"China encourages Nepal to live luxuriously with it on loan", "alarm bell" for another debt trap

Beijing [China], August 10 : China has been consistently endeavouring to expand its influence in Nepal, analysts said amid fears that China aims to trap the Himalayan nation in a spiral of irrevocable debt without helping Nepal and to use its land. That is why China encourages Nepal to 'live luxuriously' with it 'on loan'.
In May 2017, Nepal and China signed a Memorandum of Understanding on the Belt and Road Initiative (or BRI) under the leadership of the then Nepal Prime Minister Pushpa Kamal Dahal. But it has not been revealed if any project agreement has been made under that.
The bilateral agreement was believed to bring rapid infrastructural development to the country. However, no tangible project was pursued. Five years have passed since the signing of the BRI, and not a single project has been finalised.
This is because of the agreed tradition that any agreement with China should be kept secret. There is also talk that a degree of agreement has been reached on projects such as the Kerung-Kathmandu Rail.
To discuss the prospective trade crisis related to BRI and China one should consider the types of conditions China puts forward to the countries to which it provides loans, said analyst Saroj Mishra writing for Khabarhub.
He said, when it comes to a loan, it is a matter of the right of the lender to give or not to give, but the right of the borrower to take or not to take or in which project to take it is a matter of right.
The Nepali people have the right to ask questions and demand transparency about the responsibility that the Nepali people have to bear for generations and the possibility of losing the sovereign rights of the country. If there is any mistake, it should be corrected to the point where it can be corrected.
Whether it is a grant or a loan, the proposal should be made after a detailed analysis of the proposed projects. Even when a person buys a house or a car, the cost and profit and loss of the investment should be analyzed.
Making a comparison with Sri Lanka, he said, whether the huge Hambantota port built by the country on loan was necessary or not for the country should have been determined by an objective analysis of the future benefits of the project.
If it were to be made through equity investment, even if the expected profit was not obtained from the seemingly intoxicating project, there would be only a certain amount of financial loss.
But when it was made by taking a loan, it was natural that the situation of not being able to pay the interest on the principal of the huge loan proved to be extremely difficult.
China, the creditor country, could not be unaware of the fact that the project was a white elephant, and did not carry any economic potential.
It is hard to believe that China, the shrewd merchant, did not understand this. The clauses cited at the beginning of this article indicate why China knowingly invested in a completely impossible project from a financial point of view.
Not only Hambantota, but three or four other strategically important projects, are likely to be owned by China. Not only Sri Lanka, but some countries in Africa are also entrapped in China's debt trap and have reached the point of losing their sovereign rights.
Similarly, Nepal, since the year 2000, has thought of building an international airport in Pokhara and commissioned JICA to study it. Accordingly, a study was submitted to the Government of Nepal after estimating the total cost of 85 million US dollars in two phases.
Chinese company CAMC Engineering increased it to USD 264 million in August 2013. After some time, the same Chinese company again showed a cost of USD 305 million.
Nepal has thought of building an international airport in Pokhara and commissioned JICA to study it.
Finally, in 2016, CAMC Engineering got the construction contract for 217 million dollars, including 216 million concessional loans from China Exim Bank, 25 per cent loans at no interest, and 75 per cent loans with two per cent interest.
The same company also became a contractor here! The first condition of China's concessional loan was that the contract for the project should be given to the Chinese company.
Speaking of the returns and financial feasibility of this project, the annual interest of a 25 billion loan comes to 37.5 million 1 every year, Nepal has to pay only that amount of interest, and the portion of the loan payment is separate.
Nepal's Pokhara airport is absolutely a white elephant and Nepal has to pay only about one million 14 thousand interest every day! With the devaluation of the Nepalese rupee, this amount increases.
Another project in Nepal, the Nagdhunga Tunnel Marg is being built with loan assistance from the Japanese government and has an interest rate of 0.01 per cent. But the interest rates on Chinese loans are 150 times higher than on Japanese loans. The interest that should be paid to China in two and a half days is enough to be paid to the Japanese in one year.
There is an option to get a loan for a development project at an interest rate of 0.01 per cent. A good lender won't give a loan if there is no financial viability, Mishra said.
The mentioned Pokhara airport project is technically not included in BRI. Yet, the Pokhara airport represents China's intentions, Khabarhub reported.
The projects coming up or coming up under the BRI may be 'tricky' and heady, but it might be argued that they are economically viable and profitable.
The interest rate of the multi-billion dollar loan project from the northern border of Pakistan to Gwadar port in Balochistan is almost 4 per cent and it is said that the condition of Pakistan is worse than that of Sri Lanka.
In addition to the economic aspect, there is a hidden strategic aspect in the big projects that are operated with Chinese cooperation.
Wherever China goes to work, it arranges to take all the manpower from its own country as far as possible and does all the work under its complete control and supervision.
For example, more than one-third of the workers in the construction of Nepal's fast track tunnel are Chinese nationals.
According to informal reports, the workers are sent abroad to work in any form of business contracts, grants, or loan assistance, selected from the Chinese People's Liberation Army (PLA) prisoners serving sentences.
The same model may have been applied in Nepal. It's simple - any work from the specified category can be done without question and there is absolutely no possibility of breach of confidentiality.
It has also been learned that China buries its workers secretly who die in accidents while working abroad.
Is there any guarantee that the tunnels, roads, or railway tracks built by China will not be equipped with state-of-the-art control mechanisms?
Aren't the above-mentioned reasons enough to demand that we should be careful while doing business with China, not just in BRI?