Economic Diplomacy for Development Partnership 59

ECONOMIC DIPLOMACY FOR

DEVELOPMENT PARTNERSHIP
n Rajendra Shrestha
Abstract
The turn of events after the end of the Cold War called for revisiting traditional
approaches to foreign policy. Shift in the world order triggered by enhanced
economic activities in the national, regional and international markets has
increased the need for coordinated economic diplomacy. Nepal, after the
restoration of democracy in 1990, attempted to institutionalise and practise
economic diplomacy through the Ministry of Foreign Affairs and its overseas
missions. Exploring the leading features of economic diplomacy, this study revisits
the economic diplomacy experiences of Nepal. Underscoring how a country’s
development success, in the globalised era, depends on the application of new skills
and tactfulness in the conduct of relations by the lead ministry in the government,
this paper internalises the importance of more competent and robust strategies to
enhance the spirit of coordinated economic diplomacy. Hypothesising that Nepal
has huge potential for development and economic growth, and prospects to conduct
coordinated economic diplomacy, the study recommends strategies to strengthen
coordinated economic diplomacy as a tool to advance Nepal’s economic, political
and strategic interests. 
Keywords: Economic Diplomacy, Nepal, Strategies, State Actors, Non-state
Actors
Introduction 
Global politics underwent a paradigm shift after the end of World War II. As the
world community witnessed increasing incompetence of state-centric economic
models, economic prosperity through the participation of the private sector,
international agreements and linkages gained widespread admiration (Booth,
2018). The rapid turn of events in the social, political and economic dimension
led to a significant intellectual shift, away from the conventional approach to
foreign policy. As a result, economic diplomacy came to the forefront in the
late 1990s (Lee & Hocking, 2010), which is the most important and popular

n He specializes in the areas of sustainable economic development and diplomacy. He

has published in international journals including a hand book on preventing non-
communicable diseases through diet, exercise and stress management. He has over 35
years of international development experience working with the WB, ADB, UNDP.
60 Institute of Foreign A airs, Nepal : Journal of Foreign A airs, Vol. 1, No. 1, Jan 2021

aspect of conducting international relations in the 21st century. Although

economic diplomacy involves the use of economic resources and cooperation
between states for mutual benefit, the US-China trade war, today, is the biggest
geopolitical schism (Zirovcic 2016). Economic interdependence has become
a double-edged sword where “conflict of logic in the commerce of grammar”,
as American political scientist Edward Luttwak described, will result in no
winners (Kapustina, Lipková, Silin, & Drevalev, 2020). Nonetheless, even
when political relations between the two countries become acrimonious,
economic diplomacy can play a significant role in neutralising the situation
(Zirovcic 2016). Economic diplomacy allows a state to achieve its economic
interests “tactfully, politely, carefully, cleverly and cunningly” (Okano-
Heijmans, 2011). It stimulates the state’s economic interests, creates a viable
and profitable environment for economic cooperation among different actors,
and expands its sphere of influence. It not only involves trade and investment
but also entails mobilizing international assistance to resolve conflicts.
Relations between states are enhanced when diplomatic skills are combined
with economic tools to further a country’s political, economic and strategic
goals.  More clearly, it is deployed for improving import-export relations,
promoting national economic interest, informing potential foreign investors
about investment opportunities, negotiating economic and trade cooperation
to eliminate problematic divergences and harmonising standards in various
sectors, e.g., economic, social, environment and education, among others
(Okano-Heijmans, 2011). Economic diplomacy includes political involvement,
especially high-ranking politicians (ministers), along with bureaucrats; sharing
of duties and responsibilities by involving non-state actors, including private
business and civil society; transparency during the implementation of a
policy to broaden understanding and support by society; and use of facilities
and provisions of international institutions and organizations to ensure
implementation of economic goals (Economic Diplomacy, 2013). It is exercised
at the bilateral, regional and multilateral levels, and requires tactfulness to exert
influence on foreign government policy and regulatory decisions. Economic
diplomacy at the bilateral level is exercised with the help of agreements on trade,
investment, employment, taxation and a wide range of formal and informal
economic regulations between two countries. Bilateral free trade agreements
are signed and implemented between countries. Similarly, economic diplomacy
at the regional level is concerned with agreements between more than two
countries in a region driven by geographical proximity and homogeneity.  The
removal of barriers and the opening of markets become easier within a regional
framework. A region with connectivity and homogeneity enhances national
 Economic Diplomacy for Development Partnership 61

