KATHMANDU: The Pokhara International Airport, built with a concessional loan from China’s Exim Bank, is likely to put Nepal in trouble similar to Sri Lanka’s Hambantota International Port.

Concerns of transparency, corruption and financial feasibility have been the major issues being raised since the construction of the airport began in 2016 with experts fearing that Nepal could fall into a debt trap in the long run.

Experts argue the challenge for the Government of Nepal is to ensure that the airport does not turn into a “white elephant” as this infrastructure project was pushed by vested interests and political pressure.

The foundation stone of the airport, built with a $215.96 million soft loan from China’s Exim Bank, was laid by the then Prime Minister KP Oli and later inaugurated by Prime Minister Pushpa Kamal Dahal “Prachanda”.

And interestingly, a controversy erupted at the inauguration of the airport on January 1, 2023, when the Chinese Ambassador to Nepal unilaterally announced that the airport was a “flagship project of BRI”, which experts view can be a “debt trap” in the long run.

China, however, denies the claim. The Chinese Embassy in Kathmandu also mentioned that the Pokhara International Airport was a flagship project of China-Nepal BRI Cooperation.

Earlier, a 21-member advisory group formed by the Ministry of Tourism, too, had initially submitted a report saying that the Pokhara International Airport was not a commercially viable option for international flights.

It has also been said that narrow-body jets such as the Airbus A320 and A319 can have payload issues due to obstacles near the airport.

Since the very initial discussion, it was suggested that the airport in which then Prime Minister KP Oli laid the foundation stone on 13 April 2016 would create trouble for the country.

The advisory task force then even submitted an estimate that the number of passengers in Nepal will reach around 33 million in 20 years and only three international airports at Tribhuvan, Gautam Buddha and Nijgadh Airport would be commercially viable options.

However, the construction work of the airport was taken forward without giving it a second thought.

According to civil aviation officials, the airport as an international one has several disadvantages, including weather conditions, load restrictions, runway length, and quality, among others, and all these could be just a part of China’s efforts to entrap Nepal into a debt trap with an intent to gain a strong foothold here.

The airport, which was expected to be completed in 2021 with a cost of around US$305 million, was inaugurated only in 2023.

Sources claimed that the then Director General of the Authority Sanjeev Gautam had refused to open such an account because of which he was even removed from the post due to Chinese pressure on Nepal’s political leadership, corrupt government officials, and businessmen.

The reason why this airport could lead the country towards a debt trap is that the Export-Import Bank of China agreed to provide around US$215 million preferential loan to Nepal.

The Bank has provided 113.4 million dollars so far for the construction of the airport. The remaining amount of about 99.5 million dollars is yet to be provided.

The airport was built with a total amount of 212.9 million US dollars provided by China out of which 20 percent is in the form of subsidy and the remaining 80 percent amount has to be paid at the rate of 2 percent.

Earlier, the Ministry of Finance and the Civil Aviation Authority signed a subsidiary loan agreement with China on 5 June 2016 for the construction of the airport.

The Ministry of Finance took a loan from China at 2 percent and lent the amount to the Authority at a 5 percent interest.

According to experts, if the Civil Aviation Authority of Nepal is unable to pay the debt with the money raised from Pokhara International Airport, and if the airport incurs losses, both the airport and Authority will undergo a hard time.

This is one condition that China had raised before giving the loan to Nepal which means that if a loan is granted for the construction of an airport, the Civil Aviation Authority has to open a third-party intermediary account and deposit all its revenue in that account.

Meanwhile, going against the rules, the Ministry of Energy secretly signed an agreement with the Chinese CAMC company on September 20, 2011, mentioning that the tender will be invited later, and for that, “the government of Nepal will provide concrete and adequate support to CAMC”.

By doing this, Pokhara Airport would have ensured that the loan to China would be paid from the other income of the loss-making Authority.

This condition by Exim Bank raised concerns about the Authority’s risk of revenue from all its airports because of which the construction of the Airport was delayed.

Sources claimed that the then Director General of the Authority Sanjeev Gautam had refused to open such an account because of which he was even removed from the post due to Chinese pressure on Nepal’s political leadership, corrupt government officials, and businessmen.

It should be recalled that the process of construction of Pokhara Airport progressed after Dr. Baburam Bhattarai became the Prime Minister in 2068 BS.

The then Finance Minister Barshman Pun and Tourism and Civil Aviation Minister Post Bahadur Bogati led the discussion with the Chinese company and decided to accelerate the project under the EPCF model (Engineering, Procurement, Construction and Finance).

During the visit of Chinese Prime Minister Wen Jiabao to Nepal in 2012, he offered 75 million dollars of assistance with a loan for Pokhara Airport.

At the same time, the Bhattarai-led government appointed Ganesh Raj Joshi as the Secretary of the Ministry of Tourism and Civil Aviation.

After Joshi decided to award the contract for the construction of the airport to a Chinese company, there were a lot of controversies.

Joshi was later transferred to the Commission for Investigation of Abuse of Authority (CIAA).

This raised controversy yet again after the lowest bid was awarded the project, which was 140 million dollars more than the estimated cost of the government.

Meanwhile, going against the rules, the Ministry of Energy secretly signed an agreement with the Chinese CAMC company on September 20, 2011, mentioning that the tender will be invited later, and for that, “the government of Nepal will provide concrete and adequate support to CAMC”.

When the agreement was signed, then Energy Minister Posta Bahadur Bogati and Chinese Ambassador to Nepal Yang Houlan signed as witnesses on behalf of Nepal.

After this agreement, the Ministry of Finance instructed the Civil Aviation Authority to invite bids for the development of the airport. On the other hand, the Chinese company had already advanced the discussion about loan investment with Exim Bank.

Meanwhile, the Public Accounts Committee of the Parliament discussed the issue saying that there was an irregularity in the process of signing the memorandum of understanding before inviting bids.

However, the bidding process was advanced owing to extreme pressure from the political leadership.

It should be recalled that three Chinese companies submitted bids.

The government had estimated the cost of the project to be US$180 million, but the lowest bidder, the Chinese company CAMC Engineering, set a price of US$305 million, which was almost $130 million more than the estimated cost.

Two other Chinese companies, Sino Hydro Corporation and China International Water and Electric Corporation offered US$ 337,820,000 and 349,290,000 respectively.

This raised controversy yet again after the lowest bid was awarded the project, which was 140 million dollars more than the estimated cost of the government.

This also led to several protests in the country as the concern is whether Nepal can pay back the loan. And if not, it is most likely that China will do the rest!