A break in the ridgeline

In the bustling main bazaar of Gangtok, ensconced in a small shop, lies a slice of history. Sanjeevani Medicine is the kind of store one would instinctively walk past, one among the row of outlets that punctuate MG Road. But its proprietor is quite different from the other retailers in this line.

Frail and bespectacled, 78-year-old Ridh Karan is not your normal pharmaceutical shopkeeper. From a Marwari family that settled in Sikkim more than a century ago, Karan is among a few still alive who were a part of the erstwhile kingdom's thriving economy during the 1950s. Those were the days when trade with Tibet, through Nathula, was still in operation, forming the backbone of the eastern Himalayan economy. Indeed, archives suggest that 80 percent of Sino-Indian trade was conducted on this route, linking Calcutta and Siliguri to Shigatse and Lhasa via the Chumbi Valley.

Karan was an active trader, and traveled annually to Tibet from 1953 to 1959. Looking out at the busy street, he says wistfully, "It used to take us two days on muleback to get to Yadong in Tibet, with a stopover in Chhangu … We didn't just engage in commerce at the border. I had a shop in Yadong, where we took commodities which were in demand on that side." These included rice, lentils, clothes, petrol, kerosene, even motor vehicles and Rolex watches. In return, the main items of import ranged from raw wool to Chinese silk.

The presence of Chinese troops in Tibet, the Dalai Lama's escape, and the increasing tension between India and China gave Karan a sense of the troubled times ahead. In 1959, the very year of the Dalai Lama's flight south, he closed his shop and decided to focus on retail within Sikkim. This political astuteness saved him from economic ruin. In the wake of the Sino-Indian War of 1962, Nathula was shut down, leading to the collapse of several large trading houses. The mule trains stopped plying. And Sikkim was left with little more than tales of trade and the wealth of Tibet, as narrated by misty-eyed traders.

At 14,400 feet

It has taken New Delhi and Beijing 44 long years to let the border communities interact once again. On 6 July this year, Nathula was re-opened for trade amidst great fanfare. At 14,400 feet above sea level, Sikkim Chief Minister Pawan Kumar Chamling and the Chairman of the Tibet Autonomous Region (TAR), C Phuntsok, cut a ribbon, putting into effect an agreement signed between the two countries in 2003. The opening had been postponed once already, and there had been doubts about whether the ceremony would ever happen. It was only a fortnight before the inauguration that a high-level Indian delegation finalised the modalities with their counterparts in Lhasa.

Nathula was windswept, rainy and freezing on the morning of the opening. With a curious medley of Elton John, Punjabi Bhangra and soft instrumental music in the background, people from both sides mingled happily. The absence of a common language made conversation difficult, which was possibly why everyone, including government officials and army officers, focused instead on posing for photographs. This was a media jamboree, with television crews in impressive turnout. As a local newspaper had put it the day before, there were more journalists in Nathula than traders.

Not that the traders were any less enthusiastic. 100 elated Sikkimi men and women proudly showed their trade licenses, which would enable them to journey across the border and up to the Renqinggang trade mart 15 km away. 89 Tibetan traders had been granted similar passes, which made them eligible to come over to the Sherathang border mart on the Sikkimi side, which, apart from trading facilities, houses the world's highest cyber café and bank ATM. Surendra Kumar Sarda, president of the Sikkim Chamber of Commerce and Industry, was gleeful: "We have been looking forward to this day for years. This will open the door for prosperity in Sikkim."

The enthusiasm went beyond business leaders and government officials. An emphatic B Parida, a hotel owner in Gangtok, asked, "What were they thinking till now – that terrorists would cross the pass if it was opened? This should have happened a long time back."

Chamling, who had long pressured New Delhi to agree to the re-opening, appeared satisfied that it was Sikkim citizens who would stand to benefit more than others. But, he added, "The people in Sikkim must work hard and engage in active manufacturing and trade, harnessing our natural advantages. We have entered the global market now, and must be competitive." The Nathula commerce on the Indian side is initially restricted to Sikkim residents, and vehicles that make the 56 km journey from Gangtok to Nathula need to be Sikkim-registered.

Realpolitik in Beijing

To find the cause of Nathula's opening, one must look not to the provincial capitals, Gangtok and Lhasa, but to New Delhi and Beijing. Following almost three decades of open hostility, India and China succeeded in carving out relatively cordial ties after Prime Minister Rajiv Gandhi visited Beijing in 1988. Through the 1990s, these ties were strengthened through several high-level visits, treaties and the opening of border trade between Uttaranchal and Himachal Pradesh. Simultaneously, India-China bilateral trade boomed, and there was some progress on the boundary disputes between the two countries.

