China FDI footprint growing in Nepal

Sachin Parashar

 Aug 3, 2016

NEW DELHI: While India has reasons to feel upbeat about the incoming PK Dahal Prachanda’s government in Nepal, it may still struggle to ensure Nepal does not become inordinately reliant on China for its development. 

According to Nepal’s Department of Industry, China again pledged maximum FDI in Nepal for the fiscal year 2015-16. While China committed $57 million as FDI, India stood third with $18 million.

India disburses aid to Nepal worth $50-70 million every year and its commitment to Nepal cannot be measured only in terms of pledged FDI, but the latest figures on FDI again make manifest China’s increasing economic footprints in the country. The economic blockade, which crippled Nepal’s economy, likely also impacted India’s FDI commitment in 2015-16. China’s pledged $57 million in 2015-16 is 40 per cent of all FDI committed to Nepal in that fiscal year. 

As against the $600 million commitment Nepal received in 2014-15, only $140 million was pledged to it in 2015-16, mainly because of the political uncertainty. China’s share though remained steady in terms of percentage of total FDI committed. The ouster of KP Sharma Oli has come to China as a setback but Beijing already has too much at stake in Nepal and will look to bounce back just the way it did in Sri Lanka after the shock defeat of Mahinda Rajapaksa two years ago. 

Its ambassador in Beijing met Prachanda last week and the Maoist lead

er, who will take over as prime minister soon, is said to have assured him that Nepal will implement all the bilateral agreements which his predecessor Oli signed with China. Aware of the resentment in India over Oli, whom the Maoists had supported until now, Prachanda had last month sent his aide Matrika Prasad Yadav to reach out to New Delhi.

Earlier this year, Nepal counted the UK, US, Japan, China and Switzerland as its top 5 bilateral development partners on the basis of official development assistance (ODA) disbursement, leaving out India from the list for the first time in past 5 years.

While its finance ministry said ODA disbursement by India plummeted from over $47 million to $22 million in 2014-15, MEA said India continued to disburse aid worth over $50-70 million every year to Nepal.