KATHMANDU: The government of Nepal is making preparations to sign the implementation agreement of China’s Belt and Road Initiative (BRI) projects.
Following the appointment of a new minister to the Ministry of Finance, the BRI implementation agreement is set to be executed within a few weeks, highly-placed government sources said.
Meanwhile, Foreign Minister Narayankaji Shrestha is slated to sign the BRI implementation agreement during his upcoming visit to China next week.
His five-day visit, likely to commence on March 24, marks his maiden foreign diplomatic engagement.
After four years of intense negotiation and back-and-forth dealings, Nepal has finally confirmed the signing of the Belt and Road Initiative (BRI) implementation agreement with China.
In response to this development, the Chinese government has prepared the visit of Nepal’s Foreign Minister to China as a high priority.
On March 25, in Beijing, Chinese Foreign Minister Wang Yi is scheduled to meet with Nepal’s Minister for Foreign Affairs, Shrestha.
According to sources, the Nepali government has expressed reservations about certain clauses in the draft plan, particularly those pertaining to security and strategic matters despite pressure from the Chinese side.
Insiders reveal that the agreement’s drafting process has primarily involved political figures, sidelining bureaucratic involvement.
Sources disclose that Finance Minister Barsaman Pun engaged in extensive discussions with the Chinese Ambassador to Nepal Chen Song to finalize the investment framework.
Initially, Nepal had sought subsidized investment from China under the BRI.
However, in light of China’s refusal, Nepal has proposed maintaining the loan interest at approximately one percent.
The genesis of the agreement dates back to a previous alliance when Deputy Prime Minister Narayankaji Shrestha visited China. While a basic agreement was reached, certain points remained contentious.
Nepal initially signed the BRI agreement with China in 2017, submitting nine project plans.
However, progress has been stagnant over the past seven years, primarily due to disagreements over investment modalities.
The crux of the issue lies in the investment framework, hindering the project’s implementation. Despite ongoing negotiations, this remains a key challenge.
The Prachanda-led government has urged China to provide subsidies for the BRI projects. Additionally, Nepal has requested the conversion of the loan for the already constructed Pokhara International Airport into a subsidy.
However, China has yet to accede to these demands. Instead, China proposes maintaining the interest rate between 2/3 percent for loans associated with BRI projects in Nepal, which Nepal finds financially burdensome for long-term infrastructure development.
According to sources, the Nepali government has expressed reservations about certain clauses in the draft plan, particularly those pertaining to security and strategic matters despite pressure from the Chinese side.
Finance Minister Pun asked the Chinese Ambassador to lower the interest rate to below one percent, even if grants are unfeasible, but Chinese authorities have rebuffed such requests, according to sources.
Meanwhile, Prime Minister Pushpa Kamal Dahal ‘Prachanda’ is deliberating whether to sign the implementation agreement in Nepal or in China.
According to highly-placed government sources, some suggest that it would be appropriate to sign it in Nepal like the signing of the Memorandum of Understanding on Cooperation under the Belt and Road Initiative on 12 May 2017 in Kathmandu.
However, others have suggested signing it in China at a higher level.
The implementation planning and draft have been kept well secret even the Ministry of Foreign Affairs (MoFA) and high-level officials being unaware of the new developments.
Since early 2020 the BRI implementation agreement has been in limbo due to differences between the two sides.
However, both sides now agree to sign the implementation agreement. In the final phase of the BRI implementation agreement draft, there is no mention of any specific investment modality or project details but mentions the automatic renewal provisions.
There are no details provided regarding the scale and scope of the BRI projects in Nepal or investment through loans or grants.
During behind-the-scenes discussions, the Nepali side requested the Chinese side to consider providing grants and aid in the implementation agreement.
However, after the Chinese refused such an agreement the type of investment and projects are not mentioned in the draft.
Following the signing of the framework agreement on the Belt and Road Initiative between Nepal and China in 2017, Nepal initially earmarked 35 projects for implementation under this initiative.
