KATHMANDU: A document on Belt and Road Initiative (BRI) came to the fore recently, five years after Nepal signed it with China.

It is an important agreement to implement BRI. Although more than half a dozen agreements have been signed in the last five years, the five-page bilateral agreement made public by Khabarhub has been signed by the then Foreign Ministry Secretary Shankar Das Bairagi on behalf of Nepal and the then Chinese Ambassador to Nepal Yu Hong on behalf of China.

Bairagi became the Chief Secretary of the Ministry of Foreign Affairs in 2077 BS.

In the BRI Memorandum of Understanding, the BRI has been described as the largest international cooperation forum in the world today.

But there is no mention of what Nepal will benefit from this forum and what the dimensions of the benefits will be.

The MoU states that the two sides will work together to formulate development strategies in the fields of economy, environment, culture and technology.

The document made public by Khabarhub seems to have signed the framework document of the BRI project at the level of the Foreign Secretary between Nepal and China accepting the roadmap of the original agreement after signing three important agreements.

It is mentioned that economic growth and sustainable development will be achieved through connectivity, transit facilities and people-to-people relations between the two countries based on BRI keeping in view the neighborly relations.

It has been said that cooperation will be done on the basis of various principles through BRI, but the details of the terms and conditions of the additional agreement and exchange of support through BRI have not come out yet.

Geopolitical expert George I H Cooke, while analyzing the Sri Lankan crisis at a program in Kathmandu recently, suggested to Nepal that it should be vigilant in the face of Sri Lanka’s economic crisis due to its own misguided policy management.

Cooke, who participated in a discussion centered on the Belt and Road Initiative by News Society Nepal, said that Nepal could make course corrections based on international experience.

Why is Sri Lanka now in a position to borrow money to pay off its debts? He suggested Nepal find out the reason.

This is true not only on the issue of BRI but also on the question of whether to accept the terms and conditions of loans and grants from various donor agencies is important, according to him.

Regarding the risks and possibilities of loans, grants and development projects linked to BRI, the participants suggested not to deify any foreign investment and not to accept investments and agreements in a non-transparent manner.

He was referring to the investment in Pokhara Airport, the condition of the Chinese grant in the name of expansion of the Ring Road and foreign investment including Chinese in various projects.

As many as 140 countries in the world have been involved in the Belt and Road project for the last eight years.

However, after the signing of the important concept document of BRI, only the review bilateral agreement will be exchanged as the core document of this development concept should have been on the basis of joint discussion, joint construction and joint consumption.

China has included the documents of many multilateral mechanisms such as the United Nations, G20, APEC, Shanghai Cooperation Organization, and BRICScalling a modern interpretation of the ancient Silk Road.

Under this strategy of building and trading infrastructure, China now claims that the trade volume between the global cooperation partners has reached more than 9.5 trillion US dollars. Of this, 130 billion is concessional grant investment and the rest is debt.

Under the same grant package, China wants to combine the cost of the now expanding Kathmandu’s Ring Road and the cost of the Pokhara Airport as part of the loan within the project.

After signing the original document of the BRI project in 2071 BS, Nepal became the founding member of the Asian Infrastructure Investment Bank in 2072 BS as per the proposal of China.

The construction of the airport with the loan has been completed and the Chinese contractors have fled leaving the roundabout to be converted into a grant.

Nepal signed a formal agreement to join BRI on December 18, 2014. The original agreement is the main concept document with detailed terms of China’s Silk Road.

This original document is not accessible to any signatory country. Since then, various investment and infrastructure agreements have been signed on the condition that “this is based on the original document”.

The now-public 5-page MoU is an abstract agreement because the MoU on BRI projects on investment and infrastructure development partnership agreement with any country is just a formal document linked to implementation.

The document made public by Khabarhub seems to have signed the framework document of the BRI project at the level of the Foreign Secretary between Nepal and China accepting the roadmap of the original agreement after signing three important agreements.

The spokesperson of the then government Surendra Karki made public the decision of the Council of Ministers in 2074 BS saying now that the “BRI Framework Document” has been signed, understanding will be reached in various areas as per the need.

The government carried out in-depth studies on free trade, investment in Chinese currency, road links, rail links and port access.

According to Karki, the then Deputy Prime Minister Krishna Bahadur Mahara decided to go to Beijing immediately after signing the framework document for further understanding.

Minister Karki said that an eight-member Nepali team led by Deputy Prime Minister Mahara went to China.

Nepali officials had signed various agreements in this regard after attending the BRI Forum Summit held in Beijing in Baishakh, 2074 BS and 1st of Jeshta, 2074 BS.

This document, being very important, was not made available to Nepal. Four days after the signing of the MoU in Kathmandu, the Nepalese authorities were unaware of what these so-called separate agreements were based on because, in the original BRI document, China has only interpreted Nepal’s land as a means to connect with India.

After the fact that Nepal was not included in the BRI infrastructure project became public, the Sushil Koirala-led government did not sign the MoU on the condition that further discussions were held on the project proposal.

