The Chinese intention seems clear—until Nepal signs the BRI Implementation Plan, Chinese cooperation in mega projects will remain in limbo
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The finalisation of the ‘Implementation Plan’ for the execution of projects under the Belt and Road Initiative (BRI) has remained the central component of China’s Nepal policy in the last few years. Recently, China has taken a more assertive stance to portray the success of BRI in Nepal as not a single project under BRI has been executed in its immediate neighbour. Although the negotiation on BRI projects stuck soon after signing the Memorandum of Understanding (MoU) on cooperation under the Belt and Road Initiative in 2017, the push for the BRI Implementation Plan has remained the major agenda of all high-level visits from China in recent years.
China has taken a more assertive stance to portray the success of BRI in Nepal as not a single project under BRI has been executed in its immediate neighbour.
China had taken the Implementation Plan forward in early 2020 but negotiations on the plan saw minimal progress. The COVID-19 pandemic and firm stance of the then Nepali Congress (NC)-led government that the projects under BRI be funded through grants and concessional loans, rather than China’s proposal for commercial loans, stalled the progress. After the general election in November 2022, with the formation of a left coalition government in Kathmandu, China intensified its efforts to advance the Implementation Plan. The joint statement issued during then Prime Minister Prachanda’s visit to China in September 2023 mentioned that the two sides will accelerate the discussion to finalise the BRI Implementation Plan at the earliest. Soon after assuming office as Deputy Prime Minister and Foreign Minister Narayan Kaji Shrestha, an influential high-ranking CPN (Maoist-Centre) leader with a close ties to China, made a nine-day long visit to China, reportedly with the objective of finalising the Implementation Plan. The plan could not be signed; however, Shrestha expressed his commitment to finalize it soon.
The BRI Implementation Plan gained traction from across the spectrum in Nepal when the outgoing government under Prachanda expedited the final preparations to sign the document during the 16th round of the Nepal-China diplomatic consultation meeting last June. The text of the agreement forwarded by China was finalised by the National Planning Commission with inputs from the relevant ministries. On the eve of the consultation meeting, the Ministry of Foreign Affairs forwarded the draft of the plan for final approval to the prime minister’s office. The lawmakers of Nepali Congress (NC) and Rastriya Swatantra Party (RSP) along with other parties strongly condemned the government’s preparation to sign the plan without consultation with the opposition parties and wider consensus on the text of the plan. The government ultimately had to back off.
The joint statement issued during then Prime Minister Prachanda’s visit to China in September 2023 mentioned that the two sides will accelerate the discussion to finalise the BRI Implementation Plan at the earliest.
This stalled China’s tendency to leverage the left government in Nepal to promote its agenda. China often uses left parties with close ideological inclination to advance its interests. This is evident from the fact that most of the infrastructure projects in Nepal have been contracted to Chinese firms under the left-led administrations in Kathmandu.
The recent realignment in the ruling coalition under CPN-UML chair KP Sharma Oli, with Nepali Congress taking the role of key alliance partner and control of the Foreign Ministry, signals uncertainty about any deal on the Implementation Plan soon. Although Beijing will make attempts to move forward with the plan through Oli and his confidants, the strong reservation of the Nepali Congress on the funding modality and governance mechanisms of the projects under BRI will impede further developments.
At least, until the current coalition remains intact, BRI implementation in Nepal will remain on hold.
After signing the MoU on cooperation under the BRI in 2017, Nepal proposed a list of 35 projects to implement under the initiative as early as 2018 under the KP Oli administration. The number of projects was eventually trimmed to nine after the insistence of the Chinese side to reduce the number to a single digit. The negotiations on the project selection and their funding and implementation modality could not move forward. Amid the deadlock, Nepal last year contracted a hydropower project proposed under BRI to an Indian contractor, and another is being awarded to an Indian state-owned enterprise.
Chinese rationale for seeking another agreement on BRI is puzzling. As per media reports, the recently finalised draft of the Implementation Plan includes a few priority sectors of cooperation under the BRI framework, lacking any details on the funding mechanisms and implementation modalities. Chinese officials contend that the Implementation Plan would open a pathway for advancing bilateral cooperation and serve as a catalyst for the implementation of projects under BRI in Nepal. However, it is unclear how yet another generic agreement without negotiations on project selection and funding mechanisms would facilitate the execution of projects.
Amid the deadlock, Nepal last year contracted a hydropower project proposed under BRI to an Indian contractor, and another is being awarded to an Indian state-owned enterprise.
