Progress in two key projects under BRI unlikely during President’s China visit

April 24, 2019

Anil Giri, The Kathmandu Post, April 24, 2019

President Bidya Devi Bhandari’s state visit to China, starting Wednesday, is being seen as an opportunity to open new vistas of cooperation under the framework of the Belt and Road Initiative. But many have expressed scepticism about concrete headway because as of Tuesday Nepal and China did not appear prepared to sign or reach any understanding related to projects that Nepal has selected and shared with the Chinese side under the BRI.

At least three senior government officials told the Post in phone interviews on Tuesday that due to time constraints and lack of adequate homework, two projects under the BRI that were expected to make progress during the visit, have been dropped.

“We will continue negotiations in Beijing though,” an official familiar with the development told the Post on condition of anonymity because he was not authorised to speak with the media. “We will see if a last-minute agreement is possible [on projects under BRI]. Some regular pacts, however, will be signed.”

After Nepal signed up to China’s flagship initiative in May 2017, there was a lot of talks about funding from the northern neighbour. The government had formed two committees--led by the foreign and finance secretaries--to identify projects for negotiations with the Chinese side. A finance secretary-led committee had listed at least 35 projects to develop under the BRI funding.

After sluggish progress in negotiations in the following months, the Chinese side insisted that Nepal bring down the number of projects under the initiative. Accordingly, the government had made a list of nine projects to be funded under the BRI.

“But as the situation stands today”, the officials said not much should be expected under the BRI. And the major bone of contention is funding modality.

“The Chinese are hardly in favour of aid or grant for projects,” Mahesh Maskey, Nepal’s former Ambassador to China, told the Post.

“They believe that projects under grant or aid promote corruption; they lay stress on loan,” said Maskey, who served as Nepal’s envoy to Beijing from 2012 to 2016.

Opinions in Nepal have been divided over projects under the BRI, as some say this Chinese cooperation could help Nepal see rapid development, while others argue that there is a threat of a debt trap.

However, some ministers in the KP Sharma Oli government ruled out debt trap threat, saying the phrase is “imported psychology”.

Unless Nepal and China sort out the funding modality, projects under the BRI are unlikely to take off. Nepal, in general, is for the grant, while China prefers less aid or grant and soft loan and wants to come with foreign direct investment and extend support in technology transfer.

“Time has come now for us to tell the Chinese that we will take a loan. We can repay them. We have to build our capacity to pay the loan and interest,” said Maskey.

In the weeks leading up to the visit, there was an expectation that there would be some sort of understanding on funding modality on preparing the detailed project report of the Kerung-Kathmandu Railway under the framework of  Trans Himalayan Multi-Dimensional Connectivity Network. A proposal is also on the table for conducting a pre-feasibility study of the Kerung-Kurintar-Pokhara-Lumbini railway section.

In the absence of the funding modality, however, a joint meeting between railway officials from Nepal and China is yet to be fixed and it was expected that some kind of agreement might take place during the visit.

Another issue high on the agenda was the establishment of the Madan Bhandari Polytechnic Institute--also under the BRI. The Nepali side had insisted on signing of some kind of pact during the President’s visit.

“But due to some technical reasons, it is unlikely to get through,” another official familiar with the matter told the Post.

But as of Tuesday, one day ahead of President’s visit to China, officials concerned said they had not zeroed in on these two projects.

A major takeaway of the visit, however, will be signing of the Protocol to the Transit and Transportation that will give Nepal access to Chinese sea and land ports for third-country trade.

“We will discuss all aspects of our bilateral ties with China,” Foreign Secretary Shankar Das Bairagi told the Post.

“One of the agendas will be inviting Chinese President Xi to Nepal,” he added. “We are expecting a high-level visit from China this year. We hope the visit will set the tone for Xi’s visit to Nepal.”

Some other pacts, however, are expected to be signed and they are related to easing customs, preserving cultural property, traditional medicine, projects under reconstruction funded by the Chinese government and exchange of cooperation certificate for projects completed under China’s support in Nepal.

Bhandari is visiting China from April 24 to May 2 at the invitation of Xi. This is the first state visit by Nepal’s President to China. Former President Ram Baran Yadav had visited China twice, but none of the trips was a state visit. Yadav never visited Beijing.

According to the Ministry of Foreign Affairs, Bhandari will also meet with senior Chinese leaders and address the joint meeting of the business community from Nepal and China in Beijing.

Since progress in projects under the BRI is unlikely, this visit, many say, will be limited to strengthening ties with the northern neighbour which Nepal has historically shared a trouble-free relationship.

If Nepal wants to reap the benefits of China’s economic rise, it needs to come forward strongly and cautiously, say experts who have studied China.

“Since we have a strong government, it should not hesitate to take a loan,” said Maskey, the former ambassador.

“Nonetheless, we have to be cautious about reports related to a debt trap,” added Maskey, who played a crucial role in the signing of the Transit and Transportation Agreement between Nepal and China at the height of the border blockade, told the Post.



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