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The Centre for Social Innovation and Foreign Policy (CESIF) organized a national seminar on “Navigating Strategic Implications of BRI for Nepal.”

The seminar aimed to discuss the strategic opportunities and challenges posed by China’s Belt and Road Initiative (BRI) for Nepal.

Focusing on BRI’s geopolitical significance for the country, the seminar sought to generate consensus on Nepal’s priorities to maximize the Initiative’s benefits while safeguarding Nepal’s national interests.

The seminar began with welcoming remarks by CESIF’s Executive Chairperson, Vijay Kant Karna, who also set the context for the speeches, presentation, and discussions to follow.

Noting that the Nepal-China relations currently stand at a crucial juncture, Karna stressed that the BRI is a strategic tool for China to advance its vision for an alternative world order, and the Implementation Plan mimics a comprehensive agreement with long-term strategic implications for Nepal. “Instead of signing a separate Implementation Plan, Nepal should negotiate on specific projects under the Initiative,” argued Karna, reads a statement issued by CESIF.

Following the welcome speech, CESIF’s Research Director Ajaya Bhadra Khanal delivered opening remarks. His speech also highlighted the geopolitical complexities and long-term implications of BRI as China’s comprehensive vision for a new world order. “The BRI Implementation Plan is not just an infrastructure development plan but a comprehensive strategic framework, negotiating which must involve a detailed assessment of their social, political, economic, and strategic consequences for Nepal,” emphasized Mr. Khanal.

Pawan Adhikari, Research Fellow at CESIF, presented on “BRI in Nepal: Status, Challenges, and Way Forward,” shedding light on the regional and global BRI experiences, the current state of Nepal’s engagement with BRI, and potential paths for negotiation and project implementation. He stated that Nepal should prioritize feasible “small but beautiful” pilot projects before implementing “mega projects.”

The seminar featured three keynote speeches by Prakash Sharan Mahat, Former Minister for Finance / Foreign Affairs of Nepal, Pradeep Gyawali, Former Minister for Foreign Affairs of Nepal, and Raj Kishore Yadav, Chairperson, International Relations and Tourism Committee, House of Representatives, Nepal.

Mahat echoed the observation that BRI is China’s strategic tool to globalize its engagement and increase its presence and influence to achieve its national interests and broader visions. He also highlighted his party Nepali Congress (NC)’s stance, “there should be a common yardstick for Nepal’s engagement with all partners, which must prioritize the country’s national interests.” However, Nepal has had “the tendency to lack preparations and make last-minute decisions, due to which we face problems eventually,” he added, “therefore, we must take as long as it takes to reach a consensus based on Nepal’s own national interests and priorities, and not sign the Implementation Plan in haste.” Irrespective of all other dimensions, in summary, Nepal should not accept loans under the Initiative, especially when China is yet to deliver on its several grant commitments to Nepal.

Similaly, Gyawali also emphasized the need for sufficient discussions on important bilateral and multilateral agreements, especially in its dealings with the neighboring countries and superpowers, before committing to agreements with long-term consequences. “Instead of assessing where Nepal’s interests and priorities align with the Chinese Initiative and how to benefit from it, our discussions and debates have been limited to a loan versus grant narrative,” he stated, “nevertheless, Nepal should not accept loans to advance any large infrastructure project under current circumstances.”

Citing the example of Pokhara International Airport, Yadav warned that Nepal must consider some serious concerns, such as debt-sustainability, lack of transparency, and geopolitical implications of the BRI-funded projects. “Transparent discussions on major foreign policy choices constitute a fundamental aspect of democracy, but neither the MoU nor the Implementation Plan of the BRI has been discussed in the parliament and civil society platforms,” Hon. Yadav stressed, “Nepal should not sign the Implementation Plan without proper and transparent discussions.”

CESIF brought together experts and practitioners to discuss various dimensions of BRI in two different panels. The first panel included speakers Govinda Raj Pokharel, Former Vice Chairperson of the National Planning Commission of Nepal, Madhuraman Acharya, Former Foreign Secretary and Foreign Policy Expert, and Bishnu Rijal, Central Committee Member, CPN-UML, and was moderated by Vijay Kant Karna.

The discussion centered on BRI’s negotiations and their strategic implications for Nepal. Acharya characterized BRI in Nepal as a “classic case of how not to negotiate,” as it featured negotiation under duress, top-down negotiations, and politicization. “BRI Implementation Plan is essentially an explanation or formalization of the ‘strategic partnership’ between Nepal and China, agreed during Xi Jinping’s Nepal visit in 2019,” he contended, “such a comprehensive agreement should not be signed in haste, without negotiating on Nepal’s national interests.”

Pokharel emphasized that Nepal’s top priority should be on securing a trade route with China, which is “one of the most important national priorities but is often overlooked in negotiations.” He underscored the importance of identifying national priorities well in advance, because a failure to do so “significantly undermines our ability to negotiate effectively.” Bishnu Rijal discussed the necessity of external borrowing for Nepal to meet its growth targets because “Nepal cannot sustain major projects with internal resources alone.” However, Pokharel argued that Nepal can take loans only for projects with high debt-sustainability and rate of return. Mr. Rijal also highlighted the historical ties between Nepali and Chinese communists and dispelled concerns about potential policy infiltrations, arguing that these relationships do not compromise Nepal’s policy making autonomy.

The second panel discussion on “Navigating BRI: Debt, Diplomacy, and Development,” hosted experts who explored different aspects of BRI’s implementation in Nepal. Moderated by Mr. Ajaya Bhadra Khanal, the panel included speakers Kewal Prasad Bhandari, Secretary (Retd.), Government of Nepal, Prof. Bishwambhar Pyakurel Senior Economist Mr. Anil Giri, Senior Journalist, The Kathmandu Post.

Arpan Gelal, Research and Program Coordinator at CESIF, wrapped up the event by summarizing the key issues raised and the consensus reached on the seminar.

