Nepal’s Chinese conundrum: The imbalance and debt trap

By Sumit Kumar Singh

New Delhi, July 6 (SocialNews.XYZ) China's cheap loans to Nepal in the garb of infrastructure development to facilitate trade will lead to another debt trap, concerned Indian government sources have said.

India is closely watching the developments in the neighbourhood and how China is allegedly entrapping Nepal with an eye to expand its influence in the Himalayan nation.

Last year news reports revealed that China will occupy the immensely profitable port of Mombasa in Kenya. Beijing had lent huge sums to the development of Kenya's rail network, which the African nation is unable to repay. Not only this, the Nairobi inland container depot is under threat of a Chinese takeover as well.

In our neighbourhood, China adopted a similar modus operandi when Sri Lanka was forced to hand over the port of Hambantota to China on a 99-year lease due to non-payment of Chinese borrowings.

Pakistan too is not very optimistic about the China-Pakistan Economic Corridor project anymore.

Debt burden is increasing to unbearable levels and so is the repayment pressure on Pakistan. And the benefits from these infrastructure projects are very meagre and uncertain.

So, the question arises, are China's cheap loans to poor nations such as Nepal, in garb of infrastructure development to facilitate trade to give a development boost or will lead to another debt trap? The answer to which many countries, paying a heavy price, know too well but perhaps Nepal's political leadership is unaware of the cost.

Debt-trap Diplomacy

"Before we go further it is important to understand Chinese debt-trap diplomacy," said a top government officer. The officer elaborated that poorer nations are lured by offers of cheap loans from China for transformative infrastructure projects.

Such as one presently proposed by China to Nepal.

"Then, if those countries cannot keep up with their repayments, Beijing may demand concessions or other advantages in exchange for debt relief," the officer explained.

This process is known as the diplomatic debt trap.

The development project at Hambantota port in Sri Lanka serves as a cautionary tale for anyone who thinks that China's support for their infrastructure development comes with no cost.

According to research recently published by the Kiel Institute for the World Economy, there are seven countries in the world whose external loan debt to China surpasses 25 per cent of their GDP.

Three -- Djibouti, Niger and the Republic of the Congo -- are located in Africa, while four -- Kyrgyzstan, Laos, Cambodia and the Maldives -- are in Asia.

Economics is only what the Dragon understands

Nepal's quest for an alternate transit country succeeded with the finalisation of the text for the Protocol of Transit Transport Agreement with China.

China formally agreed to provide seven transit points - four sea ports (Tianjin (Xingang), Shenzhen, Lianyungang, Zhanjiang) and three land ports (Lanzhou, Lhasa, Xigatse) - to Nepal for trade with third countries.

The protocol materialised after prolonged discussions following the signing of the transit transport agreement (TTA) during Prime Minister K.P. Sharma Oli's China visit in March 2016.

"The huge fanfare celebrations were undertaken by both the governments to mislead the innocent people of the higher Himalayas," said another government officer.

According to Chinese economists, the new route will benefit Nepal immensely, but strategic experts in other countries bleeding under Chinese debt differ.

Reality Check - India vis-a-vis the Dragon

An analysis of trade route options before Nepal indicates that the route through China both for third country and bilateral trade purposes could prove costlier than the route from India.

A senior IAS officer says that for example, a 20 feet container takes approximately 45 days (one way) to reach Birgunj, Nepal, from any Chinese port located on the eastern flank of China. Whereas the transit cargo for import from Kolkata or Haldia to Kathmandu via Birgunj takes 16 days and for export it takes around seven to eight days.

The transportation charges for the entire stretch from any Chinese port located in the south-eastern flank of China to Birgunj is "way higher than what is required to be paid while transporting the cargo through India".

Nepalese traders will have to pay a high price for transporting goods to Birgunj through Chinese ports.

Similarly imported goods from Lanzhou, a western industrial zone of China, take 35 days to reach Kathmandu via Kyirong, Tibet.

This distance of around 3,155 kms could be covered both by railways and roadways.

The four seaports allotted to Nepal by China are more than 4,000 kms away from Kathmandu.

Of the four seaports, Lianyungang, at a distance of 3,950 kms, could be the nearest seaport for Nepal.

According to the Chinese the limitations mentioned above will be overcome by the proposed Belt and Road Initiative railway.

"But this also seems to be another lie the Dragon nation wants to sell to Nepal. So, where is Belt and Road Initiative? It is important to carry out a brief analysis on so called BRI," the officer explained.

Nepal's BRI Railway

The proposed Belt and Road Initiative railway will link Kerung city in southern Tibet to Nepal's capital Kathmandu, entering the country in Rasuwa district and eventually going on to India.

But locals have dubbed it as the project "kagatko rail" (paper railway) and "sapanako rail" (dream railway) for obvious reasons.

China prepared for Nepal a pre-feasibility study of the railway and this report suggested it was an extremely hard project.

It is pertinent to note that the Chinese study has not been made public despite intense debate over what's happening.

It is assumed that the report lists "six extremes": including topography, weather, hydrology and tectonics that will make the project hugely challenging or probably impossible.

Reports also suggest that about 98 per cent of the railway on the Nepal side will be in tunnels and on bridges with about five stopovers.

Tracks will need to be built on steep terrain, as the railway climbs from an altitude of 1,400 metres in Kathmandu to about 4,000 metres in Tibet.

The proposed route also cuts through the mountains near a major fault line - where the Indian plate meets the Eurasian plate to form the Himalayas - so the area is very susceptible to earthquakes.

With all these limitations and challenges even the naive will understand that it is close to impossible to complete the Belt and Road Initiative dream.

Even if it is completed by 2022 it will not sustain.

"Who are you fooling China? Nepalese people are much smarter and intelligent to understand your trap," the officer said.

The Low Hanging Fruit

Nepal wants to become a vibrant power and achieve gross national happiness as Bhutan did, so for that it needs to connect with faster, cheaper and easily accessible routes and facilities offered by India and other multilateral arrangements in the region with its industrial and commercial hubs.

"Instead of always looking for alternatives, Nepal should focus on the low hanging fruit and continue its negotiations with India and Bangladesh both at the bilateral and multilateral levels for the well being and happiness of its people. India has always been a time tested partner of Nepal," said a senior IPS officer.

India's and China's relations are connected with the umbilical cord which China is trying to bite to fulfill its vested interests.

Remember "Beti aur Roti ka rishta" lasts longer than any other connection in the world.

Traditionally and culturally too Nepal is at variation with China. Hong Kong, Taiwan are existing examples.

(Sumit Kumar Singh can be reached at sumit.k@ians.in)

Source: IANS