7 November 2019, NIICE Commentary 3153
Sumitra Karki
Chinese President Xi Jinping paid two-day visit to Nepal in October 2019. It was the first by a Chinese president in 23 years. Of the 20 agreements signed between Nepal and China during Xi’s visit to Kathmandu, most of the agreements, including Nepal’s support to Belt and Road Initiative (BRI), railway and roads connectivity between China and Nepal are momentous. At a time when China’s BRI is viewed with suspicion and resistance in different countries, China successfully motivated Nepal in getting its support for the BRI. The country signed Memorandum of Understanding (MoU) on BRI in 2017. Under BRI, Nepal agreed to work on USD2.75 billion trans-Himalayan connectivity network for the construction of road tunnel along the road from Jilong/Keyrung to Kathmandu and also for conducting a feasibility study for the construction of railway line. In this context, the article understands BRI and explores the possible opportunities for Nepal.
Understanding BRI
The Belt and Road Initiative (BRI), is a development strategy proposed by China to the Eurasian countries to increase connectivity and trade network through the land based Silk Road Economic Belt (SREB) and the ocean-going Maritime Silk Road (MSR). In 2013, Chinese president Xi Jinping gave a speech in Indonesia on ‘Join Hands in Building China-ASEAN Community of Shared Destiny’, there, for the very first time he disclosed about the initiative ‘21st Century Maritime Silk Road’. The initiative has six land corridors and a maritime silk route, namely, China–Pakistan Corridor, running from South-Western China to Pakistan; China–Myanmar–Bangladesh–India Corridor, running from Southern China to Myanmar; China–Indochina Peninsula Corridor, running from Southern China to Singapore; China–Central Asia–West Asia Corridor, running from Western China to Turkey; China–Mongolia–Russia Corridor, running from Northern China to Eastern Russia, and New Eurasian Land Bridge, running from Western China to Western Russia through Kazakhstan. At present, more than 100 countries have signed this grand Chinese project which comprises 70 percent of world’s population and China investment worth USD 8 trillion.
China’s need for BRI
According to China, BRI is an open and inclusive development platform for the countries that can actively support and participate. The initiative is supposed to reduce costs and time of transportation of Chinese goods around the world. Similarly, is useful to reduce Chinese economy’s dependence on domestic infrastructure investment by involving themselves abroad. BRI would also fulfill the increasing demands for development of least developed western and southern parts of China. Moreover, BRI could be the best way to sort out China’s quest for greater international stature for its currency Renminbi (yuan). Most importantly, the initiative itself is an important platform for China to cooperate with relevant countries around the world because we cannot ignore the fact that China desired to emerge as a global power. BRI could be the platform to make its dream come true.
BRI and Opportunities for Nepal
Nepal is a landlocked developing country, whose economy is intertwined with the Indian economy. However, Nepal wants to diversify itself by decreasing its dependence from India. Hence, Nepal does not want to miss the chance of diversification of cross-border trade and connectivity with China through BRI. Connectivity with China will allow Nepal to access the vast Chinese market, the connectivity that BRI offers will open Nepal to the world market through different sea ports. Nepal then will no longer be a ‘land-locked’ country. BRI would help Nepal to grab China’s development opportunity and gradually achieve the economic stability and prosperity. Besides reaping the economic benefits, BRI can boost several other sectors like, Infrastructural Connectivity (Road, Railways, and Air), Tourism, Cultural, Traditional and Environmental Ties, Hydroelectricity, Technology and others which will further accelerate the economic progress of Nepal.
Nepal has huge potential to emerge as the best destination for tourists. It is a huge market for tourism industry. Good weather, eye catching scenes, rivers, mountains, cultural and historical heritage sites, blend of different caste and religion and pilgrimage sites, facilities for adventurous activities are some of the factors that attracts tourist to Nepal. The rising middle class of China can be a big market for Nepalese tourism industry. Similarly, Nepal is the second richest country for water resources with huge potential to produce Hydroelectricity with more than 43,000 MW technically feasible. China has both capital and technology to produce it. Hence, this can be another sector where BRI projects could be implemented. Likewise, another significant area where BRI projects could be welcomed is agriculture, as Nepal can achieve Sustainable Development Goals through agricultural development.
Challenges of BRI
During the first tenure of KP Sharma Oli as Prime Minister, in March 2016, Nepal signed ‘Trade and Transit Agreement’ with China. That historic agreement opened the door of BRI for Nepal. Although the base for BRI was made much earlier, nothing much was achieved. For instance, during the Sher Bahadur Deuba’s government, the five different ministries had submitted 22 different development projects to be built under BRI. The proposed projects were on Physical Infrastructural and Transportation, Culture-Tourism and Civil Aviation, Water supply and Sanitation, Irrigation, and Hydro-energy sectors. However, the ministries failed to submit detailed proposal to grab the benefits from China’s ambitious development project. However, with the return of KP Sharma Oli as the Prime Minister, it is highly expected that Nepal would grab the opportunity and benefit from the China funded BRI projects. Chinese hydropower projects are also being scraped one by another due to irregularity.
Nepal will certainly benefit through BRI which particularly aims at trade and economic development. However, economy and security are mutually incompatible to each other. India and China, the two neighbours of Nepal, have a tremendous security concern as both the countries have hostile relations.
Nepal has a history of dependence on foreign direct investment and aid. If all the projects under BRI are by debt then it is important for Nepal to evaluate the risks of participating in projects under the BRI. High corruption rates and slow development is a major character of Nepalese economy. As noted above, the inability to pay back loans can result in a crippling economy, a loss of political power, and, in the worst case, a loss of sovereignty.
The geopolitical location of Nepal where it has open border with India and China’s sensitive part ‘Tibet’, posses great security concern for both its neighbours. This has direct impact on Nepal’s foreign policy. Similarly, Nepal is going through prolonged political instability and transitions. Hence, the major challenges for Nepal would be to address the security concerns of its neighbours and maintaining political stability to achieve the gains of BRI smoothly.
Conclusion
For Nepal, BRI will be beneficial as it can bring huge Chinese investment that speed up the economic development. India has many genuine security concerns in Nepal, which needs to be addressed. Without taking the southern neighbour into confidence, there can be lots of obstacles in getting Chinese development projects as India and China does not enjoy cordial relations. Thus, in such situation, if Nepal fails to balance its relation with its neighbours, it will not be that easy to take advantages of China’s BRI. Similarly, India, that enjoys excellent economic engagement with China, should understand Nepal’s need for rapid development. Nepal’s dream of prosperity through BRI is possible only when Nepal succeeds to take India and China into confidence.
