Neutrality, the idea of engaging equally with foreign countries without favouring one over another, is often regarded as the bedrock of Nepal’s approach to external affairs. But with Nepal increasingly buffeted by hardening geo-political rivalries, perhaps the time has come to redefine neutrality with a more pragmatic multi-polar strategy where we align with different countries on different issues.

The energy sector offers an illuminating case study on why Nepal must replace its dogmatic pursuit of neutrality with a more pragmatic multi-polar alignment to better advance its own national interests.

Later this month, Nepal and China are scheduled to hold a third round of discussions on developing cross-border transmission lines. This follows from an agreement to assess the feasibility of cross-border power lines during the visit of Chinese Foreign Minister Wang Yi in March 2022.

Nepal’s power strategy is now clear. It has interconnected with the Indian grid. It intends to export its excess generation to India and import from India when needed. Previously, India, China and other countries actively engaged and competed in Nepal’s power sector. With the recent choices that Nepal has made, India now holds uncontested dominance in its influence over Nepal’s power sector.

Why unnecessarily meddle with this by seeking to evaluate cross-border power lines interconnecting with China? Nepal should engage with India in the power sector, and with China in some other sector (railways, perhaps?). Defining these sectors of influence may make it easier for Nepal to engage with foreign countries separately without being drawn into the complexities of geo-political rivalries. This may be one way to limit the impact of geo-political influences on domestic affairs.

Foreign policy overwhelmed

Technically speaking, the term “neutral” never appears in the official document that describes the philosophy underlying Nepal’s approach to external affairs, Foreign Policy 2077. It does, however, refer to “non-alignment” as a core principle.

Prof Surya Prasad Subedi, a highly decorated international jurist who was recently felicitated by the Nepal Embassy in London for his lifetime accomplishments and contribution to international law and human rights, encouraged Nepal to consider “moving towards adopting a policy of permanent neutrality”. In his speech on “Economic Diplomacy for Development” at the felicitation in November 2020, Prof Subedi recommended that Nepal exploit its “traditional image of a neutral and non-aligned country”.

These policies are a great beacon for guiding engagement on global issues, but they don't provide a practical, tactical course for how other countries can be drawn into engagement in Nepal’s economic development without the risk of distorting domestic affairs.

Nepal faces large investment needs for infrastructure over the next decade, estimated to be in the range of 10 to 15 percent of GDP, a recent study by the World Bank reported. As a result, Nepal must rely on foreign governments for investments, even when mobilising international financial institutions or the private sector. This means that many parts of Nepal’s establishments are simultaneously engaging with different foreign powers across multiple issues.

At the same time, Asia is rapidly becoming more turbulent with growing geo-political rivalries. These geo-political complexities have swept into Nepal, adding to the stress of an already vulnerable country.

Nepal’s ability to manage its foreign policy direction is overwhelmed. It lacks the institutional mechanism to effectively manage multiple simultaneous communication channels between many parts of its establishment and foreign powers. There is, for example, little central oversight or direction on which ministry is seeking assistance from which foreign government, which political party is meeting whom, or which non-governmental agencies are receiving funding from which international source. To add to that, geo-political complexities are intensifying and shifting fast.

The net result of this seeming chaos is the absence of a central narrative on foreign policy, thus resulting in a high level of public distrust. In public opinion, every domestic political or economic decision is publicly judged to have been made at the behest of a foreign power. Similarly, every financial assistance or investment from a foreign government is judged to have been made to gain influence in Nepal.

Neutrality is an effective foreign policy tool if it can be institutionally managed and implemented in the first place. Nepal currently lacks those capabilities.

Sectors of influence

Nepal needs institutional mechanisms to manage the multiple, simultaneous engagement channels between its establishment and a foreign power. The government can, for example, direct its officials not to meet foreign diplomats without permission. But such simple directions are not enough. It needs stronger institutional mechanism and greater central oversight that allows it to manage the foreign policy process.

One way to do this may be to mark out sectors of influence. India in the power sector, for example, while China in railroads, and so on. Establishing such spheres of influence would limit each sector to one foreign power with an interest and a natural position of dominance in that segment. This would do two things.

One, it would remove geo-political competition from the development of Nepal’s domestic sectors. Second, it would reduce the channels of engagement between the establishment and foreign powers, thus making it easier to manage those communications more carefully. India’s sphere of influence in Nepal’s power sector isn’t hard to see.

Former American ambassador to Nepal, Randy William Berry, described it most aptly in an editorial in October 2019 while making the case that the Millennium Challenge Corporation (MCC) would expand the “proven partnership” between the United States and Nepal.

“That is why the MCC project focuses on constructing lines that will bring Nepal’s power to the consumers who will pay Nepal good money for it. It is a simple fact of geography and economics that means India,” Berry wrote. Why mess this up with a philosophical approach to neutrality by unnecessarily exploring cross-border power lines with China?

How to carve out these sectors of influence and engage foreign powers to source investments for infrastructure has already been on the minds of the political leadership. In a stirring speech in Parliament, as the MCC agreement was being debated over a year ago, Gagan Thapa summarised his strategy as follows:

“We take Rs60 billion from MCC. Then, let’s go to China, and let’s tell China, ‘America has given us Rs60 billion. Now, you give us Rs70 billion under the Belt and Road Initiative (BRI).’ Then let’s go to India, and let’s tell India, ‘America gave us Rs60 billion, China gave us Rs70 billion, and now you give us Rs80 billion.’ Let’s take from everyone. Let’s sit together. Let’s discuss.”

Gagan Thapa, Member of Parliament and a powerful general secretary of the Nepali Congress, was most likely talking about carving out sectors of influences to source investments. What else could he have been talking about, for he most certainly wasn’t talking about selling the country’s interest to the highest bidder?