ECONOMIC DIPLOMACY OF

NEPAL
MEANING/CONCEPT OF ECONOMIC
DIPLOMACY
 It is protecting and promoting nation’s economic
interests dealing with other state & non-state
actors through negotiation, lobby, forming
alliances, aggrements, seminar, meetings etc
 Preference to economics over politics in state to
state relations
 Art of serving economic security and strategic
interests of the country
 It is designed to influence policy and regulatory
decision of foreign governments and those of
international organizations to maximize
economic gains of own country.
 Economic diplomacy is an indispensable
instrument to secure Nepal’s foreign policy
objectives and economic advancement.
 The country’s ability to engage in economic
diplomacy for national prosperity can be
facilitated by leveraging on its abundant natural
resource base, rich biodiversity and cultural
heritage.
 Economic diplomacy is about knowing how to
exploit a country’s unique characteristics or
comparative advantage to maximize the benefits
for its people, and put in place sound policies
designed to achieve these objectives
ROLE OF ECONOMIC DIPLOMACY IN
NEPAL
 Attracting Foreign Direct Investment in priority
sectors
 Exploring global markets and facilitate Nepal’s
exports
 Promoting culture and tourism

 Promoting and making foreign employment

safe, secure and high return
 Increasing volume of aid and its effectiveness

 Mobilizing Diaspora resources

KEY SECTORS FOR ECONOMIC DIPLOMACY
OF NEPAL

 International Trade
 Tourism

 Development Assistance

 Foreign Direct Investment

 Foreign Employment
ECONOMIC DIPLOMACY OF NEPAL
 Trade relations with Tibet and the British in the
18th and 19th century
 Aid diplomacy since 1950s
 Nepal’s opening for tourism in 1950s
 Trade and Commerce treaty with India in 1950
 Economic liberalization in 1990s

 Nepal attempted to adjust its foreign policy after

the restoration of multiparty democracy in 1990.
 There is a division under the Ministry of Foreign
Affairs (MOFA) intending to institutionalize
economic diplomacy
 At present, the Policy Planning, Development
Diplomacy and Overseas Nepalese Affairs Division at
MOFA, along with its overseas missions, is
responsible for Nepal’s economic diplomacy.
 The division’s main task is to focus on promoting and
improving foreign trade, investment, technology
transfer, tourism, development cooperation, foreign
employment and climate change (MOFA, 2020).
 Various policy reforms and emphasize on outward
economic policies
 The High Level Task Force Report in 1996 gave
emphasis on reviewing diplomacy to focus on
economic interests

 Consequent reforms and structural changes
made and foreign policy was reoriented to focus
on economic interests
 Periodic plans also emphasized upon the
importance of economic diplomacy for the overall
development endeavours of the country
 The Government has been earmarking budgets
for economic diplomacy since 2009.
INSTITUTIONS /MECHANISMS OF
ECONOMIC DIPLOMACY
 MOFA and Diplomatic Missions
 National Planning Commission

 Sectoral Ministries and Departments

 Boards (Tourism, Foreign Employment, Trade

Promotion, Investment)
 Private Sector and their Apex Bodies

 Think Tanks ( Policy Research Institute-PRI)

 High Level Committee on Economic Diplomacy
under the Foreign Minister comprising sectoral
ministries/departments as well as the private
sector
 Economic Diplomacy and NRN Division in MOFA

 Different Mechanisms between MOFA and

Sectoral Ministries
 Different Ministries have their own international
cooperation division/section
PROSPECTS/ OPPORTUNITIES FOR
ECONOMIC DIPLOMACY
 Geographical dividend (Transit economy,
China’s growing interests in Nepal, growing
Chinese tourists, USA/China/India’s renewed
focus in the region)
 Democratic dividend

 Demographic Resource dividend

 Untapped resources

 Diasporic dividend (skill, knowledge, technology

and capital)
WHAT DETERMINES THE SUCCESS OF
ECONOMIC DIPLOMACY?
 Political vision, commitment and delivery
 Diplomatic professionalism
 Development status of the private sectors
 Effective coordination-ministry wise, policy level,
institution level
 Presence of the state in the global, regional and bilateral
forum
 Adequacy of the resources-financial, human
 Internationalization of language, culture, arts
 Utilization of the diaspora
 Priority determination based on the comparative
advantages
 Honesty of the government to fulfill the commitment to the
external world
 Rule of law, good governance, civil society
CHALLENGES OF ECONOMIC DIPLOMACY
 Low priority given to economic diplomacy
 Continued political transition (dwindling national
image, lack of conducive environment for trade,
investment, politicization of economic issues )
 Weak policy and programs accompanied by ambitious
goals
 Missing link between economic and foreign policy
 Politicization of economic issues (BIPPA/PTA/Water
Agreements)
 Appointment of ambassadors without economic and
diplomatic skills and knowledge
 Under utilization of facilities given by multilateral,
regional and bilateral level
 Weak private sector leadership
 Diplomatic deficit (diplomatic presence is
growing but not sufficient)
 Focus on traditional diplomacy not on economic
interests
 Lack of training and orientation

 Budgetary constraints

 Lack of inter-agency cooperation and

coordination
 Lack of country specific target and policy

 Poor monitoring of embassies and missions

WAY AHEAD
 Priority on economic diplomacy
 Policy coherence and consensus

 Formulate country wise strategies

 Whole of government approach

 Ensuring good governance

 Strong partnership

 Proactive economic diplomacy

 Activate diplomatic missions

 TOR and Performance Contract with

Ambassadors
FDI AND ECONOMIC DIPLOMACY
 disseminating information about Nepal’s
potential as an FDI destination country by
updating details about priority sectors, available
projects and market situation;
 making investors aware of GON’s adoption of the
concept of Special Economic Zones (SEZs),
Industrial Estates and potential trade corridors
in Nepal;
 taking advantage of the Everything But Arms
(EBA) initiative under the EU Generalized
System of Preferences, preference given by India
and proximity to large Indian and Chinese
markets
FDI AND ECONOMIC DIPLOMACY
 encouraging and promoting visits of business
delegations from potential FDI source countries
and facilitating contacts with government
agencies and potential partners, if the partner
country is willing to invest, then facilitating
contacts with local partners
 providing information to potential investors of
facilities provided to ensure the protection and
enhancement of companies or projects;
 promoting and safeguarding the corporate
interest of investment partners in Nepal’s
interest;
 providing successful FDI case studies