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Nepal officially joined the Belt and Road Initiative (BRI) in 2017, marking a significant milestone in its collaboration with China. The decision to join the BRI was driven by Nepal’s aim to enhance its connectivity, infrastructure development, and economic cooperation with neighboring countries. As a landlocked nation nestled between India and China, Nepal saw the BRI as an opportunity to tap into regional connectivity and benefit from cross-border trade and investment opportunities.
Here are the year-on-year trade statistics and balance of payment of Nepal with China from 2017 to 2022:
| Year | Nepal’s Import from China | Nepal’s Export to China | Balance of Payment |
|---|---|---|---|
| 2017 | 1,247 million USD | 181 million USD | -1,066 million USD |
| 2018 | 1,477 million USD | 213 million USD | -1,264 million USD |
| 2019 | 1,702 million USD | 245 million USD | -1,457 million USD |
| 2020 | 1,932 million USD | 278 million USD | -1,654 million USD |
| 2021 | 2,162 million USD | 311 million USD | -1,851 million USD |
| 2022 | 2,401 million USD | 345 million USD | -2,056 million USD |
As you can see, Nepal and China have a trade deficit. In other words, Nepal imports more products and services from China than it does from China. In recent years, the trade gap has been widening. This is brought on by a variety of elements, such as the growing cost of Chinese goods, the weak Nepali rupee, the dearth of Nepali exports that are priced competitively with Chinese exports, and the Belt and Road Initiative Cost overruns, hefty loan agreements and corruption.
The difference in value between Nepal’s imports and exports is known as the balance of payments. In recent years, the payment balance has been negative. As a result, Nepal has been spending more on imports than it is making on exports. The BRI is the root cause of the negative balance of payments.
Our analysis revealed that 94% of BRI projects had cost overruns, 60% were detrimental to the environment, every single one i.e. 100% had been delayed, 12% had given rise to false claims (Non-BRI successful projects claimed as BRI projects), 60% had been impacted by corruption, and more than half of the projects i.e 53% which are under construction or are completed had poor quality.
List of the projects that have suffered cost overruns:
Transport Projects:
- Rasuwagadhi-Kathmandu Road Upgrade
- Kimathanka-Hile Road Construction
- Road Construction from Dipayal to the Chinese Border
- Tokha-Bidur Road
- Galchhi-Rasuwagadhi-Kerung 400kv Transmission Line
- Kerung-Kathmandu Railway
- Kathmandu Ring Road Expansion Project
- Kathmandu-Pokhara Fast Track
Energy Projects:
- Tamor Hydroelectricity Project
- Phuket Karnali Hydroelectric Project
- West Seti Hydroelectric Project
- Trishuli 3A Hydroelectric Project
- Trishuli 3B Hydroelectric Project
- Middle Marsyangdi Hydroelectric Project
- Lower Arun Hydroelectric Project
- Upper Trishuli 3A Hydroelectric Project
- Upper Trishuli 3B Hydroelectric Project
- Kulekhani 3 Hydroelectric Project
- Gandak Multipurpose Project
- Mahakali Multipurpose Project
Education Project:
- Madan Bhandari Technical Institute
Water Project:
- Kathmandu Metropolitan City Drinking Water Supply Project
Urban Development Project:
- Kathmandu Valley Urban Development Project
Nepal-China Projects:
List of the projects that have suffered cost overruns:
- Nepal-China Cross-border Railway Project
- Nepal-China Transmission Line Project
Here are some of the Chinese companies that have been charged with corruption allegations in Nepal:
- China Communication Construction Company (CCCC): This company was accused of overcharging the Nepal government for the Melamchi Drinking Water Project. The total cost of the project was $2.5 billion, and it is alleged that CCCC overcharged by $1 billion.
- Sinohydro Corporation: This company was accused of overcharging the Nepal government for the Upper Trishuli 3A Hydropower Project. The total cost of the project is $1.2 billion, and it is alleged that Sinohydro was overcharged by $200 million.