economic interests and boosts economic liberalisation, which highlights

the growing importance of regional cooperation in economic diplomacy
(Wolff, 2017). Economic diplomacy at the multilateral level operates with
trade regimes such as within the framework of the World Trade Organization
(WTO). Since its establishment in 1995, trade between countries is increasingly
governed by international regulations. International economic and financial
organisations, such as the World Bank (WB), International Monetary Fund
(IMF) and various UN agencies, promote a multilateral form of economic
diplomacy (Lee & Hocking, 2010).  Thus, economic diplomacy encompasses
the economic and commercial aspects of traditional diplomacy and focusses on
the interdependence and interconnectedness of state and non-state actors, such
as trade and investment promotion bodies, chambers of commerce and civil
society in the international system.
Apprehending the increasing level of reciprocity and interdependence, a
coordinated economic diplomacy strategy suits Nepal to bolster its development
and economic growth. Therefore, engaging with literature on economic
diplomacy and strategies to enhance coordination among the actors, this study
revisits Nepal’s economic diplomacy practices and presents robust strategies to
enhance the economic diplomacy strategies for Nepal.
Methodology
As a qualitative research, this study reviews Nepal’s economic diplomacy
practices and recommends coordinated economic diplomacy for Nepal’s
development and economic growth. Methodologically, a systematic,
subjective and holistic approach has been opted. The author has also included
details from the consultations and discussions of the High-Level Task Force/
MOFA (2017/18). The consultations were held with the MOFA division
heads, overseas mission heads, including present/former diplomats, relevant
line ministries, private sector, Nepal Tourism Board (NTB), Federation of
Nepalese Chambers of Commerce and Industry (FNCCI), political leaders and
civil society. Academic literature on economic diplomacy was referred to for
the study, and data were collected from reports of the ministries, National
Planning Commission, NTB and other agencies.
Results: 
Nepal’s Experience with Economic Diplomacy
Nepal attempted to adjust its foreign policy after the restoration of multi-
party democracy in 1990.  Towards this end, it established a division
under the Ministry of Foreign Affairs (MOFA) intending to institutionalise
economic diplomacy (Dahal, Sainju, Lohani, Sharma, & Parajuli, 2008).  A
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broad concept of “development diplomacy”, which includes policy dialogue

and policy negotiation in international development, has been the principle
of MOFA to further Nepal’s development agenda in the international sphere
(Pokharel, 2017). At present, the Policy Planning, Development Diplomacy
and Overseas Nepalese Affairs Division at MOFA, along with its overseas
missions, is responsible for Nepal’s economic diplomacy. The division’s
main task is to focus on promoting and improving foreign trade, investment,
technology transfer, tourism, development cooperation, foreign employment
and climate change (MOFA, 2020). MOFA’s efforts and effectiveness to
engage in economic diplomacy have been questioned and criticised. The
results of more than two decades have been obscure as evidenced by the
minimal rise in national GDP. Budgetary and inadequate resources have
often been cited by officials for their poor performance. But what is lacking
is committed leadership and skills in managing negotiations and public
relations in international forums. Firstly, the allocated budget for activities
to promote economic diplomacy by the Government of Nepal (GON) is
NRs 140 million (Giri, 2020), which is not sufficient to implement plans and
strategies. Secondly, GON has overlooked actions and policies required to
increase FDI, foreign employment, tourists, and narrow the trade deficit.  It is
instead focused on setting a wish list rather than applying real efforts (Dahal
R. K., 2018). Thirdly, economic diplomacy practices are limited to lobbying
in the host country for favourable policies towards Nepal, including lobbying
for priority destination country for tourists, removing quota restrictions on
Nepali products and entering into bilateral agreements to ensure labour safety,
security and dignity in the labour destination countries. Nepal’s Millennium
Development Goal (MDG) experience, planning and implementation of the
Sustainable Development Goals (SDGs) and the country’s target to graduate
from a least developed country (LDC) by 2022 to a middle-income country
by 2030 are, however, noteworthy attempts. (National Planning Commission,
2016).
Economic diplomacy is an indispensable instrument to secure Nepal’s foreign
policy objectives and economic advancement.  The country’s ability to engage
in economic diplomacy for national prosperity can be facilitated by leveraging
on its abundant natural resource base, rich biodiversity and cultural heritage. 
Besides, a booming service sector and rising private business enterprises
equally contribute to creating a distinct possibility for Nepal to boost trade and
investment opportunities through international relations (Yadav, 2018). As a
member of global trade regimes such as the WTO and regional and sub-regional
forums, including SAARC, BIMSTEC, BBIN, BRI, etc., it has utilised trade
privileges such as duty-free and quota-free access (Sharma, 2018). At present,
GON engages in development/economic diplomacy at three levels: bilateral,
regional and multilateral. The country has directed diplomatic efforts and set
 Economic Diplomacy for Development Partnership 63

