Wang visit: Nepal, China sign nine agreements, none on BRINepali side conveys it wants more grants from China than loans. Two foreign ministers underscore the need for concerted efforts to expedite execution of ongoing projects.
From grass to railway and vaccines to economic and technical cooperation, Nepal and China on Saturday signed nine agreements and documents, but none on the Belt and Road Initiative with officials saying more negotiations needed.
The nine agreements were signed and exchanged between Nepali and Chinese officials after the delegation-level talks between Narayan Khadka and Wang Yi, the foreign ministers of the two countries.
Wang arrived in Kathmandu on Friday on a three-day visit.
Later on Saturday, Wang called on Prime Minister Sher Bahadur Deuba. According to a member of Deuba’s private secretariat, the prime minister
requested more grants and new projects from the north during his meeting with Wang, who is also the state councillor of China.
“While stressing the country’s economic priority, the prime minister during his meeting with the Chinese foreign minister and state councillor said that a loan is not what Nepal prefers at this point and sought more projects from China under a grant assistance,” Govinda Pariyar, the prime minister’s publicity affairs chief, told the Post.
None of the agreements signed on Saturday is related to the Belt and Road Initiative.
Deuba requested more projects as grants rather than loans at a time
when Nepal and China were at the final stage to conclude negotiations on the project implementation agreement for the Belt and Road Initiative, a flagship project of the Chinese President Xi Jinping that aims to inject billions of dollars into global infrastructure and connectivity related projects.
Nepal signed up to the BRI Framework Agreement in May 2017 but not a single project has taken off due to several constraints including finalisation of the text of the project implementation agreement.
Officials were expecting some breakthrough on the project implementation agreement but due to some differences between the two sides, the plan has been shelved, according to government sources.
During negotiations, the Nepali side insisted on grants and that if a loan had to be taken, it should be a “soft loan” or “concessional loan”.
A soft or concessional loan comes with minimal interest rate, while Beijing often offers loans under the BRI at a higher interest rate with a short payback period.
“And we have also set a cap,” said a senior Finance Ministry official. “Soft loans for the projects financed under the BRI must not have an interest rate more than 2 percent. Similarly, the repayment time should be as per the international standard or as per the interest rate imposed by the World Bank, the Asian Development Bank and others.”
The Nepali side has also maintained that projects under BRI should be open to all for execution, meaning the right to bid cannot be reserved exclusively for Chinese firms.
Another official familiar with the developments said negotiations will continue.
Beijing has been trying to push some projects under the BRI in Nepal, especially in the wake of Nepal’s ratification of the Millennium Challenge Corporation, a $500 million American grant for building electricity transmission lines and improving roads.
Just before Nepal’s Parliament endorsed the MCC on February 27, China had made at least two statements against the American grant—on one occasion even calling it “Pandora’s box”.
Officials familiar with Saturday’s engagements said that the Chinese side did not raise the issue of the MCC and rather focused on Nepal-China bilateral cooperation.
Pariyar said that no discussions were held on the MCC during the meeting between Deuba and Wang.
During his meeting with Wang, Foreign Minister Khadka, however, brought up the issue and tried to dispel the notion that the MCC is purely a development assistance.
“The Chinese foreign minister did not raise the issue of MCC during the meetings with the prime minister and me,” Khadka told reporters after the meeting between Deuba and Wang. “But since concerns had been raised [by China] in the past, I clarified that any development assistance coming from outside [to Nepal] is purely for developmental objectives.”
He said that he apprised the Chinese side of the fact that Nepal does not accept any project that comes with strings attached—political or any other.
The nine documents that Nepal and China signed earlier in the day include agreement on economic and technical cooperation as well as a technical assistance scheme for China-aided feasibility study of China-Nepal cross-border project in Nepal.
Officials said the feasibility study of the Kerung-Kathmandu railway is expected as per the initial estimate and that it will take another four years to prepare the detailed project report.
“Under the economic and technical cooperation, Nepal will spend the over Rs56 billion Chinese grant announced by President Xi Jinping in 2019 on education and projects related to livelihoods,” said a senior Finance Ministry official. “We have yet to select projects under this grant. A separate agreement will be signed later after selecting the projects.”
According to the Foreign Ministry, as per the agreement on economic and technical cooperation, China has agreed to provide Nepal with a grant of RMB 600 million (Rs11 billion) for the year 2020. This amount is part of the grant announced by Chinese President Xi during his Nepal visit in 2019. Negotiations for utilisation of the grant were halted due to the Covid pandemic. “The grant will be utilised for the projects mutually agreed upon by the two governments,” the Foreign Ministry said in a statement.