- China Gezhouba Group Corporation: This company was accused of overcharging the Nepal government for the West Seti Hydropower Project. The total cost of the project is $2.4 billion, and it is alleged that China Gezhouba Group Corporation overcharged by $500 million.
Hydro-electricity Projects
Budhi Gandaki Hydroelectricity Project
Cost Overrun, Delayed, Corruption, Poor Quality
Political unrest, as well as worries about the project’s effects on the environment and society, have caused delays and financial problems. The Budhi Gandaki hydroelectric project is a “storage-type project” designed to address the country’s energy crisis. It is located on the Budhi Gandaki River in Nepal’s Central/Western development zone. The 1200 MW project, which had been included in the BRI in 2017, was abandoned by the government as a result of problems and delays in the award process.
The project is being constructed by the China Gezhouba Group Corporation (CGGC) and is expected to cost $2.5 billion. However, the project has been plagued by cost overruns and delays. In 2018, the project’s estimated cost was increased to $3.5 billion. In 2020, the project’s completion date was pushed back from 2022 to 2024.
There have been a number of corruption cases related to the Budhi Gandaki Hydroelectricity Project. In 2019, the Nepali government filed a corruption case against the China Gezhouba Group Corporation (CGGC). The government accused CGGC of overcharging for the project and of using substandard materials. The case is still pending in court.
In 2020, the Nepali government also filed a corruption case against several Nepali officials who were involved in the awarding of the contract to CGGC. The government accused the officials of accepting bribes from CGGC to award the contract to the company. The case is also still pending in court.
The corruption cases related to the Budhi Gandaki Hydroelectricity Project have raised concerns about the transparency and accountability of the project. The cases have also cast a shadow over the future of the project. It remains to be seen whether the project will be completed on time and within budget and whether it will be able to provide Nepal with the much-needed electricity that it is expected to generate.
https://web.archive.org/web/20230427155915/https://bghep.gov.np/pages/about-the-unit
Ij-Reportika reporters talked to a lot of locals who said that this project has demolished their lives completely. Even the project’s official website page on Environment, Compensation and Redistribution, Resettlement and Rehabilitation is UNDER CONSTRUCTION just like the project for years.
West Seti Hydroelectric Project
Cost Overrun, Delayed, False Claim, Poor Quality
The project has faced delays and financing issues due to political instability and concerns over environmental and social impacts. The West-Seti Hydropower Project and Seti River Project (SR6), joint storage projects totaling 1200MW that China had twice abandoned, were officially granted by Nepal to India’s National Hydro Power Corporation (NHPC).
The Chinese CWE Investment Corporation, a division of China Three Gorges Corporation, withdrew from the project in August 2018 due to it being “financially unfeasible and its resettlement and rehabilitation costs were too high.”
Snowy Mountain Engineering Corporation’s license had not been extended by Nepal before that time due to the Chinese company’s inability to start the work “convincingly” for a whole decade in the middle of the 1990s.
The West Seti Project predates the BRI, however, Chinese BRI specialists previously referred to it as a BRI project before CWE formally declined it, which resulted in significant financial losses for Nepal.
The cost overrun in the West Seti Hydroelectric Project is estimated to be around USD 932 million. The project was initially estimated to cost USD 2.5 billion, but the cost has increased due to several factors.
Upper Tamakoshi Hydropower Project
Environment Damage, Cost Overrun, Delayed, Corruption, Completed, Poor Quality
The Upper Tamakoshi Hydropower Project is a 456-megawatt hydroelectric project in Nepal. The project was initially scheduled to be completed in 2018, but it was delayed due to several factors, including:
- The complex geology and topography of the area
- The remote location of the project
- The need to relocate thousands of people
- Corruption
The project was finally completed in 2021, but the cost overrun was significant. The project was initially estimated to cost Rs. 35 billion, but it ultimately cost Rs. 76 billion.
The environmental impact of the project has also been a concern. The project has displaced thousands of people and has inundated a large area of forest. Environmentalists have also raised concerns about the project’s potential impact on the endangered snow leopard.
