Nepal has already built a national consensus on not accepting loans to build Chinese railways and rather prioritize grants (Republica, 2019). Hence, the debt trap doesn’t appear as a challenge in the context of Nepal-China railways. But, expressing suspicion over China’s flagship project, even the United States has cautioned Nepal not to fall into the Chinese ‘debt trap’.
With the entry of Nepal into China’s flagship project, Belt and Road Initiative (BRI) in 2017, Chinese academicians and foreign policy experts branded Nepal as a gateway for China to enter South Asia. The agreement between both the countries to connect Kathmandu and Lhasa with trans-Himalayan railway projects is perceived today as a game-changer project in South Asia. But, implementing BRI projects, including the trans-Himalayan railway, is not free from challenges that have unnecessarily delayed the implementation of BRI projects in Nepal. As a result, China’s desire to enter South Asia via railway through Nepal is already delayed. Owing to the same, this article identifies the political, bureaucratic, economic, and environmental challenges faced by the trans-Himalayan railway project in Nepal. After discovering the changes faced by the trans-Himalayan railway project in Nepal, we will come to an understanding of how the economic challenge of implementing cross-border connectivity projects in Nepal, tops the list, which may rebrand Nepal as a ‘burden’ instead of becoming a bridge.
Following the political change of 2006 in Nepal, the Himalayan country floated the proposal of bridging its immediate neighbors, China to its north and India to its South, owing to the unprecedented economic development in the neighborhood. Beijing took Nepal’s proposal positively while New Delhi remained reluctant. As soon as Kathmandu joined China-led BRI in 2017, Beijing not only readjusted Nepal’s previous proposal of bridging the two economic giants but also identified Nepal as a strategic gateway to enter South Asia. The 2019 visit of Xi Jinping to Nepal, which was the first visit of a Chinese president in more than two decades, echoed China’s increasing interest in South Asia “as a strategic hub for defense and transit projects”. As Bhutan is not ready to develop diplomatic relations with China by coming out of the strategic partnership with India, Beijing considers the 1,415-km border between Nepal and China’s Tibetan Autonomous Region (TAR) as the source of bridging China with South Asia via land. Among the 312 passages connecting TAR with South Asia, Nepal’s Himalayan region offers 184 such routes. Despite Beijing’s interest and ambition to get connected with the South Asian region via Nepal through the launching of connectivity projects under BRI, the prospects and potentials don’t remain free of challenges, particularly the economic and geopolitical challenge against implementing cross-border connectivity projects in Nepal that may rebrand the Himalayan country as a ‘burden’ instead of a bridge.
In the manner of pursuing its South Asia ambitions, Beijing has floated the concept of a land-linked Nepal -- a stern departure from the conventional identity of a ‘landlocked’ country. For China, the extension of the Sichuan-Tibet Railway to Kathmandu through Ya’an, Qamdo, Lhasa, and Shigatse helps Nepal in pursuing a land-linked country status located between India and China. In his 2019 visit to Nepal, President Xi stated, “We will help Nepal realize its dream of becoming a land-linked country from a land-locked one.” But, is Beijing’s readiness and preparedness alone sufficient for bridging South Asia? While the modality of the funding remains uncertain, China’s eagerness to get connected with the South Asian market is already delayed. How does China perceive the political uncertainty in Kathmandu that has impacted the implementation of BRI projects? What are the bureaucratic, political, geopolitical, economic, and environmental challenges associated with connectivity projects under BRI, impeding and further procrastinating Beijing’s long-standing interest to get connected with South Asia via railways? The objective of this article is to find answers to the economic challenge alone.
No economic challenges
In August of 2018, the Department of Railways (DoR) of Nepal estimated the cost for the construction of the Kathmandu-Kerung railway, passing through complex geological terrain, around Rs. 257 billion. While 72.25 km of the railway is in Nepal, and about 98.5 percent of the railway would be either bridges or tunnels, the project is expected to cost Rs. 3.55 billion per kilometer. It indicates that the Nepal government is capable enough to manage the investment amount. But, on the backdrop of China-led BRI projects facing ‘debt trap’ allegations, Nepal finds it easy to seek grants from China to build the railway. Beijing, however, has preferred to remain silent over the modality of funding.
Although the railway was scheduled to reach Kerung by 2020, China is yet to extend its railway to Nepal borders and until then the railway line construction in Nepal is unlikely to begin. Nepal has also requested China to fully fund the Detailed Project Report (DPR) of the Kathmandu-Kerung railway, which is expected to cost around Rs. 35 billion. Only in 2018, the National Railway Authority of China had handed over the pre-feasibility study report of the Kathmandu-Kerung railway to Nepal. It was done on a grant. Only after completing the Detailed Project Report, the funding modality could be determined. While the pandemic impacted the study of the Kathmandu-Kerung railway, China has started to carry out the study in the areas from Shigatse to Nepal's border. But, the study of the project on Nepal's side is anticipated to take place only after the situation created by COVID-19 gets normal.
On safe side over ‘debt trap’ issue
The debt trap allegation against China has kept Kathmandu on the safe side. Nepal has already articulated that the railway cannot be constructed if it is not built with Chinese grant. Former foreign minister Pradeep Gyawali even went on to say that “We are not in a position to invest Rs. 300 billion in a single project now. We, therefore, urge China to build this project on grants.” Nepal has already built a national consensus on not accepting loans to build Chinese railways and rather prioritize grants (Republica, 2019). Hence, the debt trap doesn’t appear as a challenge in the context of Nepal-China railways. But, expressing suspicion over China’s flagship project, even the United States has cautioned Nepal not to fall into the Chinese ‘debt trap’. The warning by the US was the upshot of the international concerns over the issue of land grabs in Africa, seizure of Hambantota port in Sri Lanka, debt trap issues in the Maldives. Although the Western world has been warning of possible debt trap and erosion of state sovereignty while implementing the BRI projects, China deems the debt trap narrative as propaganda and mere rumors to contain the rise of China.
Although the second Belt and Road Forum for International Cooperation held in Beijing in April of 2019 mentioned about the Nepal China Cross Border Railway Projects and Nepal-China Trans-Himalayan Multi-Dimensional Connectivity Network, in a joint communique issued after the forum, there was no mention about the funding modality. While the Nepal government emphasizes enhancing connectivity without taking loans to build railways, the future of the trans-Himalayan railway remains uncertain, procrastinating China’s ambition to get connected with South Asia, and concurrently deferring land-locked Nepal’s interest in land linking India and China.
Today, as the pandemic has impacted the funding capability of BRI projects, it remains unclear whether China will be in a position to fully fund the railways as Nepal desires. Similarly, while the Chinese economy is confronting grave challenges in the US-led global system, its impact may be also felt in the funding modality, which is still undecided, on the Nepal-China railways. As a result, it may rebrand Nepal as a ‘burden’ instead of becoming a bridge.
(The author is Assistant Professor at the Department of International Relations and Diplomacy, Tribhuvan University)