up targets to increase the level of engagement with friendly states to market

goods and services, and implement and review periodic plans, SDG agenda
and a LDC advancement strategy. Nepal has planned and implemented a
sustainable, inclusive and green growth-oriented development strategy for the
coming decades to achieve a higher per capita income, reduce poverty, enhance
human capital and improve the living standards of vulnerable populations. 
There is recognition within GON that coordination between the various ministries
is essential. However, the High-Level Committee at MOFA has not been
effective. Policymakers have not laid out a framework for identifying destination
countries for global export, ways to attract foreign investment and other forms of
economically beneficial exchanges where Nepal enjoys a comparative advantage.
This can only happen through coordinated and cooperative collaboration of the
relevant line ministries and non-state actors such as trade and investment promotion
bodies, chambers of commerce and civil society. To compound the problem,
MOFA does not have the capacity to engage other line ministries and non-state
actors to tackle the diverse and complex issues. As a result, there is coordination
failure with the stakeholders in Nepal and missions abroad. For instance,
comparative advantage and economy of scale are important considerations for
the Ministry of Finance as it is related to the economic policy at home. However,
the role of overseas missions in attracting foreign business and negotiating free
trade and/or preferential trade agreements is largely ignored by the Ministry of
Finance. Another example of coordination failure is in implementing tourism
promotion activities. MOFA must coordinate with the NTB, which has a large
budget allocated for tourism promotion. The NTB not only promotes attractive
destinations within Nepal but also carries out promotional activities abroad and
provides published materials to overseas missions, but often without input and
participation of MOFA or overseas missions. There is no coordination or synergy
in the effort (Pandey & Dhakal, 2019).  Furthermore, MOFA has not demonstrated
leadership to drive economic diplomacy.  It has not kept abreast with new modes
of diplomacy, which mandates going beyond pursuing state-centric analyses of
primarily political agendas to searching for competitive advantage in the world
economy. Also, overseas mission staff lack new skills and are also constrained
by communication barriers, especially where knowledge of the local language is
important, i.e., Gulf countries, China, Russia and Japan, among others.  
Another reason for the ineffectiveness of our economic diplomacy is not
only related to the practices but also to the inability of Nepali industries and
exporters to meet import demand due to supply constraints (Asian Development
Bank, 2020). Diplomats and overseas missions must inform the Ministry of
Finance, trade and investment promotion bodies, chambers of commerce
and policymakers about international trade regulations. And as the occasion
demands and opportunity permits, they must have the capacity to negotiate
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international trade regulations to Nepal’s benefit. In essence, diplomats and

overseas missions must acquire new skills for directing private investments
towards products considering demand, competitiveness, advantage and
cultural specificity (Wolff, 2017).
Coordinated Strategy for Strengthening Economic Diplomacy
Nepal’s geo-political and geo-economic situation remains a major determinant
in the conduct of relations with other states.  Its geostrategic position warrants
country-specific treaties. For instance, while a comprehensive long-term
strategy regulating relations between India and China is essential, engagement
with the US and EU would be different, as would with the Gulf countries and
Malaysia (Dahal, 2018). Overseas missions are key players in negotiations and
in disseminating the uniqueness of Nepal in the international economy.  In the
pursuit of economic security, especially as the country is highly dependent on
remittance, new marketing strategies are needed to promote Nepal as a tourism
destination. Congruent strategies for foreign employment are important, and
the same goes for FDI and trade (Ministry of Foreign Affairs, 2020).
MOFA and overseas missions need to have a clearer understanding of the
interdependence of economic, political and social issues, and the linkages
between state and non-state players in the international system (Bhattarai,
2018). Private sector engagement stems from the need to remain competitive
as trade between states is increasingly being governed by international
regulations (National Planning Commission, 2019).  Involvement of civil
society on the other hand becomes necessary to ensure that the interests of
grassroots stakeholders are taken into account in international negotiations.
Hence, the strategy for coordinated economic diplomacy includes: 
Institutional Preparedness and Coordination
Strengthening MOFA’s institutional capacity and preparedness for this role is
of paramount importance. Improving managerial capacity and acquiring new
knowledge and negotiation skills are a prerequisite in the practice of economic
diplomacy. Effective economic diplomacy not only mandates institutional
preparedness of MOFA but also of other ministries and organisations, such as
the ministries of Finance, Industry, Commerce and Supplies, the Office of the
Prime Minister, NTB and other relevant agencies. To realise this, integrated
and effective coordination operating under a broad framework with clear
operating procedures is required.
Research and development (R&D) through strong and dynamic think tanks,
such as the Institute for Foreign Affairs (IFA), can support coordination and
articulation framework. One way to improve coordination is by forming policy
networks drawn from different line ministries, including trade and investment
 Economic Diplomacy for Development Partnership 65

