BRI In Spotlight Once Again

As Prime Minister Pushpa Kamal Dahal Prachanda told the parliament that the government would soon sign an agreement on implementing the Belt and Road Initiative (BRI), lawmakers started to speak for and against China’s 1 trillion dollar global project. Main opposition Nepali Congress (NC) lawmakers have again invoked debt trap theory, arguing that the country would fall into the trap of Chinese loans if the BRI projects came into execution. They insisted on taking grants, instead of loans, for the purpose. On the other, a lawmaker from Rastriya Janamorcha, Chitra Bahadur KC, said that by protesting the BRI, they were bolstering Millennium Challenge Corporation (MCC) to make Nepal an anti-China base of USA. Interestingly, lawmakers from three ruling communist parties – CPN-UML, CPN-Maoist Centre and CPN-Unified Socialist – kept mum about the fierce debate on the BRI in the House of Representatives (HoR). 

The lawmakers crossed swords over the BRI in the wake of Chinese Vice Minister of Foreign Affairs Sun Weidong’s three-day visit to Nepal on last Wednesday. He was here to attend 16th meeting of Nepal-China Diplomatic Consultation Mechanism. During his meeting with Minister for Foreign Affairs Narayan Kaji Shrestha, there was an understanding to sign the BRI implementation plan at the earliest. Nepal has been asking the Chinese side for grants to launch the potential BRI projects. PM Prachanda has made it clear that Nepal preferred soft or concessional loans like those provided by the World Bank (WB) and Asian Development Bank (ADB) for the implementation of BRI projects. But sources said that the two sides are yet to decide on the investment modality. Probably, it is likely to be a 'blended structure' – larger portion of grant and small segment of loans. Upon Nepal's request, the Chinese side has reportedly asked for some time to decide on the interest rates and period of loan payments.

Dispute 

However, the disputes on the BRI and MCC show how geopolitics is intertwined with the domestic politics in Nepal where the global and regional powers compete for sphere of influence. The country signed a Memorandum of Understanding (MoU) on bilateral cooperation under the framework of the BRI in 2017. It is widely believed that BRI has the potential to transform Nepal from landlocked to land-linked nation through its access to sea for the third country trade. Nepal can benefit from the second largest economy with huge surplus of money, technology and experiences in building big yet quality infrastructure projects. 

The delay in picking and implementing the specified BRI projects have been largely attributed to the penetration of geopolitical elements that have divided the political actors on China’s flagship initiative. Proposed by Chinese President Xi Jinping in 2013, it refers to the Silk Road Economic Belt and the 21st Century Maritime Silk Road, and seeks to promote policy coordination, facilities connectivity, unimpeded trade, financial integration and people-to-people relations among the nations. China has inked more than 200 BRI cooperation deals with over 150 countries and 30 international organisations across five continents.

The demand of NC lawmakers for making the MoU on BRI public is not otherwise. Since extensive mutual consultation, joint contribution and shared benefits are considered the principles of BRI, there is no rational ground to keep its MoU secret. The parliament and the common people have every right to know its contents. The government should also pay heed to the call for forging national consensus on BRI so that its implementation will not hit a snag. It is imperative that the political parties have to develop common ground on foreign policy, aid, grants and loans. In 2022, the HoR endorsed $500 million MCC compact amidst protest and political division. Unlike MCC, the BRI should not be a divisive issue. 

However, the narrative that the BRI projects should not be implemented on loans or BRI loans will force the country into a debt trap is erroneous and guided by the conspiracy theory. In October last year, this scribe published an article ‘Myth Of Debt Trap Diplomacy’ in this column, which mentioned findings of research of two American professors - Deborah Brautigam of Johns Hopkins University’s School of Advanced International Studies and Meg Rithmire of the Harvard Business School. In their joint write-up in The Atlantic magazine, they outright dismissed debt-trap discourse as ‘a lie, and a powerful one’ and found no ‘asset seizures’ in those countries that implemented BRI projects with Chinese loans.

Rising debt 

No doubt, rising debt has put a burden on national economy. But, those who are opposed to BRI should know which creditors and how much amount the country owes to them. As of mid-June 2024, the country's total debt has reached Rs. 2,400 billion – internal Rs. 1,192 billion and external Rs. 1,207 billion – which constitutes 42.08 per cent of the GDP. Of the total external debt as of June 15, 2023, the International Development Association (IDA) under the WB holds the largest share of 50 per cent followed by the ADB with 30 per cent. Exim Bank of China, India and Korea altogether have 6.90 per cent, while IMF and IFAD hold 4.03 per cent, 2.70 per cent respectively. The WB and ADB provide concessional loans at the interest of 0.75 per cent to 3 per cent. It is worth mentioning here that lending agencies rely on the interest of money loaned to countries. If the borrowers fail to pay back, they are declared bankrupt, forcing them to compromise their economic sovereignty. 

The argument that the country must not take loans for BRI projects at any cost is misguided and biased. If so, why should we accept the loans from WB, ADB, IMF and other bilateral and multilateral agencies? Loans per se do not plunge the country into debt crisis but it is pilferage, corruption and commissions involving politicians, bureaucrats, consultants, contractors and brokers that land the country into a big economic trouble. What is more important is that the executed projects must have commercial viability and the loans should be spent prudently without allowing any loopholes for their abuse. 

(The author is the Deputy Executive Editor of this daily.)