Economic Prospect of Belt and Road Initiatives in Nepal

Biranchi Poudyal1
Abstract
This paper attempts to explore global economic prospect of Belt and Road Initiative with
special focus on Nepal. The paper begins with the overall account of BRI and examines
how connectivity with China would help in prosperity for Nepal. Furthermore, the paper
discusses about funding modality as Kerung-Kathmandu railway under BRI and various
other dimensions of the construction. The paper concludes with some recommendations
regarding immediate requirements for Nepal that should be addressed via BRI.
Keywords: BRI, China, Nepal, Diplomacy, Economics, Railway, Prosperity
Introduction to BRI
In around 114 BCE, China’s imperial envoy Zhang Qian assisted the initiation of Silk
Road, a network of trade routes that connected China with Central Asia and the Arab
world(Zhang, 2013). The name gets derived from China’s most important exports—silk
and same route foster the progress of the entire region for centuries. Again in 2013,
China’s current president, Xi Jinping, envisioned re-establishing a modern version of
Silk Road that would mitigate the borders between China and Central Asia, West Asia,
and parts of South Asia.
So what exactly is Belt and Road initiative? Is it a labyrinth of railway tracks, roads,
and pipelines that links Asia with Europe? Or as claimed by many western Media,
Is it Beijing’s disguised strategy to tempt countries with investments and ensure the
paradigm shift to the multipolar world? In fact, Belt and Road initiative plan includes
physical connection, strategies, global economic prospects, and open new avenue for
exercising soft power. The old Silk Road was a chain of trader who used to exchange
goods along a corridor of trade as many of the high-value trade goods were transported
over vast distances – by pack animals and river craft. Those merchants never travelled
long on this “silk road” but functioned as a connecting node in the vast supply chain of
ancient Silk Road. Today instead of merchants and caravan we have upgraded business
firms and eager partner groups to make modern supply chain connecting cross-
1 Mr. Poudyal is a researcher in the field of international relation.

36Economic Prospect of Belt and Road Initiatives in Nepal
continental borders. It will speed up the development of an integrated Eurasian market
with its progressive influence on Africa and other neighbouring region.
Belt and Road initiative aims to construct a massive global platform for economic
collaboration, including policy coordination, free trade, commercial and financial
cooperation, along with socio-cultural partnership within the region (Simelane&Managa).
With six main economic corridors spreading over Eurasia, this initiative would redesign
the region’s substructure network, increase connectivity across the continent, and mend
some of the underdeveloped grounds along the way.
Economic Prospect of BRI
During the keynote speech at the opening ceremony of the BOAO Forum for Asia
annual conference, Chinese President Xi Jinping remarked that Belt and Road Initiative
(BRI) may be China’s initiation, but the whole world will share its opportunities and
outcomes (Reuters,2018). As a win-win initiation, BRI not only increases China’s
economic and political leverage but also benefits the entire globe. More than 60 nations,
with a combined GDP (Gross Domestic Product) of $21 trillion are standing on edge
to the BRIaction plan (Callahan, 2016). Though initiated by China, it’s a global plan—
actually inclusive—comprising about one-third of the world’s GDP, 63 percent of the
world’s population, three-quarters of energy resources, and trades almost half of the
goods that move around the world (HSBS, 2017). Xi further said, “We can make the
BRI the broadest platform for international cooperation in keeping with the trend of
economic globalization and to the greater benefit of all our peoples”(Xinhua, 2018).
While talking in the present context, China’s greatest achievement is not the BRI project
itself, but the way it names and interprets the project. History books have a collection
of similar projects initiated by the US and Japan but none has framed it as appealing as
China did by reviving its Silk Road narrative. Now, many nations within ‘historical silk
road’ mentally find themselves as already a part of this grand initiative, and the number of
countries also gets the inclination to join the wagon of new silk road because many others
have been part of it. Just the name, in part, minimizes huge expenses that would have cost
on the negotiation and diplomatic approach to bring some countries under this plan.
The enactment of the ‘Belt and Road’ initiative will result in a win-win situation for both
China and the global economy orbit. The action plan envisages the promotion of organized