promotion bodies, for multilateral, regional and bilateral engagements.  Such

networks provide business intelligence, tourism marketing and partner searches. 
Towards this end, GON must identify bilateral economic and development
partners and formulate an actor-specific strategy to optimise bilateral relations;
regularly evaluate economic relations between Nepal and development
partner countries and identify benefits and shortcomings;  formulate basic
development policies and periodic development plans within the framework
of the long-term development perspective and programmes of the National
Planning Commission; set up annual targets with objective indicators and
assess plans and policies; intensify implementation of action plans through
innovation and analysis and assess  current trends and economic relations with
partner countries; evaluate feedback collected from non-state actors, including
trade and investment promotion bodies, chambers of commerce, related
stakeholders, and building partnership with them in implementing strategies;
attract Nepali diaspora to invest in Nepal; carry out economic negotiations and
initiate a memorandum of understanding for economic cooperation; perform
periodic reviews and updates of the agreements and MoUs; and  conduct a
thorough analysis of the possible impact of partner states’ economic policies
and raise voice against possible adverse impact.
To enable MOFA in playing a catalytic role in ensuring synergy in policies and
plans, the focus is on securing a commitment from the sector ministries and
building a strong and functional mechanism at a high level for inter-ministerial
cooperation and coordination; regular interaction, dialogue and consultations
with the concerned sectors, including politicians, bureaucrats, business and
trade unions, NGOs and donors; building a critical pool of staff with new
skills and knowledge on economic diplomacy; regular assessment of feedback
from the private sector, such as the FNCCI, Confederation of Nepalese
Industries (CNI), Nepal Chamber of Commerce and others. Activities that are
specifically needed to improve performance in economic diplomacy include: 
• Playing a proactive and assertive role in coordinating different agencies
and stakeholders related to economic affairs to make the work of MOFA
and overseas missions efficient and effective; 
• Holding regular consultation between concerned MOFA officials,
especially desk officers, and missions abroad and promptly responding to
the communications received; 
• Organising at least a biennial visit by MOFA officials to the missions; 
• Preparing, updating and sharing with overseas missions briefing materials
on trade, investment, tourism, foreign assistance and other related areas,
including materials prepared by other agencies/missions;
• Formulating a policy to recruit local staff with local language capability,
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including lawyers, especially in countries where missions have to deal

with legal issues; 
• Training MOFA staff on economic diplomacy through an institutional set-
up (focussing on making missions business-friendly, imparting knowledge
in the areas of trade, investment, tourism, customs procedure, company
registration, economic priorities;  
• Providing pre-departure training to diplomats posted in the missions,
including a separate module to cater to  country-specific needs and
situation; 
• Preparing Terms of Reference (TOR) for ambassadors, clearly stating the
goals and priorities for promoting the country’s economic interests and
enhancing economic ties with the country of assignment; 
• Monitoring the efforts of diplomats through a process of incentives and
disincentives to make them accountable (High-Level Foreign Policy Task
Force, 2006);
• Encouraging diplomats and missions to work with like-minded countries
in restructuring and reforming financial institutions in favour of the
developing, least developed and landlocked developing states (Dahal,
Sainju, Lohani, Sharma & Parajuli, 2008); 
Multilateral and Regional Engagements
A systematic approach and a clear framework for cooperation, coordination
and management should be established for multilateral, regional and bilateral
engagements. There are different multilateral and international agreements such
as the WTO, United Nations Convention on Law of the Sea (UNCLOS), Paris
Agreement on Climate Change, etc. Also, international financial institutions
facilitate freedom of transit and enable preferential trade for the Landlocked
Developing Countries (LLDCs) and the Least Developed Countries (LDCs)
(World Bank, 2014).  One major and effective level of economic engagement
other than bilateral is regional and multilateral arrangements. Regional
agreements such as the South Asia Free Trade Agreement (SAFTA) and South
Asia Preferential Trading Arrangement (SAPTA) and regional/sub-regional
organisations such as BIMSTEC and BBIN can strategically maximise
advantage regarding connectivity, reduce non-tariff barriers in exports and
enhance transit facilities, tourism, electricity, trade and investment. Thus,
through these instruments on trade and transit facilitation, Nepal could benefit
economically and boost Nepal’s economic diplomacy (South Asia Sub regional
Economic Cooperation, 2019).
 Economic Diplomacy for Development Partnership 67

