Prime Minister KP Sharma Oli returned home on December 5 after a four-day official visit to China. During the visit, the two countries signed the Belt and Road Initiative (BRI) Framework Cooperation agreement. The Post’s Thira Lal Bhusal sat down with Bishnu Rimal, chief advisor to the prime minister, who was one of the key interlocutors during the framework agreement negotiations, for insights on how the deals were finalised between the two countries.

There are many queries about the details of the agreements signed between Nepal and China last week. Please tell us about the key points.

Nepal and China had been exchanging documents related to the Belt and Road Initiative of China since 2020, under the BRI implementation plan. While signing any agreement, the two countries engage in rigorous negotiations and at times it takes a long time even to finalise a word. This time, we signed a framework agreement, which is like a basket, where we have put many things.

It’s different from a memorandum of understanding (MoU). In the agreement, we have described its background, principles, objectives, the modality of mobilising financial resources and implementing mechanisms. Even the previous government led by Pushpa Kamal Dahal had planned to finalise it but it didn’t in the end. Now we have taken it ahead.

The new agreement should be understood in a context. In 2016, we were in government [during Oli’s first tenure] and we visited Beijing. At the time, China was supporting Nepal through the Trans-Himalayan Multi-Dimensional Connectivity Network (THMDCN) package. Later, the support was provided through the BRI and the THMDCN became a part of it. Nepal reached an MoU to this effect in 2017.

After that, an implementation plan needed to be signed. Following the formation of the present government, we held discussions on this. The two major coalition partners—the Nepali Congress and the CPN-UML—formed a four-member team for this specific purpose. Party general secretary Gagan Thapa and lawyer Semanta Dahal from the Nepali Congress and Yubaraj Khatiwada ji and myself from the UML were in the team.

In the past, we have reached several agreements with China, India, the United States, Japan and various other countries and sought support from them. But we haven’t been able to properly utilise the support. Our [taskforce’s] focus was to ensure best use of the pledged amount and implement the agreements.

At first, we studied the documents exchanged after 2020. At the beginning we forged consensus between the UML and the Congress and then shared the document with the Chinese side because it can only be implemented after it is acceptable for both sides. This time, we wanted to take the implementation process ahead because Nepal joined the BRI process years ago.

Nepal has already joined China’s Global Development Initiative, which is an international development concept. But there were some confusions about our participation in development projects under the BRI. There needed to be more clarity on our side. At times, it has been dragged into controversy. We wanted to dispel rumours and confusions.

First of all we all should know that the BRI is a framework and the agreement we signed is a basket deal. Later, we will select specific projects and negotiate on particular details and conditions. In fact, the debate ahead of the prime minister’s visit was driven by whether to take loans or grants from China. That was wrong.

It is rather a project-based approach. On certain projects, we need all grants while on certain others, we may jointly develop them. Still in other projects, we have to seek concessional loans. All these things depend on what project we are talking about. If a project can pay back the loan, that could be dealt accordingly. But our discussions were driven by the concept of loan versus grant. Even top leaders got swayed by such narratives and reacted accordingly.

China has declared huge grants to Nepal multiple times since 2016. But we haven’t been able to use them as we have to earmark the amounts and seek them. First, we have to say that we are going to use this money in these projects. We at the task force concluded that the amount of the grants pledged by China is enough for us for now. There is no need to take out a loan now. Our priority is to get the grants that have been stuck for years.

Do we need to select certain projects for that?

Yes, we have to first finalise the projects and prepare business plans. We can explore other options only if the grant money is insufficient for a particular project. For instance, if we start working on a cross-border railway, we would discuss whether the grant money is sufficient and whether to seek more grants or go for loans. We aren’t in that stage now. We are yet to receive the grant announced during the visit of Chinese President Xi Jinping in 2019.

Similarly, grants were announced during the China visits of then President Bidya Devi Bhandari, first President Rambaran Yadav and our prime minister KP Sharma Oli. Also, this time, the Chinese President has announced 500 million RMB in assistance. So, again, first we have to work to receive and use the grant money.

For instance, recently, the Chinese side announced to provide electric vehicles worth US$10 million as support through the Chinese embassy. The EVs include public buses, ambulances and school vans but they release them only after we provide the specifications of the vehicles that we need. The amount we sign as a budgetary support can be used wherever we want but other sums are released only after we earmark them for certain projects.

After a long negotiation, Nepal and China have agreed on the term ‘aid assistance financing’. What does that mean?

During the negotiation, we had used the term ‘grant and different financing modalities’. Later, we agreed to replace the word ‘grant’ with ‘aid’. We did so as we wanted to keep the door open in terms of seeking support from a country. If we say that we won’t receive any support except grants, it creates complications in the overall investment scenario. The Chinese government may provide a certain amount of grant to the government of Nepal but it doesn’t give it to the private sector.

If Nepal’s private sector plans to attract investment from China, the World Bank, the ADB or any other agencies, for example for a mega hydro project, they may not get it as the Chinese side knows that Nepal accepts only grants and no other form of investment. Such a condition creates complications as this agreement is applicable even for the private sector. Therefore, we didn’t want to close the door. We can’t say we accept loans from this country but not from the other. We accept assistance that serves our national interest.

Will the negotiations now onward be project-specific then?

Yes. It will be project and proposal specific. Such issues will be negotiated only when we discuss a certain project. Therefore, the ongoing debate over grants versus loan is pointless. For instance, we didn’t receive certain portions of the assistance announced by India immediately after the 2015 earthquakes. Such is also the case with China and with other countries on occasions as the conditions attached to them weren’t acceptable to us.