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and free-flowing economic exchanges, proficient allocation of resources, and the deep
amalgamation of markets. For China, the project remains crucial as Beijing reforms its
economy, develops new growth engines, and cultivates new prospects of regional growth
(Cai, 2017). For the world, it will have extensive impacts on countries within ‘Belt and
Road, project, narrow development gaps and accelerates the process of regional integration.
Cumulative investment in infrastructure will open up new prospects for development in
‘Belt and Road’ regions. It can also encourage production and consumption, which of
course upsurge jobs and market demand around the globe. To fulfil BRI infrastructural
objectives, Beijing has established many new financial organizations, among which
three are active investors: the Asian Infrastructure Investment Banks (AIIB), the New
Development Banks, and the Silk Road Fund. Estimates indicate that BRI infrastructure
in Asia alone will cost US$1.7 trillion a year through 2030(Abida, 2018).
Development achieved
After a couple of yearsof headway, the BRI project has progressed several win-win
developments between China and other countries. Evidently, the projects in Sri Lanka,
Pakistan, and the rail route from China to Iran have already proven its global worth. The
Mombasa-Nairobi Standard Gauge Railway built by a Chinese company in Kenya has
contributed 1.5 percent of GDP growth in Kenya and created 46,000 jobs locally by
reducing the transport cost and travel time from Mombasa to Nairobi by half. With the
subcontract participation of around 300 local companies, this project has improved the
local economy(Cao, 2017).Similarly, the construction of Nehru Tim Jielu Mu Hydropower
Station was done by the joint engineering team of China Gezhouba Group (CGGC) and
China Machinery Engineering Corporation (CMEC) with an investment of around $4.3
billion. BRI plan has also connected Kazakhstan and the north-western Chinese Xinjiang
Uygur Independent Region. The overall trade between Xinjiang and Kazakhstan is more
than $11 billion annually, the digit that comprises 40 percent of China-Kazakhstan trade
in total. Since the U.S.’ Marshall Plan to rebuild post-WWII Europe it’s considered the
largest overseas spending project by any single country (Hu Liu& Yan, 2017).
In the case of Nepal
Today Nepal seeks to raise from the level of a least developed country to being a
middle-income country before 2030. The economic partnership under the BRI will
reduce Nepal’s geographical and economic dependency with its southern neighbour,

38Economic Prospect of Belt and Road Initiatives in Nepal
ultimately minimizing its future vulnerability. The revival of the Silk Route will boost
up connectivity, increase trade and investments increase the mobility of the people and
most significantly open up new economic opportunities mainly integrating trade and
investment in Eurasia. Nepal used thrives as one of the important root-link historic silk
road and its revival is expected to benefit the contemporary economy of Nepal.
The essence of connectivity remains inevitable in case of Nepal as the country
fragmented within itself because of poor infrastructure. According to the World Bank
study, Nepal needs infrastructure investment equivalent to 12 percent of GDP, which
amounts to nearly US$13–18 billion over a decade, to maintain the current pace of
economic growth (Dixit, 2017). It needs to spend 2.3 to 3.5 percent of annual GDP to
improve its connectivity, including strategic and local roads. The transportation sector
alone needs anywhere between US$3.7–5.5 billion in investment for new projects.
Amid such context, the Belt and Road Initiative project which exclusively centres
on mitigating the infrastructural gap can help achieve both the physical and financial
objectives of Nepal.It will have a revolutionary impact on the overall development of
the Himalayan economy and to take bilateral relations in a new height.
After ascending up to the position of the second-largest economy in 2012, China has
amplified the amount of foreign investment in Nepal. According to economic studies,
by the end of 2016, China had spent 160 billion US dollars as foreign investment.
It is much higher compared to past investments. Such investment indicates their
broader objective to extend this ambitious project all over the globe. In such case
it is common for Nepal to expect multiple benefits. The Chinese win-win initiative
not only increases Nepal’s opportunity to benefit from the economic development
taking place in China but also accumulates the future overflow of China’s prosperity.
Crucially, Belt and road plan offers a vast network of interconnectedness, which
will be a strong foundation for developing countries to move ahead. Besides, the
connectivity in every possible ways – physical, cultural, people to people and
technological- will be sufficient to reap benefit from the economic giant. Similarly,
Chinese government is constantly encouraging their domestic firms and interested
groups to invest in Silk Route countries. Trading firm and investment boards are
mushrooming in many BRI countries to ease interested parties for investment. And
those investors are exploring prospects in various areas like hydropower, tourism,
agro-economics, and another sector. (Sharma, T)