It was in 2003, during Atal Bihari Vajpayee's visit to China, that New Delhi and Beijing agreed to resume trade across Nathula. The significance of the step lay in China's implicit recognition of Sikkim's merger with India – a fact that Beijing had consistently refused to accept before then. For its part, India reiterated its recognition of Chinese suzerainty over Tibet.

In terms of policy calculations regarding Nathula, analysts point to a multi-pronged, long-term Chinese strategy. Even as eastern China's 14,000 km-long coastline has participated in an economic boom, the western region, with its 3500 km of land frontiers, has not reaped the benefits of the boom. Mahendra Lama, of the Jawaharlal Nehru University in Delhi and author of an authoritative study on trade across Nathula, notes, "The major driving force for China to open its border for more trade and investment is the need to bring its own periphery provinces, mainly the western region, into the national mainstream."

Beijing's calculation also revolves around its broader strategy vis-à-vis Tibet. China last month inaugurated the Golmud-Lhasa rail link, which connects Beijing directly to the Tibet Autonomous Region. The strategy of opening up Beijing in the northeast and Nathula in the southeast seems aimed at promoting economic growth that will once and for all close the chapter on any meaningful Tibetan autonomy that the Dalai Lama's government-in-exile in Dharamsala demands. More prosperity is seen as a surefire way of subduing Tibetan nationalism, which is where Nathula's opening finds its uses for Beijing.

Even as the opening of the Lhasa railway has some Indian traders excited about the possibility of greater market access in the future, the line to Golmud has caused consternation among Tibetans in exile. The fact that Nathula opened on 6 July, which also happened to be both the Dalai Lama's birthday and 'World Tibet Day', may have been a coincidence. But it has only served to reinforce the impression regarding Beijing's hard-line stance on the issue of Tibetan autonomy, and India's acceptance of China's position.

Interestingly, Tibetan activists are not critical of the possible impact of the re-opening of the pass itself, given that it marks restoration of a trade link that preceded the Chinese takeover of the 1950s. In fact, they argue for even greater movement between the two sides. "This will only revive historic links, though it is important to be careful about the impact of trade on our environment. What we are more worried about is the rail link, which might facilitate further Han influx into Tibet," says Kasur Tenpa Tsering, the Delhi-based representative of the Tibetan government-in-exile.

Activating the Nathula trade route is thus seen as a part of Beijing's broader strategy to stabilize Chinese frontiers. The opening of the pass could also add 'strategic depth' by giving China easier access to the Bay of Bengal. This would complement its control over the Gwadar port off Pakistan, and create, according to one analyst, a "new maritime security paradigm" for the country. Besides these strategic calculations, the sheer economic potential of Nathula would explain Beijing's interest, for the route could provide everything that the Chinese authorities have had to provide from the distant mainland to date. Production is today concentrated beyond the eastern frontiers of Tibet, and the cost of distribution is high; border trade could fulfil local demand at reasonable rates. More importantly, China also senses a future opportunity to access the billion-strong Indian market, even if the present infrastructural limitations make this a distant proposition.

Dilemma in Delhi

It is not clear if China's strategic thinking is matched by a similar long-term plan in New Delhi. For South Block, the single most important consequence of the Nathula re-opening seems to be China's explicit and seemingly irreversible acceptance of Sikkim as an Indian province. However, Lama believes that from initial scepticism, New Delhi bureaucrats have slowly awoken to the other purposes that Nathula's re-opening can accomplish. "Besides the strategic and economic gains, the Indian state can hold up the re-opening of the pass as an example to its other northeastern states about the benefits of maintaining peace," he notes. "Nathula can also provide a lesson on how border areas can develop."

At the same time, India has not yet been able to figure out what it really wants from the Nathula route. Would it be happy with a symbolic step, one with strategic meaning but little economic impact? Or is the central government looking at more definite gains? One policymaker admits, "It is true we have been hesitant about the way ahead, due to both security and economic considerations."

The security concern essentially stems from the cautious approach advocated by some senior officers in the Indian Army who have harrowing memories of the 1962 war. They express apprehension about expansion of the road up to the pass, because it would create a wide access for an invading force into India's interior. Younger officers, however, tend to disagree. A captain serving at Nathula says, "A healthy relationship based on trade and interaction between people is the best way to increase one's security."

The economic insecurity, meanwhile, is born out of the fear of Chinese goods flooding the market if trade is flung open beyond its present limitations. Nonetheless, there is a realisation in India about the inevitable economic engagement that lies ahead, and how Nathula could be used in this regard. Foreign Secretary Shyam Saran has said, "There is certainly the potential to develop this into a border trade crossing through which even normal trade can take place in the future."

