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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