More than a hundred participants including policymakers, politicians, national and international experts, analysts, academics, diplomats, bureaucrats, and journalists attended the event.

Five years ago, during his visit to Kathmandu, Chinese President Xi Jinping issued a strong warning: “We will crush any force that casts an eye on China’s sovereignty.” This cautionary statement reflected his belief that powerful nations were using Nepal as an arena for anti-China activities.

Xi said this during his talks with Prime Minister KP Sharma Oli. As Oli prepares for his upcoming visit to China, it is likely that this issue will resurface. The key question is how Nepal will address these concerns and reassure its northern neighbor. Nepal must have carefully prepared its responses.

Xi has continued in power in China since that meeting in Kathmandu, while Oli has returned to power following shifts in Nepali political scene. Over the past five years, both domestic politics and the geopolitical environment have become more complex.

During Oli’s visit, the two leaders are expected to discuss bilateral relations, mutual cooperation, development, prosperity and the complexities of regional and global politics. Oli’s visit to China will be primarily focused on securing economic assistance and deepening bilateral relations. However, divisions within Nepal’s ruling coalition, particularly on cooperation under China’s Belt and Road Initiative (BRI), will pose a significant challenge for Oli. The Nepali Congress (NC), the leading party in the coalition, has firmly opposed BRI projects funded through loans, citing fears of Nepal falling into a Chinese debt trap. The Central Working Committee of the party has already resolved to reject any BRI loans. NC leaders are arguing that loan agreements come with long-term risks. Adding to the complexity is external pressure from regional and international powers which are discouraging Nepal from moving forward with BRI implementation.

Oli, however, supports BRI projects funded through subsidized loans if grants are not an option, and is trying to persuade the NC leadership. However, if China insists on loans and the NC maintains its opposition, Oli could find himself in a difficult situation. Speculation is already circulating that this visit might be limited to a mere “sightseeing tour” for the Prime Minister.

What next then?

Although the contents of the BRI agreement has not been made public yet, it has become a politically charged issue. It has become a tool for some to gain power and unseat others. The lack of consensus among ruling parties complicates Prime Minister Oli’s position, especially when addressing the Chinese leadership about Nepal’s reluctance to accept loans under BRI. While such political maneuvering might serve short-term goals, it raises concerns about the long-term impact on Nepal’s relations with China, a rising global power. A measured approach, therefore, is necessary.

If BRI loans cannot proceed, Oli could request China for grant support for two high-priority projects: a modern terminal building at Tribhuvan International Airport and a metro rail system for Kathmandu. The design of the airport terminal, estimated to cost Rs 40bn, has already been drawn. Although expansion works like building a taxiway are ongoing, it is certain that the existing terminal cannot handle passengers after five years.

On the other hand, the population of Kathmandu Valley has been increasing, with some estimating it has already reached six million. The existing transport infrastructure cannot handle visitor traffic 10 years from now. Considering growing urbanization, vehicle pressure, and population growth, there is a necessity to move forward with metro rail construction. Studies conducted 12 years ago by the Korea Rail Network Authority estimated the metro project’s cost at Rs 600bn. With limited scope for road expansion, initiating metro construction now could avert severe transportation challenges in the future.

Nepal’s economic constraints, including its reliance on domestic debt to pay the salary of public servants,make large-scale infrastructure projects unrealistic without foreign assistance. Instead of requesting piecemeal aid like ambulances and small-scale school buildings from its neighbors, Nepal should strategically seek substantial projects that enhance income generation and public services. If China agrees to fund one project as a grant, Nepal could approach India for the other. After the China visit, the Prime Minister will certainly visit India.

But for now, Nepal does not need to make rail construction the primary agenda with China and India. China’s rail network, which has reached Shigatse, will likely extend to Nepal to access South Asia’s markets. Similarly, India has begun feasibility studies for the Raxaul-Kathmandu rail line in response to China's Kerung-Kathmandu railway plans. Nepal should align its infrastructure priorities with these developments and seek support based on its most urgent needs.

Key agendas that Nepal must raise

Along with discussions on economic cooperation and mutual relations, Nepal must raise three critical issues with China during Prime Minister Oli’s visit. First, Nepal should emphasize the need for uninterrupted operation of northern border checkpoints, which have faced frequent closures and disruptions. Second, the persistent delays by Chinese contractors in handling infrastructure projects in Nepal must be raised, as they have negatively impacted public perception and project timelines. Lastly, the increasing involvement of Chinese nationals in criminal activities within Nepal requires serious attention to ensure law enforcement and maintain bilateral trust. Addressing these issues is crucial for strengthening Nepal-China ties and resolving ongoing challenges.

Irregular border checkpoints: Following the promulgation of a new constitution in 2015, Indian blockade caused severe shortages of essentials in Nepal, bringing daily life to a halt. During the crisis, China provided much-needed relief, including food grains, clothing, and even oil tankers, signaling its potential as an alternative supplier of petroleum products. In response, Nepal began prioritizing the opening of northern checkpoints and accelerating road construction towards China. However, since the COVID-19 pandemic, key checkpoints like Tatopani, Rasuwagadhi, Korala, Kodari, and Yari have become unreliable, with unpredictable closures disrupting trade. As a result, traders have been facing delays, which is causing perishable goods like fruits brought for major festivals to rot, resulting in huge losses. Therefore, Nepal remains cautious about the reliability and operational effectiveness of Chinese checkpoints. Ensuring smooth, transparent, and mutually beneficial checkpoint operations could facilitate easier trade and potentially strengthen bilateral relations between Nepal and China.

