maldivian President Maumoon Abdul Gayoom in his first ever visit to the island nation in May 2001. President Gayoom said he is "confident that Zhu's visit will further consolidate and advance the friendly relations of cooperation between the Maldives and China. Premier Zhu said "China and the Maldives are two friendly countries, with the friendship between their two peoples dating back to ancient times".

China-Nepal relations:

After the establishment of diplomatic relations between China and Nepal, traditional friendly and cooperative endeavors between the two neighbors have never ceased. The Chinese needed Nepal to act as a buffer and much looked-for support in international forums while the latter required urgent economic assistance to build roads, government buildings, industries and even trolley bus lines in Kathmandu city. The height came when Deputy Prime Minister Chen Yi declared in 1962, "any attack on Nepal will be regarded as an attack on China and the Chinese government will deal accordingly." The 1962 war between China and India kept China on the commanding posture in the region and Nepal reaped the benefits by well apprehending the fact that Chinese economic assistance was imperative for the upliftment of the poor economy of the country. The measure of intimate relations between the two countries can be best observed by the frequency of high level visits.

Chinese Premier Chou Enlai visited Nepal twice, Vice Premier Deng Xiaping, Premier Li Peng, Premier Zhu Rongji, Chairman of the National Committee of the Chinese People's Political Consultative Conference Li Ruihuan, Vice Premier and Foreign Minister Qian Qichen have visited Nepal while late Kings Mahendra, Birendra and the present King Gyanendra too have visited China. In fact, late King Birendra visited China altogether nine times.

Since Nepal is the first South Asian country included by the Chinese Government in its outbound tourist destination list in 2001, there is a great potential for Nepal to attract tourists from China. Here, it must be noted that Nepal is the only foreign country, which has direct air access to Lhasa. China has furthermore hammered out a strategy to develop its Western region. This includes its plan to link Lhasa with major Chinese cities through railway and express highway. The Lhasa-Golmud broad gauge railway will be complete by 2006. Similarly, the plan will also bring an increased amount of investment in the region. The enhanced Chinese economic activities in the region will positively influence the economic activities in Nepal's bordering region.

China and SAARC

Formed amidst great hopes and aspirations of the people of South Asia eighteen years ago, South Asian Association for Regional Cooperation (SAARC) is the only regional organization that South Asia possesses. It is undoubtedly a key forum for economic progress and advancement of our region. Unfortunately, its pace has been slow, its focus divided into diverse array of pressing issues, procedures lingered in pomp and formalities and has problems even in holding annual summits of heads of states or governments. Furthermore, interstate disputes continue to disturb regional harmony, economic cooperation efforts carry on as hostages of continuing political and security cruxes, and with strong ambitions but restricted powers, the organization on the whole has become a spectacular formality of showing the rest of the world that, indeed, South Asian countries too are equally interested in regional cooperation. There is absolutely no doubt that due to the never ending hostility between India and Pakistan and their tendency to use the SAARC forums for a game of one-upmanship, the regional organization has suffered one blow after another. Though SAARC houses one-fifth of the total humans- majority of them poor, there haven't been any effective cooperation among the members to fight poverty, illness, education and unemployment, etc. Whatever understanding that there has been is confined only to mere rhetoric otherwise there could be a number of areas for cooperation including transfer of technology, education, protecting environment and reducing the fatal outcomes from natural disaster, which would benefit all the member countries. Instead of the SAARC forum becoming a hostage of Indo-Pak hostility it could instead be a platform or even a gateway to move forward in a number of areas where cooperation could be expedited. Hence, "it is essential that this organization be energized. At the same time, ceaseless efforts must be made to resolve the political issues, which are acting as a brake on meaningful reconciliation" . SAARC could immensely gain from its proximity with China after all when South Asia and China combine; the total population becomes 2.6 billion people! The spillover effects of China's marvelous economic growth could be well utilized for the region's pro-poor programs, social sector development and in enhancing the stagnant economic growth rate. However, while the idea of bringing China into the realm of SAARC could have radical ramifications, even to implement such a far-reaching proposition is not without hurdles or rejections:

• SAARC member nations have not been able to boost up regional synergy, build healthy political relations among themselves and implement economic agendas. It will be unrealistic to presuppose that by simply reaching out to other countries will resolve this inherent problem that is in-built in our system and mind-sets.
  
