Chinese state firm criticises Nepal over decision to scrap US$2.5bn dam contract

Gezhouba Group says it is confident ‘invalid’ decision will be reversed after elections where pro-China bloc is tipped for victory

PUBLISHED : Friday, 01 December, 2017, 4:41pm
UPDATED : Friday, 01 December, 2017, 9:50pm

The Chinese state company awarded a contract to build a dam in Nepal has criticised the decision to scrap the deal as “invalid” but expressed confidence that the decision would be reversed after the country’s elections.

China Gezhouba Group has demanded a response from Nepal’s ministry of energy before Friday, following the announcement that the US$2.5 billion hydroelectric project would be cancelled in mid-November.

“[The decision] took us quite by surprise,” the Chinese company said in a letter dated November 17 addressed to the Nepalese government.

“We do not see that the Memorandum of Understanding has been validly terminated.”

The letter has been obtained by the South China Morning Post.

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A memorandum of understanding was signed in June, awarding the company the contact to build the Budhi Gandaki dam – located at about 50km west of Kathmandu – to generate 1,200 megawatts of hydro power annually.

The MOU allowed any party to terminate the deal “at any time, by giving 30 days’ written notice to the other party” along with its reasons for doing so.

Nepal Deputy Prime Minister Kamal Thapa formally announced on November 13 that the plan had been scrapped.

Yet the company has accused the Nepalese government of “unfair conduct” for cancelling the deal saying it had failed to “attribute a valid reason” and has given no prior notice to them.

It also said Kathmandu had not convened the regular meetings agreed in the MOU despite the efforts of the Chinese side.

“Considering all the efforts we have made on the project, we henceforth kindly request you to reverse this decision,” the letter said.

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The decision by Nepal’s caretaker government to cancel the deal – which was agreed by a previous administration – highlights the country’s divisions over how close it should be to China, which has

emerged as an alternative to its traditional ally India.

The cancellation was seen as an attempt by the pro-Indian Congress Party, which leads the current government, to counteract the pro-Chinese Communist bloc that is currently leading in the opinion polls.

A spokesman for Gezhouba said the company was confident that it would “get back” the contract after the elections.

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Nepal is holding its first election under its new post-civil war constitution.

The two-phase elections that end on December 7 will elect the first 275-member parliament and provincial assemblies.

The pro-Chinese bloc led by the Communist Party of Nepal (Unified Marxist- Leninist) and the Communist Party of Nepal (Maoist Centre) along with the smaller Naya Shakti party.

Khadga Prasad Sharma Oli – the chairman of the bloc – had warned the transitional government not to cancel the deal.

But Thapa, a member of a smaller pro-monarchy party, denied that it was a political decision, and blamed the “irregular and thoughtless manner” in which the deal had been signed by a previous coalition, of which Maoist Centre had been a member.

At the time the contract was given to Gezhouba critics had warned that it had not gone through an open bidding process as required by law.