China Takes Long Steps in Nepal

When Nepal and China signed ten agreements in Beijing in 2016 just after the Indian economic blockade on Nepal, it sent shockwaves through New Delhi – the Himalayan nation was in no mood to surrender to India’s grand security schemes, and had opted for development and diversification.

A Euro-US school of thought continues to hold that open borders and formal democracy are the way to close interstate ties and mutual development. The idea may have thrived in Europe and North America but in Nepal’s relations with India it has faced strong opposition.

The reason is simple: India has failed to uphold democratic values, pursuing instead a rote record of US exceptionalism. The effect is seen in the functioning of India’s developmental works in the Himalayan belt.

Nepal officially became a part of China’s Belt and Road Initiative (BRI) in May 2017, and nine projects, mostly road and hydropower projects, are underway amidst the pandemic.

India’s repeated trade blockades and high-handedness against Nepal, whenever the landlocked state tried to get closer to China, have thrown dirt on the south Asian giant, with Nepal evidently opting for development no matter what. This is where China has stepped in since 2016.

Nepal’s trade and transit protocol with China came into effect last February 1. The treaty accords Nepal access to seven Chinese sea and land ports for trade with a third country.

Until then Nepal was dependent on India’s seaports alone. That dependency has now been halved, although rough terrain and weak infrastructure in Nepal is a major trade concern.

China however is rapidly upgrading infrastructures on its side to link China and Nepal. These developments seem to have reached the Indian government only at a time when it is locking horns with China along the Himalayan border.

The question arises: Why do China and India have the opposite approach to initiating development projects in Nepal?

Nepal has hardly ever witnessed a stable democratic government in the past 70 years, partly because of corruption and incompetent leaders, and partly because of India’s continual political and economic interference. This had a major impact on development until a majority government was elected in 2018.

Yet India continues to perceive Nepal through the lens of security and business. It still believes that Nepal is in its sphere of influence. Hence it has taken the classical approach of neoliberalism: to keep Nepal dependent and never let the country develop.

India sees any north-south connectivity projects in Nepal with so-called security concerns, such as it openly expressed about the China-Nepal railway. Other north-south road links are also seen through this lens.

This conservative view has led to a situation where India exerts diplomatic pressure on Nepal not to pursue such projects. It has also adopted a tactical approach, of offering bilateral assistance to build such projects in order to reserve them, without ever building them.

Shen Shiwei, a producer at the state-controlled China Global Television Network, recently tweeted: “As Shigatse (日喀则) to Gyirong railway to be completed in 2022, the Chinese sections of #China-#Nepal railway will be put into full operation. The railway will further help Nepal to explore the neighboring world’s second-largest economy”.

With China aiming to connect with Nepal via railway, India is still lagging in completing its railway projects in the country’s southern areas.

Debate has surfaced yet again in Nepal whether India wants to develop railway links in the south on broad gauge lines, leaving Nepal dependent on India’s outdated and expensive technology. Analysts argue that it should opt for standard gauge as used in China regardless of Indian opposition.

Infrastructure projects near the border with India are of special concern to New Delhi, which does not want contractors from third countries, especially China, to get involved. The result is a pattern: India preemptively commits to such projects without allocating enough money or technical resources to them.

Hulaki [Postal] Road is a case in point. The project undertaken by India in 1991 is still incomplete, and the Indian government has withheld bill payments for a whole year despite pouring in millions of dollars over the years.

India must also compete with other bilateral donors in development assistance for Nepal. Because of the increasing volume and speed of implementation of Chinese aid, India is somehow pressured to commit more money or a larger number of projects. But its limited budget allocation, the weaker capacity of contractors, and complicated implementation process have created long delays.

Analysts believe that India’s infrastructure projects get bogged down, facing lengthy delays and even complete halts due to a lack of technical expertise, political will, and most importantly because of its security-aligned motive of development.

China meanwhile, sees development in Nepal as its key to the subcontinent, most importantly to India.

Within four years of signing key agreements with China, Nepal is on track to see the completion of two regional airports and several other projects funded and built by China.

These developments have left a positive impact on Nepalis: that China wants development in Nepal, while India only wants development in Nepal that favours it. A major public impression and a soft power image of China have arisen among Nepalis.

Unlike China, India had the perfect opportunity to tap Nepal’s hydropower and tourism sectors. But it never did. It also had the chance to transfer its rapid development to the only neighbouring country with which it has an open border.

