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Economic Diplomacy: A private sector perspective

The need of the hour is to make paradigm shift from aid to trade and political diplomacy to FDI diplomacy with private sector playing a key role
By Rajendra B. Shrestha

The recent People’s Movement has made Nepali people the source of sovereign power and ushered Nepal into an era of inclusive democracy and larger freedom. “Yam between two boulders” traditionally has been the focal gist of the country’s foreign policy. At a time, when the world has turned into a global village defying state boundaries, “geography has become history” now with the advancement of fast paced communication technology. In the same way, traditional two pillars of Nepal ‘s foreign policy – “Panch Sheel” and “Non Alignment” may lose its original relevance unless they are rationally adapted to suit the fast changing global environment and interpreted accordingly.

Under these domestic and international scenarios, it’s imperative for the Government of Nepal to revisit and recast its foreign policy in order to align itself with the emerging socio-economic and political environment both at home and overseas. With improving bilateral relations between our close neighbours, India and China, and while these two countries are developing at phenomenal pace, opportunities for Nepal are all the more growing in the economic front.

As such, a result-oriented partnership between public and private sector for development of trade, tourism, investment and employment should be strongly built with economic diplomacy coherently mainstreamed into Nepal ‘s total foreign policy. Post 1990 witnessed an accelerated economic interdependence projecting Nepal as a liberalised economy, which is more likely to intensify in future to comply with our membership with WTO, SAFTA and BIMST-EC. Today, Nepal is in grave economic predicament with multiplying turmoil in trade and industry sectors, declining tourism, trade and budget deficits, and negative investment climate, among others. Under these immediate challenges, our foreign policy in totality needs a critical review.

The need of the hour is to make paradigm shift from aid to trade and political diplomacy to FDI diplomacy, tourism diplomacy, employment diplomacy and water diplomacy, with private sector playing a key role and Ministry of Foreign Affairs (MOFA) and its missions abroad acting as smooth facilitators. Private sector can play a very significant role, as it is the engine of growth and major economic stakeholder of the country.
The existing structure of MOFA needs a major overhaul including the effectiveness of existing embassies and missions abroad. Repositioning/relocation should be done on the basis of utilities and value additions instead of keeping them for mere political cosmetics. Missions in India , China , USA , Thailand , Switzerland , Malaysia , Qatar , Japan and Saudi Arab need further strengthening keeping in mind the promotion of FDI and tourism. Commercial Counsellors to the Missions in New Delhi , Beijing , Bangkok and Geneva is essential with additional support staff.
Economic interests should be the guiding factor and a system within the MOFA that will monitor and feedback should come into place. Some of the embassies and missions do not even have websites, the matter that should be immediately taken care of. Establishment of new embassies in countries of substance like Denmark (to cover Scandinavian countries), South Korea , Australia and Consulates in Mumbai, Frankfurt , South Africa , Singapore and Brazil must also be considered.

A strong Bureau which can be named as Public Private Partnership Bureau (PPPB) should be immediately formed at the MOFA consisting of head of the umbrella representative body of the private sector – FNCCI, few professional businessmen of repute and with proven track record, and Secretaries of the related sectoral Ministries with an objective to build a functional linkage between private sector institutions and MOFA/Nepali embassies and Missions.
This Public Private Partnership Bureau can devise Joint Promotion Strategies and seek private sector funding for joint promotional activities like ‘Single Country Show’ showcasing the products of comparative advantage like handicrafts, carpet, garment, herbs, tourism, and hydropower potentialities. Private sector being the major stakeholder of economic diplomacy should be mainstreamed with a meaningful partnership with the government of Nepal . Only then will the resources available with FNCCI and its allied commodity associations, NTB, Carpet and Wool Development Board, Garment Association of Nepal, NPEDC, HAN, CNI, Trade Promotion Centre and big business houses yield constructive results. A comprehensive study should be immediately done with private/public sector’s joint initiative to explore potential markets both within and outside the country.

Appointments of Ambassadors should be done on professional basis and not as promoting ‘Afno Manche’ or political patronage. They should have adequate orientation on issues related to economic diplomacy and annual performance evaluations should be instituted and unsuccessful diplomats must be recalled quickly.

