Nepal’s Catch-22 over OBOR initiative and Prachanda’s upcoming China Visit

By Bikram Timilsina, Brisbane
18 March 2017


China has lately been putting considerable diplomatic pressure on Nepal to sign a Memorandum of Understanding (MoU) for its participation in the Chinese President’s One Belt, One Road (OBOR) project. Nepal, on its part, is dillydallying the process. In this context, it is interesting to note that the country’s Foreign Minister Prakash Sharan Mahat has visited India five times since he assumed office while he has not visited the communist nation even once. Similarly, Prime Minister Pushpa Kamal Dahal (Prachanda) has not shown much of an interest to visit Beijing probably because he does not want to displease India once again. However, as he has been invited to address the Boao Forum for Asia (BFA) to be held in Henan Province from March 23 to 26, he is preparing for his trip after the Chinese signaled that they were ready to welcome him to Beijing either before or after the BFA.

China has already expressed dissatisfaction over Nepal’s lack of initiative towards signing an MoU to participate in the OBOR initiative. Chinese think-tanks and the government representatives who came to Kathmandu to participate in OBOR Conference 2017 last January displayed serious concerns to the Government of Nepal regarding its plans and preparation on OBOR agreement. The Chinese officials seemed unhappy with Nepal’s delay in response to China’s OBOR proposal. Speaking as a chief guest of the conference, Foreign Minister Mahat said, ‘We are committed to strategic cooperation and enhancement of connectivity. However, China needs to understand that Nepal has a geopolitical complexity.’

This clearly reveals the position of Nepal’s catch-22 over the Chinese initiative. The news reports that claimed that the OBOR file was concealed at the Ministry for Foreign Affairs with the intention of delaying the process is striking. A response, however, to the Chinese OBOR proposal has been sent to China just a while ago after much pressure from media, intelligentsia and the social media users.

What is OBOR Initiative?

Chinese President Xi Jinping proposed OBOR in 2013 as a development strategy with a focus on connectivity and cooperation between People’s Republic of China and the rest of Eurasia. OBOR consists of two components, land-based Silk Road Economic Belt (SREB) and seagoing Maritime Silk Road (MSR). While 40 countries have already singed the cooperation agreements with China, more than a hundred are reported to have shown their interests in joining the initiative.

Nepal’s commitment

Nepal signed a preliminary agreement with China in December 2014 to express its willingness of joining the OBOR initiative. However, the Himalayan Nation is yet to sign a cooperation agreement with China that formally opens the avenue for making Nepal a part of the initiative.

China was briefly excited at the eagerness of KP Oli government in enriching Sino-Nepal relations. One of the main achievements of the Oli government in relation to China was the signing of Transit Treaty that thwarted the monopoly of India in Nepal’s transit facility. After Prachanda replaced Oli, there has been delay not only in the implementation of the agreements that the Oli government signed but also in the signing of cooperation agreement on OBOR.

Towards implementation of OBOR

Nepal has been a founding member of China-led Asian Infrastructure Investment Bank (AIIB) that started its operation in January 2016.  As AIIB is to function as the funding body of OBOR, this is important factor towards implementation of OBOR for Nepal. China also took the initiative of forming Nepal Chapter of the Belt and Road International Trade and Investment Platform. It was launched in Kathmandu in November 2016 as a private sector-led initiative to promote OBOR in Nepal.

Similarly, the first edition of the One Belt One Road Nepal Conference 2017 was organized in Kathmandu two months ago. The conference that saw the participation of major think-tanks and government representatives from China and Nepal concluded with an 8-point declaration that urged the governments of Nepal and China to establish a better connectivity between the two countries through China Nepal Economic Corridor. Li Tao, Executive Director of South Asia Studies at Sichuan University who was one of the keynote speakers at the conference said, ‘Nepal is a gateway for China to enter the South Asia and hence we cannot undermine the role of Nepal in fulfilling the core motive of One Belt One Road initiative. OBOR goal is to connect governments, infrastructure and people.’

