How will the pandemic affect BRI projects in Nepal?

Kamal Dev Bhattarai

Kamal Dev Bhattarai

How will the pandemic affect BRI projects in Nepal?

Then Ambassador of China to Nepal Yu Hong and Foreign Secretary Shanker Das Bairagi sign the BRI MoU on behalf of their respective governments on May 12, 2017 | MoFA

On June 18, Foreign Minister Pradeep Gyawali took part in a high-level video conference on the Belt and Road Initiatives (BRI), chaired by Chinese State Councilor and Foreign Minister Wang Yi. Addressing the conference, Gyawali appreciated the role of the BRI in “high-quality development in the partner countries” and underscored the importance of the new initiative of “Health Silk Road under the BRI.”

According to the Ministry of Foreign Affairs, the Health Silk Road hopes to facilitate trade in anti-epidemic medical supplies and cooperation in fighting infectious diseases, including sharing experiences and expertise. By organizing the conference, China wanted to convey a message that Covid-19 has not affected the BRI, but instead pushed the country toward new initiatives like the Health Silk Road.

Nepali politicians continue to express their full support for the BRI. Speaking at an interaction between the Nepal Communist Party and its Chinese counterpart, NCP co-chair Pushpa Kamal Dahal expressed his belief that “the BRI can bring in opportunities for common development… We can develop a community of shared destiny across the Himalayas by pursuing development path under the theme of trans-Himalayan Multi-Dimensional Connectivity Network.”

But the BRI’s actual progress in Nepal has been sluggish. Though Nepal signed the BRI framework in 2017, it is yet to select specific projects under it and the Covid-19 crisis is likely to result in further delays. Before the corona outbreak, discussions were underway on specific projects and investment modalities. As talks had reached the level investment modality, discussing it over a video conference is not an option.

Chinese officials have said that the pandemic has affected over 20 percent BRI projects in Asia, Europe and beyond. According to China’s Ministry of Foreign Affairs, another 30-40 percent of the projects have been somewhat affected. “As the situation improves we have confidence that the projects will come back and the execution of them will speed up,” said Wang Xiaolong, director-general of the ministry’s International Economic Affairs Department at a June 18 news briefing in Beijing.

Not just ongoing projects, the Covid-19 is likely to badly impact countries like Nepal that are yet to select specific BRI projects. The pandemic could mar the BRI projects in Nepal, whatever they are, for two reasons. First, due to its fragile economic condition, Nepal may not be in a position to take loans from China to finance the projects.

In this context, Nepal can ask China to give grants instead of loans. Given the growing competition among big powers and fast-changing geopolitics, China might just agree, even though China normally gives little in grants under the BRI. “In our current state of economic fragility, we should request China to provide grants on BRI projects. There are high chances that it could agree,” says Dr. Rupak Sapkota, Deputy Executive Director, Institute for Foreign Affairs. According to him, China has given Nepal high priority during the pandemic and it will continue to do so in the future. “China is mindful that the economic condition of BRI recipient countries should remain vibrant and that the BRI should cause them no added pain,” he adds.

Second, China may itself not be in a position to give either loan or grants. But Sapkota differs. He says China’s economy has not suffered a lot from the pandemic, and it will as such continue to push the BRI projects in Nepal.

Initially, Nepal had selected 39 projects but following Chinese request it whittled the number down to nine. Before the Covid-19 pandemic, discussions were underway on project prioritization. “Had there been no corona, we could have had final agreements on some projects. We could still see some agreements in the days ahead,” says Sapkota.

China is also changing its approach to the financing of the BRI projects. In the initial days, it provided loans to several countries without considering their payback capacity, which created debt problems in some countries. Now, China is providing loans only after close examination of economic viability of such countries.

Dr. Upendra Gautam, general secretary of Nepal-China Study Centre, says the pandemic obviously affects China’s ongoing and future projects in Nepal under the BRI. Gautam, however, believes Nepal needs to come up with comprehensive plans clearly outlining its priority development projects.

“There could be resource constraints but if we come up with a clear vision and priority, I expect there to be no resource constraints on the BRI projects,” he says. Gautam says the start of the Health Silk Road is in keeping with the needs of the time and Nepal should tap into it to effectively deal with its corona crisis.