For the first time, China’s external aid and development agency, China International Development Cooperation Agency (CIDCA) is making a foray into Nepal, pledging to finance 15 pilot development projects in 13 northern districts of the country.

In March 2019, the Nepal government had permitted the agency to provide development assistance so as to create capital in 15 northern districts of Nepal to meet their developmental needs.

A framework agreement was signed between the Ministry of Finance and CIDCA during the state visit of Prime Minister KP Sharma Oli to China in June 2018, allowing CIDCA to work in Nepal.

The project has been named “Northern Region Border Development Programme”. While the money in the projects will be invested by the cooperation agency, the Ministry of Commerce of China will be the implementing agency.

Besides these projects, CIDCA is executing projects like improvement of Araniko Highway and the Ring-Road Improvement Project(Phase II) , which are going to be initiated soon.

Fifteen of Nepal’s 77 districts share borders with China’s Tibet Autonomous Region.

Officials at the Ministry of Federal Affairs and the Ministry of Finance say China seems interested in the development of and direct connection with Nepal’s northern region just as India’s interest lies in the development of the southern Tarai region by investing in small and big projects.

Observers and experts on diplomacy, however, interpret it differently. They say the primary reason behind China coming forward to invest in the northern region of Nepal is the Tibet issue.

“China’s concern about Tibet is the major reason behind the investment in the northern districts,” said Pramod Jaisawal, China watcher and a former senior research fellow at Institute of Peace and Conflict Studies.

He sees China’s investment as a soft-power ploy to earn goodwill of the Nepali people living in the region while it prepares the groundwork for long-term gains.

“Chinese investment in the northern region holds low geo-strategic significance, but in doing so, it can ward off the presence of India and the West from coming closer to Tibetan border. Such investment will advance China’s goodwill in the northern region,” Jaisawal said.

Earlier, the Tibetan autonomous government used to supply food and other essentials in the districts of Darchula, Bajhang, Humla, Mugu, Dolpa, Mustang, Manang, Gorkha, Dhading, Rasuwa, Sindhupalchok, Dolakha, Solukhumbu, Sankhwasabha and Taplejung.

But this time, the Chinese development agency and the Tibetan government are directly assisting projects in northern districts, something quite different from the previous one, according to officials at the Ministry of Finance.

CIDCA was established in 2018 with an objective to strengthen the strategic planning and overall coordination of the Chinese aid to various developing and under-developed countries.

Bishnu Datta Gautam, joint secretary at the Ministry of Federal Affairs and General Administration, said the ministry had initially identified 24 projects in 15 districts for Chinese investment, but they were later whittled down to 15 at the request of Chinese officials.

The districts of Darchula and Dhading were also excluded, thus reducing the number of districts to 13.

All 15 projects have been selected and categorised into clusters based on the selection criteria of the Chinese aid agency.

“They (Chinese officials) told us to select the projects based on clusters so that one or two contractors can complete the pilot projects without moving much in a difficult geographical terrain,” an official at the Ministry of Federal Affairs told the Post. “As per their request, we developed three clusters—eastern, mid and far-west.”

As per the agreement between Nepali and Chinese officials reached in March 2019, the Chinese aid agency has expressed its intent to work with local governments of Nepal in various infrastructure projects, like roads, health facilities, school buildings and irrigation channels.

Prahlad Karki, under secretary at the Ministry of Federal Affairs and General Administration, said they were waiting for the Chinese side to respond as they have already sent the projects for approval.

“We could not hold meetings with the Chinese side because of the Covid-19 pandemic. It’s been nearly one month since we selected the projects and sent them for approval,” Karki told the Post.

“Each project is based on its size and the total budget may be somewhere around Rs 1 billion. These are pilot projects so each project’s cost will not exceed Rs 50 million.”

In a deal signed by Nepal and China in 2014, China has agreed to provide 10 million yuan ($1.63 million) annually from 2014 to 2018 to help Nepal develop its northern districts bordering China's Tibet Autonomous Region. The aid was spent in health, education and road sectors.

Now, China aims to invest one to three billion rupees for development projects in Nepal’s northern region, a telling sign of Chinese growing interest in Nepal because of the Tibet issue, say observers.

“China does not like the movement of Indian and western donors in the north due to the sensitivity of Tibet,” said Jaisawal. "With China’s investing in the northern region, it might even say to Nepal not to permit the other donors to invest in the north as it is ready to pour any investment that Nepal needs.”

Anand Pokharel, a former minister, meanwhile views the issue differently.

He says the Chinese investment interest in the northern region of Nepal was also to do with the “extensive lobbying we did with both the provincial and central governments of China.”

“Earlier, China did not pay much attention to the development of the northern region of Nepal. China has started paying attention to the region since 2009,” said Pokharel.

“It is not good that the other side of the border is poor, lacking in resources and hit hard by poverty. So the Chinese central and Tibetan governments started supporting the other side of the Himalaya on the principle of shared prosperity,” he said.

He noted that the Chinese investment was about eradicating poverty, bringing two peoples and countries closer and about expediting economic activities.

“Chinese support and interest in Nepal’s northern region always remains high,” said Pokharel.