After the failure in operating Pokhara Regional International Airport due to lack of business plans, people are now suspicious about the utilisation of any assistance fruitfully.

How can you say the Pokhara airport project is a failure? First, one should study the airport’s capacity and check how many passengers are flying to Pokhara now. A good number of people are flying there. I think the interest rate on the loan we took from China to build the airport is no different to the rate we receive from the World Bank, the IMF and other multilateral agencies. We can debate whether we have been able to operate the airport in its full capacity. But there is no need to scandalise it unnecessarily.

Ahead of the prime minister’s visit, there were voices that Nepal should seek a waiver of Pokhara airport loan from China. What happened?

Let me ask you a question. Imagine, you took a loan from Rastriya Banijya Bank to meet your needs. Say, there is a government led by a leader who favours you. Can the prime minister waive off your bank loan? No. You have to follow the system. So your question is wrong. The Pokhara airport deal is not a grant. It’s a commercial deal. Those who run the government can’t use the language of Durga Prasai, who threatens not to pay back bank loans.

What are the agreements on road connectivity and cross-border railway projects?

We have included five points under the infrastructure-urban development project. These are Tokha-Chhahare Tunnel, Hilsa Simkot Road Project, Kathmandu-Khandbari Road, Kimathanka Bridge, the cross-border railway project from Rasuwagadhi to Kathmandu and the Amargadhi City Hall. Likewise, we have included a cross-border transmission line to start energy trade with China. Under education and health, we agreed to establish universities and colleges. The Chinese side is carrying out a feasibility study of the railway project with a plan to complete it by 2026. Once the study is complete, we will discuss the funding modalities and business plans.

What is the status of the Tokha-Chhahare tunnel project?

The China side is in a position to complete its feasibility study. After that, construction work will start.

Nepal has signed so many agreements with China. While we have progressed a lot on paper, there is little progress on the ground. Will the present agreement make any substantive change in this connection?

Nepal is behind on monitoring and follow up. We should have formed bilateral mechanisms and monitored work progress. Now, there is a sense of urgency in the government to expedite development works. An inter-agency mechanism will be formed within our government. It will monitor and facilitate the work and the line ministries will execute the plans.

Why are the agreements signed with China not made public, unlike the deals inked with other countries?

There is no problem in making them public because there is nothing to hide. But all agreements aren’t made public. The MCC Compact had to be taken to the parliament as people were divided over it. Then, it was publicly debated. Likewise, people are now expressing their curiosity towards the BRI documents. But there are many projects people don’t care about. When needed, the documents can be made public as nothing can be hidden these days. And there is nothing wrong in making them public.

UMl’s coalition partner Congress was reportedly reluctant to sign the framework agreement. What was its concern?

That is a wrong narrative. Both the UML and the Congress were on the same page. It was possible to conclude the agreements because we had consensus.

But the Congress leaders expressed their concerns in public ahead of the visit and even after the signing of the deals.

We have to follow the party’s official decisions, not the statements of individual leaders. How would it have been possible to reach agreements if there were differences in the two-party taskforce, in the leadership and the party’s official positions? It’s a Nepal-China agreement jointly done by the UML and the Congress, and backed by all other parties. The prime minister convened a meeting of former prime ministers and foreign ministers ahead of his visit. All of them advised the prime minister to sign the agreement with China.

Why was the signing of the agreement delayed?

While signing a bilateral agreement, we can’t think only from our perspective. Negotiation always takes long. The joint statement has stated that the two sides are ready to sign the BRI framework as soon as possible. It took time for us to share the documents with the Chinese side after we reached Beijing. It’s not like two leaders just sit, discuss and sign on that. They have to consult concerned ministries, departments and officials. The Chinese worked overnight after we submitted the documents. My impression is that the Chinese side showed magnanimity and adopted a short-cut approach and signed on the deals. They were ready to sign the agreements on our conditions. That was a wonderful gesture.

What were the specific points of contention and how were they resolved?

We substantially edited the documents that were exchanged in the past, making them more specific and converting them into a framework of cooperation. Therefore, the Chinese side needed at least a day to study them. They argued that it would work even without mentioning the word ‘grant’. In view of the narratives in Nepal, we proposed to use ‘grant’ or a word with similar meaning. Then, we proposed ‘aid assistance financing’, and they accepted the term.

How will the new deal be implemented?

There used to be confusion about whether a certain project is under the BRI. China said even the Pokhara airport project is under the BRI while we said it was initiated before that. Now onward, all projects with China will be under the BRI cooperation. All the financing and investments from China will enter Nepal through the BRI window. We will prioritise the projects already proposed and under study such as the railway project, Tokha-Chhahare tunnel, and Madan Bhandari University. We have agreed to strengthen connectivity on border points and work will be expedited there. That will help transform Nepal from a land-locked into a land-linked country.

Why are the projects being developed with Chinese involvement so slow?

These days the Chinese side tells us to give projects only after clearing the sites. For instance, the 17-km Syafrubeshi-Rasuwagadhi road is to be built by Chinese grants. There is one transmission pole standing in the way. We are yet to remove it from the construction site. They haven’t started the work citing the same reason. Creating an environment to work on the field is our responsibility. It’s not that only China-built projects are slow. Such is also the story with our projects with other countries and agencies. Even in the case of the MCC projects, it took a long time to finalise many issues. We are too slow in implementing agreements and executing projects. First, we have to do some retrospection and improve our efficiency.