Indian and Chinese loans aren't inherently democratic or communist; the terms should be considered
The turmoil which the world experienced following the election of Donald Trump as the President of America further intensified due to the implementation of his harsh policies. The rivalry between Chinese companies and American companies in the field of technology following Trump's election has triggered waves across the globe.
Former Foreign Minister and UML Deputy General Secretary Pradeep Gyawali, who discharged his duties as the acting General Secretary from January 29 to February 6, is the leader who closely observes and analyses geo-political changes and their causes and their impacts internationally.
Neapalkhabar talked to Gyawali for his views on the geo-political changes brought by the Trump administration, the new dimensions of America-China rivalry, the issues related to the BRI Cooperation Framework signed during Prime Minister KP Sharma Oli and the Nepal-India relations during the term of Prime Minister Oli. Excerpts:
Have the assumptions about Donald Trump's foreign policy's impact on international relations proven true following his election?
Trump had presented foreign policy priorities during his election campaign. He had clearly stated that he would adopt harsher policies on immigration and remove illegal immigrants from America.
Under the policy, "Make America Great Again", he had announced that he would raise customs duties on foreign products and repatriate illegal immigrants from the US. Accordingly, the United States has withdrawn from the Paris Climate Agreement and the World Health Organization (WHO).
It is clear that he will adopt a protectionist policy. Under domestic policy, it appears that budget cuts or reviews will be made on certain issues within the country. Individuals with a strict 'America Great' mindset are being prioritized one after another in appointments. The assistance that the US has been providing, except for emergency aid, has been suspended.
These steps taken by Trump were expected. They were in line with earlier predictions. Therefore, it seems that the world was, in a way, already prepared for them. Some measures are in the process of implementation, while others have been halted by the court there. Accordingly, the entire world, including Nepal, is keeping a close eye on American policy shifts.
In the context of the policies that Trump is adopting, what steps can we take in the upcoming 90 days?
I foresee some aspects of US foreign aid being cut. For example, being a staunch Catholic Christian, President Trump and the Republican Party he represents are against abortion. If Nepal is receiving assistance from the US for safe motherhood, it seems likely that such aid will be reduced. However, I am not yet able to assess how much aid is involved in this area.
Since the US has already distanced itself from climate change agendas, the related assistance will likely be halted. However, I don’t think there has been much direct assistance from the US in this matter. We have recently started receiving assistance for climate change through the United Nations. I don’t have information on how much the US contributes to the United Nations.
The US has provided Nepal with trade facilitation under preferential terms. We have received benefits on 76-77 items. However, we have not been able to fully utilize them. Whether Nepal’s items will be included in the list of tariff reductions or not cannot be said for certain at this moment.
Through the US assistance agency USAID, significant investments are being made in various sectors. However, a large portion of USAID’s funding operates outside Nepal’s budget system. It invests in different sectors in its own way, and we often don’t have much information about how much is being invested. Some expenditures are not aligned with Nepal’s priorities and budgetary systems. We need to monitor where these issues might have an impact and prepare alternative plans for the affected sectors.
In the context of China-US relations, the most interesting development since Trump took office two weeks ago has been the 'tech war.' How do you view this?
Recently, a friend sent me a link to The Wall Street Journal. It mentioned that an AI tool called 'DeepSeek,' launched by a Chinese startup company, is creating a buzz in the US. What shocked me was that, following the launch of the AI tool, the share price of NVIDIA, the world’s most powerful chip manufacturer, dropped by nearly $500 billion in a single day. In the process, the shares of all AI-related 'chatbots' and the companies operating them also fell by 3-7%.
This was somewhat expected to happen. It was also natural. The background to this was the sanctions imposed on the Chinese company Huawei related to information technology manufacturing. When sanctions were imposed on Huawei, a fierce competition between China and the US began.
Under the pretext that 'Huawei collects data and conducts espionage,' the US influenced countries like Canada and the UK to impose restrictions or reduce the use of Huawei or other Chinese technologies. The US, Taiwan, and the Netherlands, which are among the largest chip producers in the world, imposed restrictions on exporting chips to China. In response, China was seen intensively working on chip production. China also has a large reserve of the 'rare earth elements' necessary for this purpose. There were also discussions that China might restrict the supply of these materials.
But now, suddenly, a company that started as a startup with less than 10 million in costs has created 'DeepSeek,' which is causing a stir. This competition seems very interesting.
Have you also used DeepSeek?
I have used it. It felt very fast. I also compared ChatGPT and DeepSeek. In some aspects, DeepSeek is not inferior at all. When it comes to language, I found DeepSeek to be even more refined. I also felt that DeepSeek's translations were more polished.
In recent times, the CPN (UML) seems to be more aware and concerned about the distortions brought about by artificial intelligence (AI) and social media. How do you think this development in the field of AI will affect politics?
