Investment Summit: How Valuable and Risky Are Chinese Investments in Nepal?

The recently held investment summit in Nepal did not meet expectations fully. While there were some notable agreements between private sector companies and commitments of cooperation between domestic and foreign entities, other anticipated outcomes were not achieved.

At the summit, the government disclosed that although it had plans to finalize Project Development Agreements (PDAs) for four projects, these did not materialize at the last minute. A spokesperson for the board mentioned that the agreements could not be reached due to inadequate preparations for the PDAs at the investment summit.

However, there were some positive developments. Notably, agreements and understandings were reached with several Chinese companies. The Federation of Nepalese Chambers of Commerce and Industry signed an agreement on Monday with China Dongguan Jingliang Lighting Product Company Ltd. to facilitate investment in Nepal.

In addition, an investment agreement was finalized between NexGen Management Solutions Pvt. Ltd. and China’s MABC Investment Private Limited. According to this agreement, NexGen will assist the parent company of MABC in making foreign investments in Nepal.

Furthermore, a Memorandum of Understanding (MoU) was signed between the Shakha Group of Nepal and BOAR Group of Hong Kong. This MoU is for an investment of 100 million Chinese Yuan in a wellness hotel project in Gorusinghe, Kapilvastu. Despite preparations for a PDA for an industrial park to be developed by China in Damak, Jhapa, this too was halted at the last moment.

This summit comes at a time when Chinese investments globally are under scrutiny.  Analysts in Nepal have advised to closely monitor whether promoting investments and cooperation with China or Chinese companies is beneficial or risky. China aims to become the world’s leading power and is ramping up its investments across different continents.

China has invested substantially in South America and is expanding its presence in Africa. Similarly, through the Belt and Road Initiative (BRI), it is broadening its influence from Asia to Europe.

However, there are numerous instances where countries have faced problems with Chinese investments and projects. Recently, issues such as the Hambantota port debacle in Sri Lanka, Chinese interference in Pakistan, a growing Chinese presence in the Maldives, and fluctuating relations with other countries have emerged, affecting these nations near Nepal.

In Nepal, most projects involving Chinese contractors are either stalled or completed behind schedule. China typically employs Chinese workers for these projects. Analysts emphasize that the impact of Chinese investments on Nepal’s economy needs careful consideration.

In tourist areas like Kathmandu, Pokhara, and Chitwan, Chinese-invested hotels and other infrastructures have been developed to cater primarily to Chinese tourists who frequent these facilities, consume Chinese food, and the revenue largely flows back to China. This trend is also apparent in other infrastructure projects.

The status of most Nepalese projects with Chinese investment or contractors is concerning. More than a year after its inauguration, the international airport built in Pokhara with a Chinese loan has yet to host international flights. Numerous concerns have been raised regarding the airport’s construction and the suitability of the surrounding environment for aviation.

A Chinese company is involved in constructing a tunnel for the Terai Madhes-Kathmandu Expressway, which is overseen by the Nepali Army, yet their performance has been underwhelming. Additionally, a Chinese company is participating in the expansion of the Butwal-Narayangadh road, where progress has been notably slow.