Creating new alliances and building networks of business groups based in

overseas missions are crucial for economic stability. Nepal can engage
with other South Asian countries through regional trade agreements and
strengthen the existing regional trade instruments, viz. SAFTA, SAARC and
SAPTA (SWATEE, 2007). Also through economic diplomacy, Nepal has the
potential to enter new foreign markets outside south Asia through the Bay
of Bengal Initiative for Multi-Sectoral Technical and Economic Cooperation
(BIMSTEC) and sub-regional organisations like BBIN (South Asia Sub
regional Economic Cooperation, 2019). Exploiting and accessing new markets
for goods and services is becoming increasingly urgent in view of the fact that
the country’s economy is heavily dependent on India. At the multilateral level,
the focus should be on securing fair competition for Nepali products in the
international market. This can be facilitated by participating in exhibitions,
fairs in the targeted countries, organising international forums to attract export
promotion and developing a strategy for lobbying to defend national economic
interests (South Asia Sub regional Economic Cooperation, 2019).  Similarly,
civil society must be enabled so that they can also operate at the regional
and multilateral level. The multilateral strategy includes increasing interaction
and interdependence of national economies, multinational corporations and
international organisations for Nepal (SWATEE, 2007).
Overall, at both the regional and multilateral level the focus is on facilitating
trade and business investment, promoting Nepal as a diversified tourist
destination, easing the movement of skilled, semi-skilled and unskilled labour
force, and cooperating in science and technology, including research and
development.
Technology Transfer
Access to technology and its adoption in economic development to a large degree
decide a country’s competitive position in the international labour division
(Booth, 2018). Hence, economic diplomacy should incorporate technology
transfer for improving productive capacity and structural transformation. It
includes innovation, open economic policies for investment and securing
intellectual property rights, among others. Nepal should pursue approaches
for access to and transfer of technology, including sharing and disseminating
knowledge and skills, and economic diplomacy focussing on the transfer of
scientific discoveries, production methods and other innovations at affordable
terms and conditions. Engaging proactively with UN technology banks for the
LDCs would be an added asset (NPC and ADB, 2016).
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Nepal’s aspiration to be a vibrant bridge between the two Asian giants and
the prospect of trilateralism could be realised through coordinated economic
diplomacy with other technologically advanced states through technology
transfer. Also, Nepal’s trade should be focussed on technological information
learning capacity, and the strategy should focus on inviting Multinational
Enterprises (MNEs), as quite often MNEs transfer technological information
to their affiliates, some of which may “leak” into Nepal’s economy. Another
major technological strategy for Nepal through coordinated economic
diplomacy could be direct trade in knowledge via technology licensing (United
Nations Conference on Trade and Development, 2013).
As technology transfer also depends upon people’s movement, the Nepali
diaspora, NRN and other Nepalis working abroad can become a channel for
technology transfer. International movement of Nepali people associated
with studying or working abroad for a limited period and applying their new
knowledge when they return or the movement of foreign nationals into the
country is another potential channel for technology transfer, and thus Nepal’s
economic diplomacy should focus on these. Technology-related policies should
be friendlier for the foreign investors, while the national policies should be
welcoming for international cooperation (Westphal, 2006). Therefore, there are
diverse areas for technology transfer, technological progress and innovation in
countries at different levels of development. So Nepal’s coordinated economic
diplomacy must incorporate strategies for technology transfer and innovation.  
Sector Promotion
Nepal’s export of goods and services was 8.93% (of GDP) while import of
goods and services was 42.38% in 2019 (World Bank, 2019).  Similarly, its
trade deficit stood at NRs 69,737.30 million in May 2020 (Trading Economics,
2020). To address these challenges, GON has promoted foreign trade, in
general, and export trade, in particular. Export promotion can be supported by
analysing the market situation in  the destination states to competitively and
advantageously benefit and increase export; seeking support from the Nepali
diaspora, private sector and agencies like the Trade and Export Promotion
Centre (TEPC) to develop a trade promotion strategy (Trade and Export
Promotion Centre, 2020); promoting visits of delegations of Nepali exporters
with the involvement of overseas missions; follow-up by overseas missions on
deliberations and decisions of the delegation’s meetings with the host country;
providing information regarding export products, branding, etc., through
interaction with the chambers of commerce; encouraging Nepali delegations
to participate in trade shows and exhibitions by providing information on such
 Economic Diplomacy for Development Partnership 69

