It's been over six years since the memorandum of understanding, then known as the One Belt One Road Initiative, was signed between Nepal and China. However, there seems to be a conspicuous absence of tangible progress on the ground. The project's implementation plan, as it stands, is still in the discussion phase between the two countries.
By now, over 30 international organizations and 150 countries have endorsed what is now known as the Belt and Road Initiative (BRI), which was initiated by Chinese President Xi Jinping in 2013. There is indeed a progress in the Chinese point of view. The cumulative value of imports and exports between China and other BRI participating nations has soared to $19.1 trillion, demonstrating an average annual growth rate of 6.4 percent. Moreover, two-way investments between China and other BRI countries have surged to $380 billion, with China contributing $240 billion. Under the BRI umbrella, China has committed to over 3,000 projects, with the mobilization of up to one trillion dollars in investments. It is certainly impressive.
Nevertheless, it is evident that while China aims to encompass all ongoing projects with Nepal within the BRI, not a single project has taken off under this banner. China's assertion on December 31st that the Pokhara International Airport, a bilateral deal predating the 2017 memorandum of understanding, represents its flagship project in Nepal under the BRI, caught many by surprise. The government had, in March 2016, entered into a $215.96 million soft loan agreement with China for the construction of the new airport in Pokhara, with no reference to the BRI, despite the policy concept's existence in China. Beijing's assertion emerged just ahead of the new airport's inauguration by Prime Minister Pushpa Kamal Dahal. While each project is individually signed as a distinct arrangement, and the BRI serves merely as a framework, the question of why China categorizes it as a BRI project remains speculative in Nepal.
Enthusiasm for the Belt and Road Initiative (BRI)
The government and people of land-locked Nepal exhibited significant enthusiasm for the Belt and Road Initiative (BRI), especially in the wake of the 2015 blockade imposed by India. Beyond the evident economic incentives, the Nepali population sought alternatives to their reliance on India for transit and essential goods and services, which had left them vulnerable to supply disruptions.When discussions commenced after Nepal and China inked the framework agreement on the BRI in 2017, the atmosphere was highly promising. Nepal was quick to identify and initially earmark 35 projects for implementation under this initiative. These projects held long-term benefits for Nepal, with a strong focus on enhancing connectivity and infrastructure. Subsequently, the list of prioritized projects was streamlined to nine.The day for kick-off has not arrived yet.
In 2019, during the second BRI Forum held in China, a pivotal development emerged as the outcome document incorporated the Trans-Himalayan Multi-Dimensional Connectivity Network within the BRI framework. A notable component of this initiative was the construction of the Kathmandu-Lhasa Railway, aimed to establish a railway connecting Nepal's capital, Kathmandu, to Lhasa, Tibet, with the potential to significantly bolster trade and connectivity between the two nations. Furthermore, there was a commitment to invest in Nepal's hydropower sector, a critical facet of meeting Nepal's energy demands. In this connection, when Chinese President Xi visited Kathmandu in October 2019, the two sides jointly pledged to transform Nepal from a land-locked country to a land-linked one. Nevertheless, despite this initial optimism,the second term of the BRI has also concluded, and the third term has commenced through automatic renewal provisions. There is no further progress. Key factors contributing to this transition were the political instabilities of 2020 and the change of government in July 2021.
However, several other issues also loom over the BRI collaboration. One of the prominent unresolved matters pertains to the funding modality. China and Nepal have yet to reach a consensus on whether BRI projects should be based on loans or grants. The Nepal government strongly advocates for grants, given the size and character of Nepal's economy. The preference is clear: loans should only be considered if they carry interest rates on par with those offered by multilateral lenders, not exceeding 1 percent per year. In essence, many analysts in Nepal think, commercial loans for BRI projects are generally less favorable to Nepal. The Nepali side is also seeking leniency in the repayment period.
For instance, a Chinese grant has initiated the feasibility study of the Kerung-Kathmandu railway, a process anticipated to span over three years. In contrast, progress in other areas remains lackluster. It remains uncertain whether high-yielding commercial loans will be incorporated into the operationalization of these projects. While Nepal may be inclined to pursue strategically important projects with a solid project viability, the possibility of commercial loans might be a contributing factor to the slow pace in finalizing the BRI implementation plan.It indeed seems unusual to discuss full grants in a railway project. The Chinese inability to provide a feasible and comprehensive package to its closest neighbor is certainly a reason for concern.
