News Desk
The ambitious Belt and Road Initiative (BRI), heralded as China’s grand strategy to reshape global connectivity, is faltering in Nepal. Despite the high-profile visit of Nepalese Prime Minister K.P. Sharma Oli to Beijing last week, the deep-seated discord between the two nations on financing modalities suggests the BRI’s future in Nepal is tenuous at best. Seven years after signing a Memorandum of Understanding (MoU) in 2017, the two countries have managed only to ink a vague Framework Agreement, highlighting not progress but persistent divergence.
This impasse underscores a broader reality: Nepal’s growing skepticism of Beijing’s terms and its pragmatic pivot toward India for infrastructure and energy cooperation.
The Core of the Disagreement
At the heart of the stalemate lies Nepal’s firm resistance to Beijing’s preference for high-interest loans. Kathmandu has made it clear it seeks grants or concessional loans akin to those offered by institutions like the World Bank or the Asian Development Bank. The insistence on grant-based financing reflects not only Nepal’s fiscal constraints but also its cautionary view of China’s debt-heavy funding model, which has left other nations grappling with financial distress.
This friction is apparent in the protracted negotiations over the Framework Agreement. Nepali officials, wary of falling into a debt trap, reportedly pushed for explicit language favoring grants. When China proposed “assistance financing,” Nepal countered with “aid financing” as a compromise, underscoring the semantic and substantive gulf between the two sides.
Even before Oli’s visit, Foreign Minister Arzu Rana Deuba had signaled Kathmandu’s stance during preparatory talks in Beijing. Yet, Beijing’s reluctance to budge raises questions about its commitment to adapting the BRI model for countries with distinct developmental needs and fiscal realities.
A Legacy of Unrealized Promises
The numbers speak volumes about the BRI’s checkered history in Nepal. Of the 35 projects proposed in 2017, none have materialized. The list has since been whittled down to nine, and this year Nepal submitted ten fresh proposals, including high-stakes infrastructure ventures like the Jilong-Kerung-Kathmandu railway and the Tokha-Chhahare tunnel road. However, given the lack of clarity on financing, these projects face slim odds of breaking ground.
Adding to the challenges is the Himalayan terrain, which renders large-scale infrastructure development both technically demanding and economically prohibitive. For instance, the cross-border railway project, while symbolically potent, faces daunting logistical and cost-related barriers.
China’s recent reopening of trading points along the Nepal border—closed for over three years since the pandemic—has done little to rebuild trust. The closures had severely disrupted livelihoods in Nepal’s mountain districts, reinforcing perceptions that Beijing prioritizes its geopolitical agenda over regional welfare.
Nepal’s Pivot to India
While Beijing struggles to advance the BRI, Kathmandu has been quietly deepening ties with India, embracing alternatives that are faster, cheaper, and mutually beneficial. India and Nepal are collaborating on a slew of cross-border railway projects, including the operational Jaynagar-Janakpur line and the proposed Raxaul-Kathmandu link.
In the energy sector, the two countries have signed agreements that position Nepal as a significant regional power exporter. Cross-border transmission lines and Indian support for hydroelectric projects have already yielded tangible benefits, with Nepal poised to supply surplus electricity to Bangladesh via Indian networks.
India’s provision of critical infrastructure like oil pipelines and its strategic facilitation of regional energy trade have further diminished China’s appeal. The planned pipelines between India and Nepal make Beijing’s proposal to transport fuel across Himalayan passes obsolete.
The Road Ahead
Nepal’s cautious approach to the BRI reflects a growing understanding of the geopolitical and financial risks tied to China’s ambitious projects. By contrast, India’s infrastructure and energy partnerships with Nepal are grounded in immediacy and economic pragmatism, offering a starkly different developmental model.
The symbolic mention of the Trans-Himalayan Multi-Dimensional Connectivity Network in a joint communiqué from Oli’s visit does little to dispel the cloud of uncertainty hovering over the BRI in Nepal. As the Institute of South Asian Studies in Singapore aptly notes, the interpretation of “aid financing” will determine whether these projects ever move forward—or remain trapped in bureaucratic limbo.
For Beijing, the standoff with Nepal is more than a bilateral challenge. It is a microcosm of the difficulties China faces in adapting its BRI framework to local realities. For Kathmandu, the slow unraveling of BRI ambitions may well mark the start of a strategic recalibration, one that looks increasingly toward New Delhi as a partner of choice.
In the end, the fate of the BRI in Nepal may hinge not on grand declarations but on the mundane mechanics of financing—and the hard-won trust that comes with equitable partnerships.
