Xi Jinping meeting with Nepalese PM Oli in Beijing

Will India agree to cooperate with China in Nepal’s development?

by Kamal Dev Bhattarai

While Nepal’s Foreign Minister Pradeep Gyawali was in China from April 16-21, Chinese Foreign Minister Wang Yi asked India to be a part of new development projects in Nepal. “Whether it’s China or India, our two countries shall be happy to see Nepal’s new development after its political transition,” Wang said.

China wants to invest in big connectivity projects in Nepal but prefers to bring its Asian competitor, India, on board. Some Nepali and Chinese scholars see this as an opportunity for trilateral cooperation between Nepal, India, and China, but Indian policymakers and academics have not shown much interest.

Chinese engagement in Nepal is sharply increasing with new areas of cooperation, making India uncomfortable. India views Nepal as its traditional sphere of influence, and wants to contain Chinese influence. Thus New Delhi is rejecting the proposal for trilateral cooperation, originally floated by China and later backed by some academics and political leaders in Nepal.

In November 2016, during the BRICS summit in Goa, India, there was an unplanned meeting between then-Prime Minister of Nepal Pushpa Kamal Dahal, Indian Prime Minister Narendra Modi, and Chinese President Xi Jinping. When the meeting was publicized as the beginning of trilateral cooperation, the Indian Ministry of External Affairs was very quick to say that this was not a trilateral meeting, more evidence that India is not in favor of trilateral cooperation.

After creating positive vibes in Nepal-India relations, Nepal’s Prime Minister K.P. Sharma Oli is now investing his time and energy in deepening ties with China, which is being keenly observed across the political and diplomatic arena.

Under the previous Oli government, Nepal’s relationship with India hit a low in 2015. Now newly installed as prime minister once again, Oli paid an official visit to India from April 6-8, and returned from Nepal’s southern neighbor saying that relations are back on track and “misunderstandings” have been cleared. Oli has already made it clear that a “balanced” relationship with India and China, and cordial relations with all countries, will be the cornerstone of his foreign policy, with the highest priority given to economic diplomacy. More precisely, Oli wants to change the old pattern of a heavy economic dependence on India by expanding large-scale ties with China.

While maintaining a good relationship with India, Oli plans to diversify the areas for and scope of engagement with China. China, meanwhile, is keen to increase its economic, military, and strategic influence in Nepal without direct confrontation with India. The first priority of China is to forge trilateral cooperation among Nepal, India, and China, but India has not shown any interest thus far. If trilateral cooperation is not possible, China wants to gradually enhance its presence in Nepal without upsetting India, as Beijing is doing in other South Asian countries. With Nepal’s left alliance government and Oli as prime minister, China believes that it is a fertile time to make further inroads in Nepal.

To make preparations for Oli’s upcoming visit, Foreign Minister Pradeep Gyawali visited China in the third week of April, where he held high-level talks on wide-range of bilateral issues. The outcome of Gyawali’s visit to China provides a tentative picture of the future direction of Nepal-China relations under the Oli government. Oli, who visited China in March 2016 as a prime minister, signed some “historic agreements” including a trade and transit agreement that, at least in principle, ends India’s monopoly over Nepal’s supply system. However, much needs to be done and it will take a long time to truly decrease dependence with India.

After Oli’s 2015 stint in office, the two succeeding governments, led by Communist Party of Nepal (Maoist Center) Chairman Pushpa Kamal Dahal and Nepali Congress President Sher Bahadur Deuba, were accused of not making genuine efforts to implement past agreements reached with China. As a signatory of those agreements and given his public recommitments to them during the 2017 campaign, Oli is under pressure to act swiftly to implement past deals. Now, both China and Nepal seem fully committed to implement the agreements and explore new avenues of cooperation.

Finalizing the protocol for the trade and transit agreement seems to be the first priority of both governments. There have been some technical preparations at the bureaucratic level but the protocol has not been finalized. Once it is finalized, Nepal, a land-locked country, could use Chinese ports and seas for the export and imports of goods, although it is unclear how feasible it will be to use Chinese routes in terms of cost and distance. Currently, Nepal uses Indian ports and cities for exports and imports. The border blockade of 2015 taught Nepal the lesson that total dependence on any particular country has its consequences, and thus trade and transit facilities must be diversified.

During Gyawali’s visit to China, both sides discussed in detail finalizing the protocol of the trade and transit treaty. Addressing a joint press conference after meeting his Chinese counterpart Wang Yi on April 18, Gyawali said, “We exchanged our views on the draft protocol to the Transit Transport Agreement and agreed to intensify negotiations in the coming days for its early finalization.”

