Six years after BRI agreement, Nepal has little to show for itNepali officials seem unaware the deal, involving cross-border rail, is renewed every 3 years.
For six years of the signing of the Belt and Road Initiative with Nepal, China had nothing to show for a real project. That changed with the inauguration of Pokhara International Airport earlier this year when Beijing made a unilateral announcement to keep the airport built with Chinese aid under the BRI framework.
Nepal and China signed a memorandum of understanding on One Belt One Road later known as BRI, a flagship initiative of Chinese President Xi Jinping, on May 12, 2017, subject to renewal every three years.
Beijing accords the BRI top foreign policy priority. In every high-level visit and meeting between Nepal and China, the initiative gets traction. However, after the formation of the Pushpa Kamal Dahal government in Kathmandu on December 25 last year, no substantive discussion has taken place on the Nepal side. Even the prime minister’s aides do not realise that the second term of the BRI has ended and the third term has kicked in.
“We have no idea about the end of the BRI term and overall discussion on how to take the initiative forward,” Surya Kiran Sharma, press coordinator of Prime Minister Dahal said. “Probably the Ministry of Foreign Affairs knows better. I cannot recall any discussion on the BRI.”
Although there is no clear provision on whether the two sides should renew the agreement by exchanging correspondence, officials said that would be the diplomatically correct way to go about it.
Sub-clause IV of Clause V of the BRI agreement says that the MoU shall be automatically renewed every three years unless terminated by one side by giving a written notice to the other at least three months prior to the expiration of the MoU.
“No proposal has been received on what to do under the BRI and there is no discussion at the level of prime minister as far as we know,” said Sharma.
Under sub-clause IV, the MoU is automatically renewed, said Sewa Lamsal, the foreign ministry spokesperson.
There are concerns over the BRI’s lack of momentum in Nepal even six years after the signing of the deal with its stated focus on connectivity, trade, development strategies, policy dialogue for cooperation in the fields of economy, environment, technology and culture, among others.
The agreement also aimed to facilitate transit transport, logistics, transport network security and related infrastructure development through joint study and promote cross-border projects including railway, road, civil aviation, power grid, information and communication. The MoU also states that the two sides would conclude the joint feasibility study of China-Nepal Free Trade Agreement within 2017 and, if viable, start negotiations on the Free Trade Agreement (FTA) to further open up markets and expand two-way trade.
Other areas of agreed cooperation are establishing cross-border economic cooperation zones at the existing ports, and improving the investment landscape with a view to developing mega projects in the areas of power generation, water conservation, road, railway line, cross-border transmission line, information and communication technology and infrastructure, besides customs and quarantine.
Ram Karki, deputy chief of the CPN (Maoist Centre) foreign and international department who recently visited China, said the BRI is not a priority for Nepal.
“We must not forget: What had our leaders assured the Chinese in the past, and what pledges did the Nepali Congress, the CPN-UML and the Maoist Centre leaders make to the Chinese with regard to the BRI?” said Karki, adding that the problem with Nepali leaders is their failure to communicate in clear terms.
“Be it with the Chinese or Indians, we make big promises but fail to keep them. We do not tell them what we can and cannot do. As we do not make our concerns and positions clear, there is a trust deficit in our relations with both India and China,” said Karki.
Nepal also had a shaky position on the BRI in the past. After signing the deal in 2017, the government formed two committees headed by the foreign and finance secretaries to negotiate with China on the projects selected under the BRI. The finance secretary was tasked with selecting them. As per the mandate of the Cabinet, the finance secretary-led committees picked 35 projects to be funded under the BRI. This was read out by Prime Minister KP Sharma Oli during his meeting with the then Chinese Premier Li Keqiang. Later, the Chinese side urged Kathmandu to cut the number of projects to a single digit and they were trimmed to nine.
A former finance ministry official who was involved in several negotiations with the Chinese side said most of those projects were related to connectivity and infrastructure. In 2019, during the second BRI Conference in China, its outcome document listed Trans-Himalayan Multi-Dimensional Connectivity Network under the BRI. (Former President Bidya Devi Bhandari had attended the conference.) Then, when Chinese President Xi visited Kathmandu in October 2019, the two sides agreed to enhance cooperation under the BRI.
The two sides had agreed “to intensify implementation of the Memorandum of Understanding on Cooperation under the Belt and Road Initiative to enhance connectivity, encompassing such vital components as ports, roads, railways, aviation and communications within the overarching framework of the Trans-Himalayan Multi-Dimensional Connectivity Network with a view to significantly contributing to Nepal’s development agenda of graduating from a Least Developed Country,” said the joint statement issued after Xi’s visit to Kathmandu.
The Chinese side was keen to carry out the feasibility study of Kerung-Kathmandu railway under the BRI, the former finance minister official said. “But we have shifting priorities for selecting and negotiating other projects.”
With a Chinese grant, the feasibility study of the Kerung-Kathmandu railway has already begun and it is expected to conclude in another 40-42 months, according to officials. After concluding the feasibility study, negotiations for undertaking the ambitious Kerung-Kathmandu project will begin. There are also discussions to finalise the implementation plan of BRI-related projects but they are stuck, said officials.
The BRI issue resurfaced after Sher Bahadur Deuba became the prime minister in July, 2021. During the visit of former Chinese foreign minister and state counsellor Wang Yi in March 2022, the Nepali side made it clear that it prefers grant and aid to loans for the BRI projects. “I think the issue of BRI was discussed during the visit of the foreign secretary to Beijing last month,” said Lamsal.
The Nepali side, during conversations and meetings with Chinese officials, has clarified that due to Nepal’s own compulsions and grim economic situation, it cannot afford to take loans with high interest rates.
“The country’s economic situation has not improved. We are not in a position to take loans from anywhere including China as they would increase pressure on the Nepali economy,” said an official at the Prime Minister’s Office. “Until the third BRI Conference in China and a possible Beijing visit of Prime Minister Pushpa Kamal Dahal, I do not see any chance of a breakthrough in this [financing modality].”
The talks of a prime-ministerial visit to China are in a preliminary stage. Dahal may go to China after he returns from an India visit. His tour of the north could take place at the end of June or in July or during the BRI conference.
Some experts see geopolitics behind the stagnant BRI process while others blame Nepal’s poor preparations and the concomitant lack of interest on the Chinese side.
The third BRI summit likely to be held in China later this year might address some of Nepal’s concerns, said Sundar Nath Bhattarai, chairman of the China Study Center, a Kathmandu-based think-tank.
“The Kerung-Kathmandu railway is going to be built under the BRI. Some say execution of projects under the BRI will lead to a debt trap, but that’s not true. That is pure propaganda against China and such allegations are baseless,” said Bhattarai.
Is the foreign ministry really not discussing how Nepal can use the BRI to its benefit? “Yes,” according to the foreign minister NP Saud. “I have not been briefed on the expiry of the BRI term,” said Saud. “I am not aware of this issue. We will discuss this and other relevant issues during the visit of the prime minister to China.”