BILATERAL RELATIONS

Nepal and Australia established Diplomatic Relations on February 15, 1960. Australia opened its residential Embassy in Kathmandu at the level of Chargé d’ Affaires in 1984, which was upgraded to the Ambassadorial level in 1986. The Government of Nepal established Embassy in Canberra in March 2007.  The Government of Nepal established Embassy in Canberra in March 2007 which was formally inaugurated in September 2007 during the visit of the Foreign Secretary of Nepal. The Embassy, which was initially headed at the level of charge’d’ affaires, has now been upgraded to ambassadorial level and the first residential Nepalese Ambassador to the Commonwealth of Australia presented his Letters of Credence on 26 February 2008.

Nepal-Australia relations have always been friendly and cooperative. Exchange of visits at different levels has helped nurture the traditionally warm bonds of friendship between the two countries and peoples. Australia is among Nepal’s development partners, though official development assistance  from Australia has been modest. There exist tremendous potentials to enlarge the scope and enrich the substance of bilateral relations to the mutual advantage of both  countries. The potential areas for cooperation include trade, investment and tourism.

Australia’s assistance to Nepal started in 1960.  Nepal was included in Australia’s development cooperation program in 1979 following the establishment of diplomatic relations in 1960. Since then Nepal has been receiving assistance from Australia in such fields as forestry, livestock development and manpower training. The number of Nepalese private students coming to Australia for higher studies is gradually increasing. Australia has been providing certain number of scholarships to the Nepalese students. However, the number is declining in recent years.

On 20 May 2003, Government of Nepal and the Government of Australia concluded a MoU on Development Cooperation. The MoU provides for cooperation in development programs in conformity with Nepal’s goals in economic and development fields as well as in line with the two Governments’ policies, priorities and practices. Community Development, Human Resources Development and Health are the sectors targeted for possible activities with good Governance, Human Rights, Gender and Environment being identified as crosscutting areas.

With the conclusion in June 2006 of the Nepal Australia Community Resource Management and Livelihoods Project (NACRMLP) and the scheduled termination this year of the Australian Development Scholarship Program (ADS), the Australian Government is likely to give priority to assistance aimed at addressing the root causes of conflict and issues related to poverty and discrimination.

Australia’s assistance to Nepal is largely channeled through multilateral mechanism.

According to AusAID, in financial year 2006-07, Australia’s development assistance to Nepal increased for the first time in five years. The total Australian ODA to Nepal in 06-07 rose to $7.2 million from $5.2 million in FY 05-06. The AusAID has estimated Australian Dollars 8.2 Million as total ODA for Nepal for 2007-08.

Some important projects completed under Australian cooperation include:

  1. a)    Blood-bank Project
    b)    T.B. Control Project
    c)     Civil Aviation
    d)    Transfer for Airways Facilities
    e)     Nepal-Australia Forestry Project Phase I,II, III, IV and V
    f)      Projects under SACAS (South Asia Community Assistance Scheme)
    g)     Effective and Efficient Management and Administration in Nepal (Staff College)
    h)     Nepal Vitamin “A” Programme Year I and II (training component)
    i)      Australian Development Scholarship (ADS (post graduate level fellowship)
    j)      Situation Analysis of HIV/AIDS in Nepal
    k)     Agricultural Research (ACIAR)
    l)      Third Livestock Development Project
    m)    Management of Footrot in Small Ruminants (ACIAR)

An Australian company named Snowy Mountains Engineering Corporation (SMEC) is working in the West Seti Hydro Project with a potential of 750 MW of power generation. A MoU in this regard was signed between the Government of Nepal and the Company in 1994. A Project Agreement was signed between the two sides on June 27, 1997 (which was subsequently amended on December 11, 1998). On May 11, 1997, Power Export Agreement was also signed.  The Government of Nepal has signed an agreement for its 15 percent equity participation in the project through the Asian Development Bank loan. The Government of Nepal is yet to issue a generation license to SMEC. The SMEC is expected to commence its operation later this year.

The Fred Hollows Foundation has been contributing to blindness treatment and prevention in Nepal. The Tilganga Eye Centre came into being in 1994 with support from The Fred Hollows Foundation, incorporating the Nepal Eye Program Australia. The Foundation’s current support to the Tilganga Eye includes:

  1. Funding of Outreach Microsurgical Clinics
  2. Funding Community Eye Centres in Nuwakot, Dhading and Sindhupalchok.
  3. Providing support for the maintenance of equipment used by Tilganga’s outreach clinic teams.
  4. Supplying IOLs to other eye centres in Nepal.
  5. Providing assistance for ongoing staff training at Tilganga.

Tilganga Eye Centre also provides outreach services and training for surgical teams from Bangladesh, Bhutan, Cambodia, Pakistan, Sikkim, Tibet, Myanmar, and northern India, North Korea and for other country programs coordinated by The Fred Hollows Foundation (source: The Fred Hollows Foundation)

Trade, Tourism and Investment

Merchandise Trade between Nepal and Australia is not that significant. Even in such a situation Nepal is having big trade gap with Australia.  As per the data compiled by the Federation of the Nepalese Chamber of Commerce and Industry (FNCCI) www.fncci.org, in the fiscal year 2006/07 Nepal’s exports to Australia stood at NRS. 209046000 whereas imports stood at NRS 1854733000 with the trade surplus amount of NRS 1645687000 going to Australia (link http://www.fncci.org/text/all.pdf).
As reported by Australian Department of Foreign Affairs and Trade, Nepal imports soft oil seeds, animal oils and fats, non-electrical engines and fresh vegetables from Australia. Its main export items to Australia include hand-made carpets, pashmina shawls and jewelry. Trends of Nepal’s export to Australia and trends of Nepal’s import from Australia indicate the modest level of bilateral trade between the two countries.

The number of Australian tourists visiting Nepal has increased in recent months. As per statistics compiled by the Federation of Nepalese Chamber of Commerce and Industry, in 2007 12369 Australian tourists visited Nepal. This represents 2.35 % share in the total number of tourist arrivals in Nepal. It also represents an increase in the number by 50.3% of the total tourists arrivals from Australia in 2006 (trends of Australian visitors to Nepal (PDF).

Australian investors are also involved on a modest scale in aviation industry including helicopter service and hot air ballooning. Dynasty Aviation Private Limited with an authorized capital of NRs. 56.82 million (foreign share portion – 78 %) is operating aviation services with a fleet of two helicopters (720 hrs. per annum). Likewise, Australian Business Technology INS-Nepal is operating in Kathmandu with an authorized capital of NRs. 1.40 million in the sector of education and training. Foreign share of this company, however, is only to the tune of 6%.

The Department of Electricity Development has recommended a license to an Australian company, Pacific Hydro Limited, to conduct the survey of the 51megawatt Likhu-4 hydel project (Nepal-Australia joint venture projects (PDF).

An Australian company was awarded a Australian dollars 3 million contract in 2002 in the telecommunications sector. In 2002, the Note Printing Australia (NPA) concluded an agreement with the Nepal Rastra Bank  for the supply of 50 million polymer ten rupee banknotes. The same company was again awarded another contract of Australian dollars 4 million for the supply of additional 50 million banknotes.