Identifier
Created
Classification
Origin
06CALCUTTA173
2006-04-28 11:25:00
UNCLASSIFIED//FOR OFFICIAL USE ONLY
Consulate Kolkata
Cable title:  

INDIAN HIMALAYAN STATE SIKKIM SLOWLY OPENING FOR TRADE AND

Tags:  PGOV ECON SENV SOCI ETRD IN CH 
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UNCLAS SECTION 01 OF 03 CALCUTTA 000173 

SIPDIS

SENSITIVE
SIPDIS

E.O. 12958: N/A
TAGS: PGOV ECON SENV SOCI ETRD IN CH
SUBJECT: INDIAN HIMALAYAN STATE SIKKIM SLOWLY OPENING FOR TRADE AND
TOURISM


UNCLAS SECTION 01 OF 03 CALCUTTA 000173

SIPDIS

SENSITIVE
SIPDIS

E.O. 12958: N/A
TAGS: PGOV ECON SENV SOCI ETRD IN CH
SUBJECT: INDIAN HIMALAYAN STATE SIKKIM SLOWLY OPENING FOR TRADE AND
TOURISM



1. (SBU)Summary: From April 13-19 CG visited the Himalayan
state of Sikkim to assess its political, social and economic
issues. An independent kingdom until its annexation by India in
1975, Sikkim offers an interesting contrast to its neighbors,
Bhutan, Nepal and Tibet, with which it shares many ethnic and
cultural links. The state politics are stable. Relations
between its three main communities, the Bhutias, Lepchas and
Nepali are good and it is seeing an upturn in tourism as a more
peaceful alternative to Nepal. However, poor infrastructure and
access permits are impediments to greater economic growth. In
addition, business and government officials are reluctant to
open up full trade with China through the Nathu La pass. While
generous government grants and subsidies are helping fuel
development and power generation projects, some observers
expressed concern that the GOI is creating a culture of
dependency in the state. Sikkim's unique status as the only
state in East India free from insurgency and its relatively
pristine Himalayan hinterland offer great potential for tourism
and service sector industries, if the development process is
managed well and incorporates environmental safeguards. End
Summary.


2. (SBU) Sikkim was an independent Buddhist kingdom until 1975
when it was annexed by India. Growing political instability in
1973 and protests by the large disaffected Nepali population,
some say instigated in part by the GOI, created a situation,
which India felt warranted its deployment of troops. By 1975 the
GOI instituted a plebiscite on merger with India, and forced the
abdication of the King (Choygal). Indian interference in Sikkim
was motivated by fears that China would use the instability as
an opportunity to further its claim on a kingdom that
traditionally had been a feudatory of Tibet. It was not until
2003 that China formally renounced its claim to Sikkim.


3. (SBU) Although India's 1975 annexation broke the political
dominance of the Tibetan Bhutia minority (18 percent) and gave
greater power to the majority Nepali population (70 percent),

ethnic relations are peaceful. The indigenous Lepchas (12
percent) remain mostly undisturbed in the remote rural areas of
North Sikkim. While regretting their loss of independence, few
contacts, not even ethnic Bhutias, expressed strong resentment
with India's annexation of Sikkim. Most observers noted that
the GOI has been spending a significant amount of money on
improving infrastructure and education in the state, money that
small Sikkim would not have had if it had been independent. The
GOI's Planning Commission is providing assistance of almost USD
one billion; a sizeable budget given the state has a population
of only 540,000. Anthropologist Anna Balikci (protect),working
with the Namgyal Institute of Tibetology in Gangtok, felt the
GOI assistance was creating a culture of complacency and
dependency in the rural communities and breaking down normal
social and economic patterns.


4. (SBU) In addition to noting the good ethnic relations in
Sikkim, all observers, whether government officials or private
individuals did not see immediate negative repercussions from
the civil unrest and Maoist insurgency in neighboring Nepal.
Director General of Police C.M. Ravindran said that there was no
evidence of Nepali Maoists crossing the border from Nepal and
insinuating themselves into the local Nepali community. Nor,
was there any influx of Nepali refugees fleeing instability.
Sikkim is also fortunate so far in being unaffected by Maoists
insurgencies in neighboring states of Bihar and West Bengal, or
the more aggressive Nepali politics in West Bengal. Local
Nepali activists in West Bengal had sought an autonomous
Gorkhaland centered on the hill town of Darjeeling, an area once
part of Sikkim prior to the British Raj.


