Foreign policy should deliver economic outcomes: FM Khanal

Kathmandu, Aug. 20

Minister for Foreign Affairs Shisir Khanal has said that Nepal’s foreign policy should deliver direct and transformative economic outcomes for the country.

Speaking at a programme organised by Friedrich Ebert Stiftung (FES) to launch a book 'Geopolitical Conflict in the Wolf World: Great Power Competition and the Illiberal Revolt Against the Liberal Order' in Kathmandu on Thursday, he said foreign policy should serve as a means of transforming the country’s economy.

Stating that foreign policy must become the external instrument of country's domestic economic aspirations, FM Khanal said, “We must use our geographical position between two large and rapidly growing economies not merely as a challenge but as an opportunity.”

Although Nepal had historically been portrayed as a ‘yam between two boulders’, he said the country’s strategic vision in the 21st century was to develop Nepal into a dynamic and credible bridge between two large and rapidly growing economies.

According to him, developing countries, landlocked countries and vulnerable nations would be among those most affected as the rules-based multilateral order weakened around the world. He noted that the United Nations Charter, the Bretton Woods institutions and the multilateral trading system had been established to replace raw power with common rules and collective predictability.

FM Khanal said Nepal had embraced these institutions not because they were perfect, but because they provided a basis for addressing and improving their shortcomings.

“For countries like Nepal, a rules-based multilateral order is not merely an academic priority, it is a matter of existential necessity. When the multilateral system weakens, developing, landlocked and vulnerable nations are affected before powerful countries,” he said.

He said geopolitical fragmentation and conflict were not merely theoretical issues, but had a direct impact on the lives, employment and economic well-being of Nepali citizens. Referring particularly to the large number of Nepali workers employed in West Asia, he said instability in the region had a direct impact on Nepal.

“We have a large workforce in West Asia, and they make a significant contribution to remittances coming into Nepal. As instability increases in the Gulf region, it can lead to flight disruptions, affect employment contracts, raise consumer prices, increase anxiety among families and, unfortunately, even result in the loss of Nepali lives,” Minister Khanal said.

Marc Saxer, author of the book and Head of Asia Pacific Regional Programme of the FES, said that although south is not under hot war for now the countries need to learn how to navigate in the world that has been increasingly moving to a might-based international order from the liberal rule-based one.

According to him, geoeconomic disruption shifts have been made through the trade war, supply chain reconfiguration, currency competition and price wars.

"There is now a political price for market access while open trade order has almost come to an end, while tech race is driven by security concerns and bifurcation has created high opportunity cost for third parties, and rise of techno-nationalism," he said.  

Saxer expressed concerns to the weaponisation of technology transfer.

He suggested a Neo-Westphalian order as a solution – sovereignty, non-interference and territorial integrity to be maintained by the United Nations General Assembly. This is a non-hegemonic 'universalism without interference', he said.

Former ambassador, Gyan Chandra Acharya, said that if everyone believes 'might is right', the world would be in chaos and anarchy. "That's why I think it's very important for us to make sure that whatever we have, we try to have an impact at the global level or at the regional level in terms of really getting across the values, the principles as well as the benefit of cooperation," he said.

According to him, as the multilateral institutions and principles are completely undermined, the world has so many other things that are coming up. This makes having an issue-based coalition more prominent.

Stressing on reform and revitalisation, Acharya said that since major proponents of the multilateral principles themselves are now abdicating that responsibility, it is necessary to make sure that the other powers and the rest of the international community follow it.

Binoj Basnyat, major general (retd.) of Nepali Army, said that Nepal must move to a designed strategy from the current practice of reactive diplomacy to make sure the national interest is protected.

Likewise, political analyst Dr. Chandra Dev Bhatta said that for a country like Nepal, multilateralism is the best option in terms of international cooperation and development initiatives. 

Published in The Rising Nepal on 21 August 2026.