Nepal's anti-graft body files corruption case on Chinese company over construction of Pokhara International Airport

Kathmandu [Nepal], December 7 (ANI): Nepal's anti-graft body, the Commission for Investigation of Abuse of Authority (CIAA), has filed a corruption case against 55 defendants, including the Chinese company, over the construction of Pokhara International Airport.

Filing the case in the Special Court, the graft body has named China CAMC Engineering, the construction division of state-owned conglomerate Sinomach and 54 others as the defendants.

"Since the construction of Pokhara Regional International Airport has been approved by the authorised authorities and bodies for 145 million US dollars, the procurement process should be started in accordance with the prevailing laws, including the Public Procurement Act, 2063 and the Public Procurement Regulations, 2064. It is seen that the contractor, China CAMC Engineering Co Ltd, acted with bad intentions, increased the cost estimate unnaturally without reasonable cause, and forced the other involved defendants to compete in accordance with the aforementioned laws to gain illegal benefits. Before entering into further work related to the procurement process, it was seen that it had written to civil servants of public institutions with bad intentions to increase the cost estimate by setting an unnatural price and increasing the cost estimate to 286.526 million US dollars," Information officer of CIAA stated in a release following the filing of the case in the Special court on Sunday.

China CAMC Engineering, the construction division of state-owned conglomerate Sinomach, played a pivotal role in the Pokhara airport project. It imported building materials and machinery from China, and the airport itself was brimming with Chinese-made security and industrial technology, despite China's claims about the project's quality.

The Pokhara International Airport, dubbed "White Elephant" in the preliminary stage, was estimated to cost NPR 14 billion, but the expenses were later raised to NPR 22 billion.

The quality of the construction materials used has always been in question, as the so-called International Airport is only seeing Chinese chartered aircraft landing, with others saying they will not fly in or out.

Earlier, the investigation made by a subpanel of the House of Representatives' Public Accounts Committee (PAC) also confirmed irregularities and corruption in the construction of the airport.

The subpanel also suggested that the soil at the construction site was not suitable for building the airport, as the runway's elevation had to be increased. Although nearly USD 5.5 million was paid to transport the soil and pebbles to the site from at least 5 kilometres away, the study found that no soil was brought in from outside.

Similarly, the runway elevation must be between 2,677 and 2,674 feet above sea level, as per the agreement. Filling of the sand and pebbles was necessary to attain the required elevation. However, the runway was built at 2,636 feet above sea level, going against the agreement, the study had shown.

As per the agreement with the Chinese company awarded the contract to construct the airport, there is a clause requiring it to make all necessary arrangements to build and operate the airport.

Likewise, it was the responsibility of the Chinese contractor to install all the AC units (Air Conditioners) at the airport. Still, the CAAN spent another USD 742,659 to install the HVAC system.

During the construction of drainage along the runway, taxiway, and apron, USD 1,06,48,000 was paid to the Chinese contractor, but the subpanel found that the payment was made without any work being done.

Similarly, the Chinese contractor has been found to have been paid USD 4.435 million without undertaking the work of pressing the soil to level the runway, taxiway, and drainage. The subpanel has made another astonishing discovery: the Chinese contractor was paid 5.5 US Dollars without bringing in soil from an external source.

The subpanel then found that "the construction company has been given a tax exemption worth Nrs. 2.2 billion, though the contract agreement clearly says that the construction company would pay the taxes.

The subpanel has concluded that the Civil Aviation Authority of Nepal, overseeing the construction, be directly involved in the corruption and irregularities. The report has recommended the immediate suspension of Pradeep Adhikari, director general at the authority, as well as further investigation. Adhikari served as the project's head from 2014 to 2017.

In Sunday's release, the anti-graft body has named five former ministers, Ram Sharan Mahat, (late) Post Bahadur Bogati, Ram Kumar Shrestha, Bhim Acharya, and Deepak Amatya as defendants.

In the list of defendants released by CIAA's Information Officer, Ganesh Bahadur Adhikari, ten former secretaries have also been named, including Pradeep Adhikari, the former Director General of the Civil Aviation Authority of Nepal (CAAN).

As per the court filing, the anti-graft body has sought damages of approximately NRs 8.36 billion.

The Pokhara International Airport, which since its opening earlier this year hasn't seen many international flights, except for the occasional chartered Chinese flights.