5. (U) Problems in Nepal have helped Sikkim in attracting
foreign tourists. Ecotourism Conservation Society of Sikkim
(ECOSS) founder P.D. Rai remarked that the number of foreign
tourists has remained static at around 15,000 per year, but this
recent season was seeing a rise in foreign tourist numbers as

CALCUTTA 00000173 002 OF 003


trekking and tour groups were redirecting their traffic to
Sikkim. Domestic tourist numbers have also seen a consistent
rise of 12 to 15 percent in recent years. In their interaction
with CG, members of the Confederation of Industries (CIS) noted
growth in sectors related to the service and tourism industry
such as hotel, food and beverage businesses.


6. (U) However, the attraction of Sikkim's mountainous
isolation, while a draw for tourists, has complicated economic
development as infrastructure remains inadequate. Sikkim has no
airport. There are irregular helicopter flights from the
nearest airport in Bagdogra, West Bengal to Sikkim's capital
Gangtok. Access to Sikkim's tourist areas typically involves
driving at least five hours from Bagdogra airport on narrow,
sharply winding roads, without shoulders, making a precipitous
drop of several thousand feet a very real danger. Washouts and
rockslides are ever-present obstacles. The Sikkim government
also requires special permits for all foreigners to visit the
state. The permits are usually issued but still take 30 days to
process, creating an additional bureaucratic impediment to
visitors.


7. (SBU) The GOI had agreed to open border trade with China
through Nathu La pass on the border with Tibet to stimulate
trade and development, but the opening has been delayed from
October 2005 to May 2006 and only will be open for four hours a
day, twice a week. Local business people and state government
officials were wary of full trade with China for security and
business reasons. Many still remember the 1962 Sino-Indian war
and the 1967 Nathu La Chola skirmishes. Senior state government
officials and military officers generally expressed concern
about closer economic relations with China and indicated that
the effort was being driven by the Central government. Local
business people including CIS President L.B. Chhetri said that
they were afraid they would be unable to compete with
inexpensive Chinese imports and so the business community was
not encouraging the opening of trade through Nathu La.
Traveling on the road to Nathu La, CG noted that the road was
very narrow, steep and washed-out in places, and inadequate to
support significant commercial traffic. The existing military
and tourist traffic was already more than the road could
reasonably sustain. At 14,000 ft, Nathu La is also often
blocked by heavy snow, rain and fog. CG was only able to reach
12,000 ft altitude on his visit as the road was covered by a
foot of snow.


8. (SBU) In his meeting with CG, Chief Minister Pawan Chamling
recognized the limitations on Sikkim's development due to its
relative isolation and poor infrastructure. He said the funding
from GOI is helping to improve the roads and his government had
acquired land for an airport in Pakyong, 20 miles Southwest of
Gangtok. The Airports Authority of India is expected construct
the airport in three years. The Sikkim government, though, was
also receptive to a private investor constructing and operating
the airport if permitted by the central government. The CM also
said that he was planning to develop sectors in which Sikkim had
a comparative advantage: tourism, related services and
agriculture. In March Chamling toured Europe, traveling to
France, England, Germany, Holland and Switzerland looking for
investors and tourists. He opened the Sikkim booth at the
Tourism Bourse in Berlin and signed two memoranda of
understanding with a Swiss company for producing jewelry and a
Dutch company for flower processing and export.


9. (U) Hydropower generation is also seeing significant growth
in Sikkim. CG visited the National Hydroelectric Power
Corporation's (NHPC) Teesta River Stage V power project at
Sirwani. That project, a three turbine, run-of-the-river
design, is on schedule to be completed by February 2007 and will
generate 510 MW. Just 12 percent of the power generated will be
sufficient for Sikkim's needs (Sikkim's total power demand is 51
MW). The rest will be used to stabilize the Eastern power grid.
Sikkim's total hydroelectric power generation capacity is

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estimated to be 8000 MW. Existing and proposed hydro projects
along the Teesta and Rangit rivers should see up to 4759 MW
being generated by 2010. Sikkim anticipates revenues from sale
of power going from a mere USD five million presently, to USD 40
million by 1010, and USD 233 million in 2015.

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COMMENT
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10. (SBU) Sikkim's image as a remote Shangri La is changing
with the prospects of Nathu La's opening and other efforts to
attract tourists and business. From a "Far Horizon" it is
becoming a "Brave New World." Anthropologist Balikci's concerns
about the impact on the Sikkimese people by the GOI's large
expenditures in the state, offers an echo of Huxley's social
commentary. The GOI appears to have bought a happy compliance
and complacency from the Sikkimese, which is undermining the
traditional rural norms and will be further exacerbated by the
growing influx of tourists and development. The Sikkim
government will have to manage the implications of the economic
change it is fostering -- whether on its people or environment.
Sikkim is only just starting this process of economic growth, so
the full impact is not yet manifest but failure by the state
government to plan effectively for the impending changes could
result in greater social dislocation and environmental
degradation.
JARDINE