Economic Diplomacy – An indispensable Necessity

By Mohan Krishna Shrestha (KATHMANDU, 13 December 2017) – Dust and smokey skies are not that clear yet in Kathmandu city, but the recent successful holding of the elections to the Constituent Assembly and Provincial Assemblies have ended the 12 year long transition period. As the chaotic situation and political instabilities have ended, it has given a fresh hope that the country, will now, usher into new age of development. Free, independent and rigging-free election is the backbone of democracy. After the end of the political problems, next agenda, invariably, becomes the economic development. Nepal possess all those requisite paraphernalias which are needed for a rapid economic development process. Able leadership and efficient management are the most needed at this time.

We find three types of countries viewed from the economic development perspectives. Countries replete with natural resources, countries with good reservoir of gas and oil (Middle East countries) and other countries although bereft of natural resources, yet they have succeded with industrialization and export-oriented economies. Japan and Korea can be cited as examples in this regard. In another examples, small countries like Singapore and Hong Kong have established themselves as economic and financial hubs through the development of port and banking sectors.We come to the category of the country lagging behind in economic development although we possess varied natural resources. We are subdued by the land-locked and poor mentality.

Now, we expect changes. There are several ways to achieve the economic development of the country. For this, there is ever increasing need for able and wise ladership, effective bureaucracy and hard work of the private sector. As our country is ushering into a new situation, there is no alternative than to achieve fast economic development.

In fact, The Government has been implementing the policy of economic diplomacy  since 1996. But in the lack of effectiveness and success, not much satisfactory results have been achieved so far. Economic diplomacy is, in itself, a good proposition. But in the face of several problems, it has not been able to render expected results so far. It is, therefore, inevitable that economic diplomacy needs to be revamped for effective implementation in the country in new situation. For this purpose, effective program with adequate budgetary support is a sine qua non. In fact, in several countries, foreign policy and trade are viewed jontly. In Australia and Korea, trade is attached with the Foreign Ministries. It is because foreign Ministry has a vital role in promoting the trade of the country.

Objectives of the Economic diplomacy

Mainly 6 objectives are attached to the economic diplomacy. These are timely and suitable for the country’s needs.

Tourism Promotion

Situated in the lap of the massive Himalayan chains and naturally beautiful  Nepal has enough potentialities for tourism development. Natural beauties are the main and effective source for tourism in our country. There is a beautiful blending of nature, culture and adventure tourism in the country. We, therefore, should not remain happy merely inviting 800,000 tourists a year. We can invite 2-3 million tourists a year subject to the development of requisite tourism infrastrures in the country. We need to increase facililties and services for the incoming tourists. In recent years,  private sector has come forward to make massive investment in tourism sector. As a result, there is seemingly great improvements too. As world famous hotels are also coming to operation in the country, we can expect that high class tourists will be visiting our country in future. Air connectivity and good airports are vital in this regard. As airports are slated to be constructed in Pokhara and Bhairahawa, much improvement can be expected in coming days. In Nepal, tourists of any age or sex can enjoy visiting as there are several tourism activities to meet their needs. Besides, our warm hospitality and way of the life of the people also attract tourists in the country. The government and private sector needs to go hand in hand for developing tourism sector in the country.

Export Promotion

It is another important objective of the economic diplomacy. Due to government’s vigilance, Trade and Export Promotion Centre was established, as far back,  in 1972. It was an affirmative step in the right direction. Confined to Indian markets only in the past, these days, our exportable produces have reached far and wide to more than 120 countries. Even though we cannot remain satisfied with this situation. Because, imports far exceeds exports and it is increasing in an alarming pace. In 2016, our total exports was Rs.74.593 billion rupees where as imports was Rs.956.499 billion making a trade deficit of Rs.876.906 billion. Among this figure, trade deficit with India alone reached Rs.628.85 billion. Our exportable produces also consist of same old traditional goods. Few new type of commodities are being exports but these do not fetch much value nor of big quantity. In fact, Nepal needs to produce high valued precision and semi-precision goods which fetch much prices.  Moreover, we need to develop capacities and introduce modern technologies to produce high value goods for exports. Hundreds of imported goods can be produced locally. Many consumer goods can be produced in the country avoiding imports. Such a situation will create employment opportunities and raise renevue to the government’s coffer as well.

Foreign Direct Investment

Both developed and developing countries have been implementing policies to attract foreign direct investment in their respective countries. The United States of America comes as number one country followed by France in terms of FDI import. In 2012, France imported FDI to the tune of 1 trillion dollars. Similarly, many other deveoped countries have also given due importance to FDI. Many newly economically emerging countries have given FDI utmost importance. During my stay in Paris, Cambodian Ambassador Kich Uman used to tell me that they have imported FDI upto 8 billion dollars and they can do more. Cambodia is a little bit bigger in size but her population is less than that of ours. Not  only that the country suffered untold sufferings during 30 years internecine war. But after the end of the political problems, Cambodia is now marching vigorously on the path of economic develoment.