events to relevant organisations and individuals; creation of duty drawback

schemes and increasing the availability of short and long-term credits to
Nepali exporters;  simplifying trade regulations, improving cooperation
among economic actors and combining short-term and long-term export
growth policies (Richter, 2017). 
Sector promotion seeks regular market analysis by MOFA with the assistance
of the Ministry of Industry, Commerce and Supplies, and the private sector. 
The obtained information should be shared with missions abroad. Periodic
analysis enhances trade promotion and identifies a priority commodity for
promotion. A specific-purpose and interest-based visit and participation in
trade fairs and exhibitions should be conducted. Also, Nepal should hold
trade fairs and exhibitions of an international nature to promote trade, and the
cost should be shared by GON to create a conducive environment for trade
promotion (Pant, 2011).
Investment Promotion 
Nepal should focus on increasing investment, including commercial loans,
official flows, foreign direct investment (FDI) and foreign portfolio investment
(FPI) to enhance economic growth. Though foreign investments are increasing
in Nepal, foreign direct investment, net inflows is 0.23% (of GDP) in 2018
(World Bank, 2018). Thus, FDI promotion should be the major priority to
enhance economic development.  Economic diplomacy should be carried out
by disseminating information about Nepal’s potential as an FDI destination
country by updating details about priority sectors, available projects and market
situation;  making investors aware of GON’s adoption of the concept of Special
Economic Zones (SEZs), Industrial Estates and potential trade corridors in Nepal;
taking advantage of the Everything But Arms (EBA) initiative under the EU
Generalized System of Preferences, preference given by India and proximity to
large Indian and Chinese markets (Bhandari, 2014); regulating amendments by
GON regarding legal and procedural improvements on the Industrial Enterprise
Act, Companies Act, SEZ Act, Foreign Investment and Technology Transfer
Act and Labour Act (United Nations Conference on Trade and Development,
2003); encouraging and promoting visits of business delegations from potential
FDI source countries and facilitating contacts with government agencies and
potential partners, if the partner country is willing to invest, then facilitating
contacts with local partners (Aryal, 2018); providing information to potential
investors of facilities provided to ensure the protection and enhancement of
companies or projects; promoting and safeguarding the corporate interest of
investment partners in Nepal’s interest; providing successful FDI case studies
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(like accounting firms of multinationals, Kobold watch, Incessant Rain, Cloud

factory) to encourage investment in Nepal (Booth, 2018). 
Intensification of Tourism Promotion
Nepal enjoys comparative advantage in tourism. The world’s highest peaks,
national parks rich in flora and fauna, snow-fed rivers, exceptional trekking
routes, religious and cultural diversities, and adventure tourism place Nepal
among the top destinations for tourism. Hence, economic diplomacy must
include strategies to boost tourism.  Examples to support the development of
tourism include increasing government expenditure in the tourism sector for
new infrastructure, such as airports, trails, tourism attractions and facilities;
attracting investment from the private sector in creating tourism facilities;
organising international tourism promotional campaigns, activities and
festivals in various parts of Nepal  and the world through overseas missions,
through collaboration and  coordination  with relevant government ministries,
non-governmental agencies, travel trade entrepreneurs and other stakeholders;
applying sustainable development principles in tourism by minimising  the
environmental impact and maximising local ownership; promoting Nepal
as a destination country through campaigns in partnership with overseas
missions and the private sector; accelerating regional tourism in source
markets like India, China and southeast Asia (Ministry of Tourism and Civil
Aviation, 2019). 
Labour Diplomacy 
Nepal has signed bilateral labour agreements and MoUs with nine countries
as of July 2019, of which most are less binding in nature. However, Nepal
sends youths and workers to more than 110 countries (Ministry of Labour,
Employment and Social Security, 2020). In the absence of a MoU or an
agreement with a host country, Nepali workers’ rights cannot be protected.
Hence, there is an urgent need for signing country-specific labour agreements
to protect the welfare of Nepali workers. Alternatively, Nepal could attract
these countries to establish training centres in Nepal so that there is a
match in skills required for the host country. The prospect of well-trained
human resources may attract them to sign labour agreements with Nepal
(Luitel, 2013).
One of the objectives of the overseas mission is protecting Nepali migrants,
and accordingly, the staffs are assigned specific tasks for meeting this purpose.
However, missions in this particular service have not been effective for lack of
communication skills in the local language. A policy to hire local staff could
be introduced, which is also cost-effective. As the labour market is highly
 Economic Diplomacy for Development Partnership 71

