Nepal and China have unlocked a significant milestone in their Belt and Road Initiative (BRI) partnership with the signing of the long-awaited Framework on BRI Cooperation. This historic agreement reflects a pragmatic approach to project financing and positions Nepal for enhanced connectivity and economic transformation.

The Evolution from "Grant Financing" to "Aid Financing"

A critical breakthrough in the agreement was a shift in financial terminology. Nepal initially advocated for grant financing, requesting projects under the BRI to be fully funded by Chinese grants. However, China pushed for the broader term aid financing, which includes grants, loans, or hybrid funding models.

After intense negotiations, Nepal and China settled on aid financing, ensuring greater flexibility in funding without compromising Nepal’s concerns about unsustainable debt.

Did You Know?

Grant financing is essentially free funding, while aid financing can include loans with repayment obligations. Think of it as the difference between a gift and a credit plan.

Behind-the-Scenes: Key Signatories and Negotiations

The framework was signed by Nepal’s Foreign Secretary Amrit Bahadur Rai and China’s Vice Chairman of the National Development and Reform Commission Liu Suche.

Negotiations saw last-minute hurdles, with China insisting on removing the word "grant" from the framework. This prompted intense internal discussions among the Nepali delegation. Ultimately, both sides found middle ground, reflecting their commitment to long-term cooperation.

A Journey 7 Years in the Making

Nepal signed a Memorandum of Understanding (MoU) on the BRI in 2017, but implementation faced delays due to financing disagreements. The revised Framework on BRI Cooperation was finalized during Prime Minister KP Sharma Oli’s China visit in 2024, marking a turning point for Nepal-China relations.

Key Projects: The Madan Bhandari University and 12 Priority Areas

A standout achievement was reinstating the Madan Bhandari University of Science and Technology into the framework. Initially excluded by China, Nepal successfully lobbied for its inclusion, demonstrating its commitment to prioritizing education.

The framework also prioritizes 12 critical projects, including infrastructure upgrades, energy collaboration, and cultural initiatives.

Highlights from the Nepal-China Joint Statement

The 12-point joint statement during PM Oli’s visit outlines the broader vision for Nepal-China relations. Key highlights include:

1. Strategic Partnership

• Reaffirmation of Nepal-China ties as a Strategic Partnership for Development and Prosperity since 2019.

2. Connectivity Revolution

• Transforming Nepal from a landlocked nation to a land-linked hub, with investments in road, rail, aviation, and power grid connectivity.

3. Cross-Border Railway

• Commitment to expedite the feasibility study of the Jilong/Kerung-Kathmandu Cross-Border Railway, a transformative project for Nepal’s trade and mobility.

4. Infrastructure Upgrades

• Projects like the Syaphrubesi-Rasuwagadhi Highway repair and Kathmandu Ring Road improvement.

5. Boosting Trade

• Zero-tariff treatment for Nepali goods entering China to enhance trade flows.

6. Energy and Technology

• Progress on the 220KV Cross-Border Power Transmission Line and other energy collaboration projects.

Why This Framework Matters for Nepal

1. Economic Growth

Critical infrastructure investments under the BRI can boost GDP and create jobs, advancing Nepal’s vision for a "Samriddha Nepal, Sukhi Nepali" (Prosperous Nepal, Happy Nepali).

2. Connectivity Breakthrough

Improved connectivity through railways, highways, and aviation links can transform Nepal’s integration with China and South Asia, making trade faster and more efficient.

3. Strategic Diplomacy

Balancing robust partnerships with China while safeguarding sovereignty reflects Nepal’s skilled diplomatic approach.

Challenges Ahead: Navigating Implementation

With the framework signed, the real challenge lies in execution. Key hurdles include:

• Timely Implementation: Avoiding delays through robust project management.
• Financial Transparency: Ensuring clear communication about financing terms to prevent public concerns about debt.
• Logistical Hurdles: Addressing geographic and technical challenges, especially in large-scale projects like the Cross-Border Railway.

The Framework on BRI Cooperation represents a turning point in Nepal’s development journey. By strategically aligning priorities and maintaining financial vigilance, Nepal stands to gain significantly from this partnership. While challenges persist, the potential for transformative growth makes this an exciting era for Nepal-China relations.