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The diplomatic relations between Nepal and Russia was established on 20 July 1956. However, the economic and technical cooperation between them started since 1959.
The Union of Soviet Socialist Republics (USSR) granted assistance while installing many projects in Nepal. For example, Panauti Hydro-electric power station, Pathalaiya-Dhalkebar highway, Kanti Hospital, Janakpur Cigarette Factory, Agricultural tools factory, Birgunj sugar mill, Rosin and Turpentine plant in western Nepal among others.
It is speculated that, Russian Centre of Science and Culture (RCSC) which was known as Soviet Culture Centre during its establishment in 1979 was a great intellectual and cultural center in Kathmandu. Large number of Nepalese youths were inspired by the scientific and technological innovation of the USSR. Consequently, many of them were gravitated towards Soviet Universities which is thought to have created a pool of technological and skill transfer in Nepal.
A lot of Nepalese students who studied in scholarship award provided by the former USSR are estimated to be at influential positions in Nepal. Since 1992, Nepalese students are parting to Russia for studies also on self-finance basis. However, limited number of scholarships are still applicable to Nepalese students mainly in the field of engineering and medicine.
Bilateral ties between Russia and Nepal slowed down when both countries entered the phase of political transition during the late 1980s and early 1990s. It started to revitalize advancing from the previous experiences and slowly adjusting towards the modern realities. There are substantial examples of cooperation between Russia and Nepal both during the Soviet era as well as in the era of contemporary Russian regime. With the changing geopolitical bearings in the world economy, Russia has already started to tie up not just on diplomatic front but also on economic relations with Nepal (Mishra et al., 2019).
During the tenure of Russia’s Ambassador to Nepal, Sergey Vasilievich Velichkin, Nepal became a dialogue partner for Shanghai Cooperation Organization (SCO). It is expected that, through SCO Nepal would strengthen not only the projection of its national interest in regional-cum-global forum but also foresee to heighten the bilateral relationship between Russia and Nepal. Moreover, the agreement that was signed between the Federation of Nepalese Chamber of Commerce and Industry and Chamber of Commerce and Industry of the Russian Federation in 2011 is considered as a remarkable achievement.
For the first time, there was Trade festival and Nepalese Cultural Fest held in Moscow in October 2018. During the time, 35 different manufacturing companies from Nepal introduced their products. It can be a market opportunity for Nepal in Russia whose population is about 144 million (Mishra et al., 2019). Notwithstanding, economic cooperation between Russia and Nepal is not upto the mark. Trade between Russia and Nepal stood in the figure of US .1 million in 2018 while in the first six months of 2019, there was an increase in 5.5 percent as compared to the same period in 2018. Unlike Soviet era, present day Russia is viewed as less momentous when it comes to economic and diplomatic penetration with its partner countries.
It seems, there are inadequate knowledge in Russian business communities concerning the business and investment potential in Nepal. There are enough areas where the two countries can cooperate that could raise their ties qualitatively to a new level. There is favorable investment climate in Nepal for Russia. Foreign investment in Nepal can be done both as joint venture operation with Nepalese investors and also as fully owned foreign owned enterprises. During the last couple of years, Nepal has advanced its institutional quality, rule of law and political stability. In these circumstances, geographic distance is irrelevant when it comes to Foreign Direct Investment (FDI) inflows from Russia.
Moreover, Nepal has a potential for cheap labour market, and it is focusing to develop skilled human resource in order to attract foreign investors. Therefore, the discrepancy in terms of FDI inflow and absorption capacity of labour market in Nepal is likely to be very low. In addition, there has been a progress in simplification of administrative procedure when it comes to investing foreign capital in Nepal.
Besides the prospect of diplomatic and economic cooperation, Nepal is also an attractive tourist destination for Russians. Nepal received 11,ooo Russian tourists during 2018 and this was expected to increase in the upcoming years.
It is also worth mention that, Russia provided emergency aid and humanitarian assistance to deal with the aftermath of the 2015 earthquake by sending about 100 rescue workers and doctors in Nepal.
Russian made MI-17 helicopters are distinguished as best fit for the mountainous terrain of Nepal which is indicative of prospect also in terms of military and technological cooperation between Nepal and Russia.
Re-concentrating the economic partnership between them, the bilateral trade can be expanded both in traditional goods as well as renewed form of energy cooperation. Russia has a big market which can absorb Nepalese products like carpets, readymade garments, leathers, textiles, tea, coffee, spices, beverages, spirits, clothing accessories, jewelries and plastic products among others.
Contrarily, there is a huge investment potential for Russia in Nepal mainly in the sector of hydropower, tourism, agro-processing industries and mining among others where there is cheap labour cost. Similarly, explore of mineral deposits, oil commodity supply and development of storage facilities are the other sectors where Russia can trap the investment potential in Nepal.
India, which is considered as Russia’s ally has already started pouring their investment in hydropower potential of Nepal and in many other projects. Similarly, China which is considered as Russia’s comprehensive partner and also as a geopolitical rival is also pouring its aid and investment in Nepal. In such circumstances, it is anticipated that, trade, businesses and strong diplomatic ties between Russia and Nepal will also equally flourish in the days to come.
There is a huge energy demand in India and Bangladesh. And that, Nepal has tremendous potential where it can export its surplus electricity. In such situation, Investment in hydropower sector will benefit the Russian investors both in short as well as in the long run.
During November 2019, Minister of Foreign Affairs Pradeep Gyanwali and his Russian counterpart Sergey Lavrov held a delegation-level bilateral talks in Moscow, Russia. This was the first accredited visit by Nepal’s foreign minister to Russia since 2005. It was significant in terms of bilateral turnover as both sides agreed to advance the bilateral cooperation chiefly in the range of trade, tourism, energy, education, culture and investment in the social and industrial infrastructure development.
For Nepal, the prospects of FDI from Russia could not just only bring in capital but also could transfer and strengthen knowledge, technology, resources and has potential to create employment opportunities. Thanks to the favorable policies and investment climate along with the stable political situation in Nepal as compared to a decade ago.
The views expressed above belong to the author.
Mishra, S., Zobov, A., & Fedorenko, E. (2019). Evaluation of institutional grounding for Russian investments to basic industries of Nepal. 12(4), 455.
This Article was first published on RIAC
July 05, 2021
May 14, 2021