Wang also said that the two foreign ministers had discussed trade, transit, and connectivity issues. “We have also agreed to develop the transit and connectivity between our two countries including better services of the ports, and the repair and opening of two important roads — the Arniko Highway and Syafrubesi-Rasuwagadhi Highway — and we will make sure that we will have greater cooperation in civil aviation as well,” Wang said. “We have agreed to expedite the process regarding the agreements on utilisation of existing highways of Tibet for cargo transport for Nepal and transit transportation.”

When it comes to transit, a Nepal-China railway link has been much discussed in the national and international arena in the last three years. In his recent visit to India, Oli signed an agreement on expanding railway links between Kathmandu and Raxual in India; many took this agreement as India’s countermove to the proposed Chinese railway link.

Gyawali said in the press conference that he and Wang “discussed about the early conduct of feasibility study and preparation of DPR of Nepal-China Cross Border Railway line stretching from Keyrong to Kathmandu and from Kathmandu to Pokhara and Lumbini.” India, through various formal and informal channels, is opposing the expansion of Chinese railway links to Lumbini, close to the Nepal-India border, saying that this would affect its security interests.

During last year’s campaign, Oli voiced his ambition to link Chinese railways to Nepal and now he is in a position to deliver on his promises. The question is whether India or China will deliver first when it comes providing a railway link with Nepal.

China and Nepal are also looking to finalize projects under China’s Belt and Road Initiative (BRI). In May 2017, Nepal and China signed a framework agreement on the BRI and now the onus lies on Nepal to select the projects under the BRI framework. China is growing impatient over Nepal’s foot-dragging. Nepal and China are expected to sign some projects under the BRI during Oli’s visit to China.

Along with implementing connectivity projects, Nepal is asking China to open more border crossings. Though both countries are talking about broader connectivity, China has opened very few border points. The Tatopani crossing, the oldest and biggest trading point between the two countries, has been closed for three years.

China and Nepal are also exploring the possibility of a free trade agreement (FTA). Nepal, however, is of the view that such an agreement should be signed on the condition of bringing Chinese investment and enhanced connectivity. China is also pressing Nepal to sign a Peace and Friendship Treaty and mutual legal assistance treaty.

Some areas of cooperation between Nepal and China are already seeing progress. Some China-funded projects such as constructing Pokhara International Airport and the Kathmandu Ring Road expansion are underway. Chinese investment in various sectors is increasing, motivating India to increase the amount of its assistance to Nepal in its 2018-2019 budget and work to speed up projects in Nepal.

Chinese tourists have also noticeably increased. The number of Chinese tourists visiting Nepal overtook those from India during the first quarter of 2018 for the first time, Xinhua News Agency said, citing data provided by the Department of Immigration. According to the news report, Nepal received a total of 36,384 Chinese tourists from January to March against the arrival of 34,133 Indians during the same period.

Even cooperation between the Nepal Army and People’s Liberation Army of China is on the rise, after their first joint military exercise last year. The number of high-level visits between the two countries has sharply increased, with 40 such visits in the last six years. However, Chinese President Xi Jinping has not yet visited Nepal.

As Oli prepares to deepen ties with China, the domestic atmosphere is also very favourable. There is a sort of consensus among political parties that agreements signed with China must be implemented. Similarly, mainstream media and public intellectuals are overwhelmingly positive about China and the implementation of agreed-upon projects. Mainstream media outlets often write news and editorials asking the government to take serious steps to take benefit from China’s BRI projects.

While China is perceived as a trusted neighbor, agreements, treaties, and conventions with India are greeted with suspicion. India’s failure to complete past projects on time has created frustrations and there are hopes that China-funded projects will be completed more quickly.

China’s noninterference policy seems to have played a vital role in creating positive public opinion toward China. During each and every high-level visit, China reiterates its support for the independence, sovereignty, and territorial integrity of Nepal, pledging that Beijing will not interfere in Nepal’s internal affairs.

By contrast, there are widespread perceptions that India interferes in Nepal’s politics. In 2015, when India objected to Nepal’s constitution and exerted pressure for Nepal to accommodate the voices of Madhesi people, China welcomed the promulgation of the constitution in Nepal, lauding it as a historic progress.

With a sizable majority in the legislature and public support on his side, the Oli government will be empowered to implement the agreements reached with China. Oli is expecting huge economic support from China to fulfill his domestic commitment to stability and development.