Despite neglect or lack of momentum surrounding the BRI in Nepal for many years, it has now become a top priority for Prime Minister Dahal after changes in the coalition partners.
It should be recalled that Narayan Kaji Shrestha, during his stint as the Deputy Prime Minister and Minister for Home Affairs in January, had said that Nepal and China would sign the implementation plan of the BRI “very soon”.
He dubbed the signing of the BRI implementation plan as a “key to negotiate and execute the projects”.
In response to Khabarhub’s query, Nepali Congress (NC) lawmaker Rajendra Bajgain raised a crucial point, stating, “Firstly, it must be clarified whether this initiative constitutes a loan or a grant.”
He then questioned, “In the event it is a loan, has the government devised a strategy for its repayment, considering the challenges faced by Pokhara International Airport?”
Drawing parallels to instances such as Pokhara International Airport and the Hambantota Port in Sri Lanka, Bajgain queried, “Do these leaders possess the authority to endorse such agreements without obtaining the consent of the Nepali populace?”
Consequently, he emphasized that if such agreements are indeed being pursued, the government should promptly disclose the terms of the document to the public.
It may be noted that Nepal and China signed the Memorandum of Understanding on BRI in 2017.
Interestingly, not a single project under the BRI has been executed in seven years.
According to Shrestha, Nepal and China would move into the implementation phase after signing the implementation plan.
Political analyst and foreign affairs expert, Arun Kumar Subedia, underscored the necessity for clarity regarding the economic, social, and financial ramifications of projects within the Belt and Road Initiative (BRI).
He highlighted the strategic risks that Nepal may encounter in this regard.
Subedi emphasized the importance of transparency by suggesting that the entirety of BRI project documents should be made available to the public domain akin to the practices of organizations such as the Millennium Challenge Corporation (MCC).
He posed the question, “Will the documents pertaining to BRI projects be accessible to the public domain?”
Meanwhile, it may also be recalled that a meeting convened on September 1, 2023, at the prime minister’s official residence in Baluwatar, comprising various government agencies, assigned the task of coordinating and finalizing a draft plan for implementing Belt and Road Initiative (BRI) projects to Min Bahadur Shrestha, Vice Chairman of the National Planning Commission.
Under Shrestha’s leadership, a committee had been quietly laying the groundwork for the execution of these projects.
Following a decision in the presence of Prime Minister Dahal, Foreign Secretary Bharat Raj Paudyal sent a letter to Shrestha on September 3, enclosing the draft of the BRI implementation plan forwarded by the Chinese side.
Notably, back in March 2016, the government had inked a soft loan agreement worth $215.96 million with China for the construction of the new Pokhara airport, without explicitly mentioning its association with the BRI.
This draft had undergone several revisions based on mutual understanding between officials of both Nepal and China.
Sources revealed that efforts to finalize the plan have been ongoing since early 2020, with exchanges of drafts and comments between the two sides.
According to sources, the Nepali government has expressed reservations about certain clauses in the draft plan, particularly those pertaining to security and strategic matters despite pressure from the Chinese side.
It may be noted that the Chinese side shared the BRI implementation plan’s text towards the end of 2019 or early 2020 in Nepal.
Subsequently, Nepali officials engaged in several rounds of consultations upon receiving the document.
The Nepali side had incorporated inputs from foreign, finance, and other relevant ministries before submitting the draft for Chinese approval.
However, the Chinese returned the draft with additional comments.
Following the signing of the framework agreement on the Belt and Road Initiative between Nepal and China in 2017, Nepal initially earmarked 35 projects for implementation under this initiative.
However, this number was later reduced to nine. Interestingly, the Pokhara airport, which was not initially included in the list, has now been added by China under the BRI.
Notably, back in March 2016, the government had inked a soft loan agreement worth $215.96 million with China for the construction of the new Pokhara airport, without explicitly mentioning its association with the BRI.
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