Keynote Address by Hon. Mr Shisir Khanal, Minister for Foreign Affairs of Nepal at the Fourth AIDIA Distinguished Lecture Series

Keynote Address by Hon. Mr Shisir Khanal, Minister for Foreign Affairs of Nepal

Event: Fourth AIDIA Distinguished Lecture Series

Theme: Economic Diplomacy for Prosperous Nepal: Aligning Foreign Policy with Economic Interests

Kathmandu, 2 October 2026

Distinguished Guests, Scholars, Diplomats, Policymakers, Practitioners, and Stakeholders,

Friends from the Media,

Ladies and Gentlemen,

Namaskar and a very Good Afternoon

It is a profound privilege to join this distinguished gathering for the Fourth AIDIA Distinguished Lecture Series. I extend my sincere gratitude to the Asian Institute of Diplomacy and International Affairs for convening this vital and timely forum. Over the years, AIDIA has firmly established itself as an indispensable arena for rigorous research, dynamic foreign policy dialogue, and strategic thought leadership—an intellectual crucible where innovative concepts are articulated, debated, and refined for the public good.

We were initially meant to gather on the 26th of August, but the devastating "Himalayan Tsunami" of that very day forced an unavoidable postponement. A sudden glacial collapse and torrential flash floods tore through our northern region across the border, claiming precious lives and sweeping away bridges, homes, and vital infrastructure.

As we reconvene today, our deepest sympathies and solidarity remain with the affected families. This tragedy made it painfully clear that although Nepal contributes less than 0.1 percent of global emissions, our communities bear the harshest fallout of the planetary climate crisis. Climate vulnerability is no longer a peripheral environmental talking point; it is an immediate macroeconomic hazard that disrupts trade routes, drains our treasury, and directly threatens our survival.

In light of this ecological vulnerability, today’s theme—Economic Diplomacy for Prosperous Nepal: Aligning Foreign Policy with Economic Interests—is no longer an academic debate. It is our foremost national priority.

 

We meet today at a decisive historical inflection point. The contemporary world is undergoing rapid, volatile, and structural transformations, challenging the established global order. We are witnessing the aggressive weaponization of trade policies, fragmented supply chains, and an intensifying geopolitical rivalry that threatens the multilateral institutions designed to safeguard global stability.

 

Yet, for a sovereign, forward-looking nation, moments of global turbulence must not be met with passive anxiety or defensive paralysis. They must be met with strategic clarity, unshakeable confidence, and proactive statecraft.

 

Within our own borders, we have recently witnessed a profound generational transformation. A digitally mobilized, dynamic youth—embodying the ethos of the Gen-Z movement—has fundamentally reshaped our political landscape. Their demands are clear: they are driven not by archaic political ideologies, but by an uncompromising desire for fairness, visibility, and measurable economic outcomes. They have given this government a decisive democratic mandate for good governance. Let me be clear: establishing good governance—by ensuring transparency, accountability, and the dismantling of systemic rent-seeking—is not just a moral obligation. It is the absolute foundational prerequisite for sustainable economic growth. Without institutional credibility, we cannot attract global capital, and without integrity, we cannot unlock our nation's true potential.

 

Guided by this mandate, our government is charting a bold course forward. Our foreign policy cannot remain confined to the traditional routines of protocol and political survival; it must become the dynamic external engine of our domestic economic transformation. Today, I stand before you to articulate our vision of an assertive, rooted, and outcome-oriented economic diplomacy—one that honors our civilizational legacy, confronts historical lessons, and charts a clear course toward an industrialized, self-reliant, and prosperous Nepal.

 

Standing on Our Roots: Eastern Philosophy and the Reclamation of Soft Power

To chart an ambitious course for the future, a nation must first understand the ground upon which it stands. Foreign policy is not an abstract calculus imported from abroad; it is the organic expression of a country’s soul, its civilizational heritage, and its moral ethos.

