Are BRI Projects Headed For Execution?

Following an agreement on the Framework for Belt and Road Cooperation (BRI) between Nepal and China during Prime Minister KP Sharma Oli’s visit to the northern neighbour, the possibility of implementing BRI projects have increased. But some formidable challenges involving internal and geopolitical hostility still persist before they enter into a full-fledged operation. The BRI Framework accord has touched upon the investment modality, albeit using ambiguous words. According to the briefing of Nepali foreign ministry’s officials in Beijing last Wednesday, the two nations finally decided to use the terms ‘technical support and aid financing modality’ to execute at least 10 projects under the BRI framework. Two projects have been added to the eight ventures BRI finalised earlier. 

Prior to his visit, a four-member panel of ruling Nepali Congress and CPN-UML prepared a document of Framework for BRI Cooperation in which they had set a bottom line – they would not accept loan to implement the BRI projects at all cost. The UML, the Prime Minister’s party, was for taking soft or concessional loan for the purpose. But, due to the rigid position of the NC, the largest party in the parliament, the UML had come to the NC's terms for the sake of coalition government. The jointly devised framework had proposed ‘grant financing cooperation modality’ to execute the BRI projects. But the Chinese side reportedly amended it to ‘assistant financing’ modality. Then, Nepali officials asked to add the term ‘aid’ to it. Finally, the phrase ‘aid assistance financing’ was agreed upon. The acceptance of this terminology has been seen as win-win situation for both parties.

Interpretation

The political parties, experts and media are now sweating to define and decipher the terminology used in the BRI Framework. Unlike the grant, which is donated as per the requirements of recipients is not be returned to its giver, the aid consists of all three elements - grants, loans and investment. The BRI also combines grants, soft loans or loans and investment. The term ‘aid assistant financing’ is also used by the multilateral lending agencies such as World Bank and Asian Development Bank that provide soft loans to borrowing nations. Thus, the deal implies that Nepal has, in principle, consented to receive soft loans to fund the development projects.

In 2017, the two countries had inked first framework – Memorandum of Understanding (MoU) on BRI - but they could not sort out the funding modality. The new agreement has advanced the BRI one step ahead though the use of confusing jargons has given rise to multiple interpretations. Now the two nations have to decide on project-wise investment modality. Moreover, the government has not made public the document of agreement. Neither is there any official statement attesting the use of above terms in the accord. Now it is imperative to make public the agreement to dispel speculations and controversy surrounding it.

More importantly, there should be broader consensus on the foreign policy and bilateral agreements. It is welcome that the two ruling parties forged consensus on the Framework for BRI Cooperation.  It is equally crucial to incorporate the viewpoints of other political forces inside and outside the parliament because the unified position on the foreign policy matters creates leverage for negotiations with the foreign countries and multilateral institutions.  

However, the new agreement on BRI framework has ruffled a few feathers with the ruling NC. Its spokesperson Dr Prakash Sharan Mahat has expressed dissatisfaction over the deal, arguing that they are now again back to square one. He claims that the consent on the ‘Framework for the BRI Cooperation’ is the repetition of first MoU on BRI signed in 2017. It is worth mentioning here that Nepal and China had signed MoU on BRI when Dr Mahat was himself foreign minister. But he is one of the vocal opponents of taking Chinese loans to implement the BRI projects. The nation’s credibility suffers if the agreements with other countries are not now owned up by the succeeding governments.

Upon his return from China, PM Oli had emphatically said that he had not signed any loan agreement with China, a remark that apparently seeks to assuage the suspicion of NC. This shows how challenging it is to implement the BRI in Nepal. In fact, the BRI process has been made complicated due to polarised domestic politics and external pressure. Failure to make public the MoU on BRI has also generated confusion. Similarly, Chinese diplomacy still falls short of allaying the misgivings about the motive of BRI.  

'Debt trap' narrative

The false 'debt trap' narrative has misled a large chunk of political, civil society, media and academic circle. Several research have shown that the debt trap narrative is a fabricated myth aimed at containing China’s rise. On February 6,  2021, The Atlantic, a prestigious US magazine, ran an article headlined ‘The Chinese ‘Debt Trap’ Is a Myth’ jointly authored by Deborah Brautigam of Johns Hopkins University’s School of Advanced International Studies and Meg Rithmire of the Harvard Business School. Both had studied BRI projects implemented in different countries and made public their findings, with a conclusion that the debt-trap narrative was “a lie, and a powerful one.”

The argument that all BRI projects should not be built with loan is quite impractical. If so, why should we take out loans from multilateral agencies like WB and ADB? On the other hand, grant is a free lunch. It is available once or twice, not all time. And it is also not wise to rely on it time and again. As a close neighbour, China can build a signature project on grant for Nepal. It is imperative to secure soft loans to construct the game changer infrastructures. Nepal needs to enhance internal capacity at the level of policy, politics, bureaucracy and economy to aptly deal with neighbours and other international organisations to acquire grants or loans to execute the projects of national priorities. 

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