With new dispensation in Kathmandu, talks resume on projects under BRIOfficials say Nepal and China are drafting implementation plan, as Deuba government aims to push projects under Beijing initiative to facilitate passage of America’s MCC.
Nepal and China are working on a draft implementation plan for the projects to be executed under the Belt and Road Initiative, four years after signing the framework agreement on Chinese President Xi Jinping’s flagship programme that seeks to connect Asia with Africa and Europe via land and maritime networks.
Not a single project has taken off under the BRI, to which Nepal signed up in May 2017.
Now with both sides exchanging the draft implementation plan, negotiations on projects and their execution under the Belt and Road Initiative (BRI) are expected to take off, according to multiple government officials.
A draft of the implementation plan is the prerequisite for project selection, funding modality, budget, supervision and monitoring and human resource management.
The Ministry of Foreign Affairs is taking the lead in developing the plan while other agencies like the Office of the Prime Minister and the Ministry of Finance are providing inputs, according to at least three officials working on the draft.
“The Chinese had sought the implementation plan so as to have a proper idea on how Nepal can execute the projects under the BRI,” Kali Prasad Pokhrel, who served for more than three years as the head of the North East Asia Division at the Ministry of Foreign Affairs, told the Post. “But we had yet to respond to the Chinese request.”
Pokhrel retired from service in February this year.
“Not only from Nepal, the Chinese had asked for similar implementation drafts from other countries that have signed up to the BRI as well,” said Pokharel. “I am not aware of the current status though.”
So far, close to 140 countries have signed up to the BRI.
When Nepal signed the BRI agreement in 2017, it was touted as a watershed moment in Nepal-China ties. But with not a single project taking off under the Chinese programme, there were concerns if there was reluctance from Nepal itself due to some geopolitical reasons.
India, Nepal’s southern neighbour, and the United States see the BRI as China’s bid to exert influence in the region, using its economic heft. Countries like Sri Lanka and Pakistan in South Asia too are part of the BRI.
When Nepal agreed to build projects under the BRI, Pushpa Kamal Dahal of the Communist Party of Nepal (Maoist Centre) was prime minister. After him, Sher Bahadur Deuba of the Nepali Congress led the government, followed by KP Sharma Oli of the CPN-UML.
Deuba once again is back in the seat of power now.
After successive governments failed to initiate any project under the BRI, according to people familiar with the matter, there was some kind of unease on the Chinese side if Nepal was really committed to what it signed up to.
The only development with regard to the BRI from the Nepal side is that Kathmandu in January 2019 sent a list of nine projects to China. There was no further progress on negotiations.
“After signing the framework agreement in 2017, we had sent a list of projects to be executed under the BRI to the Chinese side,” said Dhani Ram Sharma, head of the International Cooperation Division at the Ministry of Finance. “Since then there has been no further development.”
According to sources at the Finance Ministry, Nepal is investing $220 million received from the European Union and the China-led Asian Infrastructure Investment Bank to develop a transmission line to connect Karnali and Sudurpaschim provinces with the national grid.
“Half of the money will be used from the EU and half of the investment will be made from China-led AIIB and we are trying to put the project under the BRI,” a ministry official said.
A month after signing the agreement, the government in June 2017 had formed three different committees headed by secretaires from finance, foreign and physical infrastructure ministries to execute the projects under the BRI.
The finance secretary-led committee was tasked with coordinating and facilitating the selection of the projects and forwarding the concept to the foreign secretary, who was mandated to hold meetings with the relevant stakeholders before pitching them to the Chinese side.
A subcommittee led by secretaries from several ministries was entrusted with the task of providing technical support to the finance and foreign secretaries. These thematic and sectoral subcommittees were supposed to prepare technical details of the projects and recommend them to the three secretaires, according to a former secretary at the Ministry of Physical Infrastructure.
“None of these mechanisms, however, functioned properly. They became defunct without holding a single meeting,” the former secretary, who did not wish to be named, told the Post.
Initially there were talks that China would be building two separate railway projects linking China’s Kerung to Kathmandu and Kerung to Pokhara whose detailed study is still being carried out.
China has already agreed to carry out the study on the proposed rail links under the banner of Nepal-China Trans-Himalayan Multi-Dimensional Connectivity Network.
