In a major anti-corruption drive, the Commission for the Investigation of Abuse of Authority (CIAA), a constitutional body mandated to investigate corruption cases, has filed cases against 55 individuals—including five former ministers and ten former government secretaries—for their alleged involvement in corruption during the construction of Pokhara International Airport in western Nepal.
Similarly, cases have been filed against China CAMC Engineering Co. Ltd Chairman Wang Bao and Regional General Manager Shen Cheng for creating the environment of corruption. The company was selected for the airport’s construction. The Chinese side, however, has denied any corruption in the project. This is likely the highest-profile corruption case since the formation of the Sushila Karki-led government, established on the foundation of the GenZ movement, whose principal demand was combating corruption and ensuring good governance.
The airport was inaugurated in January 2023 by then Prime Minister Pushpa Kamal Dahal of the Maoist party. Since then, China has listed the airport under the Belt and Road Initiative (BRI), a claim the Nepal government denies. Since its operation began, the airport has not conducted international, except few charter flights from China, resulting in a huge financial loss. According to Yagya Raj Regmi, Information Officer at the Special Court where the case has been filed, a liability of USD 7,434,345 has been determined against the 55 individuals.
In May this year, the Public Accounts Committee (PAC) of the House of Representatives instructed the CIAA to investigate the case. At that time, lawmakers were divided over the report, as some from communist parties defended the Chinese company and questioned the report’s integrity. China CAMC Engineering, the airport’s contractor, publicly criticized the PAC report as being riddled with factual inaccuracies and lacking professional, objective analysis of the project’s implementation. This indicates that the Chinese side is unwilling to accept any allegations of corruption in the airport’s construction.
The initial project cost, estimated at Rs 14 billion, was suspiciously inflated to Rs 22 billion. According to Civil Aviation Authority of Nepal (CAAN) officials, the airport must conduct at least 100 daily domestic flights and 50 weekly international flights to sustain operations. The airport also has to pay USD 3.2 million annually in interest.
On 21 March 2016, China Exim Bank and the Government of Nepal signed a government concessional loan agreement worth RMB 1.37 billion for the Pokhara International Regional Airport Construction Project. According to AidData, a research lab based in Washington, D.C., 25 percent of the loan amount (RMB 355.9 million) was provided interest-free with a 20-year maturity period and a 7-year grace period. The remaining 75 percent of the loan (RMB 1.02 billion) carried a 2 percent interest rate, with the same maturity and grace periods. AidData further reports that Nepal used this loan to on-lend to CAAN at a 5 percent interest rate through a Subsidiary Loan Agreement finalized on 5 June 2016.
The airport’s construction was delayed after China Exim Bank required the creation of a joint escrow account into which CAAN—the project’s executing agency—would deposit income generated from all its airports. CAAN refused, delaying the release of project funds and stalling construction. In 2017, CAAN and China Exim Bank reached a compromise to deposit only the revenues generated by Pokhara International Airport into the escrow account.
It is now certain that Pokhara International Airport cannot repay the loan to the Chinese bank. As a result, some Nepali politicians have begun requesting that China convert 75 percent of the loan into a grant. However, no negotiations have taken place, and China has already rejected the possibility. Former Prime Ministers Pushpa Kamal Dahal and KP Sharma Oli separately urged the Chinese side to convert the loan into a grant, but the request was denied. China side has not reacted yet.
According to CIAA, although the cost estimate of 145 million US dollars for the construction was approved, contractor company, China CAMC Engineering Co. Ltd., with malicious intent and without reasonable grounds, unnaturally increased the cost estimate in order to obtain unlawful benefits for itself and the other involved defendants.
The company engaged in collusion and manipulated the competitive process, and before entering further procurement procedures, set an abnormal price and raised the estimate to 286.526 million US dollars. It has been found that China CAMC Engineering Co. Ltd. corresponded with public officials of the public institution with malicious intent to facilitate this increase, said CIAA.