More proactive roles in international forums like SAARC, WTO, SAFTA, BIMSTEC and LDC need to be undertaken. The Institute of Foreign Affairs (IFI) founded in 1993 and reconstituted in 1998 needs to be revamped and synergized with increased private sector participation. The support of Honorary Consul Generals/Consuls based in Nepal should also be undertaken to enhance trade, tourism and investment in the respective countries. FNCCI on its own initiative has appointed Trade Representatives in seven countries and has signed MOU with as many as 27 foreign chambers and organisations. Their roles in enhancing economic diplomacy should be further geared with joint initiative of government/embassies and FNCCI.

The government in the fiscal year 2003/2004 spent NRs. 600 million for running our embassies and missions (source: MOFA, Protocol Div). Salary and allowances accounted for almost 47% and rent and office operation accounted for 52%. This money was spent mainly for consular and ceremonial formalities. It’s ironic that no amount has been allocated for promoting economic activities.

Recently a foreign policy task force has been formed by the government consisting of former diplomats, experts on foreign relations and the FNCCI President to revisit the existing foreign policy and provide recommendations on various parameters. The recommendation of two policy studies on Economic Diplomacy done in 2002 and 2005 and EPN/ADB study-2005 should also be revisited by the recently constituted task force to avoid duplication of works. The government should implement the valid points immediately.

The functioning of MOFA so far is heavily oriented to political affairs. It’s high time serious restructuring of MOFA is done into the polity of governance in economic affairs. In view of the emerging politico-economic climate, MOFA should come out from the legacy of its past to release the country from the present economic quandary. Paradigm shift from aid to trade and political diplomacy to FDI, tourism, employment and water diplomacy should be order of the day.

Shrestha is a Senior Consultant at the FNCCI and also the Member Secretary of FNCCI Think Tank

7 thoughts on “Economic Diplomacy: A private sector perspective

  1. Dear Dr. Paneru,

    Please refer to this:

    “It is all about ourselves. We have to put our act together first before thinking of any diplomacy towards foreign country. Today’s world is commercialized and economically united. When investors see stability and good leaders with winning vision, investment start pouring in.”


  2. This refers to Rajendra B.Shresth’a article “Economic Diplomacy”. this article provided an interesting and in-depth overview of economic diplomayc, an absolute need for a poor country like Nepal.
    I regard the Rs.600 million spent on running embassies and foreign missions as non-performing assets in banking terms. Our embassies and consulates are unproductive and not promoting the country’s image as a centre for trade and tourism. Nepal could do well to adopt the economic diplomacy ,odel of Thailand. Thai Ambassadors serve as CEOs of different business organizations and their job includes promotion of trade and tourism. We could also assign enterprising youths trained in trade and tourism to each embassy. The training should be administered by FNCCI, NTB and other sectors.
    In the visa section, we could exhibit Nepali export items and tourism promotional materials. The section could also hand out booklets that include the country’s profile, useful imports and areas open for FDI and multinational business prospects. Instead of wasting huge funds on non-essential issues, emphasis should be placed on promoting trade and tourism in key cities of Europe, the USA, Japan and Australia.

    Dr.Hari Pandey

  3. Dear Dr. Paneru – noble idea. You get it. But, I think we need to prove ourselves first. It is too early to start economic diplomacy. Let me quote you the Indian example. Indian proved themselves by changing mainframe codes written in world’s computer and allowing the world businesses to be ready for Y2K IT crisis. Following the Y2K, businesses around the world, particularly from USA, recognized that India was the place to go to get IT done. IT boom led different sorts of FDI to India. India did not have to do any economic diplomacy that you and Rajendra Ji are talking about. Indian politicians are not that good. It was world’s need. When we have something good, people around the world will start noticing and FDI will follow thereafter. We Nepalese have to do a lot more and I am confident that we will get there if politicians just do politics and let entrepreneur do the business. Problem today is politicians are killing people and interfering everywhere. I am not worried about Girija and Prachanda (one day) sending their nephews and nieces to Europe and America as ambassadors. Successful and visionary people do not want that job. That is the most boring job that I can think of.

