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EFSAS Commentary

Nepal: China’s policy of Neo-Colonialism bears underlying implications for the regional stability of the Indian subcontinent


During a meeting of the members of the PHD Chamber of Commerce and Industry (PHDCCI) in New Delhi on 26 March 2019, hosting stakeholders from both Nepal and India under the umbrella of Indo-Nepalese cooperation, the Nepalese Ambassador to India, Nilambar Acharya, emphasised that the emerging close ties between Nepal and China will not come at the cost of India, aiming to dismiss India’s concerns regarding Beijing’s growing economic influence over the small, yet highly geo-politically strategic Himalayan country. Nepal’s regional significance stems from the fact that the country finds itself squeezed between two Asian rising powerhouses, India and China, which have been competing for their conflicting economic, political and cultural interests.

The Nepalese Ambassador reiterated during the meeting, "India and Nepal have been close countries for ages and are even common inheritors of similar and identical civilization. Therefore, both nations should make continuous efforts to further broaden the scope of their relationship for mutual gains and comforts". Yet, this deep-rooted relationship appears to be drastically under threat due to Nepal’s flirtations with China.

In 2018, Nepal's Department of Industry (DOI) stated that China remains the largest source of investment, development aid and economic support in the country, with Chinese investment for the period between 2017 and mid-2018, accounting for 84% of the total $505 million, namely $427 million, leaving India on a second place with investments worth $46 million, followed by the US, with $9 million. According to the DOI, Beijing remained on top of the chart of Nepal’s Foreign Direct Investment for the periods of 2016-17 and 2015-16 as well. During the Nepal Investment Summit 2017, China pledged around $8.3 billion in various sectors of Nepal’s economy, which constituted 61% of the total amount pledged, around $13,52 billion. India’s bit, in comparison, constituted the modest amount of $317 million. The very same scenario is projected for the currently ongoing Nepal Investment Summit 2019, 29-30 March, where China’s representatives once again outnumber the delegation of India.

A year earlier, in May 2017, Beijing signed a Memorandum of Understanding (MoU) on the Belt and Road Initiative with Kathmandu for the purposes of opening new connectivity routes through building roads, railways, ports and aviation, alongside further investments in communication technologies, hydropower and energy projects, finance and tourism. At the heart of the deal lies the infrastructural endeavour of building a railway line through the rugged Himalayan mountains, which will eventually link the Chinese-controlled region of Tibet with Kathmandu. On one side, the question arises whether the envisioned transit project is technically feasible considering the complex geological terrain and arduous engineering work, indicated in a statement by the Nepalese Department of Railways, according to which around 98.5% of the railway line will be bridges and tunnels, and on the other – whether the project, which could cost up to $7-8 billion, is financially attainable in light of Beijing’s legacy of debt-stricken and destitute countries behind its back. Since financial arrangements have not been yet officially made it still remains to be seen whether Nepal will contemplate on the faith of its South Asian neighbours like Pakistan and Sri Lanka, which have fallen prey to Chinese irredeemable debts, or will decide to follow the same doomed path.

Meantime, China’s growing influence in Nepal must be further analysed in respect to its attempts to forge military ties and provide financial assistance to the Nepalese Army. Apart from financial support in the form of transport and energy project investments, Beijing has been supplying military equipment and training to Nepali Army personnel, alongside academic scholarships at Chinese military universities for Nepali students. The first joint military exercise between the two countries, titled ‘Sagarmatha Friendship 2017’, took place in April 2017, while the ‘Sagarmatha Friendship - 2’ drill took place in September 2018, days after the Nepal Army pulled out last minute from the Bimstec joint military exercise in India.

Having said that, India still remains the major patron in regards to military training and the largest supplier of arms and logistical equipment to Nepal, yet Nepal’s affair with China bears much more underlying implications, not only for New Delhi, but for the entire regional stability of the Indian subcontinent. 

A report, titled ‘Between Giants: China, India, and Security Sector Reform in Nepal’ written by Subindra Bogati, Chief Executive of the Nepal Peacebuilding Initiative and Julia Strasheim, Researcher at the Federal Chancellor Helmut Schmidt Foundation and Research Associate at the GIGA German Institute of Global and Area Studies in Hamburg, explains in-depth how Chinese support for Nepal’s security and military sector will “…restrict space for human rights and civil society, overlook current security challenges, and thus exacerbate institutional drivers of instability in the long run”. The authors further referred to China’s purposeful targeting and heavy investment in the Nepalese Armed Police Force (APF), which has been widely condemned in human rights abuses and which guards the Nepal-China border, thus assisting China in the curbing of Tibetan refugees and the suppression of their political activities.

As Nihar R. Nayak, Research Fellow at the Institute for Defence Studies and Analyses (IDSA) further elaborates, “…the prolonged political turmoil in Nepal (nine Prime Ministers in the last 10 years) has unnerved China about threats from Tibetan separatists”. Therefore, according to him, Beijing has shifted its strategy from the initial state-to-state level to institutional as well as grassroot levels, infiltrating not only economically and politically but also socio-culturally.

This multifaceted strategy becomes particularly visible through China’s exploitation of the Buddhist religion and its attempts in crafting a new Nepali national identity, which suits the ulterior objectives of the People’s Republic of China. In 2011, the atheist superpower invested $3 billion in the town of Lumbini, the birthplace of Buddha, in the building of an airport, temples, hotels, shopping centres, highways and a Buddhist University, along with the installation of water-, electricity- and communication systems. Through these investments, China not simply obtained access to Nepal’s tourism economy, which is strategically important for its New Silk Road Initiative, but also secured an important pawn in its game of controlling and supressing Buddhism in the region. As Lauren Jackson, journalist for the Diplomat has argued, “Now, Chinese officials determine who has access to worship at the site; meaning they can exclude the Dalai Lama, whom Beijing has described as a “wolf in monk’s clothes”, and prominent Tibetan separatists from accessing Lumbini. This is a significant win in China’s strategic goal of silencing critics who hope to maintain the salience of the movement to liberate Tibet”. Hence, through using religion as a diplomatic tool for economic enrichment, China is establishing and fortifying its influence in the Himalayan country.

Only in the backdrop of such analytical framework, one is able to assess the role of India, its apprehensions, objectives and capabilities in regards to the stability of Nepal and the rest of South Asia. 

The important historic ties, which India and Nepal have been sharing since signing the 1950 India-Nepal Treaty of Peace and Friendship experienced decline when India imposed economic border blockade on Nepal in 2015, at a time when Nepal went through a humanitarian crisis owing to recent earthquakes. That year set an overriding precedent for the Sino-Indo-Nepalese triangle; not simply did Nepal suffer hardship from its lifelong patron, but China, in reverse, established itself as a seemingly magnanimous and generous crying shoulder willing to provide support.

It becomes imperative for New Delhi to rectify the recent neglect towards its old-time ally by handling the relationship better, reaffirming their mutual goals and providing opportunities for development and security projects. As Rajeswari Pillai Rajagopalan, Distinguished Fellow and Head of the Nuclear and Space Policy Initiative at the Observer Research Foundation, has argued, “unless India strengthens its delivery capacity, New Delhi is bound to continue to lose to China”.

India must recognize the importance of boosting its ‘neighbourhood first policy’ and increase its bilateral ties with other South Asian countries, otherwise, China’s ‘neo-colonialism’, not only economic, but as presented in this case – political, social and cultural – will continue to thrive.