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Nepal dam deal opens door to China -By Dhruba Adhikary

The Nepalese government’s go-ahead early this month to construction of a US$1.8 billion dam by China Three Gorges Corp (CTGI), the country’s first major hydropower project, may pave the way to other resource projects that will help create jobs and cut poverty in a region dominated by China and India. The snow-fed rivers cascading down the Himalayan range are Nepal’s main natural resource.

CTGI is expected to complete the US$1.8 billion West Seti River project in the west of Nepal, with an installed capacity of 750 megawatt (MW), by the end of 2019. The government confirmed the project early this month after a parliamentary inquiry followed the signing of a memorandum of understanding (MoU) with the Ministry of Energy on February 29.

Nepal has extended a warm welcome to more Chinese hydropower companies to invest in projects worth US$400 billion following the approval of the CTGI contract, China Post reported this week. Heavy involvement by Chinese companies in Nepal will raise geopolitical concerns in New Delhi, as well as questions over India’s ability to exploit its small northern neighbor’s water resources.

“In terms of capital, nobody can compete with China,” Nepalese legislator Binod K Chaudhary told reporters on the sidelines of the Boao Forum for Asia in China’s Hainan province, said the China Post report, which could not be confirmed.

The West Seti project will help bring relief to some of the estimated 40% of Nepal’s 28 million people who do not yet have access to electricity, while others have to endure bitterly cold winters with up to 14 hours of blackouts on an almost daily basis. Nepal’s total power generation does not exceed 700 MW, in a country that has potential to generate up to 42,000 MW of electricity through hydropower projects.

“This is precisely the type of project Nepal has needed for a long time,” said Ratna Sansar Shrestha, one of the country’s leading energy experts. In his view, West Seti should serve as an ideal project to help realize Nepal’s long-term goal of raising farm productivity through irrigation, and through efficient and pollution-free energy to industries and surface transport systems.

Nepal’s first hydropower plant, which generated 500 KW, became operational in 1911. It is now a museum piece at the southern edge of the Kathmandu Valley.

CTGI is to secure necessary loans from Exim Bank of China. The presence of China’s ambassador to Nepal at the MoU signing ceremony indicated official endorsement of the plan. CTGI will invest 75% of the project, with the remaining 25% the responsibility of the government’s Nepal Electricity Authority (NEA).

“The project will be developed for domestic consumption of electricity,” the MoU states.

The project had previously been given to Australia’s Snowy Mountain Engineering Corp (SMEC), which aimed to sell the bulk of electricity to Nepal’s southern neighbor, India. SMEC could not mobilize adequate money even after 16 years of effort, and the Nepalese government scrapped the agreement last July and began negotiations with other interested parties.

“It was ridiculous to make West Seti an export-based project while keeping the country’s domestic needs unmet and suppressed,” said Dipak Gyawali, who as minister responsible for water resources started the process of canceling the deal with Australian company.

Gyawali, also an energy expert, told Asia Times Online that the newly approved project could be safely converted into a multi-purpose scheme for using “regulated water” for running fisheries as well as navigation in addition to irrigating farmlands in adjacent districts.

The Nepali side, not the Chinese side, should take initiatives to make multiple use of regulated water, he said.

The West Seti project involves construction of a 187 meter high and 445 meter long concrete dam to store regular river water and additional water received during the rainy season. About 16,000 villagers in the area need to be resettled.

CTGI’s interest became evident shortly after a visit to Nepal by Chinese Premier Wen Jiabao in January when he separately offered economic and technical assistance equivalent to $119 million.

The decision to go ahead with the dam comes while the country’s politics remain unsettled following the May 2009 toppling of the Maoist-led government that had won elections the year before. The most recent government, formed last August, is led by Prime Minister Baburam Bhattarai with the backing of the Unified Communist Party of Nepal (Maoist), the largest body in parliament.

A popular perception of Nepali Maoists is that their frontline leaders are opportunists, with a disgruntled faction openly denouncing Bhattarai as an Indian puppet, while supreme leader Pushpa Kamal Dahal, also known as Prachanda, is projected as the protector of Bhattarai.

Instead of waiting for more signs of political stability, China apparently believes it is appropriate to resume assistance to its small, mountainous neighbor for the ongoing drive to expand its infrastructure base.