BRI in 2023
When Prime Minister Pushpa Kamal Dahal embarked on his visit to China from September 23 to 30, 2023, Prime Minister Li Qiang reiterated China's readiness to collaborate with Nepal to enhance connectivity across various domains, encompassing ports, roads, railways, aviation, communication, and electricity.
The shared aspiration is to expedite the establishment of the trans-Himalayan Multi-Dimensional Connectivity Network, with the ultimate goal of transitioning Nepal from a land-locked nation to a land-linked one. In addition, China expressed its willingness to increase imports of high-quality agricultural products from Nepal and encourage Chinese enterprises to actively participate in Nepal's development and construction, spanning production capacity, agriculture, and infrastructure facilities. During this visit, they also jointly witnessed the signing of more than ten bilateral cooperation documents, spanning economics and trade, agriculture, science and technology, culture, publishing, digital economy, green and low-carbon development, inspection and quarantine, as well as development assistance, among others.
The joint statement, released during the final phase of the visit, serves to clarify several important perspectives. In a diplomatically polite manner, Nepal declined China's invitation to join President Xi Jinping's Global Security Initiative (GSI), a novel concept proposed by China. However, Nepal agreed to advance the cross-border connectivity projects, demonstrating its commitment to regional development and cooperation.Nepal expressed support for the Global Development Initiative (GDI) presented by China and indicated its willingness to explore participation in the Group of Friends of the GDI. Additionally, both sides reaffirmed the significance of the 2017 agreement to cooperate under President Xi's BRI and expressed their intent to expedite consultations for the finalization of the delayed BRI implementation plan. Notably, the GDI, GSI, and Global Civilization Initiative (GCI) represent three pivotal new initiatives introduced by President Xi, which will underpin China's foreign policy during his third term.
The joint statement also acknowledged the successful opening of the Lizi-Nechung port and the resumption of passenger services at the Zhangmu-Khasa port, with a commitment to maintain communication for the future opening of other border ports, including Chentang-Kimathanka and Riwu-Olangchungola, in the near future.China has initiated the fourth phase of the Araniko Highway maintenance project, signaling its commitment to enhancing the quality of infrastructure. Additionally, it has expressed its intention to undertake repairs on the Syaphrubesi-Rasuwagadhi Highway once the ongoing demolition work is finished. The two nations have also reached an agreement to commence construction of a 220 KV Cross-Border Power Transmission line, extending from Jilong/Keyrung to Rasuwagadhi/Chilime, further reinforcing connectivity in the region.To foster railway cooperation, the 8th Working Meeting on China-Nepal Railway Cooperation is scheduled to convene shortly. Moreover, Beijing is poised to launch an initiative aimed at training Nepali railway professionals, thereby bolstering expertise in the sector. The two sides agreed to maintain communication for the opening of Chentang-Kimathanka, Riwu-Olangchungola ports at an early date.
There is a consensus to expedite the feasibility study of the Tokha-Chhare Tunnel project, underscoring the project's potential to enhance connectivity between the two countries significantly. Furthermore, there is commitment to accelerating the implementation of the second phase of the Kathmandu Ring Road project, a vital infrastructure development for improved transportation within Nepal. Satisfaction has been expressed with the consensus achieved by the civil aviation authorities of both nations regarding the expansion of air rights arrangements. There is a commitment to further strengthen cooperation in the energy sector, with a particular focus on hydropower development, cross-border transmission lines, and associated substations.
The China-Nepal Joint Implementation Mechanism, which serves as a pivotal platform for facilitating such cooperation, will continue to play a crucial role. This mechanism is committed to fostering exchanges and collaboration across various energy sectors, including hydropower, wind power, solar power, biomass power, and hydrogen.Furthermore, China has expressed a positive inclination towards considering Nepal's request for the supply of grid power to electrify remote northern villages of Nepal from the Xizang Autonomous Region of China. This consideration extends to providing equipment and technology on commercial terms, highlighting the commitment to advancing energy access and infrastructure.
Global Community with a Shared Future for Humankind
At the international level, the Belt and Road Initiative (BRI) faces its own set of challenges. The third International Belt and Road Forum, which took place in Beijing on October 17-18, featured a particularly meaningful theme. Unlike previous forums, it was titled 'High-quality Belt and Road Cooperation: Together for Common Development and Prosperity.' This shift in emphasis is significant, highlighting the forum's focus on elevating the quality of BRI cooperation. During the event, three high-level sub-forums, encompassing connectivity, green development, and the digital economy, were conducted, alongside six seminars. This forum was a commemorative event marking the 10th anniversary of the BRI.