The study, however, was halted due to the Covid-19 pandemic.
The framework was initially signed for three years, but the period elapsed without any progress. The agreement was renewed in May last year for another three years. Policy coordination, infrastructure connectivity, unimpeded trade, financial integration and connecting the people are the five major priority areas of the BRI.
The major impediment to the selection and implementation of projects under the BRI is the lack of clarity on financing modality, according to officials. Nepal, say officials, is seeking donations, but the Chinese are insisting on soft loans.
A Nepali diplomat earlier based in Beijing said there is no hard and fast rule to develop the implementation plan and not all countries that signed up to the BRI have developed such a plan.
“There are several countries that are executing projects under the BRI without an implementation plan,” said the diplomat who did not wish to be named. “Some have worked on such implementation plans though.”
According to the diplomat, since both Nepal and China had agreed to develop such a plan after signing the agreement, they must be working on it.
The implementation plan encompasses all possible areas of cooperation, and gives clarity on project negotiations to both sides.
For example, according to officials who are working on the draft, if Nepal seeks support for projects under the BRI for connectivity, then it would make a list of various kinds of projects under air connectivity, physical connectivity, digital connectivity, transmission lines, cultural connectivity and connectivity through trade, goods and commerce.
“Then we finalise the project under each area of cooperation and start negotiations,” said an official familiar with the matter.
A joint-secretary said there has been no clarity on the part of Nepal on how to negotiate and push the projects under the BRI.
“Since we never held discussions on the modality, there was no way we could have executed projects under the BRI,” the joint-secretary told the Post.
Another official told the Post that some rounds of discussions had taken place between the two sides and some drafts too were exchanged so as to reach a consensus on the proposed projects.
But in the absence of a dedicated implementation plan, Nepal could not identify the projects under the BRI.
When KP Sharma Oli visited China in 2018 during his first stint as prime minister, in his meeting with Chinese Premier Li Keqiang, he had read out a list of 35 possible projects to be executed under the BRI framework.
As China prefers soft loans to finance projects under the BRI, given Nepal's economic status and its desire to get grants from China, the Chinese officials later advised the Ministry of Finance to trim down the projects from 35 to nine.
China has its separate Commerce Consular Office in Kathmandu that looks after Chinese funding in Nepal, including the BRI.
The nine projects identified were—upgrading the Rasuwagadhi-Kathmandu road; Kimathanka-Hile road construction; road construction from Dipayal to the Chinese border; Tokha-Bidur road; Galchhi-Rasuwagadhi-Kerung 400kv transmission line; Kerung-Kathmandu rail; 762MW Tamor hydroelectricity project; 426MW Phukot Karnali hydroelectric project; and Madan Bhandari Technical Institute.
Ahead of Chinese President Xi Jinping’s Nepal visit in October 2019, the Nepali side proposed developing Madan Bhandari University under the BRI when Chinese Foreign Minister Wang Yi was in Kathmandu. That was the only project the Nepali side had proposed for development under the BRI but due to several reasons, it is in limbo. After Covid-19 hit China, other projects were affected too.
Sources in the Communist Party of Nepal (Maoist Centre), which is a key coalition partner, say the Deuba government is for starting at least two to three projects under the BRI within a year.
“Not strategic, but some medium-sized projects that can economically benefit Nepal can be thought of,” said a Standing Committee member of the Maoist Centre. “We are of the view that some projects under the BRI must be moved forward… so as to facilitate the parliamentary ratification of the United States’ Millenium Challenge Corporation.”
The MCC, under which Nepal will receive $500 million in grants, is awaiting House ratification, as it has become a hotly debated political issue in Nepal.
“As soon as the BRI was signed, there was a kind of confusion as to who will select, negotiate and pursue the projects,” said Rupak Sapkota, deputy executive director at the Institute of Foreign Affairs. “When Nepal forwarded a list of 35 projects, which were later brought down to nine, there was ad hocism… there was no proper study.”
According to Sapkota, a dedicated implementation plan can pave the way for selection of projects, after which negotiations and execution can move forward.
“As per my understanding, the current dispensation in Kathmandu may make a push for some projects under the BRI,” Sapkota, a PhD in International Relations from China’s Renmin University. “This may also help the passage of the MCC from the House.”