China’s Political and Economic missions in Nepal: Investment- Yes, Interference- No.

More Chinese investments in Nepal is very much welcome because this will help us become self-sustained and independent.

By Prithvi Man Shrestha

The Chinese private sector is looking at Nepal as an investment destination. This was the message Chinese businessmen tried to convey in the 11th meeting of Nepal-China Non-Government Cooperation Forum in Kathmandu on Thursday (16 Sept). With China’s financial muscle getting stronger, Nepal’s hydropower, tourism and agriculture sectors are on its investment radar. Their seriousness can be gauged by the fact that a high-level 40-member team came to Nepal to attend the forum. And most of them, according to Chinese ambassador to Nepal Qiu Guohong, are from reputed companies.

The business delegation led by the All-China Federation of Industry and Commerce (ACFIC) first vice-chairman Quan Zhezhu, who is also a vice-minister, had entrepreneurs from established and renowned Chinese private companies in the areas of tourism, aviation, metallurgy, real estate, medicines and mechanical engineering. Addressing the inauguration session, Qiu set the tone by saying that the power shortage in Nepal is an important opportunity for Chinese companies to be involved in hydropower development in Nepal.

China’s interest on hydropower development was evident from the fact that the businesspersons told their Nepali counterparts that they wanted to invest in hydro projects ranging from 10 MW to 500 MW.

“This will pave the way for even the district-based small Nepali entrepreneurs to invest in a joint venture with the Chinese,” said Kush Kumar Joshi, president of Nepalese Chambers of Commerce and Industry (FNCCI). The Chinese side also said they discussed hydropower, tourism and agriculture, among others, and expressed willingness to bring in investment in Nepal. “We will bring reputed Chinese companies here to explore the new investment avenues in Nepal,” said ACFIC first vice-chairman Quan. (Continued after the box)

Sept 14: A 47-member team of Chinese entrepreneurs, hydropower experts and power developers arrived in Kathmandu on Tuesday (Sept 14) to attend a high-level conclave organised by the Federation of Nepalese Chambers of Commerce and Industry (FNCCI). Prime Minister Madhav Kumar Nepal will inaugurate the three-day “brainstorming session,” which Nepal’s top bureaucrats, policy makers and entrepreneurs will attend. “Investment in Hydropower” will be the 11th initiative in the Nepal-China non-Governmental Cooperation series started in 1996 during the visit of then Prime Minister Sher Bahadur Deuba to China. Vice Chairman of the National Planning Commission Dr Jagadish Chandra Pokhrel, Foreign Secretary Madan Kumar Bhattarai, Energy Secretary Shanker Koirala and entrepreneurs from the Nepali hydro power sector will participate in the conclave. Nepal and India had orgainsed such a conclave for two consecutive years after Jana Andolan II in 2006, with Nepal Electricity Authority and Power Trading Corporation of India as the lead agencies.

During the three-day segment, entrepreneurs and experts from both sides will give their perspectives on Nepal’s policy and investment opportunities on hydropower, and more importantly, how China can help the hydro power sector in Nepal. Quan Zhezhu, vice-minister of the United Front Work of CPC Central Committee (UFW) and party secretary of All China Federation of Industries and Commerce (AFIC) will lead the Chinese delegation. epresentatives from Snap Power Company, Sino Hydro and Dtang Company are interested in investing in the hydro sector in Nepal, said a government official. Kumin and Xian provinces that have extensive experience in developing hydropower and grid extension are also in the Chinese delegation.

“China wants to engage its state owned companies in Nepal’s hydro power sector, utilizing its huge foreign currency reserve. This is a clear indication that China wants to extend its quick growth to Nepal to tap our hydro power potential,” a senior Foreign Ministry Official said. Export and Import Bank of China (EXIM), Gezhouba Company, the builder of Three Gorges Dam are also interested in investing in Nepal, said sources.

Currently, Sunkoshi (10MW) hydro project has been completed with Chinese grant assistance, while the northern neighbour has offered a soft loan for the Trishuli-3A (61MW) project. Chinese aid for Nalsyaugad (400MW) is under consideration, according to the Ministry of Energy.

Chinese company Sinohydro, in a joint venture, is developing the Upper Marshyangdi (50MW) and the Hydrochina Corporation is developing the Trishuli 2 (102MW). Likewise, Chinese contractors are involved in the Upper Tamakoshi (456MW), Chamelia (30MW), Kulekhani III (14MW), Trishuli 3A, Lower Indrawati (4.5MW) and Madi (20MW). There are many Chinese equipment suppliers for many projects, according to the ministry. The FNCCI and the ACFIC signed a nine-point memorandum of understanding (MoU) on Thursday that sought to accelerate bilateral trade, tourism and investment. Although the MoU does not speak of the actual size of Chinese investment in Nepal, the Nepali business community is upbeat about the dialogue with the Chinese entrepreneurs.

“Nepali entrepreneurs will be reaching an agreement with Chinese entrepreneurs to start a few joint ventures on these areas within the next 3-4 days,” said Joshi. “It is likely that many joint venture projects could be signed within the next one month.”

