At a time when American President Donald Trump is upending the post-war global order, the rest of the world is forced to consider political and economic realignment. In this context, the Nepali Prime Minister KP Oli’s recent visit to China is remarkable not only nationally but also globally and regionally.
The global context first. Mr. Trump has pushed South East Asian countries to China’s embrace by pulling America out of the proposed 12-country Transpacific Partnership Agreement. He pushed European countries and China into the same side by abandoning the Paris climate agreement and slapping tariffs on steel, aluminum and other imports. Such economic necessity is bound to generate a new political alliance among countries that was deemed impossible before Mr. Trump’s rise to power.
Regionally, China has been pushing hard to expand its sphere of influence through, among other things, trade and the One Belt One Road infrastructure initiative. India has been desperately trying to limit Chinese influence in South Asia.
Nepal sits on these colliding fault lines. Mr. Oli’s China visit has taken place in such a delicate time of change. His visit and the various agreements signed in his presence in Beijing suggest that Nepal has inched away from the US-Indian regional orbit and into the Chinese orbit. It has significant impact for Nepal nationally as well.
Two weeks ago, a formerly highly placed official had given me a discouraging prognosis about the Oli government’s direction of travel, and in my previous article, I reflected his sentiments. However, after Mr. Oli’s China visit, it appears that things are not so pessimistic after all if action follows the symbol and word.
During the visit, Mr. Oli met with the Chinese President Xi Jinping and his counterpart Li Keqiang in a spirit of warm friendship. The two sides also signed 22 agreements and understandings, 14 between two governments and eight between the two private sectors.
Among them, the most remarkable was Mr. Oli’s pet project: Nepal-China railway link, connecting Kerung and Kathmandu. It is expected that the project will be completed within seven years. This particular project invited serious discussion and difference in Kathmandu.
For instance, the former finance minister, Ram Sharan Mahat, questioned the wisdom of this project in view of its cost and utility vis-a-vis road and other projects. Certainly, from a purely economic standpoint, the geographical difficulties will make the railway costly to make and the distance from the economic hubs of China will make transportation uncompetitive compared to India.
I don’t have concrete data or a crystal ball to say whether this project makes economic sense. I agree with the points Mr. Mahat has made about the cost and competitiveness. However, I also know that many a time, supply creates its own demand, as the economist John-Baptiste Say has said. If the trade overland between China and Nepal increases, the volume could bring down the cost.
But the rail project is important in a political sense. It will somewhat reduce Nepal’s total reliance on India as the main supplier of many goods and sole transit country to and from third countries. This will mitigate the impact of the kind of economic blockades we have faced in the past if they are ever repeated.
Other agreements are important in their own right. It is good news that the Miteri Bridge, destroyed by the 2015 earthquake, would be rebuilt and another bridge will be built in Rasuwagadhi. They will restore the lost and create a new connectivity between the two abutting countries. Besides, the press release also promises early conclusion of the Protocol to the Agreement on Transit and Transport, which
But the reconstruction of the destroyed schools and the Nuwakot Palace, though important, might be viewed as Chinese aid being sprinkled for maximum political but minimum economic advantage for Beijing and the ruling communist party in Nepal.
The agreements between the private sectors of the two countries heavily focused on constructing hydro-power projects, which is welcome. Even though Nepal has the second highest theoretical hydro-power production potential in the world, after Brazil, we still rely on India and thermal power to meet our shortages and still cannot avoid brownouts and blackouts in the lean season when water flow and power production dip.
These agreements are important not only they help Nepal build its capacity, they are important in another significant context as well: They will motivate India to abandon its policy of making commitments and holding projects for years without implementing them. This tendency had started with the Kohalpur-Banbasa part of the East-West Highway and has continued with the Hulaki Roads, hydropower projects, and the like.
I might be wrong to think so, but I always thought the commitment made by India during Mr. Oli’s visit to New Delhi and Indian Prime Minister Narendra Modi’s Kathmandu visit to link Kathmandu to the Indian railway network would not come to fruition without the Kerung-Kathmandu link promised by Beijing.
On a broader level, the presence of China and India in some of the same sectors will set off a virtuous cycle for Nepal’s progress. If China keeps its promise this time, India will keep its. Similarly, if India keeps its promise, it will prompt China to follow suit as well, into a virtuous cycle.
Unfortunately, though, the implementation aspect has not always been encouraging. Though bilateral mechanisms have been established now with China and previously with India to monitor progress, there must first be progress to monitor. Besides, the virtuous cycle, if it comes into being, could make Nepal complacent and more reliant on its neighbors than on its own creativity and resources for respectable development.
On the whole, Prime Minister Oli’s China has been positive and encouraging at the agreement and symbolic level. Let us hope the implementation aspect would also move forward smoothly. While I don’t doubt the strong relations between Nepal and China for the good visit, the US President Trump’s upending of the post-war global order did contribute to make China Beijing more generous than before.