Working style of Chinese contractors: China’s rapid development, driven by its unmatched capacity, technology, and efficiency, has amazed the world. However, this renowned work ethic seems absent among Chinese contractors operating in Nepal. Many Nepali infrastructure projects handled by Chinese construction companies have been facing delays, mismanagement and negligence, leading to growing dissatisfaction among Nepalis. The stalled Narayangadh-Butwal road expansion project is a glaring example of this negligence. While the blame is not entirely one-sided, Nepal’s bureaucratic hurdles, complex policies, corruption, and irregularities also contribute to these challenges. It is necessary for the leaders of the two countries to address these issues for fostering productive partnerships and improving perceptions of Chinese contractors in Nepal.

Chinese citizens in criminal activities:  Since 2015, the influx of Chinese traders, tourists, and workers in Nepal has surged. Similarly, the number of Nepalis going to China for travel, study, training and seminars have also grown. Chinese investments have also expanded, particularly in hotels and restaurants in areas like Thamel, Jhamsikhel, Pokhara and Lumbini. However, this growing presence has been accompanied by a rise in criminal activities involving Chinese nationals, including kidnapping, bank fraud, cybercrime, counterfeit currency, and gold smuggling. Since the growing involvement of Chinese nationals in crime and irregularities in Nepal is not sending a good message, the issue needs to be discussed at the highest level during Oli’s China visit.

Nepali Congress (NC) and CPN-UML are working to bridge their differences over China’s Belt and Road Initiative (BRI) ahead of Prime Minister KP Sharma Oli’s Beijing visit. The NC has taken a firm stance against accepting loans for BRI projects, focusing instead on grants or concessional financing to avoid economic burdens.

A four-member task force representing both parties in the coalition has developed a unified position on the draft BRI implementation plan proposed by China. According to party leaders, the task force’s draft of Nepal’s response has been forwarded to the Chinese side. If China agrees, a new agreement to advance the BRI will be signed during Prime Minister Oli’s visit to China from Dec 2 to 6.

At the leadership level, the NC and UML have reached a consensus that loans under the BRI are unacceptable. Prime Minister Oli has reiterated this position in Cabinet meetings and public forums, emphasizing Nepal’s unwillingness to take loans. This position aligns with the stances of three major parties—NC, UML, and CPN (Maoist Center)—who agree that Nepal’s current economic challenges make loans untenable.

In June, former Prime Minister Pushpa Kamal Dahal expressed in Parliament that Nepal prefers grants over loans and that, if loans are essential, they should be concessional, with interest rates not exceeding 1.5 percent. Dahal also stated that Nepal seeks financing from China under terms similar to those offered by the World Bank and the Asian Development Bank.

However, China’s official stance on the BRI does not include grant provisions. A 2023 Chinese white paper describes the BRI as a joint development initiative rather than a foreign aid program, emphasizing mutual contributions and shared growth. “The principle of joint contribution highlights that the BRI is not an international aid program or a geopolitical tool but a collaborative effort for shared development,” the document states. So far, China has not publicly addressed Nepal’s request for grants.

The Pokhara International Airport loan has become another contentious issue. Nepal is considering asking China to waive the loan. Dahal had made a similar request during his tenure, and now the Oli administration is preparing to do the same.

In September, Deputy Prime Minister and Finance Minister Bishnu Poudel requested China to waive the airport loan. However, Chinese Ambassador to Nepal Chen Song has indicated that waiving such loans may be difficult.

Initially, the NC was staunchly opposed to the BRI, but it has softened its position. NC leaders now believe the BRI could be viable if China offers grants for infrastructure projects. To further these discussions, Minister for Foreign Affairs Arzu Rana Deuba is traveling to Beijing to prepare for Prime Minister Oli’s visit. Rana is expected to finalize the drafts of agreements that could be signed during the visit.

With a tentative consensus between coalition partners, the risk of political instability appears to have been mitigated. A senior NC leader remarked, “We should not oppose the BRI outright but must ensure Oli doesn’t sign any agreements that could lead Nepal into a debt trap.”

Nov 20

Mid Baneshwor, Kathmandu

Newspaper readership might be declining, but in Kathmandu’s tea shops, the headlines are still the spark for lively gossip. I’ve been noticing this ever since I started writing this column. That’s why tea shop owners make sure there’s at least one fresh newspaper on hand every morning—it’s as essential as the tea itself.

The other day, I stepped into a small tea shop in Mid-Baneshwor. It was quiet, just two people sipping tea. When one of them left, I worried the shop might be too empty to gather a decent story. But the man sitting next to me saved the day. He grabbed a copy of Naya Patrika and blurted out: “This is what happens in Nepal all the time. It’s unfair!”

The headline he was reacting to reported political meddling in the investigation of cooperative fraud. Apparently, only opposition leaders were being targeted, while ruling party leaders were conveniently off the hook. He was especially riled up about the arrest of Rabi Lamichhane, the chairman of the Rastriya Swatantra Party, calling it a politically motivated move.

Soon, another patron chimed in, steering the conversation toward corruption during the Panchayat era. He claimed the final years of the regime were riddled with shady deals, especially as the country transitioned to a multi-party democracy in 1990. According to him, revenue offices became cash cows for politicians, with prime ministers cutting deals to place senior officials there in exchange for a slice of the earnings.

Just then, three regulars strolled in, greeting the owner as they made themselves comfortable. The focus shifted to Durga Prasai’s recent arrest. Opinions were flying in all directions. Some defended the government’s move, while others speculated it was an attempt to suppress a rally Prasai had planned. One man brought up Prasai’s claims about Prime Minister KP Sharma Oli having stakes in a Cambodian telecom company. While some dismissed it as nonsense, others argued that Oli’s past visits to Cambodia and the involvement of Nepali businesspeople made it worth investigating.

At this point, someone brought up how easy it is to fake documents and media nowadays. “Deepfakes,” I interjected. That word caught their attention, and I explained what I knew about the technology. Then I slipped back into listening mode as the debate continued.

The conversation took a personal turn when an older man joined us and ordered tea without sugar. He shared how diabetes had been a constant battle for him over the past decade. “It’s tough being alone,” he said. His wife had passed away five years ago, and his children were settled abroad in Canada and Australia. His son was in town for Dashain, mainly to get some dental work done because healthcare is so expensive overseas.