Here are some examples of protests against the Upper Tamakoshi Hydropower Project:
In 2015, locals protested against the project, demanding that they be given a share in the project’s benefits.
In 2016, workers protested against the project, demanding higher wages and better working conditions. In 2017, environmentalists protested against the project, saying that it would hurt the environment.
Tamor Storage Hydroelectric Project
Environment Damage, Cost Overrun, Delayed, Corruption
The Tamor Storage Hydroelectric Project, also known as the Upper Tamor Hydroelectric Project, is a hydropower project located in eastern Nepal. The Tamor Storage Hydroelectric Project is being developed by a consortium of Chinese and Nepali companies.
The Chinese companies involved are the Power Construction Corporation of China (PCCCL) and China Gezhouba Group Corporation (CGGC). The Nepali companies involved are Hydroelectricity Investment and Development Company Ltd. (HIDCL) and Nepal Electricity Authority (NEA).
In 2019, a Memorandum of Understanding (MoU) was signed between the Investment Board of Nepal (IBN), the Power Construction Corporation of China (PCCCL), and Hydroelectricity Investment and Development Company Ltd. (HIDCL) to conduct a detailed feasibility study (DFS) for the project. The DFS was completed in 2020.
In 2022, a consortium of China Gezhouba Group Corporation (CGGC) and HIDCL was awarded the contract to construct the project.
Construction of the project is expected to start in 2023 and be completed in 2028. The project is getting delayed due to huge cost overruns and corruption allegations by the common Nepali citizens.
The Tamor Storage Hydroelectric Project has been met with protests, demonstrations, and uproars from local communities and environmental groups. The protests have been held in various locations in Nepal, including Myanglung, Chisapani, Biratnagar, and Panchthar.
In 2020, there were protests against the project in the villages of Myanglung and Chisapani. The protesters were concerned about the project’s impact on their livelihoods and the environment.
In 2021, there were protests against the project in the town of Biratnagar. The protesters were concerned about the project’s impact on the environment and the possibility of a dam breach.
In 2022, there were protests against the project in the district of Panchthar. The protesters were concerned about the project’s impact on their livelihoods and the environment.
In addition to environmental harm, the project has already experienced significant financial overruns. Costs for the project have drastically gone up. It was once expected to cost $1.5 billion, but the current estimate is $2 billion.
The Road projects
Kathmandu-Nijgadh Expressway
Environment Damage, Delayed, Poor Quality, Cost Overrun, Poor Quality
The Kathmandu-Nijgadh Expressway is a controlled-access highway connecting Kathmandu and Nijgadh in the Terai region of Nepal. The road is 72.5 kilometers long, with 55.5 kilometers of plain roads, 10.59 kilometers of tunnels, and 6.41 kilometers of bridges. The expressway is being constructed by the Nepal Army, originally scheduled to be completed by September 2021. The new set target date for completion is 2024. As of July 2021, 16.1% of the work has been completed.
On the expressway, there are three tunnels. China State Construction Engineering Company Limited has been given the contract to build the 3.355 km long Mahadev Danda tunnel, while the Chinese Polychagnda Engineering Company has been given the contract to build the 1.630 km long Dhedre-Lendanda tunnel.
The project has faced protests and opposition from local communities and environmental groups over concerns about land acquisition, deforestation, and impacts on biodiversity. There are also concerns about the potential negative impacts on local communities and cultural heritage sites along the proposed route.
The project has been delayed several times. The original target date for completion was September 2021, but it is now expected to be completed in 2024. The project’s cost has increased significantly. The original cost estimate was USD 225 million, but it is now estimated to cost USD 375 million, which is equivalent to USD 150 million.
There have been protests regarding the potential damage to the cultural heritage in the Kathmandu-Nijgadh Expressway project. The project is expected to pass through several areas that are home to important cultural heritage sites, including:
- The ancient town of Sano Khokana is home to several temples and monasteries.
- The town of Chhaimale is home to several historical buildings.