The 21st century is the century of technology. Some have even started saying that the "fifth industrial revolution has begun." This is opening up vast possibilities for us. It has created a large platform for communication, learning, and relationships. It has also greatly simplified many of the cumbersome tasks that had to be done "manually" by the human brain. I see that its proper use will bring benefits especially in the fields of education and health.
However, the biggest challenge is that in today's world, the "digital divide" is very frightening. Its benefits are in the hands of a very limited number of people. The companies associated with it are controlled by the richest people in the world.
Therefore, the challenge is how to reduce the "digital divide" so that the benefits of AI development can be received by the majority of people, which is a global challenge. The companies associated with it are controlled by the richest people in the world.
In the past, the biggest industrialists were the richest in the world. After financial capitalism took shape, those who ran big finance, insurance, and banks started to become the richest. There is a global challenge on how to reach the common citizens. If we want to build a just society, this "digital divide" must be reduced. This should be a concern for every government and every institution under the United Nations.
Second, the technology that is currently being developed has become like a double-edged sword. In some contexts, it has been used very well. But, its misuse is equally frightening. "Information" is now being covered by "disinformation" and "misinformation." "AI generated deepfake apps" have been prepared and have affected the economic and security sensitivity of the country. Individual privacy and inter-community harmony have been violated.
Some time ago, John McCarthy, who is considered the father of AI, said that the challenge to humanity's existence and identity has increased from AI. "Humanity's imagination and sensitivity, along with its logic and creativity, are threatened, potentially leading to an existential crisis," was his concern. As he noted, this is a global concern, and Nepal is no exception.
It is important to pay attention to how this rapidly developing technology can be used in our essential areas such as -- production, agricultural transformation, education, health. How to minimize the "side effects" it has created is another challenge of the present.
Immediately after the agreement, Foreign Minister Dr. Arzu Rana Deuba said, "We will not take loans for projects related to BRI." There were even reports that she said at a program in New Delhi, "We agreed to the BRI only because we saw the ruling coalition was about to break down. Does this indicate that the BRI will proceed smoothly?
I had gone to New Delhi for a program of the Non-Resident Nepali Association (NRNA). The Foreign Minister was on a sort of informal visit. It so happened that she and I were on the same plane returning from New Delhi.
The Foreign Minister had work to do, including medical tests. While in New Delhi, she had some informal meetings. But, her visit was portrayed in such a way that it was said, "No one even responded in New Delhi." Two or three days later, without any source, news came that "We agreed to the BRI out of compulsion." I think it would have been better if such things had been refuted.
But, whether it was during the conversation with the Foreign Minister while we were on the plane together, or during the conversation with the journalist friends who participated in that program – there is no independent confirmation of that from anywhere. I don't think the Foreign Minister said that. We all know that India and America have their own kind of "readings" about the BRI. But, what Nepal looks at is its own national interest.
What I generally say is that Nepal is a landlocked country. We cannot change our political map. Even in the distant and near future, there is no possibility of Nepal's border expanding and reaching the sea. This landlockedness has made it very difficult for us. One study says that the production cost of landlocked countries is at least 20 percent higher than that of coastal countries. With 20 percent higher cost, we will be weak in global competition. The way to overcome this and present ourselves in the world market with the same strength is greater "connectivity."
In a sense, we are also lucky. In that, to our north is China, the country with the second largest economy in the world, which aspires to become the first economy in the near future. To the south is India, the country with the largest population and the fifth largest economy in the world. In the near future, India will become the third largest economy.
If we, who are located between the second and third largest economies of the world in the near future (second and fifth today), also want to develop, we must connect with both economies through multi-dimensional networks. We cannot develop anything by staying in "isolation" without moving forward together in that flow. That is why BRI is important for us.
For that, BBIN (Bangladesh-Bhutan-India-Nepal) is also important for us. We have taken BBIN equally important. Although, Bhutan has separated from it, especially in the context of vehicles. If we could take our own vehicles to Chittagong Port or Cox's Bazar (Bangladesh), if Nepali trucks could take their goods to Kolkata or Visakhapatnam, Nepal's cost would be reduced. Therefore, if India also brings a similar kind of connectivity proposal, we will blindly support it.
The term "aid assistance" is used in BRI cooperation, which means both loans and grants. However, the Nepali Congress is still saying that "BRI projects will not be operated on loans. As a ruling coalition partner, how do you take it?
There are two aspects to this. First, as of today, we are not going to build projects under the BRI with loans. However, compared to other countries, our debt is not very high. It has reached 42-42 percent of our GDP. Out of that, foreign debt is 21-22 percent. This is not very big.
In the context of our domestic production weakening, our revenue weakening, our growth rate being very weak, there is no possibility of taking additional loans in large quantities.
But, how long will this situation last? Next year, we are "graduating" from a least developed country to a developing country. After that, wherever we take loans from the World Bank, the Asian Development Bank or the Asian Infrastructure Investment Bank, we will take commercial loans. Right now, we are taking loans at 0.75 or 1.25 percent interest rate. The World Bank will not give us loans like this forever, nor will the Asian Development Bank. Therefore, we must be prepared for commercial loans.
