The power of ‘middle powers’

In the Lowy Institute's Asia Power Index 2023, 15 countries, including Japan, Russia, Australia and South Korea, are classified as middle powers, while Nepal along with nine other countries are categorized as 'minor powers.' The foreign policy discourse in Kathmandu is dominated by the three major powers—India, China, and the United States. There is a lack of deliberation about Nepal's engagement with these middle powers which have been our long-standing development partners. 

Unlike the major powers, middle powers seemingly have fewer strategic interests in Nepal, making it easier to attract more investment and development assistance from them. Of late, these countries have shown a greater interest in engaging with Nepal across multiple areas. It is, therefore, time to explore how Nepal can maximize benefits from them. 

Many middle powers are increasing their partnership with Nepal, and they do not want to be seen as aligning with major powers, at least publicly. However, there is a convergence between the US and other middle powers on issues like democracy, human rights, and, more importantly, containing China's influence in the Indo-Pacific region. These middle powers often work through loose networks on several issues, and the US is working to empower their capacity while seeking their support to counter China.

In Nepal, these middle powers are trying to distance themselves from geopolitical ambitions but they are also concerned about Nepal’s position on key regional and international issues. 

For instance, during Japanese Foreign Minister Kamikawa Yoko's recent visit to South Asia, including Nepal and Sri Lanka, discussions focused on global and regional issues like the situation in the Middle East, the Russia-Ukraine war, and other South Asian regional matters.

Over the past few years, Japan has been investing in infrastructure development in South Asia in close collaboration with India. Its main priority is enhancing connectivity between South Asia and Southeast Asia, and for this purpose, Japan is investing in infrastructure in Northeast India. In this context, Japan considers Nepal an important position and is already investing in Nepal's infrastructure development. Japan is also concerned about the growing Chinese loans in South Asian countries, which could be a reason for the Japanese foreign minister’s visit to Nepal and Sri Lanka. Kamikawa conveyed the message that Japan is ready to step up its cooperation with Nepal, and to work closely with South Asian countries on regional and global issues.

The United Kingdom is also one of Nepal's oldest friends. The two countries established diplomatic ties in 1816. The Treaty of Friendship that the two countries signed in 1923 further formalized bilateral relations and helped Nepal claim UN membership, and reiterate its independence, sovereignty and territorial integrity. The UK has consistently been one of Nepal's top development partners. Still, there is a perception in Nepal that the UK has maintained a low profile or has been quieter about its diplomatic engagement over the past decade.

Recently, the UK has shown a greater interest in Nepal, with increased grants and a keenness to bring foreign direct investment (FDI) to the country. In February 2023, UK Minister of State (Development and Africa) Andrew Mitchell launched a new £400m UK-Nepal development portfolio, aimed at mobilizing vital private sector funding for development and creating 13,500 jobs in Nepal.

Let’s talk about South Korea now. Seoul is gradually enhancing its cooperation and engagement with Nepal. Last year, South Korea sent President Yoon Suk-Yeol's special envoy Jang Sung Min to Nepal for discussions on bilateral and other issues. The two countries are currently discussing a wide range of bilateral issues, and high-level visits are on the agenda. Prime Minister Pushpa Kamal Dahal is preparing for an official visit to South Korea soon.

The trade volume between South Korea and Nepal has significantly increased from $100,000 in 1970 to $37m in 2023. Between 1987 and 2022, South Korea provided Nepal with $282.4m in Official Development Assistance (ODA) in areas like health, water, sanitation, education, rural development and energy. The private sector of South Korea has also shown interest in investing in various sectors in Nepal. This week, South Korea’s Ambassador to Nepal Park Tae-Young said they are willing to step up cooperation with Nepal. 

All these three countries—Japan, the UK and South Korea—have strong ties with the US and are often taken as junior partners of the superpower. The Indo-Pacific outlook unveiled by these countries are very similar in content to the US’ Indo-Pacific Strategy. All of these countries have stepped up strategic partnerships with India, which has a huge influence in Nepal. Along with these, other countries like Australia and France are also increasing their engagement with Nepal. Europe’s major power Germany is also keen to invest more in Nepal. 

While Nepal is preoccupied with dealing with the three major powers, the time has come to comprehensively engage with these middle powers to bridge the investment gap that the country is currently facing. These countries have clearly shown their interest in investing in Nepal if a conducive investment climate is created. It is easier to deal with these powers because they are publicly stating that their support for Nepal is guided by deep people-to-people relations and geopolitical factors do not prominently figure into their engagement. In a recent interaction, a diplomat said: Our support in Nepal is guided by a long history of people-to-people connections and we do not have much geopolitical interests in Nepal, although there is a lot of geopolitics in Nepal.

One immediate opportunity is the high chance of attracting foreign direct investment (FDI). After the 2024 Nepal Investment Summit, these middle powers are encouraged by the government's amendments to laws as demanded by international investors and the all-party consensus on these issues. If some of their remaining issues are resolved, Nepal can attract more investment. For instance, during the investment summit, the UK conveyed that many UK investors are ready to invest in Nepal if issues related to tax and the safe repatriation of profits are eased.

Therefore, the government, think tanks and civil society should pay greater attention to stepping up engagement with these middle powers, along with the major powers vying for influence in Kathmandu. It is time for Nepal to seize this opportunity and tap into the potential of these middle powers for its development.