This opened the floodgates to a discussion on medical tourism. One man remarked how even wealthy Nepalis return home for affordable treatment. The conversation turned to lifestyle changes, with some advocating dietary adjustments over exercise. The tea shop owner joined in, admitting he also had diabetes but relied solely on medication.

Talk of health gave way to real estate woes. The older man mentioned trying to sell land in the far-western region but lamented the sluggish market. “Nobody’s buying unless it’s for building a house,” he said. A man from Kavre added that the recent floods and landslides had made things worse. Showing photos on his phone, he pointed out how risky it was to invest in flood-prone areas now. For once, everyone agreed.

The tea shop owner eventually joined the chat, venting about the government declaring a public holiday to mourn a former speaker’s death—after office hours had already started. “What’s the point?” he grumbled. The topic fizzled out quickly, though, with most patrons uninterested.

Finally, the discussion turned to politics, as it always does. The ruling CPN-UML’s decision to hold street protests on November 22 came under fire. “Why is a ruling party blocking roads?” one man asked. Another accused the UML of giving Durga Prasai too much attention. As they debated the party’s stance on China’s Belt and Road Initiative (BRI), my time ran out. I had to leave for a meeting, but the conversation was still going strong when I stepped out.

Once again, the tea shop had delivered—a microcosm of Kathmandu’s concerns, debates, and daily life, all over a cup of tea.

Home Minister Ramesh Lekhak has said that the Prime Minister KP Sharma Oli's upcoming visit to China will be based on the consensus between the ruling Nepali Congress and CPN-UML.

At a press conference held by the Nepal Press Union in Dhangadhi today, the Home Minister said that the Prime Minister's visit to China will not create any problem between the Congress and the UML. He said, "The Prime Minister's visit agenda will be prepared following consensus and if the parties failed to reach consensus on the agendas, then such agendas will not be floated for bilateral discussions."

On another note, Minister Lekhak clarified that there was no agenda for reshuffling the Cabinet till today, but the Prime Minister can take decisions in this regard when he feels it necessary. 

In the press inquiry regarding BRI, the Home Minister, who is also a Congress leader, said it was the decision of the Congress to take the BRI as a grant and not as a loan, adding that the UML was not also insisting to take it as loan; therefore, both parties have the same understanding over the agenda.

Stating that the government was formed for stability, good governance, development and economic development in the country, he said that there is no problem or disagreement between the ruling partners Congress and UML.

He said, "A joint system of two parties has been formed at three levels from the center to the district so that no problem is created between them."

The Home Minister said that activities against the law and Constitution will not be tolerated.

After receiving briefings from intra-party departments, newly elected Minister for Foreign Affairs, Arzu Rana Deuba, has begun her work. Her immediate task upon taking office was to facilitate the return of Nepali students from Bangladesh, where violence erupted following nationwide protests by students demanding the abolition of the quota system in government jobs.

On Wednesday, Minister Deuba appeared before the parliamentary committee on International Relations and Tourism, where she faced a broad range of questions on foreign policy, including China’s Belt and Road Initiative (BRI). The BRI, China’s flagship program unveiled by Xi Jinping in 2018, has once again become a focal point in both domestic and foreign policy with the formation of the new government under Prime Minister KP Sharma Oli.

Minister Deuba informed the parliamentary committee that although the broad agreement on the BRI was signed in 2017, discussions on its implementation plan have only just begun. She said key details such as the project modality, loans, and specific projects are still to be finalized. She emphasized that any agreement must undergo broader discussion before signing, citing the extensive debate on the US’s Millennium Challenge Corporation (MCC) in Parliament as a precedent.

Minister Deuba further stated that the debate should not be confined to a few ministries but should include input from a wider section of stakeholders. The first phase will involve discussions within the government, with the Parliamentary committee being informed subsequently. She reassured that the broad agreement poses no threat, as it is an overarching document, and emphasized the need for collective input on how to proceed with the BRI.

This is Minister Deuba’s first statement on the BRI. China has long pressed for the signing of the BRI implementation plan. The previous government, led by CPN (Maoist Center), was prepared to sign the document, but it was canceled at the last minute by then-Prime Minister Pushpa Kamal Dahal. Although the Ministry of Foreign Affairs had sought permission to sign the document, Dahal did not grant consent.

It was widely reported that the document was not signed due to disagreements over loan terms. However, former Foreign Minister Narayan Kaji Shrestha later clarified that the implementation plan does not mention the investment modality. He added that the issues of investment would be addressed in a separate project implementation plan to be signed after the implementation plan.

Political parties are divided over China’s BRI. The CPN-UML and other communist parties advocate for progress on the BRI and are open to taking soft loans if necessary. The Nepali Congress, a key coalition partner, has officially decided to accept only grants, not loans, under the BRI. However, the BRI’s investment modality involves joint investments in specific projects, with China potentially providing some concessions.

Chinese Premier Li Qiang, in his congratulatory message to Prime Minister Oli, expressed his desire to implement the understandings reached between top leaders of the two countries and to promote collaboration under the China-Nepal Belt and Road Cooperation, as well as in other areas. While major parties have similar positions on the BRI, some adopt a softer stance for public posturing. 

In Nepal, the BRI is often perceived as a loan to finance development infrastructure. Recently, China has advised Nepali politicians to select smaller projects under this initiative instead of large, financially viable ones.

Currently, we stand at the crossroads of shifting global alliances, new forms of global power competition, polarity among the traditional and emerging power centers, and the rise of multi-polar world order. The Indo-Pacific region is increasingly becoming the hotspot of the global power contest. South Asia, as one of the growing economic centers, with one-fourth of world population, and the unprecedented rise of China and India, has become the epicenter of global power rivalry.

