Competition Over Nepal

Located between India and China, Nepal has made its national strategy to maintain ties with both countries. While Nepal traditionally enjoyed a much closer relationship to India, the recent increase in Chinese foreign investment is seen by many in India as an attempt to draw Nepal into the Chinese sphere of influence.

The Chinese Belt and Road Initiative (BRI) has many analysts in India suspicious, as some believe that it is an attempt by China to encircle India, with heavy investment to nearly every nation surrounding India, from Pakistan to the Maldives. Critics of the Belt and Road Initiative allege that the infrastructure investments and loan deals are a Chinese attempt at debt diplomacy, which is where the Chinese leverage the extreme sums of debt owed to them to extract costly diplomatic, economic, or political concessions. One recent example is the Hambantota Port in Sri Lanka, who was pressured into signing it, along with 15,000 acres of surrounding land, over to China for 99 years.

Since the conception of the BRI, India has opposed it, warning the recipients of the dangers they’re facing by accepting these Chinese loans. While India has tried to counter the Chinese offers with their own investment, they have been unable to prevent many of the countries from taking Chinese money. While many of these nations historical had close relations with India, their more immediate neighbor compared to China, one of the strongest is the one between India and Nepal. Nepal’s armed forces are integrated into India’s, and India’s borders are open to Nepal in terms of travel, work, and trade.

As Nepal is located high in the Himalayan Mountains, infrastructure and connectivity can be exceptionally difficult. Nepal’s roads, winding along mountain sides, require constant maintenance. Shipping materials into the country and transporting them throughout can be incredibly expensive and reduces Nepal’s ability to undergo massive infrastructure projects.

There has been some controversy over India’s relationship with Nepal in the past. Some critics claim that India abuses its relationship to Nepal to keep it subservient, using economical and logistical barriers to prevent it from diversifying its economic ability. India demonstrated this dominance over Nepal with an economic blockade in 2015, which in turn provoked Nepal to sign a trade and transit treaty with China. Prime Minister Modi also went back a few promises he made to Nepal regarding the resolution of a few outstanding issues. No wonder then that Nepal is seeking alternatives to India.

Nepal has submitted a list of nine projects they wish to receive Chinese investment for; including three road projects, two hydroelectricity projects, and a cross-border railway and transmission line. As mentioned above, Nepal’s roads can be deadly, with over a thousand people dying in just the past five months. Nepal also seeks to boost its internal energy production to reduce its reliance on energy imports, more than half of which comes from India. The best way for Nepal to do this is to develop its hydropower production, and a three-day expo was held this past weekend to attract private and foreign investors to help Nepal utilize its massive potential. Showcasing their products and services at the expo were Indian and Chinese companies, along with various European nations, such as Germany and the UK.

Despite outside critics’ fears of Chinese debt-trap diplomacy, the mood in Nepal has been positive towards increasing ties with China. While China’s noninterference policy has helped create a positive public opinion, it may be the case that India’s actions have pushed Nepal towards China. India has had a long-standing issue with completing past projects on time, causing many to hope that the Chinese project will be finished on time. India also has a perception of interfering in Nepal’s politics and economy, with India’s objections to Nepal’s constitution in 2015 and the economic blockade still fresh in many people’s minds. While it may be unfair to paint all Chinese investment as nefarious, India should remain alert to the possibility of its neighbor accruing dangerous levels of debt to China. However, it is not enough to merely point out and identify flaws and risks, India must offer its own solutions to bring Nepal back to the table.