FinMin Mahat China-bound with extensive agenda

KATHMANDU, AUG 06 -

Finance Minister Ram Sharan Mahat is scheduled to lead a delegation to China on Wednesday to discuss Nepal’s membership in the China-sponsored Asia Infrastructure Investment Bank (AIIB) and other bilateral economic issues.

Mahat will meet with Chinese finance and commerce ministers and hold talks on enhancing economic relations. They will discuss the state of present ties and future areas of cooperation, said Finance Ministry officials.

Madhu Marasini, chief of the international cooperation coordination division at the ministry, said that he would be heading the technical committee during negotiations at the fourth consultative meeting on the establishment of the AIIB.

The Cabinet has decided to become a founding member of the bank which is expected to provide an alternative window of financing to Nepal whose infrastructure is one of the poorest in the world.

“We will inform the Chinese side about the Cabinet decision to become a founding member of the bank,” said Marasini. “We will hold negotiations at the consultative meeting to ensure that Nepal gets the maximum benefit from the proposed bank.”

According to a recent study conducted by the World Bank, Nepal has a funding gap of $ 13-18 billion between 2011 and 2020.

Government officials believe that as a founding member of the bank, Nepal will be in a position to get financing to improve its poor infrastructure at a lower interest rate. “As the bank is expected to provide priority financing to its founding members, Nepal will benefit much from being a founding member,” said Marasini. Prospective founding members of the bank are expected to sign a formal proposal in October this year. “The consultative meeting to be held on Aug 7-8 will finalize how much capital Nepal should invest and how many nations will become its founding members.”

According to government officials, it has been agreed that the capital investment by each founding member will be determined on the basis of its gross domestic product (GDP).  

The bank will have a paid-up capital of $ 50 billion and an authorized capital of $ 100 billion. China has pledged to put up half of the paid-up capital. It is not clear how many countries will become founding members of the bank. China has approached Sri Lanka, Pakistan, Bangladesh, Malaysia, the Philippines and Laos, among other countries, for possible membership.

Finance Minister Mahat is also scheduled to hold talks with Chinese ministers on other issues including lack of progress on the West Seti Hydropower Project, Nepal’s trade deficit with China and development of Pokhara regional international airport.

In August 2012, Investment Board Nepal (IBN) and CWE Investment, a subsidiary of China Three Gorges Corporation, had signed a revised memorandum of understanding (MoU) to develop the West Seti Project, but no concrete progress has been achieved on the much talked about project.

Nepal also suffers a huge trade deficit with China. The deficit amounted to Rs 67 billion as of the first 11 months of the current fiscal year. The government recently approved the construction of the Pokhara regional international airport by China CAMC Engineering Co at a revised price.

During the talks, Nepal will also urge China to reactivate the Inter-Government Economic and Technical Committee headed by the finance secretaries of the two countries. It has not met since 2007 even though meetings were agreed to be held annually in the two countries alternately. “Once this committee is reactivated, many bilateral economic issues will be sorted out through this mechanism,” said Marasini.

Source: The Kathmandu Post