Let our foreign relations be both geo-politics and geo-economics driven !

Kathmandu. Our PM KP Sharma Oli left Kathmandu for Beijing 2 December 2024, leading an almost ninety members team to make a deal on ‘ BRI framework for cooperation’--a new name for earlier ‘BRI implementation plan’. Nepal’s desire to negotiate the deal on a case-on-case basis is said to have been the main reason for drafting a new framework text replacing the one proposed earlier.

The foreign ministry officials handed over the new framework text to the Chinese Embassy Saturday for Beijing’s consideration. The text so submitted asks the BRI support with focus just on connectivity and cross-border infrastructure projects with a clear-cut unwillingness to borrow the BRI loans. The text, apart from identifying some areas of cooperation,  lists out some 12 projects with the request that they be executed on grant under the framework. It is a moot point whether or not the projects so asked could fall under the BRI rubric and therefore be considered by Beijing. But Kathmandu waits for good things to happen.

It is true that our public debt has tripled during the past one decade. But again, the problem is not the increasingly growing public debt, it is rather our economic growth  not moving ahead  in commensuration to what we have borrowed. A lot can be asked  in this regard including whether we squandered what we have borrowed like water in the sand? Or,  did we corrupt most of what we borrowed? 

As of today,  our public debt–GDP ratio stands at 42.675% while it is so accepted that the tipping point for public borrowing could go up to 90% in specific cases. But a 60% threshold could be a safe point  for  an economy like ours. It is not that  we suffer only from  sluggish economic growth but also from  import-heavy foreign trade patterns with alarming trade deficits. We import unimaginably against what we export. Viewed this way, the framework should  have accorded top priorities on such projects that aim at reducing trade deficits through enhanced connectivity and unlocked avenues for accelerated economic growth.

BRI’s main thrust is policy coordination, border connectivity, free and fair trade, financial integration and people to people connections among the BRI actors. BRI envisions that  efficient partnerships among its  actors could pave the way to free movements of goods, services,capital and technology which if mobilized purposefully could result in  optimal  resource allocation and productivity maximization with sufficient spillover effects around.  

We have been accepting loans from other countries including bilateral and multilateral means. Again, it is not that we have not  borrowed from China before. Is it then not a lame excuse to deny BRI borrowing simply in the pretext that our public debt has already reached a staggering height ? Does it mean no further external borrowings?   Why do we prefer citing the Sri Lankan and Pakistan case to making a borrowing under the BRI ?  Why should we indulge in the ‘we accept grants, not loans’ verbose? Where around the globbe  has a single nation flourished through grants and assistance? Where around the globe has  a beggar been rich and a giver a bankrupt?

Why were  the Sri Lankan and the Pakistan BRI projects a failure? Let us dig down some of the reasons. The Sri Lankan leaders that were guided with their own interest agreed a 6.3% interest loan with other unfavorable terms and conditions for the Hambantota International Port. As the leaders were guided by self interest, their power to negotiate was much weaker. It happened almost the same also in Pakistan’s Gwadar Port. 

Why do we not cite the Thai and Indonesian examples where BRI has made a great dent? Take the example of the Thailand High-Speed Railway project. The Thai Authorities negotiated strongly with China, took sufficient time to reach the negotiation and accepted the terms and conditions that  favored their nations. It solicited Chinese support only in constructing  and operating the project with the entire resources invested through domestic resource mobilisation. This was true also in the case of the Indonesian Jakarta-Bandung High-Speed Railway.

Why not cite also the examples of the ASEAN member nations that had a  foreign trade of just USD 40 billion before and had USD 975 billion trade after joining the BRI club. At present they are China’s largest trading partners because of  better connectivity.

It is true that  BRI loans are relatively costlier with the average rates at 4.2% with a system of bailouts to help countries avoid default on their BRI debts.  We need to convince them with the fact that the weighted average interest rate for the loans we have yet borrowed externally  stands just  at 1.15%. When put the other way round, a condition on our part  ‘we will borrow only when the additional borrowings do not cause  our weighted average  cost of borrowing to rise’ could sound like a very genuine stand.  

Once agreed as above,  we can act the way the Thai, Indonesian, and the ASEAN member nations did by demonstrating the art of negotiation with patience and perseverance.  We need to be careful enough while jotting down the nature of projects and their construction and operations, award of contracts and procurement , timeliness of operation, partnership modality, transfer of knowledge and technology, and the acceptable interest rates, among others. A great deal of homework has to be made seriously with a greater selectivity while doing all this.  

Nevertheless,  doing as above  calls for great statesmanship and leadership  on our behalf. We are a buffer state. This does not mean that we always need to act the way the two neighboring nations expect from us. Let us make an about turn and  start expecting also from them, making them know what we expect.  A truth ignored more often than not is that it is more the geo-economics than the geo-politics that should   guide us to establish our foreign relations. It is because national interest comes first. Can we act and can we talk to our foreign counterparts face to face with such a stand with our eyes on theirs? If we cannot, we have no place except in hell. 

Believing how others define BRI and getting swayed away from such definitions lead us nowhere near to the requirements. This is why we remain mostly standstill. I do not know what could be the Kathmandu-Beijing talks output. I will be happier if our PM could follow a very minutest part of what I propose here. 

I have read some literature that defines  BRI merely as Xi Jingping's pet project  to further the global influence of China with investments to build infrastructure projects. The others  define it as a central component of Xi's major country diplomacy strategy.  If what they view is  correct, China's intent appears to assume a greater leadership role in global affairs in accordance with its rising power and status. What is  wrong with this as long as the participating countries can benefit from China’s infrastructure and growth expertise using BRI as an initiative?