In this broader geopolitical landscape, Nepal, situated between these two major rivals, is dragged into the power contest of its neighbors. Nepal should carefully navigate the interest of foreign powers and should be able to leverage its geo-political position to realize its agenda of prosperity. Although it is a challenging task, it provides us with ample opportunities.

Formulating proactive foreign policy and smart diplomatic dealing is essential to maximize our national interests. We are clear on isolating ourselves from any strategic, security or military alliances, but we welcome development partnerships that do not undermine our national interests. Now coming to the topic of today’s discussion, we see BRI as an opportunity to materialize our developmental goals, but there are specific issues of concern with the BRI.

China is a long-standing bilateral partner, and one of the countries with strong historic trade, commerce and people-to-people ties. We envision deepening ties with China on mutually beneficial terms. Nepal became a part of China’s Belt and Road Initiative in 2017.

The initial motivation for joining BRI was the prospect of trade and connectivity diversification. However, seven years after signing the MoU, there has been no significant progress on BRI. As the chairman of the International Relations and Tourism Committee of the parliament, I advocate partnerships with any countries to realize our investment needs, but the partnership should be transparent and it should not undermine our sovereignty and should be a win-win situation. With the growing pressure for the BRI implementation plan agreement, we should first have a comprehensive discussion on the provisions of the BRI MoU signed in 2017, which is not yet disclosed by both the governments. The MoU should be brought and discussed in the parliament. And then, we can move onward with the discussion on implementation modality of the projects under the BRI. For this there is a need for national consensus and wider discussion on the modality of partnership under BRI. We have a lot to learn from the global experience of the BRI.

We should be clear on the stance of the financial modality to fund the BRI projects. We cannot simply accept the commercial loans with high interest rates from China with shorter payback periods. Our negotiation with China should focus on grants and concessional loans with interest rates at par with other multilateral financial institutions and should not have any strings attached. The selection of projects under the BRI should be based on comprehensive feasibility study and cost benefit analysis. We should refrain from any projects without economic viability.

There are also concerns on procurement process, financial audit of the investments and construction modality of projects. The projects should be open for bidding to all interested companies globally, Nepal should have the right to conduct financial audits of the projects under BRI. Meanwhile, projects should also procure local resources, manpower and should be able to transfer technology to ensure sustainability of the projects. At the same time, we should consider the environmental and social sustainability of the projects. To ensure this, there should be wider consultations with the multiple stakeholders and detailed study to ensure projects are environmentally, socially viable and do not underestimate the rights of local ethnic communities. I am hopeful Nepal could benefit from the partnership under BRI if China is willing to accommodate our concerns and negotiate on mutually favorable terms. I also urge the Nepal government to clarify the current status of negotiation on BRI and developments in the process. 

The author is head of parliament’s international affairs committee

Center for Social Innovation and Foreign Policy (CESIF) organized a National Seminar on “Reflecting on BRI: Experiences and Lessons from South Asia”. The seminar aimed to navigate the opportunities and challenges of China’s Belt and Road Initiative with experiences from regional neighbors who have implemented the projects under BRI. The seminar was held at a critical time of accelerated Chinese push for the BRI implementation plan agreement with Nepal.

Welcoming the participants, Executive Chairperson of CESIF Amb. Vijay Kant Karna raised concerns about the rationale and significance of the BRI Implementation Plan Agreement instead of negotiating projects on an individual basis. “The negotiation should be on an individual project basis; a single financing and implementation modality may not fit different nature of projects”, he said, reads a statement issued by CESIF.

Delivering the keynote speech, former Minister for Finance, Prakash Sharan Mahat stressed that Nepal should have the same approach to financial support from all sources because where the support comes from does not matter so much, as long as it serves the country’s national interest. “In the context where we struggle to utilize the low-interest multilateral loans from the World Bank and ADB, we should critically examine, compare, and question the terms and conditions of bilateral loans that have market rate and short-term repayment periods,” he said.

Mahat also pointed out the lack of homework on Nepal’s part when it comes to either bilateral or multilateral negotiations; only later do we engage in debates and discussions.

Another keynote speaker Raj Kishor Yadav, Chairman of the International Relations and Tourism Committee of the Parliament, stressed the need for wider discussion on BRI in the Parliament, urging the government to release the BRI MoU signed with China in 2017, according to the statement.

He further mentioned that the government should clarify the current status of negotiation on BRI and should not opt for any commercial loans. “Our negotiation with China should focus on grants and concessional loans with interest rates at par with other multilateral financial institutions and should not have any strings attached”, he stated.

Following the speeches, the speakers from Nepal, Sri Lanka, Bangladesh, and India presented the experiences and perceptions of individual countries on BRI. Elaborating on Nepal’s experience with BRI, senior journalist Anil Giri stressed the lack of understanding about BRI among policymakers, politicians, and the public alike. He pointed to forging a national consensus on the negotiation bottom line to move forward with BRI, particularly due to some ambiguous conditions in the MoU such as policy exchange and financial integration.

Talal Rafi, Economist and Fellow at Oxford Global Society, Sri Lanka, pointed out several issues on BRI projects in Sri Lanka while highlighting some positive aspects. Although International Sovereign Bank (ISB) debt ranks above the Chinese bilateral debt, Sri Lanka’s experience with BRI shows a lack of transparency, ad-hoc planning, selection of projects without viability assessment, lack of technological spillover, and environmental concerns. “The slow pace debt negotiation with China is delaying the economic recovery process”, he mentioned.

Mostakim Bin Motaher, Associate Professor at Jahangirnagar University of Bangladesh, highlighted that China’s presence in Bangladesh’s infrastructure has surged quite significantly in recent years, with deep trade and investment ties. Some of the common features of the projects financed by China are escalation of cost, non-transparent or absent bidding procedures, and delays in execution, the statement further reads.

