China-India Rail link among major BRI Infrastructure Projects
With China’s Belt & Road Initiative pressing forward, Nicholas Pandey, the Executive Director of Nepal’s Kalika Group, is bullish on growth prospects despite a construction slowdown in the past year and some serious economic bottlenecks.
Kalika’s main business is construction. “With Nepal as a developing country, this sector plays a vital role building infrastructure,” Pandey said.
Kalika Group started out in 1976, and is one of Nepal’s most prominent companies with a turnover of $52 million last year. It is keen to outstrip national economic growth this year with target revenue of $87 million, a 67% increase year on year. Nepal has seen steady 6% growth in the past three years.
On the BRI front, Kalika has partnered with a number of Chinese companies, including Ranken Railway Construction and China Railway Construction.
It has also worked with aid partners like the Asian Development Bank, EXIM Bank of India, DFID, and the World Bank.
“The Chinese are very aggressive,” said Pandey. “China has more influence in Nepal at the moment.” Its companies are particularly active in hydropower and airport construction, road building and the cement industry.
Currently, Kalika’s biggest Chinese partnership is a $61 million road construction project, according to Pandey.
Some 30% of Kalika’s overall revenue comes from Chinese infrastructure projects. One of the largest is a rail link through Nepal between China and India. “China wants to expand trade to India,” said Pandey. “I believe that Nepal holds the key to an economic boom. We should facilitate both nations”.
Pandey said Nepal has limited bargaining power with China and India, and must act “to take benefit from both neighbours” by serving as a conduit between them.
“We have tried to work with Indian companies but things haven’t worked out,” Pandey said. “India is busy with its own construction activities,” he said, noting the country also has various “economic troubles” to address.
Kalika has other regional aspirations as well, with business in Bhutan and Sri Lanka. It is also involved in a road construction project in Maryland in the U.S.
Given Kalika’s dependence on Chinese investment, Pandey conceded that the U.S.-China trade war could have some negative repercussions.
Kalika has also been open to investment from Millennium Challenge Corporation in the U.S., which has already caused some political fallout.
“Nepal needs investments,” said Pandey. “Countries like Nepal can achieve double-figure growth, there are a lot of opportunities.”
Pandey admits that Nepal presents a number of impediments to investment, including red tape, political hurdles, difficulties starting businesses, the need for tax reform, and the prospect of blacklisting for missing project deadlines.
Even so, Pandey maintains that good returns are possible for those who persist with adequate risk mitigation. Carlsberg, for example, is enjoying its biggest profit margin worldwide in Nepal.
Pandey also serves as president of the Nepalese Young Entrepreneurs Forum, and has been an angel investor in a number of startups. Kalika has consistently supported technology-based entrepreneurs to help push the country forward. Although he welcomes the political stability of recent years, he believes some government reforms have been premature.
“Human nature resists change,” said Pandey. “This is where the government has stumbled, but I still believe it has three more years to make proper changes.” He said that in the past Nepal has not seen governments last more than a year, but the present one should run full term to 2022.