  
• South Asia has only a 5 percent cumulative growth rate. Nepal, this year has had a negative growth rate due to the impact of an insurgency that has taken well over seven thousand lives. On the other hand, China has been having 7-8 percent growth rate since the last one decade. Besides, intra-regional trade volume too has been growing very slowly. It currently stands at seven percent of the region's total foreign trade. Primary and labor intensive products like tea, leather, jute, garments, etc. predominate. Hence, without a proper financial base that is capable of supporting its economic influence, the countries of the region will have to wait before actually benefiting from China's economic prowess.
  
  
• A good transportation and communication system between the South Asian countries and China still remain as hurdles. The planned Asian highway and Trans-Asian railway could definitely be positive steps in the right direction. In addition, both have to do more on fostering better cultural relations by exchange of visits, establishing China-SAARC business forums, etc. which would create a sound base for future relationship to work.
  
  
• When bilateral tension between India and Pakistan remains at an all time high and even the SAARC Summit cannot be held as scheduled, fostering closer ties between SAARC and China would create suspicion in New Delhi. A rivalry that already exists between two of SAARC's members could well expand into that between two of the Asian giants that neither would want under the present circumstances.

Ma Jiali, a Chinese scholar while elaborating about the prospects of SAARC-China relations has said, "As a neighbor of South Asia, China especially hopes to develop good relations with the South Asian countries and SAARC." He elaborates, "such good relations should include mutually beneficial economic and trade relations, healthy political relations and stable security relations. We would like to contribute to development and progress in South Asia (as) it is also in the interest of China's own prosperity and stability. China and South Asia are close neighbors linked by common mountains and rivers. We share lengthy common borders with four SAARC members: Bhutan, India, Nepal and Pakistan. We are separate geographically, yet mutually beneficial trade and cultural exchanges could be traced back to a long time."

Conclusion:

In the post Cold War world for the first time in history, global politics became multi-polar and multi-civilizational prompting almost every country to readjust and evolve new strategies to survive and prosper in the 21st century. In this background of change and flux, lessons of the past needed to be both examined and channelized in order to re-shape policies and strategies into a complex and convoluted world. This especially holds true in the context of South Asian countries. The revolutions brought about by globalization and economic liberalization with the upsurge to dismantle the old command and controlled economy has at the same time led to the breaking down of old beliefs and notions. Same is the case of the upheaval in the field of information technology. People, goods, information and ideas move around more freely than ever before. However, in the changed context, individual nations do not compete in a manner that they used to in the past rather the region as a whole has to sharpen the areas of its competitive advantage, chalk out strategies and implementable action plans just like the ASEAN, EU or the OAU have done in order to reap the maximum from a challenging global market system. In the context of "opening up" to embrace the great economic prosperity of China, Greater Mekong River Sub-Regional Projects (GMSP), Kunming-Laos-Kunming-Myanmar Road, Trans-Asian Highway and Lhasa-Golmud Railway which technically can be extended to Khasa bordering Nepal are good examples of possible socio-economic changes that the region could exploit for its own benefit. There could be other sub-regional projects in this regard as well. In fact, the Silk Route has traditionally been a linkage between the region and China not to mention trans-Himalyan tourism such as the pilgrimage to Mansarovar and Mt. Kailash. The Syafrubesi-Rasuagadhi road, the second road link from Tibet to Nepal is joining itself to the Trishuli road that directly connects itself to the terai and then on to India. Cheap Chinese goods are already making great headways in our markets while there is a concerted effort from all South Asian countries to further their exports in the Chinese market. China Eastern is now flying Beijing-Delhi, which could have been unthinkable fifteen years ago but paradoxically President Musharraf had to fly from Islamabad-Beijing to Kathmandu via Tibet in order to participate in the 11th SAARC Summit in Nepal. Hence, without overcoming the political sensitivities, chilling out an atmosphere of deep mutual suspicion and animosity and embracing free trade among member states, these positive impacts could be less forthcoming. But, change is taking place, albeit slowly and it is our duty both as individual countries living in destitute and poverty and the region as a whole to make it a point to see that this change augments economic growth prospects and actually helps in reducing the gap between the haves and have nots of our society.

Author Mr. Nishchal Nath Pandey, is Deputy Executive Director of the Kathmandu based Institute of Foreign Affairs. A well-known writer on Nepal's conduct of international affairs, he is M.A.B.L from Tribhuvan University, Kathmandu. He was previously with the National Planning Commission of Nepal as Advisor and Task Force Member to draft the ninth five-year plan of His Majesty's government of Nepal. Prior to this, he was sub-editor of The Rising Nepal, Nepal's official daily. Decorated with Gorkha Dakchin Bahu IVth class and Birendra Aishwarya service medals, he has several articles and papers to his credit.