China has also sent some high level delegations to Kathmandu in recent months to seek a positive response to its OBOR proposal. Chinese Defence Minister is slated to be in Kathmandu when Nepal’s PM will be visiting Beijing. It shows that China is serious about Nepal’s involvement on its OBOR project and is thus putting a lot of pressure directly and indirectly on Nepal to ensure its participation in the project. China’s logic for Nepal is that the tiny Himalayan nation can evolve as a dynamic bridge between China and the entire South Asian region by means of OBOR. Nepal, China thinks, can develop drastically by taking advantage of the arrangement.

From Yam to Bridge?

Nepal has traditionally been portrayed as a yam between two boulders referring to its geopolitical positioning between two giants of Asia: India and China. In recent years though, some substantial discussions have been held in the media and academia on the possibility of making Nepal a dynamic bridge between them.

With presence of very tall mountain terrains along the Chinese borders, land-locked Nepal has easy access to the outer world only via the Indian soil. Taking benefit of this geographical disadvantage of Nepal, India has muddled the internal politics of Nepal so exhaustively that most of the Nepalese political leaders have already lost their confidence that they can decide on anything of their national significance on their own. When Nepal tries to exercise its sovereign power in anything India does not like, the worst consequences would be something like the border blockades, which Nepal has already experienced for thrice in the last four decades, or the change of the coalition in Kathmandu when possible. Though there is a deep anti-India sentiment among the people and even most of the political leaders are unhappy with what India has been doing, the leaders in Nepal have not been able to get unified for the sake of their national interests because they are fine with India when it fulfils their personal and partisan interests.

In the recent years, China too has expanded its presence in Kathmandu in different ways. It has also conveyed through various diplomatic channels that it will not remain silent as it used to be in Nepal. China’s foreign policy to Nepal was previously guided by Nepal’s view towards One-China policy as Nepal shares its border with its Tibet Autonomous Region (TAR). Though Tibet is still a very sensitive concern for China in relation to Nepal, OBOR initiative has been another important factor in shaping China-Nepal relations now. China wants to start a historical presence not only in Nepal but also in the entire South Asia making Nepal its gateway now. Through Nepal’s participation in AIIB and OBOR, this is how China wants to kill two birds with a stone. Before focusing on how Nepal can benefit from OBOR, let me briefly put what China is aiming for.

As OBOR is a gigantic project that aims to historically connect more than a hundred countries, it has huge implications in difference spheres. Though China has been focusing on the aspects of connectivity and trade, it is going to work as a key factor to influence its foreign policy. It is also important to note that a major element to shape China’s foreign policy is its economic strategy. Through a better connectivity, thus, China is willing to take its international trade and economic growth to a new height.

China’s another problem is that it feels encircled by the United States in Asia. By means of economic and connectivity means, it wants to make the United States’ usual allies closer to itself. It has already been able to gather support of Australia, the UK, South Korea and India for their participation in AIIB. It is only Japan among the major US allies in Asia that has declined the concept of AIIB. By means of economic and connectivity diplomacy, China is trying to extend wider influence around the globe for shaping a new world order with its presence in the center.

On Nepal’s part, connectivity itself is a major benefit. Being a small and deprived state, it is not easy for Nepal to open railway and road links to China due to the presence of high mountains along the border. In the context that Nepal is India-locked in practical terms and it has experienced pathetic situations due to the same fact in the past, it is very important for Nepal to have better connections to the outer world via non-Indian soil. It will not only help decrease Nepal’s dependence on India, but also create a ground for Nepal’s balanced relations with both neighbours.

Similarly, as Nepal has already signed a trade and transit treaty with China, it is very important that there is better land connectivity between these countries for enhancing their cross-border trade. A better connection will also lure more Chinese investment in Nepal. It is remarkable to note here that it was only from the Chinese investors that Nepal in Investment Summit 2017 got investment commitment of USD 8.3 bn, out of a total commitment of USD 13.52 bn. This makes the relevance of Nepal’s better connectivity with China stronger.

Another advantage that Nepal can secure through better connectivity with China is increased presence of Chinese tourists in Nepal. According to China Tourism Research Institute, 120 million Chinese tourists visited foreign lands in 2015, while as per Nepal Government’s data the number of Chinese tourists visiting Nepal in the same year was only 67,000. Nepal being extraordinarily beautiful neighbour and birthplace of Lord Buddha, who is followed by 244 millions of Chinese Buddhists, this number is too insignificant. More importantly, more than 90% of the total population of Tibet is Buddhists. A better land connection will bring the cross-border communities closer and can increase Chinese tourists and pilgrims in Nepal.