Constantino Xavier’s presentation cited three reasons behind India’s decision to stay out of the BRI: the China-driven and led unilateral nature of the initiative, Chinese economic and strategic interests behind the Initiative unfavorable for India, and the concern about its capacity to absorb capital. He also highlighted how this decision has affected India’s relations with its neighbors, whereby India reinvented its delivery system. “Nepal needs to rely on itself and develop its capacity,” he stressed.

Following the country-specific presentations, the seminar hosted two panel discussions. The first panel discussion brought together Nepali experts to probe into current developments and Nepal’s concerns on BRI negotiation.

The panel hosted Amb. Madhu Raman Acharya, Rameshore Khanal, Akhilesh Upadhyay, and Amish Mulmi.

It was moderated by Amb. Vijaya Kant Karna. Key points in the discussion included the need for clarity on project implementation modalities, concerns about oversight, transparency, and environmental viability, as well as evolving narratives surrounding BRI's focus and China's interests in Nepal's development. The discussion underscored the necessity for transparent discourse and strategic negotiation to navigate Nepal's engagement with the BRI effectively.

Citing the example of Pokhara International, Amb. Acharya reiterated that China has been “shifting the goalpost” regarding BRI and emphasized that Nepal should have its own “objective assessment of each project,” as China has its strategic and economic interests in BRI.

The second panel discussion hosted delegates from countries across South Asia to discuss experiences and lessons for Nepal from their BRI journey. The session was moderated by Ajaya Bhadra Khanal, Research Director at CESIF.

Wrapping up the event, in his closing remarks, Arpan Gelal, Research and Program Coordinator at CESIF, summarized the key issues raised and the consensus reached on the seminar. “Nepal needs wider stakeholder consultation and debate to set Nepal’s negotiation priorities to ensure implementation of BRI that best serves Nepal’s interests”, he said.

More than 100 participants including policymakers, politicians, national and international experts, analysts, academics, diplomats, bureaucrats, and journalists attended the event.

The Belt and Road Initiative (BRI), a Chinese project introduced in 2013, has generated interest and concerns around the world. Through a network of highways, railroads, ports and other infrastructure, it seeks to link Asia, Africa, and Europe. One of the 149 nations that have ratified BRI is Nepal. Between China and India, Nepal has experienced its fair share of BRI-related advancements. This article investigates the contention that Nepal will fall into a debt trap as a result of BRI and analyzes the economic, geopolitical and developmental ramifications.

Understanding BRI: The BRI is a massive international infrastructure initiative that aims to link nations through a network of ports, highways, trains and other crucial infrastructure. It aspires to improve connectivity, trade and investment between participating countries. However, worries have been mounting in recipient nations over a possible debt burden resulting from these initiatives. In the case of Nepal, BRI’s effects are wide-ranging and intricate. Before signing any agreement related to BRI, Nepal must thoroughly weigh its advantages and hazards. 

The debt debate: According to critics, BRI projects, most of which come with Chinese loans attached, could result in a debt trap where recipient nations struggle to pay off their debts, which reduces their ability to make strategic decisions. Nepal may encounter this problem, given its constrained fiscal capability. Also, proponents highlight the possibilities for infrastructure development, economic growth and job creation that BRI projects may offer to Nepal.

There is a chance that Nepal may gain a lot from BRI. It might help in enhancing the nation's connectedness, boosting its economy and generating jobs. However, there are worries that Nepal could fall into a debt trap because of BRI as China is presumably ‘giving unfavorable loans to developing nations to seize their assets’. This claim has been made in relation to BRI and other Chinese investment initiatives in underdeveloped nations. The debt trap argument is supported by some evidence. For instance, several nations, which borrowed money from China, have had difficulty paying back their loans and have been compelled to cede control of critical resources like ports. To be clear, not all Chinese loans are predatory, and the debt trap argument is frequently exaggerated.

BRI engagements: Nepal has expressed interest in BRI and sees it as a chance to address its lack of infrastructure. The BRI’s proposed cross-border road, hydropower, and railway projects have the potential to improve Nepal’s connectivity and energy security. The financial viability, environmental effect, and transparency of these initiatives continue to be a source of concern.

Risk factors

Debt sustainability: China’s loans account for a sizable amount of Nepal’s external debt, raising concerns about the country’s debt-to-GDP ratio. Implementing projects successfully and achieving strong economic growth are essential for repaying these debts on time and avoiding a debt catastrophe. 

Geopolitical implications: Given its ties to both China and India, Nepal’s participation in BRI has geopolitical implications. Maintaining a balance between these two powerful neighbors is essential for the stability of Nepal. 

Project viability: The long-term profitability, potential for revenue generation and adherence to environmental and social criteria all play a role in how economically viable BRI projects are in Nepal.

Mitigation techniques: Nepal might use a number of techniques to avoid falling into a debt trap and profit from the BRI. 

Transparent project evaluation: Thorough cost-benefit evaluations and open tendering procedures can be used to find projects that are both fiscally and developmentally feasible for Nepal. 

Diversified partnerships: Including a variety of parties like global financial institutions helps lessen reliance on a single lender and advance monetary stability. Put an emphasis on local benefits: Projects that promote local employment, technology transfer and skill development should be given first priority to maximize the beneficial effects on Nepal’s economy.

There are opportunities and hazards involved in the complex discussion of whether BRI will trap Nepal in a cycle of debt. To maximize the advantages and reduce potential risks of BRI, Nepal’s rigorous evaluation of project viability, transparency decision-making, and proactive interaction with different partners will be essential. Nepal’s response to BRI projects will influence its economic and geopolitical trajectory for years to come as the initiative develops.

Prime Minister Pushpakamal Dahal has said that the Belt and Road Initiative (BRI) Project is in the final stage of implementation.

Addressing the Nepal-China Business Summit on Sunday, Prime Minister Dahal said that Nepal joined the BRI Project in 2017 and is now in the final stage of its implementation.

The Prime Minister said that work is being done on cross-border economic zones, road corridors, railways and transmission lines between Nepal and China.

He said that Nepal had imported goods from third countries by using the Chinese port some time ago.

