Nepal signed the $500 million Millennium Challenge Corporation Compact in September 2017. After years of persistence, controversy and contention in recent months, the lower house of parliament on February 27 ratified the pact with a declaration in 12 points. The decision has already been communicated to MCC headquarters.
A meeting of the MCC’s board of directors scheduled for this week is expected to adopt the decision taken by the Nepalese parliament before the pact came into force.
Four months before the signing of the US pact, Nepal had signed the Framework Agreement on the Belt and Road Initiative, an ambitious multi-billion dollar infrastructure initiative undertaken by China that aims to connect the Asia to Africa and Europe via land and sea routes. networks with the aim of improving regional integration, increasing trade and stimulating economic growth.
But not a single project under the BRI has taken off in Nepal, even five years after the signing of the framework agreement.
Several sources in government and political leaders told the Post that the main purpose of Chinese Foreign Minister and State Councilor Wang Yi’s upcoming visit is to push for the implementation of the BRI and to sign at least two projects during the visit if possible. Foreign Minister Wang is due to arrive in Kathmandu on March 26 for a two-day official visit where he will meet President Bidya Devi Bhandari, Prime Minister Sher Bahadur Deuba and hold delegation-level talks with his Nepalese counterpart Narayan Khadka. . Accompanied by some senior leaders of the Chinese Communist Party, Wang will meet several leaders of the ruling and opposition parties.
“We have already received the text of China’s BRI project implementation plan,” a senior government official told the Post, adding, “During the visit, the two sides are expected to agree on the text of the project implementation plan, which will pave the way for the execution of BRI projects.
During internal consultations on BRI projects last December, the Ministry of Finance, in its recommendations to the Ministry of Foreign Affairs, suggested that the two countries set up a joint project selection mechanism.
The official said the recommendations also include avoiding commercial loans for the implementation of BRI projects as they are too expensive.
“In our recommendation, we made it clear that we should preferably seek a grant from China or concessional loans at less than 2% annual interest to fund projects under the BRI. Our economy is too small to to be able to afford commercial loans, so we must avoid such loans,” a senior finance ministry official said.
Nepal’s former ambassador to China, Mahendra Bahadur Pandey, said during his tenure that Nepal held discussions on potential BRI projects and worked on the text of the project implementation agreement. “It’s a good volume of 40 to 45 pages in English and Chinese,” he said.
Pandey, who was appointed by the former KP Oli-led government, was recalled in September last year after Sher Bahadur Deuba came to power.
Although project implementation plan is not a prerequisite for implementing BRI Framework Agreement, some countries have developed such a plan before selecting and negotiating projects, according to another Nepalese diplomat who had served in Beijing.
“According to the suggestions from the Chinese side, we had prepared the plan, sent it to Beijing for their input and now we have received it,” the official added.
The main obstacle to the selection and implementation of projects under the BRI is the lack of clarity on the financing modalities, according to officials. Nepal, officials say, is seeking donations, but the Chinese are insisting on soft loans.
“We have already received the text from Beijing and we are exchanging final notes and comments regarding the terms of project funding,” said a senior official with knowledge of the upcoming Chinese visit. “Once both parties have signed the implementation plan, we will enter the negotiation phase of the project.”
So far, nearly 140 countries have joined the BRI.
When Nepal signed the BRI agreement in 2017, it was touted as a watershed moment in Nepal-China relations. But with no projects starting under the Chinese program, there were concerns, especially from some Western countries, if there were reluctance from Nepal itself for geopolitical reasons.
India, Nepal’s southern neighbor, and the United States view the BRI as China’s attempt to exert influence in the region using its economic clout. Countries like Sri Lanka and Pakistan in South Asia are also part of the BRI.
When Nepal agreed to build projects under the BRI, Pushpa Kamal Dahal of the Communist Party of Nepal (Maoist Centre) was Prime Minister. After him, Sher Bahadur Deuba of the Nepalese Congress led the government, followed by KP Sharma Oli of the CPN-UML. And Deuba is back in the prime minister’s seat.
After successive governments failed to launch any projects under the BRI, according to people familiar with the matter, there was a kind of unease on the Chinese side if Nepal was really committed to what it had signed.
The only development regarding the BRI on the Nepalese side is that Kathmandu in January 2019 sent a list of nine projects to China. There has been no further progress in the negotiations.
Since Wang is likely to push for BRI implementation in the context of MCC compact ratification, finalization and signing off of the project implementation plan is required before projects can enter into the implementation phase, said a senior Foreign Ministry official.
Other issues on the Nepalese agenda during Wang’s visit include the full reopening of the northern border points – Rashuwagadhi and Tatopani, which are major trading points between Nepal and China, the resumption of flights between both countries, the problems faced by Nepalese students enrolled in various Chinese universities who had to return home abruptly due to the pandemic and other regular problems related to delay, trade, infrastructure, among others.
China has closed most of its land border points since the Covid pandemic hit the country in 2019.
Meanwhile, during a recent interview with the Global Times, a spokesperson for Chinese government president Bidya Devi Bhandari also expressed dismay at the slow progress of BRI projects.
“We see them [BRI projects] as opportunities for the development of Nepal’s infrastructure and wishes to move this process forward. For many reasons, the BRI projects have not yet taken off even though we signed the MoU about five years ago. We must exert our joint efforts to accelerate them,” Bhandari said in the interview.
According to the Finance Ministry official, China will definitely push and seek Nepal’s assurance to build the Kerung-Kathmandu cross-border railway, as the Chinese have already expressed their intention to carry out a feasibility study for the project during recent virtual meetings with Nepali officials.
Initially, there was talk of China building two separate railway projects linking Chinese Kerung to Kathmandu and Kerung to Pokhara, the detailed study of which is still in progress.
China has already agreed to carry out the study on the proposed rail links under the banner of the Nepal-China Trans-Himalayan Multidimensional Connectivity Network. However, the study was interrupted due to the Covid-19 pandemic.
According to a joint secretary of the Ministry of Physical Infrastructure and Transport, the Chinese side has already made clear that it will undertake the feasibility study of the Kerung-Kathmandu railway network and an agreement to this effect is expected during the visit.
Foreign Ministry spokeswoman Sewa Lamsal said officials are currently consulting with multiple stakeholders to prepare an agenda for the high-level meeting with China’s foreign minister. “Once the consultations are over, we will officially announce the agenda and date of the visit.”