Economic diplomacy : A private sector perspective

The people’s movement has ushered Nepal into an era of inclusive democracy and larger freedom. The government thus has to revisit and recast its inconsistent foreign policy to align itself with the emerging socio-economic and political environment both at home and overseas. With improving bilateral relations with India and China, opportunities are growing for Nepal in the economic field.

As such, the private sector stresses a strong economic diplomacy, because such an approach will help build a result-oriented partnership between the public and private sectors for the development of trade, tourism, investment and employment.

The post-1990 period witnessed an accelerated economic interdependence projecting Nepal as a liberalised economy, which is more likely to increase with our WTO, SAFTA and BIMST-EC memberships. Nepal today faces an economic threat amid unabated chaos in trade and industry, declining tourism, trade, huge budget deficits and negative investment climate. Our economic diplomacy, therefore, needs a critical review.

The need of the hour is to make paradigm shifts from aid to trade and political diplomacy to FDI diplomacy, tourism diplomacy, employment diplomacy and water diplomacy, with the private sector playing a key role and the ministry of foreign affairs (MoFA) and its missions abroad acting as facilitators.

Economic diplomacy should be coherently integrated into the nation’s overall foreign policy. The MoFA’s existing structure needs a major overhaul including the effectiveness of existing embassies abroad. Repositioning/relocation should be done on the basis of utility and value additions instead of keeping them for political cosmetic reasons. Missions in India, China, the USA, Thailand, Switzerland, Malaysia, Qatar, Japan and Saudi Arabia need to be strengthened to promote FDI and tourism. Commercial councillors to the missions in New Delhi, Beijing, Bangkok and Geneva are essential with additional staff.

Economic interests should be the guiding factor along with a system within the MoFA that will monitor and provide feedback. Some of the embassies and missions do not have websites. This issue should be immediately addressed. Establishment of embassies in Denmark, South Korea, Australia and consulates in Mumbai, Frankfurt, South Africa, Singapore and Brazil must also be considered.

A strong bureau should be formed in MoFA consisting of head of umbrella body of the private sector (FNCCI), secretaries of the related sectoral ministries and professionals of proven track record with an objective to build a functional linkage between private sector institutions and MoFA/Nepali embassies and missions. Appointments of ambassadors should be done on professional basis and not for promoting political patronage.

Private sector funding should be sought for joint promotional activities like ‘Single Country Show’ showcasing Nepal’s handicrafts, carpets, garments, herbs, tourism, and hydropower potential. As the private sector is the major stakeholder of economic diplomacy, it should be integrated with a meaningful partnership with the government. 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 — and Trade Promotion Centre yield constructive results.

More proactive roles in SAARC, WTO, SAFTA, and BIMSTEC need to be undertaken. The Institute of Foreign Affairs founded in 1993 and reconstituted in 1998 needs to be revamped and synergised with increased private sector participation. The FNCCI on its own initiative has appointed trade Representatives in seven countries and has signed MoUs with as many as 27 foreign chambers and organisations. Their roles in enhancing economic diplomacy should be geared up.

The government in 2003/04 spent Rs. 600 million on running embassies and missions. Salaries accounted for 47 per cent and rent and office operations accounted for 52 per cent. This money was spent mainly for consular and ceremonial formalities. It is ironic that no amount has been allocated for promoting economic activities.

Recently, the government has formed a foreign policy task force consisting of former diplomats, experts on foreign relations and the FNCCI president to revisit the existing foreign policy and provide recommendations. The recommendations of two policy studies on Economic Diplomacy conducted in 2002 and 2005 along with the EPN/ADB study-2005 should also be revisited by the task force. The government should implement the valid points immediately. So far, the MoFA functioning is heavily oriented towards political affairs. In view of the emerging politico-economic climate, the MoFA should come out of its past legacy to free the country from the present economic quandary.

Shrestha is a consultant, FNCCI