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However, BRI itself neither leads to automatic development nor improves the economic
condition of Nepal, it just provides the opportunity and rests depend on how the nation
and its policy response to this prospect. According to Dr. Rajiv Kumar Jha, professor
at Xi’an Medical University and the director of the institute “the door of the prosperity
of Nepal has opened as it has become a member of OBOR. He says – there are many
benefits that Nepal can acquire from its northern neighbour and world’s second-
largest economy, China, but a proper homework is required from the Nepalese side
to determine the extent of benefits that Nepal can draw. With connected roots, the
dragon train will inroad Nepali border with the flood of cheap products enough to wipe
domestic companies but what will Nepal send back in those trains? Thus Nepal needs
to seek a sustainable solution for this upcoming challenge.
Kerung-Kathmandu Railway and BRI
Till some years ago the development dream of the trans-Himalayan railway linking
Kerung-Kathmandu was like magic realism to Nepal. Now after the project is listed
as one under China’s BRI during the second Belt and Road Forum in Beijing in April,
there seems some glimpse of hope. Preliminary estimates put the cost of just the 170km
Kerung to Kathmandu section of the railway at 38 billion Yuan ($5.5 billion). Even
though only 30 percent of the length from Menbu to Kathmandu is in Nepal, it will
account for almost half the cost of the project because of the required tunnelling.
The government is hopeful that China will provide the necessary support for making
possible this ambitious project. However, the two countries are yet to finalize who
will fund the cost of the project. In this confusing phase, we can try different funding
modality like the Railway construction under the BRI project can be done with help
from the AIIB, Silk Road Fund and other international financial institutions. Likewise,
Nepal and China can also go for a cooperative project financing model as adopted by
Japan-India while constructing Ahmedabad-Mumbai high-speed railway. Of the total
estimated budget, China can provide 85 percent of the cost at.1 percent interest rate
with repayment period of 25 years. Till then the flow of trade and people’s movement
through train would give enough earning for Nepal to payback the debt. Or else
China has a history of providing grants to Nepal in different projects including the
construction of Kodari highway during 1960s when China was comparatively poorer
than now and was under the doom of great famine. Owing to this fact and analysing
Nepal’s relation with China, there remain many grounds for the expectation that

40Economic Prospect of Belt and Road Initiatives in Nepal
today’s largest economy mounting at 6.6 percent growth rate a year would complete
this railway project in grants.
Apart from issues of funding, there is also ongoing national debate whether this
mega project is day-dream or future reality. Of course, the railway construction from
Kathmandu to Kerung is very challenging but not impossible if both governments
work in consensus with full determination. Owing to complex geographical structure,
as evident in a primary report submitted by China Railway First Survey and Design
institute, 98.55 percent of the railway should pass through either tunnel or bridge.
Tunnel ways are usually considered to be one of the most challenging construction
projects in the world. Requiring bespoken high tech machinery and a large quantity
of the skilled human resource to penetrate virgin hills, tunnelling projects often
demand an abundance of investment as well as time. Engineers usually encounter
plenty of geotechnical challenges that call for innovative solutions entailed with
practical executions. According to a confidential feasibility study by a Chinese firm,
complex geographical topography and laborious engineering workload will become
major obstacles in building a cross-border railway. The railway track which has to
inroad through rocky Mountains would demand excellent construction plan and high
tech engineering. With an objective to join the tracks to the Kathmandu section, the
engineers would construct ramps along the northern and southern slopes leading to
Lake Paiku, near Kerung. Those ramps are expected to mitigate the huge difference in
elevation between the northern and southern hoof of the mountains.
Engineering projects by their very nature bring unique challenges to overcome, but
designed to accommodate utilities, including policy coordination during the planning
process, and minimizing construction impacts are challenges that have to be managed
on almost every project. In this critical phase of initiating such a big railway project,
Nepal should consider learning from similar projects done by other countries. Gotthard
base tunnel opened in June 2016 can be the best sample case for Nepal. For more
that decade hundreds of workers faced tropical temperatures underground and the risk
of water in the rock to build one of the longest rail tunnel stretching at 57 km across
the Swiss Alps. The tunnel which cost $12-billion (U.S.) and 17 years of continuous
work to complete in estimated time. With the involvement of more than 2,600 people
in a construction project, 80% excavation work done by boring machines and 20%
by blasting, the project remains as the best example of engineering success despite