“A friend in need is a friend indeed is a familiar maxim,” said Upendra Gautam, who has spent over 20 years in the study of water economics of South Asian countries. In his opinion, it would be unfair to conclude that China was advancing its helping hand to Nepal just at a time when this country was being governed by a coalition led by a political party that prefers to identify itself as Maoist.

In any case, official Chinese policy has been to deal with the leadership that runs the contemporary government, and, unlike Delhi, Beijing is not seen taking sides or picking victorious candidates. That probably was one reason it previously dealt with Nepal’s monarchy so long as it provided stability to Nepal.

Chinese diplomats in Kathmandu have also consistently maintained that their country would not compete with India in Nepal.

The Chinese approach towards India in the context of relations with Nepal is mentioned in the autobiography of the late B P Koirala, Nepal’s first democratically elected prime minister. In a reference to his last meeting with former Chinese premier, the late Zhou Enlai, at the end of his China visit in 1960, Koirala quoted Zhou’s comments on economic assistance that China wanted to develop friendship with Nepal, but the international community wanted to see it competing with India.

It appears that a now far stronger China has not changed this basic position.

India ostensibly takes the opposite view. Indian security and intelligence agencies often construct alarming scenarios to justify their activities, and expenses, to carry them out. Late last month, India co-hosted in Kathmandu the “Hydropower Summit 2012” with potential developers from India as main participants.

India also unofficially organized a tour for “energy” reporters of Nepal’s print and electronic media outlets. It was presumably meant to create an atmosphere whereby GMR Group, an Indian infrastructure developer, could reopen its office in the vicinity of Karnali River in the northwest hills of Nepal. The office was set on fire last year by people opposed to Indian efforts to construct hydropower stations and take the lion’s share of electricity and regulated water across the border.

Delhi took the action as an angry onslaught by Maoist cadres, but senior dissident Maoists insist it was a spontaneous move by patriotic Nepalis who had learned from bitter 50-year experience how India can deliberately short-change Nepal through water resource agreements.

Tulanarayan Sah, who two years ago contributed to a report on how the state could share its resources among citizens, said in an article in the NEPAL weekly magazine that India’s eyes were on regulated water from West Seti.

Delhi would also consider the presence of a prominent Chinese company in Nepal as a strategic challenge.

Some analysts think that Delhi’s attitude towards Nepal is bolstered by the United States, which approves Indian measures to contain China, leading to Nepal being deprived of possible economic gains even if Washington usually remains sympathetic to Nepal.

The prospect of a large Chinese company (CTGI is one of China’s top six energy producers) entering Nepal prompted a pro-India lobby in the Nepalese parliament to halt implementation of the MoU with CTGI. The committee on natural resources instituted a probe with the intention of disqualifying the Chinese company from taking up the project.

However, since no substantive issues to oppose the deal were found, the committee gave the go-ahead, together with suggestions to rectify procedural flaws in the MoU. The approval came in the aftermath of media reports that CTGI had sent a letter to the Nepal government threatening to pull out of the project if fresh hurdles were created.

Lawmakers had raised concerns that Nepal’s government had awarded the contract without opening it up to international bidding, prompting the Chinese company to threaten in March that it would scrap the project unless things moved forward, the Wall Street Journal reported on April 2.

Those who favorably viewed China’s interest and investment in West Seti took exception to the parliamentary committee’s intervention as encroachment on the powers of the executive wing of the state.

“I was shocked to find the committee issuing a stay order and behaving like the Supreme Court,” Bipin Adhikari, a constitutional lawyer, told Asia Times Online. His stinging comment also appeared in a leading Kathmandu newspaper.

Resentment over growing Indian interference is not likely to be confined to media debate and court cases. Over time, incidents such as the one associated with the GMR office might happen in too many places and too frequently to be prevented. Since the end of monarchical power in 2006, public anger that used to be directed at the monarchy is now often directed at New Delhi.

Gopal Siwakoti “Chintan”, an international water law expert, said, ” If Delhi does not reconsider its current attitude to prevent others from working in Nepal, India-registered companies might also find it difficult to carry out their project works in this country.”

Dhruba Adhikary is a Kathmandu-based journalist.

(Copyright 2012 Asia Times Online (Holdings) Ltd. All rights reserved. Please contact us about sales, syndication and republishing.)

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