Chinese investment raises concerns in Nepal

Nepal’s strategic imperative to engage with China deeply vis-à-vis India is gradually causing trouble

In the first eight months of the fiscal year 2017/18, Chinese investors, nearly double the Indians, received investment approval from the Nepal government. Although in terms of the investment India covers the largest portion, with 1200 companies China surpasses India, which has 700 firms. India holds 35 percent of the total foreign investment in the country, and China and Hongkong have 26 and 11 percent respectively. Altogether 92 countries have investment in Nepal.

But recently the Nepal government seems to favor Chinese companies by granting them projects without competitive legal process. There is a legal provision in which the ministerial council has the discretion to fact-track the process.  The government right now is interested in granting contract directly to Chinese companies in projects such as the outer ring road of Kathmandu (to China Energy Engineering Corporation), for which dozens of other firms had applied, or to revive the contract with Gezhouba for the 1200 MW Budi Gandaki which was revoked by the Nepali Congress or the Deuba government.

Therefore, stakeholders in Nepal are gradually voicing their concerns  about this non-transparency trend which can increase the cost of projects and lead to financial irregularities. The government has 3 major motivating factors for this preference – strategic imperative to engage more with China vis-à-vis India as PM Oli has singed energy cooperation agreement with China, confidence in Chinese companies’ capacity to finance projects, and the high-priority given to these projects. In one case, apparently a free DPR offer by a Chinse firm cut the deal. Nevertheless, Nepal’s decision to give the Arun III to India also did not follow the standard procedure. But in any case,  it is in Nepal’s interest to  stick with legal process than ad-hoc decision makings. (Data Source: BBC Nepali)

10/02/2018

Nepal Matters for America

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