Diplomatic Eye: Ep-03

Economic Diplomacy and Begging Bowl Effects

Simply speaking, Economic diplomacy is described as a strategy for pursuing both economic success and political stability, and states are the most significant players in this game at the international level.  It also covers diplomacy that makes use of economic resources in order to accomplish a certain foreign policy goal. Export promotion and foreign direct investment are the focus of economic diplomacy in its precise definition. It’s also known as commercial diplomacy.

By and large, today’s global interconnectedness means that regardless of the political views that predominate in the various nations, international trade may create economic diplomacy and boost economic progress. In this backdrop, it’s high time for Nepali political and diplomatic leadership to introspect and retrospect their roles in terms of promoting or obstructing economic diplomacy.

If you go through the history of European Union, it is found that European officials start the process of constructing what is now known as the European Union in an effort to put a stop to the recurrent and brutal battles that resulted in the Second World War.

With this background, let’s talk about some topical issues- two important deals occurred in our region. Such developments in our neighboring countries include: China –Pakistan Nuclear Power Plant Deal and India US New Deal

China –Pakistan Nuclear Power Plant Deal
China and Pakistan have agreed to spend US Dollar 4.8 billion on the construction of Pakistan’s seventh nuclear power facility. The 1,200 megawatt project will be built in Chashma, a city in central Pakistan, where Beijing has already constructed four nuclear power generating units with a combined capacity of around 1,230 megawatts. China offered a more than US Dollar 100 million discount for this Chashma 5 power plant.

India US New Deal
India’s Commerce Ministry’s preliminary data shows that the value of bilateral commerce between India and the United States increased by 7.65% to US Dollar 128.55 billion in 2022–23 from US Dollar 119.5 billion in 2021–22. In 2020–21, it was US Dollar 80.51 billion.

India stands out as a possible option in supply chains, innovation centers, and joint ventures as American fears about China increase. Further, it has the capacity to function at scale since it is the largest democracy in the world, with an economy that is becoming more open and a robust technology sector. When India became a significant player in the global IT outsourcing market in the 1990s, the country’s technology sector started to grow significantly. A thriving startup ecosystem developed in India as a result of the expansion of the outsourcing sector, with many entrepreneurs taking advantage of the opportunities provided by the IT sector to launch their own businesses.

Narendra Modi, the prime minister of India during his recent visit to the US, met with executives from major tech behemoths. PM Modi met with the heads of Google, Apple, Microsoft, and other major tech companies as part of the signature “Innovation Handshake” campaign.

Following a meeting with Indian Prime Minister Narendra Modi in Washington, DC on June 23, Google and Alphabet CEO Sundar Pichai announced that Google is investing US$10 billion in India’s digitisation fund and the creation of its global fin-tech operation center in Gujarat.

On Thursday, June 15, the Defence Acquisition Council (DAC) of India approved the purchase of armed Predator Unmanned Aerial Vehicles (UAV) from General Atomics Aeronautical Systems (GA-ASI), an American aerospace firm, for more than US Dollar 3 billion.

This Unmanned aerial vehicle (UAV) Predator or MQ-9 Reaper is primarily utilized for long-distance, high-altitude surveillance and strike missions by the United States Air Force (USAF) and other foreign military forces. The MQ-1 Predator drone is replaced by the Reaper.

What is learning lesson?
With the China –Pakistan deal, Nepal should learn that the relations with big powers should be fruitful and diplomatic apparatus should always engage in fostering dialogue and cooperation. Pakistan has its own economic problems and its relations with China is not only essential to maintain the day to day operations but also mandatory for solving economic problems. On one hand its relations with India have not been improved on the other hand US-Pakistan relationship has also been changed in strategic and security perspective. Nepal as a non aligned nation should always maintain its position in such a way that none of the big players mentioned earlier should engage in hatching conspiracy against our neighbors.

History witnessed that on April 25, 1947, Nepal and the United States of America (US) established diplomatic ties. The United States and Nepal established diplomatic ties only after the United Kingdom. On February 3rd, 1958, Nepal opened an embassy in the nation’s capital. The American Embassy in Kathmandu was inaugurated on August 6th, 1959. The fact that our ancestors established a solid foundation for our bilateral relations based on reciprocal cooperation and non-alignment should be acknowledged while discussing Nepal’s relations with the US. In this modern period, are we still operating in the same manner? The crucial query is this one.

With the example of US-India relations, Nepal can learn so many things. There should be a common economic agenda for the development of a country. When you deal with international partner, you need to give emphasis on national interest. Bringing brightest brain for Setting up IT infrastructure should be given first priority. Secondly, adequate budget should be allocated in University’s Research and Development Cells so that IT innovations would flourish. Third, Nepal needs to build good rapport with Global companies such as Google, Apple, Amazon, Micro-soft and other tech companies. Nepali University Students’ placement in such companies would open new avenues. Nepali academia and corporate sector can make a meaningful link in this direction.

We can only advance peacefully and without allegiance, no matter how advanced the drone our neighbor purchased.