 

For millennia, the Himalayan land of Nepal has been a fountainhead of Eastern spiritual consciousness. Our foundational worldview is grounded in the deep philosophy of both Hindu and Buddhist traditions. In our ancient Vedic ethos, material prosperity was never viewed as antithetical to spiritual well-being. Rather, through the doctrine of Purushartha, classical thought recognized that material wealth, enterprise, and economic well-being are essential pillars of human dignity, provided they remain firmly anchored in Dharma—the universal law of righteousness, ethical conduct, and social justice.

 

Similarly, the Buddhist philosophy that was born on our soil offers humanity the profound wisdom of Majjhima Patipada, the Middle Path. The Middle Way is neither passive neutrality nor indecisive retreat. It is the courageous pursuit of balance, strategic autonomy, moral restraint, and principled engagement. It teaches us to avoid destructive extremes, reject the zero-sum binaries of geopolitical blocs, and build harmony through mutual dialogue.

 

 

 

Yet, while we take immense pride in our heritage, we must ask ourselves an honest, self-reflective question: Have we truly leveraged this unmatched civilizational depth to project our soft power and advance our strategic interests? The uncomfortable answer is that we have barely scratched the surface.

 

Consider the extraordinary story of Guru Rinpoche, Padmasambhava. Revered across the trans-Himalayan region, Tibet, Bhutan, Ladakh, and throughout East Asia as the "Second Buddha," Guru Rinpoche represents one of the most influential spiritual and intellectual figures in human history. It was Padmasambhava who journeyed across the mountains to establish Vajrayana Buddhism in Tibet, profoundly altering the religious and cultural destiny of Asia. Where did Guru Rinpoche attain his ultimate spiritual awakening? It was right here, in the sacred caves of Yanglesho and Asura in Pharping, within the Kathmandu Valley.

 

The very ground of this valley served as the spiritual launchpad from which a transcendent philosophy spread across the Asian continent. Every year, millions of practitioners across the globe revere Guru Rinpoche, yet we have allowed one of the most compelling spiritual narratives on earth to remain a local secret. We have treated our sacred geography as passive folklore rather than an instrument of spiritual diplomacy and cultural soft power. Standing confidently on our roots means reclaiming these narratives. It means developing high-value cross-border spiritual corridors, integrating places like Lumbini, Janakpur, Muktinath, and our sacred Shakti Peethas, and positioning Nepal not merely as a destination for scenic trekking, but as the world’s preeminent sanctuary for peace, philosophy, and wellness tourism.

 

The Lessons of History: How Trade Routes Shaped Nations

If civilizational philosophy provides our anchor, economic history must provide our compass. When we survey global history across epochs and continents, a singular, undeniable law emerges: nations that control, facilitate, and champion trade and resource mobility rise to lasting prosperity, while nations that embrace isolationism inevitably stagnate and decline.

 

From the ancient Silk Road to the maritime networks of Venice and the Indian Ocean trade, wealth has always followed commerce. In modern times, nations like Singapore and Switzerland overcame immense physical and geographical constraints by positioning themselves at the crossroads of maritime trade, capital, and continental European logistics.

 

This historical truth was not foreign to Nepal; in fact, it was the very foundation of our own historical greatness. For centuries, the Kathmandu Valley was not an isolated mountain retreat; it was a flourishing, wealthy, cosmopolitan entrepôt of Trans-Himalayan commerce. Our ancestors positioned Nepal as the indispensable commercial and cultural bridge connecting the fertile Gangetic plains of the south with the vast Tibetan plateau and China in the north. Newar merchants established commercial outposts in Lhasa and Shigatse. Caravans laden with wool, musk, salt, gold, silk, and spices traversed the Himalayan passes, converging in the bazaars of Patan, Bhaktapur, and Kathmandu. The valley mints struck silver coins that circulated as legal tender in Tibet for generations. The architectural wonders we admire today—the intricate wood carvings of our Durbar Squares and the gilded roofs of our stupas—were built by the extraordinary surplus capital generated by trans-Himalayan trade, open commerce, and merchant enterprise.

