July Analysis: International Relations &

Foreign Affairs

July brought significant diplomatic changes for Nepal. China launched the Silk Roadster project in response to BRI challenges, with CPC Politburo members visiting for project execution. Finance Minister Dr. Prakash Sharan Mahat emphasized collaborative projects and trade at India's G-20 finance ministerial meeting. Nepal's partnership with the US continued with a visit by US Assistant Secretary of State Donald Lu. Amid these changes, Nepal carefully evaluated its national interests and long-term sustainability.

Timeline of Major Events

 

Date	Event
July 14th	US Assistant Secretary Donald Lu visited Nepal
July 16th	Finance Minister Dr. Mahat participated in the G-20 Finance Minister-level meeting in India
July 23rd	China launched Silk Roadster Projects in Nepal with a visit of CPC Politburo member.

 

Nepal-China

China unilaterally launched the Silk Roadster Project in Bhaktapur, Nepal in the month of July. The Silk Roadster Project is cited to be under the BRI, and includes five projects: Silk Road Embarkment, Silk Road Empowerment, Silk Road Enjoyment, Silk Road Enlightenment, and Silk Road Enhancement. The project was also launched by Communist Party of China in place of the People’s Republic of China, which emphasizes China’s intent of building party-to-party ties.

While the momentum on BRI has seen a sharp decline in Nepal, especially following the Sri Lankan crisis, this move from China is seen to be an attempt at wooing Nepal back. Concerns existed over China not signing BRI Project Implementation Agreements and if projects will be executed under grants or loans. The BRI was initially proposed in 2013 and formally agreed upon in 2017. Despite multiple meetings, not a single project has been implemented. As BRI projects remain unexecuted owing to Nepal's concerns over BRI financing modality, China has been advocating for additional strategies, namely the Global Development Initiative (GDI), Global Security Initiative (GSI), and Global Civilization Initiative (GCI) for Nepal.

While China has been pressurizing Nepal for GSI, time and again Nepali leaders have reiterated that Nepal cannot and does not indent on joining any security alliance. Nepal’s Policy of Non-Alignment restricts it from joining a security alliance like GSI. Thus, through the Silk Roadster, China has explored for a new way of engagement in Nepal. The transition to the Silk Roadster project signifies a shift in Chinese priorities from grand-scale undertakings to a more localized, people-centric approach. This convergence of strategies has presented diplomatic concerns for Nepal instead of hope.

Following the initiation of the Silk Roadster, members of China's CPC Politburo visited Nepal to execute projects and programs agreed upon during President Xi Jinping's 2019 visit. Recently, officials and politicians of both Nepal and China have made frequent visits. During the visit on 23rd July, China pledged Rs145 million (eight million yuan) for agriculture-related projects across Nepal's seven provinces, benefiting 1,500 households in each province. While this financial support signifies China's proactive involvement in Nepal's economic advancement, critics have reservations about potential dependency, sovereignty, and transparency issues linked to funding institutions connected to China's ruling party. Such repeated claims and assertions of China towards Nepal might be of concern in the future.  Hence, it is crucial for Nepal to carefully evaluate and prioritize its national interests to ensure these initiatives' long-term effectiveness and sustainability.

Nepal-India

Finance Minister Dr. Prakash Sharan Mahat participated in the third finance ministerial meeting of G20 countries hosted by India in Gujrat. The meeting was addressed by Finance ministers and Central Bank Governors of G20 nations and holds significant importance within international relations. India assumed the G20 chair in December 2022 and is all set for G20 Summit on September 2023. On the sidelines of the meeting, Mahat stressed the crucial nature of finalizing India-assisted projects in Nepal and bolstering trade relationships between Nepal and India with Indian Finance Minister Nirmala Sitharaman. Minister Mahat specifically drew attention to the mutual understanding between Nepal and India, which permits the export of 10,000 MW of power from Nepal to India over a decade. He underscored that the agreement is vital in reducing the trade deficit between the two countries. The discussions also involved speeding up the implementation of the Electronic Payment System, strengthening ties in the economic sector, and other areas of shared interest between Nepal and India, which includes Indian investments in Nepal's tourism and IT sectors. Nepal's acceptance of India's invitation to the G-20 ministerial meeting reflects a positive bilateral engagement.

Nepal - US

The US Assistant Secretary of State Donald Lu visited Nepal on 14th July as a part of a regular high-level diplomatic engagement. This is his third consecutive visit to Nepal in the last three years. During Mr. Lu's one-day visit, he met many politicians and Ministers, including Foreign Minister NP Saud, former Prime Ministers Sher Bahadur Deuba and KP Sharma Oli, and Prime Minister Pushpa Kamal Dahal.  The evaluation of Nepal's MCC initiatives took place during the visit of Lu, who assessed the progress of the MCC Compact. The compact includes projects like a transmission line and road maintenance. Along with MCC, his visit also focused on continuing US support to Nepal, whilst Nepal graduates from Least Developed Country (LDC) to developing nation in 2026. The US has been at the forefront of executing Nepal's education, health, and human rights projects. Nepal and the US have been continuing their collaboration through the Millennium Challenge Corporation (MCC), focusing on enhancing infrastructure and promoting economic growth. The upcoming visit by MCC CEO Alice P Albright on September will be of significant importance, officially marking the commencement of the implementation phase.