Two-way roadNepal can benefit from a wise blend of two different neighbourhood economic policies
It is widely believed that foreign policy of a counry is an extension of its domestic policy. Big powers formulate internal and external policies, taking into consideration various factors like economics, security and hegemony in world order. Such policies disseminate certain views in the international arena, eventually affecting other states directly or indirectly. Thus, one use of foreign policy is also to understand other countries’ stance and protect ones national interests, in the context of changing priorities of different nations.
Nepal is located between the two Asian giants with distinct political and economic ideologies. But lately, both our neighbours have been formulating new policies to attain economic growth. India’s grand economic reform is linked with the ‘Make in India’ initiative and China’s with the revitalisation of the traditional silk route and maritime silk route, known as the ‘One Belt One Road’ initiative. Obviously, the change in policies of these two countries will have an impact on Nepal. Nepal’s concern should be how it can gain economic progress and prosperity by aligning its policies with those of India and China, and at the same time protect its national interests.
Make in India
‘Make in India’ initiative was launched by Indian Prime Minister Narendra Modi in 2014 with specific goals: To facilitate investment, foster innovation, enhance skill development, protect intellectual property and build best-in-class manufacturing infrastructure using the ‘3D advantage’ of India—demography, democracy and demand. As many as 25 growth sectors—such as automobile, aviation, biotechnology, chemicals, construction, defence manufacturing, among others—have been identified. For Nepal to benefit from this changed economic context in India, it has to focus on its comparative advantages. A 2006 study of the IMF concludes that Nepal’s comparative advantage rests on labour and resource intensive industries like hydropower, tourism, carpet, paper products, agro processing (vegetables, tea, honey, flower, spices and herbs) and leather products.
Nepal can be a part of the value chain and gain economic benefits by concentrating on its advantageous sectors among those in the ‘Make in India’ initiative. Nepal can also concentrate on quality human resource development that later can assist in India’s development. For instance, India would be requiring qualified engineers for its infrastructural development.
There also has to be a study on common areas of comparative advantage between similar sectors of Nepal and India. The essence of economic diplomacy in the context of the ‘Make in India’ initiative lies in pursuing two paths—first by being part of the value chain of the production system of the initiative, and second by distinguishing areas of advantage to derive mutual benefits through a win-win situation.
One Belt One Road
The One Belt One Road (OBOR) initiative, proposed by Chinese President Xi Jinping in 2013, envisages an economic land belt connecting Europe and a maritime route. It is not a single road but a collection of various routes. Two of such collections in South Asia are BCIM (Bangladesh, China, India and Myanmar) and CPEC (China-Pakistan Economic Corridor). The Economic Times Intelligence Unit writes “Chinese companies are leaving the comfort of their home market and going overseas, seeking to tap fresh market and acquire new technologies. OBOR is also coupled with a domestic investment drive, in which nearly every Chinese province has a stake”.
Trade and investment are two major areas that Nepal needs to concentrate on to gain economic prosperity. In terms of trade, Nepal has a great opportunity of becoming land-linked. The OBOR initiative can be a foundation for Nepal to move away from “Indo-centrism” to “Globalism”, as stated by Professor Sridhar Khatri. Nepal has been long maintained asymmetric dependence on India. By becoming a part of this initiative, Nepal can convert this asymmetric dependence to symmetric dependence and gradually move towards interdependence. Another important area of the OBOR initiative is the Chinese investments. Although Chinese companies have been investing in Nepal, their investment can increase by leaps and bounds due to ease of travel after Nepal joins the OBOR initiative. Moreover, Chinese tourists will provide a major boost to our tourism sector.
Two neighbouring powers are adopting and conducting two different sets of policy for their economic prosperity. Nepal can benefit in different ways from such economic policies. A wise blend of these two can herald the beginning of a modern transit economy for Nepal.
Adhikary is pursuing a master’s in International Relations and Diplomacy at Tribhuvan University