competitive, the search for labour markets should be coordinated with the
Foreign Employment Promotion Board to promote foreign employment in a
professional, safe and ethical manner (International Organization for Migration,
2019). To protect Nepali migrant workers and enhance foreign employment,
there is a need to sign mutually beneficial MoUs with labour receiving countries,
where  agreements reflect the provisions in international treaties/covenants,
address migrant workers’ concerns in the destination countries and reflect
agreements reached in regional consultations; address and resolve labour issues
in the host country promptly by removing constraints in Nepal and overseas
missions; equip missions with local staff having sufficient language and other
skills; review and update existing labour agreements, especially those that
have failed to protect the interests of Nepali workers; assess recruitment fees
and the process to make it friendly and easy to facilitate foreign employment; 
set up a high-level implementation, monitoring and evaluation mechanism to
ensure effective, safe, professional and ethical foreign employment. MOFA
and its overseas missions should explore the possibility of reducing the cost
of migration, which is one of the highest for Nepali workers. As there is high
competition in the international labour market, diversified foreign employment
opportunities need to be properly analysed for better human rights conditions and
salary/benefits (Luitel, 2013). Enhancing skills and establishing training centres
with support and/or accreditation of the host countries should be explored.
Foreign Assistance 
Nepal’s economy and development projects are highly dependent on foreign
assistance. Economic diplomacy and foreign assistance are related to the
nation’s economy and prosperity, especially for a developing country (Aryal,
2018). Thus, missions abroad should be mobilised for identifying and
taking support from the development partners. As a first step, all diplomats
and overseas missions should be made aware of Nepal’s priority areas for
assistance, strategy for achieving SDGs, graduating from a LLDC and
becoming a middle-income country by 2030 (National Planning Commission,
2019). In line with this, missions need to focus on attracting more assistance
in Nepal’s priority areas (infrastructure, productive capacity, employment
generation, capacity-building) rather than technical assistance for policy
and governance issues through negotiations and consultations (NPC and
ADB, 2016); keeping abreast of partner outlook on investment sectors, and
disseminating Nepal’s perspective to them;  analysing the context of changing
foreign assistance policy in international society;  securing non-conditional
assistance under the framework of relevant declarations, and developing
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action plans for aid effectiveness; acquiring aid for projects and programmes
with substantial resources, and which can have a significant impact on the
country’s priority areas; identifying and exploring new avenues and sources
of aid, and facilitating their entry into Nepal (Asian Development Bank,
2020);  prioritising the short- and long-term aid priorities of  Nepal to the
development partners;  securing as much assistance as possible from priority
funding schemes applicable to Nepal as a LDC (UNESCAP, 2018); expediting
disbursement of agreed assistance; and encouraging only “reputed” INGOs to
enter and operate in Nepal. To increase foreign assistance, Nepal could focus on
formulating economy-wide and sector perspective plans, ensure transparency
and accountability, enhance quality aid, and strengthen aid coordination
while promoting institutional effectiveness (NPC & ADB, 2016). Similarly,
Nepal can improve foreign assistance through improved project planning and
implementation, evaluation, impact study, and supervision and monitoring.
Also, the Nepali diaspora in coordination with MOFA can engage in economic
development and diplomacy. GON through MOFA can effectively mobilise
the Nepali diaspora community to secure foreign assistance by mapping
Nepali diaspora locations and skills for advocacy and lobbying; opening
a regular channel of communication with the diaspora through the NRN
Secretariat and engaging them in regular dialogue (Aryal, 2018); focussing on
diaspora capital markets and encouraging them to invest directly; developing
a mechanism of “Diaspora Knowledge Network” to tap their knowledge
and networking with politicians and business communities in their country
of residence to promote Nepal’s economic agenda; encouraging the concept
of “Diaspora Philanthropy” through cultural centres established by them in
different cities of the world to promote Nepal’s soft power diplomacy through
culture and tourism (Boyle & Kitchin, 2013);  updating NRN Rules 2009 to
clarify unclear/confusing interpretation of the current NRN Act 2008 in line
with the provisions of Nepal’s constitution; creating a “Diaspora Corp” for
knowledge transfer (Booth, 2018); and  supporting returnee migrants to create
jobs in Nepal (So far, there are no specific schemes promoted by the public
sector to channel migrants’ investment in the productive sector) (High-Level
Foreign Policy Task Force, 2006). 
Partnership with the Private Sector
Nepal’s 15th Five-year Development Plan from 2019/2020 to 2023/24 AD
expects the private sector to invest nearly 55.5%, or NRs 5,135.41 billion,
the government 39.1%, or NRs 3,613.32 billion, and the cooperative sector
5.4% (NPC, 2019). This demonstrates that efforts to promote economic
 Economic Diplomacy for Development Partnership 73

diplomacy cannot be effective without partnership with the private sector. Its
role in economic diplomacy could be enhanced by strengthening the existing
institutional mechanism for regular dialogue between GON and the private
sector, both at MOFA and in overseas missions; formulating a strategy for
a result-oriented partnership for promoting trade, tourism, investment and
employment; creating a strong agency in MOFA consisting of the head of
the umbrella body of the private sector, secretaries of the related sectoral
ministries and professionals to functionally link the private sector and MOFA,
embassies and missions (Shrestha, 2006); planning and implementing joint
promotional and business activities; and promoting foreign visits of Nepali
business delegations and facilitating/hosting their meetings in missions.
Also, the private sector in collaboration with the government can promote local
economic development by utilising local knowledge, skills, and resources and
link it with long-term economic growth. The government should collaborate
with trade and investment promotion bodies and pool its resources with the
private sector for promotional programmes related to economic diplomacy
(Ministry of Foreign Affairs, 2020). Moreover, proper coordination and
consultation with the private sector before formulating plans and policies
are essential. A strong private sector with strong leadership can contribute
to effective and coordinated economic diplomacy through collaboration and
cooperation with the private sector in different states. The private sector
can help bring in FDI as well as in technology transfer (Basnyat, 2011). Thus,
the private sector has a big role to play in economic diplomacy than just
investing money.  
Business-friendly Missions
One primary objective of overseas missions is to develop and promote
economic relations between the home and host countries and maximise the
benefits from such relations. Thus, missions should create an environment that
is welcoming and friendly to business promotion. Missions should be equipped
with information related to opportunities available to the investors and analyse
market efficiency and competitiveness in the host country (Rana & Chaterjee,
2011). Its role is to facilitate. Tasks include maintaining a comprehensive
and  updated website;  responding promptly to business enquiry;  introducing
relevant people and agencies from home to host country business people;
helping create contacts and linkages with business communities;  supporting
consular/consul general offices to make them effective and monitoring their
activities; and maintaining a business network with a comprehensive mailing
list of relevant people in the host country; MOFA, on its part, must develop
74 Institute of Foreign A airs, Nepal : Journal of Foreign A airs, Vol. 1, No. 1, Jan 2021