“Importing goods from third countries by using the Chinese port is the implementation of Nepal-China transit agreement.

Prime Minister Dahal said that Chinese President Xi Jinping and he discussed the issue of taking economic cooperation and partnership ahead.

The Prime Minister said that Chinese President Xi and he had a serious discussion on strengthening the cross-border connectivity.

Saying that Nepal is a suitable country for investment, he urged the Chinese businessmen to increase investment in the country.

“Nepal has become a very attractive destination for Chinese industry to invest,” he said.

On the occasion, Prime Minister Dahal also discussed the historical relationship between the two countries.

It has been more than a decade since Chinese President Xi Jinping came up with the Belt and Road Initiative (BRI), a massive infrastructure project, to enhance both hard and soft connectivity with countries in the Global South. In this period, over 150 countries have signed the BRI documents, and Chinese foreign investment in those countries has exceeded $60bn.

Nepal signed up to the BRI in 2017, and ever since it has been a thorny subject that has divided the political parties and the public. Over the past few months, there has been a heated debate regarding the controversy over the Chinese side claiming the newly opened Pokhara International Airport being a BRI project. In the parliament as well as in public forums, ministers and politicians face this question: Is Pokhara International Airport under BRI? While they insist that it is not, many are not convinced. 

A few days back, speaking at a meeting of the Parliamentary Committee, Foreign Minister NP Saud said that Nepal has not executed any projects under the BRI. Tourism Minister Sudan Kiranti has also been making a similar statement. But the Chinese side seems adamant in their position that all of its recent bilateral cooperation with Nepal falls under the BRI framework. In meetings with Nepali politicians and officials, the Chinese side has even presented some basis for such a claim. But top leaders of major parties have not spoken a single word about it, nor has the Nepal government officially taken up this issue with Beijing.  

China is of the view that since Nepal has become a BRI member, whatever cooperation happens between the countries falls under the broader framework of the BRI. This not only includes the development of  infrastructure projects, but also the aid that Nepal received during the Covid-19 pandemic. For China, the 14-point agreement signed during President Xi’s 2019 Nepal visit is the basis of that claim. 

The second paragraph of the first point in that agreement says: “Nepal and China take the Belt and Road Initiative as an important opportunity to deepen mutually-beneficial cooperation in all fields in a comprehensive manner, jointly pursue common prosperity, and dedicate themselves to maintaining peace, stability, and development in the region.”

On the basis of this point, according to a senior diplomat who recently met with Chinese Ambassador Chen Song, the Chinese side is claiming that all projects are under the BRI.  

During Xi’s visit, Nepal and China agreed to elevate the bilateral relationship into a Comprehensive Partnership of Cooperation. A few months ago, in a closed-door discussion with editors, the Chinese ambassador said they regard Pokhara International Airport as a BRI project, but it is okay if the Nepal government does not say so.

As the BRI debate rages on, China has come up with Laws on Foreign Relations, which is likely to complicate the matter.  The law shall apply to the conduct of China’s diplomatic relations with other countries, its exchanges and cooperation with them in the economic, cultural, and other areas, as well as its relations with the United Nations and other international organizations. 

Article 18 of the laws says: “China calls for putting into action the Global Development Initiative (GDI), the Global Security Initiative (GSI), and the Global Civilizational Initiative (GCI), and endeavors to advance a foreign affairs agenda on multiple fronts, at a different level, in various areas and of multiple dimensions.”  

Programs under the GDI, in collaboration with the UN agencies, have already been implemented in Nepal. As far as the GSI and GCI are concerned, the Nepal government has not made any position on it. 

China is seeking Nepal’s support in GSI and GCI, but Nepal is not willing.  But Beijing has already put the GSI and GCI under the broader framework of BRI. 

China’s BRI claim resembles the Indo-Pacific Strategy (IPS) of the United States in Nepal. Since 2018, American officials have been saying that whatever bilateral grants and assistance the US provides to Nepal is under the broader IPS framework. The US officials often say that there is no military component in Millennium Challenge Corporation (MCC), though it is a part of the IPS. So, like the IPS, the BRI is gradually becoming a hard-to-understand issue after 10 years of its launch.  

Upendra Gautam, a China expert, says like the US is saying that all its assistance falls under the IPS, China too is saying the same thing regarding the link between its support to Nepal as part of the BRI.

“It is either IPS or BRI, it is up to us how we deal with those countries,” says Gautam. “Now the Chinese officials are linking the BRI with financial institutions. If there are any issues, we can communicate with the Chinese side.”

The debate and controversy surrounding the BRI has also been fueled by the lack of homework and research that Nepali leaders and government ministers lack. The form and nature of BRI is gradually evolving with more components, and no one seems prepared. 

Of late, the Chinese side has been insisting on the implementation of BRI in Nepal. Recently, Home Minister Narayan Kaji Shrestha and Chairman of the National Assembly Ganesh Timilsina visited China. 

In meetings with Timilsina and Shrestha, high-level Chinese officials underlined the need for the implementation of the BRI in Nepal. 

The BRI issue is likely to figure out when Prime Minister Pushpa Kamal Dahal visits China later this year.

In Nepal, BRI is primarily perceived as an infrastructure project, though it has five distinct priority areas: policy coordination, infrastructure connectivity, unimpeded trade, financial integration, and connecting people.

Not only on BRI, but China’s claim over other initiatives such as Global GSI, GDI and GSI has also put the Nepal government in a quandary. During the Dragon Festival organized in Pokhara recently, Chinese Ambassador Chen raised eyebrows by saying that the festival was the implementation of GCI.

China was partly emboldened to make such a claim also partly because former President Bidya Devi Bhandari attended a virtual program of the GSI in September 2022. Bhandari had taken part in the program despite the Ministry of Foreign Affairs advising her not to. 