    Yestai Ho

  4. Dear Deadkids, Yestai Ho and Dovan guys,

    Tho I agree with what you say, but don’t you think you are diviating from the main article – Economic Diplomacy. I personally feel due to regional and global competitiveness, it is high time Nepal follow the path of economic diplomacy rather than limiting to giving employment to “afno manche” as Ambassador.
    The power of economic diplomacy can attract FDI in power sector from USA, Australia, India and Norway. Well, I strongly believe a serious effort should be initiated to do away with conventional diplomacy.
    Hey Guys, lets start talking about economics. We have had enough of politics (politricks), bad politics. It’s time to think about wealth and its creation. The expression of frustration is not going to lead us anywhere.

  5. “we in Nepal are still stuck in the very first stage of Democracy – the ideological state.”

    I agree with this statement.
    We common Nepalese have been till now unaware of these ideological issues.

    Specially youth like me were stuck in notions like ‘politics is a dirty game’, ‘corruption is the main problem’.
    But the more fundamental and deeper ideological issues like ‘democracy’, ‘monarchy’, ‘communism’, ‘liberalism’, ‘secularism’, etc were not explored.

    Now we all are filled with questions. we have started to think and analyse.
    We all will have our answers through CA elections.

    Once we have the ideological issues resolved , we can have the great economic plans and strategies to move our country ahead.

    I feel that Nepal will also soon be a part of global prosperity.
    I cannot stop having the sunny view.

  6. DeadKid – you are dead right. It is all about ourselves. We have to put our act together first before thinking of any diplomacy towards foreign country. Today’s world is commercialized and economically united. When investors see stability and good leaders with winning vision, investment start pouring in. I am tired of seeing people making begging plan without having plan to eficiently utilized the begged money. Enough of begging!!!

  7. Economic Diplomacy might be too far-fetched thing at the moment. Of course it is a vital element, keeping in view high-pace global changes but if we observe the current political developments(disastrous), the nation is under a serious threat of tumbling down.

    All words and no actions make Nepal a failed state. We have a proven track record of almost 16 years to complement the fact. Today, as we stand at the brink of chaos, it’s both revealing and disturbing to ‘experience’ as well as ‘understand’ that the Nepali society has never been so divided. The divide that I refer to is not just geographical, economical or psychological but an inclusive one and the gap between the ‘haves’ and the ‘have-nots’ is largely widening. I wish it were a bad dream I could wake up to but sorry, it isn’t so.

    Discrimination has unveiled and is publicly showing its ugly forms and like it or not, we in Nepal are still stuck in the very first stage of Democracy – the ideological state. Why is Nepal stuck in this phase? Today, it is not just critical to address this question but also seek ‘constructive’ and confrontational answers, and for once, we should not risk being short-sighted. Also, it is encouraged that we think broadly outside the box but more deeply inside it.

    The situation in Nepal looks quite gloomy, partly because we have been asking the wrong questions for several years and perhaps also because, we have this hallucination that the Maoist problem needs to be solved first. This it self is a mother of all dreadlocks and if it is to continue, our generation will end up paying a huge price for the ‘transition that went wrong’ and ‘many’ lives will suffer in the process. We cannot allow this to materialize.

    The future of the nation thus lies in our hands and that is why, we, more than our leaders, are important. It is thus imperative to realize and accept the fact that the Maoist problem is just one of the numerous problems we have in our hands and we should get over it sooner the better. Rather then being one dimensional, why not exercise our energy in asking these questions, for instance –

    · Have any political leader come up with a concrete idea of nation building so far?
    · Is my country headed towards the right direction with these political leaders?
    · Why are we stuck with these inherited leaders?
    · Are these leaders of modern thoughts?
    · Are these leaders wiling to step down?
    · Where do the taxes and the funds disappear?
    · What are my job opportunities?

    These are few questions to jump start with and we should seek proper platforms or create one in order to voice these questions rather than mindlessly demonstrating on the streets and creating more problems in an already tumbling time. Remember, using any sort of violence would directly mean organised intimidation, thus terrorizing people. Constructive dialogue is our only rescue and the adage, “We cannot succeed until we make an effort to fail” aptly fits in.

    Feedbacks & Suggestions are most welcome.

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