Need To Train Diplomats In Economic Diplomacy

Yuba Nath Lamsal:-- In the strategic calculus of the 21st-century world, economic interest has dominated more powerfully than anything else. Economic strength reflects a country’s power in international politics. National security, therefore, is tied to the economic security of any country. Be it war or other conflicts the world has seen in recent years, economic factors have been the primary triggers. Alliances and coalitions are made and, accordingly, diplomatic engagements are built. On the surface, such alliances and coalitions appear to be guided by military and political security; the crux behind it always remains the economic interest. Unless a country builds and expands its economic capacity, it cannot play a decisive role in international power politics. Economic engagements shape the level of relations among nations. Economic diplomacy has thus emerged as the most pronounced terminology in the realm of diplomacy and international relations. Economic diplomacy is more important for developing countries like Nepal that are not armed with other levers of power. Nepal has, therefore, embraced economic diplomacy as a fundamental component of its international diplomacy. Economic diplomacy is not a new concept but has been a fundamental part and purpose of diplomacy right from ancient times. Countries and rulers used to send their emissaries to influence the rulers of other countries, seeking to protect trade, the supply of resources and other materials. Although it was not called economic diplomacy, the entire exercise of engagements and interaction between countries had been for economic purposes. Economic purposes:-- Nepal’s early diplomacy was for economic purposes. Nepal established its first diplomatic mission in Lhasa, Tibet, in 1856 for the sole purpose of protecting Nepal businesspersons and their businesses. This office was called ‘Wakil Adda ’, which was later renamed as the Consulate General’s office. Even earlier than that, ‘Alaichi Kothi’ had been opened in Patna and Calcutta of India, whose primary task was to promote trade and protect Nepal’s business interests. According to Sardar Bhim Bahadur Pandey, “prior to establishing an embassy in London in 1934, Nepal had Wakil Adda in Lhasa and Delhi, Buying Agency in Calcutta and Alaichi Kothi in Patna” of India. Those were days when Nepal was a key entrepot for trade between South Asia and Tibet. Nepalese business persons had virtually monopoly over the trade in Tibet, from which Nepal had immensely benefitted. Nepal even minted silver coins and supplied them to Tibet. Even the British had envied Nepal’s booming trade with Tibet. With the change of regimes in Nepal, the priority of diplomacy and international relations also changed. Economic concerns remained secondary, whereas grabbing power and maintaining the hold on power turned out to be the primary goal of rulers. The political change of 1951 brought about a transformation in the entire course of Nepal’s worldview and foreign policy orientation. Nepal entered an era of diplomatic diversification seeking support and contribution from different countries and multilateral organisations for economic advancement. Preference then was in getting assistance in the form of grants from development partners. As donors have drastically reduced the size of grant, Nepal re-directed its diplomatic priorities to get soft loans, foreign direct investment (FDI), and promotion of export, tourism and technology transfer. In the present context, economic diplomacy is not merely a choice but a national necessity as Nepal’s own capability and resources may not be sufficient to ensure economic development and prosperity. This depends on how effectively Nepal can pool resources from across the world and mobilise them in the best interest of the country. Nepal’s economic diplomacy covers multiple sectors including investment, tourism, export, employment promotion, technology transfer, climate cooperation and diaspora mobilization, among others. As said in a previous piece, the tourism sector has witnessed relatively better performance but not to the extent of its fullest potentials. The foreign direct investment scenario is dismal. Prospective investors appear to be hesitant for a number of factors, including, as they say, Nepal’s relatively smaller market compared to our two neighbours, which offer better incentives to the investors. The other obstacles they raise are procedural and legal hurdles, trade unions’ hyper activism, higher transportation costs and poor infrastructures. These hurdles and hassles need to be done away with if more investment is to be attracted. Nepal definitely has potentials and comparative advantages in some sectors like hydro power, agro-industries, herb processing, hospitality sector, mines and minerals, textile, handicrafts and information technology for foreign investors. Moreover, Nepal’s geographical position between India and China offers opportunities for investors as they can have access to the huge markets in the neighbourhood. Exports are another important area that needs to be explored and promoted for the country’s economic prosperity. At present, Nepal has a huge trade deficit as we import almost everything from other countries. An increasing trade deficit is not a healthy sign of the national economy. A number of issues and problems business persons indicate for poor performance in the export sector. According to entrepreneurs abroad, Nepali producers often do not comply with agreed quality and quantity of goods. The other problem is the high transportation cost as Nepal does not have direct access to the sea. Legal hassles:-- These issues can be and must be addressed to foster a positive and conducive environment for more FDI, export, tourism and technology transfer. The present government has announced to focus on ‘development and economic diplomacy’ and also appears serious and committed to address these issues. The government has already initiated some actions to do away with the procedural and legal hassles as well as ensure good governance. The government has also promised to solve trade union related issue. Against this backdrop, Nepal’s diplomacy has to be re-oriented keeping in pace with newer dynamics at internal and external fronts for maximising benefits and supporting national drive for economic prosperity. For this, missions abroad need to be equipped with financial and human resources. Similarly, diplomats need to be trained in economic diplomacy equipping them with necessary skills, tools, tactics and approaches. In addition, inter-ministry coordination and partnership with the private sector appear to be glaringly lacking, due to which economic diplomacy related activities have not been effective. Nepali diaspora can be an important asset in marketing and projecting Nepal outside the world, for which our missions need to give due attention and accordingly mobilise them. (The author is a former chief editor of this daily and a former ambassador. lamsalyubanath@gmail.com) This article was first published in The Rising Nepal daily on August 5, 2026. https://risingnepaldaily.com/news/84556