
KEY TAKEAWAYS
- Often overlooked, the Himalayas’ smaller states are crucial players in regional stability.
- Bhutan’s border feud with China and Nepal’s political instability are issues to watch going forward.
- Hydropower and tourism can help both countries develop their economies and stem the flow of emigrants.
Bhutan’s border with China has been receiving increased attention in international media amid the wider trend of China’s territorial and maritime contestation across the Indo-Pacific region. In your view, how should observers understand this border situation, and to what extent does it inform Bhutan’s relations with India?
Bhandari: The demarcation of the border between Bhutan and China is an important ongoing issue for the two countries — especially after four decades of bilateral negotiations, which began in 1984. While progress has been slow, China and Bhutan have identified the disputed areas.
But the solution is marred by Bhutan’s obligation to safeguard India’s security concerns at the trijunction in Doklam, where Bhutan controls 269 square kilometers of land that is contested by China and borders India. China wants to retain this disputed land in Doklam for strategic reasons, and has attempted to entice Bhutan by making larger concessions (495 square kilometers) in Jakarlung and Pasamlung on Bhutan’s northern border.
Persuading Bhutan to concede in Doklam would presumably allow China to negotiate from a position of strength in its border dispute with India — particularly on the undemarcated border in the Indian state of Arunachal Pradesh.
For India, a Chinese presence in Doklam would endanger its national security, as a conflict with China could result in China using Doklam to push southwards to cut-off India’s land connectivity to its seven eastern states through the so-called “chicken-neck corridor” in West Bengal.
This places Bhutan in an uncomfortable position. If Bhutan were to accept the Chinese offer and agree to establish diplomatic relations with Beijing, this could make border demarcation easier and faster — for instance, China may withdraw its surprising 2020 stance that Bhutan’s Sakteng Wildlife Sanctuary was also contested territory.
However, the 2007 India-Bhutan Friendship Treaty states that the two governments “shall cooperate closely with each other on issues relating to their national interests. Neither Government shall allow the use of its territory for activities harmful to the national security and interest of the other.” Moreover, India sees itself as Bhutan’s de facto ally if Bhutan were to face any external threat to its national security and sovereignty — as was indicated in the 2017 standoff between India and China in Doklam.
Bhutan also has an established policy … to avoid being embroiled in any dispute between larger powers.
Despite religious and cultural affinities, Bhutan has a historically uneasy relationship with neighboring Tibet. However, matters like cattle herders crossing traditional boundaries for grazing were tackled on a local level and did not attract national attention. Hence, in as much as China’s infrastructure development and settlements inside Bhutanese territory undermine Bhutan’s territorial integrity, the practical implications are marginal as the areas in question are far-flung and mountainous with little or no economic benefit.
Similar to its Chinese and Indian neighbors, Bhutan is likely buying time until an opportune moment to strike a deal on the border problem presents itself. Any improvement in relations between China and India, especially de-escalation of tensions along the border, would create a more congenial environment for the resolution of the border dispute between Bhutan and China.
What are the top challenges and opportunities that you see for Bhutan, as we approach a new year?
Rabgye: One of Bhutan’s biggest challenges is the large-scale migration of young, talented and well-educated Bhutanese to Australia and elsewhere, especially the Middle East.
This exodus has created a shortage of teachers in schools, doctors and nurses in hospitals, staff in banks and government offices, and also hurts other sectors of Bhutan’s economy. Over time, the depletion of educated youth means that the quality of civil servants and members of parliament may decline as well. The exodus also has a social impact, as children whose parents are searching for opportunities abroad are increasingly left in the care of their aging grandparents.
Additionally, unlike India — which offers incentives for non-resident Indians to invest in India — Bhutan’s stringent visa and foreign direct investment rules drive Bhutanese citizens with U.S. and Australian passports to invest elsewhere.
This phenomenon poses “an existential threat” to the country, to quote Bhutan Prime Minister Dasho Tshering Tobgay. But there is also hope and opportunity. Bhutan is a small country endowed with pristine natural beauty and swift snow-fed rivers that are being harnessed to generate hydropower that is exported to India. With the right policies in place, tourism can become a major source of foreign exchange without diluting the culture and environment. Bhutan also maintains strong ties with India and Bangladesh, offering opportunities to collaborate in trade and other areas.
To address the tide of migration out of Bhutan, Bhutan’s Fifth King has shared plans to establish an economic hub called the Gelephu Mindfulness City (GMC) — a 2,500 square kilometer area in the south-central part of the country. The aim behind the GMC is to create a gateway connecting Bhutan to the world through business and employment opportunities for Bhutanese and international professionals.
Nepal has experienced significant political instability with many changes in leadership in a relatively short time span. How should observers understand these transitions of power, and what, if anything, do they mean for Nepal’s relations with India and China?
Baral: The country’s political system does not easily lend itself to producing single-party governments, relying instead on coalition governments that are often comprised of three or more parties. Therefore, there is a built-in instability to the Nepali political system.
Part of the problem is Nepal’s electoral system. Its mix of direct election and proportional representation won’t allow any one party to get an absolute majority and gives smaller parties a lot of bargaining power. Also, you could say Nepali democracy is still in its infancy — although democracy was restored in 1990, there was a coup in 2005, which again obstructed the course of democratic development.
