Speaking in the House of Representatives on Wednesday, the immediate-past finance minister, Prakash Sharan Mahat, expressed serious reservations over Nepal’s preparations to potentially sign the implementation plan of the Belt and Road Initiative (BRI) with China.

Although the government is yet to officially decide to sign the plan, which outlines the funding modality and project clusters, there are strong indications that it will be a focal point of discussion during Deputy Prime Minister and Minister for Foreign Affairs Narayan Kaji Shreshta’s visit to China starting Sunday. The government has reportedly not held any consultations on the BRI implementation plan among major parties.

At the invitation of his Chinese counterpart, Wang Yi, Shrestha is leaving for Beijing on Sunday, Suresh Kaji Shrestha, a member of the Shrestha’s private secretariat told the Post. “It is a goodwill visit,” he added.

Shrestha is scheduled to meet some leaders of the Chinese Communist Party during the visit, which will be his first foreign trip after the reorganisation of the Pushpa Kamal Dahal-led Cabinet.

Shrestha is scheduled to meet Wang on Monday in Beijing and will also visit three other Chinese cities. He will not attend the Boao Forum for Asia, said Shrestha.

The government has yet to decide who will represent Nepal at the Boao event.

“We signed the umbrella agreement of the BRI in May 2017 when I was the foreign minister, but our concerns on the implementation plan are crucial,” Mahat told the Post. “We cannot afford the expensive loans so we keep on telling the Chinese to increase the grant component if they want to invest in any projects under the BRI.”

Although signed in 2017, the text of the agreement of the BRI has neither been made public, nor has the government tabled the BRI framework agreement in Parliament for discussion.

Further, none of the countries that are parties to the BRI has signed the BRI implementation plan, which was first proposed by China at the end of 2019.

“It was the KP Oli government which first received the first draft of the BRI implementation plan in 2019 and several texts were exchanged,” a senior foreign ministry official said. “If that was useful or necessary, Oli would have definitely signed it, but he did not because selection of the projects and finalising the funding modality do not require the BRI implementation plan.”

“That is why the Oli government initially proposed 35 projects, which was later trimmed down to nine at Chinese request,” the official said.

“If the BRI implementation plan was needed, why did the Chinese push to cut the number of projects from 35 to nine? The execution, financing and investment modality does not require the BRI implementation plan as the plan alone does not guarantee effective implementation and financing modality.”

After strong reservations from senior officials, the Nepali Congress, and a few members of the ruling partners, select ministers are quietly giving final touches to the draft of the plan, an official at the Prime Minister’s Office told the Post requesting anonymity.

Lawmaker Swarnim Wagle of the Rastriya Swatantra Party (RSP) told the Post that he and his party are not aware of the latest development, but they intend to raise the issue of signing of the BRI implementation plan from inside the government.

“We will raise the issue in the government as Rabi ji [RSP chair Rabi Lamichhane] is in the government and if required, we will raise it in Parliament as well.”

A section of the Nepali political leaders including CK Raut of Janamat Party and Nepali Congress leaders have publicly accused that as BRI was not progressing despite Beijing’s strong push, Prime Minister Dahal, under Beijing’s influence, replaced Congress ministers in order to address Chinese concerns.

However, CPN-UML chair KP Oli denied Beijing’ hands behind the change in the federal coalition. “The credit goes to us, not Beijing,” he said at a party meeting last week.

A senior cabinet minister who is familiar with Shrestha’s visit schedule told the Post that signing the BRI implementation plan would not make any difference. According to the minister, it is essentially an advanced version of the BRI agreement that paves the way for project negotiations, but it will be impossible to execute projects with high-interest loans from China.

“I don’t think the BRI implementation plan will be signed during Deputy PM Shrestha’s visit. The main issue is whether to take a high-interest loan from China to execute the projects. But we cannot afford such loans now. Our preference is grant and concessional loan. After signing the BRI implementation plan, we will enter the project selection phase, which is crucial for us. Without grants for certain projects, we cannot consider high-interest loans,” said the minister.

Also, there is strong pressure from the bureaucratic level to opt for grant or concessional loan if Nepal decides to implement projects under the BRI, a government secretary said.

“Pokhara International Airport is a good example of how difficult it will be to repay the loan to the Chinese. One of the major agenda of DPM Shrestha’s visit is to negotiate the conversion of the loan of the Pokhara International Airport into a grant during his meeting with his counterpart, Wang Yi.”

Rupak Sapkota, foreign relations advisor to the prime minister, said that in his understanding, Nepal should seek loan arrangements with China similar to those with World Bank and other bilateral and multilateral lenders.

“Our focus should be on grants and concessional loans on terms similar to those offered by other international financial institutions. I think the Chinese would take our proposal positively. The blend between grant and concessional loan is another modality under discussion,” said Sapkota.

“As the government seems serious about executing certain projects under the BRI fully through grants, it is unsure whether we stick to the same nine projects or select new ones for negotiations.”

It could be both, he said.

He is of the view that the projects whose feasibility studies have been completed should be prioritised for negotiations.

“If that happens, it will be easier to identify the investment, investment modality and sustainability of the project,” he says. Additionally, Sapkota stresses that project selection be based on Nepal’s priorities.

But the Nepali Congress, the main opposition party in the House of Representatives, plans to seek answers from the government on the rationale behind signing the BRI implementation plan, why the BRI framework agreement is yet to be disclosed, and why the government is keen on accepting costly loans from China and other countries even as the country’s economic situation is dicey.

Rajendra Bajagai, a Nepali Congress lawmaker, said his party will strongly raise this issue in Parliament. He said the BRI framework agreement should be discussed in and outside Parliament in the same way the US Millennium Challenge Corporation Nepal Compact had been.

“There should be a national consensus on this issue. Pokhara airport has become a source of corruption and the anti-graft body is investigating it. Again if we are going to take the loan and create more sources of corruption, the Congress will not tolerate it. We will seek answers from the government,” said Bajgain.

After some sections of the media labelled the Pokhara airport a ‘debt trap’, the Chinese Embassy in Kathmandu on Monday issued a statement and said, “So-called China made debt traps are nothing but a narrative trap created by some forces to disrupt and jeopardise China’s cooperation with other developing countries.”

But the Chinese Embassy was silent on the ongoing investigation by the Commission for Investigation of Abuse of Authority (CIAA) into officer-bearers, engineers and officials of the Civil Aviation Authority of Nepal. The anti-graft body is looking into alleged corruption during the construction of the Pokhara airport.

China’s Exim Bank had extended $215.9 million to build the project, but it has failed to generate any revenue due to lack of international flights. The CIAA has received over 100 complaints from different individuals on several engineering and technical compromises while building the project.

After what happened with the Pokhara airport, we urged the Chinese side to offer loans at competitive market rates,” said Mahat. “We cannot accept funds, construction materials, consultants, engineers and technicians, as well as contractors from the same country.”

“We have been telling this to India, China and others. There should be competitive bidding while awarding project contracts and there should not be monopoly of one country over everything. Until we were in the government, it was our principal position that we cannot accept an interest rate [for loan] above one percent. The Chinese are offering 3-4 percent interest loans, which we cannot accept. The loan repayment timeline should be 35-40 years. As soon as the Pokhara airport was completed, the loan repayment cycle started, but then the project is not making any money,” said Mahat.