It is difficult to understand why projects under the BRI have been delayed in Nepal. Every leader of the major political parties does not seem to be against it and speaks elaborately in favor of it, emphasizing its positive impact on Nepal’s development. They also want to develop the Trans-Himalayan Multi-Dimensional Connectivity Network. The most hyped among them are the cross-border railway connecting Lhasa with Kathmandu and extending further to other parts of Nepal and the cross-border transmission line for power trade.
The importance of connectivity for Nepal—linking the rising powers of the North and South—has been widely discussed. Extracting benefits from trade and transit is significant not only for Nepal but also at a regional level. Given the slow progress in implementing projects, many intellectuals and academics believe there must be a diplomatic reason behind it.
The BRI is part of the Chinese constitution. Xi Jinping, the president of China, conceptualized the BRI, a brainchild announced in 2013. The BRI carries the historical footprints of the Silk Road, which came into being during the Han Dynasty in 140 BC.
Rising China, with its miraculous economic growth over the past thirty years since 1980, has established its position among the global powers. The BRI is an expression of extending its wings of influence in global affairs as a powerhouse both as hard and soft powers economically, culturally, militarily, and politically. In pursuance of this, the UN Security Council passed Resolution 2344 in 2017, calling for an enhanced regional economic collaboration through the BRI.
The ancient Silk Road came into existence crisscrossing the geographical boundaries and maintained a trade route for Chinese goods, basically ceramics, porcelain and silk. It also set the maritime route and sent ships across continental waters. The present BRI is the replication of the same ancient Silk Road concept in its modest form. Despite mere commercial objectives, the BRI envisages the development of infrastructures, connectivity, finance, health, climate, culture and civilization, binding people together and ameliorating the lives of people through removing developmental hurdles and alleviating poverty by shared prosperity along with inclusive growth. The concept of BRI is not only developing the Belt and Road but also developing maritime infrastructure facilities to facilitate and enhance international trade and commerce.
Nepal’s entry into it began in 2017 after the signing of an agreement between Nepal and China. It is almost a decade since we signed the agreement, and there has been no further progress in taking up and implementing projects under the BRI. The Chinese side had forwarded the BRI implementation plan around the end of 2019, which remained unheard of for many years. During this time, many other Asian and African nations have taken benefits from this and completed projects adding benefits to their economies.
In recent years, we have hardly seen any infrastructure projects under Chinese assistance in progress. However, China remained one of the major development partners of Nepal, supporting it technically and financially in building several projects for years. That has been stalled for many years as the financing modalities of China have changed from grants to loans. Only the smaller projects in intangible areas which have social aspects are being implemented. We can see Chinese language classes are held in schools and Kathmandu University under Chinese assistance, which is said to be a part of the BRI, and the Smiling Children Project and Support to Schools and Communities in Remote Areas for Pandemic Prevention and Green Recovery.
Nepal’s prolonged silence on the matter has created misunderstandings between the two governments regarding intentions. Because of this, many developmental projects are lingering without further progress, such as the construction of the Ring Road. During these long years of silence, Nepal proposed the projects and shortlisted them according to Chinese advice. The project remains in limbo, with no tangible progress toward implementation. However, in December 2024, a Framework for Belt and Road Cooperation agreement was signed during the Prime Minister’s visit. Understandably, the BRI is a top priority concern for China. Saying one thing and doing another creates irritants in bilateral relations, a pitfall Nepal must skillfully avoid in dealings with its neighbors.
Lately, Nepal has shortlisted ten projects under the BRI, which are Tokha-Chhahare tunnel road, Hilsa-Simikot road project, Kimathanka-Khandbari road and bridge, Jilong-Kerung-Kathmandu cross-border railway, Amargadhi City Hall in Dadeldhura, Jilong-Kerung-Rasuwagadhi-Chilime 220kV transmission line, Madan Bhandari University, Kathmandu Scientific Center and Science Museum, China-Nepal Friendship Industrial Park in Damak, and Jhapa Sports and Athletic Complex.
Funding conundrum
There have been internal and external pressures in Nepal not to accept loans from China to implement projects under Chinese assistance since the BRI has a loan component, and projects are carried out with loans, not grants. Loans are also not soft loans but commercial ones, and their rates would be higher than soft loans with a shorter grace period for payback.
Nepal has been receiving soft loans from the international financial institutions, the World Bank, and the Asian Development Bank with a maximum interest rate of less than 2 percent with a maturity period of twenty to thirty years.
Therefore, Nepal’s only concern is about the funding modality, which is defined as financial assistance lately. Nepal’s fear of accepting commercial loans has its reasonable cause mainly with the economic rate of return. In this context, Nepal has categorically refused to implement large-scale infrastructure projects under the BRI with the loan component.
Without conducting a project's feasibility study properly, its investment, internal rate of return, social as well as internal and external impact, the investment with the borrowed money will undoubtedly be burdensome and have the chances of falling under the debt trap. Nepal has a bad reputation in this aspect as two international airports, in Bhairaha and Pokhara, are unable to function properly. In such a scenario, Nepal has proposed to build a cross-border railway connecting Lhasa with Kathmandu, a billion-dollar project which has to pass over the harsh terrain and rugged mountains.
External concern
Geopolitics is another major issue in Nepal’s BRI implementation and slow progress. The southern neighbor along with the United States of America, who happened to be a major development partner of Nepal, does not like Nepal to be part of the BRI project. Nepal needs to tactfully sort out this knotty issue. However, India’s trade, tourism, cultural and investment relations with China are ever increasing, it does not feel comfortable with Nepal's northern outreach. Not explicitly but tacitly, the United States of America also lobbies through its southern neighbor that Nepal does not go along with the BRI projects.
It's all about diplomacy
It is an accepted fact that Nepal needs to maintain a balancing act between the North and South for its survival. However, on some occasions, without any relevancy or context, which may produce the controversy, our senior leaders use the misplaced rhetoric, at times, hurting the national pride of our neighbor. Such an utter negligence in diplomacy costs heavily, creating mistrust among leaders. Among many, that may be one of the reasons India blamed Nepal leniently more toward China.
At a time when India itself is calling for Chinese investments and promoting trade and commerce between the two countries, Nepal’s dealings with China in promoting trade and investment, implementing projects under Chinese assistance as in the past, should not be a headache for India and will not be. There must be self-confidence in the leaders of Nepal.
Building confidence through carefully chosen smaller projects
To further strengthen the friendly and cooperative relations between Nepal and China in good faith, instead of delaying the projects, Nepal needs to explore all the possibilities of implementing projects which would have a lasting impact on people’s lives and also contribute to the national GDP in the long term. The projects may include the areas of arts, museums and cultural festivals, building libraries, students' scholarship program, Chinese language, agriculture and building industrial and technological parks. Inviting investment in green energy, electric vehicles (EVs), solar and wind energy, renewable energy infrastructure, digital projects, building educational institutions, and climate projects would help in exploring the potential other sectors for cooperation.
(Mr. Bartaula is a former Diplomatic Officer of the Government of Nepal.)
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