In recent times, economic concerns have reigned supreme in diplomatic dealings all over the world. International relations are being defined with new perspectives as old foes bury their hatchets to further their economic interests. The growing economic linkages between India, China and the US are a testimony to this fact. Nepal also joined the bandwagon of economic diplomacy in the early nineties, particularly after the restoration of democracy.
In order to bolster economic diplomacy, a number of changes were introduced at the policy-making, institutional and legal levels. A high-level committee was established under the prime minister and efforts made for greater coordination among the concerned stakeholders. They in turn identified exports, foreign aid, foreign employment, water resources, foreign direct investment and tourism as the main sectors of economic diplomacy.
The Ministry of Foreign Affairs was assigned the duty of lead agency and Nepal entered into bilateral, regional and international arrangements such as BIMSTEC, SAARC and WTO with the mantras of liberalization, privatization and globalization.
However, it is widely believed that Nepali economic diplomacy has failed to live up to its potential. A widening trade deficit, with export constituting just 15 percent of total trade, is a matter of grave concern. Nepal makes few products and is constrained by its geography. Increasing dependency on foreign aid with low absorption capacity and innumerable instances of misappropriation of the fund does not augur as well.
Foreign aid management is more supply-led than demand-driven. With increasing labor migration, the cases of maltreatment of migrant workers in the receiving countries have also gone up and it’s taking its toll on social and family relations back in Nepal. Glorification of remittance-led growth has given false impression of economic strength; but the edifice built by remittance can crumble at any time, as is evident in the recent global economic downturn. The contribution of industrial sector in the gross domestic product is, rather predictably, on a decline.
Despite big talk, economic diplomacy has never been high on agenda
The state of foreign direct investment is also not encouraging with just Rs 58 billion pumped into the economy. It’s spread over just 1,900 projects and provides employment to only 145,000 people. This is disheartening vis-à-vis Nepal’s immediate neighbors in China and India that are among the world’s top FDI destinations.
Even after much emphasis on tourism promotion, its contribution to GDP remains negligible. The Visit Nepal year, for instance, is set to miss its target. The hydropower section is ailing too. Thousands of acres of land lack irrigation facilities. While Nepalis face up to 18 hours of load-shedding, millions are also deprived of clean drinking water.
Thus the stated concern for economic diplomacy does not match the work done on the ground. The budget allocated for implementation of economic diplomacy programs is more symbolic than substantial. The total budget in the last four years (2007/08 to 2010/11) set aside for economic diplomacy is around Rs 80 million, with the Nepali mission in India alone claiming Rs 7 million.
The inordinate time consumed in approving organization and management survey of the Ministry of Foreign Affairs, designated as the lead agency for economic diplomacy, is a good indication of unmatched words and actions. It has been ages since the prime minster-head economic diplomacy unit held its last meeting. The state of other meetings at the lower levels is no different. A high-level unit under the chief secretary with representation from concerned stakeholders will be more effective, in my reckoning, than the nonperforming bodies headed by the prime minister and other ministers.
There is little coordination among concerned agencies, including the private sector. Economic diplomacy’s predicament is further compounded by the ad hoc transfers of experienced officials.
As foreign policy is a mirror of a state’s domestic environment, political instability, fragile law and order situation, unhealthy labor relations, increasing load-shedding and poor state of basic infrastructure are impeding better economic relations with the country’s international partners. Better FDI inflow warrants an improvement in the overall business climate. At a time when even domestic actors are reluctant to invest, how can we expect foreign investors in Nepal? The hue and cry over the recently concluded BIPPA with India shows how far away from consensus the country is on economic issues.
The prospect of economic diplomacy can be significantly enhanced if Nepal can act as a bridge between India and China. Even without any resources at their disposal, many countries have reaped huge benefits. Nepal is replete in vital resources, from manpower to natural. The need is to properly utilize them.
The writer is with the Ministry of Foreign Affairs
bishal2u@hotmail.com
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