Nepal Aims to Curb China’s Influence Through Belt and Road Initiative (BRI)

After Nepal signed China’s ambitious Belt and Road Initiative (BRI) project in 2017, it was celebrated as a significant achievement. The expectation was that Chinese investments would contribute to Nepal’s infrastructure development and connectivity. Concurrently, amid controversy and debate, Nepal also signed the US aid project ‘MCC.’ In Kathmandu, there were widespread discussions anticipating that the BRI agreement would form part of the northern aid competition. Similar assertions were made by pro-Chinese leaders and analysts.

Six years have elapsed since the BRI agreement, and the MCC has been approved by Parliament and moved to the implementation stage. Despite Nepal’s anticipation of cooperation and investment from the BRI agreement, progress has been nearly nonexistent. The BRI remains confined to paper, raising doubts about its implementation in Nepal due to certain conditions and provisions. Additionally, China has stated that the ‘Panda Pack’ and ‘Amity Living Water’ projects are being implemented in Nepal under poverty alleviation through the BRI.

Where is the BRI facing challenges?

China initially presented the BRI as a development project, focusing on infrastructure and connectivity. However, over time, it appears that China is strategically advancing the BRI. Nepal, with its non-aligned foreign policy, has historically refrained from engaging in military strategies with any country. While the BRI was initially a Chinese development project, there are concerns that China is transforming it into a strategic initiative.

Nepal, known for its non-alignment policy with neighboring countries, including India and China, as well as the United States, is unlikely to align with China’s plan to turn the BRI into a strategic project. Nepal has previously rejected the US military project State Partnership Program 9SPP0. The influence of India on the BRI cannot be ignored, especially in matters concerning Gurkha recruitment.

Grants, not loans

Given Nepal’s clear policy against entering military agreements, it aims to advance the BRI solely as a development project. However, Nepal also desires positive relations with China. While China, as the world’s second-largest economy, has a responsibility to invest in neighboring countries, there are concerns that China may burden Nepal with debt under the BRI. Nepal emphasizes that the BRI projects should be funded through grants, not loans with high interest rates, as it cannot afford such financial burdens.

The then Prime Minister Sher Bahadur Deuba and the current government have emphasized that the BRI project should not proceed with loans. Despite some public statements supporting BRI implementation by certain communist leaders and scholars, Nepal’s economic condition may hinder its progress.

A Ministry of Foreign Affairs official stated that the BRI project will neither be canceled nor moved forward. The main concern remains whether it will be financed through loans or grants.

Nepal-China dynamics

The BRI has become a contentious issue for both Nepal and China. China appears unwilling to subsidize the project as Nepal desires, and Nepal lacks the capacity to implement it under the BRI conditions. Some argue that Nepal joined the BRI to balance geopolitics rather than for actual implementation. The suspicion arises from the behavior of Chinese contractor companies in previous projects, raising concerns about Nepal’s ability to undertake large projects on loans.

Despite China’s BRI achievements globally, the lack of perceived benefits for Nepal raises questions about the mutual relations and interests between the two neighbors. The white paper released by China indicates significant investments and cooperation agreements with numerous countries, but Nepal’s perceived exclusion raises concerns about the future of their relationship.