China’s economic influence in Nepal is growing rapidly. Chinese direct investment nearly doubled between 2007 and 2011; China now ranks as the second largest foreign investor in the country after India. But amidst thriving economic ties between the two countries, controversies surrounding Chinese-backed projects have intensified. A series of Chinese-backed infrastructure projects have run over schedule and been accused of corruption.
Water diversion debacle
In September 2012 the Nepalese government terminated a contract with China Railway 15 Bureau Group Corporation, a Chinese state enterprise, to construct a tunnel for the Melamchi Water Supply Project.
Melamchi is a national priority for the Nepali government and will supply drinking water to Kathmandu, which is currently facing a severe water crisis. The engineers had planned to siphon the waters from a Himalayan river through a 26 kilometre tunnel blasted through the hills northeast of the city.
But the project has been a source of conflict for more than a decade due to financial irregularities and local resistance. Residents of Melamchi Bazaar have demanded that profits from the project are invested back into affected communities, since their water resources will be used by people in Kathmandu.
“It is our resource, so when it is used we should get some benefits. We demanded adequate investment in education, health facilities for locals,” said Jimilal Majhi from Sindhupalchowk district. He also said that the Chinese contractor had behaved badly towards communities. “They behave like [they do] in China which doesn’t work in the democratic country like Nepal,” added Majhi.
Critics say the project won’t even succeed in solving the city’s water supply problems; this requires better management, along with conservation and rainwater harvesting (at least 40% of the city’s water is wasted through leaky pipes according to the government – outside estimates put that figure almost twice as high).
But this is not the end of the story. In May, the Trishuli 3-A hydro project in Rasuwa — a district bordering China — plunged into controversy after the China Gezouba Company Group attempted to increase the capacity of the project from 60 to 90 megawatts. This move was met with protests from the union of the Nepal Electricity Authority and huge criticism from the media.
The hydro project is being built by the state-owned China Gezouba Company Group and will cost US$ 89 million, funded by soft loans from the China Exim Bank. The government awarded the construction project to the Chinese firm in 2009, but instead of completing the work it started lobbying to upgrade the project capacity. Construction was due to be finished by next year, but the company has only completed 30% of the work so far.
The union expressed their opposition to the plans by disconnecting the minister’s Kathmandu residence from the electricity grid. They argued the upgrade would only serve to make a few individuals very rich. “We are not going to get 90 megawatts of electricity in the winter [dry season] when there is an acute electricity crisis … and there is no need for power in summer when there is plenty of rainfall and electricity generation is high” said union secretary Bhuminanda Aryal. “The decision to upgrade was due to the vested interests of some people in the energy ministry and the Chinese contractor.”
In June a group of former ministers demanded that the electricity authority withdraw the decision to upgrade, after which the upgrade was cancelled. Energy Secretary Hariram Koirala, was sacked and the government refused to renew the visa of the Chinese consultant working on the hydro project, blaming him for the delay..
Former prime minister Baburam Bhattarai, whose cabinet originally approved the project, defended the decision and denied allegations of corruption. When The Third Pole spoke to Mr. Koirala he claimed that the extra power would benefit the country.
However, whilst the project was certainly late, and its upgrade probably unnecessary, it may be worth treating some of the other allegations with caution, in particular those about corruption in Chinese-backed projects. “This is the propaganda made by pro- Indian investors as they are afraid of growing Chinese investment in Nepal and the majority of the Nepali media can’t go against the Indian lobby,” said Madan Regmi, president of the China Study Centre in Kathmandu. “If we want to develop this nation, China should be given space that would allow for both rivalry and partnership.”
Ramesh Prasad Bhushal is a Kathmandu-based journalist.