To sign or not to sign. This is the question Nepal’s Prime Minister K. P. Sharma Oli faces as he prepares for his visit to China, which has been largely overshadowed by a debate whether he should sign an implementation plan for the Belt and Road Initiative (BRI).
The current ruling coalition, comprising Mr. Oli’s Communist Party of Nepal (Unified Marxist-Leninist) [CPN-UML] and the Nepali Congress (NC), is sharply divided over the Chinese scheme and its possible implications for Nepal. While the CPN-UML views Mr. Oli’s December 2-5 visit as an opportune moment for moving the BRI implementation plan ahead, NC is wary of potential debt traps.
After joining the BRI in 2017, Nepal had initially proposed 35 projects under the initiative, but the number was later brought down to nine. However, not even a single project under the scheme has started in the last seven years and the funding modality still remains unclear.
Bone of contention
In Nepal, the common understanding of the BRI is that it entails loan assistance for infrastructure development projects.
Ajaya Bhadra Khanal, a research director at the Centre for Social Innovation and Foreign Policy, a Kathmandu-based think tank, says for China, the BRI is more than just an infrastructure initiative.
“The BRI is Beijing’s strategic vision to deepen economic integration and enhance global connectivity,” he said. “The BRI implementation plan that is under discussion now goes beyond project agreements; rather China’s overall diplomatic strategy with Nepal rests on it.”
Beijing has broadly aligned its ties — be it development initiatives or diplomatic engagements — with Nepal under the BRI, particularly since it proposed the BRI implementation plan in 2020. This was evident when Chinese Ambassador Chen Song labelled the Pokhara International Airport, a project that began long before Nepal signed up for BRI, as one under the scheme.
Amid debates over whether Mr. Oli should sign the BRI implementation plan or not, Mr. Chen held a series of talks with multiple leaders, including those from NC, with discussions largely focused on the BRI.
The Pokhara airport was built with a $26 billion loan assistance from China, but with no commercial international flights operating since its inauguration in January last year, it risks becoming a white elephant. During his visit, Mr. Oli is expected to seek a waiver on the loan or its conversion into a grant. This has led to questions as to how Nepal will be able to pay back if it secures more loans at a time when it is requesting a waiver for an earlier loan.
Dr. Prakash Sharan Mahat, a spokesperson for the NC and former Foreign Minister during whose tenure Nepal joined the BRI in 2017, said at a programme in Kathmandu on Wednesday that Nepal must be cautious while taking additional loans from any country, at a time when Nepal’s public debt-to-GDP ratio is already hovering around 44%.
Geopolitical gambit
Those opposed to BRI, including NC, say while Nepal could benefit from the Chinese scheme in terms of infrastructure projects, they are cautious about China’s possible increased leverage in Nepal.
India, which has in recent times deepened economic ties with Beijing, is wary of growing Chinese influence in its northern neighbour. New Delhi’s refusal to import goods and electricity from Nepal with Chinese components has emerged as a cause for concern of late. The United States, Nepal’s long-time development partner, is concerned about growing Chinese footprint in Nepal. Two years ago, China calling the Millennium Challenge Corporation, a $500 million American grant to Nepal, “coercive diplomacy” had raised fears of Nepal becoming a geopolitical battleground.
Observers say Mr. Oli’s coalition partner NC, which is traditionally aligned with India and the U.S., may have some kind of indirect pressure from New Delhi and Washington against signing the BRI implementation plan, given its geopolitical overtones.
“The best thing to do for Oli is taking forward the past agreements reached with China, rather than signing any new deals,” said Jhalak Subedi, a Left-leaning writer and analyst. “Oli should try to negotiate the implementation of some small projects that have been previously agreed upon and agreements that were signed during (Chinese) President Xi (Jinping)’s visit to Nepal in 2019.”
According to Mr. Subedi, since the BRI is China’s overall foreign policy tool, it presents both challenges and opportunities for Nepal.
“Nepal’s geopolitical predicaments have grown as its economy stutters. So the imminent visit should be an exercise aimed at securing goodwill from the north, while maintaining strong ties with India,” said Mr. Subedi.
Oli and Delhi
Mr. Oli’s visit to China marks a departure from the tradition of Nepali Prime Ministers flying to New Delhi first — a shift that reflects the complex dynamics of his ties with India. His perceived failure to secure an invite from New Delhi — neither during a sideline meeting in New York with Indian Prime Minister Narendra Modi in September nor during Foreign Minister Arzu Deuba Rana’s official visit in August — has further strained an already tenuous relationship.
With New Delhi giving a cold shoulder to Mr. Oli’s rapprochement efforts, the lack of warmth is apparent. Mr. Oli has displayed a confrontational approach towards India, particularly since 2015 when India imposed a border blockade. In 2020, the decision to publish a new Nepal map, including the Kalapani region, which India claims as its own, led to further dipping of his ties with India.
Analysts say Mr. Oli in India has earned an image of a China-leaning leader, a perception that stems from his tendency to whip up anti-Indian sentiments and a host of deals he signed with Beijing in 2016, including a trade and transit agreement. The deal granted Nepal access to seven Chinese ports, a move aimed at reducing Nepal’s over-reliance on the southern neighbour for third-country trade.
“But the problem is, it was not reflected in practical cooperation,” said Mr. Khanal. “On top of that, Mr. Oli’s diplomatic approach is flawed; while he offends the southern neighbour, he has managed to offend the northern neighbour too.”
According to him, Mr. Oli does not seem too obliging to Beijing in its search for a trusted ally in Nepal ever since its experiment of installing a strong Left government in Kathmandu failed. With his trust-building effort with New Delhi also coming a cropper, Mr. Oli appears to have fallen between two stools.
On Monday, Mr. Oli, during his consultative meeting with former Prime Ministers and Foreign Ministers, laid stress on the importance of Nepal’s equal ties with India and China and underscored the need to take benefit from cordial relations with both the neighbours for Nepal’s economic development.
Domestic politics
Differences in the current coalition over BRI signing have caused unease, potentially threatening the government’s stability. In an apparent attempt to assuage NC’s concerns, Mr. Oli on Monday clarified that no new loan agreements would be signed with China during his visit.
Meanwhile, Foreign Minister Rana on Thursday left for China, carrying Nepal’s revised position on the BRI implementation plan, which has been renamed “framework for cooperation on jointly building the BRI” — in an apparent message that Nepal is committed to the BRI but presently its focus is on current needs.
Amid speculations in Kathmandu that the BRI could trigger a fallout between the CPN-UML and NC, analysts say the Nepali leadership will do well not to mix foreign policy with domestic politics. According to Mr. Khanal, Mr. Oli should put Nepal and Nepali peoples’ interests at the front and leave his partisan interest behind.
“For Mr. Oli, stakes are high. How he navigates both geopolitical and domestic intricacies will be crucial,” said Mr. Khanal. “Whether he succeeds in striking a balance or exacerbates existing complexities will be key to shaping Nepal’s path.”
(Sanjeev Satgainya is an independent journalist based in Kathmandu)
Published – November 30, 2024 05:00 am IST