While doing so, we will look at three things. One, is that project in the national interest of Nepal or not? Two, is it our priority or not? Three, is it within our capacity to repay the loan amount?
We have to compare these things before taking decisions. If the interest rates of the World Bank and the Chinese Exim Bank are similar, then it may not be possible to say "I will take loan from one side, I will not take from the other." If the terms of loans from China and India are similar, then we will take from whichever side has more concessions.
We should not see it this way that loan taken from China is a noose, and loan taken from others is generosity, a boon to uplift us. But, the NC leaders, who are in power, are saying that if you have to take a loan, it should be taken from the World Bank, the International Monetary Fund, etc., and should not be taken from China!
There may be differing views within both the NC and our party. But, what the UML and the NC have said institutionally is important.
Second, we must go to the facts. For example, the country called Suriname is almost bankrupt today. A narrative has been created that the loan taken from China is a "debt trap". The Chinese loan taken by Suriname is probably close to zero percent. It has taken loans from other multinational institutions. But, due to not being able to manage the loan taken properly, it is in a bankrupt situation.
Countries like Argentina, Chile, etc., are in a difficult situation due to the loan taken from the World Bank. This is why far-right leader Javier Milei has become the president in Argentina. He is trying to bring the economy back on track by cutting many social security programs. All these crises have come about due to running policies according to the prescriptions of the World Bank, the International Monetary Fund.
While taking a loan, we should pay attention to the terms and conditions. Loans should not be taken by looking at China, India, America. There is no such thing as a loan coming from India being a democratic loan, a loan coming from China being a communist loan, a loan coming from America being an imperialist loan. It is important on what terms we take that loan and where we invest it.
There are some facts that I want to record here. After the 2072 earthquake, Nepal organized an international conference. Indian Foreign Minister Sushma Swaraj came to that conference. She announced one billion rupees at that conference. Chinese Foreign Minister Wang Yi came from China, and he also announced in the same way.
Later, India said - out of the 100 billion rupees announced, only 25 billion is a grant, and 75 billion is under the "line of credit" of the Exim Bank. The Nepal government decided to use that amount for reconstruction, and we had no other option but to accept it.
We were reconstructing the houses destroyed by the earthquake. If any house was destroyed in Gorkha or Sindhupalchowk, the policy was to rebuild it by connecting the same stones and soil in an earthquake-resistant manner, and by arranging the same wood in earthquake-resistant angles. This is why houses were built for 300,000, 400,000 rupees.
But, the condition of the Exim Bank was that more than 50 percent of the goods must be used from the country from which the loan was taken. The contract must also be given to the same country. We could not accept such a condition.
After many rounds of "negotiation", we said, "We will do the reconstruction from our own resources, and we will use that amount on roads." Roads were also identified. The Pokhara and Butwal section of the Siddhartha Highway, and the Kohalpur-Surkhet section were identified.
Now, there are contractors from Nepal. More than 80 percent of the materials including cement, gravel, sand, iron, etc., are also being used from Nepal. After this, the condition of the Exim Bank did not apply here as well. Now, after "diverting" it, we are probably using that amount in the "transmission line". Indian contractors are working on it and Indian materials are being used.
We are talking about the Chinese Exim Bank at Pokhara Airport. So, let's look at the conditions of the Exim Banks of the two countries!
Until a few weeks ago, it was often heard that the Prime Minister would often say, "Now I will visit India soon." He has stopped saying it these days. Why?
Foreign visits are based on the agendas of the nation. Sometimes there are goodwill visits as well. But, generally, in the current context, it is about making a "business-like" visit with an agenda. In the meantime, we agreed with India and started regional trade in energy, and Nepal's energy (electricity) reached Bangladesh. Just recently, we had trade talks with India. We have to review the trade agreement. Some progress has been made to this effect. Other development works are progressing successfully. Therefore, we must clearly state our position and utilize all mechanisms at our disposal. A visit may happen someday as needed.
There are more issues to be resolved with India. But, neither has the Prime Minister of India come here, nor has anyone gone from here after the new government was formed. Shouldn't there be a visit to resolve the problems?
There are problems, and we have not hidden this issue. The border issue has to be resolved. There are unequal relations left as "baggage" by history, including the 1950 treaty, which have to be resolved, and as mentioned in the TOR of the EPG, we have to review our overall relationship and open up the dimensions of a relationship befitting the 21st century.
If you are going to travel a long distance, you have to clean your shoes. Even a small particle of stone can hinder you from moving forward. We call them "irritants." The sooner we can remove the "irritants," the easier our journey will be.
From Nepal's side, we are trying to remove the "irritants." Nepal has no other interest. Nepal has no competition with India, nor are we against India. Nepal has no competition with China. Nepal is not against China.
We have to look at our national interest. We want to move forward by benefiting from the development of both our neighbors. Our neighbors should understand this. Just as we are happy with their success, I believe that they should also be happy with Nepal's success.
.
