By S. Sultan

Recently, Nepal has witnessed several evolving achievements. During the recent official visit by Nepali Foreign Minister on August 9, China announced an approximately USD $117 million grant and several infrastructure projects. Meanwhile, India has granted Nepal access to its western seaports in Gujrat for transit trade, which carries significant political and economic weight in Nepal.
As a landlocked country between two regional countries and one of the largest beneficiaries of U.S. development aid in the region, Nepal has become a key area of interest for regional and international powers. However, Kathmandu has been carefully balancing all external players within its ‘non-aligned’ approach, concentrating on national developmental requirements. With elections scheduled for November 2022, Nepal’s methodology will likely continue regardless of a change in government.
Mentioned as a Least Developed Country (LDC) by the United Nations, refining infrastructure is a key national goal for Nepal to attain economic affluence. Nepal has been leveraging its geopolitical and economic interests to pursue a promising financing mechanism for its grant projects and faster implementation from China and India, especially after ratification the U.S. Millennium Challenge Compact (MCC).
In February 2022, Nepal endorsed the USD $500 million MCC-Nepal Compact five years after officially accepting the aid, despite large-scale protests in Kathmandu and from China against US’ “coercive diplomacy” in Nepal. However, Nepal’s Parliament ratified the MCC on its own terms with a 12-point announcement that the agreement is a developmental compact and not a military or security alliance. After the endorsement of the MCC, Nepal has also been more cautious in dealing its relationships with adjacent countries, both geopolitically and geo-economically.
Due to the geo-strategic significance of Nepal, both New Delhi and Washington desire to maximize their developmental projects in Nepal to have a sway in the internal affairs of Nepal to cope with the growing influence of China in the Indio-specific region. Although, Nepal has signed development agreements but has been cautious of military or security partnerships. For instance, in May 2022, Nepal signed a five-year bilateral assistance agreement with USAID for USD $659 million. However, in June 2022, protests in Kathmandu and misgivings from China led to the termination of the signing of the State Partnership Program (SPP) between the Nepal Army and the US National Guard.
With China, Kathmandu has also managed to secure more grant projects to fulfill its development needs, despite rising protests and reports on its infringement into Nepal’s territory. During the mutual visits of the Chinese Foreign Minister to Kathmandu in March 2022 and the Nepal Foreign Minister's visit to China in August 2022, Kathmandu got grants of RMB 600 million (approx. USD $87.6 million) and RMB 800 million (around USD $117 million), individually, for financial and procedural cooperation. In addition to this, the Chinese foreign minister also decided to execution of infrastructure projects, including the construction of the second phase of the Kathmandu ring road along with a cross-border electricity line.
China’s announcements of grants to Nepal come against the backdrop of increasing Indian and U.S. interferences and interests in Nepal. Though China has managed its image in the region, there are still some hurdles in their mutual relations between china and Nepal. As China has not opened imperative trade routes for Nepal such as the Rasuwa-Keyrung and Tatopani- Jangmu ports for two-way trade in spite of Kathmandu's repeated requests. Under the Belt and Road Initiative (BRI), which Nepal signed in 2017, still many projects have not started yet.
Equally, America and India are trying to influence Nepal, both economically and diplomatically for their own interests which seems not possible due to the presence of ambitious china. Despite scaling up interests in Nepal, both India and the United States have not been able to counter China’s increasing presence and investments in Nepal. For the U.S., timely completion of the MCC and USAID projects in Nepal is a foremost challenge.
Moreover, its support for inclusive governance, regulations, and policies in Nepal must remain transparent to avoid political backlash. As Kathmandu has already made it clear that it would not like to be a part of any geopolitical or security alliance that affects its developmental interests and can also jeopardize regional peace. The upcoming elections in the country are also a litmus test and contest between pro-china and American-led India. The result of the elections would be decisive in this regard.