 

The tragedy of our modern economic history began when we severed these historic arteries. Following the consolidation of the state, Nepal turned inward, pursuing a deliberate policy of isolationism. We shut our borders, restricted modern education, suppressed private industrial enterprise, and withdrew from regional commerce. While the rest of the world was undergoing industrial revolutions, building railways, and modernizing ports, Nepal remained frozen. That era of isolationism inflicted systemic, multi-generational scars on our economy, transforming a vibrant trading crossroads into an impoverished, agrarian society. The lesson of our own history is stark and unforgiving: isolationism breeds poverty, while connectivity creates prosperity.

 

Economic Divergence and the Vision for a One Hundred Billion Dollar Economy

When Nepal finally emerged from isolation and subsequently initiated structural economic reforms in the early 1990s, we began to integrate with the regional and global economy. Embracing market-oriented policies yielded undeniable positive social progress. We made strides in reducing absolute poverty, expanding basic healthcare, and extending life expectancy.

 

However, when we look at the hard economic data, a sobering reality confronts us: we have progressed, but not nearly at the pace of our region, our neighbors, or our own national aspirations. Let us examine the empirical baseline. In the year 1980, Nepal, India, and China stood at virtually the similar economic starting line. We were not very far apart. Over the ensuing four decades,  our giant neighbors executed radical, reform-driven economic transformations. China capitalized on scale and hyper-integration into global manufacturing, catapulting its per capita income to over thirteen thousand dollars. India unleashed its private sector and expanded its economy to a per capita income approaching three thousand dollars. Nepal, meanwhile, has reached a per capita income of only around fifteen hundred dollars.

 

While our neighbors invested heavily in infrastructure and technology, Nepal became ensnared in protracted political instability and an unhealthy economic dependency on low-value imports financed by the export of our human capital. Inward remittances from our hardworking migrant youth have served as a critical lifeline, keeping poverty at bay. But let me state this with absolute clarity: no nation has ever achieved enduring greatness or sovereign dignity by exporting its youth and importing basic consumer goods.

 

Our political movement, the Rastriya Swatantra Party (RSP), and our government have arrived on the national stage with a completely different philosophy and ambition. We do not accept the status quo of incremental, sluggish growth. Under the RSP, we are determined to create a level playing field—an environment where everyone can play fair, where opportunities are democratized, and where success is determined by merit and hard work rather than political patronage. We do not demonize the private sector; we do not view honest enterprise and profit as vices. Instead, we recognize private enterprise as the indispensable engine of wealth creation and national prosperity. We believe the state must step back from being a regulator of hurdles and confidently embrace its role as a dynamic facilitator.

 

Guided by this ethos, our government is committed to an audacious, transformational goal: building a one hundred billion dollar economy within the next decade. This is not an arbitrary political slogan; it is an arithmetic and strategic necessity. It is the threshold required to create hundreds of thousands of dignified, high-paying jobs at home, halt forced labor migration, upgrade our public infrastructure, and successfully graduate from Least Developed Country status without suffering structural regression. Achieving this requires dismantling the structural bottlenecks that have constrained our private sector and transitioning into an industrialized, innovation-driven, clean-energy powerhouse.

 

Redefining the Geography of Hope: From Barrier to Dynamic Bridge

 

For more than two centuries, our strategic discourse has been imprisoned by defeatist metaphors. Generations of students and diplomats were taught to view Nepal through the historic dictum of being fragile and vulnerable. Later theorists and international relations scholars lazily labeled us a prisoner of geography.

 

I stand here today to categorically reject these outdated, self-inflecting  metaphors. Nepal is an ancient, proud, sovereign nation endowed with immense natural wealth, an energetic young population, unmatched green energy resources, and a location situated directly between two of the largest economic engines on the planet. Geography is not our prison; it is our greatest strategic asset. We must redefine our geopolitical posture from a defensive, passive entity into a dynamic, reliable bridge—a vibrant crossroads of regional commerce, clean energy, and digital connectivity.

 

To turn geography into prosperity, we are implementing a doctrine of thick connectivity and thin borders. We are moving aggressively from being a landlocked nation to becoming a true land-linked powerhouse. This means operationalizing cross-border infrastructure to seamlessly connect with the vast markets of our neighbors. We are prioritizing the rapid development of multi-modal transport corridors, accelerating the construction of cross-border railways, and upgrading our road transit systems to high-speed expressways. We are investing in our East-West and North-South corridors to slash freight transit costs and integrate our Special Economic Zones with regional supply chains.

