BRI: A Momentum Towards Development or A Debt Trap for Nepal?

02 December, 2021

Research Reports



The China’s Belt and Road Initiative is one of the rising economical reconfigurations in the World’s economy.The "Belt and Road Initiative (BRI)" was introduced by Chinese President Xi Jinping in 2013 with ambitions to establish a "Silk Road Economic Belt" and a "21st Century Maritime Silk Road.". “A strategy that aims at connecting Asia with Africa, Russia and Europe by means of land and maritime networks with a target of improving investment,infrastructure, regional integration, increasing trade and stimulating economic growth”(European Bank for Reconstruction and Development, n.d.).


“Aspiring at connecting Asia, Africa and Europe through energy and transportation infrastructure, trade, investment, education, tourism, and culture, the three chief operators of the initiative are security, market, and energy” (Nancy et al.,2019). These companies work together to provide a foundation of interconnected transportation routes and port services that improve trade and security while also assisting in market strategic penetration. Currently, the BRI appears to be a priority for the Chinese government in terms of developing successful foreign relations and policies, rather than just an economic endeavor.


This initiative is considered to be one of the most enthusiastic infrastructure projects that would ever be conceived. With these cogent opportunities Nepal could definitely not have remained phlegm. Nepal formally became part of BRI on May 12, 2017 after five years of establishment of BRI (Bhattarai, 2019), marking another important strand of the friendly relationship between two nations. Both Nepal and China have identified nine of the projects, that are-upgrading the Rasuwagadhi-Kathmandu road; Kimathanka-Hile road construction; road construction from Dipayal to the Chinese border; Tokha-Bidur road; Galchhi-Rasuwagadhi-Kerung 400kv transmission line; Kerung-Kathmandu rail; 762MW Tamor hydroelectricity project; 426MW Phuket Karnali hydroelectric project; and Madan Bhandari Technical Institute (Giri, 2021). With all of these projects ahead, the need of completing these projects needs to be the chief strategy to attract the capital and technology exigency.


Significance of BRI

Historically, Nepal and China have a record of bilateral exchanges and cooperation. The  establishment of a mechanism of bilateral coordination is pivotal to the Nepalese developmental context. “The country sits in a geo-strategically important position in the Himalayas between India and China, China being a rising power in the world and India a potential rising power” (Bishwakarma, 2018). Nepal being stuffed between these two powerful nations, it was important that there would be a paradigm transpose of baptism from land-locked to land-linked.


Because China views physical infrastructure as the first step toward integration and the construction of economic corridors in the twenty-first century, the BRI is critical to modernization. "China's international strategy includes, among other things, maintaining economic dominance, creating hard power, driving regional integration with Chinese features, and utilizing sharp power in addition to the more coercive and intrusive use of soft power" (The Economist, 2014). The BRI's major purpose is to shift China's strategic focus and resources to nations on its western border, such as Central Asia, West Asia, South Asia, and beyond, rather than waging direct and fierce wars with other major Asia-Pacific countries.


BRI being the most enthusiastic infrastructure project in history, it stands to bring out drastic changes in trade,connectivity and financial integration. “With China as its base, the BRI aims to create an integrated and wide network of regional facilities” (Yu, 2017) (cited in Bhattarai, 2019).One of the important paramount things that BRI holds is ‘economic globalization’. It brings the  world’s market system to be unified,open, balanced and rational. It is one of those umbrella dynamisms that spans multiple projects promoting the course of goods, investment and people. And that is exactly what brings the partnership under the BRI as one of the gateways for Nepal to enhance and achieve economic prosperity. Ultimately, reducing the economic dependency that Nepal has historically been a part of.


BRI’s major significance aims in achieving ‘international connectivity’. With the principle of WIN-WIN cooperation, BRI carries its purpose of connectivity of policies, infrastructure, trade, finance, and people upholding the spirit of sovereign equality of all countries. It corroborates the interests of all the nations, strengthening the cooperation and connectivity between nations. Connectivity is a major conundrum in the context of Nepal. The essence of connectivity remains inevitable in Nepal as the nation is disintegrating within itself because of the poor economic, social and technological development. Nepal being a landlocked country, it is essential that the country builds connection routes. And one of the connection routes is through the BRI that would help the nation to form, maintain and revolutionize the supply chain along with facilitating market liquidity.