That said, the transfers of power have been relatively smooth. Since 2013, Nepal has alternated between three prime ministers: KP Sharma Oli, Pushpa Kamal Dahal (also known as Prachanda), and Sher Bahadur Deuba.
Typically, Nepali communist parties have been closer with China while the Nepali Congress, the oldest and the biggest party, has been more inclined toward India. However, the unstable nature of Nepali government has made it difficult for foreigners, including India and China, to build relations or plan long-term projects with Nepal. This fractured political landscape coupled with the mixed electoral system means that there will continue to be significant differences among the political class on how to deal with India and China.
Nearly a decade has passed since Nepal’s constitution, which took significant steps toward codifying gender equality, came into effect. How has Nepal’s approach toward greater inclusiveness and representation fared in the past decade, especially regarding the role of women?
Rai: Nepal’s constitution guarantees equal rights to men and women and prohibits gender-based discrimination. But the same constitution also contains provisions that limits Nepali women’s ability to pass on citizenship to their children. Unlike men, conditions apply to women when it comes to exercising something as fundamental as their citizenship rights. And when gender equality is built on such shaky foundations, women’s meaningful representation in the country’s political processes is bound to take a back seat.
In 2015, Nepal’s constitution adopted gender quotas to promote women’s political participation. But despite the new inclusive structure of the state, policymaking in Nepal continues to be largely driven by men. For instance, even with the 33 percent of seats reserved for women under the constitution, women’s representation in parliament has been dismal. During the 2022 general election, women candidates received less than 10 percent of party nominations under Nepal’s first-past-the-post system. And among them, there were hardly any women from the Dalit community or other marginalized groups.
However, there have also been many historic firsts for women’s representation. In the past nine years, Nepal has seen its first woman president (a ceremonial position), the first woman chief justice, and the first woman parliament speaker. But a handful of women holding prominent roles only paints a partial picture of inclusiveness and representation in Nepal. Much needs to be done to address the underlying systemic barriers that prevent women’s meaningful representation in the country’s political institutions and processes.
What are the top challenges and opportunities that you see for Nepal, as we approach a new year?
Jaiswal: One of Nepal’s primary challenges in 2025 will be achieving political stability. A change in government is likely in the coming months, as the current coalition between the Nepali Congress and the Communist Party of Nepal (Unified Marxist-Leninist) appears fragile. Prime Minister KP Sharma Oli’s visit to China in December may further strain relations between coalition partners. Additionally, the nation continues to grapple with economic difficulties that have persisted since the pandemic. Youth migration remains a critical issue, with an average of 1,500 to 2,000 Nepali young people leaving the country daily for foreign employment. This trend is expected to persist given the current economic and employment situation.
Despite these challenges, Nepal has achieved notable milestones with significant potential for positive impacts. For instance, Nepal recently exported 40 MW of electricity to Bangladesh via the Indian transmission network under a trilateral power-sharing agreement with India and Bangladesh. This achievement highlights the growing potential of Nepal’s hydropower sector, which could play a transformative role in the country’s economy. Moreover, the emergence of new connectivity projects — including international airports, cross-border bus services and the establishment of big-brand hotels — presents immense opportunities for Nepal’s tourism sector. With its rich cultural heritage and breathtaking landscapes, the tourism industry is well-positioned for growth and improvement.
How should observers think about the way small states in South Asia navigate their foreign policies toward China and India, especially small states in the Himalayas?
Samaranayake: Smaller South Asian countries are often viewed as either playing large powers against each other or hedging in their strategic orientation. But when examining the foreign policy traditions and security outcomes of these countries, it is clear that their leaders have little space for balancing or hedging.
With a population of roughly 30 million, Nepal is often perceived as balancing between India and China, especially depending on the government in office. Meanwhile, with nearly one million citizens, Bhutan is often seen as a protectorate of India. Although both these smaller South Asian countries seek greater autonomy in the conduct of their international relations, they acutely understand the reality of India’s preponderance of capabilities and wide reach in the region.
As landlocked countries that trade primarily with India, Bhutan and Nepal are prioritizing economic development — with Bhutan having graduated from the U.N.’s “least developed countries” category last year and Nepal set to graduate in 2026. Both smaller states also want to avoid being caught in strategic rivalry between large powers. Furthermore, Bhutan does not have formal diplomatic relations with China but, as noted, is seeking to conclude decades-long negotiations over border demarcation. The resolution of this dispute would then raise questions about the prospect of Bhutan establishing diplomatic relations with China, as well as with other powers such as the United States.
Yet for the foreseeable future, there will continue to be limits on the range of action for Nepal and Bhutan in their development and security choices due to India’s regional dominance and major-power competition between India and China. Washington will need to survey the shifting landscapes within these smaller Himalayan countries in the coming years.
Achyut Bhandari is a former diplomat and co-founder of the Centre for Research on Bhutanese Society.
Sonam Rabgye is a retired ambassador and chairperson of the Centre for Research on Bhutanese Society.
Biswas Baral is the editor of The Kathmandu Post
Bhrikuti Rai is a journalist and co-host of the “Boju Bajai” podcast.
Dr. Pramod Jaiswal is the research director of the Nepal Institute for International Cooperation and Engagement.