Bolsters Nepal-China Economic Ties

It seems the debate on China’s Belt and Road Initiative (BRI) has slowed down at the moment. Prior to Prime Minister KP Sharma Oli’s visit to China early this month, the political spectrum was divided on the funding modality of BRI projects. After Nepal and China signed a Framework for Belt and Road Cooperation in the first week of this month, there was some ruckus within the ruling Nepali Congress over the use of certain terminology in the accord. On the other hand, communist parties have hailed the deal and stressed its implementation to benefit the two countries. Though the two countries have not entered a deal on implementing any of the 10 selected projects, the agreement on the cooperation framework sheds light on theoretical and practical insights into the projects and their implementation.

Whether or not the agreement carries elements of controversy, it is essential to make nuanced understanding of it. The word ‘cooperation’ has repeatedly featured in the text that also indicates the BRI projects are not one-sided venture. It states that even the third party can be a part of it to plug the fund gap. It has highlighted the importance of selected projects in giving fresh momentum to connectivity, infrastructure, trade, investment and tourism between the two countries. For instance, Tokha-Chahare-Bidur Highway that includes tunnel is seen as strategic project in boosting Nepal-China international trade. 

Regional integration 

Nepali section of the China-Nepal cross-border railway project directly links Nepal with China. Not only this, it also holds huge potential of regional integration as the railway serves as China’s gateway to South Asia, enabling it to access to the Indian market. Likewise, Hilsa-Simikot and Kimathanka-Khandbari road will open north-south corridors, promoting China-Nepal-India trilateral cooperation. Jilong-Rasuwagadhi-Chilime 220 KV cross-border power transmission line will be a milestone in energy cooperation between the two nations. Nepal can sell surplus electricity to the northern neighbour. 

Expressed in 10 points under six headings, the accord is seen as the culmination of positive developments in Nepal-China relations. Divided into six parts – cooperation background, cooperation principles, cooperation objectives, cooperation priorities, identified projects for negotiations and cooperation mechanisms -, it has provided a structured basis to undertake negotiations for the implementation of the prospective projects. The cooperation principles incorporate joint consultation for common development, pragmatic cooperation for meaningful effects and enabling policy environment for the increased investment.

The BRI projects will be built under the ‘aid financing modality’ and technical support from China, according to the cooperation framework. The term ‘aid financing’ comprises grants, loan/soft loans or investment. For this, they will also explore the sources of funding that suit requirements for sovereign initiated projects. They can also request international multilateral development institutions interested in investing in connectivity and development projects. Their participation can increase credibility and acceptance of BRI projects at regional and international level. 

The framework document has stressed peace and cooperation, openness and inclusiveness, mutual learning, joint consultation and contribution for shared benefits. Moreover, it promotes green, clean and environment-friendly economic development to realise people’s welfare and sustainability. Respecting each other’s sovereignty and common interest and working together to improve people livelihoods through mutually beneficial and win-win cooperation lies at the heart of the cooperation pact. Nepal and China have expressed commitment to respecting the principle of equal sovereignty in terms of policy formation, project selection and execution, fund mobilisation and mustering cooperation from other nations. This policy autonomy widens the scope of consultations and negotiations for conducting feasibility study and mobilising financial and human resources for the projects.

The framework has accorded due consideration to the developmental stages of China and Nepal, with particular emphasis on the latter’s specific development requirements and priorities. Given that Nepal is still a least-developed country, with weak industrial base, it stands to benefit from the Chinese investment, technology, experiences and expertise in the development of big infrastructure. The framework has rightly emphasised on tapping cooperation potential and encouraging innovation with objective analysis of technical, financial, commercial and economic feasibility of the projects that are in the long-term interest of the two countries, ensure value of money and give more tangible benefits of high standard BRI cooperation.

Use of national currencies 

The concerned agencies of two nations will independently assume sole responsibility for their own profits, losses and risks. The two sides require to abide by market-related rules and regulations, and applicable international standards and the national laws and regulations of each country. The framework has paved the way for the use of national currencies in bilateral trade transactions and investment based on the practical situation. This will indeed boost the value of local currencies and lessen dependency on the US dollar. For this, Nepal will facilitate to establish branches of Chinese banks and financial institutions within its territory. In a similar manner, the Nepali institutional investors will be allowed to invest in Chinese financial market. 

The two nations had signed a Memorandum of Understanding on the implementation of BRI in Kathmandu in 2017. Likewise, in 2018, they agreed to jointly build the Trans-Himalayan Multidimensional Connectivity Network (THMDCN) in Beijing through the construction of ports, roads including bridges and tunnels, railways, aviation infrastructure, telecommunication projects, electricity transmission lines to upgrade the level of connectivity. Similarly, Nepal-China relation was elevated to strategic partnership in 2019 during Chinese President Xi Jinping's visit to Nepal. Now it is imperative to build high level political trust between the two nations to strike deals on specific BRI projects. Then only can the Cooperation Framework prove to be a milestone in ushering Nepal-China economic cooperation in a new phase.

  (The author is Deputy Executive Editor of The Rising Nepal.)