China’s claim on December 31 that the Pokhara International Airport is its flagship project in Nepal under the Belt and Road Initiative (BRI) came as a surprise. Beijing made the claim on the eve of the inauguration of the new airport by Prime Minister Pushpa Kamal Dahal. Confusion has since gripped Nepal’s diplomatic circles with China unilaterally placing one project after another in Nepal under the BRI.

Last Friday, Chinese Ambassador to Nepal Chen Song wrote on Twitter that the Wechat Pay Cross-border Payment Service Inauguration in Nepal is a new step forward in financial connectivity, one of the five aspects of cross-border linkage under the BRI.

Kathmandu, however, has been claiming that no project under the BRI has been executed in Nepal.

Speaking in the House of Representatives on Monday, Foreign Minister NP Saud said: “The project implementation plan of the BRI is at a stage of discussion between Nepal and China. Not a single project in Nepal under the BRI has been executed. The project implementation plan of the BRI is still under consideration.”

Nepal-China relations have, of late, become a saga of an exchange of words, in which one side claims a particular project is under the BRI and the other side asserts it is not. The confusion will not serve Nepal, say foreign policy experts. Why has China been listing projects under the BRI?

Khadga KC, professor at the Department of International Relations and Diplomacy of Tribhuvan University, said the Chinese side might have been listing the projects to show increasing engagement between Nepal and China. “They might have wanted to increase their engagement and visibility in Nepal, which, they believe, is pale in comparison to India.”

According to KC, regional and global powers always want to show their clout in other countries, especially those in their regions, in order to portray their sphere of influence. “China is a global power, it wants to engage and show its influence, but so does India, being a regional power.”

Sundar Nath Bhattarai, the executive chairman of the China Study Centre, a Kathmandu-based think-tank, said part of the reason for the confusion is Nepal’s lack of negotiation skills, and its unwillingness to negotiate with China. “We are lazy. Either the foreign ministry or other authorities should clarify things through negotiations. Is Nepal not a member of the BRI? Have we not taken part in BRI conferences?”

Bhattarai added that the public rebuttals of China’s claims by Nepali officials have only been creating controversies, while they also don’t serve national interest.

After Nepal and China signed the framework agreement on Belt and Road Initiative in 2017, Nepal had initially selected 35 projects to be implemented under it. Later, the total number of projects was whittled down to nine. The list did not mention the Pokhara airport, which China has now listed under the BRI. The government signed a $215.96 million soft loan agreement with China in March 2016 for the construction of the new airport in Pokhara, without any mention of the BRI.

“Nepal should not be intimidated by the name BRI, even if China has incorporated a project under it, but should rather negotiate, asking them to reduce interest on loans, or give subsidies,” said KC, the professor. “None of the political parties protested when Nepal joined the BRI. We need to maintain a balanced relationship with our two neighbours in order to serve our national interest.”

As China has been listing its projects in Nepal under the BRI, the two sides also have not overtly agreed on whether the BRI projects will be loan-based or grant-based.

The Sher Bahadur Deuba government had communicated to the Chinese side that Nepal does not want loans and would prefer grants, considering the size and nature of Nepal’s economy. But, if unavoidable, a loan should come with an interest rate on par with multilateral lenders’, and not exceed 1 percent a year. The previous Deuba government had also said that Nepal could not accept commercial loans to fund BRI projects. The Nepali side is also looking to get the repayment period extended to 40 years and beyond.

Though Nepal has been asking for grants, speaking to journalists on April 22 this year, the previous Chinese ambassador to Nepal Hou Yanqi said the BRI will consist of both grants and commercial loans. “It is based on a cooperative modality that includes grants and commercial cooperation,” she said.

Hou clarified that many projects that China is currently building in Nepal fall under the BRI framework.

“This [BRI] is a long project. The projects that are being constructed in Nepal under BRI have three modalities. First, it is like Gautam Buddha Airport in Lumbini where the ADB has invested and the Chinese contractors have worked. Second, the modality of Pokhara Airport where China's commercial loans and grants are there and the construction company is also Chinese,” said Hou. “And, the third modality is like the Tribhuvan International Airport in Kathmandu. The responsibility of improving this airport has been given to a Chinese company and the cost will be borne by the Nepal government.”

In a recent interview with Kantipur, Nepal’s Ambassador to China Bishnu Pukar Shrestha said the BRI has been wrongly compared to the MCC. According to him, it is not right to say that we should not be taking loans, but we need to be careful while doing so. He also denied that Sri Lanka had fallen into a debt trap by taking loans from China. “We will also take a loan, but that will be favourable for us.”

“Why is the BRI being compared to the MCC? It is not mentioned in the BRI framework agreement that China will provide us grants. Its main motive is to increase global connectivity,” said Shrestha.

Some foreign affairs experts, however, believe China's propensity to put every project under BRI may erode its diplomatic credibility.

“Either the Chinese are diplomatically naive or they are employing propaganda diplomacy. Whatever it is, it is their business. But it is eroding their diplomatic credibility,” said Geja Sharma Wagle, a foreign affairs expert. “They also seem to be desperate for starting one or two projects under the BRI as the MCC, signed around the same time, is on the go.”

Experts stressed the need for a quick clarification on the matter as, according to them, putting projects under the BRI and denying it later, won’t help anyone.

“These kinds of arguments and counterarguments from two sides do not work. This should be sorted out through negotiations. What we need and what they want to give to us should be made clear,” said Professor KC.

“It is in the interest of both the countries to sort out the confusion over which projects fall under the BRI and which do not at the earliest,” said Bhattarai of the China Study Centre.