February 22, 2024, Thursday
Nepal 1:37:26 pm

‘China investing in Nepal to increase economic, political influence’

The Nepal Weekly
August 1, 2023

China encouraging its companies to invest abroad is driven by its ambition to expand the international market for its domestic firms as well as to realise Beijing’s larger strategic goal of expanding its economic and political influence, head of a private Nepalese think tank said on Friday.

Speaking at the launch of a book titled “China’s Emergence in Nepal’s Infrastructure: Status, Issues and Challenges” by the Centre for Social Inclusion and Federalism (CESIF) here, its Executive Chairperson Vijaya Lal Karna pointed out that Nepal was witnessing an increasing presence of Chinese companies and state-backed enterprises in the country’s infrastructure sector.

Former economic adviser to Prime Minister, Lal Shankar Ghimire, former Urban secretary of Nepal government Dipendra Nath Sharma, and senior journalist Ajaya Bhadra Khanal among others participated in the panel discussion at the programme chaired by Karna.

Chinese influence among Nepal’s communist parties has been a key driver of Chinese interest in infrastructure projects, particularly, where the interests of both parties intersect, said Amish Raj Mulmi, author of the book.

China has been Nepal’s oldest bilateral donor with USD 380.45 million in disbursement (grants and loans combined) between the years 2017- 2022.

“China’s inherent motive to encourage its companies to invest abroad is driven by its ambition to expand the international market for its domestic firms as well as to realise larger strategic aims to expand its economic and political influence,” said Karna.

“While China’s engagements in Nepal’s infrastructure are intended to address Nepal’s infrastructure gap, it is not uncommon to find Chinese engagement being driven by vested interests and collusion with Nepal’s political elite resulting in serious irregularisation in contract awards, project management, infrastructure governance mechanisms and violation of international integrity norms,” he pointed out.

 Although none of the projects under China’s Belt and Road (BRI) project has taken off in Nepal despite being a signatory member of the initiative in 2017, Nepal is witnessing an increasing presence of Chinese companies and state-backed companies in the infrastructure sector.

”A notable factor for the heightened Chinese engagement in Nepal’s infra has been the close political links that have developed between Nepali left parties and China after 2008 when Nepal was declared a republic,” according to the book.

“All big infrastructure projects since 2008 have been contracted to Chinese companies while the government in Nepal is headed by left leaders,” the book says. China has been investing heavily in various infrastructure projects in Nepal, leading to the Himalayan nation’s growing reliance on Chinese financing. China is the highest foreign investor in Nepal with total investment amounting to USD 1.6 billion so far, which equals to NRs. 21,660 crore. Nepal owes USD 287 million or 28.7 per cent of total external bilateral debt to China. However, 87 per cent of external debt is owed to multilateral donors such as the Asian Development Bank and the World Bank.