The political stability in Nepal contributed to its economic growth in 2019 and provided a consistency that is necessary for a more dynamic external engagement. The World Bank reported that Nepal’s growth rate reached 7.1 percent in 2019 in addition to an increase in foreign direct investment. A greater sense of stability has also given the Nepali government a space to develop a cohesive foreign policy. Last year Nepal’s foreign policy focused on diversifying economic and diplomatic relations beyond India and China, maintaining its stance against foreign interference in internal political affairs while keeping the agenda of economic prosperity at the core.
In 2019, Nepal faced new challenges to its foreign policy as it had to balance its relations between major powers including China, India, and the United States. In June 2019, the US revealed its Indo-Pacific Strategy (IPS), which has been perceived as a counter strategy to China’s Belt and Road Initiative (BRI). Concerns related to the IPS and BRI remain a central subject of debate in Nepal’s foreign policy. Despite potential military cooperation and diplomatic efforts of the US to bolster ties with Nepal, the latter has been skeptical of what it views as efforts to pull it away from China.
Hinting at the IPS, Foreign Minister Pradeep Kumar Gyawali and Defense Minister Ishwor Pokhrel have repeatedly stated that Nepal will not join any military alliance. As Nepal is pursuing the policy of non-alignment, joining any military alliance would be against its stated policy. However, outright rejection of the IPS risks hurting Nepal’s broader strategy of economic diplomacy with U.S. officials hinting that Nepal pulling away from the US could cost it economic opportunities.
Relations with major powers
In relation to Nepal’s relations with India in 2019, there are mixed signals. Some pending bilateral projects and agendas have moved ahead while new issues have emerged to create misunderstandings in relations between two countries. In September 2019, Nepal and India inaugurated a 69 Km long cross-border petroleum pipeline ensuring a smooth supply of petroleum products from India to Nepal. This project will save the cost, minimize distance and will help to curb air pollutions caused by transportation vehicles. At the same time, Nepal dependence with India on petroleum products will further increase.
In August 2019, Indian Minister for External Affairs Dr. S. Jaishankar visited Kathmandu to participate in the meeting of Nepal-India joint commission which reviewed all bilateral projects and issues.
Nepal and India laid foundation stone for the construction of Arun-III hydropower project which was pending for a long time. The project aims to produce 900 MW of electricity. Similarly, the construction of postal highways has received momentum and process of construction of cross-border railway line is also getting momentum. The recently retired Indian Ambassador to Nepal Manjeev Singh Puri outlined these two projects as big achievements of his tenure in Kathmandu.
Some new issues emerged which strained the bilateral relations between Nepal and India in 2019. In November 2019, India’s new political map placed Kalapani, a territory claimed Nepal, on its map which invited a series of anti-India protests in the Nepali capital. Nepal has requested India for talks on the issue, but there has not been any progress yet. Similarly, the issue of Nepal-India Eminent Persons’ Group (EPG) report remained unsettled in 2019. The EPG, an expert panel formed in 2016, has already submitted its report in 2018 suggesting ways to update the bilateral relations. However, it appears to be gathering dust as Indian Prime Minister Narendra Modi has not shown much willingness to receive the report.
In 2019, Nepal’s bilateral relationship with China was further enhanced due to Chinese President Xi Jinping’s visit in October. During the visit, the two countries signed more than one and half dozen agreements in the areas of road connectivity, railway connectivity, tunnel connectivity as well as brining more Chinese investment in Nepal. Like in the previous years, 2019 saw a surge in Chinese investment in Nepal.
There was also a growing collaboration between Nepal’s ruling party Nepal Communist Party (NCP) and Communist Party of China on the ideological front. There was increased exchange of visits between two countries at various levels and China further expanded the areas of public diplomacy with Nepal. Beijing pressed Kathmandu to sign an extradition treaty but it did not materialize. As far as controlling the activities of Tibetan refugees in Nepal were concerned, Nepali security forces were effective in curbing their activities.
2019 saw many ups and down in Nepal-US bilateral relations. The US came up with its IPS in June. However, there were already talks about it in Kathmandu after Gyawali visited the US in December 2018 during which it stated that Nepal could play a central role for a free and open Indo-Pacific.
Once the IPS was unveiled, mainly leftist parties of Nepal contested it stating that it was targeted against China and therefore Nepal should not accept it. They were also of the view that the core purpose of the IPS was forming a military alliance so Nepal should not be a part of such a scheme. A series of statements were made by Gyawali and Pokhrel reiterating that Nepal would not join any military alliance.
US Ambassador to Nepal Randy Berry clarified that neither the IPS was not targeted against any country nor there was a provision for any country to sign for the IPS. He also explained that IPS was about how US viewed Indo-pacific region.
Of late, the ruling Nepal Communist Party (NCP) has been divided over accepting US aid under the Millennium Challenge Corporation (MCC). Under the MCC, America will be providing 500 million dollars grant to Nepal for the construction of cross-border transmission line and construction of road networks. Some of the leaders are of the view that Nepal should not accept aid under it as it is a part of IPS. Gyawali, however, has been constantly stating that MCC grant does not come under the IPS. Berry has also made it clear that MCC does not have a military component to it. The US also provided some military assistance to Nepal in December 2019 as part of its longstanding partnership with the Nepali Army and handed over two sky trucks.
The K. P. Sharma Oli-led government has taken some steps to reform the country’s foreign policy which was victim to political instability and politicization during the last two decades. With the slogan, “Amity with all, enmity with none,” the government has taken measures to diversify its economic and foreign policy options, with hopes of ending the past tradition of its international engagement beyond India and China.