PM Oli China-bound amid uncertainty over BRI

The Nepali Congress (NC) and the CPN-UML seem to have agreed on a common position on how to approach China’s Belt and Road Initiative (BRI). While the initiative has garnered support domestically, it remains uncertain whether China will accept Nepal's proposed terms, according to multiple sources.

A task force from the two parties has revised the draft of the BRI implementation plan initially proposed by the Chinese side in 2020. The document, now titled Framework for Cooperation instead of BRI Implementation Plan, has been sent to the Chinese side for initial negotiations, though it is yet to be finalized. The NC and UML are of the view that projects under the BRI should be funded through grants rather than loans. This condition may come up in high-level discussions, as BRI traditionally does not include provisions for grants.

During a meeting with her Chinese counterpart, Minister for Foreign Affairs Arzu Rana Deuba reiterated this same position agreed by the two coalition parties. However, Beijing has yet to formally respond. A senior Nepali official remarked, “The document prepared by the Nepali side is vague, but it is progress. It signals that Nepal is moving forward with the  BRI, which might encourage the Chinese side to sign the document.” According to the official, the Chinese side is desperate to change the narrative that since the signing of the BRI framework in 2017, not a single project has been executed in Nepal.

A UML leader privy to the development said: “The document does not mention about the investment modality which will be settled during the project implementation phase.”

Given the great power rivalry which has also affected the BRI project, the Chinese officials may accept the document. China is reportedly eager to alter the perception of inaction regarding the BRI in Nepal. Beijing has highlighted the Pokhara International Airport as a BRI project, despite its unclear status within the initiative. During a recent meeting in Chengdu, Chinese Foreign Minister Wang Yi emphasized the progress in the joint construction of the BRI, including the Trans-Himalayan Multi-Dimensional Connectivity Network, which he claimed benefits the Nepali people.

Under the BRI framework, Nepal and China will discuss areas such as connectivity, investment, trade, tourism, agriculture and infrastructure development. If China agrees to Nepal’s proposed document, specific projects may be announced during Prime Minister KP Sharma Oli’s visit. CPN-UML General Secretary Shankar Pokhrel suggested that the new agreement could pave the way for mobilizing Chinese resources for Nepal's development.

According to officials, Chinese officials have also emphasized implementing agreements reached over the past decade, including those signed during President Xi Jinping’s 2019 visit to Nepal, rather than pursuing entirely new ones. The two countries are also discussing potential cooperation in the energy sector, including the construction of  cross-border transmission lines, a likely agenda item during Oli’s visit.

Additionally, Beijing is expected to seek renewed commitments from Nepal on the One-China policy. During her meeting with Wang, Foreign Minister Deuba reaffirmed Nepal’s adherence to the policy, asserting that Tibet (Xizang) and Taiwan are integral parts of China. She also assured that Nepal would not allow its territory to be used for activities harming China’s interests, nor support foreign interference in China’s internal affairs.

Raunab Singh Khatri, co-founder of the Aranika Project, a research firm that studies Nepal-China relations, recently published an article commenting on the evolving nature of the BRI. He noted: “The area of China’s international engagement has diversified; from hard infrastructure under the BRI, the trend slowly and gradually shifted toward digital and health connectivity, especially during the Covid-19 pandemic.”

“Will the BRI projects even take off in Nepal? The consensus among Nepali politicians is that Nepal can only accept grants and not loans—but the dilemma is that BRI is, by and large, a commercial project that is backed by “The Big Four” Chinese policy banks, Silk Road Fund, EXIM Bank, CDB, etc.”