Ramesh Lekhak, the then Minister of Physical Infrastructure and Transport of the Prachanda-led government, admits that there was a need for bilateral understanding and detailed discussion on many issues at that time.

He is another Nepali authority who signed various documents at a BRI forum in Beijing on a team led by then Deputy Prime Minister Mahara.

The agreement stipulates that Chinese loans and grants for road and rail infrastructure construction will be provided in Chinese currency.

Economists say AIIB is now offering concessional loans at higher interest rates and conditions than those offered by the Indian government and China’s Exim Bank.

To boost the yuan’s circulation, China has also launched the Asian Infrastructure Investment Bank (AIIB) on its own initiative to manage the financial resources of the project under the Belt and Road Initiative concept.

After signing the original document of the BRI project in 2071 BS, Nepal became the founding member of the Asian Infrastructure Investment Bank in 2072 BS as per the proposal of China.

Its financial resources, resource mobilization and credit investment have been put forward by China as a competitor to the World Bank and the Asian Development Bank (ADB).

After becoming the founder of AIIB, Nepal signed the transit and transportation agreement by accepting the roadmap of the original agreement under the strategy of the BRI project. These are all agreements linked to the BRI project.

The then Foreign Minister, Dr. Prakash Sharan Mahat, has long questioned the terms of the BRI in terms of signing and implementing this comprehensive agreement.

Dr. Mahat said that further discussions were needed with the BRI on some of the dubious points.

But it was the then Prime Minister Pushpa Kamal Dahal “Prachanda” who decided at the cabinet meeting that the agreement should not be delayed.

Immediately, then Deputy Prime Minister Mahara went to Beijing with the message that Nepal had signed the BRI MoU.

Loan from Asian Infrastructure Investment Bank in Nepal

The Asian Infrastructure Investment Bank manages the project’s financial resources under the Belt and Road Initiative concept, which China has been linking to its loans, grants and assistance programs.

Despite being a competitor to multinational financial institutions, the bank’s objective is to invest in large projects to be built in member countries.

It has so far invested 8.5 billion in 50 major projects in 20 countries. By 2027, the loan investment in the BRI project alone will reach $45 billion.

In addition, Indonesia, Turkey, Azerbaijan, Egypt, Bangladesh, Oman and Pakistan are still indebted to the bank.

AIIB’s Articles of Agreement have now been signed by more than 103 countries, including non-Asian and powerful countries.

Most member states are pushing for an end to the practice of lending on various terms.

But no country, including Nepal, has received unconditional concessional loans on the essential areas of infrastructure development.

Concessional loans usually have an interest rate of less than 2 percent and have a long repayment period.

However, in the meantime, any loan available to Nepal from the bank is not concessional but expensive. According to the agencies, AIIB is providing expensive loans by adding one to one and a half percent interests on the London Interbank Offered Rate.

It’s about 3 percent, and when the interest rate is determined by adding one to one and a half percent, the so-called concessional loan has to pay very expensive interest.

As the loan from AIIB is expensive, Nepal is using it in the infrastructure sector by blending it with cheap interest rate loans from other development partners.

Therefore, the loan received from AIIB is not seen as risky for the time being. But economists have warned that loans from AIIBs are not in the country’s long-term interest.

The bank’s board meeting in 2019 had approved a loan offer of US$112.3 million for Nepal with similar revolving conditions and high-interest rates.

If AIIB, which is burdened with heavy debts in the name of infrastructure development and resource mobilization, does not change its credit policy, concessional loans will make Nepal miserable.

This is the first government loan. The government has already disbursed the loan to improve the power distribution system and increase access in 13 districts of Karnali and Far-Western states.

Apart from this, a loan of USD 39.6 million from the same bank is being spent on the Upper Trishuli-1 Hydropower Project.

The government has also taken a loan from the same bank for the project of developing urban infrastructure in 19 district headquarters of the Terai.

AIIB loan has also been mobilized for Tamakoshi V and Sarada-Babai Hydropower Project, Pokhara-Jomsom-Beni Road, and Samakhusi-Tokha-Chhare Road Project.

All these projects are being implemented and will be very costly for the country’s economy.

Economists say AIIB is now offering concessional loans at higher interest rates and conditions than those offered by the Indian government and China’s Exim Bank.

Nepal, like financial institutions such as the World Bank and the Asian Development Bank, has demanded concessional loans to least developed countries, but AIIB has not responded yet.

At the fifth meeting of the bank last year, Nepal made a formal proposal to relax the conditions for providing loans and to maintain easy access to concessional loans.

This is because the interest rate on AIIB loans is much higher than concessional loans from development partners, including the World Bank and the Asian Development Bank.

If AIIB, which is burdened with heavy debts in the name of infrastructure development and resource mobilization, does not change its credit policy, concessional loans will make Nepal miserable.

In the long run, this will put a heavy burden of debt on countries with weak economies and opaque spending systems like Nepal.

Unable to repay the loan, the country’s infrastructure and assets have to be handed over.

This will automatically affect the politics and system of the country.

That is why we are repeating the CIPEC project in Pakistan and the story of Djibouti, Sri Lanka and the Mombasa-Nairobi railway in Kenya, Africa.