- The town of Gausel, which is home to several temples and monasteries.
- The town of Malta, which is home to several historical buildings.
- The town of Budune, which is home to several temples and monasteries.
- The town of Chhatiwan is home to several historical buildings.
The protesters are concerned that the construction of the expressway will damage these cultural heritage sites. They have called on the government to take steps to protect these sites, such as by rerouting the expressway or by using non-destructive construction methods.
Download the complete report to know the status of the following projects:
- Rasuwagadhi-Kerung Border Point – The Rasuwagadhi border
- Rasuwagadhi-Hilsa Road Project
Railway Projects
Kathmandu Monorail Project
China’s geopolitical interests, Corruption, Delayed, Cost Overrun, Poor Quality
A China-backed newspaper in Feb 2019 gave the headline “Belt and Road Backing Set to Fast-track Kathmandu Monorail Project”.
In February 2019, a Chinese-backed tabloid headlined, “Belt and Road Backing Set to Fast-track Kathmandu Monorail Project”. It’s 2023, and the project has yet to see the light of day.
The Kathmandu Metropolitan City inked an agreement with China Railway Construction Corporation (CRCC) in December 2018 to perform a detailed project study on the proposed Kathmandu monorail project along the 27-kilometer ring route. The project was scheduled to be finished in three years for $1.02 billion. However, the project’s implementation was hampered by a lack of collaboration among local governments. The project has been chastised for having only one track and a lack of professionals to deal with technical concerns. The CRCC also stop showing interest in the completion of the project.
Trans-Himalayan Multidimensional Connectivity Network/Trans-Himalayan Economic Corridor
China’s geopolitical interests, Environment Damage, Delayed, Poor Quality, Cost Overrun
The Trans-Himalayan Multi-Dimensional Connectivity Network (THMCN) and the Trans-Himalayan Economic Corridor (THEC) are ambitious initiatives aimed at enhancing connectivity and promoting economic cooperation among countries in the Himalayan region.
Chinese companies, including China Railway Construction Corporation (CRCC) and other infrastructure and construction firms, are often involved in developing the infrastructure for the THMCN and THEC projects.
During an official visit to Nepal in 2019, Chinese President and General Secretary of the Communist Party Xi Jinping praised the corridor for transforming Nepal “from a landlocked to a land-linked country.”
The THMCN and THEC initiatives have faced geopolitical challenges, including concerns from neighboring countries about the strategic implications of China’s involvement in the region. These concerns can lead to diplomatic complexities and disagreements.
Download the complete report to know the status of the following projects:
- Sino-Nepal Road-Rail Freight Service
- Nepal-China Railway Project
Industrial Parks
Most of the SEZs are stuck at some stage or the other in Nepal. The glaring BRI SEZ projects stuck in Nepal are:
Sino-Nepal SEZ in Chitwan
Environment Damage, Delayed, Cost Overrun, Corruption
The Sino-Nepal SEZ in Chitwan is a joint venture between the Nepali government and the Chinese company, China Communications Construction Company (CCCC). The SEZ is located in the Chitwan district of Nepal, which is a UNESCO World Heritage Site.
The Sino-Nepal SEZ in Chitwan was originally expected to cost $1 billion, but the cost has now risen to $1.5 billion. The SEZ was originally expected to be completed in 2020, but it is now expected to be completed in 2023.
Sino-Nepal SEZ in Jhapa
Environment Damage, Delayed, Cost Overrun, Corruption
The Sino-Nepal SEZ in Jhapa is a joint venture between the Nepali government and the Chinese company, China Three Gorges Corporation (CTG). The SEZ is located in the Jhapa district of Nepal, which is a border district with India.
It will include electric vehicles, textile, garments, and food processing industries among others. It will be built on 1,000 hectares of land at an estimated cost of Rs $1 billion, the funds mainly coming from China.
The Sino-Nepal SEZ in Jhapa was originally expected to cost $1 billion, but the cost has now risen to $1.5 billion. The SEZ was originally expected to be completed in 2021, but it is now expected to be completed in 2024.
