The two new international airports of Nepal that recently started operation in Pokhara and Bhairahawa have one thing in common—-the involvement of Chinese contractors.
China CAMC Engineering constructed the Pokhara Regional International Airport which was built with the assistance of China. The Asian Development Bank (ADB)-funded Gautam Buddha International Airport was constructed by another Chinese contractor, Northwest Civil Aviation Airport Construction Group.
Chinese companies have emerged as dominant players in Nepal’s physical infrastructure development, be it the projects of the government or the private sector.
The Chinese contractors were awarded the contract of constructing the important sections of the Kathmandu-Nijgadh Fast Track Project by the Nepal Army. Similarly, the Chinese contractors have also been awarded contracts for expanding the Prithvi Highway and the Narayangarh-Butwal section of the East-West Highway.
According to officials of the Department of Roads (DoR), 60 percent of contracts under international bidding are handled by Chinese contractors. “Around 60 percent of contracts under the international bidding have been awarded to the Chinese contractors related to roads and bridges,” said a senior DoR official.
Zhang Shaogang, Vice Chairman of the China Council for the Promotion of International Trade (CCPIT) also boasted about the involvement of Chinese contractors in Nepal while addressing the ‘Nepal China Business Forum 2023’ organized by the Confederation of Nepalese Industries (CNI) and the CCPIT) in Kathmandu on Tuesday.
“Chinese enterprises are also the major players in the Nepali project contracting market,” he said, adding, “As of the end of last year, China had signed project contracts worth US USD 10.74 billion in Nepal with a turnover of USD 5.48 billion. This fully demonstrates the great attention and importance Chinese investors attach to the Nepali market.”
The contracts handed over to the Chinese companies as claimed by Zhang are equivalent to the capital expenditure of the federal government in the last six fiscal years.
In the last six fiscal years till 2021/22, the government spent Rs 1350 billion capital budget and USD 10 billion in contracts awarded to Chinese enterprises is around equivalent to the total capital expenditure in the last six fiscal years. The government spent a capital budget of Rs 225 billion on average every year between FY 2016/17 and FY 2021/22.
According to the DoR official, the main reason behind the Chinese companies being able to outcompete bidders from other countries is that they usually make the lowest evaluated bid. “The government entities usually approve the lowest evaluated bids though the lowest bidder is not necessarily awarded the contract as per the public procurement law if there are other shortcomings,” the official said.
While Chinese contractors have omnipresence in the country’s infrastructure development, their performance in a number of projects has come under scrutiny in recent years. The contract with a number of Chinese contractors has also been terminated. For example, the contract with the first contractor for digging the tunnel of the Melamchi Drinking Water Supply Project was terminated because of slow progress.
The Melamchi Water Supply Development Board had terminated the contract with the China Railway Bureau Group. The Nepal Electricity Authority in December 2018, terminated the contract with company Guangxi Transmission and Substation Construction Company and the Shenzhen Clou Electronics Co Ltd for poor progress in first package of (New Khimiti-Bahrabise) under the Tamakoshi-Kathmandu 400 KV transmission line.
DoR has also put pressure on the China State Construction Engineering Corporation Limited for dismal progress in widening the Narayangarh-Butwal Road.
“Currently, foreign contractors can compete without the involvement of Nepali contractors as joint venture partners,” said the DoR official. “Studies show that involvement of Nepali contractors as joint venture partners has been more beneficial to complete the work in a shorter period.”