Time for Economic Diplomacy



By Trilok Sharma (KATHMANDU, 24 April 2017) – Still, the loud and penetrating voice of incumbent Health Minister Gagan Thapa echoes in my ears. “Nepalis had sent 1000 sacks of wheat to South Korea to feed its starving people after Korean War (1950-1953). And, now the same Nepalis are fasting to go there for employment under EPS.”  Some eight-year back when I was a student in Tri-Chandra College, this is what I had heard from the back of crowd from our popular youth leader Thapa in one of the programs organized by Nepal Students’ Union in college premises. Thapa was the chief guest.

If Thapa is right, then where things went wrong?

During the earlier days of Malla and Shah dynasty, Nepal had mutually beneficial trade relations with Tibet. Due to the high export of goods, Nepal was economically prosperous than many of the Western and Asian nations which are now providing us aid. In the course of time, prosperous Nepal turned to poor Nepal as top Nepali leadership fully engaged themselves in ideological political debate and regime change sidelining the economic agenda. Still we can sense this in our Nepali politics.

Given the current state of affairs- five months long unofficial economic blockade, more than one-and-half year long ongoing Madhes unrest, increasing influence of foreign powers in internal affairs, high unemployment rate, high trade deficit and so on, the high time has come for Nepal to switch from its conventional political and security centered foreign policy to economic diplomacy and from transitional nature of politics to stable political system.

In recent times, economic diplomacy has become one of the most effective tools for managing international relations and normalizing the hostile bilateral ties. Take  an example of Sino-US relations. Based on the core idea of economic diplomacy, now Nepal needs to redefine its bilateral relations with both next door unique giants- India and China- to make situation win-win.

As  Nepal’s idea of trilateral cooperation is not in favor of  our southern neighbor and has been repeatedly rejected  putting logic that it will further increase India’s trade deficit with China, Nepal should now  find out the possible areas in which it wants to work closely with both neighbors. This symbiotic bilateral model will surely increase the level of positive competition between both neighbors from which Nepal can reap the immense benefit.

In this regard, the Eminent Persons Group Nepal-India Relations (EPG-NIR) formed for reviewing the 1950 Treaty of Peace and Friendship, too can play a pivotal role to bring the present nosedived Nepal-India relation to normalcy by making necessary amendment in the treaty and opening the door of mutual cooperation between two the countries from new dimensions.

Similarly, to give momentum to Nepal’s economic diplomacy, with no delay the government should start to give special focus on trade, investment, economic cooperation, infrastructure development, tourism and put utmost effort to tap the immense hydropower potential. It is our hydropower which lures foreign investors.

Water resources experts have estimated that Nepal has 42,000 MW of exploitable hydropower potential but only 2% has been harnessed yet. If properly exploited and exported the surplus power to Bangladesh and India, wasting water resources can be a good source of foreign currency.

In the recent official visit of April’s second week of Bangladeshi PM Sheikh Hasina, she has requested her Indian counterpart Narendra Modi, for the facilitation of cross-border power sector cooperation between Nepal and Bangladesh.  PM Hasina has also urged to the private sector of Bangladesh to invest in Nepal’s hydropower.

Apart from this, in last two months, two other economically important news hit the headlines of Nepali newspapers. One- pledge of foreign investors to invest more than $13 billion in various sectors of Nepal, including hydropower and railway connectivity. Two- the International Monetary Fund (IMF) prediction that the country’s economy will grow by 5.5 percent in the fiscal year 2016-2017, which is still one percent less than government target of the 6.5.

Indeed this is good news for Nepalis who still have a fresh scar of the devastating earthquake of April 2015 and then of five months long unofficial economic blockade imposed by India. But given the political party oriented foreign policy, transitional nature of Nepali politics and irritating lengthy paper works for approval to make an investment, there is still a big doubt amongst intelligentsia on materialization of such commitment and prediction.

No investors want to invest in a nation where they are not welcomed on the red carpet and the nation’s climate is not investment friendly. For instance- last year a Norwegian company pulled itself from the 650 MW Tamakoshi- III hydropower project citing unfavorable political condition and insufficient return after the project completion.

This is just one good example to learn from.  To encourage the investors to invest with an open  heart without fear of losing money, better if the present government in the joint effort with opposition parties endeavor to bring some sorts of scheme or policy like India’s ‘Make in India’.

‘Make in India’ is an initiative launched in September 2014 by PM Narendra Modi to encourage the multinational and local companies to manufacture their products in India. After this initiation, next year in 2015 India witnessed the highest foreign direct investment (FDI) of $63 billion, surpassing the FDI in the US and China.

As Nepal has already set the target for graduating from Least Developed Countries (LDCs) to Developing Countries by 2022 and middle-income country by 2030, there is no way other than to manage the internal chaos as early as possible and create the investment friendly environment.

If failed, not only Nepal will lose the pledged huge investment, but will continue to suffer from the play and ploy of Indian bureaucrats and politicians and foreign powers. The dream of New Nepal once again will be limited in dream and election manifesto of political parties.

Sharma is an executive member of Nepal-China Mutual Cooperation Society (NCMCS).


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