Prior to the forum, China published a white paper titled 'Building the Belt Road: A Key Pillar of the Global Community with a Shared Future for Humankind.' This white paper aimed to provide clarity on the evolving dynamics of the BRI. It delineated China's suggested solutions to global development challenges, with a central emphasis on the guiding principles of the BRI: comprehensive consultation, collective endeavor, and shared benefits. The document underscored the collaborative nature of the BRI, encompassing all stakeholders rather than China acting in isolation. This resonates with the aspirations of many in the global south.
The white paper mentions Nepal as a candidate for participation in the Air Silk Road project, although the precise implications of this support remain somewhat ambiguous. China has entered into bilateral air transport agreements with 104 Belt and Road Initiative (BRI) partner countries and has established direct flight connections with 57 of these partners to streamline cross-border transportation. Additionally, Chinese enterprises have actively collaborated on civil aviation infrastructure projects with partner nations, including Pakistan, Nepal, and Togo, thereby supporting the growth of local civil aviation industries.However, what remains uncertain is whether the Air Silk Road is being presented as an alternative to the railway project, which holds the status of Nepal's top priority in terms of infrastructure development.
China must confront the prevailing challenges. It is a recurring critique from skeptics to brand BRI projects as potential debt traps. Many of these initiatives have faced allegations of not adequately adhering to environmental and labor standards, while others have encountered repeated delays stemming from funding shortages or opposition on political grounds. Concerns include carbon emissions from fossil-fuel power plants, elevated risks to biodiversity, and the impact on indigenous lands. The central concern revolves around the concept of risky lending.While some of these comments may carry political undertones and perhaps a tinge of jealousy in light of China's ongoing success in this domain, they are not devoid of validity. The case of Nepal's Pokhara International Airport project is often cited. Many critics argue that due to Nepal's limited oversight and quality control capacity, Chinese contractors should not reap disproportionate benefits. These allegations have cast a shadow over the initiative's reputation, particularly in South Asia. The controversy further intensified following Sri Lanka's decision to cede control of the port of Hambantota to China due to an inability to meet its debt obligations.
As China grapples with its own domestic economic challenges amid a slowdown in growth, the forum highlighted a shift toward emphasizing smaller, yet more strategically impactful projects. This new approach places a strong emphasis on low-investment, high-yield endeavors that can enhance the BRI's relevance. For instance, such projects encompass bamboo and rattan-weaving programs in Liberia, biogas technology initiatives in Tonga and Samoa, and the promotion of mushroom-growing technology in Fiji, Papua New Guinea, and Rwanda.Furthermore, the BRI's focus on the digital silk road has prioritized investments in telecommunications and digital infrastructure. As part of this evolved strategy, China has curtailed financing, imposed limits on external lending by Chinese banks, and reduced the size of investment deals to nearly half of their size five years ago. Additionally, China has transitioned away from being the sole creditor within the BRI and initiated a platform where other countries and international banks can provide financial support.This is certainly helpful.
China's success in the Belt and Road Initiative, both in Nepal and globally, will be gauged by the actual project deliveries, their quality, and the achievement of stated objectives.
In conclusion, the Belt and Road Initiative has embarked on an ambitious mission to reshape the global economic landscape. While it has garnered support from numerous countries and offers the promise of enhanced connectivity and development, it is not without its share of challenges and concerns. As the initiative moves forward, it must address the raised criticisms, ensure environmental sustainability, and navigate the complexities of our ever-evolving global landscape. The key to its success lies in demonstrating the effectiveness of the initiative through flexible and mutually beneficial approaches tailored to the unique circumstances of each participating country. By doing so, the BRI can work towards achieving its goal of shared development and prosperity in a rapidly changing world.
As of today, for Nepal, the Belt and Road Initiative remains a subject of discussion without tangible progress - No Belt, No Road; the journey is still stalled. China must substantiate its commitments. The trans-Himalayan railways, for example, should not be relegated to the backburner.Any example China sets will undoubtedly serve as compelling evidence that developing countries hold significant potential to benefit from China's involvement.
Dr. Adhikari is associated with School of Law at Kathmandu University (KUSOL) (Founder Dean and Professor of Law),University of Nepal Infrastructure Development Preparatory Board (Executive Member), Supreme Court Bar Association (Senior Advocate) and Constitution Watch Group (Member)