41KMC Journal
geographical obstacles. Now Gotthard Base tunnel allow trains to travel up to a top
speed of 250 km/h and also license heavy loaded trains to pass through the transalpine
route. With a maximum depth of 2,450 m, the tunnel is also the deepest of its kind in the
whole world. In regard to the completion of the Gotthard tunnel, Nepal can also hope to
witness the Chinese train inroading Kathmandu via well-engineered tunnel.
Similarly Nepalese public should stop discouraging government by questioning its
past failures and change our attitude of Get ‘er done mentality. Because the journey of
thousands miles begins with a single step. So instead of posing very irrational question
immediately after some month of project declaration like; where is the train, where is
the ship? We must give a chance to this stable government. We should understand that
nine years is not very long period to complete such large scale connectivity project.
Instead of counting the days, we should start counting those opportunities that the
whistling train will bring after nine years.
After ascending up to the position of the second largest economy in 2012, China has
amplified the amount of foreign investment in Nepal. According to economic studies, by the
end of 2016, China had spent 161 billion US dollars as foreign investment. It is much higher
compared to past investments. In such case it’s not a big deal for China to invest in Nepal’s
railway which is also part of its Grand BRI project. Yet the possibility of investment highly
relies on how diplomatically our leaders can negotiate with the Chinese government.
Further requirements for Nepal
In March 2016 the Transport Transit Agreement was signed during a meeting in Beijing
between Nepalese Prime Minister K. P. Sharma Oli and his Chinese counterpart Li
Keqiang. The protocol, which is key to actualization of the treaty, will allow Nepal to
conduct trade with third countries through China. Nepal presently conducts trade with
third countries only through India. So in order to improve Nepal’s connectivity and
expand Himalayan trade through China, the construction of the following highways
must be completed as soon as possible.
• Kathmandu-Kodari highway
• Biratnagar-Khandbari-Kimathanka road
• Beni-Jomsom-Korala root to connects Myagdi district with the Tibet

42Economic Prospect of Belt and Road Initiatives in Nepal
• Mailung-Syabrubesi-Rasuwagadi road and
• Hilsa-Simikot Road
Furthermore, these broad highways need compartmentalisation in form of four-lane
fast track roads for easy access. Nepal should seek finances for these highway projects
through the Asian Infrastructure Investment Bank as well as required support from the
Chinese government. Officials at the Commerce Ministry said three sea ports—Tianjin,
Shanghai and Guangzhou—and two land ports have been identified for Nepal’s third-
country trade via China. Nepal will be able to reap trade benefit if it sought agreement
on other three ports: Chongqing (river port near Chengdu), land port of Khorgas
(China-Kazakhstan border) to trade with European parts, and land port of Kashgar
(near China-Pakistan border) for establishing trade relation with Iran, Pakistan and
other Gulf countries (Chan, 2018).
Debated issues
The outline of Belt and Road Initiative exceeds beyond infrastructure and economic
development. It also provides ground for the expansion of soft power where even a country
with not good economic capability can thrive by exercising soft utilities like art, culture and
political diplomacy. However, there exist some prophesied digital narratives in western
air regarding Belt and road initiative. Like; China will produce an abundance of demand
abroad encouraging surplus in cement plants, steel mills and construction firms, which
ultimately expand business at home. This spider plan will connect every neighbouring
state with China’s economic centre, so enhancing the opportunity to deploy both hard and
soft power around the region. The dragon may initiate her strategic blueprint to upgrade
Yuan as an international substitute to the US dollar. And to institutionalise it, they will
establish more multi-lateral infrastructure bank and economic firms which will destabilise
the impact of the existing Washington-based organizations. In short, the outcome will be
systematic regional hegemony by Asia’s leading economic and political power.
Conclusion
In my view, the economic notion of connectivity on a trans-continental level by China
is very rational step, particularly at a time when globalization had remained vulnerable
amid the rising trend of protectionism and economic nationalism in the West. The West
versus rest paradox no longer dominates modern world order, as we already live in a
Global village where each land is connected by digital highways. This mega project

43KMC Journal
seeks to make the world more interconnected by contributing to the foundation of the
massive human community with a shared future. One Belt One Road abridges the
distance between nations as well upholds the global economy, and will hopefully result
in progress and generate fruits for the entire world.
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