 

Being landlocked historically implied a disadvantage in moving heavy goods, but the modern economy thrives on high-value, low-weight products. By improving our aviation infrastructure, we can directly export premium products—from Himalayan black cardamom, organic Arabica coffee, and specialty teas to valuable medicinal herbs and essential oils—straight to lucrative global markets, completely bypassing terrestrial bottlenecks.

 

 

Personal Entrepreneurial Journey and the Tech Ecosystem

Before assuming public office, my own journey as an entrepreneur taught me a fundamental truth: innovation thrives where there is an ecosystem of trust, bold vision, and seamless connectivity, rather than a labyrinth of bureaucratic hurdles. In building educational, social and commercial enterprises, I witnessed firsthand the sheer ingenuity, resilience, and brilliance of our Nepali youth.

 

We do not need to replicate the resource-heavy industrialization of the twentieth century. Instead, we have the unique opportunity to leapfrog directly into the Fourth Industrial Revolution. Our young digital entrepreneurs and freelance engineers are already proving this is possible. Despite infrastructural challenges, Nepal’s IT service exports grew to nearly one billion dollars recently, driven by a vibrant community of over sixty-six thousand ICT professionals and freelancers building products for the global market.

 

To support this ecosystem, the government has announced groundbreaking initiatives in our national budget. We are establishing the country's first sovereign artificial intelligence compute center. By leveraging our clean hydropower, we will provide high-capacity AI processing units to startups, positioning Nepal as a hub for data and digital innovation. Furthermore, we are granting a fifty percent tax exemption on income earned from IT service exports and completely waiving taxes on sweat equity for IT professionals, ensuring our brightest minds have every incentive to build global tech companies right here in Nepal.

 

A Sovereign Capital Architecture: Innovating Economic Diplomacy for the Future

To finance this national transformation, we are exploring an innovative sovereign capital architecture for Nepal's future.

For seventy years, Nepal has walked into every room in the global economy primarily as an applicant—seeking concessional loans, grants, and technical assistance that often arrive attached to external conditionalities. We must evolve from being an applicant into becoming a confident sovereign counterparty.

We are conceptualizing mechanisms to leverage our own verified, recurring endowments—most notably our massive bilateral remittance corridors—through future-flow securitization. By partnering with sovereign wealth funds in key partner countries like Qatar and Kuwait on commercial terms, Nepal can mobilize three to four billion dollars of deployable sovereign capital without policy conditionalities.

Deployed into revenue-generating hydropower, data campuses, and special economic zones, this capital will service itself while establishing Nepal's first sovereign yield curve, catalytic benchmark pricing, and unlocking billions in trapped domestic bank liquidity. Our foreign missions will thus pivot from seeking aid to originating strategic, sovereign-grade co-investments.

 

 

Maximizing Natural Endowments: Energy and Unexplored Resources

 

Beyond digital technology and capital architecture, Nepal’s economic diplomacy is intensely focused on maximizing our natural endowments. Clean, renewable energy is our greatest strategic comparative advantage. We have set a bold national target to expand our hydropower capacity to twenty-eight thousand five hundred megawatts by the year 2035. By executing strategic energy diplomacy, we are not only seeking to export surplus electricity to India and Bangladesh, but we are aggressively positioning Nepal to attract energy-intensive, low-carbon manufacturing industries. We are also advancing the production of green hydrogen, initiating pilot projects to ensure Nepal leads in the fuel of the future.

 

Moreover, we are adopting a highly pragmatic, commercial approach to our unexplored and underutilized natural resources. As outlined in the recent national budget, we are moving forward with the commercial exploration and extraction of petroleum and gas in Dailekh. Additionally, we are shifting how we view our topography. By establishing environmentally sound and strictly regulated extraction protocols, we have the immense potential to export forest products, construction materials to rapidly urbanizing neighbors like Bangladesh and India, turning our rugged terrain into a lucrative export commodity.

