New Delhi, February 24 – A multi-billion rupee project in Nepal, part of China's ambitious Belt and Road Initiative (BRI), has been dropped from the election pledges of former Kathmandu Mayor Balen Shah, who is contesting against former Prime Minister K.P. Sharma Oli in the latter's stronghold of Jhapa-5 constituency, according to reports.
Parliamentary elections are scheduled in Nepal on March 5 under an interim government, which was formed after the resignation of the Oli government following widespread anti-corruption protests by Gen Z in September last year.
The Damak Industrial Park in Jhapa, now renamed the Nepal-China Friendship Industrial Park, is now in the spotlight after Balen Shah's decision, according to the Kathmandu Post.
Quoting unnamed government officials, the Kathmandu Post said that New Delhi was concerned that the project is located near the Nepal-India border, particularly the sensitive Siliguri Corridor, also known as the "chicken's neck".
Officials also questioned why Kathmandu was allowing Beijing to build such a large project near the border, saying that the issue has now become sensitive for several other reasons as well.
Balen Shah was among the popular choices for Nepal's interim Prime Minister, but he has withdrawn his candidacy.
The 35-year-old engineer-rapper turned politician, representing the Rastriya Swatantra Party (RSP), is being projected as the future Prime Minister of Nepal.
"The project is part of the Belt and Road Initiative (BRI), an ambitious multi-continental infrastructure programme initiated by Chinese President Xi Jinping. In February 2021, former Nepal PM Oli laid the foundation stone of the project in the Kamal Rural Municipality of the (Jhapa) district," the newspaper report added.
Oli, as the Chairman of the Communist Party of Nepal (Unified Marxist Leninist), reportedly had close ties with Beijing.
"While the former Prime Minister has listed the construction and completion of the industrial park in his 41-point "commitment paper" released last week, Balen Shah has omitted the project from his manifesto unveiled on Monday," the report said.
"We are aware of the project and the controversy surrounding it, so we have decided to exclude it," it quoted an unnamed aide of Balen Shah.
Earlier reports had said that the Nepali Congress and the Communist Party of Nepal-Unified Marxist Leninist had differed on Kathmandu taking loans.
These also pointed to significant delays in the implementation of many BRI projects, with none yet finalized, raising concerns about the effectiveness of the initiative.
There have been concerns among sections in Nepal, who expressed caution regarding the financial implications of BRI projects, particularly in light of Sri Lanka's financial difficulties linked to similar Chinese investments.
"According to those privy to negotiations, originally, China had proposed several funding modalities ranging from blended financing models to commercial loans. The Nepali Congress had been insistent that it would not be taking commercial loans under BRI, but the final agreement adopted the phrase 'aid financing modalities' in place of the 'grant financing modalities' insisted upon by the Nepali Congress Party," a document released last year by the think-tank Centre for Social Innovation and Foreign Policy (CESIF) said.
The Damak Industrial Park seeks access to the Indian market through the Kakarvitta and Birgunj ports, it added, highlighting its importance being underscored with the visit of China's Ambassador to Nepal Zhang Maoming.
According to the CESIF paper, a significant hurdle for Kathmandu was Beijing's request for substantial tax exemptions, which Nepal's Finance Ministry then resisted, since it was not only during the construction phase but also for many years after the project's completion.
Though China's demand became a major point of contention, a meeting of the Investment Board of Nepal, chaired by former Prime Minister Oli, decided to accelerate the project.
The report also said that India had communicated that the project constituted a "red line" and had advised both the Nepali Congress and the Communist Party of Nepal-Unified Marxist Leninist not to move ahead.
