Nepal and the Belt and Road Initiative: Status of Projects

Posted by Written by Melissa Cyrill Reading Time: 4 minutes

Nepal joined China’s Belt and Road Initiative (BRI) in 2017 in a bid to reduce its dependence on India and improve regional connectivity infrastructure. Since then, Nepal and China have entered a period of strategic partnership. Nevertheless, a close look at the status of proposed BRI projects show that implementation has lagged due to various reasons.

As of March 2022, the flagship BRI project in Nepal is the Trans-Himalayan Multi-Dimensional Connectivity Network (THMCN), which includes a cross-border railway connecting China’s Tibet Autonomous Region with Nepal’s capital, Kathmandu, and the China-Nepal Friendship Industrial Park (also known as Damak Clean Industrial Park) in Jhapa.

While there has been local pushback over fears of China’s debt trap economic diplomacy, the environmental impact assessment of proposed projects, and Prime Minister KP Sharma Oli’s perceived closeness to Beijing, preparatory work on some of the projects have been underway.

Recently, on March 10, President Bidya Devi Bhandari urged that movement on these BRI projects be expedited as Nepal and China had signed their Memorandum of Understanding five years ago. Bhandari was, however, also quoted saying, “We have deep cultural links across the Himalayas. It goes without saying that we have kept this amity for centuries because Nepal-China relations are founded on time-tested mutual trust.”

What is the Trans-Himalayan Multi-Dimensional Connectivity Network?

The Trans-Himalayan Multi-Dimensional Connectivity Network includes infrastructure projects, such as the Trans-Himalayan Railway project and the Damak Clean Industrial Park, a joint venture undertaking in Jhapa, eastern Nepal.

On October 21, 2021, the Communist Party of China (CPC) and Nepal’s major political parties set up a consultation mechanism for political parties on the Trans-Himalayan Connectivity Network and held their first virtual meeting.

Participants in the meeting included Song Tao, Minister of the International Department of the CPC Central Committee, Timir Sina, Chairman of the Nepalese Federal House, Prachanda, Chairman of the Communist Party of Nepal, and Batraei, the leader of the Nepal People’s Socialist Party.

Nepal-China railway

Discussion had been underway for some time on constructing a railway connecting the hilly areas of Nepal with Tibet to create alternative logistics routes. A pre-feasibility study of the Kathmandu-Kerung railway line undertaken in 2018 proposed connectivity through a series of tunnels below Langtang National Park.

The Nepali section is supposed to be 72.25 km long and will need to overcome major topographical challenges posed by the Himalayan terrain; 98.5 percent of the section will reportedly be bridges or tunnels. There are four stations planned along the line, with the terminal at Sankhu in Kathmandu. A further extension to Pokhara and Lumbini was also discussed in 2018.

So far engineering difficulties due to the gradient terrain from the Tibetan Plateau to the low Nepal valleys, daunting costs, and geopolitical factors have prevented this rail connection from materializing. Critics have also mentioned that successive Nepal governments have failed to maintain the conditions of existing highway routes to Kodari and Rasuwagadi to international standards.

How the Fuxing bullet train in Tibet could improve connectivity with Nepal

While delays have plagued the development of necessary Nepal rail infrastructure, steady progress has been achieved on the China-Tibet side. In June 2021, China inaugurated the 435 km section of the Lhasa-Nyingchi Electrified High-speed Rail (HSR), which passes through 47 tunnels and 121 bridges along the Brahmaputra (Tsang Po) River. The bullet train is part of the new Sichuan-Tibet Railway. According to media reports, if this railway section gets “connected to Kerung via Lhasa and Shigatse, it would put Lhasa within six hours distance and Chengdu within 19 hours from the Nepal border”.

China-Nepal Friendship Industrial Park

Another important project under the Trans-Himalayan Multi-Dimensional Connectivity Network is the China-Nepal Friendship Industrial Park. It is a Nepal-China joint venture (JV) undertaking.

Key stakeholders

The industrial park will be jointly developed by China Lhasa Economic and Technological Development Zone Investment And Development Co. Ltd., China Ping An Group Trust Co. Ltd., Nepal Industrial Zone Management Co. Ltd., and the Daomuke City government. Construction work began October 2020 as per a Chinese report.

Location

The China-Nepal Friendship Industrial Park is about 270 kilometers away from Kathmandu and covers nearly 1600 hectares. Its proximity to highways, airports, and ports in the Indian Ocean offer unique advantages in terms of foreign trade.

Project plan

According to the project plan, infrastructure investments would amount to a total of US$1 billion and will be developed in four phases. The first phase plans to develop, over a period of three years, an area of 424.81 hectares, including 133.33 hectares of core area, with an estimated investment of US$586 million. A total of 192 small, medium, and large factories are expected to be set up inside the industrial park in the first phase.

The next two phases will be a period of rapid development of the industrial park layout; the second phase will develop 363.74 hectares and the third phase 372.04 hectares. Living facilities will be improved simultaneously, to secure “industrial and urban symbiosis”. The fourth and final phase will see 436.21 hectares of land planned for commercial real estate development, science, education, research and development industries, improving industrial structure, and establishing supporting facilities. The industrial park is projected to achieve US$5 billion output value at scale by 2030, employ 60,000 people, and house 100,000 permanent residents.

Types of industries

The China-Nepal Friendship Industrial Park is expected to host modern industries for transportation equipment, production of white goods, textile and garments, and food processing, among others. Supporting industries are logistics and scientific and technical innovation and training.

Status of work

Ongoing activities in the industrial park as reported March 2021:

  • Cadastral survey
  • Improvement of the land
  • River training works
  • Extension of industrial land
  • Bridge construction
  • Road construction
  • Design of civil works
  • Scoping of environmental impact assessment (EIA)

Nepal-China Transit Transport Treaty

In 2019, Nepal and China signed a protocol to operationalize their 2016 Transit Transport Treaty, giving the landlocked Himalayan country access to Chinese seaports in Tianjin (northern China), Shenzhen (southeast China, Guangdong Province), Lianyungang (northeast China, Jiangsu Province), and Zhanjiang (southeast China, Guangdong Province) and three land ports in Lanzhou, Lhasa, and Shigatse for third-country imports. The protocol also enabled Nepal to export via six dedicated transit points between Nepal and China. Consequently, the Transit Transport Treaty was to offer Nepal an alternative to India for its third-country trade. Yet, years have passed, and Nepal and China have still not developed a standard operating procedure to implement the transit agreement.

With inputs from Qian Zhou.

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