Opportunities for Nepal

Nepal is a developing country, whose economy is interlinked with the Indian economy. Nepal’s dependency on the Indian economy can clearly be seen during the 2015 economic embargo. However, it was necessary for Nepal to diversify its link, reducing the dependency with India. As a consequence, the BRI provided Nepal with the ideal chance. BRI may be regarded as a significant prerequisite for bilateral advantage, and Nepal can directly profit from Chinese investment and Chinese tourism as a result of this program. The economies of the BRI account for one-third of global GDP and commerce, as well as nearly two-thirds of the global population. If the BRI projects succeed, they will help a large number of disadvantaged people and vast areas of the global economy, with significant positive spillover effects on global welfare.This would definitely help Nepal to grasp up the developmental opportunity leading to economic growth and prosperity for a long run. 


BRI’s one of the greatest opportunities for Nepal would be a shift from land-locked to land-linked. This initiative would assist Nepal to improve the trade and market connectivity. And one of the steps has already been taken during 2020 by Nepal and China, finalizing the text of the Protocol to Agreement on Transit Transport. Nepal now has access to seven of Chinese maritime ports as a result of this arrangement. This is an essential milestone towards Nepal’s transformation from a landlocked country to a land-linked country. Not only this, one of the major projects of BRI in Nepal accounts for “improving connectivity that covers key components including ports, roads, aviation and communications as part of the trans-Himalayan multi-way connectivity network” (Ministry of Foreign Affairs, 2018).Trans-Himalayan railway will be a transition in the development journey of the nation.


The more desirable connectivity via the railway may be an improvement catalyst for the nation. China has already signed an MoU on Cooperation withinside the Railway Project and the most important railway challenge it would account for is the Kathmandu-Kerung railway. Pre-feasibility study has already been completed and the study shows the account of vast difficulty in establishing the railway networks (Giri, 2019).The creation of the railway might provide Nepal a possibility to have a quick delivery of products in lots of folds, slicing the transit time and lowering the cost. Moreover, it's far a tradeoff of saving time and money, and intentionally improving the potential constructing of greater cross-border trades, boom in networks and investments with advanced boom withinside the monetary area of Nepal.Thereupon, Nepal desires to be critical sufficient to transport out of the fable global and get into truth to draw the possibility and investments to its sides. Only then the connectivity conundrum that Nepal has been going through seeing that many years may be transposed right into a tremendous developmental prosperity.


Good weather, eye-catching scenes, rivers, mountains, cultural and historical heritage sites, blend of different caste and religion and pilgrimage sites, facilities for adventurous activities are some of the factors  that attract tourists to Nepal. “China is not only the second largest trading partner of Nepal but also the second largest source of tourists. The Government of China has designated Nepal as one of the tourist destinations since 2001”(Bishwakarma,2017). On the event of ‘Silk Road Tourism among China and Nepal’ , coordinated by China National Tourist Office (CNTO) and Nepal-China Chamber of Commerce and Industry ,Chinese Ambassador to Nepal Yu Hong states “the Belt and Road Forum for International Cooperation would herald new prospects for development of Silk Road tourism in the world.” Likewise, Yang Tsom added, “China’s inbound and outbound tourism market is expected to rise with the implementation of One Belt and One Road strategy in the coming years. Silk Road tourism will contribute to strengthening tourism and connectivity between China and Nepal” (People’s Review,2017). Tourism as a form of Track II diplomacy that can foster dialogue between both countries and its people. Regarding infrastructure, Chinese investment is now moving towards hydropower projects, tourism, hospitals, academic institutions and telecom companies. These infrastructural development projects will enhance the connectivity reviving the tourism sector as an increased number of Chinese tourists have added the value of revenue to Nepal creating more employment opportunities.


The connectivity that BRI brings is not only limited to physical infrastructure. It also brings another advantageous facility in the field of academic platforms. Since Nepal joined BRI, more students are obtaining scholarships to attend Chinese universities. The scholarship quota for Nepal has risen (Giri, 2019). Not only in the field of scholarship, but BRI projects  include the opening up of language training courses within China as well as in Belt and Road countries that are meant to improve cross-cultural communication; the setting up of Confucius Institutes across Asia to promote Chinese culture; and the formation of various University Alliances and Consortiums. By offering the scholarship and training provision, BRI is also supporting Nepal in its social engineering. The BRI assists in the establishment of cooperation between universities of the two countries to produce skilled manpower who can work for the welfare of both countries. Education is thus imagined as a vehicle to promote mutual learning for improving the development of education at both country- and regional-level, to deepen cross-cultural understanding and bonds, and to cultivate talents and future leaders needed to advance the BRI. In other words, education and training are meant to develop the ‘soft infrastructure’ (Peters, 2019) that would hold together and sustain this ambitious vision.It brings hopes that BRI projects will contribute to Nepal’s lasting peace and stability through job-creation, and help u-turn the current underdevelopment by constructing mega projects under the framework of BRI. 