In terms of the relationship between India and China, it is frequently implied in the media that both nations see one another as enemies. Bilateral trade, however, does not support this.

India-China trade
According to figures issued by the Chinese customs, commerce between India and China reached an all-time high of US Dollar 135.98 billion in 2022, while New Delhi’s trade imbalance with Beijing for the first time exceeded US Dollar 100 billion despite tense diplomatic relations.

What can we decipher from this?
It is believed that only persistent national interests exist in international politics; there are no enduring allies or antagonists. According to Kanti Bajpai (Feb 09, 2023), from Chinese perception, India is viewed as an unruly, polarized, backward nation with a seriously deficient democracy and a “slave” mindset. Indian views on China are likewise unfavorable. A superiority complex and a lack of regard for individualism are seen as characteristics of the authoritarian, aggressive, and soulless nation known as China. Racial stereotypes and denigration are prevalent on social media from both sides.

Despite the Doklam crisis of 2017 and Galwan tragedy in June 2020, India and China both now agreed to maintain close contact through military and diplomatic channels to safeguard peace and harmony.

This year, India chaired the Shanghai Cooperation Organization’s 22nd meeting virtually. Eight member states, including India, China, Russia, Kazakhstan, Kyrgyzstan, Pakistan, Tajikistan, and Uzbekistan, as well as four observer states and six dialogue partners, make up the Shanghai Cooperation Organization (SCO). Notably, if the SCO summit had taken place in person, Russian President Vladimir Putin would have had to go to India in the midst of the conflict between his country and Ukraine. The leaders of China and Pakistan were also anticipated in New Delhi for the SCO meeting, and India currently has tense relations with those countries.

At the conclusion of the summit, the SCO leaders adopted a statement in which they pledged “to counter the activities of terrorist, separatist, and extremist groups.”

In the previous episode, some of the important issues of Nepal India relations were raised. The point is both countries need to prove that they are trustworthy in the eyes of the citizens. There is delay in providing approval from India on the completed hydro-power projects. A few examples are given.

Delay in Approval from India on Hydropower Projects
According to media reports, the projects that were proposed to the Indian Side for which Indian authorities’ approvals were requested were Chameliya (29.1 MW), Upper Bhotekoshi (43.65 MW), Upper Tamakoshi (456 MW). Similarly, Upper Chaku 1, Super Madi, Super Dordi-Kha, and Likhu 2 are four projects with a combined capacity of 167.48 MW that have been proposed to the Indian side in an effort to obtain export authorization.

Before any power spillages start, India’s consent must be obtained. In this situation, it raises doubts about the Indian Prime Minister’s statements that his nation would purchase 10,000 MW from Nepal over the next ten years. India has been observed to be reticent in speeding the clearance process when it comes to implementation. Herein lies the crucial function of economic diplomacy, which must establish the favorable conditions for productive outcomes through substantive diplomatic engagement.

Let me finally talk on foreign aid and the Begging Bowl Effect
Since 1952, Nepal has been receiving aid from other countries. Major donor countries include the USA, Japan, UK, India, China, Denmark, Norway, Switzerland, Germany, and South Korea among others. In addition to these countries there are numerous multilaterals, INGOs or external development partners providing aid to Nepal. Nepal continues to be one of the poorest nations in South Asia despite having thousands of NGOs and receiving a substantial amount of foreign help. The experience of Nepal shows that aid and foreign funding by themselves are insufficient for long-term development. Two cases are briefly explained here.

Case 1: Ropeway
The Halchowk-Lainchour ropeway was the first to move freight, carrying stones from the quarry for the construction of palaces. Chandra Shamser Rana constructed the well-known Dhorsing-Chisapnai-Chandragiri ropeway in 1922, which passes through Kathmandu. With the help of USAID’s technical and financial assistance, it was upgraded in 1964 to extend 42 km to Hetauda.

The few ropeways in operations in the past are non-functional today. Hetauda Cement Factory Ropeway is one of such ropeways. The factory used to transport stones to the factory from the quarry site. It covered11 km distance and the carrying capacity was 150 tons/hour.

Adhikhola, Jhimruk khola, Khimti, Bhattedanda, Barpak, Tri-Chandra Nepal Tara and Kharidhunga mine ropeway are some of the other ropeways that are not in operation.

Case 2: Trolley Bus
A donation of Rs. 40 million from China allowed for the left-handed adaptation of 22 standard trolley buses, which were used to launch the trolley bus system in 1975. In 1997, ten newer-model buses were donated. A division of the Nepal Transportation Corporation (NTC), the Nepal Trolley Bus Service ran the route. As the trolley bus service had not produced a profit since 1990, the NTC was disbanded in 2001. The strict government bureaucracy, excessive personnel, and nepotism in management contributed to NTC’s failure. These factors led to weak technical expertise and ineffective operational policy.

If I were to pinpoint the main reason why it failed I can sum it up as a lack of ownership and extreme neglect on maintenance and management.

The bottom line is: You won’t have a prosperous nation up until and unless you toss out your begging bowl.