To India’s loss, it has failed to deliver on its promises of development, wasting energy rather on trying to keep Nepal from Chinese influence. It would seem that India’s Sinophobia has finally got a hold for good.

The use of Nepal's water resources is an issue where India has a significant interest. Being a downstream riparian country with an overwhelming interest for regulated water flow in the dry season, India wants some degree of control in Nepal's hydropower projects including high dams.

However, it does not want to come up with a transparent proposal based on the principle of mutual benefit and fairness. Therefore, in the hydropower sector too, its strategy appears simply to be to reserve the project and buy time. China, on the other hand, has already built several hydropower projects in Nepal.

The Indian government and companies are notorious in Nepal for not finishing hydropower projects on time, and delaying for decades. The Nepali public understands the move as nothing but an attempt to squander Nepal’s chance of rapid development, because it would be difficult for India to deploy its covert ploys against a developed country.

India quickly built a Koshi dam in 1962 to protect people in Bihar from recurring monsoon floods. To this date, India controls the dam gates, but the Indian big media continues to blame Nepal for flooding in Bihar. This lie has led the general public in Nepal to view India’s motives with suspicion.

There is an understanding in Nepal, that India only wants three things from the country: water, business, and security from China, and this is why its development projects have failed in Nepal so far, or are stuck revolving around these three concerns.

According to Ashok Swain, professor at the Department of Peace and Conflict Research, Uppsala University:

“Indian inefficiency in implementing any infrastructure project is well known, while at the same time, China is famous globally for carrying out infrastructure projects in record time.

“China is economically much more resourceful than India, so lack of finance does not become a reason to delay its committed projects, which is not the case for India.

“India has been historically careless about its relations with Nepal as it has always been under the belief that Nepal has no other option but to remain under India’s control and influence.

“On the other hand China has been strategic in prioritising its commitment towards Nepal, as it wants to bring Nepal to its side”.

Indeed China has now completed several national projects in Nepal, including for hydropower, post-quake reconstruction, military buildings, schools, hospitals. Besides two regional airports Chinese companies are working on several other projects.

Chinese President Xi Jinping’s visit to Nepal in 2019 had a significant impact on these investments. Naturally the public wonders why China is finishing projects on time, but India fails to do so.

A classic example of India’s failure is the Arun-III hydropower project, started in 1992 but never begun until just this year. Why the sudden change? Analysts say it is a means to counter China’s “aggressive” developmental works in Nepal.

According to Surya Raj Acharya, a Nepali politician and expert on infrastructure policy:

“Overall, India has contributed significantly to Nepal's infrastructure development and other socioeconomic sectors. However, because of India's so-called strategic and security concerns, it seems to have wanted to control the physical development of Nepal.

“The Nepalese people's aspiration for speedy development and India's views on Nepal's physical development are in conflict. That is why there is a growing perception that India may not want speedy development of infrastructure in Nepal.

“In order to overcome such a perception among Nepalese people, India should recalibrate its perspective on Nepal's development, and be more open and liberal towards all kinds of infrastructure development in Nepal”.

In the coming days, Nepal will need a huge investment in infrastructure projects. India cannot meet such demands. Nepal will need to seek assistance from China for money and technology. India should not object to this increased Chinese involvement.

At the same time, Nepal should take India into confidence in terms of ensuring that India's legitimate security interests will not be compromised as far as possible.

To counter China, India has begun completing a few projects such as a cross-border oil pipeline, power and transmission lines. But it remains apprehensive of any north-south high-grade projects.

Nepal and India held the eighth meeting of the Oversight Mechanism on August 17 and agreed to expedite Indian projects in Nepal. The virtual meeting came after the border and map row between the two governments.

According to Surya Raj Acharya:

“India always expressed concerns over north-south connectivity on the ground of so called security concerns. It was reported that because of such concern, the difficult alignment and lower design standard for the Tribhuvan Highway (built with Indian grant assistance) was adopted so that the road could not be used for military purposes.

“After trans-Himalayan connectivity such as the Kodari and Kerung roads, any high grade highway directly connecting Kathmandu to Terai could potentially be seen as a security concern from an Indian lens.

“Although India did not oppose Fast-Track openly, some degree of security concerns on the part of India can be well understood.”