Shyam Prasad Mainali

Economic diplomacy in its traditional sense refers to decision making and advocating of national interest using economic tools available to a nation. Versatility, good judgment and sound business skills are prerequisite for its effectiveness. Since the 21st century, Economic Diplomacy (ED) has been considered a challenge and a trend of development. Career diplomats attempt to limit it within their jurisdiction, interpreting it as a part of international relations and foreign policy. Experts have studied trade, economic relations and diplomacy, and are active in influencing external economic policy of a country.

This is sometimes referred to as dollar diplomacy or textile diplomacy. It is the specific area of modern diplomacy connected with the use of economic problems as objects and means of struggle and cooperation in international relations. ED is the activity of economic promotion which influences foreign policy with the cooperation of stakeholders such as relevant ministries and the private sector. Due to the effects of globalization combined with the free market, interstate dependency has risen exponentially, and ED is a staple feature of nation states.

Foreign investment
ED assumes all the activities focused and emphasised increasing economic activities such as attracting foreign investment, promoting exports, and exploring different sorts of economic potentialities, working with regional and international organisations as well as with concerned states. In some cases, it is narrowly defined, and efforts are made to concentrate its jurisdiction within a single organisation such as the Ministry of Foreign Affairs.

Market liberalisation has been a critical component of Nepal’s economy since the reestablishment of democracy in 1990 and is seen as a crucial force in creating growth, reducing poverty, strengthening bilateral and multilateral ties and more within the country. In order to achieve these aspirations, Nepal has been a member of the World Trade Organisation (WTO), South Asian Free Trade Area (SAFTA), Bay of Bengal Initiative for Multi-Sectoral Technical and Economic Cooperation (BIMSTEC), South Asian Association for regional Cooperation (SAARC) and others. But the country has failed to make any significant progress. For this reason, an effective application of ED is essential for Nepal’s affairs. Successive governments have incorporated economic matters in the foreign policy to achieve economic progress for the last 20 years.

Nepal has made some progress in this regard such as increase in tourism, investment from diasporas and rise in Nepali migrant workers who make huge contributions to the nation’s GDP. However, progress is limited as there has been an increase in inequality, unemployment, political instability, unpaid foreign debts, and enforcement of rule of law is almost non-existent in some cases.
Lack of coordination between the Ministry of Foreign Affairs (MoFA) and other sectoral ministries has been a stumbling block to promote ED within these institutions. The MoFA’s desire to be the sole organisation concerned with ED has been ineffective as it lacks the expertise to engage with ED. No doubt, ED has been a major talking point within other ministries and has been discussed in different forums. ED currently is a superficial policy area without a clear-cut vision and timeframe and this situation is inimical to Nepal’s economic situation. Social issues combined with worsening corruption and other crimes are further hindering the economic progress of Nepal.

However, methods and techniques highly depend on the situation of the countries concerned. Such diplomacy results in the global economic and political interests of concerned parties. ED is determined by globalisation, which is presented as economic interdependence of nations, level of the mutual relationship between the countries, consolidating the political and economic relationship with effective dynamics of international interactions so that economy requires the crucial role in foreign policy and international relations as well.

Based on the above discussions some areas of ED are determined by internationalisation of processes and reinforcement of dependence of the world economy by integrating global and regional, increasing the volume of foreign investment, exploring the potentiality of the international market in fulfilling mutual interests, the best utilisation of global economy directed towards ending the monopolisation of advantages in the global market, application of new modern technology to attract foreign direct investment, transparent and open economic information to furnish comfortable condition with external community creating a positive image, etc. are to be considered seriously in a strategically and planned manner.

As the country with hydropower and water resource potential, Nepal needs to have secured investment in harnessing these areas with topmost priority. Secondly, tourism also has higher potential due to abundance of nature, places of historical importance and archaeologically significant properties listed by UNESCO. Additionally, exportable products with competitive advantages such as pashmina, leather, paper, handicrafts, and carpet garments can also benefit the economy.

Periodical review
Measures need to be undertaken for the future effective materialisation of ED. Firstly, one effective and powerful committee at the national level led by the Prime Minister in the PM’s office should be established as an apex body including full-time experts of different concerned areas such as Secretaries of the MoFA, the Ministry of Finance and other sectoral ministries. The representative of the private sector must work as a specialised body to move our economy in a positive direction. The Investment Board of Nepal should be converted into a specific desk under this committee.

Amendment of concerned legal provisions, availability of sufficient resources to run without difficulties, a sound diplomatic action to explore the possibilities of getting support from the international sector, responsible senior diplomatic experts should be mobilised continuously. Serious and continuous efforts of this apex body with periodical review as well as solving the problems faced and moving ahead towards expected results is inevitable so that economic progress and prosperity through effective ED is possible.

(The author is a former secretary of Nepal government.)