January 28, 2017


[All this makes Nepal, perhaps, one of the global geo-strategic hotspots of the 21st century that will grow with the simultaneous rise of India as a major power, and the forward movement of the other arm of the Chinese Dream, namely Trans Himalayan Economic Corridors (THEC) as is to be witnessed in China Pakistan Economic Corridor (CPEC) strategy with around $ 48 billion of investments. Yes, there is a case for a new foreign policy.]

By Madhukar SJB Rana*

The significance of Nepal’s geo-strategic location will grow in the 21st century as compared to the previous is my core assumption in making my views here.  The rise of China in global affairs as the champion of globalization through shared prosperity, while pursuing one's own independent domestic policies, with its strategy known as OBOR - driven by the Chinese Dream as laid out by President XI Jinping - is being contested by President Obama's 'pivot to Asia', TPPA and stress on human rights and democracy.

Yes, President Elect Trump has challenged the benefits to the US from globalization and so wishes to 'make America great again' by rejecting TPPA, seeking to renegotiate NAFTA and thus promote deglobalization with less free trade for more import substitution.

However, be that as it may geo-economically, geo-strategically he will spark a comprehensive arms race globally as the US will insist that each ally must do more to defend itself while targeting China as the main enemy to making America great again.

All this makes Nepal, perhaps, one of the global geo-strategic hotspots of the 21st century that will grow with the simultaneous rise of India as a major power, and the forward movement of the other arm of the Chinese Dream, namely Trans Himalayan Economic Corridors (THEC) as is to be witnessed in China Pakistan Economic Corridor (CPEC) strategy with around $ 48 billion of investments. Yes, there is a case for a new foreign policy.


In the emergent world order that will be full of uncertainty and foreign policy risks, it is vital that Nepal gets its bilateral relations in order first and foremost. This, it needs underscoring, is far more vital than being in the UN and joining regional and sub-regional associations. Thus we need to enter into comprehensive strategic partnerships (CSPs) with India, China and Bangladesh as the three most significant partners. These should include revisions to our treaties of peace and friendships and other treaties with them to either lead to CSP or as a result of the CSP. Preferably, let it be the former.

The looming internal security problems that the nation faces, that is likely to intensify, will be softened immensely with such CSPs with all these three countries. And so, therefore, threats to its existentialism. Yes, our borders must be finally demarcated once in for all with all countries and a new national border policy enunciated to guide border negotiations.

Threats to existentialism need to be safeguarded by its own initiative -- not relying on balance of power forces through alliances or guarantees from external actors. This necessitates that Nepal work solidly to becoming a more powerful buffer state with a more modern and powerful defense and security forces befitting the threats from external and internal sources. This requires that we have an independent defense policy now denied by the India Nepal Treaty of Peace and Friendship, 1950. 

Security forces need to be brought under a unified command under a National Security Agency (NSC) that is guided by a clear enunciation of governing national values and national security policy with priorities clearly identified on a consensual basis by the political parties. This is the only way for national security coordination by the security forces, bureaucracy, civil society and government. Surprisingly, the Constitution provides for National Defense Council but not a National Security Agency. 

For all of the above aims to become a reality, Nepal needs to declare itself as a nonaligned and neutral nation as an over riding chapeau to its foreign policy. This will be better, much better, than declaring Nepal as a Zone of Peace-- whether guaranteed by the UN as such or bilaterally accepted by most countries diplomatically, as in the past by 116 countries except India.
I emphasize the above because what we must never entertain is the call, by some foreign policy analysts, for a trilateral ZOP guaranteed by China and India. This will rob us of our diplomatic maneuvers to the US, EU and Russia who have vetoes in the UNSC. And so too also powers like Japan and S. Korea.    

What does this overarching policy of nonalignment and neutrality amount to in practical terms? It amounts to voting pragmatically and on merit as a ‘non aligned’ power in the UN with due regard to its own national interest and values and international law Nepal is a party to, on the one hand. And, on the other hand, it amounts to a position of complete ‘neutrality’ when war breaks in the world or region or sub region.

It also amounts to stop the diplomatic card of play of using one neighbor against the other. Or, indeed, aspiring to  ‘balanced diplomacy’—be they the so called ‘equidistance’ or ‘equicloseness’- when the capacity do so is severely limited by a weak Ministry of Foreign with a less than ideal diplomatic cadre that is not professionally world class.  

Having said the above, does it mean that Nepal should not seek to be part of the UN Peacekeeping Mission (UNPKP)? I submit, Nepal should go all out as a part and parcel of its modernization of defense drive to be a lead country in UNKP. It should, I submit, move one step ahead: offer to serve as part of the UN Peace Enforcement Mission, if and when this instrument is found desirable by the world body. 

The world knows that Nepalese are a martial race. With the demographic shifts occurring the world over I expect more and more nations will want to hire Gurkhas as part of their security forces. I submit that this should be open to all nations provided Nepalese recruited by them are provided citizenship of the recruiting nations. We, for our part in Nepal, should offer them NRN status and more : a new status called People of Nepalese Origin (PNO) to their off springs born outside Nepal. Emerging demographics requires we maintain inter generational links with our diaspora as a matter of national interest and national glory.

While on the topic of security, Nepal should also push SAARC to take up security issues as a Summit Agenda just as it should, henceforth, join the SCO as a full member. 

Economic diplomacy must be given equal importance to political and security diplomacy for the prosperity of Nepal and best use of its natural and human capital endowments.

However, it's time to re-strategize economic diplomacy as the world gets deglobalized; and as we have not benefitted from either WTO or SAARC. Other than what should be covered as part and parcel of economic diplomacy in the suggested CSPs with Bangladesh, China and India, we need to sign economic agreements with Japan, South Korea, Malaysia, Saudi Arabia, UAE as well as UK, EU and USA so that there is far more intensified cooperation between Nepal and these countries that includes FDI in trade, transportation, tourism, labour, energy, manufacturing, and banking , insurance and educational services.

We need to seek a two way cooperation for mutual benefit that would include integration of parts of each economies for mutual benefit. This would necessitate a far more liberal policy over FDI to and from Nepal, including highly liberal policies to allow partner country nationals to buy land and buildings in Nepal and to be engaged in all sectors of the economy for mutual benefit through setting up SEZs, IPZs, ICT Districts and Educational Districts to train human capital to meet their standards, Export Promotion Villages ( EPVs) etc. Strategically, it should strive to integrate its national sub regional economies with its immediate geographical neighborhoods of Bihar, UP, W. Bengal, Sikkim, Uttarakhand and Tibet. This will help Kathmandu to be developed as the Himalayan metropolitan hub par excellence of South Asia. 

Finally, it must also strive to bring in international banks and seek, as was envisaged in the 2005 Budget, to make Nepal as a Regional Financial Centre together with it being the Regional Capital for SAARC and all international organizations, INGOs and business conglomerates of the world seeking business in the emergent new South Asia of the  21st century. It could also strive, as a part of economic diplomacy, to become the Regional Legal and Arbitration Hub for settlement of international disputes by developing world class legal services. 

* Professor, South Asian Institute of Management,  Former Finance Minister