Flash floods and uncertainty of Nepal’s trade across the Himalaya

More than a week after the catastrophic floods in Nepal’s Rasuwa district, bordering the Tibet Autonomous Region of China, the daunting challenges of rescue missions and relief operations remain. The death toll has already surpassed 1,300, and more than 4,800 people, including 36 Australians, are still missing as of Sunday. The flash floods swept away major settlements like Timure and Safrubeshi in Rasuwa district and Trishuli in Nuwakot district on the popular trekking route to the Langtang Valley and pilgrimage to Kailash Mansorovar in Tibet. Until the devastating flashfloods of August 26, the area, about 140 km to the north of Kathmandu, was thriving economically with multiple hydropower projects and flourishing tourist stopovers, while also serving as the primary trade route to Rasuwagadhi – an important northern border customs point through which Nepal’s trade is conducted with China. 

Initial financial losses from the destruction are estimated at around Rs.762 billion ($A 7 billion). The scale of damage is simply unbearable for an economy that is worth a mere $A 62.3 billion – one of the lowest among South Asian economies – and a government budget amounting to Rs. 2.12 trillion ($A 19.5 billion) for the year 2026-27.

The exact economic impact of this devastating flood has yet to be known.  But thousands of houses and acres of arable land were swept away, and tens of thousands of people were displaced. Destruction of tourism facilities, hotels, and hydroelectricity projects will likely push thousands out of work and discourage investment in the once economically thriving area. This will likely weaken livelihoods and intensify extreme poverty in the area. Moreover, the damage to Nepal’s trade with China is anticipated to be overwhelming as the flood has destroyed one of the most flourishing trade routes between the two countries through the Tibet Autonomous Region. The route passed through Rasuwagadhi in Nepal to Kerung in Tibet, which has traditionally been a major passage for trade.

Rasuwagadhi was one of the six officially declared transit points for trade with China. However, until 2015, traders preferred to trade through the Tatopani customs point as it is relatively closer to Kathmandu. This route was disconnected following the devastating earthquake that year and it is still not fully operating. So, by default, the Rasuwagadhi route appeared as the next best alternative. Its popularity gained impetus after Nepal in 2016 signed the much-hyped transit treaty for trade with third countries through China, following India’s “undeclared” trade blockade that affected Nepal’s overseas trade with third countries through India.  

That blockade was a blessing in disguise for Nepal’s trade with China. Bilateral trade surged as it gradually became a reliable and convenient route. Before the flood, a hundred container trucks passed through Rasuwagadhi each day, and the customs officials handled a major chunk of Nepal’s trade with China. Nepal’s trade through this route accounted for roughly a third of its total trade with China—Nepal’s second largest trade partner after India.

Despite relatively higher transportation costs, Nepali traders preferred the Rasuwagadhi route as it saved time in the delivery of consignments to the Tibetan market which is the main export destination. On average, the cost of transporting a standard container by cargo through this point is almost double that of the sea route. However, it only takes 7 days for the delivery of consignments from Nepal to Tibet against 40-45 days for the consignments from China to reach Nepal by sea via Indian ports.

However, following the flash floods, trade has been diverted from Rasuwagadhi to Korala, another northern border point located at an altitude of around 4,650 metres in Upper Mustang. This route was opened for trade last year following a glacial lake outburst flood, which temporarily suspended business through Rasuwagadhi.

Yet trade through Korala is not going to be easy. Due to a shortage of basic customs facilities and personnel, it is already facing an overwhelming workload. Already more than 400 containers of goods from Kerung are being transported to the Korala border, while about 200 container trucks stranded in Nyalam in Shigatse in Tibet, and originally headed for Tatopani, are being diverted to Korala. This intensifies the congestion and delay in customs clearance in addition to higher transportation costs and a relatively longer distance to be covered from Kathmandu, a major hub of the China trade. However the route is safe from floods and landslides in comparison to other routes connecting Tibet, although it remains vulnerable to disruption caused by frequent snowfall and road disturbances.

A series of past incidents demonstrate that Nepal’s trade across the Himalaya is not going to be smooth despite its aim to boost trade with China. There is that risk of recurring floods and landslides due to the complicated geographical terrain along the northern border points. No one knows when any of these routes will stop operating. After more than 50 years of operation, the Totopani route was closed in 2015 after the earthquake caused extensive damage to the trade infrastructure. The Rasuwagadhi passage thrived barely 10 years before trade had to be redirected to another route. And the smooth flow of transactions through Korala border is already in doubt as traders say it is financially not viable for commercial purpose attributed to its higher transportation cost.    

Nepal’s bid to promote trade through its northern border points will face continuous uncertainty unless reconstruction takes into consideration both geological conditions and climate change. Addressing these factors is vital to ensure the routes remain reliably open even amid recurring disasters.The government’s Post-disaster Need Assessment should prioritise reopening of the Rasuwagadhi route to recover from the losses done to the once booming trade by the disastrous flood.

Bijendra M. Shakya is an associate professor emeritus at Tribhuvan University, Kathmandu. He writes regularly for The Kathmandu Post.