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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 
 
 
¶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 
 
CALCUTTA 00000173  003 OF 003 
 
 
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. 
 
--------------- 
COMMENT 
---------------- 
 
¶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