Oli on a bri tightrope as he heads to china with domestic politics at stake

Oli on a bri tightrope as he heads to china with domestic politics at stake

The current ruling coalition in Nepal is sharply divided over the Chinese project and its possible implications for the country; while the CPN-UML views Prime Minister Oli’s visit as an opportune moment for moving the BRI implementation plan ahead, its ally NC is wary of potential debt traps.

To sign or not to sign. This is the question Nepal’s Prime Minister K.P. Sharma Oli faces as he prepares for his visit to China, which has been largely overshadowed by a debate whether he should sign an implementation plan for the Belt and Road Initiative (BRI).

The current ruling coalition, comprising Mr. Oli’s Communist Party of Nepal (Unified Marxist-Leninist) [CPN-UML] and the Nepali Congress (NC), is sharply divided over the Chinese scheme and its possible implications for Nepal. While the CPN-UML views Mr. Oli’s December 2-5 visit as an opportune moment for moving the BRI implementation plan ahead, the NC is wary of potential debt traps.

After joining the BRI in 2017, Nepal had initially proposed 35 projects under the initiative, but the number was later brought down to nine. However, not even a single project under the scheme has started in the last seven years and the funding modality still remains unclear.

In Nepal, the common understanding of the BRI is that it entails loan assistance for infrastructure development projects.

Ajaya Bhadra Khanal, a research director at the Centre for Social Innovation and Foreign Policy, a Kathmandu-based think tank, says for China, the BRI is more than just an infrastructure initiative.

“The BRI is Beijing’s strategic vision to deepen economic integration and enhance global connectivity,” he said. “The BRI implementation plan that is under discussion now goes beyond project agreements; rather China’s overall diplomatic strategy with Nepal rests on it.”

Beijing has broadly aligned its ties — be it development initiatives or diplomatic engagements — with Nepal under the BRI, particularly since it proposed the BRI implementation plan in 2020. This was evident when Chinese Ambassador Chen Song labelled the Pokhara International Airport, a project that began long before Nepal signed up for BRI, as one under the scheme.

Mr. Chen has held a series of talks with multiple leaders, including those from the NC, with discussions largely focused on the BRI.

The Pokhara airport was built with a $26 billion loan assistance from China, but with no commercial international flights operating since its inauguration in January last year, it risks becoming a white elephant. During his visit, Mr. Oli is expected to seek a waiver on the loan or its conversion into a grant.

This has led to questions as to how Nepal will be able to pay back if it secures more loans at a time when it is requesting a waiver for an earlier loan.

Dr. Prakash Sharan Mahat, a spokesperson for the NC and former Foreign Minister during whose tenure Nepal joined the BRI in 2017, said at a programme in Kathmandu on Wednesday that Nepal must be cautious while taking additional loans from any country, at a time when Nepal’s public debt-to-GDP ratio is already hovering around 44%.

Geopolitical gambit

Those opposed to the BRI, including the NC, say while Nepal could benefit from the Chinese scheme in terms of infrastructure projects, they are cautious about China’s possible increased leverage in Nepal.

India, which has in recent times deepened economic ties with Beijing, is wary of growing Chinese influence in its northern neighbour. New Delhi’s refusal to import goods and electricity from Nepal with Chinese components has emerged as a cause for concern of late. The U.S., Nepal’s long-time development partner, is concerned about growing Chinese footprint in Nepal.

Two years ago, China calling the Millennium Challenge Corporation, a $500 million American grant to Nepal, “coercive diplomacy” had raised fears of Nepal becoming a geopolitical battleground.

Observers say Mr. Oli’s coalition partner NC, which is traditionally aligned with India and the U.S., may have some kind of indirect pressure from New Delhi and Washington against signing the BRI implementation plan, given its geopolitical overtones.

“The best thing to do for Oli is taking forward the past agreements reached with China, rather than signing any new deals,” said Jhalak Subedi, a Left-leaning writer and analyst. “Oli should try to negotiate the implementation of some small projects that have been previously agreed upon and agreements that were signed during (Chinese) President Xi (Jinping)’s visit to Nepal in 2019.”

According to Mr. Subedi, since the BRI is China’s overall foreign policy tool, it presents both challenges and opportunities for Nepal. “Nepal’s geopolitical predicaments have grown as its economy stutters. So, the imminent visit should be an exercise aimed at securing goodwill from the north, while maintaining strong ties with India,” said Mr. Subedi.

Meanwhile, Foreign Minister Rana on Thursday left for China, carrying Nepal’s revised position on the BRI implementation plan, which has been renamed “framework for cooperation on jointly building the BRI” — in an apparent message that Nepal is committed to the BRI but presently its focus is on current needs.

Differences between the CPN-UML and the NC over BRI signing have triggered a debate in Kathmandu about a possible coalition breakup. Analysts say the Nepali leadership will do well not to mix foreign policy with domestic politics. According to Mr. Khanal, Mr. Oli should put Nepal and Nepali peoples’ interests at the front and leave his partisan interest behind. “For Mr. Oli, stakes are high. How he navigates both geopolitical and domestic intricacies will be crucial,” said Mr. Khanal. “Whether he succeeds in striking a balance or exacerbates existing complexities will be key to shaping Nepal’s path.”