Reinventing Nepal’s Economic Diplomacy

Kushal Pokharel

With the end of the second World War, the entire domain of international relations passed through an era of transitions, paradigm shifts in global international order and new economic balance. Amid the growing inability of the state centric economic model to deliver, the ideas of economic prosperity through private sector participation, international transactions and linkages gained greater currency. The rapid turn around of social, political and economic events created a new need for rethinking the conventional approach of foreign policy. In the light of the above, economic diplomacy came to the fore in the late 90’s. 

Popular agenda

Economic diplomacy as a tool of managing international relations has emerged as the most popular agenda of the 21st century diplomacy. Economic exchanges and co-operation among different nations have become an international norm. Even when the political relation between two countries is acrimonious, this form of diplomacy always plays its part in normalising their bilateral ties. Say for instance, the U.S. and China are arch-rivals, yet they have an unavoidable trade, business and economic interdependence. Despite the fact that these two nations with distinct political ideologies are fighting for their supremacy in the international arena, they are bound to indulge in import-export of goods and services. This is evidenced by a recent data which  shows that in 2015 the  U.S. goods and services trade with China totaled an estimated $659.4 billion. Moreover, China has recently expedited its effort towards reviving the ‘Silk Route’ under ‘One Road One Belt’ initiative which also highlights the growing significance of economic dimensions in foreign policy.

The origin of Nepal’s economic diplomacy can be traced back to the earlier days of Shah and Malla dynasty. During that period, Nepal had mutually beneficial trade relations with Tibet. Reaping benefits through exports of goods became fruitful for Nepal to enhance its prosperity. Over the time, political issues gained greater prominence in the national discourse often sidelining the integral economic agendas. Even if we look at the Nepalese history, it becomes obvious that various struggles for change in political regime have occurred but no revolution for economic reform has been witnessed.

After the restoration of multi-party democracy in 1990 and to adjust its foreign policy with the international discourse, Nepal made some crucial attempts to institutionalise economic diplomacy. As a result, under the Ministry of Foreign Affairs (MOFA), Nepal instituted a multi-lateral economic affairs division to look into the issues of economic diplomacy. Sad but true with more than two decades of such institutional practice, tangible gains in promoting economic diplomacy remain elusive-- the contribution of international economic exchanges to increase the national GDP growth rate has remained minimal. Although the officials cite the paucity of funds and inadequacy of other resources as the primary reason for such situation, it can’t be fully agreed. The problem lies more in terms of a committed leadership to take this crucial agenda in the international forum and garner adequate support for ensuring long-term achievements.

Great potential

Undoubtedly, Nepal with its majestic natural resource base and cultural heritages possess an unprecedented ability to pursue economic diplomacy for national prosperity. Ranging from the promotion of foreign trade, foreign direct investment to enhancing eco-tourism along with religious and cultural events, economic diplomacy is looking a plausible means to achieve its foreign policy objectives pertaining to economic advancement. Apart from this, the booming service sector in the country and rising private business entrepreneurship equally creates a realistic opportunity for Nepal to boost its trade through international relations. Having already entered into the global trading regime like the WTO and other sub-regional forums like BIMSTEC, Nepal is bestowed with the trade based privileges like duty free, quota free access among others. But the question is: Has Nepal been able to tap this opportunity and convert it into a real economic achievement to spur national growth?

At this juncture, it is imperative that some problems of economic diplomacy be pointed out. Firstly, inter-ministerial co-ordination among the line ministries has been very weak in Nepal. Ministries of Industry, Culture Tourism and Foreign Affairs often work with overlapping and duplication. There is also an inherent problem of supremacy to take forward the agenda of economic diplomacy among such ministries.

It is high time that the economic policy priorities were clearly laid out by our policymakers to reap the benefits. Which are the destination countries for improving our global exports? How can we attract FDI for creating an economy triggering investment climate in our country? Who could be our major religious, cultural tourists? Is adventurous tourism a possibility in Nepal? Right answers to these questions and fitting response should be sought at a deeper level to materialise the notion of economic diplomacy.

Needless to say, the onus is on the Nepali state to create a harmonious relationship among the non-state actors including the private sector and civil society organisations to inch closer to the mission of economic prosperity.  


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