Foreign policy embarrassment

 Nepal: Prime Minister Oli’s geopolitical game has reached a new low. Even as the Nepali public was deeply invested in discussing his impending visit to China, scheduled for December, a media report suggests he may go to India first, after all.

 

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Normally, a bilateral visit would be a normal affair. Not this time. Oli’s upcoming visit to China has become mired in geopolitical tension, domestic political conflict and potential embarrassments.

 

It’s unfortunate. Nepal has once again failed to manage the India-China rivalry in a respectable and diplomatic manner. If Oli visits India first, it would likely result in the postponement or even cancellation of his visit to China.

 

Whether Oli visits India first or not, two factors make his visit to China significant.

 

The first is Nepal’s seriousness in Nepal-China relations. As Nepal prepares for Oli’s visit to China, news reports in the Nepali media indicate foreign policy disarray and lack of understanding about relations with China at the highest levels. Nepal has been repeatedly making the same commitments to China and reiterating the same agreements. In the last seven years, there has been little progress on the Belt and Road Initiative (BRI) or on a majority of agreements that Nepal has signed.

 

The second is the failure of Chinese loans. As Oli goes to China, he takes with him a humiliating baggage: A message that Chinese loans in Nepal’s tourism sector have failed because of corruption and kickbacks. This fact is all the more embarrassing because top political leaders in Nepal are responsible for the failures much more than the Chinese companies or China Exim Bank, which financed the projects.

 

Foreign policy disarray

 

Despite a series of snubs from India, Oli had been postponing his China visit, hoping for an invitation from the southern neighbour. After India sidelined him, Nepali media and political society picked up on him and raised questions about the stability of the government.

 

Only last week, the Nepali Congress (NC) and the Unified Marxist-Leninist (UML) formed a bi-partisan mechanism under the leadership of Oli and NC President and former Prime Minister Sher Bahadur Deuba.

 

The most significant decision of the first meeting concerned Oli's visit to China. According to the mechanism’s press statement, “the preparation of the official visit” would be “coordinated” by Foreign Minister Arzu Rana Deuba.

 

The simplest meaning of this decision is that Oli wants to show NC’s full political support for his impending visit. This could be intended both for China and India.

 

For India, this shows that Oli’s visit to China would consider India’s concerns. For China, the backing of the NC would be of great value. The main reason why the BRI has not moved ahead is NC’s reluctance to enter into commercial loan deals with China. As a signatory, the party must show commitment to BRI and Nepal-China relations.

 

Although Oli wants to build rapport with India, his habit of making petty remarks and stoking anti-Indian sentiment has created a deep rift. This time around, after he became prime minister, he prioritised having a one-on-one meeting with Indian Prime Minister Narendra Modi.

 

It was for this reason that although Oli was invited to visit China, he has repeatedly delayed, hoping to visit India first. Until now, he has been repeatedly snubbed, while his Foreign Minister, Rana, was given extra recognition.

 

The series of events in the last two months shows that Oli’s focus is personal rather than national. According to a former senior diplomat, who has overseen several state visits, Nepali leaders often emphasise one-on-one meetings with Chinese and Indian political leaders. Such meetings, according to him, are often harmful for Nepal’s national interest because they focus on personal transactional relations rather than on overall bilateral relations.

 

All the hullabaloo has generated great expectations from Oli’s India and China visits, which will put the PM under tremendous pressure to make his visit successful. According to former ministers and senior party leaders across all parties, the “success” of such visits often affects the “survivability” of governments and weakens Nepal’s negotiation capacity.

 

The embarrassment of Chinese loans

 

The failure of Pokhara International Airport and the Nepal Airlines’ decision to dispose of Chinese aircraft have dented China’s reputation.

 

The Pokhara Regional International Airport currently operates only domestic flights (other than eight international flights so far), and the revenue is insufficient to service loans. In fact, the current expected revenue of around Rs300 million is less than a tenth of the Rs2.4 billion it needs to pay China Exim Bank every year. This has forced Nepali politicians to seek diplomatic solutions.

 

The disposal of Chinese aircraft has also turned into a complex diplomatic challenge for Nepal. The Nepal Airlines Corporation (NAC) is eager to sell the grounded aircraft at scrap value, but the Chinese Embassy in Kathmandu is worried about sending the wrong message. Nepal's government officials acknowledge that "there is no way to pay the loan."

 

The challenges now extend beyond the immediate financial losses to questions about Nepal's capacity to protect its interests. The two cases show that Nepal often has weak negotiating capacity, fails to make robust technical assessments—or these assessments are ignored by political actors—and lacks accountability mechanisms.

 

The request for loan forgiveness of Chinese aircraft and Pokhara International Airport has already created diplomatic sensitivities. The primary fault lies with both Nepali decision-makers and Chinese companies who have colluded in corruption.

 

Nepali leaders created the problem in the first place, driven by greed and corruption. Now, they want the Chinese President to intervene and forgive their loans.

 

These issues are certain to have reached the highest political levels in China. Given Chinese leaders' commitment to tackling corruption, there are grounds to be hopeful that such mistakes will not happen in the future. It can only portend well for Nepal.

 

While Nepali agencies may be shackled by political actors in investigating possible cases of corruption, the Chinese government is likely to have already investigated the cases from their side and gathered evidence about the financial transactions, kickbacks and bribes received by Nepali counterparts. This could prove to be tricky for Nepali leaders and officials involved in corruption.

 

Nepal can choose not to take loans from China—it is a matter of government policy. But Nepal’s relations with China are deeper and wider than that. Political leaders cannot choose to use relations with China as a means to play against India or to project power in the domestic political landscape.

 

The relationship with China is a serious and important matter. Nepali leaders should not let geopolitics and diplomatic incompetence affect Nepal’s trusted, stable and friendly relations with its northern neighbour. If Oli is to visit China, he must have a concrete plan on how to make progress on the commitments the two countries have made during Chinese President Xi Jinping’s visit to Nepal in 2019.