Apart from hydropower, the Chinese have shown interest in investing in engineering consultancy, sub-stations, agro-processing industries such as herbal, Yarchgumba, tea, horticulture, fish processing, agriculture machineries and tourism. “They are also interested in investing in the mining, jams and jewellery sectors,” according to Joshi.

Given the increasing number of Chinese tourists visiting Nepal, the Chinese side also expressed willingness to promote Chinese tourists in Nepal. “They were interested to promote mixed and cultural tourism,” said Joshi. “A chairman of a Shanghai-based airline also expressed the desire to start Kathmandu-Shanghai flights of his airline.”

As of August 2010, Chinese tourists occupy the fourth position in terms of total arrivals in Nepal after India, United States and the United Kingdom. Although the number of Chinese tourists reached 15,298 as of August this year, it is far less compared to Indian ones with the number of Indian tourist going up to 69,661. However, it is almost equal to the number of the U.S. and the UK. The Chinese side also showed interest in investing in products on which China has given duty free access to Nepal along with other least developed countries (LDCs). Nepal’s 350 goods will be getting duty free access along with a total of 4,721 goods of LDCs.

Nepal’s trade with China is still very small compared to other countries, but it is growing. In 2009, the two countries’ trade volume reached US$ 440 million. It reached US$ 237 million during January to May 2010, according to the ACFIC. However, the trade deficit of Nepal with China is too high with Nepal exporting goods just worth US$ 7 million during the first five months of 2010. China has already become the second largest economy after the United States and its economic clout has been increasing not only in other countries but also in Nepal. This is evident by the fact that China topped even India, traditionally the biggest investor in Nepal, in the number of joint ventures in the fiscal year 2009/10.

According to the Department of Industries, aspiring Chinese investors registered 58 joint venture industries with a total project cost of Rs 731.25million last fiscal year against 27 JVs from India. However, the size of investment is far less compared to India with the southern neighbour seeking to invest Rs 7.78 billion. The Chinese investors seek to generate employment for an estimated 2,791 persons.

Meanwhile, on the political side:

Sept 12: The visiting Chinese delegation led by He Yong, vice-premier and secretary at the secretariat of the 17th Central Committee of the Communist Party of China, held separate meetings with President Ram Baran Yadav and Prime Minister Madhav Kumar Nepal on Sunday (Sept 12). In the meeting with President Yadav at Shital Niwas today issues regarding the peace and statute drafting, Nepal-China relations, among others, were discussed. On the occasion, President Yadav assured that Nepal is committed to the ‘one China’ policy.

Likewise, the Chinese officials urged Prime Minister Nepal political deadlock. The meeting was covened at the Prime Minister’s Office in Singhadurbar. The Chinese team has expressed confidence that national consensus will be forged and the peace and the statute drafting process will be concluded successfully, Rajan Bhattarai , PM’s Foreign Affairs Advisor informed. It has been learnt that discussions on the Nepal-China relations were also held on the occasion. The team expressed safisfaction over Nepal’s ‘one China’ policy and the vigilance adopted by the country over the Tibet issue, Bhattarai added. Likewise, the team assured that China will fully support the peace process in Nepal until its conclusion, without any interference. Similarly, the team indirectly signaled that China will not accept the interference of any foreign power into Nepal’s internal affairs, sources have confirmed.

The Chinese team is scheduled to hold discussion with the UML leadership at 3.30 p.m. today.

Sept 11: The UCPN (Maoist) leaders held discussion with the visiting Chinese delegation on Saturday (Sept 11). The 21-member jumbo team of Chinese officials arrived here in the Capital this afternoon at the invitation of major three political parties—the UCPN (Maoist), the Nepali Congress and the CPN-UML. The Chinese delegation enquired about the current political situation of Nepal during the meeting held at Soaltee Hotel in the Capital.

After the meeting, Maoist Foreign Department Chief said the issues including the constitution drafting, peace process and latest political development among other issues were discussed at the meeting. Maoist Chairman Pushpa Kamal Dahal, Vice Chairman trio Mohan Vaidya, Baburam Bhattarai, Narayan Kaji Shrestha and among other leaders were present at the meeting.

Following the meeting, the Chinese delegation met NC Acting President Sushil Koirala at the same hotel. Talking to reporters, Koirala informed the Chinese officials expressed concern over the peace process and statute drafting during the meeting. NC Vice Chairman Prakash Man Singh and Secretary Ram Chandra Pokhrel among other leaders were accompanying Koirala.

The visit of high-level Chinese delegation comes at a time when the political crisis is deepening in the country with the failure to pick a new prime minister. During their stay, the Chinese leaders are scheduled to meet top officials including President Dr. Ram Baran Yadav, Prime Minister Madhav Kumar Nepal, and leaders of other major political parties.

Earlier this month, former Indian ambassador to Nepal Shyam Sharan had visited Nepal as a special envoy of Indian Prime Minister Manmohan Singh.  Apparently, the Chinese officials’ political visit has made it clear that the northern neighbour, which was believed to be away from Nepal’s internal affairs, has been increasing its concern over Nepal.