In Nepal, Foreign Investment and Technology Transfer Act has been implemented since 1992. Suitable changes have been effected in the policy according to the demand of the time. But FDI import in the country has not achieved a satisfactory level so far. Our policies related with FDI are no less than any other countries. But problem lies in its implementation. Few years ago, one American diplomat friend told me that you have One Window policy concerned with FDI, but to peep from there, one needs to enter from 11 gates. Simiarly, during the Investment Summit held in Kathmandu from 2 to 3 March 2017, many foreign delegates drew attention towards the lacunas in the implementation of FDI policies. Just having good policies, one should not think that FDI will come automatically. Rather, the good and effective implementation of such policies will facilitate to the flow of FDI in a country. It is understood that due to the plethora of rules and regulations as well as cumbersome implementation, business community seemed tired. Grievances are often heard. The need of the hour, therefore, is the effective and easy implementation of FDI policies in the country.

During these intervening years, FDI has come from more than 80 countries. Apart from big countries, even small Caribbean countries have come to invest here. Billions of Rupees have been invested as FDI in the country which has created thousands of employment opportunities. But we cannot remain satisfied and sitting pretty with the current level of FDI imports. It is understood that investors with their capital and technology are always looking for grey market for investment. We, therefore, need to develop the capacity to attract such opportunities for FDI through the joint actions of the government and private sector.

Development of Hydro-power

It has been a long time that in Nepal a total of 44 Megawatt of hydro-power can be commercially developed. But so far, real progress is far from satisfactory. Until last year, people faced a severe load-shedding as a meagre percentage of the total hydro-power capacity has been developed. Now, the situation seems changing.  Since last few years, the initiation of several projects have given hope. Due to the construction of big, medium and small size hydro-power projects, electricity output would definitely increase. Now, we feel a big respite from the load-shedding. In fact, the end of the load-shedding should have been accomplished from the electricity domestically produced. But our load-shedding has been ended due to the import of electricity from the country where we look forward to export our excessive electricity. This is really a paradoxical situation.

Nepal is, undoubtedly, rich in water resources and she can be rich only through the utilization of this natural endowment. From our rivers, water is flowing which remains our never ending natural resources. We must develop capacity to attract foreign investors in hydro-power generation sector in an amiable and friendly environment. This demands the joint action of the government and private sector. Resources itself does not give results. Rather the proper utilization of the resources accrue desired results.

Foreign Employment Opportunities

This is also one of the main objective of the economic diplomacy. Rough estimates put around 4 to 5 million Nepalis are gainfully employed in foreign countries. Some Nepali nationals are working in white collar jobs also. But majority are working in blue collar jobs in Malaysia and Middle Eastern countries. such a situation has given risen to many social problems also. In fact, youths must remain in our country. It is, therefore, necessary to create an environment where youths are provided with suitable job opportunities. In foreign countries, although jobs are available, but it does carry any guarantee. Due to the changes in the situation, problems occur in foreign countries which might affect in employment opportunities.

Nepali workers have gained the trust and confidence from foreign employers due to hard work, loyalty and reliability. It would be beneficial if we could exhort to promote the export of skilled and semi-skilled workers abroad. In fact, foreign employment give benefit to the country. At the present level, annual remittances from foreign employment has reached upto 600 billion rupees and our workes are also gaining technical knowhow. Contribution from foreign employment to the national exchequer has reached upto 30 percent. It is, therefore, necessary to develop this sector in an orderly and steely manner. In many mega projects in foreign countries, there exist possibilities for gainful employment for Nepali workers. Philippines seems well ahead in the management of foreign employment sector. During my work in Abu Dhabi, getting a cue from Philippines Embassy, our Embassy organized a Job Fair to promote Nepali workers on 7 June 2007 at Grand Hyatt hotel in Dubai.

Increment in Foreign Aid

We must repay the loan once we borrow, whether it is  a country or a person. During the course of economic development, foreign financial resorucs is solicited in the face of inadequacy of domestic resources. A country like Japan, when she was defeated and devastated in the Second World War, borrowed from Marshal Plan and constructed mega infra-structure projects. But chauvinistic Japanese people knew that it is not good to be subdued by the burden of foreign loan. They, therefore, gave much emphasis to the domestic savings and made a maximum mobilization of the domestic resources. They repaid the loaned amount within few years.

Nepal has also received financial resources from foreign countries and institutions as loan and grants. Nepal holds good standing in terms of repayment of the loaned amounts. It is beyond question that a country needs adequate financial resources for investing in mega infra-structure projects. In recent years, we feel that due to the relatively calm atmosphere, our financial horizon has been widening. Banks is considered to hold upto 20 trillion rupees as deposits. This is, indeed, a colossal sum for a country like Nepal. Such financial resources needs to be mobilized efficiently for investment in mega projects. Just few weeks ago, the government decided to construct a 1200 MW hydro-power generation project from its own resources. It was, indeed, a matter of great joy for the people. Due to such steps, people also feels their confidence upped. Nepal Airlines, a government-owned corporation, also arranged to buy two big sized planes with loan from domestic institutions.

It is, therefore, very much necessary to mobilize domestic resources as much possible not ignoring the foreign resources. Such actions would spur the confidence of the country and people. Moreover, country can defent herself from foreign interest too.

(Mr. Shrestha is a former Ambassador of Nepal to France and Permanent Delegate to UNESCO)


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