Positioning Nepal in a Multipolar World

Nepal is among few countries which is actively participating in America’s Millennium Challenge Corporation (MCC), China’s Belt and Road Initiative (BRI), and India’s wide-ranging development partnerships–all at the same time. Looking from Kathmandu’s perspective the challenge is not to focus on one partner, but balance them together to gain the most out of each relationship. All the major projects have come with geopolitical connotations as the Himalayan nation has to deal with conflicting demands from Washington, Beijing and New Delhi.

From the perspective of a land-locked nation, these projects bring potential opportunity of economic growth. In recent years the relations between the major powers and the changing regional landscape hasgiven Kathmandu a greater margin to manoeuvre its developmental goals without the risk of getting caught-up in great-power competition. The fate of Nepal benefiting from that opportunity will largely be in its own hands, rather than in the hands of outside actors.

These three different development partnerships have their own merit. Out of the total compacts received by Nepal including the MCC, which at close to USD 700 million is one of the biggest grants received by the country. The key focus is the electricity transmission infrastructure which will bolster the power sector and support power supply to regional markets. However, years of domestic political debate delayed the approval until 2022 when the project was finally approved by the Sanghiya Sansad (Nepal’s Parliament).

On the other hand, the Chinese led BRI has offered transformative transport projects such as road networks, rail networks, hydro power projects and other infrastructure investments.Even after receiving significant political attention the implementation of the project work remains slow. There are tangible limitations in financing considerations, feasibility issues, and geopolitical sensitivities in the region.

After the recent conclusion of his four day visit to China, Foreign Minister Shishir Khanal informed that both sides discussed on the “expanding cooperation in infrastructure, connectivity, border management, energy, trade, investment, agriculture, technology transfer, information technology and digitalisation, tourism, chemical fertilisers, petroleum and natural gas exploration, and people-to-people relations”. Under the leadership of Baleh Shah, Nepal is seen balancing its both external and neighbourhood development partners.

Finally, the India-Nepal co-operation continues to remain significant; the two sides have large network of economic linkages through roads, bridges, integrated check posts, petroleum pipelines, cross-border power transmission lines and railway lines. However, this connection is also subject to frequent political displeasures.

Therefore, Nepal has a challenging task in balancing the above three partnerships. Kathmandu is well aware of the fact that a mature foreign policy should seek to secure the greatest possible benefit for everyone and not to be based on relying on one partner. This comes from its “equal distance and equal proximity” which is a realisation that all the major partners have to be engaged to serve the best of Nepal’s interests. It is not neutrality for the sake of neutrality but an effort to increase policy autonomy in the evolving multi-polar world for Nepal.

In order to make these principles a reality, Nepal needs to move forward in four key areas. First of all, the export of hydropower should continue to be a priority. Nepal has enormous energy potential but is yet to fully harnessed, as a continued power export will secure its long-term economic development. As far as possible, technical and regulatory cooperation with neighbouring countries should be spared from short-term political swags and whims.

Secondly, there is a need to give renewed attention to aviation connectivity. The regional airports of Bhairahawa and Pokhara can play a positive role in economic development only if regional air connectivity and commercial viability are ensured. The diplomatic effort must be more than just a symbolic announcement – it must be a realist effort.

Thirdly, Nepal needs to conduct its developmental cooperation with much sincerity. Policy makers should not aim for a long list of projects, but rather, focus on a few projects that are financially, strategically and politically viable.

Finally, Kathmandu should tap into multi-lateral finance option as the New Development Bank (NDB) can offer alternatives, and lessen the need for reliance on any one bilateral relationship. Diversification of funding sources leads to increased negotiating ability and availability of development options.

The coming years will bring in more political and economic challenges for Kathmandu both at home and abroad. The biggest challenge before PM Balen Shah will be to manage the foreign policy of Nepal and its involvement in rapidly changing global geopolitics.

Disclaimer: Views expressed are of the author(s) and do not necessarily reflect the views of The Statecraft Institute.