Hidden Debts of BRI

Everything has its positive and negative sides. So does BRI. BRI projects definitely bring a positive energy in the economical developmental sector of one's country. But its negative side holds upon the unclear planning of the project. There lies a skepticism of feasibility and benefits of some of the schemes that will further create a tribulation in the future for the nations under BRI. Nepal may face challenges after BRI in environmental protection, security, and employment. Moreover, Nepal being a landlocked country, it has limited geographical and natural resources creating the debt of double-edge effect on economic growth and value.


Another challenging prospect lies in security for Nepal. Security is a significant issue across the world, regionally just as universally. According to Legatum Prosperity Index 2021, Nepal lies in 114th rank in the prosperity index , with security in 94th position. Security challenges in Nepal would lie with major infrastructure projects where the certainty of social and  environmental risk would revolve along with the risk of corruption. A large-scale movement of individuals starting with one spot then onto the next can pose a security threat. Along with the development of infrastructure, trade, commerce and investment, the mobility of people will also increase, which will eventually create challenges to national security, employment and business. Amidst further ambiguous investors in the projects will actually hover on more security challenges for the nation. 


Another challenging prospect that Nepal may face is the manpower. Numerous nations require an active and eager offering market for financial backers and developers to guarantee that undertakings are executed seriously and proficiently. The absence of different bidders could mean an inadequate task. There needs to be a major concern in the sectoral area of the stable manpower for the proper operation of the projects. It is necessary that Nepal creates a pack of manpower that would directly help in the productivity of the projects.


Debt hangover is another major hidden debt issue for recipient countries like Nepal. Financing that is required for the projects may enlarge the debt to an unsustainable proposition (commonly known as ‘Debt Trap Diplomacy’). “A Center for Global Development policy paper (“Examining the Debt Implications of the Belt and Road Initiative from a Policy Perspective” (March 2018)) scrutinized the debt risk for 68 borrower countries and found that eight of them are at risk of debt distress” (Adhikari & Adhikari,2019). The major hidden debt factor is the level of debt required by some of the large BRI projects. This has provoked some occupant state run administrations to audit the BRI projects they are engaged with, fully intent on paying off their obligation of openness and reliance on China. With most BRI projects transcendently subsidized by China, chances related with the renminbi additionally should be considered. China has for some time been worried about the surge of assets from the country. This longing can possibly influence interests in the BRI if the renminbi is utilized to finance projects outside China(HSBC Global Asset Management, 2018).


The other debt that the BRI will definitely create is the ‘dependency’. The dependency might constraint Nepal’s foreign policy options. Nepal has historically relied on foreign direct investment and aid.And according to the Xinhua 2021 report, China has the highest share of Foreign Direct Investment in Nepal.  Assuming every one of the undertakings under BRI are by obligation then Nepal should assess the dangers of taking part in projects under the BRI. The major characteristics that Nepal accounts for are the high corruption rates and slow development in the economy. The inability to pay back loans can result in a crabbing economy leading to a loss of political power, and, in the catastrophic case, a loss of sovereignty that can actually be seen in countries like Pakistan, Tajikistan and so others.


Therefore, Nepal must calculate the price of engagement with the BRI. The BRI calls for an invitation of opportunities as well as challenges in environment protection and social order. The Nepal government must devise policies and plans to deal with it, while the policy makers should also keep in mind other consequences.



Nepal and China are close friends and good neighbours, sharing a historical friendship which has always remained cordial and trouble-free. For Nepal, BRI will be advantageous as it can bring huge Chinese investment that speeds up economic development. BRI offers a unique opportunity for both of our countries to explore and exploit vast potentials for development for shared prosperity.It is one of the most enthusiastic infrastructure projects that would ever be conceived The concept bridges the distance between nations as well as upholds the global economy.It is not only a gateway of establishing strong relations with China, but also one of the blueprint of connecting Nepal with other European, African and Asian countries. The birth of the transcontinental economic corridor holds the power to change the global landscape. Connectivity has emerged as a new dimension in China and Nepal relations. A strong mutual synchronization is necessary to achieve the goals of BRI. With strong policy coordination and reinforcement , both of these countries need to promote a deepening financial integration and build a pathway for innovation and promote the construction of a community of shared future for mankind. Therefore,Nepal ought to seek practical and sustainable policies to benefit from the BRI projects.




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