Nepal signed up to the $500 million Millennium Challenge Corporation Compact in September 2017. After years of lingering, and controversy and discord in recent months, the lower house of parliament on February 27 ratified the compact along with a 12-point declaration. The decision has already been communicated to the MCC headquarters.

A board meeting of the MCC scheduled for this week is expected to adopt the decision made by the Nepali parliament before the compact enters into force.

Four months prior to the signing of the US compact, Nepal had signed up to the Framework Agreement on Belt and Road Initiative, an ambitious multi-billion-dollar infrastructure initiative undertaken by China that seeks to connect Asia with Africa and Europe via land and maritime networks with the aim of improving regional integration, increasing trade and stimulating economic growth.

But not a single project under the BRI has taken off in Nepal even five years after the signing of the framework agreement.

Multiple sources in the government and political leadership told the Post that the major purpose of the upcoming visit of Chinese Foreign Minister and State Councillor Wang Yi is to push for the implementation of the BRI and sign at least two projects during the visit if possible. Foreign Minister Wang is scheduled to arrive in Kathmandu on March 26 on a two-day official visit where he will call on President Bidya Devi Bhandari, Prime Minister Sher Bahadur Deuba and hold delegation level talks with his Nepali counterpart Narayan Khadka. Accompanied by some senior leaders of the Communist Party of China, Wang will meet several leaders from the ruling and opposition parties.

“We have already received the text of the project implementation plan of the BRI from China,” a senior government official told the Post, adding, “During the visit, both sides are expected to agree on the text of the project implementation plan, which will pave the way for execution of BRI projects.”

During internal consultations with regard to BRI projects in December last year, the Ministry of Finance, in its recommendations to the Ministry of Foreign Affairs, had suggested that the two countries should set up a joint mechanism for the selection of projects.

The official said the recommendations also include avoiding commercial loans for the implementation of BRI projects because they are too expensive.

“In our recommendation, we have clearly stated that we should seek preferably a grant from China or concessional loans at less than 2 percent annual interest to fund the projects under the BRI. Our economy is too small to be able to afford commercial loans, so we should avoid such loans,” a senior Finance Ministry official said.

Former Nepali ambassador to China Mahendra Bahadur Pandey said during his term, Nepal held discussions on potential BRI projects and worked on the text of the project implementation agreement. “It’s a good volume with 40-45 pages in both English and Chinese,” he said.

Pandey, who was appointed by the former KP Oli-led government, was recalled in September last year after Sher Bahadur Deuba came to power.

Although the project implementation plan is not a prerequisite for implementing the BRI Framework Agreement, some countries have developed such a plan before selecting and negotiating for projects, according to another Nepali diplomat who had served in Beijing.

“As per the suggestions of the Chinese side, we had prepared the plan, sent it to Beijing for their inputs and now we have received it,” the official added.

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.

“We have already received the text from Beijing and we are exchanging final notes and comments regarding the modalities to finance the projects,” a senior official privy to the upcoming Chinese visit said. “Once the two sides sign the implementation plan, we will enter the project negotiation phase.”

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 no project taking off under the Chinese programme, there were concerns, especially by some Western countries, 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. And Deuba is back again in the prime minister’s seat.

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.

Since Wang is likely to push for BRI implementation against the backdrop of the MCC compact’s ratification, the finalisation and signing of the project implementation plan are necessary before the projects can enter the implementation phase, said a senior foreign ministry official.

Other issues on the Nepali agenda during Wang’s visit include full-fledged reopening of the northern border points–Rashuwagadhi and Tatopani, which are major trading points between Nepal and China, resumption of flights between the two countries, problems faced by Nepali students enrolled in various Chinese universities who had to return home abruptly due to the pandemic, and other regular issues related to tarde, commerce, infrastructure, among others.

China has closed most of its land border points since the Covid pandemic hit the country in 2019.

Meanwhile, during a recent interview with the Global Times, a mouthpiece of the Chinese government President Bidya Devi Bhandari also expressed her dismay over the slow progress on the BRI projects.

“We see them [BRI projects] as opportunities for Nepal's infrastructure development and would like to advance this process. For many reasons, the BRI projects are yet to gain momentum even as we had signed the memorandum of understanding some five years ago. We need to put our common effort toward expediting them,” Bhandari said in the interview.

According to the Finance Ministry official, China will definitely push and seek assurance from Nepal to construct the Kerung-Kathmandu cross border railway as the Chinese have already expressed their intent to carry out a feasibility study for the project in recent virtual meetings with Nepali officials.

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.

According to a joint secretary at the Ministry of Physical Infrastructure and Transportation, the Chinese side has already made it clear that they will undertake the feasibility study of the Kerung-Kathmandu railway network and an agreement to this effect is expected during the visit.

Foreign Ministry spokesperson Sewa Lamsal said officials are currently consulting several stakeholders to prepare an agenda for the high-level meeting with the Chinese foreign minister. “Once the consultations are completed, we will officially announce the agenda and the date of the visit.”