The new government has set economic growth and foreign investment as its top priorities. Earlier in March 2018, Qatari businesses expressed interest in setting up production plants to bottle natural mineral-rich water in Nepal so they could be exported to Qatar. In late 2017, government discussions were held to export fresh vegetables from Nepal to Qatar. These are just some of the opportunities that have arisen as a result of Qatar’s intentions to escalate trade and investment in Nepal. They are also examples of how Nepal could potentially utilise its comparative advantages to diversify export destinations while bringing in more investments to fuel economic growth.

Qatar was the most popular destination for outbound Nepali migrant workers in the fiscal year 2016/17. The economic growth of Qatar has been significant for development in Nepal; as witnessed in 2016, remittance alone contributed to one-third of Nepal’s GDP. However, this over-reliance on overseas remittance has led to a weakening of the productive base in the economy despite the vast potential of the country.

Deepening relations

At a time when Nepal is gaining political stability and attracting foreign investment, Qatar is in the process of adopting a strategy to expand investment in Asia. It is worth noting that despite having a small land mass, Qatar is the world’s richest country per capita and is also one of the most competitive and sophisticated economies.

Despite its economic position, the Gulf crisis has led Qatar to actively seek avenues to enhance international relations, diversify its supply chains and promote deeper engagement in sustainable development. These new developments could provide Nepal with an opportunity to harness its economic and diplomatic relationship with Qatar to enhance Nepal’s role in global value chains and source financing for sustainable growth. The two countries have already signed bilateral labour and double taxation agreements. Deepening of such a bilateral relationship will also help ensure better governance of outbound Nepali labour migrants in Qatar.

The existing capability of Nepal to enhance trade with Qatar is evident from Nepal’s relatively diversified portfolio of export to Qatar. Although the volume amounted to only $74,532 in 2017, the export basket comprised of carpets (62 percent), tea and coffee (12.3 percent), and automatic data processing machines (7.8 percent) as per government data. Rags and scrap twine, paper and vegetables were other major exports. There is potential to further diversify the export base and expand the volume which requires further investments. At a time when the Qatari sovereign wealth fund with global assets estimated to be more than $300 billion is actively seeking investment opportunities around Asia, Nepal can be an attractive destination. In 2017, the World Economic Forum ranked Nepal as the 88th most competitive economy in the world, 10 ranks higher than the rank attained only a year ago. Nepal provides full foreign ownership and tax incentives in five priority sectors—hydropower, transport infrastructure, agro-processing, tourism, and manufacturing.

Attracting investments

Qatar tends to invest in overseas projects that are of national, economic and social significance.  The small, oil rich nation’s investment portfolio consists of London’s Olympic village, the New York Empire State Building, Volkswagen, and St Petersburg Airport, with further plans to invest on infrastructure sectors in Europe and North America. Qatar’s investments in luxury tourism infrastructure, in tourism-based developing countries like Tunisia and Morocco, are aimed at enhancing the quality of services offered by the industry in the host countries and promoting economic growth. It also has investments in Pakistan, Oman and Australia that have led to the production of supplies of grains, poultry and sheep for importing to Qatar and it also plans to diversify production into agro-processing, which stirs employment and export competitiveness in these countries. Qatar has planned to invest $250 million in providing housing for low and middle income families in several cities in India that contributes towards the “Housing for all by 2022” initiative of the Government of India; it has also announced its intentions to start an airline in India that will enhance domestic connectivity. Moreover, Bangladesh, Malaysia and the Philippines have been trying to attract Qatari investments to upgrade their infrastructure and boost the economy.

Attracting Qatari funds requires developing profitable and commercially viable projects with proper sustainability assessments, as Qatari investments are driven by commercial rather than political returns. Nepal has an abundance of fresh water resources, forests, diverse climatic zones and high soil fertility which Qatar lacks. Hence, Nepal can draw Qatari investments towards profitable projects in Nepal.

Nepal has been historically dependent on India and western development partners for financing economic development through aid and investment. In recent times, Nepal has been advancing economic relations with China under the Belt and Road Initiative. Developing an economic relationship with Qatar while balancing relationships with other countries in the Gulf Cooperation Council and South Asia is necessary for Nepal to expand its participation in the global value chain and diversify its economic base. Amidst the on-going Gulf crisis, this will help Qatar improve international relations, further enhance its supply chains and expand its portfolio of profitable overseas investments, thus, creating a win-win situation for both Nepal and Qatar.

Pradhan is a business strategy and trade policy consultant