China’s much hyped Belt and Road Initiative (BRI) in Nepal has been a non-starter. The two countries signed a memorandum of understanding in May 2017 to expand bilateral cooperation under the BRI but five years later, there is nothing to show on the ground, despite Chinese President Xi Jinping’s visit to the Himalayan nation in 2019.
Earlier this month two contracts of two Chinese companies that have been working on the Kathmandu-Terai Fast Track were temporarily suspended for delayed execution. The contracts were signed by the Nepali Army with China State Construction Engineering Corp. Ltd and Poly Changda Engineering Co. Ltd on 14 May 2021for building three tunnels, bridges, and a partial road, the Annapurna Express said in a report.
Issues related to interest rates and repayment structure of the loans have remained a source of contention. Nepal wants the terms of the loans for the infrastructure projects to be on par with other multilateral agencies’ funding mechanisms. Deutsche Welle (DW) in a report also said that Nepal “believes the BRI projects should be open for competitive bidding.”
Besides, China's image as a dependable economic partner has taken a beating as Beijing refused to provide any financial assistance to cash strapped Sri Lanka. "China, which had positioned itself as a saviour for other countries with its BRI projects and funding is in a spot after it refused help to Sri Lanka," an analyst who has lived in China told India Narrative.
Foreign policy watchers said that the BRI is unlikely to gain steam in the coming years especially now as the Sher Bahadur Deuba administration approved the $500 million financial assistance from the US based foreign assistance body, Millennium Challenge Corporation (MCC).
The grant is expected to help in developing an electricity grid of 400kVA transmission lines in Nepal.
According to an Observer Research Foundation study, the development of the grid will not only boost distribution of power in the domestic market but also help in exporting it to India. Additionally, the implementation of the MCC could boost the Nepalese economy in terms of raising employment opportunities as well as raising the per capita income, the study said.
Not just that. Nepal’s foreign ministry, which issued a statement after Chinese foreign minister Wang Yi’s visit to Kathmandu in March, did not mention anything on BRI projects. However, Beijing in its statement highlighted the importance of the BRI framework in Nepal.
“The recent developments of growing US influence in Nepal is an area of concern for China. Where Nepal stands today, her economic growth necessitates her Neutrality and the need to grow with the basket of multiple choices. Therefore, China may not succeed with much political influence but will seek a share in economic investments into the country, Navita Srikanth, foreign policy expert told India Narrative.
Nepal’s India approach
Meanwhile, India and Nepal, which have an open border policy, renewed focus on boosting political and economic cooperation. Prime Minister Narendra Modi's visit to Lumbini on the occasion of Buddha Purnima was a “sentiment booster.”
Prior to Modi’s visit, his Nepalese counterpart Sher Bahadur Deuba too paid a visit to India in April.
“For post-pandemic economic rebounding in both countries, a positive environment that is created with the Prime Minister's visits from both sides in recent times will be utmost crucial,” Ram Prasad Subedi, Deputy Chief of Mission, Embassy of Nepal in India said at an event organised by the India Nepal Centre under the PHDCCI framework. He added that Nepal has already begun exporting 177 MW of energy to India via the power exchange market.
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