 

The Global Nepali Diaspora: Bridging Capital, Knowledge, and Opportunity

Distinguished Guests,

Our economic statecraft cannot be complete without recognizing our greatest global bridge: the Nepali diaspora.

Today, millions of Nepalis reside across the globe—from the innovation corridors of North America and Europe to the dynamic financial hubs of the Asia-Pacific and the Gulf. For decades, the state viewed our diaspora primarily through the narrow, transactional lens of remittances. We want to fundamentally overturn that perspective.

The Nepali diaspora is our foremost network of brand ambassadors, knowledge capital, venture partners, and technology conduits. We are implementing an active Diaspora Engagement Policy that connects them through the Diaspora Knowledge Network and provides legal, financial, and institutional avenues for non-resident Nepalis to live, invest, and contribute seamlessly to Nepal's transformation. By introducing  foreign currency IPO, negotiating Bilateral Double Taxation Avoidance Agreements, and embracing the essence of "Once a Nepali, Always a Nepali," we are removing bureaucratic impediments to diaspora capital.

We are already witnessing what is possible when diaspora talent connects the world to Nepal.

Recently in New York, I met Nami Baral, who has Neural AI, with about 200 staff in Nepal, is providing an AI platform that automates workplace financial operations across more than 100 countries and has already raised our $ 50 million in investment.  Pioneers like Dr. Sameer Maskey, who founded Fusemachines, bridging advanced artificial intelligence research from Columbia University in New York to train thousands of AI engineers right here in Kathmandu, exporting high-value algorithmic solutions to global enterprises.

Himal Karmacharya and Leapfrog Technology, whose leadership connects world-class software engineering in Lalitpur with top-tier clients across the United States.

Or, Purna Kharel, with companies in Nepal and US are designing and building energy grid and utility corridors with engineers in Kathmandu for some of the biggest Utility companies in the USA.

Our goal is to build an ecosystem that fosters genuine collaboration and reverse migration. We want a Nepali biomedical researcher in Boston, a fintech architect in London, or an infrastructure specialist in Melbourne to see Nepal not merely as a sentimental homeland to visit during festivals, but as a fertile frontier of opportunity where their capital, networks, and expertise can build thriving, high-impact enterprises.

Ladies and Gentlemen,

The recent disaster has given us an undeniable impetus to act: our economic diplomacy must decisively evolve to champion climate justice as a cornerstone of our foreign policy. We can no longer accept debt-creating loans to remediate destruction we did not cause. Instead, our foreign missions must aggressively secure non-repayable, grant-based loss-and-damage funds, negotiate high-impact debt-for-climate swaps, and monetize our Himalayan ecological assets through international carbon markets. By embedding climate-resilient infrastructure standards, cross-border early-warning telemetry, and green technology transfers into every trade and investment treaty, we will pivot Nepal from a vulnerable casualty of global warming into an active, sovereign architect of regional green growth.

Conclusion: The Unified Mandate for Prosperity

 

Excellencies, Scholars, and Friends,

 

Nepal stands on the threshold of an extraordinary economic awakening. The challenges of our time are significant, but our inherent advantages are profound and enduring. We are a nation anchored in deep spiritual wisdom, yet driven by an energetic, globally connected young population.

 

We have to decisively discard the narrative of isolation and vulnerability. We are stepping into the regional and global arena with absolute confidence, sovereign dignity, and a clear transactional purpose. The success of our economic diplomacy relies on institutionalizing a unified Team Nepal approach, where the government provides agile policy coordination, our diplomatic missions act as rigorous commercial intelligence hubs, and our vibrant private sector drives the business networks necessary for exponential growth.

 

No nation can achieve lasting prosperity in isolation, and no government can execute its ambitious policies without the meaningful, dynamic partnership of its citizens and entrepreneurs. The time has come to fully integrate our foreign policy strategy, our economic ambitions, and our civilizational soft power into one unbreakable force. Together, through diligent enterprise, systemic reform, and confident statecraft, we will secure the one-hundred-billion-dollar economy our people deserve, building a prosperous, independent, and dignified Nepal in our time.

Thank you very much. Namaskar.