Economic diplomacy includes all the economic activities such as exports-import, investments, lending, aid, free trade agreements and more. We have seen in the past that economic diplomacy greatly contribute to struggling countries, but can it also contribute to Nepal?
Nepal is one if the poorest and least developed countries in the world, with a GDP per-capita of $1,500 (2013) and an annual growth rate of 3.6%. The country is heavily dependent on agriculture with 70% of the population work in that industry. That, however, does not mean that agriculture is a success in Nepal as it accounts for only 35% of the GDP:
Nepal’s economy is far behind other developing countries, and even though it is part of several international economic institutions like the WTO, IMF and World Bank, it is still having hard time in increasing growth.
25% of Nepal’s population are below the poverty line and Nepal suffers from severe lack of skilled labor. In addition, many of the ones that are skilled enough, leave the country in seeking for better opportunities. The high level of unemployment, corruption, and brain-drain have made the economy extremely vulnerable.
Economic diplomacy deals with issues such as economic resources (aid), foreign policy objectives, trade, investments and technological exchanges. Nepal is very much dependent on foreign aid (accounts for 25% of its GDP), but at the same time, other development measures must be taken to move Nepal to its next level of growth.
While economic diplomacy is very helpful, Nepal is not yet ready to enter the competitive world market, it does not have the minimum infrastructure and development, and the government does not take enough measures and is not committed to change that.
Learning from other countries in Asia, Nepal should focus on export and develop its workforce basic capabilities. As seen at the next door neighbor- Mongolia, similarly to Nepal, also suffered from similar issues. But it opened up the economy for investments and that greatly supported the country internal and external capabilities.
Nepal has a very high revenue stream from tourism. Further development in that area can greatly increase Nepal revenue and provide the government financial power to invest in education, infrastructure and health. These can boost the national economy.
However, words and actions don’t match. Political issues are putting constraints to development, and preventing foreigners from investing and from the economic diplomacy to benefit the country, as in benefited other countries.
Nepal’s government must let economic diplomacy efforts help the country. It needs to bring students back by improving living conditions, to open its doors for Foreign Direct Investments (FDI), as China did, and invest in other basic internal issues.
FDIs are waiting for opportunities, and Nepal can reap the reward by providing them with qualified employees and looser barriers for entry.
By taking advantage of the global economy, Nepal can quickly increase its growth rate and join other developing country in their success.