Dubbed as a dream come true for locals of Pokhara, the tourist destination of Nepal, the Pokhara International Airport, upon its completion, has been claimed to be part of China's grand ambitions, aligning with President Xi Jinping's signature infrastructure campaign, the Belt and Road Initiative (BRI).

Days before the formal inauguration of the airport, the Chinese Ambassador claimed it to be part of BRI, which was rejected by Nepal Government. Soon after the handover, the Pokhara airport exemplified the perils of importing China's infrastructure-at-any-cost development model, disproportionately benefiting Chinese firms at the expense of the borrowing nation.

Multiple individuals involved in the project, along with a thorough examination of thousands of documents, indicated that China CAMC Engineering had consistently dictated terms to maximise profits and protect its interests. Simultaneously, it systematically dismantled Nepali oversight. As a consequence, Nepal found itself entangled in significant debt to Chinese creditors without the expected influx of passengers to repay the loans.

Finance Ministry of the Himalayan Nation had signed a memorandum of understanding supporting CAMC's proposal in 2011, even before an official bidding process had started. The Chinese loan agreement exclusively allowed Chinese firms to bid for the project.

CAMC initially submitted a bid for USD 305 million, nearly double Nepal's cost estimate for the airport. This drew criticism from Nepali politicians, who accused the process of being rigged and the price of being inflated. Following the outcry, CAMC lowered its bid to USD 216 million, reducing the cost by approximately 30 per cent.

In 2016, China and Nepal formalised a 20-year agreement for the project, with a quarter of the funding provided as an interest-free loan. Nepal intended to borrow the remainder from China's Export-Import Bank at a 2 per cent interest rate, with repayment scheduled to begin in 2026.

As construction progressed, glaring issues came to light. The Civil Aviation Authority of Nepal was responsible for overseeing the Chinese contractor, but the lack of experienced personnel, combined with the inadequate allocation of funds for consultants, hampered the project.

Initially earmarked at USD 2.8 million, the budget for hiring consultants to ensure CAMC's compliance with international construction standards was eventually reduced to a mere USD 10,000, diverting funds elsewhere.

This lack of oversight allowed CAMC to initiate work before consultants were in place and perform construction work that did not meet international standards. Key components, such as soil density tests for the runway's foundation, were omitted, jeopardising the runway's future stability.

Other oversights included the airport's drainage system design, the omission of historical rainfall data, and the neglect of sloping topography, all of which increased the risk of flooding. The quality of Chinese-made building materials and the identities of vendors were inadequately documented, in contravention of CAMC's contract with Nepal.

While consulting efforts were expected to oversee CAMC's work, the Chinese company managed to sidestep consultants and interact directly with Nepali officials who had limited construction experience. Any efforts to seek additional information or documentation were often fruitless.

China's Export-Import Bank had commissioned China IPPR International Engineering, a consulting firm, to ensure the project's quality, safety, and schedule, and to confirm Nepal's satisfaction with CAMC's work.

However, the situation grew murkier in 2019 when CAMC acquired IPPR, turning it from a sister company into a direct subsidiary. Nepal paid IPPR's fees as part of its loan from the Chinese bank.

Furthermore, allegations surfaced that documents related to the qualifications of IPPR's workers in Pokhara had been falsified. In some cases, even employee credentials were manipulated. Such practices revealed a disconcerting disregard for transparency and accountability.

As Pokhara airport struggled to attract international flights, especially from Indian airlines, Nepal's aspirations for the airport were put in jeopardy. Buddha Air, Nepal's largest airline, had requested permits for flights to India but awaited approval from the Indian government. A feasibility study commissioned by CAMC had projected passenger numbers that would enable the airport to repay its loans from profits, but as of now, no international flights have commenced.

Nepali officials have reportedly requested that China convert the loan into a grant due to the airport's financial challenges, a matter discussed during Prime Minister Pushpa Kamal Dahal's visit to Beijing in late September 2023. The joint statement issued by China and Nepal during the visit acknowledged the completion and operation of the Pokhara airport but made no mention of plans to waive the loan.

The Pokhara airport serves as a stark example of the pitfalls of importing China's infrastructure development model, highlighting concerns about financial sustainability and transparency while fueling geopolitical rivalries in the region. (ANI)

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