While the lack of transparency is a generic feature of Chinese engagements in Nepal’s infrastructure landscape, the bilateral BRI dealings have been shrouded in secrecy since the beginning. The initial MoU on BRI is still kept confidential by both countries. Certain contentious provisions in the MoU came under scrutiny after a media house leaked the document in 2022. The recent outgoing government under Prachanda yet again took a similar step, concluding the draft of the Implementation Plan without deliberation, despite multiple calls from the lawmakers for parliamentary discussions. The left-led governments tend to override democratic norms, transparency, accountability, and processes while dealing with their Chinese counterpart, prioritising their ideological affinity with the Chinese Communist Party (CCP). BRI hasn’t remained an excuse.
After joining the initiative in 2017 with much fanfare, BRI was seen as a panacea to solve Nepal’s infrastructure deficit. The majority of Nepalis perceived BRI as a project-led infrastructure initiative with little realisation of strategic and geopolitical motives attached to it. China’s unilateral labelling of certain projects in Nepal under BRI increased the scepticism and has prompted a more cautionary approach.
Last month, the ambassador of China to Nepal took to social site X (formerly Twitter) to make a controversial claim to announce a ‘new batch’ of BRI projects in Nepal. The two countries signed the letters of exchange during the visit of the Vice Chairman of China International Development Cooperation Agency (CIDCA) for the initiation of four long-standing stalled projects, committed to be assisted by China. Earlier, the Chinese embassy had surprisingly announced Pokhara International Airport, built with a Chinese loan as a flagship project under the BRI. Nepali officials straightforwardly rejected the claim, given the loan negotiations for the airport began before the BRI was conceptualised in 2013.
China’s unilateral labelling of certain projects in Nepal under BRI increased the scepticism and has prompted a more cautionary approach.
Amidst the stalemate in cooperation on large-scale infrastructure projects in recent years, China has expanded engagements through ‘small yet smart’ projects, allegedly under the BRI framework. In July 2023, the Communist Party of China (CPC) announced the ‘Silk Roadster’ platform coinciding with the tenth anniversary of BRI. Silk Roadster is stated to foster practical cooperation and people-to-people exchanges through training, skills development, scholarships and other short-term exchanges. Further, later the same year, the outcome document of the third BRI Forum for International Cooperation mentioned two smaller projects related to education and sanitation implemented by Chinese NGOs as a part of China’s flagship initiative.
While Nepal officially mentions that not a single project has taken off in Nepal under the BRI due to unfinalised funding and implementation modalities, China appears keen to categorise any bilateral engagements in Nepal as a part of the BRI initiative. China has publicly stated its intention to establish the neighbourhood as a demonstration zone for the success of the Belt and Road initiative along with other global initiatives, and as a strategically important neighbour, Nepal is a priority. For Beijing, ensuring the implementation of an agreement reached during President Xi Jinping’s state visit to Nepal in 2019 has also been a matter of prestige. The agreement was aimed at accelerating the implementation of BRI within the broader framework of the Trans-Himalayan Multidimensional Connectivity Network. Further, China is eager to reaffirm its strategic influence to counter the US influence, particularly in light of its unsuccessful attempt to block the ratification of the Millennium Challenge Cooperation (MCC) compact in Nepal.
China has publicly stated its intention to establish the neighbourhood as a demonstration zone for the success of the Belt and Road initiative along with other global initiatives, and as a strategically important neighbour, Nepal is a priority.
China claims BRI has been implemented in Nepal, while Nepal has asserted that none of the projects under BRI has materialised. The Chinese intention seems clear—until Nepal signs the BRI Implementation Plan, Chinese cooperation in mega projects will remain in limbo, and engagements will continue to be limited to certain small-scale projects. However, finalising the financial and implementation modalities, and China’s willingness to accommodate Nepal’s interests, particularly its preference for grants and soft loans on par with other multilateral financial institutions, will remain critical for the implementation of BRI. Although the initial optimism regarding BRI has gradually waned, BRI may still move forward if China shows flexibility to address Nepal’s concerns. However, in current circumstances, BRI is bound to remain in limbo.
Arpan Gelal is Research and Program Coordinator at the Centre for Social Innovation and Foreign Policy (CESIF), Nepal.
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Arpan Gelal is Research and Program Coordinator at the Centre for Social Innovation and Foreign Policy (CESIF), Nepal. He is also a teaching faculty at ...
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