The two sides also signed a cooperation agreement on the feasibility study of China-Nepal power grid interconnections where China will finance the new alignment of the Ratamate-Rasuwagadhi-Kerung transmission line.
The two sides also signed a protocol on the safety and health conditions of haylage export from Nepal to China.
A letter of exchange on duty-free treatment for 98 percent of imported goods in China was also signed.
Besides, the Chinese side handed over the certificate of Araniko Highway Maintenance Project (Phase III). The highway was damaged by the floods and landslide as well as the 2015 earthquakes.
Both sides have also approved the minutes of the seventh meeting, held in January this year in a virtual mode, on enhancing cooperation in the railway sector.
Another agreement is about Covid vaccine assistance, as per which China will donate an additional 4 million Sinovac doses to Nepal. The last agreement is on a protocol on sending a Chinese medical team to work in Nepal at BP Koirala Memorial Cancer Hospital.
During his meeting with Wang, Khadka raised the issue of the Nepali students who returned from China in the wake of the Covid-19 pandemic but are stranded in Nepal due to Beijing’s strict Covid-19 protocols.
In response to the Nepali request, according to officials, Wang said that China is fully aware of the problem faced by Nepali students and that the Chinese ambassador in Kathmandu too has raised the issue several times.
The State Councillor and Foreign Minister of China assured Khadka of the full cooperation of the government of the People’s Republic of China to facilitate the
return of Nepali students to China to continue their studies on a priority basis and agreed to start the process at the earliest, the Foreign Ministry statement said.
The Nepali side also proposed reviving the mechanism for boundary inspection that has been halted since 2006.
“The Chinese side is positive about holding a joint inspection of the border,” said a Nepali participant in the meeting. A study panel formed by the government earlier reported that “there are some issues along the Nepal-China border” in Humla and recommended a joint inspection.
Underlining the importance of continuously maintaining the Nepal-China border peaceful and tranquil in the spirit of the boundary treaty, the two foreign ministers agreed to carry out joint inspection of Nepal-China boundary through mutual consultation, the ministry stated.
Ganesh Prasad Pandey, secretary at the Ministry of Commerce, held talks with his Chinese counterpart Sheng Qiuping on Saturday where the Nepali side raised the issue of restrictions imposed by the Chinese at two entry points—Tatopani and Rasuwagadhi.
Since the pandemic, only a few cargo trucks have arrived in Nepal via the two border points while exports from Nepal have been halted, given Beijing’s strict Covid-19 protocol.
According to the statement issued by the Ministry of Foreign Affairs, the two ministers underscored the need for concerted efforts from both sides to expedite the execution of ongoing projects as well as implementation of the agreements and understandings reached between the two countries during high-level visits.
“The two foreign ministers stressed the need to have continued partnership in order to overcome the challenges imposed by the pandemic and to focus on Covid-19 response and recovery,” read the statement. “Both sides also focused on issues relating to trade, investment and tourism. They underscored the need to fully operationalise the Tatopani-Zhangmu and Rasuwagadhi-Kerung border ports for two-way movement of goods between Nepal and China.”
Wang on Saturday handed over a model key of Pokhara Regional Airport to Khadka to mark its completion.
Officials said Saturday’s talks were cordial and the delegation from the north assured more cooperation and support to enhance bilateral ties.
“On Deuba’s request for more grant-based projects, Wang’s response was positive. Both leaders agreed to expand and strengthen the bilateral ties,” said Pariyar, the press chief to the prime minister. “The prime minister thanked the government of China for providing Covid vaccines to Nepal. Reiterating Nepal’s commitment to one-China policy, the prime minister said Nepal wants good relations with China.”
Documents signed between Nepal and China
Economic and technical cooperation
Technical assistance scheme for China-aided feasibility study of China-Nepal cross-border project
A cooperation agreement on the feasibility study of China-Nepal power grid interconnections
Protocol on the safety and health conditions of haylage export from Nepal to China
Letter of exchange on duty-free treatment for 98 percent of imported goods in China
Handover certificate of Araniko Highway Maintenance Project (Phase III)
Minutes of the 7th meeting, held in January 2022, on enhancing cooperation in the railway sector.
Delivery and acceptance certificates of China-aided Covid vaccine.
Protocol on sending a China medical team to work in Nepal.