The ambivalence of New Delhi's stand on Nathula, and how far it is willing to go, is a matter of acute concern in Gangtok. For this reason, Chief Minister Chamling spares no effort to thank every concerned ministry in Delhi for its support. Locals, meanwhile, voice apprehension about the intentions of the central government. "China has been far more flexible than India in terms of actual trade rules and procedures," says Pema Wangchuck, a prominent Gangtok journalist. "Delhi has posed unnecessary bureaucratic hurdles and has been reluctant to release funds for infrastructure. But economic logic will ensure that Nathula trade here will take off."

For now, optimism

Things have not proven quite that straightforward, however. A fortnight after the opening of the pass, trading activity had yet to begin between the two sides. The problem: the fact that Indian rules require traders to have an import-export code number. To get that code, however, it is essential to have a Permanent Account Number (PAN), issued by the national Income Tax Department. But Sikkimi residents are not issued this number, because the state does not come under the central taxation regime. It seems that in the innumerable meetings, workshops and awareness programmes in the run-up to the Nathula opening, the bureaucrats had forgotten to mention this requirement.

Gangtok traders are resentful that this formality has been waived at the two other India-China border trading points, at Lipulekh in Uttaranchal and Shipki La in Himachal Pradesh. Some believe that India has developed cold feet after seeing the Nathula route's potential, which far surpasses the limited trade possibilities at the other two points. But perhaps it is too early to hatch such theories. "This is a procedural matter – merely a reflection of the inefficient system we have in place. It will be sorted out," assures Lama.

The historic background of the trade link, geographical proximity to Calcutta and Lhasa, the efforts being made by the state government – all these give Nathula a distinctive edge vis-à-vis the other routes. But does it truly have the widely discussed economic potential? Modern trade is about multi-lane highways, high volumes and container traffic – none of which is currently in place in Sikkim. The only way to Nathula is through a narrow 143 km road from Siliguri, via Gangtok. Despite repeated promises, the central government has not yet released funds to improve the road across the difficult terrain. Some reports did suggest that INR 900 crore had been released for the purpose, but no official notification has been received in Gangtok.

Sikkim is currently allowed to export 29 products and import 15 others, including various livestock. While this is not exactly a recipe for high-volume trade, and while the state's weak industrial base does not help matters, the local business community is nonetheless convinced there is immense potential. Returning from Tibet after receiving orders for commodities, traders claimed that they had found an overwhelming response. Indeed, the challenge is to understand the needs in Tibet and capitalise on local strengths. On the import side, Sikkimis are allowed to purchase wool from their Tibetan counterparts, which in itself could reap rich dividends.

The optimism is also borne out by a glance at the map. A fully operational route across Nathula has the potential to change the way trade takes place in this corner of Asia, primarily because the distance from Calcutta to Lhasa through this route is less than 1200 km. The Calcutta-Kathmandu-Lhasa route, meanwhile, is more than twice that, at 2600 km.

The Calcutta dimension brings forth the possibilities of competition between Sikkim and West Bengal for the trading pie. This also raises broader questions about whether crossborder trade can be exclusive, or if it needs to accommodate other regions as well. The fact that trade is restricted only to Sikkimi residents has caused resentment in Siliguri. O P Agarwal, secretary of the Siliguri Merchant Association, says, "Unless Siliguri is included in the entire scheme of things concerning Nathula, the exercise will be partial." Sikkim officials confide that doing this would enable outsiders to take over the entire process, leaving locals with little more than crumbs.

Irrespective of whether Gangtok likes it or not, it is clear that the business community of North Bengal will play a key role once the trade picks up. Sikkim simply does not have either the manufacturing or agricultural base to supply Tibet on a sustained basis. In addition, a pattern visible from other zones with such restrictions is of outsiders setting up businesses under the name of local residents, and this is bound to be repeated here as well. Even if trade is restricted to border provinces for now, it is best for all actors to recognise that, sooner or later, a more inclusive framework is inevitable. The logic of Nathula trade is bound to go beyond Gangtok, and rope in Siliguri and Calcutta – not to mention Mongla in Bangladesh in the slightly extended future.

For the moment, the important point is that Nathula has re-opened. What is critical now is getting the route activated, and learning from the experience over the next few years – even as trade through the pass, both in terms of quantity and reach, expands to another level. More than anything else, it is the true power and enthusiasm of individual entrepreneurship that will drive Nathula trade. More than four decades after he last engaged in border commerce, the septuagenarian Gangtok businessman, Ridh Karan, understands this point well. With a glint in his eye, he says, "Do you think exporting dry fruits to Tibet is a good idea? I have just submitted my application for a trade license."