Ending considerably long debate and uncertainty, Nepal and China signed the Framework for Belt and Road Initiative (BRI) Cooperation agreement in Beijing on Wednesday. The document on the Framework for BRI Cooperation was signed by Acting Foreign Secretary Amrit Bahadur Rai on behalf of the Government of Nepal and Liu Sushe, deputy head of the National Development and Reform Commission—the focal agency in China tasked with the development of BRI projects—on behalf of the Chinese government. The framework will be valid for three years and will get another three-year extension unless terminated by either side. The agreement, signed during the state visit of Prime Minister K P Sharma Oli, paves the way for implementing BRI-related projects in Nepal. This historic agreement, reached almost eight years after inking the Memorandum of Understanding on the BRI, marks a significant development to deepen the economic partnership between the two countries. As the project-based negotiations start between the two countries, Nepal should select projects that fall under the priority and needs of the country and ensure value for money for every project built under the BRI framework to reap benefits from this deal.
Although Nepal signed a Memorandum of Understanding (MoU) on BRI in 2017, not a single project under this Initiative was implemented in Nepal due to differences among major political parties over whether to implement BRI projects through loans or grants. Amid this difference, a Task Force was formed to address these differences weeks before Prime Minister Oli’s visit to China. The Task Force, comprising NC and UML leaders, concluded that signing a Framework for BRI Cooperation agreement, which would guide all project-specific agreements, was essential before proceeding with the Implementation Plan. The MoU on BRI did not make structural arrangements for implementing BRI projects and lacked recognition of the Implementation Plan that China had been pushing Nepal to sign. Hence, there was a need to first reach a Framework for BRI Cooperation that would provide clear guidelines for implementing BRI projects. The new BRI deal signed on Wednesday emphasizes aligning projects with Nepal’s economic priorities and value-for-money principles. It also provides clarity on where and how to implement BRI projects, paving the way for their execution. In this sense, the new deal is instrumental in expediting the implementation of BRI projects while keeping Nepal’s needs and priorities at the center.
Nepal’s stance against loan agreement stalls BRI ‘breakthrough’
Nepal and China have also agreed to expedite the development of 10 projects within the framework of the new BRI deal. Projects agreed for implementation under the new framework include the Tokha-Chhahare Tunnel, Hilsa-Simkot Road, Kimathanka-Khandbari Road and Bridge, Geelong-Kerung-Kathmandu Transborder Railway, and the Geelong-Kerung-Chilime 220 kV Cross-Border Transmission Line. Other projects include Madan Bhandari University, Kathmandu Scientific Center and Science Museum, China-Nepal Industrial Friendship Park in Damak, Jhapa Sports Academy in Damak, and Amargadhi City Hall in Dadeldhura. Most of these projects, if implemented properly, can enhance connectivity between the two countries and boost economic transformation, deepening economic integration between the two countries. There is a caveat, however. As project-based negotiations will now take place between the two countries, Nepal should be careful in prioritizing projects that meet its specific requirements and needs. It should seek grants and concessional loans in line with the interest rates offered by the World Bank, the Asian Development Bank, and other bilateral and multilateral agencies. The onus now lies on our political leadership and policymakers to make decisions that meet the needs and priorities of the country while ensuring that their decisions won’t adversely affect the country’s macroeconomic stability.