Nepal’s better connectivity with China will also be beneficial for India. Due to border disputes between China and India in various border points, these countries have not been able to create effective land routes for mutual trade. As China has long been talking about Nepal as a potential gateway of China to South Asia, including India, it is a better option for India as well. This is why the 8-point declaration of Kathmandu OBOR Summit asked for ‘active participation of China and India for turning the concept of trilateral cooperation into reality.’ Only if China, Nepal and India can honestly work on this cooperation concept and get a way through, Nepal can be a dynamic bridge between the two Asian giants, and take benefit of it.

India as a major obstacle

India itself has not categorically denied its participation on OBOR initiative. It has rather asked for clarities on its provisions. The main reason why India is much annoyed recently with China about its OBOR initiative is that $46 billion China-Pakistan Economic Corridor (CPEC) is passing through Pakistan-occupied Kashmir, which is in Indian perception a challenge to its sovereignty.

In addition, India considers China as its rival Asian power. It is thus very likely for India to respond to any initiative put forward by China sensitively. Unless India itself is confident about the consequences of OBOR and decides about joining it, it does not want a neighboring country like Nepal, which India inappropriately considers its special sphere of influence, to put hand in hand with China on this. India has always been sensitive towards Nepal’s tilt towards China. This OBOR has now added further pressure on India since it understands that the consequent better connectivity of Nepal with China will no longer allow India to have highhandedness in Nepal’s internal affairs. Nepal is thus not going to get support from India in its wiliness to join OBOR unless India itself decides to be a part of it. This is the ‘geopolitical complexity’ that Minister Mahat was hinting at during the OBOR conference in Kathmandu. And, this is the major obstacle for PM Prachanda in his willingness to join OBOR project.

Prachanda’s upcoming China Visit

Prime Minister Pushpa Kamal Dahal Prachanda is set to visit China to participate in the BFA Annual Conference which is taking place in Hainnan Province from March 26.

However, Boao Conference is not the main priority for him. Rather, he wants to visit the northern neighbour to nullify the accusation that he is tilted more towards India. It appears that wants to visit Beijing not to ease the process of OBOR or with the intent of signing the agreement itself. Also because Prachanda-led coalition was facilitated in the active involvement of India, it is less likely that Prachanda will dare to go against India’s will on OBOR. This indicates that Prachanda is not going to Beijing to concretize the OBOR deal. Instead, as he has also been invited to participate in Beijing OBOR Forum in coming May, he wants to visit China now so that it will be easier for him to escape the Forum, in which he would have stronger pressure to sign the deal.

Even if Prachanda is in mood to sign some significant deals with China, including OBOR, during this visit, the date he has chosen seems to be wrong. When he will reach China as per his announced program, his counterpart Li Keqiang will already have left Beijing for a week-long-state visit of Australia and New Zealand. Prachanda will thus miss the opportunity of signing any deal with him this time. It is less likely that a project of higher prominence like OBOR will be inked by authorities in lower levels. There is, however, a thin possibility of that Prachanda will be able to see Chinese Premier Li in Beijing if he decides to fly to Beijing a couple of days before the announced date. This will depend on Chinese willingness, Li’s availability and China’s impression on what Nepal is proposing to do during this visit. The level of importance he will achieve in Beijing will depend on Chinese understanding of Nepal’s preparations and willingness to sign new deals and implement the older ones. For further clarity on this, we will have to wait and see.

Based in Brisbane, Bikram Timalsina holds a Master of International Studies from University of Queensland.

One thought on “Nepal’s Catch-22 over OBOR initiative and Prachanda’s upcoming China Visit

  1. Dr. Umesh Kumar Bhattarai

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    OBOR initiative is a noble idea- how to explore to take it beyond Nepal needs comprehensive thought and viable strategy. India is the main obstruction to it. How China- Nepal manage is a burning question of the day. A careful brain storming is required.

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