China-built airport in Nepal littered with corruption, finds inquiry

Bhadra Sharma & Daisuke Wakabayashi

 

A government inquiry into a new $216 million international airport in Nepal’s second-biggest city found that “irregularities and corruption” by officials and lawmakers had allowed a Chinese state-owned contractor to ignore its obligations and charge for work it never completed.

 

In a 36-page report released on Thursday, a parliamentary committee’s investigation into the airport in Pokhara found that China CAMC Engineering, the construction arm of a state-owned conglomerate, Sinomach, had failed to pay taxes, had not finished the project to specification and had used poor-quality construction, all because of corruption and a lack of oversight.

 

In 2023, The New York Times reported that CAMC had inflated the project’s cost and undermined Nepal’s efforts to maintain quality control, prioritising its own business interests. Nepal’s Civil Aviation Authority, the agency overseeing the airport’s construction, was reluctant to upset Beijing on an important project for both countries.

 

Shortly afterward, an 11-member parliamentary committee started investigating the airport’s construction.

 

The international airport in Pokhara has become a financial albatross for the impoverished country, serving as a cautionary tale about the consequences of borrowing heavily from China for major infrastructure projects.

 

The airport was built with a 20-year loan from the Export-Import Bank of China. Nepal must soon start repaying it using the profits generated by the airport, which opened in 2023. The airport has fallen well short of its projections for international passengers. There is only one weekly international route landing in Pokhara.

 

China celebrated the airport’s construction as a “flagship project” of its Belt and Road Initiative which has doled out an estimated $1 trillion in loans and grants to other countries.

 

But Nepal has quietly rejected that designation, because it has complicated diplomatic ties with India, its neighbour and rival to China for influence in the region. India, a major destination for Nepali travelers, has not approved any international routes to Pokhara.

 

In August, Nepal’s communist government, led by K P  Sharma Oli, who has close ties to Beijing, formally requested that China convert the $216 million airport loan into a grant. Nepali officials have expressed optimism about the request, but there was no formal announcement about an agreement when Oli met Xi in November.

 

The parliamentary committee’s report found that CAMC had failed to complete the work of digging, refilling, and adding gravel to the runway, as well as other key components of the airport, despite a contract requiring it to do so. It also found that the firm had received payment for aspects of the project that were never built, including a fuel supply facility and a heating, ventilation and air-conditioning system. In some of those cases, Nepal’s civil aviation authority was forced to pay for items that CAMC failed to deliver.

 

The report also stated that Nepali authorities had waived $16 million in taxes for CAMC, even though the contract stated that the company was obligated to pay customs duties and value-added tax on equipment imported from China.

 

The contract called for two runways for takeoff and landing. However, the airport effectively has only one operating runway, because the second runway is closed for safety reasons, the report said.

 

China’s Ministry of Foreign Affairs and CAMC did not immediately respond to requests for comment.

 

“It’s a massive scale of corruption,” said Rajendra Lingden, who led the inquiry.

 

The parliamentary committee called for the suspension of the top officials at the aviation agency, including its current director general, citing the risk that they may destroy documents related to the airport’s construction.

 

A spokesman for Nepal’s aviation agency declined to comment on the investigation’s findings.