We get to read about it just about every day. Nepal has a great potential to become a ‘bridge’ between the booming economies of India and China. Alternatively, it can never become that bridge because neither of our two big neighbors seems to have any need for third-party bridge-building. They are doing just fine without one, as Indo-China bilateral trade reached US $74 billion in 2012; the volume is expected to double by 2025. Nonetheless, there is a very valid consensus of sorts that Nepal can achieve prosperity only by tapping into the healthy growths of India and China. The concept of Economic Diplomacy (and not just with the two next-door giants) is much in vogue these days. It posits that only through the enhancement of economic linkages will a country be able to safeguard its national interests. Yet at a time when Nepal has not even been able to clearly articulate its foreign policy priorities, pursuing such ‘enlightened’ self-interest is no easy task. [break]
There have been some remedial efforts. The government’s most recent three year plan is aimed at taking the country to a Developing Country status from the present status of a Least Developed Country by the year 2022. Currently, fully 22 percent of the GDP is covered by remittance. How can this fickle source of national income be replaced by a steadier source? More foreign investment is one of the answers. Foreign aid, on the other hand, has had mixed success in Nepal, as everywhere else in the world. In Dead Aid Zambian-born economist Dambisa Moyo makes a strong case for how foreign aid does more harm than good in Africa by creating dependency and propping up corrupt regimes. The answer, in her opinion, is to replace foreign aid by increased development financing. But why would India or China or any other country finance development in Nepal unless they stand to gain something in return? And as things stand, they have very little incentive to invest here.
The way the foreign aid regime works in Nepal (as in Moyo’s Zambia) is that the country returns the financial favors with political ones. For instance it vows to clamp down on terrorist networks that India believes undermine its security interest. It promises to crack down on Free Tibet activists who have stepped up their presence in Nepal in recent times. Promises are made on important issues like secularism and federalism before the internationals. There are sizable returns no doubt. But the most worrying fact is that there does not seem to be any broader vision underlying these dealings. We want to be a bridge no one wants. We want to tap into the boom in the neighborhood without a workable plan. We want to engage in economic diplomacy without first getting the fundamentals of our own economy right. Amidst a prolonged political transition, this just is not possible without broader political understanding on the country’s future economic path. That would be a good start. There can be no gainful foreign policy conduct so long as we continue to act from a position of weakness rather than strength.
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