a mechanism to monitor and collect information on current issues or theme

papers prepared by various agencies and share them with its missions.
Networking
Strengthening networks and creating a sphere of influence are an important
aspect of economic diplomacy (Kostecki & Naray, 2007). Therefore, the focus
is on creating networks not only with the governments of other countries
but also with multinational corporations, development partners, financing
institutions and even individuals (Bhattarai, 2018). Regional and multilateral
platforms are one of the important instruments to promote networking, but
other agencies can also enhance networking. Say, for example, “Friends of
Nepal”, which provides a platform for networking and sharing information.
Networking can be strengthened by establishing  a caucus of parliamentarians
on issues related to Nepal through the support of overseas missions and
organising regular briefings to them and their staff on Nepal; emphasising
policies that enhance foreign investment and trade with Nepal; developing
connections with the chambers of commerce of other countries and organising
interactions with them; preparing a list of potential investors, commercial
institutions and personalities and interacting with them in person to build
trust and confidence;  establishing linkages with think tanks and universities,
especially those with a focus on Nepal studies; maintaining a list of “Nepal
lovers and supporters” and communicating with them; keeping regular contact
with government officials in the network of a mission;  using NRN and the
Nepali diaspora to promote linkages with various stakeholders; and creating a
stakeholder database to institutionalise such networking. 
Monitoring and Supervision
Monitoring and supervision of plans and policies and, if necessary, rethinking
about them are important for efficient economic diplomacy.  For this, MOFA
should have clear guidelines to enable it to assess and monitor activities. 
Autonomy to conduct and take the necessary steps for improving economic
diplomacy should be the purview of the division under MOFA. Other divisions
of the concerned ministries and the High-Level Economic Diplomacy
Implementation and Monitoring Committee under the chairmanship of the
foreign minister should be made effective to independently monitor progress.
Equally, the secretary-level committee representing all the concerned line
ministries should be formed for multi-sector support and direction (Dahal,
Sainju, Lohani, Sharma, & Parajuli, 2008). Its task includes assessing policy
announcements of the host countries vis-à-vis Nepal and the potential for
partnership.
 Economic Diplomacy for Development Partnership 75

Conclusion
This study has discovered that in the context of an increasingly globalised
world, where  states cannot escape economic interdependence, and economic
diplomacy has become the unavoidable reality of 21st century international
relations, the intricacies of the interactions among the state and non-state
actors imply that economic diplomacy cannot be compartmentalised into
separate economic or geo-economic realities of countries like Nepal, making
it crucial to formulate and implement economic diplomacy to maximise
benefits from international relations. This study also identified that the main
focus of economic diplomacy should be on trade promotion, investments,
technology transfer and tourism. Current trends in a globalising economy
warrant enhancing collaboration between the state and non-state actors, given
the increased importance shown to international trade rules and regulations,
which need to be negotiated and implemented. 
Thus, it has been realised that coordinated diplomacy must be built around
networks drawn from several government ministries as well as the private
sector and civil society. Regarding this, MOFA should expand its institutional
capabilities to drive economic diplomacy and find ways to interact effectively
with other line ministries and non-state actors. Success to a large extent will
depend on new skills, capability, tact and versatility of the staff engaged
in the conduct of economic diplomacy. Therefore, Nepal’s coordinated
economic diplomacy strategies should retrospectively learn from its economic
diplomacy practices and experiences. And to strengthen coordinated economic
diplomacy in the changing world, it should focus on institutional preparedness
and coordination, increase multilateral and regional engagements, enhance
technology transfer strategies, emphasise sectoral investment and tourism
promotion, strengthen labour diplomacy, attract foreign assistance, prioritise
partnership with the private sector, promote business-friendly missions, and,
importantly, concentrate on networking, monitoring and supervision. 
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