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 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 Co, the construction arm of the state-owned conglomerate Sinomach, failed to pay taxes, did not finish the project to specifications, and 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, the Times found.
Shortly afterward, an 11-member parliamentary committee started investigating the airport’s construction.
The international airport in Pokhara, a tourist destination at the foothills of the Himalayas, 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, a state-owned lender that finances Beijing’s overseas development work. Nepal must soon start repaying the loan 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, President Xi Jinping’s signature infrastructure campaign, 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 KP 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 failed to complete the work of digging, refilling and adding gravel to the runway, as well as other key components, despite a contract stipulating that it was required to do so.
It also found that the construction firm received payment for components 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, the civil aviation authority was forced to pay for items that CAMC failed to deliver as promised.
The report also stated that Nepali authorities waived $16 million in taxes for CAMC, despite the contract stating 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 parliamentarian Rajendra Lingden, who headed the inquiry. “The corrupt bureaucrats and politicians involved in this scam must be punished.”
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 project.
A spokesperson for the aviation agency declined to comment on the investigation’s findings.
- This article originally appeared in The New York Times