When National Assembly Chairman Timilsina visited China in the second week of June, Zhao Leiji, chairman of the People’s Congress

In the second week of June, he held discussions on the BRI and other initiatives with Zhao Leiji, chairman of the People’s Congress, and other Chinese officials. 

In one of the meetings, the Chinese side also thanked Nepal for supporting GDI and welcomed the support and participation in the GSI and GCI for jointly promoting peace, stability, and prosperity in the region and the world. 

China’s claims on the BRI and its other latest programs like the GSI run counter to Nepal government’s position, which states that there have not been any official decisions yet and that all the initiatives put forth by China are being studied.  

Nepali leaders are adopting a very cautious approach regarding China’s unilateral claims. On the BRI, Nepal is not in a hurry to take a loan to construct infrastructure because there are already questions about financial viability and sustainability of some projects, such as Pokhara International Airport, Gautam Buddha International Airport, Kathmandu-Terai Fast-track. 

Over the past 10 years, there have been a lot of changes in the original BRI document. China has emerged as a lender of last resort for developing countries that are having difficulty repaying their BRI debts. 

According to the AidData report, by the end of 2021, China had undertaken 128 rescue loan operations across 22 debtor countries worth $240bn. These operations include many so-called rollovers in which the same short-term loan is extended again and again to refinance maturing debts. 

Learning lessons from many countries, China is now cautious to provide loans under the BRI, while Nepali leaders are also equally careful to avoid a potential debt issues.

The government has said discussions are on regarding implementation of the Belt and Road Initiative (BRI) project. Nepal and China signed an agreement on the BRI project in 2017.

Delivering a statement in the National Assembly meeting today, Minister for Foreign Affairs, NP Saud said, "Discussions are being held between the two countries regarding implementation of BRI."  

Though the agreement on BRI was reached in 2017, no decision has been made so far on the modality of moving ahead the projects. Before this, Ambassador of China to Nepal, Chen Song had claimed during the inauguration of Pokhara International Airport on January 1, 2023 that a project under the BRI had been implemented.

Foreign Affairs Minister Saud however said that no project has been moved ahead under the BRI before this as well.

He  said that a feasibility study of the Kerung-Kathmandu Railway and the Inter-country Power Transmission Line between the two countries is being carried out. These projects were signed during the visit of China's then Foreign Minister Wang Yi to Nepal in March 2022.

Stating that diplomatic initiatives were being made to build independent view in international relations on the basis of merits and demerits, he said, "Nepal's diplomatic efforts are directed towards building independent opinion on international issues on the basis of merits and demerits, voting and making the international ties just, fair, responsible and cooperative."

During the deliberation on budget and programme allocated for the Foreign Ministry and subordinate bodies under the Appropriation Bill, 2060, former Foreign Minister Bimala Paudyal Rai enquired whether Nepal deviated from the non-aligned foreign policy. 

Stating that Nepal has been strengthening and expanding relations with other countries including neighboring countries on the basis of universal equality, mutual respect and benefit, Minister Saud mentioned that Nepal has been able to  achieve credibility and respect in the world due to the independent, balanced, impartial and objective point of view it has adopted.

Foreign Minister Saud had participated in the Summit of Non-Aligned Movement held at Baku of Azerbaijan from July 3-6. The Foreign Minister briefed the upper house of the Federal Parliament about his address in the Summit.

"I had expressed the commitment of the Government of Nepal on collaboration for further highlighting the relevance and significance of the Non-Aligned Movement in the changing international scenario as well as laid emphasis on solidarity and collaboration of Non-Aligned Movement member countries for the resolution of burning political and economic issues of the world. Therefore, I would like to make it clear that Nepal's commitment towards adopting non-aligned foreign policy is consistent," he said.

Once again, China has claimed that Pokhara International Airport (PIA) is a project under its Belt and Road Initiative (BRI), raising eyebrows in Kathmandu.  Despite Nepali leaders’ repeated assertion that this is not a BRI project, China continues to put it under the BRI which is likely to cause diplomatic friction between the two countries. However, the Ministry of Foreign Affairs remains mum about China’s latest claim. The ministry has not sent any diplomatic notes to China, seeking a clarification. 

Under the BRI, Nepal has proposed nine projects but there has not been any progress on it. At the same time, the BRI implementation plan is yet to be finalized. In this scenario, experts say, it is not appropriate to list all projects built under Chinese loan or grant under the BRI framework.  China’s claim clearly shows its desperation to push the BRI project in Nepal, says Vijay Kant Karna, foreign policy expert. 

Amid a program held after the first international plane landing at the PIA on Wednesday, Chinese Ambassador to Nepal Chen Song claimed that the airport is under the BRI project. He said that the airport was designed and built by a Chinese company which was made under the BRI project. While Nepal signed the BRI project in 2017, the contract for the airport project was signed in 2014. Luo Yan, chairman of the China CAMC Engineering Co Ltd, and Ratish Chandra Lal Suman, then director general of Civil Aviation Authority of Nepal, had signed the contract worth $215.96m.

On 21 March 2016, China Exim Bank and the Government of Nepal signed a government concessional loan (GCL) agreement worth RMB 1.37bn for the Pokhara International Regional Airport Construction Project. Twenty-five percent of the loan value (RMB 355.9m) was provided without interest and with a maturity period of 20 years and a grace period of seven years. The remaining 75 percent of the loan value (RMB 1.02bn) was provided at a two percent interest rate, 20-year maturity period and a seven-year grace period. 

While inaugurating the airport on 1 Jan 2023 too, the Chinese embassy had claimed it as a part of the BRI project. Karna says that this is a result of poor diplomacy of Nepal. “China is facing a dilemma because it couldn’t manage the BRI projects in Nepal,” he says. “China has now started claiming random projects as BRI out of desperation.” After four attempts to contact Foreign Ministry spokesperson Sewa Lamsal for comments failed, ApEx called up assistant spokesperson, Paras Pandit, who suggested contacting spokesperson Lamsal once again. The fifth call yielded no different result.