August 23rd, 2024
Via New York Times, an article on how a new government in Nepal has formally asked for relief from a $216 million debt it incurred for construction of an airport in Pokhara that has been beset by problems:
When Nepal’s new international airport opened last year in one of the country’s biggest cities, it was the type of landmark project expected to elevate the fortunes of one of Asia’s poorest countries while deepening its ties with China, which built and financed the project.
But the Pokhara airport has become a symbol of another sort: the pitfalls of China’s international infrastructure projects, which face criticism for sometimes costly and poor quality construction that leave borrower countries awash in debt.
On Thursday, Nepal’s one-month-old government, led by the country’s largest communist party, which has close ties to Beijing, formally asked China to convert a $216 million loan for the airport into a grant, wiping away the debt. It made the request during a visit by a Chinese delegation including Sun Weidong, China’s vice foreign minister.
The airport has been beset by problems. A few weeks after it opened in January 2023, a domestic flight headed for the city crashed into a river gorge, killing 72 people. The airport has not attracted any regular international flights, dimming the financial outlook for the project. Over the last year, Nepal’s anti-corruption agency and a parliamentary committee started investigations into the airport’s construction.
Last year, The New York Times reported that China CAMC Engineering, the construction arm of a state-owned conglomerate, Sinomach, had inflated the cost of the project and undermined Nepal’s attempts to keep tabs on construction quality.
Through its Belt and Road Initiative, a signature campaign of President Xi Jinping, China has extended more than $1 trillion in loans and grants, according to some estimates, for international infrastructure projects. The initiative is part of Beijing’s efforts to forge economic and diplomatic ties with other countries, while building a lucrative portfolio of construction work for its state-owned enterprises. But for some developing countries, the loans have become a financial albatross as they struggle to repay the debt.
In an interview on Friday, Bishnu Prasad Paudel, Nepal’s deputy prime minister and finance minister, said it made the request to China as “our neighboring country” because Nepal was still scrambling to revive its economy.
“We are hopeful,” said Mr. Paudel, but he declined to elaborate.
The Chinese embassy in Kathmandu, Nepal’s capital city, did not immediately respond to a request for comment.
If Beijing agrees to Nepal’s request, it will be another indication of a strengthening relationship between the country’s new government and China.
In July, Nepal’s biggest communist party joined forces with the Nepali Congress, the largest party in the country’s Parliament, to create a coalition government, led by K.P. Sharma Oli. He has forged a reputation for opposing the influence of India, Nepal’s neighbor to the south and a regional rival to China, during three previous stints as prime minister.
His government has wasted no time cozying up to Beijing. On Thursday, he overturned a ban on TikTok, the popular social media app owned by Chinese technology giant ByteDance, that his predecessors had imposed less than a year ago.
On the same day, Nepal also said the two countries had agreed to a series of development projects including two to upgrade highways that connect to the Chinese border. They also agreed to build integrated check posts along the border between Nepal and China.
Nepal’s economy, heavily reliant on overseas remittances and tourism, has struggled to recover since the pandemic. The international airport in Pokhara, a picturesque city set in the foothills of the Himalayas, was seen as a way to bolster tourism and breathe new life into the economy.
But so far, the airport has failed to attract any commercial international flights, largely because India has refused to grant permission for its carriers to fly in and out of Pokhara. This has raised fears that the airport would not generate enough revenue to pay back the loan from the Export-Import Bank of China. Nepal is scheduled to start repayment of the loan in 2026.
At the same time, there are two investigations into the airport’s construction. Nepal’s Commission for the Investigation of Abuse and Authority is looking into reports of corruption by the Chinese construction company for compromising construction quality to maximize profit. Nepali officials are also accused of accepting kickbacks while awarding the contract to CAMC. A separate parliamentary committee was formed to investigate possible irregularities in construction.
CAMC did not respond to a request for comment about the investigations.
Binoj Basnyat, a retired Nepali general working as a researcher with Rangsit University in Thailand, said China would probably convert the loan to a grant because it wanted to build a strong relationship with Nepal’s communist party. He also noted another benefit for China by agreeing to the request.
“The investigation into the corruption charges will quickly come to an end,” said Mr. Basnyat. “Nobody will talk about that anymore.”
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