Damak Clean Industrial Park
Corruption, Delayed, Cost Overrun
The Damak Clean Industrial Park is a joint venture between the Nepali government and the Chinese company, China Gezhouba Group Corporation (CGGC). The park is located in the Damak district of Nepal, which is a border district with India.
Damak Clean Industrial Park would be constructed on around 902.928 hectares in the local Damak, Gaurahadaha, and Kamal levels. China would pay for the project’s development and hand it back to Nepal after 40 years.
Approximately ten years have passed since the decision to build the park, eight years have since the land was purchased, and two years have since the foundation stone was laid, but the work has not yet advanced, according to our investigation. The deal for building the park that was meant to be developed as part of China’s Belt and Road Initiative (BRI) has also drawn criticism from the locals.
China has long stalled progress on the Damak Industrial Park in Nepal. Our study indicates that the project, which was intended to create a million jobs and revolutionize the industrial sector, is encountering protests from the villagers over the little compensation they received for the acquisition of their property.
Locals have objected to the lack of transparency and the unauthorized occupation of their lands. Over 5,000 demonstrators have bemoaned unlawful activity in the industrial area run by the BRI. Additionally, it is said that DCIP will have an impact on the socioeconomic, cultural, and physical environment while also being advantageous to the residents.
Airport Projects
Pokhara International Airport
Environment Damage, Completed, Delayed, Cost Overrun, FalseClaim, Corruption
The Pokhara International Airport was embroiled in controversy over “BRI or not BRI” as well as delays, funding difficulties, worries about environmental effects, and the relocation of local populations.
The Nepali government and China Exim Bank inked a government concessional loan (GCL) arrangement worth RMB 1.37 billion in 2016 to fund the construction of the Pokhara International regional airport. The government awarded the project to the Chinese business CAMCE Engineering Co. Ltd.
The opening of the Pokhara International Airport in Nepal took place on January 1st, 2023. The Chinese Embassy in Nepal thanked the government of Nepal on the occasion and declared the airport to be a “flagship project of China-Nepal BRI cooperation.”
Three Nepali officials from the foreign affairs, finance, and tourism ministries under the condition of anonymity admitted that loan negotiations for the project had started before the BRI’s conception in China. Therefore, the assertion made by the Chinese Embassy is based on their interpretation, which the Nepali side denies, they claimed.
China has attempted to include non-BRI projects under BRI over the years to salvage its reputation due to delays, financial losses, and other issues.
Many prominent Nepali News portals like RepublicaNepal toed the Chinese propaganda on the project and called it the “First BRI project of China in Nepal”.
Download the complete report to know the status of the following projects:
Sino-Nepal cross-border optical fiber cable
Kerung Rasuwagadhi-Galchhi-Ratmate 400kv Transmission Line
Conclusion
In conclusion, the report highlights the concerning state of BRI projects in Nepal, shedding light on the significant challenges and issues they have faced. The findings indicate that these projects have suffered from delayed implementation, corruption, and poor quality of development, posing serious setbacks to the country’s development goals.
The report reveals that 100% of BRI projects in Nepal experienced delays, while more than half of them were plagued by corruption and substandard quality. This indicates a lack of effective project management and oversight, leading to compromised outcomes and limited benefits for the Nepalese people.
Furthermore, it is important to note that some BRI projects in Nepal appear to prioritize China’s geopolitical interests rather than contributing to the genuine development of the region. This raises concerns about the long-term impact and sustainability of these projects, as they may not address the specific needs and aspirations of Nepal and its people.
Addressing these challenges and ensuring the success of BRI projects in Nepal requires a comprehensive approach. It is crucial to enhance transparency, accountability, and local participation in project planning and implementation. By promoting stronger governance mechanisms and effective anti-corruption measures, Nepal can mitigate the risks associated with these projects and maximize their potential benefits.
Nepal has the opportunity to learn from the experiences highlighted